-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KTa4ycMiTEdTdxMKe+WR8AhfDObzgQwbs1CBwXefaz3PMHxtgW9kG2jzoZAX98OT ak71FfyUbjS0Y0s/xov6eA== 0000948830-99-000072.txt : 19990209 0000948830-99-000072.hdr.sgml : 19990209 ACCESSION NUMBER: 0000948830-99-000072 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATALINK SYSTEMS CORP /CA/ CENTRAL INDEX KEY: 0000832370 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 353574355 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-71969 FILM NUMBER: 99524086 BUSINESS ADDRESS: STREET 1: 1735 TECHNOLOGY WAY STREET 2: STE 790 CITY: SAN JOSE STATE: CA ZIP: 95110 BUSINESS PHONE: 4083671700 MAIL ADDRESS: STREET 1: 1705 TECHNOLOGY WAY STREET 2: SUITE 790 CITY: SAN JOSE STATE: CA ZIP: 95110 FORMER COMPANY: FORMER CONFORMED NAME: PLATINUM PRODUCTIONS INC /CO DATE OF NAME CHANGE: 19930803 FORMER COMPANY: FORMER CONFORMED NAME: LORD ABBOTT INC DATE OF NAME CHANGE: 19920703 S-3 1 As filed with the Securities and Exchange Commission on February 8, 1999 SEC Registration No. 333- U.S. SECURITIES AND EXCHANGE COMMISSION FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 DATALINK SYSTEMS CORPORATION ----------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Nevada 36-3574355 - ---------------------------- ----------------------------------- (State or Other Jurisdiction (IRS Employer Identification Number) of Incorporation) 1735 Technology Drive, Suite 790, San Jose, California 95110 (408) 367-1700 -------------------------------------------------------------- (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) Anthony N. LaPine, President 1735 Technology Drive, Suite 790, San Jose, California 95110 (408) 367-1700 ------------------------------------------------------------- (Name, Address and Telephone Number of Agent for Service) Copy to: Jon D. Sawyer, Esq. Krys Boyle Freedman & Sawyer, P.C. 600 17th Street, Suite 2700 South Tower Denver, Colorado 80202 (303) 893-2300 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: ___ If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: _X_ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ___ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering: ___ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: ___
CALCULATION OF REGISTRATION FEE Proposed Proposed Maximum Maximum Title of Each Class Offering Aggregate Amount of of Securities to be Amount to be Price Per Offering Registration Registered Registered Unit Price Fee - ----------------------------------------------------------------------------- Common Stock, $.001 4,390,006 $2.625 $11,523,766 $3,203.61 Par Value Common Stock 2,054,313 $ -- $ -- $ - Purchase Warrants - ------------------------------------------------------------------------------ In accordance with Rule 416 under the Securities Act of 1933, this Registration Statement also covers an indeterminable number of shares of Common Stock, $.001 par value, as may become issuable upon conversion of the Series A Convertible Preferred Stock and the exercise of the Common Stock Purchase Warrants to prevent dilution resulting from stock splits, stock dividends, and similar transactions in accordance with the terms of the Series A Convertible Preferred Stock and the Common Stock Purchase Warrants. Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) based on the average of the closing bid and ask prices of the Common Stock as reported on the OTC Bulletin Board on February 4, 1999. Pursuant to Rule 457(g), no registration fee is required for the Common Stock Purchase Warrants since the shares of Common Stock underlying such warrants are being registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. PROSPECTUS SUBJECT TO COMPLETION DATED FEBRUARY 8, 1999 - ------------------------------------------------------------------------------ The information in this Prospectus is not complete and may be changed. The securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. DATALINK SYSTEMS CORPORATION 4,390,006 Shares of Common Stock 2,054,313 Warrants The Shares of Common Stock and the Warrants are being offered by certain Selling Securityholders. We will not receive any of the proceeds from the sale of the Shares or the Warrants by the Selling Securityholders. We will receive proceeds from any exercise of the Warrants. The Common Stock is traded in the over-the-counter market and is quoted on the OTC Bulletin Board (Symbol: NETD). On February 4, 1999, the closing bid and ask prices of the Common Stock were $2.4375 and $2.8125, respectively. This investment involves a high degree of risk. You should purchase shares only if you can afford a complete loss. See "Risk Factors" beginning on page 4. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. _________, 1999 TABLE OF CONTENTS PAGE COMPANY SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . 3 RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 RECENT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 7 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . 9 SELLING SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . 9 PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . 14 LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 16 EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE . . . . . . . . 16 2 COMPANY SUMMARY Datalink is an Internet-based company that provides personalized financial and lifestyle information to customers' wireless communication devices. We have developed technology that combines real-time data feeds, the World Wide Web and wireless communications to provide individually tailored information services to customers' pagers and digital cellular phones. Our web site and customer support team provide account maintenance services that allow subscribers to customize the types of information alerts they receive. All services are marketed from our web site as well as through direct and re- seller distribution channels. Our re-sellers currently include broker-dealers, information service providers, wireless network carriers, and other Internet companies. The first of our financial information services is QuoteXpress, an investment monitoring tool that alerts subscribers with stock quote information they pre-specify, such as price changes and volume. Other financial services include SplitXpress, a service that notifies subscribers of stock splits, buy-backs, takeovers, mergers and surprise earnings announcements. CommmodityXpress tracks futures contract prices for commodities trading on all the major US commodities markets. CompanyNews provides the latest news stories and press releases for specific companies selected by the subscriber. The headlines are delivered to the wireless device and the complete story may be delivered to their email address, and is also available on our web site. In the last six months we introduced two new lifestyle services. Sports2Go provides personalized real-time sports coverage with up-to-the- minute scores and breaking game events. InfoXtra allows subscribers to receive personalized information from a wide range of categories that include: local weather forecasts, horoscopes, winning lottery numbers, ski conditions, beach forecasts, top ten video rentals, and news headlines. We currently market two message services that link the Internet with wireless communications. MailXpress alerts subscribers when important email arrives in their mailbox. MessageX allows anyone with Internet access to send a message to the subscriber's pager or cell phone using the subscriber's email address. Our corporate offices are located at 1735 Technology Drive, Suite 790, San Jose California 95110. Our telephone number is (408) 367-1700 and our World Wide Web site is www.datalink.net. 3 RISK FACTORS Investing in the Shares or Warrants is very risky. You should be able to bear a complete loss of your investment. In deciding whether to purchase the Shares or Warrants, you should carefully consider the following factors, among others, as well as information contained in this Prospectus, our most recent Annual Report on Form 10-KSB, as amended, and the other documents incorporated by reference into this Prospectus: Recently Started Business; Our current business commenced operations Losses During Start-up during 1996. During the fiscal year ended Operations. March 31, 1998, the Company had a net loss available to common shareholders of We have incurred losses $14,738,804, and during the six months ended since we began doing September 30, 1998, we had a net loss of business. $2,775,036. Through September 30, 1998, we had an accumulated deficit of $24,449,446. Our ability to operate profitably depends on increasing our sales through increased market acceptance and successfully competing with other companies. We are also subject to other risks associated with new business enterprises. We cannot assure you that Datalink will operate profitably. Planned Research and We plan to use any cash flow we generate to Development Expenditures. research and develop improvements and upgrades to our current services and adapt them to new We plan to use any technologies. We cannot assure you that our cash-flows generated revenues will grow enough to pay for the to research and develop research and development needed to improve our products. services so that they compete in the marketplace. If we are unable to further research and develop our services, our ability to achieve profitability on a long-term basis will be adversely affected. Competition. Our market is very competitive. There are a number of competitors who are larger and have We have several compe- much greater resources than we do. Our titors, and they are industry is subject to rapid technological larger and have greater changes. Our competitors have more experienced resources. people and larger facilities and budgets than we do. These competitors could use their resources to conduct greater amounts of research and development and to offer services at lower prices than we can. These factors may adversely affect our ability to compete. Future Capital Needs. During 1997, we received $8,000,000 from the sale of securities in private transactions. We We have met capital cannot assure you that we will not need addi- needs with private tional funds or that any needed funds will be sales of securities. available, if at all, on acceptable terms. If we need additional funds, our inability to raise them will have a very adverse effect on our operations. If we raise funds by selling equity securities, sales may dilute your share ownership. If we raise funds by forming joint ventures with other companies, we may have to give up some of our rights to certain 4 technologies, products or marketing terri- tories. Dependence on Management. Our business is largely dependent on our ability to hire and retain quality managers. We have a few key Although we have a written employment agreement officers and directors. with Anthony N. LaPine, the Company's Chairman, CEO and President, the loss of Mr. LaPine or any other Officer could have an adverse effect on our business and prospects. Key-man insurance. We currently maintain key-man life insurance on only one of our employees. That policy is in the face amount of $3 million on Anthony N. LaPine. Risks Relating to Patents. We currently own a number of patents related to our products, and have applied for additional patents. We are not certain whether any new patents will be granted in the future. Even if we receive additional patents, they may not provide us with protection from competitors. Patent protection is Our failure to obtain patent protection, or uncertain. illegal use by others of any patents we have or may obtain could adversely effect our business, financial condition and operating results. In addition, the laws of certain foreign countries do not protect proprietary rights to the same extent as the laws of the United States. Costs of prosecuting Claims for damages resulting from any such and defending patent infringement may be asserted or prosecuted infringement claims against us. The validity of any patents we have are significant. or obtain could also be challenged. Any such claims could be time consuming and costly to defend, diverting management's attention and our resources. Potential Liquidity Our Shares are not listed on Nasdaq or any Problems. exchange. Trading is conducted in the over- the-counter market on the OTC Bulletin Board, which was established for securities that do not meet the Nasdaq or exchange listing requirements. Consequently, selling Datalink Shares is more difficult because smaller quantities of shares are bought and sold and security analysts' and new media's coverage of Datalink is limited. These factors could result in lower prices and larger spreads in the bid and ask prices for our shares. Risks of Low-Priced Because our Shares are not currently listed on Shares. Nasdaq or an exchange, they are subject to Rule 15g-9 under the Exchange Act. That rule imposes additional sales practice requirements on broker-dealers that sell low-priced securities to persons other than established customers and institutional accredited investors. For transactions covered by this rule, a broker- dealer must make a special suitability determination for the purchaser and have 5 received the purchaser's written consent to the transaction prior to sale. Consequently, the rule affects the ability of broker-dealers to sell our Shares and may affect the ability of holders to sell Datalink Shares in the market. No Market for Warrants. There is presently no market for the Warrants and no market is expected to develop. Conse- quently, it will be difficult for anyone who buys Warrants from a Selling Securityholder to resell the Warrants. In addition, we have only registered Shares that would be issued on the exercise of the Warrants for resale using this Prospectus. As a result, investors who buy Warrants and then exercise them would have to use this Prospectus, as amended or supplemented to show their ownership, to resell the Shares. No Dividends We intend to retain any future earnings to fund Anticipated. the operation and expansion of our business. We do not anticipate paying cash dividends on our Shares in the foreseeable future. Shares Eligible for Of the 2,157,779 Shares issued and outstanding for Future Sale. as of December 31, 1998, 595,474 Shares are "restricted securities," as that term We cannot predict the is defined under Rule 144, all of which depressive effect of are currently eligible for sale under Rule 144. resales. In addition, 4,390,006 Shares which may be issued on the conversion of the Preferred Stock and exercise of Warrants are being registered for resale by this Prospectus. We are unable to predict the effect that sales made in this offering or under Rule 144 may have on the then prevailing market price of our Shares. It is likely that market sales of large amounts of Datalink Shares (or the potential for those sales even if they do not actually occur) will have the effect of depressing the market price of our Shares. Year 2000 Compliance. We anticipate that there will be little or no Year 2000 issues and therefore little or no cost will be incurred therefrom. Our internal systems meet Year 2000 compliance standards. However, although compliance confirmation has been provided by seventy-five percent of our vendors, and the remaining twenty-five percent have indicated that they are currently Year 2000 compliant, there can be no assurance that these vendors will not experience some level of Year 2000 issues that may have an adverse effect on our systems. We have assessed our risk related to this occurrence as very low. Our contingency plan in the event that an unforeseen Year 2000 issue should occur will be to change to another vendor that is Year 2000 compliant. For this reason, we are developing an inventory of back- up vendors that may be called upon to provide services in accordance with Year 2000 compliance standards. 6 RECENT EVENTS In July 1998, Datalink announced a strategic re-seller alliance with SkyTel Communications, a wireless messaging service with over 1.4 million customers. Under the alliance, SkyTel markets a number of Datalink's services branded on SkyTel for subscription fees starting under $10. Subscribers will not incur any additional charges from SkyTel for receiving information services to the pagers. Also in July 1998, the Company announced the introduction of its first lifestyle information service, InfoXtra. InfoXtra was designed specifically with Datalink's Internet and wireless carrier partners in mind. Subscribers may chose from a variety of information categories such as weather forecasts, beach and ski conditions, daily horoscopes, top video rentals, new updates, lottery announcements and a weekly trivia question. Subscribers may also schedule the time of day they receive the alerts, and the information alerts may be configured to meet the specific demographic preferences and interests of a re-seller's subscriber base. In September 1998, Datalink announced a new sports service called Sports2Go. Sports2Go features real-time sports coverage allowing subscribers to follow any U.S. professional or collegiate sporting event when they can't be at the actual game. This services sends alerts with real-time scores, breaking sports news and statistics. Subscribers to this service customize the information they want to receive by using the account maintenance feature on the Datalink web site. In October 1998, Datalink announced the launch of a new financial information service, CompanyNews. This service tracks information about all publicly traded U.S. and Canadian companies, and delivers the breaking news specified by subscribers to their wireless device in headline form, simultaneous to the release of the news over wire services. Subscribers then have the option to have the full story delivered to their email address, or they can also read the full story on the Datalink web site. Subscribers can track an unlimited number of publicly traded companies. As information about companies is released to the wire services, the subscriber is notified automatically. As with all other Datalink services, CompanyNews can be ordered and the subscriber's tracking portfolio can be managed from the Datalink web site at www.Datalink.net. Effective October 5, 1998, William A. Mahan became the Company's Chief Financial Officer and Treasurer. Mr. Mahan, age 57, has extensive experience in corporate finance, operations, shareholder reporting and investor services and has served as chief financial officer or chief accounting officer for various public and privately held companies for the last 30 years, including New York Stock Exchange and American Stock Exchange listed companies. Additionally, Mr. Mahan was President and Chief Executive Officer of a privately held technology company from 1989 to 1993, prior to its acquisition by a New York Stock Exchange listed company. Mr. Mahan started his career with the Los Angeles office of Haskins & Sells, CPA's (now Deloitte & Touche, LLP), where he was a senior accountant working in auditing and tax for clients in a wide variety of industries. He received his degree in Finance and Accounting from Arizona State University, subsequently earning his CPA certificate while at Haskins & Sells. On October 30, 1998, Robert L. Priddy was elected to serve as an additional Director of the Company. Mr. Priddy has served as chairman and chief executive officer of RMC Capital, LLC since its inception in October 1995. In addition, he was one of the four founding partners of ValuJet Airlines. Mr. Priddy served as chief executive officer, director and chairman 7 of the airline, a wholly-owned subsidiary of Valujet, Inc., from July 1992 until November 1996. Mr. Priddy also serves on the Board of Directors of Accumed International and Advamtel. In January 1999, the Company announced the launch of a new retail marketing program to sell its wireless information services with Totally Wireless, a West coast wireless retail chain. Totally Wireless will market all of Datalink's wireless information services to customers nationwide, both in their retail stores and on the Internet. Also in January 1999, Datalink changed its OTC Bulletin Board symbol from "DASY" to "NETD" and announced that upon shareholder approval it plans to change its corporate name to Datalink.net. 8 USE OF PROCEEDS The Company will not receive any proceeds from the sale of the Common Stock or Warrants by the Selling Securityholders. To the extent that any of the Warrants are exercised, up to $9,941,000 may be received by the Company. Any net proceeds received from the exercise of the Warrants will be used for general corporate purposes. SELLING SECURITYHOLDERS Included in the securities being offered hereby are 4,390,006 shares of Common Stock being offered for resale by certain Securityholders of the Company. Up to 2,335,693 of those shares are issuable upon conversion by the holders of Series A Convertible Preferred Stock ("Preferred Stock"). Up to 2,054,313 shares are issuable upon exercise of the Warrants held by the holders of the Preferred Stock. This Prospectus also relates to the resale of the Warrants by the holders thereof. All shares and Warrants, to the extent they are being offered, are being offered for the account of the following Securityholders and their donees or pledgees (the "Selling Securityholders"). The following table sets forth certain information with respect to the Selling Securityholders for whom the Company is registering the Common Stock for resale to the public, including: (i) the maximum number of shares issuable upon conversion of the Preferred Stock;(ii) the number of shares issuable upon exercise of the Warrants; and (iii) the number of shares and Warrants offered by each Selling Securityholder. The Company has no knowledge of the intentions of any Selling Securityholder to actually sell any of the securities listed under the columns "Shares Offered" or "Warrants Offered." There are no material relationships between any of the Selling Securityholders and the Company other than as disclosed below.
Beneficial Ownership Before Offering ----------------------------------------- Number of Shares Issuable Shares on Conver- Issuable sion of on Exer- Shares Preferred cise of Offered Warrants Selling Securityholder Stock Warrants Offered - ---------------------- --------- --------- ---------- --------- Richard N. Abrams 21,328 10,664 31,992 10,664 Shannon P. Acks 6,660 3,330 9,990 3,300 James Adametz 5,000 2,500 7,500 2,500 Anasazi Partners, L.P. 6,660 3,330 9,990 3,330 Baker Family Revocable Trust u/a 10/8/91 10,000 5,000 15,000 5,000 John P. Becker 9,000 4,500 13,500 4,500 William D. Bennett, Jr. 6,660 3,330 9,990 3,330 Dr. Donald Berglund 6,660 3,330 9,990 3,330 Sandra and Howard Bernstein, JTROS -0- 21,320 21,320 21,320 Robert Bettinger 10,000 5,000 15,000 5,000 Dennis Brubaker 2,660 1,330 3,990 1,330 Felix Campos 25,320 12,660 37,980 12,660 John A. Catsimatidis 20,000 10,000 30,000 10,000 9 Willard E. Childress 8,000 4,000 12,000 4,000 Clariden Bank 41,332 20,666 61,998 20,666 David Cohen 26,640 13,320 39,960 13,320 Jonathan R. Cohen and Nancy D. Shapiro, JTROS 5,320 2,660 7,980 2,660 Julia R. Cole 10,000 5,000 15,000 5,000 Robert H. Cole 10,000 5,000 15,000 5,000 Robert H. Cole, IRA 5,000 2,500 7,500 2,500 Robert S. Cole 2,500 1,250 3,750 1,250 Riley B. and Marilyn E. Collins, JTROS 6,660 3,330 9,990 3,330 Conzett Europa Invest 80,000 40,000 120,000 40,000 Bruce Corbin -0- 2,600 2,600 2,600 Jeffrey S. Corbin 1,332 666 1,998 666 Richard Corbin -0- 6,660 6,600 6,660 Gerald B. Cramer 40,000 20,000 60,000 20,000 Bruce Cunningham 6,660 3,330 9,990 3,330 Richard G. and Priscilla A. Dahlen, JTROS -0- 5,500 5,500 5,500 Thomas and Marie D'Avanzo, JTROS 4,000 2,000 6,000 2,000 David DeAtkine, Jr. 5,000 2,500 7,500 2,500 Mario and Ruth Deliberty, JTROS 8,000 4,000 12,000 4,000 David and Suellen Dercher, JTROS 13,320 6,660 19,980 6,660 Hare & Co. 18,000 10,000 28,000 10,000 Fiducie Desjardins A/C 900595-0-59 Retirement Plan 20,000 10,000 30,000 10,000 Sidney and Sonia Deutsch, JTROS 34,700 17,350 52,050 17,350 Paul R. Doering 6,660 3,330 9,990 3,330 Steven C. Dorfman -0- 4,000 4,000 4,000 Hugh W. Downs IRA 6,660 3,330 9,990 3,330 John P. and Agnes P. Duffy, JTROS 6,660 3,330 9,990 3,330 DW Trustees (B.V.I.) Limited 6,660 3,330 9,990 3,330 Elite Sales, Inc. 5,328 2,664 7,992 2,664 Michael S. Falk -0- 200,767 200,767 200,767 S. Marcus Finkle 26,640 13,320 39,960 13,320 Baruch B. and Andrea Fischhoff, JTROS 5,000 2,500 7,500 2,500 Timothy P. Flynn 40,000 20,000 60,000 20,000 Gallagher Corporation 40,000 20,000 60,000 20,000 Edith D. Gampel Revocable Trust 20,000 10,000 30,000 10,000 Gregg M. Gaylord 10,000 5,000 15,000 5,000 Marshall S. Geller 17,760 8,880 26,640 8,880 Paul Goldenheim 6,660 3,330 9,990 3,330 Grayson Financial Management Corp. 10,000 5,000 15,000 5,000 Alan Hammerman 6,660 3,330 9,990 3,330 M. Ponder Harrison 4,000 2,000 6,000 2,000 Hathaway Partners Invest- ment Limited Partnership 40,000 20,000 60,000 20,000 Heinecken & Associates Profit Sharing Plan dated 10/12/77 6,660 3,330 9,990 3,330 Harold B. and Jane H. Hess, JTROS 1,332 666 1,998 666 10 Neal Holtvogt 4,000 2,000 6,000 2,000 Chatri and Lourdes Jhunjhnuwala, JTROS 26,664 13,332 39,996 13,332 Ramesh Jhunjhnuwala 5,328 2,664 7,992 2,664 Peggy Jordan 100,000 50,000 150,000 50,000 Kabuki Partners ADP GP 20,000 10,000 30,000 10,000 Mitchell A. Kaufman 5,320 2,660 7,980 2,660 Neeklanund Kaulpatrra 6,660 3,330 9,990 3,330 Thomas Keeney 5,000 2,500 7,500 2,500 Monsour Khayyam 40,000 20,000 60,000 20,000 Hamilton S. Kingsley 6,660 3,330 9,990 3,330 Bernard Kirsner Trust 6,660 3,330 9,990 3,330 Garth A. Koniver 5,320 2,660 7,980 2,660 Robert A. and Barbara Koplow, JTROS 10,693 5,347 16,040 5,347 LAD Partners, LP 40,000 20,000 60,000 20,000 Lagunitas Partners, LP 40,000 20,000 60,000 20,000 James R. Landers, TTEE FBO Deer Park School District 13,320 6,660 19,980 6,660 David S. Lawi 6,660 3,330 9,990 3,330 Lawrence Lieberman 5,328 2,664 7,992 2,664 John V. Luck 6,660 3,330 9,990 3,330 Maerki, Baumann & Co. AG 66,664 33,332 99,996 33,332 Jed Manocherian 6,660 3,330 9,990 3,330 Anthony P. and Susan Q. Mazzarella, JTROS 8,880 4,440 13,320 4,440 Alan Mirken 6,660 3,330 9,990 3,330 William T. McCaffrey 40,000 20,000 60,000 20,000 F. Andrew and Gail Morfesis, JTROS 10,000 5,000 15,000 5,000 David Morley 4,000 2,000 6,000 2,000 Ryan Cassidy Morrow 6,660 3,330 9,990 3,330 Ronald Moschetta 6,660 13,998 20,658 13,998 Mulkey II Limited Partnership 40,000 20,000 60,000 20,000 Mercury L.P. 6,660 3,330 9,990 3,330 David R. and Donna L. Nelson, JTROS 7,992 3,996 11,988 3,996 Orbis Pension Trustees Limited 266,640 133,320 399,960 133,320 Allen Ozdemir 13,320 6,660 19,980 6,660 Richard and Lynne M. Palmer, JTROS 4,680 2,340 7,020 2,340 Garo A. Partoyan 6,660 3,330 9,990 3,330 James Peloquen 1,332 666 1,998 666 John Piccolo 10,000 5,000 15,000 5,000 Anna M. Pocisk 13,320 6,660 19,980 6,660 Michael A. and Angela G. Poujol, JTROS 20,000 10,000 30,000 10,000 Robert Priddy 100,000 50,000 150,000 50,000 Kurt V. and Laura M. Reichelt, JTROS 12,000 6,000 18,000 6,000 11 James H. and Jean A. Rion, JTROS 4,000 2,000 6,000 2,000 Ben Rosenbloom 10,660 5,330 15,990 5,330 Adam and Lisa Ross, JTROS 10,660 5,330 15,990 5,330 Royal Bank of Canada Trust Company (Jersey) Limited 25,540 12,770 38,310 12,770 Roybec & Co. 2,000 -0- 2,000 -0- Bernard Sadow 13,320 6,660 19,980 6,660 Monroe H. and Barbara P. Schenker, JTROS 20,000 10,000 30,000 10,000 William R. Schoen IRA/SEP 6,660 3,330 9,990 3,330 Rodney N. and Vikki K. Schorlemmer, JTROS 13,320 6,660 19,980 6,660 Douglas Schwarzwaelder 5,000 2,500 7,500 2,500 J.F. Shea Co., Inc. as Nominee 1997-60 266,660 133,330 399,990 133,330 Charles M. Sheaff, IRA 13,320 6,660 19,980 6,660 Michael A. Singer 26,640 13,320 39,960 13,320 SJG Management, Inc. Profit Sharing Plan 6,660 3,330 9,990 3,330 Stephen Skoly 4,000 2,000 6,000 2,000 David Stellway 10,000 5,000 15,000 5,000 David and Susan Stollwerk, JTROS 6,660 3,330 9,990 3,330 Rick Glenn Tachibana 5,000 2,500 7,500 2,500 Matthew T. Tarantelli -0- 2,000 2,000 2,000 Walter F. Toombs 40,000 20,000 60,000 20,000 James M. Totaro 20,000 10,000 30,000 10,000 Salvatore Trupiano 9,300 4,650 13,950 4,650 Barry L. and Patricia L. Veazey, JTROS 2,500 1,250 3,750 1,250 Harold M. Wasserman 6,660 3,330 9,990 3,330 Elizabeth Weber 10,000 5,000 15,000 5,000 Arlene Weiner 6,660 3,330 9,990 3,330 Warren J. Weinstein 2,660 1,330 3,990 1,330 Walter E. Williams 6,660 3,330 9,990 3,330 Charles L. Wisseman III 5,000 2,500 7,500 2,500 The Yorkin Trust 20,000 10,000 30,000 10,000 Keith Rosenbloom -0- 47,235 47,235 47,235 Robert O'Sullivan -0- 23,617 23,617 23,617 Seth Elliott -0- 17,458 17,458 17,458 Cornelia Eldridge -0- 16,558 16,558 16,558 Inder Tallur -0- 9,893 9,893 9,893 Robert Beuret -0- 9,967 9,967 9,967 Eric Rubenstein -0- 9,792 9,792 9,792 Joseph P. Wynne -0- 7,973 7,973 7,973 David Stein -0- 7,135 7,135 7,135 Lisa Letteri -0- 7,046 7,046 7,046 Michael Rolnick -0- 5,000 5,000 5,000 Mark Danielli -0- 4,893 4,893 4,893 Michael R. Lyall -0- 3,987 3,987 3,987 Anthony Giardina -0- 2,990 2,990 2,990 Ed Downs -0- 2,760 2,760 2,760 Michael Appelbaum -0- 2,699 2,699 2,699 Peter Fulton -0- 2,475 2,475 2,475 Vladik Vainberg -0- 2,100 2,100 2,100 Eric Rand -0- 1,993 1,993 1,993 Richard White -0- 1,800 1,800 1,800 George Tsamutalis -0- 1,364 1,364 1,364 Eric Handler -0- 971 971 971 12 Sandesh Seth -0- 971 971 971 Craig Leppla -0- 997 997 997 Robert Nass -0- 997 997 997 Stephen Labarbara -0- 997 997 997 Michael Volpe -0- 997 997 997 Juan Lopera -0- 900 900 900 James Walker -0- 485 485 485 Susan Hoffman -0- 500 500 500 Richard Perreira -0- 500 500 500 Peter Dellaquilla -0- 479 479 479 Brad Van Siclen -0- 400 400 400 Travis Brock -0- 400 400 400 Darren Saltzberg -0- 338 338 338 Commonwealth Associates -0- 434,284 434,284 434,284 --------- --------- --------- --------- Total 2,335,693 2,054,313 4,390,006 2,054,313 ____________________ No information is given with respect to beneficial ownership after the offering because the number of Shares of Common Stock and Warrants would be zero, except as follows: a. After the sale of all of the securities offered hereby, Marshall S. Geller would beneficially own 10,000 shares of Common Stock, consisting of shares underlying options, which would represent less than one percent of the outstanding shares. b. After the sale of all of the securities offered hereby, Robert L. Priddy would beneficially own 241,000 shares of Common Stock, consisting of 231,000 shares of Common Stock held directly and 10,000 shares underlying options, which would represent approximately 10.4% of the outstanding shares if no other Preferred Stock is converted or Warrants are exercised. c. After the sale of all of the securities offered hereby, Commonwealth Associates would beneficially own 100,000 shares of Common Stock held directly, which would represent approximately 3.9% of the outstanding shares if no Preferred Stock or other Warrants are exercised. Assumes the conversion of all of the Preferred Stock and the exercise of all of the warrants. Mr. Geller has served as a Director of the Company since November 1997. Mr. Priddy has served as a Director of the Company since October 1998
The information concerning the Selling Securityholders may change from time to time and will be set forth in Supplements to this Prospectus. 13 PLAN OF DISTRIBUTION The purpose of this Prospectus is to permit the Selling Securityholders, if they desire, to offer and sell up to 4,390,006 Shares and 2,054,313 Warrants (the "Selling Securityholder Securities") at such times and at such places as the Selling Securityholders choose. The decision to convert the Preferred Stock into Shares, to exercise the Warrants, or to sell any shares or Warrants, is within the sole discretion of the holders thereof. There can be no assurance that any of the Preferred Stock will be converted or any of the Warrants will be exercised, or any shares or Warrants will be sold by the Selling Securityholders. The distribution of the Selling Securityholder Securities may be effected from time to time in one or more transactions. Any of the Selling Securityholder Securities may be offered for sale, from time to time, by the Selling Securityholders, or by permitted transferees or successors of the Selling Securityholders, in the over-the-counter market, or otherwise, at prices and on terms then obtainable, at fixed prices, at prices then prevailing at the time of sale, at prices related to such prevailing prices, or in negotiated transactions at negotiated prices or otherwise. The Selling Securityholder Securities offered hereby may be sold by one or more of the following: (i) through underwriters, or through underwriting syndicates; (ii) through one or more dealers or agents (which may include one or more underwriters), including, but not limited to: (a) block trades in which the broker or dealer act as principal to facilitate the transactions; (b) purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this Prospectus; (c) ordinary brokerage transactions; and (d) transactions in which the broker solicits purchasers; (iii) directly to one or more purchasers; or (iv) a combination of these methods. The names of any underwriters or agents involved in the sale of the Selling Securityholder Securities will be set forth in a Prospectus Supplement. In connection with the distribution of the Selling Securityholder Securities or otherwise, the Selling Securityholders may enter into hedging transactions with broker-dealers or other financial institutions. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of Common Stock in the course of hedging the positions they assume with the Selling Securityholders. The Selling Securityholders may also sell Common Stock short and redeliver the shares to close out such short positions. The Selling Securityholders may also enter into options or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealers or other financial institutions of the Selling Securityholder Securities, which shares such broker-dealers or financial institutions may resell pursuant to this Prospectus (as supplemented or amended to reflect this transaction). The Selling Securityholders may also pledge the Selling Securityholder Securities registered hereunder to a broker-dealer or other financial institution and, upon a default, such broker-dealer or other financial institution may effect sales of the pledged shares pursuant to this Prospectus (as supplemented or amended to reflect such transaction). In addition, any Selling Securityholder Securities covered by this Prospectus that qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than pursuant to this Prospectus. The Selling Securityholders or their underwriters, dealers or agents may sell the Selling Securityholder Securities to or through underwriters, dealers or agents, and such underwriters, dealers or agents may receive compensation in the form of discounts or concessions allowed or reallowed. Underwriters, dealers, brokers or other agents engaged by the Selling Securityholders may arrange for other such persons to participate. Any fixed public offering 14 price and any discounts and concessions may be changed from time to time. Underwriters, dealers and agents who participate in the distribution of the Selling Securityholder Securities may be deemed to be underwriters within the meaning of the Securities Act, and any discounts or commissions received by them or any profit on the resale of shares by them may be deemed to be underwriting discounts and commissions thereunder. The proposed amounts of Selling Securityholder Securities, if any, to be purchased by underwriters and the compensation, if any, of underwriters, dealers or agents will be set forth in a Prospectus Supplement. Unless granted an exemption by the Commission from Rule 10b-6 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or unless otherwise permitted under Rule 10b-6A, the Selling Securityholders will not engage in any stabilization activity in connection with the Company's securities, will furnish each broker or dealer engaged by the Selling Securityholders and each other participating broker or dealer the number of copies of this Prospectus required by such broker or dealer, and will not bid for or purchase any securities of the Company or attempt to induce any person to purchase any of the Company's securities other than as permitted under the Exchange Act. The Company will not receive any proceeds from any sales of the Selling Securityholder Securities, but will receive the proceeds from the exercise of the Warrants held by the Selling Securityholders, which proceeds, if any, will be used for general corporate purposes. In connection with the registration by the Company, the Company shall use its best efforts to prepare and file with the Commission such amendments and supplements to the registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of the Securities covered by the registration statement for the period required to effect the distribution of such Securities. The Company is paying certain expenses (other than commissions and discounts of underwriters, dealers or agents) incident to the offering and sale of the Selling Shareholder Securities to the public, which are estimated to be approximately $17,000. If the Company is required to update this Prospectus during such period, it may incur additional expenses in excess of the amount estimated above. In order to comply with certain states' securities laws, if applicable, the Securities will be sold in such jurisdictions only through registered or licensed brokers or dealers. In certain states the Securities may not be sold unless they have been registered or qualify for sale in such state or an exemption from registration or qualification is available and is complied with. 15 LEGAL MATTERS The legality of the Common Stock and Warrants offered hereby is being passed upon for the Company by Krys Boyle Freedman & Sawyer, P.C., 600 17th Street, Suite 2700 South, Denver, Colorado 80202. EXPERTS The financial statements incorporated by reference in this Prospectus have been audited by BDO Seidman LLP, independent certified public accountants, to the extent and for the periods set forth in their report, incorporated by reference herein, and are incorporated herein in reliance upon such report given upon the authority of that firm as experts in accounting and auditing. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents filed by the Company with the Commission are incorporated herein by reference: (a) The Company's Annual Report on Form 10-KSB, as amended, for the fiscal year ended March 31, 1998, filed pursuant to Section 13 of the 1934 Act (File No. 0-21069.) (b) The Company's Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998, filed pursuant to Section 13 of the 1934 Act (File No. 0- 21069). (c) The Company's Quarterly Report on Form 10-QSB for the quarter ended September 30, 1998, filed pursuant to Section 13 of the 1934 Act (File No. 0- 21069). (d) The Company's Current Report on Form 8-K, as amended, dated July 17, 1998, filed pursuant to Section 13 of the 1934 Act (File No. 0-21069). (e) The Company's Current Report on Form 8-K dated September 3, 1998, filed pursuant to Section 13 of the 1934 Act (File No. 0-21069). (f) The description of the Company's common stock contained in the Company's registration statement on Form 8-A (File No. 0-21069) declared effective on September 20, 1996. All reports and other documents subsequently filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act, prior to the filing of a post-effective amendment which indicates that all securities covered by this Prospectus have been sold or which deregisters all such securities then remaining unsold, shall be deemed to be incorporated by reference herein and to be a part hereof from the date of the filing of such reports and documents. AVAILABLE INFORMATION The Company is subject to certain informational reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). These reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024 of the Commission's office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549, and at its regional offices located at 7 World Trade Center, Suite 1300, New York, 16 NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such reports, proxy statements and other information can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549 at prescribed rates. The Commission maintains a Web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically. Additional updating information with respect to the securities covered herein may be provided in the future to purchasers by means of appendices to this Prospectus. The Company has filed with the Commission in Washington, DC a registration statement (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the 1933 Act with respect to the securities offered or to be offered hereby. This Prospectus does not contain all of the information included in the Registration Statement, certain items of which are omitted in accordance with the rules and regulations of the Commission. For further information about the Company and the securities offered hereby, reference is made to the Registration Statement and the exhibits thereto. The Registration Statement has been filed electronically through the Commission's Electronic Data Gathering, Analysis and Retrieval System and may be obtained through the Commission's Web site (http://www.sec.gov.). The Company will provide without charge to each person to whom this Prospectus is delivered, on the written or oral request of such person, a copy of any document incorporated herein by reference, excluding exhibits. Requests should be made to Datalink Systems Corporation, 1735 Technology Drive, Suite 790, San Jose, California 95110, telephone (408) 367-1700, and directed to the attention of Anthony N. LaPine. 17 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following expenses incurred in connection with the sale of the securities being registered will be borne by the Registrant. Other than the registration fee, the amounts stated are estimates. Registration Fees . . . . . . . . . . . . . . $ 3,203.61 Legal Fees and Expenses . . . . . . . . . . . 8,000.00 Accounting Fees and Expenses. . . . . . . . . 4,000.00 Miscellaneous . . . . . . . . . . . . . . . . 1,796.39 ---------- TOTAL . . . . . . . . . . . . . . . . . . $17,000.00 ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS. The only statute, charter provision, bylaw, contract, or other arrange ment under which any controlling person, Director or Officer of the Company is insured or indemnified in any manner against any liability which he may incur in his capacity as such, is as follows: (a) Subsection (1) of Section 78.751 of the Nevada Corporation Law empowers a corporation to "indemnify any person who is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful." Subsection (2) of Section 78.751 empowers a corporation to "indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the II-1 corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnify for such expenses as the court deems proper." Subsection 78.751(3) further provides that "to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter herein, he must be indemnified by the corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense." (b) Article VII of the Registrant's Articles of Incorporation provides that the Corporation is authorized to indemnify directors, officers, employees and agents to the full extent allowed for under the Nevada Business Corporation Act. (c) Article XI of the Articles of Incorporation of the Registrant provides that no director, officer or stockholder of the Company shall be personally liable for damages for breach of fiduciary duty as a director or officer; provided, that this provision shall not eliminate liability of a director or officer for acts or omissions involving intentional misconduct, fraud or a knowing violation of law or payments or distributions in violation of Nevada law. ITEM 16. EXHIBITS. Exhibit Number Description - ------- ----------- 4.1 Certificate of the Designations, Powers, Preferences and Rights of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-KSB/A for the fiscal year ended March 31, 1998) 4.2 Warrant Agreement (including form of Warrant Certificate) 5 Opinion of Krys Boyle Freedman & Sawyer, P.C., with respect to the legality of the securities being registered 23.1 Consent of BDO Seidman, LLP, Independent Certified Public Accountants 23.2 Consent of Krys Boyle Freedman & Sawyer, P.C. (contained in Exhibit 5) ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the 1933 Act; II-2 (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) ([Section] 230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; Provided, however, that paragraphs (l)(i) and (l)(ii) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the 1933 Act, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the 1934 Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the 1934 Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the 1933 Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement on Form S-3 to be signed on its behalf by the undersigned, hereunto duly authorized, in San Jose, California, on February 5, 1999. DATALINK SYSTEMS CORPORATION By:/s/ Anthony N. LaPine Anthony N. LaPine, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated: SIGNATURES TITLE DATE /s/ Anthony N. LaPine Chief Executive Officer, February 5, 1999 Anthony N. LaPine President and Chairman of the Board /s/ William A. Mahan Chief Financial Officer February 8, 1999 William A. Mahan __________________________ Director Marshall Geller /s/ Frederick M. Hoar Director February 8, 1999 Frederick M. Hoar __________________________ Director David Ladd /s/ Robert L. Priddy Director February 8, 1999 Robert L. Priddy DATALINK SYSTEMS CORPORATION INDEX TO EXHIBITS FILED WITH FORM S-3 REGISTRATION STATEMENT Exhibit Number Description - ------- ----------- 4.1 Certificate of the Designations, Powers, Preferences and Rights of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-KSB/A for the fiscal year ended March 31, 1998) 4.2 Warrant Agreement (including form of Warrant Certificate) 5 Opinion of Krys Boyle Freedman & Sawyer, P.C., with respect to the legality of the securities being registered 23.1 Consent of BDO Seidman, LLP, Independent Certified Public Accountants 23.2 Consent of Krys Boyle Freedman & Sawyer, P.C. (contained in Exhibit 5) EX-4.2 2 WARRANT AGREEMENT AGREEMENT, dated as of this 5th day of November, 1997, by and among DATALINK SYSTEMS CORPORATION, a Nevada corporation ("Company"), AMERICAN SECURITIES TRANSFER & TRUST, INC., as Warrant Agent (the "Warrant Agent"), and COMMONWEALTH ASSOCIATES, a New York limited partnership ("Commonwealth"). W I T N E S S E T H WHEREAS, in connection with a private placement (the "Private Placement") of a minimum of twenty-seven (27) and a maximum of sixty-eight and one-half (68.5) units ("Units"), each Unit consisting of 40,000 shares (the "Shares") of Series A Convertible Preferred Stock, par value $.001 per share (the "Preferred Stock") and 200,000 common stock purchase warrants ("Warrants") pursuant to an agency agreement (the "Agency Agreement") dated as of September 24, 1997 between the Company and Commonwealth, the Company may issue Warrants to purchase up to 13,700,000 shares of Common Stock (as defined below); and WHEREAS, in connection with the Private Placement, the Company may issue to Commonwealth or its designees up to 8,243,906 warrants which are convertible at the option of Commonwealth into an equal number of Warrants (the "Agent's Warrants"), and WHEREAS, each Warrant initially entitles the Registered Holder thereof to purchase one share of Common Stock; and WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer exchange and redemption of the Warrants, the issuance of certificates representing the Warrants, the exercise of the Warrants, and the rights of the holders thereof; NOW THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth and for the purpose of defining the terms and provisions of the Warrants and the certificates representing the Warrants and the respective rights and obligations thereunder of the Company, the holders of certificates representing the Warrants and the Warrant Agent, the parties hereto agree as follows: SECTION 1. Definitions. As used herein, the following terms shall have the following meanings, unless the context shall otherwise require: (a) "Common Stock" shall mean stock of the Company of any class, whether now or hereafter authorized, which has the right to participate in the distribution of earnings and assets of the Company without limit as to amount or percentage, which at the date hereof consists of 50,000,000 authorized shares of Common Stock, $.001 per value. (b) "Corporate Office" shall mean the office of the Warrant Agent (or its successor) at which at any particular time its principal business shall be administered, which office is located at the date hereof et 983 Quail Street, No. 101, Lakewood, Colorado 80215. (c) "Exercise Date" shall mean, as to any Warrant, the date on which the Warrant Agent shall have received both (a) the Warrant Certificate representing such Warrant, with the exercise form thereon duly executed by the Registered Holder thereof or his attorney-in-fact duly authorized in writing, and (b) payment in cash, or by official bank or certified check made payable to the Company, of an amount in lawful money of the United States of America equal to the applicable Purchase Price. (d) "Initial Warrant Exercise Date" shall mean the later of (i) November 5, 1998 or (ii) the date on which the Company files an amendment to its articles of incorporation increasing its authorized shares of Common Stock to not less than 70,000,000 (the "Amendment"). (e) "Purchase Price" shall mean the purchase price to be paid upon exercise of each Warrant in accordance with the terms hereof, which price shall be $.50, subject to adjustment from time to time pursuant to the provisions of Section 9 hereof, and subject to the Company's right to reduce the Purchase Price upon notice to all warrantholders. (f) "Redemption Price" shall mean the price at which the Company may, at its option in accordance with the terms hereof, redeem the Warrants, which price shall be $0.05 per Warrant. (g) "Registered Holder" shall mean as to any Warrant and as of any particular date, the person in whose name the certificate representing the Warrant shall be registered on that date on the books maintained by the Warrant Agent pursuant to Section 6. (h) "Transfer Agent" shall mean American Securities Transfer & Trust, Inc., as the Company's transfer agent, or its authorized successor, as such. (i) "Warrant Expiration Date" shall mean 5:00 P.M. (New York time) on November 5, 2002 or, with respect to Warrants which are outstanding as of the Redemption Date (but specifically excluding the Agent's Warrants), the Redemption Date as defined in Section 8, whichever is earlier; provided that if such date shall in the State of New York be a holiday or a day on which banks are authorized or required to close, then 5:00 P.M. (New York time) on the next following day which in the State of New York is not a holiday or a day on which banks are authorized or required to close. Upon notice to all warrantholders the Company shall have the right to extend the Warrant Expiration Date. SECTION 2. Warrants and Issuance of Warrant Certificates. (a) A Warrant initially shall entitle the Registered Holder of the Warrant Certificate representing such Warrant to purchase one share of Common Stock upon the exercise thereof, in accordance with the terms hereof, subject to modification and adjustment as provided in Section 9. (b) The Warrants included in the offering of Units will be detachable and separately transferable from the shares of Preferred Stock constituting part of such Units commencing on the Initial Exercise Date. (c) Upon execution of this Agreement, Warrant Certificates representing the number of Warrants sold in the Private Placement shall be executed by the Company and delivered to the Warrant Agent. Upon written order of the Company signed by its President or Chairman or a Vice President and by its Secretary or an Assistant Secretary, the Warrant Certificates shall be countersigned, issued and delivered by the Warrant Agent as part of the Units. 2 (d) From time to time, up to the Warrant Expiration Date, the Transfer Agent shall countersign and deliver stock certificates in required whole number denominations representing up to the number of shares of Common Stock as shall be issuable on exercise of the Warrants, subject to adjustment as described herein, upon the exercise of Warrants in accordance with this Agreement. (e) From time to time, up to the Warrant Expiration Date, the Warrant Agent shall countersign and deliver Warrant Certificates in required whole number denominations to the persons entitled thereto in connection with any transfer or exchange permitted under this Agreement; provided that no Warrant Certificates shall be issued except (i) those initially issued hereunder, (ii) those issued on or after the Initial Warrant Exercise Date, upon the exercise of fewer than all Warrants represented by any Warrant Certificate, to evidence any unexercised Warrants held by the exercising Registered Holder, (iii) those issued upon any transfer or exchange pursuant to Section 6; (iv) those issued in replacement of lost, stolen, destroyed or mutilated Warrant Certificates pursuant to Section 7; and (v) at the option of the Company, in such form as may be approved by its Board of Directors, to reflect any adjustment or change in the Purchase Price, the number of shares of Common Stock purchasable upon exercise of the Warrants or the Redemption Price therefor made pursuant to Section 9 hereof. (f) Notwithstanding anything to the contrary contained herein, the Agent's Warrants shall not be subject to redemption by the Company. SECTION 3. Form and Execution of Warrant Certificates. (a) The Warrant Certificates shall be substantially in the form annexed hereto as Exhibit A (the provisions of which are hereby incorporated herein) and may have such letters, numbers or other marks of identification or designation and such legends, summaries or endorsements printed, lithographed or engraved thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Warrants may be listed, or to conform to usage or to the requirements of Section 2(b). The Warrant Certificates shall be dated the date of issuance thereof (whether upon initial issuance, transfer, exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant Certificates) and issued in registered form. Warrant Certificates shall be numbered serially with the letter W on Warrants of all denominations. (b) Warrant Certificates shall be executed on behalf of the Company by its Chairman of the Board, President or any Vice President and by its Secretary or an Assistant Secretary, by manual signatures or by facsimile signatures printed thereon, and shall have imprinted thereon a facsimile of the Company's seal. Warrant Certificates shall be manually countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be an officer of the Company or to hold the particular office referenced in the Warrant Certificate before the date of issuance of the Warrant Certificates or before countersignature by the Warrant Agent and issue and delivery thereof, such Warrant Certificates may nevertheless be countersigned by the Warrant Agent, issued and delivered with the same force and effect as though the person who signed such Warrant Certificates had not ceased to be an officer of the Company or to hold such office. After countersignature by the Warrant Agent, Warrant Certificates shall be delivered by the Warrant Agent to the Registered Holder without further action by the Company, except as otherwise provided by Section 4(a) hereof. 3 SECTION 4. Exercise. (a) Each Warrant may be exercised by the Registered Holder thereof at any time on or after the Initial Warrant Exercise Date, but not after the Warrant Expiration Date, upon the terms and subject to the conditions set forth herein and in the applicable Warrant Certificate. A Warrant shall be deemed to have been exercised immediately prior to the close of business on the Exercise Date and the person entitled to receive the securities deliverable upon such exercise shall be treated for all purposes as the holder of those securities upon the exercise of the Warrant as of the close of business on the Exercise Date. As soon as practicable on or after the Exercise Date the Warrant Agent shall deposit the proceeds received from the exercise of a Warrant and shall notify the Company in writing of the exercise of the Warrants. Promptly following, and in any event within five days after the date of such notice from the Warrant Agent, the Warrant Agent, on behalf of the Company, shall cause to be issued and delivered by the Transfer Agent, to the person or persons entitled to receive the same, a certificate or certificates for the securities deliverable upon such exercise, (plus a certificate for any remaining unexercised Warrants of the Registered Holder) unless prior to the date of issuance of such certificates the Company shall instruct the Warrant Agent to refrain from causing such issuance of certificates pending clearance of checks received in payment of the Purchase Price pursuant to such Warrants. Notwithstanding the foregoing, in the case of payment made in the form of a check drawn on an account of Commonwealth or such other investment banks and brokerage houses as the Company shall approve in writing to the Warrant Agent, certificates shall immediately be issued without prior notice to the Company or any delay. Upon the exercise of any Warrant and clearance of the funds received, the Warrant Agent shall promptly remit the payment received for the Warrant (the "Warrant Proceeds") to the Company or as the Company may direct in writing. SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc. (a) The Company covenants that from and after the Initial Warrant Exercise Date, it will at all times after the effective date of the Amendment reserve and keep available out of its authorized Common Stock, solely for the purpose of issue upon exercise of Warrants, such number of shares of Common Stock as shall then be issuable upon the exercise of all outstanding Warrants. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of the Warrants shall, at the time of delivery, be duly and validly issued, fully paid, nonassessable and free from all taxes, liens and charges with respect to the issue thereof, (other than those which the Company shall promptly pay or discharge) and that upon issuance such shares, if registered under the Securities Act of 1933 (as amended, the "Act"), or if exempt from such registration, shall be listed on each national securities exchange, including the Nasdaq National Market, or the Nasdaq SmallCap Market, on which the other shares of outstanding Common Stock of the Company are then listed. (b) The Company covenants that if any securities to be reserved for the purpose of exercise of Warrants hereunder require registration with, or approval of, any governmental authority under any federal securities law before such securities may be validly issued or delivered upon such exercise, then the Company will in good faith and as expeditiously as reasonably possible and in accordance with the terms of the Private Placement offering documents, endeavor to secure such registration or approval. The Company will use reasonable efforts to obtain appropriate approvals or registrations under state "blue sky" securities laws. With respect to any such securities, however, Warrants may not be exercised by, or shares of Common Stock or other securities underlying the Warrants issued to, any Registered Holder in any state in which such exercise would be unlawful. 4 (c) The Company shall pay all documentary, stamp or similar taxes and other governmental charges that may be imposed with respect to the issuance of Warrants, or the issuance or delivery of any shares upon exercise of the Warrants; provided, however, that if the shares of Common Stock are to be delivered in a name other than the name of the Registered Holder of the Warrant Certificate representing any Warrant being exercised, then no such delivery shall be made unless the person requesting the same has paid to the Warrant Agent the amount of transfer taxes or charges incident thereto, if any. (d) The Warrant Agent is hereby irrevocably authorized to requisition the Company's Transfer Agent from time to time for certificates representing shares of Common Stock issuable upon exercise of the Warrants, and the Company will authorize the Transfer Agent to comply with all such proper requisitions. The Company will file with the Warrant Agent a statement setting forth the name and address of the Transfer Agent of the Company for shares of Common Stock issuable upon exercise of the Warrants. SECTION 6. Exchange and Registration of Transfer. (a) Warrant Certificates may be exchanged for other Warrant Certificates representing an equal aggregate number of Warrants of the same class or may be transferred in whole or in part. Warrant Certificates to be exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and upon satisfaction of the terms and provisions hereof, the Company shall execute and the Warrant Agent shall countersign, issue and deliver in exchange therefor the Warrant Certificate or Certificates which the Registered Holder making the exchange shall be entitled to receive. (b) The Warrant Agent shall keep at its office books in which, subject to such reasonable regulations as it may prescribe, it shall register Warrant Certificates and the transfer thereof in accordance with its regular practice. Upon due presentment for registration of transfer of any Warrant Certificate at such office, the Company shall execute and the Warrant Agent shall issue and deliver to the transferee or transferees a new Warrant Certificate or Certificates representing an equal aggregate number of Warrants. (c) With respect to all Warrant Certificates presented for registration or transfer, or for exchange or exercise, the subscription form on the reverse thereof shall be duly endorsed, or be accompanied by a written instrument or instruments of transfer and subscription, in form satisfactory to the Company and the Warrant Agent, duly executed by the Registered Holder or his attorney-in-fact duly authorized in writing. (d) A service charge may be imposed by the Warrant Agent for any exchange or registration of transfer of Warrant Certificates. In addition, the Company may require payment by such holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. (e) All Warrant Certificates surrendered for exercise or for exchange in case of mutilated Warrant Certificates shall be promptly cancelled by the Warrant Agent and thereafter retained by the Warrant Agent until termination of this Agreement or resignation as Warrant Agent, or, with the prior written consent of Commonwealth, disposed of or destroyed, at the direction of the Company. (f) Prior to due presentment for registration of transfer thereof, the Company and the Warrant Agent may deem and treat the Registered Holder of any Warrant Certificate as the absolute owner thereof and of each Warrant represented thereby (notwithstanding any notations of ownership or writing 5 thereon made by anyone other than a duly authorized officer of the Company or the Warrant Agent) for all purposes and shall not be affected by any notice to the contrary. SECTION 7. Loss or Mutilation. Upon receipt by the Company and the Warrant Agent of evidence satisfactory to them of the ownership of and loss, theft, destruction or mutilation of any Warrant Certificate and (in case of loss, theft or destruction) of indemnity satisfactory to them, and (in the case of mutilation) upon surrender and cancellation thereof, the Company shall execute and the Warrant Agent shall ( in the absence of notice to the Company and/or Warrant Agent that the Warrant Certificate has been acquired by a bona fide purchaser) countersign and deliver to the Registered Holder in lieu thereof a new Warrant Certificate of like tenor representing an equal aggregate number of Warrants Applicants for a substitute Warrant Certificate shall comply with such other reasonable regulations and pay such other reasonable charges as the Warrant Agent may prescribe. SECTION 8. Redemption. (a) Commencing May 5, 1999 (18 months from the date of this Agreement), on not less than thirty (30) days notice to Registered Holders of the Warrants being redeemed, the Warrants may be redeemed, at the option of the Company, at a redemption price of $.05 per Warrant, provided the Market Price of the Common Stock receivable upon exercise of such Warrants shall exceed $1.25 (the "Target Price"), subject to adjustment as set forth in Section 8(f), below. Market Price for the purpose of this Section 8 shall mean (i) the average closing bid price, for thirty (30) consecutive business days ending with the date ofthe notice of redemption, which notice shall be mailed no later than five days thereafter, of the Common Stock as reported by Nasdaq or (ii) the average of the last reported sale prices for thirty (30) consecutive business days ending with the date of the notice of redemption, which notice shall be mailed no later than five days thereafter, on the primary exchange on which the Common Stock is traded, if the Common Stock is traded on a national securities exchange, including the Nasdaq National Market. The date fixed for redemption of the Warrants is referred to herein as the "Redemption Date. " (b) If the conditions set forth in Section 8(a) are met, and the Company desires to exercise its right to redeem the Warrants, it shall mail a notice of redemption to each of the Registered Holders of the Warrants to be redeemed, first class, postage prepaid, not later than the thirtieth day before the date fixed for redemption, at their last address as shall appear on the records maintained pursuant to Section 6(b). Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Registered Holder receives such notice. (c) The notice of redemption shall specify (i) the redemption price, (ii) the Redemption Date, (iii) the place where the Warrant Certificates shall be delivered and the redemption price paid, (iv) that Commonwealth will assist each Registered Holder of a Warrant in connection with the exercise thereof and (v) that the right to exercise the Warrant shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the Redemption Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to a Registered Holder (a) to whom notice was not mailed or (b) whose notice does not substantially comply with the preceding sentence. An affidavit of the Warrant Agent or of the Secretary or an Assistant Secretary of the Company that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. 6 (d) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the Redemption Date. On and after the Redemption Date, Holders of the Warrants shall have no further rights except to receive, upon surrender of the Warrant, the Redemption Price. (e) From and after the Redemption Date, the Company shall, at the place specified in the notice of redemption, upon presentation and surrender to the Company by or on behalf of the Registered Holder thereof of one or more Warrant Certificates evidencing Warrants to be redeemed, deliver or cause to be delivered to or upon the written order of such Holder a sum in cash equal to the redemption price of each such Warrant. From and after the Redemption Date and upon the deposit or setting aside by the Company of a sum sufficient to redeem all the Warrants called for redemption, such Warrants shall expire and become void and all rights hereunder and under the Warrant Certificates, except the right to receive payment of the redemption price, shall cease. (f) Notwithstanding anything to the contrary contained on this Section 8, the Company may not redeem the Warrants unless at the time of the mailing of the notice of redemption a registration statement covering the Warrants and the shares of Common Stock issuable upon exercise thereof has been declared effective and remains effective through the Redemption Date. (g) If the shares of the Company's Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock by one or more stock dividends or a stock split or a reverse stock split, the Target Price shall be proportionally adjusted by the ratio which the total number of shares of Common Stock outstanding immediately prior to such event bears to the total number of shares of Common Stock to be outstanding immediately after such event. SECTION 9. Adjustment of Exercise Price and Number of Shares of Common Stock or Warrants. (a) Subject to the exceptions referred to in Section 9(h) below, in the event the Company shall, at any time during the one-year period commencing on the initial closing date of the Private Placement, sell any shares of Common Stock for a consideration per share less than the Purchase Price, the Purchase Price shall be immediately adjusted to equal such issuance price. (b) Subject to the exceptions referred to in Section 9(h) below, in the event the Company shall, at any time or from time to time after the date hereof, sell any shares of Common Stock for a consideration per share less than the Market Price of the Common Stock (as defined in Section 8(a)) on the date of the sale or issue any shares of Common Stock as a stock dividend to the holders of Common Stock, or subdivide or combine the outstanding shares of Common Stock into a greater or lesser number of shares (any such sale, issuance, subdivision or combination being herein called a "Change of Shares"), then, and thereafter upon each further Change of Shares, the Purchase Price in effect immediately prior to such Change of Shares shall be changed to a price (including any applicable fraction of a cent) determined by multiplying the Purchase Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares plus the number of shares of Common Stock which the aggregate consideration received (determined as provided in subsection 9(g)(F) below) for the issuance of such additional shares would purchase at the Market Price and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately after the issuance of such additional shares. Such adjustment shall be made successively whenever such an issuance is made. 7 Upon each adjustment of the Purchase Price pursuant to this Section 9, the total number of shares of Common Stock purchasable upon the exercise of each Warrant shall (subject to the provisions contained in Section 9(c) hereof) be such number of shares (calculated to the nearest tenth) purchasable at the Purchase Price in effect immediately prior to such adjustment multiplied by a fraction, the numerator of which shall be the Purchase Price in effect immediately prior to such adjustment and the denominator of which shall be the Purchase Price in effect immediately after such adjustment. (c) The Company may elect, upon any adjustment of the Purchase Price hereunder, to adjust the number of Warrants outstanding, in lieu of the adjustment in the number of shares of Common Stock purchasable upon the exercise of each Warrant as hereinabove provided, so that each Warrant outstanding after such adjustment shall represent the right to purchase one share of Common Stock. Each Warrant held of record prior to such adjustment of the number of Warrants shall become that number of Warrants (calculated to the nearest tenth) determined by multiplying the number one by a fraction, the numerator of which shall be the Purchase Price in effect immediately prior to such adjustment and the denominator of which shall be the Purchase Price in effect immediately after such adjustment. Upon each adjustment of the number of Warrants pursuant to this Section 9, the Company shall, as promptly as practicable, cause to be distributed to each Registered Holder of Warrant Certificates on the date of such adjustment Warrant Certificates evidencing, subject to Section 10 hereof, the number of additional Warrants to which such Holder shall be entitled as a result of such adjustment or, at the option of the Company, cause to be distributed to such Holder in substitution and replacement for the Warrant Certificates held by him prior to the date of adjustment (and upon surrender thereof, if required by the Company) new Warrant Certificates evidencing the number of Warrants to which such Holder shall be entitled after such adjustment. (d) In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock, or in case of any consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock), or in case of any sale or conveyance to another corporation of the property of the Company as, or substantially as, an entirety (other than a sale/leaseback, mortgage or other financing transaction), the Company shall cause effective provision to be made so that each holder of a Warrant then outstanding shall have the right thereafter, by exercising such Warrant, to purchase the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been purchased upon exercise of such Warrant immediately prior to such reclassification, capital reorganization or other change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 9. The Company shall not effect any such consolidation, merger or sale unless prior to or simultaneously with the consummation thereof the successor (if other than the Company) resulting from such consolidation or merger or the corporation purchasing assets or other appropriate corporation or entity shall assume, by written instrument executed and delivered to the Warrant Agent, the obligation to deliver to the holder of each Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holders may be entitled to purchase and the other obligations under this Agreement. The foregoing provisions shall similarly apply to successive reclassifications, capital reorganizations and other changes of outstanding shares of Common Stock and to successive consolidations, mergers, sales or conveyances. 8 (e) Irrespective of any adjustments or changes in the Purchase Price or the number of shares of Common Stock purchasable upon exercise of the Warrants, the Warrant Certificates theretofore and thereafter issued shall, unless the Company shall exercise its option to issue new Warrant Certificates pursuant to Section 2(d) hereof, continue to express the Purchase Price per share, the number of shares purchasable thereunder and the Redemption Price therefor as the Purchase Price per share, and the number of shares purchasable and the Redemption Price therefore were expressed in the Warrant Certificates when the same were originally issued (f) After each adjustment of the Purchase Price pursuant to this Section 9, the Company will promptly prepare a certificate signed by the Chairman or President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company setting forth: (i) the Purchase Price as so adjusted, (ii) the number of shares of Common Stock purchasable upon exercise of each Warrant after such adjustment, and, if the Company shall have elected to adjust the number of Warrants, the number of Warrants to which the registered holder of each Warrant shall then be entitled, and the adjustment in Redemption Price resulting therefrom, and (iii) a brief statement of the facts accounting for such adjustment. The Company will promptly file such certificate with the Warrant Agent and cause a brief summary thereof to be sent by ordinary first class mail to Commonwealth and to each registered holder of Warrants at his last address as it shall appear on the registry books of the Warrant Agent. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity thereof except as to the holder to whom the Company failed to mail such notice, or except as to the holder whose notice was defective. The affidavit of an offcer of the Warrant Agent or the Secretary or an Assistant Secretary of the Company that such notice has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. (g) For purposes of Section 9(b) and 9(c) hereof, the following provisions (A) to (F) shall also be applicable: (A) The number of shares of Common Stock outstanding at any given time shall include shares of Common Stock owned or held by or for the account of the Company and the sale or issuance of such treasury shares or the distribution of any such treasury shares shall not be considered a Change of Shares for purposes of said sections. (B) No adjustment of the Purchase Price shall be made unless such adjustment would require an increase or decrease of at least $.025 in such price; provided that any adjustments which by reason of this clause (B) are not required to be made shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment(s) so carried forward, shall require an increase or decrease of at least $.025 in the Purchase Price then in effect hereunder. (C) In case of (1) the sale by the Company for cash (or as a component of a unit being sold for cash) of any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or any securities convertible into or exchangeable for Common Stock without the payment of any further consideration other than cash, if any (such securities convertible, exercisable or exchangeable into Common Stock being herein called "Convertible Securities"), or (2) the issuance by the Company, without the receipt by the Company of any consideration therefor, of any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, in each case, if (and only if) the consideration payable to the Company upon the exercise of such rights, warrants or options shall consist of cash, whether or not such rights, 9 warrants or options, or the right to convert or exchange such Convertible Securities, are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities (determined by dividing (x) the minimum aggregate consideration payable to the Company upon the exercise of such rights, warrants or options, plus the consideration received by the Company for the issuance or sale of such rights, warrants or options, plus, in the case of such Convertible Securities, the minimum aggregate amount of additional consideration, if any, other than such Convertible Securities, payable upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities issuable upon the exercise of such rights, warrants or options) is less than the Market Price of the Common Stock on the date of the issuance or sale of such rights, warrants or options, then the total maximum number of shares of Common Stock issuable upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities (as of the date of the issuance or sale of such rights, warrants or options) shall be deemed to be outstanding shares of Common Stock for purposes of Sections 9(b) and 9(c) hereof and shall be deemed to have been sold for cash in an amount equal to such price per share. (D) In case of the sale by the Company for cash of any Convertible Securities, whether or not the right of conversion or exchange thereunder is immediately exercisable, and the price per share for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities (determined by dividing (x) the total amount of consideration received by the Company for the sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, other than such Convertible Securities, payable upon the conversion or exchange thereof, by (y) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities) is less than the Market Price of the Common Stock on the date of the sale of such Convertible Securities, then the total maximum number of shares of Common Stock issuable upon the conversion or exchange of such Convertible Securities (as of the date of the sale of such Convertible Securities) shall be deemed to be outstanding shares of Common Stock for purposes of Sections 9(b) and 9(c) hereof and shall be deemed to have been sold for cash in an amount equal to such price per share. (E) In case the Company shall modify the rights of conversion, exchange or exercise of any of the securities referred to in (C) above or any other securities of the Company convertible, exchangeable or exercisable for shares of Common Stock, for any reason other than an event that would require adjustment to prevent dilution, so that the consideration per share received by the Company after such modification is less than the Market Price on the date prior to such modification, the Purchase Price to be in effect after such modification shall be determined by multiplying the Purchase Price in effect immediately prior to such event by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding multiplied by the Market Price on the date prior to the modification plus the number of shares of Common Stock which the aggregate consideration receivable by the Company for the securities affected by the modification would purchase at the Market Price and of which the denominator shall be the number of shares of Common Stock outstanding on such date plus the number of shares of Common Stock to be issued upon conversion, exchange or exercise of the modified securities at the modified rate. Such adjustment shall become effective as of the date upon which such modification shall take effect. On the expiration of any such 10 right, warrant or option or the termination of any such right to convert or exchange any such Convertible Securities referred to in Paragraph (C) or (D) above, the Purchase Price then in effect hereunder shall forthwith be readjusted to such Purchase Price as would have obtained (a) had the adjustments made upon the issuance or sale of such rights, warrants, options or Convertible Securities been made upon the basis of the issuance of only the number of shares of Common Stock theretofore actually delivered (and the total consideration received therefor) upon the exercise of such rights, warrants or options or upon the conversion or exchange of such Convertible Securities and (b) had adjustments been made on the basis of the Purchase Price as adjusted under clause (a) for all transactions (which would have affected such adjusted Purchase Price) made after the issuance or sale of such rights, warrants, options or Convertible Securities. (F) In case of the sale for cash of any shares of Common Stock, any Convertible Securities, any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, the consideration received by the Company therefore shall be deemed to be the gross sales price therefor without deducting therefrom any expense paid or incurred by the Company or any underwriting discounts or commissions or concessions paid or allowed by the Company in connection therewith. (h) No adjustment to the Purchase Price of the Warrants or to the number of shares of Common Stock purchasable upon the exercise of each Warrant will be made, however, (i) upon the exercise of any of the options presently outstanding under the Company's Stock Option Plan (the "Plan") for officers, directors and certain other key personnel of the Company; or (ii) upon the sale or exercise of the Warrants, or (iii) upon the sale of any shares of Common Stock or Convertible Securities in a firm commitment underwritten public offering, including, without limitation, shares sold upon the exercise of any overallotment option granted to the underwriters in connection with such offering, or (iv) upon the issuance or sale of Common Stock or Convertible Securities upon the exercise of any rights or warrants to subscribe for or purchase, or any options for the purchase of, Common Stock or Convertible Securities, whether or not such rights, warrants or options were outstanding on the date of the original sale of the Warrants or were thereafter issued or sold; or (v) upon the issuance or sale of Common Stock upon conversion or exchange of any Convertible Securities, whether or not any adjustment in the Purchase Price was made or required to be made upon the issuance or sale of such Convertible Securities and whether or not such Convertible Securities were outstanding on the date of the original sale of the Warrants or were thereafter issued or sold; (i) As used in this Section 9, the term "Common Stock" shall mean and include the Company's Common Stock authorized on the date of the original issue of the Units and shall also include any capital stock of any class of the Company thereafter authorized which shall not be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends and in the distribution of assets upon the voluntary liquidation, dissolution or winding up of the Company; provided, however, that the shares issuable upon exercise of the Warrants shall include only shares of such class designated in the Company's Articles of Incorporation as Common Stock on the 11 date of the original issue of the Units or (i), in the case of any reclassification, change, consolidation, merger, sale or conveyance of the character referred to in Section 9(d) hereof, the stock, securities or property provided for in such section or (ii), in the case of any reclassification or change in the outstanding shares of Common Stock issuable upon exercise of the Warrants as a result of a subdivision or combination or consisting of a change in par value, or from par value to no par value, or from no par value to par value, such shares of Common Stock as so reclassified or changed. (j) Any determination as to whether an adjustment in the Purchase Price in effect hereunder is required pursuant to Section 9, or as to the amount of any such adjustment, if required, shall be binding upon the holders of the Warrants and the Company if made in good faith by the Board of Directors of the Company. (k) If and whenever the Company shall grant to the holders of Common Stock, as such, rights or warrants to subscribe for or to purchase, or any options for the purchase of, Common Stock or securities convertible into or exchangeable for or carrying a right, warrant or option to purchase Common Stock, the Company shall concurrently therewith grant to each Registered Holder as of the record date for such transaction of the Warrants then outstanding, the rights, warrants or options to which each Registered Holder would have been entitled if, on the record date used to determine the stockholders entitled to the rights, warrants or options being granted by the Company, the Registered Holder were the holder of record of the number of whole shares of Common Stock then issuable upon exercise (assuming, for purposes of this section 9(j), that exercise of Warrants is permissible during periods prior to the Initial Warrant Exercise Date) of his Warrants. Such grant by the Company to the holders of the Warrants shall be in lieu of any adjustment which otherwise might be called for pursuant to this Section 9. SECTION 10. Registration Under The Securities Act of 1933. The Company agrees to register for resale the Warrants and the shares of Common Stock issued or issuable upon exercise of the Warrants under the Securities Act of 1933, as amended (the "Act") no later than August 5, 1998, as more fully set forth in Section IV of the Subscription Agreement between the Company and each of the investors in the Private Placement, subject to certain contractual restrictions on transfer and exercise applicable to the Holder. SECTION 11. Fractional Warrants and Fractional Shares. (a) If the number of shares of Common Stock purchasable upon the exercise of each Warrant is adjusted pursuant to Section 9 hereof, the Company nevertheless shall not be required to issue fractions of shares, upon exercise of the Warrants or otherwise, or to distribute certificates that evidence fractional shares. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of such fractional share, determined as follows: (1) If the Common Stock is listed on a National Securities Exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market, the current market value shall be the last reported sale price of the Common Stock on such exchange or market on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the average of the closing bid and asked prices for such day on such exchange or market; or 12 (2) If the Common Stock is not listed or admitted to unlisted trading privileges, the current market value shall be the mean of the last reported bid and asked prices reported by the Nasdaq SmallCap Market or, if not traded thereon, by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (3) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount determined in such reasonable manner as may be prescribed by the Board of Directors of the Company. SECTION 12. Warrant Holders Not Deemed Stockholders. Subject to Section 9(k), no holder of Warrants shall, as such, be entitled to vote or to receive dividends or be deemed the holder of Common Stock that may at any time be issuable upon exercise of such Warrants for any purpose whatsoever, nor shall anything contained herein be construed to confer upon the holder of Warrants, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issue or reclassification of stock, change of par value or change of stock to no par value, consolidation, merger or conveyance or otherwise), or to receive notice of meetings, or to receive dividends or subscription rights, until such Holder shall have exercised such Warrants and been issued shares of Common Stock in accordance with the provisions hereof. SECTION 13. Rights of Action. All rights of action with respect to this Agreement are vested in the respective Registered Holders of the Warrants, and any Registered Holder of a Warrant, without consent of the Warrant Agent or of the holder of any other Warrant, may, in his own behalf and for his own benefit, enforce against the Company his right to exercise his Warrants for the purchase of shares of Common Stock in the manner provided in the Warrant Certificate and this Agreement. SECTION 14. Agreement of Warrant Holders. Every holder of a Warrant, by his acceptance thereof, consents and agrees with the Company, the Warrant Agent and every other holder of a Warrant that: (a) The Warrants are transferable only on the registry books of the Warrant Agent by the Registered Holder thereof in person or by his attorney-in-fact duly authorized in writing and only if the Warrant Certificates representing such Warrants are surrendered at the office of the Warrant Agent, duly endorsed or accompanied by a proper instrument of transfer satisfactory to the Warrant Agent and the Company in their sole discretion, together with payment of any applicable transfer taxes; and (b) The Company and the Warrant Agent may deem and treat the person in whose name the Warrant Certificate is registered as the holder and as the absolute, true and lawful owner of the Warrants represented thereby for all purposes, and neither the Company nor the Warrant Agent shall be affected by any notice or knowledge to the contrary, except as otherwise expressly provided in Section 7 hereof. SECTION 15. Cancellation of Warrant Certificates. If the Company shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant Certificates evidencing the same shall thereupon be delivered to the Warrant Agent and cancelled by it and retired. The Warrant Agent shall also cancel the Warrant Certificate or Warrant Certificates following exercise of any or all of the Warrants represented thereby or delivered to it for transfer, split up, combination or exchange. 13 SECTION 16. Concerning the Warrant Agent. The Warrant Agent acts hereunder as agent and in a ministerial capacity for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not, by issuing and delivering Warrant Certificates or by any other act hereunder be deemed to make any representations as to the validity, value or authorization of the Warrant Certificates or the Warrants represented thereby or of any securities or other property delivered upon exercise of any Warrant or whether any stock issued upon exercise of any Warrant is fully paid and nonassessable. The Warrant Agent shall not at any time be under any duty or responsibility to any holder of Warrant Certificates to make or cause to be made any adjustment of the Purchase Price or the Redemption Price provided in this Agreement, or to determine whether any fact exists which may require any such adjustments, or with respect to the nature or extent of any such adjustment, when made, or with respect to the method employed in making the same. It shall not (i) be liable for any recital or statement of facts contained herein or for any action taken, suffered or omitted by it in reliance on any Warrant Certificate or other document or instrument believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties, (ii) be responsible for any failure on the part of the Company to comply with any of its covenants and obligations contained in this Agreement or in any Warrant Certificate, or (iii) be liable for any act or omission in connection with this Agreement except for its own negligence or wilful misconduct. The Warrant Agent may at any time consult with counsel satisfactory to it (who may be counsel for the Company) and shall incur no liability or responsibility for any action taken, suffered or omitted by it in good faith in accordance with the opinion or advice of such counsel. Any notice, statement, instruction, request, direction, order or demand of the Company shall be sufficiently evidenced by an instrument signed by the Chairman of the Board, President, any Vice President, its Secretary, or Assistant Secretary, (unless other evidence in respect thereof is herein specifically prescribed). The Warrant Agent shall not be liable for any action taken, suffered or omitted by it in accordance with such notice, statement, instruction, request, direction, order or demand believed by it to be genuine. The Company agrees to pay the Warrant Agent reasonable compensation for its services hereunder and to reimburse it for its reasonable expenses hereunder; it further agrees to indemnify the Warrant Agent and save it harmless against any and all losses, expenses and liabilities, including judgments, costs and counsel fees, for anything done or omitted by the Warrant Agent in the execution of its duties and powers hereunder except losses, expenses and liabilities arising as a result of the Warrant Agent's negligence or wilful misconduct. The Warrant Agent may resign its duties and be discharged from all further duties and liabilities hereunder (except liabilities arising as a result of the Warrant Agent's own negligence or wilful misconduct), after giving 30 days' prior written notice to the Company. At least 15 days prior to the date such resignation is to become effective, the Warrant Agent shall cause a copy of such notice of resignation to be mailed to the Registered Holder of each Warrant Certificate at the Company's expense. Upon such resignation, or any inability of the Warrant Agent to act as such hereunder, the Company shall appoint a new warrant agent in writing. If the Company shall fail to make such appointment within a period of 15 days after it has been notified in writing of such resignation by the resigning Warrant Agent, then the Registered Holder of any Warrant Certificate may apply to any court of 14 competent jurisdiction for the appointment of a new warrant agent. Any new warrant agent, whether appointed by the Company or by such a court, shall be a bank or trust company having a capital and surplus, as shown by its last published report to its stockholders, of not less than $10,000,000 or a stock transfer company. After acceptance in writing of such appointment by the new warrant agent is received by the Company, such new warrant agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as the Warrant Agent, without any further assurance, conveyance, act or deed; but if for any reason it shall be necessary or expedient to execute and deliver any further assurance, conveyance, act or deed, the same shall be done at the expense of the Company and shall be legally and validly executed and delivered by the resigning Warrant Agent. Not later than the effective date of any such appointment the Company shall file notice thereof with the resigning Warrant Agent and shall forthwith cause a copy of such notice to be mailed to the Registered Holder of each Warrant Certificate. Any corporation into which the Warrant Agent or any new warrant agent may be converted or merged or any corporation resulting from any consolidation to which the Warrant Agent or any new warrant agent shall be a party or any corporation succeeding to the trust business of the Warrant Agent shall be a successor warrant agent under this Agreement without any further act, provided that such corporation is eligible for appointment as successor to the Warrant Agent under the provisions of the preceding paragraph. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed to the Company and to the Registered Holder of each Warrant Certificate. The Warrant Agent, its subsidiaries and affiliates, and any of its or their officers or directors, may buy and hold or sell Warrants or other securities of the Company and otherwise deal with the Company in the same manner and to the same extent and with like effects as though it were not Warrant Agent. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity. SECTION 17. Modification of Agreement. The parties hereto may by supplemental agreement make any changes or corrections in this Agreement (i) that they shall deem appropriate to cure any ambiguity or to correct any defective or inconsistent provision or manifest mistake or error herein contained; (ii) to reflect an increase in the number of Warrants which are to be governed by this Agreement resulting from a subsequent public offering of Company securities which includes Warrants having the same terms and conditions as the Warrants originally covered by or subsequently added to this Agreement under this Section 17; or (iii) that they may deem necessary or desirable and which shall not adversely affect the interests of the holders of Warrant Certificates; provided, however, that this Agreement shall not otherwise be modified, supplemented or altered in any respect except with the consent in writing of the Registered Holders of Warrant Certificates representing not less than 50% of the Warrants then outstanding; and provided, further, that no change in the number or nature of the securities purchasable upon the exercise of any Warrant, or the Purchase Price therefor, or the acceleration of the Warrant Expiration Date, shall be made without the consent in writing of the Registered Holder of the Warrant Certificate representing such Warrant, other than such changes as are specifically prescribed by this Agreement as originally executed or are made in compliance with applicable law. SECTION 18. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been made when delivered or mailed first class registered or certified mail, postage prepaid as follows: if to the Registered Holder of a Warrant 15 Certificate, at the address of such holder as shown on the registry books maintained by the Warrant Agent; if to the Company, at Datalink Systems Corporation, 1735 Technology Drive, Suite 790, San Jose, California, 95110, attention: Anthony LaPine, or at such other address as may have been furnished to the Warrant Agent in writing by the Company; if to the Warrant Agent, at its Corporate Office, if to Commonwealth, at Commonwealth Associates, 830 Third Avenue, New York, New York 10022. SECTION 19. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. SECTION 20. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and, the Warrant Agent and their respective successors and assigns, and the holders from time to time of Warrant Certificates . Nothing in this Agreement is intended or shall be construed to confer upon any other person any right, remedy or claim, in equity or at law, or to impose upon any other person any duty, liability or obligation. SECTION 21. Termination. This Agreement shall terminate at the close of business on the earlier of the Warrant Expiration Date or the date upon which all Warrants have been exercised, except that the Warrant Agent shall account to the Company for cash held by it and the provisions of Section l 5 hereof shall survive such termination. SECTION 22. Counterparts. This Agreement may be executed in several counterparts, which taken together shall constitute a single document. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. DATALINK SYSTEMS CORPORATION By: /s/ Anthony LaPine Anthony LaPine, Chief Executive Officer AMERICAN SECURITIES TRANSFER & TRUST, INC. By: /s/ Authorized Officer COMMONWEALTH ASSOCIATES, a New York limited partnership By: COMMONWEALTH MANAGEMENT CO., INC. a New York corporation, its general partner By: /s/ Joseph P. Wynne Name: Joseph P. Wynne Title: Chief Financial Officer 16 THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (THE "ACT") SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. EXHIBIT A [FORM OF FACE OF WARRANT CERTIFICATE] No. W _____ Warrants VOID AFTER NOVEMBER 5, 2002 WARRANT CERTIFICATE FOR PURCHASE OF COMMON STOCK DATALINK SYSTEMS CORPORATION This certifies that FOR VALUE RECEIVED ____________________________ or registered assigns (the "Registered Holder") is the owner of the number of Warrants ("Warrants") specified above. Each Warrant represented hereby initially entitles the Registered Holder to purchase, subject to the terms and conditions set forth in this Warrant Certificate and the Warrant Agreement (as hereinafter defined), one fully paid and nonassessable share of Common Stock, $.001 par value ("Common Stock"), of Datalink Systems Corporation, a Nevada corporation (the "Company"), at any time commencing November 5, 1998 and prior to the Expiration Date (as hereinafter defined), upon the presentation and surrender of this Warrant Certificate with the Subscription Form on the reverse hereof duly executed, at the corporate office of American Securities Transfer & Trust, Inc. as Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment of $. 50 (the "Purchase Price") in lawful money of the United States of America in cash or by official bank or certified check made payable to Company. This Warrant Certificate and each Warrant represented hereby are issued pursuant to and are subject in all respects to the terms and conditions set forth in the Warrant Agreement (the "Warrant Agreement"), dated November 5, 1997, by and among the Company, the Warrant Agent and Commonwealth Associates. In the event of certain contingencies provided for in the Warrant Agreement, the Purchase Price or the number of shares of Common Stock subject to purchase upon the exercise of each Warrant represented hereby are subject to modification or adjustment. Each Warrant represented hereby is exercisable at the option of the Registered Holder, but no fractional shares of Common Stock will be issued. In the case of the exercise of less than all the Warrants represented hereby, the Company shall cancel this Warrant Certificate upon the surrender hereof and shall execute and deliver a new Warrant Certificate or Warrant Certificates of like tenor, which the Warrant Agent shall countersign, for the balance of such Warrants. A-1 The term "Expiration Date" shall mean 5:00 P.M. (New York time) on November 5, 2002 or such earlier date as the Warrants shall be redeemed. If such date shall in the State of New York be a holiday or a day on which banks are authorized to close, then the Expiration Date shall mean 5:00 P.M. New York time) the next following day which in the State of New York is not a holiday or a day on which banks are authorized to close. The Company shall not be obligated to deliver any securities pursuant to the exercise of the Warrants represented hereby unless a registration statement under the Securities Act of 1933, as amended, with respect to such securities is effective. The Company has covenanted and agreed that it will file a registration statement in accordance with the terms of the subscription agreements executed in connection with the Company's 1997 private placement. The Warrants represented hereby shall not be exercisable by a Registered Holder in any state where such exercise would be unlawful. This Warrant Certificate is exchangeable, upon the surrender hereof by the Registered Holder at the corporate office of the Warrant Agent, for a new Warrant Certificate or Warrant Certificates of like tenor representing an equal aggregate number of Warrants, each of such new Warrant Certificates to represent such number of Warrants as shall be designated by such Registered Holder at the time of such surrender. Upon due presentment with any transfer fee, tax, or governmental charge imposed in connection therewith, for registration of transfer of this Warrant Certificate at such office, a new Warrant Certificate or Warrant Certificates representing an equal aggregate number of Warrants will be issued to the transferee in exchange therefor, subject to the limitations provided in the Warrant Agreement. Prior to the exercise of any Warrant represented hereby, the Registered Holder shall not be entitled to any rights of a stockholder of the Company, including, without limitation, the right to vote or to receive dividends or other distributions, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided in the Warrant Agreement. The Warrants represented hereby may be redeemed at the option of the Company, at a redemption price of $.05 per Class A Warrant at any time commencing May 5, 1999 provided the Market Price (as defined in the Warrant Agreement) for the Common Stock shall exceed $1.25 per share. Notice of redemption shall be given not later than the thirtieth day before the date fixed for redemption, all as provided in the Warrant Agreement. On and after the date fixed for redemption, the Registered Holder shall have no rights with respect to the Warrants represented hereby except to receive the $.05 per Warrant upon surrender of this Warrant Certificate. Prior to due presentment for registration of transfer hereof, the Company and the Warrant Agent may deem and treat the Registered Holder as the absolute owner hereof and of each Warrant represented hereby (notwithstanding any notations of ownership or writing hereon made by anyone other than a duly authorized officer of the Company or the Warrant Agent) for all purposes and shall not be affected by any notice to the contrary. This Warrant Certificate shall be governed by and construed in accordance with the laws of the State of New York. This Warrant Certificate is not valid unless countersigned by the Warrant Agent. A-2 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed, manually or in facsimile, by two of its officers "hereunto duly authorized and a facsimile of its corporate seal to be imprinted hereon. DATALINK SYSTEMS CORPORATION Dated:________________ By:____________________________________ By:____________________________________ [seal] Countersigned: AMERICAN SECURITIES TRANSFER & TRUST, INC., as Warrant Agent By:___________________________________ Authorized Officer A-3 [FORM OF REVERSE OF WARRANT CERTIFICATE] SUBSCRIPTION FORM To Be Executed by the Registered Holder in Order to Exercise Warrants The undersigned Registered Holder hereby irrevocably elects to exercise _________ Warrants represented by this Warrant Certificate, and to purchase the securities issuable upon the exercise of such Warrants, and requests that certificates for such securities shall be issued in the name of PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER __________________ __________________ __________________ [please print or type name and address] and be delivered to __________________ __________________ __________________ [please print or type name and address] and if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the Registered Holder at the address stated below. A-4 ASSIGNMENT To Be Executed by the Registered Holder in Order to Assign Warrants FOR VALUE RECEIVED, ____________________ hereby sells, assigns and transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER __________________ __________________ __________________ [please print or type name and address] ___________ of the Warrants represented by this Warrant Certificate, and hereby irrevocably constitutes and appoints ______________ Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises Dated: ______________________ X _________________________________ Signature Guaranteed __________________________________ THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A MEMBER OF THE MEDALLION STAMP PROGRAM. A-5 EX-5 3 KRYS BOYLE FREEDMAN & SAWYER, P.C. ATTORNEYS AT LAW Telephone 600 17th Street, Suite 2700 S Facsimile (303) 893-2300 Denver, Colorado 80202 (303) 893-2882 February 8, 1999 Datalink Systems Corporation 1735 Technology Way, Suite 790 San Jose, California 95110 Gentlemen: We have acted as counsel to Datalink Systems Corporation, a Nevada corporation (the "Company"), in connection with the preparation and filing with the Securities and Exchange Commission of a Registration Statement on Form S-3 (the "Registration Statement"), pursuant to which the Company is registering under the Securities Act of 1933, as amended, 4,390,006 shares (the "Shares") of its common stock, $.001 par value (the "Common Stock"), and 2,054,313 common stock purchase warrants (the "Warrants") which may be sold by Selling Securityholders. Of the Shares of Common Stock which may be sold, 2,335,693 Shares are issuable upon the conversion of Series A Convertible Preferred Stock and 2,054,313 Shares are issuable upon the exercise of the Warrants. This opinion is being rendered in connection with the filing of the Registration Statement. All capitalized terms used herein and not otherwise defined shall have the respective meanings given to them in the Registration Statement. In connection with this opinion, we have examined the Company's Articles of Incorporation and Bylaws, both as currently in effect; such other records of the corporate proceedings of the Company and certificates of the Company's officers as we have deemed relevant; and the Registration Statement and the exhibits thereto. In our examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such copies. Based upon the foregoing, and subject to the limitations set forth below, we are of the opinion that the 2,054,313 Warrants being offered for resale have been duly and validly authorized by the Company and have been duly and validly issued and are fully paid and non-assessable. Based upon the foregoing and in reliance thereon, and subject to the limitations set forth below, we are of the opinion that the 2,335,693 shares of Common Stock issuable upon the conversion of the Series A Convertible Preferred Stock and the 2,054,313 shares of Common Stock issuable upon exercise of the outstanding Warrants in accordance with their respective terms, when issued, will be duly and validly authorized, legally issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. We hereby further consent to the reference to us under the caption "Legal Matters" in the prospectus included in the Registration Statement. Very truly yours, KRYS BOYLE FREEDMAN & SAWYER, P.C. By:/s/ Jon D. SAwyer Jon D. Sawyer EX-23.1 4 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Datalink Systems Corporation San Jose, California We hereby consent to the incorporation by reference in the Prospectus constituting a part of this Registration Statement on Form S-3 of our report dated December 2, 1998, appearing in the Company's Annual Report on Form 10- KSB, as amended, relating to the consolidated financial statements of Datalink Systems Corporation for the fiscal year ended March 31, 1998. We also consent to the reference to our firm under the heading "Experts" in the Prospectus. /s/ BDO Seidman, L.L.P. BDO SEIDMAN, L.L.P. San Jose, California February 8, 1999 -----END PRIVACY-ENHANCED MESSAGE-----