UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-K





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


EXCHANGE
      ACT OF 1934





For
      the
      fiscal year ended December 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 ofincorporation
                or organization)
            (I.R.S.
                Employer Identification No.)708
                Third Avenue, New York, NY
            10017(Address
                of principal executive offices)
            (Zip
                Code)




Registrant's
      telephone number, including area code: (212) 682-8300





Securities
      registered pursuant to Section 12(b) of the Act:




Title
                of each class
            Name
                of each exchange on which registeredCommon
                Stock, par value $0.01 per share
            National
                Market System of NASDAQ




Securities
      registered pursuant to Section 12(g) of the Act: None





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act. Yes o No x




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 if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. 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 Act). Yes o No x





The
      aggregate market value of the registrant’s voting and non-voting common equity
      held by non-affiliates based on the closing market price on June 30, 2006,
      was
      $22,611,936.





The
      number of shares of the registrant’s common stock outstanding as of February 28,
      2007, was 6,397,509 shares.





DOCUMENTS
      INCORPORATED BY REFERENCE





Portions
      of the registrant’s 2007 Definitive Proxy Statement to be filed with the
      Securities and Exchange Commission are incorporated by reference into Part
      III
      hereof.









**TABLE
                  OF CONTENTS**Item
              
              
              
              Page**PART
                I**1
              
              Business
              
              21A
              
              Risk
                  Factors
              
              61B
              
              Unresolved
                  Staff Comments
              
              82
              
              Properties
              
              83
              
              Legal
                Proceedings
              
              84
              
              Submission
                of
                Matters to a Vote of Security Holders
              
              8Executive
                Officers
                of the Company
              
              9**PART
                  II**5
              
              Market
                  for the Registrant's Common Equity, Related Stockholder Matters
                  and Issuer
                  Purchases of Equity Securities
              
              106
              
              Selected
                Financial Data
              
              117
              
              Management's
                  Discussion and Analysis of Financial Condition and Results of Operations
              
              127A
              
              Quantitative
                and Qualitative Disclosures About Market Risk
              
              188
              
              Financial
                Statements
                and Supplementary Data
              
              189
              
              Changes
                in and
                Disagreements With Accountants on Accounting and Financial Disclosure
              
              189A
              
              Controls
                and Procedures
              
              189B
              
              Other
                  Information
              
              18**PART
                  III**10
              
              Directors
                  and Executive Officers of the Registrant
              
              1911
              
              Executive
                Compensation
              
              1912
              
              Security
                Ownership of
                Certain Beneficial Owners and Management and Related Stockholder
                Matters
              
              1913
              
              Certain
                Relationships
                and Related Transactions
              
              1914
              
              Principal
                  Accountant Fees and Services
              
              19**PART
                  IV**15
              
              Exhibits
                  and Financial Statement Schedules
              
              20Signatures
              
              21







**PART
      I**





Certain
      statements made in this Annual Report on Form 10-K 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 our actual results, performance,
      or achievements to be materially different from any future results, performance,
      or achievements expressed or implied by such forward-looking statements.
      Although we believe that the expectations reflected in such forward-looking
      statements are based upon reasonable assumptions, our actual results could
      differ materially from those set forth in the forward-looking statements. See
      “Item 1A - Risk Factors” for a description of certain factors that might cause
      such a difference.





**Item
      1.**  ***Business.***





**General**





Medialink
      Worldwide Incorporated and its subsidiaries (the “Company”, “Medialink”, “we”,
“us”, “our”) is a leading global provider of media communications services to
      corporations and other organizations. Through our media communications
      operations in the United States and the United Kingdom, we provide unique news
      and marketing media strategies and solutions that enable our clients to inform
      and educate their audiences through various media, including television, radio,
      and the Internet.





Through
      our Teletrax subsidiaries, we provide digital video tracking services to video
      content providers, such as entertainment companies, news organizations,
      television syndicators, direct-response marketing companies, and a sports
      organization. The TeletraxTM service provides broadcast television intelligence
      to enable our clients to monitor broadcast usage of their content on a worldwide
      basis.





In
      September 2006, we sold our U.S. Newswire division, through which we provided
      wire services to electronically distribute press releases and photography to
      news media and on-line services for domestic governmental, public affairs,
      and
      non-profit organizations. U.S. Newswire was an operating segment within our
      media communications segment.





Medialink
      was incorporated in Delaware in 1986. Our website is http://www.medialink.com.
      Our Annual Reports on Forms 10-K, Quarterly Reports on Forms 10-Q, and Current
      Reports on Forms 8-K along with any amendments to those reports are available,
      free of charge, on or through our Web site as soon as reasonably practicable
      after we electronically file such reports with the Securities and Exchange
      Commission.





**Segment
      Information**





See
      Note
      22 to Medialink’s consolidated financial statements for financial information
      about segments.





**Services**





*Media
      Communications Services.* Our
      media
      communications services offer a range of video and audio consultation,
      production, electronic storage, distribution, and monitoring services. Our
      video
      and audio offerings include video news releases, “b-roll” packages, short-form
      promotional videos, live event broadcasts, and audio news releases that we
      deliver to broadcast and broadband outlets. Our clients can choose individual
      service offerings on a stand-alone basis or a suite of our service offerings
      and
      distribution channels to better reach their intended audience. We provide our
      clients with consultative guidance to assist them in identifying potential
      interest in their message, and offer our clients all aspects of production
      services, including scripting, recording, editing, and narration. Through use
      of
      our internally-developed digital asset management (DAM) system - a dynamic
      video
      content management system that enables us to operate in a “tapeless” production
      environment - we also offer our clients a subscription-based electronic storage,
      management, delivery, and retrieval solution for their video, audio, and other
      content. Clients can use this storage solution for all of their video, audio,
      still picture, and print content regardless of its format and origination.
      The
      DAM system allows clients to collaborate with their colleagues, provide archive
      access to broadcast and broadband media interested in the client’s content, and
      easily post their content on their own or other third-party
      websites.




2




We
      distribute our clients’ content to appropriate television and radio stations
      through our comprehensive distribution platform and to on-line media outlets
      worldwide. In addition, we deliver branded client content in multiple formats
      directly to consumers and other specific and general audiences via the Internet
      with full disclosure as to its source. Our wide range of standard and customized
      services enables our clients to build public recognition, highlight the launch
      of new products, explain or respond to crisis situations, and meet their other
      communications objectives. We monitor and analyze the extent to which content
      is
      aired through the use of several distinct services, used either independently
      or
      in combination. The services we use to monitor broadcasts include our TeletraxTM
digital video tracking service and other monitoring services provided by
      third-party vendors. This monitoring and analysis provides valuable feedback
      to
      our clients about the size and type of audience that was reached, and the
      context in which the video was aired.





Video
      news releases are video productions ranging in length from 90 seconds to several
      minutes that are written and produced to communicate a client’s public
      relations, public affairs, or corporate message, and are analogous to a printed
      press release, transforming the printed word into the sound and pictures that
      television newsrooms can use in news programming at their discretion. Video
      news
      releases have been produced and distributed to television stations for decades
      and are used to display new products or services, demonstrate scientific or
      technological breakthroughs, and generally offer broadcasters content that
      they
      may otherwise not be able to obtain on their own, such as motion picture
      trailers, wind-tunnel testing of automobiles, or NASA space launches. Video
      news
      releases are paid for by the client seeking to announce news and they are
      delivered to the media without charge. All video news releases are delivered
      with “slates” or other labeling at the beginning of the video that identify the
      client and provide technical and editorial contact information. Produced in
      broadcast news style, video news releases relay the client’s news directly to
      television news decision makers who may use the video and audio material either
      in full or edited form, just as print media utilize traditional press releases.
      Television station journalists decide whether and how to use video news releases
      and the corresponding “b-roll” to illustrate or explain products, services, or
      issues of interest to their viewers. The “b-roll” is supplementary and back-up
      material that is provided with the video and does not contain a narrated audio
      track, providing broadcasters with the ability to choose select portions of
      the
      video and provide their own editorial context.





We
      also
      provide our clients, through our “In the Know” segments and other narrative
      marketing offerings, traditional branded advertising for their content by
      directly purchasing the commercial airtime from broadcasters. These narrative
      marketing segments, which are standard 30- or 60-second commercials that are
      produced more quickly and inexpensively than traditional advertisements, are
      intended to inform and educate the audience rather than sell products or
      services. We provide our narrative marketing offerings as a stand-alone solution
      for clients as well as an adjunct to our traditional earned media offering.
      We
      also produce short-form promotional videos that clients use for internal and
      external presentations, the production of which is similar to that of video
      news
      releases, and present them on Internet websites, video kiosks, and other
      non-broadcast platforms.





Our
      service offerings for live event broadcasts include satellite media tours,
      radio
      media tours, video and audio conferences, webcasts, and special events
      broadcasts. Satellite media tours consist of a sequence of one-on-one satellite
      interviews with a series of television reporters across the country or around
      the world. Satellite media tours typically allow an author, performer,
      executive, or other spokesperson to bring attention to an issue or to promote
      an
      upcoming event, product, movie, or book release. Satellite media tours generally
      are conducted from a studio but can originate from remote locations and may
      be
      aired live by the television station or recorded for a later airing. Radio
      media
      tours are similar to satellite media tours, but are provided to radio stations.
      Both satellite media tours and radio media tours are fully interactive with
      broadcast or broadband journalists, who ask their own questions of the guests,
      and are effectively no different than traditional in-studio appearances, except
      that they do not require the guests to travel from city to city. Broadcasters
      are always provided with the identity of the source or entity sponsoring the
      satellite media tour or radio media tour.




3




Audio
      news releases are similar to video news releases, but are made available to
      radio stations and audio-based websites. Radio stations make editorial decisions
      on the use of this content and we provide traditional advertising options
      through the direct purchase of commercial airtime.





We
      rely
      on our long-standing distribution alliances and our relationships with major
      news organizations for distributing our media communications services products
      to newsroom decision makers. We distribute video news releases, which are
      clearly identified as being provided by us on behalf of our clients, via
      satellite transmission, which makes the material available to newsrooms for
      retrieval and use. We also distribute our clients’ video through a digital
      distribution system that is used for distribution directly to affiliates of
      national networks, including ABC and CNN. In addition, we have arrangements
      with
      both CBS and FOX under which we have direct fiber-optic access for delivery
      to
      the national networks, which then redistribute the labeled content to their
      network affiliates. Through an agreement with the Associated Press for the
      use
      of its AP Express newswire, we alert hundreds of television newsrooms to the
      clients’ impending video material so that interested stations can retrieve the
      content from their preferred distribution channel. We also notify television
      newsrooms of the availability of client content through e-mails and direct
      telephone calls made by our trained personnel. All video news releases clearly
      identify Medialink as the source of the material and provide the name of our
      client, along with contact information so that station personnel may request
      additional information or clarification.





We
      distribute client material on-line by posting video and audio podcasts on the
      Internet through Yahoo!, Google, and a wide range of other websites, and we
      have
      entered into arrangements with various Internet distribution platforms such
      as
      Brightcove and Clip Syndicate to provide for the placement of client material
      on
      an even greater array of news, general information, and interest-specific sites.
      Using our internally-developed DAM system, we distribute client video in
      multiple formats through multiple on-line distribution channels. We have also
      developed a proprietary distribution platform for the advance notification
      and
      delivery of multi-media content to on-line newsrooms. This proprietary
      distribution platform, which leverages off of our DAM system, provides for
      the
      distribution of broadcast quality video to newsrooms and journalists by
      syndicating our clients’ content via RSS feeds and by delivery to the websites
      of television news stations. All such video content is clearly identified as
      being provided by Medialink, and includes the name of our client and in many
      instances includes the client’s website information so viewers can seek
      additional information.





For
      international distribution, we rely primarily on the services of the Associated
      Press, which for international markets provides both the notification of the
      availability of client content as well as the infrastructure through which
      such
      content is distributed.





Revenues
      in our media communications services segment are subject to seasonal
      fluctuations. The volume of projects from clients declines immediately after
      the
      year-end holiday season and again during the summer months, with the latter
      having a much more significant impact in Europe, resulting in lower revenues
      in
      the first and third quarters of each calendar year as compared to the second
      and
      fourth quarters. In addition, although not seasonal in nature, the revenues
      from
      media communications services decline with the breaking of significant news
      events, which pose the risk of crowding out the clients’ message.





*Digital
      Video Tracking Services.* We
      provide our TeletraxTM digital video tracking services through our majority-owned
      subsidiaries, TTX (US) LLC and TTX Limited, to entertainment companies, news
      organizations, television syndicators, direct-response marketing companies,
      and
      a sports organization. The TeletraxTM service enables owners of video content to
      embed an imperceptible and indelible digital watermark into their material
      whenever it is edited, transmitted, or duplicated. A global network of detectors
      then captures every broadcast incident of the embedded video whether via
      satellite, cable, or terrestrially and generates tracking reports for the
      original content owners. Reports of individual broadcast airings are delivered
      online in near real time to each client’s custom-designed portal or in data file
      transfers. Each client’s broadcast activity is updated dynamically throughout
      the day, enabling clients to respond immediately to reported results such as
      changes in end-user preferences or detections of unauthorized use. The TeletraxTM
service is built upon our extensive monitoring network and technology developed
      by Royal Philips Electronics.





We
      have
      expanded the Teletrax network of detectors to monitor the television broadcasts
      of more than 1,300 channels worldwide, including full-market coverage of the
      top
      210 domestic markets. The international network monitors approximately 200
      additional channels, broadcast from nearly 50 nations, and is comprised of
      12
      monitoring stations in North America, Europe, Asia, Australia, the Middle East,
      and South America.




4




**Clients**





Our
      media
      communications services’ client base encompasses more than 650 clients in a wide
      variety of enterprises and organizations, including automobile manufacturers,
      pharmaceutical companies, consumer goods companies, entertainment companies,
      and
      the public relations firms that represent the various entities. No single media
      communications services client accounted for more than 10% of our consolidated
      revenues for the years ended December 31, 2006, 2005, and 2004. For the years
      ended December 31, 2006, 2005, and 2004, the five largest media communications
      services clients accounted for approximately 18.1%, 12.3%, and 18.3%,
      respectively, of the segment’s revenues and the fifty largest media
      communications services clients accounted for approximately 59.3%, 48.7%, and
      52.2%, respectively, of the segment’s revenues. A significant reduction in
      business from any of the segment’s clients would not have a material adverse
      effect on the segment or on Medialink. We have contracts with certain clients
      for media communications services, but in most instances there is no contractual
      arrangement that would prevent clients from selecting other means to perform
      some or all of their work.





Our
      TeletraxTM digital video tracking services client base primarily consists of
      entertainment companies, news organizations, television syndicators,
      direct-response marketing companies, and a sports organization. The segment
      had
      a total of 30 clients as of December 31, 2006. For the years ended December
      31,
      2006, 2005, and 2004, the five largest digital video tracking services clients
      accounted for approximately 56.7%, 71.5%, and 84.0%, respectively, of the
      segment’s revenues. A significant reduction in business from one of the five
      largest clients would have a material adverse effect on the segment, but would
      not have such an effect on Medialink. Clients in the digital video tracking
      services segment are generally under contract for a period of at least one
      year,
      and in many instances are under contract for periods up to three
      years.





**Sales
      and Marketing**





We
      rely
      primarily on an internal sales force and support staff of 38 employees to sell
      and market our media communications services. In certain instances, because
      they
      have conducted business together over several years, the members of our internal
      sales force have established strong working relationships with their clients.
      These strong client relationships enable us to obtain repeat business over
      a
      long-term period in the absence of any contractual arrangement with our clients.
      However, because of these strong client relationships, the loss of any single
      member of our internal sales force could result in a decline in revenues if
      clients choose to move their business to another provider.





We
      rely
      on a separate internal sales force of five employees to sell and market our
      TeletraxTM digital video tracking services. Since primarily all clients in the
      digital video tracking services segment are under contract, the loss of any
      member of the internal sales force should not result in a significant decline
      in
      revenues.





**Competition**





*Media
      Communications Services.* We
      have
      competitors in all of our media communications services offerings, although
      most
      competitors do not offer our whole array of services and therefore only compete
      with us for select services. Many of our competitors are specialty organizations
      that compete within a narrow band of our service offerings. Certain of our
      competitors have available greater financial, technological, marketing, and
      other resources, and therefore may pose a more significant challenge. We compete
      for media communications services on the basis of quality of service, price
      of
      service, the ability to satisfy client demands, and the ability to offer a
      wide
      variety of services, products, and distribution means to better disseminate
      our
      clients’ messages.





*Digital
      Video Tracking Services.* We
      have
      competitors for our digital video tracking services, although such competitors
      rely on different technologies with different levels of reliability and
      integrity and none compete on a worldwide basis. We believe that our TeletraxTM
service, which embeds an imperceptible watermark in the video that cannot be
      stripped or altered, provides greater reliability and integrity than our
      competitors’ offerings, which rely on such means as embedding a marker in an
      audio track or other technologies under which the marker can be removed either
      intentionally or unintentionally. We compete for digital video tracking services
      based on the reliability of the TeletraxTM service, the scale and breadth of our
      monitoring network, and the ability for our clients to achieve a return on
      their
      investment based on this reliability and the domestic and international reach
      of
      our network.




5




**Employees**





We
      had
      126 employees as of December 31, 2006. In addition, we engage independent
      contractors and freelancers to supplement our work force during peak periods
      and
      on a project-by-project basis. We have no employees who were covered by a
      collective bargaining agreement. We believe that our relationships with our
      employees are satisfactory.





**Geographic
      Information**





See
      Note
      22 to Medialink’s consolidated financial statements for financial information
      about geographic regions.





**Discontinued
      Operations**





We
      sold
      U.S. Newswire, our press release wire services division, to PR Newswire
      Association, LLC ("PR Newswire") in September 2006 and report it as a
      discontinued operation. The final sale price was approximately $22,577,000,
      including $270,000 for an adjustment related to working capital transferred
      at
      closing. Of the total sale price, $16,250,000 was received at closing in 2006,
      $4,427,000 was received in February 2007, and $1,900,000 remains deposited
      in an
      escrow account, which may be used to cover certain contingencies that may arise.
      We recognized a pretax gain on sale of U.S. Newswire of approximately $7,566,000
      based on the minimum sale price of $18,000,000, with the remaining gain on
      sale
      of approximately $4,577,000 to be recognized in 2007.





In
      connection with the sale of U.S Newswire, we entered into a three-year services
      agreement with PR Newswire under which PR Newswire committed to providing us
      with media communications services work aggregating a minimum of $750,000,
      $600,000, and $500,000 for the fiscal years ended September 30, 2007, 2008,
      and
      2009, respectively, and we committed to providing PR Newswire with wire and
      photography services work aggregating a minimum of $200,000 for each of the
      fiscal years then ended. A payment to the other party is required for any
      shortfall to the extent either party does not reach its minimum commitment
      by
      the end of each fiscal year.





U.S.
      Newswire provided clients with immediate and simultaneous electronic
      distribution of news releases, media advisories, and press statements to the
      media and on-line services worldwide. U.S. Newswire distributed these releases
      via a direct wire service feed, as well as through e-mail, satellite, the
      Internet, and broadcast fax. U.S. Newswire also provided still photography
      services, including providing photographers for specific events requested by
      clients and consulting with clients to assist them in determining the most
      effective way of delivering their message in photographs.




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





*Major
      News Events* - Events
      that dominate news broadcasts may cause our clients to delay or not use our
      services for a particular project as such clients may determine that their
      messages may not receive adequate attention in light of the coverage received
      by
      these other news events. Such circumstances could have a material adverse effect
      on our business, operating results, and financial condition.





*Susceptibility
      to General Economic Conditions* - Our
      revenues are affected by our clients’ marketing communications spending and
      advertising budgets. Our revenues and results of operations may be subject
      to
      fluctuations based upon general economic conditions in the geographic locations
      where we offer services or distribute content. If there were to be a continued
      economic downturn or a continued recession in these geographic locations, then
      we expect that business enterprises, including our 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 our business, operating results, and financial
      condition.




6




*Receptiveness
      of the Media to Our Services; Changes in Our Marketplace* - We are
      a leading provider of creative production 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 should decide to reduce or eliminate its use of the news that we distribute,
      there would be a material adverse effect on our business, operating results,
      and
      financial condition.





*Competition* - The
      markets for our services are highly competitive. The principal competitive
      factors affecting us are effectiveness, reliability, price, technological
      sophistication, and timeliness. Numerous specialty companies compete with us
      in
      each of our service lines although no single company competes across all service
      lines. Compared to us, some of our competitors or potential competitors have
      longer operating histories, longer client relationships, and significantly
      greater financial, management, technological, sales, marketing, and other
      resources. In addition, clients could perform internally all or certain of
      the
      services we provide rather than outsourcing such services. We could face
      competition from companies in related communications markets, which could offer
      services that are similar or superior to those offered by us. 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. Our ability to maintain and attract clients depends to a
      significant degree on the quality of services provided and our reputation among
      our clients and potential clients as compared to that of our competitors. There
      can be no assurance that we will not face increased competition in the future
      or
      that such competition will not have a material adverse effect on our business,
      operating results, and financial condition.





*New
      Services* - We
      must develop new services to remain competitive, maintain or grow market share,
      and to operate in new markets. There can be no assurance that we will be
      successful in developing new services, or that those new services will meet
      client needs. Because of the costs incurred to develop new services, our
      potential inability to market these services successfully may have a material
      adverse effect on our business, operating results, and financial
      condition.





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





*Federal
      Communications Commission Actions -* We
      provide broadcasters, free of charge, with our clients' video content, which
      contains full identification as to the client or ultimate provider of the video
      content. Our narrative marketing offerings are clearly branded and labeled
      within the video content itself. Broadcasters that choose to air video content
      in its original or edited form may do so with the labeling or attribution that
      we provide or they may air the video content with either no labeling or
      attribution or with their own labeling and attribution. Actions that the Federal
      Communications Commission (“FCC”) may take with regard to broadcasters could
      have the effect of reducing the number of broadcasters that air our clients'
      material. Such possible FCC actions include rule enforcement and the
      promulgation of new rules and regulations requiring broadcasters to include
      labeling and attribution in the aired content.





Any
      labeling or attribution requirement would not preclude broadcasters from
      continuing to use the video content that we provide and would not change the
      manner in which we currently provide the video content to the broadcasters
      since
      we have always provided the broadcasters with this information. Any actions
      by
      the FCC on this matter, however, could reduce the effectiveness of certain
      of
      our services and therefore could have a material adverse effect on our 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 us, even if doing
      so would be beneficial to our shareholders.




7




*Capital
      Requirements* - One or
      more of our businesses or service offerings could require, or benefit from,
      additional investment beyond our current capability. If such additional funding
      was raised by us, or one or more of our business units separately, it could
      have
      the effect of diluting shareholders’ interests.





*History
      of operating losses* -
      We
      continue to incur operating losses that are funded with our existing cash
      reserves, with such operating losses having increased with the sale of U.S.
      Newswire. We have committed to funding the losses in our digital video tracking
      services business and continue to invest in this business as we still believe
      in
      the potential for this operation to be successful. In our media communications
      services business, we continue to pursue new service offerings and take cost
      cutting measures in an effort to return to profitability. Failure to return
      to
      profitability in our traditional businesses and achieve profitiabilty in our
      developing business could have a material adverse effect on our ability to
      continue to fund our operations.





*Other
      Risk Factors* -
      Other
      risk factors include our ability to develop new products and services that
      keep
      pace with technology, our ability to develop and maintain successful
      relationships with critical vendors, and the potential negative effects of
      our
      international operations. In addition, future acquisitions or divestitures
      and
      the absence of long-term contracts with clients and vendors may adversely affect
      our operations and have an adverse effect on our pricing, revenues, operating
      margins, and client base.




**Item
      1B.**  ***Unresolved
      Staff Comments.***





Not
      applicable.




**Item
      2.**  ***Properties.***





We
      rent
      our corporate headquarters in New York City under a lease that expires in 2010.
      This New York City location is also our primary facility for providing our
      domestic media communications services and serves as the domestic base for
      our
      digital video tracking services segment. Under a lease that expires in 2011,
      we
      rent a facility in London that serves as our primary facility for providing
      international media communications services and as the international base for
      our digital video tracking services segment. We rent a facility in Norwalk,
      CT,
      under a lease that expires in 2009 that serves as our information technology
      base. We also rent various smaller facilities in Washington, DC, Los Angeles,
      San Francisco, Chicago, and Dallas that serve as satellite sales offices. We
      believe that our facilities are adequate to meet our needs.




**Item
      3.**  ***Legal
      Proceedings.***





From
      time
      to time, we become involved in various legal matters that we consider to be
      in
      the ordinary course of business. While we cannot presently determine the
      potential liability, if any, related to any such matters, we believe that no
      such matters, individually or in the aggregate, will have a material adverse
      effect on our financial position.




**Item
      4.**  ***Submission
      of Matters to a Vote of Security Holders.***





There
      were no matters submitted to a vote of security holders during the fourth
      quarter of the fiscal year ended December 31, 2006.





8


**EXECUTIVE
      OFFICERS OF THE COMPANY**





The
      following table lists the executive officers of the Company. Officers are
      appointed by and serve at the discretion of the Board of Directors.





**Name**
            
            **Age**
            
            **Position**Laurence
                Moskowitz
            
            55
            
            Chairman
                of the Board, Chief Executive Officer, and PresidentLawrence
                Thomas
            
            45
            
            Chief
                Operating OfficerKenneth
                G. Torosian
            
            45
            
            Chief
                Financial Officer and SecretaryWilliam
                McCarren
            
            51
            
            Vice
                President, Former President - U.S.
                Newswire




*Laurence
      Moskowitz* ,
      a
      co-founder of the Company, has served as Chairman of the Board of Directors,
      Chief Executive Officer, and President of the Company since its inception in
      1986.





*Lawrence
      Thomas* has
      served as Chief Operating Officer of the Company since September 2005. From
      March 2005 until his appointment as Chief Operating Officer of the Company,
      Mr.
      Thomas served as President of MultiVu, a provider of broadcast and multimedia
      production and global distribution services. Mr. Thomas previously served at
      MultiVu as Senior Vice President of Sales and Operations from September 2003
      through March 2005 and as Vice President from April 2002 through September
      2003.
      Prior to such time, Mr. Thomas served as Vice President of Multimedia Services
      at PR Newswire Association LLC, MultiVu’s parent company that provides
      electronic delivery of news releases and information.





*Kenneth
      G. Torosian* has
      served as Chief Financial Officer of the Company since August 2005 and as
      Secretary since March 2006. From April 2004 until his appointment as Chief
      Financial Officer of the Company, Mr. Torosian served as the principal of Kerop
      Management Consultants LLC, a consulting firm. Through April 2004, Mr. Torosian
      served in various capacities at Applied Graphics Technologies, Inc., a provider
      of digital prepress and asset management services, including as Corporate
      Controller from January 1997 until August 2000, as Vice President of Finance
      from August 2000 until September 2001, and as Senior Vice President and Chief
      Financial Officer from September 2001 until August 2003.





*William
      McCarren* served
      as President of the Company’s U.S. Newswire division from 1999, when the Company
      acquired the operation, until the sale of the division in September 2006. Mr.
      McCarren ceased serving as an executive officer of the Company upon the sale
      of
      U.S. Newswire, and as of October 2006 has been running the Company’s public
      affairs business within the media communications segment.





9


**PART
      II**





**Item
      5.**  ***Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
      of Equity Securities.***





The
      Company’s common stock is traded on the National Market System of the National
      Association of Securities Dealers Automated Quotation System (“NASDAQ”) under
      the symbol MDLK. The following table sets forth the high and low closing sales
      prices for each period indicated:





**2006**
            
            **2005****High**
            
            **Low**
            
            **High**
            
            **Low**Quarter
                ended March 31
            
            $
            4.54
            
            $
            3.39
            
            $
            5.08
            
            $
            3.42Quarter
                ended June 30
            
            $
            4.40
            
            $
            3.71
            
            $
            4.18
            
            $
            2.91Quarter
                ended September 30
            
            $
            4.02
            
            $
            2.80
            
            $
            3.21
            
            $
            2.56Quarter
                ended December 31
            
            $
            5.28
            
            $
            3.02
            
            $
            3.50
            
            $
            2.77





As
      of
      February 28, 2007, there were approximately 102 registered holders of record
      of
      the Company’s common stock. No dividends have been paid on the Company’s common
      stock.





The
      following table sets forth certain information as of December 31, 2006, with
      respect to the Company’s equity compensation plans under which securities of the
      Company are authorized for issuance.





**Equity
                Compensation Plan Information****Plan
                category**
            
            **Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
            
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))****(a)**
            
            **(b)**
            
            **(c)**Equity
                compensation plansapproved
                by security holders
            
            
            1,012,790
            
            $
            5.00
            
            
            377,572





The
      Company does not have any equity compensation plans that have not been
      authorized by its stockholders.





The
      Company has neither sold any unregistered securities nor purchased any of its
      equity securities during the year ended December 31, 2006.




10


**Item
      6.**  ***Selected
      Financial Data.***




**December
                31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002****(In
                thousands of dollars, except per-share
                amounts)**Revenues
            
            $
            31,719
            
            $
            31,336
            
            $
            32,184
            
            $
            31,148
            
            $
            34,028Loss
                from continuing operations
            
            $
            (6,321
            )
            $
            (6,872
            )
            $
            (4,613
            )
            $
            (3,115
            )
            $
            (2,428
            )Loss
                per common share fromcontinuing
                operations:Basic
            
            $
            (1.03
            )
            $
            (1.14
            )
            $
            (0.77
            )
            $
            (0.52
            )
            $
            (0.41
            )Diluted
            
            $
            (1.03
            )
            $
            (1.14
            )
            $
            (0.77
            )
            $
            (0.52
            )
            $
            (0.41
            )Total
                assets
            
            $
            35,154
            
            $
            32,926
            
            $
            38,773
            
            $
            37,186
            
            $
            40,643Obligations
                under capital leases
            
            
            
            
            
            
            
            $
            97
            
            $
            173
            
            $
            217Convertible
                debentures
            
            $
            4,273
            
            $
            4,045
            
            
            3,833
            
            
            -
            
            
            -Total
                long-term obligations
            
            $
            4,273
            
            $
            4,045
            
            $
            3,930
            
            $
            173
            
            $
            217




No
      cash
      dividends have been paid or declared on the Company’s common stock.





11


**Item
      7.**  ***Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.***





The
      following discussion and analysis (in thousands of dollars) should be read
      in
      conjunction with the Company’s consolidated financial statements and notes
      thereto.





In
      September 2006, the Company sold the assets of U.S. Newswire, its wire
      distribution and photography services division. The consolidated financial
      statements reflect U.S. Newswire as a discontinued operation in all periods
      presented. Accordingly, prior period financial statements have been reclassified
      to reflect the financial position, results of operations, and cash flows of
      U.S.
      Newswire separately from continuing operations. The following discussion and
      analysis should be read in conjunction with the Company’s consolidated financial
      statements and notes thereto.





**Results
      of Operations**





*Year
      ended December 31, 2006, compared with 2005*





Revenues
      in 2006 increased by $383, or 1.2%, as compared to 2005. Revenues from media
      communications services in 2006 decreased by $334, or 1.1%, to $28,998. A
      decline in domestic media communications revenues of approximately $1,159 were
      partially offset by increased revenues of $825 from the Company’s operation in
      the United Kingdom. Revenues from TeletraxTM digital video tracking services in
      2006 increased by $717, or 35.8%, to $2,721 due primarily to an increase in
      service revenues of $804 resulting from an increase in the number of clients
      being served. Digital video tracking services revenues also include $97 and
      $184
      from equipment sales for the years ended December 31, 2006 and 2005,
      respectively.





Direct
      costs increased by $788 in 2006, and as a percentage of revenue increased to
      44.1% from 42.2% in 2005. Direct costs as a percentage of revenue in 2006
      increased primarily as a result of additional purchases of commercial airtime
      for the broadcast of client video in the domestic media communications
      business.





Selling,
      general, and administrative (“SG&A”) expenses in 2006 increased by $467 as
      compared to 2005, and as a percentage of revenue increased to 77.2% in 2006
      from
      76.6% in 2005. SG&A expenses in 2005 included $2,010 in severance costs
      incurred as a result of the termination of senior operations and executive
      management personnel in the fourth quarter of 2005. SG&A expenses in 2006
      included $1,186 of transaction-specific compensation related to the sale of
      U.S.
      Newswire and $219 of severance charges related to certain staff reductions
      during the year. SG&A expenses in 2006 also included $300 of stock-based
      compensation expense related to stock options, with no comparable amount
      recognized in 2005. 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 was adopted
      are not adjusted under the modified prospective application.





Exclusive
      of transaction-specific compensation, severance charges, and stock-based
      compensation expense, SG&A expenses in 2006 increased by $772 as compared to
      2005, and as a percent of revenue were 71.8% in 2006 as compared to 70.2% in
      2005. SG&A expenses related to Teletrax increased in 2006 by $884 as a
      result of additional costs incurred in connection with the continued expansion
      of the operation, certain personnel costs incurred in connection with executive
      recruiting efforts, and a settlement of outstanding amounts owed by a reseller
      of the services for less than the carrying value. Non-Teletrax SG&A expenses
      decreased by $112 in 2006 as compared to 2005. Decreases in SG&A costs
      resulting from cost reductions achieved in the domestic media communications
      services businesses were partially offset by consulting and other related costs
      incurred in connection with the termination of a former executive officer,
      additional consulting and professional fees incurred in 2006, and certain
      refurbishment costs incurred in connection with the expiration of a lease in
      the
      United Kingdom.




12




Depreciation
      and amortization expense in 2006 increased by $344 as compared to 2005 primarily
      as a result of the expansion of the network related to TeletraxTM digital video
      tracking services. Such depreciation totaled $821 and $614 for 2006 and 2005,
      respectively.





The
      Company had an operating loss of $8,739 in 2006 as compared to an operating
      loss
      of $7,523 in 2005. The operating losses in 2006 and 2005 included operating
      losses of $3,408 and $2,651, respectively, from the Company’s 76%-owned Teletrax
      subsidiaries. The Company’s results of operations for the years ended December
      31, 2006 and 2005, included 100% of the losses from the Teletrax subsidiaries
      since the minority shareholder has no future funding obligations.





Interest
      expense, net of interest income, decreased by $102 in 2006 as compared to 2005
      primarily due to the interest income earned on the proceeds from the sale of
      U.S. Newswire.





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. Although the Company believes that it is more likely
      than not that certain benefits will not be realized based on its most recent
      projections, the gain on sale of U.S. Newswire will enable the Company to
      realize certain deferred tax assets in future periods. Accordingly, the Company
      recognized net deferred tax assets totaling $832 at December 31, 2006. The
      Company has established a valuation allowance to reserve for the remainder
      of
      its deferred tax assets at December 31, 2006. The valuation allowance was $4,403
      and $4,190 at December 31, 2006 and 2005, respectively .





On
      September 29, 2006, the Company sold the assets of its U.S. Newswire division
      to
      PR Newswire Association, LLC, a wholly-owned subsidiary of United Business
      Media
      plc. The assets sold represented the Company's entire wire distribution and
      photography services businesses, which were an operating segment within the
      Company’s media communications services reporting segment. The final sale price
      was $22,577, including $270 for an adjustment related to working capital
      transferred at closing. Of the total sale price, $16,250 was received at closing
      in 2006, $4,427 was received in February 2007, and $1,900 remains deposited
      in
      an escrow account, the release of which is subject to certain contingencies.
      The
      Company recognized a gain on the sale of U.S. Newswire of approximately $7,566
      in 2006 based on the minimum sale price of $18,000, with the remaining gain
      on
      sale of approximately $4,577 to be recognized in 2007. The results of operations
      for 2006 include income from discontinued operations of $5,375, which included
      income from the operations of U.S. Newswire of $921 and the gain on sale of
      U.S.
      Newswire, net of tax, of $4,390. Income from discontinued operations for 2006
      also included $64 of gain on the sale of Delahaye, the Company’s division that
      provided research services that was sold in December 2004, as a result of the
      satisfaction of certain outstanding contingencies.





*Year
      ended December 31, 2005, compared with 2004*





Revenues
      in 2005 were $848, or 2.6%, lower than in 2004. Revenues from media
      communications services in 2004 decreased by $1,228, or 4.0%, to $29,332. A
      decline in domestic media communications revenues of approximately $1,556 were
      partially offset by increased revenues of $328 from the Company’s operation in
      the United Kingdom. Revenues from TeletraxTM digital video tracking services in
      2005 increased by $380, or 23.4%, to $2,004 due primarily to an increase in
      service revenues of $560 resulting from an increase in the number of clients
      being served. Digital video tracking services’ revenues also include $184 and
      $364 from equipment sales for the years ended December 31, 2005 and 2004.





Direct
      costs decreased by $458 in 2005, and as a percentage of revenues remained
      relatively flat, decreasing to 42.2% in 2005 from 42.5% in 2004.





SG&A
      expenses in 2005 increased by $4,060 as compared to 2004, and as a percentage
      of
      revenue increased to 76.6% in 2005 from 62.0% in 2004. SG&A expenses in 2005
      included $2,010 in severance costs incurred as a result of the termination
      of
      senior operations and executive management personnel in the fourth quarter
      of
      2005. Exclusive of such severance costs, SG&A expenses in 2005 increased by
      $2,050 and as a percentage of revenue were 70.2%. SG&A expenses related to
      Teletrax increased by $660 due primarily to additional staffing and other
      operating costs resulting from the continued expansion of the operation.
      Non-Teletrax SG&A expenses increased by $1,953 primarily from additional
      promotion costs, professional fees, and non-payroll personnel costs incurred
      in
      2005 as well as from additions for executive management. Such increase in
      non-Teletrax SG&A was partly offset by a decrease of approximately $563 for
      transaction-specific bonuses earned in 2004 with no corresponding bonuses being
      earned in 2005.




13




Depreciation
      and amortization expense in 2005 decreased by $129 as compared to 2004 primarily
      as a result of amortization of intangible assets in 2004 that were fully
      amortized by the end of 2004, resulting in no corresponding expense in 2005.
      Depreciation and amortization in 2005 and 2004 includes depreciation related
      to
      TeletraxTM digital video tracking services of $614 and $547, respectively.





The
      Company had an operating loss of $7,523 in 2005 as compared to an operating
      loss
      of $4,164 in 2004. The operating losses in 2005 and 2004 included operating
      losses of $2,651 and $2,033, respectively, from the Company’s 76%-owned Teletrax
      subsidiaries. The Company’s results of operations for the years ended December
      31, 2005 and 2004, included 100% of the losses from the Teletrax subsidiaries
      since the minority shareholder has no future funding obligations.





Interest
      expense, net of interest income, increased by $98 in 2005 as compared to 2004
      primarily due to the issuance of $5,000 convertible debentures in November
      2004.
      Interest expense in 2005 related to these debentures was $694, which included
      $266 of amortization of discount and deferred financing fees, an increase of
      $605 as compared to 2004. Prior to the issuance of the convertible debentures,
      the Company had available a line of credit, which was repaid in December 2004.
      Interest expense on the Company’s line of credit in 2004 totaled $301. The
      increase in interest expense was partially offset by an increase in interest
      income during 2005 of $191 resulting from higher average cash balances in
      2005.





Although
      the Company incurred a loss from continuing operations before taxes of $4,557
      in
      2004, the Company recognized an income tax provision of $56 primarily as a
      result of an additional valuation allowance recorded against the Company’s
      deferred tax assets and certain state and local taxes. The Company established
      a
      valuation allowance to reserve for certain of its deferred tax assets at
      December 31, 2004, based on its assessment that it was more likely than not
      that
      the benefit associated with the deferred tax assets will not be realized in
      future periods. The Company established a valuation allowance to reserve for
      certain of its deferred tax assets at December 31, 2005, based on its continued
      belief that it was more likely than not that such benefit will not be realized.
      The valuation allowance was $4,190 and $2,803 at December 31, 2005 and 2004,
      respectively .





Income
      from discontinued operations of $1,326 for the year ended December 31, 2005,
      primarily represents the results of operations of U.S. Newswire. Income from
      discontinued operations of $3,642 for the year ended December 31, 2004, consists
      of a gain, net of taxes and transaction costs, of $3,049 on the sale of
      Delahaye, an operating loss from Delahaye of $274, and operating income from
      U.S
      Newswire of $867.





**Liquidity
      and Capital Resources**





The
      Company continues to finance its operations and capital investment requirements
      from its existing cash reserves, which totaled $17,031 at December 31, 2006.
      The
      Company’s cash reserves were primarily generated from the sale of U.S. Newswire
      in September 2006. Working capital at December 31, 2006, increased by $8,627
      from 2005 primarily as a result of the proceeds from the sale of U.S. Newswire,
      partially offset by the Company funding operating losses and capital investments
      during the period, including amounts expended for Teletrax. U.S. Newswire
      generated $844, $899, and $833 of cash for the years ended December 31, 2006,
      2005, and 2004. Although the Company continues to pursue new service offerings
      and take cost cutting measures in an effort to increase the cash generated
      from
      its remaining businesses, the Company anticipates having to continue to fund
      its
      operations and capital investments from its cash reserves for the foreseeable
      future.





During
      2006, the Company recognized $1,927 of escrow funds related to the sale of
      U.S.
      Newswire. Taxes payable increased by $1,927 due to the tax liability associated
      with the gain on sale of U.S. Newswire in 2006 with no tax liability in prior
      periods.




14




Cash
      flows from operating activities during 2006 decreased by $4,088 as compared
      to
      2005 primarily as a result of the deposit of escrow funds and the timing of
      recording and paying severance for former employees. During 2006, the Company
      invested $1,815 in new equipment and new technology products and repaid $80
      of
      capital lease obligations. These amounts were primarily funded from the proceeds
      on the sale of U.S. Newswire and $387 in proceeds received upon the exercise
      of
      stock options.





The
      Company expects to spend approximately $2,000 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, including investments to continue the expansion into
      broadband. The Company intends to finance these expenditures with working
      capital. The Company believes that its working capital will provide sufficient
      cash flows to fund its cash needs throughout 2007.





The
      Company does not believe that inflation has had a material impact on its
      business.





**Off-balance
      sheet arrangements**





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.





**Contractual
      Obligations**





The
      following table summarizes the Company’s contractual obligations at December 31,
      2006.




**Payments
                due by period****Total**
            
            **Less
                than 1 year**
            
            **1-3
                years**
            
            **3-5
                years**Long-term
                debt obligations
            
            $
            5,000
            
            
            
            
            $
            5,000Operating
                lease obligations
            
            
            8,670
            
            $
            2,832
            
            
            4,271
            
            $
            1,567Purchase
                obligations
            
            
            550
            
            
            200
            
            
            350Other
                long-term liabilities
            
            
            1,381
            
            
            600
            
            
            651
            
            
            130Total
            
            $
            15,601
            
            $
            3,632
            
            $
            10,272
            
            $
            1,697





**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 Company’s consolidated
      financial statements included in this Annual Report on Form 10-K provides a
      detailed discussion of the various accounting policies of the Company. We
      believe that the following accounting policies are critical since they require
      subjective or complex judgments that could potentially affect the financial
      condition or results of operations of the Company.




*Allowance
      for Doubtful Accounts:* The
      Company assesses the carrying value of its accounts receivable based on
      management's assessment of the collectibility of specific client accounts,
      which
      includes consideration of the credit worthiness and financial condition of
      those
      specific clients. The Company also assesses the carrying value of accounts
      receivable balances based on other factors, including historical experience
      with
      bad debts, client concentrations, the general economic environment, and the
      aging of such receivables. The Company records an allowance for doubtful
      accounts to reduce its accounts receivable balance to the amount that is
      reasonably believed to be collectible. Based on the Company’s estimates, an
      allowance for doubtful accounts of $347 was established at December 31, 2006,
      compared to an allowance of $442 at December 31, 2005. A change in the Company’s
      assumptions, including the credit worthiness of clients and the default rate
      on
      receivables, would result in the Company recovering an amount of its accounts
      receivable that differs from its current carrying value. Such difference, either
      positive or negative, would be reflected as a component of the Company’s
      SG&A expense in future periods.




15




*Valuation
      of Long-Lived Assets:* In
      assessing the carrying value of its property and equipment and other long-lived
      assets in accordance with SFAS No. 144, “Accounting for the Impairment or
      Disposal of Long-Lived Assets,” the Company reviews such assets for impairment
      when events or changes in circumstances indicate that the carrying amount of
      the
      asset may not be recoverable. Recoverability is determined by comparing the
      carrying value of the assets to the future undiscounted cash flows the assets
      are expected to generate. If it is determined that the carrying amount is not
      recoverable, an impairment charge is recognized equal to the amount by which
      the
      carrying value of the asset exceeds its fair market value. No events or changes
      in circumstances have occurred that required the Company to assess the
      recoverability of its property and equipment, and therefore the Company has
      not
      recognized any impairment charges. A change in the Company’s business climate in
      future periods, including an inability to effectively market and sell new
      service offerings in which significant investments have been made or a general
      downturn in one of the Company’s operations, could lead to a required assessment
      of the recoverability of the Company’s long-lived assets, which may subsequently
      result in an impairment charge.





*Valuation
      of Goodwill:* In
      assessing the carrying value of goodwill in accordance with SFAS No. 142,
“Goodwill and Other Intangible Assets,” the Company compared the carrying value
      of its reporting units to their fair values. The Company is required to test
      its
      goodwill for impairment at least annually, and more frequently if an event
      occurs or circumstances change to indicate that an impairment may have occurred.
      The Company’s annual testing date is September 30. In accordance with SFAS No.
      142, the Company aggregated certain components to arrive at one of its reporting
      units. The Company estimated the fair value of its reporting units using a
      discounted cash flow approach. In estimating the fair value of its reporting
      units, the Company had to make various assumptions, including projections of
      future revenues based on assumed long-term growth rates, estimated costs, and
      the appropriate discount rates. The estimates used by the Company for long-term
      revenue growth and future costs are based on historical data, various internal
      estimates, and a variety of external sources, and are developed as part of
      the
      Company’s routine long-range planning process. The carrying value of the
      Company’s goodwill was $3,429 at September 30, 2006. Based on the use of these
      assumptions in estimating the fair value of each reporting unit, there was
      no
      impairment of goodwill as of September 30, 2006, the most recent annual testing
      date. A change in the Company’s assumptions, including lower long-term growth
      rates, higher operating costs, or higher discount rates could cause a change
      in
      the estimated fair value of the Company’s reporting units, and therefore could
      result in an impairment of goodwill, which would have a significant adverse
      effect on the Company’s results of operations.





*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 nonvested 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.




16




*Income
      Taxes:* In
      assessing the recoverability of its deferred tax assets, the Company compared
      the carrying value of its deferred tax assets to the tax-effected projections
      of
      its taxable income over future periods in which such assets could be realized.
      In estimating its future taxable income, the Company had to make various
      assumptions about its future operating performance. Based on the Company’s
      projection of future taxable income, which include the effects of recent
      operating and tax losses, management believed that it was more likely than
      not
      that the benefit associated with the deferred tax assets will not be fully
      realized in future periods. Accordingly, a valuation allowance in the amount
      of
      $4,403 and $4,190 at December 31, 2006 and 2005, respectively, was established
      to reserve against the carrying value of certain of the Company’s deferred tax
      assets. A change in the Company’s assumptions, including better or worse
      operating performance than projected, could result in a change in the amount
      of
      deferred tax assets that will be recovered, and therefore could result in a
      reduction or increase to the valuation allowance established at December 31,
      2006. Such an adjustment would be reflected as a component of the Company’s
      provision for income taxes in the period of the adjustment.





**Recent
      Accounting Pronouncements**





In
      June
      2006, the Financial Accounting Standards Board Interpretation No. ("FIN") 48,
      "Accounting for Uncertainty in Income Taxes - an interpretation of FASB
      Statement No. 109," was issued and is effective for fiscal years beginning
      after
      December 15, 2006. FIN 48 prescribes a recognition threshold and measurement
      attribute for the financial statement recognition and measurement of a tax
      position taken or expected to be taken in a tax return. Under FIN 48, a two-step
      process is used to evaluate a tax position. The first step establishes a
      recognition criterion under which the tax position is recognized if it is more
      likely than not that it will be sustained upon examination. The second step
      establishes a measurement criterion under which the tax position is measured
      at
      the largest amount of benefit that is greater than 50% likely of being realized
      upon ultimate settlement. The Company does not expect the adoption of FIN 48
      to
      have a material effect on its financial condition or results of
      operations.





In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin ("SAB") No. 108, “Considering the Effects of Prior Year Misstatements
      when Quantifying Misstatements in Current Year Financial Statements,” which
      provides guidance on the consideration of the effects of prior year
      misstatements in quantifying current year misstatements for the purposes of
      a
      materiality assessment. SAB No. 108 requires an entity to use both an income
      statement approach and a balance sheet approach to separately quantify and
      assess the amount of any misstatements originating in the current period and
      the
      cumulative amount of any such misstatements. The adoption of SAB No. 108 by
      the
      Company in 2006 did not have a material effect on its financial condition or
      results of operations.




17




**Item
      7A.**  ***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 ($4,273 net
      of
      unamortized discount) outstanding at December 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 December 31, 2006, the interest rate on the convertible debentures
      was
      9.87%. A change in interest rates of 1.0% would result in a change in the annual
      interest costs under the convertible debentures of approximately $50 based
      on
      the face amount of outstanding borrowings at December 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 year ended December 31, 2006,
      these operations aggregated approximately 11% of the Company’s current assets,
      approximately 20% of the Company’s current liabilities, and approximately 18% 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
      8.**  ***Financial
      Statements and Supplementary Data.***





See
      Index
      to Financial Statements and Financial Statements commencing on page F-1
      herein.




**Item
      9.**  ***Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.***





None.




**Item
      9A.**  ***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 December 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 December 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 December 31, 2006, that has materially
      affected, or is reasonably likely to affect, the Company’s internal control over
      financial reporting.




**Item
      9B.**  ***Other
      Information.***





None.




18


**PART
      III**





**Item
      10.**  ***Directors
      and Executive Officers of the Registrant.***





*(a)*
            *Directors*-
                The information with respect to directors required by this item is
                incorporated herein by reference to the Company’s 2007 Definitive Proxy
                Statement to be separately filed with the Securities and Exchange
                Commission by April 30, 2007.





*(b)*
            *Officers*-
                The information with respect to officers required by this item is
                included
                at the end of Part I of this Annual Report on Form 10-K under the
                heading
                “Executive Officers of the
                Company”.




**Item
      11.**  ***Executive
      Compensation.***





The
      information required by this item is incorporated herein by reference to the
      Company’s 2007 Definitive Proxy Statement to be separately filed with the
      Securities and Exchange Commission by April 30, 2007.




**Item
      12.**  ***Security
      Ownership of Certain Beneficial Owners and Management and Related Stockholder
      Matters.***





Except
      as
      set forth below, the information required by this item is incorporated herein
      by
      reference to the Company’s 2007 Definitive Proxy Statement to be separately
      filed with the Securities and Exchange Commission by April 30,
      2007.





The
      following table sets forth certain information as of December 31, 2006, with
      respect to the Company’s equity compensation plans under which securities of the
      Company are authorized for issuance.





**Equity
                Compensation Plan Information****Plan
                category**
            
            **Number
                of securities to be issued upon exercise of outstanding options,
                warrants
                and rights**
            
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))****(a)**
            
            **(b)**
            
            **(c)**Equity
                compensation plansapproved
                by security holders
            
            1,012,790
            
            $5.00
            
            377,572





The
      Company does not have any equity compensation plans that have not been
      authorized by its stockholders.




**Item
      13.**  ***Certain
      Relationships and Related Transactions.***





The
      information required by this item is incorporated herein by reference to the
      Company’s 2007 Definitive Proxy Statement to be separately filed with the
      Securities and Exchange Commission by April 30, 2007.




**Item
      14.**  ***Principal
      Accountant Fees and Services.***





The
      information required by this item is incorporated herein by reference to the
      Company’s 2007 Definitive Proxy Statement to be separately filed with the
      Securities and Exchange Commission by April 30, 2007.




19




**PART
      IV**





**Item
      15.**  ***Exhibits
      and Financial Statement Schedules.***





(a)
            Listed
                below are the documents filed as part of this
                report:




1.
            Financial
                Statements and the Report of Independent Registered Public Accounting
                Firm:




Report
      of
      Independent Registered Public Accounting Firm




Consolidated
      Balance Sheets as of December 31, 2006 and 2005




Consolidated
      Statements of Operations for the years ended December 31, 2006, 2005, and
      2004




Consolidated
      Statements of Cash Flows for the years ended December 31, 2006, 2005, and
      2004




Consolidated
      Statements of Stockholders’ Equity for the years ended December 31, 2006, 2005,
      and 2004




Notes
      to
      consolidated financial statements




2.
            Financial
                Statement Schedules:




Schedule
      II - Valuation and Qualifying Accounts for the years ended December 31, 2006,
      2005, and 2004




3.
            Exhibits:




See
      Exhibit Index commencing on page G-1 herein.




20


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) 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 Moskowitz
              
              Laurence
                MoskowitzChairman
                of the Board, Chief
                Executive Officer, and PresidentDate:
                April 2, 2007




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities indicated on April 2, 2007.




Signature
              
              TitleBy:
              /s/
                  Laurence Moskowitz
                Laurence
                  Moskowitz
              
              Chairman
                of the Board, Chief Executive Officer, and President (Principal Executive
                Officer)By:
              /s/
                  Kenneth G. Torosian
                Kenneth
                  G. Torosian
              
              Chief
                  Financial Officer and Secretary (Principal Financial
                  Officer)By:
              /s/
                  Bruce Bishop
                Bruce
                  Bishop
              
              DirectorBy:
              /s/
                  Harold Finelt
                Harold
                  Finelt
              
              DirectorBy:
              /s/
                  John M. Greening
                John
                  M. Greening
              
              DirectorBy:
              /s/
                  Donald Kimelman
                Donald
                  Kimelman
              
              DirectorBy:
              /s/
                  Douglas S. KnopperDouglas S. Knopper
              
              DirectorBy:
              /s/
                  Catherine Lugbauer
                Catherine
                  Lugbauer
              
              DirectorBy:
              /s/
                  James J. O’Neill
                James
                  J. O’Neill
              
              DirectorBy:
              /s/
                  Theodore Wm. Tashlik
                Theodore
                  Wm. Tashlik
              
              Director


21




**INDEX
      TO FINANCIAL STATEMENTS**




PageReport
                  of Independent Registered Public Accounting Firm
              F-2Consolidated
                  Balance Sheets as of December 31, 2006 and 2005
              F-3Consolidated
                  Statements of Operations for the years ended December 31, 2006,
                  2005, and
                  2004
              F-4Consolidated
                  Statements of Cash Flows for the years ended December 31, 2006,
                  2005, and
                  2004
              F-5Consolidated
                  Statements of Stockholders’ Equity for the years ended December 31, 2006,
                  2005, and 2004
              F-6Notes
                  to consolidated financial statements
              F-7




F-1




Report
      of Independent Registered Public Accounting Firm




The
      Board
      of Directors


Medialink
      Worldwide Incorporated:




We
      have
      audited the accompanying consolidated balance sheets of Medialink Worldwide
      Incorporated and subsidiaries as of December 31, 2006 and 2005, and the related
      consolidated statements of operations, stockholders’ equity, and cash flows for
      each of the years in the three-year period ended December 31, 2006. In
      connection with our audits of the consolidated financial statements, we also
      have audited the consolidated financial statement schedule included on page
      S-1.
      These consolidated financial statements and the consolidated financial statement
      schedule are the responsibility of the Company’s management. Our responsibility
      is to express an opinion on these consolidated financial statements and the
      consolidated financial statement schedule based on our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Medialink Worldwide
      Incorporated and subsidiaries as of December 31, 2006 and 2005, and the results
      of their operations and their cash flows for each of the years in the three-year
      period ended December 31, 2006, in conformity with U.S. generally accepted
      accounting principles. Also in our opinion, the related consolidated financial
      statement schedule, when considered in relation to the basic consolidated
      financial statements taken as a whole, presents fairly, in all material
      respects, the information set forth therein.




As
      discussed in Note 2 to the consolidated financial statements, Medialink
      Worldwide Incorporated and subsidiaries adopted SFAS No. 123 (Revised 2004),
      “Share-Based Payment,” as of January 1, 2006.






(signed)
      KPMG LLP




New
      York,
      New York





March
      26,
      2007





F-2





**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEETS**(In
                thousands of dollars, except share and per-share amounts)**December
                31,****2006**
            
            **2005**ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            $
            17,031
            
            $
            7,303Accounts
                receivable, net of allowance for doubtful accounts of$347
                and $442
            
            
            5,319
            
            
            5,014Inventory
            
            
            602
            
            
            371Prepaid
                expenses
            
            
            287
            
            
            523Prepaid
                and refundable taxes
            
            
            701
            
            
            906Deferred
                income taxes
            
            
            107
            
            
            -Escrow
                funds
            
            
            1,927
            
            
            -Other
                current assets
            
            
            78
            
            
            48Current
                assets of discontinued operations
            
            
            -
            
            
            613Total
                current assets
            
            
            26,052
            
            
            14,778Property
                and equipment - net
            
            
            4,296
            
            
            4,342Goodwill
            
            
            3,429
            
            
            3,429Deferred
                income taxes
            
            
            725
            
            
            -Other
                assets
            
            
            652
            
            
            762Non-current
                assets of discontinued operations
            
            
            -
            
            
            9,615Total
                assets
            
            $
            35,154
            
            $
            32,926LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                Liabilities:Accounts
                payable
            
            $
            1,981
            
            $
            1,663Accrued
                expenses and other current liabilities
            
            
            6,396
            
            
            5,807Income
                taxes payable
            
            
            1,927
            
            
            -Current
                portion of capital lease obligation
            
            
            -
            
            
            70Current
                liabilities of discontinued operations
            
            
            -
            
            
            117Total
                current liabilities
            
            
            10,304
            
            
            7,657Convertible
                debentures, net of unamortized discount of $727 and $955
            
            
            4,273
            
            
            4,045Other
                long-term liabilities
            
            
            1,049
            
            
            1,586Total
                liabilities
            
            
            15,626
            
            
            13,288Commitments
                and contingenciesStockholders'
                Equity:Series
                A Preferred stock: $.01 par value, authorized 50,000 shares; none
issued
                and outstandingCommon
                stock: $.01 par value, authorized 15,000,000 shares; issued 6,289,986
                shares in 2006 and 6,155,360 shares in 2005
            
            
            63
            
            
            62Additional
                paid-in capital
            
            
            27,327
            
            
            26,591Accumulated
                deficit
            
            
            (7,225
            )
            
            (6,279
            )Accumulated
                other comprehensive loss
            
            
            (294
            )
            
            (393
            )Common
                stock in treasury (at cost, 101,121 shares)
            
            
            (343
            )
            
            (343
            )Total
                stockholders' equity
            
            
            19,528
            
            
            19,638Total
                liabilities and stockholders' equity
            
            $
            35,154
            
            $
            32,926




See
      notes to consolidated financial
      statements




F-3





**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF OPERATIONS**(In
                thousands, except per-share amounts)**For
                the years ended December 31,****2006**
            
            **2005**
            
            **2004**Revenues
            
            $
            31,719
            
            $
            31,336
            
            $
            32,184Operating
                expenses:Direct
                costs
            
            
            14,001
            
            
            13,213
            
            
            13,671Selling,
                general, and administrative expenses
            
            
            24,485
            
            
            24,018
            
            
            19,958Depreciation
                and amortization
            
            
            1,972
            
            
            1,628
            
            
            1,757Loss
                from joint venture
            
            
            -
            
            
            -
            
            
            247Impairment
                of investments
            
            
            -
            
            
            -
            
            
            715Total
                operating expenses
            
            
            40,458
            
            
            38,859
            
            
            36,348Operating
                loss
            
            
            (8,739
            )
            
            (7,523
            )
            
            (4,164
            )Interest
                expense - net
            
            
            (389
            )
            
            (491
            )
            
            (393
            )Loss
                from continuing operations before taxes
            
            
            (9,128
            )
            
            (8,014
            )
            
            (4,557
            )Income
                tax expense (benefit)
            
            
            (2,807
            )
            
            (1,142
            )
            
            56Loss
                from continuing operations
            
            
            (6,321
            )
            
            (6,872
            )
            
            (4,613
            )Income
                from discontinued operations, net of tax
            
            
            5,375
            
            
            1,326
            
            
            3,642Net
                loss
            
            $
            (946
            )
            $
            (5,546
            )
            $
            (971
            )Net
                loss
            
            $
            (946
            )
            $
            (5,546
            )
            $
            (971
            )Other
                comprehensive income (loss)
            
            
            99
            
            
            (197
            )
            
            152Comprehensive
                loss
            
            $
            (847
            )
            $
            (5,743
            )
            $
            (819
            )Basic
                and diluted income (loss) per common share:Loss
                from continuing operations
            
            $
            (1.03
            )
            $
            (1.14
            )
            $
            (0.77
            )Income
                from discontinued operations
            
            
            0.88
            
            
            0.22
            
            
            0.61Net
                loss
            
            $
            (0.15
            )
            $
            (0.92
            )
            $
            (0.16
            )Weighted
                average number of common shares - basic and diluted
            
            
            6,108
            
            
            6,052
            
            
            5,998




See
        notes
        to consolidated financial statements
  F-4


**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS**(In
                thousands of dollars)**For
                the years ended December 31,****2006**
            
            **2005**
            
            **2004**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (946
            )
            $
            (5,546
            )
            $
            (971
            )Adjustments
                to reconcile net loss to net cash provided by (used in) operating
                activities:Depreciation
                and amortization
            
            
            1,972
            
            
            1,628
            
            
            1,757Provision
                for bad debts
            
            
            252
            
            
            76
            
            
            75Impairment
                of investments
            
            
            -
            
            
            -
            
            
            715Deferred
                income taxes
            
            
            (832
            )
            
            -
            
            
            2,004Loss
                from joint venture
            
            
            -
            
            
            -
            
            
            247Income
                from discontinued operations
            
            
            (5,375
            )
            
            (1,326
            )
            
            (3,642
            )Other
            
            
            697
            
            
            296
            
            
            32Changes
                in operating assets and liabilities, net of effects of
                dispositions:Accounts
                receivable
            
            
            (357
            )
            
            740
            
            
            (336
            )Prepaid
                expenses and other assets
            
            
            (1,876
            )
            
            1,019
            
            
            (968
            )Prepaid
                and refundable income taxes and taxes payable
            
            
            (1,092
            )
            
            (681
            )
            
            466Accounts
                payable and accrued expenses
            
            
            535
            
            
            (908
            )
            
            3,469Other
                liabilities
            
            
            (560
            )
            
            1,148
            
            
            (49
            )Net
                cash provided by (used in) operating activities of discontinued
                operations
            
            
            868
            
            
            928
            
            
            (663
            )Net
                cash (used in) provided by operating activities
            
            
            (6,714
            )
            
            (2,626
            )
            
            2,136CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchases
                of property and equipment
            
            
            (1,815
            )
            
            (1,833
            )
            
            (731
            )Proceeds
                from sale of division
            
            
            17,904
            
            
            -
            
            
            7,700Capital
                contributions to joint venture
            
            
            -
            
            
            -
            
            
            (255
            )Net
                cash used in investing activities of discontinued
                operations
            
            
            (24
            )
            
            (29
            )
            
            (122
            )Net
                cash provided by (used in) investing activities
            
            
            16,065
            
            
            (1,862
            )
            
            6,592CASH
                FLOWS FROM FINANCING ACTIVITIES:Payments
                on line of credit
            
            
            -
            
            
            -
            
            
            (5,500
            )Proceeds
                from issuance of convertible debentures
            
            
            -
            
            
            -
            
            
            4,758Proceeds
                from the issuance of common stock in connection with
                the exercise of stock options
            
            
            387
            
            
            280
            
            
            44Repayments
                of obligations under capital lease
            
            
            (80
            )
            
            (117
            )
            
            (81
            )Other
                financing activities
            
            
            -
            
            
            (13
            )
            
            -Net
                cash provided by (used in) financing activities
            
            
            307
            
            
            150
            
            
            (779
            )Net
                increase (decrease) in cash and cash equivalents
            
            
            9,658
            
            
            (4,338
            )
            
            7,949Effect
                of exchange rate changes on cash and cash equivalents
            
            
            70
            
            
            (34
            )
            
            20Cash
                and cash equivalents at the beginning of period
            
            
            7,303
            
            
            11,675
            
            
            3,706Cash
                and cash equivalents at end of period
            
            $
            17,031
            
            $
            7,303
            
            $
            11,675




See
      notes to consolidated financial
      statements




F-5





**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS' EQUITY**(In
                thousands of dollars)**Common
                Stock**
            
            **Additional
                Paid-in Capital**
            
            **Retained
                Earnings (Deficit)**
            
            **Accumulated
                Other Comprehensive Income (Loss)**
            
            **Common
                Stock in Treasury****Balance
                at January 1, 2004**
            
            $
            60
            
            $
            25,047
            
            $
            238
            
            $
            (348
            )
            $
            (200
            )Warrants
                granted in connection with issuance ofconvertible
                debentures
            
            
            
            
            
            1,200Receipt
                of 43,997 shares of common stock asrepayment
                of loan
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (143
            )Issuance
                of 15,257 shares of common stock inconnection
                with exercise of stock options
            
            
            1
            
            
            44Unrealized
                gain from foreign currency translationadjustments
            
            
            
            
            
            
            
            
            
            
            
            152Net
                loss
            
            
            
            
            
            
            
            
            (971
            )**Balance
                at December 31, 2004**
            
            
            61
            
            
            26,291
            
            
            (733
            )
            
            (196
            )
            
            (343
            )Issuance
                of 97,773 shares of common stock inconnection
                with exercise of stock options
            
            
            1
            
            
            279Unrealized
                loss from foreign currency translationadjustments
            
            
            
            
            
            
            
            
            
            
            
            (197
            )Compensation
                expense recognized on stock options
            
            
            
            
            
            21Net
                loss
            
            
            
            
            
            
            
            
            (5,546
            )**Balance
                at December 31, 2005**
            
            
            62
            
            
            26,591
            
            
            (6,279
            )
            
            (393
            )
            
            (343
            )Issuance
                of 134,626 shares of common stock inconnection
                with exercise of stock options
            
            
            1
            
            
            386Unrealized
                gain from foreign currency translationadjustments
            
            
            
            
            
            
            
            
            
            
            
            99Compensation
                expense recognized on stock options
            
            
            
            
            
            300Income
                tax benefit associated with the exercise ofstock
                options
            
            
            
            
            
            50Net
                loss
            
            
            
            
            
            
            
            
            (946
            )**Balance
                at December 31, 2006**
            
            
            63
            
            
            27,327
            
            
            (7,225
            )
            
            (294
            )
            
            (343
            )




See
        notes to consolidated financial
        statements


F-6


**MEDIALINK
      WORLDWIDE INCORPORATED**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(In
      thousands, except share and per-share amounts)**




**1.
      Organization**





Medialink
      Worldwide Incorporated and its subsidiaries (the “Company”) provide media
      communications services and digital video tracking services to corporations
      and
      other organizations. Through its content media operations in the United States
      and the United Kingdom, the Company offers news and marketing media strategies
      and solutions by providing consultation, production, distribution, and
      monitoring services that enable its clients to inform and educate their intended
      audiences through various media. Through its Teletrax subsidiaries, the Company
      provides digital video tracking services that provide broadcast television
      intelligence to video content providers such as entertainment companies, news
      organizations, television syndicators, direct-response marketing companies,
      and
      a sports organization, enabling clients to monitor their content.





In
      September 2006, the Company sold the assets of U.S. Newswire, its wire
      distribution and photography services division. The consolidated financial
      statements reflect U.S. Newswire as a discontinued operation in all periods
      presented. Accordingly, prior period financial statements have been reclassified
      to reflect the financial position, results of operations, and cash flows of
      U.S.
      Newswire separately from continuing operations.




**2.
      Summary of Significant Accounting Policies**





***Principles
      of Consolidation:*** The
      consolidated financial statements include the accounts of the Company and all
      of
      its subsidiaries. The Company consolidates entities in which it owns greater
      than 50% of the voting equity of an entity or otherwise is able to exert
      control. The Company consolidates its 76%-owned Teletrax subsidiaries and
      includes 100% of the losses from these subsidiaries in its consolidated results
      of operations since the minority shareholder has no future funding obligations.
      All intercompany accounts and transactions have been eliminated in the
      consolidated financial statements.





***Cash
      and Cash Equivalents:*** Cash and
      cash equivalents include all cash balances and highly liquid investments having
      original maturities of three months or less.





***Allowance
      for Doubtful Accounts*** :
      The
      Company recognizes bad debt expense on trade receivables through an allowance
      account using estimates based on past experience, and writes off trade
      receivables against the allowance account when the Company believes it has
      exhausted all available means of collection.




***Inventory:*** Inventory
      consists of equipment for sale and equipment for replacement of devices
      requiring service in the Company’s digital video tracking services business.
      Inventory is valued at the lower of cost or market, with cost determined on
      a
      specific identification basis.





***Property
      and Equipment:*** Property
      and equipment is stated at cost. Depreciation is computed on a straight-line
      basis over the estimated useful lives of the assets, which generally range
      from
      three years for certain equipment to ten years for certain furniture and
      fixtures. Leasehold improvements and assets recorded under capital leases are
      amortized on a straight-line basis over the shorter of their estimated useful
      lives or the terms of the leases.





***Long-lived
      Assets:*** In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company
      evaluates the recoverability of its long-lived assets by comparing their
      carrying value to the expected future undiscounted cash flows to be generated
      from such assets when events or circumstances indicate that an impairment may
      have occurred.





***Goodwill
      and Other Intangible Assets:*** In
      accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill
      and other intangible assets with indefinite useful lives are not amortized,
      but
      rather are subject to an annual impairment test. The Company performs its annual
      impairment test on September 30 of each year, or more frequently if an event
      occurs or circumstances change to indicate than an impairment may have occurred.
      Intangible assets with finite useful lives are amortized over their useful
      lives.




F-7




**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


***Equity
      Investments:*** The
      Company accounts for its investments in other entities under the equity method
      when it owns between 20% and 50% of the voting equity and does not have the
      ability to exercise control over the other entity or is otherwise not required
      to consolidate the entity in accordance with Financial Accounting Standards
      Board Interpretation No. (“FIN”) 46(R), “Consolidation of Variable Interest
      Entities.” The Company accounts for its investments in other entities under the
      cost method when it owns less than 20% of the voting equity and does not exert
      significant influence. Equity investments are reviewed for impairment whenever
      events or changes in circumstances indicate that the fair value of an equity
      investment is less than its carrying amount and that such a decline in value
      is
      determined to be other than temporary.





***Revenue
      Recognition:*** Revenue
      is recognized when the Company has substantially completed performance and
      no
      longer has a consequential obligation to its clients.





*Media
      communications services:* Revenue
      from the Company’s media communications services offerings, including the
      production of video and audio content and the broadcast of live events, is
      recognized upon substantial completion of the services being provided. Revenue
      from the distribution and monitoring of video and audio news releases is
      recognized upon distribution.





*Digital
      Video Tracking Services:* Revenue
      from TeletraxTM digital video tracking services is recognized ratably over the
      period of service being provided. Revenue from the sale of equipment is
      recognized upon installation and acceptance by the client. Revenues include
      $97,
      $184, and $364 from equipment sales for the years ended December 31, 2006,
      2005,
      and 2004, respectively.





***Operating
      Costs:*** Direct
      costs primarily represent incremental third-party costs incurred in connection
      with providing services to clients, including production costs, as well as
      incremental costs incurred for commissions paid to salaried sales personnel.
      Selling, general, and administrative costs include all internal costs, including
      payroll-related and other internal costs incurred in connection with providing
      services to clients, including all internal production costs.





***Advertising
      expenses:*** Advertising costs are expensed in the period in which the advertising appears
      in
      print or is broadcast. The Company incurred advertising expense, exclusive
      of
      sales and marketing efforts, of approximately $131, $73, and $92 for the years
      ended December 31, 2006, 2005, and 2004, respectively.





***Income
      Taxes:*** The
      Company accounts for income taxes under the provisions of SFAS No. 109,
“Accounting for Income Taxes.” Foreign subsidiaries are taxed according to the
      regulations existing in the countries in which they do business. Provision
      has
      not been made for United States income taxes on distributions that may be
      received from foreign subsidiaries, which are considered to be permanently
      invested overseas. A valuation allowance is recorded if it is more likely than
      not that some portion or all of the deferred tax assets will not be realized
      in
      future periods.





***Foreign
      Currency Translation:*** Assets
      and liabilities of foreign operations are translated from the functional
      currency into United States dollars using the exchange rate in effect at the
      balance sheet date. Revenues and expenses of foreign operations are translated
      from the functional currency into United States dollars using the average
      exchange rate for the period. Adjustments resulting from the translation into
      United States dollars are included as a component of “Other comprehensive
      loss.”




F-8




**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**




***Stock-Based
      Compensation:*** On
      January 1, 2006, the Company adopted the provisions of 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 was
      adopted are not adjusted under the modified prospective application. The Company
      has also elected to treat option grants with graded vesting as a single award
      and accordingly recognizes the associated compensation expense ratably over
      the
      service period. 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 years ended December 31, 2005 and 2004,
      were as follows:




**2005**
            
            **2004**Net
                loss as reported
            
            $
            (5,546
            )
            $
            (971
            )Stock-based
                compensation expense, net of tax,included
                in net loss as reported
            
            
            21
            
            
            -Stock-based
                compensation expense, net of tax, underfair
                value method
            
            
            (349
            )
            
            (165
            )Pro
                forma net loss
            
            $
            (5,874
            )
            $
            (1,136
            )Basic
                and diluted loss per share as reported
            
            $
            (0.92
            )
            $
            (0.16
            )Pro
                forma basic and diluted loss per share
            
            $
            (0.97
            )
            $
            (0.19
            )





***Estimates:*** The
      preparation of the Company’s consolidated financial statements in conformity
      with generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.





***Reclassifications:*** Certain
      prior-period amounts in the accompanying financial statements have been
      reclassified to conform to the 2006 presentation.





***Recently
      Issued Accounting Standards:*** In
      June
      2006, FIN 48, "Accounting for Uncertainty in Income Taxes - an interpretation
      of
      FASB Statement No. 109," was issued and is effective for fiscal years beginning
      after December 15, 2006. FIN 48 prescribes a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return. Under FIN 48,
      a
      two-step process is used to evaluate a tax position. The first step establishes
      a recognition criterion under which the tax position is recognized if it is
      more
      likely than not that it will be sustained upon examination. The second step
      establishes a measurement criterion under which the tax position is measured
      at
      the largest amount of benefit that is greater than 50% likely of being realized
      upon ultimate settlement. The Company does not expect the adoption of FIN 48
      to
      have a material effect on its financial condition or results of
      operations.




F-9




**MEDIALINK
          WORLDWIDE INCORPORATED**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin ("SAB") No. 108, “Considering the Effects of Prior Year Misstatements
      when Quantifying Misstatements in Current Year Financial Statements,” which
      provides guidance on the consideration of the effects of prior year
      misstatements in quantifying current year misstatements for the purposes of
      a
      materiality assessment. SAB No. 108 requires an entity to use both an income
      statement approach and a balance sheet approach to separately quantify and
      assess the amount of any misstatements originating in the current period and
      the
      cumulative amount of any such misstatements. The adoption of SAB No. 108 by
      the
      Company in 2006 did not have a material effect on its financial condition or
      results of operations.




**3.
      Discontinued Operations**





In
      September 2006, the Company sold the assets of its U.S. Newswire division to
      PR
      Newswire Association, LLC (“PR Newswire”), a wholly-owned subsidiary of United
      Business Media plc, for approximately $22,577, which includes $270 for
      additional working capital delivered at closing. The assets sold represented
      the
      Company's entire wire distribution and photography services businesses, which
      were an operating segment within the Company’s media communications services
      reporting segment. The base sale price was $19,000, of which the Company
      received $16,250 in cash at closing, which included $150 for additional working
      capital, with the remaining $2,900 deposited into escrow, of which $1,900
      represented amounts to cover potential post-closing contingencies and $1,000
      represented deferred sale price. The base sale price was subject to adjustment
      based on the operating performance of U.S. Newswire for the twelve-month period
      ended September 30, 2006, the effective date of the transaction, with the final
      sale price to be between $18,000 and $23,000. In addition, the final sale price
      was to be adjusted based on the working capital of U.S. Newswire as of September
      30, 2006.





The
      final
      sale price of $22,577 included an increase to the base sale price of $3,307
      based on the operating performance of U.S. Newswire for the pertinent period
      and
      $270 for additional working capital. In February 2007, the Company received
      additional cash proceeds of approximately $4,427, of which $3,307 represented
      additional sale price received directly from PR Newswire, $1,000 represented
      the
      release of the escrow balance representing deferred purchase price at closing,
      and $120 represented an adjustment for additional working capital. The escrow
      account balance of $1,900 to cover potential post-closing contingencies is
      scheduled to be released by the fourth quarter of 2007, subject to certain
      contingencies. In 2006 the Company recognized a pretax gain on the sale of
      U.S.
      Newswire of approximately $7,566 based on the minimum sale price of $18,000,
      with the remaining gain on sale of approximately $4,577 to be recognized in
      2007.





In
      connection with the sale of U.S Newswire, the Company entered into a three-year
      services agreement with PR Newswire under which PR Newswire committed to provide
      media communications services work aggregating a minimum of $750, $600, and
      $500
      for the fiscal years ended September 30, 2007, 2008, and 2009, respectively,
      and
      the Company committed to provided PR Newswire with wire and photography services
      work aggregating a minimum of $200 for each of the fiscal years then ended.
      A
      payment to the other party is required for any shortfall to the extent either
      party does not reach its minimum commitment by the end of each fiscal
      year.





In
      December 2004, the Company sold substantially all of the assets and liabilities
      of its research division, Delahaye, for approximately $8,000, of which $7,700
      was collected at closing and $300 was collected during 2005. The Company also
      received an additional $224 related to a purchase price adjustment based on
      working capital at closing. In connection with the settlement of all outstanding
      claims and contingencies and the receipt of the additional amount for the
      purchase price adjustment, the Company recorded additional gain, net of tax,
      of
      $64 and $194 in 2006 and 2005, respectively, on the sale of Delahaye.




F-10




**MEDIALINK
          WORLDWIDE INCORPORATED**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**
  The
            operations of U.S. Newswire and Delahaye are reported as discontinued
            operations
            for all periods presented in the accompanying consolidated financial
            statements.
            The operating results of U.S. Newswire and Delahaye are reflected separately
            from the results of continuing operations through the dates of sale.
            The results
            of operations and the gain on sale of U.S. Newswire and Delahaye are
            presented
            as discontinued operations for the years ended December 31, 2006, 2005,
            and
            2004, respectively, as follows:


**For
                the years ended December 31,****2006**
            
            
            **2005**
            
            
            **2004**Revenues
            
            $
            4,457
            
            $
            5,376
            
            $
            13,701Income
                from operations before income taxes
            
            $
            1,602
            
            $
            1,964
            
            $
            1,230Income
                tax expense
            
            
            681
            
            
            832
            
            
            637Income
                from operations
            
            
            921
            
            
            1,132
            
            
            593Gain
                on sale of division before income taxes
            
            
            7,678
            
            
            284
            
            
            4,915Income
                tax expense
            
            
            3,224
            
            
            90
            
            
            1,866Gain
                on sale of division
            
            
            4,454
            
            
            194
            
            
            3,049Income
                from discontinued operations
            
            $
            5,375
            
            $
            1,326
            
            $
            3,642





At
      December 31, 2005, the current assets of U. S. Newswire reported as a
      discontinued operation consisted of $570 of accounts receivable and $43 of
      prepaid expenses; the long-term assets consisted of $38 of property and
      equipment and $9,577 of goodwill; the current liabilities consisted entirely
      of
      accounts payable and accrued expenses. The amount of goodwill attributable
      to
      U.S. Newswire was determined based on the relative fair value of U.S. Newswire
      to the fair value of the Company’s media communications services segment at
      September 30, 2006 (see Note 6).





In
      connection with the sale of U.S. Newswire, the Company completed certain exit
      activities in September 2006 (the “Third Quarter Plan”) that included
      terminating one employee and vacating the portion of its facility in Washington,
      DC, that served as the primary facility for providing wire distribution and
      photography services. The Company also completed certain exit activities in
      the
      fourth quarter of 2006 (the “Fourth Quarter Plan”) that included terminating one
      employee and vacating the portion of its facility in Norwalk, CT, that served
      as
      a satellite location for certain activities of U.S. Newswire. The results of
      operations from discontinued operations for the year ended December 31, 2006,
      include charges of $226 and $138 related to the Third Quarter Plan and the
      Fourth Quarter Plan, respectively. The Third Quarter Plan consisted of $11
      for
      employee termination costs and $215 for contract termination costs associated
      with the lease for the Washington, DC, facility. The Company continues to occupy
      a portion of the Washington, DC, facility for use by its broadcast services
      business. The Fourth Quarter Plan consisted of $60 for employee termination
      costs and $78 for contract termination costs associated with the lease for
      the
      Norwalk, CT, facility. The Company continues to occupy a portion of the Norwalk,
      CT, facility for use as its information technology base.




**4.
      Impairment Charges**





For
      the
      year ended December 31, 2004, the Company incurred impairment charges totaling
      $715, of which $342 related to two investments previously accounted for under
      the cost method. In addition, the Company incurred an impairment charge of
      $373
      related to its 50% interest in Business Wire/Medialink, LLC (“Newstream”), a
      joint venture with Business Wire that provided for the delivery of multi-media
      content to on-line newsrooms. During 2004, Business Wire and the Company each
      made an additional capital contribution of $255. In December 2004, the joint
      venture was dissolved and the Company recognized an impairment charge equal
      to
      its remaining investment in the joint venture at the time of dissolution. Under
      its agreement with Business Wire upon dissolution of the joint venture, the
      Company continued to provide services under the Newstream name through December
      31, 2005. In January 2006, the Company commenced providing services similar
      to
      those provided by the joint venture through a new proprietary distribution
      platform.





F-11




**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


The
      results of operations of Newstream for the year ended December 31, 2004, were
      as
      follows:




**2004****(Unaudited)**Revenues
            
            $
            1,012Operating
                loss
            
            $
            (495
            )




**5.
      Property and Equipment**





Property
      and equipment at December 31 consisted of the following:




**2006**
            
            
            **2005**Equipment
            
            $
            8,242
            
            $
            6,563Furniture
                and fixtures
            
            
            1,322
            
            
            1,263Licenses
                and software
            
            
            2,095
            
            
            1,712Leasehold
                improvements
            
            
            3,528
            
            
            3,444Total
            
            
            15,187
            
            
            12,982Less:
                Accumulated depreciation and amortization
            
            
            10,891
            
            
            8,640Net
            
            $
            4,296
            
            $
            4,342




**6.
      Goodwill**





The
      Company’s intangible assets not subject to amortization under SFAS No. 142
      consisted entirely of goodwill, all of which related to the media communications
      segment. In connection with the sale of U.S. Newswire in September 2006, the
      Company allocated $9,577 of the segment’s goodwill to discontinued operations
      based on the relative fair value of the division sold to the fair value of
      the
      remainder of the segment on the date of sale. The remaining goodwill of $3,429
      was subjected to the Company’s annual impairment test, which resulted in no
      impairment for the year ended December 31, 2006.




**7.
      Accrued Expenses**





Accrued
      expenses and other current liabilities at December 31 consisted of the
      following:




**2006**
            
            **2005**Salaries
                and benefits
            
            $
            1,405
            
            $
            1,528Direct
                costs
            
            
            1,710
            
            
            1,511Client
                prepayments
            
            
            400
            
            
            938Deferred
                revenue
            
            
            789
            
            
            590Abandoned
                lease obligations
            
            
            325
            
            
            128Leasehold
                refurbishments
            
            
            343
            
            
            -Professional
                fees
            
            
            280
            
            
            319Other
                accruals
            
            
            1,144
            
            
            793Total
            
            $
            6,396
            
            $
            5,807





F-12




**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**





**8.
      Liabilities for Disposal Activities**





In
      September 2003, the Company completed a plan (the “2003 Plan”) to shut down one
      of its office locations in Norwalk, CT, by subleasing the abandoned space.
      The
      remaining liability for future payments for the 2003 Plan, all of which pertains
      to facility closure costs, and the amounts charged against the liability were
      as
      follows:




Balance
                at January 1, 2005
            
            $
            363Payments
            
            
            (71
            )Balance
                at December 31, 2005
            
            
            292Payments
            
            
            (135
            )Balance
                at December 31, 2006
            
            $
            157





At
      December 31, 2006, the liabilities for disposal activities related to the 2003
      Plan as well as the Third Quarter Plan and the Fourth Quarter Plan associated
      with the sale of U.S. Newswire (see Note 3) were included in the Company’s
      balance sheet as follows:




**Total**
            
            **Current**
              **Liabilities**
            
            **Non-current**
              **Liabilities**2003
                Plan
            
            $
            157
            
            $
            135
            
            $
            22Third
                Quarter Plan
            
            
            213
            
            
            154
            
            
            59Fourth
                Quarter Plan
            
            
            78
            
            
            36
            
            
            42Total
            
            $
            448
            
            $
            325
            
            $
            123




**9.
      Line of Credit**





Prior
      to
      2005, the Company had a credit facility with a bank under which it borrowed
      funds at an interest rate equal to the 30-day LIBOR rate plus 5.5%. The Company
      fully repaid amounts outstanding under this credit facility in December 2004
      and
      the credit facility was terminated. The average variable rate on borrowings
      under this credit facility for the 2004 period through the termination of the
      facility was 5.7%.




**10.
      Long-term Debt**





Long-term
      debt at December 31 consisted of the following:




**2006**
            
            **2005**Convertible
                debentures
            
            $
            5,000
            
            $
            5,000Unamortized
                discount
            
            
            (727
            )
            
            (955
            )Net
            
            $
            4,273
            
            $
            4,045





In
      November 2004, the Company issued redeemable subordinated convertible debentures
      with a face value of $5,000. The Debentures, which are unsecured and mature
      in
      November 2009, bear interest at a rate equal to the higher of 7% or the 6-month
      LIBOR rate (as defined) plus 4.5% for the first three years and at an adjustable
      rate thereafter. The convertible debentures provide each holder with the option
      to convert their securities into shares of the Company’s common stock at a price
      of $4.05 per share. In addition, as part of the issuance of the convertible
      debentures, each holder received detachable warrants to purchase an aggregate
      of
      582,929 shares of the Company’s common stock at a price of $3.99 per share. The
      Company can call the outstanding convertible debentures at the end of the first,
      second, and third years at a price equal to 115%, 110%, and 100%, respectively,
      of the face value. In addition, as of November 2005 the Company can force the
      holders of the convertible debentures to convert into shares of the Company’s
      common stock if the market price of the common stock exceeds $7.09 per share,
      subject to certain other conditions.




F-13


**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**




The
      gross
      proceeds of $5,000 from the issuance of the convertible debentures and the
      detachable warrants were allocated between the two financial instruments based
      on their relative fair values at the date of issuance. The fair value of the
      warrants of $1,200 was estimated using the Black-Scholes option pricing model
      and the following assumptions: expected volatility of 81.1%, expected life
      of
      five years, risk free interest rate of 3.51%, and no dividend yield. The fair
      value of the warrants was recorded as additional paid-in capital and a discount
      on the convertible debentures, which is being amortized as a component of
      interest expense over the life of the convertible debentures. The remaining
      gross proceeds of $3,800 were ascribed to the fair value of the convertible
      debentures, which accretes in value as the discount is amortized.





In
      connection with the issuance of the convertible debentures, the Company incurred
      fees totaling $256, which are being amortized as a component of interest expense
      over the term of the convertible debentures. Interest expense for the years
      ended December 31, 2006, 2005, and 2004, included $228, $212, and $33,
      respectively, from the amortization of the discount and $51, $54, and $8,
      respectively, from the amortization of the deferred financing fees. The average
      interest rate on the convertible debentures was 9.8%, 8.5%, and 7.3% for the
      years ended December 31, 2006, 2005, and 2004, respectively.





In
      the
      first quarter of 2007, convertible debentures with an aggregate face value
      of
      $650 were converted into 160,494 shares of the Company’s common stock and
      warrants to purchase 46,200 shares of the Company’s common stock were
      exercised.




**11.
      Leases**





The
      Company leases certain property used in its operations under agreements that
      are
      classified as operating leases. Such agreements generally include provisions
      for
      inflation-based rate adjustments and, in the case of leases for buildings and
      office space, payments of certain operating expenses and property
      taxes.





Future
      minimum rental payments required under the operating leases that have initial
      or
      remaining non-cancelable lease terms in excess of one year are as
      follows:




2007
            
            $
            2,8322008
            
            
            2,3712009
            
            
            1,9002010
            
            
            1,5432011
            
            
            24Total
                minimum lease payments
            
            $
            8,670





The
      Company has non-cancelable subleases related to certain properties under which
      the Company will receive minimum sublease rental payments through 2009 totaling
      approximately $944. Total rental expense under operating leases amounted to
      $2,359, $2,271, and $2,022 for the years ended December 31, 2006, 2005, and
      2004, respectively.





F-14




**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


**12.
      Preferred Stock**





During
      2001, the Company’s Board of Directors approved the adoption of a Preferred
      Stock Rights Agreement (the “Rights Agreement”), under which a dividend
      distribution of one preferred stock purchase right (the “Purchase Right”) was
      declared for each outstanding share of the Company’s common stock, payable to
      common stockholders of record at the close of business on August 30, 2001.
      Each
      Purchase Right has an exercise price of $50.00 and entitles the holder to
      purchase one one-thousandth of a share of the Company’s Series A Participating
      Preferred Stock (the “Series A Preferred”). The Purchase Rights continue to be
      represented by, and trade with, the Company's common stock certificates unless
      the Purchase Rights become exercisable, which will only occur, with certain
      exceptions, in the event that a person or group acquires, or announces a tender
      or exchange offer to acquire, a beneficial ownership of 15% or more of the
      Company's common stock then outstanding. As of December 31, 2006 and 2005,
      the
      Company’s Board of Directors had authorized 50,000 shares of the Series A
      Preferred, none of which was issued or outstanding.




**13.
      Income Taxes**





The
      components of the provision (benefit) for income taxes were as
      follows:




**2006**
            
            **2005**
            
            **2004****Current:**Federal
            
            $
            (3,260
            )
            $
            (902
            )
            $
            (1,369
            )State
                and local
            
            
            (1,322
            )
            
            (240
            )
            
            (579
            )Total
                current
            
            
            (4,582
            )
            
            (1,142
            )
            
            (1,948
            )**Deferred:**Federal
            
            
            1,263
            
            
            -
            
            
            1,483State
                and local
            
            
            512
            
            
            -
            
            
            521Total
                deferred
            
            
            1,775
            
            
            -
            
            
            2,004Total
                provision (benefit) for income taxes
            
            $
            (2,807
            )
            $
            (1,142
            )
            $
            56





The
      provision (benefit) for income taxes varied from the Federal statutory income
      tax rate due to the following:




**2006**
            
            **2005**
            
            **2004**Taxes
                at statutory rate
            
            $
            (3,104
            )
            $
            (2,725
            )
            $
            (1,549
            )State
                and local income taxes, net of Federal benefit
            
            
            (730
            )
            
            (502
            )
            
            (271
            )Valuation
                allowance on deferred tax assets
            
            
            213
            
            
            1,936
            
            
            1,839Benefit
                for foreign taxes at lower rates
            
            
            196
            
            
            -
            
            
            -Non-deductible
                expenses and other
            
            
            618
            
            
            149
            
            
            37Provision
                (benefit) for income taxes
            
            $
            (2,807
            )
            $
            (1,142
            )
            $
            56Federal
                statutory rate
            
            
            34.00
            %
            
            34.00
            %
            
            34.00
            %Effective
                rate
            
            
            30.75
            %
            
            14.25
            %
            
            (1.23
            )%





F-15




**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


The
      Company generated losses from continuing operations before taxes for the years
      ended December 31, 2006, 2005, and 2004, as follows:




**2006**
            
            **2005**
            
            **2004**Domestic
            
            $
            (7,493
            )
            $
            (6,768
            )
            $
            (2,941
            )Foreign
            
            
            (1,635
            )
            
            (1,246
            )
            
            (1,616
            )Total
            
            $
            (9,128
            )
            $
            (8,014
            )
            $
            (4,557
            )





The
      components of the net deferred tax asset at December 31 were as
      follows:




**2006**
            
            **2005**Deferred
              tax assets:Accounts
                receivable
            
            $
            66
            
            $
            230Property
                and equipment
            
            
            97
            
            
            77Goodwill
            
            
            782
            
            
            -Other
                intangible assets
            
            
            748
            
            
            932Minority
                interest
            
            
            341
            
            
            475Equity
                investments
            
            
            300
            
            
            304Accrued
                compensation
            
            
            614
            
            
            865Other
                accrued expenses
            
            
            301
            
            
            225Net
                operating loss carryforwards
            
            
            2,348
            
            
            3,084Total
                deferred tax assets
            
            
            5,597
            
            
            6,192Deferred
                tax liabilities:Goodwill
            
            
            -
            
            
            2,002Other
                liabilities
            
            
            362
            
            
            -Total
                deferred tax liabilities
            
            
            362
            
            
            2,002Net
                deferred tax asset before valuation allowance
            
            
            5,235
            
            
            4,190Valuation
                allowance on deferred tax assets
            
            
            4,403
            
            
            4,190Net
                deferred tax asset
            
            $
            832
            
            $
            -





At
      December 31, 2006, the Company had domestic state net operating loss
      carryforwards of approximately $1,075 that expire in 2016 through 2020 and
      foreign net operating loss carryforwards of $7,540 that do not expire. The
      Company had no Federal net operating loss carryforwards at December 31, 2006.
      The Company established a valuation allowance to reserve for certain of its
      deferred tax assets at December 31, 2005, based on its projections at that
      time
      leading the Company to believe 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 fully realized. The gain
      on sale of U. S. Newswire, however, will enable the Company to realize certain
      deferred tax assets in future periods. Accordingly, the Company recognized
      net
      deferred tax assets totaling $832 at December 31, 2006. The increase in the
      valuation allowance of $213 for the year ended December 31, 2006, was recognized
      as additional tax provision for the period.




**14.
      Stock Options**





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. At December 31, 2006, 355,572 shares remained available
      for the issuance of stock options and 788,190 stock options were
      outstanding.




F-16






**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


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. At
      December 31, 2006, 22,000 shares remained available for the issuance of stock
      options and 224,600 stock options were outstanding.





On
      January 1, 2006, the Company adopted the provisions SFAS No. 123R. 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 2006, the Company granted 426,140 stock options under the Employee
      Plan, of which 396,140 stock options granted to employees vest ratably over
      a
      four-year period, 20,000 stock options granted to an employee vested 20% on
      the
      grant date and ratably over a four-year period thereafter, and 10,000 stock
      options granted to a non-employee director of Teletrax vest ratably over a
      three-year period. Also during 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.





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 year ended December 31, 2006:





**Employee
                Plan**
            
            **Directors’
                Plan**Expected
                term
            
            
            4.19
            
            
            4.23Expected
                volatility
            
            
            .6308
            
            
            .7052Expected
                dividends
            
            
            0
            %
            
            0
            %Risk-free
                interest rate
            
            
            4.67
            %
            
            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.





Through
      December 31, 2005, the Company accounted for the issuance of stock options
      to
      employees and non-employee directors in accordance with the provisions of APB
      No. 25, which requires compensation cost to be measured at the grant date based
      on the intrinsic value of the stock options granted. The intrinsic value of
      a
      stock option is equal to the difference between the market price of the common
      stock on the grant date and the exercise price of the option. SFAS No. 123
      provided for an alternative measurement of compensation cost based on the fair
      value of the stock options granted to employees and non-employee directors.
      The
      fair value of a stock option is based on the intrinsic value as well as the
      time
      value of the option. The fair value of stock options granted was estimated
      on
      the grant date using the Black-Scholes option-pricing model.




F-17


**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**




The
      following weighted-average assumptions were used in estimating the fair value
      of
      stock options granted under the Employee Plan and the Director’s Plan for the
      year ended December 31, 2005:





**Employee
                Plan**
            
            **Directors’
                Plan**Expected
                term
            
            
            9.00
            
            
            10.00Expected
                volatility
            
            
            .7581
            
            
            .7641Expected
                dividends
            
            
            0
            %
            
            0
            %Risk-free
                interest rate
            
            
            4.28
            %
            
            4.15
            %





The
      following weighted-average assumptions were used in estimating the fair value
      of
      stock options granted under the Employee Plan and the Director’s Plan for the
      year ended December 31, 2004:





**Employee
                Plan**
            
            **Directors’
                Plan**Expected
                term
            
            
            9.00
            
            
            10.00Expected
                volatility
            
            
            .8579
            
            
            .8674Expected
                dividends
            
            
            0
            %
            
            0
            %Risk-free
                interest rate
            
            
            4.27
            %
            
            4.52
            %





For
      the
      year ended December 31, 2006, the Company recognized $300 of compensation
      expense related to stock options, of which $186 related to stock options granted
      to both employees and non-employee directors during 2006 and $114 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 recognized a tax benefit of $3 related to the stock-based compensation
      expense incurred.





There
      was
      no compensation cost recognized by the Company upon the grant of stock options
      under the Employee Plan or the Directors’ Plan for the years ended December 31,
      2005 and 2004. During 2005, the Company recognized compensation expense totaling
      approximately $21 in connection with the accelerated vesting of certain stock
      options granted under the Employee Plan to employees whose employment was
      terminated during the year. Such compensation expense was based on the intrinsic
      value of the stock options on the date on which vesting
      accelerated.




F-18




**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


Information
      relating to activity in the Employee Plan is summarized in the following table.
      All stock option grants included in the following table had exercise prices
      equal to 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, 2004
            
            
            1,038,511
            
            $
            5.47Options
                granted
            
            
            196,970
            
            $
            2.70
            
            $
            2.26Options
                exercised
            
            
            (15,257
            )
            $
            2.90
            
            
            
            
            $
            11Options
                forfeited
            
            
            (135,635
            )
            $
            6.28Options
                outstanding at December 31, 2004
            
            
            1,084,589
            
            $
            4.90Options
                granted
            
            
            30,000
            
            $
            2.91
            
            $
            2.30Options
                exercised
            
            
            (88,773
            )
            $
            2.79
            
            
            
            
            $
            81Options
                forfeited
            
            
            (152,497
            )
            $
            6.32Options
                outstanding at December 31, 2005
            
            
            873,319
            
            $
            4.80Options
                granted
            
            
            426,140
            
            $
            4.63
            
            $
            2.45Options
                exercised
            
            
            (134,626
            )
            $
            2.88
            
            
            
            
            $
            218Options
                forfeited and expired
            
            
            (376,643
            )
            $
            5.11Options
                outstanding at December 31, 2006
            
            
            788,190
            
            $
            4.89
            
            
            
            
            $
            853
            
            
            7.49Options
                exercisable at December 31, 2006
            
            
            311,210
            
            $
            5.59
            
            
            
            
            $
            474
            
            
            4.37





Information
      relating to options outstanding under the Employee Plan at December 31, 2006,
      is
      summarized as follows:





**Outstanding**
            
            **Exercisable****Range
                of Exercise Prices**
            
            **Options**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Life**
            
            **Options**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**$2.61
                - $3.30
            
            
            274,845
            
            $
            2.87
            
            
            6.45
            
            
            203,285
            
            $
            2.89$4.00
                - $4.99
            
            
            405,420
            
            $
            4.71
            
            
            9.72
            
            
            -
            
            
            n/a$5.38
                - $6.38
            
            
            36,725
            
            $
            5.92
            
            
            1.42
            
            
            36,725
            
            $
            5.92$11.13
                - $11.25
            
            
            41,150
            
            $
            11.24
            
            
            2.03
            
            
            41,150
            
            $
            11.24$15.00
                - $16.13
            
            
            30,050
            
            $
            15.75
            
            
            1.69
            
            
            30,050
            
            $
            15.75




F-19


**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


Information
      relating to activity in the Directors’ Plan is summarized in the following
      table. All option grants included in the following table had exercise prices
      equal to 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, 2004
            
            
            191,600
            
            $
            6.52Options
                granted
            
            
            31,000
            
            $
            3.38
            
            $
            2.92Options
                outstanding at December 31, 2004
            
            
            222,600
            
            $
            6.08Options
                granted
            
            
            24,000
            
            $
            3.48
            
            $
            2.87Options
                exercised
            
            
            (9,000
            )
            $
            3.43
            
            
            
            
            $
            6Options
                forfeited
            
            
            (44,000
            )
            $
            7.52Options
                outstanding at December 31, 2005
            
            
            193,600
            
            $
            5.55Options
                granted
            
            
            68,600
            
            $
            3.90
            
            $
            2.25Options
                forfeited and expired
            
            
            (37,600
            )
            $
            3.54Options
                outstanding at December 31, 2006
            
            
            224,600
            
            $
            5.39
            
            
            
            
            $
            287
            
            
            6.20Options
                exercisable at December 31, 2006
            
            
            170,267
            
            $
            5.98
            
            
            
            
            $
            196
            
            
            5.48





Information
      relating to options outstanding under the Directors’ Plan at December 31, 2006,
      is summarized as follows:





**Outstanding**
            
            **Exercisable****Range
                of Exercise Prices**
            
            **Options**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Life**
            
            **Options**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**$2.61
                - $3.59
            
            
            117,000
            
            $
            3.31
            
            
            7.11
            
            
            72,667
            
            $
            3.22$3.86
                - $4.38
            
            
            59,600
            
            $
            4.15
            
            
            8.14
            
            
            49,600
            
            $
            4.20$8.06
                - $10.13
            
            
            24,000
            
            $
            9.09
            
            
            1.54
            
            
            24,000
            
            $
            9.09$13.25
                - $16.50
            
            
            24,000
            
            $
            14.88
            
            
            1.58
            
            
            24,000
            
            $
            14.88





Compensation
      expense related to non-vested stock options under both the Employee Plan and
      the
      Directors’ Plan that was not recognized as of December 31, 2006, totaled $926
      and is expected to be recognized over a weighted average period of 3.3 years.
      During the years ended December 31, 2006, 2005, and 2004, the Company received
      $387, $280, and $44, 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.




**15.
      Earnings 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 years ended December 31, 2006, 2005,
      and 2004. 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 years ended
      December 31, 2006, 2005, and 2004, excluded 148,147, 99,279, and 99,715,
      respectively, of incremental shares related to stock options and warrants.
      All
      periods presented excluded 1,234,567 of incremental shares related to
      convertible debentures. Such incremental shares were excluded from the
      calculation of diluted earnings (loss) per share due to their antidilutive
      effect on income from continuing operations.




F-20





**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


**16.
      Retirement Plan**





The
      Company has a defined contribution plan in which eligible employees who have
      attained 21 years of age may contribute on both a pretax and after-tax basis
      up
      to a maximum of 15% of their annual salary, subject to annual limits established
      by the Internal Revenue Service. The Company can make discretionary
      contributions. Employees are fully vested at all times in contributions they
      make to the plan, and employees who have completed at least one year of service
      and are employed with the Company on the last business day of the year fully
      vest in Company contributions. The Company made no discretionary contributions
      to its defined contribution plan for the years ended December 31, 2006, 2005,
      and 2004, respectively.





**17.
      Commitments and Contingencies**





The
      Company is contingently liable for transactions arising in the ordinary course
      of business and from time to time may become involved in various legal
      proceedings in which damages and other remedies are sought. In the opinion
      of
      Company management, after review with legal counsel, the ultimate resolution
      of
      these matters will not have a material effect on the Company’s consolidated
      financial statements.





**18.
      Guarantees**





In
      connection with the sale of U.S. Newswire in 2006, the Company agreed to
      indemnify the purchaser for breaches of certain standard representations and
      warranties. In the event any such indemnification obligation were to be
      triggered, the Company may be liable when the damages incurred by the purchaser
      exceed $150. For certain such indemnification obligations, the Company would
      be
      liable for the amount of the damages incurred in excess of $150, with such
      damages limited to $5,000 in total. For certain other indemnification
      obligations, the Company would be liable for the full amount of the damages,
      including the first $150, with such damages limited to $5,000 in total. For
      still other indemnification obligations, there is no limit to the damages for
      which the Company would be ultimately liable. No amount has been recognized
      in
      connection with such potential obligations.





In
      connection with the sale of Delahaye, the Company agreed to indemnify the
      purchaser for breaches of certain standard representations and warranties.
      In
      the event any such indemnification obligation were to be triggered, the Company
      may be liable when the damages incurred by the purchaser exceed $100. The
      Company would be liable for the full amount of the damages incurred, including
      the first $100, with such damages limited to $2,000 in total. No amount has
      been
      recognized in connection with such potential liability.





The
      Company has entered into subleases with third parties relating to properties
      no
      longer occupied by the Company. Under an assignment of one of these subleases,
      the third party remits payment directly to the landlord, although the Company
      remains the primary obligor for the lease payments. If the third party ceased
      to
      remit payment directly to the landlord, the Company would be liable for such
      payments. The maximum potential amount for which the Company can be held liable
      is approximately $210. No amount has been recognized in connection with such
      potential liability.





**19.
      Concentration of Credit Risk**





Financial
      instruments that potentially subject the Company to concentrations of credit
      risk consist principally of cash equivalents and trade receivables. The Company
      maintains cash balances and cash equivalents with high credit quality financial
      institutions.




F-21




**MEDIALINK
      WORLDWIDE INCORPORATED**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**




The
      Company provides credit to clients on an uncollateralized basis after evaluating
      client creditworthiness. The Company’s clients are not concentrated in any
      specific geographic region, but are concentrated in the automotive, insurance,
      pharmaceutical, consumer products, and public relations agency businesses.
      The
      Company’s five largest clients provided approximately 17%, 12%, and 17% of
      revenues for the years ended December 31, 2006, 2005, and 2004, respectively.
      In
      addition, amounts due from these clients represented 22% and 14% of trade
      accounts receivable at December 31, 2006 and 2005, respectively. The Company
      does not believe that a significant reduction in business from any of its
      clients would have a material adverse effect on its results of operations or
      financial condition since no single client or group of clients is responsible
      for a significant portion of the Company’s revenues or represents a significant
      portion of the Company’s trade receivables.





**20.
      Supplemental Disclosure of Cash Flow Information**





Payments
      of interest and income taxes were as follows:




**2006**
            
            
            **2005**
            
            
            **2004**Interest
                paid
            
            $
            501
            
            $
            428
            
            $
            382Income
                taxes paid (refunded) - net
            
            $
            (221
            )
            $
            418
            
            $
            90





There
      were no non-cash investing and financing activities for the years ended December
      31, 2006 and 2005. Non-cash investing and financing activities for the year
      ended December 31, 2004, were as follows:


**2004**Common
                  stock received as repayment of loan
              
              $
              143Receivable
                  due from purchaser of a business
              
              $
              605




**21.
      Fair Value of Financial Instruments**





The
      estimated fair values of financial instruments have been determined by the
      Company using available market information and appropriate valuation
      methodologies. However, considerable judgment is required in interpreting market
      data to develop estimates of fair value. Accordingly, the estimates presented
      herein are not necessarily indicative of the amounts the Company would realize
      in a current market exchange.





The
      carrying amounts of cash and cash equivalents, non-trade receivables included
      as
      part of other current assets, and obligations under capital leases at December
      31, 2006 and 2005, are a reasonable approximation of their fair values due
      to
      the short-term nature of these instruments. The carrying amounts of the
      convertible debentures at December 31, 2006 and 2005, are a reasonable
      approximation of their fair values since the interest rates were above the
      fixed-rate minimum, resulting in the convertible debentures being variable-rate
      obligations. Non-trade receivables included as part of other non-current assets
      with carrying amounts of $11 and $20 at December 31, 2006 and 2005,
      respectively, had fair values of $10 and $18, respectively. The fair values
      of
      these instruments were estimated by discounting the future streams of payments
      at the interest rate on the convertible debentures, which is used as a surrogate
      for the Company’s incremental borrowing rate.





**22.
      Segment Information**





The
      Company has determined that its two reportable segments are media communications
      services and digital video tracking services. The media communications services
      segment provides broadcast services, including consultation, production,
      distribution, and monitoring services, to corporate entities and other
      organizations. Through the Company’s Teletrax subsidiaries, the digital video
      tracking services segment provides broadcast intelligence to video content
      providers such as entertainment companies, news organizations, television
      syndicators, direct-response marketing companies, and a sports
      organization.




F-22




**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


The
      Company identifies its reportable segments based on the services provided by
      its
      various operations. The media communications services segment is an aggregation
      of such services provided by the Company’s media communications operations in
      the United States and the United Kingdom.





The
      company previously operated a press release wire service division that was
      an
      operating segment within the media communications services reportable segment.
      This operating segment was sold in September 2006 and is reported as a
      discontinued operation (see Note 3).





The
      Company measures profit or loss of its segments based on operating income.
      Operating income for segments excludes impairments and losses from a joint
      venture. The accounting policies used to measure operating income of the
      segments are the same as those outlined in Note 2 to the consolidated financial
      statements.





Segment
      information relating to results of continuing operations was as
      follows:


**2006**
              
              
              **2005**
              
              
              **2004***Revenues:*Media
                  communications services
              
              $
              28,998
              
              $
              29,332
              
              $
              30,560Digital
                  video tracking services
              
              
              2,721
              
              
              2,004
              
              
              1,624Total
              
              $
              31,719
              
              $
              31,336
              
              $
              32,184*Operating
                  income (loss):*Media
                  communications services
              
              $
              514
              
              $
              985
              
              $
              2,328Digital
                  video tracking services
              
              
              (3,408
              )
              
              (2,651
              )
              
              (2,033
              )Total
              
              
              (2,894
              )
              
              (1,666
              )
              
              295Other
                  business activities
              
              
              (5,845
              )
              
              (5,857
              )
              
              (3,497
              )Impairment
                  of investments
              
              
              -
              
              
              -
              
              
              (715
              )Loss
                  from joint venture
              
              
              -
              
              
              -
              
              
              (247
              )Interest
                  expense - net
              
              
              (389
              )
              
              (491
              )
              
              (393
              )Loss
                  from continuing operations before taxes
              
              $
              (9,128
              )
              $
              (8,014
              )
              $
              (4,557
              )*Depreciation
                  and amortization expense*Media
                  communications services
              
              $
              1,151
              
              $
              976
              
              $
              1,073Digital
                  video tracking services
              
              
              821
              
              
              614
              
              
              547Other
                  business activities
              
              
              -
              
              
              38
              
              
              137Total
              
              $
              1,972
              
              $
              1,628
              
              $
              1,757




F-23




**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


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


**2006**
              
              **2005***Total
                  assets:*Media
                  communications services
              
              $
              11,684
              
              $
              11,412Digital
                  video tracking services
              
              
              3,279
              
              
              2,173Other
                  business activities
              
              
              20,191
              
              
              9,113Discontinued
                  operations
              
              
              -
              
              
              10,228Total
              
              $
              35,154
              
              $
              32,926*Expenditures
                  on long-lived assets:*Media
                  communications services
              
              $
              366
              
              $
              1,239Digital
                  video tracking services
              
              
              1,447
              
              
              422Other
                  business activities
              
              
              2
              
              
              172Discontinued
                  operations
              
              
              18
              
              
              29Total
              
              $
              1,833
              
              $
              1,862




The
      Company’s research segment generated revenues in foreign countries of $1,987 for
      the year ended December 31, 2004. Segment information for continuing operations
      relating to geographic regions for 2006, 2005 and 2004 was as
      follows:




**2006**
            
            **2005**
            
            **2004***Revenues:*United
                States
            
            $
            24,488
            
            $
            24,814
            
            $
            26,187United
                Kingdom
            
            
            7,231
            
            
            6,522
            
            
            5,997Total
            
            $
            31,719
            
            $
            31,336
            
            $
            32,184*Long-lived
                assets:*United
                States
            
            $
            3,837
            
            $
            3,728United
                Kingdom
            
            
            459
            
            
            614Total
            
            $
            4,296
            
            $
            4,342




**23.
      Comprehensive Income**





Comprehensive
      income includes all changes to equity that are not the result of transactions
      with shareholders and is comprised of net income and other comprehensive income.
      For the years ended December 31, 2006, 2005, and 2004, other comprehensive
      income (loss) of $99, $(197), and $152, respectively, consisted entirely of
      foreign currency translation adjustments on which no tax effect is reported
      since they relate to indefinite investments in foreign subsidiaries. At December
      31, 2006 and 2005, accumulated other comprehensive loss in the consolidated
      balance sheet of $294 and $393, respectively, consisted entirely of foreign
      currency translation adjustments.





F-24




**MEDIALINK
        WORLDWIDE INCORPORATED**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


**24.
      Selected Quarterly Financial Data (Unaudited)**




**2006
                Quarter Ended****March
                31**
            
            **June
                30**
            
            **September
                30**
            
            **December
                31**Revenues
            
            $
            7,599
            
            $
            7,593
            
            $
            7,212
            
            $
            9,315Loss
                from continuing operations
            
            $
            (2,022
            )
            $
            (1,988
            )
            $
            (956
            )
            $
            (1,355
            )Net
                income (loss)
            
            $
            (1,688
            )
            $
            (1,552
            )
            $
            3,627
            
            $
            (1,333
            )Loss
                per share from continuingoperations
                - basic and diluted
            
            $
            (0.33
            )
            $
            (0.33
            )
            $
            (0.16
            )
            $
            (0.22
            )




**2005
                Quarter Ended****March
                31**
            
            **June
                30**
            
            **September
                30**
            
            **December
                31**Revenues
            
            $
            7,368
            
            $
            7,854
            
            $
            7,416
            
            $
            8,698Loss
                from continuing operations
            
            $
            (1,399
            )
            $
            (1,237
            )
            $
            (1,628
            )
            $
            (2,608
            )Net
                loss
            
            $
            (1,129
            )
            $
            (923
            )
            $
            (1,173
            )
            $
            (2,321
            )Loss
                per share from continuingoperations
                - basic and diluted
            
            $
            (0.23
            )
            $
            (0.20
            )
            $
            (0.27
            )
            $
            (0.43
            )





F-25




**EXHIBIT
      INDEX**





Exhibit
                No.
            
            Description2.1
            
            Asset
                Purchase Agreement dated as of September 29, 2006, between Medialink
                Worldwide Incorporated and PR Newswire Association, LLC (Incorporated
                by
                reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K
                filed on October 5, 2006).3.1
            
            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. 10.3 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) Employee Savings Plan (Incorporated
                by
                reference to Exhibit No. 10.7 of the Registrant’s Quarterly Report on Form
                10-Q for the quarterly period ended September 30,
                2006).10.8
            
            Medialink
                Worldwide Incorporated Amended and Restated Stock Option
                Plan.10.9
            
            Medialink
                Worldwide Incorporated Amended and Restated 1996 Directors Stock
                Option
                Plan (Incorporated by reference to Exhibit No. 10.9 of the Registrant’s
                Quarterly Report on Form 10-Q for the quarterly period ended March
                31,
                2006).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).21
            
            Subsidiaries
                of the Registrant.23
            
            Consent
                of KPMG LLP.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.




G-1





**MEDIALINK
                WORLDWIDE INCORPORATED****SCHEDULE
                II - VALUATION AND QUALIFYING ACCOUNTS****For
                the years ended December 31, 2006, 2005, and
                2004****(In
                thousands of dollars)**


**Additions****Description**
            
            **Balance
                at beginning of period**
            
            **Charged
                to costs and expenses**
            
            **Charged
                to**
              **other
                accounts**
            
            **Deductions
                (1)**
            
            **Balance
                at end of period**Allowances
                deducted in the balance sheet fromassets
                to which they apply:**For
                the year ended December 31, 2006:**Allowance
                for doubtful accounts
            
            $
            442
            
            $
            252
            
            $
            -
            
            $
            347
            
            $
            347Valuation
                allowance on deferred tax assets
            
            $
            4,190
            
            $
            213
            
            $
            -
            
            $
            -
            
            $
            4,403**For
                the year ended December 31, 2005:**Allowance
                for doubtful accounts
            
            $
            406
            
            $
            76
            
            $
            -
            
            $
            40
            
            $
            442Valuation
                allowance on deferred tax assets
            
            $
            2,803
            
            $
            1,387
            
            $
            -
            
            $
            -
            
            $
            4,190**For
                the year ended December 31, 2004:**Allowance
                for doubtful accounts
            
            $
            316
            
            $
            137
            
            $
            -
            
            $
            47
            
            $
            406Valuation
                allowance on deferred tax assets
            
            $
            964
            
            $
            1,839
            
            $
            -
            
            $
            -
            
            $
            2,803







(1)
              Represents
                  amounts written off.




S-1