What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2008-11-13 compared with 2008-08-12 · 480 added, 204 removed, 224 unchanged (75% of the section changed)

FINANCIAL STATEMENTS

SOLUTIONS, INC.

TELECOM GROUP, INC.

AND SUBSIDIARIES

Semotus Solutions, Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS

and cash equivalents

receivables (net of allowance for doubtful accounts of $7,035 at June 30,

receivables (net of allowance for doubtful accounts of $7,035 at September

30, 2008 and March 31, 2008)

1 unchanged sentence

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

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

current assets

from Stockgroup asset sale (Note 7)

term note receivable from Stockgroup asset sale (Note 7)

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

2 unchanged sentences

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

current liabilities

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

LIABILITIES :

promissory note (Note 6)

interest on convertible promissory note

current liabilities

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

2 unchanged sentences

$0.01 par value;

50,000,000 shares;

2,249,164 issued

and outstanding at June 30, 2008 and March 31, 2008

100,000,000 authorized, 2,990,982 issued and

outstanding at September 30, 2008, and 50,000,000 authorized, 2,249,164

issued and outstanding at March 31, 2008

paid-in capital

6 unchanged sentences

accompanying notes to condensed consolidated financial

SOLUTIONS, INC.

TELECOM GROUP, INC.

AND SUBSIDIARIES

Semotus Solutions, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS

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

of stock, option and warrant expense)

6 unchanged sentences

and administrative

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

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

operating expenses

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

income (expense)

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

income (loss)

=============

income (loss) per common share:

=============

average shares outstanding:

==============

accompanying notes to condensed consolidated financial

SOLUTIONS, INC.

TELCOM GROUP, INC.

AND SUBSIDIARIES

Semotus Solutions, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

5 unchanged sentences

loss on Stockgroup asset sale (Note 7)

loss on Innofone transaction (Note 10)

merger and acquisition fee (Citytalk transaction)

in assets and liabilities:

3 unchanged sentences

expenses and other current liabilities

cash used in operating activities

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

cash provided by (used in) operating activities

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

flows from investing activities:

from Stockgroup asset sale (Note 7)

on receivable from Stockgroup asset sale (Note 7)

term receivable from Stockgroup asset sale (Note 7)

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

cash provided by investing activities

3 unchanged sentences

proceeds from Flint note payable

shares disbursement from reverse stock split

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

cash provided by (used in) financing activities

increase in cash and cash equivalents

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

increase (decrease) in cash and cash equivalents

and cash equivalents, beginning of period

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

and cash equivalents, end of period

See accompanying notes to condensed consolidated financial

SOLUTIONS, INC.

FLINT TELECOM GROUP, INC.

AND SUBSIDIARIES

Semotus Solutions, Inc.)

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

4 unchanged sentences

tax asset related to stock option grants

cash settlement of liabilities

assumed from Stockgroup asset sale (Note 7)

term receivable from Stockgroup asset sale (Note 7)

in Innofone (Note 10)

stock issued upon conversion of notes payable and accrued interest (Note

accompanying notes to condensed consolidated financial statements.

SOLUTIONS, INC.

TELECOM GROUP, INC.

AND SUBSIDIARIES

Semotus Solutions, Inc.)

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FORMATION AND BUSINESS OF THE COMPANY:

Solutions, Inc.

("We" or “Our”), changed our name from Datalink.net, Inc.

January 11, 2001.

We were originally named Datalink Systems Corporation, and we

were formed under the laws of the State of Nevada on June 18, 1996.

1996, we went public through an acquisition of a public corporation, Datalink

Communications Corporation ("DCC"), which was previously Lord Abbott, Inc., a

Colorado corporation formed in 1986.

In the June 27, 1996 acquisition of DCC, we

issued 3,293,064 shares of our $0.01 par value Common Stock to the holders of

100% of the outstanding Common Stock of DCC, and DCC became our wholly owned

As a part of the transaction, we acquired a Canadian corporation,

DSC Datalink Systems Corporation, incorporated in Vancouver, British Columbia,

which changed its name to Semotus Systems Corporation.

leading provider of enterprise application software connecting individuals

wirelessly to critical business systems, urgent information and key processes.

We help mobile employees make better and faster decisions, increase customer

satisfaction, and improve efficiencies in business processes for shorter sales

and service cycles.

Our wireless software products and professional

services are all included in the HipLink family of software, which provide

immediate mobile access and control of business-critical software applications,

databases, networks and servers.

In the year ended March 31, 2008 we

substantially scaled back the operations of Clickmarks and sold our Global

Market Pro wireless financial data software and services to Stockgroup Systems

In the year ended March 31, 2007, we closed the operations of

Expand Beyond and transferred our research and development activities from

Vancouver, Canada to Pakistan.

Telecom Group, Inc.

(“We” or “Our”), changed our name from Semotus® Solutions,

as of October 3, 2008.

From January 11, 2001 to October 2, 2008

we were named Semotus Solutions, Inc., and from August 5, 1999 to January 10,

2001 we were named Datalink.net, Inc.

We were originally named Datalink Systems

Corporation, and we were formed under the laws of the State of Nevada on June

On June 27, 1996, we went public through an acquisition of a public

corporation, Datalink Communications Corporation ("DCC"), which was previously

Lord Abbott, Inc., a Colorado corporation formed in 1986.

In the June 27, 1996

acquisition of DCC, we issued 3,293,064 shares of our $0.01 par value Common

Stock to the holders of 100% of the outstanding Common Stock of DCC, and DCC

became our wholly owned subsidiary.

As a part of the transaction, we acquired a

Canadian corporation, DSC Datalink Systems Corporation, incorporated in

Vancouver, British Columbia, which changed its name to Semotus Systems

October 1, 2008, we acquired substantially all of the assets and liabilities of

Flint Telecom, Inc.

(“FTI”) in exchange for 28,460,094 shares of our restricted

common stock pursuant to a definitive Contribution Agreement dated April 23,

FTI is a technology and services company that provides turnkey

telecom services to the global telecom and media industry.

Its assets are mainly

comprised of telecom products that blend both proprietary software and industry

leading technologies to create a converged voice and data network based on SIP

protocol, the emerging technical standard for the future of

This is also known as Digital Phone Service or Voice over

FTI generates its income by licensing its technology to

niche partner companies who themselves then provide next-generation telecom

services to their customers in both residential and business markets.

partners with organizations such as internet service providers (ISPs), rural

telecoms and cable companies, PBX system vendors and other niche telecom

operators that benefit from offering additional telecom services to their

existing customers.

FTI enables its partners to quickly establish a reliable,

feature rich and cost effective phone service for zero capital investment on

behalf of its partner.

Semotus business division is a leading provider of enterprise application

software connecting individuals wirelessly to critical business systems, urgent

information and key processes.

We help mobile employees make better and faster

decisions, increase customer satisfaction, and improve efficiencies in business

processes for shorter sales and service cycles.

Our wireless software

products and professional services are all included in the HipLink family of

software, which provide immediate mobile access and control of business-critical

software applications, databases, networks and servers.

In the year ended March

31, 2008 we substantially scaled back the operations of Clickmarks and sold our

Global Market Pro wireless financial data software and services to Stockgroup

In the year ended March 31, 2007, we closed the

operations of Expand Beyond and transferred our research and development

activities from Vancouver, Canada to Pakistan.

BASIS OF PRESENTATION AND FUTURE PROSPECTS

accompanying condensed consolidated financial statements include the accounts of

Semotus Solutions, Inc.

Flint Telecom Group, Inc.

and its subsidiaries.

The condensed consolidated balance

sheet as of June 30, 2008, the condensed consolidated statements of operations

for the three months ended June 30, 2008 and 2007, and the condensed

consolidated statements of cash flows for the three months ended June 30, 2008

and 2007 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 our management,

all adjustments (including normal recurring accruals) considered necessary for a

fair presentation have been included.

Operating results for the three months

ended June 30, 2008 are not necessarily indicative of the results that may be

expected for the year ending March 31, 2009.

Certain information and footnote

disclosures normally included in financial statements prepared in accordance

with generally accepted accounting principles have been condensed or omitted.

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-KSB for the year ended March 31,

The condensed consolidated

balance sheet as of September 30, 2008, the condensed consolidated statements of

operations for the three and six months ended September 30, 2008 and 2007, and

the condensed consolidated statements of cash flows for the six months ended

September 30, 2008 and 2007 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 our management, all adjustments (including normal recurring accruals)

considered necessary for a fair presentation have been included.

results for the three and six months ended September 30, 2008 are not

necessarily indicative of the results that may be expected for the year ending

March 31, 2009.

Certain information and footnote disclosures normally included

in financial statements prepared in accordance with generally accepted

accounting principles have been condensed or omitted.

We believe that the

disclosures provided are adequate to make the information presented not

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-KSB for the year ended March 31,

accompanying condensed consolidated financial statements do not include the

accounts of Flint Telecom, Inc.

(“FTI”) because the acquisition transaction in

which we purchased substantially all of FTI’s assets and liabilities closed on

October 1, 2008, subsequent to the closing of our second fiscal

FTI’s accounts will be combined with our accounts and filed

in an amendment to SEC Form 8-K, which we expect to file by no later than

December 16, 2008.

The acquisition will be accounted for as

a reverse merger with the acquiring entity for accounting purposes being

preparation of condensed consolidated financial statements in conformity with

4 unchanged sentences

Actual results could differ from those estimates.

condensed consolidated financial statements include the accounts of Semotus

Solutions, Inc.

condensed consolidated financial statements include the accounts of Flint

Telecom Group, Inc.

and our wholly owned subsidiary, Clickmarks.

8 unchanged sentences

Further, with

the trend toward increased acceptance of the need for wireless solutions, our

operations should be augmented in the current fiscal year.

Our continued

operation is dependant on increasing sales and achieving profitability and/or

obtaining sufficient long-term financing.

the closing of the acquisition transaction with FTI, our operations will be

augmented in the current fiscal year.

However, our continued operation is still

dependent on increasing sales and achieving profitability and/or obtaining

sufficient long-term financing.

ACCOUNTING PRONOUNCEMENTS

6 unchanged sentences

tax position taken or expected to be taken in a tax return, and also provides

guidance on derecognition, classification,

interest and penalties, accounting in interim periods, disclosure, and

FIN 48 is effective for fiscal years beginning after

December 15, 2006.

We do not believe that the adoption of FIN 48

currently has a material impact on our financial statements.

guidance on derecognition, classification, interest and penalties, accounting in

interim periods, disclosure, and transition.

FIN 48 is effective for fiscal

years beginning after December 15, 2006.

We do not believe that the

adoption of FIN 48 currently has a material impact on our financial

September 2006, the FASB issued FASB Statement No.

18 unchanged sentences

adoption of SFAS 157 currently has a material impact on our financial

December 2007, the FASB issued SFAS No.

141 (revised 2007), “Business

Combinations” (SFAS 141R) which replaces SFAS No.

SFAS 141R retains the

purchase method of accounting for acquisitions, but requires a number of

changes, including changes in the way assets and liabilities are recognized in

the purchase accounting.

It also changes the recognition of assets acquired and

liabilities assumed arising from contingencies, requires the capitalization of

in-process research and development at fair value, and requires the expensing of

acquisition-related costs as incurred.

SFAS 141R is effective for us beginning

January 1, 2009 and will apply prospectively to business combinations completed

on or after that date.

We do not expect the adoption of SFAS 141R to have a

material impact on our consolidated financial statements.

December 2007, the FASB issued SFAS No.

160, “Noncontrolling Interests in

Consolidated Financial Statements, an amendment of ARB 51” (SFAS 160) which

changes the accounting and reporting for minority interests.

Minority interests

will be recharacterized as noncontrolling interests and will be reported as a

component of equity separate from the parent’s equity, and purchases or sales of

equity interests that do not result in a change in control will be accounted for

as equity transactions.

In addition, net income attributable to the

noncontrolling interest will be included in consolidated net income on the face

of the income statement and, upon a loss of control, the interest sold, as well

as any interest retained, will be recorded at fair value with any gain or loss

recognized in earnings.

160 is effective for us beginning January

1, 2009 and will apply prospectively, except for the presentation and disclosure

requirements, which will apply retrospectively.

We do not expect the adoption of

SFAS 160 to have a material impact on our consolidated financial

1, 2006, we adopted Statement of Financial Accounting Standards (SFAS) No.

5 unchanged sentences

Total stock compensation expense recognized by us during

the three months ended June 30, 2008 and 2007 was $15,372 and $57,602,

respectively.

the three months ended September 30, 2008 and 2007 was $2,675 and $34,464;

stock compensation expense recognized by us during the six months ended

September 30, 2008 and 2007 was $18,047 and $89,093, respectively.

estimated the fair value of our option awards granted after April 1, 2006 using

9 unchanged sentences

Treasury yield curve in effect at the time of

Months Ended June 30,

Black-Scholes -Based Option Valuation

4 unchanged sentences

following table summarizes the stock option transactions for the quarter ended

June 30, 2008 based upon a closing stock price of $0.65 per share as of June 30,

September 30, 2008 based upon a closing stock price of $0.55 per share as of

September 30, 2008:

Exercise Price ($)

at April 1, 2008

at June 30, 2008

Average Remaining Contractual Life

Average Grant Date Fair Value ($)

at July 1, 2008

at September 30, 2008

aggregate intrinsic value of options is calculated as the difference between the

1 unchanged sentence

stock for the shares that had exercise prices that were lower than the $0.55

market price of our common stock at June 30, 2008.

options were exercised during the three months ended June 30, 2008.

market price of our common stock at September 30, 2008.

options were exercised during the three months ended September 30,

EARNINGS PER SHARE (EPS) DISCLOSURES

8 unchanged sentences

their effect is anti-dilutive.

three months ended June 30, 2008, 2,136,398 potential shares were not included

in the shares used to calculate diluted EPS, as no potential shares currently

have the effect of being dilutive.

three months ended June 30, 2007, 290,353 potential shares were included in the

shares used to calculate diluted EPS, as their effect is dilutive, and 522,671

potential shares were not included in the shares used to calculate diluted EPS,

as their effect is not dilutive due to the fact that the exercise prices of all

of our options and warrants were greater than the average market price of our

stock over the three months ended June 30, 2007.

INVESTMENT, CONVERTIBLE PROMISSORY NOTE AND POTENTIAL ACQUISITION

three and six months ended September 30, 2008, 1,334,456 potential shares were

not included in the shares used to calculate diluted EPS due to the fact that no

potential shares currently have the effect of being dilutive.

three and six months ended September 30, 2007, 177,853 potential shares were

included in the shares used to calculate diluted EPS, as their effect is

dilutive, and 527,437 potential shares were not included in the shares used to

calculate diluted EPS, as their effect is not dilutive due to the fact that the

exercise prices of all of our options and warrants are greater than the average

market price of our stock over the three and six month periods ended September

PROMISSORY NOTES:

ISSUANCE AND CONVERSION

an investment agreement dated April 23, 2008 with Flint Telecom Limited (the

“Flint Parent”), relating to an investment of $200,000 into Semotus (the

“Investment Agreement”).

The investment was taken in the form of a

convertible promissory note (the “Note”) which may be converted by Flint Parent

at its discretion at any time into restricted common shares of Semotus at a

conversion price of $0.275 per share, for an aggregate of 727,272 shares

(subject to adjustment for any accrued interest, and subject to adjustment for

anti-dilution).

The unpaid principal shall accrue interest at 8% per

annum and all unconverted principal and interest is due and payable on April 23,

We did not incur any placement agent fees or expenses for this

$200,000 investment.

These funds will be used to increase our sales and

marketing efforts and for other general working capital purposes.

Simultaneously,

we entered into a contribution agreement with Flint Telecom, Inc.

(“Flint”) and

the Flint Parent, pursuant to which we will acquire the majority of Flint’s

assets and liabilities in exchange for shares of our restricted common stock,

subject to certain closing conditions, including the completion by Flint of a

financing transaction and the completion of an audit of Flint (the

“Transaction”).

Upon the closing of this transaction (the “Close”), we expect to

issue approximately 28.5 million common shares of Semotus to Flint and

approximately 2 million common shares to Mr.

On a fully diluted basis,

taking into consideration our outstanding stock, the stock issuance to Mr.

LaPine, and assuming the exercise of Flint’s convertible promissory notes (which

will result in the issuance of a maximum potential total of approximately

14,000,000 additional shares) and our outstanding stock options and warrants,

there will be a total of approximately 49,000,000 shares outstanding, which will

result in Flint owning approximately 90% of the common stock of the Company, Mr.

LaPine owning 5% of the Company and the existing Semotus shareholders owning

However, there are still some outstanding closing conditions that

have not yet been met as of the date of this filing.

“Flint Parent”), relating to an investment of $200,000 into us (the “Investment

The investment was taken in the form of a convertible

promissory note (the “Note”).

The Note was converted in full on July 22, 2008 by

Flint Parent, which included the entire outstanding principal amount of $200,000

and all accrued interest up to and including July 22, 2008 which came to a

total of $204,000, into 741,818 restricted shares of our common stock at a

conversion price of $0.275 per share, comprised of 727,273 shares for the

principal of $200,000 and 14,545 shares for the accrued interest of

entered into an investment agreement on November 13, 2006 with an individual

investor, Richard Sullivan, Citytalk’s Chairman and CEO, under which he invested

$225,000 into us in the form of a convertible promissory note (the “Convertible

Promissory Note”) which was converted in full by Mr.

Sullivan on September 13,

2007 into 120,000 shares of our restricted common stock at a

conversion price of two dollars ($2.00) per share, comprised of 112,500 shares

for the principal of $225,000 and 7,500 shares for the accrued interest of

$51,702 in unamortized discount was written off at the time of

STOCKGROUP ASSET SALE

14 unchanged sentences

of Closing or gross revenue falls below $15,000 per month, whichever occurs

first In accordance with the Transition Services Agreement, we

continue to provide certain transition services to Stockgroup, including certain

accounting, administrative and technical services related to the financial data

As of June 30, 2008, Stockgroup owed us a total of

$118,525, comprising the unpaid balance of $101,400 from the original $200,000

purchase price, and $17,125 for transitional services provided by Semotus to

RELATED PARTY TRANSACTIONS

May 1, 1996, we entered into a three year employment agreement with our Chief

Executive Officer.

This agreement was extended to May 1, 2007 and automatically

renewed for one-year terms unless notice is provided by either

Effective July 15, 2007, the Compensation Committee agreed

that we should terminate the existing employment agreement with Mr.

enter into a new employment agreement with Mr.

LaPine for a term of three

Under this new employment agreement, Mr.

LaPine is entitled to

a base salary of $240,000 per year, plus discretionary increases in accordance

with our standard review procedure.

LaPine’s previous voluntary

decrease of $24,000 annually in compensation will continue with the same

voluntary decrease in his annual salary under the new employment agreement so

LaPine will continue to be compensated at an annual salary of

LaPine also receives a car allowance in the amount of

$1,000 per month.

LaPine is eligible for an annual bonus, with the actual

amount of bonus paid to be determined by the Committee in its sole discretion,

based upon such factors and performance goals as the Committee deems

LaPine’s employment is terminated by the Company without

cause or by Mr.

LaPine for good reason as provided in the Agreement, or if the

Company is acquired or dissolves and a new employment agreement satisfactory to

LaPine cannot be reached, all stock and stock options of the Company then

LaPine which are unvested shall become immediately fully vested,

and the Company shall pay to Mr.

LaPine severance pay equal to the remaining

years and/or months of his then current base salary that are due, based on a

three year agreement term .

In accordance with the Transition Services Agreement, we

continue to provide certain transition services to

including certain accounting, administrative and technical services related to

the financial data products.

As of September 30, 2008, Stockgroup

owed us a total of $131,370, comprising the unpaid balance of $86,106 from the

original $200,000 purchase price, and $45,264 for transitional services provided

by us to date.

IN TOTAL AUTHORIZED COMMON SHARES

September 30, 2008, a s a result of the closing of the

acquisition transaction with FTI and as

app roved by our shareholders at

our annual meeting held September 17, 2008,

we filed an amendment to our articles of incorporation increasing our total

authorized shares of common stock from

50,000,000 to 100,000,000 .

CONCENTRATIONS

OF CREDIT RISK:

customers accounted for a total of 28% of our revenue in the three months ended

June 30, 2008, representing 5%, 8% and 15% each.

Four customers

accounted for 46% of our accounts receivable at June 30, 2008, representing 17%,

11%, 9% and 9% each.

customers accounted for a total of 37% of our revenue in the three months ended

June 30, 2007, representing 22% and 15%, respectively.

Two customers

accounted for 20% each of our accounts receivable at June 30, 2007, and one

customer accounted for 30% of our accounts receivable at June 30, 2007, for a

combined total of three customers accounting for 70% of our accounts receivable

at June 30, 2007.

customer accounted for a total of 65% of our revenue during the three months

ended September 30, 2008 and 42% of our revenue during the six months ended

September 30, 2008.

One customer accounted for 82% of our accounts

receivable at September 30, 2008.

no material concentration of revenue during the three months ended September 30,

However, two customers accounted for a total of 37% of our

revenue in the six months ended September 30, 2007, representing 22% and 15%,

respectively.

Four customers accounted for 46% of our accounts receivable at

September 30, 2007.

INNOFONE TRANSACTION

26 unchanged sentences

currently delinquent in its SEC filings and working with its auditors to find a

cost effective

way to become current.

Innofone’s last quarterly report was filed

with the SEC on May 21, 2007 for the three and nine months ended March 31, 2007,

in which it reported total assets of $53,523,822, total liabilities of

$39,256,222 and a net loss for the three and nine months ended March 31, 2007 of

$17,156,434 and $33,601,375, respectively.

Since September 30, 2007, Innofone’s

common stock has declined.

cost effective way to become current.

Innofone’s last quarterly

report was filed with the SEC on May 21, 2007 for the three and nine months

ended March 31, 2007, in which it reported total assets of $53,523,822, total

liabilities of $39,256,222 and a net loss for the three and nine months ended

March 31, 2007 of $17,156,434 and $33,601,375, respectively.

Since September 30,

2007, Innofone’s common stock has declined.

initially generated $3.75 million of other income from the sale of a software

14 unchanged sentences

SUBSEQUENT EVENTS

22, 2008, Flint Telecom, Ltd.

(“Flint”) converted 100% of its convertible

promissory note issued on April 23, 2008, which included the entire outstanding

principal amount of $200,000 and all accrued interest up to and including

July 22, 2008, which comes to a total of $204,000, into restricted common shares

of Semotus Solutions, Inc.

at a conversion price equal to $0.275 per share,

which equals a total of 741,818 shares of our restricted common stock.

6 for more details on the convertible promissory note.

October 1, 2008, we acquired substantially

all of the assets and liabilities of Flint Telecom, Inc.

(“FTI”) in exchange for

28,460,094 shares of our restricted common stock pursuant to a definitive

Contribution Agreement dated April 23, 2008

among Semotus, FTI and Flint Telecom

Limited (“FTI Parent”) (the “Contribution Agreement”).

FTI is a technology

and services company that provides “turnkey’ telecom services to the global

telecom and media industry.

Its assets are mainly comprised of telecom products

that blend both

proprietary software and industry leading technologies

to create a converged voice and data network based on SIP protocol, the emerging

technical standard for the future of telephony.

This is also known as Digital

Phone Service or Voice over IP (VoIP).

of the closing of the transaction and in addition

to the issuance of the common stock noted above , we assumed all of FTI’s obligations under its convertible promissory

notes (the “Notes”) .

A portion of the

Notes, totaling approximately $4,000,000 in outstanding principal plus accrued

interest to date, are co nvertible into

shares of our common stock at

any time and from time to time prior to December 31, 2008 at a conversion price

of $0.275 per share, and the remaining Notes, totaling approximately $2,000,000

in outstanding principal plus accrued interest to date, are co nvertible into shares of our common stock at any time and from time to time prior to

July 1, 2009 at a conversion price of $0.50 per share.

conversion by each of the holders of such Notes, such conversion will

result in the issuance of approximately 18,500,000 additional shares of our restricted common shares .

As part of the closing of the

transaction , we also assumed all of

FTI’s obligations under outstanding

warrants exercisable at $0.50 per share for a three year term which , assuming exercise by each of the holders of such

warrants, will result in the issuance of approximately 6,850,000

additional shares of our restricted common shares.

The foregoing description of the Notes and

warrants are qualified in their entirety by reference to the full text of the

Notes and Warrants, which are attached as Exhibits 4.1 and 4.2 to our SEC Form

8-K filed on October 7, 2008, and are incorporated herein by reference.

of the closing of the transaction, we entered into

an amended and restated employment agreement with Mr.

LaPine , effectuating the

LaPine’s title changed from Chairman and Chief

Executive Officer to Chairman;

LaPine’s job description changed such that he is now required to perform only

those services commensurate with his position as Chairman, maintaining

our public listing and SEC compliance and managing the day-to-day operations

relating to the Semotus Business (as defined in

the Contribution Agreement) ;

LaPine was issued 3,508,000 shares of restricted common

stock (evidencing an approximate 5% ownership on a fully-diluted basis taking

into account the r estricted shares issued to FTI at the closing of the transaction , the unvested shares

issued to other key employees and executive officers as described below , the shares underlying the Notes and warrants and any shares outstanding

or available for issuance under our existing stock option plans).

also has the right to purchase (at any time

within the three-year period commencing on the date of closing ) or, in the event our Board should determine to dispose of the Semotus

Business unit prior to the end of such three-year period, a right of first

refusal with respect thereto, in exchange for (1) the shares issued to him in

accordance with his new employment agreement (as

contemplated by the Contribution Agreement ) or (2) the fair market value of the Semotus

Business at the time Mr.

LaPine exercises his right to purchase (payable in cash

or in shares of our common stock issued to Mr.

LaPine thereunder ), whichever is less.

The foregoing

description of Mr.

LaPine’s Amended and Restated

Employment Agreement is qualified in its entirety by reference to the

full text of the Amended and Restated Employment Agreement, which is attached

hereto as Exhibit 10.1 to our SEC Form 8-K filed on October 8, 2008, and is

incorporated herein by reference.

Additionally,

as part of the closing of the transaction, the entire FTI management team and

employees have become employees .

As a hiring and retention incentive,

in lieu of issuing stock options under our existing stock option plan, our Board has approved the issuance o f up to 8,410,000 shares of restricted common stock to

certain key employees and executive officers,

which is subject to vesting over a period of four years such that 25% of

the shares vest at the employees’ first annual anniversary and 6.25% of the

shares vest quarterly thereafter so that 100% shall be fully vested at the end

of four years.

on a fully diluted basis, taking into consideration (i) our outstanding stock , on the date of the closing, (ii) the stock

issuance to Mr.

LaPine under his new employment agreement, (iii) the stock we intend to

issue to other key employees and executive officers as described above,

(iv) the aggregate number of shares underlying the

Notes we have assumed, (v) the aggregate number of shares underlying the

F TI warrants we assumed and (vi) the aggregate number of shares

underlying our outstanding stock options, and our outstanding warrants, we have an

aggregate of approximately 70,000,000 shares outstanding .

As a result of the transaction and effective as of the closing, our existing shareholders now own approximately 3%, Mr.

LaPine now owns approximately 5% and FTI and its

investors now own approximately 92% of the

outstanding shares on a fully-diluted

as of October 1, 2008, we appointed Vincent Browne as our new Chief Executive

Anthony LaPine also resigned from

his former position as Chief Executive

Officer but will remain our Chairman of the Board.

Mark Williams and

Laurence Murray each resigned from the

Board of Directors and the vac ancies created by their resignations were filled by

Flint ’ s designees, Vincent Browne and Michael

Browne nor Mr.

Butler qualify as “ independent” directors, as that term is defined by the NASDAQ Stock

Market and the SEC, and neither wil l be

serving on any Board Committees.

addition, and also effective October 1, 2008, Pamela LaPine resigned from her

position as President, but will remain an executive of the Company as President

of Semotus, which has become a business division of the Company.

also appointed Christopher Knight as Chief Technology Officer effective as of

October 1, 2008;

Knight has subsequently been let go, without cause,

effective as of November 1, 2008.

following are descriptions of the business experience of each of Messrs.

Browne and Butler for at least the past

Vincent Browne , age 40 .

Browne founded Flint

Telecom, Ltd, Flint Telecom, Inc.’s parent company, in December of 2004 and

Flint Telecom, Inc.

was incorporated in July of 2005.

Browne has over 15

years experience in the ICT sector.

Prior to joining Flint, Mr.

Browne founded

Prime Carrier Limited (PCL) in 2000 and was its CEO.

PCL provides advanced Least

Cost Routing software and systems to international telecom companies

across the globe.

During his time as founding CEO at PCL, he raised over $18m in

various funding rounds and successfully negotiated several multi-million dollar

contracts with international customers.

Prior to that, Mr.

Browne held senior

management positions with Siemens in Ireland and with Esat BT.

a BComm degree from University College Dublin.

Michael Butler , age 53 .

Butler became Flint

Telecom, Inc.’s Executive Vice President of Investor Relations in October of

Prior to that, he was Flint’s Finance Director since February of 2006.

Butler has over 30 years

experience in Accountancy and Insolvency practices in Ireland.

Most recently as

Managing Partner with Butler & Co, which he built to become one of the

leading insolvency practices in Ireland.

Butler is a prolific investor in

early stage technology and internet companies, most notably Coretime.com which

was sold to Sage, and Hostelworld.com, the World’s leading hostel booking

Butler has a BComm from University College Dublin and is a Member of

the Irish Institute of Credit Managers.

Pursuant to the terms of their employment:

Browne will receive salary in the amount of $180,000 per year, which shall

immediately increase to $240,000 when the Company achie ves sustainable profitability for one quarter, and

2,500,000 shares of restricted common stock as described above;

and ( ii) Mr.

will receive salary in the amount of $180,000 per year and 1,500,000 shares of

restricted common stock as described above .

Each will be entitled to participate in

other employee benefit plans to the same extent provided to other executive

The foregoing description of the terms of employment of Messrs.

Browne and Butler are qualified in their entirety by reference to the full text

Browne’s Employment Agreement and Mr.

Butler’s offer letter, which are

attached as Exhibits 10.2 and 10.4 to our SEC Form 8-K filed on October 7,

In addition and in connection with the

closing of the acquisition transaction

w ith FTI, we assumed the foll owing indebtedness owed by FTI :

(i) € 1,475,000 in convertible notes owed to Mr.

$875,000 in convertible notes owed to Mr.

Butler and his family members and

and (iii) $238,9 72 in

indebtedness owed by FTI to FTI ’ s Parent

Company, which is controlled by Mr.

effective October 3, 2008, as part of the acquisition transaction with FTI and

as approved by our shareholders at our annual shareholders meeting held on

September 17, 2008, we filed an amendment to our Articles of Incorporation,

changing our corporate name from Semotus Solutions, Inc.

to Flint Telecom Group,

As a result of the closing of the acquisition transaction with FTI, FTI owns approximately 92 % of our common stock on a fully

diluted basis.

FTI also replaced

two of our former directors with two individuals designated by it.

after the closing and until the first to occur of (i) the Flint Business (as

defined in the Contribution Agreement) shall have ge nerated positive cash flow or (ii) the Flint Business

shall have obtained at least $3,000,000 in additional financing (the events

described in clause (i) and (ii) hereof each being referred to as a

“ Board Change Trigger Event” ), the board of directors wil l be comprised of

four directors, two of whom shall be designated by Flint Telecom, Ltd.

Parent” ) (initially Vincent Browne and

Michael Butler) and two of whom shall be incumbent directors of Semotus

(initially Anthony LaPine and Robert Lanz).

From a nd after the occurrence of a Board C hange Trigger Event, our board of directors shall take such actions as may be

necessary to increase the size of

our board of directors to six directors,

with the vacancies created by such board

increase to be filled by i ndividuals

designated by FTI Parent.

October 30, 2008, we let go of Christopher Knight, the Chief Information Officer

of the Company, without cause, effective November 1, 2008.

connection with Mr.

Knight’s separation, we entered into a Separation Agreement

Knight (the “Separation Agreement”), effective November 6,

Under the Separation Agreement, Mr.

Knight has agreed to

provide such services as may be

from time to time by us until November 30, 2008.

The Separation

Agreement provides that Mr.

Knight will be paid an aggregate of approximately

$124,600 in cash and $550,000 worth of shares of restricted common stock,

consisting of:

regular base salary through November 30, 2008, or approximately

residence at the corporate apartment for two additional months (November

and December) at the Company’s expense, or approximately

for past wages owed, or approximately

reimbursement

for approved expenses in an amount that has yet to be determined, and

which amount shall not exceed

pay in the form of acceleration of a portion of his unvested restricted

stock, as follows:

150,000 shares vest as of November 6, 2008, and 212,500

vest quarterly thereafter for a period of 12 months, for a total of

1,000,000 shares of restricted common stock.

The closing price

of our common stock on November 6, 2008 was $0.55 per share, and therefore

the total fair market value of these shares as of November 6, 2008 was

summary of the Separation Agreement does not purport to be complete and is

qualified in its entirety by reference to the Separation Agreement, a copy of

which is filed as an exhibit to the Form 8-K that we filed on November 10,

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements