As filed with the Securities and Exchange Commission on February__, 2000
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.
Erik F. Riegler, 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 ....... 2,662,638 $12.59 $33,522,612.42 $9,320
=========== ========== ================ ============
</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 February 1, 2000.
-----------------------
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 FEBRUARY ___, 2000
PROSPECTUS
2,662,638 Shares
Socket Communications, Inc.
Common Stock
-------------------------
This prospectus relates to the public offering, which is not being
underwritten, of up to 2,662,638 shares of our common stock by the selling
stockholders identified in this prospectus.
The prices at which the selling 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
February 1, 2000, the last sale price for our common stock as reported on
the OTC Bulletin Board was $12.56 per share.
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 , 2000.
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............................................................2
Use of Proceeds.........................................................8
The Company.............................................................9
Information Regarding Forward-Looking Statements.......................10
Selling Stockholders...................................................11
Plan of Distribution...................................................13
Legal Matters..........................................................14
Experts................................................................14
Where You Can Find More Information....................................14
Documents Incorporated by Reference....................................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 11are offering to sell, and seeking offers to buy,
shares of our 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 our 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.
<PAGE>
RISK FACTORS
An investment in the common stock offered by this prospectus involves
a high degree of risk. You should carefully consider the risks described
below before deciding to purchase the shares of 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 have a history of operating losses and we cannot assure you that we will
ever achieve profitability
We were incorporated in March 1992 and have incurred significant
operating losses in every fiscal period since inception. We may continue
to incur quarterly operating losses at least through the first quarter of
2000 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;
- our ability to perform on development contracts; and
- our ability to manage our operating expenses.
Our independent auditors have expressed doubt about our ability to continue
as a going concern
As of December 31, 1999, we had cash and cash equivalents of
$4,284,670 and a working capital balance of $4,706,870. Although we
believe our existing capital resources will be sufficient to satisfy our
working capital requirements through the year 2000, unforeseen
circumstances may arise which make it necessary to obtain additional
capital. In that event, 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 on acceptable terms would significantly impair our
ability to operate and would adversely affect our financial condition.
-2-
<PAGE>
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 because of our recurring losses,
stockholders' equity and working capital balances at that time. Although
we believe that the financings we completed in September and December 1999
address the concerns raised by our independent auditors, we cannot
guarantee that business conditions or outlook at the time our auditors
complete their audit of the financial statements for the year ended
December 31, 1999 will alleviate substantial doubt about our ability to
continue as a going concern. Accordingly, our auditors opinion may
continue to include an explanatory paragraph in the future.
Shares eligible for future sale may adversely affect the market price for
our common stock
As of December 31, 1999, we had outstanding securities convertible
into or exercisable for the following amounts of common stock:
- 2,378,105 shares issuable upon the exercise of stock options under
our 1999, 1995 and 1993 stock plans;
- 4,275,788 shares issuable upon exercise of warrants, some of which
include dilution adjustments whenever we issue common stock or
securities convertible into common stock at prices below the
effective per share exercise price;
- 433,500 shares issuable upon the conversion of outstanding shares
of Series B convertible preferred stock;
- 945,022 shares issuable upon conversion of outstanding shares of
Series C convertible preferred stock, plus additional shares
representing accrued dividends through the date of conversion; and
- 435,730 shares issuable upon the conversion of outstanding shares
of Series D convertible preferred stock.
All of the shares of common stock issuable upon conversion of the
outstanding shares of Series B, C and D convertible preferred stock, the
common stock dividends on the Series C convertible preferred stock, and
shares of common stock issuable upon exercise of warrants have been
registered for resale under the Securities Act of 1933. Accordingly, that
common stock may be sold into the market without restriction under the
Securities Act of 1933. The sale of these shares of common stock in the
market, as well as the perception 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 make it more difficult to sell our common stock in
the future.
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, tablet 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
-3-
<PAGE>
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 notebooks that operate on the Windows operating
system and handheld PCs (H/PCs, Palm-size PCs, tablet 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 and Windows CE generally
and other factors affecting the commercial success of Windows and 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 or Windows CE to achieve or maintain 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, Hewlett-Packard Corporation,
Hitachi, Microsoft, SanDisk Corporation, Symbol Technologies, Welch Allyn
and Zebra Technologies. 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
-4-
<PAGE>
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:
- 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:
- the demand for our products;
- the size and timing of customer orders;
-5-
<PAGE>
- 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
original equipment manufacturers, or OEMs. Our largest distributor, Ingram
Micro in the United States, accounted for approximately 24% of our revenue
in 1999. Our second largest distributor, Merisel in the United States,
accounted for approximately 9% of our revenue in 1999. Our largest OEM
customer, Compaq Computer Corporation, accounted for approximately 9% of
our revenue in 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
-6-
<PAGE>
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 33% of our revenue in 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.
-7-
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares
sold 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."
-8-
<PAGE>
THE COMPANY
We develop and sell connection solutions for handheld computers that
use the Windows CE operating system from Microsoft Corporation and for
mobile computers, or notebooks, that use Microsoft's Windows 9x and NT
operating systems. These connection solutions include a family of low
power "Battery Friendly?" PC and CompactFlash Card adapters for digital
mobile phones, serial communications, Ethernet connectivity, mobile data
collection, and, commencing in the second half of 2000, Bluetooth wireless
communications. Our connection products utilize industry standard PC Card
and CompactFlash form factors. 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. During 1998 and
1999, we completed a number of steps to strengthen our leadership position
and to improve our financial condition and operating results.
First, we expanded our PC Card connection family of products to add a
family of CompactFlash (CF+) serial, low power Ethernet, bar code scanning
and digital phone products to support the smallest Windows CE computer, the
Palm-size PC.
Second, we sought recurring OEM business for our products. Our serial
PC Card was selected by Compaq Computer Corporation for use with its Remote
Insight Board for remote management of Compaq servers. Shipments began in
the fourth quarter of 1998. Our Low Power Ethernet PC Card was selected by
Unisys Corporation for use with a Windows CE check reader. Shipments began
in the third quarter of 1999.
Third, we established several key strategic relationships with
industry leaders for developing new products for use with Windows CE and
Windows notebook computers including Symbol Technologies (attaching laser
scanners to notebooks and to Windows CE computers by cable, and an
integrated laser scanner in a CompactFlash form factor for insertion in a
Palm-size PC or tablet PC) and Zebra Technologies (connecting barcode
printers). The Company also began working closely with several North
American digital telephone service providers to develop digital mobile
telephone connection products for new digital telephones designed to
transfer voice and data over digital cellular networks which began shipping
in the second half of 1999.
Fourth, we improved our products. We completed the development of a
follow-on proprietary, low power Application Specific Integrated Circuit
(ASIC) with advanced features for usage in a number of existing and future
products. This proprietary ASIC will allow us to increase our date
transfer speeds and reduce our manufacturing costs. Product improvements
also included creating enhanced Ethernet drivers and a cross-over connector
to improve Ethernet performance, and the extension of our ruggedized form
factor to more of our products.
Fifth, we expanded our distribution channels and more closely aligned
them with those used by the Windows CE manufacturers, and we increased our
co-marketing activities on the web. In addition, on-site representation
was added in Europe and Asia in the fourth quarter of 1998 to more closely
support our international distributors.
Sixth, we increased our capital, raising $2.4 million in new equity
financings and converting approximately $2.1 million of convertible debt
and accrued interest into equity in 1998 and raising $5.6 million in new
equity financings in 1999. We have improved our operating results by
increasing our revenues 15% in 1998 over 1997 and 18% for the nine month
-9-
<PAGE>
period ended September 30, 1999 over the corresponding period in 1998,
improved our gross margins from 42% in 1997 to 59% in 1998 and for the nine
months ended September 30, 1999, and reduced our operating expenses 22%
from $5.4 million in 1997 to $4.2 million in 1998, partially offset by
increases of 15% for the nine month period ended September 30, 1999 of over
the corresponding nine-month period in 1998.
Seventh, we have commenced development of two new categories of
connection products to enhance our current product lines. We are working
with SanDisk Corporation to create, during the first half of 2000,
combination input/output and memory cards by adding removable flash memory
to our current connection products. We are also developing cordless
connection products for shipment by the end of 2000 that will utilize
Bluetooth technology to replace connection cables with close proximity
cordless communications.
Although we believe that our focus on the Windows CE operating system
for handheld computers, our expanding family of connection products and our
relationships with key industry strategic partners position us for future
revenue growth, we have incurred significant quarterly and annual operating
losses in every fiscal period since our inception, and we may continue to
incur quarterly operating losses at least through the first quarter of 2000
and possibly longer.
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, 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.
-10-
<PAGE>
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 and the percentage of all outstanding shares of common
stock that ownership represents;
- 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 of shares of common stock owned assuming the sale of
all shares covered by this prospectus and the percentage of all
outstanding shares of common stock that ownership represents.
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...................... 1,413,293 (3) 7.9% 24,330 1,388,963 7.8%
H. John Buckman................. 30,000 (4) * 30,000 -- *
Michael Davis................... 10,000 (5) * 10,000 -- *
Clayton Struve.................. 510,363 (6) 3.0% 151,315 359,048 2.1%
Buckman, Buckman & Reid, Inc. .. 14,720 (7) * 14,720 -- *
Robert Holz..................... 1,393,936 (8) 8.0% 100,000 1,293,936 7.5%
Kar-Lea Holdings LLC............ 133,100 (9) * 133,100 -- *
Pictet Bank & Trust Limited..... 798,600 (10) 4.7% 798,600 -- *
Brian Keelan.................... 278,970 (11) 1.6% 278,970 -- *
J. P. Wood...................... 1,021,030 (12) 6.0% 1,021,030 -- *
BarPoint.com.................... 1,428,056 (13) 8.2% 95,573 1,332,483 7.7%
John Reid....................... 5,000 (14) * 5,000 -- *
</TABLE>
- -------------------------
* Less than 1%.
(1) Based upon 16,878,930 shares of common stock outstanding as of the
close of business on February 1, 2000.
(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. The other selling stockholders have not had a
material relationship with us during the past three years.
(3) Includes 404,208 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, 22,771 shares of common stock issuable upon exercise
of warrants, 433,589 shares of common stock issuable upon exercise of
options exercisable within 60 days of the date of this prospectus,
approximately 47,708 shares of common stock issuable as payment of
dividends on Series C-2 Convertible Preferred Stock and 12,671 shares
of common stock issuable upon exercise of a preemptive right held by
the Bass Trust in connection with a private sale of common stock by the
Company on December 9, 1999.
(4) Represents shares issuable upon exercise of a warrant.
-11-
<PAGE>
(5) Represents shares issuable upon exercise of a warrant.
(6) Includes 144,419 shares of common stock currently held by Mr. Struve,
261,440 shares of common stock issuable upon conversion of shares of
Series D Convertible Preferred Stock, and 104,504 shares of common
stock issuable upon exercise of warrants.
(7) Represents shares issuable upon exercise of a warrant.
(8) Includes 3,500 shares of common stock held by Explorer Fund Management,
L.L.C., 861,961 shares of common stock held by Explorer Partners II,
L.L.C., 428,475 shares of common stock issuable upon exercise of
warrants held by Explorer Fund Management, and 100,000 shares of common
stock issuable upon exercise of warrants held by Mr. Holz. Explorer
Fund Management, as investment advisor to Explorer Partners II, has
shared voting and investment power of the shares directly owned by
Explorer Partners II. Robert Holz, therefore, as Managing Director of
Explorer Fund Management, exercises voting and investment control with
respect to the shares held by Explorer Fund Management and Explorer
Partners II. Mr. Holz disclaims beneficial ownership of the shares
held by the Explorer funds except to the extent of his pecuniary
interests is such shares.
(9) Includes 115,740 shares of common stock currently held by Kar-Lea
Holdings and 17,360 shares of common stock issuable upon exercise of
warrants.
(10) Includes 694,440 shares of common stock currently held by Pictet Bank &
Trust and 104,160 shares of common stock issuable upon exercise of
warrants.
(11) Includes 214,592 shares of common stock currently held by Brian Keelan
and 64,378 shares of common stock issuable upon exercise of warrants.
(12) Includes 785,408 shares of common stock currently held by Mr. Wood and
235,632 shares of common stock issuable upon exercise of warrants.
(13) Includes 836,754 shares of common stock, 495,729 shares of common stock
issuable upon exercise of warrants, and 95,573 shares issuable upon
exercise of a preemptive right held by BarPoint.com in connection with
a private sale of common stock by the Company on December 9, 1999.
(14) 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 participates 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
-13-
<PAGE>
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.
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
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1998 and 1997, and for each of the three years
in the period ended December 31, 1998, as set forth in their report (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 in our Annual
Report on Form 10-KSB for the year ended December 31, 1998). We've
incorporated by reference our financial statements into this prospectus in
reliance on Ernst & Young LLP's report given on their authority as experts
in accounting and auditing.
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 in this prospectus concerning the
provisions of any document are not necessarily complete. You should refer
to the copies of these documents filed as exhibits 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 are subject to the informational requirements of the Exchange Act
and, accordingly, file reports, proxy statements and other information with
the SEC. The SEC maintains a website that contains reports, proxy
statements and other information regarding us. The address of the SEC
website is http://www.sec.gov. Copies of our reports, proxy statements and
other information also may be inspected and copied at the public reference
facilities maintained by the SEC at:
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, NY 10048
Washington, D.C. 20549 Chicago, IL 60661
-14-
<PAGE>
Copies of these materials can also be obtained by mail at prescribed
rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. Our
reports, proxy statements and other public filings may also be inspected at:
The National Association of Securities Dealers
1735 K Street, N.W.
Washington, D.C. 20006
DOCUMENTS INCORPORATED BY REFERENCE
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 Reports on Form 10-Q for the quarters ended
March 31, 1999, June 30, 1999 and September 30, 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.
We will provide to any person, including any beneficial owner, to whom
a prospectus is delivered, a copy of any of the information which has been
incorporated by reference into this prospectus at no cost upon an oral or
written request to:
Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Attention: David W. Dunlap
(510) 744-2735
You can also call David W. Dunlap, Chief Financial Officer of Socket
Communications, at (510) 744-2735 with any questions about the offering.
-15-
<PAGE>
=========================================================================
2,662,638 Shares
SOCKET COMMUNICATIONS, INC.
-------------------------
Common Stock
-------------------------
PROSPECTUS
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the shares offered hereby, and only
under circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.
, 2000
=========================================================================
<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.............................. $ 9,320
Pacific Exchange listing fee...................... 7,500
Legal fees and expenses........................... 15,000
Accounting fees and expenses...................... 10,000
Miscellaneous..................................... 1,800
-----------
Total............................................. $ 43,620
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.
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
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.
-II-1-
<PAGE>
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) 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) (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 2nd day of February, 2000.
SOCKET COMMUNICATIONS, INC.
By: /s/ David W. Dunlap
----------------------------
David W. 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 W. 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 2nd day of February, 2000 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/ Gianluca Rattazzi Director
- ------------------------
Gianluca 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
February 2, 2000
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 February 4,
2000 (the "Registration Statement") in connection with the registration
under the Securities Act of 1933, as amended, of a total of 2,662,638
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, 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 2,662,638 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
San Jose, California
February 4, 2000
<PAGE>
