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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
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
SEMOTUS SOLUTIONS, INC.
(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
Rule 0-11(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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(ALL NUMBERS ARE ADJUSTED TO GIVE EFFECT TO A 1 FOR 20 REVERSE STOCK SPLIT
THAT WENT EFFECTIVE JULY 20, 2007)
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SEMOTUS SOLUTIONS, INC.
718 UNIVERSITY AVE., SUITE 202
LOS GATOS, CALIFORNIA 95032
(408) 399-6120
NOTICE OF 2007 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 20, 2007
Dear Semotus Solutions, Inc. Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Semotus Solutions, Inc. ("we", "our" or the "Company"). We will be holding the
Annual Meeting at the Company's offices located at 718 University Ave., Suite
202, Los Gatos, CA 95032, on September 20, 2007, at 1:00 p.m., Pacific Time.
At the 2007 Annual Meeting, we will ask you to:
1. Elect four (4) directors each to serve on our Board of Directors until
the 2008 Annual Meeting of Stockholders or until his successor is duly
elected and qualified;
2. Ratify the appointment of L.L. Bradford & Company, LLC as our
independent accountants for the fiscal year ending March 31, 2008;
3. Approve an amendment of our Amended Articles of Incorporation to
effect a reverse stock split in a ratio ranging from one-for-two to
one-for-five of all our issued and outstanding shares of our common
stock;
4. Approve an amendment of our Amended Articles of Incorporation to
increase the number of authorized shares of common stock from
7,500,000 to 50,000,000;
5. Approve an amendment to our 2005 Stock Option Plan to increase the
number of shares of common stock issuable upon the exercise of stock
options granted under the Plan from 150,000 to 1,150,000 shares; and
6. Transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Enclosed with this letter is a Proxy Statement, a proxy card and a return
envelope. Also enclosed is our Annual Report on Form 10-KSB for the fiscal year
ended March 31, 2007.
Only holders of common stock of the Company of record at the close of
business on July 24, 2007 are entitled to vote at the Annual Meeting. The Board
of Directors of the Company 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
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD
Los Gatos, California
July __, 2007
SEMOTUS SOLUTIONS, INC.
718 UNIVERSITY AVE., SUITE 202
LOS GATOS, CALIFORNIA 95032
(408) 399-6120
PROXY STATEMENT
FOR THE 2007 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 20, 2007
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 2007 Annual Meeting
of Semotus Solutions, Inc. (the "Company", "we" or "our"). The 2007 Annual
Meeting will be held on September 20, 2007 at the Company's offices located at
718 University Ave., Suite 202, Los Gatos, CA 95032.
This proxy statement provides detailed information about the 2007 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 (4) directors each to serve on our Board of
Directors until the 2008 Annual Meeting of Stockholders or
until his successor is duly elected and qualified;
2. Ratify the appointment of L.L. Bradford & Company, LLC as our
independent accountants for the fiscal year ending March 31,
2008;
3. Approve an amendment of our Amended Articles of Incorporation
to effect a reverse stock split in a ratio ranging from
one-for-two to one-for-five of all our issued and outstanding
shares of our common stock;
4. Approve an amendment of our Amended Articles of Incorporation
to increase the number of authorized shares of common stock
from 7,500,000 to 50,000,000;
5. Approve an amendment to our 2005 Stock Option Plan to increase
the number of shares of common stock issuable upon the
exercise of stock options granted under the Plan from 150,000
to 1,150,000 shares; and 6. Transact such other business as
may properly come before the Annual Meeting or any adjournment
thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ELECTION
OF THE BOARD'S NOMINEES FOR DIRECTOR, FOR RATIFICATION OF THE APPOINTMENT OF
L.L. BRADFORD & COMPANY, LLC AS INDEPENDENT PUBLIC ACCOUNTANTS, FOR THE REVERSE
STOCK SPLIT, FOR THE INCREASE IN AUTHORIZED COMMON SHARES, FOR THE INCREASE IN
AUTHORIZED SHARES UNDER OUR STOCK OPTION PLAN, AND FOR THE APPROVAL OF EACH OF
THE OTHER PROPOSALS.
On August 1, 2007, we will begin 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 24, 2007. We have mailed with this proxy statement a copy of
our Annual Report on Form 10-KSB for the fiscal year ended March 31, 2007.
INFORMATION ABOUT THE 2007 ANNUAL MEETING AND VOTING
THE ANNUAL MEETING
The Annual Meeting will be held at our corporate headquarters located at
718 University Ave., Suite 202, Los Gatos, CA 95032, on September 20, 2007, at
1:00 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 1, 2007, we will begin mailing this proxy statement and the
accompanying proxy card and Annual Report on Form 10-KSB to all people who,
according to our stockholder records, owned shares at the close of business on
July 24, 2007. In addition, we have provided brokers, dealers, banks, voting
trustees and their nominees, at our expense, with additional copies of this
proxy statement, proxy card and the Annual Report on Form 10-KSB so that such
record holders could supply these materials to the beneficial owners as of July
24, 2007.
Proxies may also be solicited personally by our officers or directors at
nominal cost. We may also retain, and pay a fee to, one or more other
professional proxy solicitation firms to solicit proxies from our stockholders.
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 Annual 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 Annual 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 our common stock represented thereby will
be voted in the manner specified therein. If not otherwise specified, the shares
of our 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, LLC as independent
accountants for the year ending March 31, 2008; (iii) FOR the reverse stock
split, (iv) FOR the increase in authorized common stock, (v) FOR the increase in
the number of shares of common stock issuable upon the exercise of stock options
granted under the Plan from 150,000 to 1,150,000 shares, and (vi) in the
discretion of the persons named in the enclosed form of proxy on any other
proposals which may properly come before the Annual 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 Annual Meeting. The mere
presence at the Annual 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 20, 2007.
VOTING BY PHONE OR VIA THE INTERNET. If you are a stockholder of record
(that is, if your shares of our stock are 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 Annual Meeting, you may cancel your
previous vote and vote in person at the Annual Meeting.
The deadline for voting by phone or through the Internet as a stockholder
of record is 11:59 p.m., EDT, on September 19, 2007. For stockholders whose
shares of our common stock 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 of our common stock at the Annual Meeting in
accordance with the instructions you give on the proxy card.
Attendance at the Annual Meeting will not, by itself, result in the
revocation of a previously submitted proxy. Even if you are planning to attend
the Annual Meeting, we encourage you to submit the proxy card in advance to
ensure the representation of your shares at the Annual 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 24, 2007 (the "Record Date"), 1,778,529
shares of our common stock were issued and outstanding. Each share of our common
stock 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 at the Annual Meeting is that a majority of the issued and outstanding
shares of our common stock on the Record Date be present in person or
represented by proxy and entitled to be voted. Accordingly, _________ shares of
our common stock 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. Proposal 2 requires the
affirmative "FOR" vote of a majority of those shares present and entitled to
vote on such proposal. Proposals 3 and 4 require the affirmative "FOR" vote of a
majority of the votes cast.
ADDITIONAL INFORMATION
We are mailing our Annual Report on Form 10-KSB for the fiscal year ended
March 31, 2007, including consolidated financial statements, to all stockholders
entitled to vote at the Annual Meeting together with this proxy statement. The
Annual Report on Form 10-KSB does not constitute a part of the proxy
solicitation material. The Annual Report on Form 10-KSB tells you how to get
additional information about us.
PROPOSAL 1:
ELECTION OF DIRECTORS
Nominees for election to the Board 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 and have consented to serve as directors if re-elected. Anthony N. LaPine
is also our 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 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 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 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 unanimously recommends a vote "FOR" each of the nominees to the
Board.
PROPOSAL 2:
RATIFICATION OF INDEPENDENT AUDITORS
The Board has appointed L.L. Bradford & Company, LLC, an accounting firm of
independent certified public accountants, to act as independent accountants for
our Company and its consolidated subsidiaries for our fiscal year ending March
31, 2008. The Board believes that L.L. Bradford & Company's experience with and
knowledge of our Company are important, and would like to continue this
relationship. L.L. Bradford & Company has advised our Company that the firm does
not have any direct or indirect financial interest in our Company or any of its
subsidiaries, other than its capacity as our independent certified public
accountants providing auditing and accounting services.
In making the recommendation for L.L. Bradford & Company to continue as our
Company's independent accountants for the fiscal year ending March 31, 2008, our
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 2008. In selecting L.L.Bradford & Company, the Audit Committee and the
Board carefully considered L.L. Bradford & Company's independence.
L.L. Bradford & Company has confirmed to us 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 L.L. Bradford & Company 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 unanimously recommends a vote "FOR" ratification of the
appointment of L.L. Bradford & Company, LLC.
PROPOSAL 3:
AMENDMENT OF OUR AMENDED ARTICLES OF INCORPORATION TO EFFECT A REVERSE
STOCK SPLIT IN A RATIO RANGING FROM ONE-FOR-TWO TO ONE-FOR-FIVE
OF ALL ISSUED AND OUTSTANDING SHARES OF OUR COMMON STOCK
INTRODUCTION
We propose to amend our Amended Articles of Incorporation (the "Amendment")
to effect a reverse stock split, in a ratio ranging from one-for-two to
one-for-five, of all issued and outstanding shares of our common stock. The
Board of Directors reserves the right, notwithstanding stockholder approval, and
without further action by the stockholders, to abandon or to delay the reverse
stock split, if at any time prior to the filing of the amendment it determines,
in its sole discretion, that the reverse stock split would not be in the best
interests of our stockholders.
The text that will be included in the Articles of Amendment to effect the
reverse stock split in a ratio ranging from one-for-two to one-for-five is as
follows:
"As of the beginning of the first business day (the "Effective Date")
after the filing of this Amendment every [insert number ranging from two to
five] issued and outstanding shares of the Corporation's Common Stock
automatically shall be combined and reconstituted into one share of Common
Stock, par value $0.01 per share, of the Corporation, thereby giving effect
to a one-for-[insert number ranging from two to five] reverse stock split
without further action of any kind (the "Reverse Stock Split"). Each holder
of a certificate or certificates that immediately prior to the Effective
Date represented outstanding shares of Common Stock shall be entitled to
receive, upon surrender of such certificates to the Corporation for
cancellation, a certificate or certificates representing the number of
whole shares (rounded up to the nearest whole shares) of Common Stock held
by such holder on the Effective Date after giving effect to the Reverse
Stock Split. No fractional shares of Common Stock shall be issued in the
Reverse Stock Split; instead, stockholders who would otherwise be entitled
to fractional shares will receive a share of common stock in lieu of such
fraction. No other exchange, reclassification or cancellation of issued
shares shall be effected by this Amendment."
This proposal does not change the number of total authorized shares of
common stock. Upon this Amendment becoming effective, and if Proposal 4
regarding an increase in the number of authorized shares of common stock is not
approved by the stockholders, the number of authorized shares of common stock
would remain at 7,500,000 shares of common stock. If both this amendment and
Proposal 4 become effective, the number of authorized shares of common stock
would increase to 50,000,000 shares of common stock. See the discussion under
"Proposal 4: To Approve an Amendment to our Amended Articles of Incorporation to
Increase the Number of Authorized Shares from 7,500,000 to 50,000,000 Shares"
below.
EXAMPLES. As of the Effective Date of the reverse stock split, all
stockholders will own a proportionally reduced number of shares of common stock.
For example, if a stockholder owned 1,000 shares of common stock immediately
prior to the effective date, then the stockholder would own 200 shares of common
stock as of the Effective Date if a one-for-five reverse stock split became
effective and 500 shares of common stock as of the Effective Date if a
one-for-two reverse stock split became effective, which reflects the same
proportional ownership interest in our shares of common stock because all
stockholders would have the same reduction. As a further example, if a person
held a stock option or warrant for 1,000 shares with an exercise price of $0.15
per share immediately prior to the effective date, the person would hold an
option or warrant for 200 shares with an exercise price of $0.75 per share as of
the Effective Date in the case of a one-for-ten reverse stock split, and 500
shares with an exercise price of $0.30 per share as of the Effective Date in the
case of a one-for-two reverse stock split; in each case, however, the holder of
the option or warrant must spend $150.00 to exercise the option or warrant in
full. See "Principal Effects of a Reverse Stock Split -- Common Stock" below. As
discussed below under "Reasons For a Reverse Stock Split," we expect the per
share market price for our common stock to increase in approximate proportion to
the reverse split, although there can be no assurance that it would do so.
REASONS FOR A REVERSE STOCK SPLIT
As of July 24, 2007, our total market value was approximately $5.6 million
and we had 1,778,529 shares of common stock issued and outstanding. On such
date, the closing price for our common stock on Amex was
$_.__ per share. We believe that a reverse stock split may be desirable because
the increased market price of our common stock expected as a result of
implementing a reverse stock split should encourage investor interest and
trading in our common stock and improve the marketability and liquidity of our
common stock. Because of the trading volatility often associated with low-priced
stocks, many brokerage houses and institutional investors have internal policies
and practices that either prohibit them from investing in low-priced stocks or
tend to discourage individual brokers from recommending low-priced stocks to
their customers. Some of those policies and practices may function to make the
processing of trades in low-priced stocks economically unattractive to brokers.
Additionally, because brokers' commissions on low-priced stocks generally
represent a higher percentage of the stock price than commissions on
higher-priced stocks, the current average price per share of our common stock
can result in individual stockholders paying transaction costs representing a
higher percentage of their total share value than would be the case if the share
price were substantially higher. We recognize that the liquidity of our common
stock may be adversely affected by a reverse stock split given the reduced
number of shares that would be outstanding after the reverse stock split.
However, from January 1, 2006, through July 20, 2007, our daily trading volume,
as reported by Amex, has averaged approximately 150,000 shares, and we believe
that there will be sufficient post-split shares to provide adequate liquidity
for our stockholders. The Board of Directors believes that the anticipated
higher market price may reduce, to some extent, the negative effects on the
liquidity and marketability of the common stock inherent in some of the policies
and practices of institutional investors and brokerage houses described above.
We cannot predict, however, whether a reverse stock split would achieve the
desired results. The price per share of our common stock is also a function of
our financial performance and other factors, some of which may be unrelated to
the number of shares outstanding. Accordingly, there can be no assurance that
the closing bid price of our common stock after a reverse stock split would
increase in an amount proportionate to the decrease in the number of issued and
outstanding shares, or would increase at all, or that any increase can be
sustained for a prolonged period of time.
The proposed reverse stock split is not a first step in a "going-private"
transaction. At the present time, we have no intention of effecting such a
transaction.
PRINCIPAL EFFECTS OF A REVERSE STOCK SPLIT
COMMON STOCK
Our common stock is currently registered under Section 12(g) of the
Exchange Act, and we are subject to the periodic reporting and other
requirements of the Exchange Act. The proposed reverse stock split will not
affect the registration of the common stock under the Exchange Act. If any
proposed reverse stock split is implemented, our common stock will continue to
be reported on the American Stock Exchange under the symbol "DLK," but all open
orders as of the effective date would be canceled by the American Stock
Exchange.
After the effective date of a reverse stock split, each stockholder will
own a proportionally reduced number of shares of our common stock, as set forth
in the examples above. The reverse stock split will affect all of our
stockholders uniformly and will not affect any stockholder's percentage
ownership interests in us, except to the extent that a reverse stock split
results in any of our stockholders owning a fractional share as described below.
Proportionate voting rights and other rights and preferences of the holders of
our common stock will not be affected by a reverse stock split other than as a
result of the rounding up to one whole share of common stock in lieu of
fractional shares. For example, stockholders are not currently entitled to
cumulative voting rights and will not be entitled to such rights following the
reverse stock split. Further, the number of stockholders of record will not be
affected by a reverse stock split.
A REVERSE STOCK SPLIT WILL RESULT IN SOME STOCKHOLDERS -- THOSE CURRENTLY
OWNING FEWER THAN 500 TO 200 SHARES, DEPENDING ON THE REVERSE STOCK SPLIT RATIO
IMPLEMENTED -- OWNING "ODD-LOTS" OF LESS THAN 100 SHARES OF OUR COMMON STOCK.
BROKERAGE COMMISSIONS AND OTHER COSTS OF TRANSACTIONS IN ODD-LOTS ARE GENERALLY
SOMEWHAT HIGHER THAN THE COSTS OF TRANSACTIONS ON "ROUND-LOTS" OF EVEN MULTIPLES
OF 100 SHARES.
The proposed reverse stock split would NOT change the number of authorized
shares of common stock, as designated by our Amended Articles of Incorporation.
For illustrative purposes, the following table, which is based on 1,778,529
shares of common stock issued and outstanding and 2,301,200 shares of common
stock outstanding and reserved for issuance as of July 24, 2007, approximates
the effect on our common stock of the proposed one-for-two to one-for-five
reverse stock split, and taking into consideration whether Proposal 4 to
increase the authorized number of shares of common stock is or is not approved
by the stockholders.
- -----------------------------------------------------------------------------------------------------------------
PRIOR TO REVERSE STOCK SPLIT AFTER REVERSE STOCK SPLIT
- -------------------------- ------------------------------------------------ -------------------------------------
CURRENT IF PROPOSAL 4 IS IF PROPOSAL IF PROPOSAL 4 IS IF PROPOSAL 4 IS
NOT APPROVED 4 IS APPROVED NOT APPROVED (1) APPROVED (1)
- -------------------------- -------------- ------------------ -------------- ------------------ ------------------
Authorized Common Stock 7,500,000 7,500,000 50,000,000 7,500,000 50,000,000
- -------------------------- -------------- ------------------ -------------- ------------------ ------------------
Issued and Outstanding 1,778,529 1,778,529 1,778,529 889,265 - 889,265 -
355,706 355,706
- -------------------------- -------------- ------------------ -------------- ------------------ ------------------
Issued, Outstanding and 2,301,200 2,301,200 2,301,200 1,150,600 - 1,150,600
Reserved for Issuance 460,240 -460,240
- -----------------------------------------------------------------------------------------------------------------
(1) Does not reflect the rounding up of fractional shares and resulting
issuance of one additional share.
OPTIONS, WARRANTS, CONVERTIBLE NOTES AND OTHER SECURITIES
In addition, all outstanding options, warrants, convertible notes and other
securities entitling their holders to purchase shares of our common stock would
be adjusted as a result of any reverse stock split, as required by the terms of
these securities. In particular, the exchange ratio for each instrument would be
reduced, and the exercise price per share, if applicable, would be increased, in
accordance with the terms of each instrument and based on the one-for-ten to
one-for-twenty ratio of the reverse stock split, as set forth in the above
example. Also, the number of shares reserved for issuance under the existing
employee stock option plans, warrant and convertible notes would be reduced
proportionally based on the one-for-two to one-for-five ratio of the reverse
stock split.
FRACTIONAL SHARES
No fractional shares of common stock will be issued as a result of the
proposed reverse stock split. Instead, stockholders who otherwise would be
entitled to receive fractional shares because they hold a number of shares not
evenly divisible by the one-for-two to one-for-five ratio, upon surrender to the
exchange agent of such certificates representing such fractional shares, will be
entitled to receive an additional share of common stock.
IMPLEMENTATION AND EXCHANGE OF STOCK CERTIFICATES
IF OUR STOCKHOLDERS APPROVE THE PROPOSAL AND OUR BOARD OF DIRECTORS DECIDES
TO EFFECTUATE A REVERSE STOCK SPLIT, WE WILL FILE AN AMENDMENT TO OUR AMENDED
ARTICLES OF INCORPORATION WITH THE SECRETARY OF STATE OF NEVADA. THE REVERSE
STOCK SPLIT WILL BECOME EFFECTIVE AT THE TIME SPECIFIED IN THE AMENDMENT -- THE
NEXT BUSINESS DAY AFTER THE FILING OF THE AMENDMENT -- WHICH WE REFER TO AS THE
EFFECTIVE DATE.
As of the Effective Date of the reverse stock split, each certificate
representing shares of our common stock before the reverse stock split would be
deemed, for all corporate purposes, to evidence ownership of the reduced number
of shares of our common stock resulting from the reverse stock split, except
that holders of unexchanged shares would not be entitled to receive any
dividends or other distributions payable by us after the Effective Date until
they surrender their old stock certificates for exchange. All shares underlying
options, warrants, convertible notes and other securities would also be
automatically adjusted on the Effective Date.
Our transfer agent, Computershare Trust Company, Inc., would act as the
exchange agent for purposes of implementing the exchange of stock certificates.
As soon as practicable after the Effective Date, stockholders and holders of
securities convertible into or exercisable for our common stock would be
notified of the effectiveness of the reverse stock split. Stockholders of record
would receive a letter of transmittal requesting them to surrender their old
stock certificates for new stock certificates, which will bear a different CUSIP
number, reflecting the adjusted number of shares as a result of the reverse
stock split. Persons who hold their shares in brokerage accounts or "street
name" would not be required to take any further action to effect the exchange of
their shares. No new certificates would be issued to a stockholder until such
stockholder has surrendered any outstanding certificates together with
the properly completed and executed letter of transmittal to the exchange agent.
Until surrender, each certificate representing shares before the reverse stock
split would continue to be valid and would represent the adjusted number of
shares based on the ratio of the reverse stock split. Stockholders should not
destroy any stock certificate and should not submit any certificates until they
receive a letter of transmittal.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of material United States federal income tax
consequences of a reverse stock split. It does not address any state, local or
foreign income or other tax consequences. It applies to you only if you held
shares of pre-reverse stock split common stock and shares of post-reverse stock
split common stock as capital assets for tax purposes. This section does not
apply to you if you are a member of a class of holders subject to special rules,
such as (i) a dealer in securities or currencies, (ii) a trader in securities
that elects to use a mark-to-market method of accounting for your securities
holdings, (iii) a bank, (iv) a life insurance company, (v) a tax-exempt
organization, (vi) a person who owns shares of common stock that are a hedge or
that are hedged against interest rate risks, (vii) a person who owns shares of
common stock as part of a straddle or conversion transaction for tax purposes,
(viii) a foreign person, or (ix) a person whose functional currency for tax
purposes is not the U.S. dollar. This section is based on the Internal Revenue
Code of 1986, as amended, its legislative history, existing and proposed
regulations under the Internal Revenue Code, published rulings and court
decisions, all as currently in effect, all of which are subject to change,
possibly on a retroactive basis.
PLEASE CONSULT YOUR OWN TAX ADVISOR CONCERNING THE CONSEQUENCES OF A REVERSE
STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL REVENUE CODE AND
THE LAWS OF ANY OTHER TAXING JURISDICTION.
TAX CONSEQUENCES TO COMMON STOCKHOLDERS
This discussion applies only to United States holders. A United States
holder, as used herein, is a stockholder that is: (i) a citizen or resident of
the United States, (ii) a domestic corporation, (iii) an estate whose income is
subject to United States federal income tax regardless of its source, or (iv) a
trust if a United States court can exercise primary supervision over the trust's
administration and one or more United States persons are authorized to control
all substantial decisions of the trust.
No gain or loss should be recognized by a stockholder upon such
stockholder's exchange of pre-reverse stock split shares for post-reverse stock
split shares pursuant to a reverse stock split. The aggregate tax basis of the
post-reverse stock split shares received in the reverse stock split (including
any fraction of a new share deemed to have been received) will be the same as
the stockholder's aggregate tax basis in the pre-reverse stock split shares
exchanged therefor. The stockholder's holding period for the post-reverse stock
split shares will include the period during which the stockholder held the
pre-reverse stock split shares surrendered in the reverse stock split.
TAX CONSEQUENCES TO THE COMPANY
We should not recognize any gain or loss as a result of the proposed
reverse stock split.
ACCOUNTING CONSEQUENCES
The par value per share of our common stock would remain unchanged at $0.01
per share after any reverse stock split. As a result, on the Effective Date of a
reverse stock split, the stated capital on the Company's balance sheet
attributable to the common stock will be reduced proportionally, based on the
ratio of the reverse stock split, from its present amount, and the additional
paid-in capital account will be credited with the amount by which the stated
capital is reduced. The net income or loss per share of common stock and net
book value will be increased because there will be fewer shares of the common
stock outstanding. We do not anticipate that any other accounting consequences
would arise as a result of a reverse stock split.
DISSENTERS' RIGHTS
Chapter 92A.300 - 92A.500, inclusive, of the Nevada Revised Statutes
provides for dissenters' rights for any amendment to the articles of
incorporation that reduces the total number of shares owned by the stockholder
to a fraction of a share, if the fractional share created by the amendment is to
be acquired by us for cash. We are not acquiring any fractional shares for cash,
but instead issuing a whole common share in lieu of any fractional shares.
BOARD RECOMMENDATION: The Board of Directors recommends a vote "FOR"
approval of Proposal 3 to amend our Amended Articles of Incorporation to effect
a reverse stock split, in a ratio ranging from one-for-two to one-for-five, of
all issued and outstanding shares of our common stock.
PROPOSAL 4:
AMENDMENT OF OUR AMENDED ARTICLES OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK FROM 7,500,000 TO 50,000,000
We propose to amend Article IV of our Amended Articles of Incorporation to
increase the number of authorized shares of common stock from 7,500,000 to
50,000,000. As amended, Article IV of our Restated Articles of Incorporation
would read as set forth below:
"Capital Stock. The aggregate number of shares which this Corporation shall
have authority to issue is: Fifty Million (50,000,000) shares of $0.01 par
value each, which shares shall be designated "Common Stock"; and Five
Million (5,000,000) shares of $0.001 par value each, which shares shall be
designated "Preferred Stock", and which may be issued in one or more series
at the discretion of the Board of Directors. The Board of Directors is
hereby vested with authority to fix by resolution or resolutions the
designations and the power, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, including without limitation, the dividend rate,
conversion or exchange rights, redemption price and liquidation preference,
of any series of shares of Preferred Stock and to fix the number of shares
constituting any such series, and to increase or decrease the number of
shares of any such series (but not below the number of shares thereof then
outstanding). In case the number of shares of any such series shall be so
decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution or resolutions
originally fixing the number of shares of such series. All shares of any
one series shall be alike in every particular except as otherwise provided
by these Articles of Incorporation or the Nevada Business Corporation Act."
As of July 24, 2007, we had no shares of preferred stock issued and
outstanding, 1,778,529 shares of common stock issued and outstanding and had
reserved approximately 593,671 shares of common stock for issuance under
existing warrants and stock options.
Our authorized preferred stock of 5,000,000 shares would not be changed by
this proposed amendment. Our preferred stock is undesignated. The Board of
Directors, without stockholder approval, may issue the preferred stock with
voting and conversion rights that could materially and adversely affect the
voting power of the holders of common stock, and could also decrease the amount
of earnings and assets available for distribution to the holders of common
stock.
The rights of additional authorized shares of common stock would be
identical to shares now authorized.
The authorization of common stock will not, in itself, have any effect on
your rights as a stockholder. If the Board were to issue additional shares of
common stock for other than a stock split or dividend, however, it could have a
dilutive effect on our earnings per share and on your voting power in the
Company, perhaps significantly.
We believe that the proposed increase in the number of authorized shares of
common stock is in the best interests of our stockholders. It is important for
the Board to have the flexibility to act promptly to meet future business needs
as they arise. The Company requires sufficient shares, on a readily available
basis, to maintain our financing and capital raising flexibility, fund
acquisitions and mergers, enable the use of employee benefit plans such as the
2005 Stock Option Plan, provide for potential stock splits and dividends and for
other proper business purposes. Having a limited number of shares available
severely limits our flexibility and hinders our ability to raise capital, move
quickly with respect to acquisition opportunities and attract and retain
employees.
By having additional shares readily available for issuance, we will be able
to act expeditiously without spending the time and incurring the expense of
soliciting proxies and holding special meetings of stockholders. We have no
present plans, agreements, commitments or understandings for the issuance or use
of these proposed additional shares of common stock.
The Board may issue additional shares of common stock without action on
your part only if the action is permissible under Nevada corporate law and the
rules of Amex, on which our common stock is listed. For example, approval by the
stockholders would be required by Amex rules if the issuance of shares of common
stock, or
securities convertible into common stock, such as the preferred stock, would
result in a change of control of the Company. Amex also requires stockholder
approval before the issuance of shares in private transactions equal to 20% or
more of the common stock or voting power outstanding before the issuance for
less than the greater of the book value or market value of the common stock and
before the issuance of shares in an acquisition equal to 20% or more of the
common stock or voting power outstanding before the acquisition. Exceptions to
these rules may be made upon application to Amex.
The future issuance of additional shares of common stock also could be used
to block an unsolicited acquisition through the issuance of large blocks of
stock to persons or entities considered by our officers and directors to be
opposed to such acquisition, which might be deemed to have an anti-takeover
effect (i.e., might impede the completion of a merger, tender offer or other
takeover attempt). Our management and Board could use the additional shares to
resist or frustrate a third-party transaction providing an above-market premium
that is favored by a majority of our independent stockholders. In fact, the mere
existence of such a block of authorized but unissued shares, and the Board's
ability to issue such shares without stockholder approval, might deter a bidder
from seeking to acquire our shares on an unfriendly basis. We have other
provisions in our Amended Articles of Incorporation, Bylaws and credit
agreements that could make it more difficult for a third party to acquire us.
For example, our Amended Articles of Incorporation and Bylaws provide
limitations on removing a director, the ability of the Board to issue preferred
stock with such voting, dividend, liquidation and other terms as the Board
determines, no cumulative voting for directors, special voting requirements for
certain mergers and other business combinations and special procedures for
calling special meetings of the stockholders, proposing matters for stockholder
approval and nominating directors.
While the authorization of additional shares of common stock alone or
together with the preceding provisions may have an anti-takeover effect, the
Board does not intend or view the proposed increase in authorized common stock
as an anti-takeover measure, nor are we aware of any proposed transactions of
this type. We have no present plans or proposals to adopt any other provisions
or enter into any other arrangements that may have material anti-takeover
consequences.
BOARD RECOMMENDATION: The Board of Directors recommends that you vote "FOR"
approval of Proposal 4 to amend our Amended Articles of Incorporation to
increase the number of authorized shares of common stock to 50,000,000.
PROPOSAL 5:
AMENDMENT TO THE 2005 STOCK OPTION PLAN
DESCRIPTION OF THE PLAN
In September 2005, the Company adopted the 2005 Stock Option Plan (the
"2005 Plan"). The 2005 Stock Option Plan provides for the grant of incentive
stock options or non-qualified stock options to purchase shares of the Company's
common stock. The Company is currently authorized to issue up to 150,000 shares
of common stock under the Plan. We propose to have you approve an increase in
the number of shares of common stock issuable upon the exercise of stock options
granted under the Plan from 150,000 to 1,150,000 shares. The 2005 Plan is
attached as Appendix A to this proxy. The Plan expires ten years after its
adoption.
Under the 2005 Plan, the Board of Directors may grant incentive stock
options to purchase shares of the Company's common stock only to employees, and
the Board of Directors may grant non-qualified stock options to purchase shares
of the Company's common stock to directors, officers, consultants and advisers
of the Company. The Board of Directors may grant options to purchase shares of
the Company's common stock at prices not less than fair market value, as defined
under the Plan, at the date of grant for stock options. The Board of Directors
also has the authority to set exercise dates (no longer than ten years from the
date of grant), payment terms and other provisions for each grant. In addition,
options may be granted to persons owning more than 10% of the voting power of
all classes of stock at a price no lower than 110% of the fair market value at
the date of grant, as determined by the Board of Directors. Options granted
under the Plan generally vest over four years at a rate of 25% after year one
and then equally on a monthly basis over the next three years from the date of
grant.
AMENDMENT
On July 5, 2007 the Board of Directors voted, subject to shareholder
approval, to increase the number of shares of common stock subject to options
under the 2005 Plan from 150,000 to 1,150,000. The Board of Directors believes
that the proposed increase is necessary in order for the Company to have
sufficient flexibility to provide the amounts and types of incentives to its
officers, employees, directors and consultants which are deemed necessary to
encourage the Company's success.
As of June 30, 2007, 79,000 stock options have been granted to our
employees, officers, directors and consultants under the 2005 Plan, 79,000 stock
options are outstanding under the 2005 Plan and 10,834 stock options are
exercisable under the 2005 Plan. We also have another stock option plan that has
expired, our 1996 Stock Option Plan, but, as of June 30, 2007, 163,403 stock
options were still currently outstanding under the 1996 Plan, and 155,454 of
those options are exercisable.
BOARD RECOMMENDATION
The Board of Directors unanimously recommends a vote "FOR" approval of the
amendment to the 2005 Stock Option Plan.
OTHER BUSINESS
As of the date of this proxy statement, our management was not aware of any
other matter to be presented at the Annual Meeting other than as set forth
herein. However, if any other matters are properly brought before the Annual
Meeting, the shares of our common stock 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 of our common stock
represented at the meeting is necessary to approve any such matters.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Except as otherwise disclosed herein, none of our directors or executive
officers, no nominee for election as a director of our Company and no associate
or affiliate of any of the foregoing persons has any substantial interest,
direct or indirect, by way of beneficial ownership of shares or otherwise, in
any matter to be acted upon at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows certain information regarding the common stock
beneficially owned on July 24, 2007 (the record date) for the following persons:
(i) each stockholder we know to be the beneficial owner of 5% or more of our
common stock, (ii) our directors and our executive officers named in the Summary
Compensation Table (see below), and (iii) all executive officers and directors
as a group. As of July 24, 2007, there were 1,778,529 shares of our common stock
issued and outstanding.
BENEFICIAL OWNERSHIP OF SHARES
NAME AND ADDRESS OF BENEFICIAL OWNERS* (1) NUMBER OF SHARES PERCENT
5% STOCKHOLDERS
Southridge Partners LP (2) 259,425 9.99%
Executive Pavilion 90 Grove Street
Ridgefield, CT 06877
NAMED EXECUTIVES
Anthony LaPine 132,700(3) 7.5%
Pamela LaPine 132,700(4) 7.5%
Vladimir Soskov 500(5) **
INDEPENDENT DIRECTORS
Mark Williams 1,500(6) **
Laurence W. Murray 2,660(7) **
Robert Lanz 3,000(6) **
All Officers and Directors as a Group (9 Persons) 183,835(8) 10.3%
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* Unless otherwise indicated, all addresses are c/o Semotus Solutions, Inc.,
718 University Ave., Suite 202, Los Gatos, CA 95032.
** Less than 1%
(1) This table is based upon information supplied by the named executive
officers, directors and 5% stockholders, including filings with the
Securities and Exchange Commission (the "SEC"). Unless otherwise indicated
in these notes and subject to the community property laws where applicable,
each of the listed stockholders has sole and investment power with respect
to the shares shown as beneficially owned by such stockholder. The number
of shares and percentage of beneficial ownership includes shares of common
stock issuable pursuant to stock options and warrants held by the person or
group in question, which may be exercised or converted on July 24, 2007 or
within 60 days thereafter.
(2) This information is based on a Schedule 13G filed by Southridge Partners LP
with the SEC on June 12, 2006, regarding ownership as of June 7, 2006. This
number includes 119,425 warrants to purchase shares of our common stock at
$6.00 per share; however, pursuant to a restriction on beneficial ownership
provided for in the warrant,
Southridge Partners LP is prohibited from exercising the warrant such that
it would beneficially own more than 9.99% of our common stock at any given
time.
(3) Includes 51,250 shares of common stock and exercisable options to purchase
62,550 of common stock owned directly by Mr. LaPine. Also includes 150
shares of common stock and exercisable options to purchase 18,750 shares of
common stock owned by Mr. LaPine's wife, Pamela LaPine, our President, as
set forth below.
(4) Includes 150 shares of common stock and exercisable options to purchase
18,750 shares of common stock owned directly by Pamela LaPine. Also
includes 51,250 shares of common stock and exercisable options to purchase
62,550 shares of common stock owned directly by Mrs. LaPine's husband,
Anthony LaPine, our Chief Executive Officer, as set forth above.
(5) Comprised of 500 shares of restricted common stock.
(6) Comprised of exercisable options to purchase shares of common stock.
(7) Includes exercisable options to purchase 2,500 shares of common stock and
160 shares of common stock owned directly by Mr. Murray.
(8) Includes the shares listed above as beneficially owned by the above listed
Named Executive Officers and Independent Directors, and 43,450 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 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 stockholders 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 150 (post-split) shares of common stock in April of 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 65 Chairman of the Board and Chief Executive Officer
Pamela B. LaPine 49 President
Charles K. Dargan, II 52 Chief Financial and Accounting Officer
Taliesin Durant 36 Corporate Secretary and General Counsel
Robert Lanz (1) 65 Director
Mark Williams (2) 49 Director
Laurence W. Murray (3) 67 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 began with the Company as 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. In December of 2005 Mr. LaPine resigned from his position as President,
but currently remains our Chief Executive Officer and 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.
Pamela LaPine began with the Company in 1996 and currently serves as our
President. She is responsible for the sales, marketing, account management and
strategic direction of the Company. 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 of Sales and
Marketing, 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.
Charles K. Dargan, II is our Chief Financial and Accounting Officer. Mr.
Dargan was on the Board from March 1999 to July 2002; he resigned as a member of
the Board 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. Mr. Dargan is also currently the principal / owner of CFO911, an
accounting and finance company. 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. 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 disciplines, including those related to mergers and acquisitions,
technology licensing, and software development and service contracts. Further,
she is experienced in providing legal counsel in the areas of small business
development, securities law matters and intellectual property safeguards. Ms.
Durant is a member of the California State Bar Association, having earned a
Juris Doctor degree at Northwestern School of Law at Lewis and Clark College.
While completing her final year of law school at Santa Clara University School
of Law, Ms. Durant received the Cali Excellence for the Future Award for
excellent achievement in the study of technology licensing. Ms. Durant also
earned a Bachelor of Arts in Economics from Connecticut College.
Robert Lanz has served on our Board 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, Managing Partner of RAMP Partners, LLC, an
accounting and financial management consulting firm, and Senior Advisor to CBIZ
Northern California, an accounting and consulting firm. Mr. Lanz is a certified
public accountant and a graduate of UCLA. 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 LLP, 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.
Mark Williams joined our Board 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 eight 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. Mr. Williams filed a Chapter 7
petition under the federal bankruptcy laws on September 29, 2004, which was
discharged on December 29, 2004.
Laurence W. Murray joined our Board 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 BOARD COMMITTEES.
The Board currently consists of four members. The Board held four (4)
meetings during fiscal year 2007, and executed 16 unanimous consents in lieu of
holding directors' meetings. Each of the directors appointed at that time
attended all meetings of the Board. During fiscal year 2007, the non-management
directors have met in executive sessions 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. All of our directors attended our 2006
Annual Meeting.
The standing committees of the Board 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 imposed by the American Stock Exchange.
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 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 applicable listing
standards imposed by the American Stock Exchange. The Board has concluded that
all current members of the Audit Committee satisfy these heightened independence
requirements. The Board 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 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 2005. The Audit Committee serves as the representative of the Board
for the general oversight of our 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 our company; 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 our company regarding
accounting, internal accounting controls, or auditing matters, and (ii) the
confidential, anonymous submission by employees of our company concerns
regarding questionable accounting or auditing matters.
The Audit Committee held a total of five meetings during fiscal year 2007,
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 __ of this proxy statement. The Audit Committee
Charter, as amended, 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.
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
applicable listing standards imposed by the American Stock Exchange. 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 2007. 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
applicable listing standards imposed by the American Stock Exchange.
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 2007. 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. The Nominating and
Corporate Governance Committee unanimously recommended the nominees for election
to the Board for the 2007 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 Board and its
committees, in monitoring a process to assess Board effectiveness and in
developing and implementing our 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 did not pay a third party to identify or
evaluate potential nominees in fiscal 2007 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
Our 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
Securities Exchange Act of 1934. 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 our company 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 discretionary grants of stock options, our 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 2006, we
did not grant any additional options to any directors.
The following table summarizes data concerning the compensation of our
directors for the fiscal year ended March 31, 2007.
DIRECTOR COMPENSATION
FEES NONQUALIFIED
FARNED NON-EQUITY DEFERRED
OR PAID STOCK OPTION INCENTIVE PLAN COMPENSATION ALL OTHER
IN CASH AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
NAME ($) ($) (S) ($) (S) ($) ($)
- ---------------------------------------------------------------------------------------------
Robert Lanz - - 14,533(1) - - - 14,533
- - - - - - -
Mark Williams 9,000(2) - 7,983(3) - - - 16,983
- - - - - - -
Laurence Murray - - 9,819(4) - - - 9,819
- - - - - - -
(1) Includes the following options to purchase shares of our common stock under
our 1996 Stock Option Plan and our 2005 Stock Option Plan (post 1 for 20
reverse split that went effective on July 23, 2007): 500 options
exercisable at $3.00 per share granted on June 3, 1997 (and repriced on
October 23, 2002), 500 options exercisable at $3.00 per share granted on
November 5, 2001 (and repriced on October 23, 2002), 1,500 options
exercisable at $2.80 per share granted on February 24, 2003, 500 options
exercisable at $4.80 per share granted on November 5, 2004 and 4,250
options granted on March 30, 2007 which will be exercisable at $2.20 per
share as of September 30, 2007, for a total of 7,250 options.
(2) Includes $2,500 in fees paid for services related to the filing of our
corporate state and federal income tax returns, and $6,500 in fees earned
for services related to the filing of our corporate state and federal
income tax returns.
(3) Includes the following options to purchase shares of our common stock under
our 1996 Stock Option Plan and our 2005 Stock Option Plan (post 1 for 20
reverse split that went effective on July 23, 2007): 500 options
exercisable at $3.00 per share granted on August 1, 2002 (and repriced on
October 23, 2002), 500 options exercisable at $2.40 per share granted on
April 1, 2003, 500 options exercisable at $4.80 per share granted on
November 5, 2004, and 2,500 options granted on March 30, 2007 which will be
exercisable at $2.20 per share as of September 30, 2007, for a total of
4,000 options.
(4) Includes the following options to purchase shares of our common stock under
our 1996 Stock Option Plan and our 2005 Stock Option Plan (post 1 for 20
reverse split that went effective on July 23, 2007): 500 options
exercisable at $3.40 per share granted on November 19, 2002, 500 options
exercisable at $2.80 per share granted on February 24, 2003, 500 options
exercisable at $4.80 per share granted on November 5, 2004, 1,000 options
exercisable at $3.80 per share granted on June 1, 2006, and 1,750 options
granted on March 30, 2007 which will be exercisable at $2.20 per share as
of September 30, 2007, for a total of 4,250 options.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table summarizes the total compensation paid to, earned or
received by our Named Executive Officers, who are the Chief Executive Officer
and our four other most highly compensated executive officers during the last
three fiscal years ending March 31, 2007, 2006 and 2005.
SUMMARY COMPENSATION TABLE
NON-EQUITY NONQUALIFIED
INCENTIVE DEFERRED
NAME AND STOCK OPTION PLAN COMPENSATION ALL OTHER
PRINCIPAL SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION
POSITION YEAR ($) ($) ($) ($) ($) ($) ($) TOTAL($)
-------- ---- ------- ----- ------ ------ ------------ -------- ------------ --------
Anthony 2007 216,000 -- -- -- -- -- 15,392(1) 235,392
LaPine,
Chairman and 2006 234,000 -- -- -- -- -- 15,392(1) 249,392
Chief
Executive 2005 216,000 -- -- -- -- -- 15,341(2) 231,341
Officer
Pamela LaPine, 2007 138,800 -- -- -- -- -- 12,000(3) 150,800
President
2006 120,800 -- -- -- -- -- 12,000(3) 132,800
2005 112,050 -- -- -- -- -- 11,969(3) 124,019
Vladimir 2007 111,779 10,000 1,800(4) 9,900(5) -- -- -- 133,479
Soskov, Chief
Technical 2006 117,509 -- -- 19,600(5) -- -- -- 137,109
Officer
2005 -- -- -- -- -- -- -- --
1. Represents company-paid life insurance premiums of $3,392 and an automobile
allowance of $12,000.
2. Represents company-paid life insurance premiums of $3,392 and an automobile
allowance of $11,949.
3. Represents automobile allowances and/or mileage reimbursements.
4. On June 23, 2006, we issued 500 shares of restricted common stock to Mr.
Soskov. On June 23, 2006, these shares had a value of $1,800, based on the
closing price of our common stock of $3.60 per share on the date of grant,
as reported by Amex (post 1 for 20 reverse split that went effective on
July 23, 2007).
5. On October 16, 2006, we granted Vladimir Soskov 5,000 options to purchase
shares of our common stock under our 2005 Stock Option Plan at a price of
$2.80/share. On June 23, 2005 we granted Vladimir Soskov 3,500 warrants to
purchase shares of our common stock at a price of $7.80/share (post 1 for
20 reverse split that went effective on July 23, 2007). All options and
warrants have expired as of June 27, 2007 due to the fact that Mr. Soskov
resigned on March 27, 2007.
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE
Anthony N. LaPine became the Company's Chairman, President and Chief
Executive Officer on May 1, 1996. Mr. LaPine resigned from his position as
President on December 14, 2005, but remains the Company's Chairman and Chief
Executive Officer. In connection with his employment, the Company entered into a
three year employment agreement with Mr. LaPine on May 1, 1996, which has
automatically renewed for additional one year periods until May 1, 2007. Under
this 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. As of March 31, 2006 and for the
fiscal year ended March 31, 2007, Mr. LaPine took a voluntary pay reduction of
$24,000 in his base salary, so that his annual base salary was $216,000. Mr.
LaPine also receives a car allowance in the amount of $1,000 per month. Mr.
LaPine is 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 fiscal year ended March 31, 2007. During fiscal year
2007, Mr. LaPine was not granted any additional stock options or other long term
incentive compensation. If the Company terminates Mr. LaPine's employment for
any reason other than for cause or disability, or if Mr. LaPine terminates his
employment for good reason, as defined in his employment agreement, the Company
shall continue payments of his base salary and maintain his existing insurance
benefits for the duration of the annual renewal term of his employment
agreement.
Effective July 15, 2007, the Compensation Committee agreed that the Company
should terminate the existing employment agreement with Mr. LaPine and enter
into a new employment agreement with Mr. LaPine for a term of three years. Under
this new employment agreement, Mr. LaPine is entitled to a base salary of
$240,000 per year, plus discretionary increases in accordance in conformity with
the Company's standard review procedure. However, Mr. LaPine's previous
voluntary decrease of $24,000 annually in compensation will continue with the
same voluntary decrease in his annual salary under the new employment agreement
so that Mr. LaPine will continue to be compensated at an annual salary of
$216,000. Mr. LaPine also receives a car allowance in the amount of $1,000 per
month. Mr. LaPine is eligible for an annual bonus, with the actual amount of
bonus paid to be determined by the Committee in its sole discretion, based upon
such factors and performance goals as the Committee deems appropriate. If Mr.
LaPine's employment is terminated by the Company without cause or by Mr. LaPine
for good reason as provided in the Agreement, or if the Company is acquired or
dissolves and a new employment agreement satisfactory to Mr. LaPine cannot be
reached, all stock and stock options of the Company then owned by Mr. LaPine
which are unvested shall become immediately fully vested, and the Company shall
pay to Mr. LaPine severance pay equal to the remaining years and/or months of
his then current base salary that are due, based on a three year agreement term.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END (post 1 for 20 reverse split that
went effective on July 23, 2007):
Option Awards Stock Awards
------------------------------------------------------------- ------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Market Plan Market or
Value Awards: Payout
Number of Number of Value of
of Shares Unearned Unearned
Incentive Shares, or Units Shares, Shares,
Plan Awards: or Units of Units or Units or
Number of Securities Number of of Stock Stock Other Other
Securities Underlying Securities That That Rights Rights
Underlying Unexercised Underlying Option Have Have That Have That Have
Unexercised Unearned Unexercised Exercise Option Not Not Not Not
Options(#) Options(#) Unearned Price Expiration Vested Vested Vested Vested
Name Exercisable Unexercisable Options(#) ($) Date ($) (#) (#) (#)
- ---------------------------------------------------------------------------- -----------------------------------------
Anthony Lapine 18,500 -- -- 3.40 01/12/2010 -- -- -- --
15,000 -- -- 3.40 03/05/2011 -- -- -- --
4,050 -- -- 3.40 05/16/2012 -- -- -- --
20,000 -- -- 7.00 05/16/2013 -- -- -- --
5,000 -- -- 8.20 07/24/2013 -- -- -- --
Pam Lapine 2,500 -- -- 3.40 01/12/2010 -- -- -- --
2,500 -- -- 3.40 12/27/2010 -- -- -- --
10,000 -- -- 3.40 03/05/2011 -- -- -- --
1,750 -- -- 3.40 05/16/2012 -- -- -- --
2,000 -- -- 8.20 07/24/2013 -- -- -- --
Vladimir -- 5,000 -- 2.80 10/17/2016 -- -- -- --
Soskov (1) 3,500 -- -- 7.80 06/23/2015 -- -- -- --
1. All options and warrants granted to Mr. Soskov have expired as of June 27,
2007 due to the fact that Mr. Soskov resigned on March 27, 2007.
STOCK OPTION PLANS
We currently have two authorized stock option plans, the 1996 Stock Option
Plan, as amended, which terminated in June of 2006, and the 2005 Stock Option
Plan, which will terminate in July of 2015. Descriptions of the two Stock Option
Plans are located under Footnote 11 of our Annual Report on Form 10-KSB, a copy
of which is included with this proxy statement.
SUMMARY INFORMATION CONCERNING STOCK OPTION PLANS
The following table sets forth certain information relating to our stock
option plans as of March 31, 2007 (post 1 for 20 reverse split that went
effective on July 23, 2007):
EQUITY COMPENSATION PLAN INFORMATION
- --------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES
REMAINING
AVAILABLE FOR
FUTURE ISSUANCE
UNDER EQUITY
COMPENSATION
NUMBER OF SECURITIES WEIGHTED-AVERAGE PLANS (EXCLUDING
TO BE ISSUED UPON EXERCISE PRICE SECURITIES
EXERCISE OF OF OUTSTANDING REFLECTED IN
OUTSTANDING OPTIONS OPTIONS COLUMN (A))
PLAN CATEGORY PLAN NAME (A) (B) (C)
- --------------------------- --------------- -------------------- ---------------- ------------------
Equity Compensation plans
approved by security The 1996 Stock
holders Option Plan 168,132 $ 5.40 --
- --------------------------- --------------- -------------------- ---------------- ------------------
The 2005 Stock
Option Plan 65,355 $ 2.60 84,645
- --------------------------- --------------- -------------------- ---------------- ------------------
Clickmarks Warrants(1) -- 15,000 $ 7.80 --
- --------------------------- --------------- -------------------- ---------------- ------------------
- --------------------------- --------------- -------------------- ---------------- ------------------
TOTAL 248,487 $ 4.60 84,645
- --------------------------------------------------------------------------------------------------------
(1) As part of the acquisition of Clickmarks, Inc., various Clickmarks employees
were retained by our Company. As a hiring and retention incentive, in lieu of
issuing stock options under the Company's stock option plan, we issued warrants
to this group of employees to purchase up to a total of 50,000 shares of our
common stock at an exercise price of $7.80 per share, which was the closing
price of our common stock on June 23, 2005, the date the acquisition closed and
their date of hire, vesting over a one year period and having a ten year term.
35,000 of these warrants have expired as of March 31, 2007 due to resignations
and/or terminations from employment.
INDEBTEDNESS OF DIRECTORS, OFFICERS AND OTHERS
Our directors, senior officers, and their associates were not indebted to
us or to any of our subsidiaries at any time since the beginning of our last
completed fiscal year.
EMPLOYMENT AGREEMENTS
The Company entered into a three-year employment agreement with Anthony
LaPine, our CEO, which became effective on May 1, 1996, and was extended to May
1, 2005. The agreement automatically renews for one year terms unless notice is
provided by either party. As of May 1, 2006, no notice had been given by either
party, and therefore, the agreement has automatically renewed for an additional
one year term ending May 1, 2007. 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. As of June
15, 2005 his base salary was re-instated. However, as of March 31, 2006 Mr.
LaPine took a voluntary salary reduction in the amount of $24,000 per year. Mr.
LaPine is also given a car allowance that is not to exceed $1,000 a month. Mr.
LaPine receives health, dental and vision insurance, but contributes the same
percentage towards the monthly premium as all of our employees. If we terminate
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, we are required to continue paying
the salary and other benefits for the duration of the term of the agreement.
Effective July 15, 2007, the Compensation Committee agreed that the Company
should terminate the existing employment agreement with Mr. LaPine and enter
into a new employment agreement with Mr. LaPine for a term of three years. Under
this new employment agreement, Mr. LaPine is entitled to a base salary of
$240,000 per year, plus discretionary increases in accordance in conformity with
the Company's standard review procedure. However, Mr. LaPine's previous
voluntary decrease of $24,000 annually in compensation will continue with the
same voluntary decrease in his annual salary under the new employment agreement
so that Mr. LaPine will continue to be compensated at an annual salary of
$216,000. Mr. LaPine also receives a car allowance in the amount of $1,000 per
month. Mr. LaPine is eligible for an annual bonus, 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. If Mr.
LaPine's employment is terminated by the Company without cause or by Mr. LaPine
for good reason as provided in the Agreement, or if the Company is acquired or
dissolves and a new employment agreement satisfactory to Mr. LaPine cannot be
reached, all stock and stock options of the Company then owned by Mr. LaPine
which are unvested shall become immediately fully vested, and the Company shall
pay to Mr. LaPine severance pay equal to the remaining years and/or months of
his then current base salary that are due, based on a three year agreement term.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective May 1, 1996, the Company entered into a three year employment
agreement with our Chief Executive Officer, Anthony LaPine. 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, 2006, no notice had been
given by either party, and therefore, the agreement automatically renewed for an
additional one year term ending May 1, 2007.
Effective July 15, 2007, the Compensation Committee agreed that the Company
should terminate the existing employment agreement with Mr. LaPine and enter
into a new employment agreement with Mr. LaPine for a term of three years. Under
this new employment agreement, Mr. LaPine is entitled to a base salary of
$240,000 per year, plus discretionary increases in accordance in conformity with
the Company's standard review procedure. However, Mr. LaPine's previous
voluntary decrease of $24,000 annually in compensation will continue with the
same voluntary decrease in his annual salary under the new employment agreement
so that Mr. LaPine will continue to be compensated at an annual salary of
$216,000. Mr. LaPine also receives a car allowance in the amount of $1,000 per
month. Mr. LaPine is eligible for an annual bonus, 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. If Mr.
LaPine's employment is terminated by the Company without cause or by Mr. LaPine
for good reason as provided in the Agreement, or if the Company is acquired or
dissolves and a new employment agreement satisfactory to Mr. LaPine cannot be
reached, all stock and stock options of the Company then owned by Mr. LaPine
which are unvested shall become immediately fully vested, and the Company shall
pay to Mr. LaPine severance pay equal to the remaining years and/or months of
his then current base salary that are due, based on a three year agreement term.
Effective January 2005 we entered into an independent contractor agreement
with a company located in Pakistan to provide us with certain engineering
services. This Pakistani company is partially owned by Mr. Umair Khan, who was
our Chief Operating Officer from December 14, 2005 to May 5, 2006 and who was
the Chairman and President of Clickmarks, Inc., one of our wholly owned
subsidiaries, from 1999 until May 5, 2006. Mr. Khan is currently on our Advisory
Board and as of June 30, 2007 holds 81,000 shares of our restricted common
stock.
AUDIT COMMITTEE REPORT
At the time of this Report, the Audit Committee of the Board 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 imposed by the American
Stock Exchange.
The Board 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, LL Bradford & Company, LLC. 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 that the audited financial statements be included in
the Company's Annual Report on Form 10-KSB for the fiscal year ended March 31,
2007, 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 and other highly
compensated employees, 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.
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. Because the
Company did not meet the financial objectives established for the year, the
Committee made no bonus awards to any executive officers or other highly
compensated employees.
LONG-TERM INCENTIVE COMPENSATION
In fiscal year 2007, long-term incentive compensation for senior executives,
including the officers of the Company, consisted of the continued vesting of
outstanding grants of existing stock options granted under the Company's Stock
Option Plans as well as some grants of additional stock options to certain
executives whose retention and services are critical to the Company. These stock
options have either a two, three 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
approves long-term incentive compensation awards 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. This plan is a 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. Mr. LaPine resigned from his position as President on
December 14, 2005, but remains the Company's Chairman and Chief Executive
Officer. In connection with his employment, the Company entered into a three
year employment agreement with Mr. LaPine on May 1, 1996, which has
automatically renewed for additional one year periods until May 1, 2007. Under
this 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. As of March 31, 2006 and for the
fiscal year ended March 31, 2007, Mr. LaPine took a voluntary pay reduction of
$24,000 in his base salary, so that his annual base salary was $216,000. Mr.
LaPine also receives a car allowance in the amount of $1,000 per month. Mr.
LaPine is 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 fiscal year ended March 31, 2007. During fiscal year
2007, Mr. LaPine was not granted any additional stock options or other long term
incentive compensation. If the Company terminates Mr. LaPine's employment for
any reason other than for cause or disability, or if Mr. LaPine terminates his
employment for good reason, as defined in his employment agreement, the Company
shall continue payments of his base salary and maintain his existing insurance
benefits for the duration of the annual renewal term of his employment
agreement.
Effective July 15, 2007, the Committee has agreed that the Company should
terminate the existing employment agreement with Mr. LaPine and enter into a new
employment agreement with Mr. LaPine for a term of three years. Under this new
employment agreement, Mr. LaPine is entitled to a base salary of $240,000 per
year, plus discretionary increases in accordance in conformity with the
Company's standard review procedure. However, Mr. LaPine's previous voluntary
decrease of $24,000 annually in compensation will continue with the same
voluntary decrease in his annual salary under the new employment agreement so
that Mr. LaPine will continue to be compensated at an annual salary of $216,000.
Mr. LaPine also receives a car allowance in the amount of $1,000 per month. Mr.
LaPine is eligible for an annual bonus, 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. If Mr. LaPine's
employment is terminated by the Company without cause or by Mr. LaPIne for good
reason as provided in the Agreement, or if the Company is acquired or dissolves
and a new employment agreement satisfactory to Mr. LaPine cannot be reached, all
stock and stock options of the Company then owned by Mr. LaPine which are
unvested shall become immediately fully vested, and the Company shall pay to Mr.
LaPine severance pay equal to the remaining years and/or months of his then
current base salary that are due, based on a three year agreement term.
COMPENSATION OF THE PRESIDENT
Effective as of December 14, 2005, the Company appointed Pamela LaPine as its
President. Ms. LaPine has been the Company's Executive Vice President since
2000. During the fiscal year 2007, her annual base salary was $144,800. Ms.
LaPine also receives a car allowance in the amount of $1,000 per month. Ms.
LaPine is eligible for an annual bonus, the amount of which will 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 Mrs. LaPine until the Company turns profitable for a
reasonable period of time. Therefore, Ms. LaPine did not receive a bonus for the
fiscal year ended March 31, 2007. During fiscal year 2007, Ms. LaPine was not
granted any additional stock options or other long term incentive compensation.
Ms. LaPine is an at will employee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 2007, 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 fiscal
year 2007:
Laurence Murray; Chairman
Robert Lanz;
Mark Williams
INFORMATION REGARDING THE FEES PAID TO L.L. BRADFORD & COMPANY, LLC
DURING THE YEAR ENDING MARCH 31, 2006 & 2007
AUDIT FEES
The aggregate fees billed for professional services rendered to our Company
by L.L. Bradford & Company, LLC for the years ended March 31, 2006 and 2007
were:
2006 2007
------------------------------------ ---------- ----------
Audit fees $ 36,000 $ 36,000
------------------------------------ ---------- ----------
Audit-related fees:
------------------------------------ ---------- ----------
SEC filings review and consent -- --
------------------------------------ ---------- ----------
Total audit and audit-related fees $ 36,000 $ 36,000
------------------------------------ ---------- ----------
Tax fees -- --
------------------------------------ ---------- ----------
All other fees -- --
------------------------------------ ---------- ----------
------------------------------------ ---------- ----------
Total fees $ 36,000 $ 36,000
----------------------------------------------------------
The aggregate fees billed for all audit-related services rendered by L.L.
Bradford & Company, LLC for the years ended March 31, 2006 and 2007 (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 L.L. Bradford & Company, LLC for the most
recent fiscal year or for the year ending March 31, 2006.
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.
CORPORATE GOVERNANCE INFORMATION
Stockholders can access our corporate governance information, including our
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 our 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 2007 ANNUAL REPORT ON FORM 10-KSB, INCLUDING FINANCIAL
STATEMENTS FOR THE YEAR ENDED MARCH 31, 2007, 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-KSB, PLEASE CONTACT
SEMOTUS SOLUTIONS, 718 UNIVERSITY AVE., SUITE 202, LOS GATOS, CA 95032, OR AT
TELEPHONE NUMBER (408) 399-6120.
COMMUNICATING WITH THE BOARD OF DIRECTORS
The Board does not currently have a formal process for security holders to
send communications to the Board. We, however, encourage stockholders to
communicate directly with the Board as a whole, with non-management directors or
with specified individual directors, by sending correspondence to the Secretary
at 718 University Ave., Suite 202, Los Gatos, CA 95032.
Under our Company's Bylaws, stockholders may propose business to be brought
before an annual meeting. In order for a stockholder to submit a proposal for
consideration at our annual meeting, the stockholder must fulfill
the requirements set forth in our by-laws and Rule 14a-8 under the Securities
Exchange Act of 1934 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 2008 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 718
University Ave., Suite 202, Los Gatos, CA 95032, not later than 5:00 p.m.
Pacific Standard Time on or before April 8, 2007. 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 2008 Annual Meeting. We will be
able to use proxies you give us for the next year's meeting to vote for or
against any stockholder proposal that is not included in the proxy statement at
our discretion unless the proposal is submitted to us on or before April 8,
2008.
/s/ Anthony N. LaPine
CHIEF EXECUTIVE OFFICER
Los Gatos, California
July __, 2007