FILED PURSUANT
  TO RULE 424 (b)(1)
PROSPECTUS
500,104 Shares
Socket Communications,
  Inc.
Common Stock

  


This prospectus
  relates to 500,104 shares of our common stock which may be sold from time to
  time by the selling stockholders identified in this prospectus or their transferees.
  Of the shares offered by this prospectus, 118,344 shares of common stock are
  issuable upon exercise of warrants. 
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 National Market under the symbol "SCKT" and is
  listed on the Pacific Exchange under the symbol "SOK." On May 16, 2002, the
  last reported sale price for our common stock on the Nasdaq National Market
  was $1.35 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 May 17, 2002.






TABLE OF
CONTENTS



  
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS 
  
THE COMPANY 
  
RISK FACTORS 
  
USE OF PROCEEDS 
  
SELLING STOCKHOLDERS 
  
PLAN OF DISTRIBUTION 
  
LEGAL MATTERS 
  
EXPERTS 
  
WHERE YOU CAN FIND MORE INFORMATION 
  
INFORMATION INCORPORATED BY REFERENCE 

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.
You can contact us
by mail at Socket Communications, Inc., 37400 Central Court, Newark, CA 94560 or
by phone at (510)
744-2700.



 
 
 









INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus
contains forward-looking statements within the meaning of the securities laws.
These forward-looking statements are subject to a number of risks and
uncertainties, many of which are beyond our control. All statements other than
statements of historical facts included in this prospectus, including the
statements under "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.

THE COMPANY
We are a
leading provider of connection solutions for handheld computers, offering a wide
range of connection products. Our products have been designed specifically for
handheld computers and other battery-powered devices with standard expansion
slots and work with notebooks, and are all low power, standards-based (either
CompactFlash or PC Card form factor for our plug-in cards), and user friendly.
We classify our products into four product families:

  
Our network connection
  products are plug-in CompactFlash or PC Card input/output cards that connect
  handheld computers or notebooks, either wirelessly or over a cable, to wide
  area networks through a mobile phone or telephone, to local area networks, and
  to other electronic devices to reach the Internet, send and receive email, or
  communicate with electronic appliances such as desktop computers or printers.
  Our plug-in network connection wireless products consist of Bluetooth and
  Wireless LAN cards. Our plug-in network connection wired cards consist of
  mobile phone connection cards, Ethernet cards and modems. Our Bluetooth, phone
  and Ethernet cards also work with notebooks.
  
Our bar code scanning
  products plug into handheld computers or notebooks through the CompactFlash or
  PC Card slot and turn handheld computers or notebooks into portable bar code
  scanners including traditional linear bar code scanners and PDF417
  scanners.
  
Our peripheral
  connection products add one to four serial ports to a notebook or handheld
  computer, plugging in through the PC Card or CompactFlash card slot to allow
  the attachment of peripheral devices.
  
Our embedded products
  and services provide internal connections for electronic devices and include
  Bluetooth modules, proprietary interface chips for use in third party
  electronic products, engineering design-win services to assist customers in
  integrating our embedded products, and related developer kits. 
We are
developing connection products in a smaller Secure Digital form factor which we
anticipate introducing in the second half of 2002 for use with electronic
devices having Secure Digital input/output slots. We have developed a worldwide
distribution network and our products are endorsed and recommended by many of
the leading manufacturers and distributors of mobile devices. Our goal is to
further strengthen our leadership position in our rapidly expanding markets and
to develop new and creative connection solutions as the mobile communications
market evolves. We further intend to expand the markets we serve from a focus on
handheld computers today to connecting the wide range of portable electronic
appliances, such as digital cameras, that will be interconnected over the next
several years. 
Although we
believe that our focus on handheld computers with our expanding family of
connection products and our relationships with key industry strategic partners
position us for revenue growth in 2002, we have incurred significant quarterly
and annual operating losses in every fiscal period since our inception, and we
may continue to incur quarterly operating losses at least through the first half
of 2002 and possibly longer. Our ability to achieve profitability will be highly
dependent upon: increased market acceptance of our connection products including
recently introduced products; growth and acceptance of handheld computers and
devices using the Windows CE operating system; the deployment of higher speed
networks to improve data transfer speeds over mobile phones; the ability to
raise capital to fund our product development and sales and marketing efforts;
the development of new products for new and existing markets; the improvement of
gross margins through maintaining of sales prices and reduction of product
costs, higher sales volumes and contract manufacturing efficiencies; expanding
our distribution capability; completing our product development; and managing
our operating expenses. There can be no assurances that we will meet any of
these objectives or ever achieve profitability. 
As of March
31, 2002, we had a cash and cash equivalents balance of $4,209,697,
stockholders' equity of $13,035,288, an accumulated deficit of $30,127,578, and
working capital of $1,307,713. Our current cash balance is not sufficient to
fund operations through fiscal 2002. We will require additional capital in 2002
to fund our operations and strengthen our working capital balances. See "Risk
Factors" for a discussion of the Company's need for additional capital and other
risks that may affect the Company's ability to attain
profitability.

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 the shares of common stock. The
risks described below are not the only ones that we face. Additional risks that
generally apply to publicly traded companies, that are not yet identified or
that we currently think are immaterial, may also adversely affect our company.

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 need to raise
additional capital to fund our operations. Our independent auditors included an
explanatory paragraph in their report in our amended Annual Report on Form
10-K/A for the year ended December 31, 2001 expressing substantial doubt about
our ability to continue as a going concern. 
The financial
statements in our Annual Report on Form 10-K for the year ended December 31,
2001 have been prepared on a going concern basis. The Company has incurred
losses and negative cash flows from operations since its inception. As of
December 31, 2001, the Company had working capital of $4,075,403, and an
accumulated deficit of $28,926,957. For the year ended December 31, 2001 the
Company used cash for operating activities of $4,219,239 and had a net loss of
$6,063,239. In addition, at December 31, 2001, the Company was in default under
a financial covenant of its bank line of credit, for which a waiver had been
received from the bank to reduce the tangible net worth requirement from
$5,000,000 to $4,000,000 through June 2002. The bank line of credit borrowings
of $1,317,000 were repaid in January 2002. The Company's ability to meet
obligations in the ordinary course of business is dependent on its ability to
establish profitable operations and raise additional financing. Management
believes it will be able to secure additional sources of financing in 2002
through the issuance of additional equity securities, through renewal of the
Company's bank line and through increased borrowings on the line as the level of
accounts receivable permits, and through development funding from development
partners. Management also intends to delay or reduce expenditures in the event
additional financial resources are not available on terms acceptable to the
Company. The Report of Ernst & Young LLP, Independent Auditors on the
Company's financial statements for the year ended December 31, 2001 contains an
explanatory paragraph regarding the insufficiency of the Company's current cash
balance to fund planned operating activities through fiscal 2002 and indicated
substantial doubt about the Company's ability to continue as a going concern.
There can be no assurances that additional financing will be available on
acceptable terms, if at all, and such terms may be dilutive to existing
stockholders. The Company's inability to secure the necessary financing would
have a material adverse affect on the Company's financial condition and results
of operations. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of assets and liabilities that may
result from the outcome of this uncertainty. 
We have a history
of operating losses, and we cannot assure you that we will achieve ongoing
profitability. 
We have incurred
significant operating losses since our inception in 1992. We expect to continue
to incur quarterly operating losses at least through the second quarter of 2002
and possibly longer. Profitability, if any, will depend
upon:

  
increased
  market acceptance of our products including new products being introduced into
  the market;
  
our ability to
  obtain additional capital to fund our working capital
  requirements;
  
market
  acceptance and increased availability of mobile computers that use Microsoft's
  Windows-powered operating system for handheld computers (formerly Windows
  CE);
  
the expansion
  of development and original equipment manufacturer, or OEM, customer
  relationships to increase development and product sales
  revenues;
  
the development
  of successful new products for new and existing
  markets;
  
our ability to
  increase or maintain gross margins through higher sales volumes and contract
  manufacturing
  efficiencies;
  
our ability to
  expand our distribution
  capability;
  
our ability to
  perform on development contracts;
  and
  
our ability to
  manage our operating expenses.
  

We depend
significantly on the market for mobile computers, particularly those that use
the Windows Pocket PC operating system for handheld computers (formerly Windows
CE). 
Substantially all of
our products are designed for use in handheld computers, including notebooks,
handheld PCs, Palm-size PCs, tablet PCs, and H/PC Professionals (mini
notebooks). The market for mobile computers is characterized by rapidly changing
technology, evolving industry standards, frequent new product introductions, and
significant price competition. These characteristics result in short product
life cycles and regular reductions of average selling prices over the life of a
specific product. Accordingly, growth in demand for mobile computers is
uncertain. If such growth does not occur, demand for our products would be
reduced. In addition, certain of our products utilize new technology, such as
bluetooth, which is not yet widely adopted in the market place and there can be
no assurance that this new technology will be accepted by the market place.

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 offered by Palm, and
the commercial acceptance of our newer connectivity products involving newer
technology. As a result, our future success depends on factors outside of our
control, including market acceptance of Pocket PC devices generally and other
factors affecting the commercial success of Pocket PCs devices, including
availability of critical components such as processors, changes in industry
standards, or the introduction of new or competing technologies. For instance,
our revenue for the first three quarters of fiscal 2001 fell below prior
expectations because of delays in shipment of Pocket PC devices by one of the
Pocket PC manufacturers. Any delays in or failure of Pocket PC and other
Windows-powered devices or the new Palm devices to ship on schedule, or to
achieve or maintain market acceptance would reduce the number of potential
customers of our products. 
We face increased
competition and our financial performance and future growth depend upon
sustaining leadership positions in our existing markets and successfully
targeting new markets. 
Competitive
challenges faced by Socket are likely to arise from a number of factors,
including: industry volatility resulting from rapid development and maturation
of technologies; industry consolidation resulting in companies with greater
financial, marketing, and technical resources; increasing price competition in
the face of weakening economic conditions and excess inventories; and continuing
silicon integration of networking products. Our failure to compete successfully
against current or future competitors could harm our business, operating
results, or financial condition. 
Also, in the markets
in which we compete, products have short life cycles. Therefore, our success
depends on our ability to identify new market and product opportunities, to
develop and introduce new products in a timely manner, and to gain market
acceptance of new products, particularly in our targeted emerging markets. Any
delay in new product introductions, lower than anticipated demand for our new
products, or higher manufacturing costs could have an adverse effect on our
operating results or financial condition, particularly in those product markets
we have identified as emerging high-growth opportunities. 
If we fail to
develop and introduce new products rapidly and successfully, we will not be able
to compete effectively and our business will suffer. 
The market for our
products is characterized by rapidly changing technology, evolving industry
standards, and short product life cycles. If we are unsuccessful at developing
and introducing new products and services that are appealing to end users, our
business and operating results would be seriously harmed. Accordingly, to remain
competitive we must:

  
identify
  emerging standards in the field of mobile computing
  products;
  
enhance our
  products by adding additional features to differentiate our products from
  those of our competitors;
  and
  
maintain
  superior or competitive performance in our products and bring products to
  market quickly.

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. If we fail to
anticipate our end users' needs and technological trends accurately or are
otherwise unable to complete the development of products and services quickly,
we will be unable to introduce new products and services into the market on a
timely basis, if at all. 
We expect our
competitors to continue to improve the performance of their current products and
services and to introduce new products, services, and technologies. Alternative
technologies or successful new product introductions or enhancements by our
competitors could reduce the sales and market acceptance of our products,
services and technology, cause intense price competition, or make our products
obsolete. Further, short product life cycles expose our products to the risk of
obsolescence and require frequent new product introductions. To be competitive,
we must continue to invest significant resources in research and development,
sales and marketing, and customer support. 
We cannot be sure
that we will have sufficient resources to make these investments or that we will
be able to make the technological advances necessary to be competitive.
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 seriously harm our business,
financial condition, and results of operations. 
If we do not
correctly anticipate demand for our products, our operating results will suffer.

Historically, we
have seen steady increases in demand for our products and have generally been
able to increase production to meet that demand. However, 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. Significant unanticipated fluctuations in demand could cause the
following problems in our operations: 
If demand increases
beyond what we forecast, we would have to rapidly increase production at our
third-party manufacturers. We would 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 are able to
procure enough components, our third-party manufacturers might not be able to
produce enough of our devices as fast as we need them. The inability of either
our manufacturers or our suppliers to increase production rapidly enough could
cause us to fail to meet customer demand. 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 our margins. If forecasted demand
does not develop, we could have excess production resulting in higher
inventories of finished products and components, which would be costly and 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 failure to meet some minimum purchase commitments,
each of which could result in lower margins. 
A significant
portion of our revenues currently comes from a small number of distributors, and
any decrease in revenues from these distributors could harm our business.

A significant
portion of our revenues comes from one distributor. Ingram Micro represented
approximately 23% of our worldwide revenues in fiscal 2001 and 26% of our
worldwide revenues in fiscal 2000. We expect that the majority of our revenues
will continue to depend on sales to a small number of distributors. Any downturn
in the business of these customers could seriously harm our revenues and results
of operations. 
Our intellectual
property and proprietary rights may be insufficient to protect our competitive
position. 
Our business
depends, in part, on our ability to protect our intellectual property. We rely
primarily on patent, copyright, trademark and trade secret laws to protect our
proprietary technologies. We cannot be sure that such measures will provide
meaningful protection for our proprietary technologies and processes. In 1999
and again in 2001 and 2002 we applied for patents covering our proprietary
technology relating to the implementation of memory in combination with
Input/Output adapters and we received in March 2002 the patent applied for in
1999. However, we cannot be sure that any patent will issue as a result of these
applications or future applications or, if issued, that any claims allowed will
be sufficient to protect our technology. In addition, we cannot be sure that any
existing or future patents will not be challenged, invalidated, or circumvented,
or that any right granted thereunder would provide us meaningful protection. 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 agree 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 and distribution of 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. In addition, effective
copyright, trademark, and trade secret protection may be unavailable or limited
in certain foreign countries. Certain of our customers have entered into
agreements with us pursuant to which such 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 not always
be able to adequately protect or maintain our intellectual property rights.

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 individual inventors 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. 
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. We evaluate the validity and applicability of these intellectual
property rights, and determine in each case whether we must negotiate licenses
or cross-licenses to incorporate or use the proprietary technologies, protocols,
or specifications in our products. 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 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. Further,
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, the existence of or any adverse determinations in
this litigation could subject us to significant liabilities and costs. In
addition, if we are the alleged infringer, we could be required to seek licenses
from others or be prevented from manufacturing or selling our products, which
could cause disruptions to our operations or the markets in which we compete. If
we are asserting our intellectual property rights, we could be prevented from
stopping others from manufacturing or selling competitive products. Any one of
these factors could adversely affect our results of operations or financial
condition. 
Our ability to
comply with industry standards is critical to our business. 
We must continue to
identify and ensure compliance with evolving industry standards to remain
competitive. For instance, to avoid being out of compliance with newly emerging
SD input/output standards, we are dependent upon approval of the standards for
SD I/O cards by the SD standards committee before we complete our development of
such products. Unanticipated changes in industry standards could render our
products incompatible with products developed by major hardware manufacturers
and software developers. We could be required, as a result, to invest
significant time and resources to redesign our products to ensure compliance
with relevant standards. If our products are not in compliance with prevailing
industry standards for a significant period of time, we would miss opportunities
to have our products specified as standards for new hardware components designed
by mobile computer manufacturers and OEMs. The failure to achieve any such
design win would result in the loss of any potential sales volume that could be
generated by such newly designed hardware component. 
We depend on
alliances and other business relationships with a small number of third parties.

Our strategy is to
establish strategic alliances and business relationships with leading
participants in various segments of the communications and mobile computer
markets. In accordance with this strategy, we have entered into alliances or
relationships with Bell Mobility, Cambridge Silicon Radio, Hitachi, Intermec,
Microsoft, Nokia Corporation, Palm, SanDisk Corporation, Sprint PCS, Symbol
Technologies, and Toshiba Corporation. Our success will depend not only on our
continued relationships with these parties, but also on our ability to enter
into additional strategic arrangements with new partners on commercially
reasonable terms. We believe that, in particular, relationships with application
software developers are important in creating commercial uses for our products.
Any future relationships may require us to share control over our development,
manufacturing, and marketing programs or to relinquish rights to certain
versions of our technology. Also, our strategic partners may revoke their
commitment to our products or services at any time in the future, or may develop
their own competitive products or services. Also, the hardware or software of
such companies that is integrated into our products may contain defects or
errors. Accordingly, our strategic relationships may not result in sustained
business alliances, successful product or service offerings, or the generation
of significant revenues. Failure of one or more of such alliances could result
in delay or termination of product development projects, reduction in market
penetration, decreased ability to win new customers, or loss of confidence by
current or potential customers. 
We have devoted
significant research and development resources to design activities for
Windows-powered mobile products and, more recently, to design activities for
products to work with Palm devices, diverting financial and personnel resources
from other development projects. These design activities are not undertaken
pursuant to any agreement under which Microsoft or Palm are obligated to
continue the collaboration or to support resulting products. 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, including changing market conditions, increased competition,
discontinued product lines, and product obsolescence. 
Our products may
contain undetected flaws and defects. 
Although we perform
testing prior to new product introductions, our hardware and software products
may contain undetected flaws, which may not be discovered until the products
have been used by customers. From time to time, we may temporarily suspend or
delay shipments or divert development resources from other projects to correct a
particular product deficiency. Such efforts to identify and correct errors and
make design changes may be expensive and time consuming. Failure to discover
product deficiencies in the future could delay product introductions or
shipments, require us to recall previously shipped products to make design
modifications, or cause unfavorable publicity, any of which could adversely
affect our business. 
Our quarterly
operating results may fluctuate in future periods, and our future results are
difficult to predict because we typically have little order backlog.

We expect to
experience quarterly fluctuations in operating results in the future. We
generally ship orders as received and as a result typically have little or no
backlog. Quarterly 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
revenues in the last month of the quarter. This subjects us to the risk that
even modest delays in orders adversely affect our quarterly operating results.
Our operating results may also fluctuate due to factors such
as:

  
the demand for
  our products; 
  
the size and
  timing of customer
  orders;
  
unanticipated
  delays or problems in the introduction of our new products and product
  enhancements;
  
the
  introduction of new products and product enhancements by our
  competitors;
  
changes in the
  proportion of revenue attributable to royalties and engineering development
  services;
  
product
  mix;
  
timing of
  software enhancements;

  
changes in the
  level of operating
  expenses;
  
competitive
  conditions in the industry including competitive pressures resulting in lower
  average selling prices;
  and
  
timing of
  distributor's shipments to their customers.
  

Because we base our
staffing and other operating expenses on anticipated revenue, delays in the
receipt of orders can cause significant variations in operating results from
quarter to quarter. As a result of any of the foregoing factors, our results of
operations in any given quarter may be below the expectations of public market
analysts or investors, in which case the market price of our common stock would
be adversely affected. 
We depend on key
employees, and we need to attract and retain them. 
Our future success
will depend upon the continued service of certain key technical and senior
management personnel. Competition for such personnel is intense and there can be
no assurance that we will be able to retain our existing key managerial,
technical, or sales and marketing personnel. The loss of key personnel could
adversely affect our business. 
We believe our
ability to achieve increased revenue and to develop successful new products and
product enhancements will depend in part upon our ability to attract and retain
highly skilled sales and marketing and product development personnel.
Competition for such personnel is intense, and we may not be able to retain such
key employees, and there are no assurances that we will be successful in
attracting and retaining such personnel in the future. In addition, our ability
to hire and retain such personnel will depend upon our ability to raise capital
or achieve increased revenue levels to fund the costs associated with such
personnel. Failure to attract and retain key personnel will adversely affect our
business. 
We depend on
distributors, resellers, and OEMs to sell our products. 
Because we sell our
products primarily through distributors, resellers, and OEMs, we are subject to
many risks, including risks related to their inventory levels and support for
our products. Our agreements with OEMs, distributors, and resellers, in large
part, are nonexclusive and may be terminated on short notice by either party
without cause. Our OEMs, distributors, and resellers are not within our control,
are not obligated to purchase products from us, and may represent other lines of
products. A reduction in sales effort or discontinuance of sales of our products
by our OEMs, distributors, and resellers could lead to reduced sales.

Use of distributors
also entails the risk that distributors will build up inventories in
anticipation of a growth in sales. If such growth does not occur as anticipated
these could contribute to higher levels of product returns. The loss or
ineffectiveness of any of our major distributors or OEMs could adversely affect
our operating results. 
We allow our
distributors to return a portion of our inventory to us for full credit against
other purchases. In addition, in the event we reduce our prices, we credit our
distributors for the difference between the purchase price of products remaining
in their inventory and our reduced price for such products. Actual returns and
price protection may adversely affect future operating results, particularly
since we seek to continually introduce new and enhanced products and are likely
to face increasing price competition. 
We are exposed to
credit risks on collections from large customers and in our investments.

Accounts receivables
are derived primarily from distributors and original equipment manufacturers. We
perform ongoing credit evaluations of our customers' financial condition but
generally require no collateral. Reserves are maintained for potential credit
losses, and such losses have been within our expectations. However, to the
extent that a large customer fails or is unable to pay, we are exposed to credit
risk to the extent of the amounts due to us. We invest our cash in cash demand
deposits and in a money market fund. The Company places its investments with
high-credit-quality financial institutions and limits the credit exposure to any
one financial institution or instrument. However, we are exposed to credit risk
in the event of default by these institutions to the extent of the amount
recorded on our balance sheet. 
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 are produced by a sole or 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 were unable to procure certain of such
materials, we could be required to reduce our operations, which could have a
material adverse effect upon our results. To the extent that we acquire extra
inventory stocks to protect against possible shortages, we are exposed to
additional risks associated with holding inventory including obsolescence,
excess quantities, or loss.
A significant
portion of our revenues are derived from export sales which are subject to
additional risks.
Export sales (sales
to customers outside the United States) accounted for approximately 21% of our
revenue in 2000 and approximately 38% of our revenue in 2001. Accordingly, our
operating results are subject to the risks inherent in export sales,
including

  
longer payment
  cycles;
  
unexpected
  changes in regulatory requirements, import and export restrictions and
  tariffs;
  
difficulties in
  managing foreign
  operations;
  
the burdens of
  complying with a variety of foreign
  laws;
  
greater
  difficulty or delay in accounts receivable
  collection;
  
potentially
  adverse tax consequences;
  and
  
political and
  economic instability.
  

In addition, our
export sales are currently denominated predominately in United States dollars
and in Euros for a portion of our sales to our 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 and declines in value in the
Euro relative to the 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. 
We do not have a
detailed disaster recovery plan. The State of California has recently
experienced electrical power shortages and blackouts. Additionally, we may
experience natural disasters that could interrupt our business. 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. In addition, we do not carry sufficient business interruption insurance
to compensate us for losses that may occur and any losses or damages incurred by
us could have a material adverse affect on our business.
Our stock price
is highly volatile. 
Our stock price is
  highly volatile. During the period from January 1, 2001 through May 16, 2002,
  our stock price fluctuated between a high of $7.25 and a low of $1.02. Stock
  price fluctuations are caused by many factors, some of which may be beyond our
  control including general economic conditions and the outlook of market analysts
  and investors of the industry that we are in.

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 $188,000 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." 
 
SELLING STOCKHOLDERS 

All the shares offered under this
prospectus have or will be issued pursuant to a private placement we effected in
March 2002 to increase our working capital and cash balances. The offering was
sold at a price of $1.59 per share of common stock and resulted in gross
proceeds of approximately $607,000, and net proceeds after costs and expenses of
approximately $420,000. In connection with the offering, we also 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) which were
valued at $195,268. The warrants have a term of five years, and could result in
additional proceeds if exercised. This prospectus and the registration statement
on Form S-3 of which it is a part were filed pursuant to a Registration Rights
Agreement, which we agreed to file no later than May 1, 2002 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. Two members of Socket's
Board of Directors, Charlie Bass and Enzo Torresi, invested $100,000 and
$30,000, respectively, in this offering. The Company will seek ratification of
this Financing from its stockholders at its annual meeting on June 20, 2002.

The following table sets forth, as
of the date of this
prospectus:

  
the names of
  the selling
  stockholders;
  
the number of
  shares of common stock held by each selling stockholder, plus the number of
  shares of common stock that would have been issuable to each selling
  stockholder on April 22, 2002 assuming the exercise of all convertible
  securities held by such selling stockholder on that date, without regard to
  any limitations on the exercisability of said convertible
  securities;
  
the number of
  shares of common stock owned by each selling stockholder that may be offered
  for sale from time to time by this prospectus;
  and
  
the number of
  shares of common stock owned assuming the sale of all shares covered by this
  prospectus and the percentage of all outstanding shares of common stock that
  ownership represents.
  

The shares may be
offered by the selling stockholders or by pledgees, donees, transferrees or
other successors in interest that receive such shares as a gift or through 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. 

  
    
      
Name of Selling Stockholder(1)
    
      
Shares Beneficially Owned 
Prior to
      Offering
    
      
Number of Shares Being Offered
    
      
Shares Beneficially Owned After
  Offering
  
    
      
 
    
      
 
    
      
 
    
      
Number
    
      
Percent(2)
  
    
      
Bass
      Trust
    
      
1,493,939 (3) 
    
      
78,616
    
      
1,415,323
    
      
5.9%
  
    
      
Enzo
      Torresi
    
      
98,583
      (4) 
    
      
23,583
    
      
75,000
    
      
*
  
    
      
CAT
      Finance AG 
    
      
235,000
      (5)
    
      
235,000
    
      
0
    
      
*
  
    
      
Von
      Graffenried AG PrivatBank, Bern
    
      
142,682
      (6) 
    
      
105,000
    
      
37,682
    
      
*
  
    
      
Fortis
      Global Custody Management & Trustee Services (Ireland)
      Limited
    
      
35,000
      (7) 
    
      
35,000
    
      
0
    
      
*
  
    
      
Jefferies
      & Company, Inc.
    
      
22,905
      (8) 
    
      
22,905
    
      
0
    
      
*


* Less than
1%.
(1) Charlie Bass,
trustee of the Bass Trust, is the Chairman of our Board of Directors. Dr. Bass
also served as our interim Chief Executive Officer during January and February
1996 and from April 1997 until February 1998, at which time Mr. Bass assumed the
position of Chief Executive Officer, a position he relinquished on March 22,
2000. Enzo Torresi has been a director of Socket since June 2000. Jefferies
& Company, Inc. acted as the placement agent in Socket's Common Stock
financing which closed on March 28, 2002. The other selling stockholders have
not had a material relationship with us during the past three years. 
(2) Based upon
24,019,977 shares of common stock outstanding as of the close of business on
April 22, 2002. 
(3) Includes 15,723
shares of common stock subject to warrants, and 85,000 shares of common stock
subject to options. 
(4) Includes 4,716
shares subject to warrants and 75,000 shares of common stock subject to options.

(5) Includes 47,000
shares subject to warrants. 
(6) Includes 21,000
shares subject to warrants. 
(7) Includes 7,000
shares subject to warrants. 
(8) Consists of 22,905
shares subject to warrants.



PLAN OF
DISTRIBUTION

The shares of common
stock covered by this prospectus may be offered and sold from time to time by
the selling stockholders. We will not receive any of the proceeds from the sale
by the selling stockholders of the shares of common stock, although we may
receive up to approximately $188,000 upon exercise of the warrants under which a
portion of the registered shares are issuable. The selling stockholders will act
independently of us in making decisions with respect to the timing, manner and
size of each sale of the common stock covered hereby. The selling stockholders
may (i) sell the shares being offered hereby on the Pacific Exchange, through
the Nasdaq National Market or otherwise at prices and at terms then prevailing
or at prices related to the then current market price; (ii) sell the shares
offered hereby in private sales at negotiated prices directly or through a
broker or brokers, who may act as agent or as principal or by a combination of
such methods of sale, or (iii) choose to dispose of the shares offered hereby by
gift to a third party or as a donation to a charitable or non-profit entity. The
selling stockholders and any underwriter, dealer or agent who participates in
the distribution of such shares may be deemed to be "underwriters" under the
Securities Act, and any discount, commission or concession received by such
persons might be deemed to be an underwriting discount or commission under the
Securities Act. 
In connection with
distributions of the shares offered hereby, the selling stockholders may enter
into hedging transactions with broker-dealers or other financial
institutions.In connection
with such transactions, broker-dealers or other financial institutions may
engage in short sales of our common stock in the course of hedging the positions
they assume with selling stockholders. The selling stockholders may also sell
our common stock short and deliver the shares offered hereby to close out such
short positions. The selling stockholders may also enter into option or other
transactions with broker-dealer or other financial institutions which require
the delivery to such broker-dealers or other financial institution of shares
offered hereby, which shares such broker-dealer or other financial institution
may resell pursuant to this prospectus (as supplemented or amended to reflect
such transaction). The selling stockholders may also pledge the shares offered
hereby to a broker-dealer or other financial institution, and, upon a default,
such broker-dealer or other financial institution, may effect sales of the
pledged shares pursuant to this prospectus (as supplemented or amended to
reflect such transaction). In addition, any shares offered hereby that qualify
for sale pursuant to Rule 144 may, at the option of the holder thereof, be sold
under Rule 144 rather than pursuant to this prospectus. 
Any broker-dealer
participating in such transactions as agent may receive commissions from the
selling stockholders (and, if acting as agent for the purchaser of such shares,
from such purchaser). Usual and customary brokerage fees will be paid by the
selling stockholders. Broker-dealers may agree with the selling stockholders to
sell a specified number of shares at a stipulated price per share, and, to the
extent such a broker-dealer is unable to do so acting as agent for the selling
stockholders, to purchase as principal any unsold shares at the price required
to fulfill the broker-dealer commitment to the selling stockholders.
Broker-dealers who acquire shares as principal may thereafter resell such shares
from time to time in transactions (which may involve crosses and block
transactions and which may involve sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market, in negotiated transactions or by a combination of such methods of sale
or otherwise at market prices prevailing at the time of sale or at negotiated
prices, and in connection with such resales may pay to or receive from the
purchasers of such shares commissions computed as described above. 
We have advised the
selling stockholders that the anti-manipulation of Regulation M under the
Exchange Act may apply to sales of shares in the market and to the activities of
the selling stockholders and their affiliates. In addition, we will make copies
of this prospectus available to the selling stockholders and have informed them
of the need for delivery of copies of this prospectus to purchasers on or prior
to sales of the shares offered hereby. The selling stockholders may indemnify
any broker-dealer that participates in transactions involving the sale of the
shares against certain liabilities, including liabilities arising under the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such broker-dealers, and any profits received on the resale of such shares,
may be deemed to be underwriting discounts and commissions under the Securities
Act if any such broker-dealers purchase shares as principal. 
Upon our being
notified by the selling stockholder that any material arrangement has been
entered into with a broker-dealer for the sale of shares through a cross or
block trade, a supplemental prospectus will be filed under Rule 424(c) under the
Securities Act, setting forth the name of the participating broker-dealer(s),
the number of shares involved, the price at which such shares were sold by the
selling stockholder, the commissions paid or discounts or concessions allowed by
the selling stockholder to such broker-dealer(s), and where applicable, that
such broker-dealer(s) did not conduct any investigation to verify the
information set out in this prospectus. 
There can be no
assurance that the selling stockholders will sell all or any of the shares of
common stock offered under this prospectus. 



LEGAL
MATTERS
Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California will
pass upon certain legal matters relating to the validity of the securities
offered hereby for Socket Communications.



EXPERTS
Ernst & Young
LLP, independent auditors, have audited our consolidated financial statements
included in our amended Annual Report on Form 10-K/A for the year ended December
31, 2001, as set forth in their report, which is incorporated by reference into
this prospectus and elsewhere in the registration statement. Our consolidated
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 Exchange Act 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 facilities
maintained by the SEC at: 



  
    
      
Judiciary
      Plaza
Room 1024
450 Fifth Street, N.W.
Washington, D.C.
      20549
    
      
Citicorp
      Center
500 West Madison Street
Suite 1400
Chicago, IL
      60661
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
Exchange Act prior to the completion of the offering covered by this prospectus:

(1) Our
amended Annual Report on Form 10-K/A for the year ended December 31, 2001;

  
(2) Our Current
    Report on Form 8-K as filed with the Commission on April 10, 2002; and 
  
(3) The description
    of our common stock contained in our Registration Statement on Form 8-A filed
    with the SEC on April 11, 1995 and our Registration Statement on Form 8-A/A
    filed with the SEC on June 15, 1995. 
We will
provide to any person, including any beneficial owner, to whom a prospectus is
delivered, a copy of any of the information which has been incorporated by
reference into this prospectus at no cost upon an oral or written request to:

Socket
Communications, Inc.
37400 Central Court 
Newark, CA 94560 
Attention: David W. Dunlap

(510) 744-2700 

You can also
call David W. Dunlap, Chief Financial Officer of Socket Communications, at (510)
744-2700 with any questions about the offering. 
 
 
 
 







500,104
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.
  
May 17, 2002