SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 8-K


CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

March 28, 2002
Date of Report (date of earliest event reported)

SOCKET COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)

37400 Central Court
Newark, CA 94560
(Address of principal executive offices, including zip code)

(510) 744-2700
(Registrant's telephone number, including area code)

Item 5. Other Events

In Socket Communications, Inc.'s annual report on Form 10-K, filed April 1, 2002, Socket reported gross proceeds from the closing of a common stock financing on March 28, 2002 of $1,107,000. Of that amount, a prior commitment of $500,000 was not received on April 2, 2002 when due. Socket actually received gross proceeds of $607,000 from the sale of 381,760 shares of its common stock at a price of $1.59 per share, and net proceeds after costs and expenses of approximately $466,000. In connection with the offering, Socket issued warrants to investors in the offering and Socket's placement agent in the offering to purchase an aggregate of 118,344 shares of common stock at a price of $1.59 per share (subject to adjustment in the event of a dilutive issuance). The warrants have a term of five years, and could result in additional proceeds if exercised. The form of such warrants is attached as Exhibit 10.1 to this Report and its terms are incorporated herein by reference. Pursuant to a Registration Rights Agreement, Socket agreed to file no later than May 1, 2002 a registration statement on Form S-3 to enable the resale of the shares issued in this offering and the shares issuable on exercise of the warrants issued to investors in this offering. The form of such Registration Rights Agreement is attached as Exhibit 10.2 to this Report and its terms are incorporated herein by reference. Two members of Socket's Board of Directors invested an aggregate of $130,000 in this offering.

Item 7. Financial Statements and Exhibits

(c) Exhibits

10.1 Form of warrants, dated March 28, 2002, issued to investors and Socket's placement agent.

10.2 Form of Registration Rights Agreement, dated March 28, 2002, between Socket and certain investors.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: April 10, 2002

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

(i) Common Stock Issued at Less than Market Value. If the Company issues or sells any Common Stock other than Excluded Stock (as defined in Section 9.2) without consideration or for consideration per share less than the Market Price (as defined in Section 9.2), as of the day of such issuance or sale, the Exercise Price in effect immediately prior to each such issuance or sale will immediately (except as provided below) be reduced to the price determined by multiplying the Exercise Price in effect immediately prior to such issuance or sale by a fraction, (x) the numerator of which shall be the sum of (i) the number of shares of Common Stock issued and outstanding immediately prior to such issue, (ii) the number of shares of Common Stock issuable upon exercise of outstanding Options and conversion of outstanding Convertible Securities prior to such issue and (iii) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such additional shares of Common Stock so issued or sold would purchase at the Market Price on the last trading day immediately preceding such issuance or sale and (y) the denominator of which shall be (i) the number of shares of Common Stock issued and outstanding immediately prior to such issue, (ii) the number of shares of Common Stock issuable upon exercise of outstanding Options and conversion of outstanding Convertible Securities prior to such issue, and (iii) the actual number of shares of Common Stock so issued or sold. For the purposes of any adjustment of the Exercise Price pursuant to this Section 9.1(a), the following provisions shall be applicable:

(1) In the case of the issuance of Common Stock for cash, the amount of the consideration received by the Company shall be deemed to be the amount of the cash proceeds received by the Company for such Common Stock before deducting therefrom any discounts or commissions allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof.

(2) In the case of the issuance of Common Stock (otherwise than upon the conversion of any shares of capital stock or other securities of the Company) for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as determined by the Board of Directors; provided, however, that such fair value as determined by the Board of Directors shall not exceed the aggregate Market Price of the shares of Common Stock being issued as of the date the Board of Directors authorizes the issuance of such shares.

(3) In the case of the issuance of (A) options, warrants or other rights to purchase or acquire Common Stock (whether or not at the time exercisable) or (B) securities by their terms convertible into or exchangeable for Common Stock (whether or not at the time so convertible or exchangeable) or options, warrants or rights to purchase such convertible or exchangeable securities (whether or not at the time exercisable):

a) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options, warrants or other rights to purchase or acquire Common Stock shall be deemed to have been issued at the time such options, warrants or rights are issued and for a consideration equal to the consideration (determined in the manner provided in Sections 9.1(a)(1) and (2)), if any, received by the Company upon the issuance of such options, warrants or rights plus the minimum purchase price provided in such options, warrants or rights for the Common Stock covered thereby;

b) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options, warrants or other rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such securities were issued or such options, warrants or rights were issued and for a consideration equal to the consideration, if any, received by the Company for any such securities and related options, warrants or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration (determined in the manner provided in Sections 9.1(a)(1) and (2)), if any, to be received by the Company upon the conversion or exchange of such securities, or upon the exercise of any related options, warrants or rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof;

c) on any change in the number of shares of Common Stock deliverable upon exercise of any such options, warrants or rights or conversion or exchange of such convertible or exchangeable securities or any change in the consideration to be received by the company upon such exercise, conversion or exchange, but excluding changes resulting from the antidilution provisions thereof (to the extent comparable to the antidilution provisions contained herein), the Exercise Price then in effect shall forthwith be readjusted to such Exercise Price as would have been obtained had an adjustment been made upon the issuance of such options, warrants or rights not exercised prior to such change, or of such convertible or exchangeable securities not converted or exchanged prior to such change, upon the basis of such change;

d) on the expiration or cancellation of any such options, warrants or rights (without exercise), or the termination of the right to convert or exchange such convertible or exchangeable securities (without exercise), if the Exercise Price and the number of Shares issuable upon exercise of this Warrant shall have been adjusted upon the issuance thereof, the Exercise Price and the number of Shares issuable upon exercise of this Warrant shall forthwith be readjusted to such Exercise Price and number of Shares as would have been obtained had an adjustment been made upon the issuance of such options, warrants, rights or such convertible or exchangeable securities on the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options, warrants or rights, or upon the conversion or exchange of such convertible or exchangeable securities; and

e) if the Exercise Price and the number of Shares issuable upon exercise of this Warrant shall have been adjusted upon the issuance of any such options, warrants, rights or convertible or exchangeable securities, no further adjustment of the Exercise Price and the number of Shares issuable upon exercise of this Warrant shall be made for the actual issuance of Common Stock upon the exercise, conversion or exchange thereof.

(ii) Merger. If at any time there shall be a merger or consolidation of the Company with or into another corporation when the Company is not the surviving corporation, then, to the extent that this Warrant remains in effect following such transaction, such as a part of such merger or consolidation, lawful provision shall be made so that the holder of this Warrant shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the aggregate Exercise Price then in effect and exercise in full of the Warrant, the number of shares of stock or other securities or property of the successor corporation resulting from such merger or consolidation, to which a holder of the stock deliverable upon exercise of this Warrant would have been entitled in such merger or consolidation if this Warrant had been exercised immediately before such merger or consolidation. In any such case, appropriate adjustment shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the holder after the merger or consolidation.

(iii) Reclassification, etc. If the Company at any time shall, by subdivision, combination or reclassification of securities or otherwise, change any of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, this Warrant shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant immediately prior to such subdivision, combination, reclassification or other change.

(iv) Split, Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall split, subdivide or combine the Common Stock as to which purchase rights under this Warrant exist, the Exercise Price shall be proportionately decreased in the case of a split or subdivision or proportionately increased in the case of a combination.

(v) No adjustment in the Exercise Price is required if the amount of the adjustment is less than $0.01; provided, however, that any adjustments which by reason of this Section 9.1(e) are not required to be made will be carried forward and given effect in any subsequent adjustment.

(vi) For the purposes of this Section 9.1, the term "Common Stock" shall include (1) the class of stock designated as the Common Stock of the Company at the date hereof or (2) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from no par value to par value.

(vii) Notwithstanding the foregoing, in any case which this Section 9.1 provides that an adjustment becomes effective immediately after a record date for an event, the Company may defer paying to the holder any amount in cash in lieu of any fraction pursuant to Section 4 until the occurrence of such event.

(viii) If the Company takes any action affecting the Common Stock, other than action described in this Section 9.1, that in the opinion of the Board of Directors of the Company would materially adversely affect the conversion rights of the holder of the Warrant, the Exercise Price for the Warrant may be adjusted, to the extent permitted by law, in such manner, if any and at such time, as such Board may determine in good faith to be equitable in the circumstances.

"Convertible Securities" means shall mean any evidences of indebtedness, shares (other than Common Stock) or other securities convertible into or exchangeable for Common Stock.

"Excluded Stock" means shares of Common Stock issued or issuable: (i) upon conversion or exercise of any outstanding securities; (ii) to officers, directors or employees of, or consultants to, the Company pursuant to a stock grant, option plan, purchase plan or other stock incentive plan, program or agreement, including without limitation sales of shares to such persons pursuant to restricted stock purchase agreements approved by the Board of Directors; (iii) as a dividend or distribution on shares of capital stock of the Company or in connection with any stock split, stock dividend or similar transaction; (iv) in connection with (1) equipment lease financing transactions with institutions regularly engaged in equipment leasing or (2) bank lending, if such transactions are approved by the Board of Directors and the issuance of such securities is not principally for the purpose of raising additional equity capital for the Company; (v) to customers, vendors or joint venture partners or in connection with other strategic relationships approved by the Board of Directors that may involve the grant of licenses or distribution, OEM, bundling, manufacturing, localization, or resale rights with respect to the Company's products or technology; (vi) in a firm-commitment underwritten public offering pursuant to a registration statement filed under the Securities Act of 1933, as amended; (vii) in connection with any settlement of any action, suit, proceeding or litigation approved by the Board of Directors; (viii) to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the Board of Directors; (ix) which are otherwise excluded from the definition of Excluded Stock by the written consent of the Warrant holder; (x) pursuant to business combination transactions, the acquisition of technology or other assets of other businesses or the acquisition of another corporation by the Company by merger, purchase of substantially of the assets or other reorganization; and (xi) by way of dividend or other distribution on shares currently outstanding or shares excluded from the definition of Excluded Stock by the foregoing clauses (i) through (x).

"Market Price" means, with respect to a particular security, on any given day, (A) the average of the daily closing prices for 10 consecutive trading days ending two (2) trading days prior to the day in question or, in case no reported sale takes place on such day, the average of the last closing bid and asked prices regular way, in either case on the principal national securities exchange on which the applicable security is listed or admitted to trading, or (B) if not listed or admitted to trading on any national securities exchange, (1) the average of the daily closing prices for 10 consecutive trading days ending two (2) trading days prior to the day in question reported by the NASDAQ Stock Market if such security is traded over-the-counter and quoted in the NASDAQ Stock Market, or (2) if such security is so traded, but not so quoted, the average of the closing reported bid and asked prices of such security as reported by the NASDAQ Stock Market or any comparable system, or (3) if such security is not listed on the NASDAQ Stock Market or any comparable system, the average of the closing bid and asked prices as furnished by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If such security is not listed and traded in a manner that the quotations referred to above are available for the period required hereunder, the Market Price of such security shall be deemed to be the fair value per share of such security as determined in good faith by the Board of Directors of the Company.

"Options" means rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities.

"COMPANY"

SOCKET COMMUNICATIONS, INC
a Delaware corporation

 

NOTICE OF EXERCISE

To: Socket Communications, Inc.

(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT."

(b) Any legend required by applicable state law.

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER, AS SET FORTH IN AN AGREEMENT(S) BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.

(i) prepare and file with the Securities and Exchange Commission (the "SEC") as soon as practicable and in no event later than thirty (30) days following the date the Company's 2001 annual report on Form 10-K is filed with the SEC, a registration statement on Form S-3 (the "Registration Statement") to enable the resale of the Registrable Securities by the Purchaser from time to time on Nasdaq and use all reasonable efforts to cause such Registration Statement to be declared effective as promptly as practicable after filing and to remain effective until such time as all Registrable Securities have been sold thereunder or pursuant to Rule 144 under the Securities Act (the "Registration Period") or such shares cease to be Registrable Securities.

(ii) prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep the Registration Statement effective at all times until the end of the Registration Period;

(iii) furnish to any Holder with respect to the Registrable Securities registered under the Registration Statement such reasonable number of copies of any prospectus in conformity with the requirements of the Securities Act and such other documents as the Holder may reasonably request, in order to facilitate the public sale or other disposition of all or any of the Registrable Securities by the Holder;

(iv) use reasonable commercial efforts to file documents required of the Company for normal blue sky clearance in states specified in writing by the Holder; provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented;

(v) use reasonable commercial efforts to cause the Registrable Securities to be listed on Nasdaq in connection with the filing of the Registration Statement under Section 5(a)(i);

(vi) at the Holders' written request, provide the Holders and their counsel a reasonable period of time, not to exceed 2 business days, to review the proposed Registration Statement or any amendment or supplement thereto, prior to filing with the SEC, and, at the Holders' written request, the Company shall provide each Holder with copies of any comment letters received from the SEC staff with respect to the Registration Statement that pertain specifically to this transaction or the selling shareholders and their plan of distribution within 2 business days of receipt thereof. The Company shall reflect in such documents all such comments as the Holders (and their counsel) reasonably may propose respecting the Selling Shareholders and Plan of Distribution sections (or equivalents); and

(vii) bear all Registration Expenses in connection with the procedures in paragraph (i) through (v) of this Section 5(a) and the registration of the Registrable Securities pursuant to the Registration Statement other than Selling Expenses or, except as specifically indicated Registration Expenses, fees and expenses, if any, of legal counsel or other advisers to the Holder. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 5(a) that each Holder shall furnish to the Company such information regarding itself, the Registrable Securities to be sold by such Holder, and the intended method of disposition of such securities as shall be required to effect the registration of the Registrable Securities.

(i) Each Holder agrees that it will not offer to sell or make any sale, assignment, pledge, hypothecation or other transfer with respect to the Registrable Securities that would constitute a sale within the meaning of the Securities Act except pursuant to either (i) the Registration Statement referred to in Section 5(a) or(ii) Rule 144, and that it will promptly notify the Company of any changes in the information set forth in the Registration Statement after it is prepared regarding the Holder or its plan of distribution to the extent required by applicable law.

(ii) In addition to any suspension rights under paragraph(iii) below, the Company may, upon the happening of any event, that, in the judgment of Company's board of directors, renders it advisable to suspend use of the prospectus for no more than one hundred and twenty (120) days in the aggregate in any twelve (12) month period of time due to pending corporate developments, public filings with the SEC or similar events, suspend use of the prospectus on written notice to the Holders (which notice will not disclose the content of any material non-public information and will indicate the date of the beginning and anticipated end of the intended suspension, if known), in which case the Holders shall discontinue disposition of Registrable Securities covered by the Registration Statement or prospectus until copies of a supplemented or amended prospectus are distributed to the Holders or until the Holders are advised in writing by the Company that the use of the applicable prospectus may be resumed. The suspension and notice thereof described in this Section 5(b)(ii) shall be held in strictest confidence and not disclosed by the Holders.

(iii) In the event of: (i) any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to a Registration Statement or related prospectus or for additional information, (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iii) the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (iv) any event or circumstance which necessitates the making of any changes in the Registration Statement or prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, then the Company shall deliver a certificate in writing to the Holders (the "Suspension Notice") to the effect of the foregoing (which notice will not disclose the content of any material non-public information and will indicate the date of the beginning and end of the intended suspension, if known), and, upon receipt of such Suspension Notice, the Holders will refrain from selling any Registrable Securities pursuant to the Registration Statement (a "Suspension") until the Holders' receipt of copies of a supplemented or amended prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in any such prospectus. In the event of any Suspension, the Company will use reasonable commercial efforts to allow the use of the prospectus so suspended to be resumed as soon as possible after delivery of a Suspension Notice to the Holders. The Suspension and Suspension Notice described in this Section 5(b)(iii) shall be held in strictest confidence and not disclosed by the Holders.

(iv) Provided that a Suspension is not then in effect, the Holders may sell Registrable Securities under the Registration Statement, provided that the Holders comply with the prospectus delivery requirements under the federal securities laws.

(v) In the event of a sale of Registrable Securities by a Holder, such Holder must also deliver to the Company's transfer agent, with a copy to the Company, a certificate reasonably satisfactory to the transfer agent that the foregoing prospectus delivery requirements have been met, so that ownership of the Registrable Securities may be properly transferred.