United
      States Securities and Exchange Commission


Washington,
      D.C. 20549


Form
      10-Q





xQUARTERLY
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
      ACT OF 1934





For
      the
      quarterly period ended March 31, 2006





or





o TRANSITION
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
      ACT OF 1934





For
      the
      transition period from _____ to _____




Commission
      File Number 0-21989





Medialink
      Worldwide Incorporated


(Exact
      name of registrant as specified in its charter)





Delaware
            52-1481284(State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization)
            Identification
                Number)




708
                Third Avenue, New York, NY
            10017(Address
                of principal executive offices)
            (Zip
                Code)





(212)
      682-8300


(Registrant's
      telephone number, including area code)








Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No
o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):


Large
                accelerated filer o
            Accelerated
                filer o
            Non-accelerated
                filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act.) Yes o No x





The
      number of shares of the issuer's common stock, outstanding as of the close
      of
      May 1, 2006, was 6,201,486.










**PART
      I - FINANCIAL INFORMATION**





**Item
      1.** ***Financial
      Statements***





**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEETS**(Unaudited)(In
                thousands of dollars, except share and per-share amounts)**March
                31,**
            
            **December
                31,****2006**
            
            **2005**ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            $
            5,522
            
            $
            7,303Accounts
                receivable, net of allowance for doubtful accounts of$504
                and $610
            
            
            5,727
            
            
            5,584Inventory
            
            
            324
            
            
            371Prepaid
                expenses
            
            
            689
            
            
            566Prepaid
                and refundable taxes
            
            
            911
            
            
            906Other
                current assets
            
            
            50
            
            
            48Total
                current assets
            
            
            13,223
            
            
            14,778Property
                and equipment - net
            
            
            4,562
            
            
            4,380Goodwill
            
            
            13,006
            
            
            13,006Other
                assets
            
            
            738
            
            
            762Total
                assets
            
            $
            31,529
            
            $
            32,926LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                Liabilities:Accounts
                payable
            
            $
            1,934
            
            $
            1,665Accrued
                expenses and other current liabilities
            
            
            5,946
            
            
            5,922Current
                portion of capital lease obligation
            
            
            51
            
            
            70Total
                current liabilities
            
            
            7,931
            
            
            7,657Convertible
                debentures, net of unamortized discount of $899 and $955
            
            
            4,101
            
            
            4,045Other
                long-term liabilities
            
            
            1,281
            
            
            1,586Total
                liabilities
            
            
            13,313
            
            
            13,288Commitments
                and contingenciesStockholders'
                Equity:Series
                A Preferred stock: $.01 par value, authorized 50,000 shares; noneissued
                and outstandingCommon
                stock: $.01 par value, authorized 15,000,000 shares; issued andoutstanding
                6,201,486 shares in 2006 and 6,155,360 shares in 2005
            
            
            62
            
            
            62Additional
                paid-in capital
            
            
            26,848
            
            
            26,591Accumulated
                deficit
            
            
            (7,967
            )
            
            (6,279
            )Accumulated
                other comprehensive loss
            
            
            (384
            )
            
            (393
            )Common
                stock in treasury (at cost, 101,121 shares)
            
            
            (343
            )
            
            (343
            )Total
                stockholders' equity
            
            
            18,216
            
            
            19,638Total
                liabilities and stockholders' equity
            
            $
            31,529
            
            $
            32,926




See
        notes
        to unaudited consolidated financial statements


2


**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF OPERATIONS**(Unaudited)(In
                thousands, except per-share amounts)**For
                the three months ended****March
                31,****2006**
            
            **2005**Revenues
            
            $
            8,971
            
            $
            8,548Operating
                expenses:Direct
                costs
            
            
            3,484
            
            
            3,486Selling,
                general, and administrative expenses
            
            
            6,550
            
            
            5,912Depreciation
                and amortization
            
            
            501
            
            
            424Total
                operating expenses
            
            
            10,535
            
            
            9,822Operating
                loss
            
            
            (1,564
            )
            
            (1,274
            )Interest
                expense - net
            
            
            (124
            )
            
            (135
            )Loss
                from continuing operations before taxes
            
            
            (1,688
            )
            
            (1,409
            )Income
                tax benefit
            
            
            —
            
            
            (220
            )Loss
                from continuing operations
            
            
            (1,688
            )
            
            (1,189
            )Income
                from discontinued operations
            
            
            —
            
            
            60Net
                loss
            
            $
            (1,688
            )
            $
            (1,129
            )Net
                loss
            
            $
            (1,688
            )
            $
            (1,129
            )Other
                comprehensive income (loss)
            
            
            9
            
            
            (68
            )Comprehensive
                loss
            
            $
            (1,679
            )
            $
            (1,197
            )Basic
                and diluted income (loss) per common share:Loss
                from continuing operations
            
            $
            (0.28
            )
            $
            (0.20
            )Income
                from discontinued operations
            
            
            —
            
            
            0.01Net
                loss
            
            $
            (0.28
            )
            $
            (0.19
            )Weighted
                average number of common shares - basic and diluted
            
            
            6,085
            
            
            5,987




See
      notes to unaudited consolidated financial
      statements


3





**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS**(Unaudited)(In
                thousands of dollars)**For
                the three months ended****March
                31,****2006**
            
            **2005**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (1,688
            )
            $
            (1,129
            )Adjustments
                to reconcile net loss to net cash used inoperating
                activities:Depreciation
                and amortization
            
            
            501
            
            
            424Provision
                for bad debts
            
            
            32
            
            
            (55
            )Income
                from discontinued operations
            
            
            —
            
            
            (60
            )Other
            
            
            222
            
            
            75Changes
                in operating assets and liabilitiesAccounts
                receivable
            
            
            (159
            )
            
            691Prepaid
                expenses and other assets
            
            
            (112
            )
            
            373Prepaid
                and refundable income taxes and taxes payable
            
            
            (5
            )
            
            (681
            )Accounts
                payable and accrued expenses
            
            
            120
            
            
            (1,223
            )Other
                liabilities
            
            
            (181
            )
            
            11Net
                cash used in operating activities
            
            
            (1,270
            )
            
            (1,574
            )CASH
                FLOWS FROM INVESTING ACTIVITY -Purchases
                of property and equipment
            
            
            (627
            )
            
            (373
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from the issuance of common stock in connectionwith
                the exercise of stock options
            
            
            132
            
            
            225Repayments
                of obligations under capital lease
            
            
            (20
            )
            
            (48
            )Net
                cash provided by financing activities
            
            
            112
            
            
            177Net
                decrease in cash and cash equivalents
            
            
            (1,785
            )
            
            (1,770
            )Effect
                of exchange rate changes on cash and cash equivalents
            
            
            4
            
            
            (8
            )Cash
                and cash equivalents at the beginning of period
            
            
            7,303
            
            
            11,675Cash
                and cash equivalents at end of period
            
            $
            5,522
            
            $
            9,897




See
      notes to unaudited consolidated financial
      statements





4




**MEDIALINK
        WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
        TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
        thousands of dollars, except per-share amounts)**


**1.
      Basis of Presentation**





The
      accompanying unaudited consolidated financial statements of Medialink Worldwide
      Incorporated and its subsidiaries (the “Company”), which have been prepared in
      accordance with the instructions to Form 10-Q and therefore do not include
      all
      information and footnotes necessary for a fair presentation of financial
      position, results of operations, and cash flows in conformity with generally
      accepted accounting principles, should be read in conjunction with the notes
      to
      the consolidated financial statements contained in the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2005. The Company believes that
      all
      adjustments, consisting primarily of normal recurring accruals, necessary for
      a
      fair presentation have been included in the financial statements. The operating
      results of any quarter are not necessarily indicative of the results for the
      entire year or any future period.





Certain
      reclassifications have been made to the 2005 financial statements to conform
      to
      the 2006 presentation.





**2.
      Earnings (Loss) per Share**





Basic
      earnings (loss) per share of common stock is computed by dividing income (loss)
      available to common stockholders by the weighted average number of common shares
      outstanding. There were no reconciling items to net loss to arrive at loss
      available to common stockholders for the quarterly periods ended March 31,
      2006
      and 2005. Diluted earnings (loss) per share of common stock is computed by
      giving effect to all dilutive potential common shares. The number of shares
      used
      in the calculation of diluted earnings (loss) per share for the three months
      ended March 31, 2006 and 2005, excluded 138,223 and 260,426, respectively,
      of
      incremental shares related to stock options and warrants. Such incremental
      shares were excluded from the calculation of diluted earnings (loss) per share
      due to their antidilutive effect.





**3.
      Share-Based Payments**





Under
      a
      stock option plan covering employees and other eligible participants (the
“Employee Plan”), the Company grants stock options to purchase shares of the
      Company’s common stock. Stock options granted under the Employee Plan generally
      become exercisable under two alternative vesting schedules over a four-year
      period. One vesting schedule provides for 20% of the stock options granted
      being
      exercisable on the grant date and an additional 20% becoming exercisable on
      the
      anniversary of the grant date in each of the next four years. The second vesting
      schedule provides for 25% of the stock options granted becoming exercisable
      on
      the anniversary of the grant date in each of the next four years. Incentive
      stock options granted under the Employee Plan generally have a term of ten
      years
      and an exercise price equal to the fair market value of the Company’s common
      stock on the grant date. Incentive stock options issued to employees who own
      more than 10% of the voting power of all classes of equity of the Company have
      a
      term of five years and an exercise price equal to at least 110% of the fair
      market value of the Company’s common stock on the grant date. Non-qualified
      stock options granted under the Employee Plan can have a term of up to fifteen
      years and an exercise price that is determined for each individual grant by
      a
      committee appointed by the Company’s board of directors. There are 1,670,808
      shares of the Company’s common stock reserved for the issuance of stock options
      under the Employee Plan, and 550,522 shares remained available for the issuance
      of stock options at March 31, 2006.





Under
      a
      stock option plan covering members of its board of directors (the “Directors’
Plan”), the Company grants stock options to non-employee directors. Newly
      appointed non-employee directors are granted 10,000 stock options upon their
      appointment or election to the board of directors, and all non-employee
      directors are granted 3,000 stock options on the first business day of each
      year. Additional grants of stock options may be made at the discretion of a
      committee appointed by the Company’s board of directors. Stock options granted
      under the Directors’ Plan generally vest ratably over a three-year period, have
      a term of ten years, but cannot have a term that exceeds fifteen years, and
      have
      an exercise price equal to the fair market value of the Company’s common stock
      on the grant date. There are 280,000 shares of the Company’s common stock
      reserved for the issuance of stock options under the Directors’ Plan, and at
      March 31, 2006, 22,000 shares remained available for the issuance of stock
      options.




5




**MEDIALINK
          WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
          TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
          thousands of dollars, except per-share amounts)**


On
      January 1, 2006, the Company adopted the provisions of Statement of Financial
      Accounting Standards (“SFAS”) No. 123 (Revised 2004), “Share-Based Payment”
(“SFAS No. 123R”). SFAS No. 123R requires that all share-based payments to
      employees and non-employee directors, including grants of stock options, be
      recognized in the financial statements based on their fair values on the date
      of
      grant. Prior to the adoption of SFAS No. 123R, the Company accounted for
      stock-based compensation based on the intrinsic value of the stock options
      granted in accordance with the provisions of Accounting Principles Board Opinion
      (“APB”) No. 25, “Accounting for Stock Issued to Employees,” an alternative to
      the fair-value recognition provisions of SFAS No. 123, “Accounting for
      Stock-Based Compensation.” The Company has elected to use the modified
      prospective application for the transition upon the adoption of SFAS No. 123R,
      which requires compensation expense to be recognized on options granted
      subsequent to the adoption date as well as on options granted prior to the
      adoption date for which the requisite service period had not been completed
      as
      of December 31, 2005. Periods prior to the date that SFAS No. 123R is adopted
      are not adjusted under the modified prospective application.





The
      Company uses a binomial lattice model for determining the fair value of stock
      options granted subsequent to January 1, 2006. Prior to the adoption of SFAS
      No.
      123R, the Company valued stock options using the Black-Scholes option-pricing
      model, which the Company used for the pro forma disclosure requirements of
      SFAS
      No. 123. During the first three months of 2006, the Company granted 121,640
      stock options to employees that become exercisable over a four-year period,
      vesting 25% on each anniversary of the grant date. Also during the first three
      months of 2006, the Company granted 68,600 stock options to non-employee
      directors, of which 37,600 were fully vested upon grant and 31,000 of which
      become exercisable over a three-year period, with one-third vesting on each
      anniversary of the grant date. During the first three months of 2005, the
      Company granted 24,000 stock options to non-employee directors that vest ratably
      over a three-year period.




The
      following weighted average assumptions were used in calculating the fair value
      of stock options granted under the Employee Plan and the Directors’ Plan during
      the three months ended March 31, 2006:





**Employee
                Plan**
            
            **Directors’
                Plan**Expected
                term
            3.98
            
            4.23Expected
                volatility
            .6974
            
            .7053Expected
                dividends
            0%
            
            0%Risk-free
                interest rate
            4.76%
            
            4.64%





The
      expected term of stock options is based on historical data used to estimate
      the
      exercise of options prior to their expiration. Such early exercises primarily
      result either from a termination, after which employees and non-employee
      directors generally have a period of 90 days and nine months, respectively,
      to
      exercise stock options, or from exercises occurring when the ratio of the market
      price of the Company’s common stock to the exercise price of a stock option is
      attractive to the holder of the stock option. The expected volatility is based
      on the historical volatility of the Company’s common stock. The expected
      dividends are based on the historical dividends paid and the dividends the
      Company expects to pay in future periods. The risk-free interest rate is based
      on the yields of United States Treasury Notes at the time stock options are
      granted.





For
      the
      three months ended March 31, 2006, the Company recognized $125 of compensation
      expense related to stock options, of which $97 related to stock options granted
      to both employees and non-employee directors during 2006 and $28 related to
      stock options granted prior to the adoption of SFAS No. 123R and for which
      the
      requisite service periods had not been completed as of December 31, 2005. Such
      amounts were based on the fair value of the stock options at the grant date.
      The
      Company did not recognize any tax benefit related to the stock-based
      compensation expense incurred.




6




**MEDIALINK
          WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
          TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
          thousands of dollars, except per-share amounts)**


The
      Company did not recognize any compensation expense related to stock options
      for
      the three months ended March 31, 2005, under the provisions of APB No. 25.
      The
      pro forma effects, had the Company accounted for stock-based employee
      compensation based on the fair value of stock options granted in accordance
      with
      SFAS No. 123 for the three months ended March 31, 2005, are as
      follows:





Net
                loss as reported
            
            $
            (1,129
            )Stock-based
                compensation expense, netof
                tax, included in net loss as reported
            
            
            —Stock-based
                compensation expense, netof
                tax, under fair value method
            
            
            (68
            )Pro
                forma net loss
            
            $
            (1,197
            )Basic
                and diluted net loss per share as reported
            
            $
            (0.19
            )Pro
                forma basic and diluted net loss per share
            
            $
            (0.20
            )





Information
      relating to activity in the Employee Plan for the three months ended March
      31,
      2006, is summarized in the following table. All stock option grants included in
      the following table had exercise prices equal to the market price on the grant
      date.





**Number**
              **of
                shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Fair**
              **Value**
            
            **Aggregate
                Intrinsic**
              **Value**
            
            **Weighted**
              **Average
                Remaining Contractual**
              **Term**Options
                outstanding at January 1, 2006
            
            
            873,319
            
            $
            4.80Options
                granted
            
            
            121,640
            
            $
            4.13
            
            $
            2.31Options
                exercised
            
            
            (46,126
            )
            $
            2.87
            
            
            
            
            $
            54Options
                forfeited and expired
            
            
            (267,093
            )
            $
            4.09Options
                outstanding at March 31, 2006
            
            
            681,740
            
            $
            5.09
            
            
            
            
            $
            588
            
            
            6.18Options
                exercisable at March 31, 2006
            
            
            447,570
            
            $
            5.93
            
            
            
            
            $
            385
            
            
            4.51





There
      were no stock options granted under the Employee Plan during the three months
      ended March 31, 2005. The aggregate intrinsic value of stock options exercised
      under the Employee Plan during the three months ended March 31, 2005, was $73.




7




**MEDIALINK
          WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
          TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
          thousands of dollars, except per-share amounts)**


Information
      relating to activity in the Directors’ Plan for the three months ended March 31,
      2006, is summarized in the following table. All stock option grants included
      in
      the following table had exercise prices equal to the market price on the grant
      date.





**Number**
              **of
                shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Fair**
              **Value**
            
            **Aggregate
                Intrinsic**
              **Value**
            
            **Weighted**
              **Average
                Remaining Contractual**
              **Term**Options
                outstanding at January 1, 2006
            
            
            193,600
            
            $
            5.55Options
                granted
            
            
            68,600
            
            $
            3.90
            
            $
            2.25Options
                expired
            
            
            (37,600
            )
            $
            3.54Options
                outstanding at March 31, 2006
            
            
            224,600
            
            $
            5.39
            
            
            
            
            $
            132
            
            
            6.95Options
                exercisable at March 31, 2006
            
            
            163,600
            
            $
            6.09
            
            
            
            
            $
            81
            
            
            6.17





There
      were 24,000 stock options with a weighted average fair value of $2.87 granted
      under the Directors’ Plan during the three months ended March 31, 2005. The
      aggregate intrinsic value of stock options exercised under the Directors’ Plan
      during the three months ended March 31, 2005, was $6.





Compensation
      expense related to non-vested stock options under both the Employee Plan and
      the
      Directors’ Plan that was not recognized as of March 31, 2006, totaled $535 and
      is expected to be recognized over a weighted average period of 3.2 years. During
      the three months ended March 31, 2006 and 2005, the Company received $132 and
      $225, respectively, from the exercise of stock options. The Company has a policy
      of issuing new shares of common stock upon the exercise of stock
      options.








**4.
      Supplemental Cash Flow Information:**





Cash
      paid
      for interest and income taxes during the three months ended March 31, 2006
      and
      2005, was as follows:




**2006**
            
            **2005**Interest
            
            $
            122
            
            $
            104Income
                taxes
            
            $
            —
            
            $
            481







8


**MEDIALINK
        WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
        TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
        thousands of dollars, except per-share amounts)**




**5.
      Segment Information**





Segment
      information relating to the Company’s results of continuing operations was as
      follows:





**Three
                months ended March 31,****2006**
            
            **2005***Revenues:*Media
                communications services
            
            $
            8,408
            
            $
            8,134Video
                watermarking services
            
            
            563
            
            
            414Total
            
            $
            8,971
            
            $
            8,548*Operating
                income (loss):*Media
                communications services
            
            $
            613
            
            $
            163Video
                watermarking services
            
            
            (852
            )
            
            (570
            )Total
            
            
            (239
            )
            
            (407
            )Other
                business activities
            
            
            (1,325
            )
            
            (867
            )Interest
                expense - net
            
            
            (124
            )
            
            (135
            )Loss
                from continuing operations before taxes
            
            $
            (1,688
            )
            $
            (1,409
            )





Segment
      information related to the Company’s assets was as follows:





**March
                31,**
            
            **December
                31,****2006**
            
            **2005***Total
                Assets:*Media
                communications services
            
            $
            19,778
            
            $
            21,657Video
                watermarking services
            
            
            2,794
            
            
            2,173Other
                business activities
            
            
            8,957
            
            
            9,096Total
            
            $
            31,529
            
            $
            32,926








**6.
      Discontinued Operations**





The
      results of operations for the three months ended March 31, 2005, include a
      gain
      of $60 on the sale of Delahaye, the Company’s research division that was sold in
      December 2004.




9





**Item
      2.** ***Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations***





Certain
      statements made in this Quarterly Report on Form 10-Q are “forward looking”
statements (within the meaning of the Private Securities Litigation Reform
      Act
      of 1995, as amended). Such statements involve known and unknown risks,
      uncertainties, and other factors that may cause actual results, performance,
      or
      achievements of the Company to be materially different from any future results,
      performance, or achievements expressed or implied by such forward-looking
      statements. Although the Company believes that the expectations reflected in
      such forward-looking statements are based upon reasonable assumptions, the
      Company’s actual results could differ materially from those set forth in the
      forward-looking statements. See Part II Item 1A “Risk Factors” below and Item I
      Part 1A in the Company’s annual report on Form 10-K for the year ended December
      31, 2005, for a description of certain factors that might cause such a
      difference.





The
      following discussion and analysis (in thousands of dollars) should be read
      in
      conjunction with the Company’s Unaudited Consolidated Financial Statements and
      notes thereto.





**Results
      of Operations**





*Three
      months ended March 31, 2006, compared to three months ended March 31,
      2005*





Revenues
      for the three months ended March 31, 2006, increased by $423, or 4.9%, as
      compared to the 2005 quarter. Revenues from media communications services in
      the
      first quarter of 2006 increased by $274, or 3.4%, to $8,408 primarily as a
      result of an increase in press release wire services. Revenues from TeletraxTM
video watermarking services in the first quarter of 2006 increased by $149,
      or
      36.0%, to $563 due to an increase in the number of clients being served.





Direct
      costs in the first quarter of 2006 remained relatively flat with those in the
      comparable 2005 quarter, and as a percentage of revenue declined to 38.8% in
      the
      first quarter of 2006 from 40.8% in the comparable quarter in 2005.





Selling,
      general, and administrative (“SG&A”) expenses in the first quarter of 2006
      increased by $638 as compared to the 2005 quarter, and as a percentage of
      revenue increased to 73.0% in the first quarter of 2006 from 69.2% in the 2005
      quarter. SG&A expenses in the first quarter of 2006 included $125 of
      stock-based compensation expense related to stock options, with no comparable
      amount recognized in the 2005 quarter. On January 1, 2006, the Company adopted
      Statement of Financial Accounting Standards (“SFAS”) No. 123 (Revised 2004),
“Share-Based Payment” (“SFAS No. 123R”), which requires all share-based
      payments, including stock options, to be recognized in the financial statements
      based on the fair value on the date of grant. The Company has elected to use
      the
      modified prospective application for the transition upon the adoption of SFAS
      No. 123R, which requires compensation expense to be recognized on options
      granted subsequent to the adoption date as well as on options granted prior
      to
      the adoption date for which the requisite service period had not been completed
      as of December 31, 2005. Periods prior to the date that SFAS No. 123R is adopted
      are not adjusted under the modified prospective application.





Exclusive
      of stock-based compensation expense, SG&A expenses in the first quarter of
      2006 increased by $513 as compared to the 2005 quarter, and as a percent of
      revenue were 71.6% in the first quarter of 2006. SG&A expenses increased in
      the first quarter of 2006 by $295 as a result of additional costs incurred
      in
      connection with the continued expansion of Teletrax. In addition, SG&A
      expenses increased by $218 primarily as a result of consulting and other related
      costs incurred in connection with the termination of a former executive officer
      and additional consulting and professional fees incurred in the 2006 quarter.





The
      Company had an operating loss of $1,564 in the first quarter of 2006 as compared
      to an operating loss of $1,274 in the comparable period in 2005. The operating
      losses in 2006 and 2005 included operating losses of $852 and $570,
      respectively, from the Company’s 76%-owned Teletrax subsidiaries. The Company’s
      results of operations included 100% of the losses from the Teletrax subsidiaries
      since the minority shareholder has no future funding obligations.




10





The
      Company established a valuation allowance to reserve for certain of its deferred
      tax assets at December 31, 2005, based on its assessment that it was more likely
      than not that the benefit associated with the deferred tax assets would not
      be
      realized in future periods. Based on its most recent projections, the Company
      continues to believe that it is more likely than not that such benefit will
      not
      be realized, and therefore has established a valuation allowance to reserve
      for
      certain of its deferred tax assets at March 31, 2006. The valuation allowance
      was $5,235 and $4,739 at March 31, 2006, and December 31, 2005,
      respectively .





**Financial
      Condition**





The
      Company continues to finance its operations and capital investment requirements
      from its existing cash reserves, which totaled $5,522 at March 31, 2006. Working
      capital in the first three months of 2006 decreased by $1,829 primarily as
      a
      result of funding the Company’s operating losses and funding capital investments
      made during the period, including amounts expended for the continued expansion
      of the Teletrax network. The Company believes that its cash reserves will be
      sufficient to fund its cash needs throughout 2006.





Cash
      flows from operating activities during the first three months of 2006 increased
      by $304 as compared to the comparable period in 2005 due primarily to a decrease
      in tax payments in the first quarter of 2006, partially offset by a decrease
      in
      cash generated from operations during the 2006 period. During the first three
      months of 2006, the Company invested $627 in new equipment, primarily for the
      continued expansion of the Teletrax network, and repaid $20 of capital lease
      obligations. These amounts were primarily funded from the Company’s working
      capital and $132 in proceeds received upon the exercise of stock
      options.





The
      Company expects to spend approximately $1,500 over the course of the next twelve
      months for capital improvements primarily for the continuing build out of the
      infrastructure for Teletrax and for modernization of its Media Communications
      Services business. The Company intends to finance these expenditures with
      working capital.





There
      were no material changes to the Company’s contractual obligations during the
      first three months of 2006. The Company does not have any off-balance sheet
      arrangements that have or are reasonably likely to have a current or future
      effect on its financial condition, changes in financial condition, revenues
      or
      expenses, results of operations, liquidity, capital expenditures or capital
      resources that are material to investors.





**Critical
      Accounting Policies**





Management
      must make certain estimates and assumptions in preparing the financial
      statements of the Company. Certain of these estimates and assumptions relate
      to
      matters that are inherently uncertain as they pertain to future events.
      Management believes that the estimates and assumptions used in preparing the
      financial statements of the Company were the most appropriate at that time,
      although actual results could differ significantly from those estimates under
      different conditions. Note 2, “Summary of Significant Accounting Policies,” to
      the consolidated financial statements included in the Company’s Annual Report on
      Form 10-K for the year ended December 31, 2005, provides a detailed discussion
      of the various accounting policies of the Company. In addition, a summary of
      critical accounting policies is included in Management’s Discussion and Analysis
      of Financial Condition and Results of Operations in the Company’s Annual Report
      on Form 10-K for the year ended December 31, 2005. Except for the change in
      accounting for stock-based compensation described below, there have been no
      significant changes to the critical accounting policies previously disclosed.
      The following new accounting policy is critical since it requires subjective
      or
      complex judgments that could potentially affect the financial condition or
      results of operations of the Company.




*Stock-Based
      Compensation:* On
      January 1, 2006, the Company adopted the provisions of SFAS No. 123R and elected
      to use the modified prospective application for the transition upon adoption,
      which requires compensation expense to be recognized on options granted
      subsequent to the adoption date as well as on options granted prior to the
      adoption date for which the requisite service period had not been completed
      as
      of December 31, 2005. The Company determines the fair value of stock options
      granted subsequent to the adoption of SFAS No. 123R using a binomial lattice
      model. The fair value of stock options granted prior to the adoption of SFAS
      No.
      123R was determined using the Black-Scholes option-pricing model. The Company
      must make certain assumptions in determining the fair value of stock options,
      including the volatility of the Company’s common stock, the future dividend
      yield on the Company’s common stock, and the term over which stock options will
      remain outstanding, including making assumptions about the future behavior
      patterns of the holders of stock options in regard to exercising stock options
      prior to their expiration. In addition, the Company must make certain
      assumptions regarding the rate at which options will be forfeited to estimate
      the service period that will be completed by the holders of stock options.
      Any
      deviation in the actual volatility of the Company’s common stock, the actual
      dividend yield, and the actual early exercise behavior of holders of stock
      options from that assumed in estimating the fair value of a stock option will
      not result in a change in the amount of compensation expense recognized by
      the
      Company, but will result in the actual value realized by the holder of the
      stock
      options to be different than the amount of compensation expense recognized.
      Any
      deviation in the actual forfeitures of stock options during the service period
      from that assumed will result in a change to the amount of compensation expense
      recognized, either as additional compensation expense or a reversal of
      previously recognized compensation expense in the period of change.




11








**Item
      3.** ***Quantitative
      and Qualitative Disclosures About Market Risk***





The
      Company’s primary market exposures are interest rate risk and foreign currency
      rate risk.





The
      Company had convertible debentures with a face value of $5,000 ($4,101 net
      of
      unamortized discount) outstanding at March 31, 2006. The interest rate on these
      debentures is the higher of 7% or the 6-month LIBOR rate (as defined) plus
      4.50%. At March 31, 2006, the interest rate on the convertible debentures was
      9.62%. A change in interest rates of 1.0% would result in a change in the annual
      interest costs under the convertible debentures of $50 based on the face amount
      of outstanding borrowings at March 31, 2006.





The
      Company has two operations in the United Kingdom that result in foreign currency
      exposure to the British pound. As of and for the three months ended March 31,
      2006, these operations aggregated approximately 21% of the Company’s current
      assets, approximately 23% of the Company’s current liabilities, and
      approximately 16% of the Company’s loss from continuing operations before income
      taxes. A fluctuation in the United States dollar to the British pound conversion
      rate would result in a change in the amount realized by the Company from the
      results of these operations and from the settlement of its monetary assets
      and
      liabilities denominated in British pounds.





**Item
      4.** ***Controls
      and Procedures***





The
      Company’s management evaluated, with the participation of the Company’s
      principal executive and principal financial officers, the effectiveness of
      the
      Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”)) as of March 31, 2006. Based on their evaluation, the Company’s principal
      executive and principal financial officers concluded that the Company’s
      disclosure controls and procedures were effective as of March 31, 2006. The
      design of any system of controls is based in part upon certain assumptions
      about
      the likelihood of future events, and there can be no assurance that any design
      will succeed in achieving its stated goals under all potential future
      conditions, regardless of how remote.





There
      have been no changes in the Company’s internal control over financial reporting
      (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
      occurred during the fiscal quarter ended March 31, 2006, that have materially
      affected, or is reasonably likely to affect, the Company’s internal control over
      financial reporting.




12




**PART
      II. OTHER INFORMATION**





**Item
      1.** ***Legal
      Proceedings***





From
      time
      to time, the Company becomes involved in various legal matters that the Company
      considers to be in the ordinary course of business. While the Company is not
      presently able to determine the potential liability, if any, related to any
      such
      matters, the Company believes that no such matters, individually or in the
      aggregate, will have a material adverse effect on its financial
      position.




**Item
      1A.** ***Risk
      Factors***





There
      have been no material changes to the risk factors disclosed in the Company’s
      Annual Report on Form 10-K for the year ended December 31,
      2005.





**Item
      6.** ***Exhibits***





See
      Exhibit Index.




13





**SIGNATURES**








Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.





MEDIALINK
                WORLDWIDE INCORPORATED
              (Registrant)
              
              
              By:/s/
                Laurence Moskowitz
              Laurence
                Moskowitz
              Chairman
                of the Board,
              Chief
                Executive Officer, and President
              (Principal
                Executive Officer)


Dated:
      May 15, 2006







By:/s/
                Kenneth Torosian
              Kenneth
                Torosian
              Chief
                Financial Officer
              (Principal
                Accounting Officer)


Dated:
      May 15, 2006









**EXHIBIT
      INDEX**





Exhibit
                No.
            Description3.1
            Amended
                and Restated Certificate of Incorporation of Medialink Worldwide
                Incorporated (Incorporated by reference to Exhibit No. 2.5 of Registrant’s
                Registration Statement on Form 8-A filed on January 16, 1997 (File
                No.
                000-21989)).3.2
            Amendment
                1 to the Amended and Restated By-Laws of Medialink Worldwide Incorporated
                (Incorporated by reference to Exhibit No. 3.2 of Registrant’s Annual
                Report on Form 10-K for the fiscal year ended December 31,
                2003).4.1
            Preferred
                Stock Rights Agreement, dated as of August 16, 2001, between Medialink
                Worldwide Incorporated and Mellon Investor Services, LLC, including
                the
                Certificate of Designation, the form of Rights Certificate and the
                Summary
                of Rights attached thereto as Exhibits A, B, and C, respectively
                (Incorporated by reference to Exhibit No. 4.1 of Registrant’s Registration
                Statement on Form 8-A filed on August 16, 2001 (File No.
                000-21989)).10.1
            Amended
                and Restated Employment Agreement, dated as of December 31, 2005,
                by and
                between Medialink Worldwide Incorporated and Laurence Moskowitz
                (Incorporated by reference to Exhibit No. 10.1 of the Registrant’s Annual
                Report on Form 10-K for the fiscal year ended December 31,
                2005).10.2
            Amended
                and Restated Employment Agreement, dated as of August 28, 2001, by
                and
                between Medialink Worldwide Incorporated and J. Graeme McWhirter
                (Incorporated by reference to Exhibit No. 10.2 of Registrant’s Annual
                Report on Form 10-K for the fiscal year ended December 31,
                2001).10.3
            Separation
                Agreement and General Release, dated as of December 30, 2005, by
                and
                between Medialink Worldwide Incorporated and J. Graeme McWhirter
                (Incorporated by reference to Exhibit No. 10.1 of the Registrant’s Annual
                Report on Form 10-K for the fiscal year ended December 31,
                2005).10.4
            Asset
                Purchase Agreement, dated December 31, 2004, by and between Medialink
                Worldwide Incorporated and Bacon’s Information Inc. (Incorporated by
                reference to Exhibit No. 10.1 of the Registrant’s Current Report on Form
                8-K/A filed on March 14, 2005).10.5
            Agreement
                for the Sale and Purchase of Certain Assets of Medialink UK Limited
                forming part of the Delahaye Business, dated December 31, 2004, by
                and
                between Medialink UK Limited and Romeike Limited (Incorporated by
                reference to Exhibit No. 10.2 of the Registrant’s Current Report on Form
                8-K/A filed on March 14, 2005).10.7
            Medialink
                Worldwide Incorporated 401(k) Tax Deferred Savings Plan (Incorporated
                by
                reference to Exhibit No. 10.33 of Registrant’s Registration Statement on
                Form S-1 filed on October 15, 1996 (File No.
                333-14119)).10.8
            Medialink
                Worldwide Incorporated Amended and Restated Stock Option
                Plan.10.9
            Medialink
                Worldwide Incorporated Amended and Restated 1996 Directors Stock
                Option
                Plan.10.10
            Form
                of Indemnification Agreement (Incorporated by reference to Exhibit
                No.
                10.10 of Registrant’s Annual Report on Form 10-K for the fiscal year ended
                December 31, 2003).10.11
            Forbearance
                Agreement (Incorporated by reference to Exhibit No. 10.11 of Registrant’s
                Annual Report on Form 10-K for the fiscal year ended December 31,
                2003).10.12
            Employment
                Agreement, dated as of July 11, 2005, by and between Medialink Worldwide
                Incorporated and Kenneth G. Torosian (Incorporated by reference to
                Exhibit
                No. 10.12 of Registrant’s Quarterly Report on Form 10-Q for the quarterly
                period ended September 30, 2005).10.13
            Employment
                Agreement, dated as of September 9, 2005, by and between Medialink
                Worldwide Incorporated and Lawrence A. Thomas (Incorporated by reference
                to Exhibit No. 10.13 of Registrant’s Quarterly Report on Form 10-Q for the
                quarterly period ended September 30, 2005).31.1
            Certification
                of the principal executive officer pursuant to Rules 13a-14(a) and
                15d-14(a) of the Securities Exchange Act of 1934, as
                amended.31.2
            Certification
                of the principal financial officer pursuant to Rules 13a-14(a) and
                15d-14(a) of the Securities Exchange Act of 1934, as
                amended.32
            Certification
                of the principal executive officer and principal financial officer
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.