<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission file number 1-13810
SOCKET COMMUNICATIONS, INC.
(Name of small business issuer as specified in its charter)
Delaware 94-3155066
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
37400 Central Court, Newark, CA 94560
(Address of principal executive offices including zip code)
(510) 744-2700
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO ___
---
Number of shares of Common Stock ($0.001 par value) outstanding as of May
13, 1997 was 5,209,381 shares.
This report, including all attachments, contains 14 pages.
1
<PAGE>
INDEX
PAGE NO.
Part I. Financial information
Condensed Balance Sheets - March 31, 1997 and December 31, 1996.... 3
Condensed Statements of Operations - Three Months Ended
March 31, 1997 and 1996........................................... 4
Condensed Statements of Cash Flows - Three Months Ended
March 31, 1997 and 1996........................................... 5
Notes to Condensed Financial Statements............................ 6-8
Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 9-12
Part II. Other information............................................ 13
Signatures......................................................... 14
2
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PART I. FINANCIAL INFORMATION
SOCKET COMMUNICATIONS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1997 1996*
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 646,216 $ 618,344
Accounts receivable, net......................... 927,900 833,259
Inventories...................................... 844,529 738,808
Prepaid expenses................................. 124,593 20,523
-------------- --------------
Total current assets.......................... 2,543,238 2,210,934
Property and equipment:
Machinery and office equipment................... 546,139 495,199
Computer equipment............................... 490,207 452,713
-------------- --------------
1,036,346 947,912
Accumulated depreciation......................... (605,577) (535,387)
-------------- --------------
430,769 412,525
Other assets........................................ 55,614 48,235
-------------- --------------
Total assets.................................. $ 3,029,621 $ 2,671,694
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit.............................. $ 486,583 $ 322,743
Convertible subordinated notes................... 1,000,000 --
Accounts payable and accrued expenses............ 1,414,762 1,295,913
Accrued payroll and related expenses............. 255,568 230,758
Deferred revenue................................. 202,422 238,776
Current portion of capital leases and
equipment financing notes....................... 91,038 109,236
-------------- --------------
Total current liabilities..................... 3,450,373 2,197,426
Long-term portion of capital leases and
equipment financing notes.......................... 86,683 102,735
Stockholders' equity :
Undesignated preferred stock, $0.001 par value:
Authorized shares - 2,000,000; Issued and
outstanding shares: none.................... -- --
Series A Convertible Preferred Stock, $0.001
par value:
Authorized shares - 1,000,000, Issued and
outstanding shares: 8,650
at March 31, 1997 and 15,500
at December 31, 1996......................... 1,001,064 1,793,813
Common stock, $0.001 par value:
Authorized shares - 15,000,000
Issued and outstanding shares - 4,238,065
at March 31, 1997 and 3,028,976
at December 31, 1996.......................... 4,238 3,029
Additional paid-in capital....................... 12,209,237 11,413,920
Accumulated deficit.............................. (13,721,974) (12,839,229)
-------------- --------------
Total stockholders' equity (deficit).......... (507,435) 371,533
-------------- --------------
Total liabilities and
stockholders' equity (deficit)............ $ 3,029,621 $ 2,671,694
-------------- --------------
-------------- --------------
</TABLE>
- --------------------------------
* Derived from audited financial statements.
See accompanying notes.
3
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SOCKET COMMUNICATIONS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
-------------- -------------
<S> <C> <C>
Revenue:
Product........................................ $ 1,067,963 $ 1,217,053
Royalty........................................ 2,785 76,790
-------------- -------------
Total revenue............................... 1,070,748 1,293,843
Cost of revenue................................... 540,123 718,172
-------------- -------------
Gross profit...................................... 530,625 575,671
Operating expenses:
Research and development....................... 271,787 271,020
Sales and marketing............................ 756,800 630,830
General and administrative..................... 329,355 367,143
-------------- -------------
Total operating expenses.................... 1,357,942 1,268,993
-------------- -------------
Operating loss.................................... (827,317) (693,322)
Interest income and other, net.................... 1,871 18,633
Interest expense.................................. (26,981) (10,118)
-------------- -------------
Net loss.................................... (852,427) $ (684,807)
-------------
-------------
Preferred stock dividend.................... (30,318)
--------------
Net loss applicable to common stockholders.. $ (882,745)
--------------
--------------
Net loss per share applicable to
common stockholders........................ $ (0.23)
--------------
--------------
Net loss per share.......................... $ (0.23)
-------------
-------------
Weighted average shares outstanding......... 3,854,309 2,997,264
-------------- -------------
-------------- -------------
</TABLE>
See accompanying notes.
4
<PAGE>
SOCKET COMMUNICATIONS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.......................................... $ (852,427) $ (684,807)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................. 70,190 51,281
Changes in operating assets and liabilities:
Accounts receivable......................... (94,641) 43,810
Inventories................................. (105,721) (160,854)
Prepaid expenses............................ (104,070) (456)
Other assets................................ (7,379) 1
Accounts payable and accrued expenses....... 88,531 (104,268)
Accrued payroll and related expenses........ 24,810 (65,119)
Deferred revenue............................ (36,354) (722)
--------------- ---------------
Net cash used in operating activities..... (1,017,061) (921,134)
INVESTING ACTIVITIES
Purchase of equipment............................. (88,434) (29,147)
--------------- ---------------
Net cash used in investing activities..... (88,434) (29,147)
FINANCING ACTIVITIES
Payments on capital leases and equipment
financing notes.................................. (34,250) (25,196)
Proceeds from issuance of convertible notes....... 1,000,000 --
Stock options and warrants exercised.............. 3,777 13,921
Net proceeds from borrowing under bank line of
credit........................................... 163,840 250,000
--------------- ---------------
Net cash provided by financing
activities............................... 1,133,367 238,725
--------------- ---------------
Net increase (decrease) in cash and
cash equivalents................................... 27,872 (711,556)
Cash and cash equivalents at beginning of period.... 618,344 2,406,655
--------------- ---------------
Cash and cash equivalents at end of period.......... $ 646,216 $ 1,695,099
--------------- ---------------
--------------- ---------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest............................ $ 26,981 $ 10,118
Dividends accrued but unpaid...................... $ 30,318
</TABLE>
See accompanying notes.
5
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements of Socket Communications, Inc. (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB item 310(b). Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring accruals) considered
necessary for fair presentation have been included.
The financial statements have been prepared on a going concern basis. The
Report of Independent Auditors on the Company's financial statements for the
year ended December 31, 1996 included in Form 10-KSB contained an explanatory
paragraph which indicated substantial doubt about the Company's ability to
continue as a going concern because of the Company's recurring operating
losses and the need for additional financing. The Company has incurred
cumulative losses to date of $13,721,974. The Company expects product
revenue to increase in 1997 with growth in sales of its PageCard product
which was introduced in December 1994 and the expansion of its serial card
product line. However, the Company will require additional financing during
1997 and ultimately will need to achieve profitable operations. The Company
believes that sufficient outside financing sources will be available,
however, there can be no assurance that the Company will be able to obtain
such financing on commercially reasonable terms, if at all, and such terms
may be dilutive to existing stockholders. If the Company is unable to obtain
the necessary funds, other more substantial restructuring options may be
necessary which may have adverse effects on the Company's operations. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the
amounts and classification of assets and liabilities that may result from the
outcome of this uncertainty.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Operating results for the three months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1997.
NOTE 2 - CASH EQUIVALENTS
Cash equivalents consist mainly of money market funds, which are highly
liquid financial instruments that are readily convertible to cash. The
Company has not incurred losses related to these instruments. As of March
31, 1997 and December 31, 1996, the Company had no material investments in
debt or equity securities.
6
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SOCKET COMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - INVENTORIES
Inventories consist principally of raw materials and sub-assemblies, which
are stated at the lower of cost (first-in, first-out) or market.
March 31, December 31,
1997 1996
---------------------------------
Raw materials and sub-assemblies $ 819,545 $ 712,106
Finished goods 24,984 26,702
---------------------------------
$ 844,529 $ 738,808
---------------------------------
---------------------------------
NOTE 4 - INCOME TAXES
Due to the Company's loss position, there was no provision for income taxes
for the three months ended March 31, 1997 and 1996.
NOTE 5 - NET LOSS PER SHARE AND NET LOSS PER SHARE APPLICABLE TO COMMON
STOCKHOLDERS
Net loss per share is calculated using the weighted average number of
common shares outstanding during the period. Common equivalent shares are
excluded from the calculation as the effect is antidilutive.
The Company is required to pay dividends on shares of its outstanding
Series A Preferred stock. Dividends of $30,318 for the quarter ended March
31, 1997 were added to the net loss for the quarter to determine the net loss
per share applicable to common stockholders. The net loss for the quarter
ended March 31, 1997 (excluding the effect of the dividends) was $(0.22) per
share.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact is
expected to result in no change in loss per share for the quarters ended
March 31, 1997 and 1996.
NOTE 6 - BANK FINANCING ARRANGEMENTS
The Company entered into a credit agreement (the "Agreement") with a bank,
which commenced in July 1995 and expires on June 15, 1997. The Agreement is
secured by the Company's current and future assets. The credit facility under
the Agreement allows the Company to borrow up to $500,000 based on the level
of qualified receivables. The Agreement contains covenants that require the
Company to maintain certain financial ratios. The Company was not in
compliance with the covenants at March 31, 1997 and December 31, 1996 and has
obtained a temporary waiver. As of March 31, 1997 there were $486,583
outstanding in borrowings under the Agreement.
7
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SOCKET COMMUNICATIONS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 7 - CONVERTIBLE SUBORDINATED NOTES
On January 29, 1997, the Company received a $500,000 loan from Cetronic AB
pursuant to a subordinated secured convertible promissory note (the "Cetronic
Note") issued by the Company to Cetronic. The interest rate on the Cetronic
Note is 8% and the term is 6 months. The principal and accrued interest
thereon may be converted into the Company's Common Stock at $1.00 per share
at any time during the term at the option of Cetronic. The Company may also
prepay the Cetronic Note in whole or in part at any time upon prior written
notice to Cetronic. The Cetronic Note is secured by certain marketing and
manufacturing rights for the FLEX (a high speed paging protocol) and
ERMES/POCSAG (a worldwide standard for transmitting alphanumeric messages to
page receivers) products being developed jointly by Socket and Cetronic.
On February 14, 1997, the Company received an aggregate of $500,000 in
loans from several Cetronic shareholders (the "Cetronic Shareholders") pursuant
to subordinated convertible promissory notes issued by the Company to the
Cetronic Shareholders. The tersm of each note are identical to the terms of
the Cetronic Note except that these notes are unsecured.
NOTE 8 - SUBSEQUENT EVENT - INTENT TO MERGE WITH CETRONIC AB
On May 7, 1997 the Company signed a letter of intent to merge with Cetronic
AB, a privately held Swedish company that develops and markets software and
hardware for the wireless data communications markets. Under the proposed
terms of the merger, Socket will issue $11.4 million in Socket common stock
in exchange for all of the common shares of Cetronic AB. The number of
shares will be determined by dividing $11.4 million by the average market
price of Socket's common stock prior to the closing of the merger, with a
minimum of 5.7 million and a maximum of 11.4 million common shares to be
issued. The merger is subject to completion of a definitive merger agreement
and will require the approval of the shareholders of both companies. The
letter of intent also provides for bridge financing of up to $750,000 to
Socket in the form of convertible subordinated notes to be issued to Cetronic
and to certain investors of Socket on the signing of the definitive merger
agreement. The transaction will be accounted for using the purchase method
of accounting.
8
<PAGE>
SOCKET COMMUNICATIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SECTION 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 THE
FORWARD-LOOKING STATEMENTS. FOR A MORE COMPLETE DISCUSSION OF THE FACTORS
THAT MIGHT CAUSE SUCH A DIFFERENCE, SEE "BUSINESS" INCLUDING "ADDITIONAL RISK
FACTORS AFFECTING FUTURE PERFORMANCE" IN THE COMPANY'S ANNUAL REPORT ON FORM
10-KSB FOR THE YEAR ENDED DECEMBER 31, 1996 (COLLECTIVELY THE "FORM 10-KSB
SECTIONS").
OVERVIEW
The Company's serial card products for PC Card mobile computers,
introduced in 1993 and expanded with new serial card products at the end of
1996, and the Company's PageCard PC Card wireless messaging system,
introduced in January 1995, are its principal sources of revenues. The
Company also sells an Ethernet PC card and, in the first half of 1996, a GPS
card which was subsequently discontinued in the second half of 1996. In
addition, the Company earns sales royalties from sale of certain of the
Company's products by the third party manufacturers of those products, and
service royalties on its Socket Wireless Messaging Services ("SWiMS").and on
paging revenues of certain third party paging carriers.
The Company completed its initial public offering ("IPO") in June 1995,
with net proceeds of approximately $4.8 million, issued 15,500 shares of
Series A preferred stock for $1,550,000 in November 1996, and issued
$1,000,000 in convertible subordinated notes to Cetronic AB and certain
shareholders of Cetronic in January and February 1997. Prior to the IPO, the
Company's working capital requirements were met primarily through the private
sale of equity and debt securities. The Company has sustained significant
quarterly operating losses in every fiscal period since its inception. The
Company expects to incur substantial quarterly operating losses at least
through 1997 and possibly longer.* Achieving revenue growth from the
Company's existing and future products will be highly dependent upon the
market acceptance of the PageCard wireless messaging system, continued
increases in the market acceptance of the Company's serial and Ethernet cards
and the ability of the Company to develop successful new products for new and
existing markets.* There can be no assurances that any of these events will
occur or that the Company's revenues will continue to grow. The Company's
ability to continue its operations is also dependent upon the availability of
additional capital.* In January and February 1997 the Company sold $1,000,000
in six-month 6% convertible subordinated notes to Cetronic AB and to certain
shareholders of Cetronic (see Note 7 of Notes to Condensed Financial
Statements), and on May 7, 1997, the Company announced its intent to merge
with Cetronic AB. (See Note 8 of Notes to Condensed Financial Statements and
"Liquidity and Capital Resources.")
- -----------------------
* 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 this Management's Discussion and Analysis Of Financial Condition
and Results Of Operations and in the Form 10-KSB Sections.
9
<PAGE>
SOCKET COMMUNICATIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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,
changes in 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 could be materially
adversely affected.
RESULTS OF OPERATIONS
REVENUE
Revenue for the first quarter totaled $1,070,748, a 17% decrease from the
corresponding period a year ago. The decrease was primarily due to decreased
shipments of the Company's Ethernet card and GPS card and to lower shipments
of its serial PC cards to OEM customers. The GPS card was discontinued in the
second half of 1996. These decreases were offset in part by an increase in
the volume of serial cards sold to non-OEM customers, sales of new serial
card products introduced at the end of 1996, and an increase in the volume of
PageCard wireless messaging system sales.
PRODUCT GROSS PROFIT
Product gross profit, excluding royalty revenue, is equal to product
revenue less the cost of revenue, because the costs of royalty revenue
generally are negligible. The Company's product gross margin for the first
quarter of 1997 was 49.4% of product revenues compared to 41.0% for the same
quarter a year ago. The increase resulted primarily from volume price
discounts from certain suppliers, a favorable product mix, engineered cost
decreases in the unit cost of products and lower fixed overhead costs
resulting from a move into smaller facilities in the fourth quarter of 1996.
10
<PAGE>
SOCKET COMMUNICATIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESEARCH AND DEVELOPMENT
Research and development expenses were $271,787 for the first quarter,
effectively flat with the corresponding period a year ago. The Company has
not capitalized any software development costs as costs incurred subsequent
to completion of a working model have not been material. The Company expects
to increase its research and development expenses in the second half of
1997.*
SALES AND MARKETING
Sales and marketing expenses were $756,800 for the first quarter, a 20.0%
increase over the corresponding period a year ago. The increase reflected
higher staffing levels, increased advertising activity, and higher marketing
research costs. The Company expects to increase its sales and marketing
expenses in 1997.*
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $329,355 for the first quarter, a
10.3% decrease from the corresponding period a year ago. The decrease
reflected lower occupancy costs from a move into smaller facilities in the
fourth quarter of 1996, partially offset by lower compensation costs in
January and February 1996 from a vacancy in the C.E.O. position.
INTEREST INCOME AND OTHER, NET/INTEREST EXPENSE
Interest income primarily reflects interest on cash balances earned
through investment in money market funds. Interest expense was $26,981 for
the first quarter of 1997, compared to $10,118 reported for the corresponding
period a year ago. Interest expense for the first quarter of 1997 included
interest on convertible subordinated notes sold in February 1997, higher
levels of bank credit line usage during the quarter and interest on equipment
lease financing obligations. Interest expense for the first quarter of 1996
reflected primarily interest expense on equipment lease financing obligations.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1997 and 1996, the Company used $986,743 and
$921,134, respectively, in cash for operating activities. Net cash used in
the first quarter of 1997 resulted primarily from the net loss, increases in
inventory and accounts receivable, increases in prepaid expenses from costs
associated with equity financing activities in process, and decreases in
deferred revenues offset in part by increases in accounts payable and accrued
payroll and related expenses. Net cash used in the first quarter of 1996
resulted primarily from the net loss, an increase in inventory and decreases
in accounts payable and accrued expenses and accrued payroll and related
expenses.
- -----------------------
* 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 this Management's Discussion and Analysis Of Financial Condition
and Results Of Operations and in the Form 10-KSB Sections.
11
<PAGE>
Cash used for investing activities was $88,434 in the first quarter of 1997
compared to $29,147 in the corresponding quarter a year ago. The increase
reflected higher purchases of equipment associated with the Company's
relocation into new facilities.
Cash provided by financing activities during the first quarter of 1997
reflected higher borrowings under a revolving line of credit with a bank (see
Note 6 of Notes to Condensed Financial Statements) and proceeds from the
issuance of $500,000 in six month convertible subordinated notes to Cetronic
AB on January 29, 1997 and of $500,000 in six month convertible subordinated
notes to certain shareholders of Cetronic AB on February 14, 1997 (see Note
7 of Notes to Condensed Financial Statements). Cash provided by financing
activities during the first quarter of 1996 primarily reflected borrowings
under a revolving credit line with a bank.
As of March 31, 1997, the Company had cash and cash equivalents of
$646,216. On May 7, 1997 the Company announced its intent to merge with
Cetronic AB (see Note 8 of Notes to Condensed Financial Statements) which
includes a bridge loan of up to $750,000 to Socket in the form of convertible
subordinated notes from Cetronic and certain investors of the Company at the
time a definitive merger agreement is signed, which is expected to be
completed around the end of May 1997.* In addition, Cetronic completed on
May 7, 1997 an equity financing of net proceeds of approximately $3.8
million. A substantial portion of these funds are expected to be available
to the combined companies on the closing of the merger, which is expected to
be completed in August 1997 following the registration of Company shares to
be issued in the merger and shareholder approval.* The Company believes that
its existing capital resources and revenue from operations and the cash
available from Cetronic will be adequate to satisfy its working capital
requirements through 1997.* However, the availability of the Cetronic cash is
dependent upon the successful completion of the merger and there can be no
assurances that the merger will be completed. The Report of Independent
Auditors on the Company's financial statements for the year ended December
31, 1996 included in Form 10-KSB contains an explanatory paragraph regarding
the Company's need for additional financing and indicated substantial doubt
about the Company's ability to continue as a going concern absent such
financing. 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. If the necessary funding is not obtained, there could be a
material adverse affect on the Company's financial condition and results of
operations. The Company's actual working capital needs will depend upon
numerous factors, however, including the extent and timing of acceptance of
the Company's products in the market, the Company's operating results, the
progress of the Company's research and development activities, the cost of
increasing the Company's sales and marketing activities and the status of
competitive products, none of which can be predicted with certainty.
- -----------------------
* 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 this Management's Discussion and Analysis Of Financial Condition
and Results Of Operations and in the Form 10-KSB Sections.
12
<PAGE>
PART II. OTHER INFORMATION
Items 1-5. Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
None
b. Reports on Form 8-K
No reports on Form 8-K were filed with the Securities and Exchange Commission
during the quarter ended March 31, 1997.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOCKET COMMUNICATIONS, INC.
Registrant
Date: May 14, 1997 /s/ David W. Dunlap
-------------------------------
David W. Dunlap
Vice President of Finance
and Administration and
Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SOCKET
COMMUNICATIONS, INC. CONDENSED FINANCIAL STATEMENTS FOR THE INTERIM PERIOD ENDED
MARCH 31, 1997 INCLUDED IN FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 646,216
<SECURITIES> 0
<RECEIVABLES> 927,900
<ALLOWANCES> 0
<INVENTORY> 844,529
<CURRENT-ASSETS> 2,543,238
<PP&E> 1,036,346
<DEPRECIATION> 605,577
<TOTAL-ASSETS> 3,029,621
<CURRENT-LIABILITIES> 3,450,373
<BONDS> 0
0
1,001,064
<COMMON> 4,238
<OTHER-SE> (1,512,737)
<TOTAL-LIABILITY-AND-EQUITY> 3,029,621
<SALES> 1,067,963
<TOTAL-REVENUES> 1,070,748
<CGS> 540,123
<TOTAL-COSTS> 540,123
<OTHER-EXPENSES> 1,357,942
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,981
<INCOME-PRETAX> (852,427)
<INCOME-TAX> 0
<INCOME-CONTINUING> (852,427)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (852,427)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
