<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER 1-13810
---------------------
SOCKET COMMUNICATIONS, INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C>
DELAWARE 94-3155066
(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
</TABLE>
37400 CENTRAL COURT,
NEWARK, CA 94560
(Address of principal executive offices including zip code)
(510) 744-2700
(Registrant's telephone number, including area code)
------------------------
Securities registered under Section 12(b) of the Exchange Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
- -------------------- ---------------------------------------
<C> <S>
Common Stock OTC (Bulletin Board) and Pacific Stock
($0.001 par value) Exchange
</TABLE>
Securities registered under Section 12(g) of the Exchange Act: none
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
_X_ No ____
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
Revenue for the fiscal year ended December 31, 1997: $4,779,200
Aggregate market value of Common Stock ($0.001 par value) held by
non-affiliates on March 25, 1998 based on closing price on such date:
$6,000,000. For purposes of this disclosure, shares of Common Stock held by
persons who hold more than 5% of the outstanding shares of Common Stock and
shares held by officers and directors of the registrant have been excluded
because such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily conclusive for other purposes.
Number of shares of Common Stock ($0.001 par value) outstanding as of March
25, 1998 is 6,501,275 shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Amendment on Form 10-KSB (this "Amendment") of Socket Communications,
Inc. (the "Company") amends the Company's annual report on Form 10-KSB for the
year ended December 31, 1997 (the "Form 10-KSB"), which was filed with the
Securities and Exchange Commission on or before March 31, 1998. Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Form 10K-SB.
This Amendment amends Part III of the Form 10-KSB to read in full as set
forth below.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the Company's
executive officers and directors as of March 31, 1998, as well as directors that
have been nominated by the Company for the next fiscal year.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------- --- --------------------------------------------------------------------------
<S> <C> <C>
Charlie Bass................... 56 Chairman of the Board of Directors and Chief Executive Officer
Micheal L. Gifford............. 40 Executive Vice President and Director
Gary W. Kalbach................ 56 Director
Jack C. Carsten................ 56 Director
Edward M. Esber, Jr............ 46 Director Nominee
Gianluca Rattazzi.............. 45 Director Nominee
Lars Lindgren.................. 42 Director Nominee
David W. Dunlap................ 55 Vice President of Finance and Administration, Chief Financial Officer and
Secretary
Kevin J. Mills................. 37 Vice President of Operations
</TABLE>
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 also served as
the Company's interim Chief Executive Officer during January and February 1996
and from April 1997 until February 1998, at which time Mr. Bass assumed the
position of Chief Executive Officer. 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.
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 computer 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.
1
<PAGE>
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 MBA from San Jose State
University and a B.S. in Business Administration from the University of
California at Berkeley.
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.
EDWARD M. ESBER, JR. is not presently serving as a director of the Company.
Mr. Esber has served as a director and as Chairman of SoloPoint, Inc., a
publicly-held communications management products company, since October 1995.
From October 1995 to March 1998, Mr. Esber also served as Chief Executive
Officer of SoloPoint, Inc. From May 1994 to June 1995, Mr. Esber was Chairman,
Chief Executive Officer and President of Creative Insights, Inc., a computer
toys company. From May 1993 to June 1994, Mr. Esber was President and Chief
Operating Officer of Creative Labs, Inc., the US subsidiary of Creative
Technology Ltd. Mr. Esber has served as a director of Quantum Corp. since 1988,
Integrated Circuit Systems Technology since 1997 and Borealis Corporation since
1996. Mr. Esber holds a bachelor's degree in computer engineering from Case
Western Reserve University, a master's degree in electrical engineering from
Syracuse University and a M.B.A. in general management from Harvard Business
School.
GIANLUCA RATTAZZI is not presently a director of the Company. Dr. Rattazzi
co-founded Meridian Data, Inc. ("Meridian"), a provider of CD ROM networking
software and systems, in July 1988. He has served as President and a director of
Meridian since inception and was appointed Chief Executive Officer of Meridian
in October 1992. From 1985 to 1988, Dr. Rattazzi held various executive level
positions at Virtual Microsystems, Inc., a computer peripheral networking
company, most recently as President. Dr. Rattazzi holds an M.S. degree in
Electrical Engineering and Computer Science from the University of California,
Berkeley, and a Ph.D. in Physics from the University of Rome, Italy.
LARS LINDGREN is not presently a director of the Company. Mr. Lindgren
currently serves as the Managing Director of ForetagsByggarna
("ForetagsByggarna"), a private venture capital firm which Mr. Lindgren founded
in 1991. Mr. Lindgren has been actively involved in the venture capital industry
in Sweden and to a lesser extent throughout Europe since 1984, and has founded a
number of companies including Campanius Venture, a venture capital concern of
which Mr. Lindgren continues to serve as the managing partner, ForetagsByggarna,
MiniDoc, a publicly traded company in Sweden that develops information
technology system for the pharmaceutical industry, and Nykoping Strand, a real
estate company, and also founded the Swedish Venture Capital Association. Mr.
Lindgren has served on the board of directors for numerous companies and is
presently on the boards of JKL, a Swedish public relations firm, Campanius
Venture, ForetagsByggarna and MiniDoc. Mr. Lindgren received an M.B.A. from the
Stockholm School of Economics in 1984 and has also studied at the Sloan School
of Management at M.I.T.
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
2
<PAGE>
the United States Bankruptcy Code in August 1994 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. 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.
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.
There are no family relationships among any of the Company's directors or
executive officers.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
executive officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC") and
the National Association of Securities Dealers, Inc. Executive officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during fiscal 1997,
all filing requirements applicable to its executive officers and directors were
complied with, except that one report on Form 4 was filed late for each of
Charlie Bass, Jack Carsten and Gary Kalbach.
3
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company during
the fiscal years ended December 31, 1997, 1996 and 1995 to the Company's Chief
Executive Officer, and the two other executive officers whose total 1997 salary
and bonus exceeded $100,000 (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) OPTIONS COMPENSATION($) COMPENSATION($)
- --------------------------------- --------- --------- ----------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Charlie Bass(2) ................. 1997 -- -- 30,000 -- --
Chief Executive Officer and 1996 -- -- 55,767(3) -- --
Director 1995 -- -- 3,367(3) -- --
Micheal L. Gifford .............. 1997 120,000 21,829 32,500 -- --
Executive Vice President 1996 120,000 22,211 35,745(3) -- --
and Director 1995 111,378 26,602 22,445(3) -- --
David W. Dunlap(4) .............. 1997 120,000 20,696 32,500 -- --
Vice President of Finance and 1996 120,000 18,775 15,914(3) -- --
Administration, Chief Financial 1995 100,008 21,232 21,341(3) 13,500 --
Officer and Secretary
1997 115,000 20,930 32,500 -- --
Kevin Mills ..................... 1996 99,999 22,291 15,914(3) -- --
Vice President of Operations 1995 91,042 19,111 7,014(3) -- --
Martin Levetin(5) ............... 1997 51,324 12,871 0 -- 116,183(5)
Former President, Chief 1996 134,333 62,197 126,600(3) 36,006(6) --
Executive Officer 1995 -- -- -- -- --
1997 86,250 28,339 20,000 -- 47,842(7)
John E. O'Leary(7) .............. 1996 50,750 22,969 -- -- --
Former Vice President of Sales 1995 -- -- -- -- --
</TABLE>
- ------------------------
(1) Represents cash bonuses earned for work performed during fiscal 1997.
Bonuses earned during the first three fiscal quarters of fiscal 1997 were
paid in fiscal 1997 whereas bonuses earned during the fourth fiscal quarter
of 1997 were paid in the first quarter of fiscal 1998.
(2) Dr. Bass served as Acting Chief Executive Officer from April 24, 1997
through January 1998, at which time Dr. Bass assumed the role of Chief
Executive Officer. In addition, Dr. Bass served in a consulting capacity as
Acting Chief Executive Officer of the Company from January 1, 1996 through
February 28, 1996. 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.
(3) 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 priced to reflect the market price of
the Company's Common Stock on the date of the exchange (the "1996
Repricing"). The options were subsequently repriced on January 14, 1998
pursuant to a decision by
4
<PAGE>
the Board of Directors to exchange outstanding options for new options
priced to reflect the market price of the Company's Common Stock on the date
of the exchange (the "1998 Repricing"). The new options continue the vesting
schedule of the old options except with respect to options vested as of the
1998 Repricing, which vest in equal monthly increments over the six months
following the 1998 Repricing.
(4) Mr. Dunlap joined the Company as Vice President of Finance and
Administration and Chief Financial Officer and Secretary 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.
(5) Mr. Levetin resigned as the Company's President, Chief Executive Officer and
Director on April 24, 1997. Pursuant to his employment contract, Mr. Levetin
was paid $80,600 in severance salary, $24,375 in severance bonus and $5,207
for accrued vacation time. In addition, Mr. Levetin served in a consulting
capacity for which the Company paid Mr. Levetin $6,000.
(6) 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.
(7) Mr. O'Leary resigned as the Company's Vice President of Sales on August 29,
1997. Mr. O'Leary was paid $32,500 in severance salary, $12,500 in severance
bonus and $2,842 for accrued vacation time.
OPTION GRANTS IN FISCAL 1997
The following table sets forth certain information for the fiscal year ended
December 31, 1997 with respect to each grant of stock options to the Named
Executive Officers. No stock appreciation rights were granted during such year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXCERCISE
UNDERLYING GRANTED TO PRICE PER
OPTIONS EMPLOYEES IN SHARE EXPIRATION
NAME GRANTED FISCAL 1997(1) ($)(2) DATE
- ------------------------------------------- ----------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Charlie Bass(3)............................ 30,000 7.9 0.56 07/01/07
Martin Levetin............................. -- -- -- --
Micheal L. Gifford......................... 32,500 8.5 0.56 07/01/07
John E. O'Leary(4)......................... 20,000 5.2 0.56 07/01/07
David W. Dunlap............................ 32,500 8.5 0.56 07/01/07
Kevin Mills................................ 32,500 8.5 0.56 07/01/07
</TABLE>
- ------------------------
(1) Based on options granted to employees, consultants and directors during
fiscal 1997 to purchase 381,620 shares of Common Stock.
(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) Dr. Bass assumed the position of Chairman and Acting Chief Executive Officer
effective April 24, 1997 and assumed the position Chief Executive Officer in
January 1998. Bass Associates, of which Dr. Bass is General Partner, is the
record owner of the stock options. However, Dr. Bass disclaims beneficial
ownership by Bass Associates except to the extent of his pecuniary interest
therein.
(4) Mr. O'Leary's employment with the Company was terminated on August 29, 1997.
5
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND FISCAL YEAR-END OPTION VALUES
None of the Named Executive Officers exercised any stock options during
fiscal 1997. The following table provides information on the value of such
officers' unexercised options at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 (1) DECEMBER 31, 1997 ($)(2)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Charlie Bass.......................... 27,444 37,812 -- --
Martin Levetin........................ -- -- -- --
Micheal L. Gifford.................... 42,516 25,729 -- --
David W. Dunlap....................... 33,212 29,529 -- --
Kevin Mills........................... 36,246 28,535 -- --
</TABLE>
- ------------------------
(1) No Named Executive Officer exercised stock options during fiscal 1997.
(2) Based upon a final bid price, as of December 31, 1997, of $0.36 per share.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN CONTROL ARRANGEMENTS
In February, 1998, the Company initiated a bonus plan pursuant to which the
Company will create a bonus pool in the amount of 10% of any consideration
payable by a buyer in a change of control transaction to be allocated to the
executive officers and such other employees the Board of Directors determine in
its discretion to include in such bonuses.
In October 1997, the Company entered into separate employment agreements
with Micheal Gifford, Kevin Mills and David Dunlap (each an "Executive" and
collectively the "Executives"). Pursuant to these agreements, which expire on
December 31, 2000, the employment of the Executives is terminable at will by
each Executive, respectively. If the Company terminates the Executive's
employment without cause, the Company shall pay the Executive (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 the Executive'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 the ability to purchase at book value certain items of
Company property purchased by the Company for the Executive's use, which may
include a personal computer, a cellular phone, and other similar items.
John O'Leary's employment with the Company terminated in August 1997. In
July 1996, the Company entered into an employment agreement with Mr. O'Leary
(the "O'Leary Employment Agreement"). Pursuant to the O'Leary Employment
Agreement, the Company was obligated, upon the involuntary termination of Mr.
O'Leary's employment, to pay Mr. O'Leary (i) three months' salary, (ii) health
insurance until the earlier of the date of Mr. O'Leary's eligibility for the
health insurance benefits provided by another employer or the expiration of
three months, (iii) the full bonus amount on a pro rata basis to which Mr.
O'Leary would have been entitled to for the quarter in which Mr. O'Leary's
employment terminated plus one additional quarter's full target bonus amount.
Accordingly, the Company paid Mr. O'Leary $32,500 to cover its obligation to pay
three months' salary and $12,500 to cover its obligation to pay bonuses for the
quarter subsequent to Mr. O'Leary's termination.
Mr. Levetin resigned as the Company's President and Chief Executive Officer
on April 24, 1997. In February 1996, the Company entered into an employment
agreement with Mr. Levetin (the "Levetin
6
<PAGE>
Employment Agreement"). Pursuant to the Levetin Employment Agreement, the
Company was obligated, upon termination of Mr. Levetin's employment without
cause, to pay Mr. Levetin (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. 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 included a
personal computer, a cellular phone, and other similar items. Accordingly, the
Company paid Mr. Levetin $80,000 to cover its obligation to pay six months'
salary and $24,375 to cover its obligation to pay bonuses for quarters
subsequent to Mr. Levetin's termination. In addition, Mr. Levetin availed
himself of the health insurance benefits set forth in the Levetin Employment
Agreement.
Additionally, under the 1995 Plan, all optionees' rights to purchase stock
shall, upon a change of control of the Company, be immediately vested and be
fully exercisable under certain circumstances.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Pursuant to the Delaware General Corporation Law ("Delaware Law"), the
Company has adopted provisions in its Amended and Restated Certificate of
Incorporation which eliminate the personal liability of its directors and
officers to the Company and its stockholders for monetary damages for breach of
the directors' fiduciary duties in certain circumstances. The Company's Bylaws
require the Company to indemnify its directors, officers, employees and other
agents to the fullest extent permitted by law.
The Company has entered into indemnification agreements with each of its
current directors and officers which provide for indemnification to the fullest
extent permitted by Delaware Law, including in circumstances in which
indemnification and the advancement of expenses are discretionary under Delaware
Law. The Company believes that the limitation of liability provisions in its
Amended and Restated Certificate of Incorporation and the indemnification
agreements will enhance the Company's ability to continue to attract and retain
qualified individuals to serve as directors and officers.
There is no pending litigation or proceeding involving a director, officer
or employee of the Company to which the indemnification agreements would apply.
COMPENSATION OF DIRECTORS
Directors have not received any cash compensation for their service as
Directors of the Company, but are reimbursed for expenses incurred in connection
with attending Board or Committee meetings. Beginning in 1998, each director who
is not a salaried officer or employee of the Company will receive a fee of
$1,500 for attendance at each meeting of the Board of Directors. Furthermore,
the Company's Directors are entitled to participate in the Company's 1995 Stock
Option Plan, and during fiscal 1997 Messrs. Bass, Gifford, Kalbach and Carsten
were granted options to purchase 30,000, 32,500, 15,000 and 30,000,
respectively, shares of the Company's Common Stock, each at an option exercise
price of $0.56 per share, the fair market value of the Company's Common Stock on
the date of grant. In January 1998, options to purchase 30,767, 35,745, 5,767
and 5,767 shares, respectively, at $1.55 per share, held by Messrs. Bass,
Gifford, Kalbach and Carsten were canceled and exchanged for new options with an
exercise price of $0.46 per share. The new option continues the vesting schedule
of the old option except that vested options on the date of the exchange vest in
equal monthly increments over the six months following the exchange. See
"Executive Compensation."
7
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 1, 1998, certain information with
respect to the beneficial ownership of the Common Stock of the Company on an
as-converted basis and of the Series B Preferred of the Company 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>
NUMBER OF PERCENTAGE OF
SHARES SHARES
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNED(%)(2)
- -------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Explorer Partners and affiliated entities............................................. 3,472,029(3) 32.6
11300 U.S. Highway One, Suite 400
North Palm Beach, FL 33408
Cetronic Aktiebolag [Publ]............................................................ 1,816,224(4) 20.2
Box 153
SE - 864 22
Matfors, Sweden
ForetagsByggarna BV................................................................... 729,869(5) 9.5
A.J. Ernststraat 595H
1082 LD Amsterdam, The Netherlands
Telenor Venture AS.................................................................... 671,803 9.3
Post Boks 6701
St. Olavs Plass
0130 Oslo, Norway
El Dorado Ventures and affiliated entities............................................ 386,116(6) 5.3
2400 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Lars Lindgren......................................................................... 729,869(7) 9.5
Charlie Bass.......................................................................... 691,705(8) 9.2
Martin Levetin........................................................................ -- *
Micheal L. Gifford.................................................................... 177,984(10) 2.5
Jack C. Carsten....................................................................... 154,267(11) 2.1
Edward M. Esber, Jr................................................................... -- *
Gianluca Rattazzi..................................................................... -- *
Kevin J. Mills........................................................................ 47,917(12) *
David W. Dunlap....................................................................... 45,078(13) *
All directors, nominees and officers as a group (10 persons).......................... 2,232,963(14) 27.0
</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 7,187,632 shares of Common Stock
outstanding on April 1, 1998 and any shares issuable pursuant to securities
convertible into or exercisable for shares of Common Stock by the person or
group in question on April 1, 1998 or within 60 days thereafter.
8
<PAGE>
(3) Consists of 2,148,153 shares owned by Explorer Partners, L.L.C. ("Explorer
Partners") (including 1,250,000 shares of Common Stock issuable upon
conversion of the Series B Convertible Preferred Stock and 885,000 shares
of Common Stock issuable upon conversion of the Series B-1 Convertible
Preferred Stock); 872,901 shares owned by Explorer Partners II, L.L.C.
("Explorer Partners II") (including 871,500 shares of Common Stock issuable
upon conversion of Series B-2 Convertible Preferred Stock); and 450,975
shares of Common Stock owned by Explorer Fund Management, L.L.C. ("Explorer
Fund Management", and together with Explorer Partners and Explorer Partners
II, the "Explorer Entities") subject to warrants exercisable within 60 days
of April 1, 1998. Together, the Explorer Entities hold 100% of the shares
of Series B, B-1 and B-2 Convertible Preferred Stock outstanding. Explorer
Fund Management, as investment advisor to Explorer Partners has shared
voting and investment power of the shares directly owned by Explorer
Partners with Timothy Keating, the Managing Director of Explorer Partners.
Explorer Fund Management, as investment advisor to Explorer Partners II,
also has shared voting and investment power of the shares directly owned by
Explorer Partners II with Tom Papoutsis, the Managing Director of Explorer
Partners II. Robert Holz, as Managing Director, and Timothy Keating, as a
member, of Explorer Fund Management, exercise shared voting and investment
control with respect to the shares held by Explorer Fund Management. In
addition, Messrs. Holz and Keating, in their respective roles with Explorer
Fund Management, exercise shared voting and investment control with respect
to the shares held by Explorer Partners and Explorer Partners II. Messrs.
Keating, Papoutsis and Holz disclaim beneficial ownership of the shares
held by the Explorer Entities except to the extent of their respective
pecuniary interests therein.
(4) Represents 1,269,540 shares of Common Stock issuable upon conversion of
Series C Convertible Preferred Stock and 546,684 shares of Common Stock
issuable upon conversion of Series C-1 Convertible Preferred Stock within
60 days of April 1, 1998. Cetronic Aktiebolag [Publ] holds 63.0% and 100%
of the Series C and C-1 Convertible Preferred Stock outstanding.
(5) Includes 459,869 shares of Common Stock issuable upon conversion of Series
C Convertible Preferred Stock within 60 days of April 1, 1998.
ForetagsByggarna BV holds 22.8% of the Series C Convertible Preferred Stock
outstanding.
(6) Consists of 6,812 shares owned by El Dorado C&L Fund (including 178 shares
of Common Stock subject to warrants exercisable within 60 days of April 1,
1998, 268 shares of Common Stock subject to options exercisable within 60
days of April 1, 1998 and 364 shares of Common Stock subject to notes
convertible within 60 days of April 1, 1998); 367,932 shares owned by El
Dorado Ventures III (including 9,616 shares of Common Stock subject to
warrants exercisable within 60 days of April 1, 1998, 14,482 shares of
Common Stock subject to options exercisable within 60 days of April 1, 1998
and 19,641 shares of Common Stock subject to notes convertible within 60
days of April 1, 1998); and 11,372 shares owned by El Dorado Technology IV,
L.P. (including 206 shares of Common Stock subject to warrants exercisable
within 60 days of April 1, 1998, 459 shares of Common Stock subject to
options exercisable within 60 days of April 1, 1998 and 430 shares of
Common Stock subject to notes convertible within 60 days of April 1, 1998).
(7) Consists of the 729,869 shares owned by ForetagsByggarna BV set forth in
Note (5) above. Mr. Lindgren is a partner of ForetagsByggarna and may be
deemed to share voting and investment power with respect to those shares.
However, Mr. Lindgren disclaims beneficial ownership except to the extent
of his pecuniary interest therein.
(8) Consists of 334,340 shares owned by Bass Associates (including 32,328
shares of Common Stock subject to options exercisable within 60 days of
April 1, 1998) and 357,365 shares owned by Bass Trust (including 326,964
shares of Common Stock subject to notes convertible within 60 days of April
1, 1998 and 5,000 shares of Common Stock subject to warrants exercisable
within 60 days of April 1, 1998). Dr. Bass is the General Partner of Bass
Associates and may be deemed to share voting
9
<PAGE>
and investment power with respect to these shares. However, Dr. Bass
disclaims beneficial ownership of shares owned by Bass Associates except to
the extent of his pecuniary interest therein.
(9) Consists of the 386,116 shares owned by entitles 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, options and
notes owned by the El Dorado Entities except to the extent of his pecuniary
interest therein.
(10) Includes 6,000 shares of Common Stock subject to warrants exercisable
within 60 days of April 1, 1998 and 46,018 shares of Common Stock subject
to options exercisable within 60 days of April 1, 1998.
(11) Includes 17,595 shares of Common Stock subject to options exercisable
within 60 days of April 1, 1998 and 60,227 shares of Common Stock subject
to notes convertible within 60 days of April 1, 1998.
(12) Represents shares of Common Stock subject to options exercisable within 60
days of April 1, 1998.
(13) Represents shares of Common Stock subject to options exercisable within 60
days of April 1, 1998.
(14) Includes 21,000 shares of Common Stock subject to warrants exercisable
within 60 days of April 1, 1998; 204,145 shares of Common Stock subject to
options exercisable within 60 days of April 1, 1998; 407,626 shares of
Common Stock subject to notes convertible within 60 days of April 1, 1998
and 459,896 shares of Common Stock issuable upon conversion of Series C
Convertible Preferred Stock within 60 days of April 1, 1998.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On various dates during 1997, the Company issued convertible subordinated
promissory notes to the Company's directors and certain significant
stockholders. The interest rate on the notes was 8% and all or part of the
principal and accrued interest was convertible into common shares of the Company
at the option of the holder anytime prior to their due date. No shares had been
converted as of December 31, 1997. A note to Cetronic for $500,000 due December
12, 1998 was 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 paging receivers) products being developed
jointly by Socket and Cetronic. All other notes were unsecured. The notes were
subordinated to certain of the Company's bank financing arrangements. The due
dates on certain notes were extended and the conversion rates repriced during or
at the end of their original note terms. The following table summarizes the
notes, original issue dates, maturity dates, principal amounts and conversion
rates prior to the Note Conversion (as defined below) for each note held by a
director or significant stockholder exceeding $60,000:
<TABLE>
<CAPTION>
ORIGINAL PRINCIPAL CONVERSION
NOTE HOLDER ISSUE DATE MATURITY DATE AMOUNT RATE
- -------------------------------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cetronic Aktiebolag [Publ](1)......... 01/29/97 12/12/98 $ 500,000.00 $ 1.00
ForetagsByggarna BV(2)................ 02/14/97 08/14/98 140,000.00 0.50
Telenor Venture AS.................... 02/14/97 08/14/98 300,000.00 0.50
Bass Trust(3)......................... 06/12/97 12/12/98 60,000.00 0.53
Cetronic Aktiebolag [Publ](1)......... 06/12/97 12/12/98 500,000.00 0.50
Bass Trust(3)......................... 11/07/97 12/12/98 100,000.00 0.53
ForetagsByggarna BV(2)................ 11/07/97 11/07/98 75,000.00 0.50
Cetronic Aktiebolag [Publ](1)......... 11/24/97 12/12/98 100,000.00 0.50
</TABLE>
- ------------------------
(1) At the time of the issuance of this note, Lars Lindgren, a nominee for
Director of the Company, was Chairman of Cetronic Aktiebolag [Publ], a
position from which he has since resigned.
10
<PAGE>
(2) Lars Lindgren, a nominee for Director of the Company, is a partner of
ForetagsByggarna BV.
(3) Charlie Bass, the Company's Chief Executive Officer and Chairman of the
Board of Directors, is the trustee of the Bass Trust.
Effective March 31, 1998, all of such notes listed above except for those
held by Bass Trust, converted into an aggregate of 81,576 shares of Series C
Convertible Preferred Stock, 51,574 shares of Series C-1 Convertible Preferred
Stock and 671,803 shares of Common Stock pursuant to an offer from the Company
(the "Note Conversion"). The Series C Convertible Preferred Stock and Series C-1
Convertible Preferred Stock presently held by the note holders above will
convert into 2,561,462 shares of Common Stock any time over a two year period at
the option of the holder. The Series C Convertible Preferred Stock and Series
C-1 Convertible Preferred Stock do not have voting rights. Dividends accrue at
an annual rate of 8%, and will also convert into Common Stock at the time the
Series C shares are converted.
Pursuant to the resignation of Martin Levetin on April 24, 1997 as the
Company's President and Chief Executive Officer, the Company paid Mr. Levetin
$80,600 to cover its obligation under the Levetin Employment Agreement to pay
Mr. Levetin six months' salary and $24,375 to cover its obligation to pay
bonuses for quarters subsequent to Mr. Levetin's termination.
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 1996 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 1996 Repricing, which vest in equal
monthly increments over the 12 months following the 1996 Repricing. Bass
Associates, of which Dr. Bass is General Partner, is the record owner of the New
Option. The New Option was further repriced in the 1998 Repricing to an exercise
price of $0.46. Dr. Bass disclaims beneficial ownership of shares owned by Bass
Associates except to the extent of his pecuniary interest therein.
All future affiliated transactions and/or loans between the Company and its
officers, directors and/or 5% stockholders will be on terms no less favorable
than could be obtained from unaffiliated third parties and will be approved by a
majority of the independent, disinterested directors of the Company.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized.
<TABLE>
<S> <C> <C>
SOCKET COMMUNICATIONS, INC.
REGISTRANT
Date: April 29, 1998 By: /s/ CHARLIE BASS
-----------------------------------------
Charlie Bass
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ CHARLIE BASS
- ------------------------------ Chairman and Chief April 29, 1998
Charlie Bass Executive Officer
/s/ DAVID W. DUNLAP Vice President of Finance
- ------------------------------ and Administration and April 29, 1998
David W. Dunlap Chief Financial Officer
*
- ------------------------------ Executive Vice President April 29, 1998
Micheal L. Gifford and Director
*
- ------------------------------ Director April 29, 1998
Jack C. Carsten
*
- ------------------------------ Director April 29, 1998
Gary W. Kalbach
*By: /s/ DAVID W.
DUNLAP
- ------------------------------
David W. Dunlap
Attorney-in-Fact
12
