UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
SEMOTUS SOLUTIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA 36-3574355
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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718 UNIVERSITY AVE., SUITE 202
LOS GATOS, CALIFORNIA 95032
(408) 399-6120
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
ANTHONY N. LAPINE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SEMOTUS SOLUTIONS, INC.
718 UNIVERSITY AVE., SUITE 202
LOS GATOS, CALIFORNIA 95032
(408) 399-6120
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
EDWARD M. GERGOSIAN, ESQ.
GERGOSIAN & GRALEWSKI LLP
655 WEST BROADWAY, SUITE 1410
SAN DIEGO, CA 92101
PHONE: (619) 237-9500
FAX: (619) 237-9555
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier registration statement for the
same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
------------------------ ------------ ---------------- ------------------ ----------------
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
OF SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED (1) REGISTERED PER SHARE (2) PRICE (2) REGISTRATION FEE
------------------------ ------------ ---------------- ------------------ ----------------
Common stock, $0.01 Par 250,299 $0.82 $ 205,245.18 $ 6.30
Value, to be offered
for resale by selling
stockholders (3)
------------------------ ------------ ---------------- ------------------ ----------------
TOTAL 250,299 $ 205,245.18 $ 6.30
------------------------ ------------ ---------------- ------------------ ----------------
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(1) In the event of a stock split, stock dividend, or similar transaction
involving the common stock, the number of shares registered shall automatically
be increased to cover the additional shares of common stock issuable pursuant to
Rule 416 under the Securities Act of 1933, as amended.
(2) Based upon the average of the high and low sales prices of the common
stock as reported by the American Stock Exchange on November 15, 2007, estimated
solely for the purpose of calculating the registration fee in accordance with
Rule 457(c) under the Securities Act of 1933, as amended.
(3) Represents restricted common stock that was issued upon the conversion
of two promissory notes, a $225,000 promissory note issued to Mr. Richard
Sullivan resulted in the issuance of 60,000 shares of restricted common stock to
Mr. Sullivan and 60,000 shares of restricted common stock to NTCH, Inc., and a
$200,000 promissory note issued to Miro Knezevic and Gail L. Knezevic,
Co-Trustees, Knezevic Family Trust dated June 30, 1992 ("Knezevic") resulted in
the issuance of 308,152 shares of restricted common stock to Knezevic, 177,853
of which were already registered under a prospectus that went effective on
September 11, 2007, leaving 130,299 shares of restricted common stock
unregistered, for a total of 250,299 shares of restricted common stock to be
registered.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
PROSPECTUS SUBJECT TO COMPLETION DATED _________, 2007
SEMOTUS SOLUTIONS, INC.
[LOGO]
250,299 SHARES OF COMMON STOCK
The "selling stockholders" named in this prospectus may sell up to 250,299
shares of common stock par value $0.01 per share, that were issued upon
conversion of two promissory notes, a $225,000 promissory note issued to Mr.
Richard Sullivan resulted in the issuance of 60,000 shares of restricted common
stock to Mr. Sullivan and 60,000 shares of restricted common stock to NTCH,
Inc., and a $200,000 promissory note issued to Miro Knezevic and Gail L.
Knezevic, Co-Trustees, Knezevic Family Trust dated June 30, 1992 ("Knezevic")
resulted in the issuance of 308,152 shares of restricted common stock to
Knezevic, 177,853 of which were already registered under a prospectus that went
effective on September 11, 2007, leaving 130,299 shares of restricted common
stock unregistered. We will not receive any proceeds from the sale of these
shares of common stock offered by the selling stockholders.
We are registering the offer and sale of these shares in order to allow the
selling stockholders to freely resell their shares of common stock, but the
registration of such shares does not necessarily mean that any of the shares
will be offered or sold by the selling stockholders.
Our shares of common stock are traded on the American Stock Exchange under
the symbol "DLK". On November 15, 2007, the closing sale price of our common
stock was $0.84 per share.
This investment involves a high degree of risk. You should purchase shares
only if you can afford a complete loss. See "Risk Factors" beginning on page 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. No one may sell these securities nor may
offers to buy be accepted until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer, solicitation or sale is not permitted.
THE DATE OF THIS PROSPECTUS IS _____________, 2007
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TABLE OF CONTENTS
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PAGE
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Semotus Solutions, Inc. 4
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Special Note Regarding Forward-Looking Statements 5
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Risk Factors 5
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Use of Proceeds 12
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Selling Stockholders 12
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Plan of Distribution 13
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Legal Matters 15
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Experts 15
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Documents Incorporated By Reference 15
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Available Information 16
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Disclosure of SEC Position of Indemnification
for Securities Act Liabilities 16
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. THE SELLING STOCKHOLDERS ARE OFFERING TO SELL AND SEEKING OFFERS TO
BUY, SHARES OF OUR COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK.
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SEMOTUS SOLUTIONS, INC.
OUR BUSINESS
Semotus(R) Solutions, Inc. ("We" or "Our"), is a leading provider of enterprise
application software connecting employees wirelessly to critical business
systems, information, and processes. We help mobile employees make better and
faster decisions, increase customer satisfaction, and improve efficiencies in
business processes for shorter sales and service cycles. Our wireless software
products and services include our HipLinkXS family of software. Our enterprise
application software and services provide mobility, convenience, and efficiency
and improve profitability. These software solutions provide real time, event
driven alerting, mobile access and control of business-critical software
applications, databases, networks and servers.
We were formed under the laws of the State of Nevada on June 18, 1996. On June
27, 1996, we went public through an acquisition of a public corporation,
Datalink Communications Corporation ("DCC"), which was previously Lord Abbott,
Inc., a Colorado corporation formed in 1986. As a part of the transaction, we
also acquired a Canadian corporation, DSC Datalink Systems Corporation,
incorporated in Vancouver, British Columbia, which changed its name to Semotus
Systems Corp.
We currently have one wholly owned subsidiary: Clickmarks, Inc. ("Clickmarks").
All significant intercompany transactions and balances have been eliminated in
consolidation. In the year ended March 31, 2007, we closed the operations of
Expand Beyond Corporation, and Expand Beyond filed for liquidation under Chapter
7 of the U.S. Bankruptcy Code on October 15, 2007. We also transferred our
research and development activities from Vancouver, Canada to Pakistan.
Additionally, the Global Market Pro Family and other legacy wireless financial
data consumer services and software were sold to Stockgroup Systems, Ltd.
pursuant to an asset purchase agreement signed in May of 2007. Operations of
Clickmarks consist mainly of sales of software products and professional
services and support of existing software applications. Clickmarks utilizes a
patented Presentation Level Integration (PLI) technology which enables rapid
creation of composite applications and web services out of existing backend
systems, which may be delivered via web, portal, and mobile front-ends.
Clickmarks' technology has also been added to our HipLinkXS family of software
products, as well as sold as a stand-alone software solution.
OUR CORPORATE INFORMATION
Our principal offices are located at 718 University Ave., Suite 202, Los Gatos,
CA 95032, our telephone number is 408-399-6120, and our website can be accessed
at http://www.semotus.com. Information contained in our website does not
constitute part of this prospectus. In this prospectus, references to "Semotus
Solutions," "Semotus," "we," "us" and "our" refer to Semotus Solutions, Inc. and
our subsidiaries unless the context requires otherwise.
We were formed under the laws of the State of Nevada on June 18, 1996. On June
27, 1996, we went public through an acquisition of a public corporation,
Datalink Communications Corporation ("DCC"), which was previously Lord Abbott,
Inc., a Colorado corporation formed in 1986. As a part of the transaction, we
also acquired a Canadian corporation, DSC Datalink Systems Corporation,
incorporated in Vancouver, British Columbia, which changed its name to Semotus
Systems Corp.
PROSPECTUS SUMMARY
The "selling stockholders" named in this prospectus may sell up to 250,299
shares of common stock, that were issued upon conversion of two promissory
notes, a $225,000 promissory note issued to Mr. Richard Sullivan resulted in the
issuance of 60,000 shares of restricted common stock to Mr. Sullivan and 60,000
shares of restricted common stock to NTCH, Inc., and a $200,000 promissory note
issued to Miro Knezevic and Gail L. Knezevic, Co-Trustees, Knezevic Family Trust
dated June 30, 1992 ("Knezevic") resulted in the issuance of 308,152 shares of
restricted common stock to Knezevic, 177,853 of which were already registered
under a prospectus that went effective on September 11, 2007, leaving 130,299
shares of restricted common stock unregistered, for a total of 250,299 shares of
restricted common stock to be registered. We will not receive any proceeds from
the sale of these shares of common stock offered by the selling stockholders.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled "Prospectus Summary" and "Risk
Factors," contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E
of the Securities Exchange Act of 1934. These statements relate to future events
or our future financial and operating performance and involve known and unknown
risks, uncertainties and other factors that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from that expressed or implied by these forward-looking statements.
These risks and other factors include, among other things, those listed under
"Risk Factors" and elsewhere in this prospectus. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"expects," "plans," "anticipates," "believes," "estimates," "predicts,"
"potential," "continue," "our future success depends," "seek to continue" or the
negative of these terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially. In evaluating
these statements, you should specifically consider various factors, including
the risks outlined under "Risk Factors." These factors may cause our actual
results to differ materially from any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
do not intend to update any of the forward-looking statements after the date of
this prospectus to conform these statements to actual results except as required
by law.
RISK FACTORS
Investing in our shares is very risky. You should be able to bear a complete
loss of your investment. In deciding whether to purchase our shares, you should
carefully consider the following factors, among others, as well as information
contained in this prospectus, our most recent annual report on Form 10-KSB, and
the other documents incorporated by reference into this prospectus:
Our business and the results of our operations are affected by a variety of risk
factors, including those described below.
RISK FACTORS PARTICULAR TO SEMOTUS
WE HAVE HISTORICALLY INCURRED LOSSES AND ALTHOUGH WE HAVE ACHIEVED NET INCOME
FOR THE FIRST TWO QUARTERS OF THIS FISCAL YEAR ENDING MARCH 31, 2008, WE MAY NOT
BE ABLE TO SUSTAIN SUCH GROWTH AND LOSSES MAY RETURN IN THE FUTURE.
We recorded a net loss for each year since our current business started in 1996
through our fiscal year ended March 31, 2007. As of March 31, 2007, we had an
accumulated deficit of $69,264,178.
Although we have achieved profitability for the three and six months ended
September 30, 2007, this was not due to an increase in operating revenue, but
instead mainly due to a one time license of our HipLink product, which is
non-recurring income. We expect to continue to incur operating losses in the
future. Many of our operating expenses are fixed in the short term. We have
incurred (and may incur in the future) losses from the impairment of goodwill or
other intangible assets, or from the impairment of the value of private
companies that we acquired. We must therefore generate revenues sufficient to
offset these expenses in order for us to become profitable. If we do continue to
achieve profitability in the short term, we may not be able to sustain it. We
may not achieve or sustain our revenue or profit goals and our operating losses
may continue or grow in the future.
IF WE DO NOT HAVE SUFFICIENT CAPITAL TO FUND OUR OPERATIONS, WE MAY BE FORCED TO
DISCONTINUE PRODUCT DEVELOPMENT, REDUCE OUR SALES AND MARKETING EFFORTS OR
FOREGO ATTRACTIVE BUSINESS OPPORTUNITIES.
To help ensure that we would have sufficient capital to take advantage of our
core business opportunities, we have taken significant actions during the past
two fiscal years to reduce our operating expenses. Most of our current operating
expenses, such as employee compensation and lease payments for facilities and
equipment, are relatively stable and these expense levels are based in part on
our expectations regarding future revenues. As a result, any shortfall in our
revenues relative to our expectations could cause significant changes in our
operating results from quarter to quarter. If the cost-cutting actions that we
have taken are insufficient, we may not have sufficient capital to fund our
operations, and additional capital may not be available on acceptable terms, if
at all. Any of these
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outcomes could adversely impact our ability to respond to competitive pressures
or could prevent us from conducting all or a portion of our planned operations.
We may need to undertake additional measures to reduce our operating expenses in
the future.
We expect that the cash we receive through our operations and our cash on hand
will be sufficient to meet our working capital and capital expenditure needs for
the next 12 months. After that, we may need to raise additional funds, and
additional financing may not be available on acceptable terms, if at all. We
also may require additional capital to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
If we issue additional equity securities to raise funds, the ownership
percentage of existing shareholders will be reduced. If we incur debt, the debt
will rank senior to our common shares, and we will incur debt service costs.
WE MAY NOT ACHIEVE PROFITABILITY IF WE ARE UNABLE TO MAINTAIN, IMPROVE AND
DEVELOP THE WIRELESS DATA SERVICES WE OFFER.
We believe that our future business prospects depend in part on our ability to
maintain and improve our current services and to develop new ones on a timely
basis. Our services will have to achieve market acceptance, maintain
technological competitiveness and meet an expanding range of customer
requirements. As a result of the complexities inherent in our service offerings,
major new wireless data services and service enhancements require long
development and testing periods. We may experience difficulties that could delay
or prevent the successful development, introduction or marketing of new services
and service enhancements. Additionally, our new services and service
enhancements may not achieve market acceptance. If we cannot effectively
maintain, improve and develop services we may not be able to recover our fixed
costs or otherwise become profitable.
ANY ANNOUNCED POTENTIAL MERGERS MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR
COMMON STOCK AND OUR RESULTS OF OPERATIONS.
If an announced potential merger is significantly delayed and/or not completed,
such as the previously announced potential mergers with Citytalk and Innofone
that have not closed and are not expected to close, the price of our common
stock may decline to the extent that the current market price reflects a market
assumption that the merger will be completed. In addition, in response to the
announcement of the mergers, our customers and strategic partners may delay or
defer decisions which could have a material adverse effect on our business
regardless of whether a merger is ultimately completed. Similarly, current and
prospective employees of our company may experience uncertainty about their
future roles with a combined company. These conditions may adversely affect
employee morale and our ability to attract and retain key management, sales,
marketing and technical personnel. In addition, focus on mergers and related
matters has resulted in, and may continue to result in, the diversion of
management attention and resources. To the extent that there is uncertainty
about the closing of a merger, or if a merger does not close, our business may
be harmed if customers, strategic partners or others believe that we cannot
effectively compete in the marketplace without a merger or if there is customer
and employee uncertainty surrounding the future direction of our company on a
stand-alone basis.
IF WE DO NOT RESPOND EFFECTIVELY AND ON A TIMELY BASIS TO RAPID TECHNOLOGICAL
CHANGE, OUR SERVICES MAY BECOME OBSOLETE AND WE MAY LOSE SALES.
The wireless and data communications industries are characterized by rapidly
changing technologies, industry standards, customer needs and competition, as
well as by frequent new product and service introductions. Our services are
integrated with wireless handheld devices and the computer systems of our
customers. Our services must also be compatible with the data networks of
wireless carriers. We must respond to technological changes affecting both our
customers and suppliers. We may not be successful in developing and marketing,
on a timely and cost-effective basis, new services that respond to technological
changes, evolving industry standards or changing customer requirements. Our
ability to grow and achieve profitability will depend, in part, on our ability
to accomplish all of the following in a timely and cost-effective manner:
o effectively use and integrate new wireless and data technologies;
o continue to develop our technical expertise;
o enhance our wireless data, engineering and system design services;
o develop applications for new wireless networks; and
o influence and respond to emerging industry standards and other
changes.
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WE MAY FAIL TO SUPPORT OUR ANTICIPATED EVENTUAL GROWTH IN OPERATIONS WHICH COULD
REDUCE DEMAND FOR OUR SERVICES AND MATERIALLY ADVERSELY AFFECT OUR REVENUE.
Our business strategy is based on the assumption that the number of subscribers
to our services, the amount of information they want to receive and the number
of services we offer will all increase. We must continue to develop and expand
our systems and operations to accommodate this growth. The expansion and
adaptation of our customer service and network operations center requires
substantial financial, operational and management resources. We may be unable to
expand our operations for one or more of the following reasons:
o we may not be able to locate or hire at reasonable compensation rates
qualified engineers and other employees necessary to expand our
capacity;
o we may not be able to obtain the hardware necessary to expand our
capacity;
o we may not be able to expand our customer service, billing and other
related support systems; and
o we may not be able to obtain sufficient additional capacity from
wireless carriers.
Due to the limited deployment of our services to date, the ability of our
systems and operations to connect and manage a substantially larger number of
customers while maintaining superior performance is unknown. Any failure on our
part to develop and maintain our wireless data services as we experience growth
could significantly reduce demand for our services and materially adversely
affect our revenue.
WE MAY FAIL TO SUPPORT OUR OPERATIONS, WHICH COULD REDUCE DEMAND FOR OUR
SERVICES AND MATERIALLY ADVERSELY AFFECT OUR REVENUE.
Our business strategy is based on the assumption that the number of subscribers
to our services, the amount of information they want to receive and the number
of services we offer will all increase. We must continue to develop and expand
our systems and operations to accommodate this growth. The expansion and or
maintenance and adaptation of our customer service and network operations
centers require substantial financial, operations and management resources. At
the same time, we have reduced our operating expenses, which entails a reduction
in operational and management resources. While we believe that our cost
reductions were targeted at areas that are not necessary to maintain and develop
our ability to serve customers, there can be no assurance that we will succeed
in lowering costs while maintaining our ability to provide service. If we fail
to maintain or improve service levels, we may lose customers and/or the
opportunity to provide more services and products.
WE DEPEND ON RECRUITING AND RETAINING KEY MANAGEMENT AND TECHNICAL PERSONNEL
WITH WIRELESS DATA AND SOFTWARE EXPERIENCE AND WE MAY NOT BE ABLE TO DEVELOP NEW
PRODUCTS OR SUPPORT EXISTING PRODUCTS IF WE CANNOT HIRE OR RETAIN QUALIFIED
EMPLOYEES.
Because of the technical nature of our products and the dynamic market in which
we compete, our performance depends on attracting and retaining key employees.
Competition for qualified personnel in the wireless data and messaging software
industries is intense, and finding and retaining qualified personnel with
experience in both industries is even more difficult. We believe there are only
a limited number of individuals with the requisite skills in the field of
wireless data communication, and it is increasingly difficult to hire and retain
these persons. We have a written employment agreement with Anthony N. LaPine,
the Company's Chairman, CEO. We do not have employment agreements with any other
officer or employee. If we lose the services of Mr. LaPine or any other key
officer or key employee, such as Pamela LaPine, Tali Durant or Charles K.
Dargan, we may not be able to manage or operate our business successfully and
achieve our business objectives.
OUR FUTURE REVENUES AND OPERATING RESULTS ARE DEPENDENT TO A LARGE EXTENT UPON
GENERAL ECONOMIC CONDITIONS, CONDITIONS IN THE WIRELESS SERVICES MARKET AND
CONDITIONS IN OUR PRIMARY TARGET MARKETS.
Our future revenues and operating results are dependent to a large extent upon
general economic conditions, conditions in the wireless market and within that
market, our primary target markets of financial services and software and
messaging and communications software. Economic activity continues to be slow in
these markets, and our sales cycle is significantly extended as existing and
potential customers continue to reduce their spending commitments, deferring
wireless projects and declining to make investments in new wireless services.
Moreover, adoption of wireless services has not proceeded as rapidly as
previously anticipated. If general economic conditions continue to be adverse,
if the economies in which our target customers are located continue to suffer
from a recession, if demand for our solutions does not expand, or if war or
terrorism impacts the U.S., Canada or our other target markets, our ability to
increase our customer base may be limited, and our revenue may decrease further.
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WE DEPEND UPON WIRELESS NETWORKS OWNED AND CONTROLLED BY OTHERS. IF WE DO NOT
HAVE CONTINUED ACCESS TO SUFFICIENT CAPACITY ON RELIABLE NETWORKS, WE MAY BE
UNABLE TO DELIVER SERVICES AND OUR SALES COULD DECREASE.
Our ability to grow and achieve profitability partly depends on our ability to
buy sufficient capacity on the networks of wireless carriers and on the
reliability and security of their systems. We depend on these companies to
provide uninterrupted and trouble free service and would not be able to satisfy
our customers' needs if they failed to provide the required capacity or needed
level of service. In addition, our expenses would increase and our profitability
could be materially adversely affected if wireless carriers were to increase the
prices of their services.
OUR SUCCESS IS DEPENDENT IN PART ON OUR ABILITY TO PROTECT OUR INTELLECTUAL
PROPERTY, AND OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY COULD HAVE A
SIGNIFICANT ADVERSE IMPACT IN OUR BUSINESS.
Our success and ability to compete effectively are dependent in part upon our
proprietary technology. We rely on a combination of copyright, trademark and
trade secret laws, as well as nondisclosure agreements and other contractual
restrictions, to establish and protect our proprietary rights. The measures we
undertake may not be adequate to protect our proprietary technology. To date, we
have federally registered certain of our trademarks and applied for a patent on
our financial data services software. Our practice is to affix copyright notices
on our software and product literature in order to assert copyright protection
for these works. The lack of federal registration of all of our trademarks and
copyrights may have an adverse effect on our intellectual property rights in the
future. The sale of all of our patents, even while retaining a grant-back
license to continue developing and licensing the technology underlying these
patents, limits our ability to enforce our intellectual property rights.
Additionally, we may be subject to further risks as we enter into transactions
in countries where intellectual property laws are unavailable, do not provide
adequate protection or are difficult to enforce. Despite our efforts to protect
our proprietary rights, unauthorized parties may attempt to duplicate aspects of
our products or to obtain and use information that we regard as proprietary. Our
steps to protect our proprietary technology may not be adequate to prevent
misappropriation of such technology, and may not preclude competitors from
independently developing products with functionality or features similar to our
products. If we fail to protect our proprietary technology, our business,
financial condition and results of operations could be harmed significantly.
OUR SALES CYCLE IS LONG, AND OUR STOCK PRICE COULD DECLINE IF SALES ARE DELAYED
OR CANCELLED.
Quarterly fluctuations in our operating performance are exacerbated by the
length of time between our first contact with a business customer and the first
revenue from sales of services to that customer or end users. Because our
services represent a significant investment for our business customers, we spend
a substantial amount of time educating them regarding the use and benefits of
our services and they, in turn, spend a substantial amount of time performing
internal reviews and obtaining capital expenditure approvals before purchasing
our services. As much as a year may elapse between the time we approach a
business customer and the time we begin to deliver services to a customer or end
user. Any delay in sales of our services could cause our quarterly operating
results to vary significantly from projected results, which could cause our
stock price to decline. In addition, we may spend a significant amount of time
and money on a potential customer that ultimately does not purchase our
services.
OUR SOFTWARE MAY CONTAIN DEFECTS OR ERRORS, AND OUR SALES COULD GO DOWN IF THIS
INJURES OUR REPUTATION OR DELAYS SHIPMENTS OF OUR SOFTWARE.
Our software products and platforms are complex and must meet the stringent
technical requirements of our customers. We must develop our services quickly to
keep pace with the rapidly changing software and telecommunications markets.
Software as complex as ours is likely to contain undetected errors or defects,
especially when first introduced or when new versions are released. Our software
may not be free from errors or defects after delivery to customers has begun,
which could result in the rejection of our software or services, damage to our
reputation, lost revenue, diverted development resources and increased service
and warranty costs.
WE MAY BE SUBJECT TO LIABILITY FOR TRANSMITTING INFORMATION, AND OUR INSURANCE
COVERAGE MAY BE INADEQUATE TO PROTECT US FROM THIS LIABILITY.
We may be subject to claims relating to information transmitted over systems we
develop or operate. These claims could take the form of lawsuits for defamation,
negligence, copyright or trademark infringement or other actions based on the
nature and content of the materials. Although we carry general liability
insurance, our insurance may not cover potential claims of this type or may not
be adequate to cover all costs incurred in defense of potential claims or to
indemnify us for all liability that may be imposed.
DISRUPTION OF OUR SERVICES DUE TO ACCIDENTAL OR INTENTIONAL SECURITY BREACHES
MAY HARM OUR REPUTATION CAUSING A LOSS OF SALES AND INCREASED EXPENSES.
A significant barrier to the growth of wireless data services or transactions on
the Internet or by other electronic
8
means has been the need for secure transmission of confidential information. Our
systems could be disrupted by unauthorized access, computer viruses and other
accidental or intentional actions. We may incur significant costs to protect
against the threat of security breaches or to alleviate problems caused by such
breaches. If a third-party were able to misappropriate our users' personal or
proprietary information or credit card information, we could be subject to
claims, litigation or other potential liabilities that could materially
adversely impact our revenue and may result in the loss of customers.
ANY TYPE OF SYSTEMS FAILURE COULD REDUCE SALES, OR INCREASE COSTS OR RESULT IN
CLAIMS OF LIABILITY.
Our existing wireless data software and services are dependent on real-time,
continuous feeds from outside third parties. The ability of our subscribers to
obtain data or make wireless transactions through our software and service
requires timely and uninterrupted connections with our wireless network
carriers. Any significant disruption in the feeds or wireless carriers could
result in delays in our subscribers' ability to receive information or execute
wireless transactions. There can be no assurance that our systems will operate
appropriately if we experience a hardware or software failure or if there is an
earthquake, fire or other natural disaster, a power or telecommunications
failure, insurrection or an act of war. A failure in our systems could cause
delays in transmitting data, and as a result we may lose customers or face
litigation that could involve material costs and distract management from
operating our business.
AN INTERRUPTION IN THE SUPPLY OF PRODUCTS AND SERVICES THAT WE OBTAIN FROM THIRD
PARTIES COULD CAUSE A DECLINE IN SALES OF OUR SERVICES.
In designing, developing and supporting our wireless data software and services,
we rely on wireless carriers, wireless handheld device manufacturers, content
providers and software providers. These suppliers may experience difficulty in
supplying us products or services sufficient to meet our needs or they may
terminate or fail to renew contracts for supplying us these products or services
on terms we find acceptable. Any significant interruption in the supply of any
of these products or services could cause a decline in sales of our services
unless and until we are able to replace the functionality provided by these
products and services.
We also depend on third parties to deliver and support reliable products,
enhance their current products, develop new products on a timely and
cost-effective basis and respond to emerging industry standards and other
technological changes. In addition, we rely on the ability of our content
providers to continue to provide us with uninterrupted access to the news and
financial information we provide to our customers. The failure of third parties
to meet these criteria, or their refusal or failure to deliver the information
for whatever reason, could materially harm our business.
RISK FACTORS RELATED TO OUR INDUSTRY
THE MARKET FOR WIRELESS DATA SOFTWARE APPLICATIONS AND SERVICES IS HIGHLY
UNCERTAIN AND WE MAY NOT BE ABLE TO SELL ENOUGH OF OUR SOFTWARE OR SERVICES TO
BECOME PROFITABLE.
The market for wireless data software and services is still emerging and
continued growth in demand for and acceptance of these software applications and
services remains uncertain. Current barriers to market acceptance of these
services include cost, reliability, functionality and ease of use. We cannot be
certain that these barriers will be overcome. Our competitors may develop
alternative wireless data communications systems that gain broader market
acceptance than our systems. If the market for our software and services does
not grow or grows more slowly than we currently anticipate, we may not be able
to attract enough customers for our software and services, and our revenues,
business, financial condition and operating results would be adversely affected.
THERE IS NO ASSURANCE THAT WE WILL BE ABLE TO EFFECTIVELY COMPETE AGAINST
CURRENT AND FUTURE COMPETITORS.
There are a number of competitors who are larger and have much greater resources
than we do. Many of our competitors have more experienced people and larger
facilities and budgets than we do. These competitors could use their resources
to conduct greater amounts of research and development and to offer services at
lower prices than we can. These factors may adversely affect our ability to
compete by decreasing the demand for our products and services.
OUR ABILITY TO SELL NEW AND EXISTING SOFTWARE AND SERVICES AT A PROFIT COULD BE
IMPAIRED BY COMPETITORS.
Intense competition could develop in the market for the software and services we
offer. We developed our software using standard industry development tools. Many
of our agreements with wireless carriers, wireless handheld device
9
manufacturers and data providers are non-exclusive. Our competitors could
develop and use the same products and services in competition with us. With time
and capital, it would be possible for competitors to replicate our services. Our
potential competitors could include: wireless network carriers such as Verizon
Wireless, Cingular, Sprint PCS, TMobile, Nextel and AT&T Wireless; wireless
device manufacturers, such as Apple, Palm, Motorola, Good Technology and RIM;
software developers such as Microsoft Corporation; and systems integrators such
as IBM. Most of our potential competitors have significantly greater resources
than we do. Furthermore, competitors may develop a different approach to
marketing the software and services we provide in which subscribers may not be
required to pay for the information provided by our software and services.
Competition could reduce our market share or force us to lower prices to
unprofitable levels.
NEW LAWS AND REGULATIONS THAT IMPACT OUR INDUSTRY COULD ADVERSELY AFFECT OUR
BUSINESS.
We are not currently subject to direct regulation by the Federal Communications
Commission ("FCC") or any other governmental agency, other than regulations
applicable to businesses in general. However, in the future, we may become
subject to regulation by the FCC or another regulatory agency. In addition, the
wireless carriers who supply us airtime are subject to regulation by the FCC and
regulations that affect them could adversely affect our business, by, for
example, increasing our costs or reducing our ability to continue selling and
supporting our services. Our business could suffer depending on the extent to
which our activities or those of our customers or suppliers are regulated.
WE MAY FACE INTERRUPTION OF PRODUCTION AND SERVICES DUE TO INCREASED SECURITY
MEASURES IN RESPONSE TO TERRORISM.
Our business depends on the free flow of products and services through the
channels of commerce. Recently, in response to terrorists' activities and
threats aimed at the United States, transportation, mail, financial and other
services have been slowed or stopped altogether. Further delays or stoppages in
transportation, mail, financial or other services could have a material adverse
effect on our business, results of operations and financial condition.
Furthermore, we may experience an increase in operating costs, such as costs for
transportation, insurance and security as a result of the terrorist activities
and potential activities. We may also experience delays in receiving payments
from payers that have been affected by the terrorist activities and potential
activities. The U.S. economy in general is being adversely affected by the
terrorist activities and potential activities and any economic downturn could
adversely impact our results of operations, impair our ability to raise capital
or otherwise adversely affect our ability to grow our business.
RISK FACTORS RELATED TO OUR STOCK PRICE
THE CONTINUED LISTING OF OUR COMMON STOCK ON THE AMERICAN STOCK EXCHANGE IS
UNCERTAIN.
We received a deficiency letter from the American Stock Exchange (Amex) dated
July 14, 2006, advising that, based upon its review of our financial statements
included in our Annual Report on Form 10-KSB for the fiscal year ended March 31,
2006, we are not in compliance with Amex' continued listing requirements.
Specifically, we are not in compliance with Section 1003(a)(iii) of the Amex
Company Guide, because our stockholders' equity is less than $6,000,000 and we
sustained losses from continuing operations and/or net losses in our five most
recent fiscal years. We submitted a compliance plan to Amex in August of 2006
which outlines our plans to regain compliance with Amex' continued listing
requirements. Since that time, we have provided updates and amendments to our
original compliance plan. The plan was approved on November 15, 2006. Therefore,
our listing is being continued pursuant to an extension period that was to end
concurrent with the closing of the merger with Citytalk, Inc. However, all
contractual extensions with Citytalk have expired, and we have decided to pursue
other alternatives to the merger with Citytalk and NTCH. To maintain our
listing, we are subject to periodic review by AMEX staff during this extension
period. If we do not make progress consistent with our plan, the AMEX will
initiate delisting proceedings pursuant to Section 1009 of the AMEX Company
Guide. As of September 30, 2007 our total stockholders' equity was greater than
$6,000,000, at $6,674,358 and our net income for the six months ended September
30, 2007 was $3,471,805.
SALES OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK BY OUR MAJOR STOCKHOLDERS AND
OTHERS COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
Sales of substantial numbers of shares of common stock by our major stockholders
in the public market could harm the price of our common stock. As of November 8,
2007, Anthony N. LaPine, our Chief Executive Officer and Chairman of the Board,
beneficially owned 142,200 shares of our common stock. These shares are eligible
10
for resale into the public market within the restrictions imposed by Rule 144
under the Securities Act of 1933. Sales of a significant amount of these shares
could adversely affect the market price of our common stock. In addition, as of
September 30, 2007, we have granted and have outstanding 250,673 options, with
192,749 of those options immediately exercisable, to purchase our common shares
in accordance with our 1996 and 2005 Stock Option Plans. The exercise of options
and the subsequent sale of shares could adversely affect the market price of our
common shares.
In addition, we recently filed a registration statement with the Securities and
Exchange Commission that was declared effective by the Securities and Exchange
Commission on September 11, 2007 to qualify the resale of up to 177,853 shares
of common stock. We are unable to predict the effect that sales of these shares
may have on the then prevailing market price of our shares. It is likely that
market sales of large amounts of our shares (or the potential for those sales
even if they do not actually occur) will have the effect of depressing the
market price of our shares.
FUTURE SALES OF COMMON SHARES BY OUR EXISTING SHAREHOLDERS COULD CAUSE OUR SHARE
PRICE TO FALL.
The volume of trading in our common shares on the American Stock Exchange has
not been substantial. As a result, even small dispositions of our common shares
in the public market could cause the market price of the common shares to fall.
The perception among investors that these sales will occur could also produce
this effect.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE.
The trading price of our common stock has historically been highly volatile.
Since we began trading on the American Stock Exchange, our stock price has
ranged from $0.75 to $840.00 (as adjusted for stock splits). We expect that the
market price of our common stock will continue to fluctuate as a result of
variations in our quarterly operating results and other factors beyond our
control. These fluctuations may be exaggerated if the trading volume of our
common stock is low. In addition, due to the technology-intensive and emerging
nature of our business, the market price of our common stock may rise and fall
in response to a variety of factors, including:
o announcements of technological or competitive developments;
o acquisitions or strategic alliances by us or our competitors;
o the gain or loss of a significant customer or order;
o changes in estimates of our financial performance or changes in
recommendations by securities analysts regarding us or our industry;
or
o general market or economic conditions.
This risk may be heightened because our industry is relatively new and evolving,
characterized by rapid technological change and susceptible to the introduction
of new competing technologies or competitors.
In addition, the market for internet, wireless and technology companies in
particular has experienced extreme price and volume fluctuations. These price
and volume fluctuations often have been unrelated to the operating performance
of the affected companies. These broad market and industry factors and general
economic conditions may materially and adversely affect our stock price.
WE DO NOT PLAN TO PAY ANY DIVIDENDS.
Our shares should not be purchased by investors who need income from their
holdings. We intend to retain any future earnings to fund the operation and
expansion of our business. We do not anticipate paying cash dividends on our
shares in the future. As a result, our common stock is not a good investment for
people who need income from their holdings.
11
USE OF PROCEEDS
We will not receive any proceeds from the sale of these shares of common stock
offered by the selling stockholders.
SELLING STOCKHOLDERS
Certain stockholders may offer an aggregate of 250,299 shares of common
stock for resale. The shares are being offered for the account of the
stockholders in the table below and their donees or pledgees.
The following table sets forth information concerning the selling
stockholders, including:
- the number of shares owned by the selling stockholders prior to the
offering; and
- the transaction by which the selling stockholders acquired the shares;
and
- the number of shares offered by the selling stockholders; and
- the number of shares and percentage of common stock beneficially owned
after the offering.
We have no knowledge of the intentions of the selling stockholders to actually
sell any of the securities listed under the column "Total Number of Shares Being
Offered". There are no material relationships between the selling stockholders
and us other than as disclosed below.
12
TOTAL SHARES BENEFICIALLY
NUMBER OF NUMBER OF OWNED AFTER OFFERING
SHARES SHARES ------------------------
BENEFICIALLY BEING PERCENTAGE
NAME OF SELLING STOCKHOLDER OWNED OFFERED NUMBER OF CLASS(1)
---------------------------- ---------- ---------- ---------- ----------
(2) Miro Knezevic and Gail L. Knezevic,
Co-Trustees, Knezevic Family Trust
dated June 30, 1992 308,152 130,299 0 0%
(3) Richard Sullivan 60,000 60,000 0 0%
(3) NTCH, Inc. 60,000 60,000 0 0%
---------- ---------- ---------- ----------
TOTAL 428,152 250,299 0 0%
|
(1) Assumes all of the shares of common stock offered are sold. Calculated
pursuant to Rule 13d-3(d)(1)(i) of the Securities Exchange Act of 1934, as
amended (referred to herein as the "Exchange Act"), based on 2,206,164
shares of common stock issued and outstanding on November 1, 2007.
(2) In connection with a Convertible Promissory Note, as amended, on October
23, 2007, Miro Knezevic and Gail L. Knezevic, Co-Trustees, Knezevic Family
Trust dated June 30, 1992 requested the conversion of the entire
outstanding principal amount of $200,000 of their Convertible Promissory
Note and all accrued interest up to and including October 23, 2007, which
comes to a total of $214,520.55, into restricted common shares of Semotus
Solutions, Inc. at a conversion price equal to $0.69615 per share (a 15%
discount to the ten day average trading price prior to the date of
conversion), which equals a total of 308,152 shares of our restricted
common stock. As part of the terms of the amendment to the note, we agreed
to grant certain piggyback registration rights on the 130,299 shares that
have not yet been registered on a registration statement with the
Securities and Exchange Commission, to qualify the resale of these shares
of common stock issuable upon the conversion of the note.
(3) In connection with a convertible promissory note that was converted on
September 13, 2007; Mr. Richard Sullivan requested the conversion of the
entire outstanding principal amount of $225,000 of the convertible
promissory note issued to him on November 13, 2006, and all accrued
interest up to and including September 13, 2007, which comes to a total of
$240,000, into restricted common shares of Semotus Solutions, Inc. at a
conversion price equal to two dollars ($2.00) per share (reflecting the 20
for 1 reverse split that occurred on July 20, 2007), which equals a total
of 120,000 shares of our restricted common stock. In accordance with Mr.
Sullivan's request, one half of the 120,000 shares, or 60,000 shares, were
issued to Mr. Sullivan and the other half of the shares were issued to
NTCH, Inc.
No information is given with respect to beneficial ownership after the
offering because we are assuming that all of the shares of common stock offered
will be sold.
The information concerning the selling stockholders may change from time to
time and will be set forth in supplements to this prospectus.
PLAN OF DISTRIBUTION
The purpose of this prospectus is to permit the selling stockholders to
offer and sell up to an aggregate of 250,299 shares at such times and at such
places as they choose. The decision to sell any shares is within the sole
discretion of the holder thereof.
13
The distribution of the common stock by the selling stockholders may be
effected from time to time in one or more transactions. Any of the common stock
may be offered for sale, from time to time, by the selling stockholders, or by
permitted transferees or successors of the selling stockholders, on the American
Stock Exchange, or otherwise, at prices and on terms then obtainable, at fixed
prices, at prices then prevailing at the time of sale, at prices related to such
prevailing prices, or in negotiated transactions at negotiated prices or
otherwise. The common stock may be sold by one or more of the following:
* On the American Stock Exchange or any other national common stock
exchange or automated quotation system on which our common stock is traded,
which may involve transactions solely between a broker-dealer and its customers
which are not traded across an open market and block trades.
* Through underwriters, or through underwriting syndicates.
* Through one or more dealers or agents (which may include one or more
underwriters), including, but not limited to:
a. Block trades in which the broker or dealer acts as principal to
facilitate the transactions.
b. Purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus.
c. Ordinary brokerage transactions.
d. Transactions in which the broker solicits purchasers.
* Directly to one or more purchasers
* A combination of these methods.
The names of any underwriters or agents involved in the sale of the common
stock will be set forth in a prospectus supplement.
In connection with the distribution of the common stock or otherwise, the
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions. In connection with such transactions, broker-
dealers or other financial institutions may engage in short sales of shares in
the course of hedging the positions they assume with the selling stockholders.
The selling stockholders may also sell shares short and redeliver the shares to
close out such short positions. The selling stockholders may also enter into
options or other transactions with broker-dealers or other financial
institutions which require the delivery to such broker-dealers or other
financial institutions of the common stock, which shares such broker-dealers or
financial institutions may resell pursuant to this prospectus, as supplemented
or amended to reflect that transaction. The selling stockholders may also pledge
the common stock registered hereunder to a broker-dealer or other financial
institution and, upon a default, such broker-dealer or other financial
institution may effect sales of the pledged shares pursuant to this prospectus,
as supplemented or amended to reflect such transaction. In addition, any common
stock covered by this prospectus that qualifies for sale pursuant to Rule 144
under the Securities Act may be sold under Rule 144 rather than pursuant to this
prospectus.
The selling stockholders or their underwriters, dealers or agents may sell
the common stock to or through underwriters, dealers or agents, and such
underwriters, dealers or agents may receive compensation in the form of
discounts or concessions allowed or reallowed. Underwriters, dealers, brokers or
other agents engaged by the selling stockholders may arrange for other such
persons to participate. Any fixed public offering price and any discounts and
concessions may be changed from time to time. Underwriters, dealers and agents
who participate in the distribution of the common stock may be deemed to be
underwriters within the meaning of the Securities Act, and any discounts or
commissions received by them or any profit on the resale of shares by them may
be deemed to be underwriting discounts and commissions thereunder. The proposed
amounts of the common stock, if any, to be
14
purchased by underwriters and the compensation, if any, of underwriters, dealers
or agents will be set forth in a prospectus supplement.
Unless granted an exemption by the Commission from Rule Regulation M under
the Exchange Act, or unless otherwise permitted under Regulation M, the selling
stockholders will not engage in any stabilization activity in connection with
our common stock, will furnish each broker or dealer engaged by the selling
stockholders and each other participating broker or dealer the number of copies
of this prospectus required by such broker or dealer, and will not bid for or
purchase any of our common stock or attempt to induce any person to purchase any
of the common stock other than as permitted under the Exchange Act.
We will not receive any proceeds from the sale of these shares of common
stock offered by the selling stockholders.
We shall use our best efforts to prepare and file with the Commission such
amendments and supplements to the registration statement and this prospectus as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of the
common stock covered by the registration statement for the period required to
effect the distribution of such common stock.
We are paying certain expenses (other than commissions and discounts of
underwriters, dealers or agents) incidental to the offering and sale of the
common stock to the public, which are estimated to be approximately $2,020. If
we are required to update this prospectus during such period, we may incur
additional expenses in excess of the amount estimated above.
In order to comply with certain state securities laws, if applicable, the
common stock will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the shares of common stock may
not be sold unless they have been registered or qualify for sale in such state
or an exemption from registration or qualification is available and is complied
with.
LEGAL MATTERS
The legality of the shares offered hereby is being passed upon for us by
Gergosian & Gralewski LLP located in San Diego, California. Gergosian &
Gralewski LLP was compensated for this legal opinion, and other services it will
provide to us as a member of our advisory board, through the issuance of options
to purchase up to 5,000 shares of our common stock, exercisable at $1.06 per
share and vesting monthly over a two year period commencing as of August 13,
2007.
EXPERTS
The financial statements for the years ended March 31, 2007 and 2006
incorporated by reference in this Prospectus have been audited by L.L. Bradford
& Company, LLC, independent registered public accountants, to the extent and for
the periods set forth in their report incorporated herein by reference, and are
incorporated herein in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting.
DOCUMENTS INCORPORATED BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to those documents that we have
previously filed with the Commission or documents that we will file with the
Commission in the future. The information incorporated by reference is
considered to be part of this prospectus, and later information that we file
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below, and any future filings made
with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, until we close this offering. The documents we incorporate
by reference are:
(a) Our annual report on Form 10-KSB for the fiscal year ended March 31,
2007.
(b) Our quarterly reports on Form 10-QSB for the fiscal quarters ended June
30, 2007 and September 30, 2007.
15
(c) Our Current Reports on Form 8-K, including any amendments thereto,
filed on May 11, 2007, July 9, 2007, July 24, 2007, July 27, 2007, September 19,
2007 and October 29, 2007.
(d) Our Proxy Statement for our Annual Meeting to be held on September 20,
2007.
(e) The description of our shares contained in the registration statement
on Form 8-A filed on December 15, 2000.
All reports and other documents subsequently filed by us with the SEC
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Exchange Act, prior
to the filing of a post-effective amendment which indicates that all securities
covered by this prospectus have been sold or which deregisters all such
securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of such
reports and documents.
AVAILABLE INFORMATION
We will provide without charge to each person to whom this prospectus is
delivered, on the written or oral request of such person, a copy of any document
incorporated herein by reference. Requests should be made to Semotus Solutions,
Inc. 718 University Ave., Suite 202, Los Gatos, California 95032, telephone
(408) 399-6120, and directed to the attention of Tali Durant, Corporate
Secretary.
We are subject to certain informational reporting requirements of the
Exchange Act and accordingly file reports and other information with the
Securities and Exchange Commission. These reports, proxy statements and other
information may be read and copied at the SEC's Public Reference Room at 100 F
Street, N.E., Room 1580, Washington, DC 20549 at prescribed rates. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC maintains an internet site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically. Additional updating information
with respect to the securities covered herein may be provided in the future to
purchasers by means of appendices to this prospectus.
We have filed with the SEC in Washington, DC a registration statement under
the Securities Act with respect to the securities offered or to be offered
hereby. This prospectus does not contain all of the information included in the
registration statement, certain items of which are omitted in accordance with
the rules and regulations of the SEC. For further information about Semotus
Solutions and the securities offered hereby, reference is made to the
registration statement and the exhibits thereto. The registration statement has
been filed electronically through the SEC's Electronic Data Gathering, Analysis
and Retrieval System and may be obtained through the SEC's Internet site
(http://www.sec.gov.).
DISCLOSURE OF SEC POSITION OF
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following expenses incurred in connection with the sale of the
securities being registered will be borne by the Registrant. Other than the
registration fee, the amounts stated are estimates.
-------------------------------- ----------------
Registration Fees $20
-------------------------------- ----------------
Legal Fees and Expenses $ 1,000
-------------------------------- ----------------
Accounting Fees and Expenses $ 1,000
-------------------------------- ----------------
TOTAL $ 2,020
-------------------------------- ----------------
--------------------------------------------------------------------------------
16
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ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The only statute, charter provision, bylaw, contract, or other arrangement
under which any controlling person, director or officer of Semotus Solutions,
Inc. is insured or indemnified in any manner against any liability which he may
incur in his capacity as such, is as follows:
(a) Subsection (1) of Section 78.751 of the Nevada Corporation Law empowers
a corporation to "indemnify any person who is a party or is threatened to be
made a party to any threatened pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, except an action by or
in the right of the corporation, by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful."
Subsection (2) of Section 78.751 empowers a corporation to "indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement and attorneys'
fees actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation or
for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnify for such expenses as the court deems proper."
Subsection 78.751(3) further provides that "to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections 1 and 2, or in defense of any claim, issue or matter herein he must
be indemnified by the corporation against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense."
(b) Article VII of our Articles of Incorporation provides that we are
authorized to indemnify directors, officers, employees and agents to the full
extent allowed for under the Nevada Business Corporation Act.
(c) Article XI of our Articles of Incorporation provides that no director,
officer or stockholder of Semotus Solutions shall be personally liable for
damages for breach of fiduciary duty as a director or officer; provided, that
this provision shall not eliminate liability of a director or officer for acts
or omissions involving intentional misconduct, fraud or a knowing violation of
law or payments or distributions in violation of Nevada law.
(d) Semotus' directors and officers are covered by insurance maintained by
Semotus against specified liabilities for actions taken in their capacities as
such, including liabilities under the Securities Act of 1933, as amended.
17
(e) The Registration Rights Agreement (Exhibit 10.1 hereto) provides for
indemnification of the officers and directors of Semotus by the Investors, with
regard to certain liabilities arising under the Securities Act of 1933, as
amended, or other federal or state law.
ITEM 16. EXHIBITS.
---------- -------------------------------------------------- ---------------------------------
EXHIBIT
NUMBER DESCRIPTION LOCATION
---------- -------------------------------------------------- ---------------------------------
2.1 Investment Agreement dated February 1, 2007 by Incorporated by reference to
and among Semotus Solutions, Inc. and Miro Exhibit 2.1 of Registrant's Form
Knezevic and Gail L. Knezevic, Co-Trustees, 8-K filed on February 7, 2007.
Knezevic Family Trust dated June 30, 1992.
---------- -------------------------------------------------- ---------------------------------
2.2 Investment Agreement by and among Semotus Incorporated by reference to
Solutions, Inc. and Richard Sullivan dated Exhibit 2.2 of Registrant's Form
November 13, 2006. 8-K filed on November 16, 2006.
---------- -------------------------------------------------- ---------------------------------
4.1 Convertible Promissory Note dated February 1, Incorporated by reference to
2007. Exhibit 4.1 of Registrant's Form
8-K filed on February 7, 2007.
---------- -------------------------------------------------- ---------------------------------
4.2 Amendment to the Convertible Promissory Note Incorporated by reference to
dated October 23, 2007. Exhibit 4.2 of Registrant's Form
8-K filed on October 27, 2007.
---------- -------------------------------------------------- ---------------------------------
4.3 Convertible Promissory Note dated November 13, Incorporated by reference to
2006. Exhibit 4.1 of Registrant's Form
8-K filed on November 16, 2006.
---------- -------------------------------------------------- ---------------------------------
5.1 Opinion of Gergosian & Gralewski LLP regarding Filed electronically herewith.
the legality of the securities being registered.
---------- -------------------------------------------------- ---------------------------------
10.1 Registration Rights Agreement dated February 1, Incorporated by reference to
2007 by and among Semotus Solutions, Inc. and Exhibit 10.1 of Registrant's Form
Miro Knezevic and Gail L. Knezevic, Co-Trustees, 8-K filed on February 7, 2007.
Knezevic Family Trust dated June 30, 1992.
---------- -------------------------------------------------- ---------------------------------
23.1 Consent of L.L. Bradford & Company, LLC Filed electronically herewith.
---------- -------------------------------------------------- ---------------------------------
23.2 Consent of Gergosian & Gralewski LLP (contained Filed electronically herewith.
in Exhibit 5.1).
---------- -------------------------------------------------- ---------------------------------
24.1 Power of Attorney (contained in the signature Filed electronically herewith.
page hereof).
---------- -------------------------------------------------- ---------------------------------
|
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
a. 1. To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement
to:
i. Include any prospectus required by section 10(a)(3) of the
Securities Act;
ii. Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and Notwithstanding
the forgoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation From the
low or high end of the estimated maximum offering range may be
reflected in the form of prospects filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in the
volume and price represent no more than a 20% change in the
maximum aggregate offering
18
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
iii. Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Securities Act, to treat
each post-effective amendment as a new registration statement of
the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
3. To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
b. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
c. The registrant will:
i. For determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
under Rule 424(b)(1), or (4) or 497(h) under the Securities Act
as part of this registration statement as of the time the
Commission declared it effective.
ii. For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered in
the registration statement, and that offering of the securities
at that time as the initial bona fide offering of those
securities.
d. That, for the purpose of determining liability under the Securities
Act to any purchaser:
If the registrant is relying on Rule 430C:
Each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A (ss.230.430A of this
chapter), shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. PROVIDED, HOWEVER, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is
part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any
such document immediately prior to such date of first use.
19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment to
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, hereunto duly authorized, in Los Gatos, California, on November 16,
2007.
By: /s/ Anthony N. LaPine
--------------------------
Anthony N. LaPine,
Chief Executive Officer
|
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
================================================================================
SIGNATURES TITLE DATE
================================================================================
/s/ Anthony N. LaPine Chief Executive Officer November 16, 2007
---------------------------- and Chairman of the Board
Anthony N. LaPine
/s/ Charles K. Dargan, II Chief Financial Officer November 16, 2007
---------------------------- (Principal Financial Officer
Charles K. Dargan, II and Principal Accounting
Officer)
/s/ Robert Lanz Director November 16, 2007
----------------------------
Robert Lanz*
/s/ Mark Williams Director November 16, 2007
----------------------------
Mark Williams*
/s/ Laurence Murray Director November 16, 2007
----------------------------
Laurence Murray*
|
20
SEMOTUS SOLUTIONS, INC.
(COMMISSION FILE NO. _____________)
EXHIBIT INDEX
TO
FORM S-3 REGISTRATION STATEMENT
------- -------------------------------------------------- ---------------------------------
EXHIBIT
NUMBER DESCRIPTION LOCATION
------- -------------------------------------------------- ---------------------------------
2.1 Investment Agreement dated February 1, 2007 by Incorporated by reference to
and among Semotus Solutions, Inc. and Miro Exhibit 2.1 of Registrant's Form
Knezevic and Gail L. Knezevic, Co-Trustees, 8-K filed on February 7, 2007.
Knezevic Family Trust dated June 30, 1992.
------- -------------------------------------------------- ---------------------------------
2.2 Investment Agreement by and among Semotus Incorporated by reference to
Solutions, Inc. and Richard Sullivan dated Exhibit 2.2 of Registrant's Form
November 13, 2006. 8-K filed on November 16, 2006.
------- -------------------------------------------------- ---------------------------------
4.1 Convertible Promissory Note dated February 1, Incorporated by reference to
2007. Exhibit 4.1 of Registrant's Form
8-K filed on February 7, 2007.
------- -------------------------------------------------- ---------------------------------
4.2 Amendment to the Convertible Promissory Note Incorporated by reference to
dated October 23, 2007. Exhibit 4.2 of Registrant's Form
8-K filed on October 27, 2007.
------- -------------------------------------------------- ---------------------------------
4.3 Convertible Promissory Note dated November 13, Incorporated by reference to
2006. Exhibit 4.1 of Registrant's Form
8-K filed on November 16, 2006.
------- -------------------------------------------------- ---------------------------------
5.1 Opinion of Gergosian & Gralewski LLP regarding Filed electronically herewith.
the legality of the securities being registered.
------- -------------------------------------------------- ---------------------------------
10.1 Registration Rights Agreement dated February 1, Incorporated by reference to
2007 by and among Semotus Solutions, Inc. and Exhibit 10.1 of Registrant's Form
Miro Knezevic and Gail L. Knezevic, Co-Trustees, 8-K filed on February 7, 2007.
Knezevic Family Trust dated June 30, 1992.
------- -------------------------------------------------- ---------------------------------
23.1 Consent of L.L. Bradford & Company, LLC Filed electronically herewith.
------- -------------------------------------------------- ---------------------------------
23.2 Consent of Gergosian & Gralewski LLP (contained Filed electronically herewith.
in Exhibit 5.1).
------- -------------------------------------------------- ---------------------------------
24.1 Power of Attorney (contained in the signature Filed electronically herewith.
page hereof).
------- -------------------------------------------------- ---------------------------------
|
21
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