UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-K





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


EXCHANGE
      ACT OF 1934





For
      the
      fiscal year ended December 31, 2005





or





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


EXCHANGE
      ACT OF 1934





For
      the
      transition period from ______________ to ________________





Commission
      File Number 0-21989





Medialink
      Worldwide Incorporated


(Exact
      name of registrant as specified in its charter)




Delaware
            
            52-1481284(State
                or other jurisdiction of
            
            (I.R.S.
                Employer Identification No.)incorporation
                or organization)708
                Third Avenue, New York, NY
            
            10017(Address
                of principal executive offices)
            
            (Zip
                Code)Registrant's
                telephone number, including area code: (212) 682-8300Securities
                registered pursuant to Section 12(b)
                of the Act:Title
                of each class
            
            Name
                of each exchange on which
                registeredCommon
                Stock, par value $0.01 per
                share
            
            National
                Market System of
                NASDAQSecurities
                registered pursuant to Section
                12(g) of the Act: None




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





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





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





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. [   ]





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


Large
      accelerated filer [   ]   Accelerated filer [ 
 ]  Non-accelerated filer [X]





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





The
      aggregate market value of the registrant’s voting and non-voting common equity
      held by non-affiliates based on the closing market price on June 30, 2005,
      was
      $16,763,529.





The
      number of shares of the registrant’s common stock as of February 28, 2006, was
      6,201,006 shares.





DOCUMENTS
      INCORPORATED BY REFERENCE





Portions
      of the registrant’s 2006 Definitive Proxy Statement to be filed with the
      Securities and Exchange Commission are incorporated by reference into Part
      III
      hereof.










**TABLE
      OF CONTENTS**




Item
              
              
              
              Page**PART
                  I**1
              
              Business
              
              21A
              
              Risk
                  Factors
              
              61B
              
              Unresolved
                  Staff Comments
              
              72
              
              Properties
              
              73
              
              Legal
                  Proceedings
              
              74
              
              Submission
                  of Matters to a Vote of Security Holders
              
              7Executive
                  Officers of the Company
              
              8**PART
                  II**5
              
              Market
                  for the Registrant's Common Equity, Related Stockholder Matters
                  and Issuer
                  Purchases of Equity Securities
              
              96
              
              Selected
                  Financial Data
              
              107
              
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              117A
              
              Quantitative
                  and Qualitative Disclosures About Market Risk
              
              168
              
              Financial
                  Statements and Supplementary Data
              
              169
              
              Changes
                  in and Disagreements With Accountants on Accounting and Financial
                  Disclosure
              
              169A
              
              Controls
                  and Procedures
              
              169B
              
              Other
                  Information
              
              16**PART
                III**10
              
              Directors
                  and Executive Officers of the Registrant
              
              1711
              
              Executive
                  Compensation
              
              1712
              
              Security
                  Ownership of Certain Beneficial Owners and Management and RelatedStockholder
                  Matters
              
              1713
              
              Certain
                  Relationships and Related Transactions
              
              1714
              
              Principal
                  Accountant Fees and Services
              
              17**PART
                IV**15
              
              Exhibits
                  and Financial Statement Schedules
              
              18Signatures
              
              19





**PART
      I**





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





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





**General**





Medialink
      Worldwide Incorporated and its subsidiaries (the “Company”, “Medialink”, “we”,
“us”, “our”) is a leading global provider of broadcast media communications
      services to corporations and other organizations. Through our broadcast
      operations in the United States and the United Kingdom, we provide unique news
      and marketing media strategies and solutions that enable our clients to inform
      and educate their target audiences through various media, including television,
      radio, print, and the Internet. Through our U.S. Newswire division, we provide
      wire services to electronically distribute press releases and photography to
      news media and on-line services for domestic governmental, public affairs,
      and
      non-profit organizations.





Through
      our Teletrax subsidiaries, we provide video watermarking services to video
      content providers, such as entertainment companies, news organizations,
      television syndicators, and direct-response marketing companies. The TeletraxTM
service provides broadcast television intelligence to enable our clients to
      monitor their content.





In
      December 2004 we sold our Delahaye division, through which we provided research
      services, including the analysis of public relations and corporate
      communications activities on behalf of corporate and other clients.





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





**Segment
      Information**





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





**Services**





*Media
      Communications Services.* Our
      media
      communications services consist of broadcast services and press release wire
      services.





Our
      broadcast services operations offer a range of video and audio consultation,
      production, distribution and monitoring services. Our video and audio offerings
      include video news releases and short-form promotional videos, live event
      broadcasts, audio news releases, and electronic press kits that are suitable
      for
      all broadcast media. Our clients can choose individual service offerings on
      a
      stand-alone basis or they can choose a suite of our service offerings and
      distribution channels to better target their intended audience. We provide
      our
      clients with consultative guidance to assist them in identifying potential
      interest in their message and on how to better reach their intended audience.
      We
      offer our clients all aspects of production, including scripting, recording,
      editing, and narration. We distribute our clients’ content directly to targeted
      television and radio stations through our comprehensive distribution platform
      and to on-line media outlets worldwide. In addition, we deliver client content
      in multiple formats directly to consumers and other directly targeted audiences
      via the Internet. Our wide range of standard and customized services enables
      our
      clients to build public recognition, highlight the launch of new products,
      manage crisis situations, and meet their other communications objectives. We
      monitor and analyze the extent to which content is aired through the use of
      three distinct services, used either independently or in combination. The
      services we use to monitor broadcasts include our TeletraxTM video watermarking
      service, Mediavision, our proprietary licensed broadcast video capture and
      retrieval service that retrieves video based on matching keyword searches
      against the closed captioning text used in broadcasts, and other monitoring
      services provided by third-party vendors. This monitoring and analysis provides
      valuable feedback to our clients about the size and type of audience that was
      reached, and the context in which the video was aired.





2


Video
      news releases are news stories that we write and produce to communicate a
      client’s public relations or corporate message, and are analogous to a printed
      press release, transforming the printed word into the sound and pictures that
      television newsrooms can use in programming. Video news releases are paid for
      by
      the client seeking to announce news and they are delivered to the media without
      charge. Produced in broadcast news style, video news releases relay the client’s
      news directly to television news decision makers who may use the video material
      either in full or edited form. Television stations decide whether and how to
      use
      video news releases and the corresponding “b-roll” to fill programming time,
      some on a regular basis. The “b-roll” is supplementary and back-up material that
      is provided with the video and generally does not contain the narrated audio
      track, providing broadcasters with the ability to choose select portions of
      the
      video and provide their own voice-over. We also provide our clients, through
      our
“In the Know” offering, the ability to achieve guaranteed placement for their
      video release by directly purchasing the media time from select broadcasters.
      Short-form promotional videos are produced for internal use primarily by our
      corporate clients. The production of short-form promotional videos is similar
      to
      that for video news releases, but generally varies in the manner in which it
      is
      distributed.





Our
      service offerings for live event broadcasts include satellite media tours,
      radio
      media tours, video and audio conferences, webcasts, and special events
      broadcasts. Satellite media tours consist of a sequence of one-on-one satellite
      interviews with a series of pre-booked television reporters across the country
      or around the world. Satellite media tours typically involve an interview with
      an author, performer, executive, or other spokesperson promoting an upcoming
      event, product, movie, or book release. Satellite media tours generally are
      conducted from a studio but can originate from remote locations and may be
      aired
      live by the television station or recorded for a later airing. Radio media
      tours
      are similar to satellite media tours, but are targeted to radio stations.





Audio
      news releases are similar to video news releases, but are targeted to radio
      stations. Radio stations make editorial decisions on the use of this content
      and
      we provide guaranteed placement options through the direct purchase of media
      time. We also provide electronic press kits, which are video packages provided
      primarily to the entertainment industry to assist in promoting new content
      releases.





We
      rely
      on our long-standing distribution alliances and our relationships with major
      news organizations for distributing our broadcast services products to newsroom
      decision makers. We distribute video news releases via satellite transmission
      to
      newsrooms as well as through a digital distribution system that also is used
      for
      distribution directly to national networks, including ABC and CNN. In addition,
      we have arrangements with both CBS and FOX under which we have direct
      fiber-optic access for delivery to the national networks, which then
      redistribute the content to their network affiliates. Through an agreement
      with
      the Associated Press for the use of its AP Express newswire, we alert hundreds
      of television newsrooms to the clients’ impending video release so that
      interested stations can retrieve the content from their preferred distribution
      channel. We also notify television newsrooms of the availability of client
      content through e-mails and direct telephone calls made by our trained
      personnel. We continue to expand our distribution infrastructure, and in 2005
      we
      began posting video and audio podcasts on the Internet through Yahoo! and
      Google. We have also developed a proprietary distribution platform for the
      advance notification and delivery of multi-media content to on-line newsrooms.
      Commencing in 2006, this proprietary distribution platform will also provide
      for
      the distribution of broadcast quality video to newsrooms and journalists by
      syndicating our clients’ content via RSS feeds and by direct placement on the
      websites of television news stations.





3


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





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





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





*Video
      Watermarking Services.* We
      provide our TeletraxTM video watermarking services through our majority-owned
      subsidiaries, TTX (US) LLC and TTX Limited, to entertainment companies, news
      organizations, television syndicators, and direct-response marketing companies.
      The TeletraxTM service enables owners of video content to 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 and generates tracking reports for the original content
      owners. Reports of individual broadcast airings are delivered online in near
      real time to each client’s custom-designed portal or in data file transfers.
      Each client’s broadcast activity is updated dynamically, 24 hours a day,
      enabling clients to respond immediately to reported results such as changes
      in
      end-user preferences or detections of unauthorized use. The TeletraxTM service is
      built upon our extensive monitoring network and technology developed by Royal
      Philips Electronics.





We
      have
      expanded the Teletrax network of detectors to monitor the television broadcasts
      of more than 1,100 channels worldwide and include coverage of the top 150
      domestic markets, representing more than 90% of all domestic television
      households. The international network monitors nearly 200 channels, broadcast
      from 50 nations, and comprised of 12 monitoring stations in North America,
      Europe, Asia, Australia, the Middle East, and South America.





**Clients**





Our
      media
      communications services’ client base encompasses more than 2,500 clients in a
      wide variety of enterprises and organizations, including automobile
      manufacturers, pharmaceutical companies, consumer goods companies, entertainment
      companies, numerous governmental and not-for-profit agencies and associations,
      and the public relations firms that represent the various entities. For the
      year
      ended December 31, 2003, revenues from Altria Group, Inc., and its subsidiaries
      represented approximately 16.8% of our media communications services revenues.
      No single client accounted for more than 10% of our media communications
      services revenues for the years ended December 31, 2005 and 2004. For the years
      ended December 31, 2005, 2004, and 2003, the five largest media communications
      services clients accounted for approximately 12.0%, 15.9%, and 25.9%,
      respectively, of the segment’s revenues and the fifty largest media
      communications services clients accounted for approximately 47.6%, 45.5%, and
      51.1%, respectively, of the segment’s revenues. A significant reduction in
      business from any of the segment’s clients would not have a material adverse
      effect on Medialink. We have contracts with certain clients for media
      communications services but in most instances there is no contractual
      arrangement that would prevent clients from selecting other means to perform
      some or all of their work.





4


Our
      TeletraxTM video watermarking services’ client base primarily consists of
      entertainment companies, news organizations, television syndicators, and
      direct-response marketing companies. No single client or group of clients
      represents a significant portion of the segment’s revenues, and therefore a
      significant reduction in business from any of the video watermarking services’
clients would not have a material adverse effect on Medialink. All clients
      in
      the video watermarking services segment are under contract for a period of
      at
      least one year, and in most instances are under contract for periods up to
      three
      years.





**Sales
      and Marketing**





We
      rely
      primarily on an internal sales force and support staff of approximately 45
      employees to sell and market our media communications services. In certain
      instances, because they have conducted business together over several years,
      the
      members of our internal sales force have established strong working
      relationships with their clients. These strong client relationships enable
      us to
      obtain repeat business over a long-term period in the absence of any contractual
      arrangement with our clients. However, because of these strong client
      relationships, the loss of any single member of our internal sales force could
      result in a decline in revenues if clients choose to move their business to
      another provider.





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





**Competition**





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





*Video
      Watermarking Services.* We
      have
      competitors for our video watermarking services, although such competitors
      rely
      on different technologies with different levels of reliability and integrity.
      We
      believe that our TeletraxTM service, which embeds an imperceptible watermark in
      the video that cannot be stripped or altered, provides greater reliability
      and
      integrity than our competitors’ offerings, which rely on such means as embedding
      a marker in an audio track or other technologies under which the marker can
      be
      removed either intentionally or unintentionally. We compete for video
      watermarking services based on the reliability of the TeletraxTM service and the
      ability for our clients to achieve a return on their investment based on this
      reliability.





**Employees**





As
      of
      December 31, 2005, we had 155 employees, 152 of whom were full-time salaried
      employees. In addition, we engage independent contractors and freelancers to
      supplement our work force during peak periods and on a project-by-project basis.
      We have no employees who were covered by a collective bargaining agreement.
      We
      believe that our relationships with our employees are satisfactory.





**Geographic
      Information**





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





5




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





*Major
      News Events* –
      Events that
      dominate news broadcasts, such as the events of September 11, 2001, or the
      involvement by the United States in a war, may cause our clients to delay or
      not
      use our services for a particular project as such clients may determine that
      their messages may not receive adequate attention in light of the coverage
      received by these other news events. Such circumstances could have a material
      adverse effect on our business, operating results, and financial
      condition.





*Susceptibility
      to General Economic Conditions* –
      Our revenues are
      affected by our clients’ marketing communications spending and advertising
      budgets. Our revenues and results of operations may be subject to fluctuations
      based upon general economic conditions in the geographic locations where we
      offer services or distribute content. If there were to be a continued economic
      downturn or a continued recession in these geographic locations, then we expect
      that business enterprises, including our clients and potential clients, could
      substantially and immediately reduce their marketing and communications budgets.
      In the event of such an economic climate, there would be a material adverse
      effect on our business, operating results, and financial condition.





*Receptiveness
      of the Media to Our Services; Changes in Our Marketplace* –
      We are a leading
      provider of creative production and distribution services to corporations and
      other organizations seeking to communicate with the public through the news
      media. If the marketplace for our services should change or if the news media,
      as a result of recent events or a perceived reduction in the value of our
      services or otherwise, should not be as receptive to our services or should
      decide to reduce or eliminate its use of the news that we distribute, there
      would be a material adverse effect on our business, operating results, and
      financial condition.





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





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





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





*Provisions
      of Our Charter Documents May Have Anti-takeover Effects that Could Prevent
      a
      Change in Control Even if the Change in Control Would be Beneficial to our
      Stockholders –* Provisions
      of our amended and restated certificate of incorporation, by-laws, and Delaware
      law could make it more difficult for a third party to acquire us, even if doing
      so would be beneficial to our shareholders.





6


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





*Other
      Risk Factors –* Other
      risk factors include our recent history of losses, our inability to achieve
      or
      maintain profitability, 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, and the potential
      negative effects of our international operations. In addition, future
      acquisitions or divestitures and the absence of long-term contracts with clients
      and vendors may adversely affect our operations and have an adverse effect
      on
      our pricing, revenues, operating margins, and client base.




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





Not
      applicable.




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





We
      rent
      our corporate headquarters in New York City under a lease that expires in 2010.
      This New York City location is also our primary facility for providing the
      domestic broadcast services of our media communications services segment and
      serves as the domestic base for our video watermarking services segment. Under
      a
      lease that expires in 2006, we rent a facility in London that serves as our
      primary facility for providing international media communications services
      and
      as the international base for our video watermarking services. We rent a
      facility in Washington, DC, under a lease that expires in 2008, that is our
      primary facility for providing press release wire services and also serves
      as a
      satellite sales office for broadcast services. We rent a facility in Norwalk,
      CT, under a lease that expires in 2009 that serves as our information technology
      base. We also rent various smaller facilities in Los Angeles, San Francisco,
      Chicago, and Dallas that serve as satellite sales offices. We believe that
      our
      facilities are adequate to meet our needs.




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





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




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





There
      were no matters submitted to a vote of security holders during the fourth
      quarter of the fiscal year ended December 31, 2005.


7


**EXECUTIVE
      OFFICERS OF THE COMPANY**





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





**Name**
            **Age**
            **Position**Laurence
                Moskowitz
            54
            Chairman
                of the Board, Chief Executive Officer, and PresidentLawrence
                Thomas
            44
            Chief
                Operating OfficerKenneth
                G. Torosian
            44
            Chief
                Financial OfficerWilliam
                McCarren
            50
            Vice
                President, President - U.S. NewswireJ.
                Graeme McWhirter
            50
            Former
                Executive Vice President, Chief Financial Officer, Secretary, and
                Director.




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





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





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





*William
      McCarren* has
      served as President of the Company’s U.S. Newswire division, an entity he
      co-founded in 1986, since the Company acquired the operation in 1999. Mr.
      McCarren has also served as a Vice President of the Company since
      1999.





*J.
      Graeme McWhirter* ,
      a
      co-founder of the Company, resigned as an officer and a director of the Company
      and its subsidiaries effective as of December 30, 2005. Mr. McWhirter previously
      served as Chief Financial Officer since 1986, as Executive Vice President since
      1992, as Secretary since 2001, and as a director of the Company since 1998.





8





**PART
      II**





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





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





**2005**
            
            **2004****High**
            
            **Low**
            
            **High**
            
            **Low**Quarter
                ended March 31
            
            $
            5.08
            
            $
            3.42
            
            $
            4.95
            
            $
            3.20Quarter
                ended June 30
            
            $
            4.18
            
            $
            2.91
            
            $
            4.38
            
            $
            3.44Quarter
                ended September 30
            
            $
            3.21
            
            $
            2.56
            
            $
            3.75
            
            $
            2.70Quarter
                ended December 31
            
            $
            3.50
            
            $
            2.77
            
            $
            3.56
            
            $
            3.00





As
      of
      February 28, 2006, there were approximately 109 registered holders of record
      of
      the Company’s common stock. No dividends have been paid on the Company’s common
      stock.





The
      following table sets forth certain information as of December 31, 2005, with
      respect to the Company’s equity compensation plans under which securities of the
      Company are authorized for issuance.





**Equity
                Compensation Plan Information****Plan
                category**
            
            **Number
                of securities to**
              **be
                issued upon exercise**
              **of
                outstanding options,**
              **warrants
                and rights**
            
            **Weighted-average**
              **exercise
                price of**
              **outstanding
                options,**
              **warrants
                and rights**
            
            **Number
                of securities remaining**
              **available
                for future issuance**
              **under
                equity compensation**
              **plans
                (excluding securities**
              **reflected
                in column (a))****(a)**
            
            **(b)**
            
            **(c)**Equity
                  compensation plans
                approved
                  by security holders
            
            1,066,919
            
            $4.94
            
            558,069





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





The
      Company has neither sold any unregistered securities nor purchased any of its
      equity securities during the year ended December 31, 2005.





9




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




**December
                  31,****2005**
              
              **2004**
              
              **2003**
              
              **2002**
              
              **2001****(In
                  thousands of dollars, except per-share amounts)**Revenues
              
              $
              36,172
              
              $
              36,863
              
              $
              35,383
              
              $
              38,103
              
              $
              38,610Loss
                  from continuing operations
              
              $
              (5,740
              )
              $
              (3,746
              )
              $
              (2,338
              )
              $
              (1,711
              )
              $
              (4,862
              )Loss
                    per common share fromcontinuing
                    operations:Basic
              
              $
              (0.95
              )
              $
              (0.62
              )
              $
              (0.39
              )
              $
              (0.29
              )
              $
              (0.50
              )Diluted
              
              $
              (0.95
              )
              $
              (0.62
              )
              $
              (0.39
              )
              $
              (0.29
              )
              $
              (0.50
              )Total
                  assets
              
              $
              32,926
              
              $
              38,773
              
              $
              37,186
              
              $
              40,643
              
              $
              40,813Obligations
                  under capital leases
              
              
              
              
              $
              97
              
              $
              173
              
              $
              217
              
              $
              95Other
                  long-term liabilities
              
              $
              1,202Convertible
                  debentures
              
              
              4,045
              
              
              3,833
              
              
              -
              
              
              -
              
              
              -Total
                  long-term obligations
              
              $
              5,247
              
              $
              3,930
              
              $
              173
              
              $
              217
              
              $
              95




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





10


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





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





**Results
      of Operations**





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





Revenues in 2005 decreased by $151, or 0.4%, as compared to 2004. Revenues
      from
      media communications services in 2005 decreased by $531, or 1.5%, to $34,708
      primarily as a result of a decrease in revenues from broadcast services of
      $1,112, which was partially offset by an increase in press release wire services
      of $581. The decline in revenues from broadcast services was primarily the
      result of a significant decline in business from a major client. Revenues from
      TeletraxTM video watermarking services in 2005 increased by $380, or 23.4%, to
      $2,004 due primarily to an increase in service revenues of $560 resulting from
      an increase in the number of clients being served. Video watermarking services
      revenues also include $184 and $364 from equipment sales for the years ended
      December 31, 2005 and 2004, respectively.





Direct
      costs decreased by $161 in 2005, and as a percentage of revenue remained
      relatively flat with 2004, decreasing to 39.6% in 2005 from 39.8% in
      2004.





Selling,
      general, and administrative (“SG&A”) expenses in 2005 increased by $4,033 as
      compared to 2004, and as a percentage of revenue increased to 71.1% in 2005
      from
      59.8% in 2004. SG&A expenses in 2005 included $2,010 in severance costs
      incurred as a result of the termination of senior operations and executive
      management personnel in the fourth quarter of 2005. Exclusive of such severance
      costs, SG&A expenses as a percent of revenue were 65.6% in 2005. Other
      payroll-related costs increased by $512 in 2005 primarily as the result of
      approximately $990 from additional staffing, including additions for executive
      management and sales personnel for TeletraxTM services, and additional costs
      incurred in the media communications business, partially offset by a decrease
      of
      approximately $563 for bonuses primarily as a result of certain deal-specific
      bonuses earned in 2004 with no corresponding bonuses being earned in 2005.
      Non-payroll SG&A increased by $1,511 primarily as a result of additional
      promotion costs, professional fees, and non-payroll personnel costs incurred
      in
      2005.





Depreciation
      and amortization expense in 2005 decreased by $162 as compared to 2004 primarily
      as a result of amortization of intangible assets in 2004 that were fully
      amortized by the end of 2004, resulting in no corresponding expense in 2005.
      Depreciation and amortization in 2005 and 2004 includes depreciation related
      to
      TeletraxTM video watermarking services of $614 and $547, respectively.





The
      Company had an operating loss of $5,559 in 2005 as compared to an operating
      loss
      of $2,660 in 2004. The operating losses in 2005 and 2004 included operating
      losses of $2,651and $2,033, respectively, from the Company’s 76%-owned Teletrax
      subsidiaries. The Company’s results of operations included 100% of the losses
      from the Teletrax subsidiaries since the minority shareholder has no future
      funding obligations.





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





The
      Company established a valuation allowance to reserve for certain of its
      deferred tax assets at December 31, 2004, based on its assessment that it was
      not more likely than not that the benefit associated with the deferred tax
      assets will be realized in future periods. Based on its most recent projections,
      the Company continues to believe that it is not more likely than not that such
      benefit will be realized, and therefore has established a valuation allowance
      to reserve for certain of its deferred tax assets at December 31, 2005. The
      valuation allowance was $4,739 and $2,803 at December 31, 2005 and 2004,
      respectively .





11


*Year
      ended December 31, 2004, compared with 2003*





Revenues
      in 2004 were $1,480, or 4.2%, higher than in 2003. Revenues from media
      communications services in 2004 increased by $501, or 1.4%, to $35,239. Revenues
      from TeletraxTM video watermarking services in 2004 increased by $979, or 151.8%,
      to $1,624 due primarily to an increase in service revenues of $674 resulting
      from an increase in the number of clients being served. Video watermarking
      services’ revenues also include $364 and $59 from equipment sales for the years
      ended December 31, 2004 and 2003.





Direct
      costs increased by $2,065 in 2004, and as a percentage of revenues increased
      to
      39.8% in 2004 from 35.7% in 2003. This increase in direct costs as a percentage
      of revenues was primarily attributable to changes in the service offering 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.





SG&A
      expenses in 2004 decreased by $199 as compared to 2003. As a percentage of
      revenue, SG&A decreased to 59.8% in 2004 from 62.9% in 2003. Payroll-related
      costs increased by approximately $374 primarily as a result of an increase
      of
      approximately $580 for bonuses as a result of deal-specific bonuses earned
      in
      2004 related to the sale of the Company’s research business and the convertible
      debenture financing, partially offset by a decrease related to employee
      termination costs incurred during 2003 with no corresponding costs incurred
      in
      2004. Additional staffing and normal payroll increases in both media
      communication services and TeletraxTM video watermarking services also resulted
      in additional payroll-related costs of approximately $104 in 2004. Non-payroll
      SG&A decreased by $573 primarily as a result of lower costs in 2004 upon the
      completion of the first stage of the TeletraxTM network in 2003 and a decrease in
      advertising and marketing, travel and entertainment, and occupancy costs in
      media communications services in 2004.





The
      Company recognized a loss of $247 in 2004 related to its 50% interest in a
      joint
      venture interest as compared to a loss of $316 from this joint venture in 2003.
      In addition, the Company recorded impairment charges totaling $715 in 2004,
      which consisted of a loss of $342 on the impairment of two investments accounted
      for under the cost method and a non-cash charge of $373 to write off the
      remaining investment upon dissolution of the aforementioned joint venture.





The
      Company incurred a restructuring charge of $592 in 2003 related to the closing
      of a facility and a related sublease arrangement for office space in its
      Norwalk, CT, location.





The
      Company had an operating loss of $2,660 in 2004 as compared to an operating
      loss
      of $2,256 in 2003. The operating losses in 2004 and 2003 included operating
      losses of $2,033 and $2,448, respectively, from the Company’s 76%-owned Teletrax
      subsidiaries.





Interest
      expense, net of interest income, increased by $111 in 2004 as compared to 2003
      primarily due to the issuance of $5,000 convertible debentures in November
      2004.
      Interest expense in 2004 related to these debentures was $89, which included
      $41
      of amortization of discount and deferred financing fees. Additionally, the
      Company experienced increases in interest rates during the latter part of 2003
      and throughout 2004 on the Company’s previous line of credit facility, which
      further contributed to the increase in interest expense in 2004.





Although
      the Company incurred a loss from continuing operations before taxes of $3,053
      in
      2004, the Company recognized an income tax provision of $693 primarily as a
      result of an additional valuation allowance recorded against the Company’s
      deferred tax assets and certain state and local taxes. The Company established
      a
      valuation allowance to reserve for certain of its deferred tax assets at
      December 31, 2004, based on its assessment that it was not more likely than
      not
      that the benefit associated with the deferred tax assets will be realized in
      future periods. The valuation allowance at December 31, 2004, was $2,803, an
      increase of $1,839 from the valuation allowance at December 31, 2003. The
      Company is also subject to certain minimum state and local taxes in the various
      jurisdictions in which it conducts business, which result in a provision for
      income taxes being recognized on operating losses.





12


In
      connection with the sale in December 2004 of Delahaye, its division that
      provided research services, the Company recognized income from discontinued
      operations in 2004 of $2,775, which consisted of a gain on the sale of $3,049,
      net of taxes and transaction expenses, and a loss from operations of $274.





**Liquidity
      and Capital Resources**





The
      Company continues to finance its operations and capital investment requirements
      from its existing cash reserves, which totaled $7,303 at December 31, 2005.
      The
      Company’s cash reserves were generated from $5,000 of convertible debentures
      issued in November 2004, of which $2,000 was initially used to fully repay
      the
      Company’s line of credit facility, and from the proceeds of $7,700 from the
      December 2004 sale of Delahaye, the Company’s research division.





During
      2005, accounts receivable decreased by $795 due primarily to the timing of
      cash
      receipts from clients. Other current assets decreased by $1,288 during 2005
      primarily as a result of collections of non-trade receivables, including
      approximately $600 from the purchaser of the Company’s research division.
      Working capital at December 31, 2005, decreased by $4,228 from 2004 primarily
      as
      a result of funding the Company’s operating losses and funding capital
      investments made during the period, including amounts expended for
      TeletraxTM.





Cash
      flows from operating activities during 2005 decreased by $4,762 as compared
      to
      2004 due primarily to a decrease in cash generated from operations. During
      2005,
      the Company invested $1,862 in new equipment and new technology products and
      repaid $117 of capital lease obligations. These amounts were primarily funded
      from the Company’s working capital and $280 in proceeds received upon the
      exercise of stock options.





The
      Company expects to spend approximately $1,750 over the course of the next twelve
      months for capital improvements primarily for the continuing build out of the
      infrastructure for TeletraxTM and for modernization of its media communications
      services business. The Company intends to finance these expenditures with
      working capital. The Company believes that its working capital will provide
      sufficient cash flows to fund its cash needs throughout 2006.





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





**Off-balance
      sheet arrangements**





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





**Contractual
      Obligations**





The
      following table summarizes the Company’s contractual obligations at December 31,
      2005.





**Payments
                due by period****Total**
            
            **Less
                than 1 year**
            
            **1-3
                years**
            
            **3-5
                years**Long-term
                debt obligations
            $
            5,000
            
            
            
            
            
            
            
            $
            5,000Capital
                lease obligations
            
            70
            
            $
            70Operating
                lease obligations
            
            10,735
            
            
            3,263
            
            $
            4,597
            
            
            2,875Other
                long-term liabilities
            
            1,894
            
            
            692
            
            
            971
            
            
            231Total
            $
            17,699
            
            $
            4,025
            
            $
            5,568
            
            $
            8,106





13


**Critical
      Accounting Policies**





Management
      must make certain estimates and assumptions in preparing the financial
      statements of the Company. Certain of these estimates and assumptions relate
      to
      matters that are inherently uncertain as they pertain to future events.
      Management believes that the estimates and assumptions used in preparing the
      financial statements of the Company were the most appropriate at that time,
      although actual results could differ significantly from those estimates under
      different conditions.





Note
      2,
“Summary of Significant Accounting Policies,” to the Company’s consolidated
      financial statements included in this Annual Report on Form 10-K provides a
      detailed discussion of the various accounting policies of the Company. We
      believe that the following accounting policies are critical since they require
      subjective or complex judgments that could potentially affect the financial
      condition or results of operations of the Company.




*Allowance
      for Doubtful Accounts:* The
      Company assesses the carrying value of its accounts receivable based on
      management's assessment of the collectibility of specific client accounts,
      which
      includes consideration of the credit worthiness and financial condition of
      those
      specific clients. The Company also assesses the carrying value of accounts
      receivable balances based on other factors, including historical experience
      with
      bad debts, client concentrations, the general economic environment, and the
      aging of such receivables. The Company records an allowance for doubtful
      accounts to reduce its accounts receivable balance to the amount that is
      reasonably believed to be collectible. Based on the Company’s estimates, an
      allowance for doubtful accounts of $610 was established at December 31, 2005,
      compared to an allowance of $593 at December 31, 2004. A change in the Company’s
      assumptions, including the credit worthiness of clients and the default rate
      on
      receivables, would result in the Company recovering an amount of its accounts
      receivable that differs from its current carrying value. Such difference, either
      positive or negative, would be reflected as a component of the Company’s
      SG&A expense in future periods.





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





*Valuation
      of Goodwill:* In
      assessing the carrying value of goodwill in accordance with SFAS No. 142,
“Goodwill and Other Intangible Assets,” the Company compared the carrying value
      of its reporting units to their fair values. The Company is required to test
      its
      goodwill for impairment at least annually, and more frequently if an event
      occurs or circumstances change to indicate that an impairment may have occurred.
      The Company’s annual testing date is September 30. In accordance with SFAS No.
      142, the Company aggregated certain components to arrive at one of its reporting
      units. The Company estimated the fair value of its reporting units using a
      discounted cash flow approach. In estimating the fair value of its reporting
      units, the Company had to make various assumptions, including projections of
      future revenues based on assumed long-term growth rates, estimated costs, and
      the appropriate discount rates. The estimates used by the Company for long-term
      revenue growth and future costs are based on historical data, various internal
      estimates, and a variety of external sources, and are developed as part of
      the
      Company’s routine long-range planning process. The carrying value of the
      Company’s goodwill was $13,006 at September 30, 2005. Based on the use of these
      assumptions in estimating the fair value of each reporting unit, there was
      no
      impairment of goodwill as of September 30, 2005, the most recent annual testing
      date. A change in the Company’s assumptions, including lower long-term growth
      rates, higher operating costs, or higher discount rates could cause a change
      in
      the estimated fair value of the Company’s reporting units, and therefore could
      result in an impairment of goodwill, which would have a significant adverse
      effect on the Company’s results of operations.





14


*Income
      Taxes:* In
      assessing the recoverability of its deferred tax assets, the Company compared
      the carrying value of its deferred tax assets to the tax-effected projections
      of
      its taxable income over future periods in which such assets could be realized.
      In estimating its future taxable income, the Company had to make various
      assumptions about its future operating performance. Based on the Company’s
      projection of future taxable income, which include the effects of recent
      operating and tax losses, management believed that it was not more likely than
      not that the benefit associated with the deferred tax assets will be realized
      in
      future periods. Accordingly, a valuation allowance in the amount of $4,739
      and
      $2,803 at December 31, 2005 and 2004, respectively, was established to reserve
      against the carrying value of certain of
      the Company’s deferred tax assets. A change in the Company’s
      assumptions, including better operating performance than projected, could result
      in a change in the amount of deferred tax assets that will be recovered, and
      therefore could result in a reduction to the valuation allowance established
      at
      December 31, 2005. Such an adjustment would be reflected as a component of
      the
      Company’s provision for income taxes in the period of the
      adjustment.





**Recent
      Accounting Pronouncements**





In
      December 2004, SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS No.
      123R"), was issued. SFAS No. 123R, which replaces SFAS No. 123, “Accounting for
      Stock-Based Compensation,” and supercedes Accounting Principles Board Opinion
      (“APB”) No. 25, “Accounting for Stock Issued to Employees,” requires that all
      share-based payments to employees, including grants of employee stock options,
      be recognized in the financial statements based on their fair values beginning
      with the first interim or annual period commencing after December 15, 2005.
      The
      pro forma disclosures previously permitted under SFAS No. 123 no longer will
      be
      an alternative to financial statement recognition. The Company is required
      to
      adopt SFAS No. 123R in its first quarter of fiscal 2006. Commencing January
      1,
      2006, the Company will use a binomial lattice model for valuing all share-based
      payments as opposed to using the Black-Scholes option price model, which the
      Company used for the pro forma disclosure requirements of SFAS No. 123. The
      Company will treat stock options with graded vesting that are granted after
      January 1, 2006, as a single grant on which compensation expense will be
      recognized over the service period as opposed to treating each individual
      vesting tranche as a separate grant. The Company has elected to use the modified
      prospective application for the transition upon the adoption of SFAS No. 123R,
      which requires compensation expense to be recognized on options granted
      subsequent to the adoption date as well as on options granted prior to the
      adoption date for which the requisite service period has not been completed
      as
      of December 31, 2005. Periods prior to the date that SFAS No. 123R is adopted
      are not adjusted under the modified prospective application. The Company
      estimates that the adoption of SFAS No. 123R will result in recognizing in
      future periods approximately $278 in compensation expense associated with stock
      options granted prior to the date of adoption of SFAS No. 123R for which the
      requisite service period has not been completed as of December 31, 2005. Of
      this
      total, the Company estimates that approximately $125 will be recognized in
      2006.
      The Company expects that the adoption of SFAS No. 123R will have an adverse
      impact on its consolidated results of operations and earnings per share since,
      in addition to recognizing compensation expense on options granted prior to
      the
      adoption date, all future grants of stock options will result in the recognition
      of compensation expense.





In
      May
      2005, SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of
      APB Opinion No. 20 and FASB Statement No. 3”, was issued and is effective for
      accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005. SFAS No. 154 applies to all voluntary changes in
      accounting principles and to changes required by accounting pronouncements
      that
      do not contain transition provisions. SFAS No. 154 requires, among other things,
      the retrospective application to prior periods’ financial statements of changes
      in accounting principles as opposed to including in net income the cumulative
      effect of the change in accounting principal in the period of adoption, which
      was the standard under APB Opinion No. 20, “Accounting Changes.” The impact of
      the adoption of SFAS No. 154 on the Company’s financial condition or results of
      operations is not determinable since SFAS No. 154 only affects the adoption
      of
      accounting standards in future periods.





15




**Item
      7A.**  ***Quantitative
      and Qualitative Disclosures About Market Risk.***





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





The
      Company had convertible debentures with a face value of $5,000 ($4,045 net
      of
      unamortized discount) outstanding at December 31, 2005. The interest rate on
      these debentures is the higher of 7% or the 6-month LIBOR rate (as defined)
      plus
      4.50%. At December 31, 2005, the interest rate on the convertible debentures
      was
      9.20%. A change in interest rates of 1.0% would result in a change in the annual
      interest costs under the convertible debentures of approximately $50 based
      on
      the face amount of outstanding borrowings at December 31, 2005.





The
      Company has two operations in the United Kingdom that result in foreign currency
      exposure to the British pound. As of and for the year ended December 31, 2005,
      these operations aggregated approximately 15% of the Company’s current assets,
      approximately 19% of the Company’s current liabilities, and approximately 21% of
      the Company’s loss from continuing operations before income taxes. A fluctuation
      in the United States dollar to the British pound conversion rate would result
      in
      a change in the amount realized by the Company from the results of these
      operations and from the settlement of its monetary assets and liabilities
      denominated in British pounds.




**Item
      8.**  ***Financial
      Statements and Supplementary Data.***





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




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





None.




**Item
      9A.**  ***Controls
      and Procedures.***





The
      Company’s management evaluated, with the participation of the Company’s
      principal executive and principal financial officers, the effectiveness of
      the
      Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and
      15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”)) as of December 31, 2005. Based on their evaluation, the Company’s
      principal executive and principal financial officers concluded that the
      Company’s disclosure controls and procedures were effective as of December 31,
      2005. The design of any system of controls is based in part upon certain
      assumptions about the likelihood of future events, and there can be no assurance
      that any design will succeed in achieving its stated goals under all potential
      future conditions, regardless of how remote.





There
      have been no changes in the Company’s internal control over financial reporting
      (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
      occurred during the fiscal quarter ended December 31, 2005, that has materially
      affected, or is reasonably likely to affect, the Company’s internal control over
      financial reporting.




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





None.





16


**PART
      III**





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





(a)
            *Directors*–
                The
                information with respect to directors required by this item is
                incorporated herein by reference to the Company’s 2006 Definitive Proxy
                Statement to be separately filed with the Securities and Exchange
                Commission by April 30, 2006.





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




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





The
      information required by this item is incorporated herein by reference to the
      Company’s 2006 Definitive Proxy Statement to be separately filed with the
      Securities and Exchange Commission by April 30, 2006.




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





Except
      as
      set forth below, the information required by this item is incorporated herein
      by
      reference to the Company’s 2006 Definitive Proxy Statement to be separately
      filed with the Securities and Exchange Commission by April 30,
      2006.





The
      following table sets forth certain information as of December 31, 2005, with
      respect to the Company’s equity compensation plans under which securities of the
      Company are authorized for issuance.





**Equity
                Compensation Plan Information****Plan
                category**
            
            **Number
                of securities to**
              **be
                issued upon exercise**
              **of
                outstanding options,**
              **warrants
                and rights**
            
            **Weighted-average**
              **exercise
                price of**
              **outstanding
                options,**
              **warrants
                and rights**
            
            **Number
                of securities remaining**
              **available
                for future issuance**
              **under
                equity compensation**
              **plans
                (excluding securities**
              **reflected
                in column (a))****(a)**
            
            **(b)**
            
            **(c)**Equity
                compensation plans
              approved
                by security holders
            
            1,066,919
            
            $4.94
            
            558,069





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




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





The
      information required by this item is incorporated herein by reference to the
      Company’s 2006 Definitive Proxy Statement to be separately filed with the
      Securities and Exchange Commission by April 30, 2006.




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





The
      information required by this item is incorporated herein by reference to the
      Company’s 2006 Definitive Proxy Statement to be separately filed with the
      Securities and Exchange Commission by April 30, 2006.





17


**PART
      IV**





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





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




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




Reportof
                    Independent Registered Public Accounting
                    Firm




Consolidated
                Balance Sheets as of December 31, 2005 and
                2004




Consolidated
                Statements of Operations for the years ended December 31, 2005, 2004,
                and
                2003




Consolidated
                Statements of Cash Flows for the years ended December 31, 2005, 2004,
                and
                2003




Consolidated
                Statements of Stockholders’ Equity for the years ended December 31, 2005,
                2004, and 2003




Notes
                to consolidated financial
                statements




2.
            Financial
                Statement Schedules:




Schedule
                II - Valuation and Qualifying Accounts for the years ended December
                31,
                2005, 2004, and 2003




3.
            Exhibits:




See
                Exhibit Index commencing on page G-1
                herein.





18




**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


Date:
      March 31, 2006




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities indicated on March 31, 2006.




Signature
              
              TitleBy:/s/
                  Laurence
                  MoskowitzLaurence
                  Moskowitz
              
              Chairman
                  of the Board, Chief Executive Officer, and President
                (Principal
                  Executive Officer)By:/s/
                  Kenneth G.
                  TorosianKenneth
                  G. Torosian
              
              Chief
                  Financial Officer (Principal Financial Officer)By:/s/
                  Bruce
                  BishopBruce
                  Bishop
              
              DirectorBy:/s/
                  Harold
                  FineltHarold
                  Finelt
              
              DirectorBy:/s/
                  John M.
                  GreeningJohn
                  M. Greening
              
              DirectorBy:/s/
                  Donald
                  KimelmanDonald
                  Kimelman
              
              DirectorBy:/s/
                  Douglas S.
                  KnopperDouglas
                  S. Knopper
              
              DirectorBy:/s/
                  Catherine
                  LugbauerCatherine
                  Lugbauer
              
              DirectorBy:/s/
                  James J.
                  O’NeillJames
                  J. O’Neill
              
              DirectorBy:/s/
                  Theodore Wm.
                  TashlikTheodore
                  Wm. Tashlik
              
              Director
 19


**INDEX
      TO FINANCIAL STATEMENTS**




PageReport
                  of Independent Registered Public Accounting Firm
              
              F-2Consolidated
                  Balance Sheets as of December 31, 2005 and 2004
              
              F-3Consolidated
                  Statements of Operations for the years ended December 31, 2005,
                  2004, and
                  2003
              
              F-4Consolidated
                  Statements of Cash Flows for the years ended December 31, 2005,
                  2004, and
                  2003
              
              F-5Consolidated
                  Statements of Stockholders’ Equity for the years ended December 31, 2005,
                  2004, and 2003
              
              F-6Notes
                  to consolidated financial statements
              
              F-7




F-1


**Report
      of Independent Registered Public Accounting Firm**








The
      Board
      of Directors


Medialink
      Worldwide Incorporated:




We
      have
      audited the accompanying consolidated balance sheets of Medialink Worldwide
      Incorporated and subsidiaries as of December 31, 2005 and 2004, and the related
      consolidated statements of operations, cash flows, and stockholders’ equity for
      each of the years in the three-year period ended December 31, 2005. In
      connection with our audit of the consolidated financial statements we have
      also
      audited the financial statement schedule for each of the years in the three-year
      period ended December 31, 2005 included on page S-1. These consolidated
      financial statements and the financial statement schedule are the responsibility
      of the Company’s management. Our responsibility is to express an opinion on
      these consolidated financial statements and financial statement schedule based
      on our audits.




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




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Medialink Worldwide
      Incorporated and subsidiaries as of December 31, 2005 and 2004, and the results
      of their operations and their cash flows for each of the years in the three-year
      period ended December 31, 2005, in conformity with U.S. generally accepted
      accounting principles. Also in
      our opinion, the related financial statement schedule, when considered in
      relation to the basic consolidated financial statements taken as a whole,
      presents fairly, in all material respects, the information set forth
      therein.




(signed)
      KPMG LLP




New
      York,
      New York




March
      24,
      2006





F-2




**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                BALANCE SHEETS**(In
                thousands of dollars, except share and per-share
                amounts)




**December
                31,****2005**
            
            **2004**ASSETSCurrent
                Assets:Cash
                and cash equivalents
            
            $
            7,303
            
            $
            11,675Accounts
                receivable, net of allowance for doubtful accounts of
              $610
                and $593
            
            
            5,584
            
            
            6,379Inventory
            
            
            371
            
            
            313Prepaid
                expenses
            
            
            566
            
            
            390Prepaid
                and refundable taxes
            
            
            906
            
            
            565Other
                current assets
            
            
            48
            
            
            1,336Total
                current assets
            
            
            14,778
            
            
            20,658Property
                and equipment - net
            
            
            4,380
            
            
            4,069Goodwill
            
            
            13,006
            
            
            13,006Other
                assets
            
            
            762
            
            
            1,040Total
                assets
            
            $
            32,926
            
            $
            38,773LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                Liabilities:Accounts
                payable
            
            $
            1,665
            
            $
            2,498Accrued
                expenses and other current liabilities
            
            
            5,922
            
            
            6,358Current
                portion of capital lease obligation
            
            
            70
            
            
            113Taxes
                payable
            
            
            -
            
            
            340Total
                current liabilities
            
            
            7,657
            
            
            9,309Convertible
                debentures, net of unamortized discount of $955 and $1,167
            
            
            4,045
            
            
            3,833Capital
                lease obligation, net of current portion
            
            
            -
            
            
            97Other
                long-term liabilities
            
            
            1,586
            
            
            454Total
                liabilities
            
            
            13,288
            
            
            13,693Commitments
                and contingenciesStockholders'
                Equity:Series
                A Preferred stock: $.01 par value, authorized 50,000 shares; none
              issued
                and outstandingCommonstock:
                $.01 par value, authorized 15,000,000 shares; issued and
              outstanding
                6,155,360 shares in 2005 and 6,057,587 shares in 2004
            
            
            62
            
            
            61Additional
                paid-in capital
            
            
            26,591
            
            
            26,291Accumulated
                deficit
            
            
            (6,279
            )
            
            (733
            )Accumulated
                other comprehensive loss
            
            
            (393
            )
            
            (196
            )Common
                stock in treasury (at cost, 101,121 shares)
            
            
            (343
            )
            
            (343
            )Total
                stockholders' equity
            
            
            19,638
            
            
            25,080Total
                liabilities and stockholders' equity
            
            $
            32,926
            
            $
            38,773






See
      notes to consolidated financial
      statements




F-3





**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF OPERATIONS**(In
                thousands, except per-share
                amounts)




**For
                the years ended December 31,****2005**
            
            **2004**
            
            **2003**Revenues
            
            $
            36,712
            
            $
            36,863
            
            $
            35,383Operating
                expenses:Direct
                costs
            
            
            14,522
            
            
            14,683
            
            
            12,618Selling,
                general, and administrative expenses
            
            
            26,089
            
            
            22,056
            
            
            22,255Depreciation
                and amortization
            
            
            1,660
            
            
            1,822
            
            
            1,858Loss
                from joint venture
            
            
            -
            
            
            247
            
            
            316Impairment
                of investments
            
            
            -
            
            
            715
            
            
            -Restructuring
                charges
            
            
            -
            
            
            -
            
            
            592Total
                operating expenses
            
            
            42,271
            
            
            39,523
            
            
            37,639Operating
                loss
            
            
            (5,559
            )
            
            (2,660
            )
            
            (2,256
            )Interest
                expense - net
            
            
            (491
            )
            
            (393
            )
            
            (282
            )Loss
                from continuing operations before taxes
            
            
            (6,050
            )
            
            (3,053
            )
            
            (2,538
            )Income
                tax expense (benefit)
            
            
            (310
            )
            
            693
            
            
            (200
            )Loss
                from continuing operations
            
            
            (5,740
            )
            
            (3,746
            )
            
            (2,338
            )Income
                (loss) from discontinued operations, net of tax
            
            
            194
            
            
            2,775
            
            
            (354
            )Net
                loss
            
            $
            (5,546
            )
            $
            (971
            )
            $
            (2,692
            )Net
                loss
            
            $
            (5,546
            )
            $
            (971
            )
            $
            (2,692
            )Other
                comprehensive income (loss)
            
            
            (197
            )
            
            152
            
            
            7Comprehensive
                loss
            
            $
            (5,743
            )
            $
            (819
            )
            $
            (2,685
            )Basic
                and diluted income (loss) per common share:Loss
                from continuing operations
            
            $
            (0.95
            )
            $
            (0.62
            )
            $
            (0.39
            )Income
                (loss) from discontinued operations
            
            
            0.03
            
            
            0.46
            
            
            (0.06
            )Net
                loss
            
            $
            (0.92
            )
            $
            (0.16
            )
            $
            (0.45
            )Weighted
                average number of common shares - basic and diluted
            
            
            6,052
            
            
            5,998
            
            
            5,956






See
      notes to consolidated financial
      statements


F-4




**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF CASH FLOWS**(In
                thousands of dollars)




**For
                the years ended December 31,****2005**
            
            **2004**
            
            **2003****(Revised)**
            
            **(Revised)**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (5,546
            )
            $
            (971
            )
            $
            (2,692
            )Adjustments
                to reconcile net loss to net cash (used in) provided by operating
                activities:Depreciation
                and amortization
            
            
            1,660
            
            
            1,822
            
            
            1,858Provision
                for bad debts
            
            
            158
            
            
            147
            
            
            (64
            )Impairment
                of investments
            
            
            -
            
            
            715
            
            
            -Deferred
                income taxes
            
            
            -
            
            
            2,004
            
            
            (150
            )Loss
                from joint venture
            
            
            -
            
            
            247
            
            
            316Restructuring
                charges
            
            
            -
            
            
            
            
            
            592Gain
                on sale of division and loss from discontinued operations, net of
                taxes
            
            
            (194
            )
            
            (2,775
            )
            
            354Other
            
            
            296
            
            
            32
            
            
            -Changes
                in operating assets and liabilities, net of effects of
                dispositions:Accounts
                receivable
            
            
            463
            
            
            (477
            )
            
            (12
            )Prepaid
                expenses and other assets
            
            
            1,015
            
            
            (980
            )
            
            (129
            )Prepaid
                and refundable income taxes and taxes payable
            
            
            (681
            )
            
            466
            
            
            1,579Accounts
                payable and accrued expenses
            
            
            (945
            )
            
            3,453
            
            
            (1,287
            )Other
                liabilities
            
            
            1,148
            
            
            (49
            )
            
            (86
            )Net
                cash used in operating activities of discontinued
                operations
            
            
            -
            
            
            (1,498
            )
            
            (235
            )Net
                cash (used in) provided by operating activities
            
            
            (2,626
            )
            
            2,136
            
            
            44CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchases
                of property and equipment
            
            
            (1,862
            )
            
            (733
            )
            
            (1,243
            )Proceeds
                from sale of division
            
            
            -
            
            
            7,700Capital
                contributions to joint venture
            
            
            -
            
            
            (255
            )Entities
                purchased, net of cash acquired
            
            
            -
            
            
            
            
            
            (341
            )Net
                cash used in investing activities of discontinued
                operations
            
            
            -
            
            
            (120
            )
            
            (92
            )Net
                cash (used in) provided by investing activities
            
            
            (1,862
            )
            
            6,592
            
            
            (1,676
            )CASH
                FLOWS FROM FINANCING ACTIVITIES:Payments
                on line of credit
            
            
            -
            
            
            (5,500
            )
            
            (1,304
            )Borrowings
                under line of credit
            
            
            -
            
            
            
            
            
            267Proceeds
                from issuance of convertible debentures
            
            
            -
            
            
            4,758
            
            
            -Proceeds
                from the issuance of common stock in connection with the exercise
                of stock
                options
            
            
            280
            
            
            44
            
            
            4Repayments
                of obligations under capital lease
            
            
            (117
            )
            
            (81
            )
            
            (76
            )Other
                financing activities
            
            
            (13
            )
            
            -
            
            
            -Net
                cash provided by (used in) financing activities
            
            
            150
            
            
            (779
            )
            
            (1,109
            )Net
                (decrease) increase in cash and cash equivalents
            
            
            (4,338
            )
            
            7,949
            
            
            (2,741
            )Effect
                of exchange rate changes on cash and cash equivalents
            
            
            (34
            )
            
            20
            
            
            57Cash
                and cash equivalents at the beginning of year
            
            
            11,675
            
            
            3,706
            
            
            6,390Cash
                and cash equivalents at end of year
            
            $
            7,303
            
            $
            11,675
            
            $
            3,706






See
      notes to consolidated financial
      statements




F-5





**MEDIALINK
                WORLDWIDE INCORPORATED AND SUBSIDIARIES****CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS' EQUITY**(In
                thousands of dollars)




**Common
                Stock**
            
            **Additional
                Paid-in Capital**
            
            **Retained
                Earnings (Deficit)**
            
            **Accumulated
                Other Comprehensive Income (Loss)**
            
            **Common
                Stock in Treasury****Balance
                at January 1, 2003**
            
            $
            59
            
            $
            24,769
            
            $
            2,930
            
            $
            (355
            )
            $
            (200
            )Issuance
                of 125,622 shares of common stock in
              connection
                with acquisitions
            
            
            1
            
            
            274Issuance
                of 1,600 shares of common stock in
              connection
                with exercise of stock options
            
            
            
            
            
            4Unrealized
                gain from foreign currency translation
              adjustments
            
            
            
            
            
            
            
            
            
            
            
            7Net
                loss
            
            
            
            
            
            
            
            
            (2,692
            )**Balance
                at December 31, 2003**
            
            
            60
            
            
            25,047
            
            
            238
            
            
            (348
            )
            
            (200
            )Warrants
                granted in connection with issuance of
              convertible
                debentures
            
            
            
            
            
            1,200Receipt
                of 43,997 shares of common stock as repayment
              of
                loan
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (143
            )Issuance
                of 15,257 shares of common stock in
              connection
                with exercise of stock options
            
            
            1
            
            
            44Unrealized
                gain from foreign currency translation
              adjustments
            
            
            
            
            
            
            
            
            
            
            
            152Net
                loss
            
            
            
            
            
            
            
            
            (971
            )**Balance
                at December 31, 2004**
            
            
            61
            
            
            26,291
            
            
            (733
            )
            
            (196
            )
            
            (343
            )Issuance
                of 97,773 shares of common stock in
              connection
                with exercise of stock options
            
            
            1
            
            
            279Unrealized
                loss from foreign currency translation
              adjustments
            
            
            
            
            
            
            
            
            
            
            
            (197
            )Compensation
                expense recognized on stock options
            
            
            
            
            
            21Net
                loss
            
            
            
            
            
            
            
            
            (5,546
            )**Balance
                at December 31, 2005**
            
            $
            62
            
            $
            26,591
            
            $
            (6,279
            )
            $
            (393
            )
            $
            (343
            )








See
      notes to consolidated financial
      statements





F-6


**MEDIALINK
      WORLDWIDE INCORPORATED**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


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




**1.
      Organization**





Medialink
      Worldwide Incorporated and its subsidiaries (the “Company”) provide broadcast
      media communications services and video watermarking services to corporations
      and other organizations. Through its broadcast operations in the United States
      and the United Kingdom, the Company offers news and marketing media strategies
      and solutions by providing consultation, production, distribution, and
      monitoring services that enable its clients to inform and educate their target
      audiences through various media. Through its U.S. Newswire division, the Company
      provides press release wire services for domestic governmental, public affairs,
      and non-profit organizations news sources. Through its Teletrax subsidiaries,
      the Company provides video watermarking services that provide broadcast
      television intelligence to video content providers such as entertainment
      companies, news organizations, television syndicators, and direct-response
      marketing companies, enabling clients to monitor their content.








**2.
      Summary of Significant Accounting Policies**





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





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





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




***Inventory:*** Inventory
      consists solely of equipment for sale in connection with the Company’s video
      watermarking services. Inventory is valued at the lower of cost or market,
      with
      cost determined on a specific identification basis.





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





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





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





F-7
 
  **MEDIALINK
          WORLDWIDE INCORPORATED**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


***Equity
      Investments:*** The
      Company accounts for its investments in other entities under the equity method
      when it owns between 20% and 50% of the voting equity and does not have the
      ability to exercise control over the other entity or is otherwise not required
      to consolidate the entity in accordance with Financial Accounting Standards
      Board Interpretation Number (FIN) 46(R), “Consolidation of Variable Interest
      Entities.” The Company accounts for its investments in other entities under the
      cost method when it owns less than 20% of the voting equity and does not exert
      significant influence. Equity investments are reviewed for impairment whenever
      events or changes in circumstances indicate that the fair value of an equity
      investment is less than its carrying amount and that such a decline in value
      is
      determined to be other than temporary.





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





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





*Video
      Watermarking Services:* Revenue
      from TeletraxTM video watermarking services is recognized ratably over the period
      of service being provided. Revenue from the sale of equipment is recognized
      upon
      installation and acceptance by the client. Revenues include $184, $364, and
      $59
      from equipment sales for the years ended December 31, 2005, 2004, and 2003,
      respectively.





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





***Advertising
      expenses:*** Advertising costs are generally expensed in the period in which the advertising
      appears in print or is broadcast. The Company incurred advertising expense,
      exclusive of sales and marketing efforts, of approximately $138, $146, and
      $253
      for the years ended December 31, 2005, 2004, and 2003,
      respectively.





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





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





F-8




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


***Stock-Based
      Compensation:*** Through
      December 31, 2005, the Company accounted for stock-based employee compensation
      based on the intrinsic value of the stock options granted in accordance with
      the
      provisions of Accounting Principles Board Opinion (“APB”) No. 25, “Accounting
      for Stock Issued to Employees.” Information relating to stock-based employee
      compensation, including the pro forma effects had the Company accounted for
      stock-based employee compensation based on the fair value of stock options
      granted in accordance with SFAS No. 123, “Accounting for Stock-Based
      Compensation,” is as follows:




**2005**
              
              **2004**
              
              **2003**Net
                  loss as reported
              
              $
              (5,546
              )
              $
              (971
              )
              $
              (2,692
              )Stock-based
                  compensation expense, net of tax,
                included
                  in net loss as reported
              
              
              21
              
              
              -
              
              
              -Stock-based
                  compensation expense, net of tax, under
                fair
                  value method
              
              
              (349
              )
              
              (165
              )
              
              (259
              )Pro
                  forma net loss
              
              $
              (5,874
              )
              $
              (1,136
              )
              $
              (2,951
              )Basic
                  and diluted loss per share as reported
              
              $
              (0.92
              )
              $
              (0.16
              )
              $
              (0.45
              )Pro
                  forma basic and diluted loss per share
              
              $
              (0.97
              )
              $
              (0.19
              )
              $
              (0.50
              )




***Statements
      of Cash Flows:*** The
      consolidated statements of cash flows have been revised to reflect the cash
      flows from discontinued operations as a separate component of cash flows from
      operating activities and cash flows from investing activities. Such cash flows
      from discontinued operations had previously been combined and reported as a
      single amount for the years ended December 31, 2004 and 2003.





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





***Reclassifications:*** Certain
      prior-period amounts in the accompanying financial statements have been
      reclassified to conform to the 2005 presentation.





***Recently
      Issued Accounting Standards:*** In
      December 2004, SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS No.
      123R"), was issued. SFAS No. 123R, which replaces SFAS No. 123 and supercedes
      APB No. 25, requires that all share-based payments to employees, including
      grants of employee stock options, be recognized in the financial statements
      based on their fair values beginning with the first interim or annual period
      commencing after December 15, 2005. The pro forma disclosures previously
      permitted under SFAS No. 123 no longer will be an alternative to financial
      statement recognition. The Company is required to adopt SFAS No. 123R in its
      first quarter of fiscal 2006. Commencing January 1, 2006, the Company will
      use a
      binomial lattice model for valuing all share-based payments as opposed to using
      the Black-Scholes option price model, which the Company used for the pro forma
      disclosure requirements of SFAS No. 123. The Company will treat stock options
      with graded vesting that are granted after January 1, 2006, as a single grant
      on
      which compensation expense will be recognized over the service period as opposed
      to treating each individual vesting tranche as a separate grant. The Company
      has
      elected to use the modified prospective application for the transition upon
      the
      adoption of SFAS No. 123R, which requires compensation expense to be recognized
      on options granted subsequent to the adoption date as well as on options granted
      prior to the adoption date for which the requisite service period has not been
      completed as of December 31, 2005. Periods prior to the date that SFAS No.
      123R
      is adopted are not adjusted under the modified prospective application. The
      Company estimates that the adoption of SFAS No. 123R will result in recognizing
      in future periods approximately $278 in compensation expense associated with
      stock options granted prior to the date of adoption of SFAS No. 123R for which
      the requisite service period has not been completed as of December 31, 2005.
      Of
      this total, the Company estimates that approximately $125 will be recognized
      in
      2006. The Company expects that the adoption of SFAS No. 123R will have an
      adverse impact on its consolidated results of operations and earnings per share
      since, in addition to recognizing compensation expense on options granted prior
      to the adoption date, all future grants of stock options will result in the
      recognition of compensation expense.




F-9
 
  **MEDIALINK
          WORLDWIDE INCORPORATED**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
          (Continued)**


In
      May
      2005, SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of
      APB Opinion No. 20 and FASB Statement No. 3”, was issued and is effective for
      accounting changes and corrections of errors made in fiscal years beginning
      after December 15, 2005. SFAS No. 154 applies to all voluntary changes in
      accounting principles and to changes required by accounting pronouncements
      that
      do not contain transition provisions. SFAS No. 154 requires, among other things,
      the retrospective application to prior periods’ financial statements of changes
      in accounting principles as opposed to including in net income the cumulative
      effect of the change in accounting principal in the period of adoption, which
      was the standard under APB Opinion No. 20, “Accounting Changes.” The impact of
      the adoption of SFAS No. 154 on the Company’s financial condition or results of
      operations is not determinable since SFAS No. 154 only affects the adoption
      of
      accounting standards in future periods.




**3.
      Discontinued Operations**





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





Delahaye’s
      operations are reported as a discontinued operation for all periods presented
      in
      the accompanying consolidated financial statements, and the operating results
      of
      Delahaye are reflected separately from the results of continuing operations
      through December 31, 2004, the date of sale. The results of operations and
      the
      gain on sale of Delahaye are presented as discontinued operations for the years
      ended December 31, 2005, 2004, and 2003, respectively, as follows:




**For
                  the years ended December 31,****2005**
              
              **2004**
              
              **2003**Revenues
              
              $
              -
              
              $
              9,022
              
              $
              8,670Loss from
                  operations before income taxes
              
              $
              -
              
              $
              (274
              )
              $
              (304
              )Gain
                  on sale of division
              
              
              284
              
              
              4,915
              
              
              -Income
                  (loss) from discontinued operations before income taxes
              
              
              284
              
              
              4,641
              
              
              (304
              )Income
                  tax expense
              
              
              90
              
              
              1,866
              
              
              50Income
                  (loss) from discontinued operations
              
              $
              194
              
              $
              2,775
              
              $
              (354
              )




F-10




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


The
      current liabilities of Delahaye reported as a discontinued operation at December
      31, 2003, consisted entirely of accrued expenses. The current and non-current
      assets of Delahaye reported as a discontinued operation at December 31, 2003,
      consisted of the following:





Cash
                and cash equivalents
            
            $
            2Accounts
                receivable
            
            
            2,171Prepaid
                expenses
            
            
            235Total
                current assets
            
            $
            2,408Property
                and equipment - net
            
            $
            856Goodwill
            
            
            228Other
                assets
            
            
            781Total
                non-current assets
            
            $
            1,865




**4.
      Impairment Charges**





For
      the
      year ended December 31, 2004, the Company incurred impairment charges totaling
      $715, of which $342 related to two investments previously accounted for under
      the cost method. In addition, the Company incurred an impairment charge of
      $373
      related to its 50% interest in Business Wire/Medialink, LLC (“Newstream”), a
      joint venture with Business Wire, that provided for the delivery of multi-media
      content to on-line newsrooms. During 2004, Business Wire and the Company each
      made an additional capital contribution of $256. In December 2004, the joint
      venture was dissolved and the Company recognized an impairment charge equal
      to
      its remaining investment in the joint venture at the time of dissolution. Under
      its agreement with Business Wire upon dissolution of the joint venture, the
      Company continued to provide services under the Newstream name through December
      31, 2005. In January 2006, the Company commenced providing services similar
      to
      those provided by the joint venture through a new proprietary distribution
      platform.





The
      financial position and results of operations of Newstream as of and for the
      years ended December 31, 2004 and 2003, were as follows:




**2004**
              
              **2003****(Unaudited)**Total
                  current assets
              
              $
              1,767
              
              $
              1,147Total
                  assets
              
              $
              1,934
              
              $
              1,764Total
                  current liabilities
              
              $
              1,770
              
              $
              1,616Members’
                  equity
              
              $
              164
              
              $
              148Revenues
              
              $
              1,012
              
              $
              1,186Operating
                  loss
              
              $
              (495
              )
              $
              (615
              )





F-11





**MEDIALINK
      WORLDWIDE INCORPORATED**


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




**5.
      Restructuring Charges**





In
      September 2003, the Company completed a plan to shut down one of its office
      locations in Norwalk, CT, by subleasing the abandoned space. In connection
      with
      this plan, the Company incurred a restructuring charge of $592, all of which
      represented facility closure costs. Both the primary lease and the sublease
      have
      terms extending through February 2008. The remaining liability for future
      payments and the amounts charged against the restructuring liability were as
      follows:





Balance
                at December 31, 2003
            
            $
            555Payments
            
            
            (192
            )Balance
                at December 31, 2004
            
            
            363Payments
            
            
            (71
            )Balance
                at December 31, 2005
            
            $
            292





At
      December 31, 2005, $164 of the restructuring liability is included as a
      component of “Other long-term liabilities” and $128 is included as a component
      of “Other current liabilities.”




**6.
      Property and Equipment**





Property
      and equipment at December 31 consisted of the following:





**2005**
            
            **2004**Equipment
            $
            6,787
            
            $
            6,472Furniture
                and fixtures
            
            1,353
            
            
            1,390Licenses
                and software
            
            1,734
            
            
            780Leasehold
                improvements
            
            3,444
            
            
            3,461Total
            
            13,318
            
            
            12,103Less:
                Accumulated depreciation and amortization
            
            8,938
            
            
            8,034Net
            $
            4,380
            
            $
            4,069




**7.
      Accrued Expenses**





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





**2005**
            
            **2004**Salaries
                and benefits
            $
            1,596
            
            $
            1,784Direct
                costs
            
            1,547
            
            
            1,660Client
                prepayments
            
            938
            
            
            775Deferred
                revenue
            
            590
            
            
            670Professional
                fees
            
            319
            
            
            659Other
                accruals
            
            932
            
            
            810Total
            $
            5,922
            
            $
            6,358




F-12




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


**8.
      Line of Credit**





Prior
      to
      2005, the Company had a credit facility with a bank under which it borrowed
      funds at an interest rate equal the 30-day LIBOR rate plus 5.5%. The Company
      fully repaid amounts outstanding under this credit facility in December 2004
      and
      the credit facility was terminated. The average variable rate on borrowings
      under this credit facility for the year ended December 31, 2003, and the 2004
      period through the termination of the facility was 3.7% and 5.7%, respectively.




**9.
      Long-term Debt**





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





**2005**
            
            **2004**Convertible
                debentures
            $
            5,000
            
            $
            5,000Unamortized
                discount
            
            (955)
            
            
            (1,167)Net
            $
            4,045
            
            $
            3,833





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





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





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





F-13




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


**10.
      Leases**





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




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





**Capital
                Leases**
            
            **Operating
                Leases**2006
            $
            70
            
            $
            3,2632007
            
            
            
            
            2,5102008
            
            
            
            
            2,0872009
            
            
            
            
            1,6162010
            
            
            
            
            1,259Total
                minimum lease payments
            $
            70
            
            $
            10,735





The
      Company has non-cancelable subleases related to certain properties under which
      the Company will receive minimum sublease rental payments through 2009 totaling
      approximately $1,432.





Assets
      recorded under capital leases are included in property and equipment at December
      31 as follows:





**2005**
            
            **2004**Equipment
            $
            288
            
            $
            307Less
                accumulated depreciation
            
            242
            
            
            182Net
            $
            46
            
            $
            125





Total
      rental expense under operating leases amounted to $2,550, $2,344, and $2,207,
      for the years ended December 31, 2005, 2004, and 2003,
      respectively.




**11.
      Preferred Stock**





During
      2001, the Company’s Board of Directors approved the adoption of a Preferred
      Stock Rights Agreement (the “Rights Agreement”), under which a dividend
      distribution of one preferred stock purchase right (the “Purchase Right”) was
      declared for each outstanding share of the Company’s common stock, payable to
      common stockholders of record at the close of business on August 30, 2001.
      Each
      Purchase Right has an exercise price of $50.00 and entitles the holder to
      purchase one one-thousandth of a share of the Company’s Series A Participating
      Preferred Stock (the “Series A Preferred”). The Purchase Rights continue to be
      represented by, and trade with, the Company's common stock certificates unless
      the Purchase Rights become exercisable, which will only occur, with certain
      exceptions, in the event that a person or group acquires, or announces a tender
      or exchange offer to acquire, a beneficial ownership of 15% or more of the
      Company's common stock then outstanding. As of December 31, 2005 and 2004,
      the
      Company’s Board of Directors have authorized 50,000 shares of the Series A
      Preferred, none of which was issued or outstanding.





F-14





**MEDIALINK
      WORLDWIDE INCORPORATED**


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




**12.
      Income Taxes**





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




**2005**
              
              **2004**
              
              **2003****Current:**Federal
              
              $
              (310
              )
              $
              (916
              )
              $
              -State
                  and local
              
              
              -
              
              
              (395
              )
              
              -Total
                  current
              
              
              (310
              )
              
              (1,311
              )
              
              -**Deferred:**Federal
              
              
              -
              
              
              1,483
              
              
              (235
              )State
                  and local
              
              
              -
              
              
              521
              
              
              35Total
                  deferred
              
              
              -
              
              
              2,004
              
              
              (200
              )Total
                  provision (benefit) for income taxes
              
              $
              (310
              )
              $
              693
              
              $
              (200
              )


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




**2005**
              
              **2004**
              
              **2003**Taxes
                  at statutory rate
              
              $
              (2,057
              )
              $
              (1,038
              )
              $
              (863
              )State
                  and local income taxes, net of Federal benefit
              
              
              (344
              )
              
              (150
              )
              
              (68
              )Valuation
                  allowance on deferred tax assets
              
              
              1,936
              
              
              1,839
              
              
              650Non-deductible
                  expenses and other
              
              
              155
              
              
              42
              
              
              81Provision
                  (benefit) for income taxes
              
              $
              (310
              )
              $
              693
              
              $
              (200
              )Federal
                  statutory rate
              
              
              34.00
              %
              
              34.00
              %
              
              34.00
              %Effective
                  rate
              
              
              5.12
              %
              
              (22.69
              )%
              
              7.88
              %


The
      Company generated losses from continuing operations before taxes for the years
      ended December 31, 2005, 2004, and 2003, as follows:




**2005**
              
              
              **2004**
              
              
              **2003**Domestic
              
              $
              (4,804
              )
              $
              (1,437
              )
              $
              (525
              )Foreign
              
              
              (1,246
              )
              
              (1,616
              )
              
              (2,013
              )Total
              
              $
              (6,050
              )
              $
              (3,053
              )
              $
              (2,538
              )


F-15




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




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





**2005**
            
            **2004**Deferred
                tax assets:Accounts
                receivable
            
            
            
            $
            230
            
            $
            250Property
                and equipment
            
            
            
            
            77
            
            
            -Other
                intangible assets
            
            
            
            
            1,072
            
            
            1,223Minority
                interest
            
            
            
            
            475
            
            
            270Equity
                investments
            
            
            
            
            304
            
            
            304Accrued
                compensation
            
            
            
            
            865Other
                accrued expenses
            
            
            
            
            225
            
            
            166Net
                operating loss carryforwards
            
            
            
            
            3,084
            
            
            2,094Total
                deferred tax assets
            
            
            
            
            6,332
            
            
            4,307Deferred
                tax liabilities:Goodwill
            
            
            
            
            1,593
            
            
            1,206Property
                and equipment
            
            
            
            
            -
            
            
            166Other
                assets
            
            
            
            
            -
            
            
            132Total
                deferred tax liabilities
            
            
            
            
            1,593
            
            
            1,504Net
                deferred tax asset before valuation allowance
            
            
            
            
            4,739
            
            
            2,803Valuation
                allowance on deferred tax assets
            
            
            
            
            4,739
            
            
            2,803Net
                deferred tax asset
            
            
            
            $
            -
            
            $
            -





At
      December 31, 2005, the Company had Federal net operating loss carryforwards
      of
      approximately $1,610 that expire in 2025 and domestic state net operating loss
      carryforwards of approximately $7,600 that expire in 2016 through 2020. At
      December 31, 2005, the Company had foreign net operating loss carryforwards
      of
      $1,400 that do not expire. The Company established a valuation allowance to
      reserve for certain of its deferred tax assets at December 31, 2004, based
      on
      its projections at that time leading the Company to believe that it was not
      more
      likely than not that the benefit associated with the deferred tax assets would
      be realized in future periods. Based on its most recent projections, the Company
      continues to believe that it is not more likely than not that such benefits
      will
      be realized, and therefore established a valuation allowance to reserve for
      certain of its deferred tax assets at December 31, 2005. The change in the
      valuation allowance of $1,936 during 2005 is reflected as a component of the
      Company’s income tax expense for the year ended December 31, 2005.




**13.
      Stock Options**





Under
      a
      stock option plan covering employees and other eligible participants (the
“Employee Plan”), the Company grants stock options to purchase shares of the
      Company’s common stock. Stock options granted under the Employee Plan generally
      become exercisable over a four-year period, with 20% being exercisable on the
      grant date and an additional 20% becoming exercisable on the anniversary of
      the
      grant date in each of the next four years. Incentive stock options granted
      under
      the Employee Plan generally have a term of ten years and an exercise price
      equal
      to the fair market value of the Company’s common stock on the grant date.
      Incentive stock options issued to employees who own more than 10% of the voting
      power of all classes of equity of the Company have a term of five years and
      an
      exercise price equal to at least 110% of the fair market value of the Company’s
      common stock on the grant date. Non-qualified stock options granted under the
      Employee Plan have a term of fifteen years and an exercise price that is
      determined for each individual grant by a committee appointed by the Company’s
      board of directors. There are 1,670,808 shares of the Company’s common stock
      reserved for the issuance of stock options under the Employee Plan, and at
      December 31, 2005, 405,069 shares remained available for the issuance of stock
      options.





F-16




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


Under
      a
      stock option plan covering members of its board of directors (the “Directors’
Plan”), the Company grants stock options to non-employee directors. Newly
      appointed non-employee directors are granted 10,000 stock options upon their
      appointment or election to the board of directors, and all non-employee
      directors are granted 3,000 stock options on the first business day of each
      year. Stock options granted under the Directors’ Plan vest ratably over a
      three-year period, generally have a term of ten years, but cannot have a term
      that exceeds fifteen years, and have an exercise price equal to the fair market
      value of the Company’s common stock on the grant date. There are 380,000 shares
      of the Company’s common stock reserved for the issuance of stock options under
      the Directors’ Plan, and at December 31, 2005, 153,000 shares remained available
      for the issuance of stock options.





Through
      December 31, 2005, the Company accounted for the issuance of stock options
      to
      employees and non-employee directors in accordance with the provisions of APB
      No. 25, which requires compensation cost to be measured at the grant date based
      on the intrinsic value of the stock options granted. The intrinsic value of
      a
      stock option is equal to the difference between the market price of the common
      stock on the grant date and the exercise price of the option. There was no
      compensation cost recognized by the Company upon the grant of stock options
      under the Employee Plan or the Directors’ Plan for the years ended December 31,
      2005, 2004, and 2003. During 2005, the Company recognized compensation expense
      totaling approximately $21 in connection with the accelerated vesting of certain
      stock options granted under the Employee Plan to employees whose employment
      was
      terminated during the year. Such compensation expense was based on the intrinsic
      value of the stock options on the date on which vesting
      accelerated.





SFAS
      No.
      123 provided for an alternative measurement of compensation cost based on the
      fair value of the stock options granted to employees and non-employee directors.
      The fair value of a stock option is based on the intrinsic value as well as
      the
      time value of the option. The fair value of stock options granted was estimated
      on the grant date using the Black-Scholes option-pricing model.





Information
      relating to activity in the Employee Plan is summarized in the following table.
      All stock option grants included in the following table had exercise prices
      equal to market price on the grant date.





**Number
                of shares**
            
            **Weighted
                Average Exercise Price**
            
            **Weighted
                Average Fair Value**Options
                outstanding at January 1, 2003
            
            
            1,134,725
            
            $
            4.65Options
                granted
            
            
            13,000
            
            $
            2.79
            
            $
            2.48Options
                exercised
            
            
            (1,600
            )
            $
            2.61Options
                forfeited
            
            
            (107,614
            )
            $
            4.40Options
                outstanding at December 31, 2003
            
            
            1,038,511
            
            $
            5.47Options
                granted
            
            
            196,970
            
            $
            2.70
            
            $
            2.26Options
                exercised
            
            
            (15,257
            )
            $
            2.90Options
                forfeited
            
            
            (135,635
            )
            $
            6.28Options
                outstanding at December 31, 2004
            
            
            1,084,589
            
            $
            4.90Options
                granted
            
            
            30,000
            
            $
            2.91
            
            $
            2.30Options
                exercised
            
            
            (88,773
            )
            $
            2.79Options
                forfeited
            
            
            (152,497
            )
            $
            6.32Options
                outstanding at December 31, 2005
            
            
            873,319





F-17




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


The
      number of stock options exercisable under the Employee Plan at December 31,
      2005, 2004, and 2003 was as follows:





**2005**
            
            
            **2004**
            
            
            **2003**Exercisable
                stock options
            760,789
            
            
            809,603
            
            
            791,012





Information
      relating to options outstanding under the Employee Plan at December 31, 2005,
      is
      summarized as follows:





**Outstanding**
            
            **Exercisable****Range
                of Exercise Prices**
            
            **Options**
            
            **Weighted
                Average Exercise Price**
            
            **Weighted
                Average Remaining Life**
            
            **Options**
            
            **Weighted
                Average Exercise Price**$2.61
                - $3.65
            
            679,594
            
            $
                3.10
            
            4.56
            
            567,064
            
            $
                3.18$5.38
                - $6.38
            
            67,075
            
            $
                5.97
            
            2.29
            
            67,075
            
            $
                5.97$11.13
                - $11.25
            
            71,700
            
            $11.23
            
            2.99
            
            71,700
            
            $11.23$15.00
                - $16.13
            
            54,950
            
            $15.92
            
            2.47
            
            54,950
            
            $15.92





Information
      relating to activity in the Directors’ Plan is summarized in the following
      table. All option grants included in the following table had exercise prices
      equal to market price on the grant date.





**Number
                of shares**
            
            **Weighted
                Average Exercise Price**
            
            **Weighted
                Average Fair Value**Options
                outstanding at January 1, 2003
            
            
            160,600
            
            $
            7.16Options
                granted
            
            
            31,000
            
            $
            3.19
            
            $
            2.78Options
                outstanding at December 31, 2003
            
            
            191,600
            
            $
            6.52Options
                granted
            
            
            31,000
            
            $
            3.38
            
            $
            2.92Options
                outstanding at December 31, 2004
            
            
            222,600
            
            $
            6.08Options
                granted
            
            
            24,000
            
            $
            3.48
            
            $
            2.87Options
                exercised
            
            
            (9,000
            )
            $
            3.43Options
                forfeited
            
            
            (44,000
            )
            $
            7.52Options
                outstanding at December 31, 2005
            
            
            193,600





The
      number of stock options exercisable under the Directors’ Plan at December 31,
      2005, 2004, and 2003 was as follows:




**2005**
            
            
            **2004**
            
            
            **2003**Exercisable
                stock options
            145,600
            
            
            161,591
            
            
            135,925





F-18




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


Information
      relating to options outstanding under the Directors’ Plan at December 31, 2005,
      is summarized as follows:





**Outstanding**
            
            **Exercisable****Range
                of Exercise Prices**
            
            **Options**
            
            **Weighted
                Average Exercise Price**
            
            **Weighted
                Average Remaining Life**
            
            **Options**
            
            **Weighted
                Average Exercise Price**$2.61
                - $4.38
            
            145,600
            
            $
                3.43
            
            5.52
            
            97,600
            
            $
                3.46$7.25
                - $10.13
            
            24,000
            
            $
                9.09
            
            2.54
            
            24,000
            
            $
                9.09$13.25
                - $19.38
            
            24,000
            
            $14.88
            
            2.58
            
            24,000
            
            $14.88





The
      following weighted-average assumptions were used in estimating the fair value
      of
      stock options granted under the Employee Plan:





**2005**
            
            **2004**
            
            **2003**Expected
                life
            9
                years
            
            9
                years
            
            9
                yearsExpected
                volatility
            0.7581
            
            0.8579
            
            1.0016Risk-free
                interest rate
            4.28%
            
            4.27%
            
            3.96%Expected
                dividend yield
            0%
            
            0%
            
            0%





The
      following weighted-average assumptions were used in estimating the fair value
      of
      stock options granted under the Directors’ Plan:





**2005**
            
            **2004**
            
            **2003**Expected
                life
            10
                years
            
            10
                years
            
            10
                yearsExpected
                volatility
            0.7641
            
            0.8674
            
            0.9489Risk-free
                interest rate
            4.15%
            
            4.52%
            
            3.49%Expected
                dividend yield
            0%
            
            0%
            
            0%





The
      Company adopted SFAS No. 123R effective January 1, 2006, and elected the
      modified prospective application as the transition method. Accordingly, in
      2006
      the Company will recognize compensation expense on stock options granted prior
      to 2006 for which the requisite service period was not completed as of December
      31, 2005. In addition, the Company will recognize compensation expense for
      all
      options granted subsequent to the adoption of SFAS No. 123R. The Company
      estimates that approximately $278 in compensation expense will be recognized
      in
      future periods associated with stock options granted prior to the adoption
      of
      SFAS No. 123R, of which the Company estimates that approximately $125 will
      be
      recognized in 2006. In the first quarter of 2006, the Company granted a total
      of
      68,600 stock options to non-employee directors, of which 37,600 were fully
      vested upon grant and 31,000 of which will vest ratably over a three-year
      period, and granted 121,640 stock options to employees, which will vest ratably
      over a four-year period. The fair value of these stock option grants totaled
      $435, which will be recognized as compensation expense over the service period,
      with approximately $166 to be recognized in 2006. The fair value of these stock
      option grants was estimated using a binomial lattice model.




**14.
      Earnings per Share**





Basic
      earnings (loss) per share of common stock is computed by dividing income (loss)
      available to common stockholders by the weighted average number of common shares
      outstanding. There were no reconciling items to net loss to arrive at loss
      available to common stockholders for the years ended December 31, 2005, 2004,
      and 2003. Diluted earnings (loss) per share of common stock is computed by
      giving effect to all dilutive potential common shares. The number of shares
      used
      in the calculation of diluted earnings (loss) per share for the years ended
      December 31, 2005, 2004, and 2003, excluded 99,279, 99,715, and 50,083,
      respectively, of incremental shares related to stock options and warrants.
      Such
      incremental shares were excluded from the calculation of diluted earnings (loss)
      per share due to their antidilutive effect.





F-19




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


**15.
      Retirement Plan**





The
      Company has a defined contribution plan in which eligible employees who have
      attained 21 years of age may contribute on both a pretax and after-tax basis
      up
      to a maximum of 15% of their annual salary, subject to annual limits established
      by the Internal Revenue Service. The Company can make discretionary
      contributions. Employees are fully vested at all times in contributions they
      make to the plan, and employees who have completed at least one year of service
      and are employed with the Company on the last business day of the year fully
      vest in Company contributions. The Company made no discretionary contributions
      to its defined contribution plan for the years ended December 31, 2005, 2004,
      and 2003, respectively.




**16.
      Commitments and Contingencies**





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




**17.
      Guarantees**





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





The
      Company has entered into subleases with third parties relating to properties
      no
      longer occupied by the Company. Under an assignment of one of these subleases,
      the third party remits payment directly to the landlord, although the Company
      remains the primary obligor for the lease payments. If the third party ceased
      to
      remit payment directly to the landlord, the Company would be liable for such
      payments. The maximum potential amount for which the Company can be held liable
      is approximately $294. No amount has been recognized in connection with such
      potential liability.




**18.
      Concentration of Credit Risk**





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





The
      Company provides credit to clients on an uncollateralized basis after evaluating
      client creditworthiness. The Company’s clients are not concentrated in any
      specific geographic region, but are concentrated in the automotive, insurance,
      pharmaceutical, consumer products, and public relations agency businesses.
      For
      the year ended December 31, 2003, revenues from Altria Group, Inc., and its
      subsidiaries represented approximately 16.5% of the Company’s consolidated
      revenues. The Company’s five largest clients provided approximately 9.9%, 15.2%,
      and 25.5% of revenues for the years ended December 31, 2005, 2004, and 2003,
      respectively. In addition, amounts due from these customers represented 12.5%
      and 20.1% of trade accounts receivable at December 31, 2005 and 2004,
      respectively. The Company does not believe that a significant reduction in
      business from any of its clients would have a material adverse effect on its
      results of operations or financial condition since no single client or group
      of
      clients is responsible for a significant portion of the Company’s revenues or
      represents a significant portion of the Company’s trade
      receivables.




F-20


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





**19.
      Supplemental Disclosure of Cash Flow Information**





Payments
      of interest and income taxes were as follows:





**2005**
            
            **2004**
            
            **2003**Interest
                paid
            $
            428
            
            $
            382
            
            $
            309Income
                taxes paid (refunded) - net
            $
            418
            
            $
            90
            
            $
            (1,580)





There
      were no non-cash investing and financing activities for the year ended December
      31, 2005. Non-cash investing and financing activities for the years ended
      December 31, 2004 and 2003, were as follows:





**2004**
            
            **2003**Common
                stock received as repayment of loan
            
            
            
            $
            143Receivable
                due from purchaser of a business
            
            
            
            $
            605Common
                stock issued in connection with acquisitions
            
            
            
            
            
            
            $
            275




**20.
      Fair Value of Financial Instruments**





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





The
      carrying amounts of cash and cash equivalents, non-trade receivables included
      as
      part of other current assets, and obligations under capital leases at December
      31, 2005 and 2004, are a reasonable approximation of their fair values due
      to
      the short-term nature of these instruments. The carrying amounts of the
      convertible debentures at December 31, 2005 and 2004, are a reasonable
      approximation of their fair values since the interest rates were above the
      fixed-rate minimum, resulting in the convertible debentures being variable-rate
      obligations. Non-trade receivables included as part of other non-current assets
      with carrying amounts of $20 and $31 at December 31, 2005 and 2004,
      respectively, had fair values of $18 and $28, respectively. The fair values
      of
      these instruments were estimated by discounting the future streams of payments
      at the interest rate on the convertible debentures, which is used as a surrogate
      for the Company’s incremental borrowing rate.




**21.
      Segment Information**





The
      Company has determined that its two reportable segments are media communications
      services and video watermarking services. The media communications services
      segment provides broadcast services, including consultation, production,
      distribution, and monitoring services, to corporate entities and other
      organizations and press release wire services to domestic governmental, public
      affairs, and non-profit organization news sources. Through the Company’s
      Teletrax subsidiaries, the video watermarking services segment provides
      broadcast intelligence to video content providers such as entertainment
      companies, news organizations, television syndicators, and direct-response
      marketing companies.





The
      Company identifies its reportable segments based on the services provided by
      its
      various operations. The media communications services segment is an aggregation
      of such services provided by the Company’s broadcast operations in the United
      States and the United Kingdom and the press release wire services provided
      by
      the Company’s U.S. Newswire division.





F-21
 
  **MEDIALINK
          WORLDWIDE INCORPORATED**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**


The
      Company previously operated a research services segment that provided analysis
      of public relations and corporate communications activities on behalf of
      clients. This segment was sold in December 2004 and is reported as a
      discontinued operation (see Note 3 to the consolidated financial
      statements).





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





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




**2005**
              
              **2004**
              
              **2003***Revenues:*Media
                  communications services
              
              $
              34,708
              
              $
              35,239
              
              $
              34,738Video
                  watermarking services
              
              
              2,004
              
              
              1,624
              
              
              645Total
              
              $
              36,712
              
              $
              36,863
              
              $
              35,383*Operating
                  income (loss):*Media
                  communications services
              
              $
              2,956
              
              $
              3,832
              
              $
              4,349Video
                  watermarking services
              
              
              (2,651
              )
              
              (2,033
              )
              
              (2,448
              )Total
              
              
              305
              
              
              1,799
              
              
              1,901Other
                  business activities
              
              
              (5,864
              )
              
              (3,497
              )
              
              (3,249
              )Impairment
                  of investments
              
              
              
              
              
              (715
              )Loss
                  from joint venture
              
              
              
              
              
              (247
              )
              
              (316
              )Restructuring
                  charges
              
              
              
              
              
              
              
              
              (592
              )Interest
                  expense - net
              
              
              (491
              )
              
              (393
              )
              
              (282
              )Loss
                  from continuing operations before taxes
              
              $
              (6,050
              )
              $
              (3,053
              )
              $
              (2,538
              )*Depreciation
                  expense:*Media
                  communications services
              
              $
              1,008
              
              $
              1,138
              
              $
              1,183Video
                  watermarking services
              
              
              614
              
              
              547
              
              
              392Other
                  business activities
              
              
              38
              
              
              4Total
              
              $
              1,660
              
              $
              1,689
              
              $
              1,575


F-22




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


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





**2005**
            
            **2004***Total
                Assets:*Media
                communications services
            $
            21,657
            
            $
            27,348Video
                watermarking services
            
            2,173
            
            
            2,440Other
                business activities
            
            9,096
            
            
            8,985Total
            $
            32,926
            
            $
            38,773*Expenditures
                on long-lived assets:*Media
                communications services
            $
            1,268
            
            $
            409Video
                watermarking services
            
            422
            
            
            300Other
                business activities
            
            172
            
            
            24Discontinued
                operations
            
            
            
            
            120Total
            $
            1,862
            
            $
            853





The
      Company’s research segment generated revenues in foreign countries of $1,987 and
      $1,226 for the years ended December 31, 2004 and 2003, respectively. Segment
      information for continuing operations relating to geographic regions for 2005,
      2004 and 2003 was as follows:





**2005**
            
            **2004**
            
            **2003***Revenues:*United
                States
            $
            30,190
            
            $
            30,866
            
            $
            30,675United
                Kingdom
            
            6,522
            
            
            5,997
            
            
            4,708Total
            $
            36,712
            
            $
            36,863
            
            $
            35,383*Long-lived
                assets:*United
                States
            $
            3,766
            
            $
            3,329United
                Kingdom
            
            614
            
            
            740Total
            $
            4,380
            
            $
            4,069




**22.
      Comprehensive Income**





Comprehensive
      income includes all changes to equity that are not the result of transactions
      with shareholders and is comprised of net income and other comprehensive income.
      For the years ended December 31, 2005, 2004, and 2003, other comprehensive
      income (loss) of $(197), $152, and $7, respectively, consisted entirely of
      foreign currency translation adjustments on which no tax effect is reported
      since they relate to indefinite investments in foreign subsidiaries. At December
      31, 2005 and 2004, accumulated other comprehensive loss in the consolidated
      balance sheet of $393 and $196, respectively, consisted entirely of foreign
      currency translation adjustments.





F-23





**MEDIALINK
      WORLDWIDE INCORPORATED**


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




**23.
      Selected Quarterly Financial Data (Unaudited)**




**2005
                  Quarter Ended****March
                  31**
              
              **June
                  30**
              
              **September
                  30**
              
              **December
                  31**Revenues
              
              $
              8,548
              
              $
              9,223
              
              $
              8,827
              
              $
              10,114Loss
                  from continuing operations
              
              $
              (1,189
              )
              $
              (923
              )
              $
              (1,307
              )
              $
              (2,321
              )Net
                  loss
              
              $
              (1,129
              )
              $
              (923
              )
              $
              (1,173
              )
              $
              (2,321
              )Loss
                  per share from continuingoperations
                  - basic and diluted
              
              $
              (0.20
              )
              $
              (0.15
              )
              $
              (0.22
              )
              $
              (0.38
              )
  **2004
                  Quarter Ended****March
                  31**
              
              **June
                  30**
              
              **September
                  30**
              
              **December
                  31**Revenues
              
              $
              8,488
              
              $
              9,802
              
              $
              9,221
              
              $
              9,352Loss
                  from continuing operations
              
              $
              (743
              )
              $
              (23
              )
              $
              (596
              )
              $
              (2,384
              )Net
                  income (loss)
              
              $
              (1,018
              )
              
              9
              
              $
              (456
              )
              $
              494Income
                  (loss) per share from continuingoperations
                  - basic and diluted
              
              $
              (0.12
              )
              $
              0.00
              
              $
              (0.10
              )
              $
              (0.40
              )




F-24


**EXHIBIT
      INDEX**





Exhibit
                No.
            Description3.1
            Amended
                and Restated Certificate of Incorporation of Medialink Worldwide
                Incorporated (Incorporated by reference to Exhibit No. 2.5 of Registrant’s
                Registration Statement on Form 8-A filed on January 16, 1997 (File
                No.
                000-21989)).3.2
            Amendment
                1 to the Amended and Restated By-Laws of Medialink Worldwide Incorporated
                (Incorporated by reference to Exhibit No. 3.2 of Registrant’s Annual
                Report on Form 10-K for the fiscal year ended December 31,
                2003).4.1
            Preferred
                Stock Rights Agreement, dated as of August 16, 2001, between Medialink
                Worldwide Incorporated and Mellon Investor Services, LLC, including
                the
                Certificate of Designation, the form of Rights Certificate and the
                Summary
                of Rights attached thereto as Exhibits A, B, and C, respectively
                (Incorporated by reference to Exhibit No. 4.1 of Registrant’s Registration
                Statement on Form 8-A filed on August 16, 2001 (File No.
                000-21989)).10.1
            Amended
                and Restated Employment Agreement, dated as of December 31, 2005,
                by and
                between Medialink Worldwide Incorporated and Laurence
                Moskowitz.10.2
            Amended
                and Restated Employment Agreement, dated as of August 28, 2001, by
                and
                between Medialink Worldwide Incorporated and J. Graeme McWhirter
                (Incorporated by reference to Exhibit No. 10.2 of Registrant’s Annual
                Report on Form 10-K for the fiscal year ended December 31,
                2001).10.3
            Separation
                Agreement and General Release, dated as of December 30, 2005, by
                and
                between Medialink Worldwide Incorporated and J. Graeme
                McWhirter.10.4
            Asset
                Purchase Agreement, dated December 31, 2004, by and between Medialink
                Worldwide Incorporated and Bacon’s Information Inc. (Incorporated by
                reference to Exhibit No. 10.1 of the Registrant’s Current Report on Form
                8-K/A filed on March 14, 2005).10.5
            Agreement
                for the Sale and Purchase of Certain Assets of Medialink UK Limited
                forming part of the Delahaye Business, dated December 31, 2004, by
                and
                between Medialink UK Limited and Romeike Limited (Incorporated by
                reference to Exhibit No. 10.2 of the Registrant’s Current Report on Form
                8-K/A filed on March 14, 2005).10.7
            Medialink
                Worldwide Incorporated 401(k) Tax Deferred Savings Plan (Incorporated
                by
                reference to Exhibit No. 10.33 of Registrant’s Registration Statement on
                Form S-1 filed on October 15, 1996 (File No.
                333-14119)).10.8
            Amended
                and Restated Stock Option Plan and form of Stock Option Agreement
                (Incorporated by reference to Exhibit No. 10.34 of Registrant’s
                Registration Statement on Form S-1 filed on October 15, 1996 (File
                No.
                333-14119)).10.9
            Medialink
                Worldwide Incorporated 1996 Directors Stock Option Plan and form
                of 1996
                Directors Stock Option Agreement (Incorporated by reference to Exhibit
                No.
                10.35 of Registrant’s Registration Statement on Form S-1 filed on October
                15, 1996 (File No. 333-14119)).10.10
            Form
                of Indemnification Agreement (Incorporated by reference to Exhibit
                No.
                10.10 of Registrant’s Annual Report on Form 10-K for the fiscal year ended
                December 31, 2003).10.11
            Forbearance
                Agreement (Incorporated by reference to Exhibit No. 10.11 of Registrant’s
                Annual Report on Form 10-K for the fiscal year ended December 31,
                2003).10.12
            Employment
                Agreement, dated as of July 11, 2005, by and between Medialink Worldwide
                Incorporated and Kenneth G. Torosian (Incorporated by reference to
                Exhibit
                No. 10.12 of Registrant’s Quarterly Report on Form 10-Q for the quarterly
                period ended September 30, 2005).10.13
            Employment
                Agreement, dated as of September 9, 2005, by and between Medialink
                Worldwide Incorporated and Lawrence A. Thomas (Incorporated by reference
                to Exhibit No. 10.13 of Registrant’s Quarterly Report on Form 10-Q for the
                quarterly period ended September 30, 2005).21
            Subsidiaries
                of the Registrant.23
            Consent
                of KPMG LLP.31.1
            Certification
                of the principal executive officer pursuant to Rules 13a-14(a) and
                15d-14(a) of the Securities Exchange Act of 1934, as
                amended.31.2
            Certification
                of the principal financial officer pursuant to Rules 13a-14(a) and
                15d-14(a) of the Securities Exchange Act of 1934, as
                amended.32
            Certification
                of the principal executive officer and principal financial officer
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.





G-1




**MEDIALINK
                WORLDWIDE INCORPORATED****SCHEDULE
                II - VALUATION AND QUALIFYING ACCOUNTS****For
                the years ended December 31, 2005, 2004, and
                2003****(In
                thousands of dollars)**




**Additions****Description**
            **Balance
                at beginning of period**
            
            **Charged
                to costs and expenses**
            
            **Charged
                to other accounts**
            
            **Deductions
                (1)**
            
            **Balance
                at end of period**Allowances
                deducted in the balance sheet from assets to which they
                apply:**For
                the year ended December 31, 2005:**Allowance
                for doubtful accounts
            $
            593
            
            $
            158
            
            $
            -
            
            $
            141
            
            $
            610Valuation
                allowance on deferred tax assets
            $
            2,803
            
            $
            1,936
            
            $
            -
            
            $
            -
            
            $
            4,739**For
                the year ended December 31, 2004:**Allowance
                for doubtful accounts
            $
            446
            
            $
            209
            
            $
            -
            
            $
            62
            
            $
            593Valuation
                allowance on deferred tax assets
            $
            964
            
            $
            1,839
            
            $
            -
            
            $
            -
            
            $
            2,803**For
                the year ended December 31, 2003:**Allowance
                for doubtful accounts
            $
            510
            
            $
            53
            
            $
            -
            
            $
            117
            
            $
            446Valuation
                allowance on deferred tax assets
            $
            252
            
            $
            712
            
            $
            -
            
            $
            -
            
            $
            964(1)
                Represents amounts written off.





S-1