As filed with the Securities and Exchange Commission on November 27, 1996
Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under The Securities Act of 1933
SOCKET COMMUNICATIONS, INC.
(Exact name of Registrant as specified in charter)
Delaware 94-3155066
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
37400 Central Court, Newark, CA 94560
(510) 744-2700
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
DAVID W. DUNLAP, Chief Financial Officer
SOCKET COMMUNICATIONS, INC.
37400 Central Court, Newark, CA 94560
(510) 744-2700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
BARRY E. TAYLOR, ESQ.
CHRISTOPHER F. BOYD, ESQ.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 PageMill Road, Palo Alto, California 94304
(415) 493-9300
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please the check the following box. |_|
CALCULATION OF REGISTRATION FEE
===============================================================================
Proposed Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities to be to be Price Per Offering Registration
Registered Registered Share (1) Price (1) Fee
- --------------------- ------------ --------- ------------- ------------
Common Stock, $0.001 1,192,308
par value per share shares $1.875 $2,235,577.50 $678
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(1) Estimated solely for the purposes of calculation of the registration
fee pursuant to Rule 457(c) based on the average of the high and low
prices of the Registrant's Common Stock on the Nasdaq SmallCap Market on
November 25, 1996.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a)of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to such Section 8(a), may determine.
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Information contained herein is subject to completion. A registration
statement relating to these securities has been filed with the Securities
and Exchange Commission. These securities may not be sold nor may offers
to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to buy nor shall
there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 27, 1996
1,192,308 Shares
Socket Communications, Inc.
Common Stock
This Prospectus covers 1,192,308 shares of Common Stock, par value
$0.001 per share (the "Common Stock"), of Socket Communications, Inc., a
Delaware corporation (the "Company"), which may be offered from time to
time by one or all of the selling stockholders named herein (the "Selling
Stockholders").
All of the Common Stock offered hereby consists of shares of Common
Stock to be issued by the Company to the Selling Stockholders upon the
conversion of shares of Series A Convertible Preferred Stock (the
"Preferred Stock") issued by the Company in a private transaction exempt
from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to Section 4(2) thereof (the
"Private Offering"). Such Preferred Stock may be converted into Common
Stock at the option of the holder, in whole or in part, at any time on or
after December 31, 1996, into that number of shares of Common Stock of the
Company equal to $100 divided by the Common Stock Price, which shall equal
the lower of: (a) $2 5/8; and (b)65% of the average bid price of the
Company's Common Stock, on the OTC Bulletin Board, for the five business
days prior to the business day on which notice of conversion is transmitted
by the holder of such Preferred Stock. The Common Stock Price shall be
subject to adjustment in certain events. For purposes of this Registration
Statement, the Company has assumed a Common Stock Price of $1.30. The shares
eligible for sale hereunder represent approximately 28% of the Company's
issued and outstanding shares of Common Stock, assuming conversion of the
Preferred Stock. See "Selling Stockholders" and "Plan of Distribution."
The Company will receive no part of the proceeds from the sale of the
Common Stock by the Selling Stockholders. See "Selling Stockholders" and
"Use of Proceeds." All expenses of registration incurred in connection
with this offering are being borne by the Company, but all selling and
other expenses incurred by the Selling Stockholders will be borne by such
Selling Stockholders. The Company and the Selling Stockholders have each
agreed to indemnify each other against certain liabilities, including
certain liabilities under the Securities Act.
The Company's Common Stock is currently traded on the OTC Bulletin Board
under the symbol SCKT, and listed on the Pacific Stock Exchange under the
symbol SOK. From the date of the Company's initial public offering (June
6, 1995) through November 26, 1996, the Company's Common Stock was listed
on the Nasdaq SmallCap Market under the symbol SCKT. On November 25, 1996,
the last sale price of the Company's Common Stock as reported on the Nasdaq
SmallCap Market was $2 3/8 per share. See "Price Range of Common Stock."
The Common Stock offered hereby involves a high degree of risk and
should be considered only by persons who can afford the loss of their
entire investment. See "Risk Factors" beginning on page 4.
Each Selling Stockholder and any broker executing selling orders on
behalf of the Selling Stockholders may be deemed to be an underwriter
within the meaning of the Securities Act. Commissions received by any such
broker may be deemed to be underwriting commissions under the Securities
Act.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is December 27, 1996
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No person is authorized to give any information or to make any
representations, other than those contained in this Prospectus, in
connection with the offering described herein, and, if given or made, such
information or representations must not be relied upon as having been
authorized by the Company or any Selling Stockholder. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, nor
shall there be any sale of these securities by any person in any
jurisdiction in which it is unlawful for such person to make such offer,
solicitation or sale. Neither the delivery of this Prospectus nor any sale
made hereunder shall under any circumstances create an implication that the
information contained herein is correct as of any time subsequent to the
date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and,
in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the Commission: Seven World Trade
Center, New York, New York 10007 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois, 60661. Copies of such
material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of
the site is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement
(which term shall include all amendments, exhibits and schedules thereto)
on Form S-3 under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, omits certain of the information contained in the
Registration Statement and the exhibits and schedules thereto on file with
the Commission pursuant to the Securities Act and the rules and regulations
of the Commission thereunder. For further information with respect to the
Company and the Common Stock, reference is made to the Registration
Statement and the exhibits and schedules thereto. The Registration
Statement, including exhibits thereto, may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 75 Park Place, Room 1400, New York, New
York 10007 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661, and copies may be obtained at the prescribed
rates from the Public Reference Section of the Commission at its principal
office in Washington, D.C. Statements contained in this Prospectus as to
the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus the
following documents and information heretofore filed with the Commission:
(1) the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995 (the "Form 10-KSB");
(2) the Company's Quarterly Reports on Form 10-QSB for the fiscal
quarters ended March 31, 1996, June 30, 1996 and September 30, 1996;
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(3) the description of the Company's Common Stock offered hereby
contained in the Company's Registration Statement on Form 8-A
filed by the Company with the Commission on April 11, 1995 and
the Company's Registration Statement on Form 8-A/A filed by the
Company with the Commission on June 15, 1995.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of this offering
shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such reports and documents. Any
statement incorporated herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus is delivered, upon written or oral
request of any such person, a copy of any and all of the information that
has been or may be incorporated by reference in this Prospectus, other than
exhibits to such documents unless such exhibits are specifically
incorporated by reference into such document. Requests for such copies
should be directed to the Company at Socket Communications, Inc., 37400
Central Court, Newark, California 94560, Attention: Chief Financial
Officer. The Company's telephone number at that location is (510) 744-
2700.
THE COMPANY
Socket Communications, Inc. develops and sells data communications
solutions for the mobile computer market. Socket's Wireless Messaging
System consists of the PageCard receiver, PageSoft software and Socket
Wireless Messaging Services. Other Socket products include serial PC Cards
and wired Ethernet PC Cards.
The Company was incorporated in California in March 1992 and
reincorporated in Delaware in June 1995. Its headquarters are located at
37400 Central Court, Newark, California 94560 and its telephone number is
(510) 744-2700.
Notice to California Investors
Each purchaser of Common Stock in California must meet one of the
following suitability standards: (i) a liquid net worth (excluding home,
furnishings and automobiles) of $250,000 or more and gross annual income
during 1995, and estimated during 1996, of $65,000 or more from all
sources; or (ii)a liquid net worth (excluding home, furnishings and
automobiles) of $500,000 or more. Each California resident purchasing
Common Stock offered hereby will be required to execute a representation
that it comes within one of the aforementioned categories.
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RISK FACTORS
This Prospectus contains forward-looking statements (identified with
an asterisk "*") that involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in these
forward-looking statements as a result of certain factors, including those
set forth in the following risk factors and elsewhere in, or incorporated
by reference into, this Prospectus. In addition to the other information
in this Prospectus, each prospective investor should carefully consider the
following risk factors in evaluating the Company and its business before
purchasing the securities offered hereby.
Future Capital Needs; Auditors' Report Contained Explanatory Paragraph
Regarding Going Concern
The Company will require additional capital to fund its operations.*
The Company believes its existing capital resources and revenue from
operations will be inadequate to satisfy its working capital requirements
through the end of 1997.* The Company will need to raise additional
capital to fund operations in 1997, which the Company intends to seek
through the private sale of equity securities.* There can be no assurances
that such capital will be available on acceptable terms, if at all, and
such terms may be dilutive to existing stockholders. The inability to
obtain such financing would have a material adverse effect on the Company's
results of operations. The Company could be required to significantly
reduce or suspend its operations, seek a merger partner or sell additional
securities on terms that are highly dilutive to current investors in the
Company. The Company's independent auditors included an explanatory
paragraph in their audit opinion with respect to the Company's 1995
financial statements which indicated substantial doubt about the Company's
ability to continue as a going concern due to recurring operating losses
and the need for additional financing. The factors leading to, and the
existence of, the explanatory paragraph may materially adversely affect the
Company's relationship with customers and suppliers, its ability to obtain
revenue and manufacture products and its ability to obtain financing.
History of Operating Losses; Net Capital Deficiency; No Assurance of
Profitability
The Company was incorporated in March 1992 and has incurred
significant operating losses in every fiscal period since inception. The
Company expects to incur substantial quarterly operating losses at least
through the first half of 1997 and possibly longer.* In order to become
profitable, the Company must obtain market acceptance of the PageCard
receiver and enhanced PageSoft software products, develop page-enabled
applications by independent software vendors in selected vertical markets,
obtain continued increases in the market acceptance of the Company's serial
and Ethernet cards, develop successful new products for new and existing
markets, increase gross margins through higher sales volumes and contract
manufacturing efficiencies, expand its distribution capability and manage
its operating expenses. There can be no assurance that the Company will
meet any of these objectives or ever achieve profitability.
Emerging Market for Wireless Data Communications Products
The market for wireless data communications products is only beginning
to emerge, and there can be no assurance that it will develop sufficiently
to enable the Company to achieve broad commercial acceptance of its
products. Because this market is relatively new, and because current and
future competitors are likely to introduce a variety of competing wireless
data communications solutions, it is difficult to predict the rate at which
this market will grow, if at all. If the wireless data communications
market fails to grow, or grows more slowly than anticipated, the Company's
business, operating results and financial condition will be materially
adversely affected. Although the Company intends to conform its products
to meet emerging standards in the wireless data communications market, there
can be no assurance that industry standards will emerge or, if they become
established, that the Company will be able to conform to these new standards
in a timely fashion. Even if the market for wireless data communications
products does develop, there can be no assurance that the Company's
____________________
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in "Risk Factors," and elsewhere in, or incorporated by reference
into, this prospectus.
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<PAGE>
products will achieve commercial success within such market. Furthermore,
the Company is currently focusing on developing and delivering wireless
data solutions for the specific needs of business in a number of vertical
market segments such as field sales, field service, finance, real estate,
health care, and transportation. * The Company believes that the preferred
strategy for addressing such needs is to "page-enable" existing
applications to allow the transfer of data from an application through the
paging network to the PageCard receiver where it can be downloaded into a
mobile computer. In August 1995, the Company released a software
developer's kit ("SDK") for value added resellers and independent software
vendors, which is designed to provide program interfaces for software
developers to "page-enable" their applications and to work with major
Microsoft operating systems. The Company expects "page-enabled"
applications in these areas to become available beginning in the second
half of 1996 and more extensively in 1997 and beyond.* There can be no
assurance that such page-enabled applications will gain widespread
commercial acceptance or that adoption of such applications will drive
increased purchases of PageCard receivers. Finally, due to the unique
nature of the PageCard receiver and PageCard WMS, which combine certain
technologies and features of paging and mobile computing, the Company
believes it will be required to incur significant expenses for sales and
marketing, including advertising, to educate potential customers.* Broad
commercialization of the Company's products will require the Company to
overcome significant technological and market development hurdles, many of
which may not be currently foreseen.*
The mobile computer market represents only a small percentage of the
installed base of personal computers, and there can be no assurance that
the mobile computer market will continue to grow. Because all of the
Company's products are used in mobile computing applications, the Company's
future operating results would be materially adversely affected by any
reduction in the rate of growth of the mobile computer market.
Rapid Technological Change; Dependence on Product Development; Product
Defects
The market for the Company's products is characterized by rapidly
changing technology, evolving industry standards and short product life
cycles. Accordingly, the Company's success will be substantially dependent
on a number of factors, including its ability to identify emerging
standards in the wireless data communications field, enhance its products
by adding features to provide a more complete solution and differentiate
its products from those of its competitors, maintain superior or
competitive performance in its products and bring products to market
quickly. Given the emerging nature of the wireless data communications
market, there can be no assurance that the Company's products or technology
will not be rendered obsolete by alternative technologies. Further, short
product life cycles expose the Company's products to the risk of
obsolescence and require frequent new product introductions. If the
Company is unable to develop or obtain access to advanced one-way and
emerging two-way wireless data communications technologies as they become
available, or is unable to design, develop, contract for the manufacturing
of and introduce competitive new products on a timely basis, its future
operating results will be materially adversely affected. Any significant
delays in the design, development, manufacture or shipment of new or
enhanced products would also materially adversely affect the Company's
results of operations.
The markets for mobile computers and their peripherals and for wireless
data communications are extremely competitive and characterized by rapidly
advancing technology, frequent changes in user preferences and frequent
product introductions. The future success of the Company will depend in
large part on its ability, and that of its strategic partners, to keep pace
with advances in software and hardware technologies for mobile computing and
wireless data communications. There can be no assurance that the Company
will be able to respond effectively to these technological changes or to
new product introductions by others. For example, the Company's PageCard
receiver is designed to operate on the worldwide POCSAG protocol, and
operates on the FCC-approved frequencies for paging and messaging
technologies in the United States and Canada in the 930 MHz frequency
range. For the European market, the PageCard receiver operates on the
Euromessage frequency of 466 MHz. New competitive wireless technologies,
such as FLEX in the United States and ERMES in Europe, being developed by
various market participants are not compatible with the POCSAG protocol and
may be at different frequencies. If these new technologies succeed, paging
carriers may cease to support POCSAG, and there is no assurance that the
____________________
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in "Risk Factors," and elsewhere in, or incorporated by reference
into, this prospectus.
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Company will be able to develop future products based upon these new
technologies. In addition, the Company's inability to develop products
within any new FCC allocated frequencies for these new technologies could
have a material adverse effect on the Company's business and results of
operations.
Although the Company performs testing prior to new product
introductions, the Company's hardware and software products may contain
undetected flaws, which may not be discovered until the products have been
used by customers. From time to time, the Company may temporarily suspend
or delay shipments or divert development resources from other projects to
correct a particular product deficiency. Such efforts to identify and
correct errors and make design changes may be expensive and time consuming.
Failure to discover product deficiencies in the future could delay product
introductions or shipments, require the Company to recall previously
shipped products to make design modifications or cause unfavorable
publicity, any of which could have a material adverse effect on the
Company's operating results.
Competition
The Company anticipates intense competition from a number of
companies. The overall market for communications products is increasingly
competitive, and the Company expects competition in each of its market
areas to intensify. * Currently, the Company does not have a direct
competitor for its PageCard; however, Kokusai produces a PC Card data pager
that does not have a display. The Company faces indirect competition for
short messaging applications from alphanumeric pagers, which are produced
by many companies (including Motorola, NEC, Uniden, and others), and from
alternative methods of downloading information into a mobile computer,
primarily over telephone lines. In addition to competition from companies
that offer wireless data communications devices, the Company could face
competition for its PageCard receiver and PageCard WMS from companies that
offer alternative wired or wireless communications solutions, or from large
computer and network equipment companies.*
The Company competes with IBM and Smart Modular Technologies, among
others, in the serial card market, although the Company believes that it is
the leading worldwide seller of serial cards. The market for the Company's
Ethernet card is highly competitive. Market leaders for Ethernet cards
include 3Com and Xircom. The Company also faces competition from
combination cards which combine Ethernet and other functions such as
fax/modem. Companies offering combination cards include 3Com, Xircom and
U.S. Robotics.
Many of the Company's present and potential competitors have
substantially greater financial, marketing, technical and other resources
than the Company and may succeed in establishing technology standards or
strategic alliances in the data communications or mobile computer market,
obtain more rapid market acceptance for their products, or otherwise gain a
competitive advantage. There can be no assurance that the Company will
succeed in developing products or technologies that are more effective or
better accepted in the market than those developed by its competitors.
Furthermore, the Company will also be competing with companies that have
high volume manufacturing and extensive marketing and distribution
capabilities, areas in which the Company has limited or no experience.
Increased competition, direct and indirect, could materially adversely
affect the Company's revenues and profitability through pricing pressure
and loss of market share. There can be no assurance that the Company will
be able to compete successfully against existing and new competitors as the
market evolves and the level of competition increases.
Potential Fluctuations in Quarterly Results
The Company believes that its operating results will be subject to
substantial quarterly fluctuations due to several factors, some of which
are outside the control of the Company, including fluctuating market demand
for, and declines in the average selling price of, the Company's products,
the timing of significant orders from distributors and OEM customers, delays
in the introduction of enhancements to existing and new products, market
____________________
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in "Risk Factors," and elsewhere in, or incorporated by reference
into, this prospectus.
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acceptance of existing and new products, competitive product introductions,
the mix of products sold, changes in the Company's distribution network,
the failure to anticipate changing customer product requirements, changes
in the regulatory environment, the cost and availability of components, the
level of royalties from and to third parties and general economic
conditions. * The Company generally does not operate with a significant
order backlog, and a substantial portion of the Company's revenue in any
quarter is derived from orders booked in that quarter. Accordingly, the
Company's sales expectations are based almost entirely on its internal
estimates of future demand and not on firm customer orders. The Company is
making significant investments in sales and marketing and in research and
development, and if orders and sales do not meet expectations, the
Company's operating results will be materially adversely affected. The
Company expects to incur substantial quarterly operating losses at least
through the first half of 1997 and possibly longer.*
Reliance on Third Party Component Suppliers and Contract Manufacturers
The Company subcontracts the manufacturing of substantially all of its
products on a sole source basis to independent suppliers. Sole source
components include the Company's proprietary high integration serial
("HIS") chip manufactured by AT&T Microelectronics that controls the signal
transmission between the Company's PageCard receiver and Serial I/O
products and the PC Card slot on the mobile computer, the PageCard receiver
board and RF display, which are purchased from Mitsubishi Corporation in
Japan, the Ethernet card purchased from Mitsubishi International
Corporation in the United States, and certain other cable and connector
components. Although to date the Company has generally been able to obtain
adequate supplies of these components, certain of these components are
purchased on a purchase order basis, and the Company does not have long-
term supply contracts for these components. In particular, the Company
purchases HIS chips from AT&T Microelectronics, Tamarack chips from
Tamarack, Ethernet cards from Mitsubishi International and Serial I/O cards
from Hi-Tech Manufacturing by purchase order. There can be no assurance
that the Company will not be affected by component shortages. Although the
Company's suppliers are generally large, well financed organizations, a
supplier's experiencing financial or operational difficulties that resulted
in a reduction or interruption in supply to the Company would materially
adversely affect the Company's results of operations until the Company
established sufficient manufacturing supply through an alternative source.
The Company believes that there are alternative contract manufacturers that
could produce the Company's products, but is not pursuing agreements or
understandings with alternative sources. In the event of a reduction or
interruption of supply it could take a significant period of time for the
Company to qualify an alternative subcontractor, redesign the product as
necessary and commence manufacturing. The Company's inability in the
future to obtain sufficient sole or limited source components, or to
develop alternative sources, could result in delays in product
introductions or shipments, which could have a material adverse effect on
the Company's results of operations.
Dependence on Third Party Strategic Alliances and Business Relationships
The Company's strategy is to establish strategic alliances and
business relationships with leading participants in various segments of the
communications and mobile computer markets.* The Company believes these
alliances enable it to take advantage of the superior financial resources,
technological capabilities, proprietary positions and market presences of
these companies in establishing and maintaining Socket's own position in
the wireless data communications industry. In accordance with this
strategy, the Company has entered into alliances or relationships with
AT&T, Bell Mobility, Casio Computer Co., Dell Computer, Ex Machina, GTE,
London Pager, Mitsubishi, The National Dispatch Center ("NDC"), PageNet and
Stratus RTM.
The Company's success will depend not only on the Company's continued
relationships with these parties, but also on its ability to enter into
additional strategic arrangements with new partners on commercially
reasonable terms.* The Company believes that, in particular, relationships
with application software developers are extremely important in creating
commercial uses for the Company's products necessary to achieve growth.*
____________________
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in "Risk Factors," and elsewhere in, or incorporated by reference
into, this prospectus.
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Any future relationships may require the Company to share control over its
development, manufacturing and marketing programs or to relinquish rights
to certain versions of its technology.
In particular, Mitsubishi's relationship with the Company includes
technology licensing, manufacturing and distribution rights. The Company
has co-licensed certain technologies applying to the PageCard receiver, has
contracted with Mitsubishi to supply the PageCard receiver and has granted
Mitsubishi certain distribution rights to the PageCard receiver on a
worldwide basis excluding North America. The Company's ability to manage
the business relationship with Mitsubishi effectively is important to the
success and operating results of the Company. The Company's operating
results would be materially adversely affected if it were required to
replace Mitsubishi as a supplier. The Company must purchase specified
minimum volumes of the PageCard receiver to achieve certain discounts
which, if not obtained, could adversely affect the gross margin or pricing
for the PageCard.
The Company's relationship with NDC for SWiMS includes certain
customer service activities. NDC has agreements to page messages through
PageNet and other paging carriers. Should NDC go out of business,
discontinue its relationship with the Company or with PageNet or not be
able to adequately provide services for SWiMS, the market for the PageCard
WMS would be materially adversely affected until such time as a suitable
replacement could be found. Should PageNet go out of business, be
incapable of providing low cost airtime services or discontinue its
relationship with NDC, the market for the PageCard receiver and PageCard
WMS would be materially adversely affected until such time as a suitable
replacement could be found.
The Company recently introduced its PageCard receiver and PageCard WMS
in France and the U.K. In France, paging services are provided by France
Telecom Mobiles Radiomessagerie, a nationwide paging network, and advanced
messaging services are provided by Stratus RTM. In the U.K., paging
services are provided by Hutchison Telecom, a nationwide paging network,
and advanced messaging services are provided by London Pager. The Company
does not have any commitment from any of these companies as to the level of
sales and marketing effort it will conduct or as to any minimum number of
customers. Should the sales and marketing effort of any of these companies
fall short of expectations, or should any of them go out of business or be
incapable of adequately providing wireless messaging services, the European
market for the PageCard receiver and PageCard WMS would be materially
adversely affected until such time as suitable replacements could be found.
Management of Growth
Depending on the extent of its future growth, the Company may
experience a significant strain on its management, operational and
financial resources. The Company's ability to manage its growth
effectively may require it to continue to implement and improve its
operational and financial systems and may require the addition of new
management personnel. * In addition, three of the Company's officers have
joined the Company since March 1996. Martin Levetin joined the Company in
March 1996 as President and Chief Executive Officer, Howard Case joined the
Company in July 1996 as Vice President of Marketing and John O'Leary joined
the Company in August 1996 as Vice President of Sales. The failure of the
Company's management team to effectively manage growth, should it occur,
could have a material adverse impact on the Company's results of operations.
Dependence on Key Employees
The Company's future success will depend in significant part upon the
continued service of certain key technical and senior management personnel,
and the Company's continuing ability to attract, assimilate and retain
highly qualified technical, managerial and sales and marketing personnel.
Competition for such personnel is intense, and there can be no assurance
that the Company can retain its existing key managerial, technical or sales
and marketing personnel or that it can attract, assimilate and retain such
employees in the future. The loss of key personnel or the inability to
hire, assimilate or retain qualified personnel in the future could have a
____________________
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in "Risk Factors," and elsewhere in, or incorporated by reference
into, this prospectus.
-8-
<PAGE>
material adverse effect upon the Company's results of operations. The
Company does not have key man life insurance for any of its employees.
Foreign Currency Fluctuations Affecting Costs
The PageCard receiver is supplied by Mitsubishi in Japan under an
agreement that provides for adjustment in the Company's purchase costs when
the average exchange rate of the Japanese yen is less than threshold levels
of 95 yen to the U.S. dollar (price increase) or more than 105 yen to the
U.S. dollar (price decrease). Purchase costs are adjusted by the ratio of
the yen exchange rate to the applicable threshold level. The Company
experienced adjustments in 1995 as a result of exchange fluctuations. To
date, such adjustments have not materially affected the Company's costs but
could do so in the future if the Company cannot offset price increases
through higher selling prices, other operating efficiencies or a subsequent
increase in the value of the dollar.
Distribution Risks, Product Returns and Warranties
The Company sells its products primarily through distributors,
resellers and OEMs. To date the Company has not achieved significant OEM
sales and there can be no assurance that the Company will achieve
significant sales through this channel. The Company's largest
distributors, Tech Data, Inc. and Ingram Micro, accounted for approximately
12% and 11%, respectively, of the Company's revenue in 1995, and
approximately 12.8% and 17.4%, respectively, of the Company's revenue for
the first nine months of 1996. The Company's agreements with OEMs,
distributors and resellers, in large part, are nonexclusive and may be
terminated on short notice by either party without cause. The Company's
OEMs, distributors and resellers are not within the control of the Company,
are not obligated to purchase products from the Company and may represent
other lines of products. A reduction in sales effort or discontinuance of
sales of the Company's products by its OEMs, distributors and resellers
could lead to reduced sales and could materially adversely affect the
Company's operating results. Use of distributors also entails the risk
that distributors will build up inventories in anticipation of a growth in
sales. If such growth does not occur as anticipated, these distributors
may substantially decrease the amount of product ordered in subsequent
quarters. Such fluctuations could contribute to significant variations in
the Company's future operating results. The distribution industry has been
characterized by rapid change, including consolidations and financial
difficulties of distributors and the emergence of alternative distribution
channels. In addition, there are an increasing number of companies
competing for access to these channels. The loss or ineffectiveness of any
of the Company's major distributors could have a material adverse effect on
the Company's operating results. Moreover, the Company is seeking to
broaden its channels of distribution and intends to sell its products
through new distribution channels such as mass merchandisers. * There can
be no assurance that the Company will be able to successfully sell its
products through these new channels.
The Company allows its distributors to return a portion of their
inventory to the Company for full credit against other purchases. In
addition, in the event the Company reduces its prices, the Company credits
its distributors for the difference between the purchase price of products
remaining in their inventory and the Company's reduced price for such
products. There can be no assurance that actual returns and price
protection will not have a material adverse effect on future operating
results, particularly since the Company seeks to continually introduce new
and enhanced products and is likely to face increasing price competition.
In addition, the Company's comprehensive two year warranty for its wired
products and one year warranty for its wireless products permit customers
to return any product if the product does not perform as warranted. To
date, the Company has not experienced any warranty claims, returns, stock
rotation exchanges or price protection adjustments materially above those
anticipated. However, future warranty claims, returns, stock rotation
exchanges, or price protection adjustments could be materially higher then
anticipated. The Company intends to continue to introduce new and enhanced
products, which could result in higher warranty or return claims due to the
risks inherent in the introduction of such products.* There can be no
assurance that warranty claims or returns will not have a material adverse
effect on future operating results.
____________________
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in "Risk Factors," and elsewhere in, or incorporated by reference
into, this prospectus.
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<PAGE>
Export Sales
Export sales (sales to customers outside the United States) accounted
for approximately 40% of the Company's revenue in 1995 and 42% of revenue
for the nine months ended September 30, 1996, and the Company anticipates
that export sales will continue to account in 1996 for a significant
portion of revenue. * Accordingly, the Company's operating results are
subject to the risks inherent in export sales, including unexpected changes
in regulatory requirements, exchange rates, tariffs or other barriers and
difficulties in managing foreign sales operations.
Uncertainty of Protection of Patents and Proprietary Rights
The Company relies on a combination of patents, trademarks and non-
disclosure agreements in order to establish and protect its proprietary
rights. The Company has filed, and intends to continue to file,
applications as appropriate for patents covering its products.* There can
be no assurance that patents will issue from any of its pending
applications or, if patents do issue, that the claims allowed will be
sufficiently broad to protect the Company's technology. In addition, there
can be no assurance that any patents issued to the Company will not be
challenged, invalidated or circumvented, or that the rights granted
thereunder will provide proprietary protection to the Company. Since U.S.
patent applications are maintained in secrecy until patents issue, and
since the publication of inventions in technical or patent literature tend
to lag behind such inventions by several months, the Company cannot be
certain that it was the first creator of inventions covered by its pending
patent applications, that it was the first to file patent applications for
such inventions or that the Company is not infringing on the patents of
others. The Company has also trademarked some of its proprietary product
names and logos and claims copyright protection for its proprietary
software. Litigation may be necessary to enforce the Company's patents,
trademarks, copyrights or other intellectual property rights, to protect
the Company's trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement.
Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's
business and results of operations regardless of the final outcome of such
litigation. Despite the Company's efforts to safeguard and maintain its
proprietary rights, there can be no assurance that the Company will be
successful in doing so or that the Company's competitors will not
independently develop or patent technologies that are substantially
equivalent or superior to the Company's technologies.
In addition, the laws of certain foreign countries do not protect the
Company's intellectual property rights to the same extent as do the laws of
the United States. Although the Company continues to implement protective
measures and intends to defend its proprietary rights vigorously, there can
be no assurance that these efforts will be successful. There can also be
no assurance that third parties will not assert intellectual property
infringement claims against the Company. Although no written claims or
litigation related to any such matter are currently pending against the
Company, there can be no assurance that none will be initiated, or that the
Company would prevail in any such litigation seeking either damages or an
injunction against the sale of the Company's products. Moreover, there can
be no assurance that, if such an injunction were to issue, the Company
would be able to obtain any necessary licenses on reasonable terms or at all.
Shares Eligible for Future Sale
Sales of substantial amounts of the Company's Common Stock in the public
market or the prospect of such sales by existing stockholders and warrant-
holders could materially adversely affect the market price of the Company's
Common Stock. As of October 31, 1996 the Company had outstanding 3,023,365
shares of Common Stock. Of these shares, approximately 419,400 shares are
restricted shares ("Restricted Shares") under the Securities Act of 1933, as
amended (the "Securities Act") subject to contractual lock-up agreements under
which the holders of such shares and options have agreed that they will not
sell any shares owned by them (or subsequently acquired under any option,
warrant or convertible security owned prior to this Offering), except with
____________________
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in "Risk Factors," and elsewhere in, or incorporated by reference
into, this prospectus.
-10-
<PAGE>
the prior written consent of the Placement Agent, for certain periods of
time through January 6, 1997. All 419,400 Restricted Shares will be
eligible for sale on January 6, 1997. Sales in the public market of
substantial amounts of Common Stock or the perception that such sales could
occur could depress prevailing market prices for the Common Stock.
Possible Volatility of Stock Price
The trading price of the Company's Common Stock could be subject to
significant fluctuations in response to variations in quarterly operating
results, changes in analysts' estimates, announcements of technological
innovations by the Company or its competitors, general conditions in the
mobile computer or wireless data communications industries and other
factors. In addition, the stock market is subject to price and volume
fluctuations that affect the market prices for companies in general, and
small capitalization, high technology companies in particular, and are
often unrelated to their operating performance. No assurance can be given
that the market price of the Company's Common Stock will not experience
significant fluctuations in the future, including fluctuations which are
unrelated to the Company's performance.
Illiquidity of Trading Market
From the effective date of the Company's initial public offering (June 6,
1995) through November 26, 1996, the Company's Common Stock was listed on
the Nasdaq SmallCap Market. However, the Common Stock was de-listed from
such market effective November 27, 1996 and since then has traded on the OTC
Bulletin Board. The Company's Common Stock is also quoted on the Pacific
Stock Exchange. As a result of this de-listing, an investor will find it
more difficult to dispose of, or to obtain accurate quotations as to the
price of, the Company's securities. In addition, the Company's securities
are now subject to so-called "penny stock" rules that impose additional
sales practice and market making requirements on broker-dealers who sell
and/or make a market in such securities. Consequently, removal from the
Nasdaq SmallCap Market could affect the ability or willingness of
broker-dealers to sell and/or make a market in the Company's securities
and the ability of purchasers of the Company's securities to sell their
securities in the secondary market.
No Anticipated Dividends
The Company has not previously paid any dividends on its Common Stock
and for the foreseeable future intends to continue its policy of retaining
any earnings to finance the development and expansion of its business.
Limitations on Liability and Indemnification Matters
As permitted by Delaware General Corporation Law, the Company has
included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or
alleged breach of their fiduciary duties as directors, subject to certain
exceptions. In addition, the Bylaws of the Company provide that the
Company is required to indemnify its officers and directors under certain
circumstances, including those circumstances in which indemnification would
otherwise be discretionary, and the Company is required to advance expenses
to its officers and directors as incurred in connection with proceeding
against them for which they may be indemnified. The Company has entered
into indemnification agreements with its officers and directors containing
provisions that are in some respects broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
-11-
<PAGE>
USE OF PROCEEDS
All 1,192,308 shares of Common Stock covered by this Prospectus may be
offered from time to time by one or all of the Selling Stockholders. The
Company will receive no part of the proceeds from such sales.
PRICE RANGE OF COMMON STOCK
From the effective date of the Company's initial public offering (June 6,
1995) through November 26, 1996, the Company's Common Stock was listed on
the Nasdaq SmallCap Market. However, the Common Stock was de-listed from
such market effective November 27, 1996 and since then has traded on the
OTC Bulletin Board under the symbol SCKT. The Company's Common Stock has
been quoted on the Pacific Stock Exchange under the symbol SOK since June
22, 1995. Prior to June 6, 1995, there was no public market for the Common
Stock. The following table sets forth for the periods indicated the high
and low closing sale prices of the Common Stock as reported on the Nasdaq
SmallCap Market.
1995 High Low
- ---- -------- --------
Quarter ended June 30, 1995 (from June 6, 1995) $6 3/4 $5 11/16
Quarter ended September 30, 1995 6 1/2 5 1/4
Quarter ended December 31, 1995 6 1/16 2 5/8
1996
- ----
Quarter ended March 31, 1996 4 3/4 3
Quarter ended June 30, 1996 7 3/8 2 7/8
Quarter ending September 30, 1996 4 3/8 2 7/8
Quarter ending December 31, 1995 (through
November 25, 1996) 3 5/8 1 9/16
On November 25, 1996, the last sale price of the Common Stock as reported
on the Nasdaq SmallCap Market was $2 3/8 per share. As of November 25,
1996, there were approximately 1,000 holders of record of the Common Stock.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its
Common Stock. The Company currently anticipates that it will retain all
future earnings for the expansion and operation of its business and does
not anticipate paying cash dividends in the foreseeable future. The
Company's bank line of credit prohibits the payment of cash dividends
without the written consent of the lender.
-12-
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders
and the number of shares of Common Stock being offered by each of them
hereby. Upon completion of the offering, assuming all shares of Common
Stock being offered are sold, none of the Selling Stockholders will own any
shares of Common Stock. The shares of Common Stock are being registered to
permit secondary trading of the shares of Common Stock, and the Selling
Stockholders may offer shares of Common Stock for resale from time to time.
See "Plan of Distribution."
The Selling Stockholders acquired shares of Series A Convertible Preferred
Stock pursuant to Subscription Agreements (the "Agreements") dated as of
November 1, 1996, between the Company and each Selling Stockholder. The
Selling Stockholders purchased a total of 15,500 shares of Series A Convert-
ible Preferred Stock at a price of $100 per share. Each share of Series A
Convertible Preferred Stock is convertible at the option of the holder, in
whole or in part, at any time on or after December 31, 1996, into that
number of shares of Common Stock of the Company equal to $100 divided by
the Common Stock Price, which shall equal the lower of (a) $2 5/8 and (b)
65% of the average bid price of the Company's Common Stock, on the OTC
Bulletin Board, for the five business days prior to the business day on
which notice of conversion is transmitted by the holder of such Share.
The Common Stock Price shall be subject to adjustment in certain events.
For purposes of this Registration Statement, the Company has assumed a
Common Stock Price of $1.30.
The Selling Stockholders represented in the Subscription Agreements
that they were accredited investors and were purchasing the Series A
Convertible Preferred Stock and the Common Stock issuable upon exercise of
the Series A Convertible Preferred Stock for investment and not with a view
to, or for a sale in connection with, any distribution within the meaning
of the Securities Act. The Subscription Agreements require the Company to
file a registration statement under the Securities Act, to which this
Prospectus relates, with respect to the resale of the applicable shares.
H.J. Meyers & Co., Inc. ("H.J. Meyers") acted as sales agent for the
Company in connection with the private placement. For the performance of
such services H.J. Meyers was paid a fee by the Company, including a
warrant to purchase 435,393 shares of Common Stock.
Because the Selling Stockholders may sell all or some portion of the
shares covered by this Prospectus, no estimate can be given as to the
number of shares and the percentage of outstanding Common Stock that will
be held by any of them after any particular sale.
-13-
<PAGE>
The following table and accompanying footnotes identify each Selling
Stockholder and based upon information provided to the Company, set forth
information as of November 25, 1996 with respect to the shares held by or
acquirable by, as the case may be, each Selling Stockholder. Except as
otherwise noted, the named beneficial owner has sole voting and investment
power with respect to the shares shown.
Shares Beneficially Shares Beneficially
Owned Before Owned After
Offering (2) Shares Offering (2)
------------------- Offered -------------------
Selling Stockholder (1) Number Percent Hereby Number Percent
- ----------------------- --------- -------- -------- --------- --------
Arnold Wong 19,230 * 19,230 - *
Berckeley Investment Group 384,615 9.1% 384,615 - *
Coutts & Co. AG 115,384 2.7% 115,384 - *
Harry Salzman 76,923 1.8% 76,923 - *
Jerry Houston 91,044 2.2% 38,461 52,583 1.2%
Julius Baer Securities 153,846 3.6% 153,846 - *
Peter G. Colmer 38,461 * 38,461 - *
Roderick Deleersnijder 38,461 * 38,461 - *
Ronald & Nancy Thomas
Family Trust 19,230 * 19,230 - *
Swedbank (Luxembourg) S.A. 192,307 4.6% 192,307 - *
Van Moer Santerre & Cie 76,923 1.8% 76,923 - *
Weinberg Family Trust 38,461 * 38,461 - *
___________________
* Less than 1%
(1) To the Company's knowledge, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to this
table.
(2) Percentage ownership is based on: (i) 3,028,976 shares of Common
Stock outstanding as of November 25, 1996, and any shares issuable
pursuant to warrants or options held by the person or group in question
which may be exercised or converted on November 25, 1996 or within 60
days thereafter; and (ii)after the offering, assumes sale of all shares
offered hereby.
-14-
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders will act independently of the Company in
making decisions with respect to the timing, manner and size of each sale
of the Common Stock covered hereby. The Selling Stockholders may sell
the Shares being offered hereby: (i) on the OTC Bulletin Board, on the
Pacific Stock Exchange, or otherwise at prices and at terms then prevailing
or at prices related to the then current market price; or (ii)in private
sales at negotiated prices directly or through a broker or brokers, who may
act as agent or as principal or by a combination of such methods of sale.
The Selling Stockholders and any underwriter, dealer or agent who
participate in the distribution of such shares may be deemed to be
"underwriters" under the Securities Act, and any discount, commission or
concession received by such persons might be deemed to be an underwriting
discount or commission under the Securities Act.
Any broker-dealer participating in such transactions as agent may
receive commissions from the Selling Stockholders (and, if acting as agent
for the purchaser of such shares, from such purchaser). Usual and
customary brokerage fees will be paid by the Selling Stockholders. Broker-
dealers may agree with the Selling Stockholders to sell a specified number
of shares at a stipulated price per share, and, to the extent such a
broker-dealer is unable to do so acting as agent for the Selling
Stockholders, to purchase as principal any unsold shares at the price
required to fulfill the broker-dealer commitment to the Selling
Stockholders. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and which may involve sales to and
through other broker-dealers, including transactions of the nature
described above) in the over-the-counter market, in negotiated transactions
or by a combination of such methods of sale or otherwise at market prices
prevailing at the time of sale or at negotiated prices, and in connection
with such resales may pay to or receive from the purchasers of such shares
commissions computed as described above.
The Company has advised the Selling Stockholders that the anti-
manipulation Rules 10b-6 and 10b-7 under the Exchange Act may apply to
sales of Shares in the market and to the activities of the Selling
Stockholders and their affiliates. In addition, the Company will make
copies of this Prospectus available to the Selling Stockholders and has
informed them of the need for delivery of copies of this Prospectus to
purchasers on or prior to sales of the Shares offered hereby. The Selling
Stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any commissions
paid or any discounts or concessions allowed to any such broker-dealers,
and any profits received on the resale of such shares, may be deemed to be
underwriting discounts and commissions under the Securities Act if any such
broker-dealers purchase shares as principal.
The Selling Stockholders have advised the Company that no sale or
distribution, other than as disclosed herein, will be effected until after
this Prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms thereof. The Selling Stockholders have
also agreed that if any holder of such securities shall propose to sell any
securities pursuant to the Registration Statement, it shall notify the
Company of its intent to do so at least three full business days prior to
such sale. At any time within such period, the Company may refuse to
permit the holder of such securities to resell any securities pursuant to
the Registration Statement. In order to exercise this right, the Company
must deliver a certificate in writing to the holder of such securities to
the effect that a delay in such sale is necessary because a sale pursuant
to such Registration Statement in its then-current form could constitute a
violation of the federal securities laws. In no event shall such delay
exceed ten trading days, provided that if, prior to the expiration of such
ten trading day period, the Company delivers a certificate in writing to
the holder of such securities to the effect that a further delay in such
sale beyond such ten trading day period is necessary because a sale
pursuant to such registration statement in its then-current form could
constitute a violation of the federal securities laws, the Company may
refuse to permit the holder of such securities to resell any Registrable
Securities pursuant to the registration statement for an additional period
not to exceed ten trading days.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
states, the Common Stock may not be sold unless such shares have been
registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is
complied with.
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<PAGE>
At the time a particular offer of the shares of Common Stock
registered hereunder is made, if required, a Prospectus Supplement will be
distributed that will set forth the number of shares being offered and the
terms of the offering including the name of any underwriter, dealer or
agent, the purchase price paid by any underwriter for securities purchased
from any discount, commission and other item constituting compensation and
any discount, commission or concession allowed or reallowed or paid to any
dealer, and the proposed selling price to the public.
There can be no assurance that the Selling Stockholders will sell all
or any of the shares of Common Stock offered hereunder.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon
for the Company by Wilson Sonsini Goodrich& Rosati, Professional
Corporation, Palo Alto, California.
EXPERTS
The financial statements of Socket Communications, Inc. appearing in
Socket Communications, Inc.'s Annual Report (Form 10-KSB) for the year
ended December 31, 1995, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing..
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law (the "Delaware
Law") authorizes a court to award, or a corporation's Board of Directors to
grant, indemnity to directors and officers in terms sufficiently broad to
permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Securities Act"). Article VII of
the Company's Certificate of Incorporation and Article VI of the Company's
Bylaws provide for indemnification of the Company's directors, officers,
employees and other agents to the maximum extent permitted by Delaware Law.
In addition, the Company has entered into Indemnification Agreements with
its officers and directors and certain stockholders.
Insofar as indemnification by the Company for liabilities arising
under the Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the provisions referenced
above or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer, or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered hereunder, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The Company will bear no expenses in connection with any sale or other
distribution by the Selling Stockholders of the shares being registered
other than the expenses of preparation and distribution of this
Registration Statement and the Prospectus included in this Registration
Statement, as well as the expenses incurred in connection with compliance
with blue sky laws. Such expenses are set forth in the following table.
All of the amounts shown are estimates except the Securities and Exchange
Commission ("SEC") registration fee.
Amount To
Be Paid
------------
SEC registration fee $ 678
Pacific Stock Exchange listing fee -
Legal fees and expenses 3,000
Accounting fees and expenses 2,000
Blue Sky fees and expenses 2,000
Miscellaneous -
------------
Total $ 7,678
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "Delaware
Law") authorizes a court to award, or a corporation's Board of Directors to
grant, indemnity to directors and officers in terms sufficiently broad to
permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Securities Act"). Article VII of
the Registrant's Certificate of Incorporation and Article VI of the
Registrant's Bylaws provide for indemnification of the Registrant's
directors, officers, employees and other agents to the maximum extent
permitted by Delaware Law. In addition, the Registrant has entered into
Indemnification Agreements with its officers and directors and certain
stockholders.
Item 16. Exhibits
Exhibits
5.1 Opinion of Wilson Sonsini Goodrich& Rosati, P.C. (see page II-4)
23.1 Consent of Ernst & Young LLP, independent auditors (see page II-5).
23.2 Consent of Wilson Sonsini Goodrich & Rosati, P.C.(included in
Exhibit 5.1).
24.1 Power of Attorney (see page II-3).
Item 17. Undertakings
Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions referenced
in Item 15 of this Registration Statement or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
II-1
<PAGE>
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that subparagraphs (i) and (ii) shall not apply if
the information required to be included in a post-effective amendment by
those subparagraphs is contained in periodic reports filed with or
furnished to the Securities and Exchange Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the Registration Statement.
For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The Registrant further undertakes to remove from registration by means
of a post-effective amendment any of the securities being registered which
remain unsold at the termination of this offering.
For purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated
by reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
____________________
* This statement is a forward-looking statement reflecting current
expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations due to factors
described in "Risk Factors," and elsewhere in, or incorporated by reference
into, this prospectus.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form S-3 and authorized this
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, in the City of Fremont, State of California, on the 27th day
of November, 1996.
SOCKET COMMUNICATIONS, INC.
By: /s/ David Dunlap
------------------------
David Dunlap
Vice President,
Finance and Administration
and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally,
Martin Levetin, Micheal Gifford and David Dunlap, and each one of them,
individually and without any other, his or her attorney-in-fact, each with
full power of substitution, for him or her in any and all capacities, to
sign any and all amendments to this Registration Statement (including post-
effective amendments), and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Martin Levetin President, Chief Executive Officer November 27, 1996
- ------------------- and Director (Principal Executive
Martin Levetin Officer)
/s/ David Dunlap Chief Financial Officer and Vice November 27, 1996
- ------------------- President of Finance and
David Dunlap Administration (Principal Financial
and Accounting Officer)
/s/ Micheal Gifford Executive Vice President November 27, 1996
- ------------------- and Director
Micheal Gifford
/s/ Charlie Bass Chairman of the Board of Directors November 27, 1996
- -------------------
Charlie Bass
/s/ Jack Carsten Director November 27, 1996
- -------------------
Jack Carsten
/s/ Gary Kalbach Director November 27, 1996
- -------------------
Gary Kalbach
II-3
<PAGE>
Exhibit 5.1
November 27, 1996
Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Re Registration Statement on Form S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by
you with the Securities and Exchange Commission on or about November 27,
1996, in connection with the registration under the Securities Act of 1933,
as amended, on behalf of certain stockholders of the Company (the
"Selling Stockholders") of 1,192,308 shares of your Common Stock, $0.001 par
value (the "Shares"). We understand that the Shares are sold by the Selling
Stockholders to the public as described in the Registration Statement.
As your legal counsel, examined the proceedings taken, and are familiar with
the proceedings proposed to be taken, by you in connection with the sale and
issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the issuance
of the Shares, including the proceedings being taken in order to permit such
transaction to be carried out in accordance with applicable state securities
laws, the Shares, when sold in the manner described in the Registration
Statement and in accordance with the resolutions adopted by the Board of
Directors of the Company, will be legally and validly issued, fully paid
and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in
the Registration Statement, including the Prospectus constituting a part
thereof, and any amendments thereto.
Very truly yours
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
WILSON SONSINI GOODRICH & ROSATI
II-4
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-3) and related Prospectus of Socket
Communications, Inc. for the registration of 1,192,308 shares of its common
stock and to the incorporation by reference therein of our report dated
February 9, 1996, with respect to the financial statements and schedule of
Socket Communications, Inc. included in its Annual Report (Form 10-KSB) for
the year ended December 31, 1995 filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
San Jose, California
November 27, 1996
<PAGE>
