As filed with the Securities and Exchange Commission on September 20, 1996
Registration No. 33-91210-LA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
POST-EFFECTIVE AMENDMENT NO. 1
ON FORM S-3
TO
FORM SB-2
REGISTRATION STATEMENT
Under The Securities Act of 1933
---------------
SOCKET COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 94-3155066
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6500 Kaiser Drive, Fremont, California 94555
(510) 744-2700
(Address of Registrant's principal executive offices)
---------------
DAVID W. DUNLAP, Chief Financial Officer
SOCKET COMMUNICATIONS, INC.
6500 Kaiser Drive, Fremont, California 94555
(510) 744-2700
(Name of agent for service)
---------------
Copies to:
BARRY E. TAYLOR, ESQ.
CHRISTOPHER F. BOYD, ESQ.
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation
650 Page Mill 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/
---------------
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 said Section 8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 20, 1996
597,291 Shares
Socket Communications, Inc.
Common Stock
---------------
This Prospectus covers 597,291 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
issued by the Company to the Selling Stockholders upon the conversion of
convertible notes issued by the Company to provide interim bridge financing
prior to the Company's initial public offering (the "Initial Public Offering")
effective as of June 6, 1995. 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." The Company has covenanted that, for a
period not to exceed three years from June 6, 1995, the Company will use its
best efforts to maintain the effectiveness of the registration statement of
which this Prospectus is a part in order to permit such resales of Common
Stock. The Selling Stockholders may sell the shares offered hereby from time
to time in the over-the-counter market in regular brokerage transactions, in
transactions on the Pacific Stock Exchange, in transactions directly with
market makers, in certain privately negotiated transactions, or through a
combination of such methods at fixed prices, which may be changed, at market
prices prevailing at the time of sale or negotiated prices. The Selling
Stockholders may effect such transactions by selling shares to or through
broker-dealers, and such broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the Selling Stockholders or the
purchasers of shares from whom such broker-dealers may act as agent, or to
whom they sell as principal, or both (which compensation, as to a particular
broker-dealer, may be in excess of customer commissions). 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 to give the Company three
trading days' notice of any proposed sale hereunder, and the Company may under
certain circumstances delay such proposed sale for a period not to exceed 20
days thereafter. See "Plan of Distribution."
The Company's Common Stock is currently listed in the Nasdaq SmallCap Market
under the symbol SCKT, and on the Pacific Stock Exchange under the symbol SOK.
On September 18, 1996, the last sale price of the Company's Common Stock as
reported on the Nasdaq SmallCap Market was $3.875 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.
---------------
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 September 20, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. The
Registration Statement, the exhibits and schedules forming a part thereof, and
the reports and other information filed by the Company with the Commission in
accordance with the Exchange Act 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 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 and June 30, 1996;
(3) the description of the Company's Common Stock offered hereby
contained in the Company's Registration Statement on Form 8-A filed
on April 11, 1995, as amended on June 15, 1995; and
(4) the Company's definitive Proxy Materials for the Annual Meeting of
Stockholders held on May 23, 1996 as filed with the Commission on
April 6, 1996.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
<PAGE> Page 2
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.
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.
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 6500 Kaiser Drive, Fremont, California 94555, Attention: Chief Financial
Officer. The Company's telephone number at that location is (510) 744-2700.
This Prospectus contains information concerning the Company and sales of
its Common Stock by the Selling Stockholders but does not contain all the in
formation set forth in the Registration Statement which the Company has filed
with the Commission under the Securities Act (the "Registration Statement").
The Registration Statement, including various exhibits, may be inspected at
the Commission's office in Washington, D.C.
THE COMPANY
Socket Communications, Inc. develops and sells data communications solutions
for the mobile computer market. Socket's Wireless Messaging System ("WMS")
consists of the PageCard receiver, PageSoft software and Socket Wireless
Messaging Services ("SWiMS"). 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 6500 Kaiser Drive,
Fremont, California 94555, 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.
<PAGE> Page 3
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. No investor should participate in the Offering unless such
investor can afford a complete loss of his or her investment.
Future Capital Needs; Independent 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 1996.* The Company will need to raise additional capital to fund operations
in 1996, 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 1996 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
- --------------------
* This statement is a forward-looking statement reflecting current expecta-
tions. 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.
<PAGE> Page 4
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 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, health care, real estate 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 in the second half of 1996.* 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
- --------------------
* This statement is a forward-looking statement reflecting current expecta-
tions. 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.
<PAGE> Page 5
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 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,
- --------------------
* This statement is a forward-looking statement reflecting current expecta-
tions. 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.
<PAGE> Page 6
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 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 1996 and possibly longer.*
- --------------------
* This statement is a forward-looking statement reflecting current expecta-
tions. 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.
<PAGE> Page 7
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, 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.* 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.
- --------------------
* This statement is a forward-looking statement reflecting current expecta-
tions. 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.
<PAGE> Page 8
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 return 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.
- --------------------
* This statement is a forward-looking statement reflecting current expecta-
tions. 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.
<PAGE> Page 9
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 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% and 17%, respectively, of the Company's
revenue for the first six 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
<PAGE> Page 10
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.
Export Sales
Export sales (sales to customers outside the United States) accounted for
approximately 40% of the Company's revenue in 1995 and 34% of revenue for the
six months ended June 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.
- --------------------
* This statement is a forward-looking statement reflecting current expecta-
tions. 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.
<PAGE> Page 11
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
warrantholders could materially adversely affect the market price of the
Company's Common Stock. As of August 30, 1996 the Company had outstanding
3,023,365 shares of Common Stock. Of these shares, approximately 838,800 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 the
prior written consent of the Placement Agent, for certain periods of time
through January 6, 1997. Approximately 419,400 Restricted Shares will be
eligible for sale on October 6, 1996; and approximately 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.
<PAGE> Page 12
Possible Illiquidity of Trading Market
The Common Stock is quoted on the Pacific Stock Exchange and the Nasdaq
SmallCap Market. If the Company should continue to experience losses from
operations, it may be unable to maintain the standards for continued quotation
on the Pacific Stock Exchange and the Nasdaq SmallCap Market, and the Common
Stock could be subject to removal from the Pacific Stock Exchange and the
Nasdaq SmallCap Market. Trading, if any, in the Common Stock would therefore be
conducted in the over-the-counter market on an electronic bulletin board
established for securities that do not meet the Nasdaq SmallCap Market listing
requirements or in what are commonly referred to as the "pink sheets." As a
result, an investor would find it more difficult to dispose of, or to obtain ac
curate quotations as to the price of, the Company's securities. In addition, if
the Company's securities were removed from the Nasdaq SmallCap Market, they
would be 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 Pacific Stock
Exchange and the Nasdaq SmallCap Market, if it were to occur, 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.
<PAGE> Page 13
USE OF PROCEEDS
All 597,291 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
The Common Stock of the Company has been quoted on The Nasdaq SmallCap
Market under the symbol SCKT since the Company's Initial Public Offering on
June 6, 1995, and 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) $6.7500 $5.6875
Quarter ended September 30, 1995 6.5000 5.2500
Quarter ended December 31, 1995 6.0625 2.6250
1996
- ----
Quarter ended March 31, 1996 4.7500 3.0000
Quarter ended June 30, 1996 7.3750 2.8750
Quarter ending September 30, 1996 (through
September 18, 1996) 4.3750 2.8750
On September 18, 1996, the last sale price of the Common Stock as reported
on the Nasdaq SmallCap Market was $3.875 per share. As of September 18, 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.
<PAGE> Page 14
SELLING STOCKHOLDERS
The following table sets forth as of June 30, 1995 (i) the name of each
Selling Stockholder, (ii) the number of shares of Common Stock beneficially
owned prior to the Offering, (iii) the number of shares of Common Stock to be
sold by each Selling Stockholder pursuant to this Prospectus and (iv) the
number of shares beneficially owned after the offering. Except as otherwise
noted, the named beneficial owner has sole voting and investment power with
respect to the shares shown.
Beneficial Beneficial
Ownership Before Ownership After
Offering (2) Offering (2)
----------------- Shares ----------------
Beneficial Owner (1) Number Percent Offered Number Percent
- -------------------------------- --------- ------- -------- -------- -------
Bass Associates (3) 302,012 10.2% 74,940 227,072 7.6%
c/o Socket Communications,Inc.
6500 Kaiser Drive
Fremont, California 94555
Entities affiliated with
El Dorado Ventures (4) 343,424 11.5% 98,906 244,518 8.2%
c/o Socket Communications,Inc.
6500 Kaiser Drive
Fremont, California 94555
Charlie Bass (5) 337,276 11.3% 90,341 246,935 8.3%
c/o Socket Communications,Inc.
6500 Kaiser Drive
Fremont, California 94555
Jack C. Carsten (6) 76,819 2.6% 19,967 56,852 1.9%
c/o Socket Communications,Inc.
6500 Kaiser Drive
Fremont, California 94555
Murray L. Dennis (7) 1,200 * - 1,200 *
Socket Communications,Inc.
6500 Kaiser Drive
Fremont, California 94555
Micheal L. Gifford (8) 115,966 3.9% - 115,966 3.9%
Socket Communications,Inc.
6500 Kaiser Drive
Fremont, CA 94555
Gary W. Kalbach (9) 346,977 11.6% 98,906 248,071 8.3%
c/o Socket Communications,Inc.
6500 Kaiser Drive
Fremont, California 94555
Bass Family Trust (10) 30,401 1.0% 15,401 15,000 *
Gerald Houston (11) 46,289 1.6% 11,051 35,238 1.2%
Bayview Investors 49,656 1.6% 13,433 36,223 *
Scott Brassfield 14,314 * 2,605 11,709 *
Ed Brotemarkle 3,215 * 3,215 - -
CAT Finance (12) 40,430 1.4% 6,430 34,000 1.1%
Arnold Curnyn 6,430 * 6,430 - -
DiComm Ventures 67,568 2.3% 67,568 - -
James Diller 6,560 * 1,806 4,754 *
Catherine Goodrich 16,529 * 2,614 13,915 *
Howard Greene 13,173 * 13,173 - -
Dain and Michelle Hancock 57,900 1.9% 12,900 45,000 1.5%
David House 26,046 * 26,046 - -
Albert J. Houston 14,440 * 3,890 10,550 *
Isfahan Holdings, Ltd. 26,550 * 13,280 13,270 *
<PAGE> Page 15
Beneficial Beneficial
Ownership Before Ownership After
Offering (2) Offering (2)
----------------- Shares ----------------
Beneficial Owner (1) Number Percent Offered Number Percent
- -------------------------------- --------- ------- -------- -------- -------
Jolinde Profit Sharing Trust(13) 18,450 * 6,450 12,000 *
Bruno Kovarich 7,754 * 2,088 5,666 *
James B. Light 13,294 * 13,294 - -
Donna Miller 6,450 * 6,450 - -
Richard and Sandra Mutchler(14) 6,215 * 3,215 3,000 *
Richard Petritz 6,565 * 6,565 - -
James Ratliff 3,215 * 3,215 - -
Alan J. Rubin 13,294 * 13,294 - -
Deborah Salzman 21,227 * 21,227 - -
George Schneer 17,254 * 5,727 11,527 *
Jeff and Sue Schoenbaum 6,417 * 6,417 - -
Edmund and Mary Shea Property
Trust 51,168 1.7% 32,154 19,014 *
J.F. Shea Co., Inc. 70,788 2.4% 25,173 45,615 1.5%
SPAR & Co. 134,756 4.5% 30,605 104,151 3.5%
Summit International Holdings 7,976 * 7,976 - -
Bernard Vonderschmitt 20,103 * 6,886 13,217 *
Lawrence Weisman 12,900 * 12,900 - -
All current directors and
officers as a group
10 persons) (15) 1,060,950 35.2% 220,265 840,685 27.9%
- ---------------------
* 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) before the Offering, 2,971,990
shares of Common Stock outstanding as of June 30, 1995, and any shares
issuable pursuant to warrants or options held by the person or group in
question which may be exercised or converted on June 30, 1995 or within
60 days thereafter; and (ii) after the Offering, assumes sale of all
shares offered hereby.
(3)Does not include shares beneficially owned by Charlie Bass or by the Bass
Family Trust. See notes (5) and (10) below.
(4) Beneficial ownership before the Offering consists of 6,056 shares owned by
El Dorado C&L Fund (including 178 shares of Common Stock issuable upon
the exercise of Warrants purchased in connection with the Initial Public
Offering); 327,102 shares owned by El Dorado Ventures III, L.P. (including
9,616 shares of Common Stock issuable upon the exercise of Warrants
purchased in connection with the Initial Public Offering); 10,266 shares
of Common Stock owned by El Dorado Technology IV, L.P. (including 206
shares of Common Stock issuable upon the exercise of Warrants purchased
in connection with the Initial Public Offering). Does not include shares
owned by Gary Kalbach, the General Partner of the entities affiliated with
El Dorado Ventures, as outlined above (the "El Dorado Entities"). See note
(9) below. Shares offered is comprised of 1,765 shares of Common Stock
owned by El Dorado C&L Fund, 95,334 shares of Common Stock owned by El
<PAGE> Page 16
Dorado Ventures III, L.P. and 1,807 shares of Common Stock owned by El
Dorado Technology IV, L.P.
(5) Beneficial ownership before the Offering consists of 302,012 shares owned
by Bass Associates, 4,863 shares subject to stock options exercisable on
June 30, 1995 or within 60 days thereafter, 30,401 shares owned by the
Bass Family Trust (including 5,000 shares issuable upon exercise of
Warrants purchased in connection with the Initial Public Offering).
Dr. Bass is Chairman of the Board of Directors of the Company and the
General Partner of Bass Associates and may be deemed to share voting and
investment power with respect to those shares owned by Bass Associates.
However, Dr. Bass disclaims beneficial ownership of shares owned by Bass
Associates except to the extent of his pecuniary interest therein.
Dr. Bass is the trustee of the Bass Family Trust and has voting and
investment power with respect to the shares held by the Bass Family Trust.
Shares offered is comprised of 74,940 shares of Common Stock owned by Bass
Associates and 15,401 shares owned by the Bass Family Trust.
(6) Includes 374 shares of Common Stock subject to stock options exercisable
on June 30, 1995 or within 60 days thereafter, and 1,600 shares issuable
upon exercise of Warrants purchased in connection with the Initial Public
Offering. Mr. Carsten is a director of the Company.
(7) Includes 400 shares issuable upon exercise of Warrants purchased in
connection with the Initial Public Offering.
(8) Mr. Gifford is an officer and a director of the Company.
(9) Includes 3,553 shares subject to stock options exercisable on June 30,
1995 or within 60 days thereafter. Also includes 343,424 shares owned by
the El Dorado Entities as set forth in note (4) above. Mr. Kalbach is a
director of the Company and a General Partner of El Dorado Ventures and
may be deemed to share voting and investment power with respect to those
shares. However, Mr. Kalbach disclaims beneficial ownership of shares and
Warrants owned by the El Dorado Entities except to the extent of his
pecuniary interest therein. Shares offered is comprised of 1,765 shares of
Common Stock owned by El Dorado C&L Fund, 95,334 shares of Common Stock
owned by El Dorado Ventures III, L.P. and 1,807 shares of Common Stock
owned by El Dorado Technology IV, L.P.
(10)Does not include shares owned by Bass Associates or Charlie Bass. See
notes (3) and (5) above. Includes 5,000 shares issuable upon exercise
of Warrants purchased in connection with the Initial Public Offering.
(11)Includes 8,220 shares subject to stock options exercisable on June 30,
1995 or within 60 days thereafter.
(12)Includes 12,000 shares issuable upon exercise of Warrants purchased in
connection with the Initial Public Offering.
(13)Includes 4,000 shares issuable upon exercise of Warrants purchased in
connection with the Initial Public Offering.
(14)Includes 1,000 shares issuable upon exercise of Warrants purchased in
connection with the Initial Public Offering.
(15)See notes (5), (6), (7), (9) and (11) above. Also includes 5,805 shares
subject to stock options exercisable on June 30, 1995, or within 60 days
thereafter.
<PAGE> Page 17
PLAN OF DISTRIBUTION
The Company has agreed that, to the extent necessary to permit the resale of
597,291 shares of Common Stock issued to the Selling Stockholders upon conver-
sion of convertible notes, the Company shall use its best efforts to maintain
the effectiveness of the registration statement of which this Prospectus is
a part, and keep this Prospectus current until the Company is satisfied that
Rule 144(k) is available for the resale by the then-current holders of such
Common Stock, but in no event later than three years following June 6, 1995.
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 Nasdaq SmallCap Market, 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 distri-
bution, other than as disclosed herein, will be effected until after this Pro-
spectus 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
<PAGE> Page 18
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.
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 included therein 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.
<PAGE> Page 19
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 State-
ment and the Prospectus included in this Registration Statement, as well as the
expenses incurred in connection with compliance with blue sky laws. Such ex-
penses are set forth in the following table. All of the amounts shown are est-
imates except the Securities and Exchange Commission ("SEC") registration fee.
Amount To
Be Paid
---------
SEC registration fee $ 1,133
Printing and engraving expenses 35,000
Legal fees and expenses 35,000
Accounting fees and expenses 15,000
Blue Sky fees and expenses 15,000
Miscellaneous 13,867
---------
Total $ 115,000
=========
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 reim-
bursement for expenses incurred) arising under the Securities Act of 1933, as
amended (the "Securities Act"). Article X 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 an Indemnification Agreement with its officers and
directors and certain stockholders.
Item 16. Exhibits
Exhibits
- --------
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati, P.C.
23.1 Consent of Ernst & Young LLP, Independent Auditors (see page II-4).
23.2 Consent of Counsel (included in Exhibit 5.1).
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 14 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
<PAGE> Page II-1
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
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.
<PAGE> Page II-2
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 Amendment No. 1 on Form
S-3 to Registration Statement on Form SB-2 to be signed on its behalf by the
undersigned, in the City of Fremont, State of California, on the twentieth
day of September, 1996.
SOCKET COMMUNICATIONS, INC.
By: /s/ David Dunlap
--------------------------------
David Dunlap
Vice President,
Finance and Administration and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to 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 September 20, 1996
- --------------------- and Director (Principal Executive
Martin Levetin Officer)
/s/ David Dunlap Chief Financial Officer and Vice September 20, 1996
- --------------------- President of Finance and
David Dunlap Administration (Principal Financial
and Accounting Officer)
/s/ Micheal Gifford* Executive Vice President and September 20, 1996
- --------------------- Director
Micheal Gifford
/s/ Charlie Bass* Chairman of the Board of September 20, 1996
- --------------------- Directors
Charlie Bass
/s/ Jack Carsten* Director September 20, 1996
- ---------------------
Jack Carsten
/s/ Gary Kalbach* Director September 20, 1996
- ---------------------
Gary Kalbach
* By: /s/ David Dunlap
--------------------
David Dunlap
Attorney-in-fact
<PAGE> Page II-3
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Post-Effective Amendment No. 1 on Form S-3 the Registration Statement (Form
SB-2 No. 33-91210-LA) and the related prospectus of Socket Communications, Inc.
for the registration of 597,291 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
September 20, 1996
<PAGE> Page II-4
EXHIBIT INDEX
Exhibit Description
- -------- -----------------------------------------
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati, P.C.
23.1 Consent of Ernst & Young LLP, Independent Auditors (see page II-4).
23.2 Consent of Counsel (included in Exhibit 5.1).
<PAGE> Page II-5
Exhibit 5.1
September 19, 1996
Socket Communications, Inc.
6500 Kaiser Drive
Fremont, California 94555
Re: Amendment No. 1 on Form S-3 to Registration Statement on Form SB-2
Ladies and Gentlemen:
We have examined the Amendment No. 1 on Form S-3 to Registration Statement
on Form SB-2 (the "Registration Statement") to be filed by you with the
Securities and Exchange Commission on or about September 20, 1996, in
connection with the registration for resale under the Securities Act of 1933,
as amended, of 597,291 previously issued and outstanding shares of your Common
Stock (the "Shares"). As your legal counsel, we have also reviewed the
proceedings taken in connection with the issuance of the Shares.
It is our opinion that the Shares are 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 any Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
WILSON SONSINI GOODRICH & ROSATI
