As filed with the Securities and Exchange Commission on July 9, 1999
Registration No. 333-____________
=====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-----------------------
SOCKET COMMUNICATIONS, INC.
(Exact name of Registrant as specified in charter)
-----------------------
Delaware 94-3155066
(State or other (I.R.S. Employer
jurisdiction of Identification Number)
incorporation or
organization)
37400 Central Court
Newark, CA 94560
(510) 744-2700
(Address, including zip code, and telephone number,
including area code, of
Registrant's principal executive offices)
-----------------------
DAVID W. DUNLAP
Chief Financial Officer
SOCKET COMMUNICATIONS, INC.
37400 Central Court
Newark, CA 94560
(510) 744-2700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------
Copies to:
BARRY E. TAYLOR, ESQ.
ROBERT G. O'CONNOR, ESQ.
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(650) 493-9300
-----------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 426(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
Title of Each Class of shares Offering Aggregate Amount of
of Securities to be Price Per Offering Registration
to be Registered Registered Share(1) Price(1) Fee
- --------------------------- ----------- ---------- --------------- ------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value per share ....... 3,005,909 $1.115 $3,351,587.58 $932.00
=========== ========== =============== ============
</TABLE>
(1) Estimated solely for the purpose of calculation of the registration
fee pursuant to Rule 457(c) under the Securities Act based on the
average of the bid and ask prices of the Registrant's common stock on
the OTC Bulletin Board on July 6, 1999.
-----------------------
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 or until the
Registration Statement shall become effective on such date as the
Commission, acting pursuant to such Section 8(a), may determine.
=====================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 9, 1999
PROSPECTUS
3,005,909 Shares
Socket Communications, Inc.
Common Stock
-----------------------
This prospectus relates to the public offering, which is not being
underwritten, of up to 3,005,909 shares of our common stock by the
selling stockholders identified in this prospectus.
The prices at which such stockholders may sell the shares will be
determined by the prevailing market prices for the shares or in
negotiated transactions. We will not receive any of the proceeds from
the sale of the shares.
Our common stock is quoted on the OTC Bulletin Board under the
symbol "SCKT" and is listed on the Pacific Exchange under the symbol
"SOK." On July 6, 1999, the last sale price for our common stock as
reported on the OTC Bulletin Board was $1.10 per share.
We currently do not comply with the continued listing criteria of
the Pacific Exchange. The Pacific Exchange has granted us an extension
of time until October 1999 to come into compliance with its continued
listing criteria. If we are unable to do so, the Pacific Exchange could
decide to initiate delisting procedures against us at that time. If
this happens, the liquidity of the trading market for our common stock
would be significantly impaired. See "Risk Factors - The trading market
for our common stock is illiquid, and we may be delisted from the
Pacific Exchange."
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 3.
-----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------------------
The date of this prospectus is July 9, 1999.
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer
to buy these securities in any state where the offer or sale is not
permitted.
<PAGE>
TABLE OF CONTENTS
Page
Risk Factors ............................................................3
Use of Proceeds .........................................................9
Overview of Our Business ................................................9
Information Regarding Forward Looking Statements .......................11
Selling Stockholders ...................................................12
Plan of Distribution ...................................................13
Legal Matters ..........................................................14
Experts ................................................................14
Disclosure on Commission Position of Indemnification
of Officers and Directors ...........................................14
Where You Can Find More Information ....................................15
You should rely only on the information contained in this
prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus. The
selling stockholders listed in this prospectus on page 12 are offering
to sell, and seeking offers to buy, shares of Socket Communications, Inc.
common stock only in jurisdictions where offers and sales are permitted.
The information contained in this prospectus is accurate only as of the
date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of Socket Communications, Inc. common stock.
You can contact us by mail at Socket Communications, Inc., 37400 Central
Court, Newark, CA 94560 or by phone at (510) 744-2700.
RISK FACTORS
An investment in our common stock involves a high degree of risk.
You should carefully consider the risks described below before deciding
to purchase shares of our common stock. The risks described below are
not the only ones that we face. Additional risks that generally apply
to publicly traded companies, that are not yet identified or that we
currently think are immaterial may also adversely affect our company.
-3-
<PAGE>
Any of the following factors could adversely affect our business,
financial condition or results of operations. The trading price of our
common stock could, in turn, decline and you could lose all or part of
your investment.
We need to raise additional capital to fund our operations. Our
independent auditors have expressed doubt about our ability to continue
as a going concern.
As of March 31, 1999, we had cash and cash equivalents of $567,631
and a working capital deficit of $341,960. We believe our existing
capital resources will be insufficient to satisfy our working capital
requirements through the end of 1999. In this regard, we will need to
raise additional capital to fund our working capital requirements for
the second half of 1999 and beyond. The Report of Independent Auditors
on our financial statements for the year ended December 31, 1998
contains an explanatory paragraph regarding our need for additional
financing and indicating substantial doubt about our ability to continue
as a going concern. We may not be able to raise additional capital on
acceptable terms, if at all. If we do, the additional capital may be on
terms that are dilutive to existing stockholders. Our inability to
secure any necessary funding would significantly impair our ability to
operate and would adversely affect our financial condition.
The trading market for our common stock is illiquid, and we may be
delisted from the Pacific Exchange
Our common stock trades on the OTC Bulletin Board. Our common
stock is also quoted on the Pacific Exchange. The continued listing
criteria of the Pacific Exchange requires us to have:
- at least 300,000 publicly held shares of common stock with a
market value of at least $500,000,
- at least 250 public beneficial holders of our common stock,
- total net tangible assets (the same as stockholders' equity for
Socket) of at least $500,000 or net worth of at least $2,000,000,
and
- a share bid price of at least $1.00 per share of common stock.
We have not been in compliance with the net tangible asset
requirements of the Pacific Exchange since December 31, 1996. Except
for brief periods of time, we also have not been in compliance with the
share bid price requirements of the Pacific Exchange. Therefore, we
have been subject to possible delisting procedures since December 31,
1996. In April 1999, the Pacific Exchange granted us a further
extension of time to come into compliance with the continued listing
criteria and advised us that it would next review our qualification for
continued listing in October 1999. As of March 31, 1999, we had a
stockholders' deficit of $18,749. We will need to increase our
stockholders' equity to at least $500,000, by raising additional equity
capital or through profitability, in order to comply with the Pacific
Exchange's minimum listing criteria, and we may not be successful in
doing so. In that case, the Pacific Exchange may decide to initiate
delisting proceedings against us.
If our common stock becomes delisted from the Pacific Exchange,
trading in our stock will become subject to the Commission's "penny
stock" rules under the Securities Exchange Act of 1934, which will make
it more difficult for our stockholders to dispose of our stock. The
"penny stock" rules generally impose additional sales practices and
market making requirements on broker-dealers who sell and/or make a
market in such securities. Consequently, our delisting from the Pacific
Exchange and our becoming subject to the rules on penny stocks would
affect the ability or willingness of broker-dealers to sell and/or make
a market in our securities and therefore would severely adversely affect
the market liquidity for our common stock.
-4-
<PAGE>
Shares eligible for future sale may adversely affect the market price
for our common stock
As of March 31, 1999, we had outstanding securities convertible
into or exercisable for the following amounts of common stock:
- 1,918,508 shares issuable upon the exercise of options under our
1995 and 1993 Stock Plans;
- 4,181,940 shares issuable upon exercise of warrants, certain of
which include dilution adjustments whenever we issue common stock
or securities converting into common stock at prices below $6.00
per share;
- 2,731,100 shares issuable upon the conversion of Series B
Convertible Preferred Stock;
- 3,106,700 shares issuable upon conversion of Series C Convertible
Preferred Stock; and
- 1,742,920 shares issuable upon the conversion of Series D
Convertible Preferred Stock.
Including the shares being offered under this prospectus, all of
the common stock underlying the Series B, Series C and Series D
Convertible Preferred Stock, the common stock dividends on that
preferred stock, and certain other shares of common stock have been
registered under the Securities Act of 1933. Accordingly, that common
stock may be sold into the market without restriction under the
Securities Act. The sale of these shares of common stock in the market,
and the appearance that such shares are available for sale, has in the
past and could in the future adversely affect the market price of our
common stock and could make it more difficult to sell equity securities
in the future.
We intend to issue additional equity securities in 1999 in order to
increase our working capital and to achieve compliance with the net
tangible asset requirements of the Pacific Exchange. To the extent we do
so, existing stockholders may experience substantial dilution,
particularly if the terms of such issuance include discounts to market
prices or the issuance of warrants, as we did in connection with the
issuance of $1,500,000 of Series B Preferred Stock and the issuance of
$1,000,000 of Series D Preferred Stock.
We have a history of operating losses and we cannot assure you that we
will ever achieve profitability
We were incorporated in March 1992 and we have incurred significant
operating losses in every fiscal period since inception. We are likely
to continue to incur quarterly operating losses at least through the
third quarter of 1999 and possibly longer. Profitability, if any, will
depend upon:
- increased market acceptance of products;
- our ability to obtain additional capital to fund our working
capital requirements;
- market acceptance of mobile computers that use Microsoft's Windows
CE operating system;
- the expansion of development and OEM customer relationships to
increase development and product sales revenues;
- the development of successful new products for new and existing
markets;
- our ability to increase gross margins through higher sales volumes
and contract manufacturing efficiencies, our ability to expand our
distribution capability;
-5-
<PAGE>
- our ability to perform on development contracts; and
- our ability manage our operating expenses.
We depend significantly on the market for mobile computers, particularly
those that use the Windows CE operating system
Substantially all of our products are designed for use in mobile
computers, including notebooks, handheld PCs, Palm-size PCs and H/PC
Professionals (Windows-CE based mini notebooks). The market for mobile
computers is characterized by rapidly changing technology, evolving
industry standards, frequent new product introductions and significant
price competition. These characteristics result in short product life
cycles and regular reductions of average selling prices over the life of
a specific product. Accordingly, growth in demand for mobile computers
is uncertain. If such growth does not occur, demand for our products
would be reduced.
Our ability to generate increased revenues depends significantly on
the commercial success of handheld PCs (H/PCs, Palm-size PCs and H/PC
Professionals) and other devices that operate on the Windows CE
operating system. As a result, our future success depends on factors
outside of our control, including market acceptance of Windows CE
generally and other factors affecting the commercial success of Windows
CE computers and devices, including changes in industry standards or the
introduction of new or competing technologies. Any delays in or failure
of Windows CE to achieve market acceptance would reduce the number of
potential customers of our products.
Our ability to comply with industry standards is critical to our
business
We must continue to identify and ensure compliance with evolving
industry standards to remain competitive. Unanticipated changes in
industry standards could render our products incompatible with products
developed by major hardware manufacturers and software developers. We
could be required, as a result, to invest significant time and resources
to redesign our products to ensure compliance with relevant standards.
If our products are not in compliance with prevailing industry standards
for a significant period of time, we would miss opportunities to have
our products specified as standards for new hardware components designed
by mobile computer manufacturers and OEMs. The failure to achieve any
such design win would result in the loss of any potential sales volume
that could be generated by such newly designed hardware component.
We depend on alliances and other business relationships with a small
number of third parties
Our strategy is to establish strategic alliances and business
relationships with leading participants in various segments of the
communications and mobile computer markets. In accordance with this
strategy, we have entered into alliances or relationships with Bell
Mobility, Compaq Computer Corporation, Microsoft, Symbol Technologies
and Welch Allyn. Our success will depend not only on our continued
relationships with these parties, but also on our ability to enter into
additional strategic arrangements with new partners on commercially
reasonable terms. We believe that, in particular, relationships with
application software developers are important in creating commercial
uses for our products. Any future relationships may require us to share
control over our development, manufacturing and marketing programs or to
relinquish rights to certain versions of our technology. Also, our
strategic partners may revoke their commitment to our products or
services at any time in the future, or may develop their own competitive
products or services. Also, the hardware or software of such companies
that is integrated into our products may contain defects or errors.
Accordingly, our strategic relationships may not result in sustained
business alliances, successful product or service offerings or the
generation of significant revenues. Failure of one or more of such
-6-
<PAGE>
alliances could result in delay or termination of product development
projects, reduction in market penetration, decreased ability to win new
customers or loss of confidence by current or potential customers.
We have devoted significant research and development resources to
design activities for Windows CE-based products, diverting financial and
personnel resources from other development projects. These design
activities are not undertaken pursuant to any agreement under which
Microsoft is obligated to continue the collaboration or to support
resulting products. Consequently, Microsoft may terminate its
collaborations with us for a variety of reasons including our failure to
meet agreed-upon standards or for reasons beyond our control, including
changing market conditions, increased competition, discontinued product
lines and product obsolescence.
The market for our products changes rapidly, and our success depends
upon our ability to develop new and enhanced products
The market for our products is characterized by rapidly changing
technology, evolving industry standards and short product life cycles.
Accordingly, to remain competitive we must be able to:
- identify emerging standards in the field of mobile computing
products,
- enhance our products by adding additional features to
differentiate our products from those of our competitors, and
- maintain superior or competitive performance in our products and
bring products to market quickly.
Given the emerging nature of the mobile computing products market,
our products or technology may be rendered obsolete by alternative
technologies. Further, short product life cycles expose our products to
the risk of obsolescence and require frequent new product introductions.
If we fail to develop or obtain access to advanced mobile
communications technologies as they become available, or if we fail to
develop and introduce competitive new products on a timely basis, our
future operating results will be adversely affected.
Our products may contain undetected flaws and defects
Although we perform testing prior to new product introductions, our
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, we 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 us to recall previously shipped
products to make design modifications or cause unfavorable publicity,
any of which could adversely affect our business.
Our quarterly operating results may fluctuate in future periods and our
future results are difficult to predict because we have little order
backlog
We expect to experience quarterly fluctuations in operating results
in the future. We generally ship orders as received and as a result
typically have 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, we
have often recognized a substantial portion of our revenues in the last
month of the quarter. This subjects us to the risk that even modest
delays in orders adversely affect our quarterly operating results. Our
operating results may also fluctuate due to factors such as:
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<PAGE>
- the demand for our products;
- the size and timing of customer orders;
- unanticipated delays or problems in the introduction of our new
products and product enhancements;
- the introduction of new products and product enhancements by our
competitors;
- changes in the proportion of revenues attributable to royalties
and engineering development services;
- product mix;
- timing of software enhancements;
- changes in the level of operating expenses; and
- competitive conditions in the industry including competitive
pressures resulting in lower average selling prices.
Because we base our staffing and other operating expenses on
anticipated revenue, delays in the receipt of orders can cause
significant variations in operating results from quarter to quarter. As
a result of any of the foregoing factors, our results of operations in
any given quarter may be below the expectations of public market
analysts or investors, in which case the market price of our common
stock would be adversely affected.
We depend on key employees and we need to hire additional sales and
marketing and product development personnel
Our future success will depend upon the continued service of
certain key technical and senior management personnel. Competition for
such personnel is intense, and there can be no assurance that we will be
able to retain our existing key managerial, technical or sales and
marketing personnel. The loss of key personnel has in the past and could
in the future, adversely affect our business.
We believe our ability to achieve increased revenues and to develop
successful new products and product enhancements will depend in part
upon our ability to attract and retain highly skilled sales and
marketing and product development personnel. Competition for such
personnel is intense, and we may not be able to retain such key
employees, and there are no assurances that we will be successful in
attracting and retaining such personnel in the future. In addition, our
ability to hire and retain such personnel will depend upon our ability
to raise capital or achieve increased revenue levels to fund the costs
associated with such personnel. Failure to attract and retain key
personnel will adversely affect our business.
We depend on distributors, resellers and OEMs to sell our products
We sell our products primarily through distributors, resellers and
other equipment manufacturers ("OEMs"). Our OEM sales to Compaq
Computer Corporation accounted for approximately 10% of our revenues
during the first quarter of 1999. Our largest distributor, Ingram Micro
in the U.S., accounted for approximately 29% of our revenue in the first
quarter of 1999. Our agreements with OEMs, distributors and resellers,
in large part, are nonexclusive and may be terminated on short notice by
either party without cause. Our OEMs, distributors and resellers are
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<PAGE>
not within our control, are not obligated to purchase products from us
and may represent other lines of products. A reduction in sales effort
or discontinuance of sales of our products by our OEMs, distributors and
resellers could lead to reduced sales.
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 our future operating results. The loss or ineffectiveness of any of
our major distributors or OEMs could adversely affect our operating
results.
We allow our distributors to return a portion of our inventory to
us for full credit against other purchases. In addition, in the event
we reduce our prices, we credit our distributors for the difference
between the purchase price of products remaining in their inventory and
our reduced price for such products. Actual returns and price
protection may adversely affect future operating results, particularly
since we seek to continually introduce new and enhanced products and are
likely to face increasing price competition.
A significant portion of our revenues are derived from export sales
Export sales (sales to customers outside the United States)
accounted for approximately 34% of our revenue in the first quarter of
1999. Accordingly, our operating results are subject to the risks
inherent in export sales, including longer payment cycles, unexpected
changes in regulatory requirements, import and export restrictions and
tariffs, difficulties in managing foreign operations, the burdens of
complying with a variety of foreign laws, greater difficulty or delay in
accounts receivable collection, potentially adverse tax consequences and
political and economic instability. In addition, our export sales are
currently denominated predominately in United States dollars.
Accordingly, an increase in the value of the United States dollar
relative to foreign currencies could make our products more expensive
and therefore potentially less competitive in foreign markets.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares
listed under this prospectus. All proceeds from the sale of the shares
will be for the account of the selling stockholders. See "Selling
Stockholders" and "Plan of Distribution."
OVERVIEW OF OUR BUSINESS
We are a leading supplier of connectivity products to the emerging
Windows CE handheld computing market and believe that we are the world's
leading supplier of serial plug-in cards for notebooks and for Windows
computers with PC card slots. Our family of low-power serial and
Ethernet plug-in card connection products and our family of low-power
plug-in card data collection products are our principal sources of
revenues. During 1998, we expanded our PC Card connection family of
products to add a family of CompactFlash ("CF+") serial, low power
Ethernet and bar code scanning products to support the smallest Windows
CE computer, the Palm-size PC.
By the end of the first quarter of 1999, three classes of Windows
CE computers were available from a number of computer manufacturers: the
H/PC professional (mini-notebook); the H/PC (clam shell design with
keyboard); and the Palm-size PC (pocket-sized computer). These
computers are desktop companions designed to synchronize with a Windows
desktop computer. They also operate on double-A or triple-A size
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<PAGE>
batteries, and so low power consumption is an important feature for
products that plug into and are powered by the computer. The H/PC
professional and the H/PC have a PC Card slot for input/output. The
Palm-size PC and some H/PC professionals have a CF+ slot for
input/output. The H/PC professionals were released in the second half
of 1998 and the color Palm-size PCs were released in the first quarter
of 1999. Both of these products experienced some initial periods of
short supply. All of our low power Battery Friendly products are
designed to work with these Windows CE computers and also with Windows
notebook computers.
We distribute our products primarily through worldwide distribution
channels. In the U.S., our products are distributed by Ingram Micro,
Merisel and Tech Data who resell to computer retail stores, electronic
products catalog companies and Value Added Resellers. We also sell our
products internationally through more than 30 distributors in 24
countries in Europe, Asia and the Pacific Rim. In addition, we sell
direct to selected large customers, particularly for custom products
sold to other equipment manufacturers. During 1998, we entered into a
contract with Compaq Computer Corporation to incorporate our serial PC
card into Compaq's remote server management product, and volume
shipments commenced in the fourth quarter of 1998.
Our core technologies are in transferring data into and out of
Windows CE and Windows mobile computing devices through the PC Card or
CF+ slot, achieving high data transfer speeds and low power consumption.
Our serial connection products are designed to connect one or more
peripheral devices to a mobile computer and our Ethernet connection
products are designed to connect a mobile computer to an Ethernet
network. We strive to create a broad family of low-power connection
products in PC card and in CF+ form factor, with standard (removable
cable) or ruggedized (fixed cable) designs that work with Windows CE and
Windows notebook computers. We have also identified three specific
product areas where we have aligned ourselves with industry leaders to
create products for Windows CE and Windows mobile computers: the data
collection market; the paging market; and the cellular telephone market.
In the data collection market, we have aligned with Welch Allyn to
create bar code scanning wand plug-in cards and have aligned with Symbol
Technologies to attach two of Symbol's laser scanning guns through plug-
in cards, which began shipping at the end of 1998. These products sell
with our bar code scanning software.
In the paging market, we are working with industry leaders
including Motorola and PageNet to develop one- and two- way paging
connection solutions for Windows CE computers.
In the cellular telephone market, we entered into a Memorandum of
Understanding with Bell Mobility to connect new CDMA mobile digital
telephones with a built-in serial port directly to a mobile computer.
CDMA is the digital telephone technology most widely deployed in North
America. These phones began selling in Canada during the second quarter
of 1999. We also expect nationwide CDMA digital services to be
available in the United States beginning in the fall of 1999, and we
plan to offer telephone connection cards in the Canadian and U.S.
markets beginning in the third quarter of 1999.
We expect to continue to expand our relationships and develop
additional mobile computing products in the areas of general
connections, data collection, paging and digital cellular telephones
during 1999. We believe that we have developed strong working
relationships with Microsoft and with Windows CE handheld computer
manufacturers for integrating connection solutions into Windows CE
devices, with our strategic development partners, and with software
application developers in providing technical assistance in the porting
of their applications to the Windows CE operating system.
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the
meaning of the securities laws. These forward-looking statements are
subject to a number of risks and uncertainties, many of which are beyond
our control. All statements other than statements of historical facts
included in this prospectus, including the statements under "Overview of
our Business" and elsewhere in this prospectus regarding our strategy,
future operations, financial position, estimated revenues, projected
costs, prospects, plans and objectives of management, are forward-
looking statements. When used in this prospectus, the words "will,"
"believe," "anticipate," "intend," "estimate," "expect," "project" and
similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such identifying
words. All forward-looking statements speak only as of the date of this
prospectus. Neither we nor any of the selling stockholders undertake any
obligation to update or revise publicly any forward-looking statements,
whether as a result of new information, future events or otherwise.
Although we believe that our plans, intentions and expectations
reflected in or suggested by the forward-looking statements we make in
this prospectus are reasonable, ultimately we may not achieve such
plans, intentions or expectations.
We disclose important factors that could cause our actual results
to differ materially from our expectations under "Risk Factors" and
elsewhere in this prospectus. Such factors include, among others, the
following: our ability to raise sufficient capital to fund our working
capital requirements, our continued listing on the Pacific Exchange, the
impact on our stock price of shares eligible for future issuance,
including shares that may be sold under this prospectus, our ability to
achieve profitability, developments in the market for our products,
including the market for mobile computers that use the Windows CE
operating system, and developments in our relationships with our
strategic partners. These cautionary statements qualify all forward-
looking statements attributable to us or persons acting on our behalf.
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SELLING STOCKHOLDERS
The following table sets forth, as of the date of this prospectus,
the names of the selling stockholders, the number of shares of common
stock that each selling stockholder owns, the number of shares of common
stock owned by each selling stockholder that may be offered for sale
from time to time by this prospectus and the number and percentage of
shares owned assuming the sale of all shares covered by this prospectus.
The shares may be offered by the selling stockholders or by pledgees,
donees, transferrees or other successors in interest that receive such
shares as a gift or through another non-sale related transfer.
We may amend or supplement this prospectus from time to time to
update the information provided in the table.
<TABLE>
<CAPTION>
Number of
Shares
Shares Beneficially Being Shares Beneficially
Name of Selling Stockholder(2) Owned Prior to Offering Offered Owned After Offering
- --------------------------------- ------------------------- ----------- ----------------------
Number Percent(1) Number Percent(1)
-------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Bass Trust ...................... 1,317,838 (3) 12.7% 281,963 1,035,875 10.2%
Civic Bank of Commerce .......... 50,000 (4) * 50,000 -- *
The Harmat Organization, Inc. ... 2,157,030 (5) 19.2% 2,157,030 -- *
Clayton Struve .................. 416,916 (6) 4.4% 416,916 -- *
Spencer Trask Holdings, Inc. .... 31,500 (7) * 31,500 -- *
William P. Dioguardi, Jr. ....... 10,000 (7) * 10,000 -- *
A. Emerson Martin ............... 2,500 (7) * 2,500 -- *
Thomas J. Hutzel ................ 2,500 (7) * 2,500 -- *
Ronald J. Luken ................. 2,000 (7) * 2,000 -- *
Donna Baselice .................. 1,000 (7) * 1,000 -- *
Carol Zervoulei ................. 500 (7) * 500 -- *
Adam Stern ...................... 30,000 (7) * 30,000 -- *
Roger Baumberger ................ 20,000 (7) * 20,000 -- *
</TABLE>
- --------------------
* Less than 1%.
(1) Based upon 9,081,315 shares of Company common stock outstanding as of
the close of business on June 30, 1999.
(2) Charlie Bass, trustee of the Bass Trust, is the Chairman of our Board
of Directors and served as our Interim Chief Executive Officer from
April 1997 to February 1998, at which time he assumed the position of
Chief Executive Officer. During the past three years, we have had a
customary commercial lending relationship with Civic Bank of Commerce
and Spencer Trask Holdings, Inc. has provided us with investment
banking services. Each of the Selling Stockholders listed below
Spencer Trask Holdings, Inc. is affiliated with the same; however none
of such Selling Stockholders has had an independent relationship with
us. The other selling stockholders have not had a material
relationship with us during the past three years.
(3) Includes 332,240 shares of common stock currently held by Mr. Bass
and his affiliates, 318,056 shares of common stock issuable upon
conversion of shares of Series C-2 Convertible Preferred Stock,
174,290 shares of common stock issuable upon conversion of shares of
Series D Convertible Preferred Stock, 63,097 shares of common stock
issuable upon exercise of warrants, 354,215 shares of common stock
issuable upon exercise of options exercisable within 60 days of the
date of this prospectus, approximately 33,604 shares of common stock
issuable as payment of dividends on Series C-2 Convertible Preferred
Stock and approximately 42,336 shares of common stock issuable as
payment of dividends on Series D Convertible Preferred Stock.
(4) Represents shares issuable upon exercise of a warrant.
(5) Includes 41,271 shares of common stock, 1,307,190 shares of common
stock issuable upon conversion of shares of Series D Convertible
Preferred Stock, 495,729 shares of common stock issuable upon
exercise of a warrant and approximately 312,840 shares of common
stock issuable in payment of dividends on Series D Convertible
Preferred Stock.
(6) Includes 4,827 shares of common stock, 261,440 shares of common stock
issuable upon conversion of shares of Series D Convertible Preferred
Stock, 87,144 shares of common stock issuable upon exercise of a
warrant and approximately 63,505 shares of common stock issuable as
payment of dividends on Series D Convertible Preferred Stock.
(7) Represents shares issuable upon exercise of a warrant.
-12-
<PAGE>
PLAN OF DISTRIBUTION
The shares of common stock covered by this prospectus may be
offered and sold from time to time by the selling stockholders. The
selling stockholders will act independently of us in making decisions
with respect to the timing, manner and size of each sale of the common
stock covered hereby. The selling stockholders may sell the shares
being offered hereby: (i) on the Pacific Exchange, through the OTC
Bulletin Board or otherwise at prices and at terms then prevailing or at
prices related to the then current market price; or (ii) in private
sales at negotiated prices directly or through a broker or brokers, who
may act as agent or as principal or by a combination of such methods of
sale. The selling stockholders and any underwriter, dealer or agent who
participate in the distribution of such shares may be deemed to be
"underwriters" under the Securities Act, and any discount, commission or
concession received by such persons might be deemed to be an
underwriting discount or commission under the Securities Act.
In connection with distributions of the shares offered hereby, the
selling stockholders may enter into hedging transactions with broker-
dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage
in short sales of our common stock in the course of hedging the
positions they assume with selling stockholders. The selling
stockholders may also sell our common stock short and deliver the shares
offered hereby to close out such short positions. The selling
stockholders may also enter into option or other transactions with
broker-dealer or other financial institutions which require the delivery
to such broker-dealers or other financial institution of shares offered
hereby, which shares such broker-dealer or other financial institution
may resell pursuant to this prospectus (as supplemented or amended to
reflect such transaction). The selling stockholders may also pledge the
shares offered hereby to a broker-dealer or other financial institution,
and, upon a default, such broker-dealer or other financial institution,
may effect sales of the pledged shares pursuant to this prospectus (as
supplemented or amended to reflect such transaction). In addition, any
shares offered hereby that qualify for sale pursuant to Rule 144 may, at
the option of the holder thereof, be sold under Rule 144 rather than
pursuant to this prospectus.
Any broker-dealer participating in such transactions as agent may
receive commissions from the selling stockholders (and, if acting as
agent for the purchaser of such shares, from such purchaser). Usual and
customary brokerage fees will be paid by the selling stockholders.
Broker-dealers may agree with the selling stockholders to sell a
specified number of shares at a stipulated price per share, and, to the
extent such a broker-dealer is unable to do so acting as agent for the
selling stockholders, to purchase as principal any unsold shares at the
price required to fulfill the broker-dealer commitment to the selling
stockholders. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which
may involve crosses and block transactions and which may involve sales
to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market, in negotiated
transactions or by a combination of such methods of sale or otherwise at
market prices prevailing at the time of sale or at negotiated prices,
and in connection with such resales may pay to or receive from the
purchasers of such shares commissions computed as described above.
We have advised the selling stockholders that the anti-manipulation
of Regulation M under the Exchange Act may apply to sales of shares in
the market and to the activities of the selling stockholders and their
affiliates. In addition, we will make copies of this prospectus
available to the selling stockholders and have informed them of the need
for delivery of copies of this prospectus to purchasers on or prior to
sales of the shares offered hereby. The selling stockholders may
indemnify any broker-dealer that participates in transactions involving
the sale of the shares against certain liabilities, including
liabilities arising under the Securities Act. Any commissions paid or
any discounts or concessions allowed to any such broker-dealers, and any
-13-
<PAGE>
profits received on the resale of such shares, may be deemed to be
underwriting discounts and commissions under the Securities Act if any
such broker-dealers purchase shares as principal.
In order to comply with the securities laws of certain states, if
applicable, the common stock will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in
certain states, the common stock may not be sold unless such shares have
been registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is
available and is complied with.
Any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under that
rule rather than pursuant to this prospectus.
There can be no assurance that the selling stockholders will sell
all or any of the shares of common stock offered under this prospectus.
LEGAL MATTERS
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California will pass upon certain legal matters relating to the
validity of the securities offered hereby for Socket Communications.
EXPERTS
The financial statements and schedule of Socket Communications,
Inc. included in our Annual Report (Form 10-KSB) for the year ended
December 31, 1998, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon (which contains an
explanatory paragraph describing conditions that raise substantial doubt
about the Company's ability to continue as a going concern as described
in Note 1 to the financial statements) included therein and incorporated
herein by reference. Such financial statements are incorporated herein
by reference in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Section 145 of the Delaware General Corporation Law (the "Delaware
Law") authorizes a court to award, or a corporation's Board of Directors
to grant, indemnity to directors and officers in terms sufficiently
broad to permit such indemnification under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising
under the Securities Act. Article VII of our Certificate of
Incorporation and Article VI of our Bylaws provide for indemnification
of our directors, officers, employees and other agents to the maximum
extent permitted by Delaware Law. In addition, we have entered into
Indemnification Agreements with our officers and directors and certain
stockholders.
Insofar as indemnification by us for liabilities arising under the
Securities Act may be permitted to our directors, officers and
controlling persons pursuant to the provisions referenced above or
otherwise, we have 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 us of expenses incurred or paid by one of our
directors, officers, or controlling persons 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, we will, unless in the opinion of our counsel the matter has
-14-
<PAGE>
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.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3, of which this prospectus is a part,
under the Securities Act with respect to the shares of common stock
offered hereby. This prospectus does not contain all of the information
included in the registration statement. Statements contained in this
prospectus concerning the provisions of any document are not necessarily
complete. You should refer to the copy of these documents filed as an
exhibit to the registration statement or otherwise filed by us with the
SEC for a more complete understanding of the matter involved. Each
statement concerning these documents is qualified in its entirety by
such reference.
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we
file at the SEC's public reference rooms in Washington, D.C., New York,
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Our SEC filings
are also available to the public from the SEC's web site at
http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information
to you in this document by referring you to other filings we have made
with the SEC. The information incorporated by reference is considered
to be part of this Prospectus, and later information filed with the SEC
will update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
completion of the offering covered by this prospectus:
(1) Our Annual Report on Form 10-KSB for the year ended
December 31, 1998;
(2) Our Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999; and
(3) The description of our common stock contained in our
Registration Statement on Form 8-A filed with the SEC on
April 11, 1995 and our Registration Statement on Form 8-A/A
filed with the SEC on June 15, 1995.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Dave Dunlap
Chief Financial Officer
Socket Communications, Inc.
37400 Central Court
Newark, California 94560
Attention: Chief Financial Officer
(510) 744-2700
-15-
<PAGE
=====================================================================
3,005,909 Shares
SOCKET COMMUNICATIONS, INC.
-----------------------
Common Stock
-----------------------
PROSPECTUS
July 9, 1999
=====================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The Company will bear no expenses in connection with any sale or
other distribution by the selling stockholders of the shares being
registered other than the expenses of preparation and distribution of
this Registration Statement and the Prospectus included in this
Registration Statement. Such expenses are set forth in the following
table. All of the amounts shown are estimates except the Securities and
Exchange Commission ("SEC") registration fee.
Amount To
Be Paid
----------
SEC registration fee .......................... $ 932
Pacific Exchange listing fee .................. 7,500
Legal fees and expenses ....................... 10,000
Accounting fees and expenses .................. 2,500
Miscellaneous ................................. 1,800
----------
Total ......................................... $ 22,732
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law (the "Delaware
Law") authorizes a court to award, or a corporation's Board of Directors
to grant, indemnity to directors and officers in terms sufficiently
broad to permit such indemnification under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising
under the Securities Act of 1933. Article VII of the Registrant's
Certificate of Incorporation and Article VI of the Registrant's Bylaws
provide for indemnification of the Registrant's directors, officers,
employees and other agents to the maximum extent permitted by Delaware
Law. In addition, the Registrant has entered into Indemnification
Agreements with its officers and directors and certain stockholders.
Item 16. Exhibits
Exhibits
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, P.C.
(included in Exhibit 5.1).
24.1 Power of Attorney (see page II-3).
Item 17. Undertakings
The undersigned Registrant hereby undertakes to:
(1) File, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
II-1
<PAGE>
(ii) 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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) (paragraph 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) Include any additional or changed material information
on the plan of distribution;
provided, however, that subparagraphs (i) and (ii) shall not
apply if the information required to be included in a post-effective
amendment by those subparagraphs is contained in periodic reports filed
with or furnished to the Securities and Exchange Commission by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) For the purpose of determining any liability under the
Securities Act of 1933, treat each post-effective amendment as a new
registration of the securities offered therein, and the offering of such
securities at that time to be the initial bona fide offering.
(3) Remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of this offering.
(4) For the purpose of determining any liability under the
Securities Act of 1933, treat each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this
Registration Statement as a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time to be the initial bona fide offering.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Newark, State of
California, on the 8th day of July, 1999.
SOCKET COMMUNICATIONS, INC.
By: /s/David Dunlap
-----------------------
David Dunlap
Chief Financial Officer and
Vice President of Finance and
Administration
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints, jointly and
severally, Micheal Gifford and David Dunlap, and each one of them,
individually and without any other, his attorney-in-fact, each with full
power of substitution, for him in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this
Registration Statement, 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 hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes,
may do or cause to be done by virtue hereof.
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 8th day of July, 1999 by
the following persons in the capacities indicated.
Signature Title
- --------------------------- -----------------------------------
/s/ Charlie Bass Chairman of the Board and
- ------------------------ Chief Executive Officer
Charlie Bass (Principal Executive Officer)
/s/ David Dunlap Vice President of Finance and
- ------------------------ Administration and Chief
David Dunlap Financial Officer (Principal
Financial and Accounting
Officer)
/s/ Micheal Gifford Executive Vice President and
- ------------------------ Director
Micheal Gifford
/s/ Jack Carsten Director
- ------------------------
Jack Carsten
/s/ Edward M. Esber Jr. Director
- ------------------------
Edward M. Esber, Jr.
/s/ Gialuca Rattazzi Director
- ------------------------
Gialuca Rattazzi
/s/ Lars Lindgren Director
- ------------------------
Lars Lindgren
II-4
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- ----------------------------------------------------
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, P.C.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Wilson Sonsini Goodrich & Rosati,
(included in Exhibit 5.1).
24.1 Power of Attorney (see page II-3).
II-5
<PAGE>
Exhibit 5.1
July 8, 1999
Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed
by you with the Securities and Exchange Commission on or about June 9,
1996 (the "Registration Statement") in connection with the registration
under the Securities Act of 1933, as amended, of a total of 3,005,909
shares of your common stock (the "Shares"), to be offered for sale by
the selling stockholders named therein. We understand that the shares
are to be sold by the Selling Stockholders to the public as described in
the Registration Statement. As legal counsel for Socket Communications,
Inc., 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.
It is our opinion that, upon completion of the proceedings being
taken or contemplated by us, as your counsel, and to be taken prior to
the issuance of the Shares, the Shares, when sold in the manner
described in the Registration Statement and in accordance with the
resolutions adopted by the Board of Directors of the Company, will be
legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement, including the prospectus constituting a part
thereof, and further consent to the use of our name wherever it appears
in the Registration Statement and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts"
in the Registration Statement (Form S-3) and related Prospectus of
Socket Communications, Inc. for the registration of 3,005,909 shares of
its common stock and to the incorporation by reference therein of our
report dated February 18, 1999, with respect to the financial statements
and schedule of Socket Communications, Inc. included in its Annual
Report (Form 10-KSB) for the year ended December 31, 1998, filed with
the Securities and Exchange Commission.
ERNST & YOUNG LLP
/s/ Ernst & Young LLP
San Jose, California
July 6, 1999
<PAGE>
