Exhibit (a)(1)(i)
Offer to Purchase for Cash
By
SOCKET MOBILE, INC.
Of up to 1,250,000 Shares of Its Common
Stock
At a Purchase Price not Greater Than
$4.25 per Share
Nor Less Than $3.75 per Share
THE
OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 9, 2018, UNLESS THE OFFER
IS EXTENDED OR WITHDRAWN (SUCH DATE, AS IT MAY BE EXTENDED, THE “EXPIRATION DATE”).
Socket Mobile, Inc., a Delaware corporation
(the “Company,” “Socket Mobile,” “we,” “our” or “us”), invites our
stockholders to tender up to 1,250,000 shares of our common stock, par value $0.001 per share (the “Shares”), for purchase
by us at a price not greater than $4.25 nor less than $3.75 per Share, net to the seller in cash, less any applicable withholding
taxes and without interest, upon the terms and subject to the conditions described in this Offer to Purchase and in the related
Letter of Transmittal (which together, as they may be amended or supplemented from time to time, constitute the “Offer”).
Upon the terms and subject to the conditions
of the Offer, we will determine a single per share price, not greater than $4.25 nor less than $3.75 per Share, net to the seller
in cash, less any applicable withholding taxes and without interest, that we will pay for Shares properly tendered and not properly
withdrawn in the Offer, taking into account the total number of Shares tendered and the prices specified by tendering stockholders.
Promptly after the Expiration Date, we will look at the prices chosen by stockholders for all of the Shares properly tendered.
We will then select the lowest purchase price (in multiples of $0.05) (such purchase price, the “Final Purchase Price”)
within the price range specified above that will allow us to purchase 1,250,000 Shares. If fewer than 1,250,000 Shares are properly
tendered, we will select the price that will allow us to purchase all Shares that are properly tendered and not properly withdrawn.
All Shares purchased in the Offer will be purchased at the Final Purchase Price, including those Shares tendered at a price lower
than the Final Purchase Price. However, because of the “odd lot” priority, proration and conditional tender provisions
described in this Offer to Purchase, we may not purchase all of the Shares tendered at or below the Final Purchase Price if more
than 1,250,000 Shares are properly tendered and not properly withdrawn. Shares not purchased in the Offer will be returned to the
tendering stockholders at our expense promptly after the Expiration Date.
We reserve the right, in our sole discretion,
to change the per Share purchase price range and to increase or decrease the number of Shares sought in the Offer, in each case
subject to applicable law. In accordance with the rules of the Securities and Exchange Commission (the “SEC”), we reserve
the right to accept for payment, according to the terms and conditions of the Offer, up to an additional 2% of our outstanding
Shares (or approximately 140,222 additional Shares) without amending or extending the Offer. See Section 1, Section 3
and Section 4.
As of December 31, 2017, we had 7,011,128
Shares outstanding. The 1,250,000 Shares that we are offering to purchase hereunder represent approximately 17.8% of our issued
and outstanding Shares as of December 31, 2017.
The Offer is not conditioned upon any
minimum number of Shares being tendered. The Offer is, however, subject to certain other conditions. See Section 7.
The Shares are listed and traded on The Nasdaq Capital Market
under the symbol “SCKT.” On February 1, 2018, the last full trading day before we commenced the Offer, the last reported
sale price of the Shares was $3.50 per Share. The entire price range for the Offer is above the last reported sale price of the
Shares on The Nasdaq Capital Market on February 1, 2018. Stockholders are urged to obtain current market quotations for the
Shares before deciding whether and at what purchase price or purchase prices to tender their Shares. See Section 8.
Our board of directors has approved
the Offer. However, neither we nor any member of our board of directors, D.F. King & Co., Inc., the Information Agent for the
Offer, or American Stock Transfer & Trust Company, LLC, the Depositary for the Offer, makes any recommendation to you as to
whether you should tender or refrain from tendering your Shares, or as to the price or prices at which you may choose to tender
your Shares. Neither we nor any member of our board of directors, the Information Agent or the Depositary has authorized any person
to make any recommendation with respect to the Offer. You must make your own decision as to whether to tender your Shares and,
if so, how many Shares to tender and the price or prices at which you will tender them. In doing so, you should consult your own
financial and tax advisors, and read carefully the information in this Offer to Purchase and in the related Letter of Transmittal,
including our reasons for making the Offer. See Section 2.
All of our directors and executive officers
have advised us that they do not intend to tender Shares in the Offer. See Section 11.
Neither the Securities and Exchange
Commission, any state securities commission nor any other regulatory body has approved or disapproved of this transaction or passed
upon the merits or fairness of such transaction or passed upon the adequacy or accuracy of the information contained in this Offer
to Purchase. Any representation to the contrary is a criminal offense.
There will be no dealer manager for
the Offer.
Questions and requests for assistance
may be directed to the Information Agent at its telephone number and address set forth on the back cover page of this Offer to
Purchase. If you require additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
or other Offer documents, you should contact the Information Agent, who will promptly furnish to stockholders additional copies
of these materials at our expense. Stockholders may also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Offer.
Offer to Purchase dated February 2, 2018
IMPORTANT
If you want to tender all or any portion
of your Shares, you must do one of the following prior to 5:00 p.m., New York City time, on March 9, 2018 (unless the Offer
is extended):
| · | if your Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, contact the
nominee and have the nominee tender your Shares for you; |
| · | if you hold certificates in your own name or hold Shares in book-entry form as a registered holder, complete and sign a Letter
of Transmittal according to its instructions and deliver it, together with any required signature guarantees, the certificates,
if applicable, for your Shares and any other documents required by the Letter of Transmittal, to American Stock Transfer &
Trust Company, LLC, the Depositary for the Offer, at one of the addresses shown on the back cover of this Offer to Purchase; |
| · | if you are an institution participating in The Depository Trust Company, tender your Shares according to the procedure for
book-entry transfer described in Section 3; or |
| · | if you are a holder of vested options to purchase Shares, subject to Company policies and practices, you may exercise your
vested options to purchase Shares and tender such Shares in the Offer; however, we suggest that you exercise your vested options
at least five business days prior to the date on which the Expiration Date is initially scheduled to occur (which, unless the Offer
is extended, will require you to exercise such options no later than 5:00 p.m., New York City time, on March 2, 2018) in order
to provide you with sufficient time to validly tender such Shares in the Offer. An exercise of an option cannot be revoked even
if Shares received upon the exercise thereof and tendered in the Offer are not purchased in the Offer for any reason. |
If you want to tender your Shares but
(a) your certificates for the Shares are not immediately available, or cannot be delivered to the Depositary by the Expiration
Date, (b) you cannot comply with the procedure for book-entry transfer by the Expiration Date, or (c) your other required
documents cannot be delivered to the Depositary by the Expiration Date, you may still tender your Shares if you comply with the
guaranteed delivery procedure described in Section 3.
To properly tender Shares, you must validly
complete the Letter of Transmittal, including the section relating to the price at which you are tendering your Shares.
If you wish to maximize the chance that
we will purchase your Shares in the Offer, you should check the box in the section of the Letter of Transmittal entitled “Purchase
Price Tender—Shares Tendered at Price Determined Under the Offer.” Shares tendered pursuant to that section will be
deemed to have been tendered at a price of $3.75 per Share (which is the minimum price per Share under the Offer) for purposes
of determining the Final Purchase Price and, after determination of the Final Purchase Price, all such “Purchase Price Tenders”
will be deemed to have been made at the Final Purchase Price. You should understand that this election may have the effect of
lowering the Final Purchase Price and could result in your Shares being purchased at the minimum price of $3.75 per Share.
We are not making the Offer to, and will
not accept any tendered Shares from, stockholders in any jurisdiction where it would be illegal to do so. However, we may, at our
discretion, take any actions necessary for us to make the Offer to stockholders in any such jurisdiction.
If
you have any questions regarding the Offer, please contact D.F. King & Co., Inc., the Information Agent for the Offer, at (800)
848-3410 (toll-free) or (212) 269-5550 (banks and brokers).
References herein to our board of directors
include any authorized committee thereof.
We have not authorized anyone to provide
you with information or to make any representation in connection with the Offer other than the information and representations
contained in this Offer to Purchase or in the related Letter of Transmittal. You should not rely on any recommendation, or any
such information or representation, as having been authorized by us, the Depositary or the Information Agent.
TABLE OF CONTENTS
Page
| SUMMARY TERM SHEET |
1 |
| FORWARD-LOOKING STATEMENTS |
8 |
| INTRODUCTION |
9 |
| THE OFFER |
10 |
| 1. Number of Shares; Purchase Price; Proration |
10 |
| 2. Purpose of the Offer; Certain Effects of the Offer |
13 |
| 3. Procedures for Tendering Shares |
15 |
| 4. Withdrawal Rights |
20 |
| 5. Purchase of Shares and Payment of Purchase Price |
20 |
| 6. Conditional Tender of Shares |
21 |
| 7. Conditions of the Offer |
22 |
| 8. Price Range of Shares; Dividends |
24 |
| 9. Source and Amount of Funds |
25 |
| 10. Certain Information Concerning the Company |
25 |
| 11. Interests of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares |
28 |
| 12. Certain Legal Matters; Regulatory Approvals |
34 |
| 13. Certain U.S. Federal Income Tax Consequences |
35 |
| 14. Extension of the Offer; Termination; Amendment |
39 |
| 15. Fees and Expenses |
40 |
| 16. Miscellaneous |
41 |
SUMMARY TERM SHEET
We are providing this summary term
sheet for your convenience. It highlights certain material information in this Offer to Purchase, but it does not describe all
of the details of the Offer to the same extent described in this Offer to Purchase. We urge you to read carefully this entire Offer
to Purchase, the Letter of Transmittal and the other documents that constitute part of the Offer because they contain the full
details of the Offer. We have included references to the sections of this Offer to Purchase where you will find a more complete
discussion.
Who is offering to purchase my Shares?
The issuer of the Shares, Socket Mobile,
Inc., a Delaware corporation, which we refer to as the “Company,” “Socket Mobile,” “we,” “our”
or “us,” is offering to purchase the Shares. See Section 1.
What is Socket Mobile offering to purchase?
We are offering to purchase up to 1,250,000
Shares. See Section 1.
What is the purpose of the Offer?
We believe that the Offer is a prudent
use of our financial resources and presents an appropriate balance between meeting the needs
of our business and delivering value to our stockholders. The Offer expresses our confidence in the Company’s business,
our market position and the long-term growth potential of our industry. We believe the Offer is an appropriate mechanism to return
capital to our stockholders that seek liquidity under current market conditions.
We believe that the modified “Dutch
auction” tender offer set forth in this Offer to Purchase represents an efficient mechanism to provide our stockholders with
the opportunity to tender all or a portion of their Shares and, thereby, receive a return of some or all of their investment if
they so elect. The Offer provides stockholders (particularly those who, because of the size of their shareholdings, might not be
able to sell their Shares without potential disruption to the Share price) with an opportunity to obtain liquidity with respect
to all or a portion of their Shares without potential disruption to the Share price. In addition, if we complete the Offer, stockholders
who do not participate in the Offer will automatically increase their relative percentage ownership interest in the Company at
no additional cost to them. See Section 2, Section 9 and Section 11.
The Offer also provides our stockholders
with an efficient way to sell their shares without incurring broker’s fees or commissions associated with open market sales.
Furthermore, “odd lot holders” who hold shares registered in their names and tender their shares directly to the Depositary
and whose shares are purchased in the Offer will avoid any applicable odd lot discounts that might otherwise be payable on sales
of their shares. See Section 1 and Section 2.
How many Shares will we purchase in the Offer?
We will purchase up to 1,250,000 Shares
in the Offer (representing approximately 17.8% of our outstanding Shares as of December 31, 2017). If fewer than 1,250,000 Shares
are properly tendered, we will purchase all Shares that are properly tendered and not properly withdrawn. If more than 1,250,000
Shares are properly tendered, we will purchase all Shares tendered at or below the Final Purchase Price on a pro rata basis, except
for “odd lots” (lots held by owners of less than 100 Shares), which we will purchase on a priority basis, and except
for each conditional tender whose condition was not met, which we will not purchase (except as described in Section 6).
We expressly reserve the right to purchase
up to an additional 2% of our outstanding Shares (or approximately 140,222 additional Shares) in the Offer, subject to applicable
law. See Section 1. In exercising this right, we may increase the Final Purchase Price to allow us to purchase all such additional
shares.
The Offer is not conditioned on any minimum
number of Shares being tendered, but is subject to certain other conditions. See Section 7.
What will the purchase price for the Shares be and
what will be the form of payment?
We are conducting the Offer through a
procedure commonly called a modified “Dutch auction.” This procedure allows you to select the price (in multiples of
$0.05), within a price range specified by us, at which you are willing to sell your Shares.
The price range for the Offer is $3.75
to $4.25 per Share. The entire price range for the Offer is above the last reported sale price of the Shares on The Nasdaq Capital
Market on February 1, 2018, the last full trading day prior to the commencement of the Offer.
After the Offer expires, we will look
at the prices chosen by stockholders for all of the Shares properly tendered. We will then select the lowest purchase price, not
greater than $4.25 nor less than $3.75 per Share, that will allow us to purchase 1,250,000 Shares. If fewer than 1,250,000 Shares
are properly tendered, we will select the price that will allow us to purchase all Shares that are properly tendered and not properly
withdrawn. All Shares we purchase will be purchased at the same price, even if you have selected a lower price, but we will not
purchase any Shares above the purchase price we determine.
If you wish to maximize the chance that
we will purchase your Shares, you should check the box in the section of the Letter of Transmittal entitled “Purchase Price
Tender—Shares Tendered at Price Determined Under the Offer,” indicating that you will accept the Final Purchase Price
we determine. If you agree to accept the Final Purchase Price determined in the Offer, your Shares will be deemed to have been
tendered at the minimum price of $3.75 per share. You should understand that this election may have the effect of lowering the
Final Purchase Price and could result in your Shares being purchased at the minimum price of $3.75 per Share.
If we purchase your Shares in the Offer,
we will pay you the Final Purchase Price in cash, less any applicable withholding taxes and without interest, promptly after the
Expiration Date. Under no circumstances will we pay interest on the Final Purchase Price, even if there is a delay in making payment.
See the Introduction, Section 1 and Section 3.
How will we pay for the Shares?
Assuming that the maximum of 1,250,000
Shares are tendered in the Offer at the maximum purchase price of $4.25 per Share, the aggregate purchase price will be approximately
$5.3 million. We plan to use available cash and funds borrowed under an existing credit facility to purchase Shares in the Offer
and pay all related fees and expenses. See Section 9.
How long do I have to tender my Shares?
You may tender your Shares until the
Offer expires. The Offer will expire on March 9, 2018, at 5:00 p.m., New York City time, unless we extend the Offer. See Section 1.
We may choose to extend the Offer at any time and for any reason in accordance with applicable law. We cannot assure you, however,
that we will extend the Offer or, if we extend it, for how long. See Section 1 and Section 14. If a broker, dealer, commercial
bank, trust company or other nominee holds your Shares, it may have an earlier deadline for accepting the Offer. We urge you to
contact the broker, dealer, commercial bank, trust company or other nominee that holds your Shares to find out its deadline. See
Section 3.
Can the Offer be extended, amended or terminated,
and if so, under what circumstances?
Yes. We can extend or amend the Offer
in our sole discretion in accordance with applicable law. If we extend the Offer, we may delay the acceptance of any Shares that
have been tendered. See Section 14. We can terminate the Offer under certain circumstances. See Section 7.
How will I be notified if you extend the Offer or
amend the terms of the Offer?
If we extend the Offer, we will issue
a press release not later than 9:00 a.m., New York City time, on the first business day after the previously scheduled Expiration
Date. We will announce any amendment to the Offer by making a public announcement of the amendment. See Section 14.
Are there any conditions to the Offer?
Yes. Our obligation to accept for payment
and pay for your tendered Shares depends upon a number of conditions being satisfied or waived on or prior to the Expiration Date,
including:
| · | no legal action shall have been threatened, pending or taken that might adversely affect the Offer; |
| · | no general suspension of trading in, or general limitation on prices for, securities on any national securities exchange or
in the over-the-counter markets in the United States or the declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States shall have occurred; |
| · | no decrease of more than 10% in the market price of the Shares or in the general level of market prices for equity securities
in the United States or the Nasdaq Capital Market Index, the Dow Jones Industrial Average, the Nasdaq Global Market Composite Index
or Standard & Poor’s Composite Index of 500 Industrial Companies measured from the close of trading on February 1,
2018, the last trading day prior to commencement of the Offer, shall have occurred; |
| · | no commencement of a war, armed hostilities or other similar national or international calamity, including, but not limited
to, an act of terrorism, directly or indirectly involving the United States shall have occurred on or after February 2, 2018, nor
shall any material escalation of any war or armed hostilities which had commenced prior to February 2, 2018 have occurred; |
| · | no changes in the general political, market, economic or financial conditions, domestically or internationally, that are reasonably
likely to materially and adversely affect our business or the trading in the Shares shall have occurred; |
| · | no person shall have proposed, announced or made a tender or exchange offer for the Shares (other than the Offer), merger,
business combination or other similar transaction involving us; |
| · | no person (including certain groups) shall have acquired, or proposed to acquire, beneficial ownership of more than 5% of the
outstanding Shares (other than as publicly disclosed in a filing with the SEC on or before February 1, 2018). In addition, no new
group shall have been formed since February 1, 2018, that beneficially owns more than 5% of the outstanding Shares; |
| · | no person (including a group) that has publicly disclosed in a filing with the SEC on or before February 1, 2018 that it has
beneficial ownership of more than 5% of the outstanding Shares shall have acquired, or publicly announced its proposal to acquire,
beneficial ownership of an additional 2% of the outstanding Shares; |
| · | no person shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or made a public announcement reflecting an intent to acquire us or any of our assets or securities; |
| · | no material adverse change in our business, condition (financial or otherwise), assets, income, operations or prospects shall
have occurred during the Offer; and |
| · | we shall not have determined that as a result of the consummation of the Offer and the purchase of Shares that there will be
a reasonable likelihood that the Shares will be delisted from The Nasdaq Capital Market. |
See Section 7 for a complete list of
the conditions to the Offer. Each of the conditions is for our sole benefit and may be asserted or waived by us, in whole or in
part, at any time and from time to time in our discretion prior to the Expiration Date. The Offer is not conditioned on any minimum
number of Shares being tendered.
How do I tender my Shares?
If you want to tender all or any portion
of your Shares, you must do one of the following prior to 5:00 p.m., New York City time, on March 9, 2018, or any later time
and date to which the Offer may be extended:
| · | if your Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, contact the
nominee and have the nominee tender your Shares for you; |
| · | if you hold certificates in your own name or hold Shares in book-entry form as a registered holder, complete and sign a Letter
of Transmittal according to its instructions and deliver it, together with any required signature guarantees, the certificates,
if applicable, for your Shares and any other documents required by the Letter of Transmittal, to the Depositary at one of the addresses
shown on the back cover of this Offer to Purchase; |
| · | if you are an institution participating in The Depository Trust Company, tender your Shares according to the procedure for
book-entry transfer described in Section 3; or |
| · | if you are a holder of vested options to purchase Shares, subject to Company policies and practices, you may exercise your
vested options to purchase Shares and tender such Shares in the Offer; however, we suggest that you exercise your vested options
at least five business days prior to the Expiration Date (which, unless the Offer is extended, will require you to exercise such
options no later than 5:00 p.m., New York City time, on March 2, 2018) in order to provide you with sufficient time to validly
tender such Shares in the Offer. An exercise of an option cannot be revoked even if Shares received upon the exercise thereof and
tendered in the Offer are not purchased in the Offer for any reason. |
If you want to tender your Shares but
(a) your certificates for the Shares are not immediately available, or cannot be delivered to the Depositary by the Expiration
Date, (b) you cannot comply with the procedure for book-entry transfer by the Expiration Date, or (c) your other required
documents cannot be delivered to the Depositary by the Expiration Date, you may still tender your Shares if you comply with the
guaranteed delivery procedure described in Section 3.
We are not making the Offer to, and will
not accept any tendered Shares from, stockholders in any jurisdiction where it would be illegal to do so. However, we may, at our
discretion, take any actions necessary for us to make the Offer to stockholders in any such jurisdiction.
If you have any questions regarding the
Offer, please contact the Information Agent, or your broker, dealer, commercial bank, trust company or other nominee for assistance.
The contact information for the Information Agent is set forth on the back cover of this Offer to Purchase. See Section 3
and the Letter of Transmittal.
Can I conditionally tender my Shares?
You may tender Shares subject to the
condition that a specified minimum number of your Shares tendered pursuant to a Letter of Transmittal must be purchased if any
Shares tendered are purchased. Any stockholder desiring to make a conditional tender must so indicate in the section entitled “Conditional
Tender” in the Letter of Transmittal, and, if applicable, in the Notice of Guaranteed Delivery. See Section 6.
Once I have tendered Shares in the Offer, may I withdraw
my tendered Shares?
Yes. You may withdraw any Shares you
have tendered at any time before 5:00 p.m., New York City time, on March 9, 2018, unless we extend the Offer, in which case
you may withdraw your Shares until the Expiration Date, as extended. If we have not accepted for payment the Shares you have tendered
to us, you may also withdraw your Shares at any time after 12:00 Midnight, New York City time, on March 30, 2018, the 40th business
day following the commencement of the Offer. See Section 4.
How do I withdraw Shares I previously tendered?
To properly withdraw Shares, you must
deliver on a timely basis a written notice of your withdrawal to the Depositary at one of the addresses appearing on the back cover
of this Offer to Purchase. Your notice of withdrawal must specify your name, the number of Shares to be withdrawn and the name
of the registered holder of the Shares. Some additional requirements apply if the certificates for Shares to be withdrawn have
been delivered to the Depositary or if your Shares have been tendered under the procedure for book-entry transfer set forth in
Section 3.
What happens if more than 1,250,000 Shares are tendered
at or below the Final Purchase Price?
If
more than 1,250,000 Shares (or such greater number of Shares as we may elect to accept
for payment, subject to applicable law) are properly tendered at or below the Final Purchase Price and not properly withdrawn prior
to the Expiration Date, we will purchase Shares on the following basis:
| · | first, we will purchase all Shares properly tendered by any odd lot holder (holders of less than 100 Shares) at or below
the Final Purchase Price and not properly withdrawn; |
| · | second, after the purchase of all of the Shares properly tendered by odd lot holders at or below the Final Purchase
Price, subject to the conditional tender provisions described in Section 6, we will purchase all other Shares properly tendered
at or below the Final Purchase Price on a pro rata basis with appropriate adjustment to avoid purchases of fractional Shares;
and |
| · | third, only if necessary to permit us to purchase 1,250,000 Shares (or such greater number of Shares as we may elect
to accept for payment, subject to applicable law), we will purchase Shares conditionally tendered (for which the condition was
not initially satisfied) at or below the Final Purchase Price, by random lot, to the extent feasible. To be eligible for purchase
by random lot, stockholders whose Shares are conditionally tendered must have tendered all of their Shares. |
Because
of the “odd lot” priority, proration and conditional tender provisions described above, it is possible that
we will not purchase all of the Shares that you tender even if you tender them at or below the Final Purchase Price. See Section 1.
Following the Offer, will you continue as a public
company?
Yes. The completion of the Offer in accordance
with its terms and conditions will not cause the Company to stop being subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). In addition, it is a condition of our obligation to purchase
Shares pursuant to the Offer that, as a result of the consummation of the Offer, there not be a reasonable likelihood that the
Shares will be delisted from The Nasdaq Capital Market. See Section 2 and Section 7.
What is Socket Mobile’s Board of Directors’
position on the Offer?
Socket Mobile’s board of directors
has not, nor has the Company, the Information Agent or the Depositary, made, and is not making, any recommendation to you as to
whether you should tender or refrain from tendering your Shares or as to the price or prices at which you may choose to tender
your Shares. You must make your own decisions as to whether to tender your Shares and, if so, how many Shares to tender and the
price or prices at which you will tender them. In doing so, you should read carefully the information in, or incorporated by reference
in, this Offer to Purchase and in the Letter of Transmittal, including our reasons for making the Offer. You are urged to discuss
your decisions with your own tax advisors, financial advisors and/or brokers. See Section 2.
Will Socket Mobile’s directors and executive
officers tender Shares in the Offer?
All of our directors and executive officers
have advised us that they do not intend to tender Shares in the Offer. See Section 11.
What will happen if I do not tender my Shares?
Stockholders who decide not to tender
will own a greater percentage interest in the Company’s outstanding Shares following the consummation of the Offer. See Section 2.
When and how will you pay me for the Shares I tender?
Promptly after the Expiration Date, we
will pay the Final Purchase Price, net to the seller in cash, less applicable withholding taxes and without interest, for the Shares
we purchase. We will announce the preliminary results of the Offer, including price and preliminary information about any expected
proration, on the business day following the Expiration Date. We do not expect, however, to announce the final results of any proration
or the Final Purchase Price and begin paying for tendered Shares until up to five business days after the Expiration Date. We will
pay for the Shares accepted for purchase by depositing the aggregate purchase price with the Depositary, promptly after the Expiration
Date. The Depositary will act as your agent and will transmit to you the payment for all of your Shares accepted for payment. See
Section 1 and Section 5.
If I am a holder of vested stock options, how do
I participate in the Offer?
We will not purchase unexercised options.
If you hold vested but unexercised options, you may choose to exercise such options in accordance with the terms of the applicable
stock option plan or plans and tender the Shares received upon such exercise in accordance with the Offer. Please keep in mind
that an election to exercise your stock options is irrevocable, which means that if the Shares resulting from your exercise are
not purchased in the Offer for any reason, as discussed in Section 3 hereof, you will continue to hold such Shares and you will
not be given an opportunity to unwind your exercise.
If you wish to sell Shares issuable pursuant
to unexercised options, you must:
| (1) | exercise your vested options by submitting a written exercise notice to the Company’s stock administrator (and pay the
applicable exercise price(s) to the Company and, if you are exercising a vested nonstatutory stock option, you must also pay any
taxes that must be withheld as a result of the exercise) no later than 5:00 p.m., New York City time, on March 2, 2018 (the
“Exercise Deadline”); and |
| (2) | submit your election to participate in the Offer prior to the Expiration Date. |
If you want to elect to sell Shares in
the Offer that were issuable upon exercise of a stock option and for any reason (a) you fail to properly or timely complete and
submit your option exercise notice, and/or (b) you fail to pay the applicable exercise price for any option you are exercising
(including any necessary tax amounts), in either case, before the Exercise Deadline, then you will not be eligible to sell Shares
subject to such option in the Offer.
In addition, holders of vested but unexercised
options should evaluate the Offer carefully to determine if participation would be advantageous to them, based on their stock option
exercise prices, the date of their stock option grants and the years left to exercise their options, the range of tender prices,
the tax consequences of choosing to exercise any options, and the provisions for pro rata purchases by the Company described in
Section 1. We strongly encourage holders of vested stock options to discuss the Offer with their tax advisor, broker and/or
financial advisor. Holders of unvested stock options, unvested stock awards or other restricted equity interests may not tender
Shares represented by such interests.
What is the recent market price of my Shares?
On February 1, 2018, the last full
trading day prior to the commencement of the Offer, the last reported sale price of the Shares on The Nasdaq Capital Market
was $3.50 per Share. You are urged to obtain current market quotations for the Shares before deciding whether and at what
purchase price or purchase prices to tender your Shares. See Section 8.
Will I have to pay brokerage commissions if I tender
my Shares?
If you are a registered stockholder and
you tender your Shares directly to the Depositary, you will not incur any brokerage commissions. If you hold Shares through a broker,
dealer, commercial bank, trust company or other nominee, we urge you to consult your broker, dealer, commercial bank, trust company
or other nominee to determine whether any transaction costs are applicable. See the Introduction and Section 3.
Will I have to pay stock transfer tax if I tender
my Shares?
If you instruct the Depositary in the
Letter of Transmittal to make the payment for the Shares to the registered holder, you will not incur any stock transfer tax. See
Section 5.
Are there any governmental or regulatory approvals,
consents or filings to be made or obtained in connection with the Offer?
We are not aware of any approval or other
action by any governmental, administrative or regulatory authority or agency, domestic, foreign or supranational, that would be
required for our acquisition or ownership of Shares as contemplated by the Offer. Should any such approval or other action or notice
filings be required, we presently contemplate that we will seek that approval or other action and make or cause to be made such
notice filings. We cannot predict whether we will be required to delay the acceptance for payment of or payment for Shares tendered
in the Offer pending the outcome of any such approval or other action. There can be no assurance that any such approval or other
action, if needed, would be obtained or would be obtained without substantial cost or conditions or that the failure to obtain
the approval or other action might not result in adverse consequences to our business and financial condition. Our obligations
under the Offer to accept for payment and pay for Shares are subject to the satisfaction of certain conditions. See Sections 7
and 12.
What are the U.S. federal income tax consequences
if I tender my Shares?
If you are a U.S. Holder (as defined
in Section 13), your receipt of cash from us in exchange for the Shares you tender will be a taxable transaction for U.S.
federal income tax purposes. The cash you receive for your tendered Shares generally will be treated for U.S. federal income tax
purposes either as (i) consideration received in respect of a sale or exchange of the Shares or (ii) a distribution from
us in respect of Shares. See Sections 3 and 13.
If you are a Non-U.S. Holder (as defined
in Section 13), you will be subject to U.S. federal withholding tax at a rate of 30% on the gross payments you receive pursuant
to the Offer, subject to reduction or elimination by applicable treaty, as evidenced by forms that you furnish to the Depositary
(or other applicable withholding agent). See Sections 3 and 13.
We
urge you to consult your own tax advisor as to the particular tax consequences to you of the Offer.
Whom should I contact with questions about the Offer?
The Information Agent, D.F. King &
Co., Inc., can help answer your questions. You can find the Information Agent’s contact information on the back cover of
this Offer to Purchase.
FORWARD-LOOKING STATEMENTS
This Offer to Purchase contains or incorporates
by reference certain forward-looking statements and information relating to us that are based on the beliefs of our management
as well as assumptions made by, and information currently available to, us. These statements include, but are not limited to, statements
about our strategies, plans, objectives, expectations, intentions, expenditures, and assumptions and other statements contained
in the Offer that are not historical facts, including statements regarding our unique position and anticipated products, important
drivers, customer and geographic revenue levels and mix, gross margins, operating costs and expenses and our channel inventory
levels. When used in this document, words such as “believe,” “estimate,” “expect,” “anticipate,”
“intend,” “plan” and “project” and similar expressions, as they relate to us, are intended
to identify forward-looking statements.
Although we believe the expectations
reflected in any forward-looking statements are reasonable, readers are cautioned that forward-looking statements involve known
and unknown risks and uncertainties, are not guarantees of future performance and that actual results, performance or achievements
may differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.
These differences can arise as a result of a number of risks, including those risks described in the “Risk Factors”
section of our Annual Report on Form 10-K for the year ended December 31, 2016, and our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2017. Whether actual results will conform with our expectations and predictions is subject to a number of risks
and uncertainties, including, but not limited to, the following:
| · | our ability to complete the Offer; |
| · | the price and time at which we may make any additional Share repurchases following completion of the Offer, the number of Shares
acquired in such repurchases and the terms, timing, costs and interest rate on any indebtedness incurred to fund such repurchases; |
| · | changes in general economic, business and political conditions, including the possibility of intensified international hostilities,
acts of terrorism, and changes in conditions of United States or international lending, capital and financing markets; and |
| · | any other risks detailed in the “Risk Factors” section and other sections of our Annual Report on Form 10-K for
the year ended December 31, 2016, and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, and other filings
with the SEC. |
Except as required by applicable law,
we neither intend nor assume any obligation to update these forward-looking statements, which speak only as of their dates.
Notwithstanding anything in this Offer
to Purchase, the Letter of Transmittal or any document incorporated by reference into this Offer to Purchase, the safe harbor protections
of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in connection with any tender offer.
INTRODUCTION
To the Stockholders of Socket Mobile, Inc.:
Socket Mobile, Inc., a Delaware corporation
(the “Company,” “Socket Mobile,” “we,” “our” or “us”), invites our
stockholders to tender up to 1,250,000 shares of our common stock, par value $0.001 per share (the “Shares”), for purchase
by us at a price not greater than $4.25 nor less than $3.75 per Share, net to the seller in cash, less any applicable withholding
taxes and without interest, upon the terms and subject to the conditions described in this Offer to Purchase and in the related
Letter of Transmittal, which together, as they may be amended or supplemented from time to time, constitute the “Offer.”
The
Offer will expire at 5:00 p.m., New York City time, on March 9, 2018, unless the Offer is extended or withdrawn (such date,
as it may be extended, the “Expiration Date”).
Promptly after the Expiration Date, we
will look at the prices chosen by stockholders for all of the Shares properly tendered. We will then select the lowest purchase
price, not greater than $4.25 nor less than $3.75 per Share, that will allow us to purchase 1,250,000 Shares. If fewer than 1,250,000
Shares are properly tendered, we will select the price (in multiples of $0.05) that will allow us to purchase all Shares that are
properly tendered and not properly withdrawn. We refer to the price we will select as the “Final Purchase Price.” All
Shares purchased in the Offer will be purchased at the Final Purchase Price, including those Shares tendered at a price lower than
the Final Purchase Price. However, because of the “odd lot” priority, proration and conditional tender provisions described
in this Offer to Purchase, we may not purchase all of the Shares tendered at or below the Final Purchase Price if more than 1,250,000
Shares are properly tendered and not properly withdrawn. Shares not purchased in the Offer will be returned to the tendering stockholders
at our expense promptly after the Expiration Date.
We reserve the right, in our sole discretion,
to change the per Share purchase price range and to increase or decrease the number of Shares sought in the Offer, in each case
subject to applicable law. See Section 1, Section 3 and Section 4.
If you are a holder of vested options,
you may exercise your vested options and tender any Shares issued upon such exercise. You must exercise your options sufficiently
in advance of the Expiration Date to receive your Shares in order to tender. An exercise of an option cannot be revoked even if
Shares received upon the exercise thereof and tendered in the Offer are not purchased in the Offer for any reason. See Section
3.
The Offer is not conditioned upon
any minimum number of Shares being tendered. The Offer is, however, subject to certain other conditions. See Section 7.
Our board of directors has approved
the Offer. However, neither we nor any member of our board of directors, the Information Agent or the Depositary makes any recommendation
to you as to whether you should tender or refrain from tendering your Shares, or as to the price or prices at which you may choose
to tender your Shares. Neither we nor any member of our board of directors, the Information Agent or the Depositary has authorized
any person to make any recommendation with respect to the Offer. You must make your own decision as to whether to tender your Shares
and, if so, how many Shares to tender and the price or prices at which you will tender them. In doing so, you should consult your
own financial and tax advisors, and read carefully the information in this Offer to Purchase and in the related Letter of Transmittal,
including our reasons for making the Offer. See Section 2.
Our directors and executive officers
have advised us that they do not intend to tender Shares in the Offer. See Section 11.
We will pay all fees and expenses incurred
in connection with the Offer by the Depositary and the Information Agent. See Section 15.
As of December 31, 2017, we had 7,011,128
Shares outstanding. The 1,250,000 Shares that we are offering to purchase hereunder represent approximately 17.8% of our issued
and outstanding Shares as of December 31, 2017.
The Shares are listed and traded
on The Nasdaq Capital Market under the symbol “SCKT.” On February 1, 2018, the last full trading day prior to the
commencement of the Offer, the last reported sale price of the Shares was $3.50 per Share. Stockholders are urged to obtain
current market quotations for the Shares before deciding whether and at what purchase price or purchase prices to tender
their Shares. See Section 8.
Our principal executive offices are located
at 39700 Eureka Drive, Newark, California 94560, and our phone number is (510) 933-3000.
References in this Offer to Purchase
to “dollars” and “$” are to the lawful currency of the United States of America, unless otherwise indicated
or the context suggests otherwise.
THE OFFER
1. Number
of Shares; Purchase Price; Proration.
Upon the terms and subject to the conditions
of the Offer, we will purchase up to 1,250,000 Shares, or if fewer than 1,250,000 Shares are properly tendered, all Shares that
are properly tendered and not properly withdrawn in accordance with Section 4, at a price not greater than $4.25 and not less than
$3.75 per Share, net to the seller in cash, less any applicable withholding taxes and without interest.
The term “Expiration Date”
means 5:00 p.m., New York City time, on March 9, 2018, unless and until we, in our sole discretion in accordance with applicable
law, shall have extended the period of time during which the Offer will remain open, in which event the term “Expiration
Date” shall refer to the latest time and date at which the Offer, as so extended by us, shall expire. See Section 14
for a description of our right to extend, delay, terminate or amend the Offer.
Stockholders desiring to tender Shares
must either (1) check the box in the section of the Letter of Transmittal entitled “Purchase Price Tender—Shares Tendered
at Price Determined Under the Offer,” indicating that they will accept the Final Purchase Price we determine (which could
result in the tendering stockholder receiving a purchase price per Share as low as $3.75), or (2) check one, and only one, of the
boxes in the section of the Letter of Transmittal entitled “Auction Price Tender—Shares Tendered at Price Determined
by Stockholder,” indicating the price, not greater than $4.25 and not less than $3.75 per Share, at which they are willing
to sell their Shares to us under the Offer. Prices may be specified in increments of $0.05.
Promptly following the Expiration Date,
we will determine the Final Purchase Price that we will pay for Shares properly tendered and not properly withdrawn, taking into
account the number of Shares tendered and the prices specified by tendering stockholders. We will select the lowest purchase price,
not greater than $4.25 nor less than $3.75 per Share, that will allow us to purchase 1,250,000 Shares. If fewer than 1,250,000
Shares are properly tendered, we will select the price that will allow us to purchase all Shares that are properly tendered and
not properly withdrawn. All Shares purchased in the Offer will be purchased at the Final Purchase Price, including those Shares
tendered at a price lower than the Final Purchase Price. However, because of the odd lot priority, proration and conditional tender
provisions of the Offer, we may not purchase all of the Shares tendered at or below the Final Purchase Price if more than 1,250,000
Shares are properly tendered and not properly withdrawn. We will return all Shares tendered and not purchased pursuant to the Offer,
including Shares tendered at prices in excess of the Final Purchase Price and Shares not purchased because of proration or conditional
tenders, to the tendering stockholders at our expense, promptly following the Expiration Date.
We will announce the Final Purchase Price
by press release as promptly as practicable after such determination has been made. We do not expect, however, to announce the
final results of any proration or the Final Purchase Price and begin paying for tendered Shares until up to five business days
after the Expiration Date.
By following the Instructions to the
Letter of Transmittal, stockholders can specify different minimum prices for specified portions of their Shares, but a separate
Letter of Transmittal must be submitted for Shares tendered at each price. Stockholders can also specify the order in which the
specified portions will be purchased in the event that, as a result of proration or otherwise, some but not all of the tendered
Shares are purchased pursuant to the Offer. In the event a stockholder does not designate such order and fewer than all Shares
are purchased due to proration, the Depositary will select the order of Shares purchased.
We expressly reserve the right, in our
sole discretion, in accordance with applicable law to change the per Share purchase price range and to increase or decrease the
number of Shares sought in the Offer. In accordance with the rules of the Securities and Exchange Commission (the “SEC”),
we may increase the number of Shares purchased in the Offer by no more than 2% of the outstanding Shares without amending or extending
the Offer. However, if we purchase an additional number of Shares in excess of 2% of the outstanding Shares, we will amend and
extend the Offer in compliance with applicable law. See Section 14.
In the event of an over-subscription
of the Offer as described below, Shares tendered at or below the Final Purchase Price prior to the Expiration Date will be subject
to proration, except for odd lots. The proration period and withdrawal rights also expire on the Expiration Date, subject to applicable
law.
The Offer is not conditioned
on any minimum number of Shares being tendered. The Offer is, however, subject to certain other conditions. See Section 7.
Shares acquired pursuant to the Offer
will be acquired by Socket Mobile free and clear of all liens, charges, encumbrances, security interests, claims, restrictions
and equities whatsoever, together with all rights and benefits arising therefrom, provided that any dividends or distributions
which may be declared, paid, issued, distributed, made or transferred on or in respect of such Shares to stockholders of record
on or prior to the date on which the Shares are taken up and paid for under the Offer shall be for the account of such stockholders.
See Section 8.
Priority
of Purchases. On the terms and subject to the conditions of the Offer, if more than 1,250,000 Shares (or such greater
number of Shares as we may elect to accept for payment, subject to applicable law) have been properly tendered at prices at or
below the Final Purchase Price and not properly withdrawn before the Expiration Date, we will purchase properly tendered Shares
on the basis set forth below:
| · | First, we will purchase all Shares properly tendered at or below the Final Purchase Price and not properly withdrawn
by any odd lot holder, as described below, who: |
| o | tenders all Shares owned, whether such Shares are owned beneficially or of record, by such odd lot holder at a price at or
below the Final Purchase Price (tenders of less than all of the Shares owned by such odd lot holder will not qualify for this preference);
and |
| o | completes the section entitled “Odd Lots” in the Letter of Transmittal and, if applicable, in the Notice of Guaranteed
Delivery. |
| · | Second, after the purchase of all of the Shares properly tendered by odd lot holders at or below the Final Purchase
Price, subject to the conditional tender provisions described in Section 6, we will purchase all other Shares properly tendered
at or below the Final Purchase Price on a pro rata basis with appropriate adjustment to avoid purchases of fractional Shares. |
| · | Third, only if necessary to permit us to purchase 1,250,000 Shares (or such greater number of Shares as we may elect
to accept for payment, subject to applicable law), we will purchase Shares conditionally tendered at or below the Final Purchase
Price (for which the condition was not initially satisfied) and not properly withdrawn prior to the Expiration Date by random lot,
to the extent feasible. To be eligible for purchase by random lot, stockholders whose Shares are conditionally tendered must have
properly tendered and not properly withdrawn all of their Shares. |
As a result of the foregoing priorities
applicable to the purchase of Shares tendered, it is possible that fewer than all Shares tendered by a stockholder will be purchased
or that, if a tender is conditioned upon the purchase of a specified number of Shares, none of those Shares will be purchased even
though those Shares were tendered at prices at or below the Final Purchase Price.
As we noted above, we may elect to purchase
more than 1,250,000 Shares in the Offer, subject to applicable law. If we do so, the preceding provisions will apply to the greater
number of Shares.
Odd
Lots. For purposes of the Offer, the term “odd lots” means all Shares properly tendered at prices at or
below the Final Purchase Price held by a stockholder who owns beneficially or of record an aggregate of fewer than 100 Shares,
which we refer to as an “odd lot holder,” and so certifies in the appropriate place on the Letter of Transmittal and,
if applicable, the Notice of Guaranteed Delivery. To qualify for this preference, an odd lot holder must tender all Shares owned
beneficially or of record by the odd lot holder in accordance with the procedures described in Section 3. As set forth above,
odd lots will be accepted for payment before proration, if any, of the purchase of other tendered Shares. This preference is not
available to partial tenders or to beneficial or record holders of an aggregate of 100 or more Shares, even if these holders have
separate accounts or certificates representing fewer than 100 Shares. By accepting the Offer, an odd lot holder who holds Shares
in his or her name and tenders his or her Shares directly to the Depositary would not only avoid the payment of brokerage commissions,
but also would avoid any applicable odd lot discounts in a sale of the holder’s Shares. Any odd lot holder wishing to tender
all of such odd lot holder’s Shares pursuant to the Offer should complete the section entitled “Odd Lots” in
the Letter of Transmittal and, if applicable, the Notice of Guaranteed Delivery.
Proration.
If proration of tendered Shares is required, we will determine the proration factor promptly following the Expiration Date. Proration
for each stockholder tendering Shares, other than odd lot holders, will be based on the ratio of the number of Shares properly
tendered and not properly withdrawn by such stockholder to the total number of Shares properly tendered and not properly withdrawn
by all stockholders, other than odd lot holders, at or below the Final Purchase Price, subject to conditional tenders. Because
of the difficulty in determining the number of Shares properly tendered and not withdrawn, and because of the odd lot procedure
described above, the conditional tender procedure described in Section 6 and the guaranteed delivery procedure described in
Section 3, we expect that we will not be able to announce the final proration factor or commence payment for any Shares purchased
pursuant to the Offer until up to five business days after the Expiration Date. The preliminary results of any proration will be
announced by press release as promptly as practicable after the Expiration Date. After the Expiration Date, stockholders may obtain
preliminary proration information from the Information Agent and also may be able to obtain the information from their brokers.
As described in Section 13, the
number of Shares that we will purchase from a stockholder pursuant to the Offer may affect the U.S. federal income tax consequences
to the stockholder of the purchase and, therefore, may be relevant to a stockholder’s decision whether to tender Shares.
The Letter of Transmittal affords each stockholder who tenders Shares registered in such stockholder’s name directly to the
Depositary the opportunity to designate the order of priority in which Shares tendered are to be purchased in the event of proration
as well as the ability to condition such tender on a minimum number of Shares being purchased.
This Offer to Purchase and the related
Letter of Transmittal will be mailed to record holders of the Shares and will be furnished to brokers, dealers, commercial banks,
trust companies and other nominees and similar persons whose names, or the names of whose nominees, appear on our stockholder list
or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal
to beneficial owners of Shares.
2. Purpose
of the Offer; Certain Effects of the Offer.
Purpose
of the Offer. We believe that the Offer is a prudent use of our financial resources and
presents an appropriate balance between meeting the needs of our business and delivering value to our stockholders. The
Offer expresses our confidence in the Company’s business, our market position and the long-term growth potential of our industry.
We believe the Offer is an appropriate mechanism to return capital to our stockholders that seek liquidity under current market
conditions.
We believe that the modified “Dutch
auction” tender offer set forth in this Offer to Purchase represents an efficient mechanism to provide all of our stockholders
with the opportunity to tender all or a portion of their Shares and, thereby, receive a return of some or all of their investment
if they so elect. The Offer provides stockholders (particularly those who, because of the size of their shareholdings, might not
be able to sell their Shares without potential disruption to the Share price) with an opportunity to obtain liquidity with respect
to all or a portion of their Shares without potential disruption to the Share price. In addition, if we complete the Offer, stockholders
who do not participate in the Offer will automatically increase their relative percentage ownership interest in us at no additional
cost to them.
The Offer also provides our stockholders
with an efficient way to sell their Shares without incurring broker’s fees or commissions associated with open market sales.
Furthermore, odd lot holders who hold Shares registered in their names and tender their Shares directly to the Depositary and whose
Shares are purchased in the Offer will avoid any applicable odd lot discounts that might otherwise be payable on sales of their
Shares.
Members of our senior management have
met telephonically with our board of directors to discuss the terms of the Offer. Our board of directors considered the terms of
the Offer and further reviewed the Company’s results of operations, financial position and capital requirements, general
business conditions, legal, tax and regulatory constraints or restrictions and other factors our board of directors deemed relevant,
including the expected financial impact of the Offer. Based upon the foregoing, on December 15, 2017, our board of directors unanimously
approved the Offer and delegated authority to a Transaction Committee of the board to determine the terms and conditions of the
Offer. On January 31, 2018, the Transaction Committee of our board of directors unanimously approved proceeding with the Offer to
purchase up to 1,250,000 Shares at a price not greater than $4.25 and not less than $3.75 per Share.
Our board of directors has approved
the Offer. However, neither we nor any member of our board of directors, the Information Agent or the Depositary makes any recommendation
to you as to whether you should tender or refrain from tendering your Shares, or as to the price or prices at which you may choose
to tender your Shares. Neither we nor any member of our board of directors, the Information Agent or the Depositary has authorized
any person to make any recommendation with respect to the Offer. You must make your own decision as to whether to tender your Shares
and, if so, how many Shares to tender and the price or prices at which you will tender them. In doing so, you should consult your
own financial and tax advisors, and read carefully the information in this Offer to Purchase and in the related Letter of Transmittal,
including our reasons for making the Offer.
Following the completion or termination
of the Offer, we may, from time to time, repurchase Shares on the open market or through private or public transactions in accordance
with applicable law. Rule 13e-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) generally
prohibits us and our affiliates from purchasing any Shares, other than in the Offer, until at least ten business days after the
Expiration Date, except pursuant to certain limited exceptions provided in Exchange Act Rule 14e-5.
Our directors and executive officers
have advised us that they do not intend to tender Shares in the Offer. See Section 11.
Certain
Effects of the Offer. Stockholders who decide not to tender will own a greater percentage interest in the outstanding
Shares following the consummation of the Offer. These stockholders will also continue to bear the risks associated with owning
the Shares, including risks resulting from our purchase of Shares in the Offer. Stockholders may be able to sell non-tendered Shares
in the future on The Nasdaq Capital Market or otherwise, at a net price significantly higher or lower than the Final Purchase Price
in the Offer. We can give no assurance, however, as to the price at which a stockholder may be able to sell his or her Shares in
the future.
The Offer will reduce our “public
float” (the number of Shares owned by non-affiliated stockholders and available for trading in the securities markets), and
is likely to reduce the number of our stockholders. However, we anticipate that there will be a sufficient number of Shares outstanding
and publicly traded following completion of the Offer to ensure a continued trading market for the Shares. Based upon published
guidelines of The Nasdaq Capital Market, we do not believe that our purchase of Shares under the Offer will cause our remaining
outstanding Shares to be delisted from The Nasdaq Capital Market. The Offer is conditioned upon, among other things, our having
determined that the consummation of the Offer will not cause the Shares to be delisted from The Nasdaq Capital Market. See Section 7.
We currently meet the eligibility requirements
for deregistration of the Shares under the Exchange Act due to our having fewer than 300 holders of record of our Shares, and the
Shares will continue to be eligible for deregistration under the Exchange Act following consummation of the Offer. However, we
have no present plans to terminate the registration of the Shares under the Exchange Act or to discontinue complying with the SEC’s
proxy rules and other requirements to furnish information to our stockholders, and we do not anticipate any such plans in the foreseeable
future.
Shares we acquire pursuant to the Offer
will be retired and returned to the status of authorized and unissued Shares.
Except as disclosed or incorporated by
reference in this Offer to Purchase, neither Socket Mobile, nor its executive officers, directors or affiliates (including executive
officers and directors of Socket Mobile’s affiliates) have any plans, proposals or negotiations underway that relate to or
would result in:
| · | any extraordinary transaction, such as a merger, reorganization or liquidation, involving Socket Mobile; |
| · | any purchase, sale or transfer of a material amount of assets of Socket Mobile; |
| · | any material change in the present dividend policy, or indebtedness or capitalization of Socket Mobile; |
| · | any change in the present Board or management of Socket Mobile, including, but not limited to, any plans or proposals to change
the number or the term of directors or to fill any existing vacancies on the Board or to change any material term of the employment
contract of any executive officer; |
| · | any other material change in Socket Mobile’s corporate structure or business; |
| · | any class of equity securities of Socket Mobile becoming eligible for termination of registration under Section 12(g)(4)
of the Exchange Act; |
| · | the suspension of Socket Mobile’s obligation to file reports under Section 15(d) of the Exchange Act; |
| · | the acquisition by any person of additional securities of Socket Mobile, or the disposition by any person of securities of
Socket Mobile, other than purchases and dispositions related to the exercise of outstanding options to purchase Shares and the
vesting of performance shares and restricted stock units granted to certain employees (including directors and officers); or |
| · | any changes in Socket Mobile’s Certificate of Incorporation or Bylaws, in each case as currently in effect, or other
governing instruments or other actions that could impede the acquisition of control of Socket Mobile. |
From time to time, as part of our long-term
corporate goal of increasing stockholder value, we have explored potential strategic acquisitions and business combinations. We
are not engaged in on-going discussions with any party at this time and have not entered into confidentiality agreements with,
or made confidential information available to, any party for such purposes.
Nothing in the Offer will preclude us
from pursuing, developing or engaging in future plans, proposals or negotiations that relate to or would result in one or more
of the foregoing events, subject to applicable law. Although we do not currently have any plans, other than as disclosed or incorporated
by reference in this Offer to Purchase, that relate to or would result in any of the events discussed above, we may undertake or
plan actions that relate to or could result in one or more of these events. Stockholders tendering Shares in the Offer may run
the risk of foregoing the benefit of any appreciation in the value or market price of the Shares resulting from such potential
future events. However, there can be no assurance that we will decide to undertake any such event in the future.
3. Procedures
for Tendering Shares.
Proper
Tender of Shares. For Shares to be tendered pursuant to the Offer, the certificates for such Shares (or confirmation
of receipt of such Shares pursuant to the procedure for book-entry transfer set forth below), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile of the Letter of Transmittal), including any required signature
guarantees, or an “Agent’s Message” (as defined below), and any other documents required by the Letter of Transmittal,
must be received before 5:00 p.m., New York City time, on March 9, 2018, by the Depositary at its address set forth on the
back cover of this Offer to Purchase.
In the alternative, the tendering stockholder
must, before the Expiration Date, comply with the guaranteed delivery procedure described below.
Stockholders desiring to tender Shares
under the Offer must either (1) check the box in the section of the Letter of Transmittal entitled “Purchase Price Tender—Shares
Tendered at Price Determined Under the Offer” or (2) check one, and only one, of the boxes in the section of the Letter of
Transmittal entitled “Auction Price Tender—Shares Tendered at Price Determined by Stockholder,” indicating the
price at which Shares are being tendered.
Stockholders who desire to tender Shares
at more than one price must complete a separate Letter of Transmittal for each price at which Shares are tendered, provided that
the same Shares cannot be tendered (unless properly withdrawn previously in accordance with Section 4) at more than one price.
To tender Shares properly, one and only one box must be checked in the section of the Letter of Transmittal entitled “Auction
Price Tender—Shares Tendered at Price Determined by Stockholder.”
If tendering stockholders wish to maximize
the chance that we will purchase their Shares, they should check the box in the section of the Letter of Transmittal entitled “Purchase
Price Tender—Shares Tendered at Price Determined Under the Offer.” Note that this election may have the effect of
lowering the Final Purchase Price and could result in the tendered Shares being purchased at the minimum price of $3.75 per Share.
If tendering stockholders wish to indicate
a specific price (in increments of $0.05) at which their Shares are being tendered, they must check the
applicable price box in the section of the Letter of Transmittal entitled “Auction Price Tender—Shares Tendered
at Price Determined by Stockholder.” Tendering stockholders should be aware that this election could mean that none of their
Shares will be purchased if they check a box other than the box representing the price at or below the Final Purchase Price.
In addition, odd lot holders who tender
all of their Shares must complete the section entitled “Odd Lots” in the Letter of Transmittal to qualify for the preferential
treatment available to odd lot holders as set forth in Section 1.
Stockholders holding their Shares through
a broker, dealer, commercial bank, trust company or other nominee must contact the nominee in order to tender their Shares. Stockholders
who hold Shares through nominees are urged to consult their nominees to determine whether transaction costs may apply if stockholders
tender Shares through the nominees and not directly to the Depositary.
Stockholders may tender Shares subject
to the condition that all, or a specified minimum number of Shares, be purchased. Any stockholder desiring to make such a conditional
tender should so indicate in the section of the Letter of Transmittal entitled “Conditional Tender.” It is the tendering
stockholder’s responsibility to determine the minimum number of Shares to be purchased. Stockholders should consult their
own financial and tax advisors with respect to the effect of proration of the Offer and the advisability of making a conditional
tender. See Section 6 and Section 13.
Signature
Guarantees and Method of Delivery. No signature guarantee is required if:
| · | the Letter of Transmittal is signed by the registered holder (which term, for purposes of this Section 3, will include
any participant in the book-entry facilities of The Depository Trust Company (“DTC”), whose name appears on a security
position listing as the owner of the Shares) of the Shares tendered and the holder has not completed either the section entitled
“Special Delivery Instructions” or the section entitled “Special Payment Instructions” in the Letter of
Transmittal; or |
| · | Shares are tendered for the account of a bank, broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program or an “eligible guarantor institution,”
as the term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing constituting an “Eligible Institution”).
See Instruction 12 of the Letter of Transmittal. |
If a certificate for Shares is registered
in the name of a person other than the person executing a Letter of Transmittal, or if payment is to be made, or Shares not purchased
or tendered are to be issued, to a person other than the registered holder of the certificate surrendered, then the tendered certificate
must be endorsed or accompanied by an appropriate stock power, signed in either case exactly as the name of the registered holder
appears on the certificate, with the signature guaranteed by an Eligible Institution.
In all cases, payment for Shares tendered
and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of:
| · | one of (1) the certificate(s) for the Shares or (2) a timely confirmation of the book-entry transfer of the Shares into the
Depositary’s account at DTC, as described below; |
| · | one of (1) a properly completed and duly executed Letter of Transmittal or a manually signed facsimile of the Letter of Transmittal,
including any required signature guarantees, or (2) an Agent’s Message (as defined below) in the case of a book-entry transfer;
and |
| · | any other documents required by the Letter of Transmittal. |
The method of delivery of all documents,
including certificates for Shares, the Letter of Transmittal and any other required documents, is at the sole election and risk
of the tendering stockholder. Shares will be deemed delivered only when actually received by the Depositary (including, in the
case of a book-entry transfer, by book-entry confirmation). If delivery is by mail, then registered mail with return receipt requested,
properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery.
All deliveries in connection with
the Offer, including a Letter of Transmittal and certificates for Shares, must be made to the Depositary and not to us, the Information
Agent or DTC. ANY DOCUMENTS DELIVERED TO US, THE INFORMATION AGENT OR DTC WILL NOT BE FORWARDED TO THE DEPOSITARY AND WILL NOT
BE DEEMED TO BE PROPERLY TENDERED.
Book-Entry
Delivery. The Depositary will establish an account with respect to the Shares for purposes of the Offer at DTC within
two business days after the date of this Offer to Purchase, and any financial institution that is a participant in DTC’s
system may make book-entry delivery of the Shares by causing DTC to transfer those Shares into the Depositary’s account in
accordance with DTC’s procedures for that transfer. Although delivery of Shares may be effected through a book-entry transfer
into the Depositary’s account at DTC, either (1) a properly completed and duly executed Letter of Transmittal, with any required
signature guarantees, or an Agent’s Message, and any other required documents must, in any case, be transmitted to, and received
by, the Depositary at one of its addresses set forth on the back cover page of this Offer to Purchase prior to the Expiration Date,
or (2) the guaranteed delivery procedure described below must be followed if book-entry transfer of the Shares cannot be effected
prior to the Expiration Date.
The confirmation of a book-entry transfer
of Shares into the Depositary’s account at DTC is referred to in this Offer to Purchase as a “book-entry confirmation.”
Delivery of documents to DTC in accordance with DTC’s procedures will not constitute delivery to the Depositary.
The term “Agent’s Message”
means a message transmitted by DTC to, and received by, the Depositary and forming a part of a book-entry confirmation, which states
that DTC has received an express acknowledgement from the participant tendering Shares through DTC that such participant has received,
and agrees to be bound by, the terms of the Letter of Transmittal and that Socket Mobile may enforce such agreement against that
participant.
Guaranteed
Delivery. If you wish to tender Shares in the Offer and your certificates for Shares are not immediately available or
cannot be delivered to the Depositary prior to the Expiration Date (or the procedures for book-entry transfer cannot be completed
on a timely basis), or if time will not permit delivery of all required documents to the Depositary prior to the Expiration Date,
the Shares may still be tendered if all of the following conditions are met:
| · | the tender is made by or through an Eligible Institution; |
| · | a properly completed and duly executed Notice of Guaranteed Delivery in the form we have provided with this Offer to Purchase,
including (where required) a signature guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery,
is received by the Depositary prior to the Expiration Date; and |
| · | the certificates for all tendered Shares, in proper form for transfer (or confirmation of book-entry transfer of the Shares
into the Depositary’s account at DTC), together with a properly completed and duly executed Letter of Transmittal, or an
Agent’s Message in the case of a book-entry transfer, and any required signature guarantees and other documents required
by the Letter of Transmittal, are received by the Depositary within two business days after the date of receipt by the Depositary
of the Notice of Guaranteed Delivery. |
A Notice of Guaranteed Delivery must
be delivered to the Depositary by hand, overnight courier, facsimile transmission or mail before the Expiration Date and must include
a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery.
Stockholders may contact the Information
Agent or their broker for assistance. The contact information for the Information Agent is on the back cover page of this Offer
to Purchase.
Procedures
for Stock Options. We are not offering, as part of the Offer, to purchase any outstanding stock options, and tenders
of stock options will not be accepted. Holders of vested stock options may exercise options and tender any Shares received upon
such exercise. Options must be exercised sufficiently in advance of the Expiration Date in order to have time for the exercise
to settle before the Shares received upon exercise of the options may be tendered. An exercise of an option cannot be revoked even
if Shares received upon the exercise thereof and tendered in the Offer are not purchased in the Offer for any reason.
If you wish to sell Shares issuable pursuant
to unexercised options, you must:
(1)
exercise your vested options by submitting a written exercise notice to the Company’s stock administrator (and pay
the applicable exercise price(s) to the Company and, if you are exercising a vested nonstatutory stock option, you must also pay
any taxes that must be withheld as a result of the exercise) no later than 5:00 p.m., New York City time, on March 2, 2018 (the
“Exercise Deadline”); and
(2)
submit your election to participate in the Offer prior to the Expiration Date.
If you want to elect to sell Shares in
the Offer that were issuable upon exercise of a stock option and for any reason (a) you fail to properly or timely complete and
submit your option exercise notice, and/or (b) you fail to pay the applicable exercise price for any option you are exercising
(including any necessary tax amounts), in either case, before the Exercise Deadline, then you will not be eligible to sell Shares
subject to such option in the Offer.
In addition, holders of vested but unexercised
options should evaluate the Offer carefully to determine if participation would be advantageous to them, based on their stock option
exercise prices, the date of their stock option grants and the years left to exercise their options, the range of tender prices,
the tax consequences of choosing to exercise any options, and the provisions for pro rata purchases by the Company described in
Section 1. We strongly encourage holders of vested stock options to discuss the Offer with their tax advisor, broker and/or
financial advisor. Holders of unvested stock options, unvested stock awards or other restricted equity interests may not tender
Shares represented by such interests.
Return
of Unpurchased Shares. If any tendered Shares are not purchased or are properly withdrawn before the Expiration Date,
or if less than all Shares evidenced by a stockholder’s certificates are tendered, certificates for unpurchased Shares will
be returned promptly after the expiration or termination of the Offer or the proper withdrawal of the Shares, or, in the case of
Shares tendered by book-entry transfer at DTC, the Shares will be credited to the appropriate account maintained by the tendering
stockholder at DTC, in each case without expense to the stockholder.
Determination
of Validity; Rejection of Shares; Waiver of Defects; No Obligation to Give Notice of Defects. All questions as to the
number of Shares to be accepted, the Final Purchase Price to be paid for Shares to be accepted and the validity, form, eligibility
(including time of receipt of any Shares tendered, including pursuant to the guaranteed delivery procedures) and acceptance for
payment of any tender of Shares will be determined by us, in our sole discretion, and our determination will be final and binding
on all parties, subject to a holder challenging our determination in a court of competent jurisdiction and such court issuing a
judgment to the contrary. We reserve the absolute right to reject any or all tenders of any Shares that we determine are not in
proper form or the acceptance for payment of or payment for Shares which may, in the opinion of our counsel, be unlawful. We also
reserve the absolute right to waive any of the conditions of the Offer on or prior to the Expiration Date, or any defect or irregularity
in any tender with respect to any particular Shares or any particular stockholder (whether or not we waive similar defects or irregularities
in the case of other stockholders), and our interpretation of the terms of the Offer will be final and binding on all parties,
subject to a holder challenging our determination in a court of competent jurisdiction and such court issuing a judgment to the
contrary. In the event a condition is waived with respect to any particular stockholder, the same condition will be waived with
respect to all stockholders. No tender of Shares will be deemed to have been properly made until all defects or irregularities
have been cured by the tendering stockholder or waived by us. We will not be liable for failure to waive any condition of the Offer,
or any defect or irregularity in any tender of Shares. Neither we nor the Depositary, the Information Agent or any other person
will be obligated to give notice of any defects or irregularities in tenders, nor will any of the foregoing incur any liability
for failure to give any such notification.
Tendering
Stockholder’s Representation and Warranty; Our Acceptance Constitutes an Agreement. It is a violation of Exchange
Act Rule 14e-4 for a person, directly or indirectly, to tender Shares for that person’s own account unless, at the time
of tender and at the end of the proration period or period during which Shares are accepted by lot (including any extensions of
such period), the person so tendering (1) has a “net long position” equal to or greater than the amount of Shares tendered
in (a) Shares or (b) other securities convertible into or exchangeable or exercisable for Shares and, upon acceptance
of the tender, will acquire the Shares by conversion, exchange or exercise and (2) will deliver or cause to be delivered the Shares
in accordance with the terms of the Offer. Rule 14e-4 also provides a similar restriction applicable to a tender on behalf
of another person.
A tender of Shares in accordance with
any of the procedures described above will constitute the tendering stockholder’s acceptance of the terms and conditions
of the Offer, as well as the tendering stockholder’s representation and warranty to us that (1) the stockholder has a “net
long position,” within the meaning of Rule 14e-4 promulgated under the Exchange Act, in the Shares or equivalent securities
at least equal to the Shares being tendered, and (2) the tender of Shares complies with Rule 14e-4. Our acceptance for payment
of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and us on the terms
and subject to the conditions of the Offer.
A tender of Shares made pursuant to any
method of delivery set forth herein will also constitute a representation and warranty to us that the tendering stockholder has
full power and authority to tender, sell, assign and transfer the Shares tendered, and that, when the same are accepted for purchase
by us, we will acquire good, marketable and unencumbered title thereto, free and clear of all security interests, liens, restrictions,
claims, encumbrances and other obligations relating to the sale or transfer of the Shares, and the same will not be subject to
any adverse claim or right. Any such tendering stockholder will, on request by the Depositary or us, execute and deliver any additional
documents deemed by the Depositary or us to be necessary or desirable to complete the sale, assignment and transfer of the Shares
tendered, all in accordance with the terms of the Offer.
All authority conferred or agreed to
be conferred by delivery of the Letter of Transmittal shall be binding on the successors, assigns, heirs, personal representatives,
executors, administrators and other legal representatives of the tendering stockholder and shall not be affected by, and shall
survive, the death or incapacity of such tendering stockholder.
Lost
or Destroyed Certificates. Stockholders whose certificates for part or all of their Shares have been lost, destroyed
or stolen may contact American Stock Transfer & Trust Company, LLC, the Depositary and transfer agent for the Shares, at the
address and phone number set forth on the back cover of this Offer to Purchase for instructions to obtain a replacement certificate.
That certificate will then be required to be submitted together with the Letter of Transmittal in order to receive payment for
Shares that are tendered and accepted for payment. A bond may be required to be posted by the stockholder to secure against the
risk that the certificates may be subsequently recirculated. The Letter of Transmittal and related documents cannot be processed
until the procedures for replacing lost or destroyed certificates have been followed. Stockholders are requested to contact the
Depositary immediately in order to permit timely processing of this documentation. Certificates for Shares, together with a properly
completed Letter of Transmittal and any other documents required by the Letter of Transmittal, must be delivered to the Depositary
and not to us or the Information Agent. Any certificates delivered to us or the Information Agent will not be forwarded to the
Depositary and will not be deemed to be properly tendered.
U.S.
Federal Backup Withholding. Under the U.S. federal income tax laws, payments to a tendering stockholder may be subject to “backup
withholding” at the applicable statutory rate (currently 28%), unless a tendering stockholder:
| · | provides a correct taxpayer identification number (which, for an individual stockholder, is the stockholder’s social
security number) and any other required information; or |
| · | is an exempt recipient and, when required, demonstrates this fact and otherwise complies with applicable requirements of the
backup withholding rules. |
A stockholder that does not provide a
correct taxpayer identification number may be subject to penalties imposed by the U.S. Internal Revenue Service (the “IRS”).
To prevent backup withholding on cash payable under the Offer, each stockholder that is a U.S. person should provide the Depositary
(or other applicable withholding agent) with his or her correct taxpayer identification number and certify that he or she is not
subject to backup withholding by completing the IRS Form W-9 included in the Letter of Transmittal. In order to qualify as an exempt
recipient, a stockholder that is not a U.S. person should complete and sign the appropriate IRS Form W-8, a copy of which may be
obtained from the Depositary, attesting to that stockholder’s exempt status. See Section 13.
Backup withholding is not an additional
tax. Taxpayers may use amounts withheld as a credit against their U.S. federal income tax liability, and may claim a refund if
they timely provide certain required information to the IRS.
U.S.
Federal Withholding Tax on Payments to Non-U.S. Holders. Even if a Non-U.S. Holder (as defined in Section 13) has provided
the required certification to avoid backup withholding, the Depositary (or other applicable withholding agent) will withhold U.S.
federal income taxes equal to 30% of the gross payments payable to such Non-U.S. Holder or such holder’s agent, unless the
Depositary (or other applicable withholding agent) determines that a reduced rate of withholding is available under an applicable
income tax treaty or that an exemption from withholding is applicable because such gross proceeds are effectively connected with
the Non-U.S. Holder’s conduct of a trade or business within the United States. See Section 13. In order to obtain a reduced
rate of withholding under a tax treaty, a Non-U.S. Holder must deliver to the Depositary (or other applicable withholding agent)
a properly completed and executed IRS Form W-8BEN before payment is made. To obtain an exemption from withholding on the grounds
that the gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the
United States, a Non-U.S. Holder must deliver to the Depositary (or other applicable withholding agent) a properly completed and
executed IRS Form W-8ECI. The Depositary (or other applicable withholding agent) will determine a stockholder’s status as
a Non-U.S. Holder and eligibility for a reduced rate of, or an exemption from, withholding by reference to valid certificates or
statements concerning such eligibility received from the Non-U.S. Holder unless facts and circumstances indicate that reliance
is not warranted.
A Non-U.S. Holder may be eligible to
obtain a refund of all or a portion of any tax withheld if the Non-U.S. Holder (i) satisfies the requirements for sale or
exchange treatment described in Section 13 that would characterize the exchange as a sale (as opposed to a dividend) with
respect to which the Non-U.S. Holder is not subject to U.S. federal income tax or (ii) is otherwise able to establish that
no tax or a reduced amount of tax is due.
Non-U.S. Holders are urged to
consult their tax advisors regarding the application of U.S. federal income tax withholding, including eligibility for a withholding
tax reduction or exemption, and the refund procedure.
4. Withdrawal
Rights.
Except as otherwise provided in this
Section 4, tenders of Shares pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn
at any time before the Expiration Date and, unless we have accepted tendered Shares for payment under the Offer, may also be withdrawn
at any time after 12:00 Midnight, New York City time, on March 30, 2018, the 40th business day following the commencement of the
Offer.
For a withdrawal to be effective, a notice
of withdrawal must be in written form and must be received in a timely manner by the Depositary at the address set forth on the
back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the tendering stockholder; the number of
Shares to be withdrawn; and the name of the registered holder of the Shares to be withdrawn, if different from the tendering stockholder.
If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, before the release
of the certificates, the tendering stockholder must also submit the serial numbers shown on the particular certificates for Shares
to be withdrawn and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case
of Shares tendered for the account of an Eligible Institution). If Shares have been tendered pursuant to the procedure for book-entry
transfer described in Section 3, the notice of withdrawal also must specify the name and the number of the account at DTC
to be credited with the withdrawn Shares and must otherwise comply with DTC’s procedures. If a stockholder has used more
than one Letter of Transmittal or has otherwise tendered Shares in more than one group of Shares, the stockholder may withdraw
Shares using either separate notices of withdrawal or a combined notice of withdrawal, so long as the information specified above
is included.
We will determine all questions as to
the form and validity, including the time of receipt, of any notice of withdrawal, in our sole discretion, which determination
will be final and binding on all parties, subject to a holder challenging our determination in a court of competent jurisdiction
and such court issuing a judgment to the contrary. Neither we nor the Depositary, the Information Agent or any other person will
be obligated to give notice of any defects or irregularities in any notice of withdrawal, nor will any of the foregoing incur liability
for failure to give any such notification. Withdrawals may not be rescinded, and any Shares properly withdrawn will be deemed not
properly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered before the Expiration Date by again following
one of the procedures described in Section 3.
If we extend the Offer, are delayed in
our purchase of Shares or are unable to purchase Shares pursuant to the Offer for any reason, then, without prejudice to our rights
under the Offer, the Depositary may, subject to applicable law, retain tendered Shares on our behalf, and the Shares may not be
withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described in this Section 4. Our
reservation of the right to delay payment for Shares that we have accepted for payment is limited by Exchange Act Rule 13e-4(f)(5),
which requires that we must pay the consideration offered or return the Shares tendered promptly after termination or withdrawal
of the Offer.
5. Purchase
of Shares and Payment of Purchase Price.
On the terms and subject to the conditions
of the Offer, promptly following the Expiration Date, we will:
| · | determine the Final Purchase Price, taking into account the number of Shares so tendered and the prices specified by tendering
stockholders; and |
| · | accept for payment and pay for (and thereby purchase) up to 1,250,000 Shares (or such greater number of Shares as we may elect
to accept for payment, subject to applicable law) properly tendered at prices at or below the Final Purchase Price and not properly
withdrawn. We may increase the number of Shares accepted for payment in the Offer by no more than 2% of the outstanding Shares
without amending or extending the Offer. |
For purposes of the Offer, we will be
deemed to have accepted for payment (and therefore purchased), subject to the odd lot priority, proration and conditional tender
provisions of the Offer, Shares that are properly tendered at or below the Final Purchase Price and not properly withdrawn only
when, as and if we give oral or written notice to the Depositary of our acceptance of the Shares for payment pursuant to the Offer.
On the terms and subject to the conditions
of the Offer, promptly after the Expiration Date, we will accept for purchase and pay the Final Purchase Price for all of the Shares
accepted for payment in accordance with the Offer. In all cases, payment for Shares tendered and accepted for payment in accordance
with the Offer will be made promptly, subject to possible delay due to proration, but only after timely receipt by the Depositary
of:
| · | certificates for Shares or a timely confirmation of a book-entry transfer of Shares into the Depositary’s account at
DTC; |
| · | a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile of the Letter of Transmittal)
or an Agent’s Message in the case of book-entry transfer; and |
| · | any other documents required by the Letter of Transmittal, including documents required pursuant to the guaranteed delivery
procedures. |
We will pay for Shares purchased pursuant
to the Offer by depositing the aggregate purchase price for the Shares with the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payment from us and transmitting payment to the tendering stockholders. In the event
of proration, the Depositary will determine the proration factor and pay for those tendered Shares accepted for payment promptly
after the Expiration Date. Certificates for all Shares tendered and not purchased, including all Shares tendered at prices in excess
of the Final Purchase Price and Shares not purchased due to proration or conditional tenders, will be returned, or, in the case
of Shares tendered by book-entry transfer, will be credited to the account maintained with DTC by the participant who delivered
the Shares, to the tendering stockholder promptly after the expiration or termination of the Offer at our expense.
Under no circumstances will
interest be paid on the Final Purchase Price for the Shares, regardless of any delay in making payment. In addition, if certain
events occur, we may not be obligated to purchase Shares pursuant to the Offer. See Section 7.
We will pay all stock transfer taxes,
if any, payable on the transfer to us of Shares purchased pursuant to the Offer. If, however, payment of the Final Purchase Price
is to be made to, or (in the circumstances permitted by the Offer) if unpurchased Shares are to be registered in the name of, any
person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person
signing the Letter of Transmittal, the amount of all stock transfer taxes, if any (whether imposed on the registered holder or
the other person), payable on account of the transfer to the person will be deducted from the Final Purchase Price unless satisfactory
evidence of the payment of the stock transfer taxes, or exemption from payment of the stock transfer taxes, is submitted.
6. Conditional
Tender of Shares.
Subject to the exception for odd lot
holders, in the event of an over-subscription of the Offer, Shares tendered at or below the Final Purchase Price prior to the Expiration
Date will be subject to proration. See Section 1. As discussed in Section 13, the number of Shares to be purchased from
a particular stockholder may affect the U.S. federal income tax treatment of the purchase to the stockholder and the stockholder’s
decision whether to tender. Accordingly, a stockholder may tender Shares subject to the condition that a specified minimum number
of the stockholder’s Shares tendered pursuant to a Letter of Transmittal must be purchased if any Shares tendered are purchased.
Any stockholder desiring to make a conditional tender must so indicate in the section entitled “Conditional Tender”
in the Letter of Transmittal, and, if applicable, in the Notice of Guaranteed Delivery. We urge each stockholder to consult
with his or her own financial or tax advisor with respect to the advisability of making a conditional tender.
Any tendering stockholder wishing to
make a conditional tender must calculate and appropriately indicate the minimum number of Shares that must be purchased from that
stockholder if any are to be purchased. After the Offer expires, if more than 1,250,000 Shares (or such greater number of Shares
as we may elect to accept for payment, subject to applicable law) are properly tendered and not properly withdrawn, so that we
must prorate our acceptance of and payment for tendered Shares, we will calculate a preliminary proration percentage based upon
all Shares properly tendered, conditionally or unconditionally. If the effect of this preliminary proration would be to reduce
the number of Shares to be purchased from any stockholder below the minimum number specified, the conditional tender will automatically
be regarded as withdrawn (except as provided in the next paragraph). All Shares tendered by a stockholder subject to a conditional
tender pursuant to the Letter of Transmittal and regarded as withdrawn as a result of proration will be returned promptly after
the Expiration Date at our expense.
After giving effect to these withdrawals,
we will accept the remaining Shares properly tendered, conditionally or unconditionally, on a pro rata basis, if necessary. If
conditional tenders would otherwise be regarded as withdrawn and would cause the total number of Shares to be purchased to fall
below 1,250,000 (or such greater number of Shares as we may elect to accept for payment, subject to applicable law) then, to the
extent feasible, we will select enough of the conditional tenders that would otherwise have been deemed withdrawn to permit us
to purchase 1,250,000 Shares (or such greater number of Shares as we may elect to accept for payment, subject to applicable law).
In selecting among the conditional tenders, we will select by random lot, treating all tenders by a particular taxpayer as a single
lot, and will limit our purchase in each case to the designated minimum number of Shares to be purchased.
7. Conditions
of the Offer.
The Offer is not conditioned on any minimum
number of Shares being tendered. Notwithstanding any other provision of the Offer, we will not be required to accept for payment,
purchase or pay for any Shares tendered, and may terminate or amend the Offer or may postpone the acceptance for payment of or
the payment for Shares tendered, subject to Exchange Act Rule 13e-4(f)(5), which requires that we must pay the consideration
offered or return the Shares tendered promptly after termination or withdrawal of the Offer, if at any time on or after the commencement
of the Offer and prior to the Expiration Date any of the following events have occurred (or are determined by us, in our reasonable
judgment, to have occurred) that, in our reasonable judgment, makes it inadvisable to proceed with the Offer or with acceptance
for payment or payment for the Shares in the Offer:
| · | there has been threatened, instituted or pending any action, suit or proceeding by any government or governmental, regulatory
or administrative agency, authority or tribunal or by any other person, domestic, foreign or supranational, before any court, authority,
agency or other tribunal that directly or indirectly: |
| o | challenges or seeks to make illegal, or to delay or otherwise directly or indirectly to restrain, prohibit or otherwise affect
the consummation of the Offer, the acquisition of some or all of the Shares pursuant to the Offer or otherwise relates in any manner
to the Offer; or |
| o | in our reasonable judgment, could materially and adversely affect our business, condition (financial or otherwise), income,
operations or prospects, taken as a whole, or otherwise materially impair our ability to purchase some or all of the Shares pursuant
to the Offer; |
| · | there has been any action threatened, pending or taken, including any settlement, or any approval withheld, or any statute,
rule, regulation, judgment, order or injunction threatened, invoked, proposed, sought, promulgated, enacted, entered, amended,
enforced or deemed to be applicable to the Offer or us, including any settlement, by any court, government or governmental, regulatory
or administrative authority, agency or tribunal, domestic, foreign or supranational, that, in our reasonable judgment, could directly
or indirectly: |
| o | make the acceptance for payment of, or payment for, some or all of the Shares illegal or otherwise restrict or prohibit consummation
of the Offer; |
| o | delay or restrict our ability, or render us unable, to accept for payment or pay for some or all of the Shares to be purchased
pursuant to the Offer; or |
| o | materially and adversely affect our or our affiliates’ business, condition (financial or otherwise), income, operations
or prospects; |
| · | there has occurred any of the following: |
| o | any general suspension of trading in, or limitation on prices for, securities on any United States national securities exchange
or in the over-the-counter market; |
| o | the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, whether or
not mandatory; |
| o | a material change in United States or any other currency exchange rates or a suspension of or limitation on the markets therefor; |
| o | a decrease of more than 10% in the market price of the Shares or in the general level of market prices for equity securities
in the United States of the New York Stock Exchange Composite Index, the Dow Jones Industrial Average, the NASDAQ Global Market
Composite Index or Standard & Poor’s Composite Index of 500 Industrial Companies, in each case measured from the
close of trading on February 1, 2018, the last trading day prior to commencement of the Offer; |
| o | the commencement of a war, armed hostilities or other similar national or international calamity, including, but not limited
to, an act of terrorism, directly or indirectly involving the United States, on or after February 2, 2018; |
| o | any material escalation of any war or armed hostilities which had commenced prior to February 2, 2018; |
| o | any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any
event that, in our reasonable judgment, could materially affect, the extension of credit by banks or other lending institutions
in the United States; |
| o | any change in the general political, market, economic or financial conditions, domestically or internationally, that is reasonably
likely to materially and adversely affect our business or the trading in the Shares; or |
| o | in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening
thereof; |
| · | a tender or exchange offer for any or all of the Shares (other than the Offer), or any merger, acquisition, business combination
or other similar transaction with or involving us, has been proposed, announced or made by any person or has been publicly disclosed; |
| o | any entity, “group” (as that term is used in Section 13(d)(3) of the Exchange Act) or person has acquired
or proposes to acquire beneficial ownership of more than 5% of the outstanding Shares, whether through the acquisition of stock,
the formation of a group, the grant of any option or right, or otherwise (other than as and to the extent disclosed in a Schedule 13D
or Schedule 13G filed with the SEC on or before February 1, 2018); |
| o | any entity, group or person who has filed a Schedule 13D or Schedule 13G with the SEC on or before February 1, 2018,
has acquired or proposes to acquire, whether through the acquisition of stock, the formation of a group, the grant of any option
or right, or otherwise (other than by virtue of the Offer made hereby), beneficial ownership of an additional 2% or more of the
outstanding Shares; |
| o | any person, entity or group has filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, reflecting an intent to acquire us or any of the Shares, or has made a public announcement reflecting an intent
to acquire us or any of our assets or securities; |
| o | any change or changes have occurred or are threatened in our or our affiliates’ business, condition (financial or otherwise),
properties, assets, income, operations or prospects that, in our reasonable judgment, has or could have a material adverse effect
on us or our affiliates or the benefits of the Offer to us; |
| o | any approval, permit, authorization, favorable review or consent of any governmental entity required to be obtained in connection
with the Offer shall not have been obtained on terms satisfactory to us in our reasonable discretion; or |
| · | we determine that the consummation of the Offer and the purchase of the Shares is reasonably likely to cause the Shares to
be delisted from The Nasdaq Capital Market. |
The conditions referred to above are
for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any such condition, and may be waived
by us, in whole or in part, at any time and from time to time on or prior to the Expiration Date in our reasonable discretion.
The right to assert a condition will be deemed an ongoing right that may be asserted by us at any time prior to the Expiration
Date. If a condition is triggered, we will need to waive that condition prior to the Expiration Date in order to proceed with the
Offer. In certain circumstances, if we waive any of the conditions described above, we may be required to extend the Expiration
Date in accordance with applicable law and provide additional disclosure as required by applicable law. All offer conditions, except
any that may be dependent upon the receipt of government approvals, must be satisfied or waived before the Expiration Date, and
we will have no right to exercise any of the conditions after the Expiration Date. Any determination by us concerning the events
described above will be final and binding on all parties, subject to a holder challenging our determination in a court of competent
jurisdiction and such court issuing a judgment to the contrary. See Section 14.
8. Price
Range of Shares; Dividends.
The Shares are listed and traded on The
Nasdaq Capital Market under the trading symbol “SCKT.” The following table presents the high and low sales prices of
the Shares for the periods indicated.
| | |
High | |
Low |
| Year Ended December 31, 2015 | |
| | | |
| | |
| First quarter | |
$ | 3.19 | | |
$ | 1.95 | |
| Second quarter | |
$ | 2.35 | | |
$ | 1.85 | |
| Third quarter | |
$ | 2.49 | | |
$ | 2.09 | |
| Fourth quarter | |
$ | 2.49 | | |
$ | 2.25 | |
| Year Ended December 31, 2016 | |
| | | |
| | |
| First quarter | |
$ | 3.25 | | |
$ | 1.82 | |
| Second quarter | |
$ | 4.05 | | |
$ | 2.90 | |
| Third quarter | |
$ | 4.00 | | |
$ | 2.39 | |
| Fourth quarter | |
$ | 4.10 | | |
$ | 2.62 | |
| Year Ended December 31, 2017 | |
| | | |
| | |
| First quarter | |
$ | 4.90 | | |
$ | 3.60 | |
| Second quarter | |
$ | 4.50 | | |
$ | 3.50 | |
| Third quarter | |
$ | 4.59 | | |
$ | 3.60 | |
| Fourth quarter | |
$ | 4.19 | | |
$ | 3.26 | |
| Year Ending December 31, 2018 | |
| | | |
| | |
| First quarter (through February 1, 2018) | |
$ | 3.69 | | |
$ | 3.40 | |
| | |
| | | |
| | |
We have never declared or paid dividends
on the Shares, and intend to follow a policy of retaining earnings to finance the growth of the Company and do not anticipate paying
any cash dividends in the foreseeable future. The declaration and payment of future dividends on the Shares will be at the sole
discretion of our board of directors and will depend on our profitability, the terms of any bank credit agreement and our financial
condition, capital requirements, statutory and contractual restrictions, future prospects and other factors the board of directors
deem relevant.
On February 1, 2018, the last full
trading day prior to the commencement of the Offer, the last reported sale price of the Shares was $3.50 per Share. Stockholders
are urged to obtain current market quotations for the Shares before deciding whether and at what purchase price or purchase
prices to tender their Shares.
9. Source
and Amount of Funds.
The Offer is not subject to any financing
condition. Assuming that 1,250,000 Shares are purchased in the Offer at the maximum purchase price of $4.25 per Share, the aggregate
purchase price for the Shares will be approximately $5.3 million. We plan to fund any purchase of Shares pursuant to the Offer,
including the related fees and expenses, using available cash and funds borrowed under our existing credit facility, which is described
below.
On January 31, 2018, we
entered into a Third Business Financing Modification Agreement (the “Financing Agreement”) with Western
Alliance Bank, successor in interest to Bridge Bank, National Association (“Lender”) that provides for a $2.5
million formula based revolving line of credit and a $4.0 million term loan that we may only use to repurchase shares of our
common stock. We expect to draw down the term loan on or about March 1, 2018. Pursuant to the revolving line of credit, we
are permitted to borrow up to the lesser of $2.5 million or 80% of eligible accounts receivables. Amounts outstanding under
the line of credit bear interest at the “U.S. Prime Rate” published by the Wall Street Journal plus 0.75%.
Interest is payable monthly on the line of credit, and the principal is due upon the maturity date of January 31, 2020.
Amounts outstanding under the term loan bear interest at the “U.S. Prime Rate” published by the Wall Street
Journal plus 1.75%. Following a three month interest only period, the term loan is payable in 45 equal monthly installments
of principal and interest. The loans are secured by all of our present and future assets, including intellectual property and
general intangibles. Termination of the revolving line of credit or term loan prior to its termination date may be subject to
early termination fees, subject to certain exceptions. Amounts repaid or prepaid under the term loan may not be reborrowed.
At the end of each quarter through the quarter ending December 31, 2018, we are required to prepay outstanding term loan
principal in an amount equal to 25% of excess cash flow, as set forth in the Financing Agreement, for the most recent quarter
ended. We are also obligated to pay customary fees for a loan facility of this size and type. We plan to repay amounts
borrowed under the Financing Agreement in connection with the purchase of Shares in this Offer through cash received from our
operations in the ordinary course of business.
The Financing Agreement contains
customary affirmative and negative covenants, including covenants that limit or restrict our ability to, among other things,
grant liens, make investments, incur indebtedness, merge or consolidate, dispose of assets, make acquisitions, pay dividends
or make distributions, repurchase stock, enter into transactions with affiliates and enter into restrictive agreements, in
each case subject to customary exceptions for a credit facility of this size and type. We are also required to maintain
compliance with an asset coverage ratio measured monthly, which requirements increase during the term of the Financing
Agreement, a fixed charge coverage ratio of no less than 1.75x, measured quarterly, and a total funded debt to
trailing twelve months EBITDA multiple of not more than 1.75x, measured monthly.
The Financing Agreement also
contains customary events of default including, among others, payment defaults, breaches of covenants, bankruptcy and
insolvency events, cross defaults with certain material indebtedness, judgment defaults, and breaches of representations and
warranties. Upon an event of default, Lender may declare all or a portion of our outstanding obligations payable to be
immediately due and payable and exercise other rights and remedies provided for under the Financing Agreement. During the
existence of an event of default, interest on the obligations could be increased.
We
will also utilize a portion of our existing cash in connection with the Offer and, as a result, will have reduced liquidity. Reduced
liquidity could have certain material adverse effects on us, including, but not limited to, the following: (i) our available
liquidity in the future for acquisitions, working capital, capital expenditures, and general corporate or other purposes could
be impaired, and additional financing may not be available on terms acceptable to us; (ii) our ability to withstand competitive
pressures may be decreased; and (iii) our reduced level of liquidity may make us more vulnerable to economic downturns, and
reduce our flexibility in responding to changing business, regulatory and economic conditions. After the Offer is completed, we
believe that our then-available cash, cash equivalents and short-term investments, cash flow from operations and access to capital
will continue to provide us with adequate financial resources to meet our working capital requirements and to fund capital expenditures
as well as to engage in strategic activities.
10. Certain
Information Concerning the Company.
General
We are a leading producer of data capture
products for mobile applications used in Retail, Commercial Services, Industrial & Manufacturing, Transportation & Logistics,
and Health Care. Our primary products are cordless data capture devices that connect over Bluetooth and work with applications
running on smartphones, tablets and mobile computers using operating systems from Apple® (iOS), Google™ (Android™)
and Microsoft® (Windows®). We focus on serving the needs of software application developers as scanner sales are primarily
driven by the deployment of barcode and NFC/RFID enabled mobile applications.
We design our own products and subcontract
the manufacturing of product components to independent third-party contract manufacturers who are located in the U.S., Mexico,
Singapore, China, and Taiwan and who have the equipment, know-how and capacity to manufacture products to our specifications. Final
products are assembled, tested, packaged, and distributed at and from our Newark, California facility. We offer the products worldwide
through two-tier distribution enabling customers to purchase from a large number of on-line resellers around the world including
some application developers. The geographic regions we serve include the Americas, Europe, Asia Pacific and Africa.
We believe growth in mobile applications
and the mobile workforce are resulting from technical advances in mobile technologies, cost reductions in mobile devices and the
growing adoption by businesses of mobile applications running on smartphones and tablets, building a growing demand for our products.
Our data capture products address the growing need for speed and accuracy by today’s mobile workers and by the systems supporting
those workers, thereby enhancing their productivity and allowing them to exploit time sensitive opportunities and improve customer
satisfaction.
Available Information
We are subject to the informational filing
requirements of the Exchange Act and, accordingly, are obligated to file reports, statements and other information with the SEC
relating to our business, financial condition and other matters. Information, as of particular dates, concerning our directors
and executive officers, their remuneration, stock options granted to them, the principal holders of our securities and any material
interest of these persons in transactions with us is required to be disclosed in proxy statements distributed to our stockholders
and filed with the SEC. As required by Exchange Act Rule 13e-4(c)(2), we have also filed with the SEC the Schedule TO,
which includes additional information relating to the Offer.
These reports, statements and other information
can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549.
Copies of this material may also be obtained by mail, upon payment of the SEC’s customary charges, from the Public Reference
Section of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The SEC also maintains a website at http://www.sec.gov
that contains reports, proxy and information statements and other information regarding registrants that file electronically with
the SEC, including the Schedule TO and the documents incorporated therein by reference. You may obtain information about the
Public Reference Room by calling the SEC for more information at 1-800-SEC-0330. You may also go to the Investor Relations section
of Company’s website located at http://www.socketmobile.com to access the Schedule TO and related documents.
Incorporation by Reference
The rules of the SEC allow us to “incorporate
by reference” previously-filed information, which means that we can disclose important information to you by referring you
to another document filed separately with the SEC. The following documents that have been previously filed with the SEC contain
important information about us, and we incorporate them by reference (other than any portions of the respective filings that were
furnished to, rather than filed with, the SEC under applicable SEC rules) into this Offer to Purchase:
| · | Annual Report on Form 10-K for the year ended December 31, 2016; |
| · | Definitive Proxy Statement on Schedule 14A, as filed on April 21, 2017; |
| · | Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017, and September 30, 2017; |
| · | Current
Reports on Form 8-K filed on March 21, 2017, May 5, 2017, June 14, 2017, September 5,
2017, and February 2, 2018; and |
| · | Schedule TO-C, as filed on February 2, 2018. |
Any statement contained in any document
incorporated by reference into this Offer to Purchase shall be deemed to be modified or superseded to the extent that an inconsistent
statement is made in this Offer to Purchase or any subsequently filed document. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this Offer to Purchase.
You can obtain any of the documents incorporated
by reference in this Offer to Purchase from the SEC’s website at the address or website set forth above. You may also request
a copy of these filings, at no cost, by writing or telephoning the Information Agent at its address and telephone number set forth
below:
The Information
Agent for the Offer is:
D.F. King & Co., Inc.
48
Wall Street, 22nd Floor
New
York, NY 10005
Banks and Brokers Call: (212) 269-5550
Stockholders Call Toll-Free: (800) 848-3410
Email:
sckt@dfking.com
11. Interests
of Directors and Executive Officers; Transactions and Arrangements Concerning the Shares.
Shares
Outstanding. As of December 31, 2017, we had 7,011,128 Shares issued and outstanding. The 1,250,000 Shares we are offering
to purchase hereunder represent approximately 17.8% of our issued and outstanding Shares as of December 31, 2017.
Beneficial
Ownership. As of December 31, 2017, our directors and current executive officers as a group beneficially owned an aggregate
of 2,194,124 Shares, representing 27.5% of the total number of outstanding Shares as of December 31, 2017, as determined in accordance
with Exchange Act Rule 13d-3. Our directors and executive officers are entitled to participate in the Offer on the same basis
as other stockholders. However, our directors and executive officers have advised us that they do not intend to tender Shares in
the Offer. As a result, the Offer will increase the proportional holdings of our directors and executive officers.
In addition, after expiration or termination
of the Offer, our directors and executive officers may also sell their Shares, subject to applicable law and applicable policies
and practices of the Company, from time to time in open market transactions at prices that may be more or less favorable than the
Final Purchase Price to be paid to our stockholders pursuant to the Offer.
Except as otherwise disclosed in the footnotes
below, the following table sets forth certain information as of December 31, 2017, with respect to the beneficial ownership of
each director and named executive officer of Socket Mobile. As set forth below, Mr. Charlie Bass and Mr. Kevin J. Mills are the
only beneficial owners known by Socket Mobile to hold more than 5% of the Shares. Unless otherwise noted, the address of each person
is c/o Socket Mobile, Inc., 39700 Eureka Drive, Newark, California 94560.
| Name (1) | |
Number of Shares Beneficially Owned (2) | |
Percentage Beneficially Owned (2) |
| Non-Employee Directors: | |
| | | |
| | |
| Charlie Bass (3) | |
| 1,327,234 | | |
| 18.3 | % |
| Nelson C. Chan (4) | |
| 9,667 | | |
| * | |
| Brenton Earl MacDonald (4) | |
| 9,333 | | |
| * | |
| Bill Parnell (4) | |
| 2,333 | | |
| * | |
| Named Executive Officers: | |
| | | |
| | |
| Kevin J. Mills (5) | |
| 370,882 | | |
| 5.1 | % |
| Lee A. Baillif (6) | |
| 167,496 | | |
| 2.3 | % |
| David W. Dunlap (7) | |
| 133,885 | | |
| 1.9 | % |
| James Lopez (4) | |
| 58,042 | | |
| * | |
| Leonard L. Ott (8) | |
| 115,252 | | |
| 1.6 | % |
| | |
| | | |
| | |
| All directors and current executive officers as a group (9 persons) (9) | |
| 2,194,124 | | |
| 27.7 | % |
________________________
* Less than 1.0%
| (1) | To the Company’s knowledge, the persons named in the table have sole voting and investment power with respect to all
Shares shown as beneficially owned by them, subject to community property laws where applicable and the information contained in
the footnotes to this table. |
| (2) | Percentage beneficially owned is based on 7,011,128 Shares issued and outstanding as of December 31, 2017. The number and percentage
of shares beneficially owned is determined under rules of the SEC, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole
or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days of
December 31, 2017, through the exercise of any stock option or other right. |
| (3) | Includes 239,083 Shares subject to options that are exercisable within 60 days of December 31, 2017. |
| (4) | All such Shares are subject to options that are exercisable within 60 days of December 31, 2017. |
| (5) | Includes 219,941 Shares subject to options that are exercisable within 60 days of December 31, 2017. |
| (6) | Includes 137,729 Shares subject to options that are exercisable within 60 days of December 31, 2017. |
| (7) | Includes 125,339 Shares subject to options that are exercisable within 60 days of December 31, 2017. |
| (8) | Includes 113,812 Shares subject to options that are exercisable within 60 days of December 31, 2017 |
| (9) | Includes 915,279 Shares subject to options that are exercisable within 60 days of December 31, 2017. |
Recent
Securities Transactions. Based on our records and on information provided to us by our directors, executive
officers and affiliates, neither we nor any of our directors, executive officers or affiliates have effected any transactions
involving our Shares during the 60 days prior to February 2, 2018, except for Mr. Kevin J. Mills, who gifted 12,000 Shares on
January 9, 2018.
Equity
Incentive Plans. Socket Mobile maintains the 2004 Equity Incentive Plan (“2004 Plan”), which provides for
the grant of incentive stock options, non-statutory stock options, restricted stock, stock appreciation rights and performance
awards. Employees, consultants, and directors of the Company are eligible to receive awards under the 2004 Plan. Under the terms
of the 2004 Plan, options may not be granted at prices lower than fair market value at the date of grant. The maximum term to expiration
of the options granted under the 2004 Plan is ten years from the date of grant, and options are only exercisable upon vesting.
As
of December 31, 2017, an aggregate of 85,337 Shares were available for issuance under the 2004 Plan, and 2,247,026 Shares were
subject to outstanding options (1,746,173 of which were fully vested).
Non-Employee
Director Compensation. Non-employee directors are paid a fee for preparation and attendance at four regularly scheduled
board meetings at the rate of $6,000 per meeting attended, for a maximum of $24,000 per year. Each of our non-employee directors
is also entitled to receive an annual grant of options for service on our board of directors and its committees, as follows:
| Position | |
Number of Shares Subject to Option |
| Member of the Board of Directors | |
| 5,000 | |
| Chairperson of the Board | |
| 2,000 | |
| Audit Committee: | |
| | |
| Chairperson | |
| 3,000 | |
| Member | |
| 2,000 | |
| Compensation Committee: | |
| | |
| Chairperson | |
| 3,000 | |
| Member | |
| 2,000 | |
Options granted to non-employee directors
will generally vest in equal monthly installments over two years. These equity awards are granted pursuant to the 2004 Plan.
Named
Executive Officer Compensation. A portion of the target compensation of our “Named Executive Officers” (our
Chief Executive Officer, Chief Financial Officer and three other most highly compensated executive officers as of our last completed
fiscal year) is in the form of long-term equity compensation, namely stock options. These equity awards are granted pursuant to
the 2004 Plan.
Termination or Change of Control Arrangements
2004
Equity Incentive Plan. In the event of a Change in Control (as defined below) of Socket Mobile, the successor corporation
must assume awards outstanding under the 2004 Plan, or substitute equivalent awards. If there is no assumption or substitution,
such awards will become fully vested and exercisable prior to the change in control.
Severance
Arrangements. Socket Mobile has entered into employment agreements with each of the Company’s named executive
officers that provide for severance benefits upon certain terminations of employment. Should the executive’s employment be
involuntarily terminated and such termination is not (i) for cause or (ii) due to death or disability, the executive is entitled
under the agreement to:
·
receive an involuntary termination payment consisting of his regular base salary for a period of two (2) months plus one
month for each completed two years of service up to a maximum of five (5) months following termination;
·
receive one additional month of compensation upon signing a mutual termination agreement;
·
receive reimbursement for payment of his COBRA health premiums for the lesser of the amount of time of the involuntary
termination payment or until he is eligible for the health insurance benefits provided by another employer;
·
receive the variable compensation amounts to which he would otherwise be entitled as prescribed in the Company’s
variable incentive compensation plan; and
·
purchase from the Company at book value certain items that were purchased by the Company for his use.
Stock options granted to the executive
shall cease vesting immediately upon the date of termination of employment, and vested stock options will be exercisable after
termination for the lesser of one year or the expiration date of the grant. In the event of voluntary termination with at least
60 days’ notice by an executive who has more than ten years of consecutive service to the Company, the executive’s
vested stock options will be exercisable after termination for the remaining life of the grants.
The employment agreements also
provide for compensation in the event of a Change in Control (as defined below), consisting of an involuntary termination payment
as described above and a payment equal to 1% of the consideration payable in connection with a Change in Control provided that
the price offered for the Company’s common stock is equal to or greater than $5.00 per share. Each employment agreement
expires on June 30, 2018, unless the Company fails to provide the executive with notice of intent to renew or not renew the agreement
of at least six months prior to expiration, in which case the expiration date of such agreement shall be December 31, 2018.
Definition
of “Change in Control.” With respect to the 2004 Plan and the employment agreements, a “Change in
Control” generally means:
·
The acquisition by any person of 50% or more of the total voting power of Socket Mobile’s then outstanding voting
securities;
·
The consummation of a merger or consolidation involving Socket Mobile where the outstanding securities of Socket Mobile
immediately prior to the merger or consolidation no longer represent at least 50% of the voting power of the surviving entity
immediately after such merger or consolidation; or
·
The consummation of the sale or disposition of all or substantially all of Socket Mobile’s assets.
Retirement Benefits Under 401(k) Plan
We maintain a 401(k) plan, which is broadly
available to our general employee population.
Indemnification Agreements
We have entered into indemnification agreements
with each of our executive officers and directors. Such indemnification agreements require us to indemnify these individuals to
the fullest extent permitted by law.
General
The
foregoing description of agreements and arrangements involving Shares are qualified in their entirety by reference to the text
of the respective agreement or arrangement, copies of which have been filed with the SEC. Except as otherwise described
or incorporated by reference in this Offer to Purchase, none of Socket Mobile nor, to the best of our knowledge, any of its affiliates,
directors or executive officers, is a party to any contract, arrangement, understanding or relationship with any other person relating,
directly or indirectly, to the Offer or with respect to any securities of Socket Mobile, including any contract, arrangement, understanding
or relationship concerning the transfer or the voting of securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of proxies, consents or authorizations.
12. Certain
Legal Matters; Regulatory Approvals.
We are not aware of any license or regulatory
permit that is reasonably likely to be material to our business that might be adversely affected by our acquisition of Shares as
contemplated in the Offer or of any approval or other action by any government or governmental, administrative or regulatory authority
or agency, domestic, foreign or supranational, that would be required for our acquisition or ownership of Shares as contemplated
by the Offer. Should any approval or other action be required, we presently contemplate that we will seek that approval or other
action, but we have no current intention to delay the purchase of Shares tendered pursuant to the Offer pending the outcome of
any such matter, subject to our right to decline to purchase Shares if any of the conditions in Section 7 have occurred or
are deemed by us to have occurred or have not been waived. We cannot predict whether we would be required to delay the acceptance
for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter. We cannot assure you
that any approval or other action, if needed, would be obtained or would be obtained without substantial cost or conditions or
that the failure to obtain the approval or other action might not result in adverse consequences to our business and financial
condition. If certain types of adverse actions are taken with respect to the matters discussed above, or certain approvals, consents,
licenses or permits identified above are not obtained, we can decline to accept for payment or pay for any Shares tendered. See
Section 7.
13. Certain
U.S. Federal Income Tax Consequences.
The following is a summary of certain
U.S. federal income tax consequences of the Offer to stockholders whose Shares are properly tendered and accepted for payment pursuant
to the Offer. Those stockholders who do not participate in the Offer will not incur any U.S. federal income tax liability from
the Offer. This summary is based on U.S. Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations
thereunder and administrative interpretations and judicial decisions, all as in effect on the date of this Offer to Purchase and
all of which are subject to change, with possible retroactive effect. This summary addresses only Shares held as “capital
assets” within the meaning of Section 1221 of the Code (generally, property held for investment). It does not purport
to address all of the tax consequences that may be relevant to a particular stockholder in light of that stockholder’s particular
circumstances and does not apply to persons subject to special treatment under U.S. federal income tax law (including, without
limitation, certain financial institutions, brokers, dealers or traders in securities or commodities, insurance companies, mutual
funds, regulated investment companies, real estate investment trusts, “S” corporations, partnerships or other pass-through
entities (including entities treated as such for U.S. federal income tax purposes), expatriates, tax-exempt organizations, tax-qualified
retirement plans, persons who are subject to alternative minimum tax, persons who hold Shares as a position in a “straddle”
or as part of a “hedging,” “conversion” or “integrated” transaction, persons owning (actually
or constructively) more than 5% of our outstanding Shares or persons that have a functional currency other than the U.S. dollar).
This summary does not apply to Shares acquired as compensation, upon the exercise of stock options, under a tax-qualified retirement
plan or under the Company’s employee stock purchase plan. This summary also does not address tax consequences arising under
any laws other than U.S. federal income tax laws, including under state, local or foreign laws, or under U.S. federal estate or
gift tax laws. This summary also does not address the 3.8% Medicare surtax on “net investment income,” including, among
other things, dividends and net gain from dispositions of property (other than property held in a trade or business), to which
certain individuals, estates and trusts whose income exceeds certain thresholds may be subject.
In addition, if a partnership (including
any entity treated as a partnership for U.S. federal income tax purposes) is a stockholder, the tax treatment of a partner in the
partnership generally will depend upon the status of the partner and the activities of the partner and the partnership. A stockholder
that is a partnership, and partners in such partnership, should consult their own tax advisors regarding the tax consequences of
participating in the Offer.
This summary is not intended to constitute
a complete analysis of all tax considerations relevant to a particular stockholder. Accordingly, the following summary of certain
U.S. federal income tax consequences is for informational purposes only and is not a substitute for careful tax planning and advice
based upon the particular circumstances pertaining to a stockholder. Each stockholder is urged to consult its own tax advisor regarding
the federal, state, local, foreign and other tax consequences of participating in the Offer.
For purposes of this summary, a “U.S.
Holder” is a beneficial owner of Shares that is, for U.S. federal income tax purposes:
| · | an individual who is a citizen or resident of the United States; |
| · | a corporation (or other entity or arrangement taxable as a corporation for U.S. federal income tax purposes) created or organized
in or under the laws of the United States, any state thereof or the District of Columbia; |
| · | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
| · | a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the
trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) the trust has
a valid election in effect to be treated as a U.S. person for U.S. federal income tax purposes. |
A “Non-U.S. Holder” is a
beneficial owner of Shares that is, for U.S. federal income tax purposes:
| · | a nonresident alien individual; |
| · | a foreign corporation; or |
| · | a foreign estate or trust. |
Consequences of the Offer to U.S. Holders
Characterization
of the Purchase of Shares Pursuant to the Offer. Our purchase of Shares from a U.S. Holder pursuant to the Offer generally
will be a taxable transaction for U.S. federal income tax purposes. The U.S. federal income tax consequences to a U.S. Holder may
vary depending on the U.S. Holder’s particular facts and circumstances. Under Section 302 of the Code, the sale of Shares
by a stockholder for cash pursuant to the Offer will be treated as a “sale or exchange” of Shares for U.S. federal
income tax purposes, rather than as a distribution with respect to the Shares held by the tendering U.S. Holder, if the sale (i) results
in a “complete redemption” of the U.S. Holder’s equity interest in us under Section 302(b)(3) of the Code,
(ii) is a “substantially disproportionate” redemption with respect to the U.S. Holder under Section 302(b)(2)
of the Code or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. Holder under Section 302(b)(1)
of the Code, each as described below (the “Section 302 tests”).
| · | Complete Redemption. The receipt of cash by a U.S. Holder will be a “complete redemption” of the U.S. Holder’s
equity interest in us if either (i) the U.S. Holder owns no Shares, actually or constructively, immediately after the Shares
are sold pursuant to the Offer or (ii) the U.S. Holder actually owns no Shares immediately after the Shares are sold pursuant
to the Offer and, with respect to Shares constructively owned by the U.S. Holder immediately after the offer, the U.S. Holder is
eligible to waive, and effectively waives, constructive ownership of all such Shares under procedures described in Section 302(c)
of the Code and applicable Treasury regulations. U.S. Holders wishing to satisfy the “complete redemption” test through
waiver of attribution are urged to consult their own tax advisors regarding the requirements, mechanics and desirability of such
a waiver. |
| · | Substantially Disproportionate. The receipt of cash by a U.S. Holder will be “substantially disproportionate”
if the percentage of our outstanding Shares actually and constructively owned by the U.S. Holder immediately following the sale
of Shares pursuant to the Offer is less than 80% of the percentage of our outstanding Shares actually and constructively owned
by the U.S. Holder immediately before the sale of Shares pursuant to the Offer. |
| · | Not Essentially Equivalent to a Dividend. The receipt of cash by a U.S. Holder will be “not essentially equivalent
to a dividend” if the surrender of Shares pursuant to the Offer results in a “meaningful reduction” in the U.S.
Holder’s equity interest in us, given the U.S. Holder’s particular facts and circumstances. The IRS has indicated in
published guidance that even a small reduction in the proportionate interest of a small minority stockholder in a publicly and
widely held corporation who exercises no control over corporate affairs may constitute a “meaningful reduction.” |
Contemporaneous dispositions or acquisitions
of Shares by a U.S. Holder or related individuals or entities may be deemed to be part of a single integrated transaction and may
be taken into account in determining whether the Section 302 tests have been satisfied. Each U.S. Holder should be aware that,
because proration may occur in the Offer, even if all of the Shares actually and constructively owned by a U.S. Holder are tendered
pursuant to the Offer, fewer than all of such Shares may be purchased by us. Thus, proration may affect whether the surrender of
Shares by a U.S. Holder pursuant to the Offer will meet any of the Section 302 tests. See Section 6 for information regarding
an option to make a conditional tender of a minimum number of Shares. U.S. Holders are urged to consult their own tax advisors
regarding whether to make a conditional tender of a minimum number of Shares, and the appropriate calculation thereof.
U.S. Holders are urged to consult
their own tax advisors regarding the application of the three Section 302 tests to their particular circumstances, including
the effect of the constructive ownership rules on their sale of Shares pursuant to the Offer.
Sale
or Exchange Treatment. A U.S. Holder that satisfies any of the Section 302 tests generally will recognize gain or loss
equal to the difference between the amount of cash received under the Offer and the U.S. Holder’s tax basis in such Shares.
Such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s
holding period for the Shares is more than one year at the time of disposition. Long-term capital gain is currently subject to
a reduced rate of tax for non-corporate U.S. Holders. Certain limitations apply to the deductibility of capital losses. A U.S.
Holder must calculate gain or loss separately for each block of Shares (generally, Shares acquired at the same cost in a single
transaction).
Distribution
Treatment. If a U.S. Holder does not satisfy any of the Section 302 tests, the full amount received by the U.S.
Holder pursuant to the Offer will be treated as a distribution to the U.S. Holder with respect to the U.S. Holder’s Shares,
and the U.S. Holder’s tax basis in the Shares surrendered generally will be added to any Shares retained by the U.S. Holder.
This distribution will be treated as a dividend to the extent of the U.S. Holder’s share of our current and accumulated earnings
and profits, if any, as determined under U.S. federal income tax principles. Such a dividend would be includible in the U.S. Holder’s
gross income without reduction for the tax basis of the surrendered Shares, and no current loss would be recognized. Currently,
dividends are taxable at a maximum rate of 20% for non-corporate U.S. Holders if certain holding period and other requirements
are met. To the extent that the amount received by a U.S. Holder exceeds the U.S. Holder’s share of our current and accumulated
earnings and profits, the excess first will be treated as a tax-free return of capital to the extent of the U.S. Holder’s
tax basis in its Shares and then as capital gain from the sale or exchange of Shares.
To the extent that a corporate U.S. Holder
is treated as receiving a dividend, it may be (i) eligible for a dividends received deduction (subject to applicable limitations)
and (ii) subject to the “extraordinary dividend” provisions of Section 1059 of the Code. Each corporate U.S.
Holder should consult its own tax advisor as to availability of the dividends received deduction and the application of Section 1059
of the Code in light of its particular circumstances.
Information
Reporting and Backup Withholding. In general, payments of dividends on the Shares and payments of the proceeds of a
sale or exchange of Shares may be reported to the IRS and may be subject to backup withholding (currently at a rate of 28%) unless
the U.S. Holder: (i) comes within certain exempt categories (which generally include corporations) and, when required, demonstrates
that fact; or (ii) timely provides (usually on IRS Form W-9) a correct taxpayer identification number and certifies under
penalty of perjury that the taxpayer identification number is correct and that the holder is not subject to backup withholding
because of a failure to report all dividend and interest income. Backup withholding is not an additional tax but is, instead, an
advance payment of tax that may be refunded to the extent it results in an overpayment of tax provided that the required information
related to such refund is timely provided to the IRS. The Company will comply with all applicable reporting and withholding requirements
of the IRS.
Consequences of the Offer to Non-U.S. Holders
The following discussion applies only
to Non-U.S. Holders and assumes that no item of income, gain, deduction or loss derived by the Non-U.S. Holder in respect of any
Share at any time is effectively connected with the conduct of a U.S. trade or business. Special rules, not discussed herein, may
apply to certain Non-U.S. Holders, such as: certain former citizens or residents of the United States; controlled foreign corporations;
passive foreign investment companies; corporations that accumulate earnings to avoid U.S. federal income tax; investors in pass-through
entities that are subject to special treatment under the Code; and Non-U.S. Holders that are engaged in the conduct of a U.S. trade
or business.
Sale
or Exchange Treatment. Gain realized by a Non-U.S. Holder on a sale of Shares pursuant to the Offer generally will not be subject
to U.S. federal income tax if the sale is treated as a “sale or exchange” pursuant to the Section 302 tests described
above under “Consequences of the Offer to U.S. Holders — Characterization of the Purchase of Shares Pursuant to the
Offer” unless:
| · | the Non-U.S. Holder is an individual present in the United States for 183 or more days in the taxable year of the disposition
and certain other conditions are met, in which case the gain generally will be subject to tax at a rate of 30%; or |
| · | we are or have been a U.S. real property holding corporation during the relevant statutory period. We do not believe that we
currently are, or have been during the relevant statutory period, a U.S. real property holding corporation. |
Distribution
Treatment. If a Non-U.S. Holder does not satisfy any of the Section 302 tests explained above, the full amount
received by the Non-U.S. Holder will be treated as a distribution with respect to the Non-U.S. Holder’s Shares. The treatment,
for U.S. federal income tax purposes, of such distribution as a dividend, tax-free return of capital, or gain from the sale of
Shares will be determined in the manner described above under “Consequences of the Offer to U.S. Holders — Distribution
Treatment.” To the extent that amounts received by a Non-U.S. Holder are treated as dividends, such dividends will be subject
to U.S. federal withholding tax at a rate of 30%, or a lower rate specified in an applicable income tax treaty. To obtain a reduced
rate of withholding under an income tax treaty, a Non-U.S. Holder must provide a properly executed IRS Form W-8BEN certifying,
under penalties of perjury, that the Non-U.S. Holder is a non-U.S. person and the dividends are subject to a reduced rate of withholding
under an applicable income tax treaty.
The Depositary (or other applicable
withholding agent) will withhold at a 30% rate on the gross proceeds of the Offer payable to a Non-U.S. Holder unless the Non-U.S.
Holder provides the Depositary (or other applicable withholding agent) with a properly executed IRS Form W-8BEN establishing that
a reduced rate of, or exemption from, withholding is available under an applicable income tax treaty.
A Non-U.S. Holder may be eligible to
obtain a refund of all or a portion of any tax withheld if such Non-U.S. Holder satisfies one of the Section 302 tests described
above or is otherwise able to establish that no withholding or a reduced amount of withholding is due. Backup withholding (described
below) generally will not apply to amounts subject to the 30% or treaty-reduced rate of United States federal income tax withholding.
NON-U.S. HOLDERS MAY BE SUBJECT TO
INCOME TAX ON THE SALE OF SHARES PURSUANT TO THE OFFER EVEN IF SUCH HOLDERS WOULD NOT BE SUBJECT TO TAX IF THOSE SAME SHARES WERE
SOLD ON THE OPEN MARKET. NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE U.S. FEDERAL INCOME TAX CONSEQUENCES
OF PARTICIPATION IN THE OFFER, INCLUDING THE APPLICATION OF U.S. FEDERAL INCOME TAX WITHHOLDING RULES, ELIGIBILITY FOR A REDUCTION
OF OR AN EXEMPTION FROM WITHHOLDING TAX, AND THE REFUND PROCEDURE.
Information
Reporting and Backup Withholding. A payment made to a Non-U.S. Holder in the Offer and the amount of tax, if any, withheld
from such payment may be reported to the IRS. The IRS may make this information available under the provisions of an applicable
income tax treaty to the tax authorities in the country in which the Non-U.S. Holder is resident.
Provided that a Non-U.S. Holder has complied
with certain reporting procedures (usually satisfied by providing an IRS Form W-8BEN) or otherwise establishes an exemption, the
Non-U.S. Holder generally will not be subject to backup withholding with respect to amounts received in the Offer that are (i) a
dividend or (ii) the proceeds from a sale or exchange of Shares. Additional rules relating to information reporting requirements
and backup withholding with respect to the payment of proceeds from a sale or exchange of Shares are as follows:
| · | If the proceeds are paid to or through the U.S. office of a broker, a Non-U.S. Holder generally will be a subject to backup
withholding and information reporting unless the Non-U.S. Holder certifies under penalties of perjury that it is not a U.S. person
(usually on an IRS Form W-8BEN) or otherwise establishes an exemption. |
| · | If the proceeds are paid to or through a non-U.S. office of a broker that is a U.S. person or that has certain specified U.S.
connections, a Non-U.S. Holder generally will be subject to information reporting (but generally not backup withholding) unless
the Non-U.S. Holder certifies under penalties of perjury that it is not a U.S. person (usually on an IRS Form W-8BEN) or otherwise
establishes an exemption. |
| · | If the proceeds are paid to or through a non-U.S. office of a broker that is not a U.S. person and does not have any of the
specified U.S. connections, a Non-U.S. Holder generally will not be subject to backup withholding or information reporting. |
Backup withholding is not an additional
tax. Any amounts withheld under the backup withholding rules will be allowed as a credit against the Non-U.S. Holder’s U.S.
federal income tax liability and may entitle the holder to a refund, provided that the required information is timely furnished
to the IRS.
Consequences of the Offer to Holders of Shares that
Do Not Tender in the Offer
The Offer will have no U.S. federal income
tax consequences to our stockholders that do not tender any Shares in the Offer.
THE TAX DISCUSSION SET FORTH ABOVE
IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. YOU ARE URGED TO CONSULT YOUR TAX ADVISOR TO DETERMINE THE PARTICULAR
TAX CONSEQUENCES TO YOU OF THE OFFER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
14. Extension
of the Offer; Termination; Amendment.
We expressly reserve the right to extend
the period of time the Offer is open and delay acceptance for payment of, and payment for, any Shares by giving oral or written
notice of such extension to the Depositary and making a public announcement of such extension. During any such extension, all Shares
previously tendered and not properly withdrawn will remain subject to the Offer and to the rights of a tendering stockholder to
withdraw such stockholder’s Shares.
We also expressly reserve the right,
in our sole discretion, not to accept for payment and not pay for any Shares not previously accepted for payment or paid for, subject
to applicable law, to postpone payment for Shares or terminate the Offer upon the occurrence of any of the conditions specified
in Section 7 by giving oral or written notice of the termination or postponement to the Depositary and making a public announcement
of the termination or postponement. Our reservation of the right to delay payment for Shares that we have accepted for payment
is limited by Exchange Act Rule 13e-4(f)(5), which requires that we must pay the consideration offered or return the Shares
tendered promptly after termination or withdrawal of the Offer.
Subject to compliance with applicable
law, we further reserve the right, in our reasonable discretion, and regardless of whether any of the events set forth in Section 7
have occurred or are deemed by us to have occurred, to amend the Offer in any respect, including, without limitation, by changing
the per Share purchase price range or by increasing or decreasing the number of Shares sought in the Offer. Amendments to the Offer
may be made at any time and from time to time by public announcement of the amendment. In the case of an extension, the notice
of amendment shall be issued no later than 9:00 a.m., New York City time, on the next business day after the last previously scheduled
or announced Expiration Date. Any public announcement made pursuant to the Offer will be disseminated promptly to stockholders
in a manner reasonably designed to inform stockholders of the change. Without limiting the manner in which we may choose to make
a public announcement, except as required by applicable law, we will have no obligation to publish, advertise or otherwise communicate
any public announcement other than by issuing a press release to the Dow Jones News Service or comparable service.
If we materially change the terms of
the Offer or the information concerning the Offer, or if we waive a material condition of the Offer, we will extend the Offer to
the extent required by Exchange Act Rule 13e-4(e)(3) and 13e-4(f)(1). This rule and related releases and interpretations of
the SEC provide that the minimum period during which an Offer must remain open following material changes in the terms of the Offer
or information concerning the Offer (other than a change in price or a change in percentage of securities sought) will depend on
the facts and circumstances, including the relative materiality of the terms or information. If:
| · | we increase or decrease the price range to be paid for Shares or increase or decrease the number of Shares sought in the Offer,
and, in the event of an increase in the number of Shares purchased in the Offer, the number of shares accepted for payment in the
Offer increases by more than 2% of the outstanding Shares, and |
| · | the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from,
and including, the date that notice of such an increase or decrease is first published, sent or given to security holders in the
manner specified in this Section 14, |
then in each case the Offer will be extended
until the expiration of the period of at least ten business days from and, including, such date.
If we increase the number of Shares purchased
in the Offer such that the additional number of Shares accepted for payment in the Offer does not exceed 2% of the outstanding
Shares, this will not be deemed a material change to the terms of the Offer and we will not be required to amend or extend the
Offer. See Section 1.
15. Fees
and Expenses.
We have retained D.F. King & Co.,
Inc. to act as Information Agent in connection with the Offer. The Information Agent may contact stockholders by mail, telephone,
facsimile and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating
to the Offer to beneficial owners. D.F. King & Co., Inc., in its capacity as Information Agent, will receive reasonable and
customary compensation for its services, will be reimbursed by us for reasonable out-of-pocket expenses incurred in connection
with the Offer and will be indemnified against certain liabilities in connection with the Offer, including certain liabilities
under the federal securities laws.
We have also retained American Stock
Transfer & Trust Company, LLC to act as Depositary in connection with the Offer. American Stock Transfer & Trust Company,
LLC, in its capacity as Depositary, will receive reasonable and customary compensation for its services, will be reimbursed by
us for reasonable out-of-pocket expenses incurred in connection with the Offer and will be indemnified against certain liabilities
in connection with the Offer, including certain liabilities under the federal securities laws.
We will not pay any fees or commissions
to brokers, dealers or other persons (other than fees to the Information Agent and the Depositary as described above) for soliciting
tenders of Shares pursuant to the Offer. Stockholders holding Shares through brokers, dealers or other nominee stockholders are
urged to consult the brokers, dealers or other nominee stockholders to determine whether transaction costs may apply if stockholders
tender Shares through the brokers, dealers or other nominee stockholders and not directly to the Depositary. We will, however,
upon request, reimburse brokers, dealers and commercial banks for customary mailing and handling expenses incurred by them in forwarding
the Offer and related materials to the beneficial owners of Shares held by them as a nominee or in a fiduciary capacity. No broker,
dealer, commercial bank or trust company has been authorized to act as our agent, or the agent of the Information Agent or the
Depositary, for purposes of the Offer. We will pay or cause to be paid all stock transfer taxes, if any, on our purchase of Shares,
except as otherwise provided in Section 5 hereof.
16. Miscellaneous.
We are not aware of any state where the
making of the Offer is not in compliance with applicable law. If we become aware of any state where the making of the Offer is
not in compliance with the laws of such state, we will make a good faith effort to comply with the applicable state law. If, after
good faith effort, we cannot comply with the applicable state law, we will not make the Offer to, nor will we accept tenders from
or on behalf of, the holders of Shares residing in that state. In any state where the securities or blue sky laws require the Offer
to be made by a licensed broker or dealer, the Offer shall be deemed to be made on our behalf by one or more registered brokers
or dealers licensed under the laws of such state.
After completing the Offer, we may consider
various forms of share repurchases, including open market purchases, tender offers, privately negotiated transactions and/or accelerated
share repurchases after taking into account our results of operations, financial position and capital requirements, general business
conditions, legal, tax and regulatory constraints or restrictions and other factors we deem relevant.
Pursuant to Rule 13e-4(c)(2) under
the Exchange Act, we have filed with the SEC the Schedule TO, which contains additional information relating to the Offer.
The Schedule TO, including the exhibits and any amendments and supplements thereto, may be examined, and copies may be obtained,
at the same places and in the same manner as is set forth in Section 10 with respect to information concerning Socket Mobile.
Rule 13e-4(f) under the Exchange
Act prohibits us and our affiliates from purchasing any Shares other than in the Offer until at least ten business days after the
Expiration Date. Accordingly, any additional purchases outside of the Offer may not be consummated until at least ten business
days after the Expiration Date.
You should rely only on the information
contained in this document or to which we have referred you. We have not authorized anyone to provide you with information or to
make any representation on our behalf in connection with the Offer other than those contained in this Offer to Purchase and the
related Letter of Transmittal. If given or made, you should not rely on that information or representation as having been authorized
by us, any member of the board of directors, the Depositary or the Information Agent.
WE HAVE NOT AUTHORIZED ANY PERSON
TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER YOU SHOULD TENDER OR NOT TENDER YOUR SHARES IN THE OFFER. WE HAVE NOT AUTHORIZED
ANY PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS
DOCUMENT OR IN THE LETTER OF TRANSMITTAL. ANY RECOMMENDATION OR ANY SUCH INFORMATION OR REPRESENTATION MADE BY ANYONE ELSE MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SOCKET MOBILE, INC., THE DEPOSITARY OR THE INFORMATION AGENT.
Socket Mobile, Inc.
February 2, 2018
The Letter of Transmittal, certificates
for Shares and any other required documents should be sent or delivered by each stockholder of the Company or his or her broker,
dealer, commercial bank, trust company or other nominee to the Depositary as follows:
The Depositary for the Offer is:
| If delivering by mail: |
If delivering by hand, express mail, courier or any other expedited service: |
|
American Stock Transfer & Trust
Company, LLC
Operations
Center
Attn: Reorganization Department
P.O.
Box 2042
New
York, New York 10272-2042
|
American Stock Transfer & Trust
Company, LLC
Operations
Center
Attn: Reorganization Department
6201 15th Avenue
Brooklyn,
New York 11219
|
Delivery of the Letter of Transmittal
to an address other than as set forth above will not constitute a valid delivery to the Depositary.
Any questions or requests for assistance
may be directed to the Information Agent at its telephone number and address set forth below. Requests for additional copies of
this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery or related documents may be directed to the
Information Agent at the telephone number and address set forth below. You may also contact your broker, dealer, commercial bank,
trust company or nominee for assistance concerning the tender offer. To confirm delivery of shares, stockholders are directed to
contact the Depositary.
The Information Agent
for the Offer is:
D.F. King & Co., Inc.
48
Wall Street, 22nd Floor
New
York, NY 10005
Banks and Brokers Call: (212) 269-5550
Stockholders Call Toll-Free: (800) 848-3410
Email:
sckt@dfking.com
