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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO.__)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
SEMOTUS SOLUTIONS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule0-11(a)(2)and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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SEMOTUS SOLUTIONS, INC.
16400 LARK AVE., SUITE 230
LOS GATOS, CALIFORNIA 95032
(408) 358-7100
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 25, 2003
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Semotus Solutions, Inc. We will be holding the Annual Meeting at the Company's
offices located at 16400 Lark Ave., Suite 230, Los Gatos, CA 95032, on Thursday,
September 25, 2003, at 2:30 p.m., Pacific Time.
At the 2003 Annual Meeting, we will ask you to:
1. Elect four (4) directors to the Board of Directors of the Company to
serve for a one-year term;
2. Ratify the appointment of Burr, Pilger & Mayer LLP as the Company's
independent accountants for the fiscal year ending March 31, 2004; and
3. Transact such other business as may properly come before the meeting or
any adjournment thereof. Enclosed with this letter is a Proxy Statement, a proxy
card and a return envelope. Also enclosed is Semotus Solutions' Annual Report on
Form 10-K for the fiscal year ended March 31, 2003.
Only holders of common stock of the Company of record at the close of
business on July 29, 2003 are entitled to notice of and to vote at the Annual
Meeting. The Board of Directors of the Corporation is soliciting the proxies.
Your vote is very important to us regardless of the number of shares that
you own. All stockholders, whether or not you expect to attend the Annual
Meeting, are urged to sign and date the enclosed Proxy and return it promptly in
the enclosed postage-paid envelope, or follow the instructions provided for
voting by phone or the internet. The prompt return of proxies or vote by phone
or internet will ensure a quorum and same the Company the expense of further
solicitation. Each proxy granted may be revoked by the stockholder appointing
such proxy at any time before it is voted. If you receive more than one proxy
card because your shares are registered in different names or addresses, each
such proxy card should be signed and returned to ensure that all of your shares
will be voted. If you elect to vote by phone or the internet, the last vote you
submit chronologically (by any means) will supersede your prior vote(s). Also,
if you vote by phone or the internet, and later decide to attend the Annual
Meeting, you may cancel your previous vote and vote in person at the meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Anthony N. LaPine
- ------------------------
Anthony N. LaPine
PRESIDENT
Los Gatos, California
August 1, 2003
SEMOTUS SOLUTIONS, INC.
16400 LARK AVE., SUITE 230
LOS GATOS, CALIFORNIA 95032
(408) 358-7100
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 25, 2003
GENERAL INFORMATION
This Proxy Statement provides information that you should read before you
vote on the proposals that will be presented to you at the 2003 Annual Meeting
of Semotus Solutions, Inc. ("Semotus," the "Company" or "we"). The 2003 Annual
Meeting will be held on September 25, 2003 at the Company's offices located at
16400 Lark Ave., Suite 230, Los Gatos, CA 95032.
This Proxy Statement provides detailed information about the Annual
Meeting, the proposals you will be asked to vote on at the Annual Meeting, and
other relevant information. The Board of Directors of Semotus is soliciting
these proxies.
At the Annual Meeting, you will be asked to vote on the following
proposals:
1. Elect four directors, each for a one-year term;
2. Ratify the appointment by the Board of Directors of the firm of Burr,
Pilger & Mayer LLP as independent public accountants of Semotus for the fiscal
year ending March 31, 2004; and
3. Such other matters as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ELECTION
OF THE BOARD'S NOMINEES FOR DIRECTOR AND FOR APPROVAL OF EACH OF THE OTHER
PROPOSALS.
On August 8, 2003, we began mailing this proxy statement to people who,
according to our records, owned shares of common stock in Semotus as of the
close of business on July 29, 2003. We have mailed with this proxy statement a
copy of Semotus' Annual Report on Form 10-K for the fiscal year ended March 31,
2003.
INFORMATION ABOUT THE 2003 ANNUAL MEETING AND VOTING
THE ANNUAL MEETING
The Annual Meeting will be held at Company's offices located at 16400 Lark
Ave., Suite 230, Los Gatos, CA 95032, on Thursday, September 25, 2003, at 2:30
p.m., Pacific Time.
THIS PROXY SOLICITATION
We are sending you this proxy statement because Semotus' Board of Directors
(the "Board") is seeking a proxy to vote your shares at the Annual Meeting. This
proxy statement is intended to assist you in deciding how to vote your shares.
On August 8, 2002, we began mailing this proxy statement and the accompanying
proxy card and Annual Report on form 10-K to all people who, according to our
stockholder records, owned shares at the close of business on July 29, 2003. In
addition, we have provided brokers, dealers, banks, voting trustees and their
nominees, at our expense, with additional copies of the Annual Report on form
10-K and the other accompanying materials described above so that such record
holders could supply these materials to the beneficial owners as of July 29,
2003. We will bear the entire cost of this proxy solicitation.
VOTING YOUR SHARES
You may vote your shares at the Annual Meeting by completing and returning
the enclosed proxy card, or by voting in person at the Annual Meeting.
Additionally, you may be able to vote by phone or via the internet, as described
below.
Whether or not you plan to attend the Meeting, please take the time to
vote. Votes may be cast:
o by traditional paper proxy card;
o by phone;
o via the Internet; or
o in person at the Meeting.
Please take a moment to read the instructions, choose the way to vote that
you find most convenient and cast your vote as soon as possible.
Voting by Proxy Card. If proxies in the accompanying form are properly
executed and returned, the shares of Common Stock represented thereby will be
voted in the manner specified therein. If not otherwise specified, the shares of
Common Stock represented by the proxies will be voted (i) FOR the election of
the nominees named below as directors of the Company; (ii) FOR the ratification
of the appointment of Burr, Pilger & Mayer LLP as independent accountants for
the year ending March 31, 2002; and (iii) in the discretion of the persons named
in the enclosed form of proxy on any other proposals which may properly come
before the Meeting or any adjournment or adjournments thereof. Any stockholder
who has submitted a proxy may revoke it at any time before it is voted, by
written notice addressed to and received by the Secretary of the Company, by
submitting a duly executed proxy bearing a later date or by electing to vote in
person at the Meeting. The mere presence at the Meeting of the person appointing
a proxy does not, however, revoke the appointment. IF YOU DECIDE TO VOTE BY
PROXY, YOUR PROXY CARD WILL BE VALID ONLY IF YOU SIGN, DATE AND RETURN IT BEFORE
THE ANNUAL MEETING TO BE HELD ON SEPTEMBER 25, 2003.
Voting by Phone or via the Internet. If you are a stockholder of record
(that is, if your stock is registered with the Company in your own name), you
may vote by phone, or through the Internet, by following the instructions
included with your proxy card. If your shares are registered in the name of a
broker or other nominee, your nominee may be participating in a program provided
through ADP Investor Communication Services that allows you to vote by phone or
the Internet. If so, the voting form your nominee sent you will provide phone
and Internet voting instructions. The last vote you submit chronologically (by
any means) will supersede your prior vote(s). Also, if you vote by phone or the
Internet, and later decide to attend the Meeting, you may cancel your previous
vote and vote in person at the Meeting.
The deadline for voting by phone or through the Internet as a stockholder
of record is 11:59 p.m., EDT, on September 24, 2003. For stockholders whose
shares are registered in the name of a broker or other nominee, please consult
the voting instruction provided by your broker for information about the
deadline for voting by phone or through the Internet.
Voting in Person. To vote in person, you must attend the Annual Meeting and
obtain and submit a ballot. Ballots for voting in person will be available at
the Annual Meeting. To vote by proxy, you must complete and return the enclosed
proxy card in time to be received by us by the Annual Meeting. By completing and
returning the proxy card, you will be directing the persons designated on the
proxy card to vote your shares at the Annual Meeting in accordance with the
instructions you give on the proxy card.
Attendance at the Meeting will not, by itself, result in the revocation of
a previously submitted proxy. Even if you are planning to attend the Meeting, we
encourage you to submit your proxy in advance to ensure the representation of
your shares at the Meeting.
If you hold your shares with a broker and you do not tell your broker how
to vote, your broker has the authority to vote on all routine proposals.
VOTE REQUIRED FOR APPROVAL
SHARES ENTITLED TO VOTE. On July 29, 2003, (the "Record Date") 20,140,997
shares of Semotus common stock were issued and outstanding. Each share issued
and outstanding on the Record Date will be entitled to one vote on each of the
proposals.
QUORUM. The quorum requirement for holding the meeting and transacting
business is that a majority of the issued and outstanding shares on the Record
Date be present in person or represented by proxy and entitled to be voted.
Accordingly, 10,070,499 shares must be present in person or by proxy for a
quorum to be present. If a quorum is not present, a vote cannot occur. Both
abstentions and broker non-votes are counted as present for the purposes of
determining the presence of a quorum.
VOTES REQUIRED. In the election of directors, the four persons receiving
the highest number of "FOR" votes will be elected. All other proposals require
the affirmative "FOR" vote of a majority of those shares present and entitled to
vote.
ADDITIONAL INFORMATION
We are mailing our Annual Report on Form 10-K for the fiscal year ended
March 31, 2003, including consolidated financial statements, to all shareholders
entitled to vote at the Annual Meeting together with this proxy statement. The
Annual Report on Form 10-K does not constitute a part of the proxy solicitation
material. The Annual Report on Form 10-K tells you how to get additional
information about Semotus.
PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees for election to the Board of Directors are:
Anthony N. LaPine
Robert Lanz
Mark Williams
Laurence W. Murray
Each director will be elected to serve for a one-year term, unless he
resigns or is removed before his term expires, or until his replacement is
elected and qualified. All of the four nominees are currently members of the
Board of Directors and have consented to serve as directors if re-elected.
Anthony N. LaPine is President and Chief Executive Officer of the Company. More
detailed information about each of the nominees is available in the section of
this proxy statement titled "Directors and Executive Officers".
There are no known arrangements or understandings between any director or
executive officer and any other person pursuant to which any of the above-named
directors was selected as a director of the Company.
If any of the nominees cannot serve for any reason (which is not
anticipated), the Board of Directors may designate a substitute nominee or
nominees. If a substitute is nominated, we will vote all valid proxies for the
election of the substitute nominee or nominees. Alternatively, the Board of
Directors may also decide to leave the board seat or seats open until a suitable
candidate or candidates are located, or it may decide to reduce the size of the
Board.
The Board of Directors of the Company has established the size of the board
at four members. Proxies for the Annual Meeting may not be voted for more than
four directors.
BOARD RECOMMENDATION
The Board of Directors unanimously recommends a vote "FOR" each of the
nominees to the Board of Directors.
PROPOSAL 2:
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed Burr, Pilger & Mayer LLP ("BPM"), an
accounting firm of independent certified public accountants, to act as
independent accountants for Semotus and its consolidated subsidiaries for our
fiscal year 2004. The Board believes that BPM's experience with and knowledge of
Semotus are important, and would like to continue this relationship. BPM has
advised Semotus that the firm does not have any direct or indirect financial
interest in Semotus or any of its subsidiaries, nor has BPM had any such
interest since April 1, 2002, other than its capacity as our independent
certified public accountants providing auditing and accounting services.
In making the recommendation for BPM to continue as the Company's
independent accountants for the fiscal year ended March 31, 2004, the Company's
management team and the Audit Committee reviewed past audit results and the
audit and non-audit services, if any, proposed to be performed during fiscal
year 2004. In selecting BPM, the Audit Committee and the Board of Directors
carefully considered BPM's independence.
BPM has confirmed to Semotus that it is in compliance with all rules,
standards and policies of the Independence Standards Board and the Securities
and Exchange Commission ("SEC") governing auditor independence.
A representative of BPM is expected to attend the Annual Meeting. Each
representative will have the opportunity to make a statement if he or she
desires to do so and will be able to respond to appropriate questions from
stockholders.
RECOMMENDATION
The Board of Directors unanimously recommends a vote "FOR" ratification of
the appointment of Burr, Pilger & Mayer LLP.
OTHER BUSINESS
As of the date of this proxy statement, management of the Company was not
aware of any other matter to be presented at the Meeting other than as set forth
herein. However, if any other matters are properly brought before the Meeting,
the shares represented by valid proxies will be voted with respect to such
matters in accordance with the judgment of the persons voting them. A majority
vote of the shares represented at the meeting is necessary to approve any such
matters.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of July 14, 2003, as to:
o each person (or group of affiliated persons) known by us to own
beneficially more than five percent of our common stock;
o each of our directors, our chief executive officer and the two other
most highly paid executive officers; and
o all our directors and officers as a group.
Information as to beneficial ownership is based upon statements furnished
to the Company by such persons. Each individual has sole voting and investment
power over the shares, except as otherwise noted. For the purposes of
calculating percentage ownership as of July 14, 2003, 20,140,997 shares were
issued and outstanding and, for any individual who beneficially owns shares
represented by options or warrants exercisable on or before September 12, 2003,
these shares are treated as if outstanding for that person. Unless otherwise
indicated, the address of each of the individuals and entities named below is:
c/o Semotus Solutions, Inc., 16400 Lark Ave., Suite 230, Los Gatos, CA 95032.
BENEFICIAL OWNERSHIP OF SHARES
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NAME AND ADDRESS OF BENEFICIAL OWNERS NUMBER OF SHARES PERCENT
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Directors and Executive Officers:
Anthony LaPine 2,498,282(1) 12.4%
Pamela LaPine 2,498,282(2) 12.4%
Charles K. Dargan, II 182,621(3) *
Mark Williams 12,083(4) *
Laurence W. Murray 12,499(5) *
Robert Lanz 22,499(6) *
All Officers and Directors as a
Group (8 Persons) 2,837,460(7) 14.1%
5% Stockholders: none
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* Less than 1%
(1) Includes 1,020,000 shares of common stock owned directly by Mr. LaPine;
exercisable warrants to purchase 300,000 shares of common stock;
exercisable options to purchase 840,570 of common stock; and 3,000 shares
of common stock and exercisable options to purchase 334,712 shares of
common stock owned by Mr. LaPine's wife, Pamela LaPine, the Company's
Executive Vice President and President of Financial Services, as set
forth below.
(2) Includes 3,000 shares of common stock owned directly by Pamela LaPine;
exercisable options to purchase 334,712 shares of common stock; and
1,020,000 shares of common stock, exercisable options to purchase 840,570
shares of common stock, and exercisable warrants to purchase 300,000
shares of common stock owned by Mrs. LaPine's husband, Anthony LaPine,
President and Chief Executive Officer of the Company, as set forth above.
(3) Includes exercisable options to purchase 182,621 shares of common stock.
(4) Includes exercisable options to purchase 12,083 shares of common stock.
(5) Includes exercisable options to purchase 12,499 shares of common stock.
(6) Includes exercisable options to purchase 22,499 shares of common stock.
(7) Includes the shares listed above as beneficially owned by Messrs. LaPine,
Dargan, Williams, Murray, Lanz, and Mrs. LaPine, and 109,476 shares of
common stock underlying currently exercisable options held by other
executive officers of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers (as defined in regulations
issued by the SEC) and directors, and persons who own more than ten percent of a
registered class of Semotus' equity securities, to file reports of ownership and
changes in ownership with the SEC. Officers, directors and greater than ten
percent shareholders are required by SEC regulation to furnish us with copies of
all Section 16(a) forms they file.
Based solely on a review of copies of such reports of ownership furnished
to us and certifications from executive officers and directors, we believe that
during the past fiscal year all filing requirements applicable to our directors,
officers and beneficial owners of more than 10% of a registered class of our
equity securities were complied with.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information relating to our directors and
executive officers who will continue to serve after the Annual Meeting:
NAME AGE POSITION
---- --- --------
Anthony N. LaPine 61 Chairman of the Board, President, and Chief
Executive Officer
Charles K. Dargan, II 48 Chief Financial and Accounting Officer
Taliesin Durant 32 Corporate Secretary and General Counsel
Cornel R. Fota 36 Chief Technical Officer
Pamela B. LaPine 45 Executive Vice President of Sales and Marketing
Robert Lanz (1) 61 Director
Mark Williams (2) 45 Director
Laurence W. Murray (3) 63 Director
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(1) Chairman of the Audit Committee; Member of the Compensation Committee.
(2) Member of the Audit Committee and the Compensation Committee.
(3) Mr. Murray was elected as a member of the Board of Directors of the Company
effective as of November 19, 2002. He is also Chairman of the Compensation
Committee and a member of the Audit Committee.
There is no family relationship between any Director or Executive Officer
of the Company except that Anthony N. LaPine and Pamela B. LaPine are husband
and wife. There are no known arrangements or understandings between any director
or executive officer and any other person pursuant to which any of the
above-named executive officers or directors was selected as an officer or
director of the Company.
Anthony N. LaPine has been the Company's President and one of its directors
since June of 1996. In June of 1997 Mr. LaPine was elected Chief Executive
Officer of the Company, and in August of 1997, Mr. LaPine was elected Chairman
of the Board. Mr. LaPine's career began at IBM where he served as a member of
the engineering team that developed the modern disc drive. In 1969 he was
recruited as one of the founders of Memorex's Equipment Group where he was
instrumental in developing the floppy disc drive. After the sale of Memorex to
Unisys, Mr. LaPine was recruited to re-engineer the Irwin/Olivetti Company,
where he orchestrated the invention of the first removable cartridge tape backup
in personal computers. Subsequently, he formed LaPine Technology, raised thirty
million dollars and launched the 31/2-inch Winchester disk drive technology that
is now the industry standard. Mr. LaPine then sold LaPine Technology, and formed
the LaPine Group, a private investment and management-consulting firm. Mr.
LaPine received a BSEE Cum Laude, from San Jose State University, an MSEE from
the University of Santa Clara and an MBA from the University of San Francisco.
He later became an alumnus of Stanford's Graduate School of Business through
their Executive Program.
Charles K. Dargan, II has resigned as a member of the Company's Board of
Directors effective as of July 31, 2002. However, he will continue to be the
Company's Chief Financial and Accounting Officer. Mr. Dargan was on the Board of
Directors from March 1999 to July 2002 and was the Executive Vice President of
Operations and Administration for the Company from April 2000 to January 2001,
at which time Mr. Dargan became the Company's Chief Financial and Accounting
Officer. Prior to joining Semotus Solutions, Mr. Dargan served as a Managing
Director of Corporate Finance for The Seidler Companies Incorporated, a private
brokerage, investment banking and public finance firm. In addition, he was a
partner and Chief Financial Officer of the investment banking firm of Ambient
Capital, was a Managing Director of Corporate Finance at L.H. Friend, Weinress,
Frankson & Presson, Inc., and a First Vice President at Drexel Burnham Lambert,
Incorporated. His accounting and financial industry experience has made him an
expert in public and private debt and equity finance, mergers and acquisitions
and financial management of and planning for emerging growth companies. Mr.
Dargan graduated from the University of Southern California with an MBA and an
MS in Finance, and possesses an A.B. in Government and Economics from Dartmouth
College. He also holds accounting and finance industry certifications of
Chartered Financial Analyst (CFA) and Certified Public Accountant (CPA).
Taliesin (Tali) Durant joined the Company in August 1999 and has been the
Company's Corporate Secretary and in-house counsel since January 2000. Ms.
Durant provides legal counsel for all of Semotus Solutions'corporate, financial
and business matters. This includes the drafting and negotiation of agreements
connected to the development as well as the distribution, sale and licensing of
the Company's services software and technology. She also plays a crucial role in
the Company's business development and merger and acquisition strategy. Ms.
Durant possesses expertise in a number of business and legal issues including
those related to merger and acquisition agreements, intellectual property
licensing, as well as in software development and service contracts. Ms. Durant
has experience providing legal guidance in the areas of consumer protection,
small business development and contracts, telecommunications, and intellectual
property safeguards. She is a member of the American Corporate Counsel
Association, the American Bar Association, and the California State Bar
Association. She is an alumna of the Northwestern School of Law at Lewis and
Clark College, and has specific legal expertise in the area of high technology.
Ms. Durant holds a Bachelor of Arts in Economics from Connecticut College.
Cornel Fota has been employed with the Company since 1996 and currently
serves as our Chief Technical Officer (CTO). Mr. Fota joined the Company in 1996
as a senior software engineer and was involved in developing Semotus' core
products and technologies. From July 1997 to August 1998 he was a Software
Development Manager for the Company. Mr. Fota moved to the position of Director
of Engineering from August to October of 1998, and then became Semotus' Vice
President of Engineering until he was promoted to CTO in January 2001. Mr. Fota
has experience in the analysis, design, implementation and management of
software-based projects. His areas of expertise include real-time systems,
Internet technologies, serial communications, paging protocols and
object-oriented analysis and design. Mr. Fota is responsible
for managing the Company's development, production and information systems
groups. Before joining the Company, he was involved with the development of
various Microsoft-based systems. Mr. Fota has a Master of Science in Software
Engineering from the Technical University of Bucharest, Romania. He also holds a
post-graduate management degree from Ecole Nationale des Ponts et Chaussees,
Paris, France.
Pamela LaPine began with the Company in 1996 and currently serves as
Executive Vice President of Sales and Marketing. She is responsible for the
sales, marketing, account management and strategic direction behind the
Company's Financial Services and HipLink product lines. Mrs. LaPine began as the
Company's Director of Administration in 1996 and then moved to Vice President of
Operations in 1997. In October of 1998 she moved into the position of Vice
President of Marketing, and in 2000 was promoted to Executive Vice President and
President of Financial Services. Pamela LaPine is a seasoned business
professional with over 20 years of management experience in Silicon Valley high
tech companies. She has extensive experience in corporate operations, finance,
marketing and business development. Mrs. LaPine started her management career as
Marketing Director at Digital Recording Corporation, and then transitioned to
LaPine Technologies, where she was responsible for strategic planning. She has
also held executive positions with Partners Petroleum and Olympiad Corporation.
Mrs. LaPine did her undergraduate studies at the University of Utah.
Robert Lanz has served on Semotus' Board of Directors and as Chairman of
the Company's Audit Committee since November of 2001. Mr. Lanz has over 35 years
of accounting and management experience. Mr. Lanz is currently Managing Director
of the Silicon Valley office of The Financial Valuation Group, a business
valuation consulting and litigation services firm, and Managing Partner of RAMP
Partners, LLC, an accounting and financial management consulting firm. Mr. Lanz
is a certified public accountant. From 1998 to 2000, he was an audit and
business advisory partner with BDO Seidman, LLP, an international accounting and
consulting firm, and Meredith, Cardozo, Lanz & Chiu, LLP. Mr. Lanz previously
retired from KPMG International, after a 27-year career with that firm, where he
was an audit and SEC Reviewing partner. He has also served as chief financial
officer of public and private companies, including a successful IPO. Mr. Lanz
currently sits on the board of Kelmoore Strategy Variable Trust.
Mark Williams joined the Company's Board of Directors on August 1, 2002.
Mr. Williams has over 20 years of accounting and management experience. Mr.
Williams is currently CFO and a General Partner of University Technology
Ventures. Previously, from 1990 to 2000, he was a Partner at Ruzzo, Scholl and
Murphy Accountancy Corporation. For 8 years before that, Mr. Williams was a tax
manager at Price Waterhouse. Mr. Williams is a certified public accountant and a
member of the American Institute of Certified Public Accountants and the
California Society of Certified Public Accountants.
Laurence W. Murray joined the Company's Board of Directors on November 19,
2002. Mr. Murray has over 30 years of experience in finance, accounting and
management. Currently, Mr. Murray is a professor of finance and international
business at the University of San Francisco, as well as a consultant,
specializing in corporate planning and financial strategy. Mr. Murray is also an
adjunct professor of international business at the University of California,
Berkeley. Mr. Murray holds a Ph.D. in economics and finance from Clark
University, a M.S. in economics from the University of Missouri, and a B.A. in
business from the University of Northern Iowa.
MEETINGS OF THE BOARD OF DIRECTORS AND STANDING COMMITTEES.
The Board of Directors currently consists of four members. The Board of
Directors held one meeting during fiscal year 2003, and executed 16 unanimous
consents in lieu of a meeting. Each of the directors appointed at that time
attended the one meeting.
The standing committees of the Board of Directors include an Audit
Committee and a Compensation Committee. The Compensation Committee consists of
Messrs. Lanz, Williams and Murray, with Mr. Murray as its chairman. The
Compensation Committee held one meeting during the fiscal year 2003. The
Compensation Committee determines the compensation of senior executive officers
(such as the chief executive officer and chief financial officer), subject, if
the Board so directs, to the Board's further ratification of the compensation;
determines the compensation for other officers or delegate such determinations
to the chief executive officer; grants options, stock or other equity interests
under our stock option or other equity-based incentive plans; and administers
those plans and, where such plans specify, our other employee benefit plans.
The Audit Committee currently consists of Messrs. Lanz, Williams and
Murray, with Mr. Lanz as its chairman. Mr. Lanz was elected to the Board and to
the Audit Committee in November of 2001. The Audit Committee's responsibilities
are described in a written charter adopted by the Board of Directors, which is
attached as Attachment A to this proxy statement. The Audit Committee makes
recommendations to the Board concerning the engagement of independent
accountants; reviews with the independent accountants the plans and results of
the audit engagement; approves professional services provided by the independent
accountants; considers the range of audit and non-audit fees; verifies that
auditors are independent of management and are objective in their findings;
reviews annual CPA audit and recommendations of internal controls and related
management response; reviews the audit reports with management and the auditor;
oversees the internal audit function; and monitors management's efforts to
correct deficiencies described in any audit examination. A report of the Audit
Committee can be found on page 18 of this proxy statement.
The Audit Committee held a total of 5 meetings during fiscal year 2003,
which were attended by all of the Audit Committee members appointed at that
time, except Frederick Hoar who missed two audit committee meetings.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION . The following table sets forth the compensation for
the fiscal years ended March 31 2001, 2002 and 2003 awarded to, earned by or
paid to our chief executive officer and the three other most highly paid
executive officers. We refer to these four officers as the "named executive
officers."
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
- --------------------------------------- --------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION OPTIONS/SARS COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($) (#) ($)
- --------------------------- ---- --------- -------- ----------- ------------- -------------
Anthony LaPine 2003 $ 218,000 -- $ 13,859(2) 891,000(4) $ 631,435 (7)
Chairman and Chief 2002 $ 239,770 -- $ 9,336(2) 810,000(5) $ 520,452 (7)
Executive Officer 2001 $ 240,000 -- $ 11,000(2) 300,000 $ 375,551 (7)
- --------------------------- ---- --------- -------- ----------- ------------- -------------
Charles Dargan, II 2003 $ 88,948 -- $ 30,000(3) 277,000(4) --
Chief Financial 2002 $ 154,618 -- -- 270,000(5) --
Officer 2001 $ 155,000 -- -- 140,000 --
- --------------------------- ---- --------- -------- ----------- ------------- -------------
Pamela LaPine 2003 $ 109,000 -- $ 10,966(2) 385,000(4) --
Executive Vice 2002 $ 117,919 -- $ 9,997(2) 350,000(5) --
President of Sales 2001 $ 98,000 -- $ 7,500(2) 250,000 --
and Marketing
- --------------------------- ---- --------- -------- ----------- ------------- -------------
Steven McAllister 2003 $ 134,259 -- -- 192,500(4)(6) $ 9,281 (8)
Group President (1) 2002 $ 137,500 -- -- 175,000(5)(6) --
2001 -- -- -- -- --
- --------------------------- ---- --------- -------- ----------- ------------- -------------
- --------------
(1) Mr. McAllister was Group President of the Company's E-Commerce and HipLink
Divisions from October 2001 to March 2003, and was not an executive officer
as of March 31, 2003.
(2) Represents automobile allowances and / or mileage reimbursements.
(3) Represents moving expense allowance.
(4) Represents previously granted options to purchase shares of common stock
under the Company's 1996 Stock Option Plan that were repriced on May 16,
2002 and again on October 23, 2002 as discussed in "Report on Repricing of
Options / SARs", except for the additional grants issued to each named
executive officer on May 16, 2002 (expiring on 5/16/12) and subsequently
repriced on October 23, 2002 (81,000 to Anthony LaPine; 27,000 to Charles
Dargan; 35,000 to Pamela LaPine and 17,500 to Steve McAllister).
(5) Represents previously granted options to purchase shares of common stock
under the Company's 1996 Stock Option Plan that were repriced on November
6, 2001, except for 50,000 new options granted to Charles Dargan on January
11, 2002, 75,000 new options granted to Mr. McAllister on January 11, 2002,
100,000 new options granted to Tony Travis on July 27, 2001 and
subsequently repriced on November 6, 2001, and 100,000 new options granted
to Mr. McAllister in April 2001 and subsequently repriced on November 6,
2001.
(6) These options were cancelled due to Mr. McAllister's resignation; 137,292
had not yet vested and were cancelled in May 2003, the remaining 55,208 had
vested and were exercised in April 2003.
(7) Represents the Company's forgiveness of certain loans to Anthony LaPine for
the purchase of stock; these promissory notes did not result in the Company
lending cash to Mr. LaPine. Please see page 18 - Certain Relationships and
Related Transactions.
(8) Represents accrued vacation paid upon Mr. McAllister's resignation.
Option Grants. The following table sets forth certain information
concerning individual grants of stock options made to each of the named
Executive Officers during the fiscal year ended March 31, 2003. No stock
appreciation rights were granted to these individuals during the year. All
options were granted under the Company's 1996 Stock Option Plan.
- ----------------------- ---------------------------------------------------------- ---------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
- ----------------------- ---------------------------------------------------------- ---------------------------
PERCENTAGE
NUMBER OF OF TOTAL
SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OF BASE
NAME GRANTED IN FISCAL PRICE EXPIRATION
(#) (*)(**) YEAR (#/SH) DATE 5% ($)(5) 10% ($)(5)
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
Anthony N. LaPine 140,000 (1) 2.82% $0.17 09/17/06 $ 14,968 $ 37,931
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
370,000 (1) 7.46% $0.17 01/12/10 $ 39,557 $ 100,246
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
300,000 (1) 6.05% $0.17 03/05/11 $ 32,074 $ 81,281
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
81,000 (2) 1.63% $0.17 05/16/12 $ 8,660 $ 21,946
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
Charles K. Dargan 20,000 (1) 0.40% $0.15 01/24/10 $ 1,887 $ 4,781
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
140,000 (3) 2.82% $0.15 12/27/10 $ 13,207 $ 33,469
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
40,000 (3) 0.81% $0.15 06/01/11 $ 3,773 $ 9,562
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
50,000 (3) 1.01% $0.15 01/11/12 $ 4,717 $ 11,953
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
27,000 (2) 0.54% $0.15 05/16/12 $ 2,547 $ 6,456
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
Pamela LaPine 50,000 (1) 1.01% $0.17 09/17/06 $ 5,346 $ 13,547
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
50,000 (1) 1.01% $0.17 01/12/10 $ 5,346 $ 13,547
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
50,000 (3) 1.01% $0.17 12/27/10 $ 5,346 $ 13,547
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
200,000 (1) 4.03% $0.17 03/05/11 $ 21,382 $ 54,187
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
35,000 (2) 0.71% $0.17 05/16/12 $ 3,742 $ 9,483
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
Steve McAllister 100,000 (4) 2.02% $0.15 04/06/11 $ 9,433 $ 23,907
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
75,000 (4) 1.51% $0.15 01/11/12 $ 7,075 $ 17,930
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
17,500 (2)(4) 0.35% $0.15 05/16/12 $ 1,651 $ 4,184
- ----------------------- ------------ -------- ------------ ---------- ------------ ------------ --------------
- --------------
* Options expire 90 days after the termination of employment of the option
holder.
** Represents previously granted options to purchase shares of common stock
under the Company's 1996 Stock Option Plan that were repriced on May 16,
2002, and repriced again on October 23, 2002, as discussed in "Report on
Repricing of Options / SARs" located below, except for one additional grant
issued to each named executive officer on May 16, 2002, expiring on 5/16/12
(see Footnote (2) below), and subsequently repriced on October 23, 2002.
(1) These options are fully vested and immediately exercisable.
(2) One Hundred percent of these options become exercisable one year after the
date of grant, or on May 16, 2003.
(3) One-fourth of the options become exercisable one year after the date of
grant. Thereafter, the remaining three-fourths of the options become
exercisable monthly in equal increments over a three-year period.
(4) This option holder resigned; 137,292 options were unvested and expired on
the date of resignation, or March 27, 2003; the remaining 55,208 vested
options were exercised in April of 2003.
(5) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the SEC and are based on the assumption that the exercise
price was the fair market value of the shares on the date of grant. There
is no assurance provided to any executive officer or any other holder of
our securities that the actual price appreciation over the ten-year option
term will be at the assumed 5% or 10% levels or at any other defined level.
Aggregate Option Exercises. The following table sets forth certain
information concerning individual exercises of stock options during the fiscal
year ended March 31, 2003, and the shares represented by outstanding options
held by each of the named executive officers as of March 31, 2003.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
SHARES VALUE NUMBER OF SHARES VALUE OF
ACQUIRED REALIZED UNDERLYING UNEXERCISED
ON UNEXERCISED OPTIONS IN-THE-MONEY
EXERCISE AT MARCH 31, 2003 OPTIONS
EXERCISABLE/ AT MARCH 31, 2003
UNEXERCISABLE EXERCISABLE/
UNEXERCISABLE (1)
NAME (#) ($) (#) ($)
Anthony N. LaPine -0- -0- 709,710/181,290 -0-/-0-
Charles K. Dargan, II -0- -0- 130,830/146,170 -0-/-0-
Steve McAllister -0- -0- 55,208/137,292 -0-/-0-
Pamela LaPine -0- -0- 261,264/123,736 -0-/-0-
- --------------
(1) No options were "in the money"; Options are "in the money" to the extent
the closing price of Semotus' common stock on March 31, 2003 exceeded the
exercise price of the options. The value of unexercised options represents
the difference between the exercise price of net options and $0.12, which
was the last reported sale price of Semotus common stock on March 31, 2003.
REPORT ON REPRICING OF OPTIONS / SARS.
On May 1, 2002, all employees with a fifty thousand dollar annual salary or
greater took a ten percent salary reduction. In exchange, on May 16, 2002, the
Board of Directors approved the repricing of all of those employees' outstanding
stock options under the Company's 1996 Stock Option Plan to $0.43 per share (the
current fair market value of the Company's common stock as of the reprice date),
and $0.47 per share for Anthony LaPine and Pamela LaPine (110% of the fair
market value at the date of reprice). Exercise prices ranged from $0.76 to $0.84
per share. Additionally, these employees received an additional grant equal to
10% of their total options granted under the Stock Option Plan to date.
Effective October 23, 2002 the Board of Directors of the Company approved
the repricing of all of the options held by almost all of the employees
(including executive officers) of the Company. Exercise prices ranged from $0.22
to $0.47 per share. The Board of Directors determined such a repricing to be
appropriate in order to sustain the incentivization of its employees. Employees'
existing option grants were
repriced on October 23, 2002 to an exercise price of $0.15 per share (the
current fair market value of the Company's common stock as of the reprice date)
and an exercise price of $0.17 per share (110% of the fair market value at the
date of reprice) for those persons owning more than 10% of the voting power of
all classes of stock (Anthony LaPine and Pamela LaPine). All grants maintained
their existing vesting schedules. These are deemed to be a repricing under FIN
44 and will result in variable plan accounting. While no compensation expense
was required to be recognized in the fiscal year ended March 31, 2003, expense
will be recognized in the future if the stock price increases above the revised
exercise price of the options.
The following table sets forth certain information concerning adjustments
or amendments of exercise prices of stock options or SARs previously awarded to
any of the executive officers of the Company.
TEN-YEAR OPTION / SAR REPRICINGS
NAME DATE SECURITIES MARKET PRICE EXERCISE NEW LENGTH OF
UNDERLYING OF STOCK PRICE AT EXERCISE ORIGINAL
OPTIONS/SAR AT TIME OF REPRICING PRICE($) OPTION
REPRICED OR TIME OF OR TERM
AMENDED REPRICING AMENDMENT REMAINING
(%) OR ($) AT
AMENDMENT DATE OF
($) REPRICING OR
AMENDMENT
Anthony LaPine 5/16/02 140,000 $0.43 $0.84 $ 0.47(1) 4.4 yrs.
CEO 5/16/02 370,000 $0.43 $0.84 $ 0.47(1) 7.6 yrs.
5/16/02 300,000 $0.43 $0.84 $ 0.47(1) 8.9 yrs.
10/23/02 140,000 $0.15 $0.47 $ 0.17(1) 3.9 yrs.
10/23/02 370,000 $0.15 $0.47 $ 0.17(1) 7.1 yrs.
10/23/02 300,000 $0.15 $0.47 $ 0.17(1) 8.4 yrs.
10/23/02 81,000 $0.15 $0.47 $ 0.17(1) 9.5 yrs.
Pamela LaPine 5/16/02 50,000 $0.43 $0.84 $ 0.47(1) 4.4 yrs.
Exec. VP 5/16/02 50,000 $0.43 $0.84 $ 0.47(1) 7.6 yrs.
5/16/02 50,000 $0.43 $0.84 $ 0.47(1) 8.6 yrs.
10/23/02 200,000 $0.43 $0.84 $ 0.47(1) 8.9 yrs.
10/23/02 50,000 $0.15 $0.47 $ 0.17(1) 3.9 yrs.
10/23/02 50,000 $0.15 $0.47 $ 0.17(1) 7.1 yrs.
10/23/02 50,000 $0.15 $0.47 $ 0.17(1) 8.1 yrs.
10/23/02 200,000 $0.15 $0.47 $ 0.17(1) 8.4 yrs.
10/23/02 35,000 $0.15 $0.47 $ 0.17(1) 9.5 yrs.
Charles K. 5/16/02 20,000 $0.43 $0.76 $ 0.43 7.7 yrs.
Dargan, II 5/16/02 140,000 $0.43 $0.76 $ 0.43 8.6 yrs.
CFO 5/16/02 40,000 $0.43 $0.76 $ 0.43 9.2 yrs.
5/16/02 50,000 $0.43 $0.76 $ 0.43 9.6 yrs.
10/23/02 20,000 $0.15 $0.43 $ 0.15 7.2 yrs.
10/23/02 140,000 $0.15 $0.43 $ 0.15 8.1 yrs.
10/23/02 40,000 $0.15 $0.43 $ 0.15 8.7 yrs.
10/23/02 50,000 $0.15 $0.43 $ 0.15 9.1 yrs.
10/23/02 27,000 $0.15 $0.43 $ 0.15 9.5 yrs.
Steve McAllister 5/16/02 100,000 $0.43 $0.76 $ 0.43 0 yrs.
Group President 5/16/02 75,000 $0.43 $0.76 $ 0.43 0 yrs.
10/23/02 100,000 $0.15 $0.43 $ 0.15 0 yrs.
10/23/02 75,000 $0.15 $0.43 $ 0.15 0 yrs.
10/23/02 17,500 $0.15 $0.43 $ 0.15 0 yrs.
Tali Durant 5/16/02 15,000 $0.43 $0.76 $ 0.43 7.4 yrs.
Corp. Sec. 5/16/02 10,000 $0.43 $0.76 $ 0.43 7.6 yrs.
5/16/02 20,000 $0.43 $0.76 $ 0.43 8.1 yrs.
5/16/02 25,000 $0.43 $0.76 $ 0.43 8.6 yrs.
5/16/02 25,000 $0.43 $0.76 $ 0.43 9.1 yrs.
10/23/02 15,000 $0.15 $0.43 $ 0.15 6.9 yrs.
10/23/02 10,000 $0.15 $0.43 $ 0.15 7.1 yrs.
10/23/02 20,000 $0.15 $0.43 $ 0.15 7.6 yrs.
10/23/02 25,000 $0.15 $0.43 $ 0.15 8.1 yrs.
10/23/02 25,000 $0.15 $0.43 $ 0.15 8.6 yrs.
10/23/02 25,000 $0.15 $0.43 $ 0.15 9.1 yrs.
10/23/02 12,500 $0.15 $0.43 $ 0.15 9.5 yrs.
Cornel Fota 5/16/02 1,914 $0.43 $0.76 $ 0.43 5.2 yrs.
CTO 5/16/02 10,000 $0.43 $0.76 $ 0.43 7.1 yrs.
5/16/02 20,000 $0.43 $0.76 $ 0.43 7.5 yrs.
5/16/02 50,000 $0.43 $0.76 $ 0.43 7.5 yrs.
5/16/02 40,000 $0.43 $0.76 $ 0.43 8.6 yrs.
5/16/02 50,000 $0.43 $0.76 $ 0.43 9.1 yrs.
10/23/02 1,914 $0.15 $0.43 $ 0.15 4.9 yrs.
10/23/02 10,000 $0.15 $0.43 $ 0.15 6.8 yrs.
10/23/02 20,000 $0.15 $0.43 $ 0.15 7 yrs.
10/23/02 50,000 $0.15 $0.43 $ 0.15 7.1 yrs.
10/23/02 40,000 $0.15 $0.43 $ 0.15 8.1 yrs.
10/23/02 50,000 $0.15 $0.43 $ 0.15 8.6 yrs.
10/23/02 24,000 $0.15 $0.43 $ 0.15 9.5 yrs.
- --------------
(1) This exercise price equals 110% of the current market price on the date of
the reprice.
DIRECTOR COMPENSATION
Except for reimbursement for reasonable travel expenses relating to
attendance at Board meetings and discretionary grants of stock options,
directors are not compensated for their services as directors. Directors who are
employees are eligible to participate in our equity incentive plan. In fiscal
year 2003, we granted options to purchase a total of 40,000 shares of common
stock to Mr. Lanz. We also granted options to purchase 20,000 shares of common
stock to Mr. Williams and options to purchase 20,000 shares of common stock to
Mr. Murray. All outstanding options as of May 16, 2002 were repriced to $0.43
per share and all outstanding options as of October 23, 2002 were repriced to
$0.15 per share.
The following table identifies all stock options that we have granted to
our current non-employee directors since June 1996.
NON-EMPLOYEE DIRECTOR NUMBER OF EXERCISE GRANT DATE /
SHARES UNDERLYING PRICE($) EXPIRATION DATE
OPTIONS (#)
- --------------------- ----------------- -------- -----------------------
Robert Lanz 10,000 (1) $ 0.15 11/5/2001 / 11/5/2006
10,000 (2) $ 0.15 6/3/2002 / 6/3/2007
30,000 (3) $ 0.14 2/24/2003 / 2/24/2008
Mark Williams 10,000 (4) $ 0.15 8/1/2002 / 8/1/2007
10,000 (3) $ 0.12 4/1/2003 / 4/1/2008
Laurence Murray 10,000 (5) $ 0.17 11/19/2002 / 11/19/2007
10,000 (3) $ 0.14 2/24/2003 / 2/24/2008
- --------------
(1) These options were repriced on November 6, 2001, May 16, 2002 and again on
October 23, 2002, and are all exercisable as of March 31, 2003.
(2) These options were repriced on October 23, 2002, and vest as to 50% one
year from the date of grant, or on June 3, 2003, and the remaining 50% vest
one year thereafter, or on June 3, 2004.
(3) These options vest monthly as to 1/24th for two years and have an exercise
price equal to the closing market price on the date of grant.
(4) These options are all immediately exercisable as of the grant date, and
were repriced on October 23, 2002.
(5) These options are all immediately exercisable as of the grant date, and
have an exercise price equal to the closing market price on the date of
grant, November 19, 2002.
EMPLOYMENT AGREEMENTS
The Company entered into a three-year employment agreement with Anthony
LaPine, the Company's CEO, which became effective on May 1, 1996, and was
extended to May 1, 2004. The agreement automatically renews for one year terms
unless notice is provided by either party. According to the agreement, Mr.
LaPine receives a base salary of $240,000 per year, plus discretionary increases
in conformity with the Company's standard review procedure. However, on May 1,
2002, Mr. LaPine voluntarily, along with all other employees with an annual
salary of $50,000 or greater, took a ten percent salary reduction, and therefore
currently receives a base salary of $216,000 per year. Mr. LaPine is also given
a car allowance that is not to exceed $1,000 a month. Mr. LaPine receives full
health, dental, vision, and disability insurance. If the Company terminates Mr.
LaPine's employment agreement prior to May 1, 2004 for reasons other than
disability, or if Mr. LaPine terminates the agreement for "good reason" as
defined in the agreement, the Company is mandated to continue paying the salary
and other benefits for the duration of the term.
In 2001, WizShop.com, Inc., one of the Company's subsidiaries, entered into
an employment agreement with Steve McAllister, providing, among other things, an
annual salary of $150,000. As of March 27, 2003, Mr. McAllister resigned and the
employment agreement by and among Mr. McAllister and WizShop was terminated
without penalty.
EMPLOYEE WARRANTS
On December 1, 1999, the Company issued warrants to purchase 300,000 shares
of common stock at $2.375 per share to Mr. LaPine. These warrants expire on
December 4, 2004.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective May 1, 1996, the Company entered into a three year employment
agreement with the Company's Chief Executive Officer. This agreement was
extended to May 1, 2004. The agreement automatically renews for one year terms
unless notice is provided by either party. On December 1, 1999, the Board of
Directors granted the Chief Executive Officer a warrant to purchase 300,000
shares of common stock at $2.375 per share, as part of his compensation package.
In conjunction with the private placement dated November 5, 1997 the Chief
Executive Officer of the Company entered into a stock purchase agreement. Under
the terms of the agreement, the Chief Executive Officer received 560,000 shares
of preferred stock with detachable warrants to purchase 280,000 shares of the
Company's common stock at $2.50 per share, in exchange for a note receivable in
the amount of $1,050,000. The note is collateralized by certain assets of the
officer and bears interest at a rate of 7%. This note was for the purchase of
stock and did not result in the Company lending cash to Mr. LaPine. Mr. LaPine
has not sold any of the stock purchased with this note and has not received any
cash income related to this transaction. Additionally, the warrants to purchase
280,000 shares at $2.50 per share have terminated.
On January 15, 2000, the Company entered into a Loan Forgiveness Agreement
with the Chief Executive Officer which provided that the $1,050,000 promissory
note would be forgiven if he continues to serve as the Company's Chief Executive
Officer through May 1, 2004, and there are no uncured defaults by him under his
Employment Agreement on May 1, 2004. The note, together with interest accrued
thereon has been presented as contra-equity in the balance sheet. The note plus
interest is being amortized over the period of the contract of employment.
Consequently, in the year ended March 31, 2003 expense of $631,435 has been
recorded as employment compensation. On July 26, 2002, the Board of Directors
approved the reduction in the purchase price of the 560,000 shares of this
corporation's Common Stock from $3.75 per share to $0.25 per share (representing
the current fair market value of the shares); consequently, $480,049 was
forgiven, and the $1,050,000 promissory note was canceled in exchange for a new
promissory note in the principal amount of $140,200 and otherwise containing the
same terms and conditions as the surrendered promissory note. Consequently, the
loan amortization schedule was accelerated in the amount of $480,049 due to the
re-valuation of the loan amount from $1,050,000 to $140,200. The amount
outstanding on this loan as of July 18, 2003 is $65,954.
In 2001, WizShop.com, Inc., one of the Company's subsidiaries, entered into
an employment agreement with Steve McAllister, providing, among other things, an
annual salary of $150,000. As of March 27, 2003, Mr. McAllister resigned and the
employment agreement by and among Mr. McAllister and WizShop was terminated.
AUDIT COMMITTEE REPORT
At the time of this Report, the Audit Committee of the Company's Board of
Directors consists of three directors who are not employees of the Company or
any of its subsidiaries. The Board believes that all the members of our
committee are "independent directors" as defined under applicable listing
standards.
The Board of Directors has modified its written Audit Committee Charter. A
copy of the revised Charter is attached as Attachment A.
Our committee has met and held discussions with management and the
independent auditors, Burr, Pilger & Mayer LLP ("BPM"). As a part of this
process, we have:
o Reviewed and discussed the audited financial statements with
management,
o Discussed with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication
with Audit Committees), and
o Received the written disclosures and the letter from the independent
auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and discussed with
the independent auditors their independence.
Based on the review and discussions referred to above, our committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 2003, for filing with the SEC.
Audit Committee Of The Board Of Directors
/s/ Robert Lanz
- -----------------------
Robert Lanz
CHAIRMAN
/s/ Mark Williams
- -----------------------
Mark Williams
/s/ Laurence W. Murray
- -----------------------
Laurence W. Murray
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The Compensation Committee of the Board of Directors (the "Committee") is
made up entirely of independent, non-employee Directors. The Committee is
responsible for reviewing and approving base salaries, bonuses, long-term
incentives and other compensation for Company Directors and executive officers.
In meeting this responsibility, the Committee's policy is to ensure that
executive compensation is appropriately competitive in the attraction and
retention of talented leaders, and is linked closely to individual performance,
Company performance, and increases in Semotus shareholder value.
After the end of each year, the Committee asks the Chief Executive Officer
("CEO") to present the current and proposed compensation plan, along with
supporting competitive market data, for each executive officer. After discussion
with the CEO about the individual performance of each executive, individual
compensation plans are approved and established. The Committee meets in
Executive Session to review similar information on the CEO (who is absent from
this portion of the meeting). The Committee monitors the performance of the CEO
and other executive officers throughout the year, and has final responsibility
for determining their compensation levels.
The Company's executive compensation program also takes into account the
compensation practices of companies with whom Semotus competes for executive
talent. Semotus' policy is to manage overall executive compensation at the
median level relative to companies with which we compete for executive talent,
with appropriate variation for high-performing individuals and Company
performance.
Executive employee compensation has three components: base salary,
performance award (bonus), and long-term incentives, each explained more fully
below.
BASE SALARIES. Base salaries for all Semotus employees - including the
Company's top executives - are based upon an evaluation of their
responsibilities, an assessment of their performance, and market comparisons
from compensation surveys. Average salaries for each employee group are managed
such that they fall within the median range of the competing market, in order to
ensure Semotus' ability to attract and retain a talented workforce. Changes in
base salary for the executives named in the Proxy Statement compensation tables,
as well as for all Semotus employees, depend upon projected changes in the
external market as well as the individual's contributions to Semotus' corporate
performance.
Each executive's base salary is initially determined with reference to
competitive pay practices and is dependent upon the executive's level of
responsibility and experience. The Committee uses its discretion, rather than a
formal weighting system, to evaluate these factors and to determine individual
base salary levels. Thereafter, base salaries are reviewed periodically, and
increases, or decreases, are made based on the Committee's subjective assessment
of individual performance, as well as the factors discussed above. In 2002, the
Board decided to decrease the base salaries of all executive officers, and
certain other employees, by ten percent.
Steven McAllister, Group President of the Company's HipLink Division and
President of one of Semotus' wholly owned subsidiaries, WizShop.com, Inc.,
entered into an employment agreement with WizShop.com on April 6, 2001, as
described in the Employment Agreements section of this proxy statement. Under
the employment agreement, Mr. McAllister is entitled to a base salary at the
rate of $150,000 per year. In 2002, the Board decreased his base salary, with
his approval, to its current level of $135,000 per year. Mr. McAllister is also
eligible for an annual bonus at a target of 50% of base salary, with the actual
amount of bonus paid to be based upon WizShop.com reaching a certain revenue
target. This revenue target was not reached; therefore, Mr. McAllister did not
receive a bonus for the year. In 2002, Mr. McAllister was granted the stock
options described in the executive compensation section of the proxy statement.
In December of 2002, WizShop gave Mr. McAllister notice that it was terminating
his employment agreement, effective as of March 31, 2003. Thereafter, Mr.
McAllister was to become an employee-at-will. Instead, in March of 2003, Mr.
McAllister resigned.
PERFORMANCE AWARDS (BONUSES). The Committee has the discretion to determine
the conditions (including corporate financial results and individual performance
objectives) applicable to annual performance award payments and the amounts of
such awards. For 2002, because the Company did not meet the financial objectives
established for the year, the Committee made no bonus awards to any executive
officers.
LONG-TERM INCENTIVE COMPENSATION. In 2002, long-term incentive compensation
for selected executives, including the officers of the Company, consisted of
grants and/or repricings of existing stock options granted under the Company's
1996 Stock Option Plan. These stock options have either a three-year or
four-year pro-rata vesting period to encourage retention of key executives and
to provide a longer-term focus towards creation of shareholder value. The
exercise price of these options was the fair market value on the grant date, or
reprice date, as applicable. As a result, executives receive future gains from
these options only to the extent the price of Semotus stock increases. The
entire Board of Directors of the Company approved long-term incentive
compensation awards for 2002 after evaluating the contribution of each executive
to the Company's long-term performance and the impact of each executive's
position on the organization.
Additionally, every employee at Semotus below the executive officer level
has been awarded one or more stock option grants under the Company's broad-based
stock option program initiated in 1996. This plan is an increasingly vital
element of the Company's drive to develop and motivate employees who will
sustain Semotus' long-term performance. The Committee believes that the
performance of all of its employees will contribute significantly to the
Company's future success.
COMPENSATION OF THE CEO. Anthony N. LaPine became the Company's Chairman,
President and Chief Executive Officer on May 1, 1996. In connection with his
employment, the Company entered into the employment agreement described in the
Employment Agreements section of this proxy statement. Under the employment
agreement, Mr. LaPine is entitled to a base salary at the rate of $240,000 per
year, plus discretionary increases in accordance in conformity with the
Company's standard review procedure. In 2002, the Board decreased, with Mr.
LaPine's approval, his base salary to its current level of $216,000 per year.
Mr. LaPine is also eligible for an annual bonus at a target of 50% of base
salary, with the actual amount of bonus paid to be determined by the Committee
in its sole discretion, based upon such factors and performance goals as the
Committee deems appropriate. Previously, the Board had agreed that no bonuses
would be paid to Mr. LaPine until the Company has four consecutive profitable
quarters. Therefore, Mr. LaPine did not receive a bonus for the year. In 2002,
Mr. LaPine was granted the stock options described in the executive compensation
section of the proxy statement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002, there were no Compensation Committee interlocks and no
participation in Compensation Committee decisions that were required to be
reported under the rules and regulations of the Securities Exchange Act of 1934,
as amended.
The foregoing report on executive compensation is provided by the following
non-employee directors, who constituted the Compensation Committee during 2002:
/s/ Laurence W. Murray
- ------------------------
Laurence W. Murray
CHAIRMAN
/s/ Robert Lanz
- ------------------------
Robert Lanz
/s/ Mark Williams
- ------------------------
Mark Williams
INFORMATION REGARDING THE FEES PAID TO BURR, PILGER & MAYER LLP
DURING THE YEAR ENDING MARCH 31, 2003
AUDIT FEES
For the year ended March 31, 2003, the aggregate fees billed for
professional services rendered for the audit of Semotus' annual financial
statements and the reviews of the financial statements included in Semotus' Form
10Qs by BPM were $42,250.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For the year ended March 31, 2003, Semotus did not incur any charges or pay
any fees related to any financial information systems design and implementation
services provided by BPM.
ALL OTHER FEES
For the year ended March 31, 2003, the aggregate fees billed for services
rendered by BPM, other than the fees discussed in the foregoing paragraphs were
$800, which consisted of audit-related services related to the review of a SEC
Form S-3 filing.
STOCK PERFORMANCE CHART
As part of proxy statement disclosure requirements mandated by the SEC, we
are required to provide a comparison of the cumulative total shareholder return
on our common stock with that of a broad equity market index and either a
published industry index or a peer group index. This graph is not deemed to be
"soliciting material" or to be "filed" with the SEC or subject to the SEC's
proxy rules or to the liabilities of Section 18 of the 1934 Act, and the graph
shall not be deemed to be incorporated by reference into any prior or subsequent
filing by the Company under the Securities Act of 1933 or the 1934 Act. The
stock performance shown on the graph is not indicative of future price
performance.
The following chart compares the yearly percentage change in the cumulative
total shareholder return in Semotus' common stock since 1998 with the cumulative
total return on the Nasdaq Composite Index and the Nasdaq Stock Market -
Telecommunications Index (the Peer Index). The comparison assumes $100 was
invested on March 31, 1998 in Semotus' common stock and in each of the above
indices with reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG SEMOTUS SOLUTIONS, NASDAQ COMPOSITE INDEX
AND NASDAQ TELECOMMUNICATIONS INDEX
3/31/98 3/31/99 3/31/00 3/30/01 3/28/02 3/31/03
Semotus Solutions $100.00 $ 38.17 $972.37 $ 32.06 $ 10.23 $ 1.83
Nasdaq Composite Index $100.00 $134.09 $249.11 $100.25 $100.53 $73.06
Nasdaq Telecom Index $100.00 $159.24 $283.81 $ 84.49 $ 44.75 $30.51
ADDITIONAL INFORMATION
THE COMPANY'S 2003 ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL
STATEMENTS FOR THE YEAR ENDED MARCH 31, 2003, IS BEING DISTRIBUTED TO ALL
STOCKHOLDERS OF THE COMPANY TOGETHER WITH THIS PROXY STATEMENT, IN SATISFACTION
OF THE REQUIREMENTS OF THE SECURITIES AND EXCHANGE COMMISSION. ADDITIONAL COPIES
OF THE REPORT, EXCEPT FOR EXHIBITS, ARE AVAILABLE AT NO CHARGE UPON REQUEST. TO
OBTAIN ADDITIONAL COPIES OF THE ANNUAL REPORT ON FORM 10-K, PLEASE CONTACT
SEMOTUS SOLUTIONS, 16400 LARK AVE., SUITE 230, LOS GATOS, CA 95032, OR AT
TELEPHONE NUMBER (408) 358-7100.
STOCKHOLDER PROPOSALS
If you intend to propose any matter for action at our 2004 Annual Meeting
of Stockholders and wish to have the proposal included in our proxy statement,
you must submit your proposal to the Secretary of Semotus Solutions at 16400
Lark Ave., Suite 230, Los Gatos, CA 95032, on or before April 15, 2004, not
later than 5:00 p.m. Pacific Standard Time. Please note that proposals must
comply with all of the requirements of Rule 14a-8 under the Securities Exchange
Act of 1934. Only then can we consider your proposal for inclusion in our proxy
statement and proxy relating to the 2004 Annual Meeting. We will be able to use
proxies you give us for the next year's meeting to vote for or against any
shareholder proposal that is not included in the proxy statement at our
discretion unless the proposal is submitted to us on or before April 15, 2004.
/s/ Anthony N. LaPine
- -----------------------
Anthony N. LaPine
PRESIDENT
San Jose, California
August 1, 2003
ATTACHMENT A
================================================================================
CHARTER
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
SEMOTUS SOLUTIONS, INC.
The Audit Committee of the Board of Directors of the Company was
established by the action of the Board in adopting the Bylaws of the Company.
The provisions of the Bylaws set forth the basic responsibilities and board
procedures for the Audit Committee. This Charter is intended to supplement the
Bylaw provisions and to specify in more detail the membership and
responsibilities of the Committee, as outlined below:
MEMBERSHIP
The Audit Committee shall consist of not fewer than three nor more than
five members of the Board of Directors. No member of the Committee shall be an
active or retired employee of the Company, and all of them shall be independent
of management and free from any relationship that, in the opinion of the Board
of Directors, would interfere with their independent judgment as a member of the
Committee.
RESPONSIBILITIES
The Audit Committee serves as the representative of the Board for the
general oversight of Company affairs in the area of financial accounting and
reporting and the underlying internal controls as well as the financial aspects
of the Company's funded benefit plans. Through its activities, the Committee
will facilitate open communication among directors, the Company's independent
accountants, any internal audit function, and corporate management.
The Audit Committee will assist the Board in discharging its fiduciary
responsibilities to shareholders, providing assurance as to the independence of
the Company's outside accountants and the adequacy of disclosure to shareholders
and to the public.
Specifically, the Audit Committee will:
1. Hold no less than two regularly scheduled meetings each year, and
other meetings from time to time as may be called pursuant to the
Company's Bylaws. A majority shall constitute a quorum of the Audit
Committee. A majority of the members in attendance shall decide any
question brought before any meeting of the Committee.
2. Recommend to the Board, annually, the appointment of a firm of
independent public accountants as the Company's outside auditors.
3. Review with representatives of the independent accountants:
o The plan for and scope of its annual audit of the Company's
financial statements.
o The results of the annual audit.
o Any recommendations with respect to internal controls and other
financial matters, including any perceived weaknesses in the
Company's internal controls, policies, and procedures.
o Any significant changes made by management in the basic accounting
principles and reporting standards used in the preparation of the
Company's financial statements.
4. Review the extent of any services outside the audit area performed for
the Company by its independent accountants.
5. Review the fees proposed by the Company's independent accountants for
their services.
6. Review whether management has sought a second opinion regarding a
significant accounting issue, and, if so, obtain the rationale for the
particular accounting treatment chosen.
7. Review the Company's Annual Report prior to filing with the Securities
and Exchange Commission.
8. Review the Company's Quarterly Reports prior to filing with the
Securities and Exchange Commission.
9. Review compliance by officers and employees with the Company's
policies on business ethics and public responsibility.
10. Make such other recommendations to the Board on such matters, within
the scope of its functions, as may come to its attention and which in
its discretion warrant consideration by the Board.
11. Meet privately from time to time with representatives of the
independent accountants, the Chief Financial Officer and management.
12. Handle Complaints About Accounting Matters. As part of the board's
procedure for receiving and handling complaints or concerns about the
company's conduct, the committee has established the following
procedures for: (i) the receipt, retention, and treatment of
complaints received by the company regarding accounting, internal
accounting controls, or auditing matters; and (ii) the confidential,
anonymous submission by the company's employees of concerns regarding
questionable accounting or auditing matters.
o Semotus has established and published on its Web site special
mail addresses for receiving complaints regarding accounting,
internal accounting controls, or auditing matters;
o All such complaints will be sent to the chair of the audit
committee;
o The status of the complaints will be reported on a quarterly
basis to the chair of the audit committee and, if he so directs,
to the committee or the full board;
o The audit committee chair may request special treatment,
including the retention of outside counsel or other advisors, for
any complaint addressed to it.
PROXY
SEMOTUS SOLUTIONS, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Anthony N. LaPine with the power to appoint
his substitute, and hereby authorizes him to represent and to vote as designated
below, all the shares of common stock of Semotus Solutions, Inc. held of record
by the undersigned on July 29, 2003, at the Annual Meeting of Shareholders to be
held at the Company's offices located at 16400 Lark Ave., Suite 230, Los Gatos,
CA 95032, on Thursday, September 25, 2003, at 2:30 p.m., Pacific Time or any
adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 AND 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SEMOTUS
SOLUTIONS, INC. PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED
ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF
YOU ATTEND THE MEETING.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AT THE MEETING IN ACCORDANCE
WITH THE SHAREHOLDER'S SPECIFICATIONS ON THE REVERSE SIDE. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE
TIME OF THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE
UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders, Proxy Statement and Annual Report.
(To be signed on the other side)
SEMOTUS SOLUTIONS, INC.
16400 LARK AVE.
SUITE 230
LOS GATOS, CA 95032
ATTN: TALI DURANT
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Semotus Solutions, Inc., c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR SEMTS KEEP THIS PORTION FOR YOUR
BLACK INK AS FOLLOWS: 1 RECORDS DETACH AND RETURN
THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
SEMOTUS SOLUTIONS, INC.
1. Election of four (4) Directors of the Company to serve until the next
Annual Meeting of Shareholders and until their successors have been duly
elected and qualified:
01)Anthony N. LaPine, 02)Robert Lanz, 03)Mark Williams, 04)Laurence W. Murray
For Withhold For All To withhold authority to vote, mark "For All
All All Except: Except" and write the nominee's number on the
[_] [_] [_] line below.
------------------------------------------------
Vote On Proposals
2. The ratification of the appointment of Burr, Pilger & Mayer LLP, as the
Company's independent accountants for the fiscal year ending March 31,
2004:
For Against Abstain
[_] [_] [_]
3. The transaction of such other business as may properly come before the
meeting or any adjournment thereof:
Signature(s) should agree with the name(s) stenciled hereon. Executors,
administrators, trustees, guardians and attorneys should indicate when
signing. Attorneys should submit powers of attorney.
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners)