DETERMINE, INC. (Form: 10-K, Received: 07/01/2016 17:09:37)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2016

☐	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

DETERMINE, 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.)

615 West Carmel Drive, Suite 100, Carmel, IN 46032

(Address of Principal Executive Offices)

(650) 532-1500

(Registrant’s Telephone Number)

Securities registered under Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange On Which Registered
Common Stock, $ 0.0001 par value per share	The NASDAQ Capital Market

Securities registered under Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 such 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of September 30, 2015, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, based upon the closing price of $3.93 per share as reported by The NASDAQ Capital Market on that date, was $$32,242,757.

As of June 16, 2016, the registrant had 11,366,240 outstanding shares of common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Annual Report on Form 10-K incorporates by reference from information to be filed with the Securities and Exchange Commission in the registrant’s definitive proxy statement for its 2016 Annual Meeting of Stockholders (the “Proxy Statement”) or in an amendment to this Annual Report on Form 10-K within 120 days of the registrant’s fiscal year ended March 31, 2016. Except with respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as a part hereof.

DETERMINE, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED

MARCH 31, 2016

Table of Contents

Part I
Item 1	Business	1
Item 1A	Risk Factors	8
Item 1B	Unresolved Staff Comments	15
Item 2	Properties	15
Item 3	Legal Proceedings	15
Item 4	Mine Safety Disclosures	15

Part II
Item 5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	15
Item 6	Selected Financial Data	18
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	23
Item 8	Financial Statements and Supplementary Data	23
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	54
Item 9A	Controls and Procedures	54
Item 9B	Other Information	55

Part II I
Item 10	Directors, Executive Officers and Corporate Governance	56
Item 11	Executive Compensation	56
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	56
Item 13	Certain Relationships and Related Transactions, and Director Independence	56
Item 14	Principal Accounting Fees and Services	56

Part IV
Item 15	Exhibits and Financial Statement Schedules	56
	SIGNATURES	58

Cautionary Statement Pursuant to Safe Harbor Provision of the Private Securities Litigation Reform Act of 1995

The words “Determine”, “we”, “our”, “ours”, “us”, and the “Company” refer to Determine, Inc. This Annual Report on Form 10-K (the “10-K” or Report) contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). In addition, we may make other written and oral communications from time to time that contain such statements. Forward-looking statements include statements as to industry trends and future expectations of ours and other matters that do not relate strictly to historical facts. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. These forward-looking statements include statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the heading “Risk Factors” in Item 1A of this Annual Report on Form 10-K and in our other Securities and Exchange Commission (the “SEC”) filings. Furthermore, such forward-looking statements speak only as of the date of this Report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

PART I

Item 1. Business

Overview

We are a leading global provider of SaaS Source to Pay and Enterprise Contract Lifecyclem Management (ECLM) solutions. Our visionary technologies allow our customers to effectively manage the full scope of Source to Pay and ECLM using our Determine Cloud Platform. Our Source to Pay software suite includes strategic sourcing, supplier management, contract management and procure-to-pay applications.

The Determine Cloud Platform gives procurement, finance and legal professionals the ability to deliver profound insights through analysis of their supplier relationships and contractual requirements. Our customers leverage the Determine Cloud Platform to discover previously unseen supplier and spend data; make more informed and smarter business decisions; drive new revenue; control costs; improve workflow efficiencies; and mitigate risk.

We rebranded to formally combine the three legacy industry leaders and brands: Selectica, Iasta and b-pack under one new company – Determine, Inc. Over the last three years as the company has executed its strategic plan, it has evolved significantly from a predominantly contract lifecycle management solutions provider to a leading Source to Pay with an Enterprise Contract Lifecycle Management suite. A new brand was essential to encapsulate the new business vision. Determine integrated its acclaimed contract management, procurement and Source to Pay solutions and four collective decades of business acumen onto one platform, one brand and one customer promise: Vision. Insight. Control. Our mission is to enable businesses to transform their operational data and processes into unique insights to make informed decisions that drive value and mitigate risk.

We provide the next generation of agile, enterprise cloud software solutions for managing the needs of modern businesses. Using our intuitive applications, organizations can effectively manage the full scope of source to pay and enterprise contract lifecycle management requirements using the Determine platform.

The Determine platform is an open technology infrastructure based on smart process application models. The goal of our platform is to establish awareness of relevant data, manage business documents, create embed analytical tools, create a means for collaboration, and provide advanced process management tools for fully integrating business processes through an open application programming interface (API) infrastructure. Built on a unified and highly scalable platform, we deliver deep and innovative capabilities in strategic sourcing, supplier management, enterprise contract lifecycle management, e-procurement, invoicing, and other business operation areas.

In addition to our source to pay and enterprise contract lifecycle management solutions suite, we also provide a powerful, patented configuration engine solution, which Global 1000 companies use to increase revenue by facilitating the right combination of products, services, and price.

On July 2, 2014, the Company completed its acquisition of Iasta.com, Inc., an Indiana corporation, and Iasta Resources, Inc., an Indiana corporation. The acquisition of Iasta positions the Company to provide easier access to contract management, strategic sourcing, and spend management, and increases the Company’s market coverage in more locations worldwide to its customers.

On July 31, 2015, we completed the acquisition of b-pack SAS, a French société par actions simplifiée. b-pack empowers finance and procurement enterprise professionals with flexible, innovative and critical risk mitigation solutions. It provides source to pay solutions focusing on providing rich, end-to-end procurement capabilities, including eProcurement, purchase-to-pay, asset management, budget management, invoice management, and expense management.

P roducts

Determine’s platform offers best-in-class application capabilities including:

●

Strategic Sourcing — Determine Strategic Sourcing takes the next step for organizations looking to effectively identify and source opportunities for optimizing spend. Combining project management and sourcing analysis, strategic sourcing provides the framework for executing next generation RFx and eAuction capabilities, while accelerating decision making during strategic bidding; this translates into a seamless and integrated process for savings identification, supplier selection, and award management.

Page 1

	●	Supplier Management — Determine’s Supplier Management provides an enterprise approach to support the upstream procurement needs of supplier on-boarding, profile management, and on-going supplier collaboration. By providing a supplier portal via Determine’s business network, Determine allows suppliers and customers to seamlessly interact, exchange information, and collaborate, ultimately helping our customers build and maintain relationships with their supply base that aligns with internal policies and regulatory requirements.
	●	Contract Lifecycle Management — Determine Enterprise Contract Lifecycle Management is a single, enterprise-wide contract repository and authoring platform leveraging the platform’s common workflow engine, capable of supporting unique contract management processes for complex contract scenarios. Enterprise contract lifecycle management streamlines the entire contract lifecycle process, from request, authoring, negotiation, approval, and e-signature through ongoing obligations management, analysis, reporting, and renewals.
	●	Procure to Pay — Determine Procure to Pay harnesses the downstream procurement process of purchasing through payment. Essential in the procure to pay (“P2P”) solution is the development of an intuitive shopping experience for corporate buyers of goods or services on Determine’s business network for an enhanced user experiences. For procurement teams, P2P establishes the governance and controls to manage against maverick buying outside of the system, ensuring cost savings against executed contractual agreements. Determine’s P2P capabilities also manages invoicing automation for allowing proper invoice matching and alignment of payments for goods and services rendered.
	●	Business Applications — Based on bespoke requirements, Determine provides users access to additional areas using the common platform. Companies looking to add to existing functionality can leverage additional business applications on the Determine platform to manage their unique operational requirements in areas such as asset management, inventory management, and travel and expense. Using the Determine platform, organizations can also develop and configure custom electronic forms and workflows for managing unique requirements.
	●	Analytics — Determine provides business intelligence insights and executive level reporting by combining spend data analytics, Big Data management, notifications and alerts, and customer data created within the Determine platform. The open API framework allows the Determine platform to communicate with other enterprise and external systems, such as ERP, CRM, or market data for bridging all data elements from multiple, disparate and external sources into KPI dashboard reporting. Users encounter dashboards that are developed from modern business intelligence approaches such as self-service analytics and an intuitive click-through design.
	●	Business Network — Centered on supplier enablement and connectivity, Determine’s business network is the hub for coordinating buyers and suppliers looking to engage and collaborate on the Determine platform. The idea of interoperability is at the heart of the Determine platform as it is an open network that works within a wider technology ecosystem. The Determine platform integrates with focused providers in areas including CRM, e-signatures, document management, external market data, and other business platforms.
	●	Configuration Solution — Determine’s patented Configuration engine consolidates the management and dissemination of complex product information, enabling companies to streamline the opportunity-to-order process for manufacturers, service providers, and financial services companies. Our Configuration Solution makes it easy to recommend products and services to customers, enabling accurate pricing, and increasing sales of relevant bundles, discounts, and cross-sells. The Configurator application organizes sales information and makes it available in real-time to representatives and channel partners across the globe, so they can configure flawless deals on the fly. By empowering customers, product management, marketing, sales leadership, sales operations, salespeople, and channel partners to generate error-free sales proposals for their unique requirements, we believe our solution helps companies to close sales faster, accelerate revenue generation, and enhance customer relationships.

Determine also offers SmartContracts®, SmartSource® and SmartAnalytics®. SmartContracts® combines a single, enterprise-wide contract repository and authoring platform with a flexible workflow engine capable of supporting each organization’s unique contract management processes. SmartContracts® streamlines the contract processes, from request, authoring, negotiation, approval and e-signature through ongoing obligations management, analysis, reporting, and renewals. SmartContracts® helps companies take control of their contract processes by converting from paper-based to electronic documents and by unlocking multiple layers of critical business data, making it available for the evaluation of risk, the exposure of lost revenue, the evaluation of supplier performance, and other supply chain requirements.. The solution helps to improve the customer buying experience for sales organizations, improve the control of risk and decrease time spent drafting, monitoring and managing contracts, and gain access to previously hidden discounts through the exposure and elimination of unfavorable agreements for procurement and sourcing organizations.

SmartSource® provides an enterprise scale solution to support the processes of supplier on-boarding, supplier selection and on-going supplier management. By providing a supplier portal available via the cloud, SmartSource® allows suppliers and our customers to seamlessly interact to exchange information and collaborate ultimately helping our customers to build and maintain relationships with their supply base that aligns with internal policies and regulatory requirements. The solution provides sophisticated optimization techniques utilized during the supplier selection process to allow customers to optimize their vendor selection process according to their business context taking into account criteria such as reliance on low-cost countries, exposure to risk, past performance and allocation for diverse spend. Once the supplier relationships have been established, the solution provides for on-going tracking of performance to ensure that the suppliers are delivering to their contractual service levels, KPI and quality.

Page 2

SmartAnalytics® delivers powerful business insights and executive reporting by combining our industry knowledge, data analytics and expertise, customer data created SmartContracts® and Smartsource®, as well as in other enterprise systems, such as ERP, CRM and external market data. In addition, our customers have the ability to collaborate and share spend trends and the insights from enterprise-wide spend analysis activities.

Configuration Solution is a patented Configuration engine which streamlines the management and dissemination of complex product information, enabling companies to streamline the opportunity-to-order process for manufacturers, service providers, and financial services companies. Our Configuration solution makes it easy to recommend products and services to customers, enabling accurate pricing, and increasing sales of relevant bundles, discounts, and cross-sells. The Configurator organizes sales information and makes it available in real-time to reps and channel partners across the globe, so they can configure flawless deals on the fly. By empowering customers, product management, marketing, sales leadership, sales operations, salespeople, and channel partners to generate error-free sales proposals for their unique requirements, we believe our cloud-based solution helps companies to close sales faster, accelerate revenue generation and enhance customer relationships.

Along with our software, we provide our customers with an array of services to assist them in implementations, customizations, system upgrades, migrations, and solution architecture.

We were incorporated in California in June 1996, under the name Selectica, Inc., and re-incorporated in Delaware in November 1999. The company changed its name to Determine, Inc. on October 15, 2015. The company’s principal executive office is located at 615 West Carmel Drive, Suite 100, Carmel, IN 46032, which we moved to from our prior principal executive offices located at 2121 South El Camino Real 10th Floor, San Mateo, California, 94403 during our first quarter of fiscal year 2017. Our website is www.determine.com.

Page 3

Employees

As of March 31, 2016, we had a total of 140 employees, 9 of which are located in the United Kingdom, 51 of which are located in France, and 80 of which are located in the United States. Of the total, 35 are engaged in research and development, 53 are engaged in professional services, 35 are engaged in sales and marketing, and 17 are engaged in general and administrative. We also have 58 individuals contracted through our Odessa, Ukraine facility, with 18 in professional services, and 40 engineers in research and development. None of our employees are represented by a labor union and we consider our relations with our employees to be good .

Determine Professional Services

We offer a range of services to ensure that the solutions meet users’ requirements. Our Professional Services team takes a best-practice, collaborative approach, applying their extensive experience with contract lifecycle management, strategic sourcing, procure to pay and Configuration solutions. We provide these services using both our in-house expertise and that of third parties experienced in our solutions acting under our direction. As of March 31, 2016, the Professional Services organization had 53 employees, as well as approximately 18 individuals contracted through our Odessa, Ukraine facility as noted below.

Sales and Marketing

We sell our cloud solutions primarily through our direct sales force along with strategic and OEM partners. As of March 31, 2016, our sales team consisted of 24 employees and our marketing team consisted 11 of employees.

Our direct sales force is complemented by business partners, supported by telesales and system engineering resources. We have developed programs to attract and retain high quality, motivated sales representatives that have the necessary technical skills and consultative sales experience. We have also developed specific partner relationships to expand our solutions and domain expertise into various targeted markets. We believe that the cultivation and integration of these support networks assists in both the establishment and enhancement of customer relationships.

Our marketing department is engaged in revenue-centered, sales-support and awareness-building activities, such as lead generation programs, web marketing, product management, public relations, advertising, speaking programs, seminars, sales collateral creation and production, direct mail, and event hosting.

Research and Development

To date, we have invested substantial resources in research and development. As of March 31, 2016, we had 35 full-time technical writing specialists, as well as approximately 39 engineers contracted through our Odessa, Ukraine facility as noted below. Our team primarily works on product development, enhancements, documentation, and quality assurance. For the fiscal years ended March 31, 2016 and 2015, we incurred approximately $5.0 million and $3.7 million, respectively on research and development which includes $1.4 million of impairment of software development costs and $0.1 million of acquisition related costs.

Enhancements to our existing products are released periodically to add new features, improve functionality and incorporate feedback and suggestions from our customers. These updates are usually provided as part of the product subscription or license arrangement.

International Operations

Since fiscal 2011, we maintained a relationship with a third party operating a research and operations center in Odessa, Ukraine. This facility represents a significant investment for us as we continue to execute on our global expansion strategy. Our operations in Ukraine with our third-party partner have not been materially affected by the recent political events in that country, and we have put certain contingency plans in place to minimize any disruption.

As of March 31, 2016, as a result of our acquisition of b-pack on July 31, 2015 and Iasta and Iasta Resources on July 2, 2014, we have 9 employees working in the United Kingdom and 51 working in France. As of March 31, 2015, we had 8 employees working in the United Kingdom.

Page 4

C ompetition

The market for cloud-based software solutions in general, including our Sourcing, Supplier Management, Procure to Pay, and Enterprise Contract Lifecycle Management and Configuration solutions, continues to rapidly change. Competitors vary in size and in the scope and breadth of the products and services offered. We encounter competition primarily from companies such as SAP, Apptus, Coupa and IBM, as well as (i) software companies that offer integrated solutions or specific products that compete with our ECLM Configuration solutions, (ii) information systems departments of potential or current customers that internally develop custom software, and (iii) professional services organizations. Some of these competitors are larger than us and may only compete in a segment of ours.

We believe that the principal competitive factors affecting our market include product reputation, functionality, ease-of-use, ability to integrate with other products and technologies, quality, performance, price, customer service and support, and the vendors’ reputation. Although we believe that our products currently compete favorably with regard to such factors, we cannot assure you that we can maintain our competitive position against current and potential competitors. Increased competition may result in price reductions, less beneficial contract terms, reduced gross margins and loss of market share, any of which could materially and adversely affect our business, operating results and financial condition.

Intellectual Property and Other Proprietary Rights

We rely on a combination of trademark, trade secret and copyright law and contractual restrictions to protect the proprietary aspects of our technology. These legal protections afford only limited protection for our technology. We currently hold eight patents in the United States. In addition, we have various trademarks registered or pending registration in various jurisdictions. Our trademark applications might not result in the issuance of any trademarks. Our patents or any future issued patents or trademarks might be invalidated or circumvented or otherwise fail to provide us any meaningful protection. We seek to protect the source code for our software, documentation and other written materials under trade secret and copyright laws. We license our software pursuant to license agreements, which impose certain restrictions on the licensee’s ability to utilize the software. We also seek to avoid disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. In addition, the laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets and to determine the validity and scope of the proprietary rights of others. Our failure to adequately protect our intellectual property could have a material adverse effect on our business and operating results.

AVAILABLE INFORMATION

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. The public may read and copy these materials at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding Determine, Inc. and other companies that file materials with the SEC electronically. You may also obtain copies of reports filed with the SEC, free of charge, on our website at www.determine.com.

Page 5

Item 1A. Risk Factors

Set forth below and elsewhere in this Annual Report on Form 10-K, 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-K. 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 losses and may incur losses in the future.

We incurred net losses of approximately $14.0 million and $13.7 million for the fiscal years ended March 31, 2016 and 2015, respectively. We had an accumulated deficit of approximately $302.3 million as of March 31, 2016. We may continue to incur losses in the future for a number of reasons, including uncertainty as to the level of our future revenues and the timing and impact of our cost reduction efforts. While we have made significant progress towards aligning our research and development, sales and marketing, and general and administrative expenses with revenue, given the size of our business relative to the costs associated with being a public reporting company, we will need to continue to control our expenses while maintaining and increasing revenue in order to achieve profitability. If our revenue fails to grow or grows more slowly than we currently anticipate or our operating expenses exceed our expectations, our losses may continue or increase, which would harm our business and operating results.

Our business could be seriously harmed if we lose the services of our key personnel.

Our success depends substantially on the contributions and abilities of our executive management team and other key employees. We believe that these individuals understand our operational strategies and priorities and the steps necessary to drive our long-term growth and stockholder value. The loss of services of one or more members of our management team or other key personnel could disrupt our operations and seriously harm our business.

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 revenues are dependent on orders from a relatively small number of customers. No customer was over 10% of our revenue in fiscal year 2016, and while one customer represent 16% of our revenue in fiscal year 2015. We expect that we will continue to depend upon a relatively small number of customers for a substantial portion of our revenues for the foreseeable future. As a result, if we fail to successfully sell our products and services to one or more large customers in any particular period or a large customer purchases fewer of our products or services, defers or cancels orders, or terminates its relationship with us, our business and operating results would be significantly harmed.

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 securities analysts and investors, which could cause volatility or adversely affect the trading price of our common stock.

The Company generates revenue by providing its Software-as-a-Service (“SaaS”) solutions through subscription license arrangements and related professional services, as well as through perpetual and term licenses and related software maintenance and professional services. The Company recognizes revenue in accordance with generally accepted accounting standards for software and service companies. The Company recognizes revenue when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) fees are fixed or determinable and (4) collectability is probable. If we determine that any one of the four criteria is not met, we will defer recognition of revenue until all the criteria are met.

Our annual and quarterly recurring and non-recurring revenues may fluctuate due to our inability to perform services, achieve specific milestones and obtain formal customer acceptance of specific elements of the overall completion of a project. As we provide such services and products, the timing of delivery and acceptance, changed conditions with the customers and projects could result in changes to the timing of our revenue recognition, and thus, our operating results.

Likewise, if our customers do not renew maintenance services or purchase additional products, our operating results could suffer. Historically, we have derived and expect to continue to derive a significant portion of our total revenue from existing customers who purchase additional products or renew maintenance agreements. Our customers may not renew such maintenance agreements or expand the use of our products. In addition, as we introduce new products, our current customers may not require or desire the features of our new products. If our customers do not renew their subscriptions or maintenance agreements with us or choose not to purchase additional products, our operating results could suffer.

Page 6

Because we rely on a limited number of customers, the timing of customer acceptance or milestone achievement, the amount of services we provide to a single customer, or the failure to replace a significant customer can significantly affect our operating results. Because expenses are relatively fixed in the near term, any shortfall from anticipated revenues could cause our quarterly operating results to fall below anticipated levels.

We may also experience seasonality in revenues. For example, our annual and quarterly results may fluctuate based upon our customers’ calendar year budgeting cycles. These seasonal variations may lead to fluctuations in our annual and quarterly revenues and operating results.

Our ECLM customers license our software in a number of ways including subscription licenses and perpetual licenses, which may be hosted in our third-party hosting center or on the customer’s own facilities.

Based upon the foregoing, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and that such comparisons should not be relied upon as indications of future performance. In some future period, our operating results may be below the expectations of public market analysts and investors, which could cause volatility or a decline in the price of our common stock.

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.

We rely on a combination of patent, trademark, trade secret and copyright law and contractual restrictions to protect the proprietary aspects of our technology. These legal protections afford only limited protection for our technology. We currently hold eight patents in the United States. In addition, we have various trademarks registered or pending registration in various jurisdictions. Our trademark applications might not result in the issuance of any trademarks. Our patents or any future issued trademarks might be invalidated or circumvented or otherwise fail to provide us any meaningful protection. We seek to protect the source code for our software, documentation and other written materials under trade secret and copyright laws. We license our software pursuant to license agreements, which impose certain restrictions on the licensee’s ability to utilize the software. We also seek to avoid disclosure of our intellectual property by requiring employees and consultants with access to our proprietary information to execute confidentiality agreements. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. In addition, the laws of many countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets and to determine the validity and scope of the proprietary rights of others. Our failure to adequately protect our intellectual property could have a material adverse effect on our business and operating results.

It is possible that in the future, other third parties may claim that our current or potential future products infringe their intellectual property rights. Any claims, with or without merit, could be time-consuming, result in costly litigation, divert management’s time from developing our business, cause product shipment delays, require us to enter into royalty or licensing agreements or require us to satisfy indemnification obligations to our customers. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could seriously harm our business.

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.

The sales cycle of our products has historically averaged between nine to twelve months, and may sometimes be significantly longer. We are generally required to provide a significant level of education regarding the use and benefits of our products, and potential customers tend to engage in extensive internal reviews before making purchase decisions. In addition, the purchase of our products typically involves a significant commitment by our customers of capital and other resources, and is therefore subject to delays that are beyond our control, such as customers’ internal budgetary procedures and the testing and acceptance of new technologies that affect key operations. In addition, because we target large companies, our sales cycle can be lengthier due to the decision process in large organizations. As a result of our products’ long sales cycles, we face difficulty predicting the quarter in which sales to expected customers may occur. If anticipated sales from a specific customer for a particular quarter are not realized in that quarter, our operating results for that quarter could fall below the expectations of financial analysts and investors, which could cause our stock price to decline.

Page 7

Developments in the market for cloud-based software solutions, including our ECLM and Configuration solutions, may harm our operating results, which could cause a decline in the price of our common stock.

The market for cloud-based software solutions, including ECLM and Configuration solutions, is evolving rapidly. In view of changing market trends, including vendor consolidation, the competitive environment growth rate and potential size of the market are difficult to assess. The growth of the market is dependent upon the willingness of businesses and consumers to purchase complex goods and services over the Internet and the acceptance of the Internet as a platform for business applications. In addition, companies that have already invested substantial resources in other methods of Internet selling may be reluctant or slow to adopt a new approach or application that may replace, limit or compete with their existing systems. With the transition of our focus to a subscription sales SaaS model, which may help address certain market challenges, the rapid change in the marketplace nonetheless poses a number of concerns. Any decrease in technology infrastructure spending may reduce the size of the market for our solutions. Our potential customers may decide to purchase more complete solutions offered by larger competitors instead of individual applications. If the market for our solutions is slow to develop, or if our customers purchase more fully integrated products, our business and operating results would be significantly harmed.

We face intense competition, which could reduce our sales, prevent us from achieving or maintaining profitability and inhibit our future growth.

The market for software and services that enable electronic commerce is intensely competitive and rapidly changing. We expect competition to persist and intensify, which could result in price reductions, reduced gross margins and loss of market share. Our principal competition comes from (i) publicly held and private software companies that offer integrated solutions or specific contract management and/or sales Configuration solutions and (ii) internally developed solutions. Existing and potential competitors include public companies such as Oracle Corporation, Apptus, Coupa, OpenText and SAP, as well as companies such as IBM and SciQuest .

Our competitors may intensify their efforts in our market. In addition, other enterprise software and SaaS companies may offer competitive products in the future. Competitors vary in size, in the scope and breadth of the products and services offered. Although we believe we have advantages over our competitors including the comprehensiveness of our solution, our use of Java and mobile technology and our multi-threaded architecture, some of our competitors and potential competitors have significant advantages over us, including:

•

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.

Our competitors may also bundle their products in a manner that may discourage users from purchasing our products. Current and potential competitors may establish cooperative relationships with each other or with third parties, or adopt aggressive pricing policies to gain market share. Competitive pressures may require us to reduce the prices of our products and services. We may not be able to maintain or expand our sales if competition increases, and we are unable to respond effectively.

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 industry is characterized by rapid technological change, changes in customer requirements, frequent new product and service introductions and enhancements, and emerging industry standards. In order to achieve broad customer acceptance, our products must be compatible with major software and hardware platforms used by our customers. In addition, our products are required to interoperate with electronic commerce applications and databases. We must continually modify and enhance our products to keep pace with changes in these operating systems, applications and databases. Our Configuration, pricing and quoting products are complex, and new products and product enhancements can require long development and testing periods. If our products were to be incompatible with a popular new operating system, electronic commerce application or database, our business would be significantly harmed. In addition, the development of entirely new technologies to replace existing software could lead to new competitive products that have better performance or lower prices than our products and could render our products obsolete and unmarketable.

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.

In the past, a small number of our customers have experienced difficulties or delays in completing implementation of our products. We may experience similar difficulties or delays in the future. Deploying our products typically involves integration with our customers’ legacy systems, such as existing databases and enterprise resource planning software as well adding their data to the system. Failing to meet customer expectations on deployment of our products could result in a loss of customers and negative publicity regarding us and our products, which could adversely affect our ability to attract new customers. In addition, time-consuming deployments may also increase the amount of service personnel we must allocate to each customer, thereby increasing our costs and adversely affecting our business and operating result.

Page 8

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.

We depend on our direct sales force for a significant portion of our current sales, and our future growth depends in part on the ability of our direct sales force to develop customer relationships and increase sales to a level that will allow us to reach and maintain profitability. If we are unable to retain qualified sales personnel or if newly hired personnel fail to develop the necessary skills or to reach productivity when anticipated, we may not be able to increase sales of our products and services, and our results of operation could be significantly harmed.

If we are unable to successfully 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.

Non-recurring revenues are comprised of revenues from professional services for system implementations, enhancements, and training and, to a lesser extent, perpetual license sales. Professional services generated 21% and 22% of our total revenues during the fiscal years ended March 31, 2016 and 2015, respectively. Our professional services revenues have incurred losses more than recurring revenues. We often charge for our professional services on a fixed-fee basis. If we are required to spend more hours than planned without being able to bill our customers for these overages, our cost of services revenues could exceed the fees charged to our customers on certain engagements and could cause us to recognize a loss on a contract, which would adversely affect our operating results. In addition, if we are unable to provide these professional services, we may lose sales or incur customer dissatisfaction, and our business and operating results could be significantly harmed.

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.

Complex software products such as ours may contain errors or defects, including errors relating to security, particularly when first introduced or when new versions or enhancements are released. In the past, we have discovered defects in our products and provided product updates to our customers to address such defects. Our products and other future products may contain defects or errors that could result in lost revenues, a delay in market acceptance or negative publicity, each which would significantly harm our business and operating results.

Demand for our products and services will decline significantly if our software cannot support and manage a substantial number of users.

Our strategy requires that our products be highly scalable. To date, only a limited number of our customers have deployed our products on a large scale. If our customers cannot successfully implement large-scale deployments, or if they determine that we cannot accommodate large-scale deployments, our business and operating results would be significantly harmed.

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.

Since our products are company-wide, mission-critical computer applications with a potentially strong impact on our customers’ sales, errors, defects or other performance problems could result in financial or other damages to our customers. Although our license agreements generally contain provisions designed to limit our exposure to product liability claims, existing or future laws or unfavorable judicial decisions could negate such limitation of liability provisions. Product liability litigation, even if it were unsuccessful, would be time consuming and costly to defend.

Our results of operations will be reduced by charges associated with stock-based compensation.

We have in the past and expect in the future to incur a significant amount of charges related to securities issuances, which will negatively affect our operating results. We use the Black-Scholes-Merton option pricing model to determine the fair value of our share-based payments and recognize compensation cost on a straight-line basis over the vesting periods. This pronouncement from the FASB provides for certain changes to the method for valuing stock-based compensation. Among other changes, ASC 718 applies to new awards and to awards that are outstanding which are subsequently modified or cancelled. Compensation expense calculated under ASC 718 will continue to negatively impact our operating results.

Page 9

We may fail to realize the anticipated benefits of our recent acquisitions.

On June 2, 2014, the Company entered into an Agreement and Plan of Merger, with Selectica Sourcing Inc., a Delaware corporation and wholly owned subsidiary of the Company, Iasta.com, Inc., an Indiana corporation (“Iasta.com”), Iasta Resources, Inc., an Indiana corporation (“Iasta Resources” and, together with Iasta.com, “Iasta”) and the shareholders of Iasta pursuant to which the Company acquired Iasta on July 2, 2014 (the “Iasta Acquisition”). The combined company has less than two years of operations, and we may fail to realize the expected benefits of the Iasta Acquisition if we are not able to fully integrate the two businesses.

In addition, on March 30, 2015, the Company entered into an Agreement and Plan of Merger with Selectica France SAS, a French société par actions simplifiée (pending incorporation) and wholly owned subsidiary of the Company, b-pack SAS, a French société par actions simplifiée (“b-pack”), and the shareholders of b-pack, pursuant to which the Company acquired b-pack (the “b-pack Acquisition”) on July 31, 2015. The combined company has less than one year of operations, and we may fail to realize the expected benefits of the b-pack Acquisition if we are not able to fully integrate the two businesses.

Some of our customers are hosted by a third-party provider.

Some of our ECLM customers’ licenses are hosted by a third-party data center provider under contract to us. Failure of the data center provider to maintain service levels as contracted could result in customer dissatisfaction, customer losses and potential product warranty or performance liabilities.

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 our company.

Provisions of our amended and restated certificate of incorporation, as amended to date, and amended and restated bylaws, Delaware law and our stockholder rights agreement, as amended to date, may make it more difficult for or prevent a third party from acquiring control of us without approval of our directors. These provisions include:

	•	requiring a majority vote in uncontested elections of directors;
	•	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 any person, together with its affiliates and associates, (i) acquires beneficial ownership of 4.99% or more of our outstanding common stock or (ii) commences a tender offer for our shares if upon consummation of the tender offer such person would beneficially own 4.99% or more of the outstanding common stock, subject, in each case, to certain exceptions.

These provisions may have the effect of entrenching our board of directors and may deprive or limit your strategic opportunities to sell your shares.

R estrictions 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.

Our software utilizes encryption technology, the export of which is regulated by the United States government. If our export authority is revoked or modified, if our software is unlawfully exported or if the United States adopts new legislation restricting export of software and encryption technology, we may experience delay or reduction in shipment of our products internationally. Current or future export regulations could limit our ability to distribute our products outside of the United States. While we take precautions against unlawful exportation of our software, we cannot effectively control the unauthorized distribution of software across the Internet.

Unauthorized break-ins or other assaults on our computer systems could harm our business.

Our servers are vulnerable to physical or electronic break-ins and similar disruptions, which could lead to loss of data or public release of proprietary information. In addition, unauthorized persons may improperly access our data. These and other types of attacks could harm us. Actions of this sort may be very expensive to remedy and could adversely affect results of operations.

Page 10

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.

As electronic commerce and the Internet continue to evolve, federal, state and foreign governments may adopt laws and regulations covering issues such as user privacy, taxation of goods and services provided over the Internet, pricing, content and quality of products and services. If enacted, these laws and regulations could limit the market for electronic commerce, and therefore the market for our products and services. Although many of these regulations may not apply directly to our business, we expect that laws regulating the solicitation, collection or processing of personal or consumer information could indirectly affect our business.

We are subject to international business uncertainties that could harm our business and results of operations or slow our growth.

Our ability to grow our business and our future success will depend in part on our ability to expand our operations and customer base worldwide. During fiscal 2011, we entered into a relationship with a third party that opened a research and operations center in Odessa, Ukraine. The Ukraine has experienced considerable political events recently, and while we have put certain contingency plans in place to minimize any disruption, such turmoil may impact our operations and, in turn, could compromise our ability to develop our products at the pace and cost that we desire.

Risk Related to Ownership of Common Stock

Our stock price could decline because of recent financing activities.

On March 11, 2015, the Company entered into a Junior Secured Convertible Note Purchase Agreement with Lloyd I. Miller, III (“Mr. Miller”), the Company’s largest stockholder, and MILFAM II L.P. and the Lloyd I. Miller Trust A-4, two affiliates of Mr. Miller (collectively the “Debt Investors”), pursuant to which the Company issued and sold junior secured convertible promissory notes (the “March 2015 Notes”) to the Debt Investors in the aggregate principal amount of $3 million. The March 2015 Notes are due on December 16, 2020. The Company has the option to pay any amounts of interest due under the March 2015 Notes by converting such interest into shares of common stock of the Company at a conversion price of $5.70 per share (as may be adjusted for any subdivision by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or similar event occurring prior to such record date), based upon an interest rate amount calculated at 10% per year, provided that the Company is not then under default under the March 2015 Notes or related financing agreements. The outstanding principal and interest under the March 2015 Notes may be converted into shares of Company common stock at the sole option of the Debt Investors at any time prior to the maturity date, at a conversion price of $5.70 per share (as may be adjusted for any subdivision by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or similar event occurring prior to such record date).

On December 16, 2015, the Company entered into a Junior Secured Convertible Note Purchase Agreement with Mr. Miller and MILFAM II L.P., the Lloyd I. Miller Trust A-4 and Alliance Semiconductor Corporation, a Delaware corporation, each an affiliate of Mr. Miller (collectively the “Additional Debt Investors” and, together with the Debt Investors, the Investors), pursuant to which the Company issued and sold junior secured convertible promissory notes (the “December 2015 Notes” and, together with the March 2015 Notes, the “Notes”) to the Additional Debt Investors in the aggregate principal amount of $2.5 million. The December 2015 Notes are due on December 16, 2020. The Company has the option to pay any amounts of interest due under the December 2015 Notes by converting such interest into shares of common stock of the Company, at a conversion price of $3.75 per share (as may be adjusted for any subdivision by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or similar event occurring prior to such record date), based upon an interest rate amount calculated at 10% per year, provided that the Company is not then under default under the December 2015 Notes or related financing agreements and that the Company provides prior written notice thereof to the Investors at least 10 days in advance of the payment date. The outstanding principal and interest under the December 2015 Notes may be converted into shares of Company common stock at the sole option of the Additional Debt Investors at any time prior to the maturity date, at a conversion price of $3.75 per share (as may be adjusted for any subdivision by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or similar event occurring prior to such record date).

Assuming conversion in full all obligations under the Notes at the end of the term, approximately an additional 1.8 million shares of common stock will be issued and outstanding, diluting our stockholders. Existing stockholders also will suffer significant dilution in ownership interests and voting rights and our stock price could decline as a result of potential future application of anti-dilution features of the Warrants. Additionally, sales in the public market of the shares of common stock acquired upon conversion of the Notes, or the perception that such sales could occur, could adversely affect the prevailing market price of our common stock and impair our ability to raise funds in additional stock financings. Any additional equity or convertible debt financings in the future could result in further dilution to our stockholders.

Page 11

The Investors have substantial voting power on matters submitted to a vote of stockholders.

Based on 11,192,500 shares of common stock outstanding as of February 9, 2016, the shares of common stock issued or issuable to the Investors upon conversion of the Notes would represent, in the aggregate, approximately 13.8% of the voting power of our stock. Additionally, Mr. Miller, together with his affiliated entities, participated in the debt financings described above and is the Company’s largest existing stockholder. Because the Investors own a significant percentage of our voting power, they may have considerable influence in determining the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including the election of directors and approval of mergers, consolidations and the sale of all or substantially all of our assets.

In addition, the ownership by the Investors of a substantial percentage of our total voting power could make it more difficult and expensive for a third party to pursue a change of control of the Company, even if a change of control would generally be beneficial to our stockholders.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

Facilities

On May 15, 2014, the Company entered into a First Amendment to Lease (the “Lease Amendment”) with SKBGS I, L.L.C. amending the Office Lease dated July 8, 2011, whereby the Company is leasing approximately 10,516 square feet of office space at a premises located at 2121 South El Camino Real, Suite 1000, San Mateo, California, where the Company maintains its headquarters. The Lease Amendment extends the lease term to cover a 25-month period expiring January 31, 2017 and carries a base rent of $2.85 per rentable square foot, escalating 3% each year.

In connection with the acquisition of Iasta, we assumed leases for offices in Carmel, Indiana and in London, United Kingdom. The lease in Indiana expired May 31, 2016. On April 7, 2016, the Company entered into a Lease Agreement with Atapco Carmel, Inc. for approximately 8,795 square feet of office space in a building located at 615 West Carmel Drive, Suite 100, in Carmel, Indiana. The term of the lease runs for approximately 51 months and carries a base rent of $1.33 per rentable square foot for the first year of the term of the lease (with three of the months of the first year term provided rent free), subject to annual adjustment thereafter.

In connection with the acquisition of b-pack, we assumed leases for offices in Paris, France and in Aix-en-Provence, France. The lease in Paris, dated May 4, 2011, is for approximately 1,572 square feet of office space located at 92 rue d’Amsterdam, Paris. It expires June 30, 2020 (but can be terminated June 30, 2017) and carries a base rent of $3.21 per rentable square foot. The lease in Aix-en-Provence, dated July 31, 2015 is for approximately 4,327 square feet of office space located at 220 rue Denis Papin, Aix-en-Provence. It expires July 31, 2024 (but can be terminated July 31, 2018) and carries a base rent of $1.92 per rentable square foot.

In connection with the acquisition of b-pack, we also assumed a lease for offices in Atlanta, Georgia. The lease in Georgia, dated August 1, 2014, is for approximately 1,742 square feet of office space, and was extended under the Fourth Amendment and expires July 31, 2019 and carries a base rent of $1.48 per rentable square foot.

Item 3.

Legal Proceedings

In the future we may be subject to lawsuits, including claims relating to intellectual property matters or securities laws. Any litigation, even if not successful against us, could result in substantial costs and divert management’s and other resources away from the operations of our business. If successful against us, we could be liable for large damage awards and, in the case of patent litigation, subject to injunctions that significantly harm our business. Please refer to footnote 11.

Item 4.

Mine Safety Disclosures

Not applicable.

Page 12

PART II

Item 5.

Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded over the counter on The NASDAQ Capital Market (“NASDAQ”) under the symbol “DTRM.” Our common stock began trading in March 2000 under the symbol “SLTC,” which was changed to DTRM effective October 19, 2015.

As of March 31, 2016, there were approximately 81 holders of record of our common stock. Brokers and other institutions hold many of such shares on behalf of stockholders. The table below sets forth the high and low sales price per share of our common stock for each quarter in the last two fiscal years.

	High		Low
Fiscal 2016
First Quarter	$	7.47	$	5.25
Second Quarter	$	5.23	$	3.69
Third Quarter	$	4.57	$	2.00
Fourth Quarter	$	2.43	$	1.56
Fiscal 2015
First Quarter	$	6.88	$	5.85
Second Quarter	$	6.61	$	5.60
Third Quarter	$	6.11	$	5.18
Fourth Quarter	$	6.82	$	4.54

The trading price of our common stock could be subject to wide fluctuations in response to quarterly variations in operating results, announcements of technological innovations or new products by us or our competitors, changes in financial estimates or purchase recommendations by securities analysts and other events or factors. In addition, the stock market has experienced volatility that has affected the market prices of equity securities of many high technology companies and that often has been unrelated to the operating performance of such companies. These broad market fluctuations may adversely affect the market price of our common stock.

Equity Compensation Plan Information

The following table sets forth as of March 31, 2016, certain information regarding our equity compensation plans.

	Number of Securities to be Issued Upon Exercise of Outstanding Options and RSU's		Weighted Average Exercise Price per Share of Outstanding Options and Rights		Number of Securities Available for Future Issuance Under Equity Compensation Plans
	(in thousands)
Equity compensation plans approved by stockholders
1996 and 1999 Equity Incentive Plan		324	$	6.29		-	⁽¹⁾⁽²⁾
2015 Equity Incentive Plan		1,512	$	2.83		80	⁽¹⁾⁽²⁾
Equity compensation plans not approved by stockholders
IASTA		383	$	6.61		-
Inducement Plan		687	$	4.32		-
NOLN Plan ⁽¹⁾		100	$	3.34		-
Total		3,006	$	4.02		80

(1)	These plans permit the grant of options, stock appreciation rights, shares of restricted stock and stock units.
(2)	Effective November 7, 2012 there is no provision to automatically increase the number of shares reserved for issuance under our equity compensation plans approved by stockholders.

Page 13

Stock Option Plans—Not Required to be Approved by Stockholders

2001 Supplemental Plan

We adopted the 2001 Supplemental Plan (the “Supplemental Plan”) on May 30, 2001; the Supplemental Plan did not require stockholder approval. A total of approximately 250,000 shares of common stock have been reserved for issuance under the Supplemental Plan. With limited restrictions, if shares awarded under the Supplemental Plan are forfeited, those shares will again become available for new awards under the Supplemental Plan. The Supplemental Plan permits the grant of non-statutory options and shares of restricted stock. Employees and consultants, who are not officers or members of the Board of Directors, are eligible to participate in the Supplemental Plan. Options are granted at an exercise price of not less than 85% of the fair market value per share on the date of grant. Options generally vest with respect to 25% of the shares one year after the options’ vesting commencement date and the remainder vest in equal monthly installments over the following 36 months. Options granted under the Supplemental Plan have a maximum term of ten years.

The Compensation Committee of the Board of Directors administers the Supplemental Plan and has complete discretion to make all decisions relating to the interpretation and operation of the Supplemental Plan. The Compensation Committee has the discretion to determine which eligible persons are to receive an award, and to determine the type, number, vesting requirements and other features and conditions of each award. The exercise price of options may be paid with: cash, outstanding shares of common stock, the cashless exercise method through a designated broker, a pledge of shares to a broker or a promissory note. The purchase price for newly issued restricted shares may be paid with: cash, a promissory note or the rendering of past or future services. The Compensation Committee may reprice options and may modify, extend or assume outstanding options. The Compensation Committee may accept the cancellation of outstanding options in return for the grant of new options. The new option may have the same or a different number of shares and the same or a different exercise price. If a merger or other reorganization occurs, the agreement of merger or reorganization shall provide that outstanding options and other awards under the Supplemental Plan shall be assumed or substituted with comparable awards by the surviving corporation or its parent or subsidiary, shall be continued by the Company if it is the surviving corporation, shall have accelerated vesting and then expire early or shall be cancelled for a cash payment. If a change in control occurs, awards will become fully exercisable and fully vested if the awards do not remain outstanding, are not assumed by the surviving corporation or its parent or subsidiary and if the surviving corporation or its parent or subsidiary does not substitute its own awards that have substantially the same terms for the awards granted under the Supplemental Plan. If a change in control occurs and a plan participant is involuntarily terminated within 12 months following this change in control, then the vesting of awards held by the participant will accelerate, as if the participant provided another 12 months of service. A change in control includes: a merger or consolidation after which the then-current stockholders own less than 50% of the surviving corporation, a sale of all or substantially all of the assets, a proxy contest that results in replacement of more than one-half of the directors over a 24-month period or an acquisition of 50% or more of the outstanding stock by a person other than a person related to the Company, including a corporation owned by the stockholders. The Board of Directors may amend or terminate the Supplemental Plan at any time. The Supplemental Plan will continue in effect indefinitely unless the Board of Directors decides to terminate the plan earlier.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock. Whether or not a dividend will be paid in the future will be determined by our Board of Directors. The Series F Convertible Preferred Stock (the “Series F Stock”) was not entitled to a liquidation or dividend preference. If the Series F Stock had not been converted into Common Stock following stockholder approval on May 5, 2015, beginning on May 15, 2015, the Series F Stock would have been entitled to 10% accruing dividends per annum. The dividends would have been payable quarterly in cash, beginning on June 30, 2015.

Recent Sales of Unregistered Securities

Reference is made to the description of our sale and issuance of unregistered shares of common stock, shares of Series F Stock and warrants to purchase shares of common stock on February 6, 2015, as disclosed in our Current Report on Form 8-K previously filed on February 9, 2015, which is incorporated herein by reference.

Reference is made to the description of our sale and issuance of unregistered shares of common stock on July 31, 2015, as disclosed in our Current Report on Form 8-K previously filed on August 4, 2015, as amended by our Current Report on Form 8-K/A previously filed on October 16, 2015.

Reference is made to the description of our sale and issuance of junior secured convertible promissory notes on March 11, 2015, as disclosed in our Current Report on Form 8-K previously filed on March 16, 2015, and to the description of our sale and issuance of junior secured convertible promissory notes on December 16, 2015, as disclosed in our Current Report on Form 8-K previously filed on December 17, 2015.

Page 14

Item 6. Selected Financial Data.

We are a “smaller reporting company” as defined by Regulation S-K and as such, are not required to provide the information contained in this item pursuant to Regulation S-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. 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

We provide cloud-based software solutions that help enable growing companies to transform their operational data and processes into unique insights to make informed decisions that drive value and mitigate risk.

The Determine platform is an open technology infrastructure based on smart process application models. The goal of our platform is to establish awareness of relevant data, manage business documents, embed analytical tools, create a means for collaboration, and provide advanced process management tools for fully integrating business processes through an open API infrastructure. Built on a unified and highly scalable platform, we deliver deep and innovative capabilities in strategic sourcing, supplier management, enterprise contract lifecycle management, eprocurement, invoicing, and other business operation areas.

Summary of Operating Results for Fiscal 2016

During the fiscal year ended March 31, 2016, our total revenues increased by 28% or $5.9 million, to $26.8 million compared with total revenues of $20.9 million for the fiscal year ended March 31, 2015. Recurring revenues, comprised of subscription license sales, maintenance revenues from previously sold perpetual licenses, manage application services, and hosting revenues, totaled $20.8 million or 78% of total revenues, representing an increase of $4.6 million, or 29% over fiscal 2015. Non-recurring revenues, comprised of revenues from professional services for system implementations, enhancements, and training, totaled $5.9 million, or 22%, of total revenues, representing an increase of $1.2 million or 26% over fiscal 2015. The increase in recurring and non-recurring revenues year over year resulted primarily from the acquisition of b-pack in the second quarter of fiscal 2016.

During the fiscal year ended March 31, 2016, our net loss increased by 2% or $0.3 million to $14.0 million compared to a net loss of $13.7 million for the fiscal year ended March 31, 2015. The most significant factors affecting the increase of our net loss were (i) restructuring costs of $0.5 million incurred in current year, and (ii) an increase in operating expenses in connection with the acquisition of b-pack and our ongoing investments in new and differentiated product offerings and additional headcount.

Shift in Business Model

In response to market demand, beginning in fiscal 2012, and continuing through fiscal year 2016, we have shifted our primary business focus from the sale of perpetual licenses to subscription license arrangements for our cloud-based solutions. Our business and revenue model is now focused on recurring revenues. This shift has adversely affected our short-term financial results and cash flows since the financial terms of the subscription arrangements typically require smaller periodic payments over the term of the arrangement versus the larger, initial payments we have historically received under the perpetual license arrangements. However, we believe that the subscription licensing arrangements have increased our ability to attract new customers and improve the predictability of our revenues and cash flows by reducing our dependency on the larger, perpetual licensing arrangements. Despite the shift in our business model to focus more on our subscription licensing arrangements, which has had the corresponding effect of increasing our recurring revenue, our customers have varied preferences for how they want to deploy our solutions. As such, we will continue to offer and support the traditional software license model that some of our customers still prefer.

Page 15

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Our significant accounting policies are described in notes accompanying the consolidated financial statements included in Item 8 of this Annual Report on Form 10-K. The preparation of the consolidated financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. Estimates are based on information available as of the date of the financial statements, and accordingly, actual results in future periods could differ from these estimates. Significant judgments and estimates used in the preparation of the consolidated financial statements apply critical accounting policies described in the notes to our consolidated financial statements.

We consider our recognition of revenue, collectability of accounts receivable, calculation of liabilities and stock-based compensation to be the most critical judgments that are involved in the preparation of the consolidated financial statements.

Results of Operations

Revenues

	2016			2015			Change
	(in thousands, except percentages)
Recurring revenues	$	20,843		$	16,207			4,636
Percentage of total revenues		78	%		78	%		0	%
Non-recurring revenues	$	5,917		$	4,670			1,247
Percentage of total revenues		22	%		22	%		0	%
Total revenues	$	26,760		$	20,877			5,883

Recurring revenues . Recurring revenues consist of subscription license sales, maintenance revenues from previously sold perpetual licenses, and hosting revenues. Our fiscal 2016 recurring revenues increased by $4.6 million from the prior year. Subscription revenue growth continued to drive the overall growth in recurring revenues. Subscription and hosting revenues grew to $15.8 million for fiscal year 2016, compared to $10.2 million for fiscal year 2015, representing a 54% increase year over year. These increases in recurring revenue were mainly due to the acquisition of b-pack and new customers we entered into contract with in this fiscal year. Maintenance revenues were $5.1 million for fiscal year 2016, compared $6.0 million for fiscal year 2015, representing a 15% decrease year over year. Recurring revenues continue to account for over 78% of our total revenues and we expect this trend to continue going forward.

Non-recurring revenues . Non-recurring revenues are comprised of professional services for system implementations, enhancements, and training. Our fiscal 2016 non-recurring revenue increased by $1.2 million from the prior year. These increases in non-recurring revenue were mainly due to the acquisition of b-pack.

Factors Affecting Operating Results

A small number of customers account for a significant portion of our total revenues. We expect that our revenue will continue to depend upon a limited number of customers. If we were to lose a customer, it would have a significant impact upon future revenue. Customers who accounted for at least 10% of total revenues were as follows:

	2016		2015
	(in thousands, except percentages
Revenues from Customer A	$	-	$	2,102
Percentage of total revenues		-		10	%

Sales to foreign customers accounted for only 21% of total revenue, and only 15% of revenues were denominated in foreign currency in fiscal 2016. Sales to foreign customers accounted for only 13% of total revenue, and only 4% of revenues were denominated in foreign currency in fiscal 2015.

Page 16

Cost of Revenues

	2016			2015			Change
Cost of recurring revenues	$	6,846		$	5,029			1,817
Percentage of total cost of revenue		53	%		41	%		12	%
Cost of non-recurring revenues	$	6,123		$	7,274			(1,151	)
Percentage of total cost of revenue		47	%		59	%		(12	%)
Total cost of revenues	$	12,969		$	12,303			666

Cost of recurring revenues. Cost of recurring revenues consist of costs associated with supporting our data center, a fixed allocation of our research and development costs, and salaries and related expenses of our support organization. During fiscal 2016, cost of recurring revenues increased $1.8 million or 36% compared to the prior year primarily due to the acquisition of b-pack.

Cost of non-recurring revenues. Cost of non-recurring revenues is comprised mainly of salaries and related expenses of our services organization, fees paid to resellers, costs of purchased third party licenses sold to customers as part of a bundled arrangement, and certain allocated corporate expenses. During fiscal 2016, these costs decreased by approximately $1.2 million primarily due to the decrease in headcount.

Gross Profit and Margin

Gross profit was $13.8 million, or 52% of revenues, in fiscal 2016 compared with $8.6 million, or 41% of revenues, in fiscal 2015. The increase in gross profit percentage during fiscal year 2016 resulted from higher gross margins from our non-recurring revenues due to a decrease in cost of revenue in professional services during fiscal 2016.

Gross margins represent gross profit as a percentage of revenue. Gross margins in fiscal 2016 and 2015 were affected by the factors discussed above under “Revenues” and “Cost of Revenues.”

Operating Expenses

	2016			2015
Research and development	$	3,612		$	3,373
Percentage of total revenues		13	%		16	%

Research and Development. Research and development expenses consist mainly of salaries and related costs of our engineering, quality assurance, technical publications efforts, and certain allocated expenses. The increase in research and development expenses of $0.2 million in fiscal 2016 compared to fiscal year 2015 was due to the acquisition of b-pack in fiscal 2016.

	2016			2015
Sales and marketing	$	13,222		$	12,697
Percentage of total revenues		49	%		61	%

Sales and Marketing. Sales and marketing expenses consist primarily of salaries and related costs for our sales and marketing organization, sales commissions, expenses for travel and entertainment, trade shows, public relations, collateral sales materials, advertising and certain allocated expenses. In fiscal 2016, sales and marketing expenses increased $0.5 million primarily due to the acquisition of b-pack and $0.3 million in commission expense.

	2016			2015
General and administrative	$	8,099		$	7,073
Percentage of total revenues		30	%		34	%

General and Administrative. General and administrative expenses consist mainly of personnel and related costs for general corporate functions, including finance, accounting, legal, human resources, acquisition related costs, bad debt expense and certain allocated expenses. General and administrative expenses increase of $1.0 million in fiscal 2016 compared with fiscal 2015 primarily due to the acquisition of b-pack in fiscal 2016.

Page 17

	2016			2015
Acquisition related costs	$	912		$	1,715
Percentage of total revenues		3	%		8	%

Acquisition related costs . Acquisition related expenses consist mainly of legal and accounting related costs. Acquisition related costs decrease of $0.8 million in fiscal 2016 compared with fiscal 2015 was primarily due to less outsourcing of the due diligence work for the acquisition of b-pack in fiscal 2016.

	2016			2015
Impairment of software development costs	$	1,368		$	340
Percentage of total revenues		5	%		2	%

Impairment of software development costs . Impairment of software development costs consist of compensation paid to engineering personnel and fees to outside contractors and consultants. Costs incurred internally in the development of our software products are expensed as incurred as R&D expenses until application development has been established, after which production costs are capitalized as software development costs. Impairment of software development costs increase of $1.0 million in fiscal 2016 compared with fiscal 2015 was primarily due to the acquisition integration strategies associated with the b-pack acquisition.

	2016			2015
Restructuring costs	$	451		$	-
Percentage of total revenues		2	%		0	%

Restructuring costs . Restructuring costs consist mainly of employee severance costs. During the fourth quarter of fiscal year 2016, the Company incurred a one-time restructuring charge of $0.5 million related to severance costs.

Capitalized Software

The Company capitalizes costs for internal use software incurred during the application development stage that are included in research and development expenses. Costs related to preliminary project activities and post implementation activities are expensed as incurred. Capitalized software will be amortized once the product is ready for its intended use, using the straight-line method over the estimated useful lives of the assets, w hich is three years. Management incurred impairment costs of $0.3 million in fiscal year ended March 31, 2015. During fiscal 2016, the Company continued to evaluate the capitalized software development costs across all products lines with the recent acquisition of b-pack. Given this conclusion, the Company impaired the investment previously made in what was to be a separate platform to hold all products, resulting in an impairment charge of $1.4 million in the fiscal year ended March 31, 2016.

Provision for Income Taxes

We recorded an income tax (benefit)/provision of ($545k) and ($2,950k) in fiscal 2016 and 2015. Our fiscal 2016 and 2015 effective tax rate differs from the federal statutory rate of 35% primarily due to the tax impact of changes in federal and state valuation allowances, R&D tax credits, uncertain tax positions, nondeductible expenses and foreign operations. Given our history of operating losses and our inability to achieve profitable operations, it is difficult to accurately forecast how results will be affected by the realization of net operating loss carryforwards.

Based upon the weight of available evidence, which includes our historical operating performance and the reported cumulative net losses in all prior years, we have provided a full valuation allowance against our net domestic and one French subsidiary’s foreign deferred tax assets. The remaining two French entities reflect a net foreign deferred tax liability due to intangibles arising from the acquisition offset by deferred tax assets, including net operating loss carryforwards. We will continue to evaluate the realizability of the deferred tax assets on a quarterly basis.

Page 18

Liquidity and Capital Resources

	2016			2015
	(in thousands)
Cash, cash equivalents and short-term investments	$	9,418		$	13,178
Working capital	$	(6,213	)	$	(117	)
Net cash used for operating activities	$	(5,927	)	$	(11,635	)
Net cash used for investing activities	$	(2,438	)	$	(6,464	)
Net cash provided by financing activities	$	4,631		$	14,370

Our primary sources of liquidity consisted of approximately $9.4 million in cash and cash equivalents as of March 31, 2016, $7.1 million of which was received from our short-term credit facility. This compares to approximately $13.2 million in cash and cash equivalents as of March 31, 2015, $7.4 million of which was received from our short-term credit facility.

Net cash used for operating activities was $5.9 million for the fiscal year ended March 31, 2016, resulting primarily from our net loss of $14.0 million, adjusted for non-cash expenses totaling $6.4 million, which included amortization and depreciation, impairment charge, and stock-based compensation expense.

Net cash used for operating activities was $11.6 million for the fiscal year ended March 31, 2015, resulting primarily from our net loss of $13.7 million, adjusted for non-cash expenses totaling $4.5 million, which included amortization and depreciation, impairment charge, and stock-based compensation expense.

Net cash used for investing activities was $2.3 million for the fiscal year ended March 31, 2016, resulting primarily from the acquisition of b-pack.

Net cash used for investing activities was $6.5 million for the fiscal year ended March 31, 2015, resulting primarily from the acquisition of Iasta.

Net cash provided by financing activities was $4.6 million for the fiscal year ended March 31, 2016, resulting primarily from $2.5 million received from the issuance of the December 2015 Notes offset by $0.4 million of payment of credit facility.

Net cash provided by financing activities was $14.4 million for the fiscal year ended March 31, 2015, resulting primarily from $3.0 million received from the issuance of debt and $12.3 million received from sale of preferred stock and warrants offset by $0.7 million of payment of credit facility and note inherited from the acquisition of Iasta.

We expect to incur significant operating costs for the foreseeable future. We expect to fund our operating costs, as well as our future capital expenditures and liquidity needs, from a combination of available cash balances, internally generated funds, and our short-term credit facility. As a result, our net cash flows will depend heavily on the level of future sales, changes in deferred revenues, and our ability to manage costs.

While we have made significant progress in reducing our expenditures, our current cash on hand and future cash flows provided by operating activities may not be sufficient to fund our working capital and general corporate needs and the non-discretionary capital expenditures without increasing cash flows through our operating activities, raising additional funds through the sale and issuance of additional securities, reducing expenditures, borrowing additional funds under our credit facility or debt arrangements, or a combination of the foregoing. There can be no guarantee that additional equity financing will be available to us at this time or in the future, that any available equity financing will be on terms favorable to the Company and its stockholders or that additional funds will be available under our credit facility.

Page 19

Contractual Obligations

The following table summarizes our outstanding contractual obligations as of March 31, 2016 and the effect those obligations are expected to have on our liquidity and cash flows in future periods:

	Payments Due by Period (in thousands)
Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 years		More than 5 Years
Operating lease—real estate	$	646	$	498	$	148	$	-	$	-
Customer Settlement payments		575		575		-		-		-
Loan from Lloyd I. Miller, III		7,400		-		1,900		5,500		-
France Coface Loan		407		407		-		-		-
Credit facility		7,100		7,100		-		-		-
Total	$	16,128	$	8,580	$	2,048	$	5,500	$	-

Our contractual obligations and commercial commitments at March 31, 2016 were approximately $16.1 million.

Off-balance sheet arrangements

We have no off-balance sheet arrangements or transactions with unconsolidated limited purpose entities, nor do we have any undisclosed material transactions or commitments involving related persons or entities.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are a “smaller reporting company” as defined by Regulation S-K and as such, are not required to provide the information contained in this item pursuant to Regulation S-K.

Item 8. Financial Statements and Supplementary Data.

Page 20

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	22
Consolidated Balance Sheets as of March 31, 2016 and 2015	23
Consolidated Statements of Operations and Comprehensive Loss—Years ended March 31, 2016 and 2015	24
Consolidated Statements of Redeemable Convertible Preferred Stock and Equity—Years ended March 31, 2016 and 2015	25
Consolidated Statements of Cash Flows—Years ended March 31, 2016 and 2015	26
Notes to Consolidated Financial Statements	27

Page 21

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Determine , Inc.

We have audited the accompanying consolidated balance sheets of Determine, Inc. (the “Company”) as of March 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and equity, and cash flows for each of the fiscal years in the two-year period ended March 31, 2016. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule listed in Item 15b. These consolidated financial statements and related financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal controls over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements and financial statement schedule referred to above present fairly, in all material respects, the financial position of Determine, Inc. at March 31, 2016 and March 31, 2015, and the consolidated results of their operations and their cash flows for each of the fiscal years in the two-year period ended March 31, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material aspects, the information set forth therein.

/s/ ARMANINO LLP

San Francisco, California

July 1, 2016

Page 22

DETERMINE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	March 31,			March 31,
	2016			2015

ASSETS
Current assets
Cash and cash equivalents	$	9,418		$	13,178
Accounts receivable, net of allowance for doubtful accounts of $407 and $205 as of March 31, 2016 and March 31, 2015, respectively		7,031			5,203
Restricted cash		34			34
Prepaid expenses and other current assets		1,551			1,647
Total current assets		18,034			20,062

Property and equipment, net		136			290
Capitalized software development costs, net		1,699			2,258
Goodwill		14,490			7,702
Other intangibles, net		8,011			6,453
Other assets		1,843			521
Total assets	$	44,213		$	37,286


LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY
Current liabilities
Credit facility	$	7,100		$	7,447
Accounts payable		1,973			1,535
Accrued payroll and related liabilities		1,655			910
Other accrued liabilities		2,396			1,877
Deferred revenue		10,299			8,410
Income tax payable		14			-
COFACE loan		407			-
Accrued restructuring		403			-
Total current liabilities		24,247			20,179

Long-term deferred revenue		67			22
Convertible note, net of debt discount		5,420			2,900
Other long-term liabilities		3,282			167
Deferred tax liability, non-current		290			-
Total liabilities		33,306			23,268

Commitments and contingencies (Notes 10 and 11):
Redeemable Convertible Preferred Stock:
Series F redeemable convertible preferred stock, $0.0001 par value, designated, issued and outstanding shares: 0 shares at March 31, 2016 and 119 shares at March 31, 2015		-			4,895

Common stock, $0.0001 par value: Authorized: 15,000 shares at March 31, 2015 and 2014; Issued: 11,387 and 8,019 shares at March 31, 2016 and 2015, respectively; Outstanding: 11,291 and 7,923 shares at March 31, 2016 and 2015, respectively		5			5
Additional paid-in capital		313,674			297,866
Treasury stock at cost - 96 shares at March 31, 2016 and 2015		(472	)		(472	)
Accumulated deficit		(302,297	)		(288,276	)
Accumulated other comprehensive loss		(116	)		-
Total Determine, Inc. stockholders' equity		10,794			9,123
Non-controlling interest		113			-
Total equity		10,907			9,123
Total liabilities, redeemable convertible preferred stock and equity	$	44,213		$	37,286

The accompanying notes are an integral part of these consolidated financial statements.

Page 23

DETERMINE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data)

	Fiscal Years Ended March 31,
	2016			2015


Revenues:
Recurring revenues	$	20,843		$	16,207
Non-recurring revenues		5,917			4,670
Total revenues		26,760			20,877

Cost of revenues:
Cost of recurring revenues		6,846			5,029
Cost of non-recurring revenues		6,123			7,274
Total cost of revenues		12,969			12,303

Gross profit:
Recurring gross profit		13,997			11,178
Non-recurring gross loss		(206	)		(2,604	)
Total gross profit		13,791			8,574

Operating expenses:
Research and development		3,612			3,373
Sales and marketing		13,222			12,697
General and administrative		8,099			7,073
Acquisition related costs		912			1,715
Impairment of software development costs		1,368			340
Restructuring costs		451			-
Total operating expenses		27,664			25,198

Loss from operations		(13,873	)		(16,624	)

Other income (expense), net		(700	)		(72	)

Net loss before income taxes		(14,573	)		(16,696	)
Benefit from income taxes		545			2,950
Net loss		(14,028	)		(13,746	)

Net loss attributed to non-controlling interest		7			-
Net loss attributable to Determine, Inc.		(14,021	)		(13,746	)

Redeemable preferred stock accretion		1,120			3,691
Net loss attributable to common stockholders	$	(15,148	)	$	(17,437	)

Basic and diluted net loss per share (Note 15)	$	(1.34	)	$	(1.89	)

Weighted-average shares of common stock used in computing basic and diluted net loss per share attributable to common stockholders		10,482			7,277



Statements of Comprehensive Loss:
Net loss	$	(14,028	)	$	(13,746	)
Foreign currency translation adjustments, net		(116	)		-
Comprehensive loss		(14,144	)		(13,746	)
Less: Net loss attributable to noncontrolling interest		7			-
Comprehensive loss attributable to Determine, Inc	$	(14,137	)	$	(13,746	)

The accompanying notes are an integral part of these consolidated financial statements.

Page 24

DETERMINE, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND EQUITY

(In thousands, except share data)

	Redeemable Convertible Preferred Stock						Common Stock				Additional Paid-In			Treasury Stock						Accumulated			Accumulated Other Comprehensive			Total Determine Stockholders’			Non- controlling			Total
	Shares			Amount			Shares		Amount		Capital			Shares			Amount			Deficit			Loss			Equity			Interest			Equity
Balance at March 31, 2014		680,470		$	3,653			4,790,463	$	4	$	278,083			(95,653	)	$	(472	)	$	(274,530	)		—		$	3,085			—		$	3,085

Conversion of Series D redeemable preferred stock to common stock, net of issuance costs of $53		(680,470	)		(3,653	)		690,274		—		3,653			—			—			—			—			3,653			—			3,653
Issuance of common stock, redeemable convertible Series E preferred stock, and warrants through a private placement, net of issuance costs of $100		124,891			6,419			—		—		—			—			—			—			—			—			—			—
Value of benefical conversion feature in Series E preferred stock		—			(1,571	)		—		—		1,571			—			—			—			—			1,571			—			1,571
Accretion of preferred Series E stock to redemption value		—			2,645			—		—		(2,645	)		—			—			—			—			(2,645	)		—			(2,645	)
Warrants to purchase common stock issued in connection with Series E private placement		—			—			—		—		809			—			—			—			—			809			—			809
Conversion of Series E redeemable preferred stock to common stock, net of issuance costs		(124,891	)		(7,493	)		1,248,905		1		7,492			—			—			—			—			7,493			—			7,493
Issuance of stock in consideration of Merger		—			—			1,000,000		—		6,610			—			—			—			—			6,610			—			6,610
Issuance of redeemable convertible Series F preferred stock, and warrants through a private placement, net of issuance costs of $350		118,829			4,413			—		—		—			—			—			—			—			—			—			—
Value of benefical conversion feature in Series F preferred stock		—			(564	)		—		—		564			—			—			—			—			564			—			564
Accretion of preferred Series F stock to redemption value		—			1,046			—		—		(1,046	)		—			—			—			—			(1,046	)		—			(1,046	)
Warrants to purchase common stock issued in connection with Series F private placement		—			—			—		—		678			—			—			—			—			678			—			678
Beneficial conversion feature for convertible note		—			—							100			—			—			—			—			100			—			100
ESPP purchase		—			—			48,833		—		215			—			—			—			—			215			—			215
Exercise of stock options		—			—			1,718		—		—			—			—			—			—			—			—			—
Issuance of restricted stock, net of witholding employee taxes		—			—			238,375		—		(756	)		—			—			—			—			(756	)		—			(756	)
Stock-based compensation expense		—			—			—		—		2,538			—			—			—			—			2,538			—			2,538
Net Loss		—			—			—		—		—			—			—			(13,746	)		—			(13,746	)		—			(13,746	)
Balance at March 31, 2015		118,829		$	4,895			8,018,568	$	5	$	297,866			(95,653	)	$	(472	)	$	(288,276	)		—		$	9,123			—		$	9,123

Issuance of redeemable convertible Series F preferred stock, and warrants through a private placement		6,596			250			—		—		—			—			—			—			—			—			—			—
Value of benefical conversion feature in Series F preferred stock		—			(370	)		—		—		370			—			—			—			—			371			—			371
Accretion of preferred Series F stock to redemption value		—			1,120			—		—		(1,120	)		—			—			—			—			(1,120	)		—			(1,120	)
Warrants to purchase common stock issued in connection with Series F private placement		—			—			—		—		60			—			—			—			—			60			—			60
Conversion of Series F redeemable preferred stock to common stock, net of issuance costs of $18		(125,425	)		(5,895	)		1,254,246		—		5,877			—			—			—			—			5,877			—			5,877
Issuance of stock in consideration of Merger		—			—			1,841,244		—		7,954															7,954			120			8,075
Stock issued in connection with interest on convertible note								69,731		-		365															365						365
ESPP purchase		—			—			64,178		—		171			—			—			—			—			171			—			171
Issuance of restricted stock, net of witholding employee taxes		—			—			138,898		—		(259	)		—			—			—			—			(259	)		—			(259	)
Stock-based compensation expense		—			—			—		—		2,389			—			—			—			—			2,389			—			2,389
Foreign currency translation adjustment		—			—			—		—		—			—			—			—			(116	)		(116	)		—			(116	)
Net loss		—			—			—		—		—			—			—			(14,021	)		—			(14,021	)		(7	)		(14,028	)
Balance at March 31, 2016		-		$	0			11,386,865	$	5	$	313,674			(95,653	)	$	(472	)	$	(302,297	)	$	(116	)	$	10,794		$	113		$	10,907

The accompanying notes are an integral part of these consolidated financial statements.

Page 25

DETERMINE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Fiscal Years Ended March 31,
	2016			2015
	(in thousands)
Operating activities
Net loss	$	(14,021	)	$	(13,746	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,680			1,530
Gain on disposition of property and equipment		(13	)		-
Deferred tax liability		(46	)		1,270
Accrued restructuring costs		403			-
Impairment of capitalized software		1,368			340
Stock-based compensation expense		2,389			2,538
Changes in assets and liabilities, net of business combination:
Accounts receivable, net		(154	)		421
Restricted cash		-			(34	)
Prepaid expenses and other current assets		200			(505	)
Other assets		(1,061	)		(2	)
Accounts payable		199			(195	)
Accrued payroll and related liabilities		(202	)		(421	)
Other accrued liabilities and long term liabilities		1,265			158
Deferred revenue		1,066			(2,989	)
Net cash used in operating activities		(5,927	)		(11,635	)

Investing activities
Purchase of property and equipment		(6	)		(51	)
Capitalized software		(1,383	)		(1,962	)
Minority shareholder payment		(133	)		-
Purchase of business acquired, net of cash		(826	)		(4,451	)
Net cash used in investing activities		(2,348	)		(6,464	)

Financing activities
Proceeds from sale of preferred stock with warrants, net of issuance costs		260			12,319
Employee taxes paid in exchange for restricted stock awards forefeited		(175	)		(578	)
Issuance of common stock under employee stock plan		171			215
Credit facility borrowing		-			496
Credit facility payment		(347	)		(655	)
Repayment of loan		(47	)		(277	)
Fees paid in connection with conversion of preferred stock to common stock		(17	)		-
Issuance of convertible note, net		4,786			3,000
Cost associated with promissory note		-			(150	)
Net cash provided by financing activities		4,631			14,370

Effect of exchange rate changes on cash		(116	)		-


Net decrease in cash and cash equivalents		(3,760	)		(3,729	)
Cash and cash equivalents at beginning of the period		13,178			16,907
Cash and cash equivalents at end of the period	$	9,418		$	13,178

Supplemental disclosure of cash flow information:
Cash paid for interest	$	105		$	35
Beneficial conversion feature for convertible redeemable preferred stock	$	370		$	2,135
Accretion of preferred series stock to redemption value	$	1,120		$	3,691
Conversion of redeemable preferred stock to common stock	$	5,877		$	11,145
Issuance of shares in business combination	$	7,954		$	6,610
Assumption of debt in connection with business combination	$	587		$	932
Stock issued in connection with interest on convertible note	$	365		$	-

The accompanying notes are an integral part of these consolidated financial statements.

Page 26

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 . Summary of Business

Determine, Inc. (the “Company” or “Determine”) is a leading provider of enterprise contract management, supply management, and configuration solutions. Since 1996, Determine has helped global companies actively manage their contracts throughout the sales, procurement, and legal life cycle. Determine’s contract lifecycle management, strategic sourcing, and purchasing solutions drive business value by assisting organizations in managing contracts profitably, effectively accelerating revenue opportunities, and minimizing risk through compliance. Our patented technology assists customers across a myriad of industries—including high-tech, telecommunications, manufacturing, healthcare, and financial services—to accelerate and streamline contract management, sales processes, spend analysis, procurement intelligence, sourcing, and supplier lifecycle management. Determine also provides a powerful configuration engine, which Fortune 500 companies use to increase revenue by facilitating the right combination of products, services, and price.

On October 15, 2015, the Company amended its certificate of incorporation to change our name from Selectica, Inc. to Determine, Inc., which change became effective immediately. Effective October 15, 2015, the Company also amended and restated our Bylaws to change our name from Selectica, Inc. to Determine, Inc., which change became effective immediately. The Company’s common stock trades under the ticker symbol “DTRM” effective October 19, 2015.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of the Company and our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. It also includes non-controlling interest, which is the portion of equity in a subsidiary not attributable to a parent. The non-controlling interest of the Company and its subsidiaries are not considered to be permanent equity. Non-controlling interest’s share of subsidiary earnings is reflected as net income attributable to non-controlling interest in the consolidated statements of operations and comprehensive loss.

Liquidity

The Company has incurred significant historical losses and negative cash flows from operations and has an accumulated deficit of $302.3 million at March 31, 2016. Until the Company can generate significant cash from operations, its ability to continue as a going concern is dependent upon obtaining additional financing. Management intends to raise additional funds through equity and/or debt offerings until the Company has positive operating cash flows. There is no assurance that the Company will be successful in generating or raising funds, if necessary, to sustain its operations for twelve months or beyond. Should the Company be unable to generate funds or obtain future financing, the Company may have to curtail operations by delaying development programs or relinquishing employees, which may have a material adverse effect on the Company's financial position and results of operations. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Non-Controlling Interest

On July 31, 2015, the Company completed its acquisition of b-pack and its subsidiaries resulting in Determine SAS continuing as a wholly-owned subsidiary of the Company. Determine SAS is headquartered in Paris, France, and has the following subsidiaries: b-pack Software, in charge of the sales and marketing, b-pack Services, incorporated in Aix-en-Provence, France and b-pack, Inc. incorporated in Atlanta, Georgia that primarily operates as a sales office in the US. b-pack, Inc. became a subsidiary of Determine, Inc. and was then merged into Determine, Inc. b-pack Software became a subsidiary of Determine SAS and was then merged into Determine SAS. As of March 31, 2016 neither b-pack, Inc. nor b-pack Software existed. The consolidated financial statements include the financial position and results of operations of b-pack Services in which the Company owns 82%, maintaining a controlling interest. A summary of b-pack Services is as follows as of and for the year ended March 31, 2016:

Total assets	$	517,000
Total liabilities	$	(822,000	)
Loss before income taxes	$	(72,000	)

Page 27

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Change in Presentation of Financial Statements

During the fiscal year ended March 31, 2016, the Company changed the presentation of its consolidated financial statements to separate the impairment of capitalized software development costs and acquisition related costs from operating expenses. Previously, these costs were included in research and development expenses of $0.3 million and general and administrative expenses of $1.7 million, respectively, to conform to the current year’s presentation. This reclassification of the prior period amounts did not change the previously reported operating loss or net loss.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to the accounts receivable and allowance for doubtful accounts, fair values of financial instruments, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, and accounts receivable. The Company is exposed to credit risk in the event of default by these institutions to the extent of the amount recorded on the balance sheet. The Company’s cash balances periodically exceed the FDIC insured amounts. Accounts receivable are derived from revenue earned from customers primarily located in the United States. The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral. The Company maintains reserves for potential credit losses, and historically, such losses have not been significant.

Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company’s cash equivalents consist of money market funds and commercial paper. Fair values of cash equivalents approximated original cost due to the short period of time to maturity. The cost of securities sold is based on the specific identification method. The Company’s investment policy limits the amount of credit exposure to any one issuer of debt securities.

Restricted Cash

The Company’s restricted cash consist of certificates of deposits for our credit card for our office in the UK.

Accounts Receivable, Net of Allowance for Doubtful Accounts

The Company evaluates the collectability of its accounts receivable based on a combination of factors. When the Company believes a collectability issue exists with respect to a specific receivable, the Company records an allowance to reduce that receivable to the amount that it believes to be collectible. In making the evaluations, the Company will consider the collection history with the customer, the customer’s credit rating, communications with the customer as to reasons for the delay in payment, disputes or claims filed by the customer, warranty claims, non-responsiveness of customers to collection calls, and feedback from the responsible sales contact. In addition, the Company will also consider general economic conditions, the age of the receivable and the quality of the collection efforts.

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method based on estimated useful lives. The estimated useful lives for computer software and equipment is three years, furniture and fixtures is five years, and leasehold improvements is the shorter of the lease term or estimated useful life.

Page 28

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Business Combinations

The Company accounts for acquisitions using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805 - Business Combinations. Under the acquisition method of accounting, the total purchase consideration of an acquisition is allocated to the tangible assets and identifiable intangible assets and liabilities assumed based on their fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets acquired and liabilities assumed is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from customer relationships and acquired patents and developed technology; and discount rates. Management’s estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Intangible Assets and Impairment of Long-Lived Assets

Intangible assets consist of customer relationships, trade names, and acquired technology. Intangible assets are recorded at fair value at the date of the acquisition and, for those assets having finite useful lives, are amortized using the straight-line method over their estimated useful lives, which generally range from two to five years. The Company periodically reviews its intangible and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company then compares the carrying amounts of the assets with the future net undiscounted cash flows expected to be generated by such asset. Should an impairment exist, the impairment loss would be measured based on the excess carrying value of the asset over the asset’s fair value determined using discounted estimates of future cash flows. There was a $1.4 million and $0.3 million impairment charge recorded during the years ended March 31, 2016 and 2015, respectively.

Goodwill

Goodwill represents the excess of the purchase consideration over the net tangible and an identifiable intangible asset acquired in a business combination and is allocated to reporting units expected to benefit from the business combination. The Company tests goodwill for impairment at least annually or more frequently if events or changes in circumstances indicate that the assets may be impaired. The Company has elected to first assess certain qualitative factors to determine whether it is more likely than not that the fair value of its single reporting operating unit is less than the carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. If the Company determines that it is more likely than not that the fair value is less than its carrying amount, then the two-step goodwill impairment test will be performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step will be performed; otherwise, no further step is required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the applied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. There was no impairment charge recorded during years ended March 31, 2016 and 2015.

Customer Concentrations

A limited number of customers have historically accounted for a substantial portion of the Company’s revenues. The following table presents customers that accounted for more than 10% of revenue:

	2016		2015
	(in thousands, except percentages)
Revenues from Customer A	$	-	$	2,102
Percentage of total revenues		-		10	%

As of March 31, 2016, no customers accounted for at least 10% of net accounts receivable or revenue. As of March 31, 2015, Customer A accounted for 15% of net accounts receivable.

Page 29

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Revenue Recognition

The Company generates revenues by providing its software-as-a-service solutions through subscription license arrangements and related professional services, and related software maintenance. The Company presents revenue net of sales taxes and any similar assessments.

Revenue recognition criteria . The Company recognizes revenue when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) fees are fixed or determinable and (4) collectability is reasonably assured. If the Company determines that any one of the four criteria is not met, the Company will defer recognition of revenue until all the criteria are met.

Multiple-Deliverable Arrangements. The Company enters into arrangements with multiple-deliverables that generally include subscription, support, and professional services. If a deliverable has standalone value, and delivery is probable and within the Company’s control, the Company accounts for the deliverable as a separate unit of accounting. Subscriptions to use our software solutions have standalone value as such services are often sold separately, primarily through renewals. Professional services have standalone value as the services have value to the customer on a standalone basis and are available from other vendors.

Upon separating the multiple-deliverables into separate units of accounting, the arrangement consideration is allocated to the identified separate units based on a relative selling price hierarchy. The Company determines the relative selling price for a deliverable based on its vendor-specific objective evidence of selling price (“VSOE”), if available, or its best estimate of selling price (“BESP”), if VSOE is not available. The Company has determined that third-party evidence of selling price (“TPE”) is not a practical alternative due to differences in its service offerings compared to other parties and the availability of relevant third-party pricing information. The amount of revenue allocated to delivered items is limited by contingent revenue, if any.

For professional services and subscription services, the Company has not established VSOE due to lack of pricing consistency, and other factors. Accordingly, the Company uses its BESP to determine the relative selling price.

The Company determined BESP by considering its price list, as well as overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the Company’s discounting practices, contract prices per user, the size and volume of the Company’s transactions, the customer demographic, and its market strategy.

Recurring revenues. Recurring revenues consist of subscription license sales, maintenance revenues from previously sold perpetual licenses, and hosting revenues. Recurring revenues are recognized ratably over the stated contractual period.

Non-recurring revenues. Non-recurring revenues are comprised of revenues from professional services for system implementations, enhancements, and training. For professional services arrangements billed on a time-and-materials basis, services are recognized as revenue as the services are rendered. For fixed-fee professional service arrangements, the Company recognizes revenue under the proportional performance method of accounting and estimates the proportional performance utilizing hours incurred to date as a percentage of total estimated hours to complete the project. If the Company does not have a sufficient basis to measure progress toward completion, revenue is recognized upon completion. The Company recognizes a loss for a fixed-fee professional service if the total estimated project costs exceed project revenues.

Reimbursements, including those related to travel and out-of-pocket expenses are included in non-recurring revenues, and an equivalent amount of reimbursable expenses is included in non-recurring cost of revenues.

Advertising Expense

The cost of advertising is expensed as incurred. Advertising expense for the years ended March 31, 2016 were approximately $588,000. Advertising expense for the years ended March 31, 2015 were approximately $614,000.

Foreign Currency

For the Company’s UK subsidiary, the functional currency is the U.S. dollar. Non-monetary assets and liabilities are translated into U.S. dollar equivalents at the exchange rate in effect on the balance sheet date and revenues and expenses are translated into U.S. dollars using the average exchange rate over the period. Net gains and losses resulting from foreign exchange transactions are recorded in other income (expense), net in the consolidated statements of operations. For French subsidiaries whose functional currency is the local currency, assets and liabilities are translated into U.S. dollar equivalents at the exchange rate in effect on the balance sheet date and revenues and expenses are translated into U.S. dollars using the average exchange rate over the period. Resulting currency translation adjustments are recorded in accumulated other comprehensive loss in the consolidated balance sheets.

Page 30

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Accumulated Other Comprehensive Los s

The accumulated other comprehensive loss balance consists of translation gains and losses related to our international subsidiaries with functional currencies other than the U.S. dollar, primarily the Euro.

Capitalized Software Development Costs

Stock-Based Compensation

The Company recognizes stock-based compensation expense for only those awards ultimately expected to vest on a straight-line basis over the requisite service period of the award, net of an estimated forfeiture rate. The Company estimates the fair value of stock options using a Black-Scholes-Merton valuation model, which requires the input of highly subjective assumptions, including the option’s expected term and stock price volatility. In addition, judgment is also required in estimating the number of stock-based awards that are expected to be forfeited. Forfeitures are estimated based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, its stock-based compensation expense could be materially different in the future.

Geographic Information:

International revenues are attributable to countries based on the location of the customers. For the years ended March 31, 2016 and 2015, sales to international locations were derived primarily from France, Bermuda, China, Denmark, Brazil, Canada, India, Italy, Singapore, New Zealand, Switzerland, Germany, Hong Kong, Ireland, Norway and the United Kingdom.

	Fiscal Years Ended March 31,
	2016			2015
	(in thousands, except percentages)
International revenue		21	%		13	%
Domestic revenue		79	%		87	%
Total revenue		100	%		100	%

For the years ended March 31, 2016 and 2015, the Company held long-lived assets outside of the United States with a net book value of approximately $13,000 and $47,000, respectively. These assets were located in Odessa, Ukraine.

Treasury Stock

There were no stock repurchases for the years ended March 31, 2016 and March 31, 2015.

The Company had approximately 96,000 shares of treasury stock as of March 31, 2016 and March 31, 2015.

Page 31

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Recent Accounting Pronouncements

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which simplifies the presentation of deferred income taxes by eliminating the need for entities to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. ASU 2015-17 is effective for companies beginning after December 15, 2016, with early application permitted as of the beginning of an interim or annual reporting period. The Company has already adopted in current fiscal year, thus resulting in the reclassification of current deferred tax assets to noncurrent on the accompanying consolidated balance sheet. The prior reporting period was not retrospectively adjusted. The adoption of this standard has no impact on our consolidated results of net income (loss) or comprehensive income (loss).

In January 2016, FASB issued Accounting Standards Update 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10) (“ASU 2016-01”). The new standard provides guidance for the recognition, measurement, presentation and disclosure of financial instruments. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is not permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-01 on its consolidated financial statements.

In February 2016, FASB issued Accounting Standards Update No. 2016-02, Leases (“ASU 2016-02”). The new guidance generally requires an entity to recognize on its balance sheet operating and financing lease liabilities and corresponding right-of-use assets. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on its consolidated financial statements.

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (“ ASU 2016-13”). The ASU sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently assessing the impact of the adoption of this ASU on its consolidated financial statements.

In September 2015, the FASB issued Accounting Standards Update No. 2015-16, Simplifying the Accounting for Measurement-Period Adjustments (“ASU 2015-16”). ASU 2015-16 eliminates the requirement to restate prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of a measurement period adjustment (including the impact on prior periods) be recognized in the reporting period in which the adjustment is identified. In addition, separate presentation on the face of the income statement or disclosure in the notes is required regarding the portion of the adjustment recorded in the current period earnings, by line item, that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. ASU 2015-16 is to be applied prospectively for measurement period adjustments that occur after the effective date. ASU 2015-16 is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2015, and early adoption is permitted. Since it is prospective, the impact of ASU 2015-16 on the Company’s financial condition and earnings will depend upon the nature of any measurement period adjustments identified in future periods.

In June 2015, the FASB issued Accounting Standards Update No. 2015-10, Technical Corrections and Improvements (“ASU 2015-10”). ASU 2015-10 amends a wide range of Accounting Standards Codification topics to make clarifying changes, correct unintended application of guidance, and make minor changes that are not expected to have a significant effect on current accounting practice or create a significant administrative cost on most entities. The Company does not anticipate that the adoption of ASU 2015-10 will have a material impact on its consolidated financial statements and related disclosures.

In April 2015, the Financial Accounting Standards Board (the “FASB”) issued ASU 2015-05, Intangibles−Goodwill and Other−Internal-use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement, providing guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The new guidance does not change the accounting for a customer’s accounting for service contracts. The standard update is effective for fiscal years beginning after December 15, 2015 and interim. We are currently evaluating the impact of adopting this update on our consolidated financial statements.

Page 32

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). This ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance is applicable to the Company for fiscal years beginning after December 15, 2015. Early adoption of ASU 2015-03 is permitted. The Company adopted this guidance effective April 1, 2015. In August 2015, the FASB issued ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU 2015-15 supplements the requirements of ASU 2015-03 by allowing an entity to defer and present debt issuance costs related to a line of credit arrangement as an asset and subsequently amortize the deferred costs ratably over the term of the line of credit arrangement. The Company has not determined in which period it will adopt the new guidance. Retrospective adoption is required. Long-term debt issuance costs will be reclassified from other assets to long-term debt upon adoption.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Subtopic 810) Amendments to the Consolidation Analysis , to improve consolidation guidance for legal entities and affect the consolidation evaluation for reporting organizations. The standard update is effective for fiscal years beginning after December 15, 2015 and interim periods within those years and early adoption is permitted. The standard allows for adoption retrospectively or with a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. We are currently evaluating the impact of adopting this update on our consolidated financial statements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) which amended the existing FASB Accounting Standards Codification. This standard establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The standard also provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. In April 2015, the FASB proposed a one-year deferral of the effective date for the new revenue reporting standard for entities reporting under U.S. GAAP. In accordance with the deferral, ASU 2014-09 will be effective for fiscal 2019, including interim periods within that reporting period. The Company is currently in the process of assessing the adoption methodology, which allows the amendment to be applied retrospectively to each prior period presented, or with the cumulative effect recognized as of the date of initial application. The Company is also evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial statements and has not determined whether the effect will be material to either its revenue results or its deferred commission balances.

In August 2014, FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40). The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company does not expect to early adopt this guidance and does not believe that the adoption of this guidance will have a material impact on its consolidated financial statements.

Page 33

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

3.	Acquisition

b-pack SAS

On July 31, 2015, the Company completed its acquisition of b-pack SAS, a French société par actions simplifiée (“b-pack”). As a result of the merger, the b-pack stockholders received an aggregate cash payment of $1.1 million and 1,841,244 shares of common stock of the Company, par value $0.0001, resulting in Determine SAS continuing as a wholly-owned subsidiary of the Company. The acquisition of b-pack positions the Company to provide easier access to contract management, strategic sourcing, spend management and Configuration solutions, and increases the Company’s market coverage in more locations worldwide to its customers.

b-pack SAS, was founded on December 5, 2005, and is a software-as-a-service (SaaS) business that offers a suite of cloud-based applications that help companies significantly reduce costs by optimizing, streamlining, and automating complex procurement processes with an integrated, end-to-end platform that facilitates and promotes an environment for responsible spending. Pre-merger, b-pack SAS was headquartered in Paris, France, and had the following subsidiaries: b-pack Software, b-pack Services, and b-pack, Inc. b-pack Software was 99.94% owned by b-pack SAS and was incorporated in Paris, France. b-pack Software was in charge of the sales and marketing development of Europe. b-pack Services was 82% owned by b-pack SAS and was incorporated in Aix-en-Provence, France. The remaining 18% is held by non-controlling interest shareholder. b-pack, Inc. was a wholly-owned subsidiary of b-pack SAS. b-pack, Inc. was incorporated in Atlanta, Georgia and primarily operated as a sales office in the US. Pursuant to an Agreement and Plan of Merger, dated as of March 30, 2015, b-pack merged with and into Determine SAS and Determine SAS continued as the surviving entity. The Company's operations are subject to significant risks and uncertainties, including competitive, financial, developmental, operational, technological, regulatory, and other risks associated with an emerging business.

The Company recorded the assets acquired and liabilities assumed at their estimated fair value, with the difference between the fair value of the net assets acquired and the purchase consideration reflected as goodwill. The working capital has been finalized. The acquisition consideration is comprised of the following:

(in thousands)
Cash paid	$	1,056
Total stock value		7,954
Total purchase price	$	9,010

The following table reflects the fair values of assets acquired and liabilities assumed as of the acquisition date (in thousands):

Cash and cash equivalents	$	654
Accounts receivable, net		1,674
Prepaid and other assets		105
Deferred income tax		260
Customer relationships		1,640
Developed technology		1,860
Goodwill (inclu. assembled workforce)		6,934
Other assets		268
Accounts payable		(289	)
Accrued payroll and related benefits		(1,031	)
COFACE loan		(428	)
Deferred revenue		(868	)
Accrued expenses		(210	)
VAT payable		(265	)
Deferred tax liability - current		(1,173	)
Non controlling interest		(121	)
Total net assets	$	9,010

Page 34

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

The goodwill of $6.9 million is primarily attributed to the synergies expected to arise after the acquisition and fair value of assembled workforce. We record goodwill in connection with the acquisition of businesses when the purchase price exceeds the fair values of the assets acquired and liabilities assumed. Generally, the most significant intangible assets from the businesses that we acquire are the assembled workforces, which includes the human capital of the management, administrative, marketing and business development, engineering and technical employees of the acquired businesses. Since intangible assets for assembled workforces are part of goodwill in accordance with the accounting standards for business combinations, the substantial majority of the intangible assets for our business acquisitions are recognized as goodwill. No goodwill was deemed to be deductible for income tax purposes.

Iasta.com, Inc. and Iasta Resources, Inc.

On July 2, 2014, the Company completed its acquisition of Iasta.com, Inc., an Indiana corporation, and Iasta Resources, Inc., an Indiana corporation (together, “Iasta”). Pursuant to the Agreement and Plan of Merger dated June 2, 2014, among the Company, Selectica Sourcing, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Selectica Sourcing”), Iasta and Iasta’s shareholders, Iasta merged with and into Selectica Sourcing, with Selectica Sourcing continuing as a wholly owned subsidiary of the Company.

The total purchase price for Iasta included 1,000,000 shares of the Company’s common stock valued at $6.6 million, and cash of $6.5 million, adjusted for amounts related to the repayment of $0.7 million for outstanding borrowings under a line of credit, $0.3 million related to a note payable and payment of transaction costs and certain other adjustments. The total purchase price is subject to a $1.4 million cash escrow (the “Escrow”) to cover any post-closing adjustments and indemnification obligations of the former Iasta shareholders. A portion of the Escrow will be released on the 12-month anniversary of the closing of the acquisition, and the escrow was released as part of a settlement between the Company and the Iasta shareholders. In addition, the Company granted options to certain employees of Iasta to purchase up to 700,000 shares of the Company’s common stock.

The assets acquired and liabilities assumed in connection with the acquisition of Iasta were recorded at their fair values as of the acquisition date. The total purchase price was comprised of the following:

(in thousands)
Cash Paid	$	6,494
Total Stock value		6,610
Working Capital Adjustment		(734	)
Total Purchase Price	$	12,370

Page 35

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Summary
(in thousands)
Cash	$	1,491
Restricted cash		139
Accounts receivable		2,618
Prepaid and other Assets		314
Fixed assets, net		188
Customer relationships		4,210
Developed technology		3,170
Trade name		120
Goodwill		7,702
Other long term assets		340
Accounts payable and accrued expenses		(562	)
Accrued and payroll benefits		(688	)
Credit facility		(655	)
Notes payable		(277	)
Other current liabilities		(718	)
Deferred revenue		(2,033	)
Deferred tax asset - current		280
Deferred tax liability - non current		(3,269	)
Total value of assets acquired and liabilities assumed	$	12,370

The purchase price allocation includes goodwill of $7.7 million, which is primarily attributable to the synergies expected to arise after the acquisition and fair value of assembled workforce. The Company incurred $0.4 million of transactional costs which is recorded as part of General and Administrative expenses during the year ended March 31, 2015. The acquired working capital has been finalized and impacted goodwill balance post acquisition date. The goodwill is not deductible for income tax purposes.

Finalization of preliminary purchase price allocation

Under U.S. GAAP, the period that is allowed for finalizing the identification and measurement of the fair value of the assets acquired and the liabilities assumed in a business combination ends when the acquiring entity is no longer waiting for information that it has arranged to obtain and that is known to be available or obtainable. At March 31, 2016, the Company determined that its measurement and recognition of assets acquired and liabilities assumed in the Iasta and b-pack acquisition was recorded on a final basis.

Unaudited Pro Forma Financial Information

The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and b-pack, which was considered a “significant” acquisition (as defined in Regulation S-X) for the purposes of unaudited pro forma financial information disclosure, as though the companies were combined as of April 1, 2014. The pro forma financial information for all periods presented also includes the business combination accounting effects resulting from the b-pack acquisition including amortization charges from acquired intangible assets and stock-based compensation charges for unvested stock option awards, as though the Company and b-pack were combined as of April 1, 2014. The related tax effect was insignificant.

The pro forma financial information, as presented below, is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition of b-pack had taken place as of the beginning of each period presented. T he pro forma financial information does not reflect the impact of any reorganization or operating efficiencies resulting from combining the two companies.

Page 36

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

The historical financial information has been adjusted to give effect to the pro forma events that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated financial information reflects assuming the acquisition had occurred on April 1, 2014 . Acquisition related expenses are included in general and administrative expenses.

	Fiscal Year Ended
	2016			2015
	(in thousands, except per share data)

Revenue	$	33,235		$	29,724
Loss from operations	$	(19,061	)	$	(20,925	)
Net loss	$	(19,787	)	$	(18,218	)
Basic and diluted net loss per share	$	(1.89	)	$	(2.50	)

4. Goodwill and Purchased Intangible Assets

The following is a summary of goodwill (in thousands):

Balance at March 31, 2014	$	-
Goodwill acquired		8,436
Working capital adjustment		(734	)
Balance at March 31, 2015		7,702
Goodwill acquired		6,934
Deferred tax adjustment		(146	)
Balance at March 31, 2016	$	14,490

The following is a summary of purchased intangible assets (in thousands):

	March 31, 2016
	Gross		Accumulated		Net
	Carrying		Amortization		Carrying
	Amount				Value
Acquired developed technology	$	5,034	$	1,367	$	3,667
Customer relationships		5,853		1,509		4,344
Trade name		120		120		-

	$	11,007	$	2,996	$	8,011

	March 31, 2015
	Gross		Accumulated		Net
	Carrying		Amortization		Carrying
	Amount				Value
Acquired developed technology	$	3,170	$	476	$	2,694
Customer relationships		4,210		526		3,684
Trade name		120		45		75

	$	7,500	$	1,047	$	6,453

Acquired developed technology, and customer relationships are being amortized on a straight-line basis and have weighted-average remaining useful lives of 3.65 years and 3.91 years respectively, as of March 31, 2016.

Amortization expense was $1.9 million and $1.0 million for the years ended March 31, 2016 and 2015, respectively.

Page 37

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

As of March 31, 2016, amortization expense for intangible assets for each of the next five years is as follows:

Year ended Mach 31:	(in thousands)
2017	$	2,119
2018		2,119
2019		2,119
2020		1,370
2021		284
Total	$	8,011

5.	Private Placement Funding with Redeemable Convertible Preferred Stock and Warrants

On February 6, 2015, pursuant to the terms of a Purchase Agreement between the Company and certain institutional funds and other accredited investors, the Company sold and issued 118,829 shares of Series F Convertible Preferred Stock, par value $0.0001 per share (the “Series F Stock”) to such investors at a purchase price of $47.00 per whole share of Series F Stock (or $4.70 per one-tenth of a share of Series F Stock), for an aggregate gross purchase price of approximately $5.6 million (the “2015 Financing”). In addition to the issuance of the Series F Stock, the Company issued to each investor a warrant to purchase common stock, initially exercisable for an aggregate of 594,143 shares of common stock (the “February 2015 Warrants”). The exercise price of the 2015 Warrants is $6.00 per share. The 2015 Warrants have a five-year term and became exercisable on August 6, 2015. The estimated fair value of the warrants using the Black-Scholes-Merton valuation model at the issuance date is $777,500. The total proceeds raised in the 2015 Financing equal approximately $5.6 million. The Series F Stock converted into an aggregate of 1,188,291 shares of common stock on May 5, 2015 following stockholder approval.

In addition, on May 5, 2015, pursuant to the Subscription Agreement, dated as of February 6, 2015, by and among the Company and certain members of the Company’s management and Board of Directors, the Company sold and issued to the Management and Director Investors (i) 65,955 shares of common stock of the Company, par value $0.0001 per share (“Common Stock”), at a purchase price of $4.70 per common share, for a total purchase amount of approximately $310,000 and (ii) warrants to purchase common stock of the Company (the “May 2015 Warrants”), initially exercisable for an aggregate of 32,975 shares of common stock.

The holders of Series F Stock had the right to vote together with the holders of the Company’s common stock as a single class on any matter on which the holders of common stock were entitled to vote, except that the holders of Series F Stock were not eligible to vote their shares of Series F Stock on the proposal submitted to the Company’s stockholders for approval of the issuance and sale of the securities in the 2015 Financing and the conversion of the Series F Stock. Holders of Series F Stock were entitled to cast a fraction of one vote for each share of common stock issuable to such holder on the record date for the determination of stockholders entitled to vote at a conversion rate the numerator of which was $47.00 and the denominator of which was the closing bid price per share of the common stock on February 5, 2015.

(a)

Presentation of February and May 2015 Warrants

The Company has evaluated the February and May 2015 Warrants and has concluded that equity classification is appropriate as all such February and May 2015 Warrants are considered to be indexed to the Company’s equity and there are no settlement provisions that would result in classification as a debt instrument. Such warrants are included in the Company’s stockholders’ equity and are not subject to remeasurement.

(b)

Presentation of Redeemable Convertible Preferred Stock

On May 5, 2015, following approval by the Company’s stockholders, each whole share of Series F Stock converted automatically into ten shares of common stock at an initial conversion price of $4.70 per share of common stock, for a total of 1,188,291 shares of Common Stock issued upon such conversion. Because the Series F Stock was redeemable at the option of the holder (prior to the stockholders approving conversion on May 5, 2015 as discussed above), we have recorded it in temporary equity as of March 31, 2015 until conversion on May 5, 2015, when the redemption value of $5.9 million was reclassified to stockholders’ equity.

Page 38

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

(c)

Beneficial Conversion Feature (“BCF”)

The Series F Stock was assessed under ASC 470, Debt , and the Company determined that the conversion to common stock qualifies as a BCF since it had a nondetachable conversion feature that was in-the-money at the commitment date. The BCF computation compares the carrying value of the preferred stock after the value of any derivatives has been allocated from the proceeds (in this case, the warrant value) to the transaction date value of the number of shares that the holder can convert into. The calculation resulted in a BCF of $0.4 million for Series F Stock being recorded in additional paid-in capital for the year ended March 31, 2016.

(d)

Carrying Values

The proceeds of the Series F stock and warrants were based on their estimated relative fair values. The proceeds of the 2015 Financing were allocated to the common stock, the February 2015 Warrants, May 2015 Warrants and Series F Stock based on their estimated relative fair values.

Carrying value of Series D Stock as of March 31, 2014	$	3,653

Conversion of Series D stock into common stock		(3,653	)
Carrying value of Series D Stock as of June 30, 2014	$	-

Gross proceeds on July 2, 2014	$	7,493
Fair value of warrants on July 2,2014		(809	)

Gross proceeds allocated to Series E Stock sold on July 2, 2014		6,684
Related transaction costs allocated		(265	)
Net value allocated to Series E Stock sold prior to BCF		6,419
Calculated BCF value		(1,571	)
Accretion of Series E Stock through August 27, 2014		2,645
Carrying value of Series D Stock as of August 27, 2014		7,493

Conversion of Series D stock into common stock		(7,493	)
Carrying value of Series D Stock as of September 30, 2014	$	-

Gross proceeds on February 5, 2015	$	5,585
Fair value of warrants on January 5, 2015		(682	)

Gross proceeds allocated to Series F Stock sold on February 5, 2015		4,903
Related transaction costs allocated		(490	)
Net value allocated to Series F Stock sold prior to BCF		4,413
Calculated BCF value		(564	)
Accretion of Series E Stock through March 31, 2015		1,046
Carrying value of Series F Stock as of March 31, 2015	$	4,895

Carrying value of Series F Stock as of March 31, 2015	$	4,895

Gross proceeds allocated to Series F Stock sold on May 5, 2015		250
Related transaction costs allocated		-
Net value allocated to Series F Stock sold prior to BCF		250
Calculated BCF value		(370	)
Accretion of Series F Stock through May 5, 2015		1,120
Carrying value of Series F Stock as of May 5, 2015		5,895

Conversion of Series F stock into common stock		(5,895	)
Carrying value of Series F Stock as of March 31, 2016	$	-

Page 39

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

6 .	Property and Equipment , net

Property and equipment consist of the following:

	March 31,
	2016			2015
	(in thousands)
Computers and software	$	360		$	562
Furniture and equipment		282			260
Leasehold improvements		36			70
		678			892
Less: accumulated depreciation		(542	)		(602	)

Total property and equipment, net	$	136		$	290

Depreciation expense related to property and equipment was approximately $171,000 and $262,000 for the years ended March 31, 2016 and 2015, respectively.

7 . Capitalized Software

The Company capitalizes costs for internal use incurred during the application development stage that are included in research and development expenses. Costs related to preliminary project activities and post implementation activities are expensed as incurred. Capitalized software will be amortized once the product is ready for its intended use, using the straight-line method over the estimated useful lives of the assets, which is three years. Management continues to evaluate the capitalized software development costs across all products lines with the recent acquisition of b-pack and incurred impairment costs of $1.4 million and $0.3 million in the fiscal year ended March 31, 2016 and 2015, respectively. In the fourth quarter we continued to evaluate the assets purchased in the b-pack merger. Management’s assessment resulted in a greater value in the b-pack assets, as they can be used as the basis for the unified suite offering called the Determine Platform. It was judged that adding the functionality of the products in the current Selectica product line to the b-pack platform would be more efficient, and resulted in a better unified product suite, than if we built a separate platform to hold all of the products. Given this conclusion, the Company impaired the investment that we had previously made in what was to be the separate platform to hold all of the products .

Amortization expense was $0.6 million for the years ended March 31, 2016 and 2015, respectively, and is included in the product cost of revenue. The unamortized balance of capitalized software was $1.7 million and $2.3 million as of March 31, 2016 and 2015, respectively.

8 . Balance Sheet Components

As of March 31, 2016 and 2015, accrued payroll and related liabilities, other accrued liabilities and deferred revenue consisted of the following:

	2016		2015
	(in thousands)
Accrued payroll and related liabilities:
Accrued vacation	$	715	$	561
Accrued bonus		103		83
Accrued wages		197		—
Accrued benefits		488		97
Accrued commissions		152		169
Total	$	1,655	$	910

Page 40

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

	2016		2015
	(in thousands)
Other accrued liabilities:
Accrued accounts payable	$	338	$	783
VAT on sales		344		125
Employee withhold tax for stock		84		227
Sales tax payable		819		662
Other accrued liabilities		811		80
Total	$	2,396	$	1,877

	2016		2015
	(in thousands)
Deferred revenue:
Hosting	$	52	$	90
Consulting		1,165		656
Training		118		8
Subscription		6,871		5,457
Maintenance		2,160		2,215
Other		—		6
Total	$	10,366	$	8,432

9. Restructuring

The following is a summary of restructuring accrual (in thousands):

Balance at March 31, 2015		-
Initial Costs		403
Balance at March 31, 2016	$	403

Restructuring expenses consist of employee severance costs and other contract termination costs to improve our cost structure prospectively. As part of the process of consolidating companies and moving forward with our unified platform strategy, the Company took a look across the company for duplication of effort and work that was not in fully alignment with our strategy that resulted in removal of eleven positions from the company. The eliminated positions were primarily executives and included a direct report to the CEO. The Company incurred these expenses in the fiscal year ended March 31, 2016.

10. Operating Lease Commitments

Page 41

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Re tal expenses for the office space and equipment were approximately $0.9 million and $0.7 million for years ended March 31, 2016 and 2015, respectively. Minimum payments under our operating leases agreements are $0.5 million in fiscal 2017, $0.1 million in fiscal 2018 and $0.03 million in fiscal 2019.

11. Litigation and Contingencies

From time to time the Company is subject to certain routine legal proceedings, as well as demands, claims and threatened litigation, that arise in the normal course of its business. The Company believes that the ultimate amount of liability, if any, for any pending claims of any type (either alone or combined) will not materially affect its financial position, results of operations or liquidity.

On February 1, 2016, Seal Software Ltd. (“Seal”) filed suit against the Company in California Superior Court, San Mateo. In the complaint, Seal alleged that the Company breached a contract by failing to make certain payments and sought damages. The parties have now settled the matter to their mutual satisfaction, and the lawsuit has been dismissed.

In March 2015, a minority shareholder of b-pack Services SA, a French subsidiary of Determine SAS, which was acquired when the Company acquired b-pack SAS, initiated litigation in the Nanterre Commercial Court against b-pack SAS and its founders claiming indemnification rights for his contribution to the business of b-pack Services SA and seeking monetary damages and other relief. The Nanterre Commercial Court declined jurisdiction and sent the matter to the Tribunal de Grande Instance of Nanterre, where it is currently pending. In July 2015, the same minority shareholder also initiated litigation in the Paris Commercial Court against Determine SAS to contest the merger between b-pack SAS and Selectica France SAS, which is also pending, and seeking monetary damages and other relief. The Company believes that the lawsuits are without merit and intends to defend against them vigorously. The Company did not record any provision as of March 31, 2016.

In November 2015, the Company settled outstanding litigation based upon claims the Company alleged against some of its former employees and a competitor relating to the Company’s intellectual property. The Company has included the first payment of $0.2 million in its operating loss on the basis of such amount representing the Company’s lost operating income. Additionally, the Company has been including the litigation expenses related to this matter in loss from operations since the inception of the litigation. In April 2016, such competitor paid the Company the remaining settlement amount of $0.6 million.

From time to time the Company has contractual matters with partners and customers that involve periods of discussion before a value can be placed on the events. These discussions can span multiple quarters. Subsequent to the fourth quarter, several of these long discussed matters came to a conclusion. The Company recorded expenses of $0.8 million for these in the year ended March 31, 2016.

Warranties and Indemnifications

The Company’s products are generally warranted to perform substantially in accordance with the functional specifications set forth in the associated product documentation for a period of 90 days. In the event there is a failure of such warranties, the Company generally is obligated to correct the product to conform to the product documentation or, if the Company is unable to do so, the customer is entitled to seek a refund of the purchase price of the product or service. The Company has not provided for a warranty accrual as of March 31, 2016 and 2015. To date, the Company has not refunded any amounts in relation to the warranty.

The Company generally agrees to indemnify its customers against legal claims that the Company’s software infringes certain third-party intellectual property rights. In the event of such a claim, the Company is obligated to defend its customer against the claim and to either settle the claim at the Company’s expense or pay damages that the customer is legally required to pay to the third-party claimant. In addition, in the event of the infringement, the Company agrees to modify or replace the infringing product, or, if those options are not reasonably possible, to refund the purchase price of the software. To date, the Company has not been required to make any payment resulting from infringement claims asserted against its customers. As such, the Company has not provided for an indemnification accrual as of March 31, 2016 and 2015.

Page 42

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

12. COFACE Loan

In December 2009, the Company signed a stated guaranteed insurance contract with the insurance company COFACE in order to protect the Company against the financial risks of its commercial development in the United States. As part of the contract, COFACE financed part of the expenses in the United States, with the amounts to be amortized in subsequent years. As of March 31, 2016, the amount still to be repaid was approximately $407,000.

1 3 . Credit Facility

On February 3, 2016, the Company entered into Amendment Number Five to Amended and Restated Business Financing Agreement, which amended the Business Financing Agreement entered into with Western Alliance Bank, as successor in interest to Bridge Bank, National Association (“Western Alliance Bank”) on July 25, 2014, as amended (as amended, the “Credit Facility”). The Credit Facility provides a revolving receivables financing facility in an amount up to $5.0 million (the “Receivables Financing Facility”) and a revolving cash secured financing facility in an amount up to $7.0 million (the “Working Capital Facility”), for an aggregate revolving credit facility of up to $12.0 million.

The Receivables Financing Facility may be drawn in amounts up to $5.0 million in the aggregate, subject to a minimum borrowing base requirement equal to 80% of the Company’s eligible accounts receivable as determined under the Credit Facility. The Working Capital Facility may be drawn in such amounts as requested by the Company, not to exceed $7.0 million in the aggregate. The Credit Facility (as further amended on April 20, 2016) terminates on April 20, 2018, provided, however, that in the event of an early termination by the Company; a penalty of 1.0% of the total credit facility would be triggered.

All amounts borrowed under the Credit Facility are secured by a general security interest on the assets of the Company and are subject to a 2.00 Current Ratio of (i) cash and cash equivalents plus all eligible receivables in relation to (ii) the Company’s current liabilities excluding current deferred revenue.

Except as otherwise set forth in the Credit Facility, borrowings made under the Receivables Financing Facility will bear interest at a rate equal to the prime rate or 3.25%, whichever is greater, plus 0.25%, and borrowings made under the Working Capital Facility will bear interest at a rate equal to the financial institution’s certificate of deposit 30-day rate plus 200 basis points, with the total minimum monthly interest to be charged being $2,000.

As of March 31, 2016 and March 31, 2015, the Company owed $7.1 million and $7.4 million, respectively, under the Credit Facility, and no amounts were available for future borrowings.

In order to satisfy certain conditions for Western Alliance Bank to lend additional funds under the Credit Facility, on March 11, 2015, Lloyd I. Miller, III (“Mr. Miller”), and MILFAM each entered into a Limited Guaranty (the “2015 Guaranties”) with Western Alliance Bank to provide a limited, non-revocable guaranty of the Company’s Credit Facility in the amount of $1 million each, for a total guaranteed amount of $2 million. The term of the 2015 Guaranties is two years. Western Alliance Bank, in its sole discretion, may reduce, but not increase, the guaranteed amount under the 2015 Guaranties during the term. In connection with the 2015 Guaranties, on March 11, 2015, the Company entered into a Guaranty Fee Agreement (the “2015 Fee Agreement”) with Mr. Miller, the Company’s largest stockholder, and MILFAM II L.P., pursuant to which the Company agreed to pay Mr. Miller and MILFAM an aggregate commitment fee of $100,000 and a monthly fee equal to (i) 1% of the loan amount then guaranteed under the 2015 Guaranties for the first 12 months of the term and (ii) 1.5% of the loan amount then guaranteed under the 2015 Guaranties for the second 12 months of the term. The commitment fee and the aggregate amount of the monthly fees are payable in cash by the Company within five business days following the termination or expiration of the 2015 Guaranties. On February 3, 2016, the Company entered into an Amendment to Guaranty Fee Agreement with Mr. Miller and MILFAM, pursuant to which the accrual of the fees was amended such that the monthly fees thereunder began accruing on the date that the Company draw from the Credit Facility the amounts guaranteed by Mr. Miller and MILFAM.

Additionally, on February 3, 2016, Alliance Semiconductor Corporation (“ALSC”), an affiliate of Mr. Miller, entered into a Limited Guaranty (the “2016 Guaranty”) with Western Alliance Bank to provide a limited, non-revocable guaranty of the Company’s Credit Facility in the amount of $3 million. The term of the 2016 Guaranty is two years. Western Alliance Bank, in its sole discretion, may reduce, but not increase, the guaranteed amount under the 2016 Guaranty during the term. In connection with the 2016 Guaranty, on February 2, 2016, the Company entered into a Guaranty Fee Agreement with ALSC, whereby the Company agreed to pay ALSC an aggregate commitment fee of $100,000 and a monthly fee equal to 0.5% of the amount guaranteed under the 2016 Guaranty for the first 12 months of the term and 0.75% of the amount guaranteed under the 2016 Guaranty for the second 12 months of the term. Following the date that the Company draws from the Credit Facility the amount guaranteed under the 2016 Guaranty, the monthly fees shall increase to 1.0% during the first 12 months of the term and 1.5% during the second 12 months, respectively. The commitment fee and the aggregate amount of the monthly fees are payable in cash by the Company within five business days following the termination or expiration of the 2016 Guaranty.

Page 43

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

On December 16, 2015, the Company entered into a Junior Secured Convertible Note Purchase Agreement with Mr. Miller and three of his affiliates, pursuant to which the Company issued and sold junior secured convertible promissory notes in the aggregate principal amount of $2.5 million. The Notes are due on December 16, 2020 and accrue interest at an annual rate of 8% on the aggregate unconverted and outstanding principal amount, payable quarterly, beginning on December 31, 2015. The Company has the option to pay any amounts of interest due under the Notes by converting such interest into shares of common stock of the Company, at a conversion price of $3.75 per share (as may be adjusted for any subdivision by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or similar event occurring prior to such record date, or as may be adjusted as further described below), based upon an interest rate amount calculated at 10% per year. Upon any default under the notes, the notes will bear interest at the rate of 13% per year or, if less, the maximum rate allowable under the laws of the State of New York.

Subject to applicable NASDAQ listing rule limitations (including, if applicable, approval by the Company’s stockholders), the outstanding principal and interest under the notes may be converted into shares of common stock at the sole option of the investors at any time prior to the maturity date, at a conversion price of $3.75 per share (as may be adjusted for any subdivision by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or similar event occurring prior to such record date); provided, however, that if prior to the maturity date the Company offers and sells share of its common stock in a private placement primarily intended to raise capital at a price per share of $3.25 or less, then the conversion price for the notes will be reduced to such common stock offering price plus $0.50 per share. However, the total number of shares of Common Stock that may be issued to the Investors upon conversion of the Notes may not exceed 19.99% of the Company’s outstanding shares of common stock as of December 16, 2015.

The notes may be prepaid or called by the Company prior to the maturity date. If the closing bid price for the Company’s common stock equals or exceeds $10.00 per share (as may be adjusted for any subdivision by any stock split, stock dividend, recapitalization, reorganization, scheme, arrangement or similar event occurring prior to such record date) for ten trading days in any fifteen trading-day period, the outstanding principal and interest under the Notes may be converted into shares of common stock at the sole option of the Company at the then-current conversion price.

The Company’s Credit Facility with Bridge Bank contains certain financial covenants that require, among other things, the maintenance of an asset coverage ratio of not less than 2:00 to 1:00 at the end of each month. This financial covenant was not met for the month of September 30, 2015, but on March 31, 2016 the Company met all the requirements and was in compliance.

The Company recorded $1.4 million of fees associated with the 2015 Fee Agreement as part of other long-term liabilities as of March 31, 2016.

1 4 . Stockholders’ Equity

Common Stock Reserved for Future Issuance

At March 31, 2016, shares of common stock reserved for future issuance of stock-based grants were as follows:

Equity Incentive Plans:
Restricted stock awards outstanding			244,079
Options outstanding			2,761,392
Reserved for future grants			80,186
Total common stock reserved for future issuance			3,085,657

Page 44

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

The effect of recording stock-based compensation expense (including expense related to the Employee Stock Purchase Plan (“ESPP”) discussed below) for each of the periods presented was as follows (in thousands):

	2016		2015
Cost of revenues	$	367	$	459
Research and development		250		213
Sales and marketing		919		836
General and administrative		853		1,030

Impact on net loss	$	2,389	$	2,538

1999 ESPP

The price paid for the Company’s common stock purchased under the ESPP is equal to 85% of the lower of the fair market value of the Company’s common stock at the beginning of each offering period or at the end of each offering period. The compensation expense in connection with the ESPP for the fiscal years ended March 31, 2016 and 2015 was $72,000 and 80,000, respectively. During the fiscal years ended March 31, 2016 and 2015, there were 64,178 and 48,833 shares issued under the ESPP.

Stock Option Plans—Approved by Stockholders

1996 Plan

The Company adopted the 1996 Stock Plan as amended and restated March 28, 2001 (the “1996 Plan”). A total of approximately 815,000 shares of common stock have been reserved under the 1996 Plan. With limited restrictions, if shares awarded under the 1996 Plan are forfeited, those shares will again become available for new awards under the 1996 Plan. The 1996 Plan permits the grant of options, stock appreciation rights, shares of restricted stock, and stock units. The types of options include incentive stock options that qualify for favorable tax treatment for the optionee under Section 422 of the Internal Revenue Code of 1986, and non-statutory stock options not designed to qualify for favorable tax treatment. Employees, non-employee members of the board and consultants are eligible to participate in the 1996 Plan.

Incentive stock options are granted at an exercise price of not less than 100% of the fair market value per share of the common stock on the date of grant, and non-statutory stock options are granted at an exercise price of not less than 85% of the fair market value per share on the date of grant. Options generally vest with respect to 25% of the shares one year after the options’ vesting commencement date and the remainder vest in equal monthly installments over the following 36 months. Options granted under the 1996 Plan have a maximum term of ten years.

1999 Equity Incentive Plan

The Company adopted the 1999 Equity Incentive Plan (the “1999 Plan”) on November 18, 1999. The 1999 Plan was amended in May 2010, such that the number of shares reserved for issuance is no longer automatically increased, and a total of 1,551,000 shares were reserved for future issuance. On March 10, 2015, the 1999 Plan was terminated and the shares then reserved under the 1999 Plan were released and made awardable for grant under the 2015 Plan (as defined below).

On December 3, 2012, the Compensation Committee of the Board of Directors of the Company adopted a Long Term Performance Incentive Plan (the “LTPIP”) within the 1999 Equity Incentive Plan (the “1999 Plan”), under which restricted stock units would be granted to the Company’s executives. Under the LTPIP, sixty percent (60%) of the restricted stock units will vest based upon achievement of contracted monthly recurring revenue targets over a period of three years, with fifty percent (50%) of the amount withheld from vesting until the Company achieves profitability, and forty percent (40%) vest based upon operating profit targets over a period of three years. The restricted stock units granted under the LTPIP include 420,000 shares granted to the Company’s executives, under which the Company’s Chief Executive Officer received a grant of 220,000 restricted stock units, and the Company’s Chief Financial Officer, Chief Strategy Officer, Chief Operating Officer and Chief Commercial Officer each received a grant of 50,000 restricted stock units. The Company is amortizing the related compensation expense on a straight-line basis over the expected vesting period. The compensation expense was $0.1 million for the years ended March 31, 2016 and 2015.

Page 45

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

1999 ESPP

On November 18, 1999, the Company’s Board of Directors approved the adoption of the 1999 Employee Stock Purchase Plan (the “Purchase Plan”) and the Company’s stockholders have approved of the Purchase Plan. The Purchase Plan was amended and restated on February 1, 2008 and amended and restated on November 7, 2012. A total of 100,000 shares of common stock were initially reserved for issuance under the Purchase Plan. The November 7, 2012 amendment and restatement of the Purchase Plan provided a reserve of 553,000 shares of common stock available for issuance under the Purchase Plan.

The Compensation Committee of the Board of Directors administers this plan. The Purchase Plan is intended to qualify under Section 423 of the Internal Revenue Code. The Purchase Plan permits eligible employees to purchase common stock through payroll deductions, which may not exceed 15% of an employee’s cash compensation, at a purchase price equal to the lower of 85% of the fair market value of the Company’s common stock at the beginning of each offering period or at the end of each purchase period. Employees who work more than five months per year and more than twenty hours per week are eligible to participate in the Purchase Plan. Stockholders who own more than 5% of the Company’s outstanding common stock are excluded from participating in the Purchase Plan. Each eligible employee cannot purchase more than 5,000 shares per purchase date (10,000 shares per year) and, generally, cannot purchase more than $25,000 of stock per calendar year. Eligible employees may begin participating in the Purchase Plan at the start of an offering period. Each offering period lasts six months beginning on January 31 and July 31 of each calendar year with an additional one-time offering period beginning on or about November 1, 2012 and terminating on or about January 1, 2013. Employees may end their participation in the Purchase Plan at any time. Participation ends automatically upon termination of employment. The Board of Directors may amend or terminate the Purchase Plan at any time. If not terminated earlier, the Purchase Plan has a term of twenty years. If the Board of Directors increases the number of shares of common stock reserved for issuance under the Purchase Plan, other than any share increase resulting from the formula described in the previous paragraph, it must seek the approval of the Company’s stockholders.

2001 Supplemental Plan

2015 Equity Incentive Plan

The Company’s Board of Directors adopted the 2015 Equity Incentive Plan (the “2015 Plan”) on March 10, 2015. The Company’s stockholders approved the 2015 Plan at the special meeting of the stockholders held on May 5, 2015.

Pursuant to the terms of the 2015 Plan, employees, directors and consultants of the Company, and any present or future parent or subsidiary corporation or other affiliated entity, may receive grants of stock options, restricted stock awards and/or restricted stock units of the Company and certain cash-based awards. Subject to permitted adjustments for certain corporate transactions, the 2015 Plan authorizes the issuance of up to 1,500,000 shares of Company common stock.

The 2015 Plan will be administered by the Compensation Committee of the Company’s Board of Directors, which is comprised of independent members of the Board of Directors. The Compensation Committee has full and exclusive power to make all decisions and determinations regarding (i) the selection of participants and the granting of awards; (ii) the terms and conditions relating to each award; (iii) adopting rules, regulations and guidelines for carrying out the 2015 Plan’s purposes; and (iv) interpreting the provisions of the 2015 Plan.

With limited restrictions, if shares awarded under the 2015 Plan are forfeited, those shares will again become available for new awards under the 2015 Plan. The 2015 Plan permits the grant of options, stock appreciation rights, shares of restricted stock, and stock units. The types of options include incentive stock options that qualify for favorable tax treatment for the optionee under Section 422 of the Internal Revenue Code of 1986 and non-statutory stock options not designed to qualify for favorable tax treatment. Employees, non-employee members of the Board of Directors and consultants are eligible to participate in the 2015 Plan. Each eligible participant is limited to being granted options or stock appreciation rights covering no more than 300,000 shares per fiscal year, except in the first year of employment where the limit is 500,000 shares. Incentive stock options and non-statutory stock options are granted at an exercise price of not less than 100% of the fair market value per share of the common stock on the date of grant. Options generally vest with respect to 25% of the shares one year after the options’ vesting commencement date and the remainder vest in equal monthly installments over the following 36 months. Options granted under the 2015 Plan have a maximum term of ten years.

Page 46

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

The following tables summarize activity under the equity incentive plans:

	Options Outstanding					Restricted Stock Units Outstanding
	Number of shares (in thousands)			Weighted average exercise price		Number of shares (in thousands)			Weighted average fair value

Outstanding at April 1, 2015		1,099		$	6.46		348		$	6.17
Granted		1,483		$	2.92		190		$	4.58
Granted outside of plan		800		$	4.19		-		$	-
Exercised		(2	)	$	2.04		(185	)	$	5.56
Cancelled		(619	)	$	5.93		(109	)	$	6.05
Outstanding at March 31, 2016		2,761		$	4.02		244		$	5.45

Vested and expected to vest		2,410		$	4.13

	Shares Available for Grant
	(in thousands)

Balance at April 1, 2015		563
Plan shares expired		(561	)
Options:
Granted from approved plans		(1,483	)
Granted from non-approved plans		(800	)
Shares added to the plans		2,436
Cancelled		112
Restricted Stock Units:
Granted		(190	)
Cancelled		3

Balance at March 31, 2016		80

The options outstanding and exercisable at March 31, 2016 were in the following exercise price ranges:

			OPTIONS OUTSTANDING				OPTIONS EXERCISABLE
					Weighted
			Number		Average		Weighted		Number		Weighted
Range of			Outstanding		Remaining		Average		Exercisable		Average
Exercise Prices			as of 03/31/16		Contractual Term		Exercise Price		as of 03/31/16		Exercise Price
$1.64	-	$1.64		694,294		9.90	$	1.6400		0	$	0.0000
$1.98	-	$3.24		368,700		9.73	$	2.6966		0	$	0.0000
$3.34	-	$3.99		165,250		9.54	$	3.5800		12,500	$	3.9900
$4.32	-	$4.32		687,500		9.33	$	4.3200		0	$	0.0000
$5.18	-	$6.14		378,486		8.53	$	5.9790		126,203	$	5.6958
$6.30	-	$6.30		23,333		7.62	$	6.3000		14,998	$	6.3000
$6.61	-	$6.61		382,529		5.47	$	6.6100		235,812	$	6.6100
$6.83	-	$18.90		60,200		7.00	$	7.2804		60,200	$	7.2804

$24.50	-	$24.50		500		0.13	$	24.5000		500	$	24.5000
$25.20	-	$25.20		600		0.28	$	25.2000		600	$	25.2000
$1.64	-	$25.20		2,761,392		8.83	$	4.0192		450,813	$	6.4052

Page 47

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

The weighted average remaining contractual term for exercisable options is 5.45 years. The intrinsic value is calculated as the difference between the market value as of March 31, 2016 and the exercise price of the shares. The market value of the Company’s common stock as of March 31, 2016 was $1.85. The aggregate intrinsic value of stock options outstanding at March 31, 2016 and 2015 was $146,000 and $198,000, respectively. The aggregate intrinsic value of restricted stock units outstanding at March 31, 2016 and 2015 was $0.5 million and $2.3 million, respectively.

The following table summarizes values for options granted during the respective years:

	Fiscal Years Ended
	March 31,
	2016		2015
	(in thousands, except per share data)
Weighted average grant date fair value	$	1.68	$	3.73
Intrinsic value of options exercised	$	-	$	2.00
Fair value of shares vesting during the year	$	1,085	$	287

The following table summarizes activity for awards for the respective years:

	Shares			Grant Date Fair Value Per Share		Aggregate Intrinsic Value
	(in thousands)
Balance at March 31, 2014		639		$	6.66	$	4,255
Awards granted		234		$	5.93	$	—
Awards vested/released		(362	)	$	6.32	$	—
Awards cancelled/forfeited		(163	)	$	6.43	$	—
Balance at March 31, 2015		348		$	6.66	$	2,265
Awards granted		190		$	4.58	$	—
Awards vested/released		(185	)	$	5.56	$	—
Awards cancelled/forfeited		(109	)	$	6.05	$	—
Balance at March 31, 2016		244		$	5.45	$	452

During fiscal 2016 and 2015, the fair value of rights granted under the employee stock purchase plan were estimated at the date of grant using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions:

	Fiscal Year Ended			Fiscal Year Ended
	March 31, 2016			March 31, 2015
Risk-free interest rate		0.37	%		0.06	%
Dividend yield		0.00	%		0.00	%
Expected volatility		88.77	%		28.4	%
Expected term in years		0.50			0.50
Weighted average fair value at grant date	$	1.09		$	1.49

For the fiscal years ended March 31, 2016 and 2015 the Company calculated the fair value of its employee stock options at the date of grant with the following weighted average assumptions:

	Fiscal Year Ended			Fiscal Year Ended
	March 31, 2016			March 31, 2015
Risk-free interest rate		1.63	%		1.96	%
Dividend yield		0	%		0	%
Expected volatility		52.23	%		60.45	%
Expected term in years		6.07			6.05
Weighted average fair value at grant date	$	1.68		$	3.73

Page 48

DETERMINE, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Equity Compensation Plan Information

The table below demonstrates the number of options and awards issued and the number of options and awards available for issuance, respectively, under the Company’s current equity compensation plans as of March 31, 2016:

	Number of Securities to be Issued Upon Exercise of Outstanding Options and RSU's		Weighted Average Exercise Price per Share of Outstanding Options and Rights		Number of Securities Available for Future Issuance Under Equity Compensation Plans
	(in thousands)
Equity compensation plans approved by stockholders
1996 and 1999 Equity Incentive Plan		324	$	6.29		-
2015 Equity Incentive Plan		1,512	$	2.83		80
Equity compensation plans not approved by stockholders
IASTA		383	$	6.61		-
Inducement Plan		687	$	4.32		-
NOLN Plan ⁽¹⁾		100	$	3.34		-
Total		3,006	$	4.02		80

(1) John Nolan, Chief Financial Officer, was granted an option to purchase 100,000 shares of Determine common stock on November 16, 2015. The non-qualified option has an exercise price per share of $3.34, 10-year term and vests over a 48-month period, with 25% cliff vesting after one year, and the remaining option shares vesting in equal monthly installments over the following 36 months of continuous service to the company.

All vested shares granted under all Plans are exercisable; however, shares exercised but not vested under the 1996 Stock Plan are subject to repurchase.

15 . Computation of Basic and Diluted Net Loss per Share

Basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period.

The Company excludes potentially dilutive securities from its diluted net loss per share computation when their effect would be antidilutive to net loss per share amounts. The following common stock equivalents were excluded from the net loss per share computation:

	March 31,
	2016		2015
	(in thousands)

Options		27		12
Unvested restricted stock units		26		31
Warrants		1,468		1,468
Total common stock equivalents excluded from diluted net loss per common share		1,521		1,511

Page 49

DETERMINE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

1 6 . Income Taxes

The benefit from income taxes is based upon loss before income taxes as follows (in thousands):

	March 31,
	2016			2015
Domestic pre-tax loss	$	(13,339	)	$	(16,633	)
Foreign pre-tax loss		(1,234	)		(63	)
Total pre-tax loss	$	(14,573	)	$	(16,696	)

	March 31,
	2016			2015
Federal tax at statutory rate	$	(4,870	)	$	(5,843	)
Computed state tax		(312	)		(354	)
Foreign rate differential		(17	)		23
Losses not benefited		4,274			(3,729	)
Change in tax reserve		214			2,808
Nondeductible expenses		364			815
Research and development tax credits		(198	)		3,330
Income tax benefit	$	(545	)	$	(2,950	)

The components of the benefit from income taxes are as follows (in thousands):

	March 31,
	2016			2015
Current:
US	$	-		$	-
State		6			-
Foreign		8			-
		14			-
Deferred:
Federal		(112	)		(2,901	)
State		(3	)		(49	)
Foreign		(444	)		-
		(559	)		(2,950	)

Total benefit from income taxes	$	(545	)	$	(2,950	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows (in thousands):

Page 50

DETERMINE, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

	March 31,
	2016			2015
Deferred Tax Assets:
Net operating loss carryforward	$	19,430		$	16,206
Intangible assets		8,951			8,486
Tax credit carryforwards		2,706			2,491
Reserves and accruals		900			531
Stock compensation		692			444
Fixed assets		30			-
Deferred revenue		14			-
		32,723			28,158

Deferred Tax Liability
Fixed assets		-			(3	)
Deferred revenue		-			(27	)
Intangible assets		(930	)		-
		(930	)		(30	)

Gross Deferred Tax Asset		31,793			28,131

Valuation Allowance		(32,083	)		(28,131	)

Net Deferred Liabilities	$	(290	)	$	-

ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based on the weight of available evidence, which includes the Company's historical operation performance and the reported cumulative net losses in all prior years, the Company has provided a full valuation allowance against its net deferred tax assets. The valuation allowance increased by $4.0 million and decreased by $62.2 million during fiscal 2016 and 2015, respectively.

As of March 31, 2016 the Company had federal and state net operating loss carryforwards of approximately $49.6 million and $36.9 million, which will begin to expire in various amounts beginning in fiscal 2020 and 2017, respectively. The Company also had French net operating loss carryforwards of approximately $0.5 million which have no expiration date. The Company also had federal and state research credit carryforwards of $0.15 million and $5.2 million, respectively. Federal research credits will start expiring in fiscal 2020. The state research credit has no expiration.

The Internal Revenue Code Section 382 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. In the event the Company has had a change in ownership, utilization of the carryforwards could be restricted.

Based on its most recently performed study, the Company has concluded it had an ownership change on July 2, 2014 as defined by Section 382 of the Internal Revenue Code (IRC), which is limiting the future realization of its net operating loss carryforwards since June 1999. Based on this recent study, the Company believes that the application of Section 382 will result in the forfeiture of $169 million net operating loss carryforward for federal income tax purposes and $48 million of net operating loss carryforward for California income tax purposes.

In addition, based on this recent study, the Company concluded that $3.5 million of the federal and none of California research tax credit carryforwards, respectively, would be subject to forfeiture due to Section 382 ownership changes under IRC Section 383 and/or possible credit amount reduction upon audit, but as noted above this is subject to review by the applicable taxing authority. Please note the research and development tax credit carryforwards above take into account this reduction.

The Company is required to recognize in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company policy is to record interest and penalties related to unrecognized tax benefits in income tax expense. At March 31, 2016, there was no liability for unrecognized tax benefits.

Page 51

DETERMINE, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

A reconciliation of the beginning and ending unrecognized tax benefit amounts for fiscal year 2016 are as follows (in thousands):

Balance at April 1, 2015	$	1,280

Increases related to current year tax positions		68

Balance at March 31, 2016	$	1,348

The Company’s Federal, state, and foreign tax returns are subject to examination by the tax authorities from inception due to net operating losses and tax carryforwards unutilized from such years.

17. 401(k) Benefit Plan

The Company offers a tax-deferred savings plan, the Selectica 401(k) Plan (“the 401(k) Plan”), for the benefit of qualified employees. The 401(k) Plan is designed to provide employees with an accumulation of funds at retirement. Qualified employees may elect to make contributions to the 401(k) Plan on a monthly basis. Starting in fiscal 2012, the 401(k) Plan requires the Company to match the first 1% of all employee contributions. For the fiscal years ended March 31, 2016 and 2015, the Company contributed $0.4 million and $0.3 million, respectively, to the 401(k) Plan. Administrative expenses relating to the 401(k) Plan are insignificant.

18. Segment Information

The Company operates as one business segment and therefore segment information is not presented.

19. Related Party

Determine SAS and b-pack Services rent their offices from SCI Donapierre, the company controlled by two of the Company ’ s shareholders. For year ended March 31, 2016, Determine SAS made rental payments of approximately $73,000 to SCI Donapierre.

20. Subsequent Events

Entry into a Material Definitive Agreement

On April 7, 2016, the Company entered into a Lease Agreement with Atapco Carmel, Inc. for approximately 8,795 square feet of office space in a building located at 615 West Carmel Drive, Suite 100 in Carmel, Indiana. The term of the Lease runs for approximately 51 months and provides for monthly rent payments of $11,726.67 per month for the first year of the term of the Lease (with three of the months of the first year term provided rent free), subject to annual adjustment thereafter.

Amendment of Business Financing Agreement

On April 20, 2016, Determine, Inc. and its wholly owned subsidiary, Determine Sourcing, Inc., entered into Amendment Number Seven to Amended and Restated Business Financing Agreement with Western Alliance Bank, an Arizona corporation, as successor in interest to Bridge Bank, National Association. The Amendment extended the maturity date of the underlying credit facility to April 20, 2018.

Amendment of Limited Guaranties

In order to satisfy certain conditions for Western Alliance Bank to enter into the Amendment, on April 22, 2016, Lloyd I. Miller, III, the Company’s largest stockholder, and his affiliates MILFAM II, L.P. and Alliance Semiconductor Corporation, a Delaware corporation, each entered into an Amended and Restated Limited Guaranty with Western Alliance. The Amended Guaranties extend the term of the limited guaranties entered into by Mr. Miller and MILFAM with Western Alliance on March 11, 2015, and the limited guaranty entered into by ALSC with Western Alliance on February 3, 2016 to April 20, 2018.

Page 52

DETERMINE, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Amendment to Guaranty Fee Agreements

On April 22, 2016, the Company and the Guarantors entered into a Second Amendment to 2015 Guaranty Fee Agreement and Amendment to 2016 Guaranty Fee Agreement, which (i) further amended the Guaranty Fee Agreement, dated March 11, 2015, entered into by the Company, Mr. Miller and MILFAM and (ii) amended the Guaranty Fee Agreement, dated February 3, 2016, entered into by the Company and ALSC. Pursuant to the Fee Amendment, the term of the 2015 Fee Agreement and the 2016 Fee Agreement is extended to April 20, 2018. As a condition for extending the term of the Amended Guaranties as described above, the Company agreed to pay an additional cash fee of $76,000 to Mr. Miller and MILFAM, payable by the Company within five business days following the termination or expiration of the Amended Guaranties, and also agreed to pay certain fees and expenses of the Guarantors related to the Amended Guaranties.

Page 53

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.

Controls and Procedures.

Management is responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the rule and forms of the SEC. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Principal Executive and Principal Financial Officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management, including our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures for each fiscal quarter during the year ended March 31, 2016. Based on its evaluation, our management concluded that our disclosure controls and procedures were effective as of March 31, 2016.

Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Internal control over financial reporting means a process designed by, or under the supervision of, our principal executive and principal financial officers (or persons performing similar functions), and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (ii) provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Our management, including our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our internal control over financial reporting as of March 31, 2016 based on the guidelines established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based upon our evaluation of internal control over financial reporting as of March 31, 2016, our management concluded that our internal control over financial reporting was effective as of March 31, 2016.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting in the year ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Page 54

Inherent Limitations on Effectiveness of Controls

Our management, including our Principal Executive Officer and Principal Financial Officer (or persons performing those functions), do not expect that our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Item 9B.

Other Information.

None.

Page 55

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

The information required by this item is included under the captions “Directors, Executive Officers and Corporate Governance” in the fiscal year 2016 Proxy Statement and incorporated herein by reference.

Item 11.

Executive Compensation.

The information required by this item is included under the captions “Executive Compensation and Related Information” in the fiscal year 2016 Proxy Statement and incorporated herein by reference.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is included under the captions “Common Stock Ownership of Certain Beneficial Owners and Management” and “Executive Compensation—Equity Compensation Plan Information” in the fiscal year 2016 Proxy Statement and is incorporated herein by reference.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

The information required by this item is included under the captions “Certain Relationships and Related Transactions” and “Corporate Governance—Independence of Directors” in the fiscal year 2015 Proxy Statement and is incorporated herein by reference.

Item 14.

Principal Accounting Fees and Services.

The information required by this item is included under the caption “Independent Public Accountants” in the fiscal year 2016 Proxy Statement and is incorporated herein by reference.

PART IV

Item 15.

Exhibits and Financial Statement Schedules.

The following documents are filed as part of this report:

(a) Financial Statements : See Index to Consolidated Financial Statements in Part II, Item 8.

(b) Financial Statement Schedule :

Schedule II—Valuation and Qualifying Accounts and Reserves

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

Page 56

Schedule II: Valuation and Qualifying Accounts

Accounts Receivable Allowance for Doubtful Accounts

The following describes activity in the accounts receivable allowance for doubtful accounts for the years ended March 31, 2016 and 2015, respectively:

	Balance at Beginning of Period		Increase (decrease) to Costs and Expenses			Write Offs			Reversal Benefit to Revenue		Balance at End of Period
Allowance for doubtful accounts (in $000’s) :

Fiscal year ended March 31, 2016	$	205	$	504		$	(302	)	$	—	$	407
Fiscal year ended March 31, 2015	$	247	$	(42	)	$	—		$	—	$	205

Page 57

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Mateo, State of California, on the day of July 1, 2016.

	DETERMINE, INC. Registrant
	/s/ PATRICK STAKENAS
	Patrick Stakenas President and Chief Executive Officer


	/s/ JOHN NOLAN
	John Nolan Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Patrick Stakenas and John Nolan and each of them, his or her true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any amendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.

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/ PATRICK STAKENAS	President, Chief Executive Officer	July 1, 2016
Patrick Stakenas	(Principal Executive Officer) and Director

/s/ JOHN NOLAN	Chief Financial Officer (Principal Financial Officer	July 1, 2016
John Nolan	and Principal Accounting Officer) and Secretary


/s/ ALAN HOWE	Director	July 1, 2016
Alan Howe

/s/ LLOYD SEMS	Director	July 1, 2016
Lloyd Sems

/s/ MICHAEL CASEY	Director	July 1, 2016
Michael Casey

/s/ J. MICHAEL GULLARD	Director	July 1, 2016
J. Michael Gullard

/s/ MICHAEL BRODSKY	Director	July 1, 2016
Michael Brodsky

Page 58

Exhibit No.		Description
2.1(19)		Agreement and Plan of Merger, dated as of March 30, 2015.

3.1(34)		Certificate of Incorporation (effective October 15 2015).

3.2(2)		Certificate of Designation of Series A Junior or Participating Preferred Stock.

3.3(33)		Amended and Restated Bylaws (effective October 15, 2015).

3.4(4)		Certificate of Designation of Series B Junior or Participating Preferred Stock.

4.1		Reference is made to Exhibits 3.1 through 3.4.

4.2(1)		Form of Registrant’s Common Stock certificate.

4.3(4)		Amended and Restated Rights Agreement between Registrant and Computershare Trust Company, N.A., as Rights Agent, dated January 2, 2009.

4.4(5)		Amendment dated as of January 26, 2009, to the Amended and Restated Rights Agreement between Registrant and Computershare Trust Company, N.A. as Rights Agent, dated January 2, 2009.

4.5(7)		Amendment 2, dated as of April 27, 2009, between Registrant and Wells Fargo Bank, N.A., as Rights Agent, to the Amended and Restated Rights Agreement between Registrant and Computershare Trust Company, N.A., dated January 2, 2009, as amended.

4.6(12)		Amendment 3, dated as of December 28, 2011, between Registrant and Wells Fargo Bank, N.A., as Rights Agent, to the Amended and Restated Rights Agreement between Registrant and the Rights Agent, dated January 2, 2009, as amended.

4.7(26)		Amendment No. 4, dated as of December 28, 2014, between Registrant and Wells Fargo Bank, N.A., as Rights Agent, to the Amended and Restated Rights Agreement between Registrant and the Rights Agent, dated January 2, 2009, as amended.

10.1(1)		Form of Indemnification Agreement.

10.2(1)†		1996 Stock Plan.

10.3(3)†		1999 Equity Incentive Plan Stock Option Agreement.

10.4(3)†		1999 Equity Incentive Plan Stock Option Agreement (Initial Grant to Directors).

10.5(3)†		1999 Equity Incentive Plan Stock Option Agreement (Annual Grant to Directors).

10.6(8)		1999 Employee Stock Purchase Plan, as amended and restated February 1, 2008.

10.7(8)		Form of Stock Unit Agreement for issuance of restricted stock units pursuant to the Registrant’s 1999 Equity Incentive Plan to plan participants, including named executive officers.

10.8(8)		Registrant Compensation Program for Non-Employee Directors effective May 20, 2009.

10.9(8)		Settlement, Release and License Agreement between Registrant and Versata Software Inc., a corporation f/k/a Trilogy Software, Inc., dated October 5, 2007.

10.10(32)		Severance Agreement by and between the Registrant and John Nolan, dated as of October 7, 2015.

10.11(32)		Employment Letter Agreement by and between the Registrant and John Nolan, dated as of October 7, 2015.

10.12(10)†		1999 Equity Incentive Plan, as amended May 2010.

Page 59

10.13(13)		Office Lease by and between 2121 El Camino Investors, LLC and the Registrant, executed July 28, 2011, and effective as of July 8, 2011.

10.14(14)		Comprehensive Settlement Agreement by and between the Registrant and Versata Software, Inc., dated September 20, 2011.

10.15(28)		Amended and Restated Business Financing Agreement, dated as of July 25, 2014, as amended by Amendment Number One to Amended and Restated Business Financing Agreement, dated as of December 31, 2014, as further amended by Amendment Number Two to Amended and Restated Business Financing Agreement, dated as of March 11, 2015.

10.16(15)		1999 Employee Stock Purchase Plan, as amended and restated effective November 7, 2012.

10.17(31)†		2015 Equity Incentive Plan.

10.18(31)†		2015 Equity Incentive Plan Stock Option Agreement.

10.19(31)†		2015 Equity Incentive Plan Restricted Stock Units Agreement.

10.20(31)†		2015 Equity Incentive Plan Restricted Stock Agreement.

10.21(16)		Registration Rights Agreement, dated as of May 31, 2013.

10.22(16)		Form of Series A Warrant to Purchase Common Stock, dated as of May 31, 2013.

10.23(17)		Form of Series B Warrant to Purchase Common Stock, dated as of September 12, 2013, as modified.

10.24(18)		Amendment to the Series A Warrants dated as of September 4, 2013.

10.25(19)		Employment Offer Letter dated August 6, 2013 by and between the Registrant and Michael Brodsky.

10.26(20)		Amendment to Offer Letter, dated December 4, 2013, by and between the Registrant and Michael Brodsky.

10.27(25)		Amendment to Offer Letter, dated September 1, 2014, by and between the Registrant and Michael Brodsky.

10.28(21)		Form of Registration Rights Agreement, dated as of January 24, 2014.

10.29(21)		Form of Warrant to Purchase Common Stock, dated as of January 24, 2014.

10.30(22)		First Amendment to Lease, effective as of May 15, 2014, by and between the Registrant and SKBGS I, L.L.C.

10.31(23)		Agreement and Plan of Merger, dated as of June 2, 2014.

10.32(23)		Purchase Agreement, dated as of June 5, 2014.

10.33(23)		Registration Rights Agreement, dated as of June 5, 2014.

10.34(23)		Form of Warrant to Purchase Common Stock.

10.35(23)		Forms of Voting Agreement.

10.36(24)		Registration Rights Agreement, dated as of July 2, 2014.

10.37(27)		Purchase Agreement, dated as of February 6, 2015.

10.38(27)		Subscription Agreement, dated as of February 6, 2015.

10.39(27)		Registration Rights Agreement, dated as of February 6, 2015.

10.40(27)		Form of Warrant to Purchase Common Stock, dated as of February 6, 2015, issued to Outside Investors.

Page 60

10.41(27)		Form of Warrant to Purchase Common Stock, dated as of May 5, 2015, issued to Management and Director Investors.

10.42(27)		Voting Agreements, dated as of February 6, 2015.

10.43(28)		Limited Guaranty, dated March 11, 2015 (Lloyd I. Miller, III).

10.44(28)		Limited Guaranty, dated March 11, 2015 (MILFAM II L.P.).

10.45(28)		Guaranty Fee Agreement, dated March 11, 2015.

10.46(28)		Junior Secured Convertible Note Purchase Agreement, dated March 11, 2015.

10.47(28)		Form of Junior Secured Convertible Promissory Note, dated March 11, 2015.

10.48(28)		Security Agreement, dated March 11, 2015.

10.49(28)		Subordination Agreement, dated March 11, 2015.

10.50(28)		Amendment to Voting Agreements, dated March 11, 2015.

10.51(30)		Offer Letter of Employment, dated as of June 3, 2015, by and between the Registrant and Patrick Stakenas.

10.52(30)		Severance Agreement, dated as of June 3, 2015, by and between the Registrant and Patrick Stakenas.

10.53(34)		Amendment Number Four to Amended and Restated Business Financing Agreement, dated as of November 13, 2015.

10.54(35)		Junior Secured Convertible Note Purchase Agreement, dated December 16, 2015.

10.55(35)		Form of Junior Secured Convertible Promissory Note.

10.56(35)		Amended and Restated Security Agreement, dated December 16, 2015.

10.57(35)		Amended and Restated Subordination Agreement, dated December 16, 2015.

10.58(36)		Amendment Number Five to Amended and Restated Business Financing Agreement, dated as of February 3, 2016.

10.59(36)		Limited Guaranty, dated February 3, 2016.

10.60(36)		Guaranty Fee Agreement, dated February 3, 2016.

10.61(36)		Amendment to Guaranty Fee Agreement, dated February 3, 2016.

10.62(37)		Amendment Number Six, dated March 18, 2016, to Amended and Restated Business Financing Agreement.

10.63***		Lease Agreement, dated April 7, 2016, between the Registrant and Atapco Carmel, Inc.

10.64(38)		Amendment Number Seven, dated April 20, 2016, to Amended and Restated Business Financing Agreement.

10.65(38)		Amended and Restated Limited Guaranty, dated April 22, 2016, between Western Alliance Bank and Lloyd I. Miller, III.

10.66(38)		Amended and Restated Limited Guaranty, dated April 22, 2016, between Western Alliance Bank and MILFAM II, L.P.

10.67(38)		Amended and Restated Limited Guaranty, dated April 22, 2016, between Western Alliance Bank and Alliance Semiconductor Corporation.

Page 61

10.68(38)		Second Amendment to 2015 Guaranty Fee Agreement and Amendment to 2016 Guaranty Fee Agreement, dated April 22, 2016, with Lloyd I. Miller, III, MILFAM II, L.P., and Alliance Semiconductor Corporation.

21.1***		Subsidiaries.

23.1***		Consent of Independent Registered Public Accounting Firm.

24.1***		Power of Attorney (contained in the signature page to this Annual Report on Form 10-K).

31.1**		Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2**		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1(6)		Trust Agreement, dated January 27, 2009, between Registrant and Wilmington Trust Company, as trustee.

Page 62

101.INS		XBRL Instance

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation

101.DEF		XBRL Taxonomy Extension Definition

101.LAB		XBRL Taxonomy Extension Labels

101.PRE		XBRL Taxonomy Extension Presentation

(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 10-K filed on June 30, 2003.
(3)	Previously filed in the Company’s report on Form 10-K filed on June 29, 2005.
(4)	Previously filed in the Company’s report on Form 8-K filed on January 5, 2009.
(5)	Previously filed in the Company’s report on Form 8-K filed on January 28, 2009.
(6)	Previously filed in the Company’s report on Form 8-K filed on April 7, 2009.
(7)	Previously filed in the Company’s report on Form 8-K filed on April 29, 2009.
(8)	Previously filed in the Company’s report on Form 10-K filed on July 9, 2009.
(9)	Previously filed in the Company’s report on Form 8-K filed on October 28, 2011.
(10)	Previously filed in the Company’s report on Form 10-K filed on June 29, 2010.
(11)	Previously filed on the Company’s report on Form 10-Q filed on February 14, 2011.
(12)	Previously filed in the Company’s report on Form 8-K filed on December 29, 2011.
(13)	Previously filed in the Company’s report on Form 8-K filed on August 8, 2011.
(14)	Previously filed in the Company’s report on Form 8-K filed on September 21, 2011.
(15)	Previously filed in the Company’s proxy statement filed on October 9, 2012.
(16)	Previously filed in the Company’s report on Form 8-K/A filed on June 4, 2013.
(17)	Previously filed in the Company’s report on Form 8-K filed on September 12, 2013.
(18)	Previously filed in the Company’s report on Form 8-K filed on September 4, 2013.
(19)	Previously filed in the Company’s report on Form 10-Q filed on August 14, 2013.
(20)	Previously filed in the Company’s report on Form 8-K filed on December 10, 2013.
(21)	Previously filed in the Company’s report on Form 8-K filed on January 27, 2014.
(22)	Previously filed in the Company’s report on Form 8-K filed on May 20, 2014.
(23)	Previously filed in the Company’s report on Form 8-K /A filed on June 11, 2014.
(24)	Previously filed in the Company’s report on Form 8-K filed on July 3, 2014.
(25)	Previously filed in the Company’s report on Form 8-K filed on September 3, 2014.
(26)	Previously filed in the Company’s report on Form 8-K filed on December 29, 2014.
(27)	Previously filed in the Company’s report on Form 8-K filed on February 9, 2015.
(28)	Previously filed in the Company’s report on Form 8-K filed on March 16, 2015.
(29)	Previously filed in the Company’s report on Form 8-K filed on March 30, 2015.
(30)	Previously filed in the Company’s report on Form 8-K filed on June [8], 2015.
(31)	Previously filed in the Company’s report on Form 10-K filed on June 29, 2015.
(32)	Previously filed in the Company’s report on Form 8-K filed on October 9, 2015.
(33)	Previously filed in the Company’s report on Form 8-K filed on October 19, 2015.
(34)	Previously filed in the Company’s report on Form 10-Q filed on November 16, 2015.
(35)	Previously filed in the Company’s report on Form 8-K filed on December 17, 2015.
(36)	Previously filed in the Company’s report on Form 8-K filed on February 8, 2016.
(37)	Previously filed in the Company’s report on Form 8-K filed on March 23, 2016.
(38)	Previously filed in the Company’s report on Form 8-K filed on April 26, 2016.

†	Represents a management agreement or compensatory plan.

**	This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that Determine, Inc. specifically incorporates it by reference.

***	Filed herewith.

Exhibit 10.63

NAME OF TENANT:	DETERMINE, INC.

OFFICE BUILDING:	CARMEL CORPORATE CENTER, BUILDING FOUR
	615 WEST CARMEL DRIVE, SUITE 100, CARMEL, INDIANA 46032

TABLE OF CONTENTS

Article	Page No.
Agreement of Lease; Use of Demised Premises	- 1 -
Preparation of Demised Premises for Occupancy	- 1 -
Term and Commencement Date	- 2 -
Base Rent	- 3 -
Rent Tax	- 4 -
Services and Utilities	- 4 -
Taxes and Operating Costs Escalation	- 5 -
Maintenance and Repairs	- 8 -
Alterations	- 9 -
Loss of or Damage to Tenant's Property	- 10 -
Personal Property Taxes	- 10 -
Workers' Compensation and Property Insurance; Mutual Waiver of Subrogation	- 10 -
Compliance with Laws and Insurance Policies	- 11 -
Hold Harmless	- 11 -
Liability Insurance	- 12 -
Rules and Regulations	- 12 -
Landlord's Access to Demised Premises	- 12 -
Assignment, Subletting, etc.	- 13 -
Involuntary Assignment	- 15 -
Default and Remedies	- 16 -
Landlord's Right to Cure Tenant's Default	- 18 -
No Waiver	- 19 -
Waiver of Trial by Jury	- 19 -
Attorney Fees	- 19 -
Quiet Enjoyment	- 19 -
Subordination	- 20 -
Damage by Fire or Other Casualty	- 20 -
Eminent Domain	- 21 -
Environmental Matters	- 22 -
Surrender of Premises; Holding Over	- 23 -
Notices	- 23 -
No Representations by Landlord	- 24 -
Recording	- 24 -
Real Estate Brokers	- 24 -
Name of Building or Project	- 24 -
Intentionally Deleted	- 24 -
Security Deposit	- 25 -
Miscellaneous	- 25 -
No Option to Lease	- 26 -
Addendum	- 26 -
Right of First Offer on Available Contiguous Space	- 26 -
Building Sign	- 29 -

This LEASE AGREEMENT is made and entered into as of the ________ day of __________, 2016, between ATAPCO CARMEL, INC., a Maryland corporation, having an office at One South Street, Suite 2800, Baltimore, Maryland 21202, hereinafter referred to as "Landlord," and DETERMINE, INC., a Delaware Corporation, having an office at 2121 South El Camino Real, 10 ^th Floor, San Mateo, CA 94403, hereinafter referred to as "Tenant."

RECITALS:

A. Landlord is the owner of an office building with 35,641 rentable square feet hereinafter referred to as the "Building," the address of which is 615 West Carmel Drive, Carmel, Indiana 46032, and is currently known as Carmel Corporate Center, Building Four. The site on which the Building, its related improvements, and its accompanying parking are located is hereinafter referred to as the "Land." If the Building is part of a project, the project is hereinafter referred to as the "Project."

B. Tenant desires to lease a portion of the Building from Landlord.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, Landlord and Tenant agree as follows:

ARTICLE 1

Agreement of Lease; Use of Demised Premises

1.01 Landlord hereby leases to Tenant and Tenant hereby hires from Landlord those certain premises in the Building identified or to be identified as Suite 100, hereinafter referred to as the "Demised Premises," the location of which is shown on the floor plan attached hereto as Exhibit " A " and by this reference made a part hereof, together with the nonexclusive right, in common with others, to the use of any common driveways, parking areas, entrance ways, lobbies, corridors, lavatories, elevators, ramps, stairs and similar access and service ways in and adjacent to the Building. During the term of this Lease Agreement, Landlord shall make available to Tenant, its officers, employees and invitees in common with the other tenants of the Building, free, unreserved, surface parking on the Land at a ratio of five (5) parking spaces per each one thousand (1,000) rentable square feet of space in the Building. The parties stipulate that the Demised Premises are deemed to contain eight thousand seven hundred ninety-five (8,795) rentable square feet (which includes a 15% common area factor), hereinafter referred to as the "Rentable Area of the Demised Premises." Landlord reserves from the Demised Premises space in the ceiling plenum, columns or other concealed areas for erecting, building, using and maintaining unexposed pipes, ducts, conduits, cables and wires leading to and from other parts of the Building.

1.02 The Demised Premises shall be used and occupied solely for general office use and ancillary uses related thereto and for no other purpose.

ARTICLE 2

Preparation of Demised Premises for Occupancy

2.01 Except as otherwise provided in the Work Letter (hereinafter defined), Landlord, at its cost, shall prepare or renovate the Demised Premises for Tenant's occupancy in accordance with the work letter attached hereto as Exhibit " B " ("Work Letter") and the space plan ("Space Plan") attached hereto as Exhibit " B-1, " both of which are made a part hereof by this reference ("Landlord Work"). Except for Landlord's Work, latent defects and Landlord's repair and maintenance obligations under this Lease, Tenant shall accept the Demised Premises "As-Is," and the cost of any additional improvements or other alterations which Tenant may make (in accordance with Section 9.01 of this Lease Agreement) shall be borne solely by Tenant.

2.02 Landlord warrants to Tenant that the work performed by Landlord or Landlord's contractors pursuant to Section 2.01 hereof will be free from defects in materials and workmanship. Landlord's obligation under this warranty shall be limited to replacing or correcting any such defects which are discovered within one (1) year after the Commencement Date (hereinafter defined) of this Lease Agreement, provided Tenant gives Landlord written notice of such defect within said one (1) year period. This limited warranty does not apply to damages and defects resulting from abuse, intentional acts or improper maintenance, operation or use of the Demised Premises by Tenant, its officers, agents, contractors, employees or invitees. The foregoing warranty is in lieu of all other warranties, express, implied or statutory, including warranties of merchantability and fitness for purpose. In no case will Landlord be liable for special, indirect or consequential damages, including interruption of Tenant's business or use or occupancy of the Demised Premises, and there shall be no abatement of Rent (hereinafter defined) on account of any such defects in material or workmanship.

- 1 -

2.03 Landlord hereby permits Tenant to enter upon the Demised Premises prior to the Commencement Date for the purpose of moving or installing any of Tenant's furniture, equipment, fixtures, business machines or other personal property into or upon the Demised Premises, or for any other purposes approved by Landlord as long as such use does not interfere with Landlord's Work and during such earlier entry period, the provisions of Article 9 (Alterations), Article 10 (Loss of or Damage to Tenant's Property), Article 12 (Property Insurance; Mutual Waiver of Subrogation), Article 14 (Hold Harmless) and Article 15 (Liability Insurance) of this Lease Agreement shall apply and become effective as of the date of the first such entry by Tenant.

ARTICLE 3

Term and Commencement Date

3.01 The term of this Lease Agreement is fifty-one (51) months; provided, however, that if the Commencement Date (hereinafter defined) occurs on a date other than the first day of a calendar month, the term of this Lease Agreement shall be extended by that partial month from the Commencement Date to the first day of the following calendar month.

3.02 The commencement date of the term of this Lease Agreement, herein referred to as the "Commencement Date," shall be the date when Landlord shall deliver the Demised Premises to Tenant with the Landlord’s Work substantially complete. Provided that (i) the building permit to permit construction of the Landlord’s Work has been issued on or before April 1, 2016, and (ii) the Tenant requests materials, components or finishes that are all in stock or available in a commercially reasonable time frame given the targeted Commencement Date of June 1, 2016, then if Landlord is unable to deliver possession of the Demised Premises to Tenant by June 1, 2016 with Landlord’s Work substantially completed, unless the delay in delivering the Demised Premises is due to a Tenant Delay, Tenant shall receive a Rent abatement equal to one day for each day after June 1, 2016 until the Commencement Date occurs. If the permit is issued after April 1, 2016, then any Rent abatement shall be delayed on a day-to-day basis for every day after April 1, 2016 until the permit is issued. As an example, if the building permit is issued on April 6, 2016, and the Commencement Date is June 8, 2016, then Tenant would be entitled to two (2) days of Rent abatement. For purposes of this Section, Landlord shall be deemed to have substantially completed Landlord's Work if all Landlord’s Work has been completed except punch list items which will not materially interfere with Tenant's use of the Demised Premises, and a certificate of occupancy has been issued. Notwithstanding the foregoing, the Commencement Date shall not be deferred beyond the date on which Landlord would have been able to deliver possession of the Demised Premises to Tenant but for any Tenant Delay (hereinafter defined). Immediately after the Commencement Date has been determined, Landlord and Tenant shall execute a Lease Commencement Certificate to confirm the Commencement Date.

3.03 Tenant Delay, as used herein, shall mean any delay or delays in the Commencement Date as a result of any one or more of the following: (a) Tenant's failure to furnish, approve or authorize any item reasonably requested by Landlord or required herein; (b) Tenant's delay or failure in submitting to Landlord any information, authorization or approvals reasonably requested by Landlord or required herein; (c) except as expressly allowed herein, Tenant's changes in or additions to any document previously submitted and/or approved by Tenant including but not limited to space plans, work letters and plans and specifications, as applicable (notwithstanding Landlord's approval of such changes); (d) the performance or completion of any work in the Demised Premises by Tenant or any person, firm or entity employed by Tenant; (e) Tenant's request for materials, components, finishes or improvements other than Landlord's Building Standard Tenant Improvements or which are not available in a commercially reasonable time frame given the targeted Commencement Date set forth in Section 3.02 above as long as Landlord has provided notice of this prior to Tenant making the selection; (f) Tenant's failure to pay, when due, any amounts required to be paid by Tenant pursuant hereto; (g) Tenant's request for additional bidding or rebidding of the cost of all or a portion of the work to be done by Landlord; (h) changes or postponements in the work to be done by Landlord requested by Tenant; (i) any error in the Space Plan, Work Letter or plans and specifications, as applicable, to be utilized by Landlord caused by Tenant, or its employees or agents; and (j) any other act or omission of Tenant, its agents or employees which causes a delay as set forth herein. Landlord shall use commercially reasonable efforts to notify Tenant as soon as it determines that any Tenant Delay has occurred. Tenant shall pay all costs and expenses incurred by Landlord that directly result from any Tenant Delay including, without limitation, any costs and expenses directly attributable to increases in the cost of labor and materials, within thirty (30) days after receipt of an invoice for same. Any non-Building Standard Tenant Improvements shall be identified prior to approval of the final Construction Drawings. Landlord shall note on the Construction Drawing or change order the non-Building Standard Tenant Improvements which are included therein, if any.

- 2 -

ARTICLE 4

Base Rent

4.01 The base rent ("Base Rent") for the Demised Premises over the term hereof shall be five hundred eighty-two thousand one hundred nineteen and 16/100 Dollars ($582,119.16) plus any additional Rent which may be due based on any partial month extension of this Lease Agreement as set forth in Section 3.01 hereof. Said Base Rent shall be payable without demand in monthly installments ("Monthly Base Rent") in advance on the first day of each calendar month during the term of this Lease Agreement in accordance with the following schedule:

Lease

Period

Annual Rent

Per Sq. Ft.

Period Rent

Monthly

Base Rent

First four

(4) months

$16.00

$46,906.68

$11,726.67

Next three

(3) months

$0.00

Next seven

(7) months

$16.00

$82,086.69

$11,726.67

Next twelve

(12) months

$16.35

$143,798.28

$11,983.19

Next twelve

(12) months

$16.70

$146,876.52

$12,239.71

Next thirteen

(13) months

$17.05

$162,450.99

$12,496.23

If the Commencement Date occurs on a day other than the first day of a calendar month, then the Monthly Base Rent for the partial month during which the Commencement Date occurs shall be the first Monthly Base Rent (other than any free rent) set forth in the foregoing rent schedule, prorated on the basis of the actual number of days in said month, and said rent schedule shall begin on the first day of the next calendar month. In the event that the term hereof expires or terminates on a day other than the last day of a calendar month, then the Monthly Base Rent for the month during which said expiration occurs shall be prorated on the basis of the actual number of days in said month. Notwithstanding the foregoing, the first installment of Monthly Base Rent payable hereunder shall be paid to Landlord at the time of execution of this Lease Agreement.

4.02 In addition to Monthly Base Rent, Tenant shall pay to Landlord, as additional rent, all other sums of money as shall become due from Tenant under this Lease Agreement (the "Additional Rent"). Said Base Rent, Monthly Base Rent and Additional Rent are herein sometimes referred to individually or collectively as the "Rent." Rent shall be payable, without any setoff or deduction whatsoever except as expressly provided for herein, in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, at Atapco Carmel, Inc. at One South Street, Suite 2800, Baltimore, Maryland, 21202; Attention: Accounting Department, or at such other address or by such other means as Landlord may from time to time hereafter designate in writing. If any installment of Monthly Base Rent or any additional Rent required to be paid by Tenant to Landlord hereunder is not paid within ten (10) days after the same becomes due and payable, Tenant shall pay Landlord, as additional rent, a late charge equal to five percent (5%) of the unpaid installment of Rent. In addition, any Rent not paid within ten (10) days after the same becomes due and payable shall accrue interest at the rate equal to The Wall Street Journal prime rate in effect from time to time plus three percent (3%), or the maximum contract rate of interest legally permitted to be charged Tenant, whichever is the lesser rate, from the date such Rent becomes due and payable to the date of payment thereof by Tenant. Such interest shall be deemed additional Rent payable hereunder. Acceptance of any Rent after it becomes due and payable shall not constitute a waiver of Landlord's right to charge Tenant interest thereon, and neither the notification of Tenant that Landlord intends to charge interest on late Rent nor the acceptance of any late Rent or any interest thereon shall constitute a waiver of Tenant's default with respect to the overdue amount, or prevent Landlord from exercising any of the other rights and remedies available to Landlord.

- 3 -

4.03 The date Landlord or Landlord's Agent receives Rent from Tenant shall at all times be the date utilized by Landlord for purposes of determining the timeliness of Tenant's payment. However, in the event Landlord requests payment by Tenant of Rent to a "lockbox" or other depository in which checks are cashed or deposited by a bank or entity other than Landlord ("Landlord's Agent"), receipt of Rent by Landlord's Agent shall determine the timeliness of the payment.

ARTICLE 5

Rent Tax

5.01 If any governmental authority imposes any tax measured by the amount of Rent paid, Tenant will pay or reimburse Landlord for such tax with each payment of Rent. Amounts collected by Landlord from Tenant for such tax shall not be included in Taxes (hereinafter defined) for purposes of calculating escalations pursuant to Article 7 hereof.

ARTICLE 6

Services and Utilities

6.01 Landlord shall cause the Demised Premises to be kept clean in accordance with the "Cleaning Specifications" set forth in Exhibit " C " attached hereto and by this reference made a part hereof.

6.02 (a) Landlord shall furnish to the Demised Premises, during usual business hours on a year round basis, reasonable air conditioning, heating and ventilation. For the purposes hereof, "usual business hours" shall mean between the hours of Monday to Friday 8:00 A.M. to 6:00 P.M. and Saturday 8:00 A.M. to 1:00 P.M., except legal holidays.

(b) If Tenant requests additional air conditioning for special purposes, not a part of general office use, or because of occupancy or electrical loads in excess of the Building standard as the same has been disclosed to Tenant, Landlord shall, with prior notice to Tenant, install new or additional air conditioning equipment, including, without limitation, a Liebert unit(s) or other equipment for the IT system or server room, additional air conditioning units, chillers, condensers, compressors, ducts and piping, if, in Landlord's reasonable judgment, the same will not cause damage or injury in the Building or create a dangerous or hazardous condition or entail excessive or unreasonable alterations, repairs or expense, or interfere with or disturb other tenants' available electrical loads. Tenant shall reimburse Landlord for the costs of installing and maintaining such new or additional air conditioning equipment as additional Rent, which shall be paid by Tenant within thirty (30) days after receipt of each of Landlord's invoices therefor. In addition, Landlord may charge Tenant for the actual costs incurred by it for the electricity to operate such equipment, which such charges shall be deemed additional Rent and paid by Tenant within thirty (30) days after receipt of each of Landlord's invoices therefor. If Tenant requires an additional electrical load, Landlord shall have the right, at Landlord's option: (i) to install and maintain an additional meter(s) at Tenant's expense to sub-meter the electricity consumed by such new or additional air conditioning equipment; or (ii) to install and maintain an additional meter(s) at Tenant's expense to enable the utility furnishing electricity to the Building to bill Tenant directly for such consumption.

6.03 Landlord shall furnish the electricity necessary for general illumination of the Demised Premises by the Building Standard overhead fluorescent lighting fixtures, and for the operation of 120 volt office machines and equipment generally found in a typical business office. In the event that Tenant (either prior to initial occupancy or at any time thereafter) installs or arranges for the installation of additional electrical fixtures beyond the Building Standard, or operates any electrical equipment, the aggregate load of which exceeds the Building Standard, which is four (4) watts per rentable square foot for the 120 volt convenience outlets, Landlord agrees, upon written request from Tenant, to install the necessary additional wiring and other electrical equipment and controls provided such installation will not, in Landlord's reasonable judgment, cause damage or injury to the Building or create a dangerous or hazardous condition, or entail excessive or unreasonable alteration, repairs or expense, or interfere with or disturb other tenants' available electricity. Tenant shall reimburse Landlord for the cost of such installation as additional Rent, which shall be paid by Tenant within thirty (30) days after receipt of Landlord's invoice therefor. In addition, Landlord may charge Tenant for the actual costs incurred by it in furnishing such additional electricity, which such charges shall be deemed additional Rent and paid by Tenant within thirty (30) days of receipt of each of Landlord's invoices therefor. Landlord shall have the right, at Landlord's option: (a) to install and maintain an additional meter(s) at Tenant's expense to sub-meter such additional electrical energy; or (b) to install and maintain an additional meter(s) at Tenant’s expense to enable the utility furnishing electricity to the Building to bill Tenant directly for such consumption and in such case, electricity shall not be included in Operating Costs except for that related to Common Areas.

- 4 -

6.04 Landlord shall supply water for the Building's common lavatory facilities and for any plumbing fixtures existing in the Demised Premises on the Commencement Date. If Tenant requires water for any additional purpose, Landlord may charge Tenant for the actual costs of supplying such additional water, which such charges shall be deemed additional Rent and paid by Tenant within thirty (30) days of receipt of each of Landlord's invoices therefor. Landlord shall have the right, at Landlord's option: (a) to install and maintain an additional meter(s) to sub-meter such additional water usage; or (b) to install and maintain an additional meter(s) to enable the utility furnishing water to the Building to bill Tenant directly for such consumption and in such case, water shall not be included in Operating Costs except for that related to Common Areas.

6.05 Landlord reserves the right to stop services on the air conditioning, heating, ventilating, elevator (if applicable), plumbing and electrical systems when necessary by reason of accident or emergency, or for repairs, alterations, replacements or improvements, or any other cause whatsoever beyond the reasonable control of Landlord. Except in an emergency, Landlord shall provide notice not less than ten (10) days advance notice of such interruption, or a shorter period, if reasonable under the circumstances and shall perform all repairs in a manner which minimizes its impact on Tenant's operation to the extent commercially reasonable to do so. Landlord shall have no liability because of such interruptions to such services, and there shall be no abatement of Rent by reason thereof, except as otherwise expressly provided for in Section 6.07 hereof. However, Landlord agrees to use diligence to complete all such repairs, alterations, replacements or improvements as soon as practicable under the circumstances.

6.06 If, by reason of a strike, labor trouble, act of God or other cause beyond Landlord's and Tenant's reasonable control, as applicable, including, but not limited to, governmental preemption in connection with a national emergency, any rule, order or regulation of any governmental agency or public utility, or conditions of supply and demand which are affected by war (whether or not declared by Congress) or other emergency, Landlord and/or Tenant, as applicable, shall be unable to fulfill its obligations under this Lease Agreement (other than the obligation to pay rent or make any other required payment) or Landlord shall be unable to supply any service which Landlord is obligated to supply hereunder, then, with regard to Landlord's inability to perform this Lease Agreement, Tenant's obligation to pay Rent hereunder shall in no way be affected, impaired or excused, except as otherwise expressly provided for in Section 6.07 hereof and, with regard to Tenant's inability to perform, Tenant shall not be deemed to be in default and the Lease Agreement shall continue in full force and effect. Provided, however, the delay permitted to Landlord and Tenant under this Section shall be conditioned on the party seeking to exercise the same providing notice to the other party of such event and an estimate of the delay resulting, such notice to be provided within ten (10) days of the date when the event causing the delay first occurred.

6.07 In the event that the Demised Premises or any part thereof are rendered unusable for the purposes leased because any one or more of the utilities or services which Landlord is obligated to provide to the Demised Premises under this Lease Agreement are stopped or interrupted for any reason and the restoration of such utilities or services is within the reasonable control of Landlord, if such stoppage or interruption continues for a period of six (6) consecutive business days after written notice from Tenant to Landlord, and provided Tenant does not occupy the affected portion of the Demised Premises during such period, the Rent shall be ratably abated (based on the square footage of the portion of the Demised Premises rendered unusable) from the beginning of such stoppage or interruption to the earlier of the date on which such utilities or services are restored or the date Tenant reoccupies the affected portion of the Demised Premises for the conduct of its business therein. As used herein, "interrupted" shall mean that such utilities or services are provided in such a non-continuous manner that it is unreasonable to expect that Tenant can use the affected portion of the Demised Premises for the purposes leased.

ARTICLE 7

Taxes and Operating Costs Escalation

7.01 "Taxes" shall mean (a) all real and personal property taxes, assessments (including, without limitation, assessments for public works, improvements or benefits, whether or not begun or completed prior to the commencement of the term of this Lease Agreement and whether or not completed within said term) and other governmental charges or levies of every kind, character and description whatsoever, which at any time have been or may be assessed, levied or imposed by any governmental authority upon or in respect of or which may become a lien on the Building or the Land, or upon any property of Landlord, real or personal, located in and used in connection with the Building or on the Land or which is used in connection with the operation of the Building or the Land; (b) any taxes which may be assessed, levied or imposed by any governmental authority in lieu of all or any part of such real or personal property taxes, assessments, charges or levies; (c) all business, license, use or other taxes which may be assessed, levied or imposed upon the Land, the Building or the personal property of Landlord on account of the leasing or use of the Land or Building for office use only and not related to a specific use of any tenant; and (d) all charges made by state or local governments for any services performed on or for the Land or the Building which are not included in "Operating Costs" under this Article. If the Land (together with the Building and all other improvements located thereon) is not separately assessed, Taxes shall mean an equitable proportion of the foregoing items for all the land and improvements included within the tax parcel assessed, such proportion to be determined by Landlord on the basis of such information as may be reasonably available. Taxes shall not include municipal, county, state or federal income or franchise taxes of Landlord, mortgage, stamp taxes or similar taxes related to the transfer or encumbering of the Building or Land.

- 5 -

7.02 "Base Taxes" shall mean Taxes for calendar year 2016.

7.03 If Taxes for any calendar year during the term of this Lease Agreement are higher than Base Taxes, Tenant shall pay to Landlord as additional Rent twenty-four and 6,766/10,000 percent (24.6766%) of the amount by which Taxes for such calendar year exceed Base Taxes ("Tenant's Share of Taxes").

7.04 On the first day of each calendar month during the calendar year in which the Commencement Date occurs, Tenant shall pay to Landlord an amount equal to one-twelfth (1/12th) of Landlord's good faith estimate of Tenant's Share of Taxes. Prior to the beginning of each calendar year after such initial calendar year, Landlord shall advise Tenant of Landlord's good faith estimate of Tenant's Share of Taxes for the following calendar year. On the first day of each calendar month during such calendar year, Tenant shall pay to Landlord an amount equal to one-twelfth (1/12th) of such estimated share.

7.05 (a) "Operating Costs" shall mean the aggregate of all costs actually paid or incurred by Landlord in the operation of the Building and the Land, including, but not limited to: snow removal; grass cutting; tree and landscape maintenance; repairing and restriping driveways and parking areas; the repair and maintenance of air conditioning equipment, heating equipment, plumbing equipment, life safety support systems, elevators, any other equipment, and wall, floor and window coverings; janitorial services (including rubbish removal); pest control; interior and exterior cleaning costs; supplies; property insurance; liability insurance; water, sewer, gas, electricity and steam; reasonable management, legal, accounting and engineering fees; costs incurred for energy management systems and fixtures, Building alterations, modifications or equipment installed in good faith to reduce Operating Costs, and repair and maintenance of the same, regardless of whether such costs are considered to be capital improvements under generally accepted accounting principles, which costs, including interest cost, shall be amortized on a straight line basis over the useful life of the item; Building alterations, modifications or equipment which are required to bring the Building into compliance with any governmental law, ordinance, rule or regulation that was not applicable to the Building as of the date of this Lease Agreement, which such costs, including interest cost, shall be amortized over the reasonable life of the item, which shall in no event extend beyond the remaining life of the Building; all compensation and related costs (including overtime, holiday and premium pay) actually paid or incurred to persons engaged in the direct operation and management of the Building and the Land, but excluding those at the level above building manager or its equivalent, including the cost of social security, unemployment and other payroll taxes, worker's compensation insurance, and employee benefits such as, but not limited to, vacations, pensions, group insurance and other fringe benefits; and all costs, charges, expenses, dues or assessments imposed on the Land or Building pursuant to any declarations, covenants, conditions, easements or restrictions recorded among the land records of the jurisdiction where the Building and Land are located. If any such costs are applicable to both the Building or the Land and other portions of the Project, Operating Costs shall include an equitable proportion of such costs, such proportion to be reasonably determined by Landlord on the basis of such information as may be reasonably available. It is understood and agreed that Operating Costs shall include both costs directly incurred and costs incurred under outside contracts and that this paragraph is for definitional purposes only and shall not impose any obligation upon Landlord to incur such expenses or provide such services.

(b) Notwithstanding anything to the contrary in this Article 7, Operating Costs shall not include the following: (i) leasing and brokerage fees and commissions and other fees related to leasing, including advertising costs; (ii) architectural fees, engineering fees, and all other costs for tenant improvement work for Tenant or for other tenants of the Building; (iii) costs reimbursed to Landlord by insurance companies or third parties; (iv) except as specifically provided for in subsection 7.05(a) above, depreciation, amortization and interest payments; (v) except as specifically provided for in subsection 7.05(a) above, costs incurred for capital improvements of any nature; (vi) Landlord's general corporate overhead and administrative expenses; (vii) legal fees and other costs and expenses incurred in resolving disputes with tenants, collecting rent or otherwise enforcing leases of tenants of the Building, other than for the enforcement of the Rules and Regulations or incurred as part of the sale, financing or encumbering of the Land and/or the Building; (viii) amounts paid to any person, firm or corporation related or otherwise affiliated with Landlord, to the extent they exceed arms-length, competitive prices for the goods or services provided; (ix) the costs of goods and services which any tenant, including Tenant, reimburses Landlord for or pays directly to third parties, to the extent of such reimbursement or payment; (x) the costs of services provided to other tenants of the Building that are not provided or available to Tenant; (xi) the costs of management fees in excess of five percent (5%) of the gross revenues of the Building; (xii) rent under ground leases; (xiii) costs arising from the gross negligence or intentional misconduct of Landlord, including late fees from the failure to pay expenses when due (unless the delay is caused by a tenant); and (xiv) the costs of remediating any hazardous substance which arose prior to the Commencement Date, or which was due to Landlord's negligent acts or omissions, or was the result of migration onto the Land from off site, but only to the extent such remediation is required by applicable law.

- 6 -

(c) If the average occupancy of the Building is less than ninety percent (90%) of the rentable area of the Building during any calendar year, including the base calendar year specified in Section 7.06 hereof (if a calendar year is specified for determining Base Operating Costs), Landlord shall "gross up" the Operating Costs for that year to the amount that, in Landlord's reasonable good faith judgment, consistent with industry practices, would have been incurred had the average occupancy of the Building been ninety percent (90%) of the rentable area of the Building during that calendar year.

7.06 "Base Operating Costs" shall mean Operating Costs for calendar year 2016.

7.07 If Operating Costs for any calendar year during the term of this Lease Agreement are higher than Base Operating Costs, Tenant shall pay to Landlord as additional Rent twenty-four and 6,766/10,000 percent (24.6766%) of the amount by which Operating Costs for such calendar year exceed Base Operating Costs ("Tenant's Share of Operating Costs").

7.08 On the first day of each calendar month during the calendar year in which the Commencement Date occurs, Tenant shall pay to Landlord an amount equal to one-twelfth (1/12th) of Landlord's good faith estimate of Tenant's Share of Operating Costs. Prior to the beginning of each calendar year after such initial calendar year, Landlord shall advise Tenant of Landlord's estimate of Tenant's Share of Operating Costs for the following calendar year. On the first day of each calendar month during such calendar year, Tenant shall pay to Landlord an amount equal to one-twelfth (1/12th) of such estimated share.

7.09 Within one hundred twenty (120) days after the end of every calendar year during the term of this Lease Agreement, Landlord shall determine any additional Rent payable by Tenant pursuant to this Article 7 for that calendar year, in excess of the monthly payments made by Tenant pursuant to this Article 7, and such additional Rent shall be payable by Tenant within thirty (30) days after receipt from Landlord of a statement of such excess amount due, which such statement shall include a breakdown into significant general expense categories, such as: taxes; general operating; cleaning; heating, ventilation and air conditioning; electrical; elevators; plumbing; general and administrative; utilities; insurance; and snow removal. Within one hundred twenty (120) days after the end of every calendar year during the term of this Lease Agreement, Landlord shall determine any excess of the monthly payments made by Tenant pursuant to this Article 7 over the amount of additional Rent payable by Tenant pursuant to the provisions of this Article 7 for that calendar year and such additional Rent shall, after determination of such excess by Landlord, be credited against the installments of Rent next becoming payable under this Lease Agreement, or, in the event that such determination is made after the expiration or other termination of this Lease Agreement, shall be paid to Tenant within thirty (30) days after such determination.

7.10 Tenant, at its expense, shall have the right to have its internal or independent auditors that are not being compensated on a contingency fee basis inspect Landlord's accounting records in support of any statement sent to it by Landlord pursuant to Article 7 hereof, during Landlord's regular business hours, at Landlord's real estate accounting office in Baltimore, Maryland or another location approved by Landlord in writing, at any time not later than ninety (90) days after it receives any such statement by giving Landlord at least ten (10) days' prior written notice of its desire to do so; however, neither the giving of such notice nor the disputing of the statement shall defer the time period specified in Section 7.09 above within which Tenant must pay the additional Rent as billed in the statement. Tenant shall: (a) provide Landlord with a copy of the results of such audit within fifteen (15) days after the audit is completed; (b) keep all information obtained through said audit, as well as any information regarding a compromise, settlement or adjustment reached between Landlord and Tenant, in strict confidence; and (c) indemnify, defend and hold Landlord harmless from and against all costs, damages, claims, liabilities, expenses, losses, court costs and attorney fees suffered by or claimed against Landlord, based in whole or in part upon the breach of said confidentiality agreement. The above confidentiality and indemnification agreement shall survive the expiration or termination of this Lease Agreement. In addition, Tenant acknowledges that as a condition precedent to its right to audit as set forth herein, Tenant's auditor must execute a confidentiality and indemnification agreement substantially similar to Tenant’s as set forth herein. In the event that as a result of the audit process it is determined that the statement provided in Section 7.09 is incorrect, any excess payments due by Landlord to Tenant shall be paid or applied as provided in Section 7.09, and if Landlord is found to have overcharged by 10% or more, Landlord shall reimburse Tenant for the reasonable costs of the audit. Landlord and Tenant agree that if Tenant shall fail to request the audit within the ninety (90) day period, the statement of the Landlord shall be deemed to be final and binding.

- 7 -

7.11 Any additional Rent called for by this Article which is applicable to a period of less than a full calendar year shall be prorated on the basis of a 365 day year.

7.12 Nothing contained in this Article shall be interpreted at any time to reduce the Monthly Base Rent payable under this Lease Agreement below the amount specified in Article 4 hereof.

7.13 Tenant's obligation to pay any and all additional Rent under this Article and Landlord's and Tenant's obligations to make any adjustments referred to in this Article shall survive the expiration or termination of this Lease Agreement.

ARTICLE 8

Maintenance and Repairs

8.01 Except for those repairs, restorations and replacements which Tenant is required to make pursuant to Section 8.03 hereof, Landlord shall maintain, repair and replace, as necessary, and keep in good order and condition, as applicable: (a) the heating, ventilating and air conditioning systems serving the Demised Premises and the common areas in the Building; (b) the plumbing, sprinkler and electrical lines and systems and other building mechanical and service systems serving the Demised Premises and the common areas in the Building; (c) the interior and exterior structure of the Building, including the roof, exterior walls, load bearing walls, demising walls, support beams, foundation, columns and exterior doors and windows; and (d) the common areas located within or adjacent to the Building, including any common driveways, parking areas, landscaping, entrance ways, lobbies, corridors, lavatories, elevators, ramps, stairs and similar access and service ways. Except for the foregoing, and as otherwise expressly provided in this Lease, Landlord shall have no obligation whatsoever to make any repairs to the Demised Premises or the Building.

8.02 Landlord, at its cost and expense, shall maintain, repair and replace, as necessary, and keep in good order and condition, the building standard lighting fixtures within the Demised Premises and the common areas, including ballasts, lamps and bulbs.

8.03 Tenant shall use the Demised Premises and the Building and the fixtures and appurtenances therein with care. Subject to Section 12.06, all damage to the Demised Premises, or to its fixtures, appurtenances and equipment, other than ordinary wear and tear and damage by fire or other insured casualty, caused by or resulting from Tenant's use, alterations, improvements, or occupation thereof or caused by or resulting from the negligence or improper conduct of Tenant, its officers, agents, employees or invitees, shall be promptly repaired, restored or replaced by Tenant at no cost to Landlord. Tenant shall, at its sole cost and expense, maintain, repair, replace and keep in good order and condition any additions, improvements or other alterations installed by Tenant. All the aforesaid repairs, restorations and replacements shall be in quality and class equal to the original work or installations and to the reasonable satisfaction of Landlord. If Tenant fails to make such repairs, restorations or replacements within thirty (30) days after Landlord notifies Tenant in writing to make them, the same may be made by Landlord at the expense of Tenant, and such expense shall be collectible as additional Rent which shall be paid by Tenant within thirty (30) days after receipt of Landlord's invoice therefor.

8.04 Tenant shall not place a load upon any floor of the Demised Premises that exceeds the lesser of (a) a combined dead and live load eighty (80) pounds per square foot (including partitioning loading) or (b) the maximum floor load per square foot allowed by law. Business machines and mechanical equipment shall be placed and maintained by Tenant at Tenant's expense, in settings sufficient, in Landlord's reasonable judgment, to absorb and prevent vibration, noise and annoyance.

8.05 There shall be no allowance to Tenant for any diminution of rental value and no liability on the part of Landlord by reason of inconvenience, annoyance or injury to business arising from the making of any repairs in or to the Building or the Demised Premises, or in or to the fixtures, appurtenances or equipment thereof, except as otherwise expressly provided for in Section 6.07 or elsewhere in this Lease Agreement.

- 8 -

ARTICLE 9

Alterations

9.01 Tenant shall not make any removals, additions, improvements or other alterations in or to the Demised Premises without Landlord's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed as to non-structural removals, additions, improvements or other alterations, and which consent may be withheld in Landlord's sole and absolute discretion as to structural removals, additions, improvements and other alterations. Any such approved alterations shall be done at Tenant's sole cost and expense, in accordance with the applicable laws, ordinances, orders, rules and regulations of any public authority having jurisdiction over the Building, at such times and in such manner as Landlord may approve in writing by either (a) contractors retained by Tenant and approved by Landlord in writing not to be unreasonably withheld , or (b) Landlord with its own employees or through contractors retained by Landlord, in which event Tenant shall reimburse Landlord for all reasonable costs and expenses incurred in performing such work within thirty (30) days after receipt of Landlord's invoice therefor. In addition, whether the work is done by contractors retained by Tenant or directly by Landlord with its own employees or through contractors retained by Landlord, Tenant shall pay to Landlord, within thirty (30) days after receipt of Landlord's invoice therefor, such amount as Landlord reasonably determines to be appropriate as compensation for its supervision of the work, not to exceed 5% of the cost of the work. Tenant shall give Landlord not less than ten (10) days' prior written notice of the commencement of any such work by Tenant's contractors. Tenant shall require (a) its contractors, architects, and engineers to carry general liability insurance coverage, and (b) its architects and engineers to carry professional liability insurance coverage, each in an amount reasonably approved by Landlord, and to furnish to Landlord prior to the commencement of any work a certificate(s) evidencing such coverage and naming Landlord as an additional insured. Landlord's consent to alterations which Tenant may wish to make in or to the Demised Premises shall not be construed to mean that Landlord believes that such alterations comply with all applicable laws, ordinances, orders, rules and regulations of any public authority, as hereinabove required of Tenant. Notwithstanding the foregoing, Tenant shall be permitted to make minor cosmetic changes to the Demised Premises without Landlord's consent, but with advance notice to Landlord, so long as the cost of the same is not in excess of $50,000 annually in the aggregate, and the same does not affect the structure or exterior appearance of the Building and does not harm the building mechanical systems.

9.02 Any mechanic's lien filed against the Demised Premises, the Building or the Land for work done or materials or equipment furnished to or contracted for by Tenant shall be discharged or bonded by Tenant, at Tenant's expense, within forty (40) days after the date it is filed or the date Tenant is notified of such filing, whichever is later. If Tenant fails to so discharge or bond any such lien, Landlord may, with notice to Tenant, do so at Tenant's expense, and the amount expended by Landlord in so doing, together with all expenses, including attorneys' fees, incurred by Landlord in connection therewith, shall be collectible as additional Rent and shall be paid by Tenant within thirty (30) days after receipt of Landlord's invoice therefor.

9.03 All additions, improvements or other alterations which Tenant may make to the Demised Premises shall remain upon and be surrendered with the Demised Premises at the expiration or termination of this Lease Agreement. However, if Tenant shall make any such alterations in or to the Demised Premises without Landlord's written consent, or if Landlord when granting such consent reserves the right to require Tenant to remove such alterations and restore the Demised Premises at the expiration or termination of this Lease Agreement, then Landlord may elect, by giving Tenant written notice no later than thirty (30) days prior to the expiration or termination of this Lease Agreement, to require Tenant, at its expense, to remove such alterations and restore the Demised Premises by the termination of this Lease. If Tenant does not remove such alterations and restore the Demised Premises by the termination date, Landlord may recover the costs of such removal and restoration from Tenant.

9.04 All articles of personal property, equipment and all business and trade fixtures, wires, private telephone systems and lines, furniture and movable partitions owned, leased or installed by Tenant at its expense in the Demised Premises or in any telephone closet or other area of the Building, shall be and remain the property of Tenant and, subject to the provisions of Section 9.01 hereof, may be removed by Tenant at any time, provided that Tenant, at its expense, shall repair any damage to the Building caused by such removal or by the original installation. Tenant shall remove all of the aforedescribed property at the expiration or termination of this Lease Agreement, and Tenant shall, at its expense, repair any damage to the Building caused by such removal or by the original installation. If Tenant does not remove its property as aforesaid, not later than the date of expiration or termination of this Lease Agreement, such property shall be deemed abandoned and Landlord may, at its election, either retain such property as its own or remove and dispose of such property as it sees fit. If Landlord elects to remove and dispose of such property, Landlord may recover the costs of such removal and disposal from Tenant as additional Rent which shall be paid by Tenant within thirty (30) days after receipt of Landlord's invoice therefor.

- 9 -

ARTICLE 10

Loss of or Damage to Tenant's Property

10.01 Subject to the provisions of Section 12.06 of this Lease Agreement, neither Landlord nor its officers, agents or employees shall be liable to Tenant for any loss of or damage to personal property of Tenant located in the Demised Premises or in any telephone closet or other area of the Building, resulting from theft, fire, explosion, steam, gas, electricity, water or moisture in or from any part of the Building, including its roof, walls, ceilings and floors, or from the pipes, appliances, or mechanical and electrical systems in the Building or from any other place or from any other cause, whether or not similar to the foregoing causes.

10.02 Tenant shall immediately notify Landlord verbally, and promptly thereafter in writing, in the event of any loss of or damage to the Building, the Demised Premises or Tenant's personal property resulting from any theft, fire, accident, occurrence or condition in, on or about the Demised Premises or the Building.

ARTICLE 11

Personal Property Taxes

11.01 Tenant shall be liable for and shall pay or reimburse Landlord for any taxes levied against or attributable to any of Tenant's personal property.

ARTICLE 12

Workers' Compensation and Property Insurance; Mutual Waiver of Subrogation

12.01 Landlord shall obtain and maintain in effect at all times during the term of this Lease Agreement an "all risk" property insurance policy covering all risks of direct physical loss or damage to the Building, to the extent of their full replacement value, with a Loss of Rents endorsement.

12.02 Tenant, at Tenant's expense, shall obtain and maintain in effect at all times during the term of this Lease Agreement an "special form" insurance policy covering all risks of direct physical loss or damage to Tenant's personal property in the Demised Premises or in any telephone closet or other area of the Building, and to all of Tenant's additions, improvements or other alterations in or to the Demised Premises, to the extent of their full replacement value, with a Business Income endorsement.

12.03 Tenant, at Tenant's expense, shall obtain and maintain in effect during the Term of this Lease Agreement, workers' compensation insurance insuring against and satisfying Tenant's obligations and liabilities under the workers' compensation laws of the state in which the Demised Premises are located, which shall include a waiver of subrogation in favor of Landlord.

12.04 The insurance policy required to be obtained and maintained by Tenant under Section 12.02 hereof: (a) must be written as primary policy coverage and not contributing with or in excess of any coverage which Landlord may carry; (b) must provide that the policy may not be canceled unless Landlord shall have received at least ten (10) days' prior written notice of cancellation; and (c) must be issued by an insurance company having an A. M. Best Rating of A-, VII or better. The issuance of any such insurance policy shall not be deemed to limit or restrict in any way Tenant's liability or obligations arising under or out of this Lease Agreement.

- 10 -

12.05 Tenant shall furnish Landlord with a certificate evidencing the insurance required to be obtained and maintained by Tenant under Sections 12.02 and 12.03 of this Article prior to the Commencement Date and not later than five (5) days prior to expiration of any policy.

12.06 Notwithstanding any other provision of this Lease Agreement, neither Landlord nor Tenant shall be liable to the other party or to any insurance company (by way of subrogation or otherwise) insuring the other party for any loss or damage to any building, structure or other tangible property, or any resulting loss of income or additional expense, even though such loss or damage might have been caused by the negligence of such party, its officers, employees, agents or contractors, if such loss or damage is covered by insurance benefitting the party suffering such loss or damage or was required to be covered by insurance pursuant to this Article. The foregoing waiver shall not apply if it would have the effect, but only to the extent of such effect, of invalidating any insurance coverage of Landlord or Tenant. Tenant agrees to cause all other occupants of the Demised Premises claiming by, under, or through Tenant to execute and deliver to Landlord such a waiver of claims.

ARTICLE 13

Compliance with Laws and Insurance Policies

13.01 In connection with its use and occupancy of the Demised Premises and the common areas in and adjacent to the Building, Tenant, at its expense, shall promptly comply with all applicable present and future federal, state and local laws, ordinances and regulations and with all orders and rules of governmental authorities having jurisdiction, including, without limitation, compliance with any law, ordinance or regulation that requires alterations by Landlord or Tenant to the Demised Premises or the Building because of Tenant's particular and specific use of the same. Tenant shall pay or reimburse Landlord for all costs, expenses, fines, penalties or damages which may be levied or imposed upon Landlord by reason of Tenant's failure to comply with the provisions of this Section. Landlord shall be responsible for violations of laws, ordinances and regulations if, the same (i) exist as a result of Landlord's acts or omissions, and (ii) occur prior to the Commencement Date.

13.02 Tenant shall not do, omit to do, or permit to be done any act or thing in, on or about the Demised Premises which will invalidate or be in conflict with any requirement, covenant or condition of any property insurance policy covering part or all of the Building or the fixtures and property therein, or which will subject Landlord to any uninsured liability to any person for bodily injury, death or property damage. Landlord warrants that general office use shall not cause a violation of this Section.

13.03 If, as a result of any act or omission by Tenant, or the presence in the Demised Premises or the Building of anything, equipment or improvements of Tenant, the premium rate for property or other insurance applicable to the Building shall be increased to an amount higher than it otherwise would be, Tenant shall reimburse Landlord for all increases of insurance premiums so caused. Such reimbursement shall be collectible as additional Rent which shall be paid by Tenant within thirty (30) days after receipt of Landlord's invoice therefor. If any increase in the Landlord's premium rate for property or other insurance applicable to the Building is stated by Landlord's insurance carrier or by the applicable Insurance Rating Bureau to be due to any act, omission, thing, equipment or improvements by or of Tenant, such statement shall be prima facie evidence that the increase in such rate is due to such act, omission, thing, equipment or improvements.

ARTICLE 14

Hold Harmless

14.01 Tenant shall hold harmless and defend Landlord, its officers, agents and employees, at Tenant's sole cost with counsel reasonably satisfactory to Landlord, from and against any and all claims, damages, causes of action for damages, costs and expenses (including, without limitation attorneys' fees) on account of any injury to or death of any person or any loss of or damage to property occurring in, on or about the Demised Premises at any time during the term of this Lease Agreement, but not to the extent such injury, death, loss or damage is caused by the intentional misconduct or negligence of Landlord, its officers, agents or employees.

14.02 This Article 14 shall survive the expiration or termination of this Lease Agreement.

- 11 -

ARTICLE 15

Liability Insurance

15.01 Tenant, at Tenant's expense, shall obtain and maintain in effect at all times during the term of this Lease Agreement an ISO Commercial General Liability Coverage insurance policy, written on an occurrence basis (and not a "claims made" basis), with a combined single limit for bodily injury and property damage per occurrence of not less than Three Million Dollars ($3,000,000), insuring against all liability of Tenant, its agents and employees, arising out of and in connection with Tenant's use, occupancy or maintenance of the Demised Premises, and the performance by Tenant of the hold harmless provisions of Section 14.01 of this Lease Agreement. Such policy shall be endorsed to name Landlord as additional insured. If Tenant's insurance covers more than one (1) location, Tenant's policy shall be endorsed to stipulate a "per location" limit of not less than the above amount which applies separately to the Demised Premises. Tenant's liability insurance may be provided by a combination of primary and umbrella coverage held by Tenant provided all such policies are at least as broad in scope as the primary commercial general liability policy required above. No such insurance policy may provide for a deductible or self insured retention exceeding Ten Thousand Dollars ($10,000) without the prior written approval of Landlord, which approval shall not be unreasonably withheld.

15.02 The insurance policy required to be obtained and maintained by Tenant under Section 15.01 hereof: (a) must be written as primary policy coverage and not contributing with or in excess of any coverage which Landlord may carry; (b) must provide that the policy may not be canceled unless Landlord shall have received at least ten (10) days' prior written notice of cancellation; and (c) must be issued by an insurance company having an A. M. Best Rating of A-,VII or better. Neither the issuance of any such insurance policy nor the minimum limits specified in Section 15.01 hereof shall be deemed to limit or restrict in any way Tenant's liability or obligations arising under or out of this Lease Agreement.

15.03 Tenant shall furnish Landlord with a certificate evidencing the insurance policy required to be obtained and maintained by Tenant under this Article prior to the Commencement Date and not later than five (5) days prior to expiration of any policy. Each such certificate shall be binding on the issuer thereof and may not prohibit Landlord from relying thereon.

15.04 Landlord shall obtain and maintain during the term of the Lease Agreement an ISO Commercial General Liability Coverage insurance policy written on an occurrence basis, with combined single limit coverage of not less than $3,000,000 and reasonable deductible.

ARTICLE 16

Rules and Regulations

16.01 Tenant and Tenant's employees and agents shall comply with the Rules and Regulations set forth in Exhibit " D " attached hereto and by this reference made a part hereof, and such reasonable amendments thereto and such other and further reasonable Rules and Regulations as Landlord may from time to time adopt. Landlord shall give Tenant prior written notice of any such amendments or additional Rules or Regulations. If there is a conflict between the Rules and Regulations and any of the provisions of this Lease Agreement, the provisions of this Lease Agreement shall prevail. Nothing contained in this Lease Agreement shall be construed to impose upon Landlord any duty or obligation to enforce the Rules and Regulations against any other tenant of the Building, and Landlord shall not be liable to Tenant for violation of the same by any other tenant or its employees, agents or invitees. However, if and to the extent Landlord does attempt to enforce the Rules and Regulations, it shall do so uniformly with respect to all of the tenants of the Building.

ARTICLE 17

Landlord's Access to Demised Premises

17.01 Landlord and its employees, contractors, agents and authorized representatives shall have the right to enter the Demised Premises at any time during emergencies and to do any necessary or required cleaning or maintenance, and upon reasonable advance notice at all reasonable times for the purpose of inspecting the condition of the Demised Premises or for any other lawful purpose provided that advance notice as is reasonable under the circumstances shall be provided prior to entry for maintenance purposes that would affect Tenants' operations.

- 12 -

17.02 If, at any time during the last month of the term of this Lease Agreement or any extension term, Tenant shall have removed all of Tenant's property from the Demised Premises, including the business and trade fixtures, private telephone systems and lines, cabinetwork, furniture and movable partitions which may be removed by Tenant pursuant to Section 9.04 hereof, Landlord may immediately enter and alter, renovate and decorate the Demised Premises, and such acts shall have no effect upon Tenant's remaining obligations under this Lease Agreement but Landlord shall indemnify and hold Tenant harmless from any loss claim or damage resulting from Landlord's acts.

17.03 If Tenant shall not be personally present to open and permit an entry into the Demised Premises at any time such an entry is permitted by this Article, Landlord or its employees, contractors, agents or authorized representatives may gain entry into the Demised Premises by use of a master key.

17.04 Landlord shall use all commercially reasonable efforts to conduct its activities in the Demised Premises in a manner that seeks to cause the least possible inconvenience, annoyance or disturbance to Tenant. However, Landlord shall not be liable in any manner for any inconvenience, annoyance, disturbance, loss of business, nuisance or other damage arising out of Landlord's entry (or the entry by Landlord's employees, contractors, agents or authorized representatives) into the Demised Premises pursuant to this Article, except for damage caused by the intentional misconduct or negligence of Landlord, its employees, agents or authorized representatives during any such entry as to which Landlord is not otherwise released pursuant to any other provision of the Lease. No act taken by Landlord or its employees, contractors, agents or authorized representatives pursuant to this Article shall be considered to constitute an eviction of Tenant in whole or in part, and Tenant shall not be entitled to an abatement or reduction of Rent as a result of any such entry by Landlord.

ARTICLE 18

Assignment, Subletting, etc.

18.01 Tenant shall not directly or indirectly, voluntarily, by operation of law or otherwise, assign, transfer, mortgage or encumber this Lease Agreement, or sublet the Demised Premises or any part thereof, or suffer or permit the Demised Premises or any part thereof to be used or occupied by any other person or entity (the employees and agents of Tenant excepted), without the prior written consent of Landlord in each instance. Landlord and Tenant acknowledge, consent and agree, however, that the following are strictly prohibited: (a) any public advertising of the rate at which Tenant is willing to sublet the Demised Premises; (b) any sublease or assignment to an existing tenant or subtenant of space in the Building or the Project; and (c) any assignment of less than all of the Demised Premises. Any request for such consent shall be in writing and shall be accompanied by a true copy of any offer to take an assignment or sublease which Tenant may have received, as well as a copy of the proposed assignment or sublease, if one has been prepared; and Tenant shall furnish to Landlord all information reasonably requested by Landlord with respect to the reputation and financial responsibility and standing of the proposed assignee or subtenant, and the nature of the business to be conducted by the proposed assignee or subtenant in the Demised Premises. If Tenant is a partnership or limited liability company, a withdrawal or direct or indirect change (voluntary, involuntary, by operation of law or otherwise) of a partner (or partners) or member (or members) owning twenty five percent (25%) or more of the partnership or limited liability company, or the dissolution of the partnership or limited liability company; or if Tenant consists of more than one person, an assignment or transfer (voluntary, involuntary, by operation of law or otherwise) from one such person to the other(s); or if Tenant is a corporation (other than a corporation the outstanding voting stock of which is listed on a "national securities exchange", as defined in the Securities Exchange Act of 1934), any dissolution, merger, consolidation or other reorganization of Tenant; or any direct or indirect change in the ownership (voluntary, involuntary, by operation of law or otherwise) of fifty percent (50%) or more of the ownership interests from the ownership existing on the date of execution of this Lease Agreement; shall be deemed an assignment prohibited hereunder unless the prior written consent of Landlord thereto has been obtained. Notwithstanding anything contained in this Lease Agreement to the contrary, Landlord shall not be obligated to entertain or consider any request by Tenant to consent to any proposed assignment, subletting or other prohibited transaction regarding all or any portion of the Demised Premises unless each request by Tenant is accompanied by a nonrefundable fee payable to Landlord in the amount of One Thousand and No/100 Dollars ($1,000.00) to cover Landlord's administrative, legal and other costs and expenses incurred in processing each of Tenant's requests. Neither Tenant's payment nor Landlord's acceptance of the foregoing fee shall be construed to impose any obligation whatsoever upon Landlord to consent to Tenant's request. Notwithstanding the foregoing, in the event of an assignment of this Lease Agreement or the transfer of Tenant's ownership interest resulting from a merger, asset sale or stock/membership sale, then, so long as the requirements in Section 18.03 below are satisfied, Landlord's consent shall not be required, but Tenant shall provide advance notice to Landlord, together with an assumption agreement confirming the remaining entity will comply with the requirements of Section 18.03(b) below.

- 13 -

18.02 If any such assignment or subletting provides for the receipt by, on behalf of or on account of Tenant of any consideration of any kind whatsoever (including, without limitation, a premium rental for a sublease or a lump sum payment for an assignment) in excess of the Rent and other charges due Landlord under this Lease Agreement (or in the case of a subletting of less than all of the Demised Premises, in excess of the pro rata portion of the Rent and other charges allocable to the portion of the Demised Premises proposed to be sublet), Tenant shall pay to Landlord, as Additional Rent, after deducting the actual and reasonable costs expended by Tenant with respect to the assignment or subletting, including brokerage commissions and tenant improvements, fifty percent (50%) of said excess immediately upon receipt by Tenant of each installment of said excess consideration. Landlord shall have the right at any time upon ten (10) days' prior written notice to Tenant to audit and inspect the books, records and accounts of Tenant to verify the amount of consideration due to Landlord hereunder so long as Landlord enters into a confidentiality agreement, as reasonably required by Tenant. In the event that the transfer of Tenant’s interest in the Lease Agreement is part of Tenant’s transfer of its ownership interest or all or a substantial part of its assets, only the consideration which is properly allocated to the Lease Agreement shall be deemed consideration for the Lease Agreement.

18.03 Landlord's consent to Tenant's request to assign this Lease Agreement, or sublet the Demised Premises or any part thereof, shall not be unreasonably withheld, but shall be strictly conditioned upon Tenant and/or its assignee or subtenant, as the case may be, at its or their sole expense, complying with any and all additional requirements of present or future laws which arise as a result of the assignment or subletting. In addition, as a condition precedent to Landlord's consent, Landlord may require that:

(a) Tenant provide Landlord with evidence reasonably satisfactory to Landlord that the value of Landlord's interest under this Lease Agreement will not be diminished or reduced by such assignment or subletting. Such evidence shall include, but need not be limited to, evidence respecting the relevant business experience, reputation, financial responsibility and status of the proposed assignee or subtenant;

(b) the proposed assignment or subletting shall be evidenced by a written instrument in form and substance reasonably satisfactory to Landlord, executed by Tenant and the assignee or subtenant, and containing an undertaking by any assignee to assume, be bound by and perform all of the terms, covenants and conditions of this Lease Agreement to be done, kept and performed by Tenant, or an undertaking by any subtenant to be bound by all of the provisions of this Lease Agreement related to that part of the Demises Premises sublet;

(c) at the time of the proposed assignment or subletting, Tenant shall not be in default under this Lease Agreement in any respect; and

(d) if Tenant proposes to sublet less than all of the space in the Demised Premises, Tenant, at its sole cost and expense, shall (i) obtain and deliver to Landlord a certificate of occupancy for its subtenant from the governmental authority having jurisdiction over the Building, if required, and (ii) construct a demising wall and make such other improvements to the sublet space as may be required for the issuance of such certificate of occupancy; the foregoing shall not prohibit the subleasing of one or more individual offices in the Demised Premises without a demising wall being required, if permitted by applicable law.

Tenant hereby agrees and acknowledges that each and all of the above conditions for the granting by Landlord of its consent to any subletting of the Demised Premises or any assignment of this Lease Agreement are reasonable and Landlord's imposition of such conditions shall under no circumstances impair or limit Landlord's rights and remedies under this Lease, at law or in equity.

18.04 Neither the consent by Landlord to any assignment, transfer, mortgage, encumbrance, subletting or use by others, nor the collection or acceptance of Rent by Landlord from any such assignee, transferee, subtenant, or occupant shall relieve Tenant from the further performance of the terms, conditions, covenants and obligations of this Lease Agreement, nor shall it relieve Tenant, its successors or assigns, or such assignees, transferees, subtenants or occupants, from the obligation to seek and obtain the prior written consent of Landlord to any further assignment, transfer, mortgage, encumbrance, subletting or use by others. In the event this Lease Agreement is assigned, transferred, mortgaged, or encumbered, or the Demised Premises are subleased or used by others as aforesaid, Landlord may consent to subsequent assignments, transfers, mortgages, encumbrances, sublettings or uses by others without notifying Tenant or its successors in interest and without obtaining the consent of Tenant or such successors.

- 14 -

18.05 Tenant hereby irrevocably assigns to Landlord, as security for the performance of Tenant's obligations under this Lease Agreement, all rent from any subletting of all or any portion of the Demised Premises, and agrees that in the event of any default by Tenant, Landlord may collect such rent and apply it towards Tenant's obligations under this Lease Agreement. Tenant agrees to indemnify and defend Landlord against any and all liabilities which Landlord may incur as a result of any assignment or subletting by Tenant, unless said liability is the direct result of Landlord's negligence.

18.06 Landlord and its successors may freely sell, assign or otherwise transfer all or any portion of its interest under this Lease Agreement or in the Demised Premises or the Building, and in the event of any such sale, assignment or other transfer, the party originally executing this Lease Agreement as Landlord, and any successor of such party, shall, without further agreement between Landlord and Tenant or between Landlord and/or Tenant and the person who is the purchaser, assignee or other transferee of Landlord, be relieved of any and all of its obligations under this Lease Agreement thereafter accruing, and Tenant shall thereafter be bound to such purchaser, assignee or other transferee, as the case may be, with the same effect as though the latter had been the original Landlord hereunder; provided that the purchaser, assignee or other transferee assumes and agrees in writing to carry out all the obligations of Landlord hereunder first occurring after such purchase, assignment or other transfer.

ARTICLE 19

Involuntary Assignment

19.01 No interest of Tenant in or under this Lease Agreement shall be assignable by operation of law (including, without limitation, the transfer of this Lease Agreement by testacy or intestacy) or by involuntary assignment. Each of the following acts shall be considered an involuntary assignment:

(a) the making by Tenant of an assignment for the benefit of creditors, or Tenant's petitioning for or entering into any arrangement with Tenant's creditors to settle, compound or extend the time for payment of an obligation of Tenant;

(b) the filing by Tenant of any petition for the commencement of any case, proceeding or other action under Title 11 of the United States Code or any successor statute thereto, or any other insolvency, reorganization, moratorium or other statute for the relief of, or relating to, debtors, including, without limitation, the filing by Tenant of any petition under Chapters 7, 11 or 13 of the Bankruptcy Code;

(c) the filing against Tenant of an involuntary petition for the commencement of any case, proceeding or other action under said Title 11, successor or other statute and the failure of Tenant to secure a dismissal thereof within ten (10) days thereafter;

(d) the appointment of a trustee or a receiver with authority to take possession of the Demised Premises, and the failure of Tenant to secure a dismissal or removal thereof within ten (10) days thereafter; or

(e) the filing of a lien, recording of a judgment or issuance of a writ of attachment or execution against, or the seizure, purported seizure, execution or sale by or for any creditor of Tenant of Tenant's interest in this Lease Agreement or any other property whereby the Demised Premises shall be taken or occupied by someone other than Tenant, and the failure of Tenant to secure a dismissal, release or removal thereof within ten (10) days thereafter.

19.02 An assignment by operation of law or an involuntary assignment of any interest of Tenant in or under this Lease Agreement shall constitute a material default by Tenant, and Landlord shall have the right to pursue any or all of the remedies provided in Article 20 hereof, including, without limitation, the right, pursuant to Section 20.02(b) hereof, to terminate this Lease Agreement, in which case this Lease Agreement shall not be treated as an asset of Tenant.

- 15 -

ARTICLE 20

Default and Remedies

20.01 The occurrence of any one of the following shall constitute a default by Tenant under this Lease Agreement: (a) Tenant shall fail to pay any Rent or any other sum payable by Tenant hereunder when due, and such failure continues for more than five (5) days after Tenant receives written notice thereof from Landlord (provided, however, that the notice requirement contained in this subsection (a) is not in addition to any legal requirement that notice be given and may be satisfied by sending the notice required by any applicable law or statute); (b) Tenant shall attempt to assign, transfer, mortgage or encumber this Lease Agreement, or sublet the Demised Premises or any part thereof, or suffer or permit the Demised Premises or any part thereof to be used by others, in violation of Article 18 hereof; (c) there shall be an assignment by operation of law or an involuntary assignment (as defined in Section 19.01 hereof) of any interest of Tenant in or under this Lease Agreement; or (d) Tenant shall fail to perform or comply with any of the other covenants or conditions of this Lease Agreement, including the Rules and Regulations set forth in Exhibit " D, " and such failure continues for more than thirty (30) days after Tenant receives written notice thereof from Landlord; provided, however, that if the failure to perform or comply cannot reasonably be corrected within thirty (30) days, Tenant shall not be in default if Tenant commences to correct the failure to perform or comply within said thirty (30) day period and diligently and in good faith continues to correct the same thereafter; or (e) any of the events, conditions or the like constituting an involuntary assignment by Tenant pursuant to Article 19 above occurs with respect to any guarantor of the Lease.

20.02 If Tenant commits a default under this Lease Agreement, Landlord shall have, in addition to any and all other rights and remedies which Landlord may have under this Lease Agreement or by law or in equity, the following remedies:

(a) Landlord shall have the right, by written notice to Tenant, to declare this Lease terminated and the term ended, in which event Tenant shall vacate and surrender the Demised Premises but shall remain liable for all obligations arising during the balance of the stated term as if this Lease had remained in full force and effect. No act by Landlord allowed under this Section 20.02 shall terminate this Lease Agreement unless Landlord notifies Tenant in writing that Landlord elects to terminate this Lease.

(b) Landlord can reenter the Demised Premises, remove all of Tenant's property therefrom and store the same in a public warehouse or elsewhere at the expense of and for the account of Tenant, and relet the Demised Premises, or any part thereof, to third parties for Tenant's account. Tenant shall be immediately liable to Landlord for all reasonable costs Landlord incurs by reason of its reentry, protecting or caring for the Demised Premises, or reletting or endeavoring to relet the Demised Premises, including, without limitation, attorneys' fees, brokers' commissions, expenses of remodeling which are necessary or desirable for the reletting, and like costs.

(c) Landlord may relet all or any part of the Demised Premises. Reletting can be for a period shorter or longer than the remaining term of this Lease Agreement. Tenant shall pay to Landlord the Rent due under this Lease Agreement on the dates the Rent is due, less the rent Landlord receives from any reletting.

(d) Landlord can terminate Tenant's right to possession of the Demised Premises at any time. No act by Landlord, other than giving notice to Tenant that its right to possession has been terminated, shall terminate this Lease Agreement. Acts of maintenance, repair or remodeling, efforts to relet the Demised Premises, or the appointment of a receiver on Landlord's initiative to protect Landlord's interest under this Lease Agreement shall not constitute a termination of Tenant's right to possession.

(e) On termination of this Lease or Tenant's right to possession of the Demised Premises, Landlord shall have the right to recover from Tenant:

(i)

the worth, at the time of the award, of the unpaid Rent that had been earned at the time of termination of this Lease Agreement;

(ii)

the worth, at the time of the award, of the amount by which the unpaid Rent that would have been earned after the date of termination of this Lease Agreement to the time of the award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided;

- 16 -

	(iii)	the worth, at the time of the award, of the amount by which the unpaid Rent that would have been earned for the balance of the term of this Lease Agreement after the time of the award exceeds the amount of such rental loss that Tenant proves could be reasonably avoided;

	(iv)	the costs and expenses described in paragraph (a) above;

(v)

any other amount, including court costs and reasonable attorneys' fees, necessary to compensate Landlord for all detriment caused by Tenant's default; and

(vi)

at Landlord's election, such other amount, in addition to or in lieu of the foregoing, as may be permitted from time to time by applicable law.

As used in subparagraphs (i) and (ii) of this paragraph, "the worth, at the time of the award," shall be computed by allowing interest at the rate of The Wall Street Journal prime rate in effect from time to time plus three percent (3%) or the maximum contract rate of interest legally permitted to be charged Tenant, whichever is the lesser rate. As used in subparagraph (iii) of this paragraph, "the worth, at the time of the award," shall be computed by discounting the amount at the discount rate at the time of the award of the Federal Reserve Bank serving the area in which the Demised Premises are located.

20.03 In the event of the exercise by Landlord of any one or more of its rights and remedies under this Article, Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws.

20.04 Tenant hereby waives all claims and demands against Landlord for damages or loss arising out of or in connection with any reentering and taking possession of the Demised Premises as hereinabove permitted in this Article, and waives all claims and demands for damages or losses arising out of or in connection with any destruction of or damage to the Demised Premises or for any loss of property belonging to Tenant or to any other person, firm or corporation which may be in or upon the Demised Premises at the time of such reentry, except such damages or losses as are caused by the negligence or intentional misconduct of Landlord, its officers, agents or employees.

20.05 The various rights, options, elections, powers and remedies contained in this Article shall not be deemed to be exclusive; they are cumulative and in addition to any other remedies, rights or priorities contained elsewhere in this Lease Agreement or now or later allowed by law or in equity.

20.06 (a) Both Landlord and Tenant shall each use commercially reasonable efforts to mitigate any damages resulting from a default of the other party under this Lease Agreement.

(b) Landlord's obligation to mitigate damages after a default by Tenant under this Lease Agreement shall be satisfied in full if Landlord undertakes to lease the Demised Premises to a prospective tenant (a "Prospective Tenant(s)") in accordance with the following criteria:

(i)

Landlord shall have no obligation to solicit or entertain negotiations with any Prospective Tenants for the Demised Premises until Landlord obtains full and complete possession of the Demised Premises including, without limitation, if required by law, the final and unappealable legal right to relet the Demised Premises free of any claim of Tenant.

(ii)

Landlord shall not be obligated to offer the Demised Premises to a Prospective Tenant when other premises in the Building or the Project suitable for that Prospective Tenant's use are (or soon will be) available.

(iii)

Landlord shall not be obligated to lease the Demised Premises to a Prospective Tenant for a rental less than the current fair market rental then prevailing for similar space in the Building (as determined by Landlord), nor shall Landlord be obligated to enter into a new lease under other terms and conditions that are unacceptable to Landlord under Landlord's then current leasing policies for comparable space in the Building.

- 17 -

(iv)

Landlord shall not be obligated to enter into a lease with any Prospective Tenant whose use would: (A) violate any restriction, covenant or requirement contained in the lease of another tenant in the Building; (B) adversely affect the reputation of the Building; or (C) be incompatible with the operation of the Building as a first class building.

(v)

Landlord shall not be obligated to enter into a lease with any Prospective Tenant which does not have, in Landlord's reasonable opinion, sufficient financial resources or operating experience to operate its business in the Demised Premises in a first class manner.

(vi)

Landlord shall not be required to expend any amount of money to alter, remodel, or otherwise make the Demised Premises suitable for use by a Prospective Tenant unless:

Tenant pays any such sum to Landlord in advance of Landlord's execution of a substitute lease with such Prospective Tenant (which payment shall not be in lieu of any damages or other sums to which Landlord may be entitled as a result of Tenant's default under this Lease Agreement); or

Landlord, in Landlord's sole discretion, determines that any such expenditure is financially justified in connection with entering into a lease with the Prospective Tenant.

(c) Upon compliance with the above criteria regarding the releasing of the Demised Premises after a default by Tenant, Landlord shall be deemed to have fully satisfied Landlord's obligation to mitigate damages under this Lease Agreement and under any applicable law or judicial ruling, and Tenant waives and releases, to the fullest extent legally permissible, any right to assert in any action by Landlord to enforce the terms of this Lease Agreement, any defense, counterclaim, or rights of setoff or recoupment respecting the mitigation of damages by Landlord, unless and to the extent Landlord maliciously or in bad faith fails to act in accordance with the requirements of the foregoing sections.

(d) Tenant's right to seek damages from Landlord as a result of a default by Landlord under this Lease Agreement shall be conditioned on Tenant (i) providing Landlord with written notice of any default which specifies in detail the nature of same and allowing Landlord thirty (30) days to cure or commence to cure same, except in the case of an emergency, in which case Landlord's period to cure shall be such lesser period as is reasonable under the circumstances, and (ii) taking all actions reasonably required, under the circumstances, to minimize any loss or damage to Tenant's property or business, or to any of Tenant's officers, employees, agents, invitees, or other third parties that may be caused by any such default of Landlord.

(e) Tenant agrees to look solely to Landlord's interest in the Land and Building and proceeds and awards related thereto for satisfaction of any claim against Landlord hereunder and not to any other property or assets of Landlord.

ARTICLE 21

Landlord's Right to Cure Tenant's Default

21.01 If Tenant shall default (as defined in Section 20.01 hereof) in the observance or performance of any covenant or condition on Tenant's part to be observed or performed under or in connection with this Lease Agreement, Landlord may, but without obligation so to do, immediately or at any time thereafter perform the same for the account of Tenant (but without waiving or curing Tenant's default), and if Landlord makes any expenditures or incurs any obligations for the payment of money in connection therewith, all such sums paid or obligations incurred by Landlord, plus a markup of ten percent (10%) of the amount thereof to cover overhead and administrative costs incurred by Landlord in connection therewith, shall be collectible by Landlord as additional Rent, which shall be paid by Tenant within thirty (30) days after receipt of Landlord's invoice therefor.

- 18 -

ARTICLE 22

No Waiver

22.01 No act or conduct of Landlord, its employees, agents or representatives, including, without limitation, the acceptance of the keys to the Demised Premises, shall constitute an acceptance of the surrender of the Demised Premises by Tenant before the expiration of the term of this Lease Agreement. Only a written notice from Landlord to Tenant shall constitute acceptance of the surrender of the Demised Premises and accomplish a termination of this Lease Agreement.

22.02 The failure of Landlord or Tenant to seek redress for violation of, or to insist upon the strict performance of, any covenant or condition of this Lease Agreement shall not be deemed a waiver by Landlord or Tenant of its right to such redress for a prior, concurrent or subsequent violation of the same or to subsequently insist upon strict performance of any other covenant or condition of this Lease Agreement. The receipt and acceptance by Landlord of Rent with knowledge of any preceding breach by Tenant of any covenant, term or condition of this Lease Agreement shall not be deemed a waiver of such breach. The failure of Landlord to enforce any of the Rules and Regulations set forth in Exhibit "D" hereto or hereafter adopted against Tenant or any other tenant in the Building shall not be deemed a waiver of any of said Rules and Regulations. No provision of this Lease Agreement and no default by Landlord or Tenant hereunder shall be deemed to have been waived by the other party unless such waiver is in writing and signed by the waiving party.

22.03 No payment by Tenant or receipt and acceptance by Landlord of a lesser amount than the Rent herein stipulated shall be deemed to be other than on account of the stipulated Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment of Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such Rent or pursue any other right or remedy provided herein or at law or in equity.

ARTICLE 23

Waiver of Trial by Jury

23.01 Landlord and Tenant do hereby waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with this Lease Agreement, the relationship of Landlord and Tenant, or Tenant's use or occupancy of the Demised Premises.

ARTICLE 24

Attorney Fees

24.01 In the event Tenant defaults hereunder and Landlord engages an attorney to collect rent or other charges due Landlord hereunder, to recover possession of the Demised Premises or to pursue any other rights and remedies available to Landlord by law or in equity, Tenant agrees to pay or reimburse Landlord for its reasonable attorneys' fees and related costs. In the event any action, suit or proceeding is commenced under or in connection with this Lease Agreement, or for recovery of possession of the Demised Premises, the losing party shall pay to the prevailing party, and the prevailing party shall be entitled to an award for, the reasonable amount of the attorneys' fees, court costs and other litigation expenses incurred by the prevailing party in connection with such action, suit or proceeding.

ARTICLE 25

Quiet Enjoyment

25.01 Landlord covenants and agrees with Tenant that, conditioned upon Tenant's prompt payment of the Rent and observance and performance of all the terms, covenants and conditions of this Lease Agreement on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the Demised Premises in accordance with the provisions of this Lease Agreement without any interruption or disturbance from Landlord; subject to the operation and effect of any Mortgage (hereinafter defined) to which this Lease shall be subordinate (and the rights of the Mortgagee, as hereinafter defined, thereunder or with respect thereto).

- 19 -

ARTICLE 26

Subordination

26.01 This Lease Agreement shall, at the option of the Landlord or any Mortgagee, be subject and subordinate to the lien of each and every Mortgage which may now or hereafter affect the Land or the Building, to all advances made thereunder, and to all renewals, modifications, consolidations, replacements and extensions thereof; provided, however, that with respect to Mortgages which become a lien on the Land or the Building after the date on which this Lease Agreement is entered into, as a condition precedent to such subordination, each such Mortgage by its terms, or by separate agreement of the Mortgagee, shall provide that in case of a foreclosure of such Mortgage, for so long as Tenant shall not be in default under this Lease Agreement, there shall be no disturbance of the quiet use and occupancy of the Demised Premises by Tenant or the leasehold estate created by this Lease Agreement. The subordination of this Lease Agreement to any such Mortgage or Mortgages shall be self-operative and shall not require any further instrument of subordination but shall be subject to Tenant's rights of non-disturbance, as provided above. However, Tenant shall from time to time, within twenty (20) days after Landlord or any Mortgagee so requests in writing, execute, acknowledge and deliver to the requesting party, a certificate or instrument evidencing such subordination and non-disturbance. In addition, if requested in writing by any Mortgagee or purchaser at a foreclosure proceeding, Tenant shall, by execution of an agreement in recordable form, attorn to such Mortgagee or purchaser acquiring title to the Land or the Building and recognize such purchaser as the landlord hereunder for the unexpired balance of the term of this Lease Agreement.

26.02 If, in connection with the procurement, continuation, amendment or renewal of any Mortgage, the Mortgagee shall request reasonable modifications of this Lease Agreement as a condition of such financing, Tenant will not withhold its consent thereto provided that such modifications do not increase the obligations of Tenant under this Lease Agreement or adversely affect the rights of Tenant under this Lease Agreement.

26.03 As used herein, "Mortgage" shall mean any mortgage or deed of trust constituting a lien on the interest of Landlord in the Land or the Building, or any part thereof, and shall also include any ground, underlying or master lease pursuant to a sale and leaseback agreement whereby Landlord sells and simultaneously acquires a possessory interest under a lease from, or other agreement with, such transferee. "Mortgagee" shall mean the mortgagee, trustee or landlord under any such mortgage, deed of trust, or ground, underlying or master lease.

26.04 In the event Tenant, or Tenant's lender requests Landlord to waive (a) any Landlord's lien against Tenant's personal property, or (b) any rights of distraint for rent and execution against Tenant's personal property, Landlord will accommodate such request provided that Landlord's standard form of waiver is used and that any such request is accompanied by a non-refundable administrative fee in the amount of Two Hundred and Fifty and No/100 Dollars ($250.00) made payable to Landlord to cover Landlord's administrative and legal costs related thereto.

ARTICLE 27

Damage by Fire or Other Casualty

27.01 If the Demised Premises, the Building or any portion thereof shall be damaged by fire or other casualty, and if this Lease Agreement is not terminated as herein provided, Landlord shall proceed with reasonable diligence to repair the damage at its expense, except that any repairs made to Tenant's additions, improvements or other alterations to the Demised Premises, shall be made by (and at the expense of) Tenant, and the repair or replacement of any property which Tenant is entitled to remove pursuant to Section 9.04 hereof shall be the responsibility and at the expense of Tenant. Tenant shall not be entitled to compensation or damages on account of annoyance or inconvenience arising out of the making of the repairs which Landlord is required to make pursuant to this Section.

27.02 During such period as all or any portion of the Demised Premises are rendered untenantable as a result of a fire or other casualty, the Rent shall be ratably abated (based on square footage of the area affected) until the Demised Premises shall be once again wholly tenantable. However, notwithstanding the foregoing, there shall be no abatement in Rent if such fire or other casualty shall have been caused by the gross negligence or intentional misconduct of Tenant or its officers, agents, employees, invitees or the direct or indirect owners of any interests therein. Furthermore, in no event shall there be any abatement in Rent for any time required for repairs to additions, improvements or other alterations which are to be made at the expense of Tenant, or to repair or replace any property which Tenant is entitled to remove pursuant to Section 9.04 hereof. However, Tenant shall be permitted to make such repairs and replacements concurrently with Landlord's repairs, provided they do not interfere with Landlord's repair work.

- 20 -

27.03 If the Demised Premises, the Building or any portion thereof shall be damaged by fire or other casualty so as to render the Demised Premises wholly untenantable, and if such damage shall be so great that the Demised Premises, with the exercise of reasonable diligence, cannot be made fit for occupancy within two hundred seventy (270) days from the happening thereof, then either Landlord or Tenant may elect to terminate this Lease Agreement effective as of the date of the occurrence of such damage by giving the other party written notice of such election within thirty (30) days after such date. If such damage occurs during the last year of the term of the Lease Agreement, including any extensions thereof, and if such damage shall be so great that the Demised Premises, with the exercise of reasonable diligence, cannot be made fit for occupancy within ninety (90) days of the happening thereof, then either Landlord or Tenant may elect to terminate this Lease Agreement effective as of the date of the occurrence of such damage by giving the other party written notice of such election within thirty (30) days after such date. In the event of any such termination, Tenant shall be given fifteen (15) days to remove its personal property from the Demised Premises, after which Tenant shall surrender the Demised Premises to Landlord and Landlord may reenter and take possession of the Demised Premises and remove Tenant and its personal property therefrom. Landlord and Tenant waive the provisions of any law that would dictate automatic termination or grant either of them an option to terminate in the event of damage or destruction.

27.04 If (i) the Building shall be damaged by fire or other casualty to the extent of thirty percent (30%) or more of the replacement cost thereof, whether or not the Demised Premises were rendered wholly untenantable by such damage, or (ii) Landlord is unable to rebuild any portion of the Building due to any inability to obtain any required governmental approval in connection therein, or (iii) all or any part of the Building (whether or not including all or any part of the Demised Premises) shall be damaged or destroyed at any time by the occurrence of any risk not insured under any fire and extended coverage insurance maintained by Landlord, or (iv) the amount of the net insurance proceeds paid or payable to Landlord (and free of all claims by Mortgagees and others and all costs of collection or otherwise) is not sufficient to pay fully the cost to repair and rebuild the Demised Premises and the balance of the Building; then , Landlord may elect not to repair or rebuild and may elect to terminate this Lease within ninety (90) days following the occurrence of such fire or other casualty upon written notice to Tenant during such 90-day period (upon which termination Landlord and Tenant shall, except as otherwise expressly provided herein to the contrary, have no further rights or obligations hereunder). The effective date of such a termination shall be the date specified in such notice by Landlord, which date shall be not less than thirty (30) nor more than sixty (60) days after the giving of such notice. Tenant shall surrender the Demised Premises to Landlord on or before the effective date of such a termination, after which date Landlord may reenter and take possession of the Demised Premises and remove Tenant and its personal property therefrom.

27.05 The determination of how long it will take, with the exercise of reasonable diligence, to make the Demised Premises fit for occupancy, or of whether or not the Building was damaged to the extent of thirty percent (30%) or more of the replacement cost thereof, shall be made at Landlord's expense by a reputable architect, contractor or other qualified consultant selected by Landlord and instructed to report its findings to Landlord and Tenant within twenty (20) days after the date of the occurrence of the damage.

ARTICLE 28

Eminent Domain

28.01 If the whole of the Demised Premises shall be taken by eminent domain or disposed of under threat of an impending taking by eminent domain, by or to any public authority, this Lease Agreement shall cease and terminate one (1) day prior to the date legal title to the Demised Premises shall vest in such authority.

28.02 If only a portion of the Demised Premises is so taken or disposed of, or if such a taking or disposition of any portion of the Building or the Land materially interferes with Tenant's access to the Demised Premises or materially reduces the number of parking spaces available to tenants of the Building, Tenant may, at its option, terminate this Lease Agreement by giving written notice thereof to Landlord at any time prior to or within ten (10) days after the date legal title to that portion of the Demised Premises shall vest in the taking or acquiring authority, in which event this Lease Agreement shall cease and terminate one (1) day prior to the date legal title to that portion of the Demised Premises shall vest in such authority.

- 21 -

28.03 If only a portion of the Demised Premises is so taken or disposed of and if Tenant does not exercise its option to terminate this Lease Agreement as provided for in Section 28.02 hereof, then, in such event: (a) this Lease Agreement shall continue in full force and effect as to the remaining portion of the Demised Premises; (b) Landlord, with reasonable promptness, and at its expense, shall make such repairs and alterations to the Demised Premises as are necessary to restore the same to an economic architectural unit, susceptible to the same type of use as that which was in effect immediately prior to the taking or disposition; and (c) the Base Rent and Monthly Base Rent payable during the remainder of the initial term and during any extension terms, and the percentage(s) set forth in Article 7 (Taxes and Operating Costs Escalation) of this Lease Agreement, shall be proportionately reduced, based on the ratio of the square footage of the Demised Premises after the taking or disposition to the square footage of the Demised Premises prior to the taking or disposition, as of the date legal title to that portion of the Demised Premises shall vest in the taking or acquiring authority. In no event, however, shall Landlord be obligated to expend for such repairs an amount in excess of the taking proceeds (net of all costs and expenses of collection or otherwise and free of any and all claims by Mortgagees and others) actually recovered as a result of such taking and Landlord shall have no obligation to repair, restore or replace any alterations, fixtures or signs made or installed by Tenant or any, floor coverings, furnishings, furniture, equipment, decorations or any other personal property of Tenant (the repair, restoration and replacement of which shall be the sole obligation of, and be promptly performed by, Tenant).

28.04 In any of the foregoing cases, Landlord shall be entitled to all compensation and awards arising out of or in connection with such taking or disposition, including any portion thereof attributable to the value of the leasehold estate, except that nothing herein contained shall be deemed to prevent Tenant from recovering from the taking or acquiring authority compensation for the taking of any personal property or fixtures belonging to it or for interruption or damage to its business or for moving or other expenses, to the extent any of the same are compensable by law.

ARTICLE 29

Environmental Matters

29.01 As used in this Article, "Hazardous Substance" means any pollutant, contaminant, toxic or hazardous waste, dangerous substance, potentially dangerous substance, noxious substance, toxic substance, flammable, explosive, radioactive material, urea formaldehyde foam insulation, asbestos, PCBs, or any other substances the removal of which is required, or the manufacture, production, generation, use, maintenance, disposal, treatment, storage, transfer, handling or ownership of which is restricted, prohibited, regulated or penalized by any federal, state, county, or municipal statutes or laws now or at any time hereafter in effect, including but not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. §§ 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. §§ 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. §§ 2601 et seq.), and the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.), as these laws have been amended or supplemented.

29.02 Landlord represents to Tenant that to its actual knowledge, the Building and the Land do not contain any Hazardous Substance in violation of any applicable federal, state or local environmental laws, ordinances and regulations.

29.03 Tenant shall not use, or knowingly permit others to use the Demised Premises or any other part of the Building or the Land for the production, generation, manufacture, treatment, transportation, storage or disposal of any Hazardous Substance, except with the prior written consent of Landlord and in compliance with any and all applicable federal, state and local environmental laws, ordinances and regulations. Provided however, Tenant, without Landlord's prior written consent shall be allowed, in strict compliance with all laws, to utilize ordinary quantities of Hazardous Substances customarily used in general office use and in conformity with the use of the Demised Premises allowed herein (e.g., cleaning supplies, copier toner and similar items). Tenant shall immediately notify Landlord in writing of (a) any release or discharge by Tenant or any other occupant of the Demised Premises of a Hazardous Substance, or (b) any notice of violation or alleged violation of any law regarding any Hazardous Substance at the Building or the Land received by Tenant or any other occupant of the Demised Premises.

- 22 -

29.04 Tenant shall indemnify, defend and hold harmless Landlord, its officers, agents and employees, from and against any and all claims, damages, expenses, penalties, liability and costs, resulting or arising from a breach of the covenant contained in Section 29.03 above.

29.05 The provisions of this Article shall survive the expiration or termination of this Lease Agreement.

ARTICLE 30

Surrender of Premises; Holding Over

30.01 Tenant waives notice to quit possession of the Demised Premises at the expiration or termination of the term hereof. Upon the expiration or termination of the term hereof, Tenant shall: (a) quit and surrender the Demised Premises to Landlord, broom clean, in good order and condition, ordinary wear and tear and damage by fire or other insured casualty excepted; (b) if and to the extent required by Landlord in accordance with Section 9.03 hereof, remove alterations and restore the Demised Premises; and (c) remove from the Demised Premises the personal property which it is required to remove pursuant to Section 9.04 hereof and repair any damage to the Building caused by such removal.

30.02 If Tenant, with Landlord's written consent, remains in possession of the Demised Premises after the expiration or termination of the term hereof, this Lease Agreement shall be deemed to have been renewed on a month to month basis, terminable on thirty (30) days' notice given at any time by either party, and Tenant shall continue to pay to Landlord for each month or portion (on a pro rata basis) of a month that Tenant holds over, the Monthly Base Rent in effect for the month immediately preceding the expiration or other termination of the term hereof, plus all additional Rent which Tenant is required to pay under this Lease Agreement, and shall comply with all of the terms, covenants and conditions of this Lease Agreement throughout such renewal period.

30.03 If Tenant, without Landlord's written consent, remains in possession of the Demised Premises after the expiration or termination of the term hereof, Tenant shall be deemed in default hereof and Tenant shall pay to Landlord, for each month or portion (on a pro rata basis) of a month that Tenant holds over, one hundred twenty five percent (125%) of the Monthly Base Rent in effect for the month immediately preceding the expiration or other termination of the term hereof, plus all additional Rent which Tenant is required to pay under this Lease Agreement, without regard to any caps or limits which may have been in place during the term hereof, and shall comply with all of the terms, covenants and conditions of this Lease Agreement throughout the time Tenant holds over. In addition, Tenant shall indemnify and hold harmless Landlord from and against all damages resulting from Tenant's failure to quit and surrender the Demised Premises at the expiration or termination of the term hereof, including, without limitation, claims made by a succeeding tenant. Any sufferance by Landlord of such a holding over by Tenant shall not constitute a renewal of this Lease Agreement, or the exercise of any option to extend or renew, and Landlord may cause Tenant to be evicted at any time after the expiration or termination of the term hereof. Payment by Tenant and acceptance by Landlord of the above monies shall not be considered liquidated damages and Landlord shall be entitled to all legal or equitable damages allowed by law.

ARTICLE 31

Notices

31.01 Any notice or communication which Landlord may desire or be required to give to Tenant shall be, sent by registered or certified mail, return receipt requested, or by Federal Express or any other nationally recognized overnight delivery service, addressed to Tenant at its address set forth in the introductory paragraph of this Lease Agreement, and with a copy to DETERMINE, INC, at 615 West Carmel Drive, Suite 100, Carmel, Indiana 46032, or at such other address as Tenant shall designate by written notice to Landlord. Any notice or communication which Tenant may desire or be required to give to Landlord shall be sent by registered or certified mail, return receipt requested, or by Federal Express or any other nationally recognized overnight delivery service, addressed to Landlord at its address set forth in the introductory paragraph of this Lease Agreement, with a copy to Landlord at its Management Office at ATAPCO CARMEL, INC. at 630 West Carmel Drive, Suite 135, Carmel, Indiana 46032, or at such other address or addresses as Landlord shall designate by written notice to Tenant. All notices sent by mail shall be deemed given on the date the return receipt is signed or delivery rejected by the addressee. Notice sent by Federal Express or any other nationally recognized overnight delivery service shall be deemed to have been duly given one (1) business day after delivery to the service prior to its deadline for overnight delivery.

- 23 -

ARTICLE 32

No Representations by Landlord

32.01 Tenant acknowledges that neither Landlord nor any of Landlord's agents, representatives, officers or employees has made any representations or promises with respect to the Building or the Demised Premises except as herein expressly set forth, and that it has not executed this Lease Agreement in reliance upon any representations or promises of Landlord or Landlord's agents, representatives, officers or employees with respect to the Building or the Demised Premises except as herein expressly set forth. Tenant acknowledges that neither Landlord nor its agents or employees have made any representations or warranties as to the suitability or fitness of the Demised Premises for the conduct of Tenant's business or for any other purpose, nor has Landlord or its agents or employees agreed to undertake any alterations or construct any improvements to the Demised Premises except as expressly provided in this Lease Agreement.

ARTICLE 33

Recording

33.01 This Lease Agreement shall not be recorded.

ARTICLE 34

Real Estate Brokers

34.01 Landlord and Tenant acknowledge that John Vandenbark of CBRE, INC. and Brian Askins of Colliers International, Inc. (the "Broker(s)"), acting as a licensed real estate broker(s), was/were instrumental in the consummation of this Lease Agreement. Landlord agrees to pay any commission that may be due the Broker(s). Landlord and Tenant each represent and warrant to each other that it has not had any dealing with any other real estate broker or finder with respect to the subject matter of this Lease Agreement, and agree to hold each other harmless from and against any and all damages, costs and expenses resulting from any claim(s) for a brokerage commission or finder's fee that may be asserted against either of them by any other broker or finder with whom the other has dealt.

ARTICLE 35

Name of Building or Project

35.01 Landlord shall have the right at any time and from time to time during the term of the Lease Agreement, without liability to Tenant, to designate or change a name for the Building or the Project.

ARTICLE 36

Intentionally Deleted

- 24 -

ARTICLE 37

Security Deposit

37.01 Upon execution of this Lease Agreement, Tenant shall deposit with Landlord the sum of thirty-five thousand one hundred eighty and 00/100 Dollars ($35,180.00) of which eleven thousand seven hundred twenty-six and 67/100 Dollars ($11,726.67) shall be applied to the September 2017 base rent, which will reduce the security deposit sum to twenty-three thousand four hundred fifty-three and 33/100 Dollars ($23,453.33) for the remainder of the Lease term, as security for the full performance of every provision of this Lease Agreement to be performed by Tenant. If Tenant defaults with respect to any provision of this Lease Agreement, including, but not limited to, the provisions relating to the payment of Rent, Landlord may (but shall not be required to) use, apply or retain all or any part of this security deposit for the payment of any Rent or any other sum in default, or for the payment of any other amount which Landlord may spend or become obligated to spend by reason of Tenant's default, or to compensate Landlord for any other loss, cost or damage which Landlord may spend or become obligated to spend by reason of Tenant's default, or to compensate Landlord for any other loss, cost or damage which Landlord may suffer by reason of Tenant's default. If any portion of said deposit is so used or applied, Tenant shall, within five (5) days after written demand therefor, deposit cash with Landlord in an amount sufficient to restore the security deposit to its original amount, and Tenant's failure to do so shall be a breach of this Lease Agreement. Landlord shall not be required to keep this security deposit separate from its general funds, and Tenant shall not be entitled to interest on such deposit. Landlord's obligations with respect to the security deposit are those of a debtor and not a trustee. At the expiration or termination of this Lease Agreement, the security deposit or any balance thereof shall be returned to Tenant within thirty (30) days following Tenant's vacation and surrender of the Demised Premises and performance of all of the covenants to be performed by Tenant hereunder, including, without limitation, the payment of Taxes and Operating Costs escalation accruing through the expiration or termination date of this Lease Agreement, less any sums withheld by Landlord to cure any existing default by Tenant. In the event Landlord sells, assigns or otherwise transfers all or any portion of its interest under this Lease Agreement or in the Demised Premises or the Building, Landlord may transfer said security deposit to the person who is the purchaser, assignee or other transferee of Landlord, and upon such transfer Landlord shall be discharged from any further liability with respect to said security deposit.

ARTICLE 38

Miscellaneous

38.01 Words of any gender used herein shall include any other gender, and singular words include the plural, and vice versa, and "person" includes persons, firms and corporations and all other types of entities and organizations, unless in each case the sense otherwise requires. The term "Landlord" as used herein shall mean only the Owner of the Demised Premises at the relevant time.

38.02 Tenant, at any time and from time to time, at the written request of Landlord, shall promptly execute, acknowledge and deliver to Landlord a certificate certifying (a) that this Lease Agreement is unmodified and in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications); (b) that to the best of Tenant's knowledge there are not then existing any offsets or defenses against the enforcement of any provision of this Lease Agreement except as therein specified; (c) the amount of the Base Rent and the Monthly Base Rent; (d) the dates, if any, to which the Rent or other charges have been paid in advance; (e) the amount of any security deposit being held by Landlord; and (f) any other matters that Landlord or any Mortgagee may reasonably require to be confirmed. Any such certificate may be relied upon by a prospective purchaser, or Mortgagee of all or any portion of the Demised Premises, the Building or the Land.

38.03 Time is of the essence of the notice requirements and the obligations of the parties under this Lease Agreement.

38.04 If there are any covenants yet to be performed by Landlord or Tenant as of the date of expiration or termination of the term hereof, including, without limitation, the payment of Taxes and Operating Costs escalation and other Rent accruing under this Lease Agreement as of such date, such covenants shall survive the expiration or termination of the term hereof whether or not they are then known or determined.

38.05 This Lease Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof, and any purported agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part unless such purported agreement is in writing and signed by the party against whom enforcement is sought.

38.06 If there is more than one Tenant, the obligations herein imposed on Tenant shall be joint and several.

- 25 -

38.07 This Lease Agreement shall be governed and interpreted in accordance with the laws of the state in which the Demised Premises are located.

38.08 The unenforceability, invalidity or illegality of any provision of this Lease Agreement shall not render the other provisions unenforceable, invalid or illegal.

38.09 If Tenant is a corporation, limited liability corporation, limited liability partnership or other similar form of entity (the "Entity"), the individual executing this Lease Agreement on behalf of said Entity represents and warrants to Landlord that he or she is duly authorized to execute and deliver this Lease Agreement on behalf of said Entity, that the Entity is qualified to do business in the state where the Building is located, and that this Lease Agreement, including but not limited to the indemnifications set forth herein from Tenant to Landlord, are binding upon said Entity. The individual executing this Lease Agreement on behalf of Landlord represents and warrants to Tenant that he or she is duly authorized to execute and deliver this Lease Agreement on behalf of Landlord, that Landlord is qualified to do business in the state where the Building is located, and that this Lease Agreement, including but not limited to the indemnifications set forth herein from Landlord to Tenant, are binding upon Landlord.

38.10 Tenant, at any time and from time to time, at the written request of Landlord, shall furnish Landlord with financial statements of Tenant in form and content reasonably satisfactory to Landlord.

38.11 The covenants, conditions and agreements contained in this Lease Agreement shall bind and inure to the benefit of Landlord and Tenant and, except as otherwise provided in this Lease Agreement, their respective successors and assigns.

38.12 The Article headings are inserted only as a matter of convenience and reference and in no way define, limit or describe the scope of any Article of this Lease Agreement nor the intent of any of its provisions.

38.13 Landlord and Tenant acknowledge that each of them and their counsel have had an opportunity to review this Lease and that this Lease will not be construed against Landlord merely because Landlord's counsel has prepared it.

38.14 This Agreement may be executed in multiple counterparts each of which said executed counterparts shall be deemed an original for all purposes.

ARTICLE 39

No Option to Lease

39.01 The submission of this Lease Agreement to Tenant for examination does not constitute a reservation of or option for the Demised Premises. This Lease Agreement shall be effective and binding as a lease only upon execution and delivery thereof by both Landlord and Tenant.

ARTICLE 40

Addendum

40.01 The Addendum, if any, attached hereto is hereby made an integral part of this Lease Agreement.

ARTICLE 41

Right of First Offer on Available Contiguous Space

41.01 There is three thousand four hundred twenty-eight (3,428) rentable square feet of space on the first (1st) floor of the Building (the "Available Contiguous Space"), the location of which is shown on the floor plan attached to this Lease Agreement as Exhibit "A," which is currently available for leasing. Throughout the initial Term of this Lease Agreement, provided Tenant is not in default of this Lease Agreement and except as otherwise provided herein, Landlord shall not commence substantive negotiations with any third party to enter into a lease for all or any portion of the Available Contiguous Space without first offering it to Tenant in accordance with this Article. The provisions of this Article shall be operative each time, in Landlord's reasonable judgement, a third party has expressed a bona fide interest in leasing all or any portion of the Available Contiguous Space.

- 26 -

41.02 Notwithstanding anything in this Article to the contrary, during the last six (6) months of the initial Term of this Lease Agreement, Landlord shall be free to lease all or any portion of the Available Contiguous Space to one or more third parties without having to first offer it to Tenant. In addition, notwithstanding anything in this Article to the contrary, Landlord may extend the term of its lease with any future tenant of all or any portion of the Available Contiguous Space without having to again offer such space to Tenant.

41.03 If at any time and each time during the initial Term of this Lease Agreement, a third party, in Landlord's reasonable judgment, has expressed a bona fide interest in leasing all or any portion of the Available Contiguous Space, and if Landlord desires to lease the same to such third party, prior to commencing substantive negotiations with such third party Landlord, if required herein, shall notify Tenant thereof in writing, identifying the space the third party has expressed an interest in leasing (the "Additional Space"). Tenant shall have five (5) business days after receipt of Landlord's notice within which to notify Landlord in writing whether or not it wants to lease the Additional Space. Time is agreed to be of the essence with respect to this response time. If Landlord does not receive an affirmative written response from Tenant within five (5) business days after Tenant receives the aforementioned written notice from Landlord, Landlord shall be free to lease the Additional Space to such third party.

41.04 (a) Not later than fifteen (15) days after it has notified Landlord in writing that it wants to lease the Available Contiguous Space, Tenant shall submit to Landlord a space plan for the Available Contiguous Space Premises that: (a) is in conformity with all applicable building codes and ordinances; (b) in Landlord's reasonable opinion, does not create any aesthetic or other conflict with the design and function of the Building; and (c) has been approved by Tenant (the "Space Plan").

(b) In the event Landlord's architect prepares architectural, electrical and/or mechanical plans and specifications ("Plans and Specifications") based upon the Space Plan, Tenant must approve or object to same as follows:

(i)

No later than three (3) business days after Landlord has delivered the Plans and Specifications to Tenant, Tenant shall either approve the same in writing or, if Tenant has reasonable objections thereto, deliver to Landlord a detailed written description of Tenant's objections.

(ii)

Thereafter, until such Plans and Specifications are approved, Tenant shall work diligently and in a reasonable, cooperative and good faith manner with Landlord and its architect or other agent to arrive at acceptable Plans and Specifications.

(iii)

Tenant shall respond in writing to all revisions to the Plans and Specifications within three (3) business days after receiving them.

If Tenant fails to strictly abide by the time limits set forth herein or fails to act in a reasonable, cooperative and good faith manner as set forth above, it shall be deemed to be an act of Tenant Delay (as defined below).

(c) Landlord shall prepare or renovate the Available Contiguous Space Premises for Tenant's occupancy (the "Additional Space Tenant Improvements") in accordance with the Space Plan and (if applicable) the Plans and Specifications. The cost of all such work up to a maximum of thirty-one and 00/100 Cents ($0.31) per rentable square foot of the Additional Space times the number of months remaining in the initial Term of this Lease Agreement after the Effective Date as of which the Available Contiguous Space is added to the Demised Premises (the "Additional Space Allowance") shall be borne by Landlord.

- 27 -

(d) The Additional Space Allowance shall be applied by Landlord against the costs of designing, planning and constructing the Additional Space Tenant Improvements. In the event the costs incurred in connection with the design, planning and construction of the Available Contiguous Space Tenant Improvements exceed the Additional Space Allowance, Tenant shall be responsible for bearing and paying such excess costs (the "Additional Space Excess Costs"), as follows:

(i)

Tenant shall pay to Landlord, prior to the commencement of construction of the Additional Space Tenant Improvements, an amount equal to fifty percent (50%) of such Additional Space Excess Costs (as then estimated by Landlord).

(ii)

After substantial completion of the Additional Space Tenant Improvements but prior to occupancy of the Additional Space by Tenant, Tenant shall pay to Landlord an amount equal to ninety percent (90%) of the Additional Space Excess Costs (as then estimated by Landlord), less payments received by Landlord pursuant to (i) above.

(iii)

As soon as the final accounting is prepared and submitted by Landlord to Tenant, Tenant shall pay to Landlord the entire unpaid balance of the actual Additional Space Excess Costs based on the final costs to Landlord within thirty (30) days after receipt of Landlord's invoice therefor.

The Additional Space Excess Costs (if any) payable by Tenant under this Section shall constitute additional Rent due hereunder at the time specified herein. Landlord agrees to work diligently and in good faith to complete the Additional Space Tenant Improvements in an economical and cost-efficient manner and to use contractors who have either bid for such work or are known to provide bids at a competitive rate.

(e) Except as otherwise provided above in this Section, all installations and improvements now or hereafter placed on or in the Additional Space shall be for Tenant's account and at Tenant's cost.

41.05 Landlord warrants to Tenant that the work performed by Landlord or Landlord's contractors pursuant to Section 41.04 hereof will be free from defects in materials and workmanship. Landlord's obligation under this warranty shall be limited to replacing or correcting any such defects which are discovered within one (1) year after the Effective Date (hereinafter defined), provided Tenant gives Landlord written notice of such defect within said one (1) year period. This limited warranty does not apply to damages and defects resulting from abuse, intentional acts or improper maintenance, operation or use of the Additional Space by Tenant, its officers, agents, contractors, employees or invitees. The foregoing warranty is in lieu of all other warranties, express, implied or statutory, including warranties of merchantability and fitness for purpose. In no case will Landlord be liable for special, indirect or consequential damages, including interruption of Tenant's business or use or occupancy of the Additional Space, and there shall be no abatement of Rent (hereinafter defined) on account of any such defects in material or workmanship.

41.06 In the event Landlord permits Tenant to enter upon the Additional Space prior to the Effective Date for the purpose of moving or installing any of Tenant's furniture, equipment, fixtures, business machines or other personal property into or upon the Additional Space, or for any other purposes, the provisions of Article 9 (Alterations), Article 10 (Loss of or Damage to Tenant's Property), Article 12 (Workers' Compensation and Property Insurance; Mutual Waiver of Subrogation), Article 14 (Hold Harmless) and Article 15 (Liability Insurance) of this Lease Agreement shall apply and become effective as of the date of the first such entry by Tenant.

41.07 The Additional Space shall be added to the Demised Premises under this Lease Agreement for the balance of the initial Term hereof, effective as of the earlier of: (a) the date when Tenant shall take possession of and occupy the Additional Space for purposes other than as set forth in Section 41.06 hereof; or (b) five (5) days after Landlord notifies Tenant in writing that the Additional Space Tenant Improvements have been substantially completed (the "Effective Date"). For purposes of this Section, Landlord shall be deemed to have substantially completed the Additional Space Tenant Improvements even though there may remain to be done punch list items which will not materially interfere with Tenant's use of the Additional Space. Notwithstanding the foregoing, the Effective Date shall not be deferred beyond the date on which Landlord would have been able to deliver possession of the Additional Space to Tenant but for any Tenant Delay (hereinafter defined). Immediately after the Effective Date has been determined, Landlord and Tenant shall execute an Effective Date Certificate to confirm the Effective Date.

41.08 As of the Effective Date, Exhibit "A" and the description and size of the Demised Premises set forth in Section 1.01 of this Lease Agreement shall be amended to reflect the addition of the Additional Space to the Demised Premises.

41.09 The annual base rent for the Additional Space over the balance of the initial Term of this Lease Agreement shall be the same annual rent per rentable square foot that is payable with respect to the original Demised Premises over such period. As of the Effective Date, Section 4.01 (Base Rent) of this Lease Agreement shall be amended to reflect the addition of the Additional Space to the Demised Premises.

- 28 -

41.10 As of the Effective Date, the percentage set forth in Sections 7.03 and 7.07 (Taxes and Operating Costs Escalation) of this Lease Agreement shall be increased to reflect the addition of the Additional Space to the Demised Premises.

41.11 If and each time all or any portion of the Available Contiguous Space is leased by Tenant, Landlord shall prepare and Landlord and Tenant shall execute an appropriate amendment to this Lease Agreement for the purpose of adding such space to the Demised Premises.

41.12 Landlord shall not be obligated to lease only a portion of the Available Space to Tenant unless the remaining portion will be in compliance with all applicable codes and will be of a size and configuration that will not, in Landlord's reasonable judgment, substantially impede its leaseability.

41.13 This Article shall be personal to the original Tenant under this Lease Agreement named Determine, Inc., or to entities under the control of, under common control with, or controlled by Determine, Inc., or the successor by sale or merger to Determine, Inc., and shall be immediately null and void and of no effect if such original Tenant assigns this Lease Agreement with or without Landlord's consent in accordance with Article 18 hereof.

ARTICLE 42

Building Sign

42.01 Subject to the requirements or restrictions of any applicable zoning codes and ordinances, the approval of the appropriate governmental authority, if required, and the approval of Landlord as to the size, location, appearance and method of attachment, which approval shall not be unreasonably withheld or delayed, for so long as Tenant shall lease the original Demised Premises, Tenant shall have the right to install and maintain, at its sole cost and expense, a sign identifying its company name and/or logo on an exterior wall of the Building. Tenant shall pay all fees and obtain all governmental waivers, variances, permits and approvals that may be required for the installation of such a sign. Tenant shall maintain the condition and appearance of such sign in compliance with all laws, ordinances and governmental orders, and to the complete satisfaction of Landlord. Any approved structural or electrical modifications or additions to the Building made necessary by the installation of such sign shall be paid for by Tenant. If such sign is illuminated, Tenant shall pay directly or reimburse Landlord for the cost of electricity to illuminate the sign. If at any time during the term of this Lease Agreement, including any extensions thereof, Tenant shall be leasing the original Demised Premises, Tenant shall, within thirty (30) days after receipt of a written request from Landlord to do so, remove any such sign and restore the affected portion of the Building to the same condition and appearance as existed prior to the installation of the sign. Otherwise, Tenant shall remove any such sign and restore the affected portion of the Building as aforesaid at the expiration or sooner termination of this Lease Agreement.

(INTENTIONALLY LEFT BLANK)

- 29 -

IN WITNESS WHEREOF, and intending to be legally bound hereby, Landlord has caused this Lease Agreement to be executed on its behalf by a duly authorized officer, and Tenant, if a corporation, has caused this Lease Agreement to be executed on its behalf by a duly authorized officer, or, if a limited liability corporation, has caused this Lease Agreement to be executed on its behalf by an authorized member or managing member, as applicable, or, if a partnership or limited liability partnership, has caused this Lease Agreement to be executed on its behalf by one or more of its duly authorized partners, or, if an individual, has hereunto set his hand, all as of the day and year first written above.

		Landlord:

ATTEST:		ATAPCO CARMEL, INC.



By:	/s/	By:	/s/
	Jeffrey P. McCormack, Secretary		Kevin F. McAndrews, President




		Tenant:

ATTEST/WITNESS:		DETERMINE, INC.



By:		By:

		Name:

		Title:

- 30 -

EXHIBIT "A"

Page 1 of 1

EXHIBIT "B"

TO ACCOMPANY LEASE AGREEMENT DATED _____________________, 2016, between ATAPCO CARMEL, INC. and DETERMINE, INC., a Delaware Corporation, having an office at 2121 South El Camino Real, 10 ^th Floor, San Mateo, CA 94403.

1. The parties acknowledge that the space plan attached hereto as Exhibit “B-1” is approved and included by reference in this Lease Agreement (the "Space Plan"). Landlord shall promptly prepare construction drawings based on the Space Plan (the "Drawings"), but in no event later than March 31, 2016, which shall be subject to Tenant's approval, not to be unreasonably withheld and to be provided within ten (10) days of Tenant's receipt of the Drawings. Landlord shall, within five (5) business days of receipt of Tenant's comments to the Drawings, revise the same to include Tenant's reasonable revisions. Tenant shall have three (3) business days to review the revised Drawings. The final Drawings and the Space Plan are collectively referred to as the "Plans." THE FINAL SPACE PLAN, DRAWINGS AND SCOPE OF WORK TO BE MUTUALLY APPROVED BY BOTH LANDLORD AND TENANT PER SUBMITTALS FROM BRIANA DUNKIN INTERIORS INC. dba PARALLEL DESIGN GROUP SHALL BE ATTACHED HERETO PRIOR TO START OF CONSTRUCTION OF TENANT IMPROVEMENTS. All of Landlord's Work shall be (i) performed in a good and workmanlike manner, (ii) in material compliance with all legal requirements and in substantial compliance with the Plans. If there are no specifications listed below for particular materials or equipment, Landlord shall use those types and quantities of materials and/or equipment that are typically utilized by Landlord for tenant space in the Building. Landlord shall promptly commence and diligently pursue the Landlord's Work to completion and shall keep Tenant apprised on the progress of construction.

2. With the exception of the work described in Paragraph 1 above and the express terms of the Lease Agreement, Tenant accepts the Demised Premises in its "as-is" condition.

3. Tenant shall be responsible for any additional architectural or construction costs that may be associated with changes requested by Tenant to the approved space plan submitted by BRIANA DUNKIN INTERIORS INC. dba PARALLEL DESIGN GROUP.

4.	Tenant is responsible for installation and maintenance of its telephone system, computer system, tele/data cabling, AV systems, security system (including security cameras), and generator serving the Demised Premises

5.	Tenant is responsible for scheduling the installation of its furniture, including systems furniture.

The Space Plan is subject to change orders as are reasonably requested in writing, so long As any additional costs related to the change order shall be Tenant’s sole and exclusive obligation and any additional time needed to complete the Landlord’s work due to the change order shall defer the Commencement Date on a day for day basis, and shall defer and extend the date on which any liability for failure to complete the Landlord’s Work would otherwise commence on a day to day basis as well. All requested change orders must be specifically designated as a change order request and shall be subject to Landlord’s consent, not to be unreasonably withheld.

Exhibit “B”

Page 1 of 1

- 33 -

Exhibit "C"

CLEANING SPECIFICATIONS

Landlord shall provide janitorial services in the common areas of the Building and in the Demised Premises of a standard typical for a Class A office building. These services shall include the following:

Nightly - Monday through Friday (or Sunday through Thursday)

1. Empty and clean all waste receptacles, and remove all normal waste paper and waste materials.

2. Wash clean all water fountains and coolers.

3. Spot vacuum all carpeted areas.

4. Spot sweep all hard flooring surfaces.

5. Wash and disinfect all lavatory floors.

6. Wash and disinfect all counters, faucets, basins, bowls and urinals in lavatories.

7. Clean mirrors in lavatories.

8. Wash both sides of all toilet seats.

9. Fill all toilet tissue, paper towel, sanitary napkin and soap dispensers in lavatories.

Weekly

1. Dust all telephones, copiers, computers and other office equipment.

2. Dust and wipe clean clear surfaces of all furniture.

3. Clean all lavatory partitions, tile walls, dispensers and receptacles.

4. Dust and spot clean all glass entry doors.

Periodic - As Needed

1. Wipe and clean all walls, doors, door frames, polished metal surfaces, light switches and receptacle covers to remove dust, dirt, smudges, stains and fingerprints.

2. Wash all exterior Building windows.

Excluded Areas

Notwithstanding the foregoing, Landlord shall not be obligated to provide cleaning services in areas of the Demised Premises that are not used as office areas, such as closets, storage rooms, mailrooms, computer rooms, laboratories and areas used primarily for the storage, preparation, service or consumption of food or beverages (the "Excluded Areas"). Tenant, at its sole cost and expense, shall cause all Excluded Areas to be cleaned on a regular basis in a manner satisfactory to Landlord. If Tenant does not perform such cleaning services itself, it shall contract directly with Landlord's cleaning contractor to provide such services.

Exhibit “C”

Page 1 of 1

Exhibit "D"

RULES AND REGULATIONS

1. Tenant and its agents, employees and invitees shall not loiter in or upon or in any way obstruct the grounds, sidewalks, driveways or parking areas, or the common halls, passages, exits, entrances, corridors, stairways or elevators, in or about the Building, or use such areas for any purpose other than for ingress to and egress from the Demised Premises. These areas are not for the use of the general public, and Landlord reserves the right to control and prevent access to them by all persons whose presence in the reasonable judgment of Landlord will be prejudicial to the safety, character, reputation and interests of the Building and its tenants. However, nothing in these Rules and Regulations shall be construed to prevent access by Tenant's employees, agents, contractors, invitees or those persons with whom Tenant usually deals in the ordinary course of its business, unless those persons violate these Rules and Regulations or are engaged in illegal activities.

2. Tenant shall have access to the Demised Premises 24 hours per day, every day. However, Landlord reserves the right to control ingress and egress to and from the Building and/or to close and keep locked all entrance and exit doors of the Building on Saturdays, Sundays and legal holidays, on other days between the hours of 6:00 P.M. and 6:00 A.M., and during such other times as Landlord deems advisable for the adequate protection of the Building. Access to the Building at such times shall be subject to such reasonable rules and regulations as Landlord may from time to time prescribe. Tenant and its agents, employees and invitees, and any other persons entering or leaving the Building at such times, may be required to sign a Building register, and any lobby attendant or agent of Landlord in charge shall have the right to refuse admittance to any person not possessing satisfactory identification and authorization. Landlord assumes no responsibility with respect to and shall not be liable for any damages resulting from the admission or denial of admission of any person, authorized or unauthorized, into the Building.

3. Office moves and the movement of furniture, equipment, safes, freight and bulky items into and out of the Building shall be done only at such times and in such manner as Landlord shall reasonably designate.

4. Articles of unusual size and weight will not be permitted in the Building. Landlord shall have the right to limit or prescribe the weight, size and position of all safes and other heavy equipment to be brought into the Building if reasonable and done in good faith. All damage to the Building caused by moving, installing or removing any furniture, equipment, safes, freight or other items or property of or for Tenant shall be repaired at Tenant's expense.

5. Smoking inside the Building is not allowed in lavatories, lobbies, corridors, stairwells or other common areas. Smoking outside the Building is allowed only in common areas specifically designated by Landlord for smoking. Tenant and its agents, employees and invitees shall not throw cigar or cigarette butts or other substances or litter of any kind in or about the Building except in receptacles placed there for that purpose.

6. Tenant and its agents, employees and invitees shall not make, or permit to be made, any noise that is disruptive to the other tenants or is inconsistent with the use of a first class office building, whether by the use of any musical instrument, radio, television set, other audio device or otherwise, or cause or permit any unusual or objectionable odors to be produced upon or emanate from the Demised Premises, or to materially disturb or interfere with other tenants or their agents, employees or invitees.

7. No animals (except those trained to assist the disabled), birds, bicycles or other vehicles shall be brought into or kept within the Demised Premises or any other part of the Building.

8. Except as may be expressly allowed by Article 29 of the Lease Agreement, no flammable, combustible or explosive fluid, chemical or substance shall be brought into or kept within the Demised Premises or any other part of the Building, and Tenant and its agents, employees and invitees shall obey and comply with all fire regulations and procedures applicable to the Demised Premises and the Building.

9. Except for microwave cooking, Tenant and its agents, employees and invitees shall not do or permit to be done any cooking upon the Demised Premises, or any other part of the Building, without the prior written consent of the Landlord.

Exhibit “D”

Page 1 of 2

10. Tenant shall not use the Demised Premises for manufacturing; or store goods, wares or merchandise within the Demised Premises except in the ordinary course of Tenant's business; or permit any auction to be conducted within or upon the Demised Premises, the Building, or the common areas adjacent to the Building.

11. Tenant shall not install or use any machinery or equipment in the Demised Premises which causes disturbing noise or jar or tremor to any of the floors or walls of the Building, or which by its weight might damage the floor of the Building upon which it is placed.

12. The directory board is provided exclusively for the display of the name and location in the Building of each tenant and Landlord reserves the right to exclude any other name therefrom and to make a charge for each and every name in addition to the name of Tenant placed on the directory board with the consent of Landlord.

13. The lavatories, toilets, urinals, washbowls and other plumbing fixtures available to Tenant and its agents, employees and invitees shall not be used for any purpose other than that for which they were designed, and no rubbish, rags, newspapers or other foreign substances shall be deposited therein. Any expense resulting from any misuse of the plumbing fixtures shall be borne by the tenant who, or whose agents, employees or invitees, shall have caused the same.

14. Tenant shall not change the locks, or install new or additional locks, on the doors of the Demised Premises without the prior written consent of Landlord. At the termination of its tenancy, Tenant shall deliver to Landlord all keys to the Demised Premises, lavatories and other areas within the Building that were furnished to Tenant or that Tenant has had made. If any keys furnished to Tenant are lost, Tenant shall reimburse Landlord for the cost of replacing them.

15. Tenant shall not mark, drive nails, screw or drill into, or in any way deface, the walls, floors, ceilings, doors, frames, partitions or any other part of the Demised Premises or the Building, other than to hang pictures or other objects commonly used for office decorations, without the prior written consent of Landlord, not to be unreasonably withheld.

16. Except as is provided in the Lease, no signs, advertisements, antennae, objects, notices or lettering shall be exhibited, inscribed, painted or affixed on any part of the exterior, roof or common areas of the Building, or on any of the sidewalks, driveways, parking areas, grounds or other common areas adjacent to the Building, or on any part of the Demised Premises that is visible from outside the Demised Premises, without the prior written consent of Landlord. Landlord shall have the right to prohibit any advertising by Tenant which, in Landlord's opinion reasonably exercised, tends to impair the reputation of the Building or its desirability as an office building, and, upon written notice from Landlord, Tenant shall refrain from or discontinue such advertising.

17. All data, electric and telephone cabling and wiring shall be installed as reasonably directed by Landlord, and the boring or cutting of floors and partitions for cables, wires or other purposes is not to be permitted except with the prior written consent of Landlord, not to be unreasonably withheld; the foregoing does not apply to Landlord's Work which is done by Landlord.

18. Tenant shall not install any curtains, blinds, shades, screens, awnings or other form of inside or outside window covering, or window ventilators or similar devices, without the prior written consent of Landlord, not to be unreasonably withheld.

19. Parking of vehicles on the Landlord's property is permitted only in areas designated by Landlord for that purpose. No trucks (other than vans and pickup trucks), motor homes, boats or trailers of any kind may be parked on Landlord's property at any time, and no vehicles of any kind may be kept on Landlord's property overnight. The washing, maintenance or repair of vehicles is not permitted on Landlord's property except as may be specifically permitted by Landlord.

20. Tenant will not, without the consent of Landlord, use the name of the Building for any purpose other than as the address of the business to be conducted by Tenant in the Demised Premises, nor will Tenant do or permit the doing of anything in connection with Tenant's business or advertising that in the reasonable judgment of Landlord may reflect unfavorably on Landlord or the Building or confuse or mislead the public as to any relationship between Landlord and Tenant.

21. If Tenant desires janitorial services in addition to those furnished by Landlord, or required to be furnished, under the Lease Agreement, Tenant shall not engage anyone other than Landlord's cleaning contractor to provide such additional services without the prior written consent of Landlord.

Exhibit “D”

Page 2 of 2

EXHIBIT 21 .1

SUBSIDIARIES

-Determine Sourcing, Inc.

-Determine Limited

-Determine SAS

-b-pack services SAS

- Determine GMBH

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 333-203355, 333-202579, 333-198148, 333-198149, 333-194246 and 333-189855 and Form S-8 Nos. 333-200709, 333-200708, 333-160486, 333-151686, 333-148041, 333-126306, 333-122708, 333-116449, 333-103622, 333-64246, 333-56576, and 333-32666) of our report dated July 1, 2016, with respect to the consolidated financial statements of Determine, Inc., included in the Annual Report on Form 10-K for the two year period ended March 31, 2016.

/s/ Armanino LLP

San Francisco, California

July 1, 2016

EXHIBIT 31.1

DETERMINE, INC.

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Patrick Stakenas, certify that:

1)	I have reviewed this Annual Report on Form 10-K of Determine, Inc.;

2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 1, 2016

/s/ PATRICK STAKENAS
Patrick Stakenas
President and Chief Executive Officer

EXHIBIT 31.2

DETERMINE, INC.

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, John Nolan, certify that:

1)	I have reviewed this Annual Report on Form 10-K of Determine, Inc.;

2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5)	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 1, 2016

/s/ JOHN NOLAN
John Nolan
Chief Financial Officer

EXHIBIT 32.1

DETERMINE, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Determine, Inc. (the “Company”) for the years ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick Stakenas, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: July 1, 2016

/s/ PATRICK STAKENAS
Patrick Stakenas
President and Chief Executive Officer

EXHIBIT 32.2

DETERMINE, INC.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Determine, Inc. (the “Company”) for the years ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Nolan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: July 1, 2016

/s/ JOHN NOLAN
John Nolan
Chief Financial Officer