UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


FORM
10-K





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


EXCHANGE
ACT OF 1934





For the
fiscal year ended December 31, 2004





Commission
File Number 0-21989





Medialink
Worldwide Incorporated


(Exact
name of registrant as specified in its charter)





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





708
Third Avenue, New York, New York 10017


(Address
of principal executive offices) (Zip Code)





(212)
682-8300


(Registrant's
telephone number, including area code)





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





Title
      of each class
    Name
      of each exchange on which registeredCommon
      Stock-$.01 par value
    National
      Market System of NASDAQ





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 an accelerated filer (as defined in Rule
12b-2 of the Act). Yes o No x





The
aggregate market value of the voting stock held by non-affiliates of the
registrant amounted to $18,371,723, computed by reference to the price at which
the voting common stock was last sold as of the last business day of the
registrant’s most recently completed second quarter.





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the close of business on March 26, 2005: Common Stock -
6,022,702.








DOCUMENTS
INCORPORATED BY REFERENCE





Portions
of the Registrant’s Definitive Proxy Statement for the 2005 Annual Meeting of
Stockholders, to be held on June 9, 2005, to be filed pursuant to Regulation 14A
within 120 days after the Registrant’s fiscal year ended December 31, 2004 are
incorporated by reference in Part II, Item 5 and Part III of this
report.











MEDIALINK
WORLDWIDE INCORPORATED





FORM
10-K





YEAR
ENDED DECEMBER 31, 2004





TABLE OF
CONTENTS


PagePART
      IItem
      1.
    Business
    2Item
      2.
    Properties
    9Item
      3.
    Legal
      Proceedings
    9Item
      4.
    Submission
      of Matters to a Vote of Security Holders
    9PART
      IIItem
      5.
    Market
      for the Registrant's Common Equity, Related Stockholder
      Matters and Issuer Purchases of Equity Securities
    10Item
      6.
    Selected
      Financial Data
    11Item
      7.
    Management's
      Discussion and Analysis of Financial Condition
      and Results of Operations
    12Item
      7A.
    Quantitative
      and Qualitative Disclosures About Market Risk
    23Item
      8.
    Financial
      Statements and Supplementary Data
    24Item
      9.
    Changes
      in and Disagreements With Accountants On
      Accounting and Financial Disclosure
    25Item
      9A.
    Controls
      and Procedures
    25Item
      9B.
    Other
      Information
    25PART
      IIIItem
      10.
    Directors
      and Executive Officers of the Registrant
    25Item
      11.
    Executive
      Compensation
    25Item
      12.
    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
    25Item
      13.
    Certain
      Relationships and Related Transactions
    26Item
      14.
    Principal
      Accounting Fees and Services
    26PART
      IVItem
      15.
    Exhibits
      and Financial Statement Schedules
    26SIGNATURES
    Chief
      Executive Officer, President and Chief FinancialOfficer
    29Directors
    29Report
      of Independent Registered Public Accounting
      Firm
    F-1Financial
      Statements
    F-2







1





**FORWARD
LOOKING STATEMENTS**





With the
exception of the historical information contained in this Form 10-K, the matters
described herein contain certain “forward-looking statements” that are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements in this Form 10-K are not
promises or guarantees and are subject to risks and uncertainties that could
cause our actual results to differ materially from those anticipated. These
statements are based on management’s current expectations and are naturally
subject to uncertainty and changes in circumstances. We caution you not to place
undue reliance upon any such forward-looking statements, which speak only as of
the date made. Actual results may vary materially from those expressed or
implied by the statements herein. Such statements may relate, among other
things, to our ability to respond to economic changes and improve operational
efficiency, the benefits of our products to be realized by our customers, or our
plans, objectives, and expected financial and operating results. Forward-looking
statements may also include, without limitation, any statement relating to
future events, conditions or circumstances or using words such as: will,
believe, anticipate, expect, could, may, estimate, project, plan, predict,
intend or similar expressions that involve risk or uncertainty. These risks and
uncertainties include, among other things, our recent history of losses; our
ability to achieve or maintain profitability; worldwide economic weakness;
geopolitical conditions and continued threats of terrorism; effectiveness of our
cost reduction programs; the receptiveness of the media to our services; changes
in our marketplace which could limit or reduce the perceived value of our
services to our clients; our ability to develop new services and market
acceptance of such services, such as TeletraxTM; the volume and importance of
breaking news which can have the effect of crowding out the content we produce
and deliver to broadcast outlets on behalf of our clients; our ability to
develop new products and services that keep pace with technology; our ability to
develop and maintain successful relationships with critical vendors; the
potential negative effects of our international operations on the Company;
future acquisitions or divestitures may adversely affect our operations and
financial results; the absence of long term contracts with customers and
vendors; and increased competition may have an adverse effect on pricing,
revenues, gross margins and our customer base. More detailed information about
these risk factors is set forth in filings by Medialink Worldwide Incorporated
with the Securities and Exchange Commission, including the Company's
registration statement, most recent quarterly report on Form 10-Q, and other
publicly available information regarding the Company. Medialink Worldwide
Incorporated is under no obligation to (and expressly disclaims any such
obligation to) update or alter its forward-looking statements whether as a
result of new information, future events or otherwise.





**ITEM
1. BUSINESS.**





**GENERAL**





Medialink
Worldwide Incorporated (“Medialink”) is a leading global provider of creative
and distribution services to corporations and other organizations seeking to
communicate with the public through broadcast, print and Internet media.
Medialink is based in New York, with offices in the United States and an
international hub in London. The Company uniquely blends its creative and
production expertise with established news media credibility, proprietary
databases, an electronic distribution infrastructure and its unique TeletraxTM
service, the first truly global electronic video tracking solution, to provide
its clients with the ability to create, distribute and measure their
communications. Medialink is a publicly traded company (Nasdaq:
MDLK).





2





In the
fourth quarter of 2004 Medialink secured a $5 million convertible debentures
financing and sold its Media Research Services division (“Delahaye”) for
approximately $8 million, recording a pre-tax gain of approximately $5 million.
These transactions will enable Medialink to focus on its primary mission: to
offer the counsel, skills and infrastructure to reach television viewers, radio
listeners, newspaper readers and Internet users via editorial coverage and
marketing-oriented media placements on behalf its clients. The sale also
provided capital to further accelerate the growth of TeletraxTM, the centerpiece
of the Company’s monitoring services that track the impact of client
communications across all major media.





The
Company’s core services help corporations and organizations inform and educate
target audiences with maximum impact on television, radio, print, and the
Internet. Medialink’s clients, ranging from General Motors to General Mills,
Siemens to Symbol Technologies, rely on Medialink to generate, monitor and
report on media exposure for their new products, innovations, mergers,
acquisitions and other corporate initiatives.





For
example, when the European Space Agency (ESA) wanted to raise public awareness
of its Mars Express space mission prior to the projected Christmas Day arrival
on the planet, Medialink created and distributed a video news “package” that
captured worldwide attention in dozens of countries throughout Europe, China,
the Middle East and the United States.





In
addition, Medialink assisted DaimlerChrysler with its litigation communications
strategy by scheduling and producing broadcast interviews featuring its senior
legal expert speaking out on national and local television and radio newscasts
in support of tort reform in the United States. To help extend DaimlerChrysler’s
message against lawsuit abuse, Medialink also produced and distributed taped
video to TV stations that explained a particular case involving an alleged bogus
lawsuit against the automotive manufacturer.





In
another example, Morgan Stanley employed Medialink’s radio production and
distribution service as a means to educate listeners regarding personal finance
issues on a weekly basis. Organizations and government agencies, such as the
National Association of Realtors and the U.S. Department of Energy, commonly
rely on Medialink’s U.S. Newswire division to provide electronic distribution of
press releases and related materials to the news media.





By
leveraging relationships with news organizations, Medialink rapidly alerts and
disseminates clients’ news to every major newsroom in the United States.
Similarly, international distribution relationships enable Medialink to reach
virtually any audience, in any country, through any news medium. Each
year, Medialink generates tens of thousands of broadcast news airings worldwide
reaching billions of viewers, listeners and readers on media as diverse as CNN,
The New York Times, ABC, Sky News, The Washington Post, BBC, Bloomberg Radio,
AOL, Yahoo! and China Central Television, the national television station of the
People’s Republic of China.





Medialink
has also broadened its media offering for clients by establishing key marketing
relationships with leading U.S. cable television programmers. These programming
outlets provide wider exposure and precisely targeted placements for
informational video segments, which reach additional viewers in the clients’
desired demographic segments.





The
Company’s success is apparent in its rich and diverse client base, which
includes Anheuser-Busch, The American Association for Retired Persons, Bayer,
DIAGEO, Disney, European Space Agency, Ford, GE Financial, General Motors,
International Olympic Committee, Intel, Jaguar, Microsoft, Miramax, McDonald’s,
Morgan Stanley, National Association of Realtors, Neiman Marcus, Omega, Royal
Philips Electronics, Siemens and Visa International. Clients also include
virtually every major PR firm in the United States and the United
Kingdom.





3





TeletraxTM, Medialink’s subsidiary that offers the broadcast industry’s first
global digital video watermarking and tracking solution, presents potential new
revenue sources outside of the Company’s core broadcast services. Video content
providers such as news organizations, television syndicators, motion picture
studios, TV sports programmers and major TV advertisers are interested in
TeletraxTM’s powerful applications for media asset management, verification of
airings for network and syndicated programming, advertising
proof-of-performance, sponsorship evaluation, and intellectual property rights
management.





During
the year, clients ranging from ABC Television Network and Buena Vista
Entertainment to the BBC in the United Kingdom, entered into multi-year
contracts to utilize this unique content asset management tool to track and
monitor the usage of their video content. In 2004, TeletraxTM reached additional
agreements with Tribune Entertainment, NBC Universal Domestic Television, Media
Review International and Internet Broadcasting Systems, adding to clients
including Reuters Television and NBC News Channel. Medialink also uses the
TeletraxTM system to track and monitor the worldwide usage of its client video
distributed by the Company.





In 2004,
the Company further expanded TeletraxTM’s monitoring network into more than 100
of the top-ranking U.S. television markets and Latin America, bringing its
worldwide capacity to more than 700 television stations in the United States and
an international network that monitors more than 200 channels being broadcast
from nearly 50 nations in Europe, Asia, Australia, the Middle East and Latin
America.




**STRATEGY**





From its
inception, the Company has been at the vanguard as public relations has evolved
from being print-focused to embracing video, audio and the Internet. Medialink’s
strategy is to enable its clients to effectively and efficiently communicate
news to audiences through all mediums. The Company achieves this by: (i)
creating and producing compelling content; (ii) distributing content through the
Company’s unmatched infrastructure;
and (iii) monitoring distribution effectiveness.




The
Company believes it is the market share leader in each of its primary service
offerings. In 2004, Medialink sold its research unit, Delahaye, in order to
provide more resources to and increase management focus on its faster growing
media communications and video watermarking businesses. Medialink has identified
several avenues that should further support the Company’s growth, including: (i)
leveraging client relationships **** through
cross-marketing; (ii) developing new products and services; and (iii) broadening
the sales force and client base.


****


**OPERATIONAL
OVERVIEW**




Medialink
offers its comprehensive range of services through the following divisions:




**Media
Communications Services**




**Broadcast
Services**  **Group
(“BSG”)—** Through
BSG, the Company provides its content creation, production, distribution and
electronic broadcast monitoring services. BSG’s principal products and services
include video news releases and short-form promotional videos, live event
broadcasts (including satellite media tours, videoconferences and webcasting),
audio news releases and radio media tours, in formats that are suitable for all
broadcast news media, as well as other types of programming. BSG distributes its
clients’ news stories directly to targeted television and radio, through its
comprehensive distribution platform, and on-line media outlets worldwide,
through Newstream.com. BSG also monitors and statistically analyzes the extent
to which content is aired, thereby providing valuable feedback to the client.
BSG utilizes a variety of methods to track and monitor video usage, including
its exclusive offering of TeletraxTM, providing it with the only truly global
electronic video tracking solution.




4


****


**U.S.
Newswire (“USN”)—** USN is a
leading press release wire service for domestic governmental, public affairs and
non-profit organization news sources. Its clients rely on it to provide
immediate and simultaneous electronic distribution of their news releases, media
advisories and press statements to the media and on-line services worldwide. The
division distributes news releases via a direct wire service feed, as well as
through e-mail, satellite, the Internet and broadcast fax. USN also provides
still photography services.




**Video
Watermarking Services**




**TeletraxTM
—** TeletraxTM
is the broadcast
industry’s first
global electronic video watermarking and tracking solution. Using TeletraxTM,
owners of video content - the motion picture industry, news organizations,
advertising agencies, and program syndicators to name a few - “embed” an
imperceptible and indelible digital watermark into their material whenever it is
edited, broadcast or duplicated. A global network of decoders, or “detectors,”
then captures every broadcast incident of the embedded video whether via
satellite, cable or terrestrially. The TeletraxTM service then generates tracking
reports for the original content owners. The system provides proof of
performance reports and alerts copyright owners in near-real time to violations.
As a key asset management tool for content owners seeking to protect and
leverage their video property, TeletraxTM will help drive the financial
performance of its clients, enabling them to efficiently and effectively
leverage their video content. TeletraxTM is built upon Medialink’s extensive
monitoring network and technology developed by Royal Philips Electronics.




A summary
of the Company’s operations by major geographic location are as follows for the
years ended December 31,





2004
    
    2003
    
    2002US
    
    UK
    
    US
    
    UK
    
    US
    
    UKRevenues:External
      clients
    
    $
    31,009,733
    
    $
    5,853,015
    
    $
    30,924,642
    
    $
    4,458,800
    
    $
    31,139,309
    
    $
    6,963,981Inter-segment
    
    
    336,000
    
    
    144,000
    
    
    192,000
    
    
    249,000
    
    
    365,000
    
    
    212,000Total
      revenues oncontinuing operations
    
    $
    31,345,733
    
    $
    5,997,015
    
    $
    31,116,642
    
    $
    4,707,800
    
    $
    31,504,309
    
    $
    7,175,981Total
      assets ofcontinuing operations
    
    $
    35,352,404
    
    $
    3,420,137
    
    $
    29,311,177
    
    $
    3,601,155
    
    $
    33,819,098
    
    $
    3,441,878


****


**SERVICE
OFFERING**




Medialink
offers clients a unique combination of creative content production, global media
distribution and video watermarking, which enables clients to communicate their
news efficiently and effectively. Through its BSG division, the Company provides
a complete range of customized production and distribution services to
corporations and other organizations to help them build public recognition,
launch new products, manage crisis situations and meet other communications
objectives. Utilizing its electronic monitoring capabilities, BSG also measures distribution
reach and evaluates results. Through USN, the Company provides news release
distribution for governmental, public affairs and non-profit organizations.
Through TeletraxTM, Medialink offers the only truly global video tracking
solution available to the broadcast, advertising and entertainment industries. Medialink’s
ability to offer the comprehensive services that its clients demand makes it the
partner of choice for leading corporations, organizations and PR firms
worldwide.




5





**Production
      and**
      **Live
      Broadcast**
    **Distribution**
    **Internet**
    **Monitoring**·Video & Audio News
      Release
      Production:
      Domestic
      Internationa
    ·Video & Audio News
      Release
      Distribution & Monitoring:
      Domestic
      International
    ·Newstream.com
    ·TeletraxTM:
      Digital
      Asset
      Management
      Tracking
      of TV
      Show
      Promotions
      Proof
      of Advertising
      Performance
      Intellectual
      Property
      RightsManagement·Live Broadcasts:
      Satellite
      Media Tours
      Radio
      Media Tours
      Special
      Event Broadcasts
      Video
      Conferences
      Audio
      Conferences
    ·Press Release Distribution
    ·Webcasting·Electronic Press Kits
    ·Still Photography & Digital
      Distribution
    ·Web Releases·Public Service Announcements
    ·Digital Photo Distribution·Corporate Videos
    ·Cyber Media Tours


****


**CLIENTS**





The
Company provides its services to more than 3,000 clients. The Company’s clients
include corporations such as Anheuser-Busch, AT&T, Bayer, DIAGEO, Disney,
Ford, GE Financial, General Motors, GlaxoSmithKline, Intel, Jaguar, Microsoft,
Miramax, McDonald’s, Morgan Stanley, NBC Universal, Omega, Royal Philips
Electronics, Siemens and Visa International; organizations such as the American
Association of Retired Persons, the European Space Agency, the International
Olympic Committee and National Association of Realtors; and the world's largest
marketing communications firms such as Burson-Marsteller, Hill & Knowlton,
Ketchum Communications, Edelman Public Relations Worldwide and Weber Shandwick
Worldwide.





**DISTRIBUTION
AGREEMENTS**




The
Company has long-standing distribution alliances and powerful relationships with
major news organizations that provide clients unparalleled access to newsroom
decision-makers. Through an agreement with the Associated Press for the use of
its AP Express newswire, Medialink can quickly alert more than 700 television
and 400 radio newsrooms to clients’ impending video and audio news. The
Company’s strong relationships with ABC, CBS and FOX, among others, provide it
access to their network affiliates through their dedicated and highly
cost-effective satellite “news” feeds. Medialink continues to expand its
distribution infrastructure through strategic distribution agreements with
high-profile media companies such as AOL and Yahoo!. The Company also has
developed a delivery mechanism for multi-media content to more than 11,000
on-line, or Internet, newsrooms. Due to the Company’s extensive usage of both
satellite distribution and electronic broadcast monitoring services, the Company
is able to obtain preferential pricing from its key suppliers. Medialink’s
extensive relationships and its reputation as a producer of newsworthy,
broadcast-quality content ensure that clients’ video and audio news productions
capture the attention of newsroom decision-makers and thus their intended
audiences.







6





**BACKGROUND**





The
Company, founded in 1986 with the mission of developing the world’s first
distribution system for video news releases and other video public relations
material to television stations, began offering production - in addition to
distribution - of video news releases in 1994 and has since developed a full
range of video, audio, Internet, still photography and print services which it
now provides on a global basis. Medialink enables its clients to reach more than
11,000 newsrooms at television and radio networks, local stations, cable
channels, direct broadcast satellite systems and online multimedia newsrooms.





The
Company’s expanded service offerings have evolved from its core business - the
satellite distribution of video news releases (“VNR”) and the electronic
monitoring of their broadcasts on television. A VNR is a television news story
that communicates an entity’s public relations or corporate message. It is paid
for by the corporation or organization seeking to announce news and is delivered
without charge to the media. Ultimately, a VNR is the television equivalent of a
printed press release, transforming the printed word into the sound and pictures
television newsrooms can use in programming. Produced in broadcast news style,
VNRs relay the news of a product launch, medical discovery, corporate merger
event, timely feature or breaking news directly to television news
decision-makers who may use the video and audio material in full or edited form.
Most major television stations in the world now use VNRs, some on a regular
basis. The Company offers VNR and Audio News Release (“ANR”) production services
worldwide. Working closely with clients, Medialink’s team of highly experienced
broadcast and network radio professionals instantly translates clients’ messages
into effective video or audio news stories. All aspects of production, including
scripting, editing, narration and sound bites of the news story, are
custom-built and designed to reach specifically targeted audiences.





The
Company also produces and coordinates live broadcast services include Satellite
Media Tours (“SMT”), Radio Media Tours (“RMT”), audio and video news conferences
and special-event broadcasts. SMTs consist of a sequence of one-on-one satellite
interviews with a series of pre-booked television reporters across the country
or around the world. Typical SMT applications include, among others, an
interview with an author, performer, executive or other spokesperson promoting
an upcoming event, product, movie or book release. SMTs 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. Similar to SMTs,
Medialink offers RMTs targeted to radio stations across the country or around
the world.





Widespread
adoption of Internet-based communications continues as companies leverage the
opportunity by creating content-rich Web destinations while controlling costs.
In 1999, Medialink created Newstream.com, an Internet portal that delivers
multimedia assets to more than 11,000 online news and information Web sites that
increasingly need streaming video, audio, presentations, and graphics to be
competitive. During its fifth year of operations, Newstream.com’s overall
membership - including journalists, professional communicators, financial
analysts and members of the general public - stands at more than 75,000.





In late
1999, the Company acquired U.S. Newswire LLC. U.S. Newswire, founded in 1986, is
a leader in providing wire service, Internet and online distribution of
full-text and multimedia news for government and public policy news sources to
news media and online services - locally, nationally and worldwide. Clients
include Cabinet agencies and the majority of political campaigns, advocacy
groups, trade associations, “think tanks”, public affairs firms and other
similar organizations.





7





In 2002,
the Company launched TeletraxTM, providing
Medialink with a unique selling proposition complementary to its core broadcast
service business by offering a content management tool with the distinctive
ability to track video content whenever and wherever it is broadcast. TeletraxTM
is expected to unlock new revenue streams for Medialink outside of its
traditional business. TeletraxTM
fulfills the needs of a variety of industries, including
advertising, sports, music, film and television syndication. The network of
detectors currently monitors more than 800 television stations in nearly 50
countries, including more than 100 top-ranking markets in the United
States.





The
Company has many competitors in different aspects of its businesses, although no
one competitor competes in all of the Company’s businesses. Some of these
competitors or their parent companies may have assets substantially greater than
those of the Company.





**EMPLOYEES**





As of
December 31, 2004, the Company had 164 employees including 68 in client
services, 57 in sales and marketing and 39 in corporate and administration.
Included in corporate and administration were executives totaling 6. None of the
Company’s employees is represented by a labor union. Management believes that
its employee relations are good. The Company also engages on a part-time,
project-by-project basis, independent production crews at various locations
worldwide. These crews have the skills, training and experience that the Company
requires for its production services.





The
Company, a Delaware corporation, was incorporated in 1986. Medialink’s website
is http://www.medialink.com. The Company makes available free of charge, on or
through its Web site, its annual, quarterly and current reports, and any
amendments to those reports, as soon as reasonably practicable after
electronically filing such reports with the Securities and Exchange Commission
(“SEC”). Such reports are also available on the SEC’s website,
http://www.sec.gov.





8





**ITEM
2.**  **PROPERTIES.**





As of
December 31, 2004, the Company’s properties are all leased as
follows:





**Location**
    
    **Gross
      Square Footage**New
      York
    
    
    39,368Boston
    
    
    1,655Chicago
    
    
    1,317Dallas
    
    
    1,417Washington,
      DC
    
    
    7,043San
      Francisco
    
    
    1,401Los
      Angeles
    
    
    4,047Norwalk,
      CT
    
    
    24,690London
    
    
    7,896








**ITEM
3.**  **LEGAL
PROCEEDINGS.**





The
Company is not a party to any material legal proceedings.





**ITEM
4.**  **SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.**





None.








9





**PART
II**





**ITEM
5.**  **MARKET
FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.**





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 per share of the Company’s common stock on the NASDAQ National Market
System for the periods indicated:





Quarter
      Ended
    
    Low
    
    HighQuarter
      ended March 31, 2004
    
    $
    3.20
    
    $
    4.95Quarter
      ended June 30, 2004
    
    
    3.44
    
    
    4.38Quarter
      ended September 30, 2004
    
    
    2.70
    
    
    3.75Quarter
      ended December 31, 2004
    
    
    3.00
    
    
    3.56Quarter
      ended March 31, 2003
    
    $
    2.77
    
    $
    3.52Quarter
      ended June 30, 2003
    
    
    2.60
    
    
    3.55Quarter
      ended September 30, 2003
    
    
    2.85
    
    
    4.44Quarter
      ended December 31, 2003
    
    
    2.82
    
    
    3.48


As of
December 31, 2004, there were approximately 1,331 holders of record of the
Company’s common stock.





The
Company has not paid, and does not anticipate paying for the foreseeable future,
any dividends to holders of its common stock. The declaration of dividends by
the Company in the future is subject to the sole discretion of the Company’s
Board of Directors and will depend upon the operating results, capital
requirements and financial position of the Company, general economic conditions
and other pertinent conditions or restrictions relating to any financing.





*Equity
Compensation Plan Information*


Information
regarding the Company’s equity compensation plans is set forth in the section
entitled “Executive Compensation - Equity Compensation Plan Information” in the
Company’s Definitive Proxy Statement, to be filed within 120 days after
Registrant’s fiscal year end of December 31, 2004, which information is
incorporated herein by reference.





10





**ITEM
6. SELECTED FINANCIAL DATA**


The
following selected consolidated financial data have been derived from the
Company's audited consolidated financial statements. The information below
should be read in conjunction with the consolidated financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Annual Report on Form
10-K.
 
 On
December 31, 2004 Medialink sold substantially all of the assets and liabilities
of its research division, Delahaye. Delahaye’s operations are reported as
discontinued operations for all periods presented in the following selected
financial data, and the operating results of Delahaye through December 31, 2004,
the date of sale, are reflected separately from the results of continuing
operations.










For
      the Years Ended December 31,2004
    
    2003
    
    2002
    
    2001
    
    2000(In
      thousands, except per share data)***Operating
      Data:***Revenues
    
    $
    36,863
    
    $
    35,383
    
    $
    38,103
    
    $
    38,610
    
    $
    46,554Gross
      profit
    
    
    22,180
    
    
    22,765
    
    
    24,582
    
    
    23,841
    
    
    27,916Operating
      expenses (a and b)
    
    
    24,849
    
    
    25,021
    
    
    26,131
    
    
    28,558
    
    
    26,702Operating
      income (loss)
    
    
    (2,669
    )
    
    (2,256
    )
    
    (1,549
    )
    
    (4,717
    )
    
    1,214Income
      (loss) from continuing operations
    
    
    (3,746
    )
    
    (2,338
    )
    
    (1,711
    )
    
    (4,862
    )
    
    1,280Basic
      and diluted net income (loss) per common sharefrom
      continuing operations
    
    $
    (0.62
    )
    $
    (0.39
    )
    $
    (0.29
    )
    $
    (0.50
    )
    $
    0.13***Balance
      Sheet Data:***Working
      capital
    
    $
    11,584
    
    $
    2,768
    
    $
    4,308
    
    $
    6,085
    
    $
    10,644Assets
    
    
    38,773
    
    
    37,186
    
    
    40,643
    
    
    40,813
    
    
    42,028Long-term
      debt, net
    
    
    3,930
    
    
    173
    
    
    217
    
    
    95
    
    
    157Stockholders'
      equity
    
    $
    25,079
    
    $
    24,798
    
    $
    27,204
    
    $
    29,046
    
    $
    32,570
  (a)
      2004 operating expenses include $715 of non-cash charges related to
      impairment of investments and write off of investment in joint venture.
      2003 operating expenses include a restructuring charge related to the
      sublease of excess office space of $592. 2002 operating expenses include
      advisory charges of $1,300. 2001 operating expenses include restructuring,
      loss on sale of subsidiary and advisory charges of $634, $496, and $805,
      respectively.(b)
      As required by Statements of Financial Accounting Standards 142 "Goodwill
      and Other Intangibles", beginning with our 2002 results, goodwill and
      other intangible assets that have indefinite lives are no longer amortized
      due to a change in generally accepted accounting principles. During 2001
      and 2000 the Company recorded amortization expense related to goodwill of
      $875 and $730,
respectively.





11





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


RESULTS
OF OPERATIONS





*Summary
and Outlook*


The year
2004 was a year of repositioning for the Company. The Public Relations industry
and the US economy, as a whole, showed signs of growth and consequently demand
for the Company’s Media Communications Services increased. 2004 was the first
year since 2000 that the Company reported a year over year increase in revenue
from its Media Communications Services. In addition, TeletraxTM service
revenue grew by 119% as compared to 2003, further confirming the acceptability
of its technology and value to the market place.





During
2004 the Company issued $5 million of convertible debentures, paid off its line
of credit and sold Delahaye, its research division, for approximately $8
million, recording a pre-tax gain of $5 million on the sale. These transactions
and 2004 operations resulted in a markedly improved financial position at
December 31, 2004, as the Company ended the year with $11.7 million in cash,
substantially no short-term debt and working capital of $11.58 million, an
improvement of $8.81 million as compared to the prior year. The Company believes
that it is entering 2005 with a more efficient organizational structure and that
it has the resources and ability to execute its strategic plans to deliver
improved shareholder value.





Revenues
from Media Communications services increased $499,000, or 1.4% as compared to
2003. During 2003 the Company substantially completed the first stage of the
roll-out of TeletraxTM’s detection network to nearly 50 countries and over 700
channels. During 2004, the Company broadened its TeletraxTM network and expects
to continue to grow the network to support client demand. Revenues from
TeletraxTM, including equipment sales, increased by $979,000, or 151.8%, to $1.62
million in 2004 as compared to $645,000 in 2003.





Medialink
has financed its operations primarily through cash generated from operations,
reliance on its line of credit facility and the issuance of $5 million
convertible debentures in November 2004, as well as the sale of Delahaye in
December 2004. The Company believes, based upon its 2005 financial forecast,
that it has sufficient capital resources to fund its net cash needs for at least
the next twelve months.





As
previously discussed, in December 2004, the Company sold Delahaye for
approximately $8 million. Delahaye’s operations are reported as discontinued
operations for all periods discussed in the accompanying management discussion
and analysis, and the operating results of Delahaye through December 31, 2004,
the date of sale, are reflected separately from the results of continuing
operations.










12


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





*Fiscal
Year 2004 as Compared to Fiscal Year 2003*


Revenues
increased by $1.48 million, or 4 *.* 2%, from
$35.38 million in 2003 to $36.86 million in 2004. Revenue from the Company’s
Media Communications Services increased by $499,000. Additionally, revenue from
TeletraxTM, the Company’s 76% owned subsidiary, was $1.62 million in 2004, an
increase of $979,000, or 152%, as compared to 2003. 2004 marked a return to
increased revenue for Media Communications services posting its first year over
year increase in revenue since 2000.





Direct
costs increased by $2.06 million, or 16.4%, from $12.62 million in 2003 to
$14.68 million in 2004. Direct costs as a percentage of revenue were 39.8% and
35.7%, respectively, in 2004 and 2003. The decrease in the gross profit margin
was attributable to changes in product mix during 2004 as well as an increase in
marketing communications services where the Company acts more like an
advertising company purchasing paid placements on cable television. The Company
believes as it increasingly integrates its existing services with marketing
communications services, it will increase its buying leverage, resulting in
improved margins as well as fuel the growth in revenue.





Selling,
general and administrative (“S, G & A”) expenses decreased by $191,000 or
less than 1.0%, from $22.26 million in 2003 to $22.06 million in 2004. The
change in S, G & A expenses includes increases in payroll and
payroll-related costs (“Payroll”) of approximately $374,000. The increase in
Payroll is substantially the result of increases in Payroll to its Media
Communication Services of $750,000 and the increase of Payroll related to
TeletraxTM of $54,000, net of termination costs during 2003 of $430,000. Included
in the increases in Payroll are approximately $700,000 of bonuses made as a
result of the closing of the convertible debenture financing and the sale of
Delahaye. Additionally, as a result of the completion of the first stage of the
TeletraxTM network in 2003, TeletraxTM had decreases in other S, G & A
expenses of approximately $245,000 in 2004 as compared to 2003. Excluding the
decreases in S, G & A expenses relating to TeletraxTM, the Company otherwise
reduced its S, G & A by approximately $320,000 in 2004 as compared to 2003,
including, but not limited to, savings in advertising and marketing, travel and
entertainment, rent and office costs.





In March
2004 the Company recorded a loss on the impairment of investments of $342,000
related to two investments accounted for under the cost method. On December 31,
2004, Newstream, an entity in which the Company had a 50% joint venture
interest, was dissolved. As a result of the dissolution, the Company recorded a
non-cash charge of $373,000 to write off the remaining balance of its investment
in Newstream. In accordance with the dissolution agreement, the Company is
permitted and intends to provide Newstream services to its client base under the
Newstream name, for the next twelve months. Subsequently,
Medialink anticipates providing these services under a different service
name.





13





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


In
September 2003 the Company entered into an agreement to sublease excess office
space in its Norwalk, CT location. The sublease resulted in a $592,000
restructuring charge to operations in the 3rd quarter of 2003.





Depreciation
and amortization expense decreased by $36,000, or 1.9%, from $1.86 million in
2003 to $1.82 million in 2004.





As a
result of the foregoing, the Company experienced an operating loss of $2.67
million in 2004 as compared to an operating loss of $2.26 million in 2003. The
operating loss in 2004 includes impairment charges related to two investments
and the write off of its interest in a joint venture aggregating $715,000. The
operating loss in 2003 included a $592,000 restructuring charge related to the
sublease of excess office space and termination costs of approximately $430,000.
Additionally, operating losses of $2.03 million and $2.45 million in 2004 and
2003, respectively, from the Company’s 76% owned subsidiary, TeletraxTM are
included in operating losses. The minority shareholder of TeletraxTM has no
future funding obligations and, accordingly, the Company has recorded 100% of
the loss from this subsidiary.





Interest
expense increased by $106,000 from $309,000 in 2003 to $415,000 in 2004. The
increase was substantially due to the issuance of convertible debentures in the
amount of $5.00 million in November 2004. Interest expense related to this
issuance was $89,000, which included $33,000 of amortization of the discount
recorded against the convertible debentures (see note 5 of the financial
statements). Additionally the Company had increases in interest rates during
2003 and throughout 2004 on the Company’s line of credit facility which
contributed to the increase in interest expense, net of a decrease in interest
expense due to lower balances on the credit line.





During
2004 Medialink recorded an increase to the valuation allowance on its net
deferred tax assets of $1.83 million because the realization of these assets is
uncertain. Additionally, the Company was subject to minimum state and local
taxes and taxes on capital. The increase in the valuation allowance and the
minimum state and local taxes resulted in an income tax expense of $693,000 on a
loss from continuing operations before taxes of $3.05 million. In 2003 the
Company was subject to minimum state and local taxes and taxes on capital.
Additionally, as a result of the limited historical results of its UK
operations, including TeletraxTM and management’s limited ability to project its
UK future results, the Company had recorded a valuation allowance of $964,000
related to the foreign deferred tax asset generated by its UK losses. The
benefit for income taxes in 2003 of $200,000 on a loss from continuing
operations before taxes of $2.54 million reflects the additional valuation
allowance and the minimum state and local taxes (see note 10 of the financial
statements).





Including
a loss from a joint venture of $247,000 and impairment charges related to two
investments and the write off of its interest in a joint venture aggregating
$715,000, the Company had a loss from continuing operations of $3.75 million in
2004, as compared to a loss from continuing operations of $2.34 million in 2003,
which included a loss from a joint venture of $316,000 and a restructuring
charge of $592,000. The loss
in 2004 and 2003 included losses of $2.06 million and $2.48 million,
respectively, from TeletraxTM. The minority shareholder has no future funding
obligations and, accordingly, the Company has recorded 100% of the losses from
this subsidiary. In 2004
the Company had basic loss per share of $0.62 compared to basic loss per share
from continuing operations of $0.39 in 2003.





14





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


In
December 2004, the Company sold Delahaye for approximately $8 million, resulting
in a gain on the sale of $3.05 million, net of taxes and transaction expenses.
Additionally, losses from Delahaye’s operations were $274,000 and $304,000 for
2004 and 2003, respectively.





Including
gain on the sale of a division and losses on discontinued operations, the
Company had a net loss of $972,000 in 2004 as compared to a net loss of $2.69
million in 2003. In 2004
the Company had basic loss per share of $0.16 compared to basic loss per share
of $0.45 in 2003.





*Fiscal
Year 2003 as Compared to Fiscal Year 2002*





As
previously discussed, in December 2004 the Company sold its research division,
Delahaye for approximately $8 million in cash. The following analysis reflects
the operations of Delahaye as discontinued operations for all periods
presented.





Revenues
decreased by $2.72 million, or 7.1%, from $38.10 million in 2002 to $35.38
million in 2003. Revenue from the Company’s Media Communications Services
decreased by $2.98 million. Additionally, revenue from TeletraxTM, the Company’s
76% owned subsidiary, was $645,000 in 2003, an increase of $261,000, or 68%, as
compared to 2002. During 2003, the Company experienced a decrease in demand from
clients for its Media Communications Services products as a result of the events
leading up to the war in Iraq and the commencement of military action. Events
which dominate news broadcasts, such as the war in Iraq, can cause the Company’s
clients to delay the use of, or in some cases not use, the Company’s services,
due to concern that the impact of their projects would be adversely affected by
the focus of the media on such news events. Additionally, during 2003 the
Company was negatively affected by the continuing adverse economic conditions,
particularly in the public relations sector.





Direct
costs decreased by $903,000, or 6.7%, from $13.52 million in 2002 to $12.62
million in 2003. The decrease in direct costs is the result of lower revenues
and, to a lesser extent, improved profit margins in 2003 as compared to 2002.
Direct costs as a percentage of revenue were 35.7% and 35.5%, respectively, in
2003 and 2002. The increase in the gross profit margin was attributable to a
favorable product mix during 2003 and the result of adjustments the Company made
over the last several quarters to its direct cost structure, including
renegotiating vendor rates and improving the efficiency of its operating
processes.





S, G
& A expenses decreased by $80,000 or less than 1.0%, from $22.33 million in
2002 to $22.25 million in 2003. The change in S, G & A expenses includes
increases in Payroll of approximately $147,000. The increase in Payroll is the
result of termination costs during 2003 ($430,000) and the increase of Payroll
related to TeletraxTM ($661,000), net of savings of $944,000 from the Company’s
remaining operations. Additionally, TeletraxTM had increases in other S, G &
A expenses of approximately $551,000 in 2003 as compared to 2002. Not including
the increases in S, G & A expenses relating to TeletraxTM, the Company
otherwise reduced its S, G & A by approximately $778,000 in 2003 as compared
to 2002, including, but not limited to, savings in advertising and marketing,
travel and entertainment, rent and office costs.





In
September 2003 the Company entered into an agreement to sublease excess office
space in its Norwalk, CT location. The sublease resulted in a $592,000
restructuring charge to operations in the 3rd quarter of 2003. The transaction
reduces S, G & A expenses by approximately $120,000 per annum through
February 2008.





15





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





In August
2001 the Company received an unsolicited takeover bid by United Business Media
plc to purchase all of its issued and outstanding common shares. In connection
with this unsolicited offer the Company incurred legal and financial advisory
expenses of approximately $1.30 million for 2002. The unsolicited offer is no
longer active and the Company does not anticipate incurring any additional
costs.





Depreciation
and amortization expense decreased by $288,000, or 13.4%, from $2.15 million in
2002 to $1.86 million in 2003. In 2002 a customer list, acquired in conjunction
with the acquisition of The Corporate TV Group, Inc., was fully amortized. As a
result, there was a decrease in amortization of $367,000. Additionally,
depreciation and amortization increased approximately $79,000 due to current
year fixed asset additions, substantially related to the roll out of
TeletraxTM.





As a
result of the foregoing, the Company experienced an operating loss from
continuing operations of $2.26 million in 2003 as compared to an operating loss
of $1.55 million in 2002. The operating loss in 2003 includes a $592,000
restructuring charge related to the sublease of excess office space and
termination costs of approximately $430,000. The operating loss in 2002 included
advisory charges of $1.30 million. Additionally, operating losses of $2.49
million and $875,000 in 2003 and 2002, respectively, from the Company’s 76%
owned subsidiary, TeletraxTM are included in operating losses. The minority
shareholder of TeletraxTM has no future funding obligations and, accordingly, the
Company has recorded 100% of the loss from this subsidiary.





Interest
expense increased by $19,000 from $290,000 in 2002 to $309,000 in 2003. The
increase was due to increases in interest rates during 2003 on the Company’s
line of credit facility, net of a decrease in interest expense due to lower
balances on the credit line, and interest on the Company’s capitalized lease
obligations in 2003.





Income
tax benefit was calculated using Medialink's effective tax rates of 41% in both
2003 and 2002. In 2003 and 2002 the Company was also subject to minimum state
and local taxes and taxes on capital. Additionally, as a result of the limited
historical results of its UK operations, including TeletraxTM and management’s
limited ability to project its UK future results, the Company has recorded a
valuation allowance of $964,000 related to the foreign deferred tax asset
generated by its UK losses. Recording the additional valuation allowance and the
minimum state and local taxes reduces the effective tax rates to less than 7.9%
and 2.6% in 2003 and 2002, respectively.





Including
a loss from a joint venture of $316,000 and restructuring charge of $592,000,
the Company had a loss from continuing operations of $2.34 million in 2003, as
compared to a loss of $1.71 million in 2002, which included a loss from a joint
venture of $350,000 and advisory charges of $1.30 million. The loss
in 2003 and 2002 included losses of $2.48 million and $886,000, respectively,
from TeletraxTM. The minority shareholder has no future funding obligations and,
accordingly, the Company has recorded 100% of the losses from this subsidiary.





Including
losses on discontinued operations, the Company had a net loss of $2.69 million
in 2003 as compared to a net loss of $1.87 million in 2002. In 2003
the Company had basic loss per share of $0.45 compared to basic loss per share
of $0.32 in 2002.





16





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


Below is
a table that presents our contractual obligations and commitments at December
31, 2004:




**Payments
Due by Period (in thousands)**




**Contractual
      Obligations**
    
    **Total**
    
    **Less
      than**
      **One
      Year**
    
    **1-3
      years**
    
    **4-5
      years**
    
    **After
      5 years**Convertible
      Debenture
    
    $
    5,000
    
    
    
    
    
    
    
    $
    5,000Capital
      lease obligations
    
    $
    210
    
    $
    113
    
    $
    97
    
    
    --
    
    
    --Operating
      leaseobligations
    
    $
    13,617
    
    $
    3,103
    
    $
    7,639
    
    $
    2,875
    
    
    --Total
    
    $
    18,827
    
    $
    3,216
    
    $
    7,736
    
    $
    7,875
    
    
    --





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




LIQUIDITY
AND CAPITAL RESOURCES





Medialink
has financed its operations primarily through cash generated from operations,
reliance on its line of credit facility and the issuance of $5 million
convertible debentures in November 2004. Additionally, the Company sold its
research division, Delahaye, in December 2004 for approximately $8 million,
recording a pre-tax gain on sale of $5 million. Cash flow provided by operating
activities of continuing operations amounted to $3.71 million and $463,000 in
2004 and 2003, respectively. Capital expenditures which are primarily incurred
to support Medialink's sales and operations and the roll-out of the TeletraxTM
network were $815,000 in 2004 and $1.40 million in 2003.





The
Company had a line of credit facility with a bank expiring in January 31, 2005.
Interest under the line was payable monthly at the rate of the 30-Day LIBOR Rate
plus 5.5% per annum. On November 8, 2004, the Company amended certain provisions
of its loan credit facility. Pursuant to the amending letter, the term of the
loan credit facility was extended to December 31, 2005; several financial
covenants were amended; and maximum borrowings were reduced to $2 million. In
December 2004 the outstanding balance on the line of credit was paid in full and
the agreement was terminated.





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





17





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


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





As of
December 31, 2004 Medialink had $11.67 million in cash and cash equivalents as
compared to $3.71 million as at December 31, 2003. As at December 31, 2004 and
2003, long-term debt, including current portion, was $4.04 million, net of
unamortized discount of $1.17 million and $269,000, respectively.





The
Company believes, based upon its 2005 financial forecast, that it has sufficient
capital resources to fund its net cash needs for at least the next twelve
months.





RISK
FACTORS





*Major
News Events*


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





*Susceptibility
to General Economic Conditions*


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





*Receptiveness
of the Media to Our Services; Changes in Our Marketplace*


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





18


**


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


**


*Competition*


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





*New
Services*


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





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


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





*Capital
Requirements*


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





*Other
Risk Factors*


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





19





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





CRITICAL
ACCOUNTING POLICIES


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





*Revenue
Recognition*


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





*Allowance
for Doubtful Accounts*


The
allowance for doubtful accounts is based on management's assessment of the
collectibility of specific customer accounts and includes consideration of the
credit worthiness and financial condition of those specific customers. The
Company records an allowance to reduce the specific receivables to the amount
that is reasonably believed to be collectible. The Company also records an
allowance for all other accounts receivable balances based on multiple factors
including historical experience with bad debts, customer concentrations, the
general economic environment, and the aging of such receivables. For the year
ended December 31, 2004 revenue from no single client amounted to greater than
10% of the Company’s consolidated revenues; however, for the year ended December
31, 2003, 14% of the Company’s consolidated revenues were from one client. If
there were a deterioration of this major customer's financial condition, if the
Company becomes aware of additional information related to the credit worthiness
of this major customer, or if future actual default rates on trade receivables,
in general, differ from those currently anticipated, the Company may have to
adjust its allowance for doubtful accounts, which would affect earnings in the
period the adjustments are made.


**


*Valuation
of Long-Lived Assets Including Goodwill and Intangible Assets*


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





20





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


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





*Income
Taxes*


Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and for operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. We
considered all of the available evidence to arrive at our position on the net
deferred tax assets; however, should circumstances change which would alter our
judgment in this regard it may have an impact on future operating
results.





21




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


EFFECTS
OF NEWLY-ISSUED ACCOUNTING STANDARDS





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





INFLATION





Inflation
has not had, nor does the Company anticipate it having, a significant impact on
the Company’s current and future operations.





FOREIGN
CURRENCY





The
conversion of various European currencies to the Euro has not had, nor does the
Company anticipate it having, a significant impact on the Company’s current and
future operations.
















22


**Item
7A.**  **QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**





*Debt*


The
Company has a convertible debenture which exposes the Company to the risk of
earnings or cash flow loss due to changes in market interest rates. At December
31, 2004, $3.83 million, net of unamortized discount of $1.17 million, was
outstanding on debentures. The interest rate on the facility is based upon the
higher of 7% or 6-month LIBOR rate plus a margin, as defined. All other Company
debt is fixed-rate and, therefore, does not expose the Company to the risk of
earnings or cash flow loss due to changes in market interest rate.





*Foreign
Currency Exchange Rate Risk*


In the
normal course of business, through its UK operations, the Company is exposed to
the effect of foreign exchange rate fluctuations on the United States dollar
value of its foreign subsidiaries’ results of operations and financial
condition. At December 31, 2004, the Company’s primary foreign currency market
exposure was the British pound.


































23


**ITEM
8.**  **FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.**





The
following audited consolidated financial statements and related report are set
forth in this Annual Report on Form 10-K on the following pages:





Report
      of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated
      Balance Sheets as of December 31, 2004 andDecember 31,
      2003
    
    
    F-2Consolidated
      Statements of Operations for the Years Ended December 31, 2004,
      December 31, 2003 and December 31, 2002
    
    
    F-3Consolidated
      Statements of Stockholders’ Equity and Comprehensive Income for the Years
      Ended December 31, 2004, December 31, 2003 and December 31,
      2002
    
    
    F-4Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2004, December
      31, 2003 and December 31, 2002
    
    
    F-5Notes
      to Consolidated Financial Statements
    
    
    F-6













24


**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, 2004 and 2003, and the related
consolidated statements of operations, stockholders’ equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
December 31, 2004. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements 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, 2004 and 2003, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2004, in conformity with U.S. generally accepted
accounting principles.




(signed)
KPMG LLP




New York,
New York


March 15,
2005




F-1




MEDIALINK
      WORLDWIDE INCORPORATED AND SUBSIDIARIESCONSOLIDATED
      BALANCE SHEETSAs
      of December 31, 2004 and 2003
  2004
    
    2003ASSETSCurrent
      Assets:Cash
      and cash equivalents
    
    $
    11,674,828
    
    $
    3,705,666Accounts
      receivable, net of allowance for doubtful accounts of$592,781 and
      $446,055
    
    
    6,144,658
    
    
    5,527,918Prepaid
      expenses
    
    
    625,457
    
    
    451,746Prepaid
      and refundable taxes
    
    
    565,004
    
    
    690,657Deferred
      tax assets
    
    
    --
    
    
    199,000Other
      current assets
    
    
    1,882,990
    
    
    1,496,660Current
      assets of discontinued operations
    
    
    --
    
    
    2,408,316Total
      current assets
    
    
    20,892,937
    
    
    14,479,963Property
      and equipment, net
    
    
    4,068,987
    
    
    4,943,633Goodwill,
      net of accumulated amortization of $2,338,473
    
    
    13,006,137
    
    
    13,006,137Customer
      list and other intangibles, net of accumulated amortizationof
      $4,440,485 in 2003
    
    
    --
    
    
    59,515Investment
      in joint venture
    
    
    --
    
    
    365,483Deferred
      tax assets
    
    
    --
    
    
    1,805,000Other
      assets
    
    
    804,480
    
    
    660,917Non-current
      assets of discontinued operations
    
    
    --
    
    
    1,865,237Total
      assets
    
    $
    38,772,541
    
    $
    37,185,885LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      Liabilities:Current
      portion of obligations under capital lease
    
    $
    113,332
    
    $
    96,248Borrowings
      on credit facilities
    
    
    --
    
    
    5,500,000Accounts
      payable
    
    
    2,497,813
    
    
    1,564,263Accrued
      expenses and other current liabilities
    
    
    6,357,928
    
    
    3,585,181Taxes
      payable
    
    
    340,000
    
    
    --Current
      liabilities of discontinued operations
    
    
    --
    
    
    966,078Total
      current liabilities
    
    
    9,309,073
    
    
    11,711,770Convertible
      debentures, net of unamortized discount of $1,167,000
    
    
    3,833,000
    
    
    --Capital
      lease obligation, net of current portion
    
    
    97,428
    
    
    173,000Other
      long term liabilities
    
    
    453,777
    
    
    503,336Total
      liabilities
    
    
    13,693,278
    
    
    12,388,106Stockholders'
      Equity:Common
      stock; $.01 par value. Authorized 15,000,000 shares;
issued6,055,430
      shares in 2004 and 6,040,173 shares in 2003
    
    
    60,554
    
    
    60,401Additional
      paid-in capital
    
    
    26,291,385
    
    
    25,047,284(Accumulated
      deficit) retained earnings
    
    
    (733,235
    )
    
    238,477Accumulated
      other comprehensive loss
    
    
    (196,077
    )
    
    (348,449
    )25,422,627
    
    
    24,997,713Less
      common stock in treasury (at cost, 101,121shares and 57,124
      shares)
    
    
    (343,364
    )
    
    (199,934
    )Total
      stockholders' equity
    
    
    25,079,263
    
    
    24,797,779Total
      liabilities and stockholders' equity
    
    $
    38,772,541
    
    $
    37,185,885
  See
accompanying notes to consolidated financial statements


F-2




MEDIALINK
      WORLDWIDE INCORPORATED AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF OPERATIONSFor
      the Years Ended December 31, 2004, 2003 and
2002
  2004
    
    2003
    
    2002Revenues
    
    $
    36,862,748
    
    $
    35,383,442
    
    $
    38,103,290Direct
      costs
    
    
    14,682,722
    
    
    12,618,563
    
    
    13,521,762Gross
      Profit
    
    
    22,180,026
    
    
    22,764,879
    
    
    24,581,528Operating
      expenses:Selling,
      general and administrative expenses
    
    
    22,063,976
    
    
    22,254,673
    
    
    22,334,699Depreciation
      and amortization
    
    
    1,822,364
    
    
    1,858,255
    
    
    2,146,123Loss
      from joint venture
    
    
    247,305
    
    
    316,121
    
    
    350,000Impairment
      of investments and write off of investmentin joint
      venture
    
    
    714,897Restructuring
      charges
    
    
    --
    
    
    592,000
    
    
    --Advisory
      charges
    
    
    --
    
    
    --
    
    
    1,300,000Total
      Operating Expenses
    
    
    24,848,542
    
    
    25,021,049
    
    
    26,130,822Operating
      loss
    
    
    (2,668,516
    )
    
    (2,256,170
    )
    
    (1,549,294
    )Interest
      expense
    
    
    (415,091
    )
    
    (308,945
    )
    
    (289,616
    )Interest
      income
    
    
    30,371
    
    
    27,197
    
    
    81,110Loss
      from continuing operations before taxes
    
    
    (3,053,236
    )
    
    (2,537,918
    )
    
    (1,757,800
    )Income
      tax expense (benefit)
    
    
    693,000
    
    
    (200,000
    )
    
    (45,980
    )Loss
      from continuing operations
    
    
    (3,746,236
    )
    
    (2,337,918
    )
    
    (1,711,820
    )Discontinued
      operations:Loss
      from discontinued operations
    
    
    (274,146
    )
    
    (304,359
    )
    
    (256,890
    )Gain
      on sale of division
    
    
    4,914,670
    
    
    --
    
    
    --Income
      (loss) on discontinued operations before income taxes
    
    
    4,640,524
    
    
    (304,359
    )
    
    (256,890
    )Income
      tax expense (benefit)
    
    
    1,866,000
    
    
    50,000
    
    
    (100,000
    )Income
      (loss) on discontinued operations
    
    
    2,774,524
    
    
    (354,359
    )
    
    (156,890
    )Net
      loss
    
    $
    (971,712
    )
    $
    (2,692,277
    )
    $
    (1,868,710
    )Basic
      and diluted loss per share from continuing operations
    
    $
    (0.62
    )
    $
    (0.39
    )
    $
    (0.29
    )Basic
      and diluted loss per share from discontinued operations
    
    $
    0.46
    
    $
    (0.06
    )
    $
    (0.03
    )Basic
      and diluted net loss per share
    
    $
    (0.16
    )
    $
    (0.45
    )
    $
    (0.32
    )Shares
      used in per share calculations:Basic
      and diluted
    
    
    5,997,000
    
    
    5,955,779
    
    
    5,909,312
 See accompanying notes to consolidated financial
statements
  F-3
 MEDIALINK
      WORLDWIDE INCORPORATED AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE
  INCOMEFor
      the Years Ended December 31, 2004, 2003 and
2002
  AccumulatedOtherComprehensiveLoss
      - ForeignCommon
      stock
    
    Additional
    
    
    
    Currency
    
    Common
    
    TotalNumber
      of
    
    
    
    Paid-In
    
    Retained
    
    Translation
    
    Stock
      in
    
    Stockholders'Shares
    
    Par
      Value
    
    Capital
    
    Earnings
    
    Adjustment
    
    Treasury
    
    EquityBalance
      at January 1, 2002
    
    
    5,820,714
    
    
    58,207
    
    
    24,409,660
    
    
    4,799,464
    
    
    (221,249
    )
    
    --
    
    
    29,046,082Comprehensive
      income:Net
      loss
    
    
    --
    
    
    --
    
    
    --
    
    
    (1,868,710
    )
    
    --
    
    
    --
    
    
    (1,868,710
    )Foreign
      currency translation adjustment
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    (134,055
    )
    
    --
    
    
    (134,055
    )Total
      comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,002,765
    )Stock
      options exercised
    
    
    700
    
    
    7
    
    
    1,958
    
    
    --
    
    
    --
    
    
    --
    
    
    1,965Issuances
      of common stock in connectionwith acquisitions of
      businesses
    
    
    125,622
    
    
    1,256
    
    
    357,144
    
    
    --
    
    
    --
    
    
    --
    
    
    358,400Treasury
      Stock Transaction
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    (199,934
    )
    
    (199,934
    )Balance
      at December 31, 2002
    
    
    5,947,036
    
    
    59,470
    
    
    24,768,762
    
    
    2,930,754
    
    
    (355,304
    )
    
    (199,934
    )
    
    27,203,748Comprehensive
      income:Net
      loss
    
    
    --
    
    
    --
    
    
    --
    
    
    (2,692,277
    )
    
    --
    
    
    --
    
    
    (2,692,277
    )Foreign
      currency translation adjustment
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    6,855
    
    
    --
    
    
    6,855Total
      comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,685,422
    )Stock
      options exercised
    
    
    1,600
    
    
    16
    
    
    4,160
    
    
    -
    
    
    --
    
    
    --
    
    
    4,176Issuances
      of common stock in connectionwith acquisitions of
      businesses
    
    
    91,537
    
    
    915
    
    
    274,362
    
    
    --
    
    
    --
    
    
    --
    
    
    275,277Balance
      at December 31, 2003
    
    
    6,040,173
    
    $
    60,401
    
    $
    25,047,284
    
    $
    238,477
    
    $
    (348,449
    )
    $
    (199,934
    )
    $
    24,797,779Comprehensive
      income:Net
      loss
    
    
    --
    
    
    --
    
    
    --
    
    
    (971,712
    )
    
    --
    
    
    --
    
    
    (971,712
    )Foreign
      currency translation adjustment
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    152,372
    
    
    --
    
    
    152,372Total
      comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (819,340
    )Stock
      options exercised
    
    
    15,257
    
    
    153
    
    
    44,101
    
    
    --
    
    
    --
    
    
    --
    
    
    44,254Issuance
      of warrants in connection withconvertible
      debentures
    
    
    --
    
    
    --
    
    
    1,200,000
    
    
    -
    
    
    --
    
    
    --
    
    
    1,200,000Treasury
      Stock Transaction
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    --
    
    
    (143,430
    )
    
    (143,430
    )Balance
      at December 31, 2004
    
    
    6,055,430
    
    $
    60,554
    
    $
    26,291,385
    
    $
    (733,235
    )
    $
    (196,077
    )
    $
    (343,364
    )
    $
    25,079,263
 See accompanying notes to consolidated financial
statements
  F-4




MEDIALINK
      WORLDWIDE INCORPORATED AND SUBSIDIARIESCONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      the Years Ended December 31, 2004, 2003 and
2002
  2004
    
    2003
    
    2002CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
    
    $
    (971,712
    )
    $
    (2,692,277
    )
    $
    (1,868,710
    )Adjustments
      to reconcile net loss to net cash provided by continuingoperating
      activities:Depreciation
      and amortization
    
    
    1,822,364
    
    
    1,858,262
    
    
    2,146,123Amortization
      of discount on convertible debentures
    
    
    33,333
    
    
    --
    
    
    --Allowance
      for doubtful accounts
    
    
    146,726
    
    
    (64,145
    )
    
    232,650Impairment
      of investments and write off of investment in joint
venture
    
    
    714,897
    
    
    --
    
    
    --Deferred
      income taxes
    
    
    2,004,000
    
    
    (150,000
    )
    
    245,000Equity
      loss from joint venture
    
    
    247,305
    
    
    316,121
    
    
    350,000Restructuring
      charge
    
    
    --
    
    
    592,000
    
    
    --Gain
      on sale of division and loss from discontinued operations, netof
      taxes
    
    
    (2,774,524
    )
    
    354,359
    
    
    156,890Changes
      in assets and liabilities, net of acquisitions:Accounts
      receivable
    
    
    (611,094
    )
    
    (101,623
    )
    
    1,423,106Other
      assets
    
    
    (316,616
    )
    
    7,950
    
    
    (398,553
    )Prepaid
      expenses and other current assets
    
    
    (703,471
    )
    
    (182,843
    )
    
    86,464Prepaid
      and refundable income taxes and taxes payable
    
    
    465,653
    
    
    1,579,147
    
    
    (526,145
    )Accounts
      payable and accrued expenses
    
    
    3,706,297
    
    
    (967,958
    )
    
    2,072,661Other
      liabilities
    
    
    (49,559
    )
    
    (85,664
    )
    
    --Net
      cash provided by operating activities
    
    
    3,713,599
    
    
    463,329
    
    
    3,919,486CASH
      FLOWS FROM INVESTING ACTIVITIES:Cash
      paid on acquisitions
    
    
    --
    
    
    (341,231
    )
    
    (850,000
    )Capital
      contribution in joint venture
    
    
    (254,719
    )
    
    --
    
    
    (250,000
    )Proceeds
      from sale of division
    
    
    7,700,000
    
    
    --
    
    
    --Purchases
      of property and equipment
    
    
    (814,632
    )
    
    (1,400,462
    )
    
    (1,000,225
    )Net
      cash provided by (used in) investing activities
    
    
    6,630,649
    
    
    (1,741,693
    )
    
    (2,100,225
    )CASH
      FLOWS FROM FINANCING ACTIVITIESAdvances
      on line of credit
    
    
    -
    
    
    267,389
    
    
    267,984Payments
      on line of credit
    
    
    (5,500,000
    )
    
    (1,304,054
    )
    
    --Proceeds
      from the issuance of convertible debentures andcommon stock
      warrants, net of transaction costs
    
    
    4,757,482
    
    
    --
    
    
    --Proceeds
      from the issuance of common stock in connectionwith the exercise
      of stock options
    
    
    44,254
    
    
    4,176
    
    
    1,965Repayments
      obligations under capital lease
    
    
    (58,821
    )
    
    (45,291
    )
    
    (55,067
    )Net
      cash (used in) provided by financing activities
    
    
    (757,085
    )
    
    (1,077,780
    )
    
    214,882Net
      cash used in discontinued operations
    
    
    (1,618,001
    )
    
    (327,840
    )
    
    (324,568
    )Net
      increase (decrease) in cash and cash equivalents
    
    
    7,969,162
    
    
    (2,683,984
    )
    
    1,709,575Cash
      and cash equivalents at the beginning of year
    
    
    3,705,666
    
    
    6,389,650
    
    
    4,680,075Cash
      and cash equivalents at end of year
    
    $
    11,674,828
    
    $
    3,705,666
    
    $
    6,389,650
 See accompanying notes to consolidated financial
statements
 
  F-5


**MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**


**NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**
  ***1.***  ***Summary
of Significant Accounting Policies***





*Description
of Business and Basis of Presentation*


Medialink
Worldwide Incorporated (the “Company”) is a provider of worldwide video and
audio production and distribution services for businesses and other
organizations that seek to communicate and evaluate their news through
television, radio, print, the Internet and other media. Additionally, through
its subsidiaries, Teletrax, Ltd. and TTX (US) LLC, the Company has deployed a
global video tracking, and monitoring system. The Company, a Delaware
corporation formed on September 24, 1986, is headquartered in New York with
offices in the United States and the United Kingdom.





As
further discussed in note 3, Medialink sold its research division, Delahaye, a
provider of public relations research services for businesses and other
organizations that seek to communicate and evaluate their news through
television, radio, the Internet and other media. Delahaye’s operations are
reported as discontinued operations for all periods presented in the
accompanying consolidated financial statements, and the operating results of
Delahaye through December 31, 2004, the date of sale, are reflected separately
from the results of continuing operations.





The
consolidated financial statements include the accounts of Medialink Worldwide
Incorporated, its wholly owned subsidiaries and its 76% owned subsidiaries,
Teletrax, Ltd. and TTX (US) LLC. All significant intercompany transactions and
balances have been eliminated in consolidation.





*Revenue
Recognition*


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





*Use
of Estimates*


The
preparation of the consolidated financial statements requires management of the
Company to make a number of estimates and assumptions relating to the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the period. Significant items
subject to such estimates and assumptions include the carrying amount of
property, plant and equipment, intangibles and goodwill; and valuation
allowances for receivables and deferred income tax assets. Actual results could
differ from those estimates.





*Cash
and Cash Equivalents*


The
Company considers all highly liquid investments purchased with a maturity of
three months or less, to be cash equivalents.








F-6


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


*Property
and Equipment*


Property
and equipment, recorded at cost, is depreciated on a straight-line basis over
the estimated useful lives of the assets. Leasehold improvements are amortized
on a straight-line basis over the shorter of the lease term or the estimated
useful life of the asset. The following estimated useful lives are used for
financial statement purposes:





Office
      equipment and software
    3
      to 5 yearsFurniture
      and fixtures
    4
      to 10 yearsLeasehold
      improvements
    3
      to 10 years





*Goodwill
and Other Intangible Assets*


Goodwill
represents the excess of costs over fair value of assets of businesses acquired.
Goodwill and intangible assets acquired in a purchase business combination and
determined to have an indefinite useful life are not amortized, but instead
tested for impairment at least annually in accordance with the provisions of
FASB Statement No. 142, Goodwill and Other Intangible Assets. Intangible assets
with estimable useful lives are amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment in
accordance with FASB Statement No. 144, Accounting for Impairment or Disposal of
Long-Lived Assets.





Other
intangible assets, including customer lists and covenants not to compete, are
being amortized on a straight-line basis over the term of the agreement or the
estimated future period of benefit, which ranges from 3 to 71⁄2
years.





*Impairment
of Long-lived Assets*


In
accordance with Statement 144, long-lived assets, such as property, plant, and
equipment, and identifiable intangibles subject to amortization, are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the
asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset. Assets to be disposed
of would be separately presented in the balance sheet and reported at the lower
of the carrying amount or fair value less costs to sell, and are no longer
depreciated. The assets and liabilities of a disposal group classified as held
for sale would be presented separately in the appropriate asset and liability
sections of the balance sheet.





Goodwill
is tested annually for impairment, and is tested for impairment more frequently
if events and circumstances indicate that the asset might be impaired. An
impairment loss is recognized to the extent that the carrying amount exceeds the
asset’s fair value. This determination is made at the reporting unit level and
consists of two steps. In accordance with paragraph 30 of SFAS 142, Medialink
has aggregated certain components that are similar in (a) the nature of the
products and services (b) the similar nature of the processes required to
provide these services; (c) the similar nature of their customers and (d) their
similar economic characteristics, being the purchase of third party services,
salary costs and selling, general and administrative costs. First, the
Company determines the fair value of a reporting unit and compares it to its
carrying amount. Second, if the carrying amount of a reporting unit exceeds its
fair value, an impairment loss is recognized for any excess of the carrying
amount of the reporting unit’s goodwill over the implied fair value of that
goodwill. The implied fair value of goodwill is determined by allocating the
fair value of the reporting unit in a manner similar to a purchase price
allocation, in accordance with FASB Statement No. 141, Business Combinations.
The residual fair value after this allocation is the implied fair value of the
reporting unit goodwill.





F-7


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


**


*Major
Customers*


Revenues
from Altria Group, Inc., which includes its wholly-owned subsidiaries, Philip
Morris USA Inc., Philip Morris International Inc., its majority-owned
subsidiary, Kraft Foods Inc. and Miller Brewing through July 2002, amounted to
approximately 14% of consolidated revenues in each of years 2003 and 2002.
Revenue from no single client amounted to greater than 10% of consolidated
revenues in 2004.





*Investments
in Affiliates*


The
Company accounts for its investments in affiliates in which it owns between 20%
and 50% of the voting stock and possesses significant influence over the
affiliate under the equity method. Investments in affiliates are reviewed for
impairment whenever events or changes in circumstances indicate that the fair
value of an investment is less than its carrying amount, and when such a loss in
value is determined to be other than temporary.





*Foreign
Currency Translation*


The
financial position and results of operations of the Company’s UK subsidiaries
are measured using local currency as the functional currency. Assets and
liabilities of the entities have been translated at exchange rates on the
balance sheet date, and related revenue and expenses have been translated at
average monthly exchange rates. The aggregate effect of translation adjustments
is reflected as a separate component of shareholders’ equity in accumulated
other comprehensive loss until there is a sale or liquidation of the underlying
foreign investment.





*Income
Taxes*


Income
taxes are accounted for under the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and for operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.





Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.





*Fair
Value of Financial Instruments*


The
carrying amounts of cash, receivables, accounts payable, accrued liabilities and
borrowings on line of credit facility approximate fair value because of the
short maturity of these instruments. The carrying amounts of long-term debt
approximate fair value as the effective rates for these instruments are
comparable to market rates at year-end.





F-8




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


*Earnings
per Share*


Basic
loss per share (“EPS”) is computed by dividing net loss attributable to common
stock by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution from the exercise or
conversion of securities to common stock. For the year ended December 31, 2004,
2003 and 2002 the Company had common stock equivalents of 99,715, 50,083 and
64,349, respectively, related to stock options that were not included in the
computation of EPS because they were antidilutive.





*Stock-Based
Compensation*


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





For
      the year ended December 31,2004
    
    2003
    
    2002Net
      loss - as reported
    
    $
    (971,712
    )
    $
    (2,692,277
    )
    $
    (1,868,710
    )Deduct:
      total stock-basedemployee compensation
    expensedetermined
      under the fairvalue method, net of related taxeffects
    
    
    (165,000
    )
    
    (259,000
    )
    
    (110,000
    )Net
      loss - pro forma
    
    $
    (1,136,712
    )
    $
    (2,951,277
    )
    $
    (1,978,710
    )Basic
      and diluted EPS - as reported
    
    $
    (.16
    )
    $
    (.45
    )
    $
    (.32
    )Basic
      and diluted EPS - pro forma
    
    $
    (.19
    )
    $
    (.50
    )
    $
    (.33
    )





The fair
value of each grant is estimated using the Black-Scholes Option Pricing Model
with the following assumptions: dividend yield of 0% for all grants, expected
volatility of 60% for 2004, 5% for 2003 and 10% for 2002, risk free interest
rates of 3.42% for 2004, 4.25% for 2003 and 4.25% for 2002 grants and expected
lives of 5 years for all grants.





The
Company will adopt the provisions of FASB Statement No. 123 (revised 2004),
Share-Based Payment, in 2005 regarding stock compensation as discussed
below.





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


*Recently
Issued Accounting Standards*


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





*Reclassification*


Certain
reclassifications have been made to the 2003 and 2002 financial statements to
conform to the 2004 presentation, primarily to reflect the presentation of
Delahaye as a discontinued operation in 2003 and 2002.





***2.***  ***Property
and Equipment***





Property
and equipment, at cost, consists of:





December
      31,2004
    
    2003Office
      equipment and software
    
    $
    7,251,909
    
    $
    6,381,772Furniture
      and fixtures
    
    
    1,389,841
    
    
    1,353,741Leasehold
      improvements
    
    
    3,461,522
    
    
    3,401,98412,103,272
    
    
    11,137,497Less
      accumulated depreciation and amortization
    
    
    (8,034,285
    )
    
    (6,193,864
    )Property
      and equipment, net
    
    $
    4,068,987
    
    $
    4,943,633





Depreciation
and amortization expense was $1,689,255 and $1,574,263 the years ended December
31, 2004 and 2003, respectively.








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


***3.***  ***Business
Transactions***





**(a)** **Sale
of Division**





In
December 2004, the Company sold its research division, Delahaye, for
approximately $8 million, of which $7.70 million was collected at closing and
the balance expected in the second quarter of 2005. Additionally, the proceeds
are to be adjusted for the amount by which working capital on the date of the
sale exceeds certain thresholds. Any additional balances due are expected to be
collected in the second quarter of 2005. As part of the transaction, Medialink
divested substantially all of the net assets of Delahaye, which had an estimated
carrying value of $2.90 million, including $228,000 of goodwill and $1.40
million in net trade receivables, for the US and UK divisions combined. Any
assigned and uncollected receivables as of June 29, 2005 will be transferred and
assigned to Medialink for subsequent collection. Delahaye’s operations are
reported as discontinued operations for all periods presented in the
accompanying consolidated financial statements, and the operating results of
Delahaye through December 31, 2004, the date of sale, are reflected separately
from the results of continuing operations. The gain on the sale of Delahaye is
approximately $3.05 million net of taxes and includes transaction expenses of
approximately $460,000, which include broker fees and legal fees. Summarized
operating results and gain on sale for the years ended December 31, 2004, 2003
and 2002 are as follows:





For
      the Year Ended December 31,2004
    
    2003
    
    2002(in
      thousands)Total
      Revenue
    
    $
    9,022
    
    $
    8,670
    
    $
    9,261Loss
      from operations before income taxes
    
    $
    (274
    )
    $
    (304
    )
    $
    (257
    )Gain
      on sale of discontinued operations
    
    
    4,915
    
    
    --
    
    
    --Income
      (loss) from discontinuedoperations before income
      taxes
    
    
    4,641
    
    
    (304
    )
    
    (257
    )Income
      tax expense (benefit)
    
    
    1,866
    
    
    50
    
    
    (100
    )Income
      (loss) on discontinued operations
    
    $
    2,775
    
    $
    (354
    )
    $
    (157
    )





**(b)** **Acquisitions,
Goodwill and Other Intangibles**





Through
1999, the Company made various acquisitions that have been accounted for under
the purchase method of accounting. As of December 31, 2004 the aggregate
purchase price, including acquisition costs and amounts paid as a result of
earn-out agreements, exceeded the estimated fair value of the total tangible net
assets acquired by $19.34 million for all of the acquisitions. Of this amount $4
million has been allocated to customer lists and has been fully amortized as of
December 31, 2004 and $15.34 million has been allocated to
goodwill.





At
December 31, 2004 there were no potential additional earn-out provisions
outstanding on any of the Company’s acquisitions.








F-11
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


Intangible
assets consist of the following:





December
      31, 2003(in
      thousands)GrossAmortization
    
    Carrying
    
    AccumulatedPeriod
    
    Amount
    
    Amortization
    
    NetNon-competes
    
    
    4-7.5
      years
    
    $
    500
    
    $
    (440
    )
    $
    60





Aggregate
amortization expense for the years ended December 31, 2004, 2003 and 2002 was
$60,000, $79,997 and 490,196, respectively.





**(c)** **Joint
Venture**





On August
1, 1999 the Company entered into a joint venture with Business Wire to form
Business Wire/Medialink, LLC (“Newstream”), for the purpose of connecting its
clients to multimedia Internet news sites as Newstream.com. The Company, which
had a 50% interest in the joint venture, accounted for its interest in Newstream
under the equity method, as it does not have a controlling interest in the
entity. During 2004 and 2002 each member made an additional capital contribution
of $255,719 and $250,000, respectively.





In
December 2004 Newstream was dissolved. As a result of the dissolution, the
Company recorded a non-cash charge of $373,000 to write off the remaining
balance in its investment in Newstream. In accordance with the dissolution
agreement, the Company is permitted and intends to provide Newstream services to
its client base under the Newstream name, for the next twelve months. Subsequently,
Medialink anticipates providing these services under a different service
name.








F-12
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


The
following is selected unaudited financial data of Newstream at December
31:





2004
    
    2003
    
    2002Balance
      Sheet Data:Total
      current assets
    
    $
    1,767,000
    
    $
    1,147,000
    
    $
    1,310,000Total
      assets
    
    
    1,934,000
    
    
    1,764,000
    
    
    2,350,000Total
      current liabilities
    
    
    1,770,000
    
    
    1,616,000
    
    
    1,587,000Total
      liabilities and members equity
    
    
    1,934,000
    
    
    1,764,000
    
    
    2,350,000Operating
      Data:Revenues
    
    $
    1,012,000
    
    $
    1,186,000
    
    $
    1,164,000Operating
      loss
    
    
    (495,000
    )
    
    (615,000
    )
    
    (665,000
    )Net
      loss
    
    
    (495,000
    )
    
    (614,000
    )
    
    (663,000
    )





Approximately
$622,000, $541,000 and $501,000 of total revenue of Newstream was generated by
the Company in 2004, 2003 and 2002, respectively.





The
Company also allocated certain expenses to the joint venture for personnel and
other direct, general and administrative costs incurred on its behalf. Total
assessments amounted to $561,000, $781,000 and $683,000 in 2004, 2003 and 2002,
respectively. The balance outstanding at December 31, 2004, 2003 and 2002
relating to these assessments amounted to $522,000, $678,000 and $663,000,
respectively and are included in prepaid expenses and other current assets. The
balance due from joint venture at December 31, 2004 was subsequently received in
January 2005.





***4.*** ***Line
of Credit - Bank***





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





At
December 31, 2003 the Company was not in compliance with one of the financial
covenants which was waived by the lender through the issuance of a forbearance.





The
Company paid a line of credit fee of $30,000 covering the period from April 15,
2004 through January 31, 2005.





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





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








F-13
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


***5.***  ***Long-term
Debt and Capital Lease Obligations:***





As of
December 31, long-term debt consisted of:





2004
    
    2003Convertible
      Debentures
    
    $
    5,000,000
    
    $
    --Less:
      unamortized debt discount
    
    
    (1,167,000
    )
    
    --Net
      Convertible Debentures
    
    $
    3,833,000
    
    $
    --








On
November 9, 2004, the Company issued $5 million of redeemable subordinated
unsecured convertible debentures (the “Debenture”) to institutional investors.
The $5,000,000 Debenture which matures on November 9, 2009, bears interest at a
rate equal to the higher of 7% or 6-month LIBOR (2.63% at December 31, 2004)
plus 4.5% per annum for the first three years and an adjusted rate thereafter,
as defined in the agreement, and provides the holder with the option to convert
the loan to common stock at $4.05 per share. In addition, the Company agreed to
issue to the investors warrants to purchase an aggregate of 582,929 shares of
the Company's common stock at an exercise price of $3.99 per share. The
aggregate purchase price of the Debenture and warrants ($5,000,000) was
allocated between the Debenture and the warrants based upon their relative fair
market value. The purchase price assigned to the Debenture and the warrants was
$3.80 million and $1.20 million, respectively. The difference between the face
amount of the Debenture of $5.00 million and the aggregate purchase price of the
Debenture of $1.20 million was recorded as a debt discount and is being
amortized over the life of the Debenture. The Company used the Black-Scholes
Model to calculate the fair value of the warrants. The underlying assumptions
included in the Black-Scholes Model were: a risk-free interest rate of 3.51%; an
expected life of five years; and an expected volatility of 81.1% with no
dividend yield.





The
Company may elect to redeem the outstanding debentures at 115% of the principal
amount after the first year, 110% after the second year and 100% after the third
year. In addition, after the 1 st anniversary of the date of issuance, subject to certain requirements, as
defined, the Company can force the holder to convert the Debenture if
Medialink’s market price per common share exceeds $7.09. As of December 31,
2004, $5.00 million was outstanding under the Debenture which has been
classified long-term debt. The obligation has been reported net of $1,167,000
related to unamortized debt discount on warrants.





Additionally,
the Company is obligated under a capitalized lease covering certain equipment.
The capitalized lease is payable in quarterly installments of $29,666, which
includes principal and interest at the rate of 10.8% per annum through August
2006.





As of
December 31, obligations under capital leases
consisted of:





2004
    
    2003Capitalized
      lease
    
    $
    210,760
    
    $
    269,248Less:
      current portion
    
    
    (113,332
    )
    
    (96,248
    )Long-term
      debt, net of current portion
    
    $
    97,428
    
    $
    173,000





F-14


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


At
December 31, 2004 and 2003, the gross amount of the equipment and related
accumulated depreciation recorded under the capital lease was as
follows:





2004
    
    2003Equipment
    
    $
    307,184
    
    $
    324,443Less
      accumulated depreciation
    
    
    (182,542
    )
    
    (64,337
    )$
    124,642
    
    $
    260,106





Depreciation
of equipment held under the capital lease is included in depreciation and
amortization expense.





***6.***  ***Stockholders’
Equity:***





In
November 2004 the Company received 43,997 shares of Medialink common stock as
payment of balances due from a former officer of the Company totaling $143,430
arising from the termination of his employment. The shares valued at $3.26 per
share on the date of the agreement have been recorded as treasury stock at
December 31, 2004.





As
further discussed in note 5, on November 9, 2004 the Company issued $5 million
of redeemable subordinated unsecured convertible debentures to institutional
investors. In connection with this transaction, the Company agreed to issue to
the investors warrants to purchase an aggregate of 582,929 shares of the
Company’s common stock at an exercise price of $3.99 per share. The fair value
of the warrants, $1.2 million, was calculated using the Black-Scholes
Model.





In 2003
and 2002 the Company issued 91,537 shares and 125,622 shares, respectively, of
common stock as consideration for acquisitions. The fair value of the common
stock was determined based on the average trading price, over various periods,
of the Company’s common stock at the times of the respective
acquisitions.





In July
2002 the Company received 57,124 shares of Medialink common stock as payment for
loan balances due from a former officer of the Company totaling $199,934. The
shares, valued at $3.50 per share on the date of the agreement, have been
recorded as treasury stock at December 31, 2004 and 2003.








F-15
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


***7.***  ***Employee
Compensation Plans***





The
Company provides an incentive and nonqualified stock option plan (the “Stock
Option Plan”) for employees and other eligible participants. The option price
for all incentive stock options is the fair market value of the Company’s common
stock on the date of grant, except for employees owning more than 10% of the
outstanding common stock of the Company. The option price for employees owning
more than 10% of the outstanding common stock of the Company may be no less than
110% of the fair market value of the shares on the date of the option grant. The
stock options vest over a period of four years and have a term of ten years. The
number of options to be granted and option prices are determined by the
Compensation Committee of the Board of Directors in accordance with the terms of
the Stock Option Plan. The Company has reserved 1,670,808 shares of authorized
common stock for issuance under this plan. As of December 31, 2004 the Company
had 282,572 shares available for grant.





Activity
in the Stock Option Plan is as follows:





Shares
      Under
    
    Weighted
      AverageOption
    
    Exercise
      PricesOutstanding
      at January 1, 2002
    
    
    993,266
    
    $
    6.38Granted
    
    
    293,100
    
    $
    2.61Exercised
    
    
    (700
    )
    $
    2.81Canceled
    
    
    (150,941
    )
    $
    6.65Outstanding
      at December 31, 2002
    
    
    1,134,725
    
    $
    4.65Exercisable
      at December 31, 2002 through 2012
    
    
    702,941
    
    $
    6.52Outstanding
      at January 1, 2003
    
    
    1,134,725
    
    $
    4.65Granted
    
    
    13,000
    
    $
    2.79Exercised
    
    
    (1,600
    )
    $
    2.61Canceled
    
    
    (107,614
    )
    $
    4.40Outstanding
      at December 31, 2003
    
    
    1,038,511
    
    $
    5.47Exercisable
      at December 31, 2003 through 2013
    
    
    791,012
    
    $
    6.28Outstanding
      at January 1, 2004
    
    
    1,038,511
    
    $
    5.47Granted
    
    
    196,970
    
    $
    2.70Exercised
    
    
    (15,257
    )
    $
    2.90Canceled
    
    
    (135,635
    )
    $
    6.28Outstanding
      at December 31, 2004
    
    
    1,084,589
    
    $
    4.90Exercisable
      at December 31, 2004 through 2014
    
    
    809,603
    
    $
    5.63











F-16
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


The
Following table summarizes information about stock options outstanding under the
Stock Option Plan at December 31, 2004:





Outstanding
    
    ExercisableWeighted
    
    WeightedRange
      of
    
    
    
    Average
    
    Average
    
    
    
    WeightedExercise
    
    Number
    
    Remaining
    
    Exercise
    
    Number
    
    AveragePrices
    
    Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    Exercise
      Price$2.61-8.24
    
    
    906,589
    
    
    5.59
      years
    
    $
    3.32
    
    
    631,603
    
    $
    3.57$8.25-13.87
    
    
    110,050
    
    
    3.85
      years
    
    $
    11.08
    
    
    110,050
    
    $
    11.08$13.88-19.50
    
    
    67,950
    
    
    3.51
      years
    
    $
    15.95
    
    
    67,950
    
    $
    15.95Outstanding
      at December 31, 2004
    
    
    1,084,589
    
    
    
    
    
    
    
    
    809,603





The
Company provides a stock option plan for its directors (the “Director Plan”) for
the granting of options to non-employee members of the Company’s Board of
Directors to purchase shares of the Company’s common stock. The Company has
reserved 280,000 shares of authorized common stock for the issuance under this
plan. The option price under the Director Plan shall not be less than the fair
market value of such share of common stock on the date of grant. Under the
Director Plan, options issued vest over a three-year period and are exercisable
at such times as determined by the Company but no later than 15 years after the
date of the grant.





Under the
Director Plan, options to purchase 31,000 shares at exercise prices of $3.55 and
$3.30, 31,000 shares at $3.30 and $2.97 and 28,000 shares at exercise prices of
$2.61 and $3.59 were issued during 2004, 2003 and 2002, respectively. These
options expire 10 years from the date of grant; however, upon termination of
board membership of any director, the options will expire 12 months after the
termination date, but no later than the expiration date. No options were
exercised under the Director Plan during 2004, 2003 or 2002. Non-employee
directors are also eligible for additional grants of 3,000 shares per year
provided they continue to serve the Company in that capacity. Such future grants
would become exercisable over a three-year period.





F-17
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


Activity
in the Stock Option Plan is as follows:





Shares
      Under
    
    Weighted
      AverageOption
    
    Exercise
      PricesOutstanding
      at January 1, 2002
    
    
    132,600
    
    $
    8.05Granted
    
    
    28,000
    
    $
    2.96Exercised
    
    
    --
    
    
    --Canceled
    
    
    --
    
    
    --Outstanding
      at December 31, 2002
    
    
    160,600
    
    $
    7.16Exercisable
      at December 31, 2002 through 2012
    
    
    113,334
    
    $
    8.53Outstanding
      at January 1, 2003
    
    
    160,600
    
    $
    7.16Granted
    
    
    31,000
    
    $
    3.19Exercised
    
    
    --
    
    
    --Canceled
    
    
    --
    
    
    --Outstanding
      at December 31, 2003
    
    
    191,600
    
    $
    6.52Exercisable
      at December 31, 2003 through 2013
    
    
    135,925
    
    $
    7.86Outstanding
      at January 1, 2004
    
    
    191,600
    
    $
    6.52Granted
    
    
    31,000
    
    $
    3.38Exercised
    
    
    **--**
    
    
    **--**Canceled
    
    
    --
    
    
    --Outstanding
      at December 31, 2004
    
    
    222,
      600
    
    $
    6.08Exercisable
      at December 31, 2004 through 2014
    
    
    161,591
    
    $
    7.15





The
following table summarizes information about stock options outstanding under the
Director Plan at December 31, 2004:





Outstanding
    
    ExercisableWeighted
    
    WeightedRange
      of
    
    
    
    Average
    
    Average
    
    
    
    WeightedExercise
    
    Number
    
    Remaining
    
    Exercise
    
    Number
    
    AveragePrices
    
    Outstanding
    
    Life
    
    Price
    
    Exercisable
    
    Exercise
      Price$2.61-8.20
    
    
    170,600
    
    
    6.01
      years
    
    $
    4.06
    
    
    109,591
    
    $
    4.50$8.21-13.79
    
    
    37,000
    
    
    2.51
      years
    
    $
    11.19
    
    
    37,000
    
    $
    11.19$13.80-19.38
    
    
    15,000
    
    
    4.09
      years
    
    $
    16.50
    
    
    15,000
    
    $
    16.50Outstanding
      atDecember 31, 2004
    
    
    222,600
    
    
    
    
    
    
    
    
    161,591







F-18


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


****


***8.***  ***Commitments***





**(a)** **Leases**





The
Company has various non-cancelable operating leases for office space that expire
in 2010. Future minimum payments under operating leases consisted of the
following at December 31, 2004:





For
      the year ending December 31,2005
    
    
    3,103,0002006
    
    
    3,152,0002007
    
    
    2,450,0002008
    
    
    2,037,0002009
    
    
    1,616,000Thereafter
    
    
    1,259,000Total
      minimum lease payments
    
    $
    13,617,000





Rent
expense under operating leases amounted to approximately $2,344,000, $2,207,000
and $2,325,000 for the years ended December 31, 2004, 2003 and 2002,
respectively.





Additionally,
the Company has various sublease arrangements with sub-lessees.





Additionally,
in connection with the sale of Delahaye, the Company entered into agreements
with purchaser and landlords assigning the rights of two leases to the new owner
of Delahaye. Accordingly, these leases are not included in the lease commitment
schedule.





**(b)** **Employment
Agreements**





The
Company has entered into employment agreements with various executives expiring
through December 31, 2005. Future minimum payments, including base salary and
minimum bonuses, related to these agreements, are approximately $1,665,000 in
2005.





**(c)**  **Advisory
Charges**





In August
2001 the Company received an unsolicited takeover bid from United Business Media
plc to purchase all of its issued and outstanding common shares. In connection
with this unsolicited offer the Company retained a financial advisor and other
professionals to assist the Company in analyzing and considering the unsolicited
offer and the various strategic opportunities available to the Company to
maximize shareholder value. The unsolicited offer had been withdrawn. The terms
of the amended agreement provided that the Company pay the financial advisor
$1,600,000 not including expenses. The agreement expired in August 2002 with no
transaction transpiring and, accordingly, the remaining balance due under the
agreement was charged to operations during the 2002. For the year ended December
31, 2002, $1,200,000 was charged to operations related to this amended agreement
and included in advisory charges.








F-19
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


***9.***  ***Accrued
Expenses and Other Current Liabilities***





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





2004
    
    2003Salary
      and related
    
    $
    1,784,357
    
    $
    478,246Direct
      costs
    
    
    1,660,164
    
    
    1,154,774Client
      prepayments
    
    
    775,000
    
    
    474,000Deferred
      revenue
    
    
    670,182
    
    
    199,639Professional
      fees
    
    
    658,578
    
    
    235,004Other
      accrued expenses, each representing less than 5% of total current
      liabilities
    
    
    809,647
    
    
    1,043,518$
    6,357,928
    
    $
    3,585,181





***10.***  ***Income
Taxes:***





The
provision (benefit) for income taxes consists of the following
components:





For
      the Year Ended December 31,2004
    
    2003
    
    2002Current:Federal
    
    $
    411,000
    
    $
    --
    
    $
    (385,000
    )State
      and local
    
    
    144,000
    
    
    --
    
    
    (5,980
    )555,000
    
    
    --
    
    
    (390,980
    )Deferred:Federal
    
    
    1,483,000
    
    
    (185,000
    )
    
    180,000State
      and local
    
    
    521,000
    
    
    35,000
    
    
    65,0002,004,000
    
    
    (150,000
    )
    
    245,000$
    2,559,000
    
    $
    (150,000
    )
    $
    (145,980
    )





F-20
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


The
difference in income tax benefit between the amount computed using the statutory
federal income tax rate and the Company’s effective tax rate is due to the
following:





For
      the Year Ended December 31,2004
    
    2003
    
    2002Income
      tax expense (benefit) at statutory rate from continuing
      operations
    
    $
    (1,038,000
    )
    $
    (863,000
    )
    $
    (598,000
    )Increase
      (decrease) in income taxes resulting from:State
      and local income taxes, net of Federal income tax benefit
      (provision)
    
    
    (150,000
    )
    
    (68,000
    )
    
    81,000Valuation
      allowance on deferred tax assets
    
    
    1,839,000
    
    
    650,000
    
    
    252,000Non-deductible
      expenses and other
    
    
    42,000
    
    
    81,000
    
    
    219,020693,000
    
    
    (200,000
    )
    
    (45,980
    )Income
      tax expense (benefit) from discontinued operations
    
    
    1,866,000
    
    
    50,000
    
    
    (100,000
    )Actual
      income tax expense (benefit)
    
    $
    2,559,000
    
    $
    (150,000
    )
    $
    (145,980
    )





F-21
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


The tax
effect of temporary differences that give rise to significant portions of the
deferred tax assets and liabilities are as follows:





As
      of December 31,2004
    
    2003Deferred
      tax assets:Allowance
      for doubtful accounts
    
    $
    250,000
    
    $
    199,000Depreciation
      and amortization of property and equipment
    
    
    --
    
    
    63,000Amortization
      of intangibles
    
    
    17,000
    
    
    456,000Accrued
      loss on sublease
    
    
    152,000
    
    
    161,000Non-deductible
      interest
    
    
    14,000
    
    
    --Net
      operating loss carry forwards:US
      federal and state
    
    
    671,000
    
    
    925,000Foreign
    
    
    1,423,000
    
    
    964,000Loss
      on minority interest of subsidiary
    
    
    270,000
    
    
    --Non-deductible
      write-offs of investments
    
    
    304,000
    
    
    --Capital
      loss carryforward
    
    
    --
    
    
    200,000Total
      deferred tax assets
    
    
    3,101,000
    
    
    2,968,000Deferred
      tax liabilities:Depreciation
      and amortization of Property and equipment
    
    
    (166,000
    )
    
    --Gain
      on sale of division
    
    
    (132,000
    )
    
    --Total
      deferred tax liabilities
    
    
    (298,000
    )
    
    --Net
      deferred tax assets before valuation allowance
    
    
    2,803,000
    
    
    2,968,000Less
      valuation allowance
    
    
    (2,803,000
    )
    
    (964,000
    )Net
      deferred tax assets
    
    $
    --
    
    $
    2,004,000





During
2004 the Company was able to utilize certain US federal and state net operating
and capital loss carryforwards to offset the gain on the sale of its research
division. At December 31, 2004 the Company has net operating loss carryforwards
for state and local tax purposes of approximately $7.2 million expiring through
2018. Additionally, the Company has foreign loss carryforwards of approximately
$3,400,000. The foreign loss carryforwards have no expiration date.





In
assessing the realizability of deferred tax assets, management considers whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. The Company considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning in making these assessments. In view of the history of
operating losses in the UK and the anticipation that such losses will continue
in the near term as a result of additional investments in Teletrax, in 2002,
2003 and 2004 the Company established valuation allowances for operating loss
carryforwards in the UK. For the year ended December 31, 2004, due to a number
of factors, including the fiscal 2004 taxable loss from continuing operations
and the additional investments to be made in Teletrax and in other areas of the
Company’s operations, the Company lowered its projections of future taxable
income, particularly for the next 12 months. As a result of these lower
projections of future taxable income, management believes the future utilization
of the Company’s deferred tax assets is no longer more-likely-than-not. The
Company has made the decision to fully reserve the remaining net deferred tax
assets at December 31, 2004. The net change in the total valuation allowance for
the years ended December 31, 2004, 2003, and 2002 was an increase of $1.83
million, $712,000, and $252,000, respectively





F-22


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


******


***11.***  ***Segment
Information***





The
Company has several operating segments that, because of their similar economic
characteristics, have been aggregated into one reportable segment pursuant to
the requirements of SFAS 131. The following disclosure requirements of SFAS 131
consist only of segment information by geographic location.





A summary
of the Company’s operations by major geographic location are as follows for the
years ended December 31,





2004
    
    2003
    
    2002US
    
    UK
    
    US
    
    UK
    
    US
    
    UKRevenues:External
      clients
    
    $
    31,009,733
    
    $
    5,853,015
    
    $
    30,924,642
    
    $
    4,458,800
    
    $
    31,139,309
    
    $
    6,963,981Inter-segment
    
    
    336,000
    
    
    144,000
    
    
    192,000
    
    
    249,000
    
    
    365,000
    
    
    212,000Total
      revenues on continuing operations
    
    $
    31,345,733
    
    $
    5,997,015
    
    $
    31,116,642
    
    $
    4,707,800
    
    $
    31,504,309
    
    $
    7,175,981Total
      assets of continuing operations
    
    $
    35,352,404
    
    $
    3,420,137
    
    $
    29,311,177
    
    $
    3,601,155
    
    $
    33,819,098
    
    $
    3,441,878





***12.***  ***Supplemental
Cash Flow Information:***





Cash paid
(received) for interest and income taxes during the years ended December 31,
2004, 2003 and 2002 was as follows:





2004
    
    2003
    
    2002Interest
    
    $
    382,000
    
    $
    309,000
    
    $
    290,000Income
      Taxes
    
    $
    90,000
    
    $
    (1,580,000
    )
    $
    135,000











F-23
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


Non-cash
investing and financing activities for the years ended December 31, 2004, 2003
and 2002 were as follows:





2004
    
    2003
    
    2002Common
      stock issued in connection with acquisitions
    
    $
    --
    
    $
    275,000
    
    $
    358,000Treasury
      stock received in connection with satisfaction of a note receivable or
      other receivable
    
    $
    143,000
    
    $
    --
    
    $
    200,000Due
      from purchaser in connection with sale of Delahaye
    
    $
    605,000
    
    $
    --
    
    $
    --Accrued
      earn-out provision
    
    $
    --
    
    $
    --
    
    $
    262,000





***13.***  ***401(k)
Plan:***





The
Company maintains a qualified 401(k) plan (the “Plan”) covering all eligible
employees. Eligible employees may make elective salary reduction contributions
to the Plan of up to 15% of their annual compensation, subject to a dollar limit
established by law. In addition, the Company may provide, in its discretion, a
matching contribution equal to a percentage of the employee's contribution.
Participants are fully vested at all times in the amounts they contribute to the
Plan. Only participants who have completed a year of service during the Plan
year and are actively employed on the last day of such year are vested in the
Company's matching contributions for such year. There was no matching
contribution made by the Company in 2004, 2003 or 2002.





***14.***  ***Allowance
for Doubtful Accounts:***


**


2004
    
    2003
    
    2002Balance
      at beginning of year
    
    $
    446,055
    
    $
    510,200
    
    $
    277,550Direct
      write-offs
    
    
    (61,734
    )
    
    (116,702
    )
    
    (53,442
    )Additional
      charges to costs and expenses
    
    
    208,460
    
    
    52,557
    
    
    286,092Balance
      at the end of year
    
    $
    592,781
    
    $
    446,055
    
    $
    510,200









F-24
 ****
 **MEDIALINK
WORLDWIDE INCORPORATED AND SUBSIDIARIES**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (continued)**


***15.***  ***Quarterly
Results of Operations (Unaudited):***








(In
      thousands of dollars, except per share data)For
      the Quarter EndedMarch
      31,
    
    June
      30,
    
    September
      30,
    
    December
      31,2004
    
    2004
    
    2004
    
    2004Revenues
    
    $
    8,488
    
    $
    9,803
    
    $
    9,221
    
    $
    9,351Gross
      profit
    
    
    5,542
    
    
    5,929
    
    
    5,319
    
    
    5,390Operating
      (loss) income fromcontinuing operations
    
    
    (753
    )
    
    112
    
    
    (516
    )
    
    (1,511
    )Net
      loss
    
    
    (1,018
    )
    
    10
    
    
    (457
    )
    
    495Basic
      and diluted (loss) income per share
    
    
    (0.17
    )
    
    --
    
    
    (0.08
    )
    
    0.08





For
      the Quarter EndedMarch
      31,
    
    June
      30,
    
    September
      30,
    
    December
      31,2003
    
    2003
    
    2003
    
    2003Revenues
    
    $
    8,679
    
    $
    9,645
    
    $
    8,105
    
    $
    8,954Gross
      profit
    
    
    5,520
    
    
    6,164
    
    
    5,241
    
    
    5,839Operating
      (loss) income fromcontinuing operations
    
    
    (749
    )
    
    (470
    )
    
    (1,113
    )
    
    75Net
      loss
    
    
    (678
    )
    
    (598
    )
    
    (1,068
    )
    
    (347
    )Basic
      and diluted loss per share
    
    
    (0.11
    )
    
    (0.10
    )
    
    (0.18
    )
    
    (0.06
    )





***16.***  ***Restructuring
Charges :***





In
September 2003 the Company entered into an agreement to sublease excess office
space in its Norwalk, CT location. The sublease resulted in a $592,000
restructuring charge to operations in the 3rd quarter of 2003 calculated as
follows:





Present
      value of current lease obligation
    
    $
    1,010,000Present
      value of sublet rental income
    
    
    (491,000
    )Costs
      incurred in connection with agreement
    
    
    73,000Net
      restructuring charge
    
    
    592,000Less:
      utilization in 2003
    
    
    (36,664
    )Balance
      at December 31, 2003
    
    
    555,336Less:
      utilization in 2004
    
    
    (192,253
    )Balance
      at December 31, 2004
    
    
    363,083Less:
      current portion
    
    
    (128,000
    )Balance
      at December 31, 2004, net ofcurrent portion
    
    $
    235,083





Both the
existing lease and sublease expire in February 2008.
















F-25




**ITEM
9.** **CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.**


None.





**ITEM
9A.** **CONTROLS
AND PROCEDURES.**





Within 90
days prior to the date of this report, we carried out an evaluation, under the
supervision and with the participation of our chief executive officer, principal
accounting officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our chief executive officer, principal accounting officer and
principal financial officer concluded that our disclosure controls and
procedures, as of the date of the evaluation, are effective in timely alerting
them to material information required to be included in our periodic SEC
reports. It should be noted that the design of any system of controls is based
in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions, regardless of how
remote.





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





**ITEM
9B.** **OTHER
INFORMATION.**


None.





**PART
III**





**ITEM
10.**  **DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT.**





Information
regarding directors of the Company who are standing for reelection is set forth
under “Election of Directors” in the Company’s Definitive Proxy Statement to be
filed within 120 days after the Company’s fiscal year ended December 31, 2004
(the “Proxy Statement”), which information is incorporated herein by
reference.





**ITEM
11.**  **EXECUTIVE
COMPENSATION.**





Information
regarding the Company’s compensation of its named executive officers is set
forth under “Executive Compensation” in the Company’s Definitive Proxy
Statement, which information is incorporated herein by reference. Information
regarding the Company’s compensation of its directors is set forth under
“Directors’ Compensation” in the Proxy Statement, which information is
incorporated herein by reference.





**ITEM
12.** **SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.**





Information
regarding security ownership of certain beneficial owners and management is set
forth under “Common Stock Ownership of Certain Beneficial Owners and Management”
in the Company’s Proxy Statement, which information is incorporated herein by
reference.





25





**ITEM
13.**  **CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.**





Information
regarding certain relationships and related transactions is set forth under
“Certain Relationships and Related Transactions” in the Company’s Proxy
Statement, which information is incorporated herein by reference.








**ITEM
14.**  **PRINCIPAL
ACCOUNTING FEES AND SERVICES.**





The
information required by this Item 14 regarding the Company’s principal
accounting fees and services is incorporated herein by reference from the
information provided under the heading “Proposal 3: Ratification of Independent
Auditors” of the Company’s Definitive Proxy Statement anticipated to be dated
April 28, 2005.





**PART
IV**





**ITEM
15.**  **EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES.**





(a)
    **FINANCIAL
      STATEMENTS**





The
following Financial Statements are included:





1.FINANCIAL
STATEMENTS


Page
      NumberCONSOLIDATED
      FINANCIAL STATEMENTS OF MEDIALINKWORLDWIDE
      INCORPORATED AND SUBSIDIARIESReport
      of Independent Registered Public Accounting Firm
    F-1Consolidated
      Balance Sheets as of December 31, 2004 andDecember 31, 2003
    F-2Consolidated
      Statements of Operations for the Years Ended December 31,2004, December 31, 2003 and December 31,
      2002
    F-3Consolidated
      Statements of Stockholders’ Equity and Comprehensive
      Incomefor the Years Ended December 31, 2004, December
      31, 2003 and December 31, 2002
    F-4Consolidated
      Statements of Cash Flows for the Years Ended December 31,2004,
      December 31, 2003 and December 31, 2002
    F-5Notes
      to Consolidated Financial Statements for the Years EndedDecember 31, 2004, December 31, 2003 and
      December 31, 2002
    F-6








2. All
schedules have been omitted because they are not applicable or the required
information is included in the financial statements or notes
thereto.











26





(b)  EXHIBITS





**Exhibit**
      **Number**
    
    **Description**
    
    **Foot****notes**3.1
    
    Amended
      and Restated Certificate of Incorporation ofMedialink
      Worldwide Incorporated
    
    (1)3.2
    
    Amendment
      1 to the Amended and Restated By-Laws of the MedialinkWorldwide
      Incorporated4.1
    
    Preferred
      Stock Rights Agreement, dated as of August 16, 2001 between Medialink
      Worldwide Incorporated and Mellon Investor Service, 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
    
    (2)10.1
    
    Amended
      and Restated Employment Agreement, dated as of August 28, 2001, by and
      between Medialink Worldwide Incorporated and Laurence
      Moskowitz
    
    (3)10.2
    
    Amended
      and Restated Employment Agreement, dated as of August 28, 2001, by and
      between Medialink Worldwide Incorporated and J. Graeme
      McWhirter
    
    (4)10.3
    
    Amended
      and Restated Employment Agreement, dated as of January 1, 2002, by and
      between Medialink Worldwide Incorporated and Richard Frisch
    
    (5)10.4
    
    Non-Compete
      Agreement, dated as of June 16, 1997, by and between Medialink
      Worldwide Incorporated, Corporate TV Group, Inc. and Richard
      Frisch
    
    (6)10.5
    
    Asset
      Purchase Agreement, dated as of June 16, 1997, by and among Medialink
      Worldwide Incorporated, Corporate TV Group, Inc. and Richard
      Frisch
    
    (7)10.6
    
    Registration
      Rights Agreement, made as of June 16, 1997, by and between Medialink
      Worldwide Incorporated and Richard Frisch
    
    (8)10.7
    
    Medialink
      Worldwide Incorporated 401(k) Tax Deferred Savings Plan
    
    (9)10.8
    
    Amended
      and Restated Stock Option Plan and form of Stock Option
      Agreement
    
    (10)10.9
    
    Medialink
      Worldwide Incorporated 1996 Directors Stock Option Plan and form of 1996
      Directors Stock Option Agreement
    
    (11)10.10
    
    Form
      of Indemnification Agreement10.11
    
    Forbearance
      Agreement10.12
    
    Asset Purchase
      Agreement, dated December 31, 2004, by and between MedialinkWorldwide
      Incorporated and Bacon’s Information Inc.
    
    (12)*21.
    
    Subsidiaries
      of Medialink Worldwide Incorporated*23.
    
    Consent
      of KPMG LLP27.
    
    Financial
      Data Schedule*31.1
    
    Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002*31.2
    
    Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002*32
    
    Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act*32
    
    Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act


_______________________


* Filed
herewith





27








(1)
    Filed
      as Exhibit 2.5 to Medialink Worldwide Incorporated Form 8-A, filed on
      January 16, 1997 (Registration No. 000-21989) and incorporated herein by
      reference.





(2)
    Filed
      as Exhibit 4.1 to Medialink Worldwide Incorporated Report on Form 8-A
      dated August 16, 2001 and incorporated herein by
  reference.





(3)
    Filed
      as Exhibit 10.1 to Medialink Worldwide Incorporated Annual Report on Form
      10-K dated March 28, 2002 and incorporated herein by
    reference





(4)
    Filed
      as Exhibit 10.2 to Medialink Worldwide Incorporated Annual Report on
      Form 10-K dated March 28, 2002 and incorporated herein by
      reference.





(5)
    Filed
      as Exhibit 10.3 to Medialink Worldwide Incorporated Annual Report on
      Form 10-K dated March 31, 2003 and incorporated herein by
      reference.





(6)
    Filed
      as Exhibit 28.2 to Medialink Worldwide Incorporated Current Report on
      Form 8-K dated July 1, 1997 and incorporated herein by
      reference.





(7)
    Filed
      as Exhibit 2.1 to Medialink Worldwide Incorporated Current Report on
      Form 8-K dated July 1, 1997 and incorporated herein by
      reference.





(8)
    Filed
      as Exhibit 28.4 to Medialink Worldwide Incorporated Current Report on
      Form 8-K dated July 1, 1997 and incorporated herein by
      reference.





(9)
    Filed
      as Exhibit 10.33 to Medialink Worldwide Incorporated Registration
      Statement on Form S-1 (No. 333-14119) dated October 15,
      1996 and incorporated herein by reference.





(10)
    Filed
      as Exhibit 10.34 to Medialink Worldwide Incorporated Registration
      Statement on Form S-1 (No. 333-14119) dated October 15,
      1996 and incorporated herein by reference.





(11)
    Filed
      as Exhibit 10.35 to Medialink Worldwide Incorporated Registration
      Statement on Form S-1 (No. 333-14119) dated October 15,
      1996 and incorporated herein by reference.





(12)
    Filed
      as Exhibit 10.1 to Medialink Worldwide Incorporated Current Report on Form
      8-K/A dated January 3, 2005 and incorporated herein by
      reference.













28


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 INCORPORATED





By: /s/
Laurence Moskowitz


Laurence
Moskowitz,


Chairman
of the Board, Chief Executive Officer and President





By: /s/
J. Graeme McWhirter


J. Graeme
McWhirter


Executive
Vice President, Secretary and Chief Financial Officer


Dated:
March 30, 2005





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 and on the dates indicated.




/s/
      Laurence Moskowitz
    
    March
      30, 2005Laurence
      Moskowitz, Chairmanof
      the Board, Chief Executive Officer and President/s/
      Harold Finelt
    
    March
      30, 2005Harold
      Finelt, Director/s/
      Donald Kimelman
    
    March
      30, 2005Donald
      Kimelman, Director/s/
      James J. O’Neill
    
    March
      30, 2005James
      J. O’Neill, Director/s/
      Theodore Wm. Tashlik
    
    March
      30, 2005Theodore
      Wm. Tashlik, Director/s/
      Paul Sagan
    
    March
      30, 2005Paul
      Sagan, Director/s/
      J. Graeme McWhirter
    
    March
      30, 2005J.
      Graeme McWhirter, DirectorExecutive
      Vice President, Secretary and Chief Financial Officer/s/
      Alain Schibl
    
    March
      30, 2005Alain
      Schibl, Director/s/
      Catherine Lugbauer
    
    March
      30, 2005Catherine
      Lugbauer, Director/s/
      John M. Greening
    
    March
      30, 2005John
      M. Greening, Director




29