FILED PURSUANT TO RULE 424(b)(3)
FILE NUMBER 333-82591
PROSPECTUS
3,005,909 Shares
Socket Communications, Inc.
Common Stock
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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
August 2, 1999, the last sale price for our common stock as reported on the
OTC Bulletin Board was $1.06 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.
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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 August 3, 1999.
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TABLE OF CONTENTS
Page
Risk Factors............................................................ 3
Use of Proceeds......................................................... 8
Overview of Our Business................................................ 9
Information Regarding Forward Looking Statements........................10
Selling Stockholders....................................................11
Plan of Distribution....................................................12
Legal Matters...........................................................13
Experts.................................................................13
Disclosure on Commission Position of Indemnification
of Officers and Directors............................................13
Where You Can Find More Information.....................................14
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 11 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.
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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.
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
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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.
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;
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- 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;
- 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.
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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 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
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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:
- 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.
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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 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."
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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 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
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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.
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>
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* 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.
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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
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allowed to any such broker-dealers, and any profits received on the resale
of such shares, may be deemed to be underwriting discounts and commissions
under the Securities Act if any such broker-dealers purchase shares as
principal.
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 been settled by controlling
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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
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3,005,909 Shares
SOCKET COMMUNICATIONS, INC.
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Common Stock
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PROSPECTUS
August 3, 1999
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