As filed with the Securities
and Exchange Commission on April 18, 2003
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)
|
|
|
|
|
|
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:
Herbert P. Fockler, 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: From time to time 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 462(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
|
Title of Each
Class of |
Amount |
Proposed |
Proposed |
Amount of |
|
Common Stock, $0.001 par value per share |
4,844,797 shares |
$0.975 |
$4,723,677.08 |
$382.15 |
(1) Shares of Common Stock that may be offered pursuant to this Registration Statement include shares issuable as dividend distributions in respect of the Series F Convertible Preferred Stock and 1,547,107 shares that may be issued upon the exercise of warrants.
(2) Estimated solely for the purpose of calculation of the registration fee pursuant to Rule 457(c) under the Securities Act based on a per share price of $0.975, the average of the high and low reported sales prices of the Registrant's common stock on the Nasdaq National Market on April 16, 2003.
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 of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.
SUBJECT TO COMPLETION, DATED April 18, 2003
PROSPECTUS
4,844,797 Shares
Socket Communications, Inc.
Common Stock
This prospectus relates
to 4,844,797 shares of our common stock which may be sold from time to time
by certain stockholders set forth in "Selling Stockholders" section
of this prospectus. Of the shares offered by this prospectus, such shares include
shares issuable as dividend distributions in respect of the Series F Convertible
Preferred Stock and 1,547,107 shares of common stock issuable upon exercise
of warrants. The balance of the shares offered pursuant to this prospectus represent
the maximum number of shares of our common stock that may be issued upon conversion
of shares of our Series F Convertible Preferred Stock held by the selling stockholders
or their transferees.
The prices at which
the selling stockholders or their transferees may sell the shares will be determined
by the prevailing market prices for the shares or in negotiated transactions.
While we may receive proceeds upon the exercise of the warrants, we will not
receive any proceeds from the sale of the shares offered by this prospectus.
Our common stock is quoted on the Nasdaq SmallCap Market under the symbol "SCKT" and is listed on the Pacific Exchange under the symbol "SOK." On April 16, 2003, the last reported sale price for our common stock on the Nasdaq SmallCap Market was $0.95 per share.
Investment in the securities involves a high degree of risk. See "Risk Factors".
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is April ___, 2002.
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.
TABLE OF CONTENTS
INFORMATION CONTAINED IN THIS PROSPECTUS
DESCRIPTION OF SERIES F CONVERTIBLE PREFERRED STOCK
THE COMPANY
We design,
manufacture and sell products that connect handheld and notebook computers to
the Internet, computer networks, and peripherals through both wireless and cable
connections. Our products are designed for use with a broad range of handheld
and notebook computers, and employ innovative designs that reduce battery power
consumption and make them easy to install and use. Our products have been designed
specifically for handheld computers and other battery-powered devices with standard
expansion slots for plug-in cards. We believe that growth in the mobile workforce,
combined with technical advances and cost reductions in handheld computers and
networking technologies, are driving broader adoption of mobile data communications.
Our products are designed to address the growing need for connectivity by enabling
the use of handheld devices to extend data communications capabilities beyond
location-dependent wired networks or telephone lines, thereby enabling mobile
computer users to enhance their productivity, exploit time sensitive opportunities
and improve customer satisfaction. Our products allow consumers to easily integrate
hardware, software and services into complete mobile connectivity solutions.
Our products
can be classified into four broad product families:
Our network connection products are connection devices that can be plugged into standard expansion slots in handheld and notebook computers. These products allow users to connect their handheld and notebook computers to the Internet via mobile phone services, or to private networks, or to communicate with other electronic devices such as desktop computers and printers. Our bar code scanning products plug into handheld or notebook computers and turn handheld or notebook computers into portable bar code scanners that can be used in various retail and industrial workplaces. Our serial products add connection ports to a notebook or handheld computer that allows users to connect these portable computers to standard peripherals designed for desktop PCs. Our embedded products and services allow manufacturers of mobile phones, handheld computers and other devices to build wireless connection functions into their products.
Handheld computers have evolved over the past several years from simple devices
used mainly to hold personal information into small portable computers with
functionality similar to desktop PCs. Advances in mobile network access and
transfer speeds are enabling handheld computer users to access the Internet,
send and receive email, access corporate data files, and exchange mobile instant
messages anywhere and at any time. Growth in the mobile workforce and increasing
reliance on the Internet and email are increasing the demand for mobile data
communications. Advances in wireless connection technologies, particularly Bluetooth
and Wireless LAN (WiFi), are being commercialized to allow handheld computers
to interact wirelessly with nearby computers and with a wide array of electronic
appliances, including mobile phones, printer, digital cameras, LAN access points,
automobile communications systems, bar code scanners, home entertainment and
security systems, public kiosks, public Internet access locations and vending
machines. We believe we are well positioned to benefit from expected growth
in mobile data communications by maintaining a leadership position in connection
solutions for mobile devices. Our marketing and product development strategy
is to capitalize on strategic partner relationships, offer a comprehensive range
of products, build a strong brand name, diversify our distribution channels
and support product developers.
We have an
experienced management team and Board of Directors. Many of our senior officers
joined us during the years 1992 through 1994, including Kevin Mills, President
and CEO; co-founder Micheal Gifford, Business Unit Manager of our embedded and
industrial business unit; David Dunlap, Chief Financial Officer; Len Ott, Chief
Technical Officer; and Peter Phillips, Vice President of Marketing. Kevin Mills
and Micheal Gifford serve on our Board of Directors. Our Board of Directors
also includes co-founder Charlie Bass as Chairman, who has served in that capacity
since 1992, along with four other independent directors. Two of our independent
directors, Enzo Torresi and Gianluca Rattazzi, are former chief executive officers
of high technology companies and our two other independent directors, Leon Malmed
and Peter Sealey, are former senior sales and marketing executives.
We were incorporated in California in March 1992, and reincorporated in Delaware at the time of our initial public offering in June 1995. We have approximately 60 full time employees, and our headquarters are located at 37400 Central Court, Newark, California 94560. Our telephone number is (510) 744-2700. We have established two marketing and support subsidiaries, Socket Communications, Europe, located in Grenoble, France, and Socket Communications K.K., located in Tokyo, Japan.
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, as well as the risks
described in our annual and quarterly reports filed with the Securities and
Exchange Commission, 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.
If any
of the events, contingencies, circumstances or conditions described in the following
risks actually occur, our business, financial condition or results of operations
could be seriously harmed. 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, we cannot assure you that we will achieve ongoing
profitability and we have monthly payment obligations.
We have incurred
significant operating losses since our inception. We expect to incur operating
losses through the first quarter of 2003 and possibly longer. For the fiscal
years ended December 31, 2002 and 2001, we incurred a net loss of $2,971,830
and $6,063,239, respectively. To sustain profitability, we must accomplish numerous
objectives, including the development of successful new products. We cannot
foresee with any certainty whether we will be able to achieve these objectives
in the future. Accordingly, we cannot assure you that we will generate sufficient
net revenue to achieve ongoing profitability.
We also have
debt payment obligations to Nokia Corporation under a Business Transfer Agreement
that we entered into with Nokia in March 2002. These payments are in the amount
of approximately $87,600, plus accrued interest, per month through November
2003, with a final payment of approximately $437,300 plus accrued interest,
due in December 2003. In addition, we sold 100,000 shares of Series E Preferred
in a private placement financing in October 2002. We are obligated to pay one-fifteenth
of the original value of the Series E Preferred ($66,667) in cash or shares
of Common Stock at a conversion price of $0.87 per share, together with accrued
dividends, at the end of every month that commenced on January 31, 2003. If
we cannot achieve profitability, we will not be able to support our operations
from positive cash flows, make debt payments to Nokia or make cash amortization
payments on the Series E Preferred, in which case we would need to raise more
capital. We cannot assure you that additional capital will be available on acceptable
terms, if at all, and such terms may be dilutive to existing stockholders. If
we are unable to secure the necessary capital, we will need to suspend some
or all of our current operations.
Our Common
Stock may be delisted from the Nasdaq stock market and the Pacific Exchange,
which would have a materially adverse effect on the liquidity and price of our
Common Stock.
We recently
transferred our Common Stock listing from the Nasdaq National Market to the
Nasdaq SmallCap Market, because we were not able to maintain the requirements
for listing on the National Market. However, our SmallCap Market listing and
our listing on the Pacific Exchange are also contingent on meeting specific
quantitative standards, including a minimum bid price of $1.00. We may not be
able to meet these requirements in the future, particularly if our Common Stock
fails to trade at above $1.00 per share. Our Common Stock last closed above
$1.00 on September 10, 2002. We expect that our Common Stock will continue to
be listed on the Nasdaq SmallCap Market until August 15, 2003, after which it
may be delisted. With respect to the Pacific Exchange, we have been advised
that our listing status will be reviewed monthly, and while there can be no
assurances as to our continued listing, we believe there is a reasonable possibility
that our listing on the Pacific Exchange will be continued until August 15,
2003. If our Common Stock is delisted from the SmallCap Market and the Pacific
Exchange, and is thereafter traded only on the over-the-counter market, our
stockholders' ability to purchase and sell our Common Stock could be less orderly
and efficient and more costly. Furthermore, a delisting of our Common Stock
could have a materially adverse impact on our business operations by damaging
our general business reputation and impairing our ability to obtain additional
capital. As a result of the negative impact on the liquidity of our Common Stock
and on our business, a delisting would also likely decrease the market price
of our Common Stock and increase the volatility of our stock price.
A significant
portion of our revenue currently comes from a single distributor, and any decrease
in revenue from this distributor could harm our business.
A significant
portion of our revenue comes from one distributor, Ingram Micro, which represented
approximately 22 percent of our worldwide revenue in fiscal 2002 and 23 percent
of our worldwide revenue for 2001. We expect a significant portion of our revenue
will continue to depend on sales to Ingram Micro. We do not have long-term commitments
from Ingram Micro to carry our products, and it could choose to stop selling
some or all our products at any time. If we lose our relationship with Ingram
Micro, we could experience disruption and delays in marketing our products.
If the
market for handheld computers fails to grow, we might not achieve our sales
projections.
Substantially
all of our products are designed for use with mobile personal computers, including
handhelds, notebook computers and tablets. If the mobile personal computer industry
does not grow or growth slows, we might not achieve our sales projections.
Our sales
would be hurt if the new technologies used in our products do not become widely
adopted.
Many of our
products use new technologies, such as the Bluetooth wireless standard and 2D
bar code scanning, which are not yet widely adopted in the market. If these
technologies fail to become widespread, our sales will suffer.
If third
parties do not produce and sell innovative products with which our products
are compatible, we may not achieve our sales projections.
Our success
is dependent upon the ability of third parties in the mobile personal computer
industry to complete development of products that include or are compatible
with our technology and to sell their products into the marketplace. Our ability
to generate increased revenue depends significantly on the commercial success
of Windows-powered handheld devices, particularly the Pocket PC, and other devices,
such as the new line of handhelds with expansion options expected to be offered
by Palm. If manufacturers are unable to ship new products such as Pocket PC
and other Windows-powered devices or Palm devices on schedule, or if these products
fail to achieve or maintain market acceptance, the number of our potential new
customers would be reduced and we would not be able to meet our sales expectations.
We could
face increased competition in the future, which would adversely affect our financial
performance.
The market
for handheld computers in which we operate is very competitive. Our future financial
performance is contingent on a number of unpredictable factors, including that:
Increased
competition could result in price reductions, fewer customer orders, reduced
margins, and loss of market share. Our failure to compete successfully against
current or future competitors could harm our business, operating results, or
financial condition.
If we
fail to develop and introduce new products rapidly and successfully, we will
not be able to compete effectively, and our ability to generate sufficient revenues
will be negatively affected.
The market
for our products is prone to rapidly changing technology, evolving industry
standards and short product life cycles. If we are unsuccessful at developing
and introducing new products and services on a timely basis that include the
latest technologies conforming with the newest standards and that are appealing
to end users, we will not be able to compete effectively, and our ability to
generate significant revenues will be seriously harmed.
The development
of new products and services can be very difficult and requires high levels
of innovation. The development process is also lengthy and costly. Short product
life cycles expose our products to the risk of obsolescence and require frequent
new product introductions. We will be unable to introduce new products and services
into the market on a timely basis or compete successfully, if we fail to:
We cannot
be sure that we will have sufficient resources to make adequate investments
in research and development or that we will be able to make the technological
advances necessary to be competitive.
If we
do not correctly anticipate demand for our products, our operating results will
suffer.
The demand
for our products depends on many factors and will be difficult to forecast.
We expect that it will become more difficult to forecast demand as we introduce
and support more products and as competition in the market for our products
intensifies.
If demand
increases beyond forecasted levels, we would have to rapidly increase production
at our third-party manufacturers. We depend on suppliers to provide additional
volumes of components and those suppliers might not be able to increase production
rapidly enough to meet unexpected demand. Even if we were able to procure enough
components, our third-party manufacturers might not be able to produce enough
of our devices to meet our customer demand. In addition, rapid increases in
production levels to meet unanticipated demand could result in higher costs
for manufacturing and supply of components and other expenses. These higher
costs could lower our profit margins. Further, if production is increased rapidly,
manufacturing yields could decline, which may also lower operating results.
If demand
is lower than forecasted levels, we could have excess production resulting in
higher inventories of finished products and components, which could lead to
write-offs of some or all of the excess inventories. Lower than forecasted demand
could also result in excess manufacturing capacity at our third-party manufacturers
and our failure to meet some minimum purchase commitments, each of which may
lower our operating results.
We depend
on alliances and other business relationships with a small number of third parties,
and a disruption in any one of these relationships would hinder our ability
to develop and sell our products.
We depend
on strategic alliances and business relationships with leading participants
in various segments of the communications and mobile personal computer markets
to help us develop and market our products. 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. 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, failure 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-powered
mobile products and, more recently, to design activities for Palm devices. Such
design activities have diverted financial and personnel resources from other
development projects. These design activities are not undertaken pursuant to
any agreement under which Microsoft or Palm is obligated to continue the collaboration
or to support the products produced from the collaboration. Consequently, Microsoft
or Palm may terminate their collaborations with us for a variety of reasons
including our failure to meet agreed-upon standards or for reasons beyond our
control, such as changing market conditions, increased competition, discontinued
product lines, and product obsolescence.
We rely
primarily on distributors, resellers, retailers and original equipment manufacturers
to sell our products, and our sales would suffer if any of these third parties
stops selling our products effectively.
Because we
sell our products primarily through distributors, resellers, retailers and original
equipment manufacturers, we are subject to risks associated with channel distribution,
such as risks related to their inventory levels and support for our products.
Our distribution channels may build up inventories in anticipation of growth
in their sales. If such growth in their sales does not occur as anticipated,
the inventory build up could contribute to higher levels of product returns.
The lack of sales by any one significant participant in our distribution channels
could result in excess inventories and adversely affect our operating results.
Our agreements
with distributors, resellers, retailers and original equipment manufacturers
are generally nonexclusive and may be terminated on short notice by them without
cause. Our distributors, resellers, retailers and original equipment manufacturers
are not within our control, are not obligated to purchase products from us,
and may represent competitive lines of products. Our current sales growth expectations
are contingent in part on our ability to enter into additional distribution
relationships and expand our retail sales channels. We cannot predict whether
we will be successful in establishing new distribution relationships, expanding
our retail sales channels or maintaining our existing relationships. A failure
to enter into new distribution relationships or to expand our retail sales channels
could adversely impact our ability to grow our sales.
We allow
our distribution channels to return a portion of their inventory to us for full
credit against other purchases. We also supply some retailers on a consignment
basis, which means that their inventory can be returned to us at any time. 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.
Our intellectual
property and proprietary rights may be insufficient to protect our competitive
position.
Our business
depends on our ability to protect our intellectual property. We rely primarily
on patent, copyright, trademark, trade secret laws, and other restrictions on
disclosure to protect our proprietary technologies. We cannot be sure that these
measures will provide meaningful protection for our proprietary technologies
and processes. We cannot be sure that any patent issued to us will be sufficient
to protect our technology. The failure of any patents to provide protection
to our technology would make it easier for our competitors to offer similar
products. In connection with our participation in the development of various
industry standards, we may be required to license certain of our patents to
other parties, including our competitors, that develop products based upon the
adopted standards.
We also generally
enter into confidentiality agreements with our employees, distributors, and
strategic partners, and generally control access to our documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use our products, services, or technology
without authorization, develop similar technology independently, or design around
our patents.
Effective
copyright, trademark, and trade secret protection may be unavailable or limited
in certain foreign countries. Furthermore, certain of our customers have entered
into agreements with us which provide that the customers have the right to use
our proprietary technology in the event we default in our contractual obligations,
including product supply obligations, and fail to cure the default within a
specified period of time.
We may
become subject to claims of intellectual property rights infringement, which
could result in substantial liability.
In the course
of our business, we may receive claims of infringement or otherwise become aware
of potentially relevant patents or other intellectual property rights held by
other parties. Many of our competitors have large intellectual property portfolios,
including patents that may cover technologies that are relevant to our business.
In addition, many smaller companies, universities, and individuals have obtained
or applied for patents in areas of technology that may relate to our business.
The industry is moving towards aggressive assertion, licensing, and litigation
of patents and other intellectual property rights.
If we are
unable to obtain and maintain licenses on favorable terms for intellectual property
rights required for the manufacture, sale, and use of our products, particularly
those products which must comply with industry standard protocols and specifications
to be commercially viable, our results of operations or financial condition
could be adversely impacted.
In addition
to disputes relating to the validity or alleged infringement of other parties'
rights, we may become involved in disputes relating to our assertion of our
intellectual property rights. Whether we are defending the assertion of intellectual
property rights against us or asserting our intellectual property rights against
others, intellectual property litigation can be complex, costly, protracted,
and highly disruptive to business operations by diverting the attention and
energies of management and key technical personnel. Plaintiffs in intellectual
property cases often seek injunctive relief, and the measures of damages in
intellectual property litigation are complex and often subjective or uncertain.
Thus, any adverse determinations in this type of litigation could subject us
to significant liabilities and costs.
New industry
standards may require us to redesign our products, which could substantially
increase our operating expenses.
Standards
for the form and functionality of our products are established by standards
committees. Separate committees establish standards, which evolve and change
over time, for different categories of our products. We must continue to identify
and ensure compliance with evolving industry standards so that our products
are interoperable and we remain competitive. Unanticipated changes in industry
standards could render our products incompatible with products developed by
major hardware manufacturers and software developers. Should any unanticipated
changes occur, we would be required 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 original equipment manufacturers.
Undetected
flaws and defects in our products may disrupt product sales and result in expensive
and time-consuming remedial action.
Our hardware
and software products may contain undetected flaws, which may not be discovered
until customers have used the products. From time to time, we may temporarily
suspend or delay shipments or divert development resources from other projects
to correct a particular product deficiency. 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 and operating results.
Our quarterly
operating results may fluctuate in future periods, which could cause our stock
price to decline.
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 revenue 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 revenue
in the last month of the quarter. This subjects us to the risk that even modest
delays in orders may adversely affect our quarterly operating results. Our operating
results may also fluctuate due to factors such as:
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.
The loss
of one or more of our senior personnel could harm our existing business.
A number
of our officers and senior managers have been employed for seven to ten years
by us, including our President, Chief Financial Officer, Chief Technical Officer,
Vice President of Marketing, and Senior Vice President for Business Development/General
Manager Embedded and Industrial Systems Unit. Our future success will depend
upon the continued service of key officers and senior managers. Competition
for officers and senior managers is intense and there can be no assurance that
we will be able to retain our existing senior personnel. The loss of key senior
personnel could adversely affect our ability to compete.
If we
are unable to attract and retain highly skilled sales and marketing and product
development personnel, our ability to develop new products and product enhancements
will be adversely affected.
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.
Our products involve a number of new and evolving technologies, and we frequently
need to apply these technologies to the unique requirements of mobile connection
products. Our personnel must be familiar with both the technologies we support
and the unique requirements of the products to which our products connect. Competition
for such personnel is intense, and we may not be able to attract and retain
such key personnel. In addition, our ability to hire and retain such key personnel
will depend upon our ability to raise capital or achieve increased revenue levels
to fund the costs associated with such key personnel. Failure to attract and
retain such key personnel will adversely affect our ability to develop new products
and product enhancements.
We may
not be able to collect revenues from customers who experience financial difficulties.
Our accounts
receivable are derived primarily from distributors and original equipment manufacturers.
We perform ongoing credit evaluations of our customers' financial conditions
but generally require no collateral. Reserves are maintained for potential credit
losses, and such losses have historically been within such reserves. However,
many of our customers may be thinly capitalized and may be prone to failure
in adverse market conditions. Although our collection history has been good,
from time to time a customer may not pay us because of financial difficulty,
bankruptcy or liquidation.
We may
be unable to manufacture our products because we are dependent on a limited
number of qualified suppliers for our components.
Several of
our component parts, including our serial interface chip, our Ethernet chip,
and our bar code scanning modules, are produced by one or a limited number of
suppliers. Shortages could occur in these essential materials due to an interruption
of supply or increased demand in the industry. If we are unable to procure certain
component parts, we could be required to reduce our operations while we seek
alternative sources for these components, which could have a material adverse
effect on our financial results. To the extent that we acquire extra inventory
stocks to protect against possible shortages, we would be exposed to additional
risks associated with holding inventory, such as obsolescence, excess quantities,
or loss.
Our operating
results could be harmed by economic, political, regulatory and other risks associated
with export sales.
Export sales
(sales to customers outside the United States) accounted for approximately 42
percent of our revenue in 2002 and approximately 38 percent of our revenue for
2001. Accordingly, our operating results are subject to the risks inherent in
export sales, including:
Our export
sales are predominately denominated in United States dollars and in Euros for
a portion of our sales to European distributors. 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. Declines in the value of the Euro relative to the United States dollar
may result in foreign currency losses relating to collection of Euro denominated
receivables.
Our operations
are vulnerable to interruption by fire, earthquake, power loss, telecommunications
failure, and other events beyond our control.
Our corporate
headquarters is located near an earthquake fault. The potential impact of a
major earthquake on our facilities, infrastructure, and overall business is
unknown. Additionally, we may experience electrical power blackouts or natural
disasters that could interrupt our business. We do not have a detailed disaster
recovery plan. We do not carry sufficient business interruption insurance to
compensate us for losses that may occur. Any losses or damages incurred by us
as a result of these events could have a material adverse effect on our business.
The sale
of a substantial number of shares of Common Stock could cause the market price
of our Common Stock to decline.
Sales of
a substantial number of shares of our Common Stock in the public market could
adversely affect the market price for our Common Stock. The market price of
our Common Stock could also decline if one or more of our significant stockholders
decided for any reason to sell substantial amounts of our Common Stock in the
public market.
As of March
31, 2003, we had 24,351,984 shares of Common Stock outstanding. Substantially
all of these shares are freely tradable in the public market, either without
restriction or subject, in some cases, only to S-3 or S-8/S-3 prospectus delivery
requirements, and, in some cases, only to manner of sale, volume, and notice
requirements of Rule 144 under the Securities Act of 1933, as amended.
As of March
31, 2003, we had 100,000 shares of Series E Preferred outstanding that are convertible
into 919,540 shares of Common Stock at $0.87 per share. If the share price of
the Common Stock exceeds $0.87 per share, the holder of Series E Preferred may
decide to convert some or all of the Series E Preferred into Common Stock, and
such Common Stock would be freely tradable in the public market and subject
only to S-3 prospectus delivery requirements.
As of March
31, 2003, we had 276,269 shares of Series F Preferred Stock outstanding that
are convertible into 2,762,690 shares of Common Stock at $0.722 per share.
As of March
31, 2003, we had 6,079,253 shares subject to outstanding options under our stock
option plans, and 684,088 shares were available for future issuance under the
plans. We have registered the shares of Common Stock subject to outstanding
options and reserved for issuance under our stock option plans. Accordingly,
shares underlying vested options will be eligible for resale in the public market
as soon as the options are exercised.
As of March
31, 2003, we had warrants outstanding to purchase a total of 1,930,451 shares
of our Common Stock.
Volatility
in the trading price of our Common Stock could negatively impact the price of
our Common Stock.
During the
period from April 1, 2002 through March 31, 2003, our Common Stock price fluctuated
between a high of $1.95 and a low of $0.51. The trading price of our Common
Stock could be subject to wide fluctuations in response to many factors, some
of which are beyond our control, including general economic conditions and the
outlook of securities analysts and investors on our industry. In addition, the
stock markets in general, and the markets for high technology stocks in particular,
have experienced high volatility that has often been unrelated to the operating
performance of particular companies. These broad market fluctuations may adversely
affect the trading price of our Common Stock.
We may
require additional capital in the future and we cannot assure you that capital
will be available on reasonable terms, if at all, or on terms that would not
cause substantial dilution to your stock holdings.
We have historically needed to raise capital to fund our operating losses. We expect to continue to incur operating losses through the first quarter of 2003 and possibly longer. Our forecasts are highly dependent on factors beyond our control, including market acceptance of our products and sales of handheld computers. If capital requirements vary materially from those currently planned, we may require additional capital sooner than expected. There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to us, if at all. Any sale of a substantial number of additional shares will cause dilution to your investment and could also cause the market price of our Common Stock to fall.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares sold under this prospectus, although we may receive up to approximately $1,117,011 upon exercise of the warrants. All proceeds from the sale of the shares will be for the account of the selling stockholders. See "Selling Stockholders" and "Plan of Distribution."
INFORMATION
CONTAINED IN THIS PROSPECTUS
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 are 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.
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
"The Company" 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 operations, our ability to achieve profitability, developments in
the market for our products, including the market for mobile computers that
use the Windows Pocket PC 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.
DESCRIPTION
OF SERIES F CONVERTIBLE PREFERRED STOCK
On March 21, 2003 we completed
a private placement of Series F Convertible Preferred Stock and Common Stock
Purchase Warrants pursuant to Subscription Agreements by and among certain of
the selling stockholders and us. The private placement was managed by Spencer
Trask Ventures, Inc.
Sale of Series F Convertible
Preferred Stock and Warrants. Pursuant to the Subscription Agreements, we
sold to certain of the selling stockholders a total of 276,269 units at a price
of $7.22 per unit (the "Purchase Price") for aggregate proceeds of
$2,000,000 in cash. Each unit consisted of (i) one share of our Series F Convertible
Preferred Stock, convertible into 10 shares of our Common Stock (resulting in
an implied conversion price of $0.722 per share) subject to certain adjustments
as set forth in the Certificate of Designation of the Series F Preferred Stock;
and (ii) one warrant to purchase three shares of our Common Stock at a price
of $0.722 per share (the "Warrant Exercise Price"). We paid an aggregate
of $260,000 in fees and expenses to Spencer Trask in connection with the sale
of these securities, and also issued to Spencer Trask a warrant to purchase
718,300 shares of our Common Stock at a price of $0.722 per share. Two directors
of ours, Charlie Bass and Enzo Torresi, participated in the private placement
in the amounts of $100,000 and $15,000, respectively, at a price of $7.595 per
unit, in compliance with the rules of the NASDAQ stock market for insider participation.
Optional Conversion.
Holders of Series F Preferred Stock are entitled to convert all or an portion
of their Series F Preferred Stock into Common Stock on a one-for-ten basis (subject
to adjustment) at any time prior to the third anniversary of the closing date
of the private placement.
Automatic Conversion.
All shares of Series F Preferred Stock, if not converted sooner by the holder,
will convert automatically into Common Stock on a one-for-ten basis (subject
to adjustment) upon the earliest of (i) March 21, 2006 (the "Mandatory
Conversion Date"); (ii) immediately preceding a sale of all or substantially
all of our assets or a merger or consolidation of another entity with us, subject
to certain conditions; or (iii) if, after March 21, 2005 (or, if additional
units are sold, two years from the date of the final sale), the Common Stock
has a closing sale price of $5.00 or more for twenty consecutive trading days.
Dividend Rights.
Holders of Series F Preferred Stock are entitled to a cumulative dividend of
8 percent of the Purchase Price per year, payable in cash or, in our discretion,
in registered shares of Common Stock, at the end of each calendar quarter and
on the Mandatory Conversion Date. Holders of Series F Preferred are also entitled
to an additional dividend at the same rate as any dividend declared and paid
on our Common Stock. No dividends may be declared or paid on any shares of Common
Stock unless an equal or greater dividend is paid on the Series F Preferred
Stock in the same year and unless all prior accrued but unpaid dividends on
the Series F Preferred Stock have been paid.
Liquidation Preference.
In the event we liquidate, dissolve or wind up, the holders of Series F Preferred
Stock are entitled to receive, in preference to our Series E Preferred Stock
and our Common Stock, an amount equal to the Purchase Price plus any accrued
but unpaid dividends. After payment of the respective liquidation preferences
of all shares of Preferred Stock, the remaining assets will be distributed ratably
amount all holders of Series F Preferred Stock and Common Stock on an as-converted
basis.
Voting. Except as
required by law, the holders of the Series F Preferred Stock are entitled to
vote with the holders of the Common Stock as a single class on all matters presented
to the stockholders, provided that the holders of Series F Preferred Stock are
entitled to vote separately on any alternations of the rights or change in the
authorized number of shares of Series F Preferred Stock, the redemption or repurchase
of the Series F Preferred Stock, or any matters required by law to be submitted
to a separate class or series vote. Each share of Series F Preferred Stock has
the number of votes equal to the number of shares of Common Stock into which
such share is convertible.
Pre-emptive Rights.
The holders of the Series F Preferred Stock also have the right to purchase
all or part of such holders' pro rata share of our issuances of new securities,
subject to certain exceptions.
SELLING
STOCKHOLDERS
The shares may be offered by the selling stockholders or by pledgees, donees, transferees or other successors in interest that receive such shares as a gift or through a private sale or other transfer. We may amend or supplement this prospectus from time to time to update the information provided in the table. The shares being offered by the selling stockholders may be increased by up to 535,000 shares if we elect to pay dividends on the Series F Preferred Stock with shares of Common Stock.
|
Certificate Name |
Shares
Beneficially Owned |
Number of Shares Being Offered |
Shares Beneficially Owned After Offering |
|
|
|
|
Number |
Percent(1) |
|
|
Jan Arnett, M.D. (2) |
22,516 |
22,516 |
* |
* |
|
David T. Barry (3) |
13,507 |
13,507 |
* |
* |
|
James K. Baskin (4) |
13,507 |
13,507 |
* |
* |
|
The Bass Trust (5) |
1,664,901 |
171,171 |
1,493,730 |
6.1% |
|
Joe N. & Jamie Behrendt Revocable Trust 10/20/96 (6) |
45,019 |
45,019 |
* |
* |
|
Lon Bell (7) |
90,038 |
90,038 |
* |
* |
|
Mark
Boyce (8)
|
90,038 | 90,038 |
* |
* |
|
William
J. Callahan & Joan M. Callahan JTWROS (9)
|
45,019 | 45,019 |
* |
* |
|
Clariden
Bank (10)
|
180,063 | 180,063 |
* |
* |
|
Dr.
Malcolm R. Currie (11)
|
18,018 | 18,018 |
* |
* |
|
DCG&T
c/f Eric Rubenstein IRA (12)
|
9,009 | 9,009 |
* |
* |
|
DCG&T
c/f Robert G. Heidenreich IRA (13)
|
54,028 | 54,028 |
* |
* |
|
DCG&T
c/f Scott Leishman IRA Rollover (14)
|
13,507 | 13,507 |
* |
* |
|
DCG&T
Co. FBO Warren Kramer IRA (15)
|
22,516 | 22,516 |
* |
* |
|
Stephen
A. de Kanter (16)
|
45,019 | 45,019 |
* |
* |
|
Delaware
Charter G&T C/F Elizabeth A. Eller IRA (17)
|
36,023 | 36,023 |
* |
* |
|
Delaware
Charter G&T Co FBO Elizabeth H. Bone SEP IRA (18)
|
36,023 | 36,023 |
* |
* |
|
Steven
H. Deutsch & Wilma K. Deutsch JTWROS (19)
|
36,023 | 36,023 |
* |
* |
|
Cindy
Dolgin (20)
|
45,019 | 45,019 |
* |
* |
|
Jacob
M. Engel (21)
|
45,019 | 45,019 |
* |
* |
|
Joseph
A. Fabiani (22)
|
18,018 | 18,018 |
* |
* |
|
Harold
L. Finelt (23)
|
45,019 | 45,019 |
* |
* |
|
George
Fink (24)
|
18,018 | 18,018 |
* |
* |
|
Gary
Fischoff (25)
|
45,019 | 45,019 |
* |
* |
|
Jonathan
Fleisig (26)
|
180,063 | 180,063 |
* |
* |
|
Maurice
& Stacy Gozlan TIE (27)
|
90,038 | 90,038 |
* |
* |
|
Hanam
Capital Corporation (28)
|
45,019 | 45,019 |
* |
* |
|
Headwaters
Holdings LLC (29)
|
180,063 | 180,063 |
* |
* |
|
Byron
Hughey & Julie Hughey Ten by Entirety with Common Law Ros Expressly
Contained (30)
|
27,014 | 27,014 |
* |
* |
|
Hypo
Alpe-Adria-Bank (Liechtenstein) AG (31)
|
90,038 | 90,038 |
* |
* |
|
Alec
Jaret (32)
|
18,018 | 18,018 |
* |
* |
|
Jericho
Investments (33)
|
90,038 | 90,038 |
* |
* |
|
David
V. Kahn (34)
|
18,018 | 18,018 |
* |
* |
|
Jonathan
E. Kahn (35)
|
45,019 | 45,019 |
* |
* |
|
John
J. Kealy Revocable Trust dtd 8/15/96 John J. Kealy TTEE (36)
|
12,610 | 12,610 |
* |
* |
|
James
Kendall (37)
|
90,038 | 90,038 |
* |
* |
|
Christian
Kolster (38)
|
72,033 | 72,033 |
* |
* |
|
Kenneth
J. Kostal (39)
|
22,516 | 22,516 |
* |
* |
|
Thaddeus
B. Kubis & Maria G. Kubis JTWROS (40)
|
18,018 | 18,018 |
* |
* |
|
Ronald
Lachman (41)
|
180,063 | 180,063 |
* |
* |
|
Ezra
P. Mager (42)
|
90,038 | 90,038 |
* |
* |
|
Thomas
A. Masci, Jr. (43)
|
13,507 | 13,507 |
* |
* |
|
Kathleen
S. McHugh (44)
|
9,009 | 9,009 |
* |
* |
|
Richard
J. Mish (45)
|
22,516 | 22,516 |
* |
* |
|
Mouton
Family Living Trust (46)
|
22,516 | 22,516 |
* |
* |
|
Brian
Neville (47)
|
15,007 | 13,507 |
* |
* |
|
Gus
& Karen Nicolopoulos (48)
|
18,018 | 18,018 |
* |
* |
|
Edward
J. O'Connell (49)
|
45,019 | 45,019 |
* |
* |
|
O.T.
Finance, SA (50)
|
45,019 | 45,019 |
* |
* |
|
Performance
Capital Group, LLC (51)
|
45,019 | 45,019 |
* |
* |
|
Kenneth
J. Peterson (52)
|
90,038 | 90,038 |
* |
* |
|
Lisa
Peterson & Mark Smith JTWROS (53)
|
18,018 | 18,018 |
* |
* |
|
K.V.
Rajagopalan (54)
|
18,018 | 18,018 |
* |
* |
|
Elisha
Rothman (55)
|
90,038 | 90,038 |
* |
* |
|
Alan
Rubin (56)
|
90,038 | 90,038 |
* |
* |
|
Richard
Russey (57)
|
13,507 | 13,507 |
* |
* |
|
Richard
Sakakeeny (58)
|
18,018 | 18,018 |
* |
* |
|
Larry
Schwartz (59)
|
9,009 | 9,009 |
* |
* |
|
Elliot
Sokolow (60)
|
45,019 | 45,019 |
* |
* |
|
Mark
C. Steadman (61)
|
14,417 | 14,417 |
* |
* |
|
Adam
K. Stern (62)
|
19,018 | 18,018 |
* |
* |
|
David
& Ida Stollwerk (63)
|
18,018 | 18,018 |
* |
* |
|
Enzo
Torresi (64)
|
115,716 | 25,675 |
* |
* |
|
Samuel
Victor Vail (65)
|
18,018 | 18,018 |
* |
* |
|
Vitel
Ventures, Inc. (66)
|
45,019 | 45,019 |
* |
* |
|
Jerold
Weinger & Lilli Weinger JTWROS (67)
|
45,019 | 45,019 |
* |
* |
|
Paul
J. Weir (68)
|
13,507 | 13,507 |
* |
* |
|
Ralph
C. Wintrode Trust dtd May 9, 2001 (69)
|
36,023 | 36,023 |
* |
* |
|
Henry
Yordan (70)
|
18,018 | 18,018 |
* |
* |
|
Michael
Zimmerman (71)
|
18,018 | 18,018 |
* |
* |
|
Spencer
Trask Private Equity Fund I, L.P. (72)
|
90,038 | 90,038 |
* |
* |
|
Spencer
Trask Private Equity Fund II, L.P. (73)
|
90,038 | 90,038 |
* |
* |
|
Spencer
Trask Private Equity Fund III, LLC (74)
|
90,038 | 90,038 |
* |
* |
|
Spencer
Trask Ventures, Inc. (75)
|
718,300 | 718,300 |
* |
* |
|
________________________ |
PLAN
OF DISTRIBUTION
The selling stockholders
and any of their pledgees, assignees and successors-in-interest may, from time
to time, sell any or all of their shares of common stock on any stock exchange,
market or trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. The selling stockholders may
use any one or more of the following methods when selling shares:
The selling stockholders
may also sell shares under Rule 144 under the Securities Act, if available,
rather than under this prospectus. Broker-dealers engaged by the selling stockholders
may arrange for other brokers-dealers to participate in sales. Broker-dealers
may receive commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in amounts to be negotiated. The selling stockholders do not expect these commissions
and discounts to exceed what is customary in the types of transactions involved.
The selling stockholders
may from time to time pledge or grant a security interest in some or all of
the preferred stock, common stock or warrants owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell the shares of common stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act amending the list of selling stockholders to
include the pledgee, transferee or other successors in interest as selling stockholders
under this prospectus.
The selling stockholders
also may transfer the shares of common stock in other circumstances, in which
case the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
The selling stockholders
and any broker-dealers or agents that are involved in selling the shares may
be deemed to be "underwriters" within the meaning of the Securities
Act in connection with such sales. In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of the shares purchased
by them may be deemed to be underwriting commissions or discounts under the
Securities Act. The selling stockholders have informed us that none of them
have any agreement or understanding, directly or indirectly, with any person
to distribute the common stock.
We are required to pay all fees and expenses incurred by us incident to the registration of the shares. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
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 for
us hereby.
EXPERTS
Ernst & Young LLP,
independent auditors, have audited our consolidated financial statements included
in our Annual Report on Form 10 K for the year ended December 31, 2002, as set
forth in their report, which is incorporated by reference in this prospectus
and elsewhere in the registration statement. Our financial statements are incorporated
by reference 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 Securities and Exchange Act of 1934 and, accordingly, file
reports, proxy statements and other information with the SEC. The SEC maintains
a web site at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. Copies of our reports, proxy statements and other information
also may be inspected and copied at the public reference facility maintained
by the SEC at the Judiciary Plaza, 450 Fifth Street, N.W., Room 124, Washington,
D.C. 20549. 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.
INFORMATION
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 and information listed below and any future filings made with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities and Exchange
Act prior to the completion of the offering covered by this prospectus:
(1) Our Annual Report on Form 10 K for the year ended December 31, 2002;
(2) Our current report on Form 8-K filed with the SEC on March 25, 2003.
(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 2700
You can also call David W. Dunlap, Chief Financial Officer of Socket Communications, at (510) 744 2700 with any questions about the shares offered under this prospectus.
4,844,797 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.
April ___, 2003
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses
of Issuance and Distribution
The Registrant 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 registration fee.
|
Amount
To |
|
|
SEC registration fee |
$382.15 |
|
Legal fees and expenses |
25,000 |
|
Accounting fees and expenses |
10,000 |
|
Miscellaneous |
5,000 |
|
__________
|
|
|
Total |
$ 40,382.15 |
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 and officers and authorize indemnification of 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, the Registrant has 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 Registrant of expenses incurred or paid by one of Registrant's 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, Registrant will, unless in the opinion of Registrant's 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
Item 16. Exhibits
EXHIBIT INDEX
|
Exhibits |
|
|
3.3† |
Certificate of Designations of the Series F Convertible Preferred Stock |
|
5.1 |
Opinion of Wilson Sonsini Goodrich & Rosati, P.C. |
|
10.1* |
Form of Series F Preferred Stock Subscription Agreement, dated March 21, 2003. |
|
10.2* |
Form of Common Stock Warrant, dated March 21, 2003. |
|
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-4). |
______________
† Incorporated by reference to an exhibit filed with Registrant's
Form 10-K that was filed with the Securities and Exchange Commission on March
31, 2003.
* Incorporated by reference to exhibits filed with Registrant's Current Report
on Form 8-K that was filed with the Securities and Exchange Commission on March
25, 2003.
Item 17. Undertakings
The undersigned Registrant hereby
undertakes:
(1) To file, during any period in
which offers or sales are being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(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 Securities and Exchange Commission pursuant to Rule 424(b) 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) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the effective registration statement;
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 that are incorporated by reference in the Registration Statement.
II-2
(2) For the purpose of determining
any liability under the Securities Act 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 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.
(5) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has 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 the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer of controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its 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 will be governed by the final adjudication of such issue.
II-3
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 for 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 16th day of April, 2003.
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, Kevin J. Mills 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, 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.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed on the 16th day of April, 2003 by the following persons in the capacities indicated.
|
Signature |
Title |
|
/s/
Kevin Mills |
President and Chief Executive Officer (Principal Executive), and Director |
|
/s/
Charlie Bass |
Chairman of the Board |
|
/s/
David W. Dunlap |
Vice President of Finance and Administration and Chief Financial Officer (Principal Financial and Accounting Officer) |
|
/s/
Micheal Gifford |
Executive Vice President and Director |
|
/s/
Enzo Torresi |
Director |
|
/s/
Gianluca Rattazzi |
Director |
|
/s/
Peter Sealey |
Director |
|
/s/
Leon Malmed |
Director |
II-4
EXHIBIT INDEX
|
Exhibits |
|
|
3.3 |
Certificate of Designations of the Series F Convertible Preferred Stock |
|
5.1 |
Opinion of Wilson Sonsini Goodrich & Rosati, P.C. |
|
10.1* |
Form of Series F Preferred Stock Subscription Agreement, dated March 21, 2003. |
|
10.2* |
Form of Common Stock Warrant, dated March 21, 2003. |
|
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-4). |
______________
† Incorporated by reference to an exhibit filed with Registrant's
Form 10-K that was filed with the Securities and Exchange Commission on March
31, 2003.
* Incorporated by reference to exhibits filed with Registrant's Current Report
on Form 8-K that was filed with the Securities and Exchange Commission on March
25, 2003.
II-6
Exhibit 5.1
WILSON SONSINI GOODRICH
& ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304
(650) 565-3807
April 17, 2003
Socket Communications, Inc.
37400 Central Court
Newark, CA 94560
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
At your request, we have examined
the Registration Statement on Form S 3 to be filed by Socket Communications,
Inc., a Delaware corporation (the "Company"), with the Securities
and Exchange Commission on or about April 18, 2003 (the "Registration Statement")
in connection with the registration under the Securities Act of 1933, as amended
(the "Act"), of a total of 4,844,797 shares of the Company's common
stock (the "Shares"), which may be offered for sale by the selling
stockholders named therein to the public as described in the Registration Statement.
As legal counsel for the Company, we have examined instruments, documents, certificates
and records that we deem relevant and necessary for the basis of our opinion
hereinafter expressed.
It is our opinion that, upon completion
of the proceedings being taken or contemplated by us, as the Company's counsel,
the Shares, when issued and sold in the manner described in the Registration
Statement, in accordance with the resolutions adopted by the Board of Directors
of the Company and in accordance with the applicable agreements and charter
documents of the Company, will be legally and validly issued, fully paid and
nonassessable.
We hereby consent to the filing
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
Exhibit 23.1
CONSENT OF ERNST
& YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our
firm under the caption "Experts" in this Registration Statement on
Form S-3 and related Prospectus of Socket Communications, Inc. for the registration
of 4,844,797 shares of its common stock and to the incorporation by reference
therein of our report dated February 10, 2003 (except Note 14, as to which the
date is March 28, 2003), with respect to the consolidated financial statements
of Socket Communications, Inc. included in its Annual Report (Form 10-K) for
the year ended December 31, 2002, filed with the Securities and Exchange Commission.
/s/ Ernst & Young
LLP
San Jose, California
April 16, 2003