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.
(Name of Registrant as Specified In Its Charter)
-----------------------------------------
(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 23, 2004
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 23, 2004, at 2:30 p.m., Pacific Time.
At the 2004 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 L.L. Bradford & Company as the Company's
independent accountants for the fiscal year ending March 31, 2005; 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, 2004.
Only holders of common stock of the Company of record at the close of
business on July 26, 2004 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 save 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, 2004
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 23, 2004
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 2004 Annual Meeting
of Semotus Solutions, Inc. (the "Company", "we" or "our"). The 2004 Annual
Meeting will be held on September 23, 2004 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
L.L. Bradford & Company as independent public accountants of Semotus for
the fiscal year ending March 31, 2005; 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 6, 2004, we began mailing this proxy statement to people who,
according to our records, owned shares of our common stock as of the close of
business on July 26, 2004. We have mailed with this proxy statement a copy of
our Annual Report on Form 10-K for the fiscal year ended March 31, 2004.
INFORMATION ABOUT THE 2004 ANNUAL MEETING AND VOTING
THE ANNUAL MEETING
The Annual Meeting will be held at our corporate headquarter offices
located at 16400 Lark Ave., Suite 230, Los Gatos, CA 95032, on Thursday,
September 23, 2004, at 2:30 p.m., Pacific Time.
THIS PROXY SOLICITATION
We are sending you this proxy statement because our 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 6, 2004, 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 26, 2004. 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 26,
2004. 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 L.L. Bradford & Company as independent accountants for the
year ending March 31, 2005; 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, THE
PROXY CARD WILL BE VALID ONLY IF YOU SIGN, DATE AND RETURN IT BEFORE THE ANNUAL
MEETING TO BE HELD ON SEPTEMBER 23, 2004.
Voting by Phone or via the Internet. If you are a stockholder of record
(that is, if your stock is registered with us in your own name), you may vote by
phone, or through the Internet, by following the instructions included with the
enclosed 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 22, 2004. For stockholders whose
shares are registered in the name of a broker or other nominee, please consult
the voting instructions 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 the proxy card 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 26, 2004 (the "Record Date") 22,702,469
shares of our 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, 11,351,235 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, 2004, 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 us.
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 our President and Chief Executive Officer. 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 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 L.L. Bradford & Company ("LLB"), an
accounting firm of independent certified public accountants, to act as
independent accountants for Semotus and its consolidated subsidiaries for our
fiscal year ending March 31, 2005. LLB has advised Semotus that the firm does
not have any direct or indirect financial interest in Semotus or any of its
subsidiaries, other than its capacity as our independent certified public
accountants.
Burr, Pilger & Mayer LLP ("BPM") served as our independent auditors from
July 15, 2002 to July 13, 2004. We have determined to change our independent
auditors for fiscal year 2005, and we dismissed BPM on July 13, 2004. The
decision to change independent auditors was recommended by the Company's
management team and unanimously approved by the Company's Audit Committee and
the Board of Directors.
Our decision to change our independent auditors did not occur due to any
existing or previous accounting disagreements with BPM, and BPM has expressed no
disclaimer of opinion, adverse opinion, qualification or limitation as to
uncertainty, audit scope, or accounting principles regarding our financial
statements or the audit process, for the fiscal years ended March 31, 2004 or
2003. Neither have there been any accounting disagreements or reportable events
within the meaning of Item 304(a)(1)(iv) and Item 304(a)(1)(v) of SEC Regulation
S-K for those periods or for the interim period from April 1, 2004 up to and
including July 13, 2004. BPM has stated in its letter addressed to the SEC its
concurrence with the foregoing statements in this paragraph.
On July 13, 2004, we engaged L.L. Bradford & Company ("LLB") to serve as our
independent auditors for the fiscal year ending March 31, 2005. The decision to
engage LLB was recommended by the Company's management team and unanimously
approved by the Company's Audit Committee and the Board of Directors. We did not
seek the advice of LLB on specific audit issues relating to the application of
accounting principles to a specified transaction, either completed or proposed,
the type of audit opinion that might be rendered on our financial statements, or
any matter that was a reportable event prior to engagement of this firm.
In making the recommendation for LLB to become the Company's independent
accountants for the fiscal year ending March 31, 2005, the Company's management
team and the Audit Committee reviewed the audit and non-audit services proposed
to be performed during fiscal year 2005. In selecting LLB, the Audit Committee
and the Board of Directors carefully considered LLB's independence. The Audit
Committee has determined that the performance of the non-audit services proposed
to be performed by LLB will not impair the independence of LLB.
LLB 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 LLB is expected to attend the Annual Meeting. This
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 L.L. Bradford & Company.
OTHER BUSINESS
As of the date of this proxy statement, our management 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 10, 2004, 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 us 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 10, 2004, 22,702,469 shares were issued and
outstanding and, for any individual who beneficially owns shares represented by
options or warrants exercisable on or before September 8, 2004, 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
NAME AND ADDRESS OF BENEFICIAL OWNERS NUMBER OF PERCENT
SHARES
Directors and Executive Officers:
Anthony LaPine 3,139,831(1) 13.8%
Pamela LaPine 3,139,831(2) 13.8%
Charles K. Dargan, II 200,121(3) *
Mark Williams 17,083(4) *
Laurence W. Murray 20,699(5) *
Robert Lanz 42,499(6) *
All Officers and Directors as a Group (8 Persons) 3,622,462(7) 16.0%
5% Stockholders: none
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* Less than 1%
(1) Includes 1,025,000 shares of common stock, exercisable warrants to
purchase 300,000 shares of common stock, and exercisable options to
purchase 1,391,000 of common stock owned directly by Mr. LaPine. Also
includes 3,000 shares of common stock and exercisable options to purchase
420,831 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 and exercisable options to purchase
420,831 shares of common stock owned directly by Pamela LaPine. Also
includes 1,025,000 shares of common stock, exercisable options to
purchase 1,391,000 shares of common stock, and exercisable warrants to
purchase 300,000 shares of common stock owned directly by Mrs. LaPine's
husband, Anthony LaPine, President and Chief Executive Officer of the
Company, as set forth above.
(3) Comprised of exercisable options to purchase 200,121 shares of common
stock.
(4) Comprised of exercisable options to purchase 17,083 shares of common
stock.
(5) Includes exercisable options to purchase 17,499 shares of common stock
and 3,200 shares of common stock owned directly by Mr. Murray.
(6) Comprised of exercisable options to purchase 42,499 shares of common
stock.
(7) Includes the shares listed above as beneficially owned by Messrs. LaPine,
Dargan, Williams, Murray, Lanz, and Mrs. LaPine, and 202,229 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 our 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, except that a Form 5 disclosing the
purchase of 3,000 shares of common stock on April 20, 2004 for Laurence W.
Murray has not yet been filed.
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 62 Chairman of the Board, President, and Chief
Executive Officer
Charles K. Dargan, II 49 Chief Financial and Accounting Officer
Taliesin Durant 33 Corporate Secretary and General Counsel
Pamela B. LaPine 46 Executive Vice President of Sales and Marketing
Robert Lanz (1) 62 Director
Mark Williams (2) 46 Director
Laurence W. Murray (3) 64 Director
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(1) Chairman of the Audit Committee; Member of the Compensation Committee and
the Nominating and Corporate Governance Committee.
(2) Chairman of the Nominating and Corporate Governance Committee; Member of
the Audit Committee and the Compensation Committee.
(3) Chairman of the Compensation Committee; Member of the Audit Committee and
the Nominating and Corporate Governance Committee.
There is no family relationship between any Director or Executive Officer
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.
Anthony N. LaPine has been our President and one of our Directors since
June of 1996. In June of 1997 Mr. LaPine was elected Chief Executive Officer,
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 its Executive Program.
Charles K. Dargan, II is our Chief Financial and Accounting Officer. Mr.
Dargan was on the Board of Directors from March 1999 to July 2002; he resigned
as a member of the Company's Board of Directors effective as of July 31, 2002.
Mr. Dargan was the Executive Vice President of Operations and Administration for
the Company from April 2000 to January 2001, at which time Mr. Dargan became our
Chief Financial and Accounting Officer. Prior to joining Semotus, 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 our
Corporate Secretary and in-house counsel since January 2000. Ms. Durant provides
legal counsel for all of our 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 our services software and
technology. She also plays a crucial role in our 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.
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 our Board of Directors and as Chairman of our
Audit Committee since November of 2001. Mr. Lanz has over 35 years of accounting
and management experience. Mr. Lanz is 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 serves on
the board of Kelmoore Strategy Variable Trust.
Mark Williams joined our Board of Directors on August 1, 2002. Mr. Williams
has over 20 years of accounting and management experience. Mr. Williams is
currently a self employed certified public accountant in the area of income tax.
From 2000 to 2002 Mr. Williams was 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 member of the American
Institute of Certified Public Accountants.
Laurence W. Murray joined our 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.
Cornel Fota, the Company's CTO, resigned effective July 31, 2004. The
Company has hired a replacement and has restructured the position as a
non-executive officer position.
MEETINGS OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES.
The Board of Directors currently consists of four members. The Board of
Directors held two meetings during fiscal year 2004, and executed 30 unanimous
consents in lieu of a meeting. Each of the directors appointed at that time
attended all meetings of the Board. During fiscal year 2004, the non-management
directors have met in executive session without the presence of management as
required from time to time.
Our Board has not adopted a formal policy regarding directors' attendance
at our annual meeting of the stockholders. However, our directors are strongly
encouraged to attend the annual meeting. Mr. LaPine, Mr. Lanz and Mr. Williams
attended our 2003 Annual Meeting of Stockholders.
The standing committees of the Board of Directors include an Audit
Committee, a Compensation Committee and a Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee was formed in
November of 2003. All members of the Audit Committee, Compensation Committee and
Nominating and Corporate Governance Committee are independent directors as such
term is defined in the applicable Listing Standards.
AUDIT COMMITTEE. 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 Board of Directors has
considered whether the members of the Audit Committee satisfy the additional
"independence" and "financial literacy" requirements for Audit Committee members
as set forth in the Item 7(d)(3)(iv) of Schedule 14A and as adopted in the
Listing Standards. The Board of Directors has concluded that all current members
of the Audit Committee satisfy these heightened independence requirements. The
Board of Directors has also determined that Mr. Lanz is an audit committee
financial expert and is independent of management, as required under Section 407
of the Sarbanes-Oxley Act of 2002. The Board of Directors believes that Mr. Lanz
is qualified to be an "audit committee financial expert".
The Audit Committee's responsibilities are described in a written charter
adopted by the Board of Directors. The Audit Committee Charter was amended in
fiscal year 2004. The Audit Committee serves as the representative of the Board
for the general oversight of Semotus' affairs in the area of financial
accounting and reporting, and its underlying internal controls. The Audit
Committee makes recommendations to the Board concerning the engagement of
independent accountants; reviews with the independent accountants the plans,
scope 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 the annual CPA audit and recommendations of
internal controls and related management responses; reviews the audit reports
with management and the auditor; oversees the internal audit function and the
accounting and financial reporting processes of Semotus; and monitors
management's efforts to correct deficiencies described in any audit examination.
The Audit Committee has also established procedures for (i) the receipt,
retention and treatment of complaints received by Semotus regarding accounting,
internal accounting controls, or auditing matters, and (ii) the confidential,
anonymous submission by Semotus employees of concerns regarding questionable
accounting or auditing matters.
The Audit Committee held a total of five meetings during fiscal year 2004,
which were attended by all of the Audit Committee members appointed at that
time, except Laurence Murray who missed two audit committee meetings. A report
of the Audit Committee which discusses the activities of the Audit Committee in
more detail can be found on page 13. The Audit Committee Charter, as amended, is
attached hereto as Appendix A to this proxy statement and is also available on
our website at www.semotus.com, the content of which website is not incorporated
by reference into, or considered a part of, this document.
COMPENSATION COMMITTEE. The Compensation Committee currently consists of
Messrs. Lanz, Williams and Murray, with Mr. Murray as its chairman. All members
of the Compensation Committee are independent directors, as defined under the
Listing Standards. 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 delegates 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 Compensation Committee held one meeting during fiscal year 2004. The
Compensation Committee Report which discusses the activities of the Compensation
Committee in more detail is set forth below beginning on page 14. A copy of the
Charter of the Compensation Committee, which became effective in February of
2003, is available on our website at www.semotus.com, the content of which
website is not incorporated by reference into, or considered a part of, this
document.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE. The Nominating and Corporate
Governance Committee was formed in November of 2003. The Nominating and
Corporate Governance Committee currently consists of Messrs. Lanz, Williams and
Murray, with Mr. Williams as its chairman. All members of the Nominating and
Corporate Governance Committee are independent directors, as defined under the
Listing Standards.
The Nominating and Corporate Governance Committee assists the Board in
identifying qualified individuals to become board members, in determining the
composition of the board of directors and its committees, in monitoring a
process to assess board effectiveness and in developing and implementing the
Company's corporate governance guidelines.
The Nominating and Corporate Governance Committee held one meeting during
fiscal year 2004. A copy of the Charter of the Nominating and Corporate
Governance Committee, which became effective in November of 2003, is available
on our website at www.semotus.com, the content of which website is not
incorporated by reference into, or considered a part of, this document.
DIRECTOR NOMINEE CRITERIA AND PROCESS
The Nominating and Corporate Governance Committee is responsible for
reviewing and recommending nominees to the Board, which is responsible for
approving director candidates for nomination by the Board of Directors. The
Nominating and Corporate Governance Committee unanimously recommended the
nominees for election to the Board of Directors for the 2004 Annual Meeting. The
Committee's objective, pursuant to its charter, is to assist the board in
identifying qualified individuals to become Board members, in determining the
composition of the Doard of Directors and its committees, in monitoring a
process to assess Board effectiveness and in developing and implementing
Semotus' corporate governance guidelines.
In considering director candidates, the Committee will consider, among
other things, those individuals who have the highest personal and professional
integrity, who shall have demonstrated exceptional ability and judgment and who
shall be most effective, in conjunction with the other nominees to the Board, in
collectively serving the long-term interests of the stockholders. Our Nominating
and Corporate Governance Committee has not paid a third party to identify or
evaluate potential nominees in fiscal 2004 or with respect to the current slate.
However, the Committee will take suggestions from many sources, including, but
not limited to, stockholders or third-party search firms.
STOCKHOLDER NOMINATIONS FOR DIRECTORS
Semotus' stockholders may submit candidates for consideration as director
nominees. All candidate submissions must comply with the requirements of our
certificate of incorporation and bylaws, as well as the requirements of the
Exchange Act. Our Bylaws contain certain time limitations and procedures for
stockholder nominations of directors. Any stockholder who intends to bring
before an annual meeting of stockholders any nomination for director shall
deliver a written notice to the Secretary of Semotus setting forth specified
information with respect to the stockholder and additional information as would
be required under Regulation 14A under the Exchange Act and Rule 14a-8 for a
proxy statement used to solicit proxies for such nominee. In general, the notice
must be delivered not less than one hundred and twenty (120) days prior to the
first anniversary of the preceding year's mailing date of the annual meeting's
proxy statement.
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 2004, we granted options to purchase a total of 10,000 shares of common
stock to Mr. Williams.
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.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION . The following table sets forth the compensation for
the fiscal years ended March 31 2002, 2003 and 2004 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 2004 $ 216,000 -- $ 9,022(1) 500,000 (3) $ 77,783 (6)
Chairman and Chief 2003 $ 218,000 -- $13,859 (1) 891,000 (4) $631,435 (6)
Executive Officer 2002 $ 239,770 -- $ 9,336 (1) 810,000 (5) $520,452 (6)
- ---------------------------------------------------------------------------------------------------------------
Charles Dargan, II 2004 $ 48,000 -- -- -- --
Chief Financial 2003 $ 88,948 -- $30,000 (2) 277,000 (4) --
Officer 2002 $ 154,618 -- -- 270,000 (5) --
- ---------------------------------------------------------------------------------------------------------------
Pamela LaPine 2004 $ 108,000 -- $13,995 (1) 40,000 (3) --
Executive Vice 2003 $ 109,000 -- $10,966 (1) 385,000 (4) --
President of Sales 2002 $ 117,919 -- $ 9,997 (1) 350,000 (5) --
and Marketing
- ---------------------------------------------------------------------------------------------------------------
- --------------
(1) Represents automobile allowances and / or mileage reimbursements.
(2) Represents moving expense allowance.
(3) Represents new options granted to purchase shares of common stock under the
Company's 1996 Stock Option Plan during fiscal year 2004, 400,000 of which
were granted on May 16, 2003 to Anthony LaPine, 100,000 of which were
granted on July 27, 2003 to Anthony LaPine, and 40,000 of which were
granted to Pamela LaPine on July 24, 2003.
(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; and 35,000 to Pamela LaPine).
(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.
(6) 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.
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, 2004. 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
- -------------------------------------------------------------------------------------------------------------
NUMBER OF PERCENTAGE OF
SHARES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OF BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(#)(*) FISCAL YEAR ($/SH) DATE 5% ($)(3) 10% ($)(3)
- -------------------------------------------------------------------------------------------------------------
Anthony N. LaPine 400,000 (1) 23.3% $0.35 5/16/2013 $52,000 $116,000
100,000 (2) 5.8% $0.41 7/24/2013 $14,500 $33,000
- -------------------------------------------------------------------------------------------------------------
Pamela LaPine 40,000 (2) 2.3% $0.41 7/24/2013 $5,800 $13,200
- -------------------------------------------------------------------------------------------------------------
* Options expire 90 days after the termination of employment of the option
holder.
(1) 100% of these options become exercisable one year after the date of grant,
or on May 16, 2004.
(2) 100% of these options become exercisable one year after the date of grant,
or on July 24, 2004.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the SEC and are based on the assumption that the exercise
price was the fair market value of the shares on the date of grant. There
is no assurance provided to any executive officer or any other holder of
our securities that the actual price appreciation over the ten-year option
term will be at the assumed 5% or 10% levels or at any other defined level.
AGGREGATE OPTION EXERCISES. The following table sets forth certain
information concerning individual exercises of stock options during the fiscal
year ended March 31, 2004, and the shares represented by outstanding options
held by each of the named executive officers as of March 31, 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
VALUE OF
NUMBER OF SHARES UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS OPTIONS
ACQUIRED AT MARCH 31, 2004 AT MARCH 31, 2004
ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE (1)
NAME (#) ($) (#) ($)
Anthony N. LaPine -0- -0- 891,000 / 500,000 418,770 / 139,000
Charles K. Dargan, II 60,000 32,380 181,179 / 55,821 88,778 / 27,352
Pamela LaPine -0- -0- 375,624 / 49,376 176, 543 / 13,607
- --------------
(1) Options are "in the money" to the extent the closing price of Semotus'
common stock on March 31, 2004 exceeded the exercise price of the options.
The value of unexercised options represents the difference between the
exercise price of net options and $0.64, which was the closing price of
Semotus common stock on March 31, 2004.
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. As of May 1, 2004, no notice had been
given by either party, and therefore, the agreement has automatically renewed
for an additional one year term ending May 1, 2005. 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 the end of the current
term 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.
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. As of May 1, 2004, no notice had been
given by either party, and therefore, the agreement has automatically renewed
for an additional one year term ending May 1, 2005. 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. As of May 1, 2004,
pursuant to Mr. LaPine's employment agreement, the loan was completely forgiven
and no amount remains outstanding.
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 at the time of such meeting, 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, 2004, 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 2003, the
Committee decided to maintain the ten percent decrease in the base salaries
taken in 2002 by all executive officers and certain other employees. The
Committee has determined to maintain this salary decrease for these executive
officers and employees until the Company turns profitable for a reasonable
period of time and the Committee agrees to resume regular salary levels.
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 2003,
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 2003, 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 2003 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 $216,000 per
year. This decreased salary level has been maintained throughout 2003, and will
continue until the Company turns profitable. 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. The Committee
has agreed that no bonuses would be paid to Mr. LaPine until the Company has
turned profitable for a reasonable period of time
and the Committee agrees to the amount of the bonus. Therefore, Mr. LaPine did
not receive a bonus for the year ended December 31, 2003. In 2003, Mr. LaPine
was granted the stock options described in the executive compensation section of
the proxy statement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2003, 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 and 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 2003.
/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, 2004 AND 2003
AUDIT FEES
The aggregate fees billed for professional services rendered for Semotus by
Burr, Pilger & Mayer LLP for the years ended March 31, 2004 and 2003 were:
2004 2003
--------- ---------
Audit fees $ 39,155 $ 42,250
Audit-related fees:
SEC filings review and consent $ 5,595 $ 800
Total audit and audit-related fees $ 44,750 $ 43,050
Tax fees -- --
Total fees $ 44,750 $ 43,050
========= =========
The aggregate fees billed for all audit-related services rendered by Burr,
Pilger & Mayer LLP for the years ended March 31, 2004 and 2003 (see chart above
under heading "Audit-related fees") related to the review of various SEC filings
and correspondence, such as Form S-3s. No other professional services were
rendered or fees were billed by Burr, Pilger & Mayer LLP for the most recent
fiscal year or for the year ending March 31, 2003.
The Audit Committee has adopted policies and procedures for the
pre-approval of the above fees. All requests for services to be provided by the
Company's independent accountants are submitted to the Audit Committee. Requests
for all non-audit related services require pre-approval form the Audit
Committee.
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 March 31, 1999 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, 1999 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
[PERFORMANCE CHART]
- ----------------------- -------- --------- -------- -------- -------- --------
3/31/99 3/31/00 3/30/01 3/28/02 3/31/03 3/31/04
- ----------------------- -------- --------- -------- -------- -------- --------
Semotus Solutions $100.00 $2547.60 $ 84.00 $ 26.80 $ 4.80 $ 25.60
- ----------------------- -------- --------- -------- -------- -------- --------
Nasdaq Composite Index $100.00 $ 185.78 $ 74.76 $ 74.97 $ 54.49 $ 81.02
- ----------------------- -------- --------- -------- -------- -------- --------
Nasdaq Telecom Index $100.00 $ 178.23 $ 53.06 $ 28.10 $ 19.16 $ 29.74
- ----------------------- -------- --------- -------- -------- -------- --------
CORPORATE GOVERNANCE INFORMATION
Stockholders can access Semotus' corporate governance information,
including Semotus' Code of Ethics for Principal Executive Office and Senior
Financial Officers and the charters of the Audit Committee, Compensation
Committee, and Nominating and Corporate Governance Committee, at Semotus'
website, www.semotus.com , the content of which website is not incorporated by,
referenced into, or considered a part of, this document.
ADDITIONAL INFORMATION
THE COMPANY'S 2004 ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL
STATEMENTS FOR THE YEAR ENDED MARCH 31, 2004, 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.
COMMUNICATING WITH THE BOARD OF DIRECTORS
In order to communicate with the Board of Directors as a whole, with
non-management directors or with specified individual directors, correspondence
may be directed to the Secretary at 16400 Lark Ave., Suite 230, Los Gatos, CA
95032.
Under Semotus' Bylaws, stockholders may propose business to be brought
before an annual meeting. In order for a stockholder to submit a proposal for
consideration at Semotus' annual meeting, the stockholder must fulfill the
requirements set forth in our by-laws and Rule setting forth specified
information with respect to the stockholder and additional information as would
be required under Regulation 14A under the Exchange Act and Rule 14a-8 for a
proxy statement used to solicit proxies for such nominee. In general, the notice
must be delivered not less than one hundred and twenty (120) days prior to the
first anniversary of the preceding year's mailing date of the annual meeting's
proxy statement.
If you intend to propose any matter for action at our 2005 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 8, 2005, 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 2005 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 8, 2005.
/s/ Anthony N. LaPine
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Anthony N. LaPine
PRESIDENT
San Jose, California
August 1, 2004
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.
13. Ensure it receives from the outside auditors a formal written statement
delineating all relationships between the auditor and the Company,
consistent with Independence Standards Board Standard 1, and actively
engage in a dialogue with the auditor with respect to any disclosed
relationships or services that may impact the objectivity and independence
of the auditor and take, or recommend that the full board take, appropriate
action to oversee the independence of the outside auditor.
14. Oversee the accounting and financial reporting processes of the issuer and
the audits of the financial statements of the issuer.
15. Have the responsibilities, authority and procedures necessary to comply
with Rule 10A-3(b)(2), (3), (4) and (5) under the Securities Exchange Act
of 1934 (subject to the exemptions provided in Rule 10A-3(c) under the
Securities Exchange Act of 1934), concerning responsibilities relating to:
(i) registered public accounting firms, (ii) complaints relating to
accounting, internal accounting controls or auditing matters, (iii)
authority to engage advisors, and (iv) funding as determined by the audit
committee.
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 26, 2004, 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 23, 2004, 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 the enclosed proxy card in hand when you
access the web site. You will be prompted to enter a 12-digit Control Number 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 the
enclosed proxy card in hand when you call. You will be prompted to enter the
12-digit Control Number and then follow the simple instructions the Vote Voice
provides you.
VOTE BY MAIL
Mark, sign, and date the enclosed 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 SEMTS KEEP THIS PORTION FOR YOUR RECORDS
BLUE OR BLACK INK AS FOLLOWS: 1 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 Except"
All All Except: and write the nominee's number on the line below.
[ ] [ ] [ ] ____________________________________________________
Vote On Proposals
2. The ratification of the appointment of L.L. Bradford & Company, as the
Company's independent accountants for the fiscal year ending March 31, 2005:
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.
- --------------------------------------- ----------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners)