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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 10, 2006
SEMOTUS SOLUTIONS, INC.
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(Exact Name of Registrant as Specified in its Charter)
NEVADA 0-21069 36-3574355
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
718 University Ave., Suite 202 Los Gatos, CA 95032
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(Address of Principal Executive Offices) (Zip Code)
(408) 399-6120
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(Registrant's Telephone Number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[X] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CRF 240.14d-2(b))
[_] Pre-commencement communication pursuant to Rule 13e-4(C) under the Exchange
Act (17 CFR 240.13e-4(C))
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ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
Semotus Solutions, Inc. ("Semotus") has entered into a definitive Agreement and
Plan of Reorganization on November 10, 2006 with Citytalk, Inc. ("Citytalk"),
relating to the merger of Citytalk with and into Semotus, with Semotus as the
surviving corporation of the merger (the "Merger Agreement"). In the Merger
Agreement, Semotus has agreed to acquire 100% of the issued and outstanding
capital stock of Citytalk for 418,744,000 shares of Semotus Solutions' common
stock. On a fully diluted basis, taking into consideration Semotus' outstanding
stock, and assuming the exercise of all our warrants and vested stock options,
Semotus would have approximately 46,500,000 common shares outstanding.
Therefore, the issuance of 418,744,000 common shares to Citytalk will result in
the Semotus shareholders owning approximately 10% of the combined corporation
upon the close of the merger.
The agreement is subject to Semotus' stockholders approval, Citytalk's
stockholders approval, the American Stock Exchange's approval and other closing
conditions, including the acquisition by Citytalk of three other companies, NTCH
Colorado, Inc., NTCH Idaho, Inc. and NTCH Tennessee, Inc. (collectively,
"NTCH"), and an investment of at least $60,000,000 into Citytalk. Citytalk is a
merger vehicle created to acquire tower infrastructure and flat rate cellular
operations in key markets in the continential United States. If the merger with
Citytalk does close, we have agreed to pay a placement fee to the placement
agent, Bathgate Capital Partners, LLC in the form of $150,000 and 2,000,000
shares of restricted common stock. The foregoing description of the Merger
Agreement is qualified in its entirety by reference to the full text of the
Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated
herein by reference.
In determining the number of common shares of Semotus to be issued to Citytalk
in the merger, their respective managements considered the book value of
Citytalk to be zero at the time of the transaction and placed primary value on
NTCH's assets and the proposed financing, which are prerequisites to closing the
merger. The combination of NTCH's assets and at least $60,000,000 in capital
that Citytalk has committed as a closing condition will provide value in the
form of the expectation of a profitable ongoing business with meaningful
revenues and adequate operating capital. Mr. Sullivan's past achievements, along
with that of his management team, were also valuable considerations that post
merger will provide for operational stability and the expectation of continued
growth through future acquisitions, which is one of Mr. Sullivan's major
strengths. Another consideration was the fact that this merger and the combined
company is a major component to Semotus' compliance plan to remedy Semotus'
current AMEX listing deficiencies that unless resolved will result in the
delisting of Semotus from the American Stock Exchange. Additional factors
considered in the value determination included the ongoing inability of Semotus
to achieve financial stability or profitability without a major revamping of its
business and a significant capital infusion. Semotus continues to operate at a
loss, reporting $350,610 in net loss for its fiscal second quarter ended
September 30th 2006. The working capital of Semotus as of September 30th 2006
was $338,021 or approximately $0.01 per share with an accumulated deficit of
$68,138,493. Consequently, based upon all of the above factors, it was agreed to
by the parties, contingent on the acquisition of the NTCH companies and the
raising of at least $60,000,000, that Semotus would issue 418,744,000 shares of
restricted common stock to Citytalk's shareholders as the purchase price.
We have also signed an investment agreement dated November 13, 2006, by and
among Semotus and an individual investor, Richard Sullivan, Citytalk's Chairman
and CEO, relating to an investment of US$225,000 (the "Investment Agreement").
The investment was taken in the form of a promissory note (the "Convertible
Promissory Note") which may be converted by Mr. Sullivan at his discretion at
any time into restricted common shares of Semotus at a conversion price of ten
cents ($0.10) per share, for a total of 2,250,000 shares. The unpaid principal
shall accrue interest at 8% per annum and all unconverted principal and interest
is due and payable on November 1, 2008. We will incur no placement agent fees or
expenses for this $225,000 investment. The issuance of the underlying shares is
dependent upon the American Stock Exchange's approval. These funds will be used
to increase our sales and marketing efforts and for other general working
capital purposes. The foregoing description of the Investment Agreement and
Convertible Promissory Note is qualified in its entirety by reference to the
full text of the Investment Agreement and Convertible Promissory Note, which are
attached hereto as Exhibits 2.2 and 4.1, respectively, and are incorporated
herein by reference.
On November 15, 2006, Semotus issued a press release with respect to this Merger
Agreement, Investment Agreement and Convertible Promissory Note. A copy of the
press release is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
We have signed an investment agreement dated November 13, 2006, by and among
Semotus and an individual investor, Richard Sullivan, Citytalk's Chairman and
CEO, relating to an investment of US$225,000 (the "Investment Agreement"). The
investment was taken in the form of a promissory note (the "Convertible
Promissory Note") which may be converted by Mr. Sullivan at his discretion at
any time into restricted common shares of Semotus at a conversion price of ten
cents ($0.10) per share, for a total of 2,250,000 shares. The unpaid principal
shall accrue interest at 8% per annum and all unconverted principal and interest
is due and payable on November 1, 2008. We will incur no placement agent fees or
expenses for this $225,000 investment. The issuance of the underlying shares is
dependent upon the American Stock Exchange's approval. These funds will be used
to increase our sales and marketing efforts and for other general working
capital purposes. The foregoing description of the Investment Agreement and
Convertible Promissory Note is qualified in its entirety by reference to the
full text of the Investment Agreement and Convertible Promissory Note, which are
attached hereto as Exhibits 2.2 and 4.1, respectively, and are incorporated
herein by reference.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
In connection with the merger with Citytalk, as discussed above in Section 1.01,
we have agreed to issue 418,744,000 shares of common stock to Citytalk's
shareholders and pay a placement fee to the placement agent, Bathgate Capital
Partners, in the form of $150,000 and 2,000,000 shares of restricted common
stock, if the Merger does close.
We have also issued a promissory note (the "Convertible Promissory Note") which
may be converted by the investor into common shares of Semotus at a conversion
price of ten cents ($0.10) per share, for a total of 2,250,000 shares, in
exchange for a $225,000 investment by Richard Sullivan, Citytalk's Chairman and
CEO. The unpaid principal shall accrue interest at 8% per annum and all
unconverted principal and interest is due and payable on November 1, 2008. The
issuance of the underlying shares is dependent upon the American Stock
Exchange's approval.
As part of the Merger and the Investment, we agreed to file a registration
statement with the Securities and Exchange Commission to qualify the resale of
the 2,000,000 shares of common stock that will be issued to Bathgate Capital
Partners and the 2,250,000 shares of common stock issuable upon the conversion
of the Convertible Promissory Note.
The securities to be issued in this private placement have not been registered
under the Securities Act of 1933, as amended, and may not be offered or sold in
the United States absent registration or an applicable exemption from
registration requirements of the Securities Act of 1933. The appropriate
restrictive legend will be placed on the certificates and stop transfer
instructions will be issued to the transfer agent.
The issuance will be made in reliance on Section 4(2) of the Act and will be
made without general solicitation or advertising. The purchasers are
sophisticated investors with access to all relevant information necessary to
evaluate the investment, who represented to us that the securities are being
acquired for investment purposes.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
Semotus intends to file a proxy statement in connection with the merger
transaction involving Semotus and Citytalk before the end of the calendar year.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT WHEN IT
BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER
TRANSACTION. Investors and
security holders may obtain free copies of these documents (when they are
available) and other documents filed with the SEC at the SEC's web site at
www.sec.gov. In addition, investors and security holders may obtain free copies
of the documents filed with the SEC by Semotus by contacting Semotus Investor
Relations at 718 University Ave., Suite 202, Los Gatos, CA 95032, telephone
(408) 399-6120, and directed to the attention of Tali Durant, Corporate
Secretary.
Semotus and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the stockholders of Semotus in
connection with the merger transaction. Information regarding the special
interests of these directors and executive officers in the merger transaction
will be included in the proxy statement of Semotus described above. Additional
information regarding the directors and executive officers of Semotus is also
included in Semotus' proxy statement for its 2006 Annual Meeting of
Stockholders, which was filed with the SEC on July 26, 2006. These documents are
available free of charge at the SEC's web site at www.sec.gov and from Investor
Relations at Semotus as described above.
ITEM 9. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Not applicable.
(b) Not applicable.
(c) Exhibits. The following exhibits are filed with this report:
Exhibit Number Description
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2.1 Agreement and Plan of Reorganization by and among
Semotus Solutions, Inc. and Citytalk, Inc. dated
November 10, 2006.
2.2 Investment Agreement by and among Semotus Solutions,
Inc. and certain individual investors dated November
13, 2006.
4.1 Convertible Promissory Note dated November 13, 2006.
10.1 Amendment 4 to the Agreement by and among Semotus
Solutions, Inc. and Bathgate Capital Partners, LLC
dated October 27, 2006.
99.1 Press Release of Semotus Solutions, Inc. issued on
November 15, 2006.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
hereunto duly authorized.
SEMOTUS SOLUTIONS, INC.
Date: November 15, 2006 By: /s/ Anthony N. LaPine
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Anthony N. LaPine,
Chief Executive Officer