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:

[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12

SEMOTUS SOLUTIONS, INC.
(Name of Registrant as Specified In Its Charter)
-----------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------------
(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):
---------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------------

[ ] 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:
---------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------------------
(ALL NUMBERS ARE ADJUSTED TO GIVE EFFECT TO A 1 FOR 20 REVERSE STOCK SPLIT THAT
WENT EFFECTIVE JULY 20, 2007)

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
Anthony N. LaPine
CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD

Los Gatos, California
July 27, 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:

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"), 1,778,374
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, 889,188 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 26, 2007, our total market value was approximately $1.7 million
and we had 1,778,374 shares of common stock issued and outstanding. On such
date, the closing price for our common stock on Amex was $0.93 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 1,778,374
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 1,778,374 1,778,374 1,778,374 889,187 - 889,187 -
355,675 355,675
- ------------------------- -------------- ------------------ -------------- ------------------ ------------------
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, 1,778,374 shares of common stock issued and outstanding and had
reserved approximately 522,826 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 1,778,374 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%
- -------------

* 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 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
- -------------
(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 25
years of accounting and management experience. Mr. Williams currently is a
partner in the Firm of Ruzzo, Scholl & Murphy. From 2002 to 2007 he operated his
own accounting firm. 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. Mr. Williams earned his
Bachelor of Science in Accounting from San Jose State University.

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. Anthony LaPine was the only director
that 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 27 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
EARNED NON-EQUITY DEFERRED
OR PAID STOCK OPTION INCENTIVE PLAN COMPENSATION ALL OTHER
IN CASH AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
NAME ($) ($) ($) ($) ($) ($) ($)
- --------------------------------------------------------------------------------------------------

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: 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: 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: 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

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 142,800 -- -- -- -- -- 12,000(3) 150,800
President
2006 120,800 -- -- -- -- -- 12,000(3) 132,800

2005 112,050 -- -- -- -- -- 11,969(3) 124,019

Vladimir 2007 88,719 10,000 1,800(4) 9,900(5) -- -- -- 110,419
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.
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. 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:

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 Soskov
(1) -- 5,000 -- 2.80 10/17/2016 -- -- -- --
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:

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.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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
4,050 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:

/s/ Laurence Murray
- --------------------------
Laurence Murray; Chairman

/s/ Robert Lanz
- --------------------------
Robert Lanz

/s/ Mark Williams
- --------------------------
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 SB-2s. 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
- -------------------------
Anthony N. LaPine
CHIEF EXECUTIVE OFFICER

Los Gatos, California
July 27, 2007

SEMOTUS SOLUTIONS, INC.
2005 STOCK OPTION PLAN
AS AMENDED AND RESTATED

1. PURPOSES OF THE PLAN. The purposes of this 2005 Stock Option Plan (the
"Plan") of Semotus Solutions, Inc. (the "Company") are to:

(i) encourage selected officers, directors, employees and consultants to
improve operations and increase profits of the Company;

(ii) encourage selected officers and employees to accept or continue
employment with the Company or its Affiliates; and

(iii) increase the interest of selected officers, directors, employees and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company ("Common Stock").

Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs"), intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").

2. ELIGIBLE PERSONS. Every person who at the date of grant of an Option is an
employee of the Company or of any Affiliate (as defined below) (including
employees who are also officers or directors of the Company or of any Affiliate)
is eligible to receive NQOs or ISOs under this Plan. The term "Affiliate" as
used in the Plan means a parent or subsidiary corporation as defined in the
applicable provisions (currently Sections 424(e) and (f), respectively) of the
Code. Every person who is a director, officer, employee of or consultant to the
Company or any Affiliate at the date of grant of an Option is eligible to
receive NQOs under this Plan.

3. STOCK SUBJECT TO THIS PLAN. Subject to the provisions of Section 6.1.1 of the
Plan, the maximum aggregate number of shares of stock that may be granted
pursuant to this Plan is one million, one hundred fifty thousand (1,150,000)
shares of Common Stock. The shares unexercised shall become available again for
grants under the Plan.

4. ADMINISTRATION.

4.1 Option Committee. This Plan shall be administered by the Board of
Directors of the Company (the "Board") or by a committee of at least two
non-employee Board members to which administration of the Plan is delegated (in
either case, the "Option Committee"). No member of the Option Committee shall be
liable for any decision, action, or omission respecting the Plan, any options,
or any option shares.

4.2 Disinterested Administration. This Plan shall be administered in
accordance with the disinterested administrative requirements of Rule 16b-3
promulgated by the Securities and Exchange Commission ("Rule 16b-3"), or any
successor rule thereto.

4.3 Authority of the Option Committee. Subject to the other provisions of
this Plan, the Options Committee shall have the authority, in its discretion:
(i) to grant Options; (ii) to determine the fair market of the Common Stock
subject to Options; (iii) to determine the exercise price of Options granted;
(iv) to determine the persons whom, and the time or times at which, Options
shall be granted, and the number of shares of Common Stock subject to each
Option; (v) to interpret this Plan; (vi) to prescribe, amend, and rescind rules
and regulations relating to this Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical), including but
not limited to, the time or times at which Options shall be exercisable; (viii)
with the consent of the optionee, to modify or amend any Option; (ix) to defer
(with the consent of the optionee) or accelerate the exercise date or vesting of
any Option; (x) to authorize any person to execute on behalf of the Company any
instrument evidencing the grant of an Option; and (xi) to make all other
determination deemed necessary or advisable for the administration of this Plan.
The Option Committee may delegate nondiscretionary administrative duties to such
employees of the Company as it deems proper.

4.4 Determinations Final. All questions of interpretation, implementation,
and application of this Plan shall be determined by the Option Committee. Such
determinations shall be final and binding on all persons.

5. GRANTING OF OPTIONS: OPTION AGREEMENT.

5.1 Ten-Year Term. The Board shall grant no Options under this Plan after
ten years from the date of adoption of this Plan.

5.2 Option Agreement. Each Option shall be evidenced by a written stock
option agreement, in form satisfactory to the Company, executed by the Company
and the person to whom such Option is granted; provided, however, that the
failure by the Company, the optionee, or both to execute such an agreement shall
not invalidate the granting of any Option.

5.3 Designation as ISO or NQO. The agreement shall specify whether each
Option it evidences is a NQO or an ISO. Notwithstanding designation of any
Option as an ISO or a NQO, if the aggregate fair market value of the shares
under Options designated as ISOs would become exercisable for the first time by
any Optionee at a rate in excess of $100,000 in any calendar year (under all
plans of the Company), then unless otherwise provided in the stock option
agreement or by the Option Committee, such Options shall be NQOs to the extent
of the excess above $100,000. For purposes of this Section 5.3, the Options
shall be taken into account in the order in which they were granted, and the
fair market value of the shares shall be determined as of the time the Option
with respect to such shares is granted.

5.4 Grant to Prospective Employees. The Option Committee may approve the
grant of Options under this Plan to persons who are expected to become employees
of the Company, but are not employed at the date of approval. In such cases, the
Option shall be deemed granted, without further approval, on the date the
optionee is first treated as an employee for payroll purposes.

6. TERMS AND CONDITIONS OF OPTIONS. Each Option granted under this Plan shall be

designated as a NQO or an ISO. Each Option shall be subject to the terms and
conditions set forth in Section 6.1. NQOs shall be also subject to the terms and
conditions set forth in Section 6.2, but not those set forth in Section 6.3.
ISOs shall also be subject to the terms and conditions set forth in Section 6.3,
but not those set forth in Section 6.2.

6.1 Terms and Conditions to Which All Options Are Subject. All Options
granted under this Plan shall be subject to the following terms and conditions:

6.1.1 Changes in Capital Structure. The existence of outstanding
Options shall not affect the Company's right to effect adjustments,
recapitalization, reorganizations, or other changes in its or any other
corporation's capital structure or business, any merger or consolidation, any
issuance of bonds, debentures, preferred, or prior preference stock ahead of or
affecting Common Stock, the dissolution or liquidation of the Company's or any
other corporation's assets or business or any other corporate act whether
similar to the events described above or otherwise. Subject to Section 6.1.2, if
the stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, recapitalization, or other event, or converted into or
exchanged for other securities as a result of a merger, consolidation,
reorganization, or other event, appropriate adjustments shall be made in (i) the
number and class of shares of stock subject to this Plan and each outstanding
Option; provided, however, that the Company shall not be required to issue
fractional shares as a result to any such adjustments. Each such adjustment
shall be subject to approval by the Option Committee in its sole discretion, and
may be made without regard to any resulting tax consequence to the optionee.

6.1.2 Corporate Transactions. In connection with (i) any merger,
consolidation, acquisition, separation, or reorganization in which more than 50%
of the shares of Common Stock of the Company outstanding immediately before such
event are converted into cash or into another security, (ii) any dissolution or
liquidation of the Company or any partial liquidation involving 50% or more of
the assets of the Company, (iii) any sale of more than 50% of the Company's
assets, or (iv) any like occurrence in which the Company is involved, the Option
Committee may, in its absolute discretion, do one or more of the following upon
ten days' prior written notice to optionees; (a) accelerate any vesting schedule
to which an Option is subject; (b) cancel Options upon payment to each optionee
in cash, with respect to each Option to the extent then exercisable, of any
amount which, in the absolute discretion of the Option Committee, is determined
to be equivalent to any excess of the market value (at the effective time of
such event) of the consideration that such optionee would have received of the
Option had been exercised before the effective time over the exercise price of
the Option; (c) shorten the period during which such Options are exercisable
(provided they remain exercisable, to the extent otherwise exercisable, for at
least ten days after the date the notice is given); or (d) arrange that new
option rights be substituted for the option rights granted under this Plan, or
that the Company's obligations as to Options outstanding under this Plan be
assumed, by an employer corporation other than the Company or by a parent or
subsidiary of such employer corporation. The actions described in this Section
6.1.2 may be taken without regard to any resulting tax consequence to the
optionee.

6.1.3 Time of Option Exercise. Except as necessary to satisfy the
requirements of Section 422 of the Code and subject to Section 5, Options
granted under this Plan shall be exercisable (a) immediately as of the effective
date of the stock option agreement granting the

Option, or (b) at such other times as are specified in the written stock option
agreement relating to such Option: provided, however, that so long as the
optionee is a director or officer, as those terms are used in Section 16 of the
Exchange Act, such Option may not be exercisable, in whole or in part, at any
time prior to the six-month anniversary of the date of the Option grant, unless
the Option Committee determines that the foregoing provision is not necessary to
comply with the provisions of Rule 16b-3 or that Rule 16b-3 is not applicable to
the Plan. No Option shall be exercisable, however, until a written stock option
agreement in form satisfactory to the Company is executed by the Company and the
optionee. The Option Committee, in its absolute discretion, may later waive any
limitations respecting the time at which an Option or any portion of an Option
first becomes exercisable.

6.1.4 Option Grant Date. Except as provided in Section 5.4 or as
otherwise specified by the Option Committee, the date of grant of an Option
under this Plan shall be the date as of which the Option Committee approves the
grant.

6.1.5 Nonassignability of Option Rights. No Option granted under this
Plan shall be assignable or otherwise transferable by the optionee except by
will, by the laws of descent and distribution, or pursuant to a qualified
domestic relations order (limited in the case of an ISO, to a qualified domestic
relations order that effects a transfer of an ISO that is community property as
part of a division of community property). During the life of the optionee, an
Option shall be exercisable only by the optionee.

6.1.6 Payment. Except as provided below, payment in full shall be made
for all stock purchased at the time written notice of exercise of an Option is
given to the Company, and proceeds of any payment shall constitute general funds
of the Company. Payment may be made in cash, by delivery to the Company of
shares of Common Stock owned by the optionee (duly endorsed in favor of the
Company or accompanied by a duly endorsed stock power), or by any other form of
consideration and method of payment to the extent permitted under any applicable
laws. Any shares delivered shall be valued as of the date of exercise of the
Option in the manner set forth in Section 6.1.12. Optionees may not exercise
Options by delivery of shares more frequently than at six-month intervals.

6.1.7 Termination of Employment. Unless determined otherwise by the
Option Committee in its absolute discretion to the extent not already expired or
exercised, every Option granted under this Plan shall terminate at the earlier
of (a) the Expiration Date (as defined in Section 6.1.12) or (b) three months
after termination of employment with the Company or any Affiliate; provided,
that an Option shall be exercisable after the date of termination of employment
only to the extent exercisable on the date of termination; and provided further,
that if termination of employment is due to the optionee's death or "disability"
( as determined in accordance with Section 22(e)(3) of the Code), the optionee,
or the optionee's personal representative (or any other person who acquires the
Option from the optionee by will or the applicable laws of descent and
distribution), may at any time within 18 months after the termination of
employment (or such lesser period as is specified in the option agreement but in
no event after the Expiration Dare of the Option), exercise the rights to the
extent they were exercisable on the date of termination. Transfer of an optionee
from the Company to an Affiliate or vice versa, or from one Affiliate to
another, or a leave of absence due to sickness, military service, or other cause
duly approved by the Company,

shall not be deemed a termination of employment for purposes of this Plan. For
the purpose of this Section 6.1.7, "employment" means engagement with the
Company or any subsidiary of the Company either as an employee, as a director,
or as a consultant.

6.1.8 Repurchase of Stock. At the time the Company grants Options
under this Plan, the Company may retain, for itself or others, rights to
purchase the shares acquired under the Option or impose other restrictions on
the shares. The terms and conditions of any such rights or other restrictions
shall be set forth in the stock option agreement evidencing the Option.

6.1.9 Withholding and Employment Taxes. At the time of exercise of an
Option (or at such later time(s) as the Company may prescribe), the optionee
shall remit to the Company in cash all applicable (as determined by the Company
in its sole discretion) federal and state withholding taxes. Subject to
compliance with all applicable laws, the Option Committee may, in the exercise
of its sole discretion, permit an optionee to pay some or all of such taxes by
means of a promissory note on such terms as the Option Committee deems
appropriate. If authorized by the Option Committee in its sole discretion, and
if the Option has been held for six months or more, an optionee may elect to
have shares of Common Stock which are acquired upon exercise of the Option
withheld by the Company or to tender to the Company other shares of Common Stock
or other securities of the Company owned by the optionee on the date of
determination of the amount of tax to be withheld as a result of the exercise of
such Option (the "Tax Date") to pay the amount of tax that is required by law to
be withheld by the Company as a result of the exercise of such Option, provided
that the election satisfies the following requirements:

(i) the election shall be irrevocable, shall be made at least six
months before the Option exercise, and shall be subject to the disapproval of
the Option Committee at any time before consummation of the Option exercise; or

(ii) the election shall be made in advance to take effect in a
subsequent "window period" (as defined below) in which the Option is exercised,
and the Option Committee shall approve the election when it is made or at any
time thereafter up to consummation of the Option exercise; or

(iii) the election shall be made in a window period and the
approval of the Option Committee shall be given after the election is made and
within the same window period, and the Option exercise shall be consummated
within such window period; or

(iv) shares or other previously owned securities shall be
tendered (but stock shall not be withheld.) at any time up to the consummation
of the Option exercise (in which event, neither a prior irrevocable election nor
window period timing nor shall be required).

A "window period" is the period beginning on the third business day following
the date of release for publication of quarterly or annual summary statements of
sales and earnings and ending on the 12th business day following such date. Any
securities so withheld or tendered shall be valued by the Company as of the Tax
Date.

6.1.10 Other Provisions. Each Option granted under this Plan may
contain such other terms, provisions, and conditions not consistent with this
Plan as may be determined by the Option Committee, and each ISO granted under
this Plan shall include such provisions and conditions as are necessary to
qualify the Option as an "incentive stock option" within the meaning of Section
422 of the Code.

6.1.11 Determination of Value. For purposes of the Plan, the value of
Common Stock or other securities of the Company shall be determined as follows:

(i) If the Common Stock of the Company is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers Automated Quotation System, its fair market value shall be the closing
sales price for such Common Stock or the closing bid if no sale was reported, as
quoted on such system or exchange (or the largest such exchange) for the date
the value is to be determined (or if there is no sale for such date, then for
the last preceding business day on which there was at least one sale), as
reported in the Wall Street Journal.

(ii) If the Common Stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
Common Stock on the date the value is to be determined (or if there is no quoted
price for the date of grant, then for the last preceding business day on which
there was a quoted price).

(iii) If the Common Stock of the Company is as described in
Section 6.1.11(i) or (ii), but is restricted by law, contract, market
conditions, or otherwise as to salability or transferability, its fair market
value shall be as set forth in Section 6.1.11(i) or (ii), as appropriate, less,
as determined by the Option Committee, an appropriate discount, based on the
nature and terms of the restrictions.

(iv) In the absence of an established market for the Common
Stock, the fair market value thereof shall be determined by the Option
Committee, with reference to the Company's net worth, prospective earning power,
dividend-paying capacity, and other relevant factors, including the goodwill of
the Company, the economic outlook in the Company's industry, the Company's
position in the industry and its management, and the values of stock of other
corporations in the same or a similar line of business.

6.1.12 Option Term. No Option shall be exercisable more than ten years
after the date of grant, or such lesser period of time is set forth in the stock
option agreement (the end of the maximum exercise period stated in the stock
option agreement is referred to in this Plan as the "Expiration Date"). No
Option/ISO granted to any person who owns, directly or by attribution, stock
possessing more than ten percent of the total combined voting power of all
classes of stock of the Company of any Affiliate (a "Ten Percent Stockholder")
shall be exercisable more than five years after the date of grant.

6.1.13 Exercise Price. The exercise price of any Option granted to any
Ten Percent Stockholder shall in no event be less than 110 percent of the fair
market value (determined in

accordance with Section 6.1.11) of the stock covered by the Option at the time
the Option is granted.

6.1.14 Compliance with Securities Laws. The Company shall not be
obligated to offer or sell any shares of Common Stock upon exercise of an Option
unless the shares of Common Stock are at that time effectively registered or
exempt from registration under the federal securities laws and the offer and
sale of the shares of Common Stock are otherwise in compliance with all
applicable state and local securities laws. The Company shall have no obligation
to register the shares of Common Stock under the federal securities laws or take
whatever other steps may be necessary to enable the shares of Common Stock to be
offered and sold under federal or other securities laws. Upon exercising all or
any portion of an Option, an optionee may be required to furnish representations
or undertakings deemed appropriate by the Company to enable the offer and sale
of the shares of Common Stock or subsequent transfers of any interest in the
shares of Common Stock to comply with applicable securities laws. Stock
certificates evidencing shares of Common Stock acquired upon exercise of options
shall bear any legend required by, or useful for purposes of compliance with,
applicable securities laws, this Plan, or the stock option agreement evidencing
the Option.

6.2 Terms and Conditions to Which Only NQOs Are Subject. Options granted
under this Plan which are designated as NQOs shall be subject to the following
terms and conditions:

6.2.1 Exercise Price. Except as set forth in Section 6.1.13, the
exercise price of a NQO shall not be less than 85 percent of the fair market
value (determined in accordance with Section 6.1.12) of the stock subject to the
Option on the date of grant.

6.3 Terms and Conditions to Which Only ISOs Are Subject. Options granted
under this Plan which are designated as ISOs shall be subject to the following
terms and conditions:

6.3.1 Exercise Price. Except as set forth in Section 6.1.13, the
exercise price of an ISO shall be determined in accordance with the applicable
provisions of the Code and shall in no event be less than the fair market value
(determined in accordance with Section 6.1.11) of the Common Stock covered by
the Option at the time the Option is granted.

6.3.2 Disqualifying Dispositions. If Common Stock acquired upon
exercise of an ISO is disposed of in a "disqualifying disposition" within the
meaning of Section 422 of the Code, the holder of the Common Stock immediately
before the disposition shall notify the Company in writing of the date and terms
of the disposition and comply with any other requirements imposed by the Company
in order to enable the Company to secure any related income tax deduction to
which it is entitled.

7. MANNER OF EXERCISE.

7.1 Notice of Exercise. An optionee wishing to exercise an Option shall
give written notice to the Company at its principal executive office, to the
attention of the officer of the Company designated by the Option Committee,
accompanied by payment of the exercise price as

provided in Section 6.1.6. The date the Company receives written notice of an
exercise hereunder accompanied by payment of the exercise price and, if
required, by payment of any federal or state withholding or employment taxes
required to be withheld by virtue of exercise of the Option will be considered
as the date such Option was exercised.

7.2 Issuance of Certificates. Promptly after receipt of written notice of
exercise of an Option, the Company shall, without stock issue or transfer taxes
to the optionee or other person entitled to exercise the Option, deliver to the
optionee or such other person a certificate or certificates for the requisite
number of shares of Common Stock. Unless the Company specifies otherwise, an
optionee or transferee of an optionee shall not have any privileges as a
shareholder with respect to any Common Stock covered by the Option until the
date of issuance of a stock certificate. Subject to Section 6.1.1 hereof, no
adjustment shall be made for dividends or other rights for which the record date
is prior to the date the certificates are delivered.

8. EMPLOYMENT RELATIONSHIP. Nothing in this Plan or any Option granted
thereunder shall interfere with or limit in any way the right of the Company or
of any of its Affiliates to terminate any optionee's employment at any time, nor
confer upon any optionee any right to continue in the employ of the Company or
any of its Affiliates.

9. AMENDMENTS TO PLAN. The Board may amend this Plan at any time. Without the
consent of an optionee, no amendment may affect outstanding Options except to
conform this Plan and ISOs granted under this Plan to federal or other tax laws
relating to incentive stock options. No amendment shall require shareholder
approval unless shareholder approval is required to preserve incentive stock
option treatment for tax purposes or the Board otherwise concludes that
shareholder approval is advisable.

10. SHAREHOLDER APPROVAL: TERM. The Board of Directors of the Company adopted
this Plan on July 21, 2005, and the Company's shareholders approved this Plan on
September 22, 2005. This Plan shall terminate ten years after initial adoption
by the Board unless terminated earlier by the Board. The Board may terminate
this Plan without shareholder approval. No Options shall be granted after
termination of this Plan, but termination shall not affect rights and
obligations under then-outstanding Options.