EXHIBIT 16.1
PricewaterhouseCoopers, LLP
Ten Almaden Boulevard, Suite 1600
San Jose, California 95113
August 12, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the statements made by Datalink Systems Corporation (copy
attached) which we understand were filed with the Commission, pursuant to Item
4 of Form 8-K/A, as part of the Company's Form 8-K/A report as of July 17,
1998. Further to our letter to the Commission of July 27, 1998, we agree with
the statements concerning our Firm contained in such Form 8-K/A, except as set
forth below:
Paragraph 4 of the Company's response states: "During the course of the
fiscal year ended March 31, 1997, PwC did not recommend the application of
EITF 88-18 to the treatment of such revenues for purposes of the Company's
financial disclosure in its quarterly SEC filings. However, prior to filing
the Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997 (the
"1997 10-KSB"), PwC introduced the EITF 88-18 treatment to said revenues."
The Company filed on September 11, 1996 an amended 8-K/A, which included the
audited financial statements of DSC Datalink Systems Corporation, as of
December 31, 1995 and 1994 and for the years ended December 31, 1995 and 1994
and for the period from June 15, 1993 (date of inception) to December 31,
1995. Note 9 to the aforementioned financial statements discloses the
applicability of EITF 88-18 to the sale of technology. In addition, the
applicability of EITF 88-18 was discussed in detail with senior management of
the Company in August 1996.
Paragraph 7 of the Company's response states: "With the intention of
researching the EITF 88-18 treatment, the Company consulted with two
accounting consultants regarding clarification of the foregoing issue;
however, the Company did not, and disclaims any suggestion that it did, seek
the opinion of any accountant other than PwC." Senior management of the
Company had advised PwC that the Company had sought the advice of several
accounting firms, including an accounting firm that provides tax consulting to
the Company, and an economic consulting firm.
Paragraph 11 of the Company's response states: "COMPANY RESOLUTION: The
Company was late in filing the 1997 10-KSB. This was in large part due to
requirements made by PwC during July 1997 to make last minute adjustments to
the 10-KSB as required by the unexpected application of EITF 88-18. PwC
delivered its original, manually executed report on the Company's financial
statements for the year ended March 31, 1997 under a cover letter dated August
12, 1997. This is the same date of PwC's consent to refer to and include its
report in the 1997 10-KSB. The 1997 10-KSB was subsequently filed on August
12, 1997. The last minute adjustments required for the 1997 10-KSB also
applied to the report for the quarter ended June 30, 1997 and caused this
report to be filed one date late. The Company has since filed all reports
required to be filed by it pursuant to the Exchange Act on a timely basis."
The delay in the Company's filing of the 1997 10-KSB was the result of the
Company's inability to reconcile certain common stock and stock option
activity on a timely basis and the Company's continued resistance with respect
to the previously reported disagreements.
Paragraph 13 of the Company's response states: "COMPANY RESOLUTION: All
adjustments related to the sale of technology were made as a result of the
implementation of EITF 88-18. Adjustments to accounts payable, accrued
liabilities, and common stock transactions were required due to Company
practices occurring prior to the Company becoming publicly held. After the
Company became public, all required adjustments were completed. PwC has since
audited and issued its report on the Company's financial statements for the
fiscal year ended March 31, 1998." The Company practices in question also
dealt with transactions subsequent to the Company becoming publicly held.
Paragraph 15 of the Company's response states: "COMPANY RESOLUTION: The
claimed inadequacy of records maintained by the Company related to certain
prior common stock transactions were considered to be the result of past
practices prior to the date the Company became a public company." Company
agreed that the proposed audit adjustments related to common stock
transactions were appropriate and proper. The Company practices in question
also dealt with transactions subsequent to the Company becoming publicly held.
Paragraph 16 of the Company's response states: "In addition, PwC states in
the response letter (Exhibit 16) that "material audit adjustments were
necessary" causing a need for the Company to restate its report for the
quarter ended December 31, 1997, in Form 10-QSB. Although Company management
is unaware of any communications made by PwC during the March 31, 1998 audit
advising the necessity of material adjustments to its report for the quarter
ended December 31, 1997, in Form 10-QSB, the Company is prepared to make any
adjustments that PwC requires." In June 1998 PwC advised senior management of
the Company's need to amend Form 10-QSB for the quarter ended December 31,
1997.
Very truly yours,
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP