U.S.
Securities and Exchange Commission


Washington,
D.C. 20549


Form
10-Q





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


EXCHANGE
ACT OF 1934





For the
quarterly period ended March 31, 2005





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
    (I.R.S.
      Employerof
      incorporation or
    Identification
      Number)organization)





708
Third Avenue, New York, New York 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 an accelerated filer (as defined in Rule
12b-2 of the Exchange Act.) Yes o No x





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the close of business on May 13, 2005:





Common
Stock - 6,032,082











TABLE OF
CONTENTS








**PART
      I. FINANCIAL INFORMATION**ITEM
      1.
    Financial
      Statements
    3Consolidated
      Balance Sheets as of March 31,2005
      (unaudited) and December 31, 2004
    3Unaudited
      Consolidated Statements of Operationsfor
      the three months ended March 31, 2005 and 2004
    4Unaudited
      Consolidated Statements of Cash Flowsfor
      the three months ended March 31, 2005 and 2004
    5Notes
      to Unaudited Consolidated Financial Statements
    6 -
      11ITEM
      2.
    Management's
      Discussion and Analysis of Financial Conditionand
      Results of Operations
    12
      - 19ITEM
      3.
    Quantitative
      and Qualitative Disclosure About Market Risk
    20ITEM
      4.
    Controls
      and Procedures
    20**PART
      II. OTHER INFORMATION**ITEM
      1.
    Legal
      Proceedings
    21ITEM
      2.
    Unregistered
      Sales of Equity Securities andUse
      of Proceeds
    21ITEM
      3.
    Defaults
      Upon Senior Securities
    21ITEM
      4.
    Submission
      of Matters to a Vote of Security Holders
    21ITEM
      5.
    Other
      Information
    21ITEM
      6.
    Exhibits
    21














MEDIALINK
      WORLDWIDE INCORPORATED AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSAs
      of March 31, 2005 and December 31, 2004March
      31,
    
    December
      31,2005
    
    2004(Unaudited)ASSETSCurrent
      Assets:Cash
      and cash equivalents
    
    $
    9,897,241
    
    $
    11,674,828Accounts
      receivable, net of allowance for doubtful accounts of$538,255
      and $592,781
    
    
    5,460,916
    
    
    6,144,658Prepaid
      expenses
    
    
    674,303
    
    
    625,457Prepaid
      and refundable taxes
    
    
    905,589
    
    
    565,004Other
      current assets
    
    
    1,153,169
    
    
    1,882,990Total
      current assets
    
    
    18,091,218
    
    
    20,892,937Property
      and equipment, net
    
    
    4,000,654
    
    
    4,068,987Goodwill,
      net of accumulated amortization of $2,338,473
    
    
    13,006,137
    
    
    13,006,137Other
      assets
    
    
    1,085,265
    
    
    804,480Total
      assets
    
    $
    36,183,274
    
    $
    38,772,541LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Current
      portion of obligations under capital lease
    
    $
    115,000
    
    $
    113,332Accounts
      payable
    
    
    2,344,718
    
    
    2,497,813Accrued
      expenses and other current liabilities
    
    
    5,215,165
    
    
    6,357,928Taxes
      payable
    
    
    —
    
    
    340,000Total
      current liabilities
    
    
    7,674,883
    
    
    9,309,073Convertible
      debentures, net of unamortized discount of $1,107,000 and
      $1,167,000
    
    
    3,893,000
    
    
    3,833,000Capital
      lease obligation, net of current portion
    
    
    42,857
    
    
    97,428Other
      long-term liabilities
    
    
    464,739
    
    
    453,777Total
      liabilities
    
    
    12,075,479
    
    
    13,693,278Stockholders'
      Equity:Common
      stock; $.01 par value. Authorized 15,000,000 shares;
issued6,133,203
      shares in 2005 and 6,055,430 shares in 2004
    
    
    61,332
    
    
    60,554Additional
      paid-in capital
    
    
    26,515,697
    
    
    26,291,385Accumulated
      deficit
    
    
    (1,862,117
    )
    
    (733,235
    )Accumulated
      other comprehensive loss
    
    
    (263,753
    )
    
    (196,077
    )24,451,159
    
    
    25,422,627Less
      common stock in treasury (at cost, 101,121shares)
    
    
    (343,364
    )
    
    (343,364
    )Total
      stockholders' equity
    
    
    24,107,795
    
    
    25,079,263Total
      liabilities and stockholders' equity
    
    $
    36,183,274
    
    $
    38,772,541


See
accompanying notes to consolidated financial statements





3





MEDIALINK
      WORLDWIDE INCORPORATED AND SUBSIDIARIESUNAUDITED
      CONSOLIDATED STATEMENTS OF OPERATIONSFor
      the Three Months Ended March 31, 2005 and 20042005
    
    2004Revenues
    
    $
    8,547,690
    
    $
    8,487,767Direct
      costs
    
    
    3,485,996
    
    
    2,946,196Gross
      Profit
    
    
    5,061,694
    
    
    5,541,571Operating
      expenses:Selling,
      general and administrative expenses
    
    
    5,912,073
    
    
    5,367,723Depreciation
      and amortization
    
    
    439,027
    
    
    490,372Loss
      from joint venture
    
    
    —
    
    
    94,688Impairment
      of investments
    
    
    —
    
    
    342,000Total
      Operating Expenses
    
    
    6,351,100
    
    
    6,294,783Operating
      loss
    
    
    (1,289,406
    )
    
    (753,212
    )Interest
      expense, net
    
    
    (119,697
    )
    
    (79,664
    )Loss
      from continuing operations before taxes
    
    
    (1,409,103
    )
    
    (832,876
    )Income
      tax benefit
    
    
    (220,000
    )
    
    (90,000
    )Loss
      from continuing operations
    
    
    (1,189,103
    )
    
    (742,876
    )Discontinued
      operations:Loss
      from discontinued operations
    
    
    —
    
    
    (334,890
    )Gain
      on sale of division
    
    
    60,222
    
    
    —Income
      (loss) on discontinued operations before income taxes
    
    
    60,222
    
    
    (334,890
    )Income
      tax benefit
    
    
    —
    
    
    (60,000
    )Income
      (loss) on discontinued operations
    
    
    60,222
    
    
    (274,890
    )Net
      loss
    
    $
    (1,128,881
    )
    $
    (1,017,766
    )Basic
      and diluted loss per share from continuing operations
    
    $
    (0.20
    )
    $
    (0.12
    )Basic
      and diluted income (loss) per share from discontinued
      operations
    
    $
    0.01
    
    $
    (0.05
    )Basic
      and diluted net loss per share
    
    $
    (0.19
    )
    $
    (0.17
    )Shares
      used in per share calculations:Basic
      and diluted
    
    
    5,987,487
    
    
    5,992,890
See
accompanying notes to consolidated financial statements

4





MEDIALINK
      WORLDWIDE INCORPORATED AND SUBSIDIARIESUNAUDITED
      CONSOLIDATED STATEMENTS OF CASH FLOWSFor
      the Three Months Ended March 31, 2005 and 20042005
    
    2004CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
    
    $
    (1,128,881
    )
    $
    (1,017,766
    )Adjustments
      to reconcile net loss to net cash provided by continuingoperating
      activities:Depreciation
      and amortization
    
    
    439,027
    
    
    490,372Amortization
      of discount on convertible debentures
    
    
    60,000
    
    
    —Allowance
      for doubtful accounts
    
    
    (54,526
    )
    
    63,761Impairment
      of investments
    
    
    —
    
    
    342,000Deferred
      income taxes
    
    
    —
    
    
    (175,000
    )Equity
      loss from joint venture
    
    
    —
    
    
    94,688Gain
      on sale of division and loss from discontinued operations,
    netof
      taxes
    
    
    (60,222
    )
    
    274,890Changes
      in assets and liabilities:Accounts
      receivable
    
    
    730,813
    
    
    124,184Other
      assets
    
    
    (296,085
    )
    
    (263,444
    )Prepaid
      expenses and other current assets
    
    
    680,975
    
    
    (751,453
    )Prepaid
      and refundable income taxes and taxes payable
    
    
    (680,585
    )
    
    (48,438
    )Accounts
      payable and accrued expenses
    
    
    (1,295,858
    )
    
    331,481Other
      liabilities
    
    
    10,962
    
    
    (70,432
    )Net
      cash used in operating activities
    
    
    (1,594,380
    )
    
    (605,157
    )CASH
      FLOWS FROM INVESTING ACTIVITY -Purchases
      of property and equipment
    
    
    (355,394
    )
    
    (259,297
    )Net
      cash used in investing activity
    
    
    (355,394
    )
    
    (259,297
    )CASH
      FLOWS FROM FINANCING ACTIVITIESAdvances
      on line of credit
    
    
    —
    
    
    52,017Payments
      on line of credit
    
    
    —
    
    
    (552,017
    )Proceeds
      from the issuance of common stock in connectionwith
      the exercise of stock options
    
    
    225,090
    
    
    8,962Repayments
      of obligations under capital lease
    
    
    (52,903
    )
    
    (33,797
    )Net
      cash provided by (used in) financing activities
    
    
    172,187
    
    
    (524,835
    )Net
      cash provided by discontinued operations
    
    
    —
    
    
    165,253Net
      decrease in cash and cash equivalents
    
    
    (1,777,587
    )
    
    (1,224,036
    )Cash
      and cash equivalents at the beginning of year
    
    
    11,674,828
    
    
    3,708,130Cash
      and cash equivalents at end of period
    
    $
    9,897,241
    
    $
    2,484,094
See
accompanying notes to consolidated financial statements





5





**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**


(1)  Basis of
presentation





The
consolidated financial statements included herein have been prepared by
Medialink Worldwide Incorporated and Subsidiaries (collectively, the “Company”
or “Medialink”), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in consolidated financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes that the
disclosures are adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's annual report on Form 10-K filing for the year ended December 31,
2004.





The
unaudited consolidated financial statements included herein reflect all
adjustments (which include only normal, recurring adjustments) which are, in the
opinion of management, necessary to state fairly the results for the three
months ended March 31, 2005. The results for the three months ended March 31,
2005 are not necessarily indicative of the results expected for the full fiscal
year.





Medialink
sold its research division, Delahaye, a provider of public relations research
services for businesses and other organizations that seek to communicate and
evaluate their news through television, radio, the Internet and other media.
Delahaye’s operations are reported as discontinued operations for all periods
presented in the accompanying consolidated financial statements, and the
operating results of Delahaye through December 31, 2004, the date of sale, are
reflected separately from the results of continuing operations.





Certain
reclassifications have been made to the 2004 financial statements to conform to
the 2005 presentation, including reclassifications to reflect the presentation
of Delahaye as a discontinued operation in 2004.




(2)  Loss per
Share





Basic
loss per common share is computed using net loss applicable to common stock and
the weighted average number of shares outstanding. Diluted loss per common share
is computed using the weighted average number of shares outstanding adjusted for
the incremental shares from assumed conversion of all potentially dilutive
securities attributed to outstanding options and warrants to purchase common
stock. For the three month period ended March 31, 2005 the Company had common
stock equivalents of 271,570 related to stock options and warrants that were not
included in the computation of diluted loss per common share on continuing
operations nor net loss per common share because they were antidilutive. For the
three month period ended March 31, 2004, the Company had common stock
equivalents of 151,216 related to stock options that were not included in the
computation of diluted loss per common share because they were antidilutive.




6





**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(continued)**


(3)  Accumulated
Other Comprehensive Loss and Comprehensive Loss





The
components of comprehensive loss consist of the following:





For
      the three months ended March 31,2005
    
    2004Net
      loss
    
    $
    (1,128,881
    )
    $
    (1,017,766
    )Other
      comprehensive loss:Foreign
      currency translationadjustments
    
    
    (67,676
    )
    
    103,655Comprehensive
      loss
    
    $
    (1,196,557
    )
    $
    (914,111
    )








Accumulated
other comprehensive loss at March 31, 2005 and December 31, 2004 consists of
foreign currency translation adjustments.




(4)  Recent
Accounting Pronouncements





In
December 2004, the FASB issued SFAS No. 123 (revised 2004), "Share-Based
Payment" ("SFAS 123R"), which replaces SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") and supercedes APB Opinion No. 25, "Accounting for
Stock Issued to Employees." SFAS 123R requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
financial statements based on their fair values, beginning with the first
interim or annual period commencing after December 15, 2005, with early adoption
encouraged. The pro forma disclosures previously permitted under SFAS 123, no
longer will be an alternative to financial statement recognition. The Company is
required to adopt SFAS 123R in its first quarter of fiscal 2006. Under SFAS
123R, the Company must determine the appropriate fair value model to be used for
valuing share-based payments, the amortization method for compensation cost and
the transition method to be used at date of adoption. The transition methods
include prospective and retroactive adoption options. Under the retroactive
option, prior periods may be restated either as of the beginning of the year of
adoption or for all periods presented. The prospective method requires that
compensation expense be recorded for all unvested stock options and restricted
stock at the beginning of the first quarter of adoption of SFAS 123R, while the
retroactive method would record compensation expense for all unvested stock
options and restricted stock beginning with the first period restated. The
Company is evaluating the requirements of SFAS 123R and expects that the
adoption of SFAS 123R will have an adverse impact on its consolidated results of
operations and earnings per share. The Company has not yet determined the method
of adoption or the effect of adopting SFAS 123R.


7
 
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(continued)**


(5)  Business
Transactions





On April
8, 2002, TTX Limited ("TeletraxTM"), a subsidiary of the Company, entered into a
Technology License Agreement with Koninklijke Philips Electronics N.V.
("Philips") for the use of Philips' WaterCast technology. Medialink owns 76% of
TeletraxTM. The minority shareholder of TeletraxTM has no future funding
obligations and, accordingly, the Company has recorded 100% of the loss from
operations of this subsidiary, which it consolidates.





On August
1, 1999 the Company entered into a joint venture with Business Wire to form
Business Wire/Medialink, LLC (“Newstream”), for the purpose of connecting its
clients to multimedia Internet news sites as Newstream.com. The Company, which
had a 50% interest in the joint venture, accounted for its interest in Newstream
under the equity method, as it did not have a controlling interest in the
entity. In December 2004 Newstream was dissolved. As a result of the
dissolution, the Company recorded a non-cash charge of $373,000 to write off the
remaining balance in its investment in Newstream. In accordance with the
dissolution agreement, the Company is permitted to and is currently providing
Newstream services to its client base under the Newstream name, for the next
nine months. Subsequently, Medialink anticipates it will continue to provide
these services under a different service name.





During
the three months ended March 31, 2004, the Company recorded a loss on the
impairment of investments of $342,000 related to two investments accounted for
under the cost method.





In
December 2004, the Company sold substantially all of the assets and liabilities
of its research division, Delahaye, for approximately $8 million, of which $7.70
million was collected at closing and the balance expected in the second quarter
of 2005. Additionally, the proceeds are to be adjusted for the amount by which
working capital on the date of the sale exceeds certain thresholds. Any
additional balances due are expected to be collected in the second quarter of
2005. As part of the transaction, Medialink divested substantially all of the
net assets of Delahaye, which had an estimated carrying value of $2.90 million,
including $228,000 of goodwill and $1.40 million in net trade receivables, for
the US and UK divisions combined. Any assigned and uncollected receivables as of
June 29, 2005 will be transferred and assigned to Medialink for subsequent
collection. Delahaye’s operations are reported as discontinued operations for
all periods presented in the accompanying consolidated financial statements, and
the operating results of Delahaye through December 31, 2004, the date of sale,
are reflected separately from the results of continuing operations.


8
 
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(continued)**


Summarized
operating results and gain on sale for the three months ended March 31, 2005 and
2004 are as follows:





For
      the Three Ended March 31,2005
    
    2004(in
      thousands)Total
      Revenue
    
    
    
    
    $
    2,080Loss
      from operations before income taxes
    
    
    
    
    $
    (335
    )Gain
      on sale of discontinued operations
    
    $
    60
    
    
    —Income
      (loss) from discontinuedoperations
      before income taxes
    
    
    60
    
    
    (335
    )Income
      tax expense benefit
    
    
    —
    
    
    (60
    )Income
      (loss) on discontinued operations
    
    $
    60
    
    $
    (275
    )




(6)  Line of
Credit





The
Company had a line of credit facility with a bank expiring in January 31, 2005.
Interest under the line was payable monthly at the rate of the 30-Day LIBOR Rate
plus 5.5% per annum.





On
November 8, 2004, the Company amended certain provisions of its loan credit
facility. Pursuant to the amending letter, the term of the loan credit facility
was extended to December 31, 2005; several financial covenants were amended; and
maximum borrowings were reduced to $2 million.





In
December 2004 the outstanding balance on the line of credit was paid in full and
the agreement was terminated.




9
 
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(continued)**


(7)  Stock
Based Compensation





The
Company applies the intrinsic-value-based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations including FASB Interpretation No. 44,
Accounting for Certain Transactions involving Stock Compensation, an
interpretation of APB Opinion No. 25, to account for its fixed-plan stock
options. Under this method, compensation expense is recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. FASB Statement No. 123, Accounting for Stock-Based Compensation
and FASB Statement No. 148, Accounting for Stock-Based Compensation - Transition
and Disclosure, an amendment of FASB Statement No. 123, established accounting
and disclosure requirements using a fair-value-based method of accounting for
stock-based employee compensation plans. As permitted by existing accounting
standards, the Company has elected to continue to apply the
intrinsic-value-based method of accounting described above, and has adopted only
the disclosure requirements of Statement 123, as amended. The following table
illustrates the effect on net loss if the fair-value-based method had been
applied to all outstanding and unvested awards in each period.





For
      the three months ended March 31,2005
    
    2004Net
      loss - as reported
    
    $
    (1,128,881
    )
    $
    (1,017,766
    )Deduct:
      total stock-basedemployee
      compensation expensedetermined
      under the fairvalue
      method, net of related taxeffects
    
    
    (68,000
    )
    
    (34,132
    )Net
      loss - pro forma
    
    $
    (1,196,881
    )
    $
    (1,051,898
    )Basic
      and diluted net loss per share - as reported
    
    $
    (.19
    )
    $
    (.17
    )Basic
      and diluted net loss per share - pro forma
    
    $
    (.20
    )
    $
    (.18
    )




The fair
value of each grant is estimated using the Black-Scholes Option Pricing Model
with the following assumptions: dividend yield of 0% for all grants, expected
volatility of 34.6% for 2005, risk free interest rates of 3.65% for 2005, and
expected lives of 10 years for all grants. There
were no options granted during the three months ended March 31,
2004.


10
 
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **(continued)**


(8)  Supplemental
Cash Flow Information:





Cash paid
for interest and income taxes during the three months ended March 31, 2005 and
2004 was as follows:





2005
    
    2004Interest
    
    $
    104,000
    
    $
    80,000Income
      Taxes
    
    $
    481,000
    
    $
    72,000




11


****MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**

**ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS**
******


**RESULTS
OF OPERATIONS**





*Summary
and Outlook*





While
revenue for the first quarter of 2005 was flat as compared to 2004, the Company
recorded growth in revenue from its core services, despite a decline in demand
for its strategic services, reducing strategic service revenue by $563,000, as
well as growth in TeletraxTM service revenue.





Having
entered 2005 with a markedly improved balance sheet and capital in place, as a
result of the sale of Delahaye and the issuance of $5 million subordinated
convertible debenture financing, the Company began to execute its plan to
accelerate the growth of TeletraxTM and to make strategic investments to grow its
core services.








*Three
months ended March 31, 2005 compared to three months ended March 31,
2004*





Revenues
for the three months ended March 31, 2005 (“2005”) were $8.55 million as
compared to $8.49 million for the three months ended March 31, 2004 (“2004”),
broken out as follows:





(in
      thousands)For
      the Three Months Ended March 31,2005
    
    2004
    
    Change
    
    %Media
      Communication Services
    
    $
    8,134
    
    $
    8,059
    
    $
    75
    
    
    1
    %TeletraxTM:Service
      Revenue
    
    
    414
    
    
    269
    
    
    145
    
    
    54
    %Equipment
      Sales
    
    
    -
    
    
    160
    
    
    (160
    )
    
    (100
    %)Total
      TeletraxTM
    
    
    414
    
    
    429
    
    
    (15
    )
    
    (3
    %)Total
      Revenue
    
    $
    8,548
    
    $
    8,488
    
    $
    60
    
    
    1
    %





For the
first quarter of 2005, revenues from Medialink’s Media Communications services,
increased $75,000, or 1% as compared to 2004. At the same time, the Company has
continued to invest in its new TeletraxTM service and increased revenue from its
TeletraxTM services, excluding sales of equipment, by $145,000, from $269,000 in
2004 to $414,000 in 2005.





While the
Company detected a slight rebound in spending in the public relations industry
during the quarter, the Company experienced a decrease in demand for its
strategic services as a significant client had fewer issue-related needs during
2005 as compared to 2004. Included in the increase in revenue from Media
Communication Services of $75,000 was a reduction in revenue from its strategic
services of $563,000.





12


**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**

**ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)**

Direct costs increased by $540,000 or 18.3%, from $2.95 million in
2004 to $3.49 million in 2005. Included in direct costs were direct costs
associated with TeletraxTM services of $319,000 and $306,000, respectively, in
2005 and 2004. The Company’s gross profit percentage was 59% and 65% in 2005 and
2004, respectively. The
decrease in the gross profit margin was attributable to changes in product mix
during 2005 as well as an increase in marketing communications services, where
the Company purchases paid placements to strategically improve client results on
distribution projects. These placements are generally sold at a lower gross
profit margin. The Company believes as it increasingly integrates its existing
services with marketing communications services, it will increase its buying
leverage, resulting in improved margins as well as fuel the growth in
revenue.





Selling,
general and administrative expenses (“S, G & A”) increased by $544,000, or
10.1%, from $5.37 million in 2004 to $5.91 million in 2005. The increase in S, G
& A includes increases in payroll and payroll-related costs (“Payroll”) of
approximately $274,000. Not including the increase in Payroll, the Company
otherwise increased its S, G & A expenses by $270,000. The increases in both
payroll and S, G & A include increased spending on sales and marketing
costs, including sales personnel as the Company begins to execute its spending
plans that it anticipates will accelerate growth in revenue from both the
Company’s core services and TeletraxTM.





Depreciation
and amortization expense decreased by $51,000, or 10%, from $490,000 in 2004 to
$439,000 in 2005. Included in depreciation and amortization is depreciation
related to TeletraxTM of $150,000 and $131,000 in 2005 and 2004, respectively.
The decrease was substantially due to amortization on intangibles that were
fully amortized during 2004.





During
2004 the Company recorded a loss on the impairment of investments of $342,000
related to two investments accounted for under the equity cost method.





As a
result of the foregoing, the Company had an operating loss of $1.29 million in
2005 as compared to an operating loss of $753,000 in 2004. The operating loss in
2005 and 2004 included operating losses of $570,000 and $513,000, respectively,
from the Company’s 76% owned subsidiary, TeletraxTM, which was formed in April
2002. The minority shareholder of TeletraxTM has no future funding obligations
and, accordingly, the Company has recorded 100% of the loss from this
subsidiary.





Interest
expense, net of interest income, increased by $40,000 from $80,000 in 2004 to
$120,000 in 2005. The increase was substantially due to the issuance of
convertible debentures in the amount of $5.00 million in November 2004. Interest
expense related to this issuance was $159,000, which included $60,000 of
amortization of the discount recorded against the convertible debentures.
Additionally, in December 2004, the Company paid off the remaining balance on
its line of credit.





The
Company recorded a benefit for income taxes for 2005 and 2004 based on the
anticipated effective tax rate for the respective full year.





As of
December 31, 2004 and through March 31, 2005, due to a number of factors,
including the fiscal 2004 and first quarter 2005 taxable losses from continuing
operations and the additional investments to be made in Teletrax and in other
areas of the Company’s operations, the Company lowered its projections of future
taxable income, particularly for the year ending December 31, 2005. As a result
of these lower projections of future taxable income, management believes the
future utilization of the Company’s deferred tax assets is no longer
more-likely-than-not. The Company made the decision to fully reserve its net
deferred tax assets at December 31, 2004 and continues to fully reserve its net
deferred tax assets at March 31, 2005.





13


**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**

**ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)**

In 2004, as a result of the limited historical results of its UK
operations, including TeletraxTM and management’s limited ability to project its
UK future results, the Company had recorded a valuation allowance of $179,000
related to the foreign deferred tax asset generated by its UK
losses.





Including
gain on the sale of a division and losses on discontinued operations, the
Company had a net loss of $1.13 million in 2005 as compared to a net loss of
$1.02 million in 2004. In 2005
the Company had basic loss per share of $0.19 compared to basic loss per share
of $0.17 in 2004.




LIQUIDITY
AND CAPITAL RESOURCES





Medialink
has financed its operations primarily through cash generated from operations,
reliance on its line of credit facility and the issuance of $5 million
convertible debentures in November 2004. Additionally, the Company sold its
research division, Delahaye, in December 2004 for approximately $8 million,
recording a pre-tax gain on sale of $5 million. Cash flow used in operating
activities of continuing operations amounted to $1.59 million and $605,000 in
2005 and 2004, respectively. Capital expenditures which are primarily incurred
to support Medialink's sales and operations and the roll-out of the TeletraxTM
network were $355,000 in 2005 and $259,000 in 2004.





On
November 9, 2004, the Company issued $5 million of redeemable subordinated
unsecured convertible debentures (the “Debentures”) to institutional investors.
The $5,000,000 Debentures which mature on November 9, 2009, bear interest at a
rate equal to the higher of 7% or 6-month LIBOR plus 4.5% per annum for the
first three years and an adjusted rate thereafter, as defined in the agreement
with the institutional investors, and provide the holders with the option to
convert the loan to common stock at $4.05 per share. In addition, the Company
agreed to issue to the investors warrants to purchase an aggregate of 582,929
shares of the Company's common stock at an exercise price of $3.99 per share.
The aggregate purchase price of the Debentures and warrants ($5,000,000) was
allocated between the Debentures and the warrants based upon their relative fair
market value. The purchase price assigned to the Debentures and the warrants was
$3.80 million and $1.20 million, respectively. The $1.20 million difference
between the face amount of the Debentures of $5 million and the purchase price
assigned to the Debentures was recorded as a debt discount and is being
amortized over the life of the Debentures. The Company used the Black-Scholes
Model to calculate the fair value of the warrants. The underlying assumptions
included in the Black-Scholes Model were: a risk-free interest rate of 3.51%; an
expected life of five years; and an expected volatility of 81.1% with no
dividend yield.





In
December 2004, the Company sold its research division, Delahaye, for
approximately $8 million, of which $7.70 million was collected at closing and
the balance expected in the second quarter of 2005. Delahaye’s operations are
reported as discontinued operations for all periods presented in the
accompanying consolidated financial statements, and the operating results of
Delahaye through December 31, 2004, the date of sale, are reflected separately
from the results of continuing operations. The gain on the sale of Delahaye was
approximately $3.05 million net of taxes and included transaction expenses of
approximately $460,000, including broker and legal fees.





14


**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**

**ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)**

As of March 31, 2005 Medialink had $9.90 million in cash and cash
equivalents as compared to $11.67 million as of December 31, 2004. As of
March 31, 2005 long-term debt, including current portion, was $4.05 million, net
of unamortized discount of $1.11 million as compared to $4.04 million, net of
unamortized discount of $1.17 million at December 31, 2004. The
decrease in cash and cash equivalents of $1.7 million includes purchases of
fixed assets of $355,000. The remaining change was substantially attributable to
the changes in its operating assets and liabilities.





The
Company believes, based upon its financial forecast, that it has sufficient
capital resources to fund its net cash needs for at least the next twelve
months.





*Contractual
Obligations*


There
were no material changes to our contractual obligations during the 2005 Quarter.
For information regarding our contractual obligations at December 31, 2004, see
our Annual Report on Form 10-K for the fiscal year ended December 31,
2004.





*Off
Balance Sheet Arrangements*


We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that are material to investors.




RISK
FACTORS





*Major
News Events*


Events
which dominate news broadcasts, such as the events of September 11 th or the
involvement by the United States in a war, may cause the Company’s clients to
delay or not use the Company’s services for a particular project as such clients
may determine that their messages may not receive adequate attention in light of
the coverage of other news events. Such circumstances could have a material
adverse effect on the Company’s business, operating results and financial
condition.





*Susceptibility
to General Economic Conditions*


The
Company’s revenues are affected by its clients’ marketing communications
spending and advertising budgets. The Company’s revenues and results of
operations may be subject to fluctuations based upon general economic conditions
in the geographic locations where it offers its services or distributes its
material. If there were to be continued economic downturn or a continued
recession in these geographic locations, then the Company expects that business
enterprises, including its clients and potential clients, could substantially
and immediately reduce their marketing and communications budgets. In the event
of such an economic climate, there would be a material adverse effect on the
Company’s business, operating results and financial condition.





15


**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**

**ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)**
**
*Receptiveness of the Media to Our Services; Changes in Our
Marketplace*


The
Company is the leading provider of creative and distribution services to
corporations and other organizations seeking to communicate with the public
through the news media. If the marketplace for our services should change or if
the news media, as a result of recent events or a perceived reduction in the
value of our services or otherwise, should not be as receptive to our services
or shall decide to reduce or eliminate its use of the news that the Company
distributes, there would be a material adverse effect on the Company’s business,
operating results and financial condition.





*Competition*


The
markets for the Company’s services are highly competitive. The principal
competitive factors affecting the Company are effectiveness, reliability, price,
technological sophistication and timeliness. Numerous specialty companies
compete with the Company in each of its service lines although no single company
competes across all service lines. Some of the Company’s competitors or
potential competitors have longer operating histories, longer client
relationships and significantly greater financial, management, technological,
sales, marketing and other resources than the Company. In addition, clients
could perform internally all or certain of the services provided by the Company
rather than outsourcing such services. The Company could face competition from
companies in related communications markets which could offer services that are
similar or superior to those offered by the Company. In addition, national and
regional telecommunications providers could enter the market with materially
lower electronic delivery costs, and radio and television networks could also
begin transmitting business communications separate from their news programming.
The Company’s ability to maintain and attract clients depends to a significant
degree on the quality of services provided and its reputation among its clients
and potential clients as compared to that of its competitors. There can be no
assurance that the Company will not face increased competition in the future or
that such competition will not have a material adverse effect on the Company’s
business, operating results and financial condition.





*New
Services*


The
Company must develop new services to remain competitive, maintain or grow market
share and to operate in new markets. There can be no assurance that the Company
will be successful in developing new services, or that those new services will
meet customer needs. As a result of the expenses incurred in developing new
services and the potential inability of the Company to market these services
successfully, the Company’s operating results may be negatively
affected.





*Governmental
Regulations*


Changes
in governing laws and regulations could, directly or indirectly, adversely
affect our operations. Limitations, restrictions or conditions imposed by these
laws and regulations on the Company or on the news media could have the effect
of reducing the effectiveness of our services and could have a material adverse
affect on the Company’s business, operating results and financial
condition.





*Provisions
of Our Charter Documents May Have Anti-takeover Effects that Could Prevent a
Change in Control Even if the Change in Control Would be Beneficial to our
Stockholders*


Provisions
of our amended and restated certificate of incorporation, by-laws and Delaware
law could make it more difficult for a third party to acquire the Company, even
if doing so would be beneficial to our shareholders.





16


**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**

**ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)**

*Capital Requirements*


One or
more of our businesses could require, or benefit from, additional investment
beyond our current capability. Such additional funding could be raised by the
Company, or one or more of its business units separately, and could have the
effect of diluting shareholders’ interests.





*Other
Risk Factors*


Other
risk factors include our recent history of losses, our ability to achieve or
maintain profitability, effectiveness of our cost reduction programs, our
ability to develop new services and market acceptance of such services, such as
TeletraxTM, our ability to develop new products and services that keep pace with
technology, our ability to develop and maintain successful relationships with
critical vendors, the potential negative effects of our international operations
on the Company. In addition, future acquisitions or divestitures and the absence
of long term contracts with customers and vendors may adversely effect our
operations and have an adverse effect on pricing, revenues, gross margins and
our customer base.




CRITICAL
ACCOUNTING POLICIES


We have
identified the policies below as significant to our business operations and the
understanding of our results of operations. The impact and any associated risks
related to these policies on our business operations is discussed throughout
Management's Discussion and Analysis of Financial Condition and Results of
Operations where such policies affect our reported and expected financial
results. For a detailed discussion on the application of these and other
accounting policies, see Note 1 in the Notes to the Consolidated Financial
Statements in the Company’s Form 10-K for the year ended December 31,
2004.





*Revenue
Recognition*


Revenue
earned from the distribution and monitoring of video news releases and the
distribution of printed news releases is recognized in the period that the
release is distributed. Fees earned for webcasts, satellite media tours and
other live events and the production of video news releases and still
photographs are recognized in the period that the services are performed. Fees
earned from TeletraxTM are recognized ratably over the period of service. Fees
earned from research services are recognized using the percentage of completion
method. Invoices to clients are generated in accordance with the terms of the
applicable contract, which may not be directly related to the performance of
services. Unbilled receivables are invoiced based upon the achievement of
specific events as defined by each agreement including deliverables, timetables
and incurrence of certain costs. Unbilled receivables are classified as a
current asset. Advanced billings to clients in excess of revenue earned are
recorded as deferred revenues and are classified as a current
liability.





*Allowance
for Doubtful Accounts*


The
allowance for doubtful accounts is based on management's assessment of the
collectibility of specific customer accounts and includes consideration of the
credit worthiness and financial condition of those specific customers. The
Company records an allowance to reduce the specific receivables to the amount
that is reasonably believed to be collectible. The Company also records an
allowance for all other accounts receivable balances based on multiple factors
including historical experience with bad debts, customer concentrations, the
general economic environment, and the aging of such receivables. If there were a
deterioration of a major customer's financial condition, if the Company becomes
aware of additional information related to the credit-worthiness of a major
customer, or if future actual default rates on trade receivables, in general,
differ from those currently anticipated, the Company may have to adjust its
allowance for doubtful accounts, which would affect earnings in the period the
adjustments are made.




17


**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**

**ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)**
**
*Valuation of Long-Lived Assets Including Goodwill and Intangible
Assets*


In
accordance with SFAS 144, the Company reviews property and equipment and certain
identifiable intangible assets for impairment when events or changes in
circumstances indicate the carrying amount of such an asset may not be
recoverable. Recoverability of these assets is measured by comparison of their
carrying amount to future undiscounted cash flows the assets are expected to
generate. If an asset is considered to be impaired, the impairment to be
recognized in earnings equals the amount by which the carrying value of the
asset exceeds their fair market value. Although the Company has recognized no
impairment adjustments related to its property and equipment or identifiable
intangibles during the past three fiscal years, deterioration in the Company's
business or revenue from one of its service offerings in the future could lead
to such impairment adjustments in future periods in which such business issues
are identified.





We review
the carrying value of our goodwill in accordance with Statement of Financial
Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” by
comparing the carrying value of our reporting units to their fair values. In
accordance with paragraph 30 of SFAS 142, Medialink has aggregated certain
components to arrive at one of its reporting units. These components have been
aggregated because they are similar in (a) the nature of the products and
services provided; (b) the similar nature of the processes required to provide
these services; (c) the similar nature of their customers and (d) their similar
economic characteristics, being the purchase of third party services, salary
costs and selling, general and administrative costs. Furthermore, it is
Medialink’s strategy to leverage the services provided by each component across
the other components. We are required to perform this comparison at least
annually or more frequently if circumstances indicate possible impairment. When
determining fair value, we utilize a discounted future cash flow approach using
various assumptions, including projections of revenues, based on assumed long
term growth rates, estimated costs, and appropriate discount rates. Our
estimates of long-term growth and costs are based on historical data, various
internal estimates and a variety of external sources, and are developed as part
of our routine long range planning process. Based on the Company’s estimates as
of September 30, 2004 there was no impairment of goodwill; however, changes in
various circumstances, including changes in the Company’s forecasts or changes
in the Company’s internal business structure, could cause one or more of the
Company’s reporting units to be valued differently, thereby causing an
impairment of goodwill. We had approximately $13.01 million of goodwill as of
March 31, 2005. Given the significance of our goodwill, an adverse change to the
fair value could result in an impairment charge, which could be material to our
consolidated earnings.







18


**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 
 **ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)**


*Income
Taxes*


Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and for operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. As
of December 31, 2004 and through March 31, 2005, due to a number of factors,
including the fiscal 2004 and first quarter 2005 taxable losses from continuing
operations and the additional investments to be made in Teletrax and in other
areas of the Company’s operations, the Company lowered its projections of future
taxable income, particularly for the year ending December 31, 2005. As a result
of these lower projections of future taxable income, management believes the
future utilization of the Company’s deferred tax assets is no longer
more-likely-than-not. The Company made the decision to fully reserve its net
deferred tax assets at December 31, 2004 and continues to fully reserve its net
deferred tax assets at March 31, 2005.




19


**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**


Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK





*Debt*


The
Company has convertible debentures which expose the Company to the risk of
earnings or cash flow loss due to changes in market interest rates. At March 31,
2005, $3.89 million, net of unamortized discount of $1.11 million, was
outstanding on debentures. The interest rate on these facilities is based upon
the higher of 7% or 6-month LIBOR rate plus a margin, as defined. All other
Company debt is fixed-rate and, therefore, does not expose the Company to the
risk of earnings or cash flow loss due to changes in market interest
rate.





*Foreign
Operations*


In the
normal course of business, through its UK operations, the Company is exposed to
the effect of foreign exchange rate fluctuations on the United States dollar
value of its foreign subsidiaries’ results of operations and financial
condition. At March 31, 2005, the Company’s primary foreign currency market
exposure was the British pound.





*Market
Risk*


Our
accounts receivables are subject, in the normal course of business, to
collection risks. We regularly assess these risks and have established policies
and business practices to protect against the adverse effects of collection
risks. As a result we do not anticipate any material losses in this
area.





Item 4.
CONTROLS AND PROCEDURES





During
the quarterly period ended March 31, 2005, we carried out an evaluation, under
the supervision and with the participation of our chief executive officer,
principal accounting officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our chief executive officer, principal
accounting officer and principal financial officer concluded that our disclosure
controls and procedures, as of March 31, 2005, are effective in timely alerting
them to material information required to be included in our periodic SEC
reports. It should be noted that 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.





In
addition, we reviewed our internal controls during the quarterly period ended
March 31, 2005, and there have been no significant changes in those controls or
in other factors that could significantly affect those controls subsequent to
the date of their last evaluation.


20


**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**

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 none of such matters, individually or in the
aggregate, will have a material adverse effect on its financial
position.





ITEM
2.  Unregistered
Sales of Equity Securities and Use of Proceeds.


None





ITEM
3.  Defaults
Upon Senior Securities.


None





ITEM
4.  Submission
of Matters to a Vote of Security Holders.


None





ITEM 5.  Other
Information.


None





ITEM 6.  Exhibits.





(a)
Exhibits:


31.1
    Certifications
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.





31.2
    Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of
  2002.





32.
    Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.







21


****MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
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
      INCORPORATEDBy:
    /s/
      Laurence MoskowitzLaurence Moskowitz,Chairman of the Board, Chief
      Executive Officer and President


****By:
    /s/ J. Graeme
  McWhirterJ. Graeme McWhirterExecutive Vice President,
      Assistant Secretary,Chief Financial Officer and
Director





Dated:
May 16, 2005