SEMOTUS SOLUTIONS INC(Form: 10-Q, Received: 11/14/2002 14:08:02)

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WtjE/9ry4ymsw8T5wytC1cmIISg0aYxKBL6/bDPTSlaqEA3JIQYljbNmoWH1av7X v00pYBhXFWkMQbzVTwizHw== 0001127074-04-000008.txt : 20040212 0001127074-04-000008.hdr.sgml : 20040212 20040212151821 ACCESSION NUMBER: 0001127074-04-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEMOTUS SOLUTIONS INC CENTRAL INDEX KEY: 0000832370 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 954599440 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15569 FILM NUMBER: 04590892 BUSINESS ADDRESS: STREET 1: 16400 LARK AVE STREET 2: SUITE 230 CITY: LOS GATOS STATE: CA ZIP: 95032 BUSINESS PHONE: 4083587100 MAIL ADDRESS: STREET 1: 16400 LARK AVE STREET 2: SUITE 230 CITY: LOS GATOS STATE: CA ZIP: 95032 FORMER COMPANY: FORMER CONFORMED NAME: DATALINK NET INC DATE OF NAME CHANGE: 19990707 FORMER COMPANY: FORMER CONFORMED NAME: DATALINK SYSTEMS CORP /CA/ DATE OF NAME CHANGE: 19960723 FORMER COMPANY: FORMER CONFORMED NAME: LORD ABBOTT INC DATE OF NAME CHANGE: 19920703 10-Q 1 sem_10q3.htm SEMOTUS SOLUTIONS, INC. 10-Q FOR 12/31/2003 SEMOTUS SOLUTIONS INC(Form: 10-Q, Received: 11/14/2002 14:08:02)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2003

Commission file number: 1-15569

SEMOTUS SOLUTIONS, INC.

(Exact name of Registrant as specified in its charter)

Nevada 36-3574355

------------------------------ ---------------------------

(State or other jurisdiction of (I.R.S. Employer Identification No)

incorporation or organization)

16400 Lark Ave., Suite 230, Los Gatos, CA 95032

(Address of principal executive offices including zip code)

(408) 358-7100

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]

There were 22,570,295 shares of the Registrant's Common Stock outstanding as of January 27, 2004.

SEMOTUS SOLUTIONS, INC.

TABLE OF CONTENTS

Page

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS:

a. Consolidated Balance Sheets as of December 31, 2003

and March 31, 2003 3

b. Consolidated Statements of Operations and

Comprehensive Loss for the three and nine month periods

ended December 31, 2003 and 2002 4

c. Consolidated Statements of Cash Flows for the nine

months ended December 31, 2003 and 2002 5

d. Notes to Consolidated Financial Statements 7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS 9

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 13

ITEM 4. CONTROLS AND PROCEDURES 13

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS 13

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 13

ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 13

ITEM 5. OTHER INFORMATION 14

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 14

SIGNATURES 15

PART I - FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

SEMOTUS SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(unaudited)

ASSETS	December 31 2003	March 31 2003
CURRENT ASSETS:
Cash and cash equivalents	$ 1,317,539	$ 1,969,910
Trade receivables (net of allowance for doubtful accounts of $0.00 at December 31, 2003 and $6,090 at March 31, 2003)	155,499	140,646
Prepaid expenses and other current assets	29,859	35,284
Current assets held for sale	--	298,200
Current assets from discontinued operations	--	23,029
	------------	-----------
Total current assets	1,502,897	2,467,069

Property and equipment, net	191,476	342,614
Goodwill, net	1,430,141	1,430,141
Non-current assets held for sale	--	408,732
	------------	------------
Total assets	$ 3,124,514	$ 4,648,556
	============	============
LIABILITIES and SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable	$ 245,535	$ 372,391
Accrued vacation	51,556	60,528
Other accrued liabilities	89,442	63,122
Notes payable	10,000	56,224
Current portion of capital lease obligations	9,172	17,609
Deferred revenue	123,878	79,119
Current liabilities related to assets held for sale	--	300,717
Current liabilities from discontinued operations	--	52,714
	------------	------------
Total current liabilities	529,583	1,002,424

Capital lease obligation, net of current portion	689	15,189
Non-current liabilities related to assets held for sale	--	321,216
	------------	------------
Total liabilities	530,272	1,338,829
	------------	------------

Commitments and contingencies (Note 8)

	------------	------------
SHAREHOLDERS' EQUITY
Common stock: $0.01 par value; authorized: 50,000,000 shares; issued and outstanding: 20,435,496 at December 31, 2003 and 19,275,211 at March 31, 2003	204,355	192,752
Additional paid-in capital	67,258,568	66,163,351
Accumulated other comprehensive loss	(73,142)	(93,306)
Notes receivable -- related parties	(33,455)	(91,281)
Accumulated deficit	(64,762,084)	(62,861,789)
	------------	------------
Total shareholders' equity	2,594,242	3,309,727
	------------	------------
Total liabilities and shareholders' equity	$ 3,124,514 ============	$ 4,648,556 ============

See accompanying notes to consolidated financial statements.

SEMOTUS SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

	Three Months December	Ended 31,	Nine Months December	Ended 31,
	2003	2002	2003	2002
Revenues:	$ 283,846	$ 350,445	$ 1,010,680	$ 1,005,612

Cost of revenue:	79,398	70,746	225,257	251,101
	------------	------------	------------	------------
Gross profit	204,448	279,699	785,423	754,511

Operating expenses:
Research and development	121,783	142,532	434,413	523,295
Sales and marketing	166,431	220,810	512,715	713,439
General and administrative	249,050	340,774	702,982	1,889,088
Depreciation and amortization	51,269	278,922	159,187	943,951
Stock, option and warrant expense	(280,054)	1,362	1,013,323	24,283
	------------	------------	------------	------------
Total operating expenses	308,479	984,400	2,822,620	4,094,056
	------------	------------	------------	------------
Operating loss from continuing operations	(104,031)	(704,701)	(2,037,197)	(3,339,545)

Other income	32,515	101,030	31,068	298,784
	------------	------------	------------	------------

Loss from continuing operations	(71,516)	(603,671)	(2,006,129)	(3,040,761)
Income from discontinued operations	--	31,728	105,834	205,110
	------------	------------	------------	------------
Net loss	(71,516)	(571,943)	(1,900,295)	(2,835,651)
Other comprehensive income (loss) - -- Translation adjustment	4,897	2,080	20,164	207
	------------	------------	------------	------------
Comprehensive loss	$ (66,619)	$ (569,863)	$(1,880,131)	$(2,835,444)
	============	============	============	============
Net loss per common share:
Basic	$ (0.00)	$ (0.03)	$ (0.09)	$ (0.16)
Diluted	$ (0.00)	$ (0.03)	$ (0.09)	$ (0.16)
Weighted average shares used in per share calculation, basic and diluted	20,401,292	18,108,715	20,135,053	17,764,736
	============	============	============	============

See accompanying notes to consolidated financial statements.

SEMOTUS SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months December	Ended 31,
	2003	2002
Cash flows from operating activities:
Net loss	$(1,900,295)	$(2,835,651)
Income from discontinued operations	(105,834)	(205,110)
	------------	------------
Loss from continuing operations	(2,006,129)	(3,040,761)
Foreign currency translation adjustment	20,164	207

Adjustments to reconcile net loss from continuing operations to net cash used in operating activities from continuing operations:
Depreciation and amortization	159,187	943,951
Compensation expense related to stock and stock options issued for services	1,013,323	24,283
Amortization of advances on technology sales	--	(206,724)
Amortization of notes receivable	57,826	574,647
Net loss (gain) from disposition of assets	(3,616)	1,220
Non-cash settlement of liabilities	44,580	45,353
Non-cash legal settlement	--	119,862

Changes in assets and liabilities:
Accounts and other receivables	(14,853)	(43,931)
Prepaid expenses and other assets	5,425	69,604
Accounts payable	(126,857)	97,253
Accrued liabilities	17,348	(111,477)
Deferred revenue	44,759	(27,455)
Advances on technology sales	--	13,966
	------------	------------
Net cash used in operating activities	(788,843)	(1,540,002)
	------------	------------
Cash flows from investing activities:
Acquisition of property & equipment	--	(18,925)
Cash proceeds from sale of fixed assets	--	560
	------------	------------
Net cash used in investing activities	--	(18,365)
	------------	------------
Cash flows from financing activities:
Repayments of notes payable	(46,224)	(22,881)
Repayments of capital lease obligations	(10,120)	(12,564)
Proceeds from exercise of options and warrants	128,377	--
Repurchase of preferred stock	--	(100,000)
	------------	------------
Net cash provided by (used in) financing activities	72,033	(135,445)
	------------	------------
Net cash provided by (used in) discontinued operations	64,439	(86,289)
Net decrease in cash and cash equivalents	(652,371)	(1,780,101)
Cash and cash equivalents, beginning of period	1,969,910	4,070,642
	------------	------------
Cash and cash equivalents, end of period	$ 1,317,539	$ 2,290,541
	============	============

See accompanying notes to consolidated financial statements.

SEMOTUS SOLUTIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(unaudited)

	Nine Months December	Ended 31,
	2003	2002
SUPPLEMENTAL CASH FLOW DISCLOSURE:

Cash paid for interest	$ 8,175	$ 61,917
	=============	=============
Cash paid for income taxes	$ --	$ 3,701
	============	=============

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Additional non-cash purchase consideration paid to shareholders of WizShop.com, Inc. pursuant to the Merger Agreement	$ 30,815	$ 122,681
	=============	=============
Non-cash compensation expense due to variable accounting for repriced stock options	$ 947,850	$ --
	============	=============
Common stock issued for services	$ 34,658	$ 24,283
	============	=============
Common stock issued for liabilities	$ 44,580	$ 165,215
	=============	=============
Warrant issued as partial consideration for repurchase of preferred stock	$ --	$ 90,497

See accompanying notes to consolidated financial statements.

SEMOTUS SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BUSINESS OF THE COMPANY:

Semotus Solutions, Inc. ("We" or "Our") is a leading provider of enterprise application software connecting employees to critical business systems, information, and processes. We help mobile employees make better and faster decisions, increase customer satisfaction, and improve efficiencies in their business processes for shorter sales and service cycles. Our products serve such vertical markets as workforce automation and financial services. Our enterprise application software provides mobility, convenience and efficiency and improves profitability.

For more information please go to our website at http://www.semotus.com.

2. BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of Semotus Solutions, Inc. and our subsidiaries. The consolidated balance sheet as of December 31, 2003, the consolidated statements of operations and comprehensive loss for the three and nine month periods ended December 31, 2003 and 2002, and the consolidated statements of cash flows for the nine months ended December 31, 2003 and 2002 have been prepared by us, without audit and in accordance with the instructions to Form 10-Q and Regulation S-K. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended December 31, 2003 are not necessarily indicative of the results that may be expected for the year ending March 31, 2004. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting princi ples have been condensed or omitted. We believe that the disclosures provided are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended March 31, 2003.

The consolidated financial statements include our accounts and our wholly owned subsidiaries: Semotus Systems Corporation (Canadian subsidiary) and Simkin, Inc., and our discontinued entities: Five Star Advantage, Inc. (Five Star), Wares on the Web, Inc. (Wares), Application Design Associates, Inc. (ADA) and WizShop.com, Inc. (WizShop). All significant intercompany transactions and balances have been eliminated in consolidation. Operations of the Canadian subsidiary consist mainly of research and development and engineering on our behalf. Five Star's and Wares' operations have been discontinued as of June 28, 2002 and August 19, 2002, respectively. ADA has been sold as of May 6, 2003. WizShop's operations have also been discontinued as of September 30, 2003. Cross Communications, Inc. was merged with and into Semotus as of October 21, 2003. Simkin continues to generate some revenues from the sales of products and services.

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.

3. RECENT PRONOUNCEMENTS

In November 2002, the Emerging Issues Task Force issued its final consensus on Revenue Arrangements with Multiple Deliverables. This guidance is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003 or alternatively, entities may elect to report the change in accounting as a cumulative-effect adjustment. EITF 00-21 discusses criteria necessary to determine when an arrangement may be viewed to have separate units of accounting (and thus revenue) and when an arrangement should be viewed as a single unit of accounting. Adoption of EITF 00-21 did not have a material impact on our financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51." This interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the interpretation. The interpretation applies immediately to variable interests in variable interest entities created or obtained after January 31, 2003. The interpretation is applied to the enterprise no later than the end of the first reporting period beginning after June 15, 2003. The application of this interpretation has not had a material effect on our financial statements. The interpretation requires certain disclosures in financial statements issued after January 31, 2003 if it is reasonably possible that we will consolidate or disclose information about variable interest entities when the interpretation becomes effective. As of December 31, 2003, we do not have any variable interest entities.

In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement clarifies and creates more consistent reporting of contracts as either derivatives or hybrid financial instruments. The Statement is effective for contracts entered into or modified after June 30, 2003. We historically have not used derivatives or hedging instruments. Currently, we do have a small exposure to the Canadian - -- U.S. dollar exchange rate, but we have not deemed it necessary to hedge this exposure.

In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity and is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective as of the beginning of the first interim period beginning after June 15, 2003. We adopted SFAS No. 150 on June 1, 2003. As of December 31, 2003, the adoption of SFAS No. 150 has not had a material impact on our results of operations or financial condition.

4. OTHER INCOME

For the three and nine months ended December 31, 2003, other income and expense is primarily the net of interest income and interest expense and the realization of a small one-time gain from the sale of old expiring patents. In the three and nine months ended December 31, 2002, other income was substantially comprised of interest income and expense as well as amortization of advances from technology sales received in previous periods, and the owner's fees and offsetting interest income recognized, related to the technology sales. See the Consolidated Statement of Operations and Comprehensive Loss and Notes to the Financial Statements in our Annual Report on Form 10-K for the year ended March 31, 2003.

5. STOCK-BASED COMPENSATION EXPENSE

We account for employee stock-based compensation plans using the intrinsic value method of recognition and measurement principles as delineated in APB Opinion 25, "Accounting for Stock Issued to Employees" and related interpretations. No stock-based employee compensation cost is reflected in the statement of operations upon granting of stock options, as all options granted under our Stock Option Plan had an exercise price equal to or greater than the market value of the underlying common stock on the day of grant. However, since certain employee stock options were repriced in October 2002, we accounted for those options under the variable accounting requirements of APB Opinion 25 and FIN 44, "Accounting for Certain Transactions Involving Stock Compensation", and accordingly, compensation expense was recorded in the three and nine months ended December 31, 2003, since the current market price of the underlying stock exceeded the exercise price on the date the grant was repriced. At December 31, 2003, our closing stock price was $0.70 per share, a decline of $0.21 per share from the closing stock price at September 30, 2003. In accordance with FIN 44, we reduced our previous estimate of stock compensation expense by the reduction in stock price, multiplied by the number of outstanding vested repriced options at December 31, 2003. This produced a net reduction of $314,712 in the intrinsic value based method of expense as shown in the following table.

The following is a summary of the effect on net loss and net loss per share if we had applied a fair value method prescribed by SFAS No. 123, "Accounting for Stock-Based Compensation" to account for stock-based compensation for the periods indicated:

	Three Months	Ended	Nine Months	Ended
	December	31,	December	31,
	2003	2002	2003	2002
Net loss, as reported	$ (71,516)	$ (571,943)	$ (1,900,295)	$ (2,835,651)
Add: Total stock-based employee compensation expense determined under intrinsic value based method for all awards and variable accounting for repriced options	(314,712)	--	947,850	--
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards	(100,195)	--	(250,564)	--

Pro forma net loss	(486,423)	(571,943)	(1,203,009)	(2,835,651)

Net loss per share:
Basic - as reported	$ (0.00)	$ (0.03)	$ (0.09)	$ (0.16)

Basic -- pro forma	$ (0.02)	$ (0.03)	$ (0.06)	$ (0.16)

Diluted -- as reported	$ (0.00)	$ (0.03)	$ (0.09)	$ (0.16)

Diluted -- pro forma	$ (0.02)	$ (0.03)	$ (0.06)	$ (0.16)

These pro forma amounts may not be representative of the effects for future years as options vest over several years and additional awards are generally made each year.

6. EARNINGS PER SHARE (EPS) DISCLOSURES

In accordance with SFAS No. 128 "Earnings Per Share " (EPS), we report Basic and Diluted EPS as follows: Basic EPS is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities. Common equivalent shares are excluded from the computation of net loss per share if their effect is anti-dilutive.

For the three and nine months ended December 31, 2003 and 2002, 4,349,738 potential shares and 6,569,039 potential shares, respectively, were excluded from the shares used to calculate diluted EPS as their effect is anti-dilutive.

7. DISCONTINUED OPERATIONS

As part of our Centralization and Consolidation Plan, which is further described in our March 31, 2003 Form 10-K, we reduced our e-commerce and m-commerce presence with the elimination of unprofitable products and services in that segment. FiveStar was not expected to make a significant contribution to our future profitability as its operations were unprofitable. Therefore, we decided to close the facilities and cease the operations as of the end of June 2002. Furthermore, Five Star filed for liquidation under Chapter 7 of the U.S. Bankruptcy Code on June 28, 2002. In continuing with the reduced e-commerce and m-commerce presence and the elimination of unprofitable products and services, we decided to discontinue the operations of Wares on the Web in August 2002. The Wares on the Web operations were unprofitable, and consequently, Wares on the Web filed for liquidation under Chapter 7 of the U.S. Bankruptcy Code on August 19, 2002. WizShop's operations were also discontinued as of September 30, 2003, as it was not expected to make a significant contribution to our future profitability. WizShop does not have any additional contracts for its online software marketing business, the last of which was completed as of March 31, 2003.

On January 18, 2002, the Global Beverage Group, "GBG", a Canadian-based direct store delivery consortium, completed a strategic investment in Semotus' ADA subsidiary by acquiring a 49% share in ADA. For its 49% stock purchase, GBG paid us $250,000 in cash and agreed to invest $1 million in ADA over the next 15 months in order to help with the development of the next generation of ADA asset tracking and management software. In May 2003, GBG purchased the remaining 51% of ADA for the return of 500,000 shares of our common stock originally issued in May of 2001 and 2002 as part of our acquisition of ADA. This event resulted in the discontinuation of ADA's operations in fiscal year 2003.

In accordance with FAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", the operations of FiveStar, Wares, ADA

and WizShop have been recorded as discontinued operations in the three and nine month periods ended December 31, 2003 and 2002, respectively. In the three months ended December 31, 2003, there was not any income or loss from discontinued operations. In the nine months ended December 31, 2003, the net income from discontinued operations of $105,834 is comprised solely of the operations of WizShop. Substantially all of the income was from a legal settlement. The net income from discontinued operations of $31,728 and $205,110 for the three and nine months ended December 31, 2002, respectively, consisted of a net loss from operations in the nine months ended December 31, 2002 of $127,770 at Five Star, and net income (loss) from operations of $(315) and $6,689, respectively, at Wares, a net loss from operations of $3,862 and $26,237 respectively at ADA and net income of $35,905 and $352,428, respectively, at WizShop. A net gain upon disposition of the assets and liabilities of Five Star and W ares of $128,582 was recognized at March 31, 2003.

8. COMMITMENTS AND CONTINGENCIES

Effective October 23, 2002 our Board of Directors approved the repricing of most of the options under our 1996 Stock Option Plan, as amended, with exercise prices ranging from $0.22 to $0.84 per share held by most of the employees (including executive officers) and Board members. In light of the reductions in work force and salary reductions, our Board of Directors deemed it advisable to reprice the options to provide a retention incentive for the remaining employees. The option grants were repriced to an exercise price of $0.15 per share (the current fair market value of our common stock as of the reprice date) and an exercise price of $0.17 per share (110% of the fair market value at the date of reprice) for those persons owning more than 10% of the voting power of all classes of stock. All grants maintained their existing vesting schedule. This is deemed to be a repricing under FIN 44 and resulted in variable plan accounting. A decrease in the closing stock price on December 31, 2003 from the closing stock price on September 30, 2003 resulted in an offset of $314,712 to the compensation expense to be recognized in the three months ended December 31, 2003; however, a compensation expense in the amount of $947,850 was required to be recognized to reflect the net increase in stock price over the repriced amount for the nine months ended December 31, 2003. Increases or decreases in our stock price will continue to be recognized in the future for outstanding vested repriced options if the stock price continues to be above the revised exercise price of the options.

9. SEGMENT INFORMATION

After the Consolidation and Centralization Plan was largely completed by March 31, 2003, we determined that our ongoing operations were in one segment, wireless and mobile enterprise software. Our products consist mainly of the Global Market Pro family of products and the Hiplink family of products. Utilizing the definitions described in SFAS 131, "Disclosures about Segments of an Enterprise and Related Information", the nature of the products and services are all similar. Accordingly, starting in the current fiscal year, we will report the single line of business of wireless and mobile enterprise software and will no longer report operations from three prior segments: Enterprise and Commerce Sales, Professional and Related Services and Logistics. Further, per SFAS 131, the corresponding information for the earlier period presented has been restated to conform to the single segment.

10. SUBSEQUENT EVENTS

On January 23, 2004, we closed an equity private placement of US$1,028,750. Under the terms of the private placement, we sold an aggregate of 1,959,524 shares at $0.525 per share and 489,881 share purchase warrants. Each warrant entitles the holder to purchase an additional share of common stock at a price of $0.8625 per share for a period of five years. In connection with the private placement, we paid a placement fee of $85,000, of which $51,216 was paid in cash and the balance was paid by the issuance of 64,350 shares of common stock and 40,476 share purchase warrants. After payment of expenses and placement fees, we received net proceeds of $972,534. These funds will be used to finance the ongoing operations of the business and to augment its sales and marketing efforts.

As part of the private placement, we have agreed to file a registration statement with the Securities and Exchange Commission to qualify the resale of the 2,023,874 shares of common stock and the 530,357 shares of common stock issuable upon the exercise of the share purchase warrants issued in the private placement. We are required to file this registration by March 3, 2004 and have the registration statement declared effective by the Securities and Exchange Commission by May 2, 2004. Should we fail to file the registration statement or have it declared effective within the time requirements, we will be required to pay a penalty of 1% of the purchase price per month, or $10,287.50 per month, for the first 3 months of noncompliance and 2% per month, or $20,575 per month, thereafter. At this time, we believe that we will meet the time requirements for filing the registration statement and having it declared effective; however, having the registration statement declared effective is subject to the review and approval of the Securities and Exchange Commission. The securities issued in this private placement have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements of the Securities Act of 1933.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the attached financial statements and notes thereto. Except for the historical information contained herein, the matters discussed below are forward-looking statements that involve certain risks and uncertainties, including, among others, the risks and uncertainties discussed below.

CRITICAL ACCOUNTING POLICIES

We described our critical accounting policies in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of our Annual Report on Form 10-K for the year ended March 31, 2003.

Our critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations, and require our management's significant judgments and estimates and such consistent application of such critical accounting policies fairly depicts our financial condition and results of operations for all periods presented.

OVERVIEW

After the Consolidation and Centralization Plan was largely completed by March 31, 2003, we determined that our ongoing operations were in one segment, wireless and mobile enterprise software. Our products consist mainly of the Global Market Pro family of products and the Hiplink family of products. Utilizing the definitions described in SFAS 131, "Disclosures about Segments of an Enterprise and Related Information", the nature of the products and services are all similar. Accordingly, starting in the current fiscal year, we will report the single line of business of wireless and mobile enterprise software and will no longer report operations from three prior segments: Enterprise and Commerce Sales, Professional and Related Services, and Logistics. Further, per SFAS 131, the corresponding information for the earlier period presented has been restated to conform to the single segment.

As a result of the centralization and consolidation implementation, the net loss declined to $71,516 from $571,943 and to $0.00 per share from $0.03 per share in the three months ended December 31, 2003 versus 2002. Also, the net loss declined to $1,900,295 or $0.09 per share from $2,835,651 or $0.16 per share for the nine months ended December 31, 2003 versus 2002. Likewise, the overall net decrease in cash was reduced to $652,371 from $1,780,101 in the nine months ended December 31, 2003 versus 2002.

RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002

REVENUES

Revenues for the three and nine months ended December 31, 2003 were $283,846 and $1,010,680, respectively, as compared to $350,445 and $1,005,612, respectively, for the three and nine months ended December 31, 2002.

The 19% decrease in revenue for the three months ended December 31, 2003 as compared to 2002 is largely due to a decline in the fourth quarter calendar year 2003 technology purchases, which we believe is largely due to changes in technology purchasing allocations between 2003 and 2004. This decline only affected our third quarter and was not large enough to offset the increase in revenue over the nine months ended December 31, 2003 as compared to the comparable period ended December 31, 2002.

COST OF REVENUES AND GROSS MARGIN

The overall gross profit margin decreased to 72% in the three months ended December 31, 2003 from 80% in the comparable period ended December 31, 2002. The decrease is a result of increases in data feed costs. This only affected the third quarter ended December 31, 2003 and was not large enough to offset the small increase in gross profit for the nine months ended December 31, 2003 to 78% from 75% in the comparable period ended December 31, 2002. The nine-month period increase is the result of continuing improvements in the reduction of costs and low variable costs for the wireless and mobile enterprise software products. The cost of sales consists mainly of network, airtime and data feed charges.

OPERATING EXPENSES

Operating expenses declined overall in the three and nine month periods ended December 31, 2003 versus the comparable periods in the last fiscal year, due to the full amortization of the GMP asset and due to the Centralization and Consolidation Plan, which has significantly reduced operating expenses in all areas, including research and development, sales and marketing and general and administrative cost centers. We categorize operating expenses into five major categories: research and development, sales and marketing, general and administrative, depreciation and amortization, and stock, option and warrant expense. The table below summarizes the changes in these five categories of operating expenses (unaudited):

	Three Months December	Ended 31,	Nine Months December	Ended 31,
Description	2003	2002	2003	2002
Research and development	$ 121,783	$ 142,532	$ 434,413	$ 523,295
Sales and marketing	166,431	220,810	512,715	713,439
General and administrative	249,050	340,774	702,982	1,889,088
Depreciation and amortization	51,269	278,922	159,187	943,951
Stock, option and warrant expense	(280,054)	1,362	1,013,323	24,283
	------------------	-------------------	-------------------	-------------------
Total	$ 308,479	$ 984,400	$ 2,822,620	$ 4,094,056

Research and development expenses are expenses incurred in developing new products and product enhancements for current products. These expenditures are charged to expense as incurred. Much of the development work for the Global Market Pro and HiplinkXS product lines have been completed, which has reduced research and development expenses. Remaining engineering costs are production projects for the existing products and services.

Sales and marketing expenses consist of costs incurred to develop and implement marketing and sales programs for our product lines. These include costs required to staff the marketing department and develop a sales and marketing strategy, participation in trade shows, media development and advertising, and web site development and maintenance. These costs also include the expenses of hiring sales personnel and maintaining a customer support call center. These costs have declined principally due to the reduction in general advertising and non-sales supported marketing. There has also been a reduction in marketing personnel as we have shifted to emphasizing marketing and sales support for our existing products.

General and administrative expenses include senior management, accounting, legal, business development consulting, rent, administrative personnel, and other overhead related costs. This category also includes the costs associated with being a publicly traded company, including the costs of the AMEX listings, SEC filings, investor and public relations. These costs declined substantially during the three and nine months ended December 31, 2003, as personnel and offices were reduced and operating functions were consolidated.

Depreciation and amortization expense includes depreciation of computers and other related hardware and certain fixtures. The decline in this expense for the three and nine months ended December 31, 2003 versus 2002 is as a result of the full amortization of the GMP asset in fiscal year 2003, and from the decline in capital spending on depreciable assets.

The non-cash charges for compensation consists mainly of grants of stock, options and warrants for services provided to us. Such services include financial, legal and business development consulting. Additionally, common stock was issued for certain accrued liabilities. The common stock issued was valued at its fair market value at the time of issuance. Certain employee stock options, which have been repriced, are subject to the variable plan requirements of FIN No. 44, that requires us to adjust compensation expense for increases and decreases in the intrinsic value of our common stock until those options are exercised, forfeited, or expire unexercised. A decrease in the closing stock price on December 31, 2003 from the closing stock price on September 30, 2003 resulted in an offset of $314,712 to the compensation expense to be recognized in the three months ended December 31, 2003; $947,850 in compensation expense was required to be recognized in the nine months ended December 31, 2003. No compensation expense for variable stock options was required to be recognized in the three and nine months ended December 31, 2002 (See Note 5, "Stock Based Compensation Expense"). Increases or decreases in our stock price will also be recognized in the future for outstanding vested repriced options if the stock price continues to be above the revised exercise price of the options. The increase in non-cash charges for compensation is due mainly to the compensation expense recorded for the October 2002 repriced stock options and to a lesser extent from the compensation expense for the settlement of the Merger Agreement with the shareholder of Cross Communications, Inc. and restricted stock grants to consultants.

NON-OPERATING INCOME AND EXPENSES

Non-operating income and expense for the three and nine months ended December 31, 2003 consists primarily of interest income from invested cash and interest expense from notes payable and a small one-time gain from the sale of old, expiring patents (see Note 4, "Other Income"). For the three and nine months ended December 31, 2002, non-operating income and expense also included interest income and expense as well as amortization of advances from technology sales received in previous periods, and the owner's fees and offsetting interest income recognized, related to the technology sales. See the Consolidated Statement of Operations and Comprehensive Loss and Notes to the Financial Statements in our Annual Report on Form 10-K for the year ended March 31, 2003.

Net interest income declined as less cash was available for investment during the three and nine-month periods ended December 31, 2003 versus 2002, as we continue with operating losses. The other income for the three and nine months ended December 31, 2003 includes a small realized one-time gain from the sale of old expiring patents. Another factor in the other income for the three and nine months ended December 31, 2002 is the amortization of technology advances, which had been declining due to the smaller balances resulting from the effective interest method of amortization. We determined that as of March 31, 2003, the technology transactions were completed and therefore the contracts were terminated (see Note 10, "Advances on Technology Sale" in our Annual Report on Form 10-K for the year ended March 31, 2003).

COMPREHENSIVE LOSS

The decrease in comprehensive loss to $66,619 or $0.00 per share, and $1,880,131 or $0.09 per share for the three and nine months ended December 31, 2003, respectively, compared to $569,863 or $0.03 per share, and $2,835,444 or $0.16 per share for the three and nine months ended December 31, 2002, respectively, is a direct result of the implementation of cost reduction programs which have consolidated and centralized our operating units and the elimination of unprofitable products and services.

LIQUIDITY AND CAPITAL RESOURCES

The overall decrease in our cash position is due to our continued operating losses. Cash continued to be spent on operating resources and upgrading and maintaining certain wireless products although a cash management and cost reduction program has been implemented and has reduced the overall cash loss by 63% for the nine month period ended December 31, 2003, versus 2002. The sources and uses of cash are summarized as follows (unaudited):

NINE MONTHS ENDED

DECEMBER 31,

	2003	2002
Net cash used in operating activities	$ (788,843)	$ (1,540,002)
Net cash used in investing activities	--	(18,365)
Net cash provided by (used in) financing activities	72,033	(135,445)
Net cash provided by (used in) discontinued operations	64,439	(86,289)
	----------------------	----------------------
Net decrease in cash and cash equivalents	$ (652,371) =============	$ (1,780,101) =============

Cash used in operating activities consisted principally of net loss of $1,900,295 offset primarily by $1,013,323 of stock-based compensation, as well as by non-cash charges of $159,187 in depreciation and amortization, and $57,826 in amortization of notes receivable. Other operating activities that contributed to the use of cash were $74,178 in the net change of current assets and current liabilities. This decrease resulted primarily from a decrease in accounts payable of $126,857 offset by increases in accrued liabilities and deferred revenue of $17,348 and $44,759, respectively, and an increase in accounts receivable of $14,853.

There was no cash used in investing activities for the nine months ended December 31, 2003. Cash used in investing activities for the nine months ended December 31, 2002 consisted principally of cash used for the acquisition of property and equipment.

Cash flows from financing activities produced a net increase in cash of $72,033, which resulted primarily from the exercise of stock options, offset in part from repayments of notes payable and capital leases.

Net cash provided by discontinued operations of $64,439 for the nine months ended December 31, 2003 is primarily from the discontinuation of the operations of WizShop, Inc.

As of December 31, 2003, we had cash and cash equivalents amounting to $1,317,539, a decrease of $652,371 from the balance at March 31, 2003. Working capital decreased to $973,314 at December 31, 2003 from $1,464,645 at the fiscal 2003 year end. The decrease in working capital is due to the resources used in our operations, as explained above. We have not yet generated sufficient revenues to cover the costs of continued product development and support, sales and marketing efforts and general and administrative expenses. There are no material commitments for capital expenditures at December 31, 2003.

Management believes that it has adequate working capital for the next 12 months.

RECENT PRONOUNCEMENTS:

In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement clarifies and creates more consistent reporting of contracts as either derivatives or hybrid financial instruments. The Statement is effective for contracts entered into or modified after June 30, 2003. We historically have not used derivatives or hedging instruments. Currently, we do have a small exposure to the Canadian - -- U.S. dollar exchange rate, but have not deemed it necessary to hedge this exposure.

In May 2003, the FASB issued SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity and is effective for financial instruments entered into or modified after May 31, 2003. We adopted SFAS No. 150 on June 1, 2003. As of December 31, 2003, the adoption of SFAS No. 150 has not had a material impact on our results of operations or financial condition.

FORWARD LOOKING STATEMENTS AND RISK FACTORS

This report includes forward-looking statements relating to, among other things, projections of future results of operations, our plans, objectives and expectations regarding our future services and operations and general industry and business conditions applicable to us. We have based these forward-looking statements on our current expectations and projections about future events. You can find many of these forward-looking statements by looking for words such as "may", "should", "believes", "expects", "anticipates", "estimates", "intends", "projects", "goals", "objectives", or similar expressions in this document or in documents incorporated herein. These forward-looking statements are subject to a number of risks, uncertainties and assumptions about us that could cause actual results to differ materially from those in such forward-looking statements. Such risks, uncertainties and assumptions include, but are not limited to, our limited operating history, our historical losses, our reduced c apital resources, the infancy of the wireless data industry where there is no established market for our products and services, our ability to adapt to rapid technological changes, our dependence on wireless networks owned and controlled by others, and the other factors that we describe in the section entitled "Risk Factors" in the Form 10K for the year ended March 31, 2003. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE REGARDING MARKET RISK

We have limited exposure to financial market risks, including changes in interest rates. At December 31, 2003, we had cash and cash equivalents of $1,317,539. Cash and cash equivalents consisted of demand deposits and money market accounts. Because of the cash equivalency of the money market accounts and the liquidity thereof, there is no material exposure to changes in interest rates for these accounts.

We also have short-term notes payable in the amount of $10,000, at December 31, 2003. These notes are due and payable within one year. Because of the short-term nature of the notes and the fixed rate on the notes, there is no material exposure to changes in interest rates for these accounts. We do not have any derivative or hedge instruments at December 31, 2003.

We have a permanent engineering operation in Vancouver, B.C., Canada and therefore has an exposure to the Canadian and U.S. dollar exchange rate. In the ordinary course of our business we transfer funds to the Canadian company and record the translation at the current exchange rate. We record translation gains and losses in Comprehensive Loss. At December 31, 2003, the cumulative translation loss was $73,142. Given the relative stability of the Canadian and U.S. dollar exchange rate, we have not deemed it necessary to hedge this exposure. We do actively monitor the situation and as of December 31, 2003 there has been a small but trending decline in the U.S. dollar against the Canadian dollar. Should the trend continue, we may seek to limit or hedge the exposure.

ITEM 4. CONTROLS AND PROCEDURES

a) Evaluation of disclosure controls and procedures. As of the end of the Company's most recently completed fiscal quarter covered by this report, the Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.

b) Changes in internal controls. There have been no changes in the Company's internal controls over financial reporting that occurred during the Company's last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any legal proceedings.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

We issued securities, which were not registered under the Securities Act of 1933, as amended, as follows:

During the quarter ended December 31, 2003, we issued 21,250 shares of common stock to three independent consultants for services rendered.

With respect to these transactions, we relied on Section 4(2) of the Securities Act of 1933, as amended. The investors were given complete information concerning us and represented that the shares were being acquired for investment purposes. The issuances were made without general solicitation or advertising. The appropriate restrictive legend was placed on the certificates and stop transfer instructions were issued to the transfer agent.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

a) Exhibits

Form of Registration Rights Agreement by and among Semotus Solutions, Inc., vFinance Investments, Inc. and each of Redwood Capital Partners, Inc., Bara Limited, Southshore Capital Fund Limited, James M. Totaro and Enable Growth Partners, LP dated January 14, 2004.

Form of Common Stock and Warrant Purchase Agreement by and among Semotus Solutions, Inc. and each of Redwood Capital Partners, Inc., Bara Limited, Southshore Capital Fund Limited, James M. Totaro and Enable Growth Partners, LP dated January 14, 2004.
Form of Warrant dated January 14, 2004 by and among Semotus Solutions, Inc. and each of Redwood Capital Partners, Inc., Bara Limited, Southshore Capital Fund Limited, James M. Totaro, Enable Growth Partners, LP., Richard Rosenblum, David Stefansky, vFinance Investments, Inc. and Arend Verweij.

31.1 Certification pursuant to 17 C.F.R. ss.240.15d-14(a) for Anthony N. LaPine.

31.2 Certification pursuant to 17 C.F.R. ss.240.15d-14(a) for Charles K. Dargan, II.

32.1 Certification pursuant to 18 U.S.C. ss.1350 for Anthony N. LaPine.

32.2 Certification pursuant to 18 U.S.C. ss.1350 for Charles K. Dargan, II.

b) Reports on Form 8-K:

We filed one Current Report on Form 8-K during this quarter. On November 17, 2003 a Form 8-K was filed pursuant to Item 7 and Item 9 with respect to our financial results for the second quarter ended September 30, 2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

SEMOTUS SOLUTIONS, INC.

Date: February 11, 2004 By: /s/ Anthony N. LaPine

---------------------------------------

Anthony N. LaPine, President, CEO and

Chief Executive Officer (Principal

Executive Officer)

By: /s/ Charles K. Dargan, II

---------------------------------------

Charles K. Dargan, II, Chief Financial

Officer (Principal Financial Officer)

EXHIBIT 31.1

CERTIFICATIONS

I, Anthony N. LaPine, President and Chief Executive Officer of the Company, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Semotus Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 11, 2004

/s/ Anthony N. LaPine

----------------------------

Anthony N. LaPine

President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATIONS

I, Charles K. Dargan, II, Chief Financial Officer of the Company, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Semotus Solutions, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 11, 2004

/s/ Charles K. Dargan, II

--------------------------------

Charles K. Dargan, II

Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Semotus Solutions, Inc. (the "Company") on Form 10-Q for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Form 10-Q"), I, Anthony N. LaPine, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

DATED: February 11, 2004 /S/ ANTHONY N. LAPINE

-------------------------------

ANTHONY N. LAPINE

CHIEF EXECUTIVE OFFICER

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Semotus Solutions, Inc. (the "Company") on Form 10-Q for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Form 10-Q"), I, Charles K. Dargan, II, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

DATED: February 11, 2004 /S/ CHARLES K. DARGAN, II

------------------------------

CHARLES K. DARGAN, II

CHIEF FINANCIAL OFFICER

End of Filing
EX-10 3 ex10-2.htm WARRANT DOCUMENT *

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

SEMOTUS SOLUTIONS, INC.

COMMON STOCK PURCHASE WARRANT

1. Issuance; Certain Definitions. In consideration of good and valuable consideration, the receipt of which is hereby acknowledged by SEMOTUS SOLUTIONS, INC., a Nevada corporation (the "Company"), _________________ or registered assigns (the "Holder") is hereby granted the right to purchase at any time until 5:00 P.M., New York City time, on January 14, 2009 (the "Expiration Date"), _____________________ (__________) fully paid and nonassessable shares of the Company's Common Stock, $0.01 par value per share (the "Common Stock"), at an initial exercise price per share (the "Exercise Price") of $0.8625 per share, subject to further adjustment as set forth herein.

2. Exercise of Warrants.

(a) This Warrant is exercisable in whole or in part at any time and from time to time. Such exercise shall be effectuated by submitting to the Company (either by delivery to the Company or by facsimile transmission as provided in Section 8 hereof) a completed and duly executed Notice of Exercise (substantially in the form attached to this Warrant) as provided in this paragraph. The date such Notice of Exercise is faxed to the Company shall be the "Exercise Date", provided that the Holder of this Warrant tenders this Warrant Certificate and appropriate payment of the aggregate Exercise Price to the Company within five (5) business days thereafter. The Notice of Exercise shall be executed by the Holder of this Warrant and shall indicate the number of shares then being purchased pursuant to such exercise. Upon surrender of this Warrant Certificate, together with appropriate payment of the aggregat e Exercise Price for the shares of Common Stock purchased, the Holder shall be entitled to receive a certificate or certificates for the shares of Common Stock so purchased.

(b) The Exercise Price per share of Common Stock for the shares then being exercised shall be payable in cash or by certified or official bank check.

(c) The Holder shall be deemed to be the holder of the shares issuable to it in accordance with the provisions of this Section 2 on the Exercise Date, provided that the holder complies with all the delivery requirements of Section 2.

3. Reservation of Shares. The Company hereby agrees that at all times during the term of this Warrant there shall be reserved for issuance upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance upon exercise of this Warrant (the "Warrant Shares").

4. Mutilation or Loss of Warrant. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.

5. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.

6. Protection Against Dilution and Other Adjustments.

6.1 Adjustment Mechanism. If an adjustment of the Exercise Price is required pursuant to this Section 6, the Holder shall be entitled to purchase such number of additional shares of Common Stock as will cause (i) the total number of shares of Common Stock Holder is entitled to purchase pursuant to this Warrant, multiplied by (ii) the adjusted Exercise Price per share, to equal (iii) the dollar amount of the total number of shares of Common Stock Holder is entitled to purchase before adjustment multiplied by the total Exercise Price immediately before adjustment.

6.2 Capital Adjustments. In case of any stock split or reverse stock split, stock dividend, reclassification of the Common Stock, recapitalization, merger or consolidation, or like capital adjustment affecting the Common Stock of the Company prior to the exercise of this Warrant or its applicable portion, the provisions of this Section 6 shall be applied as if such capital adjustment event had occurred immediately prior to the exercise date of this Warrant and the original Exercise Price had been fairly allocated to the stock resulting from such capital adjustment; and in other respects the provisions of this Section shall be applied in a fair, equitable and reasonable manner so as to give effect, as nearly as may be, to the purposes hereof.

6.3 Spin Off. If, for any reason, prior to the exercise of this Warrant in full, the Company spins off or otherwise divests itself of a part of its business or operations or disposes all or of a part of its assets in a transaction (the "Spin Off") in which the Company does not receive compensation for such business, operations or assets, but causes securities of another entity to be issued to security holders of the Company, then the Company shall notify the Holder at least thirty (30) days prior to the record date with respect to such Spin-Off.

7. Transfer to Comply with the Securities Act; Registration Rights.

7.1 Transfer. This Warrant has not been registered under the Securities Act of 1933, as amended, (the "Act") and has been issued to the Holder for investment and not with a view to the distribution of either the Warrant or the Warrant Shares. Except for transfers to officers, employees and affiliates of the Holder, neither this Warrant nor any of the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may be sold, transferred, pledged or hypothecated in the absence of an effective registration statement under the Act relating to such security or an opinion of counsel satisfactory to the Company that registration is not required under the Act. Each certificate for the Warrant, the Warrant Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend on the face thereof, in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section.

7.2 Registration Rights. (a) Reference is made to the Registration Rights Agreement. The Company's obligations under the Registration Rights Agreement and the other terms and conditions thereof with respect to the Warrant Shares, including, but not necessarily limited to, the Company's commitment to file a registration statement including the Warrant Shares, to have the registration of the Warrant Shares completed and effective, and to maintain such registration, are incorporated herein by reference.

(b) In addition to the registration rights referred to in the preceding provisions of Section 7.2(a), effective after the expiration of the effectiveness of the Registration Statement as contemplated by the Registration Rights Agreement, the Holder shall have piggy-back registration rights with respect to the Warrant Shares then held by the Holder or then subject to issuance upon exercise of this Warrant (collectively, the "Remaining Warrant Shares"), subject to the conditions set forth below. If, at any time after the Registration Statement has ceased to be effective, the Company participates (whether voluntarily or by reason of an obligation to a third party) in the registration of any shares of the Company's stock (other than a registration on Form S-8 or on Form S-4), the Company shall give written notice thereof to the Holder and the Holder shall have the right, exercisable within ten (10) business days after receipt of such notice, to demand inclusi on of all or a portion of the Holder's Remaining Warrant Shares in such registration statement. If the Holder exercises such election, the Remaining Warrant Shares so designated shall be included in the registration statement at no cost or expense to the Holder (other than any costs or commissions which would be borne by the Holder under the terms of the Registration Rights Agreement); provided, however, that if there is a managing underwriter of the offering of shares referred to in the registration statement and such managing underwriter advises the Company in writing that the number of shares proposed to be included in the offering will have an adverse effect on its ability to successfully conclude the offering and, as a result, the number of shares to be included in the offering is to be reduced, the number of Remaining Warrant Shares of the Holder which were to be included in the registration (before such reduction) will be reduced pro rata with the number of shares included for all other parties whose shares are being registered. The Holder's rights under this Section 7 shall expire at such time as the Holder can sell all of the Remaining Warrant Shares under Rule 144 without volume or other restrictions or limit.

8. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, telegraphed, sent by facsimile transmission or sent by certified, registered or express mail, postage pre-paid. Any such notice shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile transmission, or, if mailed, four days after the date of deposit in the United States mails, as follows:

(i) if to the Company, to:

SEMOTUS SOLUTIONS, INC.

16400 Lark Avenue, Suite 230

Los Gatos, CA 95032

Attn: Legal Counsel

Telephone No.: (408) 358-7100

Telecopier No.: (408) 358-7110

with a copy to:

Clark, Wilson

800 - 885 West Georgia Street

Vancouver, BC V6C 3H1

Attn.: Virgil Hlus

Phone: (604) 891-7707

Fax: (604) 687-6314

(ii) if to the Holder, to:

[investor name]

[investor address]

Attn:

with a copy to:

Name; Address

Attn:

Telephone No.

Telecopier No.

Any party may give notice in accordance with this Section to the other parties designate to another address or person for receipt of notices hereunder.

9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant contains the full understanding of the parties with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings other than expressly contained herein and therein.

10. Governing Law. This Warrant shall be deemed to be a contract made under the laws of the State of New York for contracts to be wholly performed in such State and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the State of New York, New York County in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions.

11. Jury Trial Waiver. The Company and the Holder hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect of any matter arising out or in connection with this Warrant.

12. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

13. Descriptive Headings. Descriptive headings of the several Sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

IN WITNESS WHEREOF, the Company has executed this Warrant as of the _____ day of January, 2004.

SEMOTUS SOLUTIONS, INC.

By:

Name:
Title:

NOTICE OF EXERCISE OF WARRANT

The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant Certificate dated as of ______________, ______, to purchase _____________ shares of the Common Stock, $0.01 par value, of SEMOTUS SOLUTIONS, INC., and tenders herewith payment in accordance with Section 1 of said Common Stock Purchase Warrant.

CASH: $_____________ = (Exercise Price x Exercise Shares)

Payment is being made by:

enclosed check

wire transfer

other

Please deliver the stock certificate to:

Dated:

[Name of Holder]

By:

EX-10 4 ex10-1.htm COMMON STOCK AND WARRANT PURCHASE AGG COMMON STOCK AND WARRANT PURCHASE AGREEMENT COMMON STOCK AND WARRANT PURCHASE AGREEMENT

THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT is dated as of January 14,2004 (this "Purchase Agreement" or "Agreement"), by and between SEMOTUS SOLUTIONS, INC., a Nevada corporation, having its principal place of business located at 16400 Lark Avenue, Suite 230, Los Gatos, CA 95032 (the "Company"), and each of the Investors listed on Annex A hereto (the "Investor", and collectively the "Investors").

W I T N E S S E T H

WHEREAS, the Company wishes to sell to the respective Investors, and such respective Investors are willing to buy from the Company, subject to the terms and conditions set forth herein, one million nine hundred fifty-nine thousand five hundred and twenty four (1,959,524) shares of Common Stock, par value $.01 per share (the "Common Stock") of the Company.

NOW, THEREFORE, for and in consideration of the premises and the mutual agreement contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

A. Definitions. As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:

(i) "Closing Date" means the date of the closing of the purchase and sale of the Shares and Warrants, as provided herein.

(ii) "Company Control Person" means each director, executive officer, promoter, and such other persons as may be deemed in control of the Company pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as hereinafter defined).

(iii) "Effective Date" means the effective date of the Registration Statement covering the Registrable Securities (as those terms are defined in the Registration Rights Agreement) relating to the Shares.

(iv) "Escrow Funds" means the Aggregate Amount delivered to the Escrow Agent as contemplated by Sections 5(b) and (c) hereof.

(v)"Funding Date" means the date of the release of the Escrow Funds upon compliance with the provisions of Section 6(b) hereof.

(vi)"Last Audited Date" means March 31, 2003.

(vii) "Investor" shall bear the definition in the Preamble to this Agreement

(viii) "Majority In Interest" means Investors owning in excess of 51% of the Shares on the relevant date.

(ix) "Material Adverse Effect" means an event or combination of events, which individually or in the aggregate, would reasonably be expected to (w) adversely affect the legality, validity or enforceability of the Shares or any of the Transaction Agreements, (x) have or result in a material adverse effect on the results of operations, assets, or financial condition of the Company and its subsidiaries, taken as a whole, (y) adversely impair the Company's ability to perform fully on a timely basis its obligations under any of the Transaction Agreements or the transactions contemplated thereby, or (z) materially and adversely affect the value of the rights granted to the Investors in the Transaction Agreements.

(x) "Principal Trading Market" means the American Stock Exchange.

(xi) "Registration Rights Agreement" means the Registration Rights Agreement in the form annexed hereto as Annex IV, as executed by each Investor and the Company simultaneously with the execution of this Agreement.

(xii) "Shares" means the shares of Common Stock issued to the Investors.

(xiii) "Transaction Agreements" means this Purchase Agreement, the Joint Escrow Instructions, and the Registration Rights Agreement, and includes all ancillary documents referred to in those agreements.

(xiv) "Warrants" means warrants to purchase 489,881 Shares at $0.8625 per share in the form attached hereto as Annex VI.

(xv) "1933 Act" or "Securities Act" means the Securities Act of 1933, as amended.

(xvi) "1934 Act" or "Exchange Act" means the Securities Exchange Act of 1934, as amended.

1. PURCHASE AND SALE; MUTUAL DELIVERIES. (a) Upon the following terms and conditions, the Company shall issue and sell to the Investors and the Investors shall purchase from the Company that number of shares of Common Stock equal to One Million Twenty Eight Thousand Seven Hundred and Fifty and 00/100 ($1,028,750,000.00) (the "Aggregate Amount") divided by the Purchase Price (as hereinafter defined), resulting in an aggregate of 1,959,524 Shares and Warrants to be issued upon the payment of the amounts by the respective Investors in the amounts and denominations set forth in Annex I. The Purchase Price is $.525 per share. The Company's obligation to sell the Shares to each Investor and each Investor's obligation to purchase Shares from the Company is several and represents a separate agreement. Upon receipt of the Agg regate Amount by the Escrow Agent, the Company shall deliver to the respective Investor one or more certificates representing the Shares and the Warrants, bearing substantially the following legend:

THE SECURITIES REPRESENTED HEREBY (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.

(b) (i) The respective Investor acknowledges that (1) the Shares, the Warrants and the shares of Common Stock issuable upon exercise of the Warrants (the "Warrant Shares") have not been and are not being registered under the provisions of the 1933 Act and, except as provided in the Registration Rights Agreement or otherwise included in an effective registration statement, the Shares, the Warrants and the Warrant Shares have not been and are not being registered under the 1933 Act, and may not be transferred unless (A) subsequently registered thereunder and the Investor shall have delivered a Selling Stockholders Undertaking in the form annexed hereto or (B) the Investor shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the Shares, the Warrants and/or the Warrant Shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; (2) any sale of the Shares, the Warrants and/or the Warrant Shares made in reliance on Rule 144 promulgated under the 1933 Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such Shares, the Warrants and/or the Warrant Shares under circumstances in which the seller, or the person through whom the sale is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations of the Securities and Exchange Commission ("Commission" or the "SEC") thereunder; and (3) neither the Company nor any other person is under any obligation to register the Shares, the Warrants and/or the Warrant Shares (other than pursuant to the Registration Rights Agreement) under the 1933 Act.

(ii) Within three (3) business days (such third business day, the "Delivery Date") after the business day on which the Company has received a notice of sale (by facsimile or other delivery), the original Common Stock certificate (and if the same are not delivered to the Company on the same date, the date of delivery of the second of such items) from a given Investor, a Selling Stockholders Undertaking in the form annexed hereto and any relevant state "blue sky" information (if necessary), the Company at its expense, (i) shall deliver, and shall cause legal counsel selected by the Company to deliver, to its transfer agent (with copies to Investor) an appropriate instruction and opinion of such counsel, for the delivery of unlegended Shares issuable pursuant to the registration statement for the Shares and/or the Warrant Shares, provided that such registration statement at the time of sale has been declared effective by the Commission and is current (the "Unlegended Shares"); and (ii) transmit the certificates representing the Unlegended Shares (together, unless otherwise instructed by the Investor, with Common Stock not sold), to the Investor at the address specified in a notice of sale (which address may be the Investor's address for notices as contemplated by Section 9 hereof or a different address) via express courier, by electronic transfer or otherwise.

(iii) In lieu of delivering physical certificates representing the Unlegended Shares, if the Company's transfer agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, upon request of an Investor and its compliance with the provisions contained in this paragraph, so long as the certificates therefor do not bear a legend and the Investor holding same is not obligated to return such certificate for the placement of a legend thereon, the Company shall use its best efforts to cause its transfer agent to electronically transmit the Unlegended Shares by crediting the account of such Investor's Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.

(c) The Company shall also deliver, or cause to be delivered, the original or execution copies of this Purchase Agreement.

(d) There are no preemptive rights of any shareholder of the Company, as such, to acquire the Shares, the Warrants and/or the Warrant Shares. No party has a currently exercisable right of first refusal which would be applicable to any or all of the transactions contemplated by the Transaction Agreements.

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to each respective Investor that:

(a) The Company has the corporate power and authority to enter into this Purchase Agreement, and to perform its obligations hereunder. The execution and delivery by the Company of this Purchase Agreement and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Purchase Agreement has been duly executed and delivered by the Company and constitutes the valid and binding obligation of the Company enforceable against it in accordance with its respective terms, subject to the effects of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and to general equitable principles.

(b) Except as set forth in the SEC Documents (as hereinafter defined) or Annex V, there is no pending, or to the knowledge of the Company, threatened, judicial, administrative or arbitral action, claim, suit, proceeding or investigation which might affect the validity or enforceability of this Purchase Agreement or which involves the Company and which if adversely determined, could reasonably be expected to have a Material Adverse Effect.

(c) Except as contemplated by the Registration Rights Agreement, the American Stock Exchange and any applicable state or Federal securities law filings, no consent or approval of, or exemption by, or filing with, any party or governmental or public body or authority is required in connection with the execution, delivery and performance under this Purchase Agreement or the taking of any action contemplated hereunder or thereunder.

(d) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation.

(e) The execution, delivery and performance of this Purchase Agreement by the Company, and the consummation of the transactions contemplated hereby, will not (i) violate any provision of the Company's certificate of incorporation or bylaws, (ii) violate, conflict with or result in the breach of any of the terms of, result in a material modification of the effect of, otherwise, give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both constitute) a default under, any contract or other agreement to which the Company is a party or by or to which the Company or any of the Company's assets or properties may be bound or subject, (iii) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body by which the Company, or the assets or properties of the Company are bound and (iv) to the Company's knowledge, violate any statute, law or regulation.

(f) The Shares have been duly authorized and, when issued and paid for in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable, free and clear of all liens, claims or encumbrances. The Company has reserved from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the Warrants in order to issue the full number of the Warrant Shares as are or may become issuable upon exercise of the Warrants.

(g) Assuming the accuracy of the Investors' respective representations and warranties set forth herein, no registration under the Securities Act is required for the offer and sale of the Shares, the Warrants and the Warrant Shares by the Company to the Investors. The Company is eligible to register the resale of its Common Stock for resale by the Purchasers under Form S-3 promulgated under the Securities Act.

(h) The issuance and sale of the Shares hereunder does not contravene the rules and regulations of the American Stock Exchange and no approval of the shareholders of the Company is required for the Company to issue and deliver to the Investors the maximum number of shares of Common Stock contemplated in this transaction.

(i) Absence of Certain Changes. Since the Last Audited Date, there has been no material adverse change and no Material Adverse Effect, except as disclosed in the Company's SEC Documents. Since the Last Audited Date, except as provided in the Company's SEC Documents or disclosed in the Transaction Documents, the Company has not (i) incurred or become subject to any material liabilities (absolute or contingent) except liabilities incurred in the ordinary course of business consistent with past practices; (ii) declared or made any payment or distribution of cash or other property to shareholders with respect to its capital stock, or purchased or redeemed, or made any agreements to purchase or redeem, any shares of its capital stock; (iii) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business consistent with past practices; (iv) suffered any substantial losses or waived any rights of ma terial value, whether or not in the ordinary course of business, or suffered the loss of any material amount of existing business; (v) made any changes in employee compensation, except in the ordinary course of business consistent with past practices; or (vi) experienced any material problems with labor or management in connection with the terms and conditions of their employment.

(j) Absence of Litigation. Except as disclosed in the Company's SEC Documents, (i) there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company before or by any governmental authority or nongovernmental department, commission, board, bureau, agency or instrumentality or any other person, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, any of the Transaction Agreements; (ii) the Company is not aware of any valid basis for any such claim that (either individually or in the aggregate with all other such events and circumstances) could reasonably be expected to have a Material Adverse Effect; or (iii) there ar e no outstanding or unsatisfied judgments, orders, decrees, writs, injunctions or stipulations to which the Company is a party or by which it or any of its properties is bound, that involve the transaction contemplated herein or that, alone or in the aggregate, could reasonably be expect to have a Material Adverse Effect.

(k) No Undisclosed Liabilities or Events. The Company has no liabilities or obligations other than those disclosed in the Transaction Agreements or the Company's SEC Documents or those incurred in the ordinary course of the Company's business since the Last Audited Date, or which individually or in the aggregate, would have a Material Adverse Effect. No event or circumstances has occurred or exists with respect to the Company or its properties, business, operations, financial condition, or results of operations, which, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed. There are no proposals currently under consideration or currently anticipated to be under consideration by the board of directors or the executi ve officers of the Company which proposals would (x) change the certificate of incorporation or other charter document or by-laws of the Company, each as currently in effect, with or without shareholder approval, which change would reduce or otherwise adversely affect the rights and powers of the shareholders of the Common Stock or (y) materially or substantially change the business, assets or capital of the Company, including its interests in subsidiaries.

(l) Fees to Brokers, Finders and Others. Except as set forth in the Term Sheet (as defined herein), the Company has taken no action which would give rise to any claim by any person for brokerage commission, finder's fees or similar payments by the Company relating to this Purchase Agreement or the transactions contemplated hereby. Investor shall have no obligation with respect to such fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this Section 2(l) that may be due in connection with the transactions contemplated hereby nor for any compensation in respect of the sales to James Totaro or Enable Growth Partners., L.P. . The Company shall indemnify and hold harmless each of Investor, its employees, officers, directors, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect of any such claimed or existing fees, as and when incurred.

(m) Absence of Certain Company Control Person Actions or Events. None of the following has occurred during the past ten (10) years with respect to a Company Control Person:

(1) A petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such Company Control Person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

(2) Such Company Control Person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

(3) Such Company Control Person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

(i) acting, as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, any other person regulated by the Commodity Futures Trading Commission ("CFTC") or engaging in or continuing any conduct or practice in connection with such activity;

(ii) engaging in any type of business practice; or

(iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws;

(4) Such Company Control Person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such Company Control Person to engage in any activity described in section 2(m)(3), or to be associated with persons engaged in any such activity; or

(5) Such Company Control Person was found by a court of competent jurisdiction in a civil action or by the CFTC or SEC to have violated any federal or state securities law, and the judgment in such civil action or finding by the CFTC or SEC has not been subsequently reversed, suspended, or vacated.

(n) The number of Shares issuable hereunder may have a dilutive effect on the ownership interests of the other shareholders (and persons having the right to become shareholders) of the Company. The Company's executive officers and directors have studied and fully understand the nature of the Shares and Warrants being sold hereby and recognize that they have such a potential dilutive effect. The board of directors of the Company has concluded, in its good faith business judgment, that such issuance is in the best interests of the Company. The Company specifically acknowledges that its obligation to issue the Shares and the Warrant Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of ot her shareholders of the Company, and the Company will honor every Notice of Exercise (as contemplated by the Warrants), unless the Company is subject to an injunction (which injunction was not sought by the Company) prohibiting the Company from doing so.

3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor hereby represents and warrants to the Company that:

(a) The Investor has the corporate power and authority to enter into this Purchase Agreement and to perform its obligations hereunder. The execution and delivery by the Investor of this Purchase Agreement, and the consummation by the Investor of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of the Investor. This Purchase Agreement has been duly executed and delivered by the Investor and constitutes the valid and binding obligation of the Investor, enforceable against it in accordance with its respective terms, subject to the effects of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and to general equitable principles.

(b) The execution, delivery and performance by the Investor of this Purchase Agreement, and the consummation of the transactions contemplated hereby, do not and will not breach or constitute a default under any applicable law or regulation or of any agreement, judgment, order, decree or other instrument binding on the Investor.

(c) The Investor has such knowledge and prior substantial investment experience in financial and business matters, including investment in non-listed and non-registered securities, and has had the opportunity to read the SEC Documents and to evaluate the merits and risks of investment in the Company and the Shares.

(d) The Investor is an "accredited investor" as that term is defined in Rule 501(a) of Regulation D promulgated under the 1933 #9; Act.

(e) Prior to the execution of this Purchase Agreement, the Investor and any affiliates of Investor have not participated in any hedging transactions involving the Company's Common Stock and have not sold short any of the Company's Common Stock.

(f) The Investor is acquiring the Shares and the Warrants, solely for the Investor's own account for investment and not with a view to or for sale in connection with a distribution of any of the Shares or the Warrants.

(g) Except as set for in the Registration Rights Agreement, the Investor does not have a present intention to sell the Shares, the Warrants or the Warrant Shares, nor a present arrangement or intention to effect any distribution of any of the Shares or Warrants to or through any person or entity for purposes of selling, offering, distributing or otherwise disposing of any of the Shares, the Warrants or the Warrant Shares.

(h) The Investor may be required to bear the economic risk of the investment indefinitely because none of the Shares, the Warrants or the Warrant Shares may be sold, hypothecated or otherwise disposed of unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from registration is available. Any resale of any of the Shares or the Warrant Shares can be made only pursuant to (i) a registration statement under the Securities Act which is effective and current at the time of sale or (ii) a specific exemption from the registration requirements of the Securities Act. In claiming any such exemption, the Investor will, prior to any offer or sale or distribution of any Shares or the Warrant Shares advise the Company and, if requested, provide the Company wit h a favorable written opinion of counsel, in form and substance satisfactory to counsel to the Company, as to the applicability of such exemption to the proposed sale or distribution.

(i) The Investor understands that the exemption afforded by Rule 144 promulgated by the Commission under the Securities Act ("Rule 144") will not become available for at least one year from the date of payment for the Shares and any sales in reliance on Rule 144, if then available, can be made only in accordance with the terms and conditions of that rule, including, among other things, a requirement that the Company then be subject to, and current, in its periodic filing requirements under the Exchange Act, and, among other things, a limitation on the amount of shares of Common Stock that may be sold in specified time periods and the manner in which the sale can be made; that, while the Company's Common Stock is registered under the Exchange Act and the Company is presently subject to the periodic reporting requirements of the Exchange Act, there can be no assurance that the Company will remain subject to such reporting obligations or current in its filing obligations; and that, in case Rule 144 is not applicable to a disposition of the Shares or the Warrant Shares, compliance with the registration provisions of the Securities Act or some other exemption from such registration provisions will be required.

(j) The Investor understands that legends shall be placed on the certificates evidencing the Shares, the Warrants and the Warrant Shares to the effect that such securities have not been registered under the Securities Act or applicable state securities laws and appropriate notations thereof will be made in the Company's stock books. Stop transfer instructions will be placed with the transfer agent of the Company's Common Stock. The Investor understands that the Warrants will bear similar legends.

(k) vFinance is an accredited investor, one of the Investors listed on Annex I, and a registered broker dealer, as stated in their letter attached hereto as Annex IX. Except as set forth in the Term Sheet between the Company and vFinance Investments, Inc., dated October 20, 2003 (the "Term Sheet"), the Investor has taken no action which would give rise to any claim by any person for brokerage commission, finder's fees or similar payments by Investor relating to this Purchase Agreement or the transactions contemplated hereby. The Company shall have no obligation with respect to such fees or with respect to any claims made by or on behalf of other persons for fees of a type contemplated in this Section 3(k) that may be due in connection with the transactions contemplated hereby nor for any compensation in respect of the sales to James Totaro or Enable Growth Partners, L.P. The Investor shall indemnify and hold harmless the Company, its employees, officers, directors, agents, and partners, and their respective affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney's fees) and expenses suffered in respect of any such claimed or existing fees, as and when incurred.

(l) The execution, delivery and performance of this Purchase Agreement by the Investor, and the consummation of the transactions contemplated hereby, will not (i) violate any provision of the Investor's corporate organizational documents, (ii) violate, conflict with or result in the breach of any of the terms of, result in a material modification of the effect of, otherwise, give any other contracting party the right to terminate, or constitute (or with notice or lapse of time or both) a default under, any contract or other agreement to which the Investor is a party or by or to which the Investor or any of the Investor's assets or properties may be bound or subject, (iii) violate any order, judgment, injunction, award or decree of any court, arbitrator or governmental or regulatory body by which the Investor, or the assets or properties of the Investor are bound and (iv) to the Investor's knowledge, violate any statute, law or regulation, including but not limited t o the USA Patriot Act.

(m) Except with respect to sale of the Shares and/or the Warrant Shares pursuant to Rule 144, prior to having any legend removed from the Shares or the Warrant Shares, the Investor shall comply with the applicable state blue sky laws and, to the extent practicable, notify the Company of the State, if any, in which the sale of such Shares and/or the Warrant Shares by the Investor has taken place.

4. COVENANTS OF THE COMPANY.

(a) Registration Rights Agreement. The Company covenants and agrees to enter into a Registration Rights Agreement governing the registration of the Shares and the Warrant Shares with the Investors dated as of the date hereof.

(b) Current Public Information. The Company has furnished or made available to each Investor true and correct copies of all registration statements, reports and documents, including proxy statements (other than preliminary proxy statements), filed with the Commission by or with respect to the Company since March 31, 2003 and prior to the date of this Agreement, pursuant to the Securities Act or the Exchange Act (collectively, the "SEC Documents"). The SEC Documents are the only filings made by or with respect to the Company since March 31, 2003 pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act or pursuant to the Securities Act. The Company has filed all reports, schedules, forms, statements and other documents required to be filed under Sections 13(a), 13(c), 14 a nd 15(d) of the Exchange Act since March 31, 2003 and prior to the date of this Agreement.

(c) SEC Documents. Except pursuant to a confidentiality agreement, if any, the Company has not provided to the Investor any information which according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company but which has not been so disclosed. As of their respective dates or their restated dates (if so restated), the SEC Documents complied, and all similar documents filed with the SEC prior to the Closing Date will comply, in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and rules and regulations of the SEC promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents contained, nor will any similar document filed with the SEC prior to the Closing Date contain, any untrue statement of a material fact or omit to state a material fact required to be stat ed therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents, as of the dates thereof (or the restated dates, if so restated), complied, and all similar documents filed with the SEC prior to the Closing Date will comply, as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC and other applicable rules and regulations with respect thereto. Such financial statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements as permitted by Form 10-Q or 10-QSB of the SEC) and fairly present in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

(d) Public Announcement. As soon as practicable the Company shall issue a press release disclosing the material terms of the transactions contemplated hereby and file a Current Report on Form 8-K disclosing the transactions contemplated hereby. In addition, the Company will make such other filings and notices in the manner and time required by the Commission and the American Stock Exchange.

(e) Maintain Listing/S-3 Qualification. The Company shall use commercially reasonable efforts to maintain the listing of the Shares, Warrant Shares and the Common Stock on the American Stock Exchange. The Company shall use commercially reasonable efforts to continue to meet the "registrant eligibility" requirements for a secondary offering as set forth in the general instructions in Form S-3 to enable the registration of the Registrable Securities (as defined in the Registration Rights Agreement).

(f) Trading in Securities. The Company specifically acknowledges that, except to the extent specifically provided herein or in any of the other Transaction Agreements (but limited in each instance to the extent so specified), and subject to applicable state and federal securities laws, the Investor retains the right (but is not otherwise obligated) to buy, sell or otherwise trade in the Company's Common Stock, including, but not necessarily limited to, the Shares, at any time before, contemporaneous with or after the execution of this Purchase Agreement or from time to time and in any manner whatsoever permitted by applicable federal and state securities laws.

(g) Use of Proceeds. The Company will use the proceeds received hereunder (excluding amounts paid by the Company for legal fees, finder's fees and escrow fees in connection with the sale of the Shares) for the purposes contemplated by the schedule attached hereto as Annex VII, and, unless specifically consented to in advance in each instance by a Majority in Interest of the Investors, the Company shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership enterprise or other person, including any of its affiliates.

5. DELIVERY OF SHARES.

(a) In accordance with the Joint Escrow Instructions, attached hereto as Annex II and made a part hereof, promptly following the delivery by the respective Investor of the Aggregate Amount for the Shares in accordance with Section 1 hereof, the Company will irrevocably instruct its transfer agent to issue to such Investor legended certificates representing the Shares and the Warrants.

(b) Form of Payment; Delivery of Certificates:

(i) The respective Investor shall pay the Aggregate Amount for the Shares and the Warrants by delivering immediately available good funds in United States Dollars to the Escrow Agent no later than the date prior to the Closing Date.

(ii) No later than the Closing Date, but in any event promptly following payment by the respective Investor to the Escrow Agent of the Aggregate Amount, the Company shall deliver the Shares and the Warrants, each duly executed on behalf of the Company and issued in the name of the respective Investor, to the Escrow Agent.

(iii) By signing this Agreement, each respective Investor and the Company, subject to acceptance by the Escrow Agent, agrees to all of the terms and conditions of, and becomes a party to, the Joint Escrow Instructions, all of the provisions of which are incorporated herein by this reference as if set forth in full.

Bank of New York

350 Fifth Avenue

New York, New York 10001

ABA# 021000018

For credit to the account of Krieger & Prager llp

Account No.:

Re: SEMOTUS Transaction

6. CLOSING DATE.

(a) The Closing Date shall occur on the date which is the first NYSE trading day after each of the conditions contemplated by Sections 7 and 8 hereof shall have either been satisfied or been waived by the party in whose favor such conditions run.

(b) Notwithstanding anything to the contrary contained herein, the Escrow Agent will be authorized to release the Escrow Funds to the Company and to others and to release the other Escrow Property on the Funding Date upon satisfaction of (i) the conditions set forth in Sections 7 and 8 hereof, (ii) approval of the listing application for the Shares and Warrants by the American Stock Exchange, and (iii) as further as provided in the Joint Escrow Instructions.

7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

Each Investor understands that the Company's obligation to sell the Shares and issue the Warrants to such Investor pursuant to this Agreement on the Closing Date is conditioned upon:

(a) The execution and delivery of this Purchase Agreement, the Registration Rights Agreement, and the Investor Questionnaire annexed hereto as Annex VIII by such Investor;

(b) Delivery by such Investor to the Escrow Agent of good funds as payment in full of an amount equal to the Aggregate Amount set forth on the execution page hereof for the Shares and Warrants in accordance with this Purchase Agreement;

(c) The accuracy on such Closing Date of the representations and warranties of such Investor contained in this Purchase Agreement, each as if made on such date, and the performance by such Investor on or before such date of all covenants and agreements of the Investor required to be performed on or before such date; and

(d) There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.

8. CONDITIONS TO THE INVESTORS' OBLIGATION TO PURCHASE.

The Company understands that the respective Investor's obligation to purchase the Shares and receive the Warrants on the Closing Date is conditioned upon:

(a) The execution and delivery of this Purchase Agreement and the other Transaction Agreements by the Company;

(b) Delivery by the Company to the Escrow Agent of the Shares and Warrants in accordance with this Purchase Agreement;

(c) The accuracy in all material respects on such Closing Date of the representations and warranties of the Company contained in this Purchase Agreement, each as if made on such date, and the performance by the Company on or before such date of all covenants and agreements of the Company required to be performed on or before such date;

(d) On such Closing Date, the Registration Rights Agreement shall be in full force and effect and the Company shall not be in default thereunder;

(e) On such Closing Date, the respective Investor shall have received an opinion of counsel for the Company (and delivered to the Escrow Agent), dated the Closing Date, in form, scope and substance reasonably satisfactory to the Investor, substantially to the effect set forth in Annex III attached hereto;

(f) There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained; and

(g) From and after the date hereof to and including such Closing Date, each of the following conditions will remain in effect: (i) the trading of the Common Stock shall not have been suspended by the SEC or on the Principal Trading Market; (ii) no minimum prices shall been established for the Common Stock traded on the Principal Trading Market; and (iii) there shall not have been any material adverse change in any financial market that, in the reasonable judgment of the Investor, makes it impracticable or inadvisable to purchase the Shares. In addition, on the Closing Date, trading in Common Stock or in securities generally on the Principal Trading Market shall not have been suspended or limited.

9. NOTICES. Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given upon personal delivery or seven (7) business days after deposit in the United States Postal Service, by (a) advance copy by fax, and/or (b) mailing or delivery by express courier or registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses, or at such other addresses as a party may designate by ten days advance written notice to each of the other parties hereto.

COMPANY

SEMOTUS SOLUTIONS, INC.

16400 Lark Avenue, Suite 230

Los Gatos, CA 95032

Attn:

Telephone No.: (408) 358-7100

Telecopier No.: (408) 358-7110

with a copy to:

Clark, Wilson

800 - 885 West Georgia Street

Vancouver, BC V6C 3H1

Phone: (604) 891-7707

Fax: (604) 687-6314

Attn:VirgilHlus Telephone No.: ( )

Telecopier No.: ( )

Investor:

As set forth in Annex I hereto.

with a copy to (with respect to Investors provided by vFinance only)

Krieger & Prager, LLP

39 Broadway, Suite 1440

New York, New York 10006

Attn: Samuel Krieger, Esq.

Telephone No.: (212) 363-2900

Telecopier No.: (212) 363-2999

10. SEVERABILITY. If a court of competent jurisdiction determines that any provision of this Purchase Agreement is invalid, unenforceable or illegal for any reason, such determination shall not affect or impair the validity, legality and enforceability of the other provisions of this Purchase Agreement in any other jurisdiction. If any such invalidity, unenforceability or illegality of a provision of this Purchase Agreement becomes known or apparent to any of the parties hereto, the parties shall negotiate promptly and in good faith in an attempt to make appropriate changes and adjustments to such provision specifically and this Purchase Agreement generally to achieve as closely as possible, consistent with applicable law, the intent and spirit of such provision specifically and this Purchase Agreement generally.

11. EXECUTION IN COUNTERPARTS. This Purchase Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute the same Purchase Agreement. A facsimile signature of this Agreement shall be legal and binding on all parties hereto.

12. JURY TRIAL WAIVER. The Company and the Investors hereby waive a trial by jury in any action, proceeding or counterclaim brought by any Party hereto against any of the others in respect of any matter arising out or in connection with the Transaction Agreements.

13. GOVERNING LAW: MISCELLANEOUS.

(a) The corporate laws of the State of Nevada shall govern all issues concerning the relative rights of the Company and the Investors as its stockholders. All other questions concerning this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the State of New York, New York County in connection with any dispute arising under this Purchase Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions.

(b) Failure of any party to exercise any right or remedy under this Purchase Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(c) This Purchase Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

(d) All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

(e) The headings of this Purchase Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Purchase Agreement.

(f) This Agreement may be amended only by an instrument in writing signed by both parties; no waiver shall be effective unless signed by the person charged with making such waiver.

(g) This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.

14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and each Investor's representations and warranties herein shall survive the execution and delivery of this Purchase Agreement and the delivery of the Shares and the Warrants and the payment of the Aggregate Amount, and shall inure to the benefit of each respective Investor and the Company and their respective successors and assigns.

15. INDEPENDENT NATURE OF INVESTORS' OBLIGATIONS AND RIGHTS. The obligations of each Investor are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, this Agreement has been duly executed by the respective Investor (if an entity, by one of its officers thereunto duly authorized) as of the date set forth below.

AMOUNT AND PURCHASE PRICE OF COMMON STOCK: $

NUMBER OF SHARES:

NUMBER OF WARRANTS:

SIGNATURES FOR ENTITIES

IN WITNESS WHEREOF, the undersigned represents that the foregoing statements are true and correct and that it has caused this Common Stock Purchase Agreement to be duly executed on its behalf this _______ day of ______, 2004.

Printed Name of Investor

____________________________

Printed Name of Investor

By: __________________________

(Signature of Authorized Person)

__________________________

Printed Name and Title

By: (Signature of Authorized Person)

Printed Name and Title

If Investor is a partnership, corporation, limited liability company or other entity:

I. Jurisdiction where Investor's investment decision was made:

_ Jurisdiction of mailing address listed in Annex I

Other: ____________________________

II. Jurisdiction of Incorporation or Organization: ___________________

As of the date set forth below, the undersigned hereby accepts this Purchase Agreement and represents that the foregoing statements are true and correct and that it has caused this Purchase Agreement to be duly executed on its behalf.

SEMOTUS SOLUTIONS, INC.

By:

Title: _______________________________

Date: _______________, 2004

ANNEX I SCHEDULE OF INVESTORS

ANNEX II JOINT ESCROW INSTRUCTIONS

ANNEX III OPINION OF COUNSEL

ANNEX IV REGISTRATION RIGHTS AGREEMENT

ANNEX V COMPANY DISCLOSURE MATERIALS

ANNEX VI FORM OF WARRANT

ANNEX VII USE OF PROCEEDS SCHEDULE

ANNEX VIII INVESTORS QUESTIONNAIRE

EX-4 5 ex4.htm REG. RIGHTS AGREEMENT * ANNEX IV

TO

SECURITIES PURCHASE

AGREEMENT

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT, dated as of January 14, 2004 (this "Agreement"), is made by and between SEMOTUS SOLUTIONS, INC., a Nevada corporation, with headquarters located at 16400 Lark Avenue, Suite 230, Los Gatos, CA 95032 (the "Company"), and each entity named on a signature page hereto (each, an "Investor"), (each agreement with an Investor being deemed a separate and independent agreement between the Company and such Investor, except that each Investor acknowledges and consents to the rights granted to each other Investor under such agreement).

W I T N E S S E T H:

WHEREAS, upon the terms and subject to the conditions of the Common Stock and Warrant Purchase Agreement, dated as of January 14, 2004, between the Investor and the Company (the "Purchase Agreement"; terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement), the Company has agreed to issue and sell to the Investors the Shares; and

WHEREAS, the Company has agreed to issue the Warrants to the Investor and vFinance Investments, Inc. in connection with the sale of the Shares , and the Warrants may be exercised for the purchase of shares of Common Stock (the "Warrant Shares") upon the terms and conditions of the Warrants; and

WHEREAS, to induce the Investor to execute and deliver the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:

1. Definitions. As used in this Agreement, the following terms shall have the following meanings:

(a) "Effective Date" means the date the SEC declares a Registration Statement covering Registrable Securities and otherwise meeting the conditions contemplated hereby to be effective.

(b) "Held Shares Value" means the aggregate Purchase Price for Shares acquired by the Investor and not yet sold.

(c) "Investor" means the Investor or any permitted transferee or assignee who agrees to become bound by the provisions of this Agreement in accordance with Section 9 hereof and who holds Registrable Securities, as the context may require.

(d) "Potential Material Event" means any of the following: (i) the possession by the Company of material information not ripe for disclosure in a registration statement, which shall be evidenced by a determination in good faith by the Board of Directors of the Company that disclosure of such information in the registration statement would be detrimental to the business and affairs of the Company, or (ii) any material engagement or activity by the Company which would, in the good faith determination of the Board of Directors of the Company, be adversely affected by disclosure in a registration statement at such time; in each case where such determination shall be accompanied by a good faith determination by the Board of Directors of the Company that the registration statement would be materially misleading absent the inclusion of such information.

(e) "Register," "Registered," and "Registration" refer to a registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis ("Rule 415"), and the declaration or ordering of effectiveness of such Registration Statement by the Commission.

(f) "Registrable Securities" means the Common Stock and the Warrant Shares.

(g) "Registration Statement" means a registration statement of the Company under the Securities Act covering Registrable Securities on Form S-3, if the Company is then eligible to file using such form, and if not eligible, on Form SB-2 or other appropriate form.

(h) "Required Effective Date" means May 2, 2004 [60 days after the Required Filing Date].

(i) "Restricted Sale Date" means the first date, other than a date during a Permitted Suspension Period (as defined below), on which the Investor is restricted from making sales of Registrable Securities covered by any previously effective Registration Statement.

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Common Stock and Warrant Purchase Agreement or in the Rules of the SEC.

2. Registration.

(a) Mandatory Registration.

(i) The Company shall prepare and file with the SEC, as soon as practicable but not later than 40 days after the Closing (the "Required Filing Date"), an amendment to an existing Registration Statement, or a Registration Statement in either event registering for resale by the Investor a sufficient number of shares of Common Stock for the Investors to sell all of the Registrable Securities. The Registration Statement shall also state that, in accordance with Rules 416 and 457 under the Securities Act, it also covers such indeterminate number of additional shares of Common Stock as may become issuable to prevent dilution resulting from stock splits, or stock dividends. The Company will use its reasonable best efforts to cause such Registration Statement to be declared effective on a date (the "Initial Required Effective Date") which is no later than the earlier of (Y) five (5) days after oral or written notice by the SEC that it may be declared effective or (Z) the Required Effective Date.

(ii) In addition to the registration rights referred to in the preceding provisions of Section 2(a), the Investor shall have piggy-back registration rights with respect to the Registrable Securities then held by the Investor, subject to the conditions set forth below. If, at any time after the date hereof, the Company participates (whether voluntarily or by reason of an obligation to a third party) in the registration of any shares of the Company's stock (other than a registration on Form S-8, Form S-4 or any other similar forms ), the Company shall given written notice thereof to the Investor and the Investor shall have the right, exercisable within ten (10) business days after receipt of such notice, to demand inclusion of all or a portion of the Investor's Registrable Securities in such registration statement. If the Investor exercises such election, the Registrable Securities so designated shall be included in the registration statement at no cost or expense to the Investor (other than any costs or commissions which would be borne by the Investor under the terms of the Registration Rights Agreement); provided, however, that if there is a managing underwriter of the offering of shares referred to in registration statement and such managing underwriter advises the Company in writing that the number of shares proposed to be included in the offering will have an adverse effect on its ability to successfully conclude the offering and, as a result, the number of shares to be included in the offering is to be reduced, the number of Registrable Securities of the Investor which were to be included in the registration (before such reduction) will be reduced pro rate with the number of shares included for all other parties whose shares are being registered. The Investor's rights under this Section shall expire at such time as the Inves tor can sell all of the Registrable Securities under Rule 144 without volume or other restrictions or limit.

Payments by the Company.

(i) [RESERVED]

(ii) If the Registration Statement covering the Registrable Securities is not filed by the Required Filing Date, or declared effective by the Required Effective Date, or if there is a Restricted Sale Date, other than a Permitted Suspension Period, within ninety (90) days after the effective date of the Registration Statement, then the Company will make payments to the Investor in such amounts and at such times as shall be determined pursuant to this Section 2(b).

(iii) The amount (the "Periodic Amount") to be paid by the Company to the Investor shall be determined as of each Computation Date (as defined below) and such amount shall be equal to the Periodic Amount Percentage (as defined below) of the Purchase Price for the Common Stock for the period from the date following the Required Effective Date or a Restricted Sale Date, as the case may be, to the first relevant Computation Date, and thereafter to each subsequent Computation Date. The "Periodic Amount Percentage" means (A) with respect to the Required Effective Date, one percent (1%) of the Purchase Price of the Common Stock for the first, second and third Computation Dates and two percent (2%) of the Purchase Price of the Common Stock to each Computation Date thereafter, and (b) with respect to a Restricted Sale Date other than a Permitted Suspension Period, two percent (2%)of the Purchase Price of the Common Stock, not previously sold by the Investor after the Restricted Sale Date to each Computation Date thereafter. Anything in the preceding provisions of this paragraph (iii) to the contrary notwithstanding, after the relevant Effective Date the Purchase Price shall be deemed to refer to the sum of the Held Shares Value. By way of illustration and not in limitation of the foregoing, if the Registration Statement is not timely filed and declared effective by 165 days after the Closing Date, the Periodic Amount will aggregate five (5%) percent of the Purchase Price (1% days 90-120; 2% dated 121-150; 2% days 151-165). [depends upon required filing date].

(iv) Each Periodic Amount will be payable by the Company, except as provided in the other provisions of this subparagraph (iv), in cash or other immediately available funds to the Investor (1) on the day after the Required Effective Date or a Restricted Sale Date, as the case may be, and (2) on the earlier of (A) each thirtieth day thereafter, (B) the third business day after the date the Registration Statement is filed or is declared effective, or (C) the third business day after the Registration Statement has its restrictions removed after the relevant Effective Date, in each case without requiring demand therefor by the Investor. Notwithstanding the provisions of the first sentence of this subparagraph (iv), at the mutual agreement of the Company and the Investor, any time before the Periodic Amount is paid, all or a portion of the Periodic Amount can be paid by the issuance of additional shares of Common Stock to the Investor ("Periodic Amount Shares") in an amount equal to the Periodic Amount being paid thereby divided by 90% of the average Closing Bid Price for the last five (5) trading days prior to the Computation Date.

(v) The parties acknowledge that the damages which may be incurred by the Investor if the Registration Statement has not been declared effective by the Required Effective Date, including if the right to sell Registrable Securities under a previously effective Registration Statement is suspended or the shares of the Company's stock are not listed on the Principal Trading Market, may be difficult to ascertain. The parties agree that the Periodic Amounts represent a reasonable estimate on the part of the parties, as of the date of this Agreement, of the amount of such damages.

(vi) Notwithstanding the foregoing, the amounts payable by the Company pursuant to this provision shall not be payable to the extent any delay in the effectiveness of the Registration Statement occurs because of an act of, or a failure to act or to act timely by the Investor or its counsel.

(vii) "Computation Date" means (A) the date which is the earlier of thirty (30) days after the Required Filing Date, Required Effective Date, or a Restricted Sale Date, or when the shares of Common Stock are listed on the Principal Trading Market (with respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case may be, and (B) each date which is the earlier of (1) thirty (30) days after the previous Computation Date or (2) the date after the previous Computation Date on which the Registration Statement is declared effective or has its restrictions removed or the shares of Common Stock are listed on the Principal Trading Market (with respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case may be.

3. Obligations of the Company. In connection with the registration of the Registrable Securities, the Company shall do each of the following:

(a) Prepare and file, with the SEC a Registration Statement with respect to not less than the number of Registrable Securities as provided in Section 2(a) above, and thereafter use its reasonable best efforts to cause such Registration Statement relating to Registrable Securities to become effective by the Required Effective Date and keep the Registration Statement effective at all times during the period (the "Registration Period") continuing until the earlier of (i) the date when the Investors may sell all Registrable Securities under Rule 144(k) without volume or other restrictions or limits, (ii) the date the Investors no longer own any of the Registrable Securities, which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, i n light of the circumstances in which they were made, not misleading, or (iii) one (1) year after the Effective Date of the Registration Statement.

(b) Prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during the Registration Period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement;

(c) Permit a single firm of counsel designated by the Investors (which, until further notice, shall be deemed to be Krieger & Prager llp, Attn: Samuel Krieger, Esq., which firm has requested to receive such notification; each, an "Investor's Counsel") to review the Registration Statement and all amendments and supplements thereto for a reasonable period of time (but not less than three (3) business days) prior to their filing with the SEC, and not file any document in a form to which such counsel reasonably objects;

(d) Notify the Investor's Counsel and any managing underwriters immediately (and, in the case of (i)(A) below, not less than three (3) business days prior to such filing) and (if requested by any such person) confirm such notice in writing no later than one (1) business day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to the Registration Statement is proposed to be filed; (B) whenever the SEC notifies the Company whether there will be a "review" of such Registration Statement; (C) whenever the Company receives (or a representative of the Company receives on its behalf) any oral or written comments from the SEC in respect of a Registration Statement (copies or, in the case of oral comments, summaries of such comments (as such comments relate to the Investor) shall be promptly furnished by the Company to the Investors); and (D) with respect to the Registration Statement or any post-effective ame ndment, when the same has become effective; (ii) of any request by the SEC or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or Prospectus or for additional information; (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement covering any or all of the Registrable Securities or the initiation of any proceedings for that purpose; (iv) if at any time any of the representations or warranties of the Company contained in any agreement (including any underwriting agreement) contemplated hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose; and (vi) of the occurrence of any event that to the best knowledge of the Company m akes any statement made in the Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement, Prospectus or other documents so that, in the case of the Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. In addition, the Company shall furnish the Investor's Counsel with copies of all intended written responses to the comments contemplated in clause (C) of this Section 3(d) that relate to Investors not later than one (1) business day in advance of the filing of such responses with the SEC so that the Investors shall have the opportunity to comment thereon;

(e) Furnish to Investor's Counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one (1) copy of the Registration Statement, each preliminary prospectus and prospectus, and each amendment or supplement thereto, all correspondence to, with, or from the SEC, and (ii) such number of copies of a prospectus, and all amendments and supplements thereto (as contemplated in Section 3(d) above) and such other documents, as such Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor;

(f) As promptly as practicable after becoming aware thereof, notify each Investor of the happening of any event of which the Company has knowledge, as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and use its best efforts promptly to prepare a supplement or amendment to the Registration Statement or other appropriate filing with the SEC to correct such untrue statement or omission, and deliver a number of copies of such supplement or amendment to each Investor as such Investor may reasonably request;

(g) As promptly as practicable after becoming aware thereof, notify each Investor who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance by the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time;

(h) Notwithstanding the foregoing, if at any time or from time to time after the date of effectiveness of the Registration Statement, the Company notifies the Investors in writing of the existence of a Potential Material Event, the Investors shall not offer or sell any Registrable Securities, or engage in any other transaction involving or relating to the Registrable Securities, from the time of the giving of notice with respect to a Potential Material Event until such Investor receives written notice from the Company that such Potential Material Event either has been disclosed to the public or no longer constitutes a Potential Material Event; provided, however, that the Company may not so suspend the right to such holders of Registrable Securities during the periods the Registration Statement is required to be in effect other than during a Permitted Suspension Period (and the applicable provisions of Section 2(b) shall apply with respect to a ny such suspension other than during a Permitted Suspension Period). The term "Permitted Suspension Period" means up to two such suspension periods, each of which suspension period shall not either (i) be for more than ten (10) business days or (ii) begin less than ten (10) business days after the last day of the preceding suspension (whether or not such last day was during or after a Permitted Suspension Period); provided further that the Company shall, if lawful to do so, provide the Investor with at least two (2) business days' notice of the existence (but not the substance of) a Potential Material Event;

(i) Use its reasonable efforts to secure and maintain the designation and listing of all the Registrable Securities covered by the Registration Statement on the Principal Trading Market within the meaning of Rule 11Aa2-1 of the SEC under the Exchange Act and the quotation of the Registrable Securities on the Principal Trading Market.;

(j) Provide a transfer agent and registrar, which may be a single entity, for the Registrable Securities not later than the initial Effective Date. ;

(k) Cooperate with the Investors who hold Registrable Securities being offered to facilitate the timely preparation and delivery of certificates for the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities to be in such denominations or amounts as the case may be, as the Investors may reasonably request, and, within five (5) business days after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) an appropriate instruction and opinion of such counsel, which shall include, without limitation, directions to the transfer agent to issue certificates of Registrable Securities (including certificates for Registrable Securities to be issued after the Effective Date and replacement certificates for Registrable Securities previously issued) without legends or other restrictions; provided that the Company has received the deliveries required in the Purchase Agreement;

(l) Take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of the Registrable Securities pursuant to the Registration Statement; and

(m) Comply with all applicable rules and regulations of the Commission and make generally available to its security holders earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall cover said 12-month period, or end shorter periods as is consistent with the requirements of Rule 158.

4. Obligations of the Investors. In connection with the registration of the Registrable Securities, the Investors shall have the following obligations:

(a) Each Investor, by such Investor's acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of the Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor's election to exclude all of such Investor's Registrable Securities from the Registration Statement; and

(b) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(f) or 3(g), above, such Investor will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Investor's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by the Company, such Investor shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in such Investor's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice.

5. Expenses of Registration. (a) All reasonable expenses (other than underwriting discounts and commissions of the Investor) incurred in connection with registrations, filings or qualifications pursuant to Section 3, but including, without limitation, all registration, listing, and qualifications fees, printers and accounting fees, the fees and disbursements of counsel for the Company, and the fees of a single firm of counsel for the Investors (but not to exceed $2,000) shall be borne by the Company.

(b) Except as and to the extent specifically set forth in Schedule 5(b) attached hereto, neither the Company nor any of its subsidiaries has, as of the date hereof, nor shall the Company nor any of its subsidiaries, on or after the date of this Agreement and until sixty (60) days after the Effective Date, enter into any agreement granting any registration rights with respect to any of its securities to any Person, except for certain equity based stock compensation plans.

6. Indemnification. In the event any Registrable Securities are included in a Registration Statement under this Agreement:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each Investor who holds such Registrable Securities, the directors, if any, of such Investor, the officers, if any, of such Investor, each person, if any, who controls any Investor within the meaning of the Securities Act or the Exchange Act (each, an "Indemnified Person" or "Indemnified Party"), against any losses, claims, damages, liabilities or expenses (joint or several) incurred (collectively, "Claims") to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any of the following statements, omissions or violations in the Registration Statement, or any post-effective amendment thereof, or any prospectus included therein: (i) any untrue statement or alleged untrue statemen t of a material fact contained in the Registration Statement or any post-effective amendment thereof or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation under the Securities Act, the Exchange Act or any state securities law (the matters in the foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject to cla use (b) of this Section 6, the Company shall reimburse the Investors, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a) shall not (I) apply to a Claim arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto, after such prospectus was made available by the Company pursuant to Section 3(c) hereof; (II) be available to the extent such Claim is based on a failure of the Investor to deliver or cause to be delivered the prospectus made available by the Company or the amendment or supplement thereto made available by the Company; (III) be available to the extent such Claim is based on the delivery of a prospectus by the Investor after receiving notice from the Company under Section 3(f), (g) or (h) hereof (other than a notice regarding the effectiveness of the Registration Statement or any amendment or supplement thereto), or (IV) apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Each Investor will indemnify the Company and its officers, directors and agents (each, an "Indemnified Person" or "Indemnified Party") against any claims arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company, by or on behalf of such Investor, expressly for use in connection with the preparation of the Registration Statement or the amendment or supplement thereto, subject to such lim itations and conditions as are applicable to the indemnification provided by the Company to this Section 6. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

(b) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action (including any governmental action), such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be. In case any such action is brought against any Indemnified Person or Indemnified Party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such Indemnified Person or Indemnified Party of its election so to assume the defense thereof, the indemnifying party will not be liable to such Indemnified Person or Indemnified Party under this Section 6 for any legal or other reasonable out-of-pocket expenses subsequently incurred by such Indemnified Person or Indemnified Party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion. The Indemnified Person or Indemnified Party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and reasonable out-of-pocket expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the Indemnified Person or Indemnified Party provided such counsel is of the opinion that all defenses available to the Indemnified Party can be maintained without prejudicing the rights of the indemnifying party. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as such expense, loss, damage or liability is incurred and is due and payable.

7. Contribution. To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that (a) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6; (b) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of such fraudulent misrepresentation; and (c) except where the seller has committed fraud (other than a fraud by reason of the information included or omitted from the Registration Statement as to which the Company has not given notice as contemplated under Section 3 hereof) or intentional misconduct, contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.

8. Reports under Securities Act and Exchange Act. With a view to making available to Investor the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit Investor to sell securities of the Company to the public without Registration ("Rule 144"), the Company agrees to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

(c) furnish to Investor so long as Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company and (iii) such other information as may be reasonably requested to permit Investor to sell such securities pursuant to Rule 144 without Registration.

(d) The Company will, at the request of any Holder of Registrable Securities, in connection with the sale of some or all of the Registrable Securities pursuant to Rule 144 upon receipt from such Holder of a certificate certifying (i) that such Holder has held such Registrable Securities for a period of not less than one (1) year, (ii) that such Holder has not been an affiliate (as defined in Rule 144) of the company for more than the ninety (90) preceding days, and (iii) as to such other matters as may be appropriate in accordance with such Rule, remove from the stock certificate representing such Registrable Securities that portion of any restrictive legend which relates to the registration provisions of the Securities Act, provided, however, that, if the Company fails to provide such instructions and opinion within three business days of receipt of the above certifications (i) through (iii), at the Company's cost and expense, counsel to Investor may provide such instructions and opinion to the transfer agent regarding the removal of the restrictive legend.

9. Assignment of the Registration Rights. The rights to have the Company register Registrable Securities pursuant to this Agreement shall be automatically assigned by the Investors to any transferee of the Registrable Securities only if the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee and (b) the securities with respect to which such registration rights are being transferred or assigned.

10. Amendment of Registration Rights. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investors who hold (a) fifty (50%) percent interest in the Registrable Securities as of such date. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company.

11. Miscellaneous.

(a) A person or entity is deemed to be a holder of Registrable Securities whenever such person or entity owns of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.

(b) Notices required or permitted to be given hereunder shall be given in the manner contemplated by the Purchase Agreement, (i) if to the Company or to the Investor, to their respective address contemplated by the Purchase Agreement, and (ii) if to any other Investor, at such address as such Investor shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 11(b).

(c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(d) The corporate laws of the State of Nevada shall govern all issues concerning the relative rights of the Company and the Investors as its stockholders. All other questions concerning this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. . The parties hereto hereby submit to the exclusive jurisdiction of the United States federal and state courts located in New York County, State of New York with respect to any dispute arising under this Agreement or the transactions contemplated hereby.

(e) The Company, the Investor hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect of any matter arising out of or in connection with this Agreement or any of the other Transaction Agreements.

(f) If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.

(g) Subject to the requirements of Section 9 hereof, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto . vFinance Investments, Inc. and its designees shall be deemed third party beneficiaries of this Agreement

(h) All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

(i) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning thereof.

(j) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by telephone line facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

(k) The Company acknowledges that any failure by the Company to perform its obligations under Section 2(a) hereof, or any delay in such performance could result in loss to the Investors, and the Company agrees that, in addition to any other liability the Company may have by reason of such failure or delay, the Company shall be liable for all direct damages caused by any such failure or delay, unless the same is the result of force majeure. Neither party shall be liable for consequential damages.

(l) This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement may be amended only by an instrument in writing signed by the party to be charged with enforcement thereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

COMPANY

SEMOTUS SOLUTIONS, INC.

By: /s/ Anthony N. LaPine

Name: Anthony N. LaPine
Title: President and CEO

[INVESTOR]

By:

Name:
Title:

vFinance Investments, Inc.

By:______________________________________

Name:___________________________________

Title:___________________________________

-----END PRIVACY-ENHANCED MESSAGE-----

COMPANY	SEMOTUS SOLUTIONS, INC. 16400 Lark Avenue, Suite 230 Los Gatos, CA 95032 Attn: Telephone No.: (408) 358-7100 Telecopier No.: (408) 358-7110
with a copy to:	Clark, Wilson 800 - 885 West Georgia Street Vancouver, BC V6C 3H1 Phone: (604) 891-7707 Fax: (604) 687-6314 Attn:VirgilHlus Telephone No.: ( ) Telecopier No.: ( )
Investor:	As set forth in Annex I hereto.
with a copy to (with respect to Investors provided by vFinance only)	Krieger & Prager, LLP 39 Broadway, Suite 1440 New York, New York 10006 Attn: Samuel Krieger, Esq. Telephone No.: (212) 363-2900 Telecopier No.: (212) 363-2999