SOCKET COMMUNICATIONS INC, SB-2, 1997-02-24

SOCKET COMMUNICATIONS INC
SB-2, 1997-02-24
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 1997
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SOCKET COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)

<TABLE>
<CAPTION>
DELAWARE 3577 94-3155066
<S> <C> <C>
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
</TABLE>

37400 Central Court
Newark, California 94560
(510) 744-2700
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

DAVID W. DUNLAP
Chief Financial Officer
SOCKET COMMUNICATIONS, INC.
37400 Central Court, Newark, California 94560
(510) 744-2700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

COPIES TO:

<TABLE>
<S> <C>
BARRY E. TAYLOR, ESQ. THOMAS J. POLETTI, ESQ.
CHRISTOPHER F. BOYD, ESQ. KATHERINE J. BLAIR, ESQ.
MATTHEW B. SWARTZ, ESQ. Freshman, Marantz, Orlanski,
Wilson Sonsini Goodrich & Rosati, P.C. Cooper & Klein
650 Page Mill Road 9100 Wilshire Blvd., 8th Floor East
Palo Alto, California 94304 Beverly Hills, California 90212-3480
(415) 493-9300 (310) 273-1870
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED SECURITY(1) PRICE(1) FEE
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value (2)(3).................. 2,875,000 $0.69 $1,983,750 --
Underwriter's Warrant (4).............................. 1 5.00 5 --
Common Stock issuable upon exercise of Underwriter's
Warrant (5)(6)........................................ 250,000 0.83 207,500 --
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Totals................................................. -- -- $2,191,250 $664.02
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457.
(2) For the purpose of calculation of the registration fee, the shares of Common
Stock registered hereunder (the "Shares") have been assumed to have a
proposed maximum offering price per share of $0.69 (the average of the high
and low prices reported in the OTC Bulletin Board on February 18, 1997).
(3) Includes 375,000 shares that the Underwriter has the option to purchase to
cover over-allotments, if any.
(4) In connection with the Registrant's sale of the Shares, the Registrant is
granting to the Underwriter a warrant to purchase 250,000 shares (the
"Underwriter's Warrant"). The price to be paid by the Underwriter for the
Underwriter's Warrant is $5.00.
(5) For purposes of calculation of the registration fee, each share of Common
Stock issuable upon exercise of the Underwriter's Warrant has been assumed
to have a proposed maximum offering price of $0.83 (120% of the average of
the high and low prices reported in the OTC Bulletin Board on February 18,
1997).
(6) Such shares are being registered for resale by the Underwriter and its
assigns and transferees on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933.
--------------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
2,500,000 SHARES

[LOGO]

COMMON STOCK
---------------------

All of the 2,500,000 shares of Common Stock offered hereby are being sold by
Socket Communications, Inc. ("Socket" or the "Company"). The Company's Common
Stock is traded on the OTC Bulletin Board under the symbol "SCKT" and on the
Pacific Stock Exchange under the symbol "SOK." On February 21, 1997, the last
reported sale price of the Common Stock on the OTC Bulletin Board was $0.78. See
"Price Range of Common Stock." Application is being made to have the Common
Stock listed on the Nasdaq SmallCap Market under the symbol "SCKT."
------------------------

THESE SECURITIES INVOLVE 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 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF
COMMON STOCK OFFERED HEREBY.
------------------------

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.

<TABLE>
<CAPTION>
PRICE UNDERWRITING
TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.............................................. $ $ $
Total (3).............................................. $ $ $
</TABLE>

(1) Does not include additional compensation to be received by the Underwriter
in the form of (i) a non-accountable expense allowance of 3% of the selling
price of each share sold by the Underwriter (including any shares sold
pursuant to the Underwriter's exercise of the over-allotment option
described in footnote (3)); and (ii) a warrant to purchase up to 250,000
shares at $ per share, exercisable over a period of four years,
commencing one year from the date of this Prospectus (the "Underwriter's
Warrant"). In addition, the Company has agreed to indemnify the Underwriter
against certain civil liabilities under the Securities Act of 1933. See
"Underwriting."

(2) Before deducting expenses of the offering payable by the Company, estimated
at $460,000, including the Underwriter's non-accountable expense allowance.

(3) The Company has granted the Underwriter an option, exercisable within 30
days of the date of this Prospectus, to purchase up to 375,000 additional
shares on the same terms and conditions as set forth above to cover
over-allotments, if any. If all such additional shares are purchased, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be increased to $ , $ and $ ,
respectively. See "Underwriting."
------------------------

The Common Stock is offered on a "firm commitment" basis by the Underwriter
when, as and if delivered to and accepted by the Underwriter, and subject to
prior sale, withdrawal or cancellation of the offer without notice. It is
expected that delivery of the certificates representing the shares will be made
at the offices of H.J. Meyers & Co., Inc., 1895 Mt. Hope Avenue, Rochester, New
York 14620 on or about , 1997.

H.J. MEYERS & CO., INC.

THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. a Registration Statement on Form SB-2 under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement and
the exhibits and schedules filed therewith. Statements contained in this
Prospectus as to the contents of any contract or any 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 all respects by such
reference. A copy of the Registration Statement, and the exhibits and schedules
thereto, may be inspected without charge at the offices of the Commission, or
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549.

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. Reports,
proxy statements and other information filed by the Company can be inspected and
copied (at prescribed rates) at the Commission's Public Reference Section, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, as well as the New York
Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048,
and the Chicago Regional Office, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601. Quotations relating to the Company's Common Stock appear on the
OTC Bulletin Board and such reports, proxy statements and other information
concerning the Company can also be inspected at the offices of the Nasdaq Stock
Market, 1735 K Street, N.W., Washington, D.C. 20006. The Commission also
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.
------------------------

Socket, the Socket logo and the names of products offered by Socket are
trademarks or registered trademarks of Socket. All other trademarks or service
marks appearing in this Prospectus are trademarks or registered trademarks of
the respective companies that utilize them.
------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

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

NOTICE TO CALIFORNIA INVESTORS

Each purchaser of shares 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 1996, and
estimated during 1997, 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 shares offered hereby will be required to execute
a representation that it comes within one of the aforementioned categories.

2
<PAGE>
SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. EACH PROSPECTIVE INVESTOR IS URGED TO READ THIS
PROSPECTUS IN ITS ENTIRETY. CERTAIN TECHNICAL TERMS USED HEREIN ARE DEFINED IN
THE GLOSSARY IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION
CONTAINED IN THIS PROSPECTUS ASSUMES NO EXERCISE OF THE UNDERWRITER'S
OVER-ALLOTMENT OPTION. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
(IDENTIFIED WITH AN ASTERISK "*") THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

Socket Communications, Inc. ("Socket" or the "Company") develops and sells
data communications solutions for the mobile computer market. The market for
mobile computers has grown rapidly in recent years. Demand for notebook
computers has increased as their capabilities have expanded and their size,
weight and price have been reduced. Demand for handheld personal computers
("H/PCs"), such as palmtops and personal digital assistants, although slow to
materialize initially, is projected to increase as a result of the recent launch
of the Microsoft Windows CE operating system and Windows CE-based devices from
Casio, Compaq and other electronic appliance manufacturers.* The Yankee Group,
an independent market research firm, projects that the installed base of
portable computers, including all varieties of H/PCs and notebook computers,
will grow from 10.2 million in 1995 to 43.2 million in 2000.*

The growth in the number of mobile computers has corresponded with a
significant increase in the quantity and complexity of information that
businesses need to deliver to their mobile workforces. In response to these data
delivery requirements, several technologies and approaches have been developed
to effectively monitor, collect, deliver and efficiently use vast amounts of
relevant data. Such emerging solutions include narrowcasting or "webcasting,"
the ability to deliver highly customized information to users from multiple data
sources; software that enables the automation of sales processes and information
exchanges between hundreds or thousands of mobile computer users and central
information systems containing enterprise-wide customer databases; Windows CE,
the first standard operating system for H/PCs, which is expected to result in a
significant increase in the development of third-party applications software for
such devices; and the resulting launch of Windows CE-based H/PCs by leading
vendors such as Casio and Compaq.*

Furthermore, in an environment where service responsiveness and cost
efficiency are key competitive differentiators, enterprises must have the
ability to deliver time sensitive and relevant data to their off-site employees
immediately and not wait until such employees can obtain access to a telephone
line or other means of wired transmission. For example, financial service firms
need to deliver up-to-the minute stock quotes and company news to their brokers,
and sales organizations need to transmit promising leads and appointment changes
to their field representatives. More generally, the mobile professional needs to
receive time-sensitive messages and calendar updates as soon as possible.

To date, no vendor has been able to provide an effective solution that
enables the delivery of sufficient quantities of relevant data on a timely basis
to mobile computer users. The paging network is generally superior for such
purposes to two-way radio networks (such as Ram, Ardis and CDPD) and to the
cellular network because paging provides significantly more extensive coverage,
and lower equipment and service costs. Until recently, paging was optimized for,
and restricted to, numeric and

- ------------------------
* This statement is a forward-looking statement reflecting current expectations.
There can be no assurance that the Company's actual future performance will
meet the Company's current expectations due to factors described in "Risk
Factors" and elsewhere in this Prospectus.

3
<PAGE>
limited alphanumeric notification. However, the Company believes that data
paging has the potential to provide an effective solution to more complex
wireless information delivery needs as a result of the recently increased
capacity of paging networks, the decreasing costs of data pagers and related
services, the growing number of page-enabled applications and the introduction
of certain proprietary technologies developed by the Company.*

Socket's objective is to provide the leading solution to the need to deliver
sufficient quantities of relevant data on a timely basis to mobile computer
users.* The Company's PageCard Wireless Messaging System ("WMS") is an
integrated hardware, software and service offering using the paging network that
consists of: (i) the PageCard receiver that connects to a mobile computer
through a PC Card interface; (ii) the PageSoft suite of software applications
and utilities designed to facilitate the transmission of information from the
office to the mobile computer through the PageCard receiver; and (iii) wireless
messaging notification and support services. Socket's strategy to achieve its
objective of establishing the PageCard WMS as the leading wireless solution by
which relevant data is delivered on a timely basis to mobile computer users
includes the following key elements: (i) leverage Socket's hardware and software
technology to introduce innovative wireless solutions; (ii) leverage emerging
industry standards in paging and operating systems; (iii) expand the data paging
market by page-enabling enterprise-wide software applications; (iv) establish
strategic alliances and business relationships with leading companies in various
segments of the communications, software and mobile computer markets; and (v)
establish and leverage third-party integrator and distribution channels.

The Company's product offering also includes serial PC Cards and wired
Ethernet PC Cards. The Company was originally incorporated in California in
March 1992 and reincorporated in Delaware in June 1995 in connection with its
initial public offering. Its headquarters are located at 37400 Central Court,
Newark, California 94560 and its telephone number is (510) 744-2700.

RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. In addition to the other information presented or referenced herein, the
discussion of risk factors on pages 7 to 16 of this Prospectus should be
considered carefully in evaluating an investment in the Common Stock. The risks
associated with an investment in the Company include the following factors:
Future Capital Needs; Independent Auditors' Report Containing Explanatory
Paragraph Regarding Going Concern; History of Operating Losses; No Assurance of
Profitability; Emerging Market for Wireless Data Communication Products; Rapid
Technological Change; Dependence on Product Development; Product Defects;
Competition; Potential Fluctuations in Quarterly Results; Reliance on Third
Party Component Suppliers and Contract Manufacturers; Dependence on Third Party
Strategic Alliances and Business Relationships; Management of Growth; Dependence
on Key Employees; Foreign Currency Fluctuations Affecting Costs; Distribution
Risks, Product Returns and Warranties; Export Sales; Uncertainty of Protection
of Patents and Proprietary Rights; Shares Eligible for Future Sale; Volatility
of Stock Price; Illiquidity of Trading Market; Limitations of Liability and
Indemnification Matters; Management's Discretion Regarding Use of Proceeds; No
Anticipated Dividends.

4
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM
MARCH 20, 1992
(INCEPTION) YEAR ENDED DECEMBER 31,
THROUGH ------------------------------------------
DECEMBER 31, 1992 1993 1994 1995 1996
------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................................... $ 5 $ 1,051 $ 3,075 $ 4,530 $ 4,570
Cost of revenue............................. 5 973 2,289 2,874 2,496
Operating expenses.......................... 567 1,850 4,039 4,961 5,382
Net loss.................................... (565) (1,770) (3,318) (3,316) (3,328)
Accretion of preferred stock................ (543)
---------
Net loss applicable to common
stockholders............................... (3,871)
Net loss per share applicable to common
stockholders............................... $ (1.28)(3)
---------
---------
Net loss per share (pro forma for 1994)..... $ (1.71) $ (1.63)
--------- ---------
--------- ---------
Shares used in computing net loss per share
(pro forma for 1994) (1)................... 1,941 2,035 3,015
--------- --------- ---------
--------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED (2)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................... $ 14 $ 4,054
Total assets......................................................................... 2,672 6,712
Long-term portion of capital leases and equipment financing notes.................... 103 103
Stockholders' equity................................................................. 371 4,411
</TABLE>

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(1) See Note 2 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing net loss per share.

(2) Adjusted to reflect the application of the estimated net proceeds of this
Offering at an assumed public offering price of $2.00 per share, after
deducting underwriting discounts and commissions and estimated offering
expenses. See "Use of Proceeds" and "Capitalization."

(3) Net loss per share for 1996 excluding the accretion of preferred stock would
have been $(1.10) per share.

5
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the
Company.......................... 2,500,000 shares
Common Stock Outstanding prior to
the Offering (1)................. 3,028,976 shares
Common Stock Outstanding after the
Offering (1)(2).................. 5,528,976 shares
Use of Proceeds................... Capital expenditures, expansion of engineering, sales
and marketing, customer service, manufacturing
activities and other general corporate purposes,
including supporting increases in accounts receivable
and inventory. See "Use of Proceeds."
Proposed Nasdaq SmallCap Market
Symbol........................... SCKT
</TABLE>

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(1) Does not include: (i) options outstanding as of December 31, 1996 to
purchase 489,365 shares of Common Stock; (ii) 9,600 shares of Series A
Convertible Preferred Stock issued by the Company on November 1, 1996 (the
"Series A Private Placement") and outstanding as of February 20, 1997, each
of which is convertible into that number of shares of Common Stock equal to
$100 divided by the lower of (a) $2 5/8 or (b) 65% of the average bid price
of the Company's Common Stock on the OTC Bulletin Board for the five
business days prior to the day on which notice of conversion is transmitted
by the holder (which would convert into approximately 2,363,077 shares of
Common Stock if all notices of conversion were transmitted on February 20,
1997); (iii) 971,683 shares of Common Stock issued upon conversions of
Series A Preferred Stock for which notices of conversion were transmitted
subsequent to December 31, 1996 and prior to February 20, 1997; (iv)
outstanding warrants to purchase 917,872 shares of Common Stock (to be
increased because of antidilution provisions to approximately 1,588,704
shares upon the closing of this Offering and assuming conversion of the
Series A Convertible Preferred Stock (if all notices of conversion were
transmitted on February 20, 1997)); (v) a warrant to purchase 43,539 shares
of Common Stock issued to the Underwriter in connection with the Series A
Private Placement; and (vi) 1,000,000 shares of Common Stock issuable upon
conversion of convertible promissory notes issued by the Company in January
and February 1997 to Cetronic AB and certain shareholders thereof.

(2) Does not include 250,000 shares of Common Stock issuable upon exercise of
the Underwriter's Warrant.

6
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, EACH PROSPECTIVE
INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING 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. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS (IDENTIFIED WITH AN ASTERISK "*") THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE
IN, OR INCORPORATED BY REFERENCE INTO, THIS PROSPECTUS. IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS, EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY
CONSIDER THE FOLLOWING RISK FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS
BEFORE PURCHASING THE SECURITIES OFFERED HEREBY.

FUTURE CAPITAL NEEDS; INDEPENDENT AUDITORS' REPORT CONTAINED EXPLANATORY
PARAGRAPH REGARDING GOING CONCERN

Following this Offering, the Company may require additional capital to fund
its operations.* Although its losses are expected to continue at least through
the first half of 1997, and there can be no assurance that the Company will ever
achieve profitability, the Company anticipates that its existing capital
resources, its bank line and revenues from operations, together with the net
proceeds of this Offering, will be adequate to satisfy its working capital
requirements through the first quarter of 1998.* 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. As a result, there can be no assurance that the Company will not
require additional funding prior to such date.* If required, 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 1996 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. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and Financial
Statements.

HISTORY OF OPERATING LOSSES; NO ASSURANCE OF PROFITABILITY

The Company was incorporated in March 1992 and has incurred significant
operating losses in every fiscal period since inception. The Company expects to
incur substantial quarterly operating losses at least through the first half of
1997 and possibly longer.* In order to become profitable, the Company must
obtain market acceptance of the PageCard receiver and enhanced PageSoft software
products, develop page-enabled applications for 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.

7
<PAGE>
There can be no assurance that the Company will meet any of these objectives or
ever achieve profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

EMERGING MARKET FOR WIRELESS DATA COMMUNICATION PRODUCTS

The market for wireless data communications products has been slow to
emerge, and there can be no assurance that it will develop sufficiently to
enable the Company to achieve broad commercial acceptance of its products.
Because this market is relatively new and has developed slowly, 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,
real estate, health care, and transportation. The Company believes that the
preferred strategy for addressing such needs is to page-enable existing
applications to allow the transfer of data from an application through the
paging network to the PageCard receiver where it can be downloaded into a mobile
computer. The Company's software developer's kit is designed to provide program
interfaces for software developers to page-enable their applications and to work
with major Microsoft operating systems. Although a limited number of
page-enabled applications are now available, there can be no assurance that any
additional such applications will become available. Further, there can be no
assurance that such page-enabled applications will be developed, or if
developed, 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. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Industry Overview" and "--
Strategy."

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

8
<PAGE>
competitive performance in its products and bring products to market quickly.
Given the emerging nature of the wireless data communications market, there can
be no assurance that the Company's products or technology will not be rendered
obsolete by alternative technologies. Further, short product life cycles expose
the Company's products to the risk of obsolescence and require frequent new
product introductions. If the Company is unable to develop or obtain access to
advanced one-way and emerging two-way wireless data communications technologies
as they become available, or is unable to design, develop, contract for the
manufacturing of and introduce competitive new products on a timely basis, its
future operating results will be materially adversely affected. Any significant
delays in the design, development, manufacture or shipment of new or enhanced
products would also materially adversely affect the Company's results of
operations.

The markets for mobile computers and their peripherals and for wireless data
communications are extremely competitive and characterized by rapidly advancing
technology, frequent changes in user preferences and frequent product
introductions. The future success of the Company will depend in large part on
its ability, and that of its strategic partners, to keep pace with advances in
software and hardware technologies for mobile computing and wireless data
communications. There can be no assurance that the Company will be able to
respond effectively to these technological changes or to new product
introductions by others. For example, the Company's PageCard receiver is
designed to operate on the worldwide POCSAG protocol, and operates on the
frequencies approved by the Federal Communications Commission ("FCC") 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 operate 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. See "Business -- Industry Overview" and "--
Strategy."

COMPETITION

The Company anticipates intense competition from a number of companies. The
overall market for communications products is increasingly competitive, and the
Company expects competition in each of its market areas to intensify. Currently,
the Company does not have a direct competitor for its PageCard; however, Kokusai
produces a PC Card data pager that does not have a display. The Company faces
indirect competition for short messaging applications from alphanumeric pagers,
which are produced by many companies (including Motorola, NEC, Uniden, and
others), and from alternative methods of downloading information into a mobile
computer, primarily over telephone lines. In addition to competition from
companies that offer wireless data communications devices, the

9
<PAGE>
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. 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. See "Business --
Competition."

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 and general economic
conditions.* The Company generally does not operate with a significant order
backlog, and a substantial portion of the Company's revenue in any quarter is
derived from orders booked in that quarter. Accordingly, the Company's sales
expectations are based almost entirely on its internal estimates of future
demand and not on firm customer orders. The Company is making significant
investments in sales and marketing and in research and development, and if
orders and sales do not meet expectations, the Company's operating results will
be materially adversely affected. The Company expects to incur substantial
quarterly operating losses at least through the first half of 1997 and possibly
longer.* See "Management's Discussion and Analysis and Financial Condition and
Results of Operations -- Quarterly Results of Operations."

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 Lucent Technologies that controls the signal transmission
between the Company's PageCard receiver and Serial I/0 products and the PC Card
slot on the mobile computer, the PageCard receiver board and RF display, which
are purchased from Mitsubishi

10
<PAGE>
Corporation ("Mitsubishi") in Japan, the Ethernet card purchased from Mitsubishi
International Corporation ("Mitsubishi International") 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/0 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, if a supplier
experienced financial or operational difficulties that resulted in a reduction
or interruption in supply to the Company, the Company's results of operations
would be materially adversely affected until it 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. See "Business -- Manufacturing."

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 GTE, Casio, Apple, Cetronic, Bell
Mobility, PageNet, The National Dispatch Center ("NDC"), Lucent Technologies and
Mitsubishi.

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.

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'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

11
<PAGE>
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. See "Business."

MANAGEMENT OF GROWTH

Depending on the extent of its future growth, if any, 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. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business -- Personnel" and "Management."

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 currently has employment agreements
with Martin Levetin and Micheal Gifford. The Company does not have key man life
insurance for any of its employees. See "Management -- Employment Agreements."

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

12
<PAGE>
applicable threshold level. The Company experienced adjustments in 1996 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, Ingram Micro and Tech Data,
accounted for approximately 17% and 12%, respectively, of the Company's revenue
in 1996. The Company's agreements with OEMs, distributors and resellers, in
large part, are nonexclusive and may be terminated on short notice by either
party without cause. The Company's OEMs, distributors and resellers are not
within the control of the Company, are not obligated to purchase products from
the Company and may represent other lines of products. A reduction in sales
effort or discontinuance of sales of the Company's products by its OEMs,
distributors and resellers could lead to reduced sales and could materially
adversely affect the Company's operating results. Use of distributors also
entails the risk that distributors will build up inventories in anticipation of
a growth in sales. If such growth does not occur as anticipated, these
distributors may substantially decrease the amount of product ordered in
subsequent quarters. Such fluctuations could contribute to significant
variations in the Company's future operating results. The distribution industry
has been characterized by rapid change, including consolidations and financial
difficulties of distributors and the emergence of alternative distribution
channels. In addition, there are an increasing number of companies competing for
access to these channels. The loss or ineffectiveness of any of the Company's
major distributors could have a material adverse effect on the Company's
operating results. Moreover, the Company is seeking to broaden its channels of
distribution and intends to sell its products through new distribution channels
such as mass merchandisers. There can be no assurance that the Company will be
able to successfully sell its products through these new channels.

The Company allows its distributors to return a portion of their inventory
to the Company for full credit against other purchases. In addition, in the
event the Company reduces its prices, the Company credits its distributors for
the difference between the purchase price of products remaining in their
inventory and the Company's reduced price for such products. There can be no
assurance that actual returns and price protection will not have a material
adverse effect on future operating results, particularly since the Company seeks
to continually introduce new and enhanced products and is likely to face
increasing price competition. In addition, the Company's comprehensive two year
warranty for its wired products and one year warranty for its wireless products
permit customers to return any product if the product does not perform as
warranted. To date, the Company has not experienced any warranty claims,
returns, stock rotation exchanges or price protection adjustments materially
above those anticipated. However, future warranty claims, returns, stock
rotation exchanges, or price protection adjustments could be materially higher
then anticipated. The Company intends to continue to introduce new and enhanced
products, which could result in higher warranty or return claims due to the
risks inherent in the introduction of such products.* There can be no assurance
that warranty claims or returns will not have a material adverse effect on
future operating results. See "Business -- Sales and Marketing."

EXPORT SALES

Export sales (sales to customers outside the United States) accounted for
approximately 40% of the Company's revenue in 1996, and the Company anticipates
that export sales will continue to

13
<PAGE>
account 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. See "Business --
Sales and Marketing."

UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY RIGHTS

The Company relies on a combination of patents, trademarks and nondisclosure
agreements in order to establish and protect its proprietary rights. The Company
has filed, and intends to continue to file, applications as appropriate for
patents covering its products.* There can be no assurance that patents will
issue from any of its pending applications or, if patents do issue, that the
claims allowed will be sufficiently broad to protect the Company's technology.
In addition, there can be no assurance that any patents issued to the Company
will not be challenged, invalidated or circumvented, or that the rights granted
thereunder will provide proprietary protection to the Company. Since U.S. patent
applications are maintained in secrecy until patents issue, and since the
publication of inventions in technical or patent literature tend to lag behind
such inventions by several months, the Company cannot be certain that it was the
first creator of inventions covered by its pending patent applications, that it
was the first to file patent applications for such inventions or that the
Company is not infringing on the patents of others. The Company has also
trademarked some of its proprietary product names and logos and claims copyright
protection for its proprietary software. Litigation may be necessary to enforce
the Company's patents, trademarks, copyrights or other intellectual property
rights, to protect the Company's trade secrets, to determine the validity and
scope of the proprietary rights of others or to defend against claims of
infringement. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business and
results of operations regardless of the final outcome of such litigation.
Despite the Company's efforts to safeguard and maintain its proprietary rights,
there can be no assurance that the Company will be successful in doing so or
that the Company's competitors will not independently develop or patent
technologies that are substantially equivalent or superior to the Company's
technologies.

In addition, the laws of certain foreign countries do not protect the
Company's intellectual property rights to the same extent as do the laws of the
United States. Although the Company continues to implement protective measures
and intends to defend its proprietary rights vigorously, there can be no
assurance that these efforts will be successful. There can also be no assurance
that third parties will not assert intellectual property infringement claims
against the Company. Although no written claims or litigation related to any
such matter are currently pending against the Company, there can be no assurance
that none will be initiated, or that the Company would prevail in any such
litigation seeking either damages or an injunction against the sale of the
Company's products. Moreover, there can be no assurance that, if such an
injunction were issued, the Company would be able to obtain any necessary
licenses on reasonable terms or at all. See "Business -- Intellectual Property
Rights."

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 February 20, 1997 the Company had outstanding 4,000,659 shares of
Common Stock. Upon completion of this Offering, the Company will have
outstanding 6,500,659 shares of Common Stock, assuming no exercise of the
Underwriter's over-allotment option, and no exercise of outstanding options or
warrants. Of these shares, 5,169,524 will be freely tradeable without
restriction under the Securities Act, unless held by "affiliates" of the

14
<PAGE>
Company as that term is defined in Rule 144 under the Securities Act. This
number of shares includes (i) the 2,500,000 shares of Common Stock offered
hereby, (ii) the 1,100,550 shares of Common Stock included in the Units sold in
the Company's initial public offering, (iii) the 597,291 shares of Common Stock
held by certain stockholders registered by the Company on a Registration
Statement on Form SB-2 dated August 24, 1995 for resale by such stockholders and
(iv) the 971,683 shares of Common Stock held by investors pursuant to
conversions of shares of the Company's Series A Preferred Stock.

In addition, 2,363,077 shares of the Company's Common Stock may be acquired
immediately upon conversion of the 9,600 shares of the Company's Series A
Preferred Stock acquired in the Series A Private Placement and currently
outstanding.

Further, immediately exercisable rights to acquire 1,000,000 shares of the
Company's Common Stock are currently held by Cetronic AB and certain
shareholders thereof (the "Cetronic Shares"). Though upon exercise of this right
the Cetronic Shares constitute Restricted Securities, the Company is obligated
to register the Cetronic Shares within 90 days of a request for registration by
the holders of the promissory notes, rendering the Cetronic Shares immediately
salable thereafter.

The Company has also filed a registration statement on Form S-8 under the
Securities Act covering 501,859 shares of Common Stock reserved for issuance
under the Company's 1993 Stock Option/Stock Issuance Plan and 1995 Stock Plan.
Shares registered under such registration statement are, subject to Rule 144
volume limitations applicable to affiliates of the Company, available for sale
in the open market, subject to vesting restrictions. See "Management -- Stock
Plans."

Finally, the Company has registered 3,000,000 shares of its Common Stock
pursuant to a Registration Statement on Form S-3 for issuance upon the
conversion of the 15,500 shares of the Company's Series A Convertible Preferred
Stock issued in a private placement on November 1, 1996. Such shares of Series A
Convertible Preferred Stock are convertible into shares of Common Stock at any
time at the option of the holders thereof and, if not previously so converted,
will convert automatically into Common Stock on November 1, 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.
See "Management -- Stock Plans," "Description of Capital Stock" and "Shares
Eligible for Future Sale."

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.
See "Price Range of Common Stock."

ILLIQUIDITY OF TRADING MARKET

From the effective date of the Company's initial public offering (June 6,
1995) through November 26, 1996, the Company's Common Stock was listed on the
Nasdaq SmallCap Market. However, the Common Stock was de-listed from such market
effective November 27, 1996 and since then has traded on the OTC Bulletin Board.
The Company has applied to have its Common Stock re-listed on the Nasdaq
SmallCap Market; however, there can be no assurance that such application will
be accepted

15
<PAGE>
or, if accepted, that the Company will be able to maintain the standards for
continued quotation on Nasdaq. The Company's Common Stock is also quoted on the
Pacific Stock Exchange; however, because the Company's stockholders' equity as
of December 31, 1996 was below the exchange's minimum capital requirements, the
appropriateness of the Company's continued listing thereon is currently being
reviewed by the Pacific Stock Exchange's equity listing committee. There can be
no assurance that such committee will not decide to initiate delisting
proceedings against the Company. If the Company's Common Stock is not accepted
for quotation on the Nasdaq SmallCap Market and/or is delisted from the Pacific
Stock Exchange, an investor will find it more difficult to dispose of, or to
obtain accurate quotations as to the price of, the Company's securities. In
addition, the Company's securities are now subject to so-called "penny stock"
rules that impose additional sales practice and market making requirements on
broker-dealers who sell and/or make a market in such securities. Consequently,
the Company's inability to obtain listing on the Nasdaq SmallCap Market,
subsequent removal from the Nasdaq SmallCap Market if listed thereon, or
delisting from the Pacific Stock Exchange 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.

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. See "Management -- Limitations on Liability and Indemnification
Matters."

MANAGEMENT'S DISCRETION REGARDING USE OF PROCEEDS

Approximately $2,000,000, or 49.5%, of the net proceeds of this Offering
have not been allocated to any specific purpose and will be available to
management to use in its sole discretion to support the Company's operations and
growth. See "Use of Proceeds."

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. See "Dividend
Policy."

16
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Common Stock
offered hereby, after deducting underwriting discounts and commissions and
offering expenses, are estimated to be approximately $4,040,000, assuming an
offering price of $2.00 per share. The Company expects to use the net proceeds
from this Offering approximately as follows:

<TABLE>
<CAPTION>
AMOUNT PERCENT
------------- -----------
<S> <C> <C>
Capital expenditures.................................................................... $ 140,000 3.4%
Expansion of engineering activities..................................................... 400,000 9.9
Expansion of sales, marketing and customer service activities........................... 1,100,000 27.2
Expansion of manufacturing activities................................................... 200,000 5.0
Expansion of administrative activities.................................................. 200,000 5.0
Working capital and general corporate purposes, including supporting increases in
accounts receivable and inventory...................................................... 2,000,000 49.5
------------- -----
$ 4,040,000 100.0%
------------- -----
------------- -----
</TABLE>

The projected expenditures described above are estimates and approximations
only and do not represent firm commitments by the Company. The Company may in
the future find it necessary or advisable to change the allocation of the net
proceeds due to the availability of other business opportunities or other
factors, including the Company's expansion plans, arrangements with other
companies and competitive developments.*

A portion of the net proceeds may also be used to acquire or invest in
complementary businesses, or to obtain the right to use complementary
technologies, although no such acquisitions or investments are being negotiated
by the Company at the present time. Pending the use of the net proceeds for the
above purposes, the Company intends to invest such funds in investment-grade
obligations, including short-term, interest bearing money market funds. The
Company believes that the net proceeds from this Offering, together with its
existing cash resources, its bank line and revenue from operations, will be
adequate to satisfy its working capital requirements through the first quarter
of 1998.* See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

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, if any, 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.

17
<PAGE>
PRICE RANGE OF COMMON STOCK

From the effective date of the Company's initial public offering (June 6,
1995) through November 26, 1996, the Company's Common Stock was listed on the
Nasdaq SmallCap Market under the symbol SCKT. The Common Stock was de-listed
from such market effective November 27, 1996 and since then has been traded on
the OTC Bulletin Board under the symbol SCKT. See "Risk Factors -- Illiquidity
of Trading Market." The Company's Common Stock is quoted on the Pacific Stock
Exchange under the symbol SOK; however, because the Company's stockholders'
equity as of December 31, 1996 was below the exchange's minimum capital
requirements, the appropriateness of the Company's continued listing thereon is
currently being reviewed by the Pacific Stock Exchange's equity listing
committee. There can be no assurance that such committee will not decide to
initiate delisting proceedings against the Company. On February 20, 1997, there
were approximately 800 holders of record of the Common Stock. The Company has
not paid cash dividends on its Common Stock.

The quarterly high and low sales prices since June 6, 1995, when the
Company's Common Stock began trading publicly, are as follows:

<TABLE>
<CAPTION>
COMMON STOCK
--------------------
QUARTER ENDED HIGH LOW
- ------------------------------------------------------------ --------- ---------
<S> <C> <C>
June 30, 1995............................................... $ 6.75 $ 5.25
September 30, 1995.......................................... 6.50 5.25
December 31, 1995........................................... 6.06 2.63
March 31, 1996.............................................. 4.38 3.00
June 30, 1996............................................... 7.38 2.88
September 30, 1996.......................................... 4.38 2.88
December 31, 1996........................................... 3.62 0.75
March 31, 1997 (through February 21, 1997).................. 1.13 0.56
</TABLE>

These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.

18
<PAGE>
CAPITALIZATION

The following table sets forth the total capitalization of the Company (i)
as of December 31, 1996; and (ii) as adjusted to reflect the sale by the Company
of 2,500,000 shares of Common Stock at an assumed public offering price of $2.00
per share, less applicable underwriting discounts and commissions and net of
expenses and the application of the estimated net proceeds therefrom:

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Long-term portion of capital leases and equipment financing note........................ $ 103 $ 103
---------- -----------
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:
1,000,000 shares designated; 15,500 shares issued and outstanding actual and as
adjusted........................................................................... 1,793 1,793
Common Stock, $0.001 par value:
15,000,000 shares authorized; 3,028,976 shares issued and outstanding actual;
5,528,976 shares issued and outstanding as adjusted (1)............................ 3 6
Additional paid-in capital............................................................ 11,414 15,451
Accumulated deficit................................................................... (12,839) (12,839)
---------- -----------
Total stockholders' equity.......................................................... 371 4,411
---------- -----------
Total capitalization.............................................................. $ 474 $ 4,514
---------- -----------
---------- -----------
</TABLE>

19
<PAGE>
SELECTED FINANCIAL DATA

The following selected statement of operations data for each of the three
years in the period ended December 31, 1996 and the balance sheet data at
December 31, 1995 and 1996 are derived from financial statements of the Company
which have been audited by Ernst & Young LLP, independent auditors, whose report
with respect thereto states that there is substantial doubt about the Company's
ability to continue as a going concern, and are included elsewhere in this
Prospectus. The financial statements and selected financial data do not include
any adjustments that might result from the outcome of this uncertainty. The
selected statement of operations data for the period from March 20, 1992
(inception) through December 31, 1992 and for the year ended December 31, 1993
and the selected balance sheet data at December 31, 1992, 1993 and 1994 are
derived from audited financial statements not included herein. The data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements, notes thereto and the independent auditors' report included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PERIOD FROM
MARCH 20, 1992
(INCEPTION) YEAR ENDED DECEMBER 31,
THROUGH --------------------------------------------
DECEMBER 31, 1992 1993 1994 1995 1996 (1)
------------------- --------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................. $ 5 $ 1,051 $ 3,075 $ 4,530 $ 4,570
Cost of revenue......................................... 5 973 2,289 2,874 2,496
------ --------- --------- --------- -----------
Gross profit............................................ -- 78 786 1,656 2,074

Operating expenses:
Research and development.............................. 261 721 1,261 1,099 1,067
Sales and marketing................................... 201 589 1,536 2,232 2,667
General and administrative............................ 105 540 1,242 1,630 1,647
------ --------- --------- --------- -----------
Total operating expenses.......................... 567 1,850 4,039 4,961 5,381
------ --------- --------- --------- -----------
Operating loss.......................................... (567) (1,772) (3,253) (3,305) (3,307)
Interest income......................................... 2 3 (3) 101 30
Interest expense........................................ -- (1) (62) (112) (51)
------ --------- --------- --------- -----------
Net loss................................................ $ (565) $ (1,770) $ (3,318) $ (3,316) (3,328)
------ --------- --------- ---------
------ --------- --------- ---------
Accretion of preferred stock............................ (543)
-----------
Net loss applicable to common stockholders.............. $ 3,871
-----------
-----------
Net loss per share applicable to common stockholders.... $ (1.28)(1)
-----------
-----------
Net loss per share (pro forma for 1994)................. $ (1.71) $ (1.63)
--------- ---------
--------- ---------
Weighted average shares outstanding (pro forma for
1994).................................................. 1,941 2,035 3,015
--------- --------- -----------
--------- --------- -----------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............................................ $ 210 $ (853) $ (1,839) $ 2,144 $ 14
Total assets......................................................... 364 789 2,102 4,275 2,672
Long-term portion of capital leases and equipment financing notes.... 4 2 131 141 103
Redeemable convertible preferred stock............................... -- 1,623 4,180 -- --
Total stockholders' equity (deficit)................................. (565) (2,333) (5,640) 2,428 371
Cash dividends....................................................... -- -- -- -- --
</TABLE>

- ------------------------------
* See Note 1 of Notes to Financial Statements for an explanation of the
determination of the number of shares used in computing pro forma net loss
per share.

(1) Net loss per share for 1996 excluding the accretion of preferred stock would
have been $(1.10) per share.

20
<PAGE>
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 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. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN THIS MANAGEMENT'S DISCUSSION AND ANALYSIS SECTION
AND IN "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

The Company's serial and Ethernet card products for PC Card mobile
computers, introduced in 1993, are its principal sources of revenues. The
Company also sells a PageCard PC Card wireless messaging system introduced in
December 1994. In addition, the Company earns royalties from the sale of certain
of the Company's products by the third-party manufacturers of those products and
royalties on wireless messaging services provided by third-party carriers.

The Company completed its initial public offering ("IPO") in June 1995, with
net proceeds of approximately $4.8 million. Prior to the IPO, the Company's
working capital requirements were met primarily through the private sale of
equity and debt securities. In November 1996, the Company sold $1.6 million of
its convertible preferred stock through a private placement, and in January and
February 1997 the Company issued $1.0 million in convertible promissory notes
through a private placement. See "--Liquidity and Capital Resources." See also
Notes 4 and 16 to Notes to Financial Statements.

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 the first half of 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
receiver, the market acceptance and timely release of enhanced PageSoft software
products, the development of page-enabled applications by independent software
vendors in selected vertical markets, 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 assurance 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.* See "--Liquidity
and Capital Resources."

21
<PAGE>
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.

ANNUAL RESULTS OF OPERATIONS

REVENUE

In 1996, revenue was $4,570,438, substantially unchanged from 1995 revenue
of $4,530,479. In 1995, revenue was $4,530,479, an increase of 47% over revenue
of $3,074,843 in 1994. The substantial majority of revenue in all three years
was derived from sales of serial and Ethernet cards. In 1996, sales growth of
the Company's serial card and, to a lesser extent, PageCard was offset by
declines in Ethernet card sales volumes and, to a lesser extent, GPS card sales,
which were discontinued in the second half of 1996. The increase in 1995 revenue
over 1994 was due to significant sales growth of the Company's serial card and,
to a lesser extent, PageCard. Ethernet card volumes in 1995 increased moderately
over 1994 but were more than offset by Ethernet card price reductions, resulting
in a moderate decrease in Ethernet revenue in 1995 compared to 1994. Royalty and
service revenue was primarily related to sales by third party manufacturers of
the Company's GPS and Ethernet cards.

The Company markets its products primarily through distributors and OEMs.
Recognition of revenue on shipments to distributors and the related cost of
sales are deferred until such distributors resell the products to their
customers. Recognition of revenue on shipments to customers other than
distributors occurs generally at the time of shipment. Export sales constituted
40%, 40%, and 52% of revenue in 1996, 1995, and 1994, respectively.

PRODUCT GROSS PROFIT

Product gross profit, excluding royalty and service revenue, is equal to
product revenue less the cost of revenue, because the costs of royalty and
service revenue generally are negligible. The Company's product gross profit for
1996 was $1,889,223, or 43% of product revenue, compared to $1,478,306, or 34%
of product revenue, in 1995, and $636,927, or 22% of product revenue, in 1994.
The product gross margin increase in 1996 over 1995 resulted from a higher
percentage of revenues attributable to the higher margin serial card, lower cost
of products sold due to engineered cost decreases and vendor volume price
discounts. The product gross margin increase in 1995 over 1994 resulted
primarily from a higher percentage of revenues attributable to the higher margin
serial card, volume price discounts from certain Company vendors, engineered
cost decreases in the unit cost of products, and the allocation of fixed
manufacturing operating costs over a higher volume base, offset in part by a
selling price reduction for Ethernet cards.

RESEARCH AND DEVELOPMENT

Research and development expenses in 1996 were $1,067,399, a decrease of 3%
from 1995 expenses of $1,098,766. The decrease in 1996 reflected a decrease in
costs of development tooling partially offset by an increase in personnel
expenses, including employees, engineering contractors and consultants. Research
and development expenses in 1995 of $1,098,766 decreased 13% from 1994 expenses
of $1,261,549. The decrease in 1995 primarily reflected reductions in contract
engineering services resulting from the completion of engineering projects. The
Company has not capitalized any software development costs. The Company expects
to increase its research and development expenses in 1997.*

22
<PAGE>
SALES AND MARKETING

Sales and marketing expenses in 1996 were $2,666,933, an increase of 19%
from 1995 expenses of $2,232,276. The increase primarily reflected higher
staffing levels, increased advertising activity and increased levels of travel.
Sales and marketing expenses in 1995 of $2,232,276 increased 45% over 1994
expenses of $1,535,483. The increase reflected higher staffing levels, increased
advertising, increased sales commissions, and higher facilities costs. The
Company expects to increase its sales and marketing expenses in 1997.*

GENERAL AND ADMINISTRATIVE

General and administrative expenses in 1996 were $1,647,335, substantially
unchanged from 1995 expenses of $1,630,668. The increase reflected higher
recruiting and relocation fees, insurance costs and professional fees partially
offset by reduced staffing levels, lower rent in November and December 1996
resulting from a relocation into new facilities, and by a two-month vacancy in
the Chief Executive Officer position which was filled March 1, 1996. General and
administrative expenses in 1995 of $1,630,668 increased 31% over 1994 expenses
of $1,242,308. The 1995 increase reflected a full year of higher executive and
administrative staffing levels added in 1994, and a full year of higher
occupancy costs associated with a new facility which was occupied in the fourth
quarter of 1994. The Company expects its general and administrative expenses to
decline moderately in 1997 due to a relocation in October 1996 into less
expensive facilities.*

INTEREST INCOME, INTEREST EXPENSE, NET

Interest income primarily reflects interest earned on cash balances.
Interest expense primarily reflects interest expense on convertible notes issued
and outstanding during portions of 1994 and 1995 to provide interim bridge
financing relating to equity offerings, and interest expense relating to
equipment lease financing obligations.

INCOME TAXES

There was no provision for income taxes for the years ended December 31,
1996, 1995 and 1994, as the Company incurred net operating losses. As of
December 31, 1996, the Company had federal and state net operating loss
carryforwards of approximately $9,100,000 and $4,500,000, respectively. The
Company also has federal and state tax credit carryforwards of approximately
$139,000 and $113,000, respectively. The net operating losses and credit
carryforwards will expire at various dates beginning in 1997 through 2011, if
not utilized. The utilization of the federal net operating loss and the
deduction of equivalent federal tax credit carryforwards of approximately
$5,200,000 included in the above amounts will be subject to a cumulative annual
limitation of approximately $600,000 per year pursuant to the stock ownership
change provision of the Tax Reform Act of 1986. Future changes in ownership,
including stock offerings, may result in additional limitations.

For financial reporting purposes, a valuation allowance of $4,877,000 has
been recorded to offset deferred tax assets recognized under Financial
Accounting Standards No. 109, "Accounting for Income Taxes," primarily related
to net operating losses and capitalized research and development costs. See Note
11 of Notes to Financial Statements.

23
<PAGE>
QUARTERLY RESULTS OF OPERATIONS

The following table sets forth summary quarterly statements of operations
for each of the quarters in 1996 and 1995. This unaudited quarterly information
has been prepared on the same basis as the annual information presented
elsewhere herein, and, in the Company's opinion, includes all adjustments
(consisting only of normal recurring entries) necessary for a fair presentation
of the information for the quarters presented. The operating results for any
quarter are not necessarily indicative of results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY QUARTERLY DATA:
Revenue:
Product........................ $ 1,116 $ 1,125 $ 937 $ 1,174 $ 1,217 $ 908 $ 1,117 $ 1,143
Royalty........................ 47 55 63 13 77 60 35 13
--------- -------- --------- -------- --------- -------- --------- --------
Total revenue.................... 1,163 1,180 1,000 1,187 1,294 968 1,152 1,156
Gross profit..................... 396 431 451 378 576 399 554 545

OPERATING EXPENSES:
Research and development....... 262 265 242 330 271 244 260 292
Sales and marketing............ 506 497 609 620 631 697 698 641
General and administrative..... 385 366 363 516 367 408 436 436
--------- -------- --------- -------- --------- -------- --------- --------
Total operating expenses......... 1,153 1,128 1,214 1,466 1,269 1,349 1,394 1,369
Net loss......................... $ (803) $ (744) $ (721) $(1,048) $ (685) $ (955) $ (853) $ (835)
</TABLE>

The Company has experienced significant quarterly fluctuations in operating
results and anticipates such fluctuations in the future.* The Company generally
ships orders as received and as a result typically has little or no backlog.
Quarterly revenues and operating results therefore depend on the volume and
timing of orders received during the quarter, which are difficult to forecast.
Historically, the Company has often recognized a substantial portion of its
revenues in the last month of the quarter, typically in the last week. Operating
results may also fluctuate due to factors such as the demand for the Company's
products, the size and timing of customer orders, the introduction of new
products and product enhancements by the Company or its competitors, changes in
the proportion of revenues attributable to royalties and service, product mix,
timing of software enhancements, changes in the level of operating expenses, and
competitive conditions in the industry. Because the Company's staffing and other
operating expenses are based on anticipated revenue, a substantial portion of
which is not typically generated until the end of each quarter, delays in the
receipt of orders can cause significant variations in operating results from
quarter to quarter.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 1996, the Company had cash and cash equivalents of $0.6
million. Subsequently, on January 29, 1997 the Company issued a $0.5 million
subordinated secured convertible promissory note to Cetronic AB, and on February
14, 1997 the Company issued $0.5 million of subordinated unsecured convertible
promissory notes to certain shareholders of Cetronic AB. See Note 16 of Notes to
Financial Statements.

Net cash used for operating activities was $3.1 million in 1996, resulting
primarily from the net loss, an increase in inventories and accrued payroll and
related expenses, partially offset by increases in accounts payable and accrued
expenses and deferred revenue. Net cash used for operating activities was $3.2
million in 1995, resulting primarily from the net loss, an increase in
inventories and a decrease in accrued payroll and related expenses, partially
offset by increases in accounts payable and accrued expenses.

24
<PAGE>
Net cash used in investing activities was $0.3 million in 1996 and $0.15
million in 1995, used for the purchase of furniture, test and manufacturing
equipment.

Net cash provided by financing activities was $1.6 million in 1996. On
November 1, 1996, the Company sold $1.6 million of Series A Convertible
Preferred Stock with net proceeds of $1.3 million (see Note 4 of Notes to
Financial Statements). Other financing activities in 1996 consisted of proceeds
from equipment financing, advances on the Company's revolving line of credit
(see Note 5 to Notes to Financial Statements) and proceeds from the exercise of
stock options, partially offset by the repayment of amounts due on capital
leases and equipment financing notes. Net cash provided by financing activities
was $5.4 million in 1995, consisting of net proceeds of $4.8 million from the
IPO, the issuance of $1.5 million of 8% convertible notes, proceeds from
equipment financing and proceeds from the exercise of stock options, partially
offset by the repayment on the closing of the IPO of $1.0 million of 8%
convertible notes and the repayment of amounts due on capital leases and
equipment financing notes.

The Company has a $500,000 revolving credit line with a bank, with amounts
available for borrowing based upon the level of qualified receivables and upon
maintaining certain financial covenants. As of December 31, 1996, the Company
was not in compliance with several of these covenants; however, the bank has
temporarily waived the compliance requirement. The balance of outstanding
borrowings under the line at December 31, 1996 was $322,743. As of February 20,
1997, there were no outstanding borrowings under the credit line. The bank line
of credit arrangement expires June 15, 1997.

Following this Offering, the Company may require additional capital to fund
its operations.* Although its losses are expected to continue at least through
the first half of 1997, and there can be no assurance that the Company will ever
achieve profitability, the Company anticipates that its existing capital
resources, its bank line and revenues from operations, together with the net
proceeds of this Offering will be adequate to satisfy its working capital
requirements through the first quarter of 1998.* 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. As a result, there can be no assurance that the Company will not
require additional funding prior to such date. If required, 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 1996 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.

25
<PAGE>
BUSINESS

THE FOLLOWING BUSINESS 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 AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE
SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

INDUSTRY OVERVIEW

Socket Communications, Inc. ("Socket" or the "Company") develops and sells
data communications solutions for the mobile computer market. The market for
mobile computers has grown rapidly in recent years. Demand for notebook
computers has increased as their capabilities have expanded and their size,
weight and price have been reduced. Demand for handheld personal computers
("H/PCs"), such as palmtops and personal digital assistants, although slow to
materialize initially, is projected to increase as a result of the recent launch
of the Microsoft Windows CE operating system and Windows CE-based devices from
Casio, Compaq and other electronic appliance manufacturers.* The Yankee Group,
an independent market research firm, projects that the installed base of mobile
computers, including all varieties of H/PCs and notebook computers, will grow
from 10.2 million in 1995 to 43.2 million in 2000.*

The growth in the number of mobile computers has corresponded with a
significant increase in the quantity and complexity of information that
businesses need to deliver to their mobile workforces. In response to these data
delivery requirements, several technologies and approaches have been developed
to effectively monitor, collect, deliver and efficiently use vast amounts of
relevant data. Such emerging solutions include: narrowcasting or "webcasting,"
the ability to deliver highly customized information to users from multiple data
sources; software that enables the automation of sales processes and information
exchanges between hundreds or thousands of mobile computer users and central
information systems containing enterprise-wide customer databases; Windows CE,
the first standard operating system for H/PCs, which is expected to result in a
significant increase in the development of third-party applications software for
such devices; and the resulting launch of Windows CE-based H/PCs by leading
vendors such as Casio and Compaq.*

Furthermore, in an environment where service responsiveness and cost
efficiency are key competitive differentiators, enterprises must have the
ability to deliver time-sensitive and relevant information to their off-site
employees immediately and not wait until such employees can obtain access to a
telephone line or other means of wired transmission. For example, financial
service firms need to deliver up-to-the minute stock quotes and company news to
their brokers, and sales organizations need to transmit promising leads and
appointment changes to their field representatives. More generally, the mobile
professional needs to receive time-sensitive messages and calendar updates as
soon as possible.

26
<PAGE>
recently increased capacity of paging networks, the decreasing costs of data
pagers and related services, the growing number of page-enabled applications and
the introduction of certain proprietary technologies developed by the Company.*

STRATEGY

Socket's objective is to provide the leading solution to the need to deliver
time sensitive data to mobile computer users.* The Company's PageCard Wireless
Messaging System ("WMS") is an integrated hardware, software and service
offering using the paging network that consists of: (i) the PageCard receiver
that connects to a mobile computer through a PC Card interface; (ii) the
PageSoft suite of software applications and utilities designed to facilitate the
transmission of information from the office to the mobile computer through the
PageCard receiver; and (iii) wireless messaging notification and support
services.

Socket's strategy to achieve its objective of establishing the PageCard WMS
as the leading wireless solution by which time sensitive data is delivered to
mobile computer users includes the following key elements:

LEVERAGE SOCKET'S HARDWARE AND SOFTWARE TECHNOLOGY TO INTRODUCE INNOVATIVE
WIRELESS SOLUTIONS

Socket has developed a set of hardware and software building blocks which
are designed to enable the Company to bring innovative products to market
quickly, to offer these products for multiple computer platforms and to
manufacture and package them at a low cost. These building blocks include: (i) a
library of software tools which are designed to minimize product development
time and maximize platform independence; (ii) the Company's high integration
serial ("HIS") chip, which is designed to serve as the basis for single or dual
port serial communications devices, thereby reducing cost, component count,
power requirements and software development effort; and (iii) Socket's universal
bus interface, which enables Socket's products to work with a variety of PC Card
hosts.

LEVERAGE EMERGING INDUSTRY STANDARDS

Socket is continually enhancing the PageCard WMS to optimize it for those
industry standards that the Company believes will serve as the foundation for
future wireless data transfer and mobile workforce solutions.* With regard to
national one-way paging technologies, the Company believes that FLEX will
eventually replace POCSAG because it is faster and more efficient.* The Company
is therefore working with Cetronic AB to develop a FLEX-compatible version of
the PageCard WMS, which the Company expects to be commercially available by the
fourth quarter of 1997.* With regard to two-way paging, the Company is a
founding member of the Personal Air Communications Technology ("PACT") vendor
forum to promote and facilitate the development of end-to-end two-way wireless
messaging products and applications using the PACT two-way messaging protocol
being developed by AT&T. The Company also expects to develop a version of the
PageCard WMS that will be compatible with the REFLEX two-way paging technology
by the end of 1998.* Finally, the Company has adapted the PageCard WMS to
operate with Microsoft's recently announced Windows CE operating system platform
for H/PCs.

EXPAND DATA PAGING MARKET BY PAGE-ENABLING ENTERPRISE-WIDE SOFTWARE APPLICATIONS

The Company believes that management information system administrators and
corporate mobile workforces prefer to work with familiar software applications.
The Company intends to expand the market for the PageCard WMS by page-enabling
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. For this purpose, the Company has developed a software
developers kit

27
<PAGE>
("SDK"), which is designed to provide program interfaces that make it easy for
software developers to page-enable their applications and to work with major
Microsoft environments, both in real and protected mode, including DOS, Windows,
Windows for Workgroups, Windows NT, Windows 95 and Windows CE. The SDK is
designed to facilitate the page-enabling of emerging software applications in
areas such as groupware, contact management and sales force automation, news and
information alerts, and investment portfolio management.

ESTABLISH STRATEGIC ALLIANCES AND BUSINESS RELATIONSHIPS

The Company has established and intends to continue to establish strategic
alliances with leading participants in various segments of the communications,
software and mobile computer markets.* The Company believes these alliances and
relationships enable it to take advantage of the superior financial resources,
technological capabilities, proprietary positions and market presence 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 GTE, Mitsubishi, Casio, Apple
Computer, Cetronic AB, Bell Mobility, The National Dispatch Center, PageNet, and
Lucent Technologies. In addition, the Company intends to establish technology
partnerships and cross-marketing agreements with leading vendors in the
narrowcasting or "webcasting" software market, the groupware software market,
the sales force automation software market and the H/PC market, each of which
the Company believes will broaden the acceptance of, and expand the need for,
the PageCard WMS.* See "-- Strategic Alliances and Business Relationships."

ESTABLISH AND LEVERAGE THIRD-PARTY INTEGRATOR AND DISTRIBUTION CHANNELS

The Company has adopted a multichannel distribution strategy which focuses
on OEM and integrator channels. Due to the unique characteristics that
differentiate the PageCard WMS from most other paging devices, the Company
believes that its products will be sold primarily through a third-party
integrator channel which provides mobile computing products and strategies to
organizations, rather than the traditional retail pager and cellular channels.*
The Company's direct sales force calls upon paging service providers, computer
resellers, VARs, ISVs, distributors and network administrators and mobile
computer professionals within major corporate accounts to create product
awareness, assist in product evaluations, provide ongoing education and support
and expand the use of the PageCard WMS.

The Company is currently working with several third-party integrators to
develop PageCard WMS solutions targeted toward selected vertical markets. For
example, the Company is working with a leading third-party integrator in the
home health care field to develop a solution that the parties believe would
resemble the following description.* Home health care nurses would download
patient care information from a central computer over the telephone line into
their Apple Newton Messagepads each day before beginning their visits. The
patient records would include patient care instructions and pertinent patient
information. At the conclusion of the patient visit, the nurse would write a
service report on the Messagepad server, which record would be added to the
electronic patient record. Updated patient records would be uploaded by the
nurse at the end of the day to the central computer, which would update the
master patient file and provide data for use by medical personnel (patient
monitoring) and by administration personnel (billing). The patient record system
is being page-enabled to allow patient data to be forwarded to a nurse
wirelessly when changes occur to patient instructions during the day of a visit,
or when a nurse is redirected to a patient not previously scheduled for a visit.
As a result, nurses would have current patient care information available and
current patient care record information would be maintained.*

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<PAGE>
PRODUCTS

The Company's products include, in addition to the PageCard WMS,
"page-enabled" applications software and a family of serial and Ethernet card
products.

PAGECARD WIRELESS MESSAGING SYSTEM

The PageCard WMS has three components: the PageCard receiver, PageSoft
communications software and Socket's Wireless Messaging Services.

PAGECARD RECEIVER. The PageCard receiver is a dual-mode pager that
functions as a stand-alone alphanumeric pager and connects to a mobile computer
through a Type II or Type III PC Card interface enabling wireless messages to be
delivered directly to a mobile computer. An easy-to-read LCD display, two
control buttons and an audible beeper enable the PageCard receiver to replace
the mobile professional's existing pager. A typical alphanumeric pager weighs 6
oz., can store up to 40 messages and has a total memory capacity of 6,000
characters. The PageCard receiver weighs 2.2 oz., holds up to 370 messages and
has a total memory capacity of 128,000 characters.

Developed in partnership with Mitsubishi, the PageCard receiver is
compatible with the POCSAG worldwide paging transmission standard and is
available in the 900 MHz range, the primary frequency range in North America,
and 466 MHz, the Euromessage paging frequency. The Company believes that the
PageCard receiver is the only commercially available PC Card pager which
supports the 466 MHz frequency. These capabilities enable the PageCard receiver
to take advantage of the extensive wireless data networks already in place.* The
Company expects to complete the development of its next generation PageCard WMS
for the higher-capacity paging networks based on the FLEX protocol during 1997.*
The Company also intends to continue developing its two-way PageCard WMS product
during 1998.*

The PageCard receiver can be used with any Windows-based PC, Windows-based
H/PC, the Hewlett-Packard LX Series, the Apple PowerBook and the Newton
MessagePad. The plug-and-play capability of the PageCard receiver and the
software tools included in Socket's SDK enable mobile computer users to download
wireless data into their mobile computers simply by inserting the PageCard
receiver into a Type II or Type III PC card slot. Such data messages would be
difficult or impossible to read using a conventional alphanumeric pager.

The PageCard receiver handles numeric, alphanumeric and binary data and
three categories of messages:

- PRIVATE MESSAGES are sent to the primary address of the PageCard receiver
and are usually intended for a single user. They can be numeric pages,
text messages, e-mail, binary file updates or notification of faxes,
caller holding or voice mail.

- GROUP MESSAGES can be broadcast to multiple PageCard receivers. Examples
of group messages include text messages to a field sales or service force,
binary file updates to price lists or inventory databases or any other
information that an enterprise generates internally and wishes to
distribute efficiently to a local or national field force. The most
significant cost advantage of group message broadcasting is that there is
no cost difference between sending a paging message to a single PageCard
receiver and sending one to an unlimited number of PageCard receivers.
Group messages which update binary files also save the time a field force
would otherwise spend calling the corporate network and downloading file
updates via a modem.

29
<PAGE>
- INFORMATION SERVICE MESSAGES are for public information services that
provide stock prices, mortgage rates, currency exchange rates, news feeds,
weather, sports scores, traffic information and other data.

PAGESOFT COMMUNICATIONS SOFTWARE. PageSoft is a suite of applications and
utilities designed to make it easy to transmit relevant information from the
office to the PageCard receiver and to download it from the PageCard receiver
into a mobile computer. PageSoft currently consists of send, receiver and mail
forwarding software. The current Windows versions of the send and receive
software support Windows 3.1, Windows 95, Windows 95 and Windows CE. The
Company's Windows send and receive software incorporates advanced messaging
features including binary file transfers, compression, encryption, and the
Company's message intercept protocol which facilitates the routing of multiple
types of messages to the applications for which they are intended or to the
e-mail in-boxes of Microsoft Mail, cc:Mail, Windows CE e-mail, Lotus Notes Mail
or a generic e-mail in-box. Mail forwarding software for Microsoft Mail is a
rules-based mail forwarding agent that resides on a server (or a second desktop
system) and automatically forwards user selected e-mail messages to the
PageCard. Users are able to instruct the forwarding agent to monitor their
e-mail in-box on the office network, check for specified criteria such as the
sender or the subject and forward either the entire message or a specified
number of characters of the message to the user's PageCard receiver via a modem.
E-mail forwarding software for cc:Mail is also available. E-mail forwarding
software for Lotus Notes Mail is available from Lotus Corporation.

SOCKET WIRELESS MESSAGING SERVICES ("SWIMS"). SWiMS is a low-cost, turnkey
messaging and support system that includes a personal toll-free number,
immediate activation, unified billing, modem-based message dispatch,
operator-assisted dispatch and message reconciliation, an Internet gateway with
a personal PageCard receiver Internet address, fax notification with on-demand
forwarding, voice messaging and annotation of faxes with on-demand playback,
message scheduling and a 24-hour bulletin board system that enables a computer
with a modem to send messages to the PageCard receiver. SWiMS currently uses the
nationwide carrier service of PageNet, the largest paging carrier in the U.S.,
with over 6.2 million subscribers. SWiMS is administered by The National
Dispatch Center.

SWiMS is an integrated service for monitoring and managing major forms of
electronic business communications, including:

TELEPHONE: A colleague can call the personal toll-free number of a
SWiMS subscriber and dictate a message to an on-line operator. The
message will then be sent to the subscriber's PageCard receiver. This
operator dispatch service is available 24 hours a day, seven days a
week.

FAX: A colleague can send a fax to the personal toll-free number of a
SWiMS subscriber. SWiMS will store the fax and send wireless
notification to the subscriber's PageCard receiver that a fax is
waiting. The SWiMS subscriber can locate the most convenient fax machine
(e.g., at a hotel, a copy center, a customer's site), call the toll-free
number, supply a password and specify the phone number of the fax
machine. SWiMS will then forward the fax to that phone number. A SWiMS
operator will also read the fax message to the subscriber if requested,
which facilitates getting the information if a fax machine is not
readily available.

VOICE MAIL: Colleagues can send voice messages of up to five minutes in
conjunction with, or in lieu of, a fax. SWiMS will store the voice
message and immediately send wireless notification to the subscriber's
PageCard receiver. Subscribers can play these voice messages back over
the phone after supplying the correct password.

30
<PAGE>
CALL CONNECT: Colleagues can call the subscriber's toll-free number and
ask to be connected to the subscriber. SWiMS will immediately send
wireless notification to the subscriber's PageCard receiver that a
caller is waiting. The subscriber can call in on the toll-free number
and will be connected. If the subscriber does not call in, the colleague
is routed to voice mail.

PAGER: SWiMS enables colleagues to send messages to the personal
toll-free number of a SWiMS subscriber via telephone dictation or, for
numeric messages, via touch-tone phone input. Colleagues can send
messages via modem to a special toll-free number by using specialized
software, or by logging into the SWiMS BBS with a modem using
conventional communications software. Subscribers can also schedule
pages to be sent to themselves for remembering important information and
events by dictating the message and transmission time to an operator.

E-MAIL: SWiMS offers an Internet e-mail gateway which enables a
colleague to send a wireless message of up to 690 characters to the
SWiMS subscriber's PageCard receiver simply by sending e-mail to the
user's PageCard receiver's Internet address.

MESSAGE RECONCILIATION: SWiMS offers on-demand message reconciliation
and reading or retransmission via operator or the BBS. Messages will be
stored for message reconciliation and retransmission for up to 30 days.
SWiMS sequentially numbers messages sent to a subscriber which assists
the subscriber in determining that all messages sent have been received.

PAGE-ENABLED SOFTWARE APPLICATIONS

The Company's SDK facilitates the page-enabling of software applications and
allows software developers to work with major Microsoft operating systems, both
in real and protected mode, including DOS, Windows, Windows for Workgroup,
Windows NT, Windows 95 and Windows CE. The Company has also developed software
to page-enable Symantec's Act!, a popular contact management program. The
Company intends to work with VARs and ISVs to page-enable additional
applications.*

SERIAL I/O CARDS

Socket developed the first commercially available PC Card serial card in
1993 and believes that it is the leading worldwide supplier of serial cards. In
1996, Socket developed and introduced other serial card products including a
ruggedized serial card, a dual serial card and a serial-Ethernet combination
card. The Company expects to introduce an infrared serial card in the first
quarter of 1997.* On a PC Card mobile computer, the Socket Serial I/O card
operates as a standard communication port, and can work with conventional serial
communications programs such as LapLink and PROCOMM. Uses for the serial cards
include attaching input devices such as stenography machines for court reporting
or bar code scanners, data collection devices such as medical monitoring
instruments or data scopes, high speed fax/modems, or output devices such as
label printers. The Serial I/O cards can be used with any Windows-based PC Card
mobile computer, Windows CE-based H/PC, the HP 100/200 LX palmtop, the Sun
Voyager, the Apple PowerBook and the Newton MessagePad, the Sharp Zaurus and
others.

ETHERNET CARDS

Socket released the first commercially available PC Card Ethernet card in
1992. The 16-bit Socket EA and EA+ cards enable a PC Card mobile computer user
to communicate with an Ethernet network at speeds comparable to the internal
cards installed in workstations, which can be up to four times faster than
network adapters based on parallel ports.

31
<PAGE>
The Socket EA adapter includes a 10BaseT connector for unshielded twisted
pair cabling, while the Socket EA+ adapter includes both a 10BaseT and a 10Base2
connector. The Socket EA and EA+ are compatible with the popular NE2000 network
controller, making them compatible with the major PC-based network operating
systems.

STRATEGIC ALLIANCES AND BUSINESS RELATIONSHIPS

The Company has established strategic alliances and business relationships
with the following companies:

GTE, a telecommunications company, bundles the Company's PageCard receiving
and wireless messaging software with GTE's wireless message services for a
single monthly service fee. The Company and GTE also engage in joint selling and
marketing activities in selected vertical markets.

CASIO COMPUTER CORPORATION, a consumer-electronics product manufacturer and
a leading supplier of Windows CE H/PCs, has a joint development, marketing and
distribution agreement with the Company for the Company's Windows CE messaging
software.

APPLE COMPUTER, a computer manufacturer, is promoting the development of
wireless vertical applications for the Newton MessagePad. The Company and Apple
have completed a joint development program to page-enable the Newton MessagePad
operating system to employ the Company's PageCard receiver for Newton-based
wireless applications and are undertaking joint sales and marketing activities
in selected vertical markets.

CETRONIC AB, a wireless products and technology company, and the Company are
jointly developing a PageCard receiver that is compatible with the higher speed
FLEX paging networks.

BELL MOBILITY, a telecommunications company, distributes the Company's
PageCard in Canada.

PAGENET, the largest paging carrier in the U.S., is the paging network
provider for the paging frequencies used by the Company's U.S. PageCard.
PageNet's services are provided through the Company's contract with the National
Dispatch Center and through GTE.

THE NATIONAL DISPATCH CENTER, a paging gateway service provider, administers
SWiMS.

LUCENT TECHNOLOGIES (formerly AT&T Microelectronics), a semiconductor chip
manufacturer, collaborated with the Company on the development of the Company's
proprietary HIS chip and currently serves as the foundry for the HIS chip.

MITSUBISHI CORPORATION, a manufacturer and distributor, supplies the
Company's PageCard receiver.

PROPRIETARY TECHNOLOGY

Socket has developed a number of technology building blocks to enhance its
ability to develop new hardware and software products, to offer products which
run on multiple host platforms and to manufacture and package products
efficiently.

Socket's most important hardware building block is the universal bus
interface, a highly flexible implementation of the PC Card interface whose
features include programmable bus steering, dual mapping of control and data
registers into both memory and I/O space, an extensive card information
structure which includes function ID and function extension tuples, share-memory
arbitration circuitry, support for "execute-in-place," the ability to support
both level and edge triggered interrupts from multiple sources, host
synchronization during initialization and complete polarity and masking control
of interrupts. Socket's universal bus interface enables Socket's products to
work with major PC Card hosts. Socket's PageCard receiver is compatible with PC
Card Windows notebooks, Windows CE H/PCs, the Apple PowerBook, the Apple Newton
MessagePad and the HP 100/200 LX palmtop.

32
<PAGE>
Socket's universal bus interface has been incorporated into several
application specific integrated circuits, including Socket's HIS chip, a highly
integrated general purpose serial interface used in both the PageCard receiver
and the Serial I/O Card to control signal transmission between these products
and the mobile computer's PC Card slot.

Socket has also developed a library of software tools which are used to
reduce product development time and maximize platform independence. These tools
include smart installation software which works across Socket's entire product
line, ODI and NDIS network driver software for the Ethernet card, direct enabler
software for major PC Card hosts and Card Service client drivers for
plug-and-play "Hot Swap" operation.

Socket's PageSoft communications software and SDK form the basis of an
extensive suite of one-way messaging tools and utilities that are designed to
enable Socket to add value to the PageCard WMS and its derivatives and establish
a family of proprietary software products.

SALES AND MARKETING

The Company markets its products through OEMs, paging service providers,
computer platform vendors, vertical market VARs, and a worldwide network of
distributors and resellers. The Company is also collaborating with independent
software vendors to develop applications and tools to be used with the PageCard
WMS, some of which are expected to be jointly marketed by the Company.* The
Company supports its distributors and resellers through education, training and
customer assistance by the Company's sales, marketing and technical support
staff and third party manufacturers' representatives. During 1996, distributors
Ingram Micro and Tech Data accounted for 17% and 12% of the Company's revenues.
As of December 31, 1996, the Company had 12 people in sales, marketing and
technical support. The Company intends to increase its sales and marketing
effort by adding personnel and increasing promotional activities.*

Consistent with industry practice, the Company provides its distributors
with stock balancing and price protection rights which permit these distributors
to return slow-moving products to the Company for credit and to receive price
adjustments for inventories of the Company's products held by distributors if
the Company lowers the price of those products. The effect of such returns and
adjustments on the Company's operating results is minimized since the Company
recognizes revenues on products shipped to distributors at the time the
merchandise is sold by the distributor. To date, the Company has not experienced
any significant returns or price protection adjustments.

The Company relies significantly on its OEMs, distributors and resellers for
the marketing and distribution of its products. Of particular importance to the
Company are its relationships with GTE, Casio Computer, Apple Computer and Bell
Mobility for the distribution of its wireless messaging products. 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; furthermore, the Company's OEMs, distributors and resellers are not
within the control of the Company and 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.

The Company is generally able to ship orders when received and does not have
significant backlog.

33
<PAGE>
Export sales represented approximately 40%, 40% and 52% of the Company's
revenue for the years ended December 31, 1996, 1995 and 1994, respectively.
Export sales are subject to the complications of complying with laws of various
countries and the risk of import/export restrictions and tariff regulations.

MANUFACTURING

The Company subcontracts the manufacture of substantially all of its
products to independent, third party contract manufacturers on a sole source
basis. The Company performs final product testing and packages its products at
its Newark, California facility.

Sole source components include the Company's proprietary HIS chip
manufactured by Lucent Technologies 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 Quanta Electro in the United States, the Serial I/O card manufactured by
Hi-Tech Manufacturing 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 Lucent Technologies, Tamarack chips from Tamarack, Ethernet cards
from Quanta Electro and Serial I/O cards from Hi-Tech Manufacturing by purchase
order under standard commercial terms and conditions in the industry. The
Company has an agreement with Mitsubishi with a three year term ending December
1997 subject to automatic renewals and termination for material breach and
certain other events. The Mitsubishi agreement covers the development of the
current PageCard POCSAG receiver and subsequent improvement and modifications as
determined by the parties, as well as the mutual provision of engineering and
technical assistance. The agreement also sets forth procedures for orders,
purchases, forecasts and pricing, and requires that the Company maintain a
standby letter of credit to cover PageCard purchases from Mitsubishi.

Although the Company's suppliers are generally large, well-financed
organizations, in the event that a supplier were to experience financial or
operational difficulties that resulted in a reduction or interruption in supply
to the Company, it would materially adversely affect the Company's results of
operations until the Company established sufficient manufacturing supply through
an alternative source which could take a significant period of time including
qualifying an alternative subcontractor, redesigning the product as necessary,
and commencing manufacturing.

RESEARCH AND DEVELOPMENT

Since its inception, the Company has made substantial investments in
research and development. The Company believes that its future performance will
depend in large part on its ability to develop significant enhancements to its
PageCard receiver and PageSoft communications software and to develop successful
new products for emerging and existing markets.* In particular, the Company
believes the timely completion and expected introduction of a FLEX version of
the PageCard in the second half of 1997 and the development and introduction of
a two-way paging product after 1997 is important to maintain a technological
leadership position in wireless solutions and remain competitive.* As of
December 31, 1996, the Company had seven persons on its product development
staff and

34
<PAGE>
hires engineering consultants to perform additional engineering services from
time to time as required. Research and development expenditures were $1.1
million, $1.1 million and $1.3 million for the years ended December 31, 1996,
1995 and 1994, respectively. The Company anticipates that it will continue to
commit substantial resources to research and development in the future. *

COMPETITION

The overall market for communications products is increasingly competitive,
and the Company expects competition in each of its market areas to intensify.*
The Company anticipates intense competition from a number of new and established
wired and wireless computer, communications and network equipment companies.*
Increased competition, direct and indirect, could materially adversely affect
the Company's revenues and ability to achieve profitability through pricing
pressure and loss of market share.

Currently, the Company does not have a direct competitor for its PageCard
WMS whose unique features as a data paging system include its capability to
receive, store and download long messages and data, the ability to direct
multiple simultaneous messages from different applications to their intended
laptop application or electronic mail inbox, and the capability to read messages
on a digital display. The Company faces indirect competition for short messaging
applications from alphanumeric pagers which are produced by many companies
including Motorola, NEC, and others, and from alternative methods of downloading
information into a mobile computer, primarily over telephone lines or other
wireless data networks.

INTELLECTUAL PROPERTY RIGHTS

The Company relies on a combination of patent, copyright, trademark and
trade secret laws and confidentiality procedures to protect its proprietary
rights. The Company has filed applications for two patents in the United States.
As part of its confidentiality procedures, the Company generally enters into
non-disclosure agreements with its employees, distributors and strategic
partners, and limits access to and distribution of its software, documentation
and other proprietary information. Despite these precautions, it may be possible
for a third party to copy or otherwise to obtain and use the Company's products
or technology without authorization, or to develop similar technology
independently. In addition, effective protection of intellectual property rights
may be unavailable or limited in certain foreign countries.

There are no current pending material claims that the Company's products,
trademarks or other proprietary rights significantly infringe the proprietary
rights of third parties. However, there can be no assurance that the Company
will not receive in the future communications from third parties

35
<PAGE>
asserting that the Company's products infringe, or may infringe, the proprietary
rights of third parties which could result in significant additional expense to
the Company or the discontinuation of use or redesign of infringing products.

PERSONNEL

As of December 31, 1996, the Company employed 28 people on a full-time
basis. Of these, 12 were responsible for sales, marketing and customer technical
support, seven were in research and development, five were in finance and
administration and four were involved in operations. The Company's employees are
not represented by a union, and the Company considers its relationship with its
employees to be good. 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.* The Company does not have key man life insurance for any of its
employees.

FACILITIES

The Company leases a 23,000 square foot facility in Newark, California. The
facility is subject to a lease which expires in 2001. The current monthly rent
is approximately $16,325. The Company believes that its current facilities are
sufficient to meet its needs for the foreseeable future.

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<PAGE>
MANAGEMENT

Executive Officers and Directors

The current executive officers and directors of the Company, and their ages
as of December 31, 1996, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- ----------------------------------------
<S> <C> <C>
Charlie Bass............................ 54 Chairman of the Board of Directors
Martin S. Levetin....................... 56 President & Chief Executive Officer and
Director
Micheal L. Gifford...................... 38 Executive Vice President and Director
Kevin J. Mills.......................... 36 Vice President of Operations
David W. Dunlap......................... 54 Vice President of Finance and
Administration and Chief Financial
Officer
Howard M. Case.......................... 52 Vice President of Marketing
John E. O'Leary......................... 41 Vice President of Sales
Jack C. Carsten (1)(2).................. 55 Director
Gary W. Kalbach (1)(2).................. 55 Director
</TABLE>

- ------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee

The Company currently has authorized five directors. All directors are
elected to hold office until the next annual meeting of stockholders of the
Company and until their successors have been elected. Officers are elected at
the first Board of Directors meeting following the stockholders' meeting at
which the directors are elected and serve at the discretion of the Board of
Directors.

CHARLIE BASS co-founded the Company in March 1992, and has been the Chairman
of the Board of Directors from such time to the present. Dr. Bass has been the
General Partner of Bass Associates, a venture capital firm, since September
1989. Dr. Bass currently serves as a director of Meridian Data, Inc., SoloPoint,
Inc. and several private companies. Dr. Bass is also a consulting professor of
electrical engineering at Stanford University. Dr. Bass holds a Ph.D. in
electrical engineering from the University of Hawaii.

MARTIN S. LEVETIN has been President and Chief Executive Officer of the
Company since March 1, 1996 and has served as a director of the Company since
that date. From March 1991 through February 1996, Dr. Levetin held several
positions at RAM Mobile Data, a wireless networking company, including Senior
Vice President--Systems and Technology and Vice President and General
Manager--Wireless Messaging. Dr. Levetin served as Operations Support Systems
Director for Andersen Consulting, a consulting company, from September 1990 to
March 1991 and held various positions with AT&T, a communications company, from
1968 to 1990 including International Sales director and General Manager, Product
and Market Management. Dr. Levetin holds a Ph.D. in electrical engineering from
Northeastern University.

MICHEAL L. GIFFORD has been a director of the Company since its inception in
March 1992 and has served as Executive Vice President since October 1994. Mr.
Gifford served as President of the Company from its inception in March 1992 to
September 1994, and as the Company's Chief Executive Officer from March 1992 to
June 1994. From December 1986 to December 1991, Mr. Gifford served as a director
and as Director of Sales and Marketing for Tidewater Associates, a computer
consulting and product development company. Prior to working for Tidewater
Associates, Mr. Gifford co-founded and was President of Gifford Computer
Systems, a computer network integration company. Mr. Gifford received a B.S. in
Mechanical Engineering from the University of California at Berkeley.

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<PAGE>
KEVIN J. MILLS has served as the Company's Vice President of Operations
since September 1993. Prior to joining the Company, Mr. Mills worked from
September 1987 to August 1993 at Logitech, Inc., a computer peripherals company,
serving most recently as Director of Operations. He received a B.E. in
Electronic Engineering from the University of Limerick, Ireland.

DAVID W. DUNLAP has served as the Company's Vice President of Finance and
Administration and Chief Financial Officer since February 1995. Prior to joining
the Company, Mr. Dunlap served as Vice President of Finance and Administration
at Appian Technology Inc. ("Appian"), a semiconductor company, from September
1993 to February 1995. Appian filed a voluntary petition for bankruptcy under
Chapter 11 of the United States Bankruptcy Code in August 1994 (the "Bankruptcy
Code") in connection with the sale of substantially all of its assets to Cirrus
Logic, Inc. Mr. Dunlap served as Vice President of Finance and Administration
and Chief Financial Officer at Mountain Network Solutions, Inc., a computer
peripherals manufacturing company, from March 1992 to September 1993. From June
1990 to March 1992, Mr. Dunlap was the Vice President of Finance and
Administration and Chief Financial Officer at Touch Communications, Inc.
("Touch"), a network software company. In January 1992, Touch filed a voluntary
petition for bankruptcy under Chapter 11 of the Bankruptcy Code in connection
with the sale of substantially all of its assets. In 1989, Mr. Dunlap served as
Chief Financial Officer at Supertek Computers, Inc., a minisupercomputer
manufacturing company, which was sold to Cray Research, Inc. He is a certified
public accountant, and received an M.B.A. and a B.A. in Business Administration
from the University of California at Berkeley.

HOWARD M. CASE has served as the Company's Vice President of Marketing since
July 1996 and as a marketing consultant to the Company from May 1996 to July
1996. Prior to joining the Company, he held various positions with RAM Mobile
Data, a wireless networking company, from 1992 to December 1995, the most recent
as Vice President, Wireless Messaging. In 1983, Mr. Case co-founded Conetic
System, a messaging software company which developed Higgins groupware software,
and served as its Vice President/Sales and Marketing until it was acquired in
March 1989 by Enable Software, a software company. Mr. Case continued with
Enable Software as Vice President Sales and Marketing - The Higgins Group from
March 1989 to December 1991. Mr. Case has a B.S. degree from Spring Hill
College, Mobile, Alabama.

JOHN E. O'LEARY has served as the Company's Vice President of Sales since
July 1996. Prior to joining the Company, he held various marketing and sales
management positions with Digital Equipment Corporation ("Digital"), a computer
systems manufacturer, from 1986 through July 1996, serving most recently as Vice
President, Systems Business Unit which marketed and sold Digital's servers,
workstations and network software in the western United States. Mr. O'Leary
received an M.B.A. from the University of New Hampshire and a Bachelor of Arts
degree from Holy Cross College, Boston, Massachusetts.

JACK C. CARSTEN has been a director of the Company since May 1993. He also
served in a consulting capacity as the interim Chief Executive Officer of the
Company from July 1994 to September 1994. Mr. Carsten owns and operates
Technology Investments, a venture capital firm. Prior to founding Technology
Investments, Mr. Carsten was a general partner of U.S. Venture Partners, a
venture capital firm. Prior to U.S. Venture Partners, he held senior management
positions at Intel Corporation, most recently serving as Senior Vice President
and General Manager of the Component Group, Microcomputer Group and ASIC
Components Group. He received an A.B. in Physics from Duke University.

GARY W. KALBACH has been a director of the Company since December 1993. Mr.
Kalbach co-founded and has been a general partner of El Dorado Ventures, a
venture capital firm, since May 1986. Prior to founding El Dorado Ventures, Mr.
Kalbach served as a General Partner of the Sprout Group, a venture capital
affiliate of Donaldson, Lufkin & Jenrette, from January 1983 to September 1985,
and served as the sole general partner of West Coast Venture Capital from
September 1978 to January 1983. Mr. Kalbach received an M.B.A. from San Jose
State University and a B.S. in Business Administration from the University of
California at Berkeley.

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<PAGE>
COMPENSATION OF DIRECTORS

The Company's directors do not currently receive any cash compensation for
service on the Board of Directors, but directors may be reimbursed for
reasonable expenses incurred in connection with attendance at Board and
committee meetings. The Company does, however, provide grants of stock options
on a discretionary basis to its directors to compensate for their service as
directors. Each such compensation decision is made by the Company's Board of
Directors without participation by the interested director.

In December 1996, Jack Carsten, a director of the Company, received an
option to purchase 2,400 shares of the Company's Common Stock in exchange for
his service as a director. The shares so received have an exercise price of
$1.55 and vest in equal monthly increments over a twelve month period.

In December 1996, Gary Kalbach, a director of the Company, received an
option to purchase 2,400 shares of the Company's Common Stock in exchange for
his service as a director. The shares so received have an exercise price of
$1.55 and vest in equal monthly increments over a twelve month period.

Charlie Bass, a director of the Company, provides consulting services to the
Company from time to time on a per project basis. See "Certain Transactions."

EXECUTIVE COMPENSATION

The following table sets forth the compensation earned by the two
individuals who served as the Company's Chief Executive Officer during the
fiscal year ended December 31, 1996 or who acted in a similar capacity during
such fiscal year and the three other executive officers whose total salary and
bonus in fiscal 1996 exceeded $100,000 (the "Named Executive Officers"), for
services rendered in all capacities to the Company:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
1996 ANNUAL COMPENSATION OTHER SECURITIES
------------------------ ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) COMPENSATION ($) OPTIONS
- --------------------------------------------- --------- ----------- ----------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Martin S. Levetin (2)........................ 1996 $ 134,333 $ 62,197 $ 36,006(3) 126,600*
President, Chief Executive 1995 -- -- -- --
Officer and Director 1994 -- -- -- --
Charlie Bass (4)............................. 1996 -- -- -- 55,767*
Former acting Chief 1995 -- -- -- --
Executive Officer and 1994 -- -- -- --
Director
Micheal L. Gifford........................... 1996 120,000 22,211 -- 35,745*
Executive Vice President 1995 111,378 26,602 -- 22,445
and Director 1994 100,000 5,903 -- --
David W. Dunlap (5).......................... 1996 120,000 18,775 -- 15,914*
1995 100,008 21,232 13,500 21,341
1994 -- -- 8,000 --
Kevin Mills.................................. 1996 99,999 22,291 -- 15,914*
1995 91,042 19,111 -- 7,014
1994 85,934 3,934 -- 5,144
</TABLE>

- ------------------------
* Includes options granted pursuant to the Compensation Committee's decision
on December 18, 1996 to reprice certain outstanding options by exchanging
outstanding options for new options

39
<PAGE>
priced to reflect the market price of the Company's Common Stock on the date
of the exchange (the "Repricing"). See "Management -- Stock Option
Information" and "Management -- Report on Repricing of Options."

(1) Represents cash bonuses earned for work performed during fiscal 1996.
Bonuses earned during the first three fiscal quarters of fiscal 1996 were
paid in fiscal 1996 whereas bonuses earned during the fourth fiscal quarter
of 1996 were paid in the first quarter of fiscal 1997.

(2) Mr. Levetin joined the Company on March 1, 1996 as President and Chief
Executive Officer. As of December 31, 1996, Mr. Levetin earned an annualized
salary of $160,000.

(3) Consists of moving expenses incurred by Mr. Levetin (and reimbursed by the
Company) in connection with his relocation in order to begin work at the
Company.

(4) Dr. Bass served in a consulting capacity as acting Chief Executive Officer
of the Company from January 1, 1996 through February 28, 1996. In
consideration for such consulting services, the Company granted Dr. Bass an
option to purchase 25,000 shares of Common Stock at an exercise price of
$4.25 and vesting over a four-year period (the "Old Option"). In connection
with the Repricing, Dr. Bass received an option to purchase 25,000 shares
(the "New Option") in exchange for the cancellation of the Old Option. The
New Option has an exercise price of $1.55. The New Option continues the
vesting schedule of the Old Option except with respect to options vested as
of the Repricing, which vest in equal monthly increments over the 12 months
following the Repricing. Bass Associates, of which Dr. Bass is General
Partner, is the record owner of the New Option. Dr. Bass disclaims
beneficial ownership of shares owned by Bass Associates except to the extent
of his pecuniary interest therein. See "Management -- Report on Repricing of
Options."

(5) Mr. Dunlap joined the Company as Vice President of Finance and
Administration and Chief Financial Officer on February 16, 1995. "Other
Annual Compensation" for Mr. Dunlap consists of consulting fees paid by the
Company to Mr. Dunlap prior to his joining the Company as an employee.

40
<PAGE>
STOCK OPTION INFORMATION

The following table sets forth certain information for the fiscal year ended
December 31, 1996 with respect to each grant of stock options to the Named
Executive Officers.

OPTION GRANTS IN FISCAL 1996

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED FISCAL 1996 (1) SHARE ($)(2) DATE
- ------------------------------------------------------ -------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
Martin S. Levetin..................................... 100,000 27.7% $ 4.25 3/1/06
26,600 7.4 1.55 12/18/06
100,000* 38.4* 1.55* 12/18/06*

Micheal L. Gifford.................................... 13,300 3.7 1.55 12/18/06
22,445* 8.6* 1.55* 12/18/06*

Bass Associates....................................... 25,000 6.9 4.25 3/1/06
(Charlie Bass) (3) 2,400 1.8 1.55 12/18/06
3,367* 1.3* 1.55* 12/18/06*
25,000* 9.6* 1.55* 12/18/06*

David W. Dunlap....................................... 8,900 2.5 1.55 12/18/06
7,014* 2.7* 1.55* 12/18/06*

Kevin Mills........................................... 8,900 2.5 1.55 12/18/06
7,014* 2.7* 1.55* 12/18/06*
</TABLE>

- ------------------------
* Represents grant of options made pursuant to the Repricing. See "Management
-- Report on Repricing of Options."

(1) Based on options granted to employees, consultants and directors during
fiscal 1996, and, with respect to options granted in connection with the
Repricing, on the 260,192 options so granted to employees, consultants and
directors.

(2) All options were granted at an exercise price equal to the fair market value
of the Company's Common Stock, as determined by the Board of Directors on
the date of grant.

(3) Bass Associates, of which Dr. Bass is General Partner, is the record owner
of the stock options. However, Dr. Bass disclaims beneficial ownership of
shares owned by Bass Associates except to the extent of his pecuniary
interest therein.

41
<PAGE>
The following table sets forth certain information with respect to the value
of stock options held by each of the Named Executive Officers for the fiscal
year ended December 31, 1996.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1996 (#)(1) DECEMBER 31, 1996 ($)(2)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Martin S. Levetin......................................... -- 126,600 $ -- $ --
Micheal L. Gifford........................................ -- 35,745 -- --
Charlie Bass.............................................. 4,489 30,767 3,546 --
David W. Dunlap........................................... 7,020 23,221 5,546 4,311
Kevin Mills............................................... 10,170 22,111 7,494 2,905
</TABLE>

- ------------------------
(1) No Named Executive Officer exercised stock options during fiscal 1996.
(2) Based upon a final bid price, as of December 31, 1996, of $1.38 per share.

STOCK PLANS

1993 STOCK OPTION/STOCK ISSUANCE PLAN. The Company's 1993 Stock
Option/Stock Issuance Plan (the "1993 Plan") was adopted by the Board of
Directors in March 1993 and approved by the stockholders in April 1993. The 1993
Plan authorizes for issuance 257,182 shares of Common Stock. As of December 31,
1996, options to purchase a total of 68,024 shares (net of cancellations) had
been exercised, options to purchase a total of 92,267 shares were outstanding
and 96,891 shares remained available for future issuance. The Company does not
expect to grant any additional options to purchase shares of the Company's
Common Stock under the 1993 Plan.

The 1993 Plan is divided into two separate components: (i) an option grant
program under which employees (including officers) and independent consultants
of the Company and any parent or subsidiary corporations may, at the discretion
of the Compensation Committee, be granted options to purchase shares of Common
Stock at an exercise price not less than 85% of the fair market value of such
shares on the grant date, and (ii) the Stock Issuance Program under which such
individuals may, in the Committee's discretion, be issued shares of Common Stock
directly, through the purchase of such shares at a price not less than 85% of
the fair market value at the time of issuance or as a bonus for services
rendered the Company.

The exercise price for options granted under the 1993 Plan may be paid in
cash or in outstanding shares of Common Stock. Options may also be exercised on
a cashless basis through the same day sale of the purchased shares. The
Committee may also permit the optionee to pay the exercise price through a
promissory note payable in installments over a period of years. The amount
financed may include any federal or state income and employment taxes incurred
by reason of the option exercise.

Special stock appreciation rights may also be granted under the 1993 Plan to
officers of the Company who are subject to the short-swing profit restrictions
of the federal securities laws. Upon the acquisition of 50% or more of the
Company's outstanding voting stock pursuant to a hostile tender offer, each
option with such a limited right outstanding for at least six months will
automatically be canceled in exchange for a cash distribution to the officer
based upon the tender offer price.

1995 STOCK PLAN. The Company's 1995 Stock Plan (the "1995 Stock Plan") was
adopted by the Board of Directors in April 1995 and stockholders in May 1995 and
amended by the Board of Directors in February 1996 and by the stockholders in
May 1996. As of December 31, 1996 a total of 435,000 shares of Common Stock were
reserved for issuance under the 1995 Stock Plan; options to purchase a

42
<PAGE>
total of 397,098 shares were outstanding and options to purchase 37,902 shares
remained available for future issuance. The 1995 Stock Plan provides for the
grant to employees (including employee directors and officers) of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and for the grant of nonstatutory stock options
and the grant or sale of restricted stock to employees and consultants.
Non-employee directors are not eligible to participate in the 1995 Stock Plan.

The 1995 Stock Plan may be administered by the Board or a committee approved
by the Board, in either case in a manner that complies with Rule 16b-3 under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3"). The 1995 Stock Plan
is administered by the Compensation Committee of the Board. The Compensation
Committee has complete discretion to determine which eligible individuals are to
receive option grants and share issuances, the number of shares subject to each
such grant or issuance, the status of any granted option as either an incentive
option or a nonstatutory option under the federal tax laws, the vesting schedule
to be in effect for each option grant or direct stock issuance and the maximum
term for which each granted option is to remain outstanding.

The exercise price per share of all incentive stock options granted under
the 1995 Stock Plan must be at least equal to the fair market value per share of
Common Stock on the date of grant. The exercise price per share of all
nonstatutory stock options shall be no less than 85% of the fair market value on
the date of grant. The Company expects to continue its policy of setting stock
option exercise prices at the fair market value per share of the Common Stock at
the date of grant. With respect to any participant who owns more than 10% of the
voting power of all classes of the Company's outstanding capital stock, the
exercise price of any incentive stock option or nonstatutory stock option must
be equal to at least 110% of fair market value on the grant date. With respect
to any participant who owns more than 10% of the voting power of all classes of
the Company's outstanding capital stock, the term of any incentive stock option
or nonstatutory stock option may not exceed five years, however, the terms of
all other options granted under the 1995 Stock Plan may not exceed ten years.
The price per share of restricted stock granted under the 1995 Stock Plan shall
be determined by the administrator on the date of grant. Options and restricted
stock granted under the 1995 Stock Plan will typically be subject to a four-year
vesting schedule.

EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS

In February 1996, the Company entered into an employment agreement with
Martin S. Levetin, the Company's President and Chief Executive Officer. Pursuant
to this agreement, which is terminable at will by either party, if the Company
terminates Mr. Levetin's employment without cause, the Company shall pay Mr.
Levetin (i) six months' base salary regardless of whether he secures other
employment during these six months, (ii) health insurance until the earlier of
the date of Mr. Levetin's eligibility for the health insurance benefits provided
by another employer or the expiration of six months, (iii) the full bonus amount
to which he would have been entitled for the first quarter following termination
and one-half of such bonus amount for the second quarter following termination
and (iv) certain other benefits including outplacement services and the ability
to purchase at book value certain items of Company property purchased by the
Company for Mr. Levetin's use, which may include a personal computer, a cellular
phone, and other similar items.

In July 1996, the Company entered into an employment agreement with Micheal
Gifford, the Company's Executive Vice President. Pursuant to this agreement,
which expires in December 31, 2000 and is terminable at will by either party,
the Company is obligated to pay Mr. Gifford's base salary and if the Company
terminates Mr. Gifford's employment without cause, the Company shall pay Mr.
Gifford (i) six months' base salary regardless of whether he secures other
employment during those six months, (ii) health insurance until the earlier of
the date of Mr. Gifford's eligibility for the health insurance benefits provided
by another employer or the expiration of six months, (iii) the full bonus amount
to which he would have been entitled for the first quarter following termination
and one-half of such bonus amount for the second quarter following termination
and (iv) certain other

43
<PAGE>
benefits including outplacement services and the ability to purchase at book
value certain items of Company property purchased by the Company for Mr.
Gifford's use, which may include a personal computer, a cellular phone, and
other similar items.

REPORT ON REPRICING OF OPTIONS

In December 1996, the Compensation Committee authorized the reduction of the
exercise price of options granted to employees, including executive officers,
pursuant to the 1995 Stock Plan that had exercise prices higher than the market
price of the Company's Common Stock at the time of the repricing. This repricing
(the "Repricing") was accomplished by an exchange of each option held by an
optionee at the time of the Repricing (the "Surrendered Options") for an option
with a lower exercise price and an extended vesting period (the "Repriced
Options"). Options granted to employees are intended to provide incentive to the
employees to work to achieve long term success for the Company. The decline in
the market price of the Company's Common Stock following the grants of the
Surrendered Options frustrated this purpose and the committee deemed it to be in
the best interests of the Company to allow the exchange of Surrendered Options
for Repriced Options in order to reduce the exercise price to the market price
at the time of the exchange. All Repriced Options are subject to a new vesting
period, beginning on the date of Repricing. The vesting schedule of the Repriced
Options continues the vesting schedule of the Surrendered Options with respect
to unvested shares; shares that had vested as of the Repricing vest in equal
monthly increments over the 12 months following the Repricing.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS

As permitted by the 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 proceedings 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. The indemnification agreements require the Company, among other
things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as directors or officers
(other than liabilities arising from willful misconduct of a culpable nature),
to advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms. The Company has also obtained
directors' and officers' liability insurance. At present, the Company is not
aware of any pending or threatened litigation or proceeding involving a
director, officer, employee or agent of the Company in which indemnification
would be required or permitted. The Company believes that its charter provisions
and indemnification agreements are necessary to attract and retain qualified
persons as directors and officers. Insofar as indemnification for liabilities
under the Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.

44
<PAGE>
CERTAIN TRANSACTIONS

Dr. Bass served in a consulting capacity as acting Chief Executive Officer
of the Company from January 1, 1996 through February 28, 1996. In consideration
for such consulting services, the Company granted Dr. Bass an option to purchase
25,000 shares of Common Stock at an exercise price of $4.25 and vesting over a
four-year period (the "Old Option"). In connection with the Repricing, Dr. Bass
received an option to purchase 25,000 shares (the "New Option") in exchange for
the cancellation of the Old Option. The New Option has an exercise price of
$1.55. The New Option continues the vesting schedule of the Old Option except
with respect to options vested as of the Repricing, which vest in equal monthly
increments over the 12 months following the Repricing. Bass Associates, of which
Dr. Bass is General Partner, is the record owner of the New Option. Dr. Bass
disclaims beneficial ownership of shares owned by Bass Associates except to the
extent of his pecuniary interest therein. See "Management -- Report on Repricing
of Options."

45
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth as of February 20, 1997, and as adjusted to
reflect the sale of the Common Stock offered hereby, certain information with
respect to the beneficial ownership of the Common Stock of the Company on an
as-converted basis and of the Series A Convertible Preferred Stock of the
Company ("Series A") as to (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company, (iii) each Named Executive Officer, and (iv) all
directors and officers of the Company as a group. Except as otherwise noted, the
named beneficial owner has sole voting and investment power with respect to the
shares shown.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED (2)
SHARES --------------------------
TITLE OF BENEFICIALLY BEFORE AFTER
CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) OFFERING OFFERING
- ----------- ------------------------------------------------------------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Common Berckeley Investment Group (3) .................................... 1,230,769 23.5% 15.9%
c/o American Offshore Management, Inc.
2875 NE 191 Street
Ste. 702C
Aventura, Florida 33180
Common Cetronic AB and affiliates (4) .................................... 1,000,000 19.9% 13.3%
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Common Julius Baer Securities (5) ........................................ 418,462 9.5% 6.0%
Julius Baer Securities
330 Madison Avenue
New York, NY 10017
Common Entities affiliated with El Dorado Ventures (6) ................... 348,936 8.7% 5.4%
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Common Bass Associates (7) ............................................... 324,107 8.1% 5.0%
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Common Swedbank (Luxembourg) S.A. (8) .................................... 221,539 5.2% 3.3%
P. O. Box 1305
L-1013
Luxembourg
Common Charlie Bass (9) .................................................. 342,167 8.5% 5.3%
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Common Jack C. Carsten (10) .............................................. 80,612 2.0% 1.2%
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
</TABLE>

46
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED (2)
SHARES --------------------------
TITLE OF BENEFICIALLY BEFORE AFTER
CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) OFFERING OFFERING
- ----------- ------------------------------------------------------------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Common Martin S. Levetin ................................................. 21,888 * *
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Common Micheal L. Gifford (11) ........................................... 129,959 3.2% 2.0%
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Common Gary W. Kalbach (12) .............................................. 348,936 8.7% 5.4%
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Common David W. Dunlap (13) .............................................. 14,144 * *
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Common Kevin J. Mills (14) ............................................... 10,120 * *
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Common All directors and officers as a group (15) (9 persons)............. 947,826 19.2% 12.7%
Series A Berckeley Investment Group ........................................ 5,000 52.1% 52.1%
c/o American Offshore Management, Inc.
2875 NE 191 Street
Ste. 702C
Aventura, Florida 33180
Series A Julius Baer Securities ............................................ 1,700 17.7% 17.7%
Julius Baer Securities
330 Madison Avenue
New York, NY 10017
Series A Swedbank (Luxembourg) S.A. ........................................ 900 9.4% 9.4%
P. O. Box 1305
L-1013
Luxembourg
Series A Coutts & Co. AG ................................................... 500 5.2% 5.2%
Talstraase 59
Zurich, Switzerland 8022
Series A Peter Colmer ...................................................... 500 5.2% 5.2%
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
</TABLE>

47
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF BENEFICIALLY OWNED (2)
SHARES --------------------------
TITLE OF BENEFICIALLY BEFORE AFTER
CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) OFFERING OFFERING
- ----------- ------------------------------------------------------------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Series A Roderick Deleersnijder ............................................ 500 5.2% 5.2%
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Series A Weinberg Family Trust ............................................. 500 5.2% 5.2%
c/o Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Series A All directors and officers as a group (9 persons) ................. 0 0 0
</TABLE>

- ------------------------
* 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, 4,000,659 shares
of Common Stock outstanding as of February 20, 1997 and any shares issuable
pursuant to securities convertible into or exercisable for shares of Common
Stock by the person or group in question on February 20, 1997 or within 60
days thereafter; and (ii) after the Offering, an additional 2,500,000 shares
to be issued by the Company in the Offering. Percentages of Series A
Convertible Preferred Stock represent relative proportions of the 9,600
shares of Series A Convertible Preferred Stock outstanding as of February
20, 1997.

(3) Represents shares of Common Stock issuable upon conversion of the 5,000
shares of Series A Convertible Preferred Stock beneficially owned and
assumes notice of conversion of such shares of Series A Convertible
Preferred Stock is transmitted on February 20, 1997.

(4) Represents shares receivable upon conversion of convertible notes
convertible within 60 days of February 20, 1997 by Cetronic AB or certain of
its shareholders.

(5) Represents shares of Common Stock issuable upon conversion of the 1,700
shares of Series A Convertible Preferred Stock beneficially owned and
assumes notice of conversion of such shares of Series A Convertible
Preferred Stock is transmitted on February 20, 1997.

(6) Consists of 7,894 shares owned by El Dorado C&L Fund (including 178 shares
of Common Stock issuable upon the exercise of outstanding warrants), 328,939
shares owned by El Dorado Ventures III (including 9,616 shares of Common
Stock issuable upon the exercise of outstanding warrants) and 12,103 shares
owned by El Dorado Technology IV, L.P. (including 206 shares of Common Stock
issuable upon the exercise of outstanding warrants).

(7) Includes options to purchase 7,095 shares of Common Stock and warrants to
acquire 5,000 shares of Common Stock, each exercisable on February 20, 1997
or within 60 days thereafter.

(8) Represents shares of Common Stock issuable upon conversion of the 900 shares
of Series A Convertible Preferred Stock beneficially owned and assumes
notice of conversion of such shares of Series A Convertible Preferred Stock
is transmitted on February 20, 1997.

(9) Consists of 309,107 shares owned by Bass Associates, 25,401 shares
controlled by the Bass Family Trust (including 9,754 shares subject to stock
options and warrants to acquire 5,000 shares each exercisable on February
20, 1997 or within 60 days thereafter). Dr. Bass is the General Partner

48
<PAGE>
Bass Associates and may be deemed to share voting and investment power with
respect to those shares. However, Dr. Bass disclaims beneficial ownership of
shares owned by Bass Associates except to the extent of his pecuniary
interest therein.

(10) Includes 5,767 shares subject to stock options exercisable on February 20,
1997 or within 60 days thereafter.

(11) Includes 13,993 shares subject to stock options exercisable on February 20,
1997 or within 60 days thereafter.

(12) Consists of 6,857 shares subject to stock options exercisable on February
20, 1997 or within 60 days thereafter. Also includes 338,936 shares owned by
entities affiliated with El Dorado Ventures set forth in Note (6) above (the
"El Dorado Entities"). Mr. Kalbach is 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, warrants and options owned by the El Dorado Entities except to the
extent of his pecuniary interest therein.

(13) Represents 14,144 shares subject to stock options exercisable on February
20, 1997 or within 60 days thereafter.

(14) Represents 10,120 shares subject to stock options exercisable on February
20, 1997 or within 60 days thereafter.

(15) See notes (5), (6) and (7) above. Also includes 17,900 shares subject to
stock options exercisable on February 20, 1997 or within 60 days thereafter.

49
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 15,000,000 shares of
Common Stock, $0.001 par value, and 3,000,000 shares of Preferred Stock, $0.001
par value.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share in all matters to
be voted on by the shareholders, except that, upon giving notice as required by
law, shareholders may cumulate their votes in the election of directors. Subject
to preferences that may be applicable to any Preferred Stock outstanding at the
time, holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared from time to time by the Board of Directors out of funds
legally available therefor. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of the
Company's liabilities and the liquidation preference, if any, of any then
outstanding shares of Preferred Stock. Holders of Common Stock have no
preemptive rights and no rights to convert their Common Stock into any other
securities, and there are no redemption or sinking fund provisions with respect
to such shares. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be materially adversely affected by, the rights of
the holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.

PREFERRED STOCK

The Company is authorized to issue up to 3,000,000 shares of Preferred
Stock, of which 1,000,000 shares are designated Series A Convertible Preferred
Stock and 2,000,000 are undesignated.

UNDESIGNATED PREFERRED STOCK The Board of Directors has the authority to
issue the undesignated Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued shares of undesignated Preferred Stock, as well as to fix the
number of shares constituting any series and the designations of such series,
without any further vote or action by the stockholders. The Board of Directors,
without stockholder approval, may issue Preferred Stock with voting and
conversion rights which could materially adversely affect the voting power of
the holders of Common Stock. The issuance of Preferred Stock could also decrease
the amount of earnings and assets available for distribution to holders of
Common Stock. In addition, the issuance of Preferred Stock may have the effect
of delaying, deferring or preventing a change in control of the Company.

SERIES A CONVERTIBLE PREFERRED STOCK In the event of any liquidation,
dissolution or winding up of the Company, the assets of the Company are to be
distributed first to each holder of the Series A Convertible Preferred Stock in
an aggregate amount equal to the number of shares of the Series A Convertible
Preferred Stock held by such holder multiplied by $100, plus any declared or
unpaid dividends thereon; next to the holders of the Common Stock in an
aggregate amount equal to the number of shares of Common Stock held by each
holder multiplied by the per share Stated Value (as such term is defined in the
Certificate of Designation); and thereafter the holders of the Common Stock and
the Series A Convertible Preferred Stock are entitled to share pro rata in all
remaining assets of the Company available for distribution, with the number of
shares held by each holder of Series A Convertible Preferred Stock deemed to be
the number of shares of Common Stock into which the shares of Series A
Convertible Preferred Stock are then convertible. As long as any Preferred Stock
is outstanding, certain consolidations or mergers, sales or dispositions of all
or substantially all of the assets of the Company or a transaction resulting in
the sale of the shares representing a majority of the voting power of the
Company are deemed to be a liquidation, dissolution or winding up of the Company
for these purposes.

The shares of Series A Convertible Preferred Stock are convertible at the
option of the holder, in whole or in part, at any time, into shares of Common
Stock of the Company equal to $100 divided by

50
<PAGE>
the lower of: (i) 2 5/8 and (ii) 65% of the average bid price of the Company's
Common Stock on the OTC Bulletin Board for the five business days prior to the
business day on which notice of conversion is transmitted by the holder of such
share of Series A Convertible Preferred Stock, subject to adjustment upon
certain events. Each share of Series A Convertible Preferred Stock shall be
converted automatically into shares of Common Stock on the earliest of (i)
immediately preceding a merger or consolidation of the Company if as a result of
such transaction the holder of Series A Convertible Preferred Stock would
receive publicly traded securities with a market value greater than the initial
liquidation preference of the Series A Convertible Preferred Stock or (ii)
November 1, 1997. The conversion ratio of Series A Convertible Preferred Stock
into Common Stock is subject to certain antidilution protection, including for
stock splits, dividends and other recapitalizations, as well as certain sales of
Common Stock below the then effective conversion price. Upon such conversion, no
fractional shares shall be issued but instead the holder shall receive cash at
the fair market value for such fractional share. There are a number of
exceptions to the antidilution provisions, including in connection with the
grant and exercise of options under the Company's 1995 Stock Plan, the sale of
the Series A Convertible Preferred Stock, including the sale of a warrant to the
Underwriter, and the conversion or exercise or any option, warrant, right or
other convertible security.

Holders of the Series A Convertible Preferred Stock have no voting rights,
provided that the consent of the holders of record of a majority of the
outstanding shares of Series A Convertible Preferred Stock is required in order
to authorize or issue any shares of any new class of shares having preferences
greater than the Series A Convertible Preferred Stock as to change the
designation of the rights, preferences or privileges of the Series A Convertible
Preferred Stock so as to materially adversely affect the Series A Convertible
Preferred Stock, to increase the number of Series A Convertible Preferred Stock,
and in order to reissue any shares that are acquired by the Company.

The holders of the Series A Convertible Preferred Stock have no preemptive
rights and the Series A Convertible Preferred Stock is not subject to mandatory
redemption, whether at the option of the Company, the holder or upon any other
event, provided that the Company may from time to time purchase any shares of
Series A Convertible Preferred Stock upon such terms and conditions as may be
mutually acceptable by the Company and the holder. The holders of record of a
majority of all the Series A Convertible Preferred Stock outstanding together
with the holders, any series of Preferred Stock entitled to vote therewith, if
any, taken together, may waive any preference, right, privilege or power of such
stock or any term or conditions pertaining thereto, except as described in the
above paragraph when the consent of the holders of record of at least a majority
of the outstanding shares of the Series A Convertible Preferred Stock is
required.

WARRANTS

At the closing of this Offering, the Company will issue to the Underwriter
the Underwriter's Warrant to purchase for investment a maximum of 250,000 shares
of Common Stock. The Underwriter's Warrant will be exercisable for a four-year
period commencing one year from the date of this Prospectus. The exercise price
of the Underwriter's Warrant will be $2.40 per share (assuming a public offering
price of $2.00 per share). The Underwriter's Warrant will not be transferable
prior to its exercise date except to officers of the Underwriter and members of
the selling group and officers and partners thereof. The Underwriter's Warrant
will contain anti-dilution provisions providing adjustment in the event of any
recapitalization, reclassification, stock dividend, stock split or similar

51
<PAGE>
transaction. The Underwriter's Warrant does not entitle the Underwriter to any
rights as a stockholder of the Company until such Warrant is exercised and
shares are purchased thereunder. The Underwriter's Warrant and the securities
thereunder may not be offered for sale except in compliance with the applicable
provisions of the Securities Act. The Company has agreed that, if it shall cause
to be filed with the Securities and Exchange Commission either an amendment to
the Registration Statement of which this Prospectus is a part or a separate
registration statement, the Underwriter shall have the right during the
five-year period commencing on the date of this Prospectus to include in such
amendment or Registration Statement the Underwriter's Warrant and the securities
issuable upon its exercise at no expense to the Underwriter. Additionally, the
Company has agreed that, upon written request by a holder or holders of 50% or
more of the Underwriter's Warrant which is made during the exercise period of
the Underwriter's Warrant, the Company will, on two separate occasions, register
the Underwriter's Warrant and any of the securities issuable upon exercise
thereof. The initial such registration will be at the Company's expense and the
second such registration will be at the expense of the holder(s) of the
Underwriter's Warrant.

As of December 31, 1996, the Company had outstanding warrants to purchase
757,590 shares of Common Stock at exercise prices ranging from $3.56 to $7.20
per share. The number of shares of Common Stock purchasable upon exercise of
such warrants increased to 917,872 shares as of February 20, 1996, and the
exercise prices as of such date ranged from $3.56 to $5.58 per share, because of
the effect of antidilution provisions triggered by conversion of Series A
Convertible Preferred Stock prior to such date.

REGISTRATION RIGHTS

After this Offering, the holders of approximately 1,971,963 shares of Common
Stock ("Registrable Securities"), including shares issued upon conversion of the
Company's outstanding Preferred Stock, are entitled to certain rights with
respect to the registration of such shares under the Securities Act. If the
Company proposes to register any of its securities under the Securities Act for
its own account, holders of Registrable Securities are entitled to notice of
such registration and are entitled to include Registrable Securities therein,
provided, among other conditions, that the underwriters of any such offering
have the right to limit the number of shares included in such registration. In
addition, three months after the registration, holders of at least fifty percent
(50%) of the Registrable Securities may require the Company to prepare and file
a registration statement under the Securities Act at its expense covering all or
any portion of such Registrable Securities, and the Company is required to use
its best efforts to effect such registration, subject to certain conditions and
limitations. The Company is not obligated to effect more than two of these
stockholder-initiated registrations. Further, holders of Registrable Securities
may require the Company to file additional registration statements on Form S-3,
subject to certain conditions and limitations.

The Company has also granted registration rights to the holder of the
Underwriter's Warrant, which provide such holder with certain rights to register
the shares of Common Stock underlying the Underwriter's Warrant. See
"Underwriting."

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.

52
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have outstanding
6,500,659 shares of Common Stock, assuming no exercise of the Underwriter's
over-allotment option and no exercise of outstanding options or warrants. Of
these shares, 5,169,524 will be freely tradeable without restriction under the
Securities Act, unless held by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act. This number of shares includes (i)
the 2,500,000 shares of Common Stock offered hereby, (ii) the 1,100,550 shares
of Common Stock included in the Units sold in the Company's initial public
offering, (iii) the 597,291 shares of Common Stock held by certain stockholders
registered by the Company on a Registration Statement on Form SB-2 dated August
24, 1995 for resale by such stockholders and (iv) the 971,683 shares of Common
Stock held by certain stockholders pursuant to conversions of shares of the
Company's Series A Preferred Stock.

The remaining 1,331,135 shares of Common Stock outstanding upon completion
of this Offering will be "restricted securities" as that term is defined in Rule
144 under the Securities Act ("Restricted Shares"). All such Restricted Shares
may be sold in the public market under Rule 144, 144(k) or 701 promulgated under
the Securities Act, which are summarized below. In general, under Rule 144 as
currently in effect a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least two years (including the
holding period of any prior owner other than an affiliate of the Company) would
be entitled to sell within any three-month period a number of shares that does
not exceed the greater of (i) one percent of the number of shares of Common
Stock then outstanding (which will equal approximately 65,000 shares immediately
after this Offering) or (ii) the average weekly trading volume of the Common
Stock during the four calendar weeks preceding the filing of notice of such
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about the Company. Under Rule 144(k), a person who is not deemed to have been an
affiliate of the Company at any time during the three months preceding a sale,
and who has beneficially owned the shares proposed to be sold for at least three
years (including the holding period of any prior owner except an affiliate of
the Company), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule 144.

Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates of the Company to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that nonaffiliates may sell such shares in reliance on Rule 144 without
having to comply with the public information, volume limitation or notice
provisions of Rule 144.

In addition, up to 2,363,077 shares of the Company's Common Stock may be
acquired immediately upon conversion of the 9,600 shares of the Company's Series
A Convertible Preferred Stock outstanding as of February 20, 1996 at the option
of the holders of such shares (if all notices of conversion were transmitted on
February 20, 1997).

Further, Cetronic AB and certain of its affiliates hold immediately
exercisable rights to acquire 1,000,000 shares of the Company's Common Stock
(the "Cetronic Shares"). Though upon exercise of this right the Cetronic Shares
will constitute Restricted Shares, the Company is obligated to register the
Cetronic Shares within 90 days of a request for registration by the holders
thereof.

53
<PAGE>
The Company has also filed a registration statement on Form S-8 under the
Securities Act covering 501,859 shares of Common Stock reserved for issuance
under the 1993 Plan and the 1995 Stock Plan. Shares registered under such
registration statement are, subject to Rule 144 volume limitations applicable to
affiliates of the Company, available for sale in the open market, subject to
vesting restrictions. See "Management -- Stock Plans."

The Company has agreed that for 12 months from the date of this Prospectus,
it will not sell or otherwise dispose of any securities without the prior
written consent of the Underwriter, which consent shall not be unreasonably
withheld, with the exception of shares issued pursuant to the exercise of
options, warrants or other convertible securities outstanding or reserved prior
to the Effective Date or pursuant to employee benefit plans approved by the
stockholders as of the Effective Date or pursuant to mergers and acquisitions
involving the Company. For 12 months from the Effective Date, the Company shall
not sell or issue any securities pursuant to Regulation S under the Act without
the Underwriter's prior written consent, which consent shall not be unreasonably
withheld.

54
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to H.J. Meyers & Co., Inc. (the "Underwriter"), and
the Underwriter has agreed to purchase from the Company, 2,500,000 shares of
Common Stock. The underwriting discount set forth on the cover page of this
Prospectus will be allowed to the Underwriter at the time of delivery to the
Underwriter of the shares of Common Stock so purchased.

The Underwriter has advised the Company that it proposes to offer the Common
Stock to the public at an offering price of $ per share and that the
Underwriter may allow certain dealers who are members of the National
Association of Securities Dealers, Inc. ("NASD") a concession of not in excess
of $0. per share, of which not in excess of $0. may be reallowed to
certain other dealers. After commencement of the Offering, the public offering
price and concession may be changed.

The Company has granted to the Underwriter an option, exercisable during the
30-day period from the date of this Prospectus, to purchase up to a maximum of
375,000 additional shares of Common Stock on the same terms set forth above. The
Underwriter may exercise such right only to satisfy over-allotments in the sale
of the Common Stock.

The Company has agreed to pay to the Underwriter a non-accountable expense
allowance equal to three percent (3%) of the total proceeds of the Offering, or
$ ($ if the Underwriter exercises the over-allotment option in
full), of which $ has already been paid. In addition to the Underwriter's
commissions and the Underwriter's non-accountable expense allowance, the Company
is required to pay the costs of qualifying the Common Stock under federal and
state securities laws, together with legal and accounting fees, printing and
other costs in connection with this Offering, estimated to total approximately
$300,000.

At the closing of this Offering, the Company will issue to the Underwriter
the Underwriter's Warrant to purchase for investment a maximum of 250,000 shares
of Common Stock of the Company. The Underwriter's Warrant will be exercisable
for a four-year period commencing one year from the date of this Prospectus. The
exercise price of the Underwriter's Warrant will be $2.40 per share (assuming a
public offering price of $2.00 per share). The Underwriter's Warrant will not be
transferable prior to its exercise date except to officers of the Underwriter
and members of the selling group and officers and partners thereof. The
Underwriter's Warrant will contain anti-dilution provisions providing adjustment
in the event of any recapitalization, reclassification, stock dividend, stock
split or similar transaction. The Underwriter's Warrant does not entitle the
Underwriter to any rights as a stockholder of the Company until such Warrant is
exercised and shares are purchased thereunder. The Underwriter's Warrant and the
securities thereunder may not be offered for sale except in compliance with the
applicable provisions of the Securities Act. The Company has agreed that, if it
shall cause to be filed with the Securities and Exchange Commission either an
amendment to the Registration Statement of which this Prospectus is a part or a
separate registration statement, the Underwriter shall have the right during the
five-year period commencing on the date of this Prospectus to include in such
amendment or Registration Statement the Underwriter's Warrant and the securities
issuable upon its exercise at no expense to the Underwriter. Additionally, the
Company has agreed that, upon written request by a holder or holders of 50% or
more of the Underwriter's Warrant which is made during the exercise period of
the Underwriter's Warrant, the Company will, on two separate occasions, register
the Underwriter's Warrant and any of the securities issuable upon exercise
thereof. The initial such registration will be at the Company's expense and the
second such registration will be at the expense of the holder(s) of the
Underwriter's Warrant.

For the period during which the Underwriter's Warrant is exercisable, the
holder or holders will have the opportunity to profit from a rise in the market
value of the Company's Common Stock, with a resulting dilution in the interests
of the other stockholders of the Company. The holder or holders of

55
<PAGE>
the Underwriter's Warrant can be expected to exercise it at a time when the
Company would, in all likelihood, be able to obtain any needed capital from an
offering of its unissued Common Stock on terms more favorable to the Company
than those provided for in the Underwriter's Warrant. Such facts may materially
adversely affect the terms on which the Company can obtain additional financing.
To the extent that the Underwriter realizes any gain from the resale of the
Underwriter's Warrant or the securities issuable thereunder, such gain may be
deemed additional underwriting compensation under the Securities Act.

The Company has agreed that for 12 months from the date of this Prospectus
(the "Effective Date"), it will not sell or otherwise dispose of any securities
without the prior written consent of the Underwriter, which consent shall not be
unreasonably withheld, with the exception of shares issued pursuant to the
exercise of options, warrants or other convertible securities outstanding or
reserved prior to the Effective Date or pursuant to employee benefit plans
approved by the stockholders as of the Effective Date or pursuant to mergers and
acquisitions involving the Company. For 12 months from the Effective Date, the
Company shall not sell or issue any securities pursuant to Regulation S under
the Act without the Underwriter's prior written consent, which consent shall not
be unreasonably withheld.

The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities in connection with
the registration statement, including liabilities under the Securities Act.

For a period of 24 months from the closing of this Offering, the Underwriter
has the right to designate a member, acceptable to the Company, of the Company's
Board of Directors.

The foregoing is a brief summary of certain provisions of the Underwriting
Agreement and does not purport to be a complete statement of its terms and
conditions. A copy of the Underwriting Agreement is on file with the Securities
and Exchange Commission as an exhibit to the Registration Statement of which
this Prospectus is a part. See "Additional Information."

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto,
California. Certain legal matters in connection with the Offering will be passed
upon for the Underwriter by Freshman, Marantz, Orlanski, Cooper & Klein, a law
corporation, Beverly Hills, California.

EXPERTS

The financial statements of Socket Communications, Inc. at December 31, 1996
and 1995, and for each of the three years in the period ended December 31, 1996,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report (which
contains an explanatory paragraph which raises substantial doubt about the
Company's ability to continue as a going concern) appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.

56
<PAGE>
SOCKET COMMUNICATIONS, INC.
INDEX TO FINANCIAL STATEMENTS

CONTENTS

FOR THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996

<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Balance Sheets........................................................................ F-3
Statements of Operations.............................................................. F-4
Statements of Redeemable Convertible Preferred Stock
and Stockholders' Equity (Deficit)................................................... F-5
Statements of Cash Flows.............................................................. F-6
Notes to Financial Statements......................................................... F-7
</TABLE>

F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Socket Communications, Inc.

We have audited the accompanying balance sheets of Socket Communications,
Inc. as of December 31, 1996 and 1995, and the related statements of operations,
redeemable convertible preferred stock and stockholders' equity (deficit), and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Socket Communications, Inc.
at December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming Socket
Communications, Inc. will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company's recurring operating losses and the need
for additional financing raise substantial doubt about its ability to continue
as a going concern. Management's plans as to these matters are also discussed in
Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

ERNST & YOUNG LLP
San Jose, California
January 31, 1997

F-2
<PAGE>
SOCKET COMMUNICATIONS, INC.
BALANCE SHEETS
ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1995
--------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................................... $ 618,344 $ 2,406,655
Accounts receivable, net of allowance for doubtful accounts of $35,330 in 1996
and $47,790 in 1995........................................................... 833,259 900,717
Inventories.................................................................... 738,808 510,331
Prepaid expenses............................................................... 20,523 31,880
--------------- --------------
Total current assets......................................................... 2,210,934 3,849,583
Property and equipment:
Machinery and office equipment................................................. 495,199 340,108
Computer equipment............................................................. 452,713 345,571
--------------- --------------
947,912 685,679
Accumulated depreciation....................................................... (535,387) (332,300)
--------------- --------------
412,525 353,379
Other assets..................................................................... 48,235 72,436
--------------- --------------
Total assets................................................................. $ 2,671,694 $ 4,275,398
--------------- --------------
--------------- --------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit............................................................ $ 322,743 $ --
Accounts payable and accrued expenses.......................................... 1,277,259 1,089,676
Accounts payable to related parties............................................ 18,654 39,763
Accrued payroll and related expenses........................................... 230,758 357,771
Deferred revenue............................................................... 238,776 112,143
Current portion of capital leases and equipment financing notes................ 109,236 106,629
--------------- --------------
Total current liabilities.................................................... 2,197,426 1,705,982
Long-term portion of capital leases and equipment financing notes................ 102,735 141,121
Stockholders' equity:
Undesignated preferred stock, $0.001 par value:
Authorized shares -- 2,000,000
Issued and outstanding shares -- none in 1996 and 1995....................... -- --
Series A Convertible Preferred Stock, $0.001 par value:
Designated shares -- 1,000,000
Issued and outstanding shares -- 15,500 in 1996, none in 1995................ 1,793,813 --
Common stock, $0.001 par value:
Authorized shares -- 15,000,000
Issued and outstanding shares -- 3,028,976 in 1996 and 2,990,870 in 1995..... 3,029 2,991
Additional paid-in capital..................................................... 11,413,920 11,393,663
Accumulated deficit............................................................ (12,839,229) (8,968,359)
--------------- --------------
Total stockholders' equity................................................... 371,533 2,428,295
--------------- --------------
Total liabilities and stockholders' equity................................. $ 2,671,694 $ 4,275,398
--------------- --------------
--------------- --------------
</TABLE>

See accompanying notes.

F-3
<PAGE>
SOCKET COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Revenue:
Product......................................................... $ 4,385,251 $ 4,352,368 $ 2,925,942
Royalty and service............................................. 185,187 178,111 148,901
-------------- -------------- --------------
Total revenue................................................. 4,570,438 4,530,479 3,074,843
Cost of revenue................................................... 2,496,028 2,874,062 2,289,015
-------------- -------------- --------------
Gross profit...................................................... 2,074,410 1,656,417 785,828
Operating expenses:
Research and development........................................ 1,067,399 1,098,766 1,261,549
Sales and marketing............................................. 2,666,933 2,232,276 1,535,483
General and administrative...................................... 1,647,335 1,630,668 1,242,308
-------------- -------------- --------------
Total operating expenses...................................... 5,381,667 4,961,710 4,039,340
-------------- -------------- --------------
Operating loss.................................................... (3,307,257) (3,305,293) (3,253,512)
Interest income and other (expense), net.......................... 29,496 101,203 (2,852)
Interest expense.................................................. (50,609) (111,435) (61,196)
-------------- -------------- --------------
Net loss.......................................................... (3,328,370) $ (3,315,525) $ (3,317,560)
-------------- --------------
-------------- --------------
Accretion of preferred stock...................................... (542,500)
--------------
Net loss applicable to common stockholders........................ $ (3,870,870)
--------------
--------------
Net loss per share applicable to common stockholders.............. $ (1.28)
--------------
--------------
Net loss per share (pro forma in 1994)........................ $ (1.63) $ (1.71)
-------------- --------------
-------------- --------------
Weighted average shares outstanding........................... 3,015,263 2,034,653 1,941,081
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

See accompanying notes.

F-4
<PAGE>
SOCKET COMMUNICATIONS, INC.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)
<TABLE>
<CAPTION>

SERIES A
REDEEMABLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993............ 415,339 $ 1,623,479 -- $ --
Conversion of stockholders' notes to
Series C redeemable convertible
preferred stock at $6.68 per share in
March 1994, net of issuance costs of
$29,800................................ 165,236 1,074,471 -- --
Conversion of stockholders' notes and
sale of Series D redeemable convertible
preferred stock for $8.02 per share in
May 1994, net of issuance costs of
$32,512................................ 188,818 1,481,729 -- --
Issuance of common stock for services
rendered............................... -- -- -- --
Exercise of common stock options........ -- -- -- --
Net Loss................................ -- -- -- --
------------- ------------- ------------- -------------
Balance at December 31, 1994............ 769,393 4,179,679 -- --
Issuance of Initial Public Offering
common stock for $6.00 per share in
June 1995, net of issuance costs of
$1,805,924............................. -- -- -- --
Conversion of all redeemable convertible
preferred stock to common stock in June
1995................................... (769,393) (4,179,679) -- --
Conversion of convertible notes and
accrued interest to common stock in
June 1995.............................. -- -- -- --
Exercise of common stock options........ -- -- -- --
Exercise of warrants.................... -- -- -- --
Net Loss................................ -- -- -- --
------------- ------------- ------------- -------------
Balance at December 31, 1995............ -- -- -- --
Issuance of Series A Convertible
Preferred Stock........................ -- -- 15,500 1,251,313
Exercise of common stock options........ -- -- -- --
Accretion of preferred stock............ -- -- -- 542,500
Net Loss................................ -- -- -- --
------------- ------------- ------------- -------------
Balance at December 31, 1996............ -- $ -- 15,500 $ 1,793,813
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------

<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
----------------------------- PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993............ 235,204 $ 235 $ 2,183 $ (2,335,274) $ (2,332,856)
Conversion of stockholders' notes to
Series C redeemable convertible
preferred stock at $6.68 per share in
March 1994, net of issuance costs of
$29,800................................ -- -- -- -- --
Conversion of stockholders' notes and
sale of Series D redeemable convertible
preferred stock for $8.02 per share in
May 1994, net of issuance costs of
$32,512................................ -- -- -- -- --
Issuance of common stock for services
rendered............................... 25,188 25 6,521 -- 6,546
Exercise of common stock options........ 6,322 7 4,049 -- 4,056
Net Loss................................ -- -- -- (3,317,560) (3,317,560)
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1994............ 266,714 267 12,753 (5,652,834) (5,639,814)
Issuance of Initial Public Offering
common stock for $6.00 per share in
June 1995, net of issuance costs of
$1,805,924............................. 1,100,550 1,100 4,796,276 -- 4,797,376
Conversion of all redeemable convertible
preferred stock to common stock in June
1995................................... 953,053 953 4,178,726 -- 4,179,679
Conversion of convertible notes and
accrued interest to common stock in
June 1995.............................. 597,291 597 2,388,635 -- 2,389,232
Exercise of common stock options........ 23,596 24 12,058 -- 12,082
Exercise of warrants.................... 49,666 50 5,215 -- 5,265
Net Loss................................ -- -- -- (3,315,525) (3,315,525)
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1995............ 2,990,870 2,991 11,393,663 (8,968,359) 2,428,295
Issuance of Series A Convertible
Preferred Stock........................ -- -- -- -- 1,251,313
Exercise of common stock options........ 38,106 38 20,257 -- 20,295
Accretion of preferred stock............ -- -- -- (542,500) --
Net Loss................................ -- -- -- (3,328,370) (3,328,370)
------------- ------------- ------------- ------------- -------------
Balance at December 31, 1996............ 3,028,976 $ 3,029 $ 11,413,920 $ (12,839,229) $ 371,533
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>

See accompanying notes.

F-5
<PAGE>
SOCKET COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................................................. $ (3,328,370) $ (3,315,525) $ (3,317,560)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation....................................................... 79,095 160,929 139,692
Amortization....................................................... 150,634 95,847 --
Accrued interest on converted notes................................ -- 110,232 26,714
Issuance of common stock for services rendered..................... -- -- 6,546
Loss on disposal of property and equipment......................... 7,173 -- --
Changes in operating assets and liabilities:
Accounts receivable.............................................. 67,458 36,101 (517,759)
Inventories...................................................... (228,477) (300,270) (137,037)
Prepaid expenses................................................. 11,357 6,708 (34,888)
Other assets..................................................... 24,201 (26,426) (33,436)
Accounts payable and accrued expenses............................ 191,583 (102,908) 466,465
Accounts payable to related parties.............................. (25,109) (41,695) 42,001
Accrued payroll and related expenses............................. (127,013) 156,953 153,156
Deferred revenue................................................. 126,633 (9,267) 88,137
------------- ------------- -------------
Net cash used in operating activities.......................... (3,050,835) (3,229,321) (3,117,969)
INVESTING ACTIVITIES
Purchase of equipment................................................ (296,048) (146,799) (242,076)
------------- ------------- -------------
Net cash used in investing activities.......................... (296,048) (146,799) (242,076)
FINANCING ACTIVITIES
Payments on capital leases and equipment financing notes............. (121,640) (79,043) (30,593)
Proceeds from equipment financing.................................... 85,861 125,493 --
Net advances on revolving line of credit............................. 322,743 -- --
Proceeds from issuance of convertible notes.......................... -- 1,469,000 2,696,011
Repayment of convertible notes....................................... -- (955,000) --
Stock options exercised.............................................. 20,295 12,082 4,056
Stock warrants exercised............................................. -- 5,265 --
Net proceeds from sale of preferred stock............................ 1,251,313 -- 950,212
Net proceeds from sale of common stock............................... -- 4,797,376 --
------------- ------------- -------------
Net cash provided by financing activities...................... 1,558,572 5,375,173 3,619,686
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents................. (1,788,311) 1,999,053 259,641
Cash and cash equivalents at beginning of year....................... 2,406,655 407,602 147,961
------------- ------------- -------------
Cash and cash equivalents at end of year............................. $ 618,344 $ 2,406,655 $ 407,602
------------- ------------- -------------
------------- ------------- -------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest............................................... $ 50,609 $ 25,599 $ 13,564
Lease obligations incurred for equipment............................. $ -- $ -- $ 288,389
Notes payable and accrued interest converted to preferred stock...... $ -- $ -- $ 1,605,988
Notes payable and accrued interest converted to common stock......... $ -- $ 2,389,232 $ --
Issuance of common stock for services rendered....................... $ -- $ -- $ 6,546
Accretion of preferred stock......................................... $ 542,500 $ -- $ --
</TABLE>

See accompanying notes.

F-6
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION
Socket Communications, Inc. ("Socket" or "the Company") develops and sells
data communications connection solutions for the mobile computer market.
Socket's Narrowband Personal Communications Services (NPCS) products include
hardware, software and services for wireless messaging. Socket's
PageCard-Registered Trademark- is a PC Card alphanumeric pager that can download
wireless data to a mobile computer. The PageSoft-Registered Trademark- library
of wireless messaging software includes NPCS development tools, send and receive
applications, plus rules-based e-mail forwarding agents. Socket Wireless
Messaging Services include operator dispatch, Internet and World Wide Web
gateways for wireless messages, plus voice mail and fax forwarding services with
automatic wireless notification. Other Socket products include a family of
serial PC Cards and a family of wired Ethernet PC Cards. In 1995, the Company
was reincorporated in the state of Delaware.

BASIS OF PRESENTATION

The financial statements have been prepared on a going concern basis. The
Company has incurred cumulative losses to date of $12,839,229. 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 the Company is unable to obtain the
necessary funds, the Company could be required to significantly reduce or
suspend its operations, seek a merger, or sell additional securities on terms
that are highly dilutive to current investors in the Company. 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.

USE OF ESTIMATES

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.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 December 31, 1996
and 1995, the Company had no material investments in debt or equity securities.

INVENTORIES

Inventories consist principally of raw materials and sub-assemblies, which
are stated at the lower of cost (first-in, first-out) or market.

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Raw materials and sub-assemblies.............................................. $ 712,106 $ 481,592
Finished goods................................................................ 26,702 28,739
----------- -----------
$ 738,808 $ 510,331
----------- -----------
----------- -----------
</TABLE>

F-7
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization are
computed using the straight-line method, over the estimated useful lives of the
assets which range from one to five years. Assets under capital leases are
amortized over the shorter of the asset life or the remaining lease term.

CONCENTRATION OF CREDIT RISK

The Company uses financial instruments that potentially subject it to
concentrations of credit risk. Such instruments include cash equivalents and
accounts receivable. The Company invests its cash in cash deposits and money
market funds. The Company places its investments with high-credit-quality
financial institutions and limits the credit exposure to any one financial
institution or instrument. To date, the Company has not experienced losses on
these investments. The Company sells primarily to distributors and original
equipment manufacturers. The Company performs ongoing credit evaluations of its
customers' financial condition but generally requires no collateral. Reserves
are maintained for potential credit losses, and such losses have been within
management's expectations.

REVENUE RECOGNITION

Product revenue to customers other than distributors is recognized at the
time of shipment. Revenue on shipments to distributors, which are subject to
certain rights of return and price protection, is deferred until the merchandise
is sold by the distributors. Certain royalty agreements provide for per unit
royalties to be paid to the Company based on the sale of certain of the
Company's products by third party manufacturers. Revenue under such agreements
is recognized at the time of shipment by the third party manufacturer. The cost
of such royalty revenue is immaterial.

SALES RETURNS AND WARRANTIES

The Company accrues for estimated sales returns/exchanges for end user sales
and warranty costs upon recognition of sales. The Company has not experienced
significant warranty claims to date.

ADVERTISING EXPENSE

The cost of advertising is expensed as incurred. The Company incurred
$370,945, $340,086 and $292,608 in advertising costs during 1996, 1995 and 1994,
respectively.

NET LOSS PER SHARE

Net loss per share applicable to common stockholders in 1996 is computed
using the weighted average number of shares of common stock outstanding during
the period.

The 1995 and 1994 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, however,
pursuant to the Securities and Exchange Commission Staff Accounting Bulletins,
common stock and common equivalent shares issued by the Company at prices below
the public offering price during the four quarters ended March 31, 1995 have
been included in the calculation as if they were outstanding for all periods
through March 31, 1995 (using the treasury stock method for warrants and options
at the initial public offering price). Net loss per share for 1994 calculated on
this basis was $(2.44).

In 1994 pro forma net loss per share, which is disclosed on the statement of
operations, has been computed as described above and also gives effect, even if
antidilutive, to common equivalent shares

F-8
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
from redeemable convertible preferred stock that converted upon the closing of
the Company's initial public offering (using the if-converted method). All of
the convertible preferred stock outstanding as of the closing date of the
offering automatically converted into 953,054 shares of common stock.

SUPPLEMENTAL NET LOSS PER SHARE

Supplemental net loss per share for 1995 computed to give effect to the
conversion of redeemable convertible preferred shares as of January 1, 1995
(using the if-converted method) was $(1.44). Supplemental net loss per share
excluding the accretion of preferred stock was $(1.10) for 1996.

NOTE 3 -- CONVERTIBLE NOTES AND WARRANTS ISSUED PRIOR TO THE IPO
During August through December 1994 and January through April 1995, the
Company issued $1,765,000 and $1,469,000, respectively, of convertible notes
(collectively the "Pre-IPO Debt Financing"). In June 1995, on completion of the
IPO, $955,000 in convertible note principal was repaid and the balance of
$2,279,000 plus accrued interest of $110,232 (total $2,389,232) was converted to
597,291 shares of common stock.

In return for pro rata participation by Series D redeemable convertible
preferred stockholders in the Pre-IPO Debt Financing, the Company exchanged each
participating stockholder's existing Series D preferred shares purchased at
$8.02 per share for Series D-1 preferred shares at $5.88 per share, and each
participating stockholder's outstanding warrants to purchase Series D preferred
shares at $8.02 per share were exchanged for warrants to purchase an equal
number of common shares at the then fair market value of $0.59 per share. In
June 1995, antidilution provisions in the Series D stockholder agreements
further reduced the conversion price to $5.80 per share for Series D and $4.93
per share for Series D-1. In return for pro rata participation by Series C
preferred stockholders in the Pre-IPO Debt Financing, each participating
stockholder's outstanding warrants to purchase Series C preferred shares at
$6.68 per share were exchanged for warrants to purchase an equal number of
common shares at the then fair market value of $0.59 per share. In June 1995,
antidilution provisions in the Series C stockholder agreements reduced the
conversion price of Series C stock to $5.26 per share. Antidilution provisions
applicable to the Series A and Series B preferred stockholders were waived by
the stockholders. As a result of additional shares issued in the Pre-IPO Debt
Financing for Series D-1 and the additional shares issued to Series C, D and D-1
preferred shareholders for antidilution protection, 769,393 originally issued
preferred shares, constituting all of the preferred shares outstanding at the
time of the IPO, were converted in June 1995 into 953,053 common shares.

During 1993, 1994, and 1995, in connection with the issuance of convertible
notes, the Company issued warrants to purchase 60,458 shares of the Company's
preferred stock. In return for pro rata participation in the Pre-IPO Debt
Financing 53,053 of these warrants were exchanged for an equal number of
warrants to purchase shares of the Company's common stock. After adjustments for
antidilution, these common warrants and remaining preferred warrants were net
exercised into 49,666 shares of common stock. Also, in connection with the
Pre-IPO Debt Financing the Company issued warrants to purchase 165,064 shares of
the Company's common stock. These warrants were subsequently canceled in
connection with the IPO.

NOTE 4 -- SERIES A CONVERTIBLE PREFERRED STOCK
The Board of Directors may issue up to 3,000,000 shares of undesignated
preferred stock in one or more series and may fix the rights, privileges and
restrictions granted to or imposed upon any wholly unissued series of
undesignated preferred stock, as well as to fix the number of shares
constituting any

F-9
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 -- SERIES A CONVERTIBLE PREFERRED STOCK (CONTINUED)
series and designations of such series, without any further vote or action by
the stockholders. In October 1996, the Company designated 1,000,000 shares of
the 3,000,000 Undesignated Preferred Stock as Series A Convertible Preferred
Stock.

On November 1, 1996 (the "Closing"), the Company sold 15,500 shares of its
Series A Convertible Preferred Stock, $0.001 par value, at $100 per share
pursuant to Regulation D of the Securities Act of 1933, as amended (the
"Transaction"). The Transaction was effected pursuant to a Private Offering
Memorandum.

The holders of the Series A Convertible Preferred Stock are entitled to
receive dividends at an annual rate of 6% (adjusted ratably if a holder converts
Series A Convertible Preferred Stock into Common Stock prior to a Dividend
Payment Date, as defined hereafter), payable on April 1, 1997 and November 1,
1997 (each a "Dividend Payment Date"), and otherwise when, and as and if
declared by the Board of Directors at the same rate as to which any dividend is
declared and paid on shares of Common Stock. No dividends shall be declared or
paid on any shares of Common Stock unless an equal or greater dividend is paid
on the Series A Convertible Preferred Stock in the same year. Each share of
Series A Convertible Preferred Stock is convertible at the option of the holder,
in whole or in part, at any time on or after the 60th day following the Closing,
into shares of Common Stock of the Company equal to $100 divided by the lower
of: (i) $2 5/8; and (ii) 65% of the average bid price of the Company's Common
Stock, as reported on the OTC bulletin board, for the five business days prior
to the business day on which notice of conversion is transmitted by the holder
of such share of Series A Convertible Preferred Stock, subject to adjustment in
certain events. Each share of Series A Convertible Preferred Stock shall be
converted automatically into shares of Common Stock on the earliest of (i)
immediately preceding a merger or consolidation of the Company if as a result of
such transaction the holders of Common Stock would receive publicly traded
securities with a market value greater than the initial liquidation preference
of the Series A Convertible Preferred Stock or (ii) November 1, 1997. The
Company recorded accretion of $542,500 for the 35% discount given to the Series
A convertible preferred stockholders in the fourth quarter of 1996.

In the event of any liquidation, dissolution or winding up of the Company,
the assets of the Company are to be distributed first to each holder of the
Series A Convertible Preferred Stock in an aggregate amount equal to the number
of shares of the Series A Convertible Preferred Stock held by such holder
multiplied by $100, plus any declared or unpaid dividends thereon; next to the
holders of the Common Stock in an aggregate amount equal to the number of shares
of Common Stock held by each holder multiplied by the per share Stated Value (as
such term is defined in the Certificate of Designation); and thereafter the
holders of the Common Stock and the Series A Convertible Preferred Stock are
entitled to share pro rata in all remaining assets of the Company available for
distribution, with the number of shares held by each holder of Series A
Convertible Preferred Stock deemed to be the number of shares of Common Stock
into which the shares of Series A Convertible Preferred Stock are then
convertible. As long as any Preferred Stock is outstanding, certain
consolidations or mergers, sales or dispositions of all or substantially all of
the assets of the Company or a transaction resulting in the sale of the shares
representing a majority of the voting power of the Company are deemed to be a
liquidation, dissolution or winding up of the Company for these purposes.

F-10
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4 -- SERIES A CONVERTIBLE PREFERRED STOCK (CONTINUED)
rights, preferences or privileges of the Series A Convertible Preferred Stock so
as to materially adversely affect the Series A Convertible Preferred Stock, to
increase the number of shares of Series A Convertible Preferred Stock, and in
order to reissue any shares that are acquired by the Company.

In connection with the Transaction, the placement agent received a warrant
to purchase 43,539 shares of common stock at an exercise price of $3.56 per
share. The warrant is immediately exercisable and has a 5 year term. No shares
were converted as of December 31, 1996.

NOTE 5 -- BANK FINANCING ARRANGEMENTS
The Company entered into a credit agreement (the Agreement) with a bank,
which commenced in July 1995 and expires in June 1997. The Agreement is secured
by all of 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 at an interest rate of the lenders index rate, which is
based on prime, plus 1.5% (9.75% at December 31, 1996). The Agreement contains
covenants that require the Company to maintain certain financial ratios. The
Company was not in compliance with the covenants at December 31, 1996 which
include tangible net worth, total liability to tangible net worth and current
ratios, and has obtained a waiver from the bank. As of December 31, 1996,
outstanding borrowings under the Agreement were $322,743.

In addition to the line of credit, the Company has an available letter of
credit for $500,000 under an agreement with a bank. This agreement is secured by
various international accounts receivables and a California Export Finance
Program Guarantee. At December 31, 1996, no amounts were outstanding under the
letter of credit.

NOTE 6 -- CAPITAL LEASE OBLIGATIONS AND EQUIPMENT FINANCINGS
The Company leases certain of its equipment under capital leases. At
December 31, 1996 and 1995, property and equipment with a cost of $478,165 and
$387,656, respectively, were subject to such financing arrangements. Related
accumulated amortization at December 31, 1996 and 1995, amounted to $271,569 and
$120,935, respectively. Future minimum payments under capital lease and
equipment financing arrangements as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997.................................................................... $ 139,534
1998.................................................................... 94,695
1999.................................................................... 27,206
---------
Total minimum payments................................................ 261,435
Less amount representing interest....................................... (49,464)
---------
Present value of net minimum payments................................... 211,971
Less current portion.................................................... (109,236)
---------
Long-term portion..................................................... $ 102,735
---------
---------
</TABLE>

F-11
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7 -- COMMITMENTS
The Company leases its operating facilities under a five-year noncancelable
operating lease which expires in October 2001. Future minimum lease payments
under operating leases net of sublease receipts are as follows:

Rental expense under all operating leases was $330,097, $413,616 and
$222,816 for the years ended December 31, 1996, 1995 and 1994, respectively.

The Company subleases a former facility under a noncancelable operating
lease which expires in November 1997. Future minimum lease receipts under this
sublease are $33,534.

NOTE 8 -- STOCK OPTION PLANS
The Company's 1993 Stock Option/Stock Issuance Plan (the 1993 Plan) provides
for the grant of incentive stock options and nonstatutory stock options or the
immediate issuance of the Company s common stock to employees, directors, and
consultants of the Company at prices not less than 85% of the fair market value
of the common stock on the date of grant, as determined by the Board of
Directors. The vesting and exercise provisions are determined by the Board of
Directors, with a maximum term of ten years. Options granted and shares issued
under the 1993 Plan generally vest over a four-year period, with 25% vesting
after one year and 2.08% each month afterwards. Unvested shares which have been
purchased are subject to repurchase by the Company.

Information with respect to the 1993 Plan is summarized as follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
----------------------------
AVAILABLE NUMBER OF WEIGHTED AVERAGE
FOR GRANT SHARES PRICE PER SHARE
---------- --------- -----------------
<S> <C> <C> <C>
Balance at December 31, 1993................................. 53,597 58,628 $ 0.49
Increase in shares authorized.............................. 121,577 -- --
Granted.................................................... (177,568) 177,568 0.62
Canceled................................................... 16,249 (16,249) 0.38
Exercised.................................................. -- (6,322) 0.64
---------- --------- ------
Balance at December 31, 1994................................. 13,855 213,625 0.60
Increase in shares authorized.............................. 23,380 -- --
Granted.................................................... (16,617) 16,617 0.59
Canceled................................................... 62,887 (62,887) 0.60
Exercised.................................................. -- (23,596) 0.51
---------- --------- ------
Balance at December 31, 1995................................. 83,505 143,759 0.61
Canceled................................................... 13,386 (13,386) 0.62
Exercised.................................................. -- (38,106) 0.56
---------- --------- ------
Balance at December 31, 1996................................. 96,891 92,267 $ 0.63
---------- --------- ------
---------- --------- ------
</TABLE>

F-12
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 -- STOCK OPTION PLANS (CONTINUED)
As of December 31, 1996, 67,286 options were exercisable. The Company has
not granted options from the 1993 Plan since February 1995 and does not intend
to make any future grants from the 1993 Plan. The weighted average contractual
life for options outstanding under the 1993 Plan at December 31, 1996 is
approximately 7.1 years.

The Company's 1995 Stock Plan (the 1995 Plan) provides for the grant of
incentive stock options and nonstatutory stock options to employees, directors,
and consultants of the Company. The exercise price per share of all incentive
stock options granted must be at least equal to the fair market value per share
of Common Stock on the date of grant. The exercise price per share of all
nonstatutory stock options shall be not less than 85% of the fair market value
of the common stock on the date of grant. The vesting and exercise provisions
are determined by the Board of Directors, with a maximum term of ten years.

Information with respect to the 1995 Plan is summarized as follows:

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
-----------------------------
AVAILABLE NUMBER OF WEIGHTED AVERAGE
FOR GRANT SHARES PRICE PER SHARE
---------- ---------- -----------------
<S> <C> <C> <C>
Shares authorized.......................................... 285,000 -- $ --
Granted.................................................... (175,749) 175,749 5.00
Canceled................................................... 48,047 (48,047) 5.00
---------- ---------- ------
Balance at December 31, 1995................................. 157,298 127,702 5.00
Increase in shares authorized.............................. 150,000 -- --
Granted.................................................... (360,650) 360,650 2.98
Canceled................................................... 91,254 (91,254) 4.60
Repriced options canceled.................................. 260,192 (260,192) 4.12
Repriced options granted................................... (260,192) 260,192 1.55
---------- ---------- ------
Balance at December 31, 1996................................. 37,902 397,098 $ 1.57
---------- ---------- ------
---------- ---------- ------
</TABLE>

In December 1996, the Company granted employees, including executives, the
option to exchange 260,192 options with an aggregate exercise price of
$1,073,260 for new options with an exercise price of $1.55 per share. All vested
options that are repriced will vest monthly over an additional one year period
and the unvested repriced options will vest under the original terms of the
option grant. As of December 31, 1996, no options were exercisable. The weighted
average contractual life for options outstanding under the 1995 Stock Plan at
December 31, 1996 is approximately 10 years.

The Company has elected to follow Accounting Principle Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. For options granted prior to the initial public offering, the fair
value for these options was estimated at the date of grant using the Minimum
Value option pricing method with the following assumption for 1995: a risk-free
interest rate of 5.67%; a dividend yield of

F-13
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 8 -- STOCK OPTION PLANS (CONTINUED)
0%; and an expected life of options of 5.5 years. For options granted subsequent
to the initial public offering, the fair value for these options was estimated
at the date of grant using the Black-Scholes option pricing model with the
following assumptions: a risk-free interest rate of 5.43%; a dividend yield of
0%; a volatility factor of the expected market price of the Company's common
stock of .60; and an expected life of the option of 5.5 years.

The Minimum Value option valuation method may be used by nonpublic companies
to value an award. The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the expected stock
price volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.

Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of Statement 123, the Company's net loss per
share would have increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Pro forma net loss applicable to common stockholders.................... $ (3,921,363)
Pro forma net loss...................................................... $ (3,381,295)
Pro forma loss per share................................................ $ (1.30) $ (1.66)
</TABLE>

Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1999.

NOTE 9 -- WARRANTS
The Company issued warrants to purchase common stock in connection with its
initial public offering and periodically granted warrants in connection with
certain note agreements and certain lease agreements. The Company has the
following warrants outstanding to purchase common stock at December 31, 1996:

<TABLE>
<CAPTION>
NUMBER PRICE PER
CAPITAL STOCK OF SHARES SHARE EXPIRATION DATE
- -------------------------------------------------- --------- --------- -------------------
<S> <C> <C> <C>
Common............................................ 4,985 $ 5.26 June 1998
Common............................................ 550,275 $ 7.20 June 2000
Common............................................ 150,000 $ 7.20 June 2000
Common............................................ 43,539 $ 3.56 November 2001
Common............................................ 8,791 $ 5.6875 December 2001
</TABLE>

The common warrants expiring in June 2000 are subject to certain dilution
adjustments resulting from the subsequent issuance of common stock at prices
below the initial public offering price for the Company's common stock.

F-14
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 10 -- SHARES RESERVED
Common stock reserved for future issuance was as follows at December 31,
1996:

<TABLE>
<S> <C>
Stock option plans outstanding (see Note 8).............................. 489,365
Reserved for future stock option grants (see Note 8)..................... 134,793
Common stock warrants (see Note 9)....................................... 564,051
Underwriter's warrants (see Notes 4 and 9)............................... 193,539
Series A Preferred Stock (see Note 4).................................... 3,000,000
---------
Total common stock reserved for future issuance........................ 4,381,748
---------
---------
</TABLE>

NOTE 11 -- INCOME TAXES
Due to the Company's loss position, there was no provision for income taxes
for the years ended December 31, 1996, 1995, and 1994.

As of December 31, 1996, the Company had federal and state net operating
loss carryforwards of approximately $9,100,000 and $4,500,000, respectively. The
Company also had federal and state tax credit carryforwards of approximately
$139,000 and $113,000, respectively. The net operating loss and credit
carryforwards will expire at various dates beginning in 1997 through 2011, if
not utilized.

The utilization of the federal net operating loss, and the deduction of
equivalent federal tax credit carryforwards of approximately $5,200,000 included
in the above amounts will be subject to a cumulative annual limitation of
approximately $600,000 per year pursuant to the stock ownership change provision
of the Tax Reform Act of 1986. Future changes in ownership, including stock
offerings, may result in additional limitations.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amount used for income tax purposes. Significant components of
deferred tax assets are as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Net operating loss carryforwards........................................ $ 3,370,000 $ 2,183,000
Credits................................................................. 213,000 181,000
Capitalized research and development costs.............................. 854,000 774,000
Reserves................................................................ 158,000 79,000
Other................................................................... 282,000 291,000
-------------- --------------
Total deferred tax assets............................................. 4,877,000 3,508,000
Valuation allowance for deferred tax assets............................. (4,877,000) (3,508,000)
-------------- --------------
Net deferred tax assets............................................... $ -- $ --
-------------- --------------
-------------- --------------
</TABLE>

NOTE 12 -- INDUSTRY AND GEOGRAPHIC INFORMATION
The Company conducts its business within one industry segment. Export
revenues, predominately representing sales to European countries, accounted for
approximately 40% of total revenue for the years ended December 31, 1996 and
1995, and 52% for the year ended December 31, 1994. The Company had no
significant operations outside the United States through December 31, 1996.

F-15
<PAGE>
SOCKET COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 13 -- MAJOR CUSTOMERS
Customers who accounted for at least 10% of total revenues were as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Ingram Micro..................................................................... 17% 11% *
Tech Data........................................................................ 12% 12% 16%
Mitsubishi (UK).................................................................. * 20% 16%
</TABLE>

- ------------------------
* Revenues were less than 10%

NOTE 14 -- RELATED PARTIES
The Company had outstanding accounts payable to the Impact Zone of $18,654,
$39,763 and $56,984 at December 31, 1996, 1995, and 1994 respectively, and
incurred expenses during the years ended December 31, 1996, 1995, and 1994 of
$211,329, $130,340 and $361,169 respectively. The former Vice President of
Engineering, currently technical consultant to the Company is a principal
stockholder of The Impact Zone. The Impact Zone provides consulting services,
rents office space, and rents equipment on a month-to-month basis to the
Company.

The Company incurred expenses during the years ended December 31, 1995, and
1994 of $11,314 and $69,917, respectively, to a director and stockholder of the
Company for consulting services. No amounts were incurred or outstanding for the
year ended December 31, 1996.

NOTE 15 -- RETIREMENT PLAN
During fiscal year 1996, the Company adopted a tax-deferred savings plan,
the Socket Communications, Inc. 401(k) Plan, for the benefit of qualified
employees. The plan is designed to provide employees with an accumulation of
funds at retirement. Qualified employees may elect to make contributions to the
plan on a quarterly basis. No contributions are made by the Company.

NOTE 16 -- EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF INDEPENDENT AUDITOR'S
REPORT
On January 29, 1997, the Company received a $500,000 loan from Cetronic AB
("Cetronic") 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 terms of each note are identical to the terms of the Cetronic
Note except that these notes are unsecured.

F-16
<PAGE>
GLOSSARY

<TABLE>
<S> <C>
10Base2 A network connection scheme that utilizes coaxial cable, also
called Thinnet
10BaseT A network connection scheme that utilizes unshielded twisted
pair cable, also called UTP
BBS An electronic Bulletin Board System, accessed via a modem, that
enables users to read, deposit and retrieve messages and
computer files
E-mail A store-and-forward system whereby computer users can exchange
specially formatted messages and computer data
Ethernet A hardware and software protocol for connecting computers
together to create a local area network
Euromessage A consortium of European paging carriers that includes France
Telecom (France), Dete Mobile (Germany), Hutchison and
Sprintel (U.K.), SIP (Italy) and Euromessage (Holland)
Fax/modem A device that uses telephone lines to enable computers to send
and receive faxes and exchange data with other computers
FLEX A high speed paging protocol recently introduced by Motorola
Hot Swap In the context of PC cards, the ability to interchange cards
while application programs are running and have applications
recognize the new cards automatically
ISV Independent Software Vendor, an organization that sells
proprietary software
LapLink A program that connects two PCs via a standard serial or
parallel port and that enables users to copy more data than
will fit on a floppy disk
Message Reconciliation The ability to identify messages that were sent to a wireless
device but were not received, and to cause missed messages
either to be rebroadcast to the wireless device, read back by
an operator over a phone, or transferred to a PC via modem
NDIS A popular Ethernet software protocol for sending data packets
between networked computers
ODI A popular Ethernet software protocol for sending data packets
between networked computers
OEM Original Equipment Manufacturer, an organization that purchases
a product from a third party manufacturer and incorporates
that product within a broader package, often under the OEM's
private label
Paging infrastructure The base of satellites, transmission towers, wireline
connections, repeaters, concentrators, computers, and routers
that make up the wireless data network used to provide paging
carrier service.
PCMCIA Personal Computer Memory Card International Association, a
trade association and a hardware and software specification
for credit card sized devices used in mobile computers
Plug and play In the context of PC cards, the ability of a computer's
operating system to recognize a card automatically
</TABLE>

G-1
<PAGE>
<TABLE>
<S> <C>
POCSAG Post Office Code Standardisation Advisory Group, a worldwide
standard used for transmitting wireless alphanumeric messages
to page receivers
PROCOMM A popular software program that enables computers to
communicate via modems
REFLEX A two-way paging protocol being developed by Motorola
SDK Software Developers Kit, a set of software tools that enable
application developers to customize a product
UART Universal Asynchronous Receiver Transmitter, a device that
enables a computer to send and receive serial data
VAR Value Added Reseller, a reseller who offers customers extra
hardware, software or service that enhances a product
</TABLE>

G-2
<PAGE>
- ---------------------------------------------
---------------------------------------------
- ---------------------------------------------
---------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

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

TABLE OF CONTENTS
----------------------

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 17
Dividend Policy........................................................... 17
Price Range of Common Stock............................................... 18
Capitalization............................................................ 19
Selected Financial Data................................................... 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 26
Management................................................................ 37
Certain Transactions...................................................... 45
Principal Stockholders.................................................... 46
Description of Capital Stock.............................................. 50
Shares Eligible for Future Sale........................................... 53
Underwriting.............................................................. 55
Legal Matters............................................................. 56
Experts................................................................... 56
Index to Financial Statements............................................. F-1
Glossary.................................................................. G-1
</TABLE>

2,500,000 SHARES

[LOGO]

COMMON STOCK

FEBRUARY , 1997

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

PROSPECTUS

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

H.J. MEYERS & CO., INC.

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's Board of Directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article X of the Registrant's Certificate of
Incorporation (Exhibit 3.1 hereto) and Article VI of the Registrant's Bylaws
(Exhibit 3.2 hereto) provide for indemnification of the Registrant's directors,
officers, employees and other agents to the maximum extent permitted by Delaware
Law. In addition, the Registrant has entered into Indemnification Agreements
(Exhibit 10.1 hereto) with its officers and directors and certain stockholders.
The Underwriting Agreement (Exhibit 1.1 hereto) also provides for
cross-indemnification among the Company and the Underwriter with respect to
certain matters, including matters arising under the Securities Act.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
SEC registration fee............................................................. $ 664
NASD filing fee.................................................................. 719
Nasdaq SmallCap Market listing fee............................................... 7,500
Printing and engraving expenses.................................................. 75,000
Legal fees and expenses.......................................................... 80,000
Accounting fees and expenses..................................................... 60,000
Blue Sky fees and expenses....................................................... 35,000
Transfer agent and custodian fees................................................ 3,500
Representative's non-accountable expense allowance............................... 150,000
Miscellaneous.................................................................... 47,617
-----------
Total.......................................................................... $ 460,000
-----------
-----------
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

Since January 1, 1994, the Registrant has issued and sold the following
unregistered securities:

(1) In January 1994, the Registrant issued to the following lenders
convertible promissory notes bearing interest at 8% per year (the "Second Series
C Notes") in the aggregate principal amount of $787,000: Bass Associates,
Bayview Investors, Ltd., Jack Carsten, El Dorado C&L Fund, El Dorado Ventures
III, El Dorado Technology IV, A.J. Houston, Bruno Kovarich, George Schneer, J.F.
Shea Co., and Bernard Vonderschmitt. In connection with the issuance of the
Second Series C Notes, the Registrant issued to these lenders warrants (the
"Second Series C Warrants") to purchase an aggregate of 30,559 shares of Series
C Preferred at an exercise price of $6.68 per share. Catherine Goodrich assisted
the Registrant with the issuance of the Second Series C Notes and, in
consideration for such services was granted on option to purchase 623 shares of
Common Stock.

(2) In March 1994, the Registrant issued to an equipment lessor a warrant to
purchase 3,923 shares of Series C Preferred.

II-1
<PAGE>
(3) In March 1994, the Registrant issued to Dale Gifford, the Registrant's
former Vice President of Engineering and a technical consultant to the Company,
13,093 shares of Common Stock, valued at $8,400, in consideration for past
consulting services.

(4) In April 1994, the First Series C Notes and Second Series C Notes, plus
all accrued interest, converted into an aggregate of 165,236 shares of Series C
Preferred.

(5) In March and April 1994, the Registrant issued to the following lenders
(the "Series D Investors") convertible promissory notes bearing interest at 8%
per year (the "Series D Notes") in the aggregate principal amount of $500,000:
Bass Associates, Scott Brassfield, Larry Cary, El Dorado Technology IV, El
Dorado Ventures III, El Dorado C&L Fund, Isfahan Holdings, Louis Co., Kenneth
Morrissey, SPAR & CO, and Phillip White. In connection with the issuance of the
Series D Notes, the Registrant issued to these lenders warrants (the "Series D
Warrants") to purchase an aggregate of 15,639 shares of Series D Preferred Stock
("Series D Preferred") at an exercise price of $8.02 per share.

(6) In May 1994, the Registrant issued and sold 118,460 shares of Series D
Preferred to the El Dorado C&L Fund, El Dorado Ventures III, El Dorado
Technology IV L.P. and SPAR & Co. for aggregate cash consideration of $950,000.
In conjunction with the issuance and sale of the Series D Preferred, the Series
D Notes, plus all accrued interest, converted into an aggregate of 62,561 shares
of Series D Preferred. In connection with the issuance of the Series D
Preferred, H.J. Meyers & Co., Inc. was paid a commission of $23,400, and was
issued 1,561 shares of Series D Preferred and 390 Series D Warrants. In
addition, H.J. Meyers & Co., Inc. received the right to have a designee attend
the meetings of the Registrant's Board of Directors as an observer.

(7) In August and October 1994, the Registrant issued to Jack Carsten, a
director of the Registrant, 8,978 shares of Common Stock in exchange for
consulting services.

(8) From August through December 1994 and in January 1995, the Registrant
issued to the following lenders convertible promissory notes in the aggregate
principal amount of $1,824,000 (the "First Bridge Notes"): Bass Associates,
Gerald Houston, Deborah Salzman, Howard Green, James Light, Alan Rubin, Summit
International, Isfahan Holdings, Scott Brassfield, Jack Carsten, El Dorado
Technology IV, El Dorado C&L Fund, El Dorado Ventures III, David House, Richard
Petritz, J.F. Shea Co., Catherine Goodrich, George Schneer, Bernard
Vonderschmitt, Bruno Kovarich, DiComm Ventures, A.J. Houston, Bayview Investors,
Ltd., and James Diller. In connection with the issuance of the First Bridge
Notes: (i) 6,858 of the First Series C Warrants and all of the Second Series C
Warrants were converted into warrants to purchase 37,417 shares of Common Stock
at $0.59 per share; (ii) 12,516 of the Series D Warrants were converted into
warrants to purchase 12,516 shares of Common Stock at $0.59 per share; and (iii)
168,533 shares of Series D Preferred were converted into the right to receive
229,818 shares of Series D-1 Preferred Stock.

(9) In February 1995, the First Bridge Notes were amended to extend the due
date to May 15, 1995.

(10) In March 1995, the First Bridge Notes were amended to extend the due
date to August 15, 1995.

(11) In March and April 1995, the Registrant issued to the following lenders
convertible promissory notes in the aggregate principal amount of $1,410,000:
Dain Hancock, David House, Jolinde Profit Sharing Account, Donna Miller, Deborah
Salzman, Lawrence Weisman, Edwin Brotemarkle, Bass Associates, Jack Carsten, CAT
Finance AG, Arnold Curnyn, El Dorado Ventures III, El Dorado Technology IV, El
Dorado C&L Fund, Richard & Sandra Mutchler, James Ratliff, George Schneer, J.F.
Shea Co., Jeff & Sue Schoenbaum, and Bernard Vonderschmitt. In connection with
such issuance, H.J. Meyers & Co., Inc. was paid aggregate commissions of
$58,500, plus a non-accountable expense allowance of $8,775.

II-2
<PAGE>
(12) In November 1996, the Company sold 15,500 shares of its Series A
Convertible Preferred shares for aggregate cash consideration of $1,550,000
pursuant to the registration exemption provided by Regulation D of the Act to:
Arnold Wong, Berckeley Investment Group, Coutts & Co. AG, Harry Salzman, Jerry
Houston, Julius Baer Securities, Peter G. Colmer, Roderick Deleersnijder, Ronald
& Nancy Thomas Family Trust, Swedbank (Luxembourg) S.A., VanMoer Santerre & Cie
and Weinberg Family Trust.

The issuances of the securities described in paragraphs (1) through (12)
above were deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) under the Securities Act, Regulation D under the
Securities Act or Rule 701 promulgated under Section 3(b) of the Securities Act
as transactions by an issuer not involving a public offering or transactions
pursuant to compensatory benefit plans and contracts relating to compensation as
provided under such Rule 701.

In addition, between March 31, 1992 and March 31, 1995, the Registrant
issued an aggregate of 7,160 shares of its Common Stock to Jack Carsten, Dave
Johnson and Daniel Wilcken pursuant to the exercise of options granted by the
Registrant. Options to purchase 6,225 of these shares had an issue price of
$0.64 per share and options to purchase the remaining 935 shares had exercise
prices of $0.59 per share. The Registrant relied upon the exemption from the
registration requirements of the Securities Act provided under Section 4(2)
and/or Rule 701 of the Securities Act.

ITEM 27. EXHIBITS

<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S>
1.1(2) Form of Underwriting Agreement.

3.1(1) Amended and Restated Certificate of Incorporation of Registrant.

3.2(1) Bylaws of Registrant.

4.1(2) Form of Underwriter's Warrant.

4.2(1) Specimen Common Stock Certificate.

5.1 Opinion of Wilson Sonsini Goodrich & Rosati, P.C.

10.1(1) Form of Indemnification Agreement entered into between Registrant and its directors and officers.

10.2(1) 1993 Stock Option/Stock Issuance Plan and forms of agreement thereunder.

10.3(1) 1995 Stock Plan and forms of agreement thereunder.

10.4(1) Amended and Restated Investors' Rights Agreement among the Registrant and certain stockholders of the
Registrant dated May 6, 1994.

10.5 Standard Lease Agreement by and between Central Court, LLC and the Registrant dated September 15, 1996.

10.6(1) PageCard Development, Manufacturing and Distribution Agreement by and between Mitsubishi Corporation and
the Registrant dated December 1, 1994.

10.7(1) Co-Marketing and Services Agreement by and between The National Dispatch Center, Inc. and the Registrant
dated February 6, 1995.

10.8(1) Employment Agreement between Micheal Gifford and the Registrant dated July 27, 1996.

10.9(1) Employment Agreement between Martin Levetin and the Company dated February 2, 1996.

11.1 Statement of computation of earnings per share.
</TABLE>

II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
- -----------
<C> <S>
23.1 Consent of Independent Auditors (see page II-6).

23.2 Consent of Counsel (included in Exhibit 5.1).

24.1 Power of Attorney (see page II-5).
</TABLE>

- ------------------------
(1) Incorporated by reference to the Registration Statement on Form SB-2 (No.
33-91210-LA) filed by the Registrant with the Securities and Exchange
Commission and declared effective on June 6, 1995.

(2) To be filed by amendment.

ITEM 28. 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 24 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
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:

That for purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

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;

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 the Offering.

II-4
<PAGE>
SIGNATURES

In accordance with 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 SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Fremont,
State of California, on the 20th day of February, 1997.

SOCKET COMMUNICATIONS, INC.

By: /s/ MARTIN S. LEVETIN

-----------------------------------
Martin S. Levetin
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND DIRECTOR

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints, jointly and severally, Martin S. Levetin and
David Dunlap, and each one of them, individually and without the other, his or
her attorney-in-fact, each with the power of substitution, for him or her in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------------------- ------------------------------------ ----------------------
<C> <S> <C>

/s/ MARTIN S. LEVETIN President, Chief Executive Officer
---------------------------------------- and Director (Principal Executive February 20, 1997
Martin S. Levetin Officer)

Chief Financial Officer and Vice
/s/ DAVID DUNLAP President of Finance and
---------------------------------------- Administration (Principal Financial February 20, 1997
David Dunlap and Accounting Officer)

/S/ MICHEAL GIFFORD
---------------------------------------- Executive Vice President and February 20, 1997
Micheal Gifford Director

/s/ CHARLIE BASS
---------------------------------------- Chairman of the Board of Directors February 20, 1997
Charlie Bass

/s/ JACK CARSTEN
---------------------------------------- Director February 20, 1997
Jack Carsten

/s/ GARY KALBACH
---------------------------------------- Director February 20, 1997
Gary Kalbach
</TABLE>

II-5
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference of our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated January 31, 1997 in the
Registration Statement (Form SB-2) and related Prospectus of Socket
Communications, Inc. for the registration of 2,875,000 shares of Common Stock,
one Underwriter's Warrant, and 250,000 shares of Common Stock issuable upon
exercise of the Underwriter's Warrant.

ERNST & YOUNG LLP

San Jose, California
February 21, 1997

II-6
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
1.1(2) Form of Underwriting Agreement...................................................................

3.1(1) Amended and Restated Certificate of Incorporation of Registrant..................................

3.2(1) Bylaws of Registrant.............................................................................

4.1(2) Form of Underwriter's Warrant....................................................................

4.2(1) Specimen Common Stock Certificate................................................................

5.1 Opinion of Wilson Sonsini Goodrich & Rosati, P.C.................................................

10.1(1) Form of Indemnification Agreement entered into between Registrant and its directors and
officers........................................................................................

10.2(1) 1993 Stock Option/Stock Issuance Plan and forms of agreement thereunder..........................

10.3(1) 1995 Stock Plan and forms of agreement thereunder................................................

10.4(1) Amended and Restated Investors' Rights Agreement among the Registrant and certain stockholders of
the Registrant dated May 6, 1994................................................................

10.5 Standard Lease Agreement by and between Central Court, LLC and the Registrant dated September 15,
1996............................................................................................

10.6(1) PageCard Development, Manufacturing and Distribution Agreement by and between Mitsubishi
Corporation and the Registrant dated December 1, 1994...........................................

10.7(1) Co-Marketing and Services Agreement by and between The National Dispatch Center, Inc. and the
Registrant dated February 6, 1995...............................................................

10.8(1) Employment Agreement between Micheal Gifford and the Registrant dated July 27, 1996..............

10.9 Employment Agreement between Martin Levetin and the Company dated February 2, 1996...............

11.1 Statement of computation of earnings per share...................................................

23.1 Consent of Independent Auditors (see page II-6)..................................................

23.2 Consent of Counsel (included in Exhibit 5.1).....................................................

24.1 Power of Attorney (see page II-5)................................................................
</TABLE>

(2) To be filed by amendment.

<PAGE>

EXHIBIT 5.1

January 10, 1997

Socket Communications, Inc.
6500 Kaiser Drive
Fremont, California 94555

RE: REGISTRATION STATEMENT ON FORM SB-2

Ladies and Gentlemen:

We have examined the Registration Statement on Form SB-2 to be filed by
you with the Securities and Exchange Commission on January 10, 1997 (as such
may thereafter be amended or supplemented, the "Registration Statement"),
in connection with the registration under the Securities Act of 1933, as
amended, of 8,625,000 shares of your Common Stock, $0.001 par value (the
"Shares") including warrants to purchase 5,750,000 shares of Common Stock
(the "Warrants"). The Shares and Warrants include an over-allotment option
granted to the Underwriters to purchase 1,125,000 Shares, including 750,000
Warrants. We understand that the Shares and Warrants are to be sold to the
Underwriters for resale to the public as described in the Registration
Statement. As your legal counsel, we have examined the proceedings taken, and
are familiar with the proceedings proposed to be taken by you in connection
with the sale and issuance of the Shares and the Warrants.

It is our opinion that, upon completion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the issuance of
the Shares and Warrants, including the proceedings being taken in order to
permit such transaction to be carried out in accordance with applicable state
securities laws, the Shares and Warrants, when issued and sold in the manner
described in the Registration Statement and in accordance with the
resolutions adopted by the Board of Directors of the Company, will be legally
and validly issued, fully paid and nonassessable.

We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in
the Registration Statement, including the Prospectus constituting a part
thereof, and any amendments thereto.

Very truly yours,

WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation

<PAGE>

STANDARD LEASE AGREEMENT

BY AND BETWEEN

CENTRAL COURT, LLC,
a California limited liability company ("Landlord")

AND

SOCKET COMMUNICATIONS, INC.,
a Delaware corporation ("Tenant")

<PAGE>

TABLE OF CONTENTS

1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Agreed Interest Rate . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Commencement Date. . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Common Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 [Intentionally deleted.] . . . . . . . . . . . . . . . . . . . . . 1
1.5 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.10 Leasehold Improvements . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Monthly Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Permitted Use. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.14 Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.15 Prepaid Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.16 Private Restrictions . . . . . . . . . . . . . . . . . . . . . . . 2
1.17 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.18 Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.19 [Intentionally deleted.] . . . . . . . . . . . . . . . . . . . . . 3
1.20 Tenant's Minimum Liability Insurance Coverage. . . . . . . . . . . 3
1.21 Tenant's Work. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 Trade Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. TERM AND ACCEPTANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Delivery and Acceptance of Possession. . . . . . . . . . . . . . . 3
2.2 Early Occupancy. . . . . . . . . . . . . . . . . . . . . . . . . . 4

3. RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Monthly Payments . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Additional Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Payment of Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.4 Late Charge and Interest on Rent in Default. . . . . . . . . . . . 4
3.5 Prepayment of Rent . . . . . . . . . . . . . . . . . . . . . . . . 5
3.6 Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . 5

<PAGE>

4. USE OF PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Limitation on Type . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Compliance with Laws and Private Restrictions. . . . . . . . . . . 6
4.3 Insurance Requirements . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Outside Areas. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Signs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.6 Rules and Regulations. . . . . . . . . . . . . . . . . . . . . . . 7
4.7 Parking and Reservation of Rights. . . . . . . . . . . . . . . . . 7
4.8 Window Coverings . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.9 Auctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

5. TRADE FIXTURES AND LEASEHOLD IMPROVEMENTS. . . . . . . . . . . . . . . . 8
5.1 Trade Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.2 Leasehold Improvements . . . . . . . . . . . . . . . . . . . . . . 9
5.3 Alterations Required by Law. . . . . . . . . . . . . . . . . . . .10
5.4 Initial Improvements . . . . . . . . . . . . . . . . . . . . . . .10
5.5 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

6. REPAIR, MAINTENANCE AND OPERATING EXPENSES . . . . . . . . . . . . . . .12
6.1 Tenant's Obligation to Maintain. . . . . . . . . . . . . . . . . .12
6.2 Landlord's Obligation to Maintain. . . . . . . . . . . . . . . . .13
6.3 Control of Common Area . . . . . . . . . . . . . . . . . . . . . .14
6.4 Tenant's Negligence. . . . . . . . . . . . . . . . . . . . . . . .14

7. WASTE DISPOSAL AND UTILITIES . . . . . . . . . . . . . . . . . . . . . .14
7.1 Waste Disposal . . . . . . . . . . . . . . . . . . . . . . . . . .14
7.2 Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . .15
7.3 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
7.4 Compliance with Governmental Regulations . . . . . . . . . . . . .16

8. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.1 [Intentionally deleted.] . . . . . . . . . . . . . . . . . . . . .16
8.2 Taxes on Tenant's Property . . . . . . . . . . . . . . . . . . . .16

9. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
9.1 Tenant's Insurance . . . . . . . . . . . . . . . . . . . . . . . .16
9.2 Landlord's Insurance . . . . . . . . . . . . . . . . . . . . . . .18
9.3 Release and Waiver of Subrogation. . . . . . . . . . . . . . . . .18

10. LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY . . . . . . . . . . . .18
10.1 Limitation on Landlord's Liability . . . . . . . . . . . . . . . .18

<PAGE>

10.2 Limitation on Tenant's Recourse . . . . . . . . . . . . . . . . .19
10.3 Indemnification of Landlord . . . . . . . . . . . . . . . . . . .19

11. DAMAGE TO PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . .19
11.1 Landlord's Duty to Restore . . . . . . . . . . . . . . . . . . . .19
11.2 Landlord's Right to Terminate . . . . . . . . . . . . . . . . . .20
11.3 Tenant's Right to Terminate . . . . . . . . . . . . . . . . . . .20
11.4 Abatement of Rent . . . . . . . . . . . . . . . . . . . . . . . .21

12. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
12.1 Taking of Premises. . . . . . . . . . . . . . . . . . . . . . . .21
12.2 Taking of Common Area . . . . . . . . . . . . . . . . . . . . . .22
12.3 Restoration and Abatement of Rent . . . . . . . . . . . . . . . .22
12.4 Temporary Taking. . . . . . . . . . . . . . . . . . . . . . . . .22
12.5 Division of Condemnation Award. . . . . . . . . . . . . . . . . .22

13. DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . .23
13.1 Events of Tenant's Default. . . . . . . . . . . . . . . . . . . .23
13.2 Landlord's Remedies . . . . . . . . . . . . . . . . . . . . . . .24
13.3 Landlord's Default and Tenant's Remedies. . . . . . . . . . . . .26
13.4 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26

14. ASSIGNMENT AND SUBLETTING. . . . . . . . . . . . . . . . . . . . . . . .26
14.1 By Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
14.2 By Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . .29

15. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .30
15.1 Landlord's Right to Enter . . . . . . . . . . . . . . . . . . . .30
15.2 Surrender of the Premises . . . . . . . . . . . . . . . . . . . .30
15.3 Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . . .31
15.4 Non-Disturbance, Subordination. . . . . . . . . . . . . . . . . .31
15.5 Tenant's Attornment . . . . . . . . . . . . . . . . . . . . . . .31
15.6 Mortgagee Protection. . . . . . . . . . . . . . . . . . . . . . .32
15.7 Estoppel Certificates and Financial Statements. . . . . . . . . .32
15.8 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . .32
15.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
15.10 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . .33
15.11 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . .33
15.12 Termination by Exercise of Option . . . . . . . . . . . . . . . .34
15.13 Brokerage Commissions . . . . . . . . . . . . . . . . . . . . . .34
15.14 Right to Lease Additional Space . . . . . . . . . . . . . . . . .34

iii

<PAGE>

15.15 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . .37
15.16 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . .37

<PAGE>

STANDARD LEASE AGREEMENT

THIS LEASE AGREEMENT, dated September 15, 1996, for reference purposes
only, is made by and between CENTRAL COURT, LLC, a California limited
liability company ("Landlord"), and Socket Communications, Inc., a Delaware
corporation ("Tenant").

1. DEFINITIONS: As used herein the following terms shall have the following
meanings:

1.1 AGREED INTEREST RATE: The term "Agreed Interest Rate" shall mean
that interest rate determined as of the time it is to be applied that is
equal to the lesser of (i) two percent (2%) in excess of the "prime rate"
published from time to time by the Bank of America, N.A., or (ii) the maximum
interest rate permitted by law.

1.2 COMMENCEMENT DATE: The term "Commencement Date" shall mean November
1, 1996. However, if the Premises are not delivered by October 1, 1996, then
the Commencement Date shall be extended one (1) day for each day that
possession is delayed beyond October 1, 1996.

1.3 COMMON AREA: The term "Common Area" shall mean all areas and
facilities within the Property designated as common area on the site plan
attached hereto as EXHIBIT A, (including the parking areas, access and
perimeter roads, pedestrian sidewalk, landscaped areas, trash enclosures, and
the like).

1.4 [INTENTIONALLY DELETED.]

1.5 EFFECTIVE DATE: The term "Effective Date" shall mean the date the
last signatory to this Lease, whose execution is required to make it binding
on the parties hereto shall have executed this Lease.

1.6 HAZARDOUS MATERIALS: The term "Hazardous Materials" shall mean
asbestos, radon, petroleum fractions, and any other substance, material or
waste designated as toxic, hazardous, acutely hazardous, extremely hazardous,
radioactive or biohazardous or otherwise as a danger to health or the
environmental under any Law now or hereafter enacted.

1.7 LAW: The term "Law" shall mean any judicial decision, statute,
constitution, ordinance, resolution, regulation, rule, administrative order,
or other requirement of any municipal, county, state, federal, or other
government agency or authority having jurisdiction over the parties to this
Lease or the Premises or both, in effect either at the Effective Date of this
Lease or any time during the Lease Term, including, without limitation, any
regulation, order, or policy of any quasi-official entity or body (e.g.,
board of fire examiners, public utilities or special district).

<PAGE>

1.8 LEASE: The term "Lease" shall mean this printed lease, Exhibits "A"
(site plan), "B" (deleted), "C" (deleted), "D" (Rules and Regulations), "E"
(space plan) and "F" (expansion space) all of which are attached hereto and
incorporated herein by this reference, together with any amendment to this
Lease or such exhibits executed by the parties in accordance with Section
15.18.

1.9 LEASE TERM: The term "Lease Term" shall mean that period of time
commencing on the Commencement Date and ending on October 31, 2001. The
Lease Term shall be extended one (1) day for each day possession is delayed
beyond October 1, 1996 as set forth in Section 1.2 above.

1.10 LEASEHOLD IMPROVEMENTS: The term "Leasehold Improvements" shall
mean all improvements, additions, alterations, and fixtures installed in the
Premises by Tenant at its expense which are not Trade Fixtures.

1.11 LENDER: The term "Lender" shall mean (i) any beneficiary,
mortgagee, secured party, or other holder of any deed of trust, mortgage or
other written security device or agreement affecting the Property, and the
note or other obligations secured by it, and (ii) the Lessor under any
underlying ground lease under which Landlord holds its interest in the
Property.

1.12 MONTHLY RENT: The term "Monthly Rent" shall mean Sixteen Thousand
Three Hundred Twenty-Five and 40/100 Dollars ($16,325.40).

1.13 PERMITTED USE: The term "Permitted Use" shall mean the use of the
Premises for the research and development, testing, assembly, warehousing,
shipment and repair of electronic products and the office and other legal
uses incidental thereto. The "Permitted Use" may be modified only with the
consent of the Landlord, which consent may be withheld, only if (i) the
requested use is incompatible with the other tenants of the Property, (ii)
involves the use of Hazardous Materials or other dangerous materials or
processes, (iii) violates applicable Laws or Private Restrictions, (iv)
reduces the Landlord's financial security in the Lease, or (v) is otherwise
unsuitable in Landlord's reasonable opinion.

1.14 PREMISES: As of the Commencement Date, the term "Premises" shall
mean approximately twenty-three thousand three hundred twenty-two (23,322)
square feet of space located in the Property (as outlined in the site plan
attached hereto as EXHIBIT A.)

1.15 PREPAID RENT: The term "Prepaid Rent" shall mean the sum of
Sixteen Thousand Three Hundred Twenty-Five and 40/100 Dollars ($16,325.40).

1.16 PRIVATE RESTRICTIONS: The term "Private Restrictions" shall mean
all covenants, conditions and restrictions, private agreements, reciprocal
easement agreements, and any other instruments (herein "encumbrances")
affecting the use of the Premises recorded as of the Effective Date and all
encumbrances recorded after the Effective Date (i) which do not materially
interfere with Tenant's

<PAGE>

then existing use of the Premises or, alternatively, which are approved by
Tenant, which approval shall not be unreasonably withheld or delayed.
Nothing herein shall be deemed to require Tenant's consent to any encumbrance
of the Property.

1.17 PROPERTY: The term "Property" shall mean that real property with
all improvements now or hereafter located thereon commonly known as 37600
Central Court, Newark, Alameda County California described by the site plan
attached hereto as EXHIBIT A; provided, however, that Landlord may change the
boundaries and composition of the Property by removing or adding land and/or
buildings and, thereafter the term "Property" shall refer to such real
property so enlarged or reduced, so long as such change does not materially
interfere with Tenant's use and quiet enjoyment of the Property.

1.18 SECURITY DEPOSIT: The term "Security Deposit" shall mean the sum
of Twenty-Eight Thousand Three Hundred Twenty-Five and 40/100 Dollars
($28,325.40).

1.19 [INTENTIONALLY DELETED.]

1.20 TENANT'S MINIMUM LIABILITY INSURANCE COVERAGE: The term "Tenant's
Minimum Liability Insurance Coverage" shall mean Two Million Dollars
($2,000,000.00).

1.21 TENANT'S WORK: The term "Tenant's Work" shall mean those certain
alterations, additions and improvements which Tenant shall construct in the
Premises pursuant to Section 5.4 hereof.

1.22 TRADE FIXTURES: The term "Trade Fixtures" shall mean anything
affixed to the Premises by Tenant at its expense for purposes of trade,
manufacture, ornament, or domestic use (except replacement of similar work or
material originally installed by Landlord) which can be removed without
injury to the Premises unless such thing has, by the manner in which it is
affixed, become an integral part of the Premises; provided, however, that all
of Tenant's signs shall be Trade Fixtures regardless of how affixed to the
Premises.

2. TERM AND ACCEPTANCE: Landlord hereby leases the Premises to Tenant for
the Lease Term on the following terms and conditions:

2.1 DELIVERY AND ACCEPTANCE OF POSSESSION: Landlord shall use all
reasonable efforts to deliver to Tenant possession of the Premises on or
before October 1, 1996. Landlord has no obligation to construct any
improvements in the Premises nor to undertake any repair of the Premises,
except as expressly provided in Section 2.1 and 6.2, below. Tenant
acknowledges that it has had an ample opportunity to inspect the Premises and
every portion thereof, and all legal, development and other matters
associated with the Premises and that neither Landlord, nor anyone acting on
behalf of the Landlord, has made any representation, express or implied, upon
which Tenant is relying in executing this Lease except as provided in this
Section 2.1. Subject only to the express terms of this

<PAGE>

Lease, by executing this Lease, Tenant acknowledges its acceptance of the
Premises in their existing, "as is" condition, with all faults (including,
without limitation, any deviations from or failure to fulfill the Americans
with Disabilities Act), and Tenant hereby waives any claim it may have
concerning the condition of the Premises, the permitted uses thereof, or the
fitness of the Premises for Tenant's use except that Landlord warrants that
(a) the Premises were in compliance with all laws, codes, regulations and
ordinances of any governmental authorities at the time the original
construction of the Premises was completed; and (b) as of the date Landlord
delivers possession of the Premises to Tenant the plumbing, electrical, gas,
HVAC and other utility systems serving the Premises are in good condition and
repair. Landlord further represents that Landlord does not have any
knowledge of contamination of the soil or groundwater on the Premises that is
in violation of any laws.

2.2 EARLY OCCUPANCY: If Tenant enters or permits its contractors to
enter the Premises prior to the Commencement Date with the written permission
of Landlord, it shall do so upon all of the terms of this Lease (including
its obligations regarding indemnity and insurance).

3. RENT:

3.1 MONTHLY PAYMENTS: Commencing on the Commencement Date and
continuing on the first day of each month throughout the Lease Term, Tenant
shall pay to Landlord the Monthly Rent for the Premises ("Monthly Rent") in
the amount of Sixteen Thousand Three Hundred Twenty-Five and 40/100 Dollars
($16,325.40).

3.2 ADDITIONAL RENT: Commencing on the Commencement Date and continuing
throughout the Lease Term, Tenant shall pay, as additional rent (the
"Additional Rent"), (i) Landlord's share of the net consideration received by
Tenant upon certain assignments and sublettings as required by Section 14.1,
(ii) any late charges, interest, and/or attorneys' fees due Landlord pursuant
to Sections 3.4 and 15.10 and (iii) any other amounts due Landlord pursuant
to this Lease.

3.3 PAYMENT OF RENT: All Monthly Rent and any other amounts required to
be paid in monthly installments shall be paid in advance on the first day of
each calendar month during the Lease Term. All amounts due hereunder shall
be paid in lawful money of the United States, without any abatement,
deduction or offset whatsoever, and without any prior demand therefor, to
Landlord at its address set forth above or at such other place as Landlord
may designate from time to time. Tenant's obligation to pay Monthly Rent
shall be prorated for any partial month based on a thirty (30) day month.

3.4 LATE CHARGE AND INTEREST ON RENT IN DEFAULT: Tenant acknowledges
that the late payment by Tenant of any monthly installment of Monthly Rent or
any Additional Rent will cause Landlord to incur certain costs and expenses
not contemplated under this Lease, the exact amount of which are extremely
difficult or impractical to fix. Such costs and expenses will include,
without limitation, administration and collection costs and processing and
accounting expenses. Therefore, if any such Monthly Rent is not received by
Landlord from Tenant within three (3) days after the

<PAGE>

delinquent amount became due or if any Additional Rent is not received within
three (3) days after written notice that the amount was not paid when due,
Tenant shall immediately pay to Landlord a late charge equal to five percent
(5%) of such delinquent rent. Landlord and Tenant agree that this late
charge represents a reasonable estimate of such costs and expenses and is
fair compensation to Landlord for its loss suffered by Tenant's failure to
make timely payment. In no event shall this provision for a late charge be
deemed to grant to Tenant a grace period or extension of time within which to
pay any rent or prevent Landlord from exercising any right or remedy
available to Landlord upon Tenant's failure to pay any rent due under this
Lease in a timely fashion, including the right to terminate this Lease. If
any amount due hereunder is not paid on or before the third (3rd) day
following the due date, then, in addition to such late charge, Tenant shall
pay to Landlord interest on the delinquent amount (but not on any late charge
imposed with respect to such amount) at the Agreed Interest Rate from the
date such amount became due until paid.

3.5 PREPAYMENT OF RENT: Concurrent with the execution of this Lease by
both parties, Tenant shall pay to Landlord the Prepaid Rent, in the amount
specified above, as prepayment of rent for credit against the first
installment(s) of Monthly Rent due hereunder.

3.6 SECURITY DEPOSIT: Concurrent with the execution of this Lease by
both parties, Tenant shall deposit with Landlord the Security Deposit, in the
amount specified above, as security for the performance by Tenant of all of
its obligations hereunder, and not as prepayment of rent. At all times
Tenant shall insure that the amount held by Landlord as a Security Deposit is
equal to the greater of the Monthly Rent then payable under pursuant to this
Lease or the amount of the Security Deposit specified in Section 1. Landlord
may apply such portion or portions of the Security Deposit as are reasonably
necessary for the following purposes: (i) to remedy any default by Tenant in
the payment of Monthly Rent or Additional Rent, (ii) to repair damage to the
Premises caused by Tenant; (iii) to clean the Premises upon termination of
the Lease; and (iv) to the extent permitted by law, to remedy any other
default of Tenant and, in this regard, Tenant hereby waives any restriction
on the uses to which the Security Deposit may be put contained in Section
1950.7 of the California Civil Code. In the event the Security Deposit or
any portion thereof is so used, Tenant agrees to pay to Landlord promptly
upon demand an amount in cash sufficient to restore the Security Deposit to
the full original sum. Landlord shall not be deemed a trustee of the
Security Deposit. Landlord may use the Security Deposit in Landlord's
ordinary business and shall not be required to segregate it from its general
accounts. Tenant shall not be entitled to any interest on the Security
Deposit. If Landlord transfers the Premises during the Lease Term, Landlord
may pay the Security Deposit to any subsequent owner in conformity with the
provisions of Section 1950.7 of the California Civil Code and/or any
successor statute, in which event the transferring, Landlord will be released
from all liability for the return of the Security Deposit.

<PAGE>

4. USE OF PREMISES:

4.1 LIMITATION ON TYPE: Tenant may use the Premises solely for the
Permitted Use and for no other purpose. Tenant shall not do or permit
anything to be done in or about the Premises or the Common Area which will
(i) interfere with the rights of other occupant(s) of the Property, (ii)
cause structural injury to the Property, or (iii) cause damage to any part of
the Property except to the extent reasonably necessary for the installation
of Tenant's equipment and trade fixtures, and then only in a manner which has
been first approved by Landlord in writing. Tenant shall not operate any
equipment within the Premises which will (i) injure, vibrate or shake the
Premises, (ii) overload existing electrical systems or other mechanical
equipment servicing the Premises, or (iii) impair the efficient operation of
the sprinkler system or the heating, ventilating or air conditioning ("HVAC")
equipment within or servicing the Premises, (iv) damage, overload, or corrode
the sanitary sewer system. Tenant shall not attach, hang or suspend anything
from the ceiling, roof, walls or columns of the premises or set any load on
the floor in excess of approved structural limits as reasonably defined by
Landlord's architect. Any dust, fumes, or waste products generated by
Tenant's use of the Premises shall be contained and disposed so that they do
not (i) create a fire or health hazard, (ii) damage the Premises, or (iii)
interfere with the businesses of other tenants of the Property. All noise or
odors generated by Tenant's use of the Premises shall be contained or muffled
so that they do not interfere with the businesses of other tenants of the
Property. Tenant shall not change the exterior of the Premises or install
any equipment or antennas on or make any penetrations of the exterior or roof
of the Building. Tenant shall not commit nor permit to be committed any
waste in or about the Premises, and Tenant shall keep the Premises in a neat,
clean, attractive and orderly condition, free of any Hazardous Materials
introduced to the Premises by Tenant or its agents, representatives,
contractors or invitees, and any objectionable noises, odors, dust or
nuisances which may disturb the quiet enjoyment of other tenants or occupants
of the Premises.

4.2 COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS: Tenant shall not use
or permit any person to use the Premises in any manner which violates any
Laws or Private Restrictions. Tenant shall abide by and promptly observe and
comply with all Laws and Private Restrictions (including the Americans with
Disabilities Act) affecting the Premises or the Tenant's use thereof; and
shall indemnify and hold Landlord harmless from any liability resulting from
Tenant's failure so to do; provided, however, that Tenant shall have no
obligation to comply with any Law requiring improvements to any portion of
the Property lying outside the demising walls of the Premises or to the
structural or the exterior demising walls of the Premises, except to the
extent required as a consequence of the use (other than customary office use)
of the Premises by Tenant.

4.3 INSURANCE REQUIREMENTS: Tenant shall not use or permit any person
to use the Premises or the Common Area in any manner which will cause the
existing rate of insurance upon the Property, or any of its contents, to be
increased (unless Tenant pays the increase upon demand) or cause a
cancellation of any insurance policy covering the Premises. Tenant shall not
sell, or permit to be kept, used, or sold in or about the Premises any
article which may be prohibited by the standard form of fire

<PAGE>

insurance policy. Tenant shall comply with all requirements of any insurance
company, insurance underwriter, or Board of Fire Underwriters which are
necessary to maintain, at standard rates, the insurance coverage carried by
either Landlord or Tenant pursuant to this Lease.

4.4 OUTSIDE AREAS: Tenant shall have no access to the atrium area of the
Property. To prohibit such access and screen Tenant's kitchen uses, Tenant
shall not remove and shall maintain as part of the Premises the existing
sheetrock covering the glazing of the kitchen area of its Premises and covering
the doors to the atrium portion of the Property from the Premises in good
condition and repair as indicated on EXHIBIT G. No materials, supplies, tanks
or containers, equipment, finished products or semi-finished products, raw
materials, inoperable vehicles or articles of any nature shall be stored upon or
permitted to remain outside of the Premises except in fully fenced and screened
areas outside the Premises, which have been designed for such purpose and have
been designated by Landlord for such use by Tenant.

4.5 SIGNS: Landlord, at its expense, shall identify Tenant on the
existing monument sign. Tenant shall also have the right to place a sign, at
Tenant's sole cost and expense, on the door of the Premises with the written
approval of Landlord, which approval shall not be unreasonably withheld or
delayed. Except as set forth above, Tenant shall not place on any portion of
the Premises, or the Property any sign, placard, lettering in or on windows,
banner, displays or other advertising or communicative material which is visible
from the exterior of the Premises without the prior written approval of
Landlord. All such approved signs shall strictly conform to all Laws and
Private Restrictions, and shall be installed at the expense of Tenant. Tenant
shall, at the expiration or sooner termination of this Lease, remove all signs
installed by it and repair any damage caused by such removal. Tenant shall at
all times maintain such signs in good condition and repair.

4.6 RULES AND REGULATIONS: Tenant shall comply with the Rules and
Regulations applicable to the Property, which are attached hereto as EXHIBIT D.
Landlord may from time to time promulgate reasonable rules and regulations for
the care and orderly management of the Property and the safety of its tenants
and invitees. Such rules and regulations shall be binding upon Tenant upon
delivery of a copy thereof to Tenant, and Tenant agrees to abide by such rules
and regulations. If there is a conflict between the rules and regulations and
any of the provisions of this Lease, the provisions of this Lease shall prevail.
Landlord shall not be responsible for the violation by any other tenant of the
Property of any such rules and regulations. Notwithstanding the foregoing,
Tenant shall not be required to comply with any new rule or regulation, unless
the same applies non-discriminatorily to all occupants of the Project and does
not unreasonably interfere with Tenant's use of the Premises or Tenant's parking
rights.

4.7 PARKING AND RESERVATION OF RIGHTS: Without additional rental charge,
Landlord shall allocate for Tenant's non-exclusive use seventy-three (73)
parking spaces within the area shown on EXHIBIT A. Tenant shall have the
nonexclusive right to use such parking spaces in common with other tenants of
the Property. Although Landlord shall have no duty to police the use of any
particular space, Tenant, at its expense, may mark, on the curb, twenty (20)
additional spaces, designated by Landlord, adjacent to the entry of the
Premises, as "[Tenant Name] Parking Only" and, if the

<PAGE>

Premises is expanded pursuant to Section 15.14, then Tenant may also mark one
(1) additional space designated by Landlord in the area adjacent to the entry
of the Premises in such manner, for each 333 additional square feet of such
expansion space. Tenant shall not at any time use or permit its employees or
invitees to use more parking spaces than the number so allocated to Tenant or
to park or permit the parking of its vehicles or the vehicles of others in
any portion of the Property not designated by Landlord as Tenant's parking
area. Within two (2) business days after written request therefor from
Landlord, Tenant shall furnish Landlord with a list of its and its employees
vehicle license numbers. Landlord reserves the right, after having given
Tenant reasonable notice, to have any vehicles owned by Tenant or its
employees or invitees utilizing parking spaces in excess of the parking
spaces allowed for Tenant's use or otherwise in violation of this Lease to be
towed away at Tenant's cost. All deliveries shall be made (i) in a manner
and at such hours as landlord shall specify and (ii) in a manner which does
not interfere with the businesses of other occupants of the Property. In the
event Landlord is required by any Law to limit or control parking in the
Property, whether by validation of parking tickets or any other method of
assessment, Tenant agrees to participate in such validation or assessment
program under such reasonable rules and regulations as are from time to time
established by Landlord. Landlord also shall grant to Tenant the right to use
the Common Area for ingress to and egress from the Premises in common with
the other Tenant's of the Property, reserving and excepting to Landlord the
use of the exterior walls, the roof and the area beneath and above the
Premises, together with the right to install, maintain, use, and replace
ducts, wires, conduits and pipes leading through the Premises in locations
which will not materially interfere with Tenant's use of the Premises.
Tenant's lease of the Premises shall be subject to (i) all Laws, (ii) all
Private Restrictions, easements, and other matters of public record, and
(iii) the reasonable rules and regulations from time to time promulgated by
Landlord governing the use of the Common Area. Landlord shall have no
obligation to police the use or safety of the parking lot.

4.8 WINDOW COVERINGS: Tenant shall use a window covering identical to
the window coverings in the other portions of the Property or such other
window covering as is reasonably acceptable to Landlord to cover all windows
in the Premises.

4.9 AUCTIONS: Tenant shall not conduct or permit to be conducted on any
portion of the Premises, or the Property any sale of any kind, including (i)
any public or private auction; fire sale, going-out-of-business sale,
distress sale, or other liquidation sale, or (ii) any so-called "flea
market," open-air market, or any other similar activity.

5. TRADE FIXTURES AND LEASEHOLD IMPROVEMENTS:

5.1 TRADE FIXTURES: Throughout the Lease Term, Tenant shall provide,
install, and maintain in good condition all Trade Fixtures required in the
conduct of its business in the Premises. All Trade Fixtures brought onto the
Premises at the Tenant's expense shall remain Tenant's property.

<PAGE>

5.2 LEASEHOLD IMPROVEMENTS: Tenant shall not construct any Leasehold
Improvements or otherwise alter the Premises without Landlord's prior
approval and not until Landlord shall have first approved the plans and
specifications therefor, which approval shall not be unreasonably withheld.
In no event shall Tenant make any alterations to the Premises which could
affect the structural integrity or the exterior of the Premises. All such
approved Leasehold Improvements shall be installed by Tenant at Tenant's
expense using a licensed contractor first reasonably approved by Landlord in
substantial compliance with the approved plans and specifications therefor.
Landlord may require, among other things, as a condition of approval of such
contractor, that such contractor at all times during the period of
construction of the Leasehold Improvements carry general liability insurance
with such coverages and liability limits as may be reasonably required by
Landlord, and worker's compensation insurance in compliance with Law, issued
by insurance companies licensed to do business in the state of California,
and naming Landlord as an additional insured on all such policies where
applicable.

All construction undertaken by Tenant shall be done in accordance with
all Laws and in a good and workmanlike manner using new materials of good
quality. Tenant shall not commence construction of any Leasehold Improvements
until (i) all required governmental approvals and permits shall have been
obtained, (ii) all requirements regarding insurance imposed by this Lease
have been satisfied, (iii) Tenant shall have given Landlord at least five (5)
days prior written notice of its intention to commence such construction,
(iv) Tenant shall have notified Landlord by telephone of the commencement of
construction on the day it commences, and (v) if requested by Landlord in its
reasonable discretion, Tenant shall have obtained contingent liability and
broad form builders' risk insurance or completion and performance bonds in an
amount reasonably satisfactory to Landlord, naming Landlord as an additional
insured; provided, however, that no performance bonds shall be required for
the initial Tenant Improvements made pursuant to Section 5.4 if (a) Tenant
provides Landlord with at least five (5) days' written notice prior to
commencement of construction, stating that Landlord needs to post a notice of
non-responsibility on the Premises and (b) Tenant shall cooperate with
Landlord in the posting and maintaining of the notice. In the event that no
notice, or an insufficient notice, of non-responsibility is posted through no
fault of Landlord, upon Landlord's request, Tenant shall stop construction
work on the Premises until a proper, legally valid notice is posted. All
Leasehold Improvements shall remain the property of Tenant during the Lease
Term, but shall not be damaged, altered, or removed from the Premises. At
the expiration or sooner termination of the Lease Term, all Leasehold
Improvements shall be surrendered to Landlord as a part of the realty and
shall then become Landlord's property, and Landlord shall have no obligation
to reimburse Tenant for all or any portion of the value or cost thereof;
provided, however, that if Landlord requires Tenant to remove any Leasehold
Improvements in accordance with the provisions of Section 15.2, then Tenant
shall so remove such Leasehold Improvements prior to the expiration or sooner
termination of the Lease Term. Notwithstanding the foregoing, Tenant may
construct nonstructural alterations, additions and improvements
("Alterations") in the Premises, which do not affect the HVAC, electrical,
plumbing, or other building service centers, and are not visible outside of
the Premises without Landlord's prior approval, if the cost of such work does
not exceed Twenty-Five

<PAGE>

Thousand Dollars ($25,000) and if Tenant provides Landlord with notice prior
to commencement of the work, in order to permit Landlord to post a notice of
non-responsibility.

Upon written request of Tenant, Landlord shall advise Tenant in writing
whether it reserves the right to require Tenant to remove the Alterations
that are the subject of the request from the Premises upon termination of the
Lease. Landlord shall provide a written response within fifteen (15) days
indicating that Landlord will allow Tenant to leave the Alterations in place.
If no response is received, then it shall be presumed that Landlord has
reserved its right to require removal of the Alterations that are the subject
of the request.

5.3 ALTERATIONS REQUIRED BY LAW: Tenant shall make any alteration,
addition or change of any sort, whether structural or otherwise, to the
Premises that is required by any Law by reason of Tenant's use (other than
customary office use) of the Premises.

5.4 INITIAL IMPROVEMENTS: Tenant shall construct in the Premises those
certain improvements shown or described on the plans for such improvements
(the "Space Plan") described in EXHIBIT E ("Tenant's Work") in accordance
with the following.

A. Landlord and Tenant shall use reasonable good faith efforts to
reach agreement upon final plans, specifications and working drawings for
Tenant's Work (the "Final Plans") which Final Plans shall reflect the logical
and reasonable evolution and development of the Space Plan.

B. Except as otherwise provided to the contrary in this Section
5.4, Tenant shall construct Tenant's Work in accordance with the requirements
set forth in Section 5.2 hereof.

C. Except to the extent specifically made the obligation of
Landlord pursuant to this Subsection C, Tenant shall be solely responsible
for the payment of all costs incurred in connection with the design,
governmental approval, and construction of Tenant's Work; provided, however,
that, subject to Subpart E of this Section, below, Landlord shall be
obligated to reimburse Tenant for the cost of installing carpet in the
Premises in an amount not exceeding Twelve Thousand Dollars ($12,000.00) (the
"Allowance"). Landlord shall disburse to Tenant the Allowance only when:

(i) Tenant shall have delivered to Landlord any other
document, evidence or information that Landlord may
reasonably request to evidence and confirm that the
Tenant's Work for which Landlord seek reimbursement has been
completed in accordance with the Final Plans and Tenant has
otherwise fulfilled in all material respects the terms and
conditions of this Section with respect to the Tenant's Work
that has been done prior to the request for disbursement of
the Allowance.

<PAGE>

(ii) No default or event of default shall have occurred, nor
shall there have occurred any event which (with the giving
of notice or the passage of time or both) could constitute
such a default or event of default, under this Agreement.

(iii) Landlord shall have no reason to believe that any
activities of Tenant or Tenant's employees, agents,
contractors or representatives in connection with the
Premises and Tenant's Work fail to comply with any Laws, nor
shall there exist any litigation, revocation or suspension
pending or threatened with respect to compliance with any
such Laws.

D. The recarpeting of the Premises paid for with Landlord's funds
shall become the property of Landlord upon installation and shall not be removed
or altered by Tenant, except in accordance with Section 5.2. Any part of
Tenant's Work which is constructed by Tenant with funds of Tenant shall become
the property of Tenant upon installation and Tenant shall have the right to
depreciate and claim and collect investment tax credits in such improvements;
provided, however, that (i) Tenant shall not remove or alter such improvements
during the term of the Lease, except as permitted by Section 5.2; (ii) such
improvements shall be surrendered to Landlord, and title to such improvements
shall vest in Landlord, at the expiration or earlier termination of the Lease
Term; and (iii) in no event shall Landlord have any obligation to pay Tenant for
the cost or value of such improvements.

E. On or before January 1, 1997, Tenant shall:

(i) complete all of the Tenant's Work in accordance with
the approved Final Plans and all applicable Laws and in
a good and workmanlike manner;

(ii) obtain from every mechanic, materialman, supplier,
contractor and subcontractor providing goods or
services to the Premises in connection with Tenant's
Work (and shall have delivered to Landlord) waivers and
releases of mechanics' liens, stop notice claims,
equitable lien claims and all other lien claim rights
in form reasonably satisfactory to Landlord.

(iii) Tenant shall have caused a notice of completion
for Tenant's Work in the form and in the manner
required by Section 3093 of the California Civil
Code to be recorded in the Office of the Recorder
of Alameda County within ten (10) days after
Tenant's Work has been substantially completed.
(If Tenant should fail to record such notice
within such ten (10)-day period, then Landlord
shall have the right to (i) cause such notice to
be recorded (and Tenant shall execute or cause to
be executed any and all documents required by Law
to enable Landlord to do so); and/or (ii) withhold
reimbursement of the Allowance until the statutory
period for the filing of mechanic's liens has run
(or in lieu thereof, Tenant has provided Landlord
with a

<PAGE>

mechanic's lien bond acceptable to Landlord
protecting Landlord from mechanic's liens and stop
notices for Tenant's Work).)

If Tenant fails to perform the obligations required in this Subsection E on or
before January 1, 1997, then, without limiting Landlord's other rights and
remedies on account of Tenant's default, Tenant shall reimburse to Landlord any
Allowance previously paid to Tenant, which sum shall be held as additional
security for the Tenant's obligations under this Lease in accordance with
Section 3.6, above. The Tenant shall be entitled to a re-disbursement of the
Allowance only when all of the obligations of Tenant in this Section 5.4 have
been preformed and the conditions to disbursement of the Allowance set forth in
subparts (ii) and (iii) of Subsection C, above, are met as of the date of the
re-disbursement.

F. Notwithstanding anything to the contrary in this Lease, in no
event shall Landlord have any obligation to bring the area inside the Premises
into compliance with the Americans with Disabilities Act and all such compliance
shall be the obligation of Tenant and covered by Tenant's Work.

5.5 LIENS: Tenant shall keep the Premises and the Property free from any
liens and shall pay when due all bills arising out of any work performed,
materials furnished, or obligations incurred by Tenant, its agents, employees or
contractors relating to the Premises. If any claim of lien is recorded, Tenant
shall bond against or discharge the same within ten (10) days after notice that
the same has been recorded against the Premises and/or the Property. Should
Tenant receive any notice that a lien or stop notice be filed against the
Premises of the Allowance, or that an action has commenced affecting the
Premises or the Tenant's Work, Tenant shall immediately deliver to Landlord
written notice of such fact.

6. REPAIR, MAINTENANCE AND OPERATING EXPENSES:

6.1 TENANT'S OBLIGATION TO MAINTAIN: Except as otherwise provided in
Section 11 (restoration of damage caused by fire and other perils) and in
Section 6.2 (Landlord's maintenance obligations), Tenant shall, at its sole
expense, at all times during the Lease Term, regularly inspect, service
clean, keep, and maintain in good order, condition, and repair (i) the
Premises, and every part thereof within the exterior demising walls,
foundation and roof of the Premises, (ii) all plate glass within the Premises
and, to the extent damaged by the negligence or willful misconduct of Tenant
or its agents, employees, contractors, sublessees, or invitees or the use
(other than customary office uses) of the Premises by Tenant, the plate glass
constituting the exterior walls of the Premises, (iii) all damage caused to
the Property by (a) the misuse or use (other than office use) of the Premises
during the Lease Term, (b) a breach of Tenant's obligations under this Lease,
or (c) the negligence or willful misconduct of Tenant or its agents,
employees, invitees or sublessees, (iv) the utility facilities serving the
Premises (including electrical wiring and conduits, gas lines, HVAC, water
pipes, building safety equipment, and plumbing and sewage fixtures and pipes)
within or outside the walls, floor, or on the

<PAGE>

roof of the Premises up to the point where such facilities join a main or
other junction (e.g., sewer main or electrical transformer) from which such
utility services are distributed to other parts of the Property as well as to
the Premises, (v) all damage caused to the Property, or any portion thereof,
as a consequence of the negligence, willful misconduct or use (other than
customary office use) of the Premises by Tenant, or its agents, employees,
contractors or invitees, including without limitation, all damage to the roof
caused by the installation, maintenance or operation of a HVAC unit placed
thereon by Tenant as part of Tenant's Work, and (vi) all Tenant's Work. All
repairs and replacements required of Tenant shall be promptly made with new
materials of like kind and quality; except that Landlord may elect to
undertake, at Tenant's cost, any repair required to the building shell,
electrical, HVAC, plumbing, gas, building safety, sewer, water, or other
building systems, the exterior glass, the roof, or any Common Area, which
would otherwise be the obligation of Tenant hereunder. Tenant shall
reimburse Landlord for the cost of such repairs on or before the seventh
(7th) day following delivery of written demand for payment. If the work
affects the structural parts of the Premises or the utility facilities or if
the estimated cost of any item of repair or replacement is in excess of Two
Thousand Five Hundred Dollars ($2,500), then Tenant shall first obtain
Landlord's written approval of the scope of work, plans therefor, materials
to be used, and the contractor.

Notwithstanding the foregoing, (i) Tenant shall not be responsible for
the performance or any cost of repair and maintenance: (a) necessitated
solely by the acts of any other tenants of the Property or their agents,
employees or contractors; (b) necessitated by the occurrence of any act of
God or the exercise of the power of eminent domain; (c) for which the
Landlord has obtained reimbursement from others; (d) to remove, investigate
or remediate Hazardous Materials not introduced to the Premises by Tenant,
its employees, agents, representatives, contractors or invitees, and (ii)
Tenant shall be responsible for replacing any HVAC units placed in the
Premises by Tenant, but shall not be required to perform the replacement of
the HVAC packages serving the Premises. Such replacement shall be performed
by Landlord and Tenant shall reimburse Landlord on the first day of each
month during the lease term for its portion of the total cost of such
replacement. Tenant's share shall be the monthly installment that would be
necessary to amortize a loan in the principal amount of the replacement cost
with interest at the rate of ten percent (10%) per annum over the useful life
of the replacement.

6.2 LANDLORD'S OBLIGATION TO MAINTAIN: Except to the extent required of
Tenant pursuant to Section 6.1, Landlord shall repair and maintain the Common
Area parking lots, walkways, driveways, landscaping fences, and water and
electric installations (to the distribution point from which such utilities are
distributed to the various tenant spaces on the Property); and shall repair and
maintain the roof, exterior demising walls, and structural parts of the building
in good condition and repair in a manner consistent with similar business parks
in the Newark area. Except as provided in Section 11, there shall be no
abatement of rent or liability of Tenant on account of any injury or
interference with Tenant's business with respect to any improvements,
alterations or repairs made by Landlord to the Property or any part thereof.
Landlord shall not be responsible for repairs required by an accident, fire or
other peril, except as otherwise required by Section 11, or for damage caused to
any part of

<PAGE>

the Property by any act, negligence or omission of Tenant or its
agents, contractors, employees or invitees. It is an express condition
precedent to all obligations of Landlord to repair and maintain that Tenant
shall have notified Landlord of the need for such repairs and maintenance,
whereupon Landlord shall promptly commence and diligently prosecute its repair
obligations. Tenant hereby waives the benefits of any statute which would
afford Tenant the right to make repairs at Landlord's expense or to terminate
this Lease because of Lessor's failure to keep the Premises in good order,
condition and repair.

6.3 CONTROL OF COMMON AREA: Landlord shall at all times have exclusive
control of the Common Area. Landlord shall have the right, without the same
constituting an actual or constructive eviction and without entitling Tenant to
any abatement of rent, to: (i) close any part of the Common Area to whatever
extent required in the opinion of Landlord's counsel to prevent a dedication
thereof or the accrual of any prescriptive rights therein; (ii) temporarily
close the Common Area to perform maintenance or for any other reason deemed
sufficient by Landlord; (iii) designate other property outside the boundaries of
the Property to become part of the Property; (iv) change the shape, size,
location, number and extent of improvements on the Common Area including,
without limitation, changes in the location of driveways, entrances,
passageways, doors and doorways, elevators, stairs, restrooms, exits, parking
spaces, parking areas, sidewalks or the direction of the flow of traffic and the
site of the Common Area; and/or (v) change the name or address of the Premises.
The use of the Common Area shall be subject to such reasonable regulation and
changes therein as Landlord shall make from time to time. Landlord shall not
exercise its rights to control the Common Area in a manner that would materially
interfere with Tenant's use of the Premises without first obtaining Tenant's
approval which shall not be unreasonably withheld. Tenant shall keep the Common
Area free and clear of all obstructions created or permitted by Tenant. Nothing
herein shall affect the right of Landlord at any time to remove such
unauthorized person from the Common Area nor to prohibit the use of the Common
Area by unauthorized persons. In exercising any such rights regarding the
Common Area, Landlord shall make a reasonable effort to minimize any disruption
to Tenant's business.

6.4 TENANT'S NEGLIGENCE: Anything in this Lease to the contrary
notwithstanding but subject to the provisions of Section 9.2, Tenant shall pay
for all damage to the Premises or the Property caused by the negligent act or
omission of Tenant, its employees, contractors, or invitees or by the failure of
Tenant to promptly discharge its obligations under this Lease or comply with the
terms of this Lease.

7. WASTE DISPOSAL AND UTILITIES:

7.1 WASTE DISPOSAL: Tenant shall store its waste either inside the
Premises or within outside trash enclosures that are designated. Tenant shall
cause all of its waste to be regularly removed from the Property at Tenant's
sole cost. Tenant shall keep all fire corridors and mechanical equipment rooms
in the Premises free and clear of all obstructions at all times.

<PAGE>

7.2 HAZARDOUS MATERIALS: Tenant shall not store, manufacture, dispose
of, discharge, transport, expose individuals to, or otherwise use Hazardous
Materials in or about the Property (except for normal use of those Hazardous
Materials routinely used for office and janitorial purposes) without
Landlord's written consent, which consent may be withheld in Landlord's sole
discretion. Tenant shall be solely responsible for and shall defend,
indemnify, and hold harmless Landlord and its agents, employees, members,
managers, successors and assigns, from and against all claims, costs,
liabilities, attorneys' fees, experts' fees, costs and expenses of every
type and nature, direct or contingent, arising out of or in connection with
the storage, manufacture, disposal, discharge, transport, exposure of an
individual to, or other use of a Hazardous Materials by Tenant or its agents,
employees, contractors, and/or sublessees. If the presence of Hazardous
Materials on the Premises caused or permitted by Tenant results in the
Contamination of the Property or any other property, then Tenant shall
promptly take any and all action necessary to remove such Contamination. At
any time Landlord may conduct evaluations, investigations, audits and/or
water or soil tests to determine whether Tenant is complying with this Lease
or whether any Contamination is present at the Property. If such tests
reveal the presence of Contamination arising out of or in connection with the
storage, manufacture, disposal, discharge, transport, exposure of an
individual to, or other use of a Hazardous Materials by Tenant or its agents,
employees, contractors, and/or sublessees, then Landlord (i) may require
Tenant, at its cost, to eliminate the Contamination and Hazardous Materials
from the Property and any other affected property, or (ii) may itself take
such steps, at Tenant's cost, as are necessary to eliminate the Contamination
and the Hazardous Materials from the Property and any other affected
property. Tenant shall reimburse Landlord for the cost so expended within
three (3) days following Landlord's written demand therefor. The Tenant's
rights and obligations hereunder shall survive the termination of this Lease
for any reason. As used in this Section, "Contamination" shall mean the
presence of a Hazardous Material in the soil, groundwater, surface water,
ambient air, or building materials of property. Tenant shall have no
obligation under this Lease for any costs, liabilities, attorneys' fees,
experts' fees, costs and expenses of any type and nature, direct or
contingent, arising out of or in connection with the storage, manufacture,
disposal, discharge, transport, exposure of an individual to, or other use of
a Hazardous Materials by parties other than Tenant, its successors,
sublessees and assigns, or the agents, employees and/or contractors of Tenant
or its successors, sublessees or assigns.

7.3 UTILITIES: Tenant shall promptly pay, as the same become due, all
charges for water, gas, electricity, telephone, sewer service, waste pick-up,
and any other utilities, materials or services furnished directly to or used
by Tenant on or about the Premises during the Lease Term, including, without
limitation, (i) meter, use and/or connection fees, hook-up fees, standby
fees, and (ii) penalties for discontinued or interrupted service. If the
space is not separately metered, Landlord shall install separate utility
meters and Tenant and Landlord shall evenly split the costs associated with
such separate metering.

<PAGE>

7.4 COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Landlord and Tenant shall
comply with all rules, regulations and requirements promulgated by national,
state or local governmental agencies or utility suppliers concerning the use
of utility services, including any rationing, limitation or other control.
Landlord may voluntarily cooperate in a reasonable manner with the efforts of
all governmental agencies or utility suppliers in reducing energy or other
resources consumption to the extent such cooperation does not unreasonably
interfere with Tenant's use of the Premises. Tenant shall not be entitled to
terminate this Lease nor to any abatement in rent by reason of such
compliance or cooperation. Tenant agrees at all times to cooperate fully
with Landlord and to abide by all reasonable rules, regulations and
requirements which Landlord may prescribe in order to maximize the efficient
operation of the HVAC system and all other utility systems.

8. TAXES:

8.1 [INTENTIONALLY DELETED.]

8.2 TAXES ON TENANT'S PROPERTY: Tenant shall pay before delinquency any
and all taxes, assessments, license fees, and public charges levied,
assessed, or imposed against Tenant or Tenant's estate in this Lease or the
property of Tenant situated within the Premises which become due during the
Lease Term. On demand by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of these payments. If any portion of such Taxes are
assessed against the Property, Tenant shall reimburse Landlord for the amount
thereof upon demand or will obtain a separate assessment solely to Tenant of
such levies.

9. INSURANCE:

9.1 TENANT'S INSURANCE: Tenant shall maintain insurance complying with
all of the following:

A. Tenant shall procure, pay for and keep in full force and effect,
the following:

(1) Comprehensive general liability insurance, including
property damage, against liability for personal injury,
bodily injury, death and damage to property occurring in or
about, or resulting from an occurrence in or about, the
Premises with combined single limit coverage of not less
than the amount of Tenant's Minimum Liability Insurance
Coverage set forth in Section 1, which insurance shall
contain "fire legal" endorsement coverage and a "contractual
liability" endorsement insuring Tenant's performance of
Tenant's obligation to indemnify Landlord contained in
Section 10.3;

(2) Plate-Glass insurance for plate-glass within the
Premises and the plate-glass on the exterior walls of the
building to the extent damaged by the negligence or willful
misconduct of Tenant or its agents, employees, contractors,
sublessees, or invitees, or

<PAGE>

by Tenant's use (other than customary office use) of the
Premises at actual replacement cost.

(3) Fire and property damage insurance against loss caused
by fire, extended coverage perils including steam boiler
insurance, sprinkler leakage, if applicable, vandalism,
malicious mischief and such other additional perils as now
are or hereafter may be included in a standard extended
coverage endorsement from time to time in general use in the
county in which the Property is located, insuring Tenant's
personal property, inventory, Trade Fixtures, and Leasehold
Improvements within the Leased Premises for the full actual
replacement cost thereof;

(4) Worker's compensation coverage and any other employee
benefit insurance sufficient to comply with all Laws;

(5) With respect to construction, alterations,
improvements, or the like undertaken by Tenant, upon
reasonable demand by Landlord based on such factors as the
size and risk of the work, contingent liability and broad
form builder's risk insurance, in an amount, if any,
necessary to protect Landlord;

(6) Such other insurance that is required by a Lender or
requested by Landlord so long as it is of the type of
coverage and at the rates commonly carried by comparable
businesses and/or landlords similarly situated.

B. Each policy of insurance required to be carried by Tenant pursuant
to this Section (i) shall name Landlord and such other parties in interest as
Landlord designates as additional insureds; (ii) shall be primary insurance
which provides that the insurer shall be liable for the full amount of the loss
up to and including the total amount of liability set forth in the declarations
without the right of contribution from any other insurance coverage of Landlord;
(iii) shall be in a form satisfactory to Landlord; (iv) shall be carried with
companies reasonably acceptable to Landlord; (v) shall provide that such policy
shall not be subject to cancellation, lapse or change except after at least
thirty (30) days prior written notice to Landlord; (vi) shall not have a
"deductible" in excess of Five Thousand Dollars ($5,000) per occurrence;
(vii) shall contain a cross liability endorsement; and (viii) shall contain a
"severability" clause.

C. A copy of each paid-up policy evidencing the insurance required to
be carried by Tenant pursuant to this Section (appropriately authenticated by
the insurer) or a certificate of the insurer, certifying that such policy has
been issued, providing the coverage required by this Section, and containing the
provisions specified herein, shall be delivered to Landlord prior to the time
Tenant or any of its contractor enters the Premises and upon renewal of such
policies, but not less than thirty (30) days prior to the expiration of the term
of such coverage. Landlord may, at any time, and from time to time, inspect
and/or copy any and all insurance policies required to be procured by Tenant

<PAGE>

pursuant to this Section. If Landlord's lender or insurance adviser
reasonably determines at any time that the amount of coverage required for
any policy of insurance Tenant is to obtain pursuant to this Section is not
adequate, then Tenant shall increase such coverage for such insurance to such
amount as Landlord's lender or insurance advisor reasonably deems adequate,
not to exceed the level of coverage commonly carried by comparable businesses
similarly situated for such insurance.

9.2 LANDLORD'S INSURANCE: Landlord shall maintain full replacement cost
fire and extended perils insurance for the Premises.

9.3 RELEASE AND WAIVER OF SUBROGATION: Notwithstanding anything to the
contrary in this Lease, the parties hereto release each other, and their
respective agents, employees, from any liability for injury to any person or
damage to property that is caused by or results from any risk insured against
under any valid and collectible insurance policy carried by either of the
parties which contains a waiver of subrogation by the insurer and is in force
at the time of such injury or damage; provided, however, that any such person
or entity shall not be released from such liability to the extent any damages
resulting from such injury or damage is not covered by the recovery obtained
by the insured from such insurance, but only if the insurance in question
permits such partial release in connection with obtaining a waiver of
subrogation from the insurer. This release shall be in effect only so long
as the applicable insurance policy contains a clause to the effect that this
release shall not affect the right of the insured to recover under such
policy. Each party shall use its best efforts to cause each insurance policy
obtained by it to provide that the insurer waives all right of recovery by
way of subrogation against the other party and its agents and employees in
connection with any injury or damage covered by such policy. However, if any
insurance policy cannot be obtained with such a waiver of subrogation, or if
such waiver of subrogation is only available at additional cost and the party
for whose benefit the waiver is to be obtained does not pay such additional
cost, then the party obtaining such insurance shall notify the other party of
that fact and thereupon shall be relieved of the obligation to obtain such
waiver of subrogation rights from the insurer with respect to the particular
insurance involved.

10. LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY:

10.1 LIMITATION ON LANDLORD'S LIABILITY: Notwithstanding anything to
the contrary in this Lease, except as directly resulting from the gross
negligence, willful misconduct of Landlord, or Landlord's breach of its
obligations under the Lease, Landlord shall not be liable to Tenant, nor
shall Tenant be entitled to terminate this Lease or to any abatement of rent,
for any injury to Tenant, its agents, employees, contractors, or invitees,
damage to Tenant's property, or loss to Tenant's business resulting from any
cause, including without limitation any (i) failure, interruption or
installation of any HVAC or other utility system or service; (ii) failure to
furnish or delay in furnishing any utilities or services when such failure or
delay is caused by Acts of God or the elements, labor disturbances of any
character, any other accidents or other conditions beyond the reasonable
control of Landlord, (iii) maintenance, repairs or improvements to the
Premises, (iv) limitation, curtailment, rationing or

<PAGE>

restriction on the use of water or electricity, gas or any other form of
energy or any services or utility serving the Premises, (v) vandalism or
forcible entry by unauthorized person.

10.2 LIMITATION ON TENANT'S RECOURSE: Notwithstanding anything to the
contrary in this Lease, so long as the Landlord is a corporation, limited
liability company, trust, partnership, joint venture, unincorporated
association, or other form of business entity, (i) the obligations of
Landlord shall not constitute personal obligations of the officers,
directors, trustees, partners, joint venturers, members, owners,
stockholders, or other principals or representatives of such business entity,
and (ii) Tenant shall have recourse only to the assets of such business
entity for the satisfaction of such obligations and not against the assets of
such officers, directors, trustees, partners, joint venturers, members,
owners, stockholders, principals, or representatives, other than to the
extent of their interest in the assets owned by such business entity.

10.3 INDEMNIFICATION OF LANDLORD: Tenant shall hold harmless, indemnify
and defend Landlord, and its employees, agents and contractors, with
competent counsel reasonably satisfactory to Landlord, from all liability,
penalties, losses, damages, costs, expenses, causes of action, claims and/or
judgments arising in connection with or as a result of (i) any cause or
causes whatsoever (other than the gross negligence or willful misconduct of
Landlord) occurring in or about or resulting from an occurrence in or about
the Premises, or (ii) resulting from the negligence or willful misconduct of
Tenant, its agents, employees and contractors, wherever the same may occur.
The provisions of this Section survive the expiration or sooner termination
of this Lease for any reason with respect to any claims or liability
occurring prior to such expiration or sooner termination. No waiver or
release made by Tenant in the Lease shall be effective as to, and subject to
Section 10.2 Tenant shall neither release Landlord from, nor indemnify,
protect, defend or hold harmless Landlord to the extent any loss or liability
is caused by: (i) the gross negligence or intentional acts or omissions of
Landlord or its agents, employees or contractors; (ii) the acts or omissions
of any other tenants of the building or project, or their agents, employees
or contractors; or (iii) a breach of Landlord's obligations or
representations under the Lease.

11. DAMAGE TO PREMISES:

11.1 LANDLORD'S DUTY TO RESTORE: If the Premises are damaged by any
peril after the Effective Date of this Lease, Landlord shall restore the
Premises unless the Lease is terminated by Landlord pursuant to Section 11.2
or by Tenant pursuant to Section 11.3. All insurance proceeds available from
the fire and property damage insurance carried by Landlord shall be paid to
and become the property of Landlord. If this Lease is terminated pursuant to
either Section 11.2 or 11.3, then all insurance proceeds available from
insurance carried by Tenant which covers loss to property that is Landlord's
property or would become Landlord's property on termination of this Lease
shall be paid to and become the property of Landlord. If this Lease is not
so terminated, then upon receipt of the insurance proceeds (if the loss is
covered by insurance) and the issuance of all necessary governmental permits,
Landlord shall commence and diligently prosecute to completion the
restoration of the

<PAGE>

Premises, to the extent then allowed by Law, to substantially the same
condition in which the Premises were immediately prior to such damage;
provided, however that Landlord shall not be required to expend more than the
insurance proceeds of the peril received by Landlord. Landlord's obligation
to restore shall be limited to the Premises and interior improvements
constructed by Landlord as they existed as of the Commencement Date,
excluding Tenant's Work, any Leasehold Improvements, Trade Fixtures and/or
personal property constructed or installed by Tenant in the Premises. If
this Lease is not terminated pursuant to Section 11.2 or 11.3, then Tenant
shall forthwith commence and thereafter prosecute to completion the
replacement and completely repair all Leasehold Improvements and Trade
Fixtures, if any, installed by Tenant, existing at the time of such damage or
destruction, and which were to have been surrendered to Landlord hereunder;
and all insurance proceeds received by Tenant from the insurance carried by
it pursuant to Subsection 9.1A(3) shall be used for such purpose.

11.2 LANDLORD'S RIGHT TO TERMINATE: Landlord shall have the option to
terminate this Lease in the event any of the following occurs, which option
may be exercised only by delivery to Tenant of a written notice of election
to terminate within thirty (30) days after the date of such damage:

A. Either the Property or the Premises is damaged by any peril
either covered by valid and collectible insurance actually carried by
Landlord and in force at the time of such damage or destruction, to such an
extent that the estimated cost to restore equals or exceeds fifty percent
(50%) of the then actual replacement cost thereof;

B. Either the Property or the Premises is damaged to such an extent
that the estimated cost to restore not covered by collectible insurance
carried by Landlord equals or exceeds One Hundred Thousand Dollars ($100,000);

C. The Premises are damaged by any peril within twelve (12) months
of the last day of the Lease Term to such an extent that the estimated cost
to restore equals or exceeds an amount equal to three (3) times the Monthly
Rent for the month of the destructive event.

D. Either the Property or the Premises is damaged by any peril and,
because of the Laws then in force, (i) may not be restored at reasonable cost
to substantially the same condition in which it was prior to such damage, or
(ii) may not be used for the same use being made thereof before such damage
(whether or not restored as required by this Section).

11.3 TENANT'S RIGHT TO TERMINATE: If the Premises are damaged by any
peril and Landlord does not elect to terminate this Lease or is not entitled
to terminate this Lease pursuant to Section 11.2, then within forty-five
(45) days after the date of damage, Landlord shall furnish Tenant with the
written opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be completed. Tenant shall
have the option to terminate this Lease in the event any of the following
occurs, which option may be exercised only by delivery to Landlord of a

<PAGE>

written notice of election to terminate within seven (7) days after Tenant
receives from Landlord the estimate of the time needed to complete such
restoration:

A. As a consequence of such casualty, Tenant is unable to use a
material part of the Premises and, either (1) in the reasonable opinion of
Landlord's architect or construction consultant, the restoration of the
Premises cannot be substantially completed within one hundred twenty (120)
days after the date of such damage; (2) such restoration, once begun, is not
completed by the later of (a) one hundred eighty (180) days of the date of
such damage or (b) the date the improvements were estimated by the Landlord's
architect or construction consultant to be completed (the "Outside Completion
Date") and Tenant provides Landlord written notice of Tenant's election to
terminate within seven (7) days of the one hundred eighty (180) day period;
provided, however, that the Outside Completion Date and the date for Tenant's
termination notice shall be extended by one (1) day for each day that
completion of the restoration is delayed for a cause beyond Landlord's
reasonable control; or (3) in any event such restoration is not completed
within two hundred seventy (270) days after the date of such damage.

B. The Premises are damaged within twelve (12) months of the last
day of the Lease Term to such an extent that Tenant is unable to use a
material part of the Premises and, in the reasonable opinion of Landlord's
architect or construction consultant, the restoration of the Premises cannot
be substantially completed within sixty (60) days after the date of such
damage.

11.4 ABATEMENT OF RENT: In the event of damage to the Premises which
does not result in the termination of this Lease, the Monthly Rent shall be
temporarily abated during the period the Premises may not be reasonably used
by Tenant in proportion to the degree to which Tenant's use of the Premises
is impaired by such damage. Tenant shall not be entitled to any compensation
or damages from Landlord for loss of Tenant's business or property or for any
inconvenience or annoyance caused by such damage or restoration. Tenant
hereby waives the provisions of Section 1932, Subdivision 2, and Section
1933, Subdivision 4, of the California Civil code, and the provisions of any
similar law hereinafter enacted.

12. CONDEMNATION:

12.1 TAKING OF PREMISES: Landlord shall have the option to terminate
this Lease if, as a result of a taking by means of the exercise of the power
of eminent domain (including a voluntary sale or transfer by Landlord to a
condemnor under threat of condemnation), (i) all or any part of the Premises
is so taken, (ii) more than ten (10%) of the Property is so taken, or (iii)
more than fifty percent (50%) of the Common Area is so taken. Any such
option to terminate by Landlord must be exercisable within a reasonable
period of time, to be effective as of the date possession is taken by the
condemnor.

<PAGE>

12.2 TAKING OF COMMON AREA: Tenant shall have the option to terminate
this Lease if, as a result of any taking by means of the exercise of the
power of eminent domain (including any voluntary sale or transfer by Landlord
to any condemnor under threat of condemnation), (i) all of the Premises is so
taken, (ii) ten percent (10%) or more of the Premises is so taken and that
part of the Premises that remains cannot be reconstructed within a reasonable
period of time and thereby made reasonably suitable for the continued
operation of the Tenant's business, or (iii) there is a taking of more than
fifty percent (50%) of the Common Area and, as a result of such taking,
Tenant's access to the Premises is materially impeded or Landlord cannot
provide parking spaces within walking distance of the Premises equal in
number to at least eighty percent (80%) of the number of spaces allocated to
Tenant by Section 2.1, whether by rearrangement of the remaining parking
areas in the Common Area, (including construction of multi-deck parking
structures or restriping for compact cars where permitted by law) or by
alternative parking facilities on other land. Tenant must exercise such
option within ten (10) days following the date that possession of the
Premises and/or Common Area that is condemned is taken by the condemnor.

12.3 RESTORATION AND ABATEMENT OF RENT: If any part of the Premises or
the Common Area is taken by Condemnation and this Lease is not terminated,
then Landlord shall restore the remaining portion of the Premises and Common
Area as they existed as of the Effective Date, excluding any Leasehold
Improvements, Trade Fixtures and/or personal property constructed or
installed by Tenant after the Effective Date. Thereafter, except in the case
of a temporary taking, as of the date possession is taken the Monthly Rent
shall be reduced in the same proportion that the floor area of that part of
the Premises so taken (less any addition thereto by reason of any
reconstruction) bears to the original floor area of the Premises.

12.4 TEMPORARY TAKING: If any portion of the Premises is temporarily
taken for one (1) year or less, this Lease shall remain in effect. If any
portion of the Premises is temporarily taken by condemnation for a period
which exceeds one (1) year or which extends beyond the natural expiration of
the Lease Term, and such taking materially and adversely affects Tenant's
ability to use the Premises for the Permitted Use, then Landlord and Tenant
shall each independently have the option to terminate this Lease, effective
on the date possession is taken by the condemnor.

12.5 DIVISION OF CONDEMNATION AWARD: Any award made as a result of any
Condemnation of the Premises or the Common Area shall belong to and be paid
to Landlord, and Tenant hereby assigns to Landlord all of its right, title
and interest in any such award; provided, however, that Tenant shall be
entitled to receive any Condemnation award that is made directly to Tenant
(i) for the taking of personal property or Trade Fixtures belonging to
Tenant, (ii) for the interruption of Tenant's business or its moving costs,
(iii) for loss of Tenant's goodwill, or (iv) for any temporary taking where
this Lease is not terminated as a result of such taking. The rights of
Landlord and Tenant regarding any Condemnation shall be determined as
provided in this Section, and each party hereby waives the provisions of
Section 1265.130 of the California Code of Civil Procedure and the provisions
of any

<PAGE>

similar law hereinafter enacted allowing either party to petition the
Superior Court to terminate this Lease in the event of a partial taking of
the Premises.

13. DEFAULT AND REMEDIES:

13.1 EVENTS OF TENANT'S DEFAULT: Tenant shall be in default of its
obligations under this Lease and an event of default by Tenant shall be
deemed to have occurred under the provisions of the Lease, if any of the
following events occurs:

A. Tenant shall have failed to pay Monthly Rent or any Additional
Rent when due and such failure is not cured within three (3) days after
delivery of a written notice of default in the payment of rent (which notice
requirement may be fulfilled by the delivery of a three-day notice pursuant
to California Code of Civil Procedure Section 1161); or

B. Tenant shall have failed to perform any term, covenant, or
condition of this Lease except those requiring the payment of Monthly Rent or
Additional Rent, and Tenant shall have failed to commence cure of such breach
within ten (10) days after written notice from Landlord specifying the nature
of such breach or to thereafter expeditiously complete such cure within a
reasonable time; or

C. Tenant shall have made a general assignment of its assets for
the benefit of its creditors; or

D. Tenant shall have sublet the Premises or assigned its interest
in the Lease in violation of the provisions contained in Section 14, whether
voluntarily or by operation of law; or

E. Tenant shall have permitted the sequestration or attachment of,
or execution on, or the appointment of a custodian or receiver with respect
to, all or any substantial part of the property of Tenant or any property
essential to the conduct of Tenant's business and Tenant shall have failed to
obtain a return or release of such property within sixty (60) days
thereafter, or prior to sale pursuant to such sequestration, attachment or
levy, whichever is earlier, or

F. Tenant shall have abandoned the Premises and failed to pay rent
or perform its obligations hereunder; or

G. A court shall have made or entered any decree or order with
respect to Tenant or Tenant shall have submitted to or sought a decree or
order (or a petition or pleading shall have been filed in connection
therewith) which: (i) grants or constitutes (or seeks) an order for relief,
appointment of a trustee, or confirmation of a reorganization plan under the
bankruptcy laws of the United States; (ii) approves as properly filed (or
seeks such approval of) a petition seeking liquidation or reorganization
under said bankruptcy laws or any other debtor's relief law or statute of the
United States or any state thereof; or (iii) otherwise directs (or seeks) the
winding up or liquidation of

<PAGE>

Tenant; and such petition, decree or order shall have continued in effect for
a period of sixty (60) or more days.

13.2 LANDLORD'S REMEDIES: In the event of any default by Tenant,
Landlord shall have the following remedies, in addition to all other rights
and remedies provided by any Law or otherwise provided in this Lease, to
which Landlord may resort cumulatively, or in the alternative:

A. Landlord may, at Landlord's election, keep this Lease in effect
and enforce by an action at law or in equity all of its rights and remedies
under the Lease, including (i) the right to recover the rent and other sums
as they become due by appropriate legal action, (ii) the right to make
payments required of Tenant or perform Tenant's obligations and be reimbursed
by Tenant for the cost thereof with interest at the Agreed Interest Rate from
the date the sum is paid by Landlord until Landlord is reimbursed by Tenant,
and (iii) the remedies of injunctive relief and specific performance to
compel Tenant to perform its obligations under this Lease.

B. Landlord may, at Landlord's election, terminate this Lease by
giving Tenant written notice of termination, in which event this Lease shall
terminate on the date set forth for termination in such notice. Any
termination under this subsection shall not relieve Tenant from its
obligation to pay sums then due Landlord or from any claim against Tenant for
damages or rent previously accrued or then accruing. In no event shall any
one or more of the following actions by Landlord, in the absence of a written
election by Landlord to terminate this Lease, constitute a termination of
this Lease:

(1) Appointment of a receiver or keeper in order to protect
Landlord's interest hereunder;

(2) Consent to any subletting of the Premises or assignment of
this Lease by Tenant, whether pursuant to the provisions hereof
or otherwise; or

(3) Any other action by Landlord or Landlord's agents intended
to mitigate the adverse effects of any breach of this Lease by
Tenant, including without limitation any action taken to maintain
and preserve the Premises or any action taken to relet the
Premises or any portions thereof, for the account of Tenant and
in the name of Tenant.

C. In the event Tenant breaches this Lease and abandons the
Premises, this Lease shall not terminate unless Landlord gives Tenant written
notice of its election to so terminate this Lease. No act by or on behalf of
Landlord intended to mitigate the adverse effect of such breach, including
those described by subsections B(1), (2) and (3) immediately preceding, shall
constitute a termination of Tenant's right to possession unless Landlord
gives Tenant written notice of termination. Should Landlord not terminate
this Lease by giving Tenant written notice, Landlord may enforce all its
rights and remedies under this Lease, including the right to recover the rent
as it becomes due under the Lease as provided in California Civil Code
Section 1951.4, as in effect on the Effective Date of this Lease.

<PAGE>

D. In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to damages in an amount as set forth in
California Civil Code Section 1951.2 as in effect on the Effective Date of
this Lease. For purposes of computing damages pursuant to Section 1951.2, an
interest rate equal to the Agreed Interest Rate shall be used where
permitted. Such damages shall include without limitation:

(1) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that Tenant proves could
be reasonably avoided, computed by discounting such amount at the
discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%); and

(2) Any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform
Tenant's obligations under this Lease, or which in the ordinary
course of things would be likely to result therefrom, including,
without limitation, the following: (i) expenses for cleaning,
repairing or restoring the Premises; (ii) the costs Landlord
would not have otherwise incurred for altering, remodeling or
otherwise improving the Premises for the purpose of reletting had
the default not occurred, including installation of leasehold
improvements (whether such installation be funded by a reduction
of rent, direct payment or allowance to a new tenant, or
otherwise); (iii) broker's fees, advertising costs and other
expenses of reletting the Premises fairly allocable to the
unexpired portion of the Lease Term; (iv) utilities and security
precautions; (v) expenses in retaking possession of the Premises;
and (vi) attorneys' fees and court costs incurred by Landlord in
retaking possession of the Premises and in re-leasing the
Premises or otherwise incurred as a result of Tenant's default.

(3) For purposes of this Section, (i) the term "rent" includes
the Monthly Rent and all Additional Rent, and (ii) if it becomes
necessary to determine the amount of Additional Rent that would
have become due had Tenant not breached its obligations under
this Lease, all such Additional Rent shall be computed on the
basis of the average monthly amount thereof accruing during the
immediately preceding sixty (60) month period, except that if it
becomes necessary to compute such Additional Rent before such a
sixty (60) month period has occurred, then such rent shall be
computed on the basis of the average monthly amount thereof
accruing during such shorter period.

E. Nothing in this section shall limit Landlord's right to
indemnification from Tenant as provided in the other provision of this Lease.
Any notice given by Landlord in order to satisfy the requirements of Section
13.1A or B above shall also satisfy the notice requirements of California Code
of Civil Procedure Section 1161 regarding unlawful detainer proceedings.

25
<PAGE>

13.3 LANDLORD'S DEFAULT AND TENANT'S REMEDIES: In the event Landlord
fails to perform any of its obligations under this Lease and fails to cure
such default within thirty (30) days after written notice from Tenant
specifying the nature of such default where such default could reasonably be
cured within said thirty (30) day period, or fails to commence such cure
within said thirty (30) day period and thereafter continuously with due
diligence prosecutes such cure to completion where such default could not
reasonably be cured within said thirty (30) day period, then Tenant may
proceed in equity or at law to compel Landlord to perform its obligations
and/or to recover damages proximately caused by such failure to perform
(except to the extent Tenant has waived its right to damages resulting from
injury to person or damage to property as provided herein). Tenant waives
the provisions of Sections 1932(1), 1941 and 1942 of the California Civil
Code and/or any similar or successor law regarding Tenant's right to
terminate this Lease or to make repairs and deduct the expenses of such
repairs from the rent due under the Lease.

13.4 WAIVER: One party's consent to or approval of any act by the other
party requiring the first party's consent or approval shall not be deemed to
waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. The receipt by Landlord of any
rent or payment with or without knowledge of the breach of any other
provision hereof shall not be deemed a waiver of any such breach unless such
waiver is in writing and signed by Landlord. No delay or omission in the
exercise of any right or remedy accruing to either party upon any breach by
the other party under this Lease shall impair such right or remedy or be
construed as a waiver of any such breach theretofore or hereafter occurring.
The waiver by either party of any breach of any provision of this Lease shall
not be deemed to be a waiver of any subsequent breach of the same of any
other provisions herein contained.

14. ASSIGNMENT AND SUBLETTING:

14.1 BY TENANT: The following provisions shall apply to any assignment,
subletting or other transfer by Tenant or any subtenant or assignee or other
successor in interest of the original Tenant (collectively referred to in
this Section as "Tenant"):

A. Tenant shall not do any of the following (collectively referred
to herein as a "Transfer"), whether voluntarily, involuntarily, or by
operation of laws, without the prior written consent of Landlord, which
consent shall not be unreasonably withheld: (i) sublet all or any part of
the Premises or allow it to be sublet, occupied or used by any person or
entity other than Tenant; (ii) assign its interest in this Lease; (iii)
transfer any right appurtenant to this Lease or the Premises; (iv) mortgage
or encumber the Lease (or otherwise use the Lease as a security device) in
any manner; or (v) terminate or materially amend or modify an assignment,
sublease, or other transfer that has been previously approved by Landlord.
Tenant shall reimburse Landlord for all reasonable costs and attorneys' fees
incurred by Landlord in connection with the processing and/or documentation
of any requested Transfer whether or not Landlord's consent is granted. Any
Transfer so approved by Landlord shall not be effective until Tenant has paid
all such costs and attorneys' fees to Landlord and

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delivered to Landlord an executed counterpart of the document evidencing the
Transfer which (i) is in form approved by Landlord, (ii) contains the same
terms and conditions as stated in Tenant's notice given to Landlord pursuant
to subsection B below, and (iii) contains the agreement of the proposed
Transferee (except in the case of a sublease of part of the Premises or a
mortgage of the Premises in which case the sublessee or transferee will agree
to not violate any term of this Lease) to assume all obligations of Tenant
related to the Transfer arising after the effective date of such Transfer and
to remain jointly and severally liable therefor with Tenant. Any attempted
Transfer without Landlord's consent shall constitute a default by Tenant and
shall be voidable at Landlord's option. Landlord's consent to any one
Transfer shall not constitute a waiver of this Section 14.1 as to any
subsequent Transfer nor a consent to any subsequent Transfer. No Transfer,
even with the consent of Landlord, shall relieve Tenant of its personal and
primary obligation to pay the rent and to perform all of the other
obligations to be performed by Tenant hereunder. The acceptance of rent by
Landlord from any person shall not be deemed to be a waiver by Landlord of
any provision of this Lease nor to be a consent to any Transfer.

B. Tenant shall give Landlord at least ten (10) days prior written
notice of any desired Transfer and of the proposed terms of such Transfer
including but not limited to (i) the name and legal composition of the
proposed Transferee; (ii) a current financial statement of the Transferee,
financial statements of the Transferee covering the preceding three years,
and the "best available" financial statement of the Transferee for a period
ending not more than one year prior to the proposed effective date of the
Transfer, all of which statements are prepared in accordance with generally
accepted accounting principles; (iii) the nature of the proposed Transferee's
business to be carried on in the Premises; (iv) all consideration to be given
on account of the Transfer; (v) a current financial statement of Tenant; and
(vi) such other information as may be requested by Landlord. Tenant's notice
shall not be deemed to have been served or given until such time as Tenant
has provided Landlord with all information reasonably requested by Landlord
pursuant to this Subsection B. Tenant shall immediately notify Landlord of
any modification to the proposed terms of such Transfer.

C. In the event that Tenant seeks to make any Transfer, Landlord
shall have the right to withhold its consent to such Transfer, as permitted
pursuant to Subsection A above, or to exercise any of the rights set forth in
this Subsection C, by giving Tenant written notice of its election within
thirty (30) days after Tenant's notice of intent to Transfer has been deemed
given to Landlord. Without otherwise limiting the criteria upon which
Landlord may withhold its consent to any proposed Transfer, if Landlord
withholds its consent where the proposed Transferee's financial condition is
not sufficient to enable Transferee to meet its obligations under the
proposed Transfer (as determined by Landlord, in the reasonable exercise of
its business judgment), such withholding of consent shall be presumptively
reasonable. The following rights are in addition to Landlord's right to
withhold its consent to any Transfer, and may be exercised by Landlord in its
sole discretion without limiting Landlord in the exercise of any other right
or remedy which Landlord may have:

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(1) Landlord may terminate this Lease if Tenant proposes to
assign this Lease or to sublet substantially all of the Premises
for substantially all of the remaining term of this Lease (except
to a party purchasing substantially all of the assets of Tenant
located in the Premises as a going concern) and, in such event,
Landlord shall thereafter be free to lease the Premises the
Premises to whomever it pleases on whatever terms are acceptable
to Landlord. In the event Landlord elects to so terminate this
Lease, then the Lease shall so terminate in its entirety on the
day the assignment or sublease would have been effective. Upon
such termination, Tenant shall be released from any further
obligation under this Lease and Landlord and Tenant shall execute
a cancellation and release with respect to the Lease to effect
such termination.

(2) Landlord may elect to permit Tenant to so assign the Lease
or sublease such part of the Premises, in which event Tenant may
do so, but without being released of its liability for the
performance of all of its obligations under the Lease. If Tenant
assigns its interest in this Lease in accordance with this
Subsection (2), then Tenant shall pay to Landlord all
consideration received by Tenant over and above the assignee's
agreement to assume the obligations of Tenant under this Lease.
If Tenant sublets all or part of the Premises, then Tenant shall
pay to Landlord 50% of the positive difference, if any, between
(i) all rent and other consideration paid by the subtenant to
Tenant, less (ii) all rent paid by Tenant to Landlord pursuant to
this Lease which is allocable to the area so sublet. Such amount
shall be paid to Landlord on the same basis, whether periodic or
in lump sum, that such rent and other consideration is paid to
Tenant by its subtenant. Notwithstanding the foregoing, Tenant
may deduct from the consideration due Landlord under the terms of
this Section 14.1.C(2) the following Tenant's costs to the extent
associated with its obtaining and performing the sublease of the
Premises: (i) construction of improvements specifically made for
any sublessee; (ii) leasing commissions; (iii) advertising costs;
and (iv) reasonable attorneys' fees, which costs shall be
recovered in an amount amortized over the term of the sublease.
Tenant's obligations under this Subsection shall survive any
assignment or sublease, and Tenant's failure to perform its
obligations under this Subsection shall be a default under this
Lease. At the time Tenant makes any payment to Landlord required
by this Subsection, Tenant shall deliver an itemized statement of
the method by which the amount to which Landlord is entitled was
calculated certified by Tenant as true and correct. Landlord
shall have the right to inspect Tenant's books and records
relating to the payments due pursuant to this Subsection. Upon
request therefore, Tenant shall deliver to Landlord copies of all
bills, invoices, or other documents upon which its calculations
are based. Landlord may condition its approval of any Transfer
upon obtaining a certification from both Tenant and the proposed
Transferee of all amounts that are to be paid to Tenant in
connection with such Transfer. As used herein, the term
"consideration" shall mean any consideration of any kind
received, or to be received, by Tenant as a result of the
Transfer, if such sums are related to Tenant's interest in this
lease or in the Premises, including payments (in excess of the
fair market value thereof) for Tenant's assets, fixtures,
leasehold

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improvements, inventory, accounts, goodwill, equipment,
furniture, general intangibles and any capital stock or other
equity ownership interest in Tenant.

D. If Tenant is a corporation, any dissolution, merger,
consolidation, or other reorganization of Tenant, or the sale or transfer in
the aggregate over the Lease Term of a controlling percentage of the capital
stock of Tenant, shall be deemed a voluntary assignment of Tenant's interest
in this Lease, provided, however, that the foregoing shall not apply to
corporations the capital stock of which is publicly traded. The phrase
"controlling percentage" means the ownership of and the right to vote stock
possessing more than fifty percent (50%) of the total combined voting power
of all classes of Tenant's capital stock issued, outstanding and entitled to
vote for the election of directors.

E. It is the intent of the parties hereto that this Lease shall
confer upon Tenant only the right to use and occupy the Premises and to
exercise such other rights as are conferred upon Tenant by this Lease. The
parties agree that this Lease is not intended to have a bonus value, nor to
serve as a vehicle whereby Tenant may profit by a future Transfer of this
Lease or the right to use or occupy the Premises as a result of any favorable
terms contained herein or any future changes in the market for leased space.
It is the intent of the parties that any such bonus value that may attach to
this Lease shall be and remain the exclusive property of Landlord. Tenant
expressly agrees that the provisions of this Section are not unreasonable
standards or conditions for purposes of Section 1951.4(b)(2) of the
California Civil Code, as amended from time to time.

F. Tenant irrevocably assigns to Landlord, as security for Tenant's
obligations under this Lease, all rent or other consideration not otherwise
payable to Landlord by reason of any Transfer. Landlord, as assignee of
Tenant, or a receiver for Tenant appointed on Landlord's application, may
collect such rent or other consideration and apply it toward Tenant's
obligation under this Lease, provided, however, that until occurrence of any
default by Tenant, Tenant shall have the right to collect and retain such
rent or other consideration not otherwise payable to Landlord.

G. Notwithstanding the foregoing, Tenant may, without Landlord's
prior written consent and without paying Landlord any consideration and free
of any termination right by Landlord, sublet the Premises and/or assign or
Transfer the Lease to (a) any natural person or legal entity which controls,
is controlled by, or is under common control with Tenant; or (b) a successor
corporation related to Tenant by merger, consolidation, reorganization or
government actions so long as the net worth of such successor is greater than
or equal to the greater of the net worth of the Tenant on the date
immediately preceding the date upon which the merger, consolidation,
reorganization or government action occurs.

14.2 BY LANDLORD: Landlord and its successors in interest shall have the
right to transfer their interest in the Premises and the Property at any time
and to any person or entity. In the event of any such transfer, the Landlord
originally named herein (and in the case of any subsequent transfer, the
transferor) from the date of such transfer, (i) shall be automatically relieved,
without any further act

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by any person or entity, of all liability for the performance of the
obligations of the Landlord hereunder which may accrue after the date of such
transfer and which are assumed by the transferee, and Landlord shall be
released from obligations the transferee agrees to assume and perform. After
the date of any such transfer, the term "Landlord" as used herein shall mean
the transferee of such interest in the Premises and the Property.

15. GENERAL PROVISIONS:

15.1 LANDLORD'S RIGHT TO ENTER: Landlord and its agents may enter the
Premises at any reasonable time, following twenty-four (24) hours notice
except in the case of an emergency, for the purpose of (i) inspecting the
same; (ii) posting notices of non-responsibility, (iii) supplying any service
to be provided by Landlord to Tenant, (iv) showing the Premises to
prospective purchasers, mortgagees or tenants, (v) making necessary
alterations, additions, or repairs, (vi) performing Tenant's obligation when
Tenant has failed to do so after written notice from Landlord, (vii) placing
upon the Premises, within the last six (6) months of the Term, ordinary "for
lease" or "for sale" signs, and/or (viii) in case of an emergency. For each
of the aforesaid purposes, Landlord at any time may enter the Premises by
means of a master key, and Landlord shall have the right to use any and all
means Landlord may deem necessary and proper to open the doors of the
Premises in an emergency. Any entry into the Premises or portions thereof
obtained by Landlord by any of said means, or other wise, shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into,
or a detainer of, the Premises, or an eviction, actual or constructive, of
Tenant from the Premises or any portion thereof. Tenant shall have the right
to accompany Landlord during any such entry and Landlord shall use all
reasonable efforts to avoid interfering with Tenant's use of the Premises
during such entry.

15.2 SURRENDER OF THE PREMISES: Immediately prior to the expiration or
upon the sooner termination of this Lease, Tenant shall remove all Tenant's
Trade Fixtures and other personal property and vacate and surrender the
Premises to Landlord in the same condition as existed at the Commencement
Date, reasonable wear and tear, damage by casualty, Hazardous Materials not
introduced to the Property by Tenant or its agents, employees, contractors or
invitees excepted, with all interior walls cleaned, all carpets shampooed and
cleaned, all HVAC equipment within the Premises in operating order and in
good repair, and all floors cleaned, all to the reasonable satisfaction of
Landlord. If Landlord so requests, Tenant shall, prior to the expiration or
sooner termination of this Lease, remove any Leasehold Improvements
designated by Landlord and repair all damage caused by such removal. If the
Premises are not so surrendered at the termination of this Lease, Tenant
shall be liable to Landlord for all costs incurred by Landlord in returning
the Premises to the required condition, plus interest on all costs incurred
at the Agreed Interest Rate. Tenant shall indemnify Landlord against loss or
liability resulting from delay by Tenant in so surrendering the Premises,
including, without limitation, any claims made by any succeeding tenant.

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15.3 HOLDING OVER: This Lease shall terminate without further notice at
the expiration of the Lease Term. Any holding over by Tenant after
expiration of the Lease Term shall not constitute a renewal or extension of
the Lease or give Tenant any rights in or to the Premises except as expressly
provided in this Lease. Any holding over after such expiration with the
consent of Landlord shall be construed to be a tenancy from month to month on
the same terms and conditions herein specified insofar as applicable except
that Monthly Rent shall be increased to an amount equal to one hundred fifty
percent (150%) of the Monthly Rent required during the last month of the
Lease Term.

15.4 NON-DISTURBANCE, SUBORDINATION: Landlord will use its best efforts
to obtain a non-disturbance agreement for Tenant from Bank of America, the
current deed of trust holder. The following provisions shall govern the
relationship of this Lease to any underlying lease, mortgage or deed of trust
which now or hereafter affects the Property, and any renewal, modification,
consolidation, replacement or extension thereof (a "Security Instrument").

A. This Lease is subject and subordinate to all Security
Instruments existing as of the Effective Date. However, if any Lender so
requires, this Lease shall become prior and superior to any such Security
Instrument.

B. At Landlord's election, this Lease shall become subject and
subordinate to any Security Instrument created after the Effective Date.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed so long as Tenant is not in default and
performs all of his obligations under this Lease, unless this Lease is
otherwise terminated pursuant to its terms.

C. Tenant shall execute any document or instrument required by
Landlord or any Lender to make this Lease either prior or subordinate to a
Security Instrument, which may include such other matters as the Lender
customarily requires in connection with such agreements, including provisions
that the Lender not be liable for (i) the return of the Security Deposit
unless the Lender receives it from Landlord, and (ii) any defaults on the
part of Landlord occurring prior to the time the Lender takes possession of
the Property in connection with the enforcement of its Security Instrument,
so long as the Lender executes a non-disturbance agreement with Tenant on
terms presented by the Lender and approved by Tenant (which approval shall
not be unreasonably withheld by Tenant). Tenant's failure to execute any
such document or instrument within ten (10) days after written demand
therefor shall constitute a default by Tenant.

15.5 TENANT'S ATTORNMENT: Tenant shall attorn (i) to any purchaser of
the Premises or Property at any foreclosure sale or private sale conducted
pursuant to any security instrument encumbering the Premises and/or the
Property, (ii) to any grantee or transferee designated in any deed given in
lieu of foreclosure, or (iii) to the lessor under any underlying ground lease
should such ground lease be terminated; provided the transferee agrees to
recognize Tenant's rights under this Lease which accrue after the date of the
transfer in question.

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15.6 MORTGAGEE PROTECTION: In the event of any default on the part of
the Landlord, Tenant will give notice by registered mail to any Lender or
lessor under any underlying ground lease whose name, if any, has been
provided to Tenant and shall offer such Lender at least ninety (90) days to
cure the default.

15.7 ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS: At all times
during the Lease Term, Tenant agrees, following any request by Landlord, to
promptly execute and deliver to Landlord an estoppel certificate, (i)
certifying that this Lease is unmodified and in full force and effect, or if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect, (ii) stating the date to
which the rent and other charges are paid in advance, if any, (iii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults
on the part of Landlord hereunder, or if there are uncured defaults, and (iv)
certifying such other information about the Lease as may be reasonably
required by Landlord. Tenant's failure to deliver an estoppel certificate
within ten (10) days after delivery of Landlord's request therefore shall be
a conclusive admission by Tenant that, as of the date of the request for such
statement, (i) this Lease is unmodified except as may be represented by
Landlord in said request and is in full force and effect, (ii) there are no
uncured defaults in Landlord's performance, and (iii) no rent has been paid
in advance. At any time during the Lease Term, Tenant shall, upon ten (10)
days' prior written notice from Landlord, provide Tenant's most recent
financial statement and financial statements covering the twenty-four (24)
month period prior to the date of such most recent financial statement to any
existing Lender or to any potential Lender or buyer of the Property. Such
statements shall be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of Tenant shall be audited by
an independent certified public accountant.

15.8 FORCE MAJEURE: Any prevention, delay, or stoppage due to strikes,
lockouts, inclement weather, labor disputes, inability to obtain labor,
materials, fuels or reasonable substitutes therefor, governmental
restrictions, regulations, controls, action or inaction, civil commotion,
fire or other acts of God, and other causes beyond the reasonable control of
the party obligated to perform (except financial inability) shall excuse the
performance, for a period equal to the period of any said prevention, delay,
or stoppage, of any obligation hereunder except the obligation of Tenant to
pay rent or any other sums due hereunder.

15.9 NOTICES: Any notice required or desired to be given regarding this
Lease shall be in writing and shall be personally served, or in lieu of personal
service may be given by mail. Personally served notices shall be deemed to have
been given when received by the party, if served by mail, such notice shall be
deemed to have been given (i) on the third business day after mailing to the
party if such notice was deposited in the United States mail, certified and
postage prepaid, addressed to the party to be served at the address set forth
below, and (ii) in all other cases when actually received. The giving of
notices to the law firms specified below is a courtesy and is not required for a
notice to

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be effective under this Lease. Either party may change its address by giving
notice of same in accordance with this paragraph.

Address For Landlord: Central Court, LLC
c/o W. Mackall Jason
37600 Central Court
Newark, California 94560

with courtesy copy to: Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: Real Estate
Department

Address For Tenant: Before the Commencement Date:
Socket Communications, Inc.
6500 Kaiser Drive
Fremont, CA 94555
Attn: President

After the Commencement Date:
Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Attn: President

15.10 ATTORNEYS' FEES: In the event Landlord or Tenant shall bring any
action or legal proceeding for an alleged breach of any provision of this
Lease, to recover rent, to terminate this Lease or to otherwise enforce,
protect or establish any term or covenant of this Lease, the prevailing party
shall be entitled to recover as a part of such action or proceedings, or in a
separate action brought for that purpose, reasonable attorneys' fees and
court costs as may be fixed by the court.

15.11 CORPORATE AUTHORITY: If Tenant is a corporation (or a
partnership), each individual executing this Lease on behalf of said
corporation (or partnership) represents and warrants that he is duly
authorized to execute and deliver this Lease on behalf of said corporation in
accordance with the by-laws of said corporation (or partnership in accordance
with the partnership agreement of said partnership) and that this Lease is
binding upon said corporation (or partnership) in accordance with its terms.
If Tenant is a corporation, each of the persons executing this Lease on
behalf of Tenant does hereby covenant and warrant that Tenant is a duly
authorized and existing corporation, that Tenant has and is qualified to do
business in California and that the corporation has full right and authority
to enter into this Lease. If Tenant is a corporation Tenant shall, within
thirty (30) days after

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execution of this Lease, deliver to Landlord a certified copy of the
resolution of the board of directors of said corporation authorizing or
ratifying the execution of this Lease.

15.12 TERMINATION BY EXERCISE OF OPTION: If this Lease is terminated
pursuant to its terms by the proper exercise of an option to terminate
specifically granted to Landlord or Tenant by this Lease, then this Lease
shall terminate thirty (30) days after the date the option to terminate is
properly exercised (unless another date is specified in that part of the
Lease creating the option, in which event the date so specified for
termination shall prevail), the rent and all other charges due hereunder
shall be prorated as of the date of termination, and neither Landlord nor
Tenant shall have any further rights or obligations under this Lease except
for those that have accrued prior to the date of termination. This Section
does not apply to a termination of this Lease by Landlord as a result of a
default by Tenant.

15.13 BROKERAGE COMMISSIONS: Tenant warrants that is has not had any
dealings with any real estate brokers, leasing agents, salesmen, or incurred
any obligations for the payment of real estate brokerage commissions or
finder's fees which would be earned or due and payable by reason of the
execution of this Lease other than Cornish & Carey and BT Commercial.

15.14 RIGHT TO LEASE ADDITIONAL SPACE: Should Landlord elect to lease
either the Refusal Space to any third party other than Bemiss-Jason
Corporation or to Stelux Holdings, Ltd., Tenant shall have a right of first
refusal to lease the mezzanine space depicted on attached EXHIBIT F on the
terms and conditions set forth below.

A. OFFER TO LEASE: If Landlord desires to lease the Refusal Space
or any portion thereof (herein "Offered Space") to a third party, Landlord
shall give Tenant written notice of the following (an "Offer"): (i) a
statement of Landlord's intent to lease the Offered Space; (ii) a request
that Tenant notify Landlord whether or not Tenant is interested in leasing
the Offered Space; (iii) the form of lease Landlord desires to use for the
transaction; (iv) a complete description of the Offered Space in question,
including the location, the area of the Offered Space in question, and a
floor plan showing the configuration thereof; and (v) a description of the
following proposed material terms of a lease that Landlord would be willing
to enter into for the Offered Space in question (the "Basic Business Terms"):
(a) the rent; (b) the obligation, if any, of the tenant to contribute to
operating expenses and property taxes; (c) the lease term; (d) any options to
extend the lease term (and the rent for such options); (e) any tenant
improvement allowance Landlord is willing to offer; and (g) any other
material business terms that Landlord desires to offer.

B. TENANT'S ELECTION AND LEASE OF SPACE: Prior to the expiration
of the five (5) day period commencing on the delivery of the Offer to Tenant,
Tenant shall have the right to give written notice to Landlord ("Tenant's
Notice") of Tenant's exercise of its Right of First Offer with respect to the
lease of the Offered Space in question and so identified in such Offer.

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If Tenant timely notifies Landlord that it desires to exercise its Right
of First Offer with respect to such Offered Space in question, Landlord shall
lease to Tenant and Tenant shall lease from Landlord the Offered Space
identified in the Offer on the Basic Business Terms stated in the Offer. The
lease of the Offered Space in question shall be consummated by the
preparation and execution of a written lease (using the form of lease
submitted by Landlord with the Offer) incorporating the Basic Business Terms
set forth in the Offer; provided, however, that the lease shall provide that
a default by Tenant under any other lease between it and Landlord shall
constitute a default under Tenant's lease of the Offered Space in question
and under this Lease. The lease shall be executed by Landlord and Tenant as
soon as reasonably practicable after Tenant has made its election to accept
the Offer, but in no event later than ten (10) days thereafter. If Tenant
does not indicate in writing its agreement to lease the Offered Space in
question on the terms contained in the Offer within the specified time, then
the following shall apply:

(1) Landlord shall have the right to lease the Offered
Space in question, provided that Landlord shall have sent
to, or received from, a lessee prospect, a non-binding term
sheet within thirty (30) days after delivery of the Offer to
Tenant and within one hundred eighty (180) days after the
Offer is delivered to Tenant, Landlord shall have entered
into a lease with said prospect on terms not materially more
favorable to the lessee than those contained in the Offer
delivered to Tenant. Notwithstanding the foregoing,
Landlord may use such form of lease as it desires and may
make any changes to such form of lease or otherwise append
language thereto at the request of a prospective tenant to
induce the prospect to lease the Offered Space from
Landlord, provided, however, that such changes must be
commercially reasonable and may not result in materially
change the Basic Business Terms set forth in the Offer in a
manner which makes the lease materially more favorable to
the lessee.

(2) If Landlord does not send or receive a term sheet to a
prospect within thirty (30) days and within one hundred
eighty (180) days after delivery of the Offer wishes to
exchange a term sheet with a prospect or, if within one
hundred eighty (180) days after the Offer is delivered to
Tenant, Landlord elects to lease the Offered Space in
question to a prospect identified during the thirty (30) day
period on terms materially different than the Basic Business
Terms stated in the Offer (such that the lease is made
materially more favorable to the lessee), then Landlord may
give notice to Tenant of such election setting forth the new
terms (or reiterating previously offered terms) upon which
Landlord is willing to so lease the Offered Space in
question (the "Amended Offer"). Tenant shall have the right
to lease the Offered Space in question upon the Basic
Business Terms stated in the Offer, as modified by the
Amended Offer, which right may be exercised by delivering
written notice of such election to exercise to Landlord
within three (3) days following delivery to Tenant of the
Amended Offer. If Tenant does not give written notice to
Landlord of its election to lease the Offered Space in
question on said terms within said three (3) day period,
then Landlord shall have the right to lease

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the Offered Space in question on terms not materially more
favorable to the lessee than those contained in the Offer,
as modified by the Amended Offer, so long as the lease is
executed within ninety (90) days after the Amended Offer is
delivered to Tenant with a prospect (who sends to or
receives from Landlord a non-binding term sheet within
thirty (30) days after delivery of the Amended Offer).

C. SEPARATE RIGHT: Tenant's failure to exercise its Right of
First Offer with respect to any Offered Space described in any Offer shall
not waive Tenant's Right of First Offer with respect to any other Refusal
Space not described in any such Offer.

D. NEGOTIATIONS: Nothing contained herein shall be construed to
prohibit Landlord from conducting negotiations for the lease of Refusal Space
either before or after Landlord has delivered to Tenant an Offer, including
during the period Landlord and Tenant are negotiating to reach agreement upon
a final lease. Landlord shall be free to market any portion of the Refusal
Space and negotiate with prospective tenants for any such space, which right
shall only cease on the execution of a final lease by Landlord and Tenant
with respect to Offered Space in accordance with this Section.

E. SUBORDINATION OF RIGHT: This Right of First Offer is
subordinate to (a) the refusal rights held by Stelux Holdings, Ltd., who has
a prior refusal right on the Tenant's right of first refusal space, and (b)
any renewal, extension, or modification of an existing lease of the Property.
If Tenant is offered the opportunity to exercise its Right of First Offer
with respect to any Refusal Space and declines to exercise such right, and if
Landlord subsequently enters into a lease with a third party affecting the
space so offered to Tenant, the Right of First Offer contained herein with
respect to the Offered Space Tenant declined to lease shall thereafter be
subject and subordinate to (i) any rights granted to such third party tenant
with respect to the Refusal Space, including rights of first refusal, rights
of first negotiation, options or rights to extend, and options or rights to
expand; and (ii) any future renewal, extension, modification, or expansion of
such lease or rights.

F. ESTOPPEL: If Landlord has delivered to Tenant an Offer and
Tenant has not elected to lease the Offered Space on the terms contained in
the Offer, then, if Landlord so requests, Tenant shall deliver to Landlord or
any prospective tenant a certificate or certificates stating that: (i)
Landlord has complied with the provisions herein and may lease the premises
in question on terms and conditions acceptable to Landlord free of any rights
or claims of Tenant; or (ii) Landlord has not complied with the provisions
hereof and specifying the manner in which Landlord has failed to so comply.
Such certificate shall be delivered promptly after request therefor but in no
event later than five (5) days after request has been delivered to Tenant.
Tenant's failure to deliver such certificate within the required time period
shall be deemed an admission upon which any party may rely that Landlord has
complied with the provisions hereof and may lease the premises in question on
terms and conditions acceptable to Landlord free of any rights or claims by
Tenant.

36
<PAGE>

G. CONDITION PRECEDENT: Landlord's obligations under this Section
are expressly conditioned upon (i) the absence of any default by Tenant, or
any circumstance which with the giving of notice, the passage of time, or
both would constitute a default; and (ii) Landlord's good faith determination
that there has been no material adverse change in the finances, business,
operations, affairs or prospects of Tenant since the commencement of the term
of the Lease; and (iii) Landlord's good faith determination that Tenant has
sufficient financial creditworthiness to perform its obligations under the
Lease for all of the Premises (including the Offered Space) for the remaining
term of the Lease.

15.15 MISCELLANEOUS: Should any provisions of this Lease prove to be
invalid or illegal, such invalidity or illegality shall in no way affect,
impair or invalidate any other provision hereof, and such remaining
provisions shall remain in full force and effect. Time is of the essence
with respect to the performance of every provision of this Lease in which
time of performance is a factor. The captions used in this Lease are for
convenience only and shall not be considered in the construction or
interpretation of any provision hereof. Any executed copy of this Lease shall
be deemed an original for all purposes. This Lease shall, subject to the
provisions regarding assignment, apply to and bind the respective heirs,
successors, executors, administrators and assigns of Landlord and Tenant.
"Party" shall mean Landlord or Tenant, as the context implies. If Tenant
consists of more than one person or entity, then all members of Tenant shall
be jointly and severally liable hereunder. If Tenant is a corporation,
nothing in this Section is intended to confer personal liability upon the
officers or shareholders of Tenant. This Lease shall be construed and
enforced in accordance with the laws of the State of California. The
language in all parts of this Lease shall in all cases be construed as a
whole according to its fair meaning, and not strictly for or against either
Landlord or Tenant. When the context of this Lease requires, the neuter
gender includes the masculine, the feminine, a partnership or corporation or
joint venture, and the singular includes the plural. The terms "shall,"
"will," and "agree" are mandatory. The term "may" is permissive. When a
party is required to do something by this Lease, it shall do so at its sole
cost and expense without right of reimbursement from the other party unless
specific provision is made therefor. All measurements of gross leasable area
shall be made from the outside faces of exterior walls and the centerline of
joint partitions. Landlord makes no covenant or warranty as to the exact
square footage of any area. Where Tenant is obligated not to perform any
act, Tenant is also obligated to restrain any others within its control from
performing said act, including agents, invitees, contractors, subcontractors
and employees. Landlord shall not become or be deemed a partner nor a joint
venturer with Tenant by reason of the provisions of this Lease. Except as
expressly provided otherwise herein, if either party's consent or approval is
required as a condition to the doing of any act by the other party, such
consent shall not be unreasonably withheld or delayed.

15.16 ENTIRE AGREEMENT: This Lease constitutes the entire agreement
between the parties, and there are no binding agreements or representations
between the parties except as expressed herein. Except as expressly set
forth herein, Tenant acknowledges that neither Landlord nor Landlord's
agent(s) has made any representation or warranty as to (i) whether the
Premises may be used for

37
<PAGE>

Tenant's intended use under existing Law or (ii) the suitability of the
Premises or the Common Area for the conduct of Tenant's business or the
condition of any improvements located thereon. Tenant expressly waives all
claims for damage by reason of any statement, representation, warranty,
promise or other agreement of Landlord or Landlord's agent(s), if any, not
contained in this Lease or in any addendum or amendment hereto. No
subsequent change or addition to this Lease shall be binding unless in
writing and signed by the parties hereto.

38
<PAGE>

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease with the
intent to be legally bound thereby, to be effective as of the Effective Date of
this Lease.

AS LANDLORD: AS TENANT:

CENTRAL COURT, LLC, SOCKET COMMUNICATIONS, INC.
a California limited liability company a Delaware corporation

By: /s/ W. Mackall Jason By: /s/ David W. Dunlap
------------------------------ ------------------------------
W. Mackall Jason,
its managing member Printed
Name: David W. Dunlap
------------------------------

Title: Vice President Finance
and Securities
------------------------------

By: /s/ Martin Levetin
------------------------------
Printed
Name: Martin Levetin
------------------------------

Title: President
------------------------------

If Tenant is a CORPORATION, the authorized officers must sign on behalf of
the corporation and indicate the capacity in which they are signing. The
Lease must be executed by the chairman of the board, president or
vice-president AND the secretary, assistant secretary, the chief financial
officer or assistant treasurer, UNLESS the Bylaws or resolution of the Board
of Directors shall otherwise provide, in which event, the Bylaws or a
certified copy of the resolution, as the case may be, must be attached to
this Lease.

<PAGE>

EXHIBIT A

[Attach Plot Plan showing Premises and Dedicated Parking - A1]
[showing Refusal Space - A2]

<PAGE>

EXHIBIT B

[Intentionally deleted.]

<PAGE>

EXHIBIT C

[Intentionally deleted.]

<PAGE>

EXHIBIT D

CENTRAL COURT
RULES AND REGULATIONS

16. The sidewalks, halls, passages, exits, entrances, elevators and
stairways of the building shall not be obstructed by any of the tenants or
used by them for any purpose other than for ingress to and egress from their
respective premises. The halls, passages, exits, entrances, elevators and
stairways are not for the general public, and Landlord shall in all cases
retain the right to control and prevent access thereto of all persons whose
presence in the judgment of Landlord would be prejudicial to the safety,
character, reputation or interests of the building and its tenants, provided
that nothing herein contained shall be construed to prevent such access to
persons with whom any tenant normally deals in the ordinary course of its
business, unless such persons are engaged in illegal activities. No tenant
and no employee or invitee of any tenant shall go upon the roof of the
building without the prior written consent of Landlord.

17. No sign, placard, picture, name, advertisement or notice visible
from the exterior of the building shall be inscribed, painted, affixed or
otherwise displayed by Tenant on any part of the building without the written
consent of Landlord. All approved signs or lettering on doors shall be
printed, painted, affixed or inscribed at the expense of the Tenant by a
person approved by Landlord, which approval will not be unreasonably
withheld. Material within the Premises, visible from outside the building,
will not be permitted.

18. Tenant shall not allow a "fire sale" or bankruptcy sale or any
auction to be held on the Premises or allow the Premises to be used for the
storage of merchandise held for sale to the general public at the Premises.

19. No tenant shall allow the Premises to be used for lodging, nor shall
cooking be done or permitted by Tenant on the Premises, except the use by
Tenant of Underwriter's Laboratory approved equipment, including a microwave
oven, and equipment for brewing coffee, tea, hot chocolate, and similar
beverages shall be permitted, provided that such use is in accordance with
all applicable federal, state and city laws, codes, ordinances, rules and
regulations.

20. Except with the prior written consent of Landlord, no person or
persons other than those approved by Landlord shall be permitted to enter the
Premises for the purpose of cleaning the same. Tenant shall not cause any
unnecessary labor by reason of Tenant's carelessness or indifference in the
preservation of good order and cleanliness.

21. Tenant shall not alter any lock or install a new or additional lock
or any bolt on any door of the Premises without the prior written consent of
Landlord. Tenant shall in each case furnish

<PAGE>

Landlord with a key for any such lock. Tenant, upon the termination of the
Lease, shall deliver to Landlord all keys to doors in the building.

22. Tenant shall see that the doors of the Premises are closed and
locked and that all water faucets, water apparatus and utilities are shut off
before Tenant or Tenant's employees leave the Premises, so as to prevent
waste or damage. Tenant shall keep the doors to the building corridors
closed at all times except for ingress and egress.

23. The toilet rooms, toilets, urinals, wash basins and other apparatus
shall not be used for any purpose other than that for which they were
constructed; no foreign substance of any kind whatsoever shall be thrown
therein.

24. Hand trucks shall not be used in any space or public halls of the
building, either by any Tenant or others, except those equipped with rubber
tires and side guards or such other material-handling equipment as Landlord
may approve.

25. Tenant shall not leave vehicles in the parking areas overnight
without Landlord's prior written approval, except that Tenant's employees
shall be permitted to leave cars in the parking area for a reasonable number
of days as a result of employee business trips. All traffic directional
signs and arrows in the parking area must be observed. Washing, waxing,
cleaning or servicing of any vehicle is prohibited. Parking is prohibited in
areas not striped for parking; in aisles; where "no parking" signs are
posted; on ramps; and in cross-hatched areas. Every person is required to
park and lock his own vehicle and he assumes all responsibility for damage to
his vehicle.

26. Tenant shall coordinate all moving activity of office equipment and
furniture in and out of the building with Landlord and use the services of an
insured professional moving company. Heavy objects shall stand on platforms
or wood strips of such thickness as is necessary to properly distribute the
weight.

27. Tenant shall store all its trash and garbage within the Premises or
outside of the Premises only in trash collection containers approved in
writing by Landlord. No material shall be placed in the trash boxes,
receptacles or common areas if such material is of such nature that it may
not be disposed of in the ordinary and customary manner of removing and
disposing of non-hazardous trash and garbage in the area without being in
violation of any law or ordinance governing such disposal.

28. Canvassing, soliciting, distributing handbills or any other written
material and peddling in the building are prohibited, and Tenant shall
cooperate to prevent the same.

29. Tenant shall not allow or keep any animals or pets of any kind on
the Premises, except for seeing-eye dogs which are for the direct purpose of
aiding and assisting the visually impaired.

<PAGE>

30. Tenant assumes any and all responsibility for protecting its
Premises from theft, robbery and pilferage, which includes keeping doors
locked and other means of entry to the Premises closed.

31. Tenant shall be responsible for the observance of all of the
foregoing rules by Tenant's employees, agents, clients, customers, invitees
and guests.

32. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease. In the event of any
conflict between the terms of these Rules and Regulations and the Lease, the
Lease shall prevail.

33. Landlord reserves the right to make such other reasonable,
nondiscriminatory rules and regulations as in its judgment may from time to
time be needed for the safety, care and cleanliness of the building and for
the preservation of good order therein.

<PAGE>

EXHIBIT E

Drawing Index
- -------------

1. A0 Cover Sheet
2. A1 Site Plan & Details
3. A2 Floor Plan, Demolition & New Construction
4. A3 Reflected Ceiling & Finish Plan
5. E0 Abbreviation Index
6. E2.1D Floor Plan Demolition
7. E2.1L Floor Plan Lighting
8. E2.1P Floor Plan Power
9. M1 Mechanical Plan

<PAGE>

EXHIBIT F

[Second Floor Plan]

<PAGE>

EXHIBIT G

[floor plan]

<PAGE>

EXHIBIT 10.9

[SOCKET LETTERHEAD]

Martin Levetin February 2, 1996
38 Springhill Road
Randolph, N.J. 07869

Dear Martin,

On behalf of the Board of Directors, I am pleased to offer you the position
of President and Chief Executive Officer of Socket Communications, Inc. as an
exempt employee, with employment commencing on March 1, 1996. In this
position, you will report directly to Socket's Board of Directors. You will
be elected to Socket's Board at the first Board meeting following your start
of employment. Thereafter, your tenure as a Board member will be determined
by the Company's Articles of Incorporation.

The terms and conditions which will apply to your compensation and employment
are as follows:

For calendar year 1996, your base salary will be $13,333.34 per month,
payable semi-monthly (equivalent to $160,000 annualized rate). In January
1997, your base salary will be reviewed. In addition to the base salary, you
will participate in Socket's Management Incentive Compensation Program. Your
portion of the Program for calendar year 1996 will be $65,000 at plan
($16,250 per quarter) and will be based on the current 1996 Business Plan or
any plan subsequently approved by the Board. The full $16,250 amount for Q1
1996 will be paid to you in April 1996 if you begin employment by March 1,
1996.

This offer of employment includes a stock option grant of 100,000 shares of
Common Stock to be vested over a four year period according to Socket's 1995
Stock Option Plan. These stock options will be authorized at the Board
meeting following your hire date with an exercise price equal to the fair
market value of the Common Stock at that time. Shares vest 25% after 12
months and 1/48 monthly thereafter except that if you should be involuntary
terminated without cause in the first 12 months, your shares will vest
prorata through the date of termination.

The Company will pay for a portion of your costs of relocation as follows:
twelve coach round-trip airline trips (SFO, Oakland or San Jose - Newark) may
be used by you or your wife through October 1, 1996; temporary housing and
automobile allowance of $2,500 per month for six months; payment of the real
estate commission on the sale of your New Jersey residence if sold prior to
March 1, 1997; $10,000 moving allowance for household goods, payable at the
time of move if the move occurs prior to March 1, 1997 and an additional
$10,000 moving allowance if the move occurs prior to October 1, 1996.

<PAGE>

Martin Levetin
February 2, 1996
Page 2

Commencing with full-time employment, you will be entitled to all such
holiday, sick, health and medical benefits as are provided to other employees
of Socket Communications, Inc. You must be a regular full-time employee in
order to become eligible for the health plan, other insurance benefits,
participation in the Flexible Benefits Program, Paid Time Off (PTO) program,
and when initiated, the 401(K) program. Socket Communications, Inc. reserves
the right to modify, amend, or terminate any employee benefits at any time
for any reason.

Employment with Socket Communications, Inc. is not for a specific term and
can be terminated by yourself or by Socket Communications, Inc. at any time
for any reason, with or without cause. Any contrary representations which
have been made or which may be made to you are superseded by this offer. In
the event of your involuntary termination for other than cause, vesting of
stock options will cease on the date of termination and the Company shall (i)
continue your base salary payments semi-monthly for six months (ii) continue
health insurance until the earlier of the date of your eligibility for the
health insurance benefits provided by another employer or the expiration of
six months (iii) pay you when paid to Socket employees the full bonus amount
to which you would have been entitled for the first quarter following
termination and one-half of such bonus amount for the second quarter
following termination (for this measurement, if your termination occurs in
the first half of a quarter, the first quarter following termination will be
the quarter in which you are terminated, otherwise, it will be the following
quarter) and (iv) offer you the right to purchase at book value certain items
of Company property purchased by the Company for your use, which may include
a personal computer, a cellular phone, and other similar items.

Socket Communications, Inc. maintains a policy of non-discrimination with all
employees and applicants for employment. All aspects of employment with
Socket Communications, Inc. are governed on the basis of merit, competence,
qualifications and the ability to do the job and will not be influenced in
any manner by race, color, religion, sex, age, national origin, handicap,
marital status, medical condition, or veteran service.

Your employment pursuant to this offer is contingent on your executing
Socket's Proprietary Information and Inventions Agreement (enclosed) and upon
you providing Socket Communications, Inc. with legally required proof of your
identity.

If you accept this offer, the terms described in this letter shall be the
terms of your employment which will begin on March 1, 1996. Any modifications
of these terms must be in writing and signed by yourself and Socket
Communications' Chairman. This offer, if not accepted, will expire on
February 15, 1996.

<PAGE>

Martin Levetin
February 2, 1996
Page 3

This offer comes as a result of the significant due diligence conducted by
the Socket Board of Directors and is conveyed with enthusiasm and optimism
for the prospect of you leading Socket to achieve its full potential. If you
accept the above described offer, please return to me a signed copy of this
letter.

Sincerely,

SOCKET COMMUNICATIONS, INC.

By: /s/ Charlie Bass
------------------------------
Charlie Bass
Chairman

I accept this offer:

/s/ Martin Levetin February 5, 1996
- ---------------------------------- ----------
Martin Levetin

<PAGE>
EXHIBIT 11.1

SOCKET COMMUNICATIONS, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE LOSS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Net loss........................................................................ $ (3,328) $ (3,316) $ (3,318)
Accretion of preferred stock.................................................... (543)
---------
Net loss applicable to common stockholders...................................... $ (3,871)
---------
---------
Computations of weighted average common and common equivalent shares
outstanding:
Weighted average common shares outstanding.................................... 3,015 1,757 249
Common equivalent shares from stock options, convertible preferred stock, and
convertible notes granted or issued during the twelve-month period prior to
the Company's initial public offering........................................ -- 278 1,111
--------- --------- ---------
Shares used in computing net loss per share..................................... 3,015 2,035 1,360
--------- --------- ---------
--------- --------- ---------
Net loss per share applicable to common stockholders............................ $ (1.28)
---------
---------
Net loss per share.............................................................. $ (1.63) $ (2.44)
--------- ---------
--------- ---------

Computation of shares used in pro forma net loss per share:
Total weighted average common and common equivalent shares outstanding (as
above)....................................................................... 1,360
Common equivalent shares attributable to convertible preferred stock
(if-converted method)........................................................ 581
---------
Shares used in computing pro forma net loss per share........................... 1,941
---------
---------
Pro forma net loss per share.................................................... $ (1.71)
---------
---------
</TABLE>