MEDIALINK WORLDWIDE INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002

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
incorporation or organization) Identification Number)

708 Third Avenue, New York, New York 10017
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(212) 682-8300
--------------
(Registrant's telephone number, including area code)

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

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

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

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant amounted to $13,168,316 as of the last business day of the
registrant's most recently completed second quarter.

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of business on March 28, 2003: Common Stock -
5,993,671.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's notice of Annual Meeting of Stockholders, to be
held on June 5, 2003, and proxy statement to be filed pursuant to Regulation 14A
within 120 days after the Registrant's fiscal year ended December 31, 2002 are
incorporated by reference in Part II, Item 5 and Part III of this report.

FORWARD LOOKING STATEMENTS

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

ITEM 1. BUSINESS.

GENERAL

Medialink Worldwide Incorporated ("Medialink"), a global leader in corporate
media communications services, is based in New York, with offices in 10 cities
worldwide including an international base in London. Medialink's mission is to
link its clients, professional communicators, to the media in order to
communicate the client's message to targeted or mass audiences worldwide. The
Company uniquely blends its creative and production expertise with established
news media credibility, proprietary databases, an electronic distribution
infrastructure and the first truly global electronic video tracking solution to
provide its clients with the ability to create, distribute and measure their
communications. Medialink is a publicly traded company (Nasdaq: MDLK).

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Typical client communication needs include brand awareness, new product
launches, regulatory actions, mergers and acquisitions, crisis communications,
and other major corporate events. For example, on behalf of Allergan, Inc., news
footage of the FDA approval of Botox(R) covered by television stations
nationwide included video produced and distributed by Medialink. As part of a
promotional campaign, when The Indiana Heart Hospital, called the "Hospital of
the Future," opened its doors, Medialink scheduled and produced live interviews
between hospital administrators and major market television stations,
positioning it as the most advanced all-digital heart facility in the country.
Morgan Stanley employs Medialink's guaranteed radio service as a means to
educate listeners regarding personal finance issues on a weekly basis.
Organizations and government agencies, such as the American Bar Association and
the U.S. Department of Energy, commonly turn to Medialink's U.S. Newswire
division to provide distribution of press releases and related materials to the
news media.

Medialink is not an advertising agency in that it does not purchase time and
space in the media. It is not a public relations firm as it does not develop the
essential strategy of client communications. But it is the counselor of
expertise in the visual and aural media, the conduit that conveys messages to
the media and the monitor that assesses the reach and impact of the messages on
these audiences.

Medialink offers corporations and organizations full service solutions that
combine the artistry to create, the scientific capability to distribute and the
passion to deliver results. Offering customized communications solutions
designed for the unique needs of its more than 3,000 clients, Medialink is the
industry leader. Medialink specializes in working with clients to create
communications programs designed to reach audiences primarily through its unique
links to the media. On behalf of its clients, Medialink creates and distributes
news to broadcast, print and online newsrooms around the world, for their free
and unrestricted use. Unlike its competitors, Medialink combines this content
production and distribution expertise with complete qualitative and quantitative
communications monitoring, research and analysis services.

By leveraging relationships with news organizations, such as The Associated
Press, ABC Networks, CBS Newspath, and Fox NewsEdge, Medialink can quickly alert
and disseminate clients' news to every major newsroom in the U.S. Similarly,
international distribution relationships enable Medialink to reach virtually any
audience, in any country, on any news medium. Medialink reaches audiences
worldwide via media as diverse as CNN, ABC, BBC, Germany's SAT1, Bloomberg
Radio, The New York Times, The Washington Post and thousands of online news
sites. The Company's success is apparent in its rich and diverse client base,
which includes AT&T, British Airways, Dell, DIAGEO, Disney, Ford, GE Financial,
General Motors, IBM, Intel, Jaguar, Miramax, NASDAQ, National Association of
Realtors, Novartis, Pearson, Pfizer, Altria Group (formerly Philip Morris
Companies Inc.), Siemens, Sony, and Xerox Corporation. Clients also include
virtually every major PR firm in the US and the UK.

During 2002, the Company launched Teletrax(TM), the broadcast industry's first
global electronic video watermarking and tracking solution. Medialink currently
uses the Teletrax system to track and monitor the worldwide usage of video
distributed by the Company. Since its launch, Reuters Television and NBC News
Channel have entered in to multi-year agreements to utilize this unique content
asset management tool to track and monitor the usage of their video content.
Teletrax offers Medialink new revenue streams outside of its core broadcast
services, such as copyright management, advertising proof-of-performance,
sponsorship evaluation, verification of airings for network and syndicated
programming, and intellectual property rights management. Teletrax, exclusively
offers this service and is 76% owned by Medialink.

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STRATEGY

From its inception, the Company has been at the vanguard as public relations has
evolved from being print-focused to embracing video, audio and the Internet.
Medialink's strategy is to enable its clients to effectively and efficiently
communicate news to audiences through all mediums. The Company achieves this by:
(i) creating and producing compelling content; (ii) distributing content through
the Company's unmatched infrastructure; (iii) monitoring distribution
effectiveness and providing analytical feedback; and (iv) providing customized
research to gauge the effectiveness of clients' communications efforts.
The Company believes it is the market share leader in each of its primary
service offerings. Medialink has identified several avenues that should further
support the Company's growth, including: (i) leveraging client relationships
through cross-marketing; (ii) developing new products and services; and (iii)
broadening the sales force and client base.

OPERATIONAL OVERVIEW

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

Media Communications Services

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

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

Media Research Services

Delahaye Medialink--This division is a global leader in providing
communications/media research and analysis. Delahaye combines qualitative
and quantitative research techniques, proprietary technologies and its own
media and communications expertise to help companies and other organizations
plan and evaluate their internal and external communications programs. Using
data compiled from a variety of sources, including electronic monitoring and
press clipping services, the division employs sophisticated statistical
analyses to measure the quality and quantity of the client's print,
broadcast and Internet news coverage. Delahaye also offers interpretive
analyses that can provide: (i) an overall appraisal of the efficiency and
impact of a client's communications efforts; (ii) a comparison of the
client's news coverage

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with that of its competitors; and (iii) a gauge of the client's return on
investment for its communications programs.

Video Watermarking Services

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

SERVICE OFFERING

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

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MEDIALINK WORLDWIDE INCORPORATED SERVICE OFFERINGS
....................................... .............................. ............................ ................................
Production and Live Broadcast Distribution Internet Research/Analysis
....................................... .............................. ............................ ................................

o Video and Audio News o Video and Audio o Cyber Media Tours o Competitive
Release Production: News Release Analysis
Domestic Distribution and
International Monitoring:
Domestic
International
....................................... .............................. ............................ ................................
o Live Broadcasts: o Press Release o Webcasting o News Coverage
Satellite Media Tours Distribution Analysis
Radio Media Tours
Special Event
Broadcasts
Video Conferences
Audio Conferences
....................................... .............................. ............................ ................................
o Electronic Press Kits o Still Photography & o Web Releases o Campaign
Digital Distribution Effectiveness
....................................... .............................. ............................ ................................
o Public o Newstream.com o Performance
Service Benchmarking
Announcements
....................................... .............................. ............................ ................................
o Corporate Videos o WirePix o Syndicated
Distribution Research Studies
....................................... .............................. ............................ ................................
o Media Audits
....................................... .............................. ............................ ................................
o Strategic
Communications
Consulting and Crisis
- -----------------------------------------------------------------------------------------------------------------------------------

CLIENTS

The Company provides its services to more than 3,000 clients. The Company's
clients include corporations such as AT&T, General Motors, IBM, Johnson &
Johnson, Dell Computer, Intel, Disney, British Airways, Pfizer Pharmaceuticals,
Altria Group, Kraft Foods, Miller Brewing, adidas, Bayer, BP, DIAGEO, DTI, Ford
Motor Company, GE Financial, Jaguar, Miramax, Nasdaq, Pearson, Ericsson, Sony
and Novartis; organizations such as the American Association of Retired Persons,
National Association of Realtors and the AFL-CIO; and the world's largest
marketing communications firms such as Burson-Marsteller, Hill & Knowlton,
Ketchum Communications, Edelman Public Relations Worldwide and Weber Shandwick
Worldwide.

DISTRIBUTION AGREEMENTS

The Company has long-standing distribution alliances and powerful relationships
with major news organizations that provide clients unparalleled access to
newsroom decision-makers. Through an agreement with the Associated Press for the
use of its AP Express newswire, Medialink can quickly alert more than 700
television and 400 radio newsrooms to clients' impending video and audio news.
The Company's strong relationships with ABC, CBS and

5

FOX, among others, provide it access to their network affiliates through their
dedicated and highly cost-effective satellite news feeds. Medialink continues to
expand its distribution infrastructure through strategic distribution agreements
with high-profile media companies such as AOL Time Warner and Yahoo!. Through
its Newstream.com joint venture, the Company has developed a delivery mechanism
for multi-media content to more than 10,000 on-line newsrooms. Due to the
Company's extensive usage of both satellite distribution and electronic
broadcast monitoring services, the Company is able to obtain preferential
pricing from its key suppliers. Medialink's extensive relationships and its
reputation as a producer of newsworthy, broadcast-quality content ensure that
clients' video and audio news productions capture the attention of newsroom
decision-makers and thus their intended audiences.

BACKGROUND

The Company began offering production - in addition to distribution - of video
news releases in 1994 and has since developed a full range of video, audio,
Internet, still photography and print services which it now provides on a global
basis. Medialink enables its clients to reach more than 11,000 newsrooms at
television and radio networks, local stations, cable channels, direct broadcast
satellite systems, as well as more than 10,000 online multimedia newsrooms.

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

The Company also produces and coordinates live broadcast services include
Satellite Media Tours ("SMT"), Radio Media Tours ("RMT"), audio and video news
conferences and special-event broadcasts. SMTs consist of a sequence of
one-on-one satellite interviews with a series of pre-booked television reporters
across the country or around the world. Typical SMT applications include, among
others, an interview with an author, performer, executive or other spokesperson
promoting an upcoming event, product, movie or book release. SMTs generally are
conducted from a studio but can originate from remote locations and may be aired
live by the television station or recorded for a later airing. Similar to SMTs,
Medialink offers RMTs targeted to radio stations across the country or around
the world.

The acceptance of digital audio and video media is driving the next Internet
evolution. Companies are seeking to leverage the Internet by creating
content-rich Web destinations while controlling costs. In 1999, Medialink
created Newstream.com, a joint venture with Business

6

Wire, a leading distributor of text-based press releases. Newstream.com delivers
multimedia assets to more than 10,000 online news and information Web sites that
increasingly need streaming video, audio, presentations, and graphics to be
competitive. During its third year of operations, Newstream.com continued to
experience growth. Newstream.com's overall membership - including journalists,
professional communicators, financial analysts and members of the general public
- - stands at more than 65,000. The number of registered journalist stood at more
than 16,000 as of December 2002. More than 12,000 professional communicators and
more than 3,500 financial analysts utilized Newstream.com in 2002. Registration
among the general public was up 41% from 23,266 in January of 2002 to 32,768 in
December 2002.

As webcasting continues to gain momentum throughout the communications industry,
Medialink has expanded the capabilities of its webcasting services. Medialink
provides production, distribution and tracking of live events on the Web. In
tandem with traditional satellite videoconferences or as Web-only events, these
webcasts link companies to their clients, consumers, shareholders, employees or
other crucial audiences live. Medialink also provides creative counseling to
help clients design special web pages and to promote their activities
effectively. The Company has produced webcasts ranging from product launches and
press conferences to merger announcements and internal seminars for a number of
clients, including Dell Computer Corporation, Boeing, Pearson, Diageo, Kellogg
Company, Ford Motor Company, Bell Atlantic, Datek, Radio Shack, Ford Motor
Company and Toyota.

In November 1998, Medialink expanded its United Kingdom still photography
service into the United States through the acquisition of WirePix, a New
York-based public relations photo service. The Company's clients have included
corporations such as Hasbro, Colgate-Palmolive, Compaq Computer Corporation and
McDonald's. Public relations firms such as Burson-Marstellar, Cohn & Wolfe,
Fleishman Hillard and Manning Selvage & Lee have also engaged WirePix's
services.

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

The Company continues to diversify its service offerings, and in 1999, the
Company accelerated development of its research group by acquiring the Delahaye
Group, a leading public relations and media analysis firm. During 2000, the
Company successfully integrated it with its own research operations. The new
research team has emerged as a leader in helping corporations and organizations
around the world communicate more efficiently and effectively. By providing
media monitoring, analysis, and public relations research, Medialink helps
corporations determine return on investment from their communications efforts.
Contributing to the group's growth were the Company's previous investments in
Infotrend and NewsIQ, both proprietary media tracking tools enabling Delahaye to
process thousands of pieces of news and provide clients with analytics relating
to the client's overall communications program.

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In 2001, the Company introduced the Media Reputation Index (MRi). The MRi
assesses the media's impact on corporate reputation, providing the basis for
understanding and improving a company's perception as covered by the news media.
The index benchmarks the 100 largest US-based companies including Exxon Mobil
Corporation, General Motors Corporation, Ford Motor Company and Wal-Mart Stores,
Inc., tracking and evaluating each company's media coverage over time and versus
all 100 companies.

In 2002, the Company launched Teletrax, providing Medialink with a unique
selling proposition complementary to its core broadcast service business by
offering a content management tool with the distinctive ability to track video
content whenever and wherever it is broadcast. Teletrax is expected to unlock
new revenue streams for Medialink outside of its traditional business. Teletrax
fulfills the needs of a variety of industries, including Advertising, Sports,
Music, Film and Television Syndication. The network of detectors currently
monitors more than 250 television stations in 30 countries, including in the
top-30 markets in the U.S.

EMPLOYEES

As of December 31, 2002, the Company had approximately 288 employees including
196 in client services, 58 in sales and marketing and 34 in corporate and
administration. Included in corporate and administration were executives
totaling 8. None of the Company's employees is represented by a labor union.
Management believes that its employee relations are good. The Company also
engages on a part-time, project-by-project basis, independent production crews
at various locations worldwide. These crews have the skills, training and
experience which the Company requires for its production services.

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

ITEM 2. PROPERTIES.

As of December 31, 2002, the Company's properties are all leased as follows:

Location Gross Square Footage
-------- --------------------
New York 39,368
Boston 1,655
Chicago 1,317
Dallas 1,596
Washington, DC 7,043
San Francisco 1,401
Los Angeles 4,047
Norwalk, CT 24,690
Portsmouth, NH 11,055
London 10,896

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ITEM 3. LEGAL PROCEEDINGS.

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

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

None.

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PART II

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

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

Quarter Ended Low High
------------- --- ----

Quarter ended March 31, 2002 2.50 3.44
Quarter ended June 30, 2002 2.62 4.30
Quarter ended September 30, 2002 3.18 3.99
Quarter ended December 31, 2002 2.89 3.83

Quarter ended March 31, 2001 2.75 5.63
Quarter ended June 30, 2001 2.49 4.29
Quarter ended September 30, 2001 3.07 4.93
Quarter ended December 31, 2001 2.20 3.95

As of December 31, 2002, there were approximately 1,800 holders of record of the
Company's common stock.

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

Equity Compensation Plan Information

Information regarding the Company's equity compensation plans is set forth in
the section entitled "Executive Compensation - Equity Compensation Plan
Information" in the Company's Notice of Annual Meeting of Stockholders and Proxy
Statement, to be filed within 120 days after Registrant's fiscal year end of
December 31, 2002, which information is incorporated herein by reference.

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ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data have been derived from the
Company's audited consolidated financial statements. The information below
should be read in conjunction with the consolidated financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Annual Report on Form
10-K.

Certain acquisitions occurring in 1999 and 1998 have been accounted for under
purchase accounting and accordingly, are only reflected herein for dates and
periods on and after the respective dates of acquisition. Additionally, all of
the balances have been restated to reflect the merger with The Delahaye Group,
Inc. which was accounted for as a pooling. See Note 3 of the Company's
Consolidated Financial Statements.

For the Years Ended December 31,
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
(In thousands, except per share data)

Operating Data:

Revenues $47,365 $48,420 $ 56,474 $ 44,614 $43,511
Gross profit 31,629 30,722 35,958 29,277 27,584
Selling, general and administrative expenses (a) 31,795 34,275 31,426 25,924 23,375
Loss from joint venture 350 728 1,079 234 -
Earnings before interest, taxes,
depreciation and amortization (a) 2,089 (708) 6,346 5,483 6,112
Operating income (loss) (1,817) (6,216) 3,453 3,119 4,209
Income (loss) before provision for
income taxes (2,015) (6,348) 3,532 3,339 4,548
Net income (loss) (1,869) (3,773) 2,057 1,992 2,335
Pro forma earnings (loss) per share (b) $ (0.19) $ (0.46) $ 0.35 $ 0.34 $ 0.39
Earnings (loss) per share $ (0.32) $ (0.65) $ 0.35 $ 0.34 $ 0.39

Balance Sheet Data:

Working capital $ 4,091 $ 6,085 $ 10,644 $ 11,117 $13,943
Assets 41,082 40,813 42,028 36,982 33,293
Long-term debt, net - 95 157 233 779
Stockholders' equity $27,204 $29,046 $ 32,570 $ 29,887 $26,340

(a) 2002 selling, general and administrative expenses ("S, G & A") and earnings
before interest, taxes, depreciation and amortization ("EBITDA") exclude
advisory charges of $1.30 million. 2001 S, G & A and EBITDA exclude
restructuring, loss on sale of subsidiary and advisory charges of $634, $496,
and $805, respectively.

(b) Pro forma earnings per share is defined as earnings per share excluding
restructuring, loss on sale of subsidiary and advisory charges.

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

RESULTS OF OPERATIONS

Fiscal Year 2002 as Compared to Fiscal Year 2001

Revenues decreased by $1.06 million, or 2.2%, from $48.42 million in 2001 to
$47.36 million in 2002. Beginning in 2002, the Company had elected to change its
previous revenue breakout from four classifications (Distribution, Productions
and Live Broadcast, Internet Services, and Research and Other) to two
classifications (Media Communications Services and Media Research Services),
better reflecting the actual services the Company provides. Revenue from the
Company's Media Communications Services decreased by $256,000, and the Company's
Research Communication Services revenue decreased by $799,000. During 2002 the
Company continued to be challenged by a difficult economic environment, which
had an adverse effect on the Company's clients' spending and communication
budgets, resulting in the decrease in revenue as compared to 2001. Third party
statistics, including various public relations trade magazines, indicate that
the overall industry declines in revenue were greater than what the Company
experienced.

Direct costs decreased by $1.96 million, or 11.1%, from $17.70 million in 2001
to $15.74 million in 2002. The decrease in direct costs is the result of lower
revenues and increased profit margins in 2002 as compared to 2001. Direct costs
as a percentage of revenue were 33.2% and 36.6%, respectively, in 2002 and 2001.
In spite of the difficult economic environment, the Company was able to improve
its gross profit margin. The increase in the gross profit margin was
attributable to a favorable product mix during 2002 and operating efficiencies
implemented during 2002.

Selling, general and administrative ("S, G & A") expenses decreased by $1.51
million or 4.9%, from $30.70 million in 2001 to $29.19 million in 2002. Included
in the decrease in S, G & A is a decrease in payroll and related costs of
approximately $730,000. In reaction to the difficult economic environment and
the effects of September 11, 2001, the Company reduced its headcount in the 4th
Quarter of 2001 and produced other S, G & A savings, including, but not limited
to, advertising and marketing, travel and entertainment and office costs.
Offsetting these cost reductions, Teletrax, the Company's subsidiary formed in
2002, incurred $912,000 of S, G & A during 2002.

During 2001 the Company sold a component of its UK photography business and as a
result incurred a loss from the sale of a subsidiary of $496,000.

12

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

During 2001 the Company combined its U.S. and international broadcast services
into a Global Broadcast Services unit. The corporate reorganization is designed
to accelerate the growth of its broadcast services business. The Company
incurred a charge of $420,000 as a result of the restructuring. Additionally, in
September 2001 the Company reduced its staff in the UK and US incurring a
restructuring charge of $214,000.

In August 2001 the Company received an unsolicited takeover bid by United
Business Media plc to purchase all of its issued and outstanding common shares.
In connection with this unsolicited offer the Company incurred legal and
financial advisory expenses of approximately $1.30 million and $805,000, for
2002 and 2001, respectively. The unsolicited offer is no longer active and the
Company does not anticipate incurring any additional costs.

Depreciation and amortization expense decreased by $966,000, or 27%, from $3.57
million in 2001 to $2.61 million in 2002. The decrease was due primarily to the
elimination of amortization of goodwill as a result of the implementation of
SFAS 142, net of additional depreciation and amortization expense arising from
additions in property and equipment and capitalized software. Included in 2001
was amortization of goodwill of $875,000 and none for 2002. Additionally,
amortization on the Company's customer list, acquired in connection with the
acquisition of Corporate Television Group, which became fully amortized during
the 2nd Quarter of 2002, decreased $367,000 from $800,000 in 2001 to $433,000 in
2002.

As a result of the foregoing, the Company experienced an operating loss of $1.82
million in 2002 as compared to operating loss of $6.22 million in 2001. The
operating loss in 2002 included advisory charges of $1.30 million and an
operating loss of $875,000 from the Company's newly formed 76% owned subsidiary,
Teletrax. The minority shareholder of Teletrax has no future funding obligations
and, accordingly, the Company has recorded 100% of the loss from this
subsidiary. The operating loss in 2001 included loss on sale of a subsidiary of
$496,000, restructuring charges of $634,000 and advisory charges of $805,000.

Interest expense increased by $6,000 from $273,000 in 2001 to $279,000 in 2002.
The increase was due to the Company's increased borrowings on its line of credit
during 2002 as compared to 2001, net of reduced interest rates during 2002.

Income tax expense (benefit) was calculated using Medialink's effective tax
rates of 41% in both 2002 and 2001. In 2002 the Company was also subject to
minimum state and local taxes and taxes on capital. Additionally, as a result of
the limited historical results of Teletrax, the Company's newly formed 76%
foreign subsidiary, and management's limited ability to project Teletrax's
future results, the Company has recorded a valuation allowance of $252,000
related to the foreign deferred tax asset generated by Teletrax's loss.

Including loss from joint venture and advisory charges the Company had a net
loss of $1.87 million in 2002 as compared to a net loss of $3.77 million in
2001, which included a loss from joint venture, loss from sale of subsidiary,
advisory charges and restructuring charges. The net loss in 2002 included a loss
of $886,000 from the Company's newly formed 76% owned subsidiary, Teletrax. The
minority shareholder has no future funding obligations and, accordingly, the
Company has recorded 100% of the loss from this subsidiary. In 2002 the Company
had basic loss per share of $0.32 compared to basic loss per share of $0.65 in
2001.

13

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

Fiscal Year 2001 as Compared to Fiscal Year 2000

Revenues decreased by $8.05 million, or 14%, from $56.47 million in 2000 to
$48.42 million in 2001. Revenue from the Company's Media Communications Services
decreased by $7.99 million, and the Company's Research Communication Services
revenue decreased by $59,000. The decrease in revenue from Media Communication
Services includes a decrease in revenue related to Internet services of $4.91
million which mirrored the downward trend in the new media sector experienced
throughout 2001. During the first nine months of 2001 the Company was challenged
by a difficult economic environment, resulting in lower than anticipated
revenue. As a result of the September 11th tragedy, revenues from the Company's
distribution services were significantly affected. Through the first two
quarters of 2001 revenue had decreased by $3.92 million, or 13.8%, as compared
to the prior year resulting from the weakening of the economy and the decrease
in revenue from Internet services. Revenue in the 3rd Quarter of 2001 had
decreased by 25% as compared to the 3rd Quarter of 2000 resulting primarily from
the events of September 11th and the continued weak economy. Revenue in the 4th
Quarter of 2001 had decreased 21% as compared to the 4th Quarter of 2000
resulting from the aftermath of September 11th and related war on terrorism and
the continued weak economy.

Direct costs decreased by $2.82 million, or 14%, from $20.52 million in 2000 to
$17.70 million in 2001. Direct costs as a percentage of revenue were 36.6% and
36.3%, respectively, in 2001 and 2000. In spite of the difficult economic
environment, the Company was able to maintain its gross profit margin.

Selling, general and administrative ("S, G & A") expenses increased by $2.17
million or 8%, from $28.53 million in 2000 to $30.70 million in 2001. Included
in the increase in S, G & A is an increase in payroll and related costs of
approximately $1.11 million. Also included in the increase in S, G & A is
approximately $779,000 in rent resulting from, among other things, the expansion
of the Company's corporate headquarters in New York which now includes a new
state-of-the-art production and broadcast television studio that officially
opened in April 2001. The Company believes that the studio will provide
additional revenue streams as well as reduce its costs of production and
distribution services.

As the Company experienced a slow-down in demand resulting from the economic
downturn during 2001, it made adjustments during the first and third quarter of
2001 in its personnel and other S, G & A expenditures.

During 2001 the Company sold a component of its UK photography business and as a
result incurred a loss from the sale of a subsidiary of $496,000.

During 2001 the Company combined its U.S. and international broadcast services
into a Global Broadcast Services unit. The corporate reorganization is designed
to accelerate the growth of its broadcast services business. The Company
incurred a charge of $420,000 as a result of the restructuring. Additionally, in
September 2001 the Company reduced its staff in the UK and US incurring a
restructuring charge of $214,000.

In connection with the unsolicited takeover bid by United Business Media plc,
the Company incurred legal and financial advisory expenses of approximately
$805,000 through December 31, 2001.

14

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

Depreciation and amortization expense increased by $679,000, or 24%, from $2.89
million in 2000 to $3.57 million in 2001. The increase was due primarily to
additional amortization expense arising from additional earn-out payments,
recorded as goodwill, made by the Company on its various acquisitions and
depreciation expense related to the Company's new studio.

As a result of the foregoing, the Company experienced an operating loss of $6.22
million in 2001 as compared to operating income of $3.45 million in 2000.
Excluding the loss from joint venture, loss on sale of subsidiary, advisory
charges and restructuring charges the operating loss for 2001 was $3.55 million
as compared to operating income of $4.53 million in 2000.

Interest expense increased by $226,000 from $47,000 in 2000 to $273,000 in 2001.
The increase was due to the Company increased borrowings on its line of credit
during 2001 as compared to 2000.

Income tax expense (benefit) was calculated using Medialink's effective tax
rates of 41% in 2001 and 42% in 2000.

Including loss from joint venture, loss from sale of subsidiary, advisory
charges and restructuring charges, the Company had a net loss of $3.77 million
in 2001 as compared to net income of $2.06 million in 2000. In 2001 the Company
had basic loss per share of $0.65 compared to basic earnings per share of $0.36
in 2000.

LIQUIDITY AND CAPITAL RESOURCES

Medialink has financed its operations primarily through cash generated from
operations and through draw downs on its line of credit facility. Cash flow
provided by operating activities amounted to $3.95 million and $569,000 in 2002
and 2001, respectively. Capital expenditures which are primarily incurred to
support Medialink's sales and operations were $1.35 million in 2002 and $2.19
million in 2001. The Company expects to make capital expenditures of
approximately $1,000,000 on the roll-out of the Teletrax network during 2003. In
addition, the Company expects to make capital expenditures in the ordinary
course of business of approximately $1,000,000 during 2003.

On August 1, 1999 the Company entered into a joint venture with Business Wire to
form Business Wire/Medialink, LLC, doing business as Newstream.com. Each member
made an initial capital contribution of $2.00 million, plus acquisition costs.
The Company accounts for its interest in Newstream.com under the equity method.
Each member made additional capital contributions of $250,000 and $500,000 each,
during 2002 and 2001, respectively. During 2002 and 2001 the Company also made
various earn-out payments on acquisitions aggregating $850,000 and $1.06
million, respectively, in cash.

In June 1997 Medialink acquired certain assets of CTV. The initial purchase
price of $4.18 million was paid $3.85 million in cash and $333,000 in Medialink
common stock. Included in the cash portion was $300,000 related to the purchase
of a non-compete. Earn-out provisions allow for up to an additional $6.2 million
to be paid, through 2002, based upon certain revenue and profitability targets
over the next five years. Assuming the targets are met, the overall
consideration will be in the form of cash and Medialink common stock, as
specified in the

15

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

agreement. During 2002 and 2001 Medialink made cash payments of approximately
$625,000 and $834,000, respectively, as additional consideration for the CTV
acquisition.

During 1999 the Company made an acquisition of a news-related company. As
consideration for this purchase, the Company paid $1.26 million in cash and
55,348 shares of the Company's common stock valued at $800,000. Earn-out
provisions allow for additional payments of purchase price of up to $1.50
million, based on reaching certain profitability levels, to be paid in the form
of cash and the Company's common stock as specified in the agreement, over a
period of three years. Through December 31, 2002 $1.13 million of additional
consideration has been recorded under the earn-out provisions.

At December 31, 2002 the maximum future earn-out payments on the above
acquisitions are approximately $800,000 ($503,000 in the form of cash and
$297,000 in the form of Medialink common stock) through March 2003.

In August 2001 the Company received an unsolicited takeover bid from United
Business Media plc to purchase all of its issued and outstanding common shares.
In connection with this unsolicited offer the Company retained a financial
advisor to assist the Company in analyzing and considering the unsolicited offer
and the various strategic opportunities available to the Company to maximize
shareholder value. The terms of the agreement provided that the Company pay the
financial advisor between $2,000,000 and $2,500,000 by August 20, 2002. In
August 2002 the agreement was amended to decrease the total fees to $1.60
million plus expenses. In accordance with the terms of the amended agreement, as
of December 31, 2002, $1.20 million has been paid with the remaining balance of
$400,000 included in accounts payable. The remaining balance is due in April
2003. As of December 31, 2001 the unsolicited offer was no longer active.

The Company had a line of credit facility with a bank, allowing for borrowings
of up to $7.50 million through January 1, 2003. The Company has renewed the
credit facility through April 15, 2004. The renewed credit facility allows for
borrowings of up to $7.50 million. The renewed facility bears interest at the
30-Day LIBOR Rate (1.38% at December 31, 2002) plus 2.25% through 3.25%, per
annum, as defined.

As of December 31, 2002 Medialink had $6.39 million in cash and cash equivalents
as compared to $4.68 million as at December 31, 2001. As at December 31, 2002
and 2001, long-term debt, including current portion, was $45,000 and $150,000,
respectively.

The Company believes that it has sufficient capital resources, including
availability under its line of credit facility, and cash flow from operations to
fund its net cash needs for at least the next twelve months.

RISK FACTORS

Major News Events
Events which dominate news broadcasts, such as the events of September 11th or
the involvement by the United States in a war, may cause the Company's clients
to delay or not use the Company's services for a particular project as such
clients may determine that their messages may not receive

16

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

adequate attention in light of the coverage of other news events. Such
circumstances could have a material adverse effect on the Company's business,
operating results and financial condition.

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

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

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

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

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

Line of credit
The Company had a balance due under its line of credit of $6.54 million with a
due date of January 1, 2003. The Company renewed the facility through April
2004. Covenants under the line

17

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

of credit agreement require the Company to meet certain financial ratios,
including minimum tangible net worth and minimum earnings before depreciation,
amortization, interest and other charges, as defined in the agreement.

While management believes the Company is currently in compliance with the
covenants under the line of credit agreement, there can be no assurance that the
Company will continue to be in compliance in the future. In that event, the
Company may be required to raise additional funds in order to repay the
outstanding balance under the line of credit and there can be no assurance that,
if required, the Company would be able to raise such funds on favorable terms,
if at all.

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

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

CRITICAL ACCOUNTING POLICIES

We have identified the policies below as significant to our business operations
and the understanding of our results of operations. The impact and any
associated risks related to these policies on our business operations is
discussed throughout Management's Discussion and Analysis of Financial Condition
and Results of Operations where such policies affect our reported and expected
financial results. For a detailed discussion on the application of these and
other accounting policies, see Note 1 in the Notes to the Consolidated Financial
Statements in the Company's Form 10-K for the year ended December 31, 2002.

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

Allowance for Doubtful Accounts
Management must make estimates of the uncollectibility of the Company's accounts
receivable. Management specifically analyzes accounts receivable, historical bad
debt, customer

18

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

concentrations, customer creditworthiness and current trends when evaluating the
adequacy of the allowance for doubtful accounts.

Goodwill and Intangible Assets
Goodwill represents the excess of purchase price and related costs over the
value assigned to the net tangible and intangible assets of businesses acquired.
In 2001 and 2000, goodwill was amortized on a straight-line basis over its
expected useful life, not to exceed 40 years, and we periodically reviewed the
recoverability of goodwill and intangible assets. Effective January 1, 2002, we
adopted the provisions of Financial Accounting Standards Board (FASB) Statement
of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets, which required us to ceased amortizing goodwill and to assess goodwill
for impairment at least annually in the absence of an indicator of possible
impairment and immediately upon an indicator of possible impairment. The annual
impairment testing required by SFAS No. 142 will also requires the Company to
use its judgment and could require the Company to write down the carrying value
of its goodwill and other intangible assets in future periods.

Other intangible assets, including customer lists and covenants not to compete,
are being amortized on a straight-line basis over the term of the agreement or
the estimated future period of benefit, which ranges from 3 to 7 1/2 years.

The agreements pursuant to which the Company acquired certain companies include
provisions that could require the Company to issue additional cash or shares of
common stock if certain performance targets are met. The value of any such
additional consideration will be added to the goodwill related to such
acquisition.

Long-lived Assets
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

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

19

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

EFFECTS OF NEWLY-ISSUED ACCOUNTING STANDARDS

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
143 ("SFAS 143"), "Accounting for Asset Retirement Obligations," which is
effective January 1, 2003. SFAS 143 addresses the financial accounting and
reporting for obligations and retirement costs related to the retirement of
tangible long-lived assets. The Company does not expect that the adoption of
SFAS 143 will have a significant impact on the Company's financial statements.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived
Assets," which is effective January 1, 2002. SFAS 144 supersedes FASB Statement
No 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," and the accounting and reporting provisions relating
to the disposal of a segment of a business of Accounting Principles Board
Opinion No. 30. The adoption of SFAS 144 did not have a significant impact on
the Company's financial statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections. SFAS
No. 145, which is effective for fiscal years beginning after May 15, 2002,
provides guidance for income statement classification of gains and losses on
extinguishment of debt and accounting for certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. We do not
believe the adoption of this statement will have a material impact on our
consolidated financial statements.

In July 2002, Statement of Financial Accounting Standards No. 146, "Accounting
for Costs Associated with Exit or Disposal Activities" ("Statement 146") was
issued. This Statement addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues Task
Force Issue ("EITF") 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)." The principal difference between Statement
146 and EITF 94-3 relates to the timing of liability recognition. Under
Statement 146, a liability for a cost associated with an exit or disposal
activity is recognized when the liability is incurred. Under EITF 94-3, a
liability for an exit cost was recognized at the date of an entity's commitment
to an exit plan. The provisions of Statement 146 are effective for exit or
disposal activities that are initiated after December 31, 2002. The adoption of
this statement is not expected to have a material impact on the Company's
financial position or results of operations.

In November 2002, the FASB issued FIN 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." FIN 45 elaborates on the existing disclosure requirements for most
guarantees, including residual value guarantees issued in conjunction with
operating lease agreements. It also clarifies that at the time a company issues
a guarantee, the company must recognize an initial liability for the fair value
of the obligation it assumes under that guarantee and must disclose that
information in its interim and annual financial statements. The initial
recognition and measurement provisions apply on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure
requirements are effective for financial statements of interim or annual periods
ending after December 15, 2002. The adoption of FIN 45 is not expected to have a
significant impact on our financial position and results of operations.

20

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

In January 2003, the FASB issued FIN 46, "Consolidation of Variable Interest
Entities." FIN 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. A variable interest entity is a corporation,
partnership, trust, or any other legal structures used for business purposes
that either (a) does not have equity investors with voting rights or (b) has
equity investors that do not provide sufficient financial resources for the
entity to support its activities. A variable interest entity often holds
financial assets, including loans or receivables, real estate or other property.
A variable interest entity may be essentially passive or it may engage in
research and development or other activities on behalf of another company. The
consolidation requirements of FIN 46 apply immediately to variable interest
entities created after January 31, 2003. The consolidation requirements apply to
older entities in the first fiscal year or interim period beginning after June
15, 2003. Certain of the disclosure requirements apply to all financial
statements issued after January 31, 2003, regardless of when the variable
interest entity was established. The Company has evaluated the impact of FIN 46
and does not believe that it has any investment in variable interest entity.

INFLATION

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

FOREIGN CURRENCY

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

21

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Debt
The Company has a line of credit agreement which exposes the Company to the risk
of earnings or cash flow loss due to changes in market interest rates. At
December 31, 2002, $6.54 million was outstanding on the line of credit which has
a maturity date of January 2003. The facility was renewed through April 2004.
The interest rate on the renewed facility is based upon the 30-day LIBOR rate
(1.38% at December 31, 2002) plus a margin of 2.25% through 3.25%, as defined.
All other Company debt is fixed-rate and, therefore, does not expose the Company
to the risk of earnings or cash flow loss due to changes in market interest
rate.

Foreign Currency Exchange Rate Risk
In the normal course of business, through its UK operations, the Company is
exposed to the effect of foreign exchange rate fluctuations on the United States
dollar value of its foreign subsidiaries' results of operations and financial
condition. At December 31, 2002, the Company's primary foreign currency market
exposure was the British pound.

22

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

Independent Auditors' Report F-1

Consolidated Balance Sheets as of December 31, 2002 and F-2
December 31, 2001

Consolidated Statements of Operations for the Years Ended December 31, 2002, December 31, F-3
2001 and December 31, 2000

Consolidated Statements of Stockholders' Equity for the Years Ended F-4
December 31, 2002, December 31, 2001 and December 31, 2000

Consolidated Statements of Cash Flows for the Years Ended December 31, F-5
2002, December 31, 2001 and December 31, 2000

Notes to Consolidated Financial Statements F-6

23

Independent Auditors' Report
----------------------------

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, 2002 and 2001, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
2002. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, 2002 and 2001, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.

As discussed in note 1, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangibles Assets" in the year ended
December 31, 2002.

/S/ KPMG LLP

February 25, 2003
New York, New York

F-1

MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2002 and 2001

2002 2001
---- ----

ASSETS
Current Assets:
Cash and cash equivalents $ 6,389,650 $ 4,680,075
Accounts receivable, net of allowance for doubtful accounts of
$655,417 and $356,240 6,571,226 8,260,396
Prepaid expenses and other current assets 2,540,334 2,874,339
Prepaid and refundable taxes 2,269,804 1,743,659
Deferred tax assets 199,000 199,000
------------- -------------
Total current assets 17,970,014 17,757,469
------------- -------------

Property and equipment, net 5,889,840 6,127,665

Goodwill, net of accumulated amortization of $2,467,381 12,854,121 11,581,696
Customer list and other intangibles, net of accumulated amortization
of $4,673,113 and $4,182,917 139,512 638,529
Investment in joint venture 681,604 781,604
Deferred tax assets 1,655,000 1,900,000
Other assets 1,892,243 2,025,590
------------- -------------
Total assets $ 41,082,334 $ 40,812,553
============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 45,291 $ 55,639
Borrowings on credit facilities 6,536,665 6,268,681
Accounts payable 2,203,436 1,573,371
Accrued expenses and other current liabilities 5,093,194 3,774,061
------------- -------------
Total current liabilities 13,878,586 11,671,752
Long-term debt, net of current portion -- 44,719
Note payable - stockholder -- 50,000
------------- -------------
Total liabilities 13,878,586 11,766,471
------------- -------------
Stockholders' Equity:
Common stock; $.01 par value. Authorized 15,000,000 shares; issued
5,947,036 shares in 2002 and 5,820,714 shares in 2001 59,470 58,207
Additional paid-in capital 24,768,762 24,409,660
Retained earnings 2,930,754 4,799,464
Accumulated other comprehensive loss (355,304) (221,249)
------------- -------------
27,403,682 29,046,082
------------- -------------
Less common stock in treasury (at cost, 57,124 shares in 2002) (199,934) -
------------- -------------

Total stockholders' equity 27,203,748 29,046,082
------------- -------------
Total liabilities and stockholders' equity $ 41,082,334 $ 40,812,553
============= =============

See accompanying notes to consolidated financial statements.

F-2

MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2002, 2001 and 2000

2002 2001 2000
---- ---- ----

Revenues $ 47,364,720 $ 48,420,133 $ 56,473,553

Direct costs 15,735,836 17,697,753 20,515,111
------------- ------------- ------------

Gross Profit 31,628,884 30,722,380 35,958,442

Operating expenses:
Selling, general and administrative expenses 29,189,674 30,703,302 28,532,954
Depreciation and amortization 2,605,804 3,571,943 2,893,361
Loss from joint venture 350,000 728,268 1,079,095
Loss on sale of subsidiary - 495,905 -
Restructuring charges - 634,000 -
Advisory charges 1,300,000 804,626 -
------------- ------------- ------------
Total Operating Expenses 33,445,478 36,938,044 32,505,410
------------- ------------- ------------

Operating income (loss) (1,816,594) (6,215,664) 3,453,032

Interest expense (279,206) (273,383) (46,924)

Interest income 81,110 141,568 125,478
------------- ------------- ------------

Income (loss) before income taxes (2,014,690) (6,347,479) 3,531,586

(Beneifit) provision for income taxes (145,980) (2,574,000) 1,475,000
------------- ------------- ------------

Net income (loss) $ (1,868,710) $ (3,773,479) $ 2,056,586
============= ============= ============

Basic earnings (loss) per share $ (0.32) $ (0.65) $ 0.36
============= ============= ============

Diluted earnings (loss) per share $ (0.32) $ (0.65) $ 0.35
============= ============= ============

See accompanying notes to consolidated financial statements.

F-3

MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2002, 2001 and 2000

Common stock
---------------------------------- Additional
Number of Paid-In Retained
Shares Par Value Capital Earnings
--------------------------------------------------------------------------

Balance at January 1, 2000 5,636,859 $ 56,369 $ 23,506,200 $ 6,516,357
Comprehensive income:
Net income - - - 2,056,586
Foreign currency translation adjustment - - - -

Total comprehensive income
Stock options exercised 38,895 389 102,497 -
Issuances of common stock in connection
with acquisitions of businesses 75,939 759 529,990 -
---------- ------- ----------- ----------
Balance at December 31, 2000 5,751,693 57,517 24,138,687 8,572,943
Comprehensive income:
Net loss - - - (3,773,479)
Foreign currency translation adjustment - - - -

Total comprehensive loss
Stock options exercised 42,320 423 121,240 -
Issuances of common stock in connection
with acquisitions of businesses 26,701 267 149,733 -
---------- ------- ----------- ----------
Balance at December 31, 2001 5,820,714 58,207 24,409,660 4,799,464
Comprehensive income:
Net loss - - - (1,868,710)
Foreign currency translation adjustment - - - -

Total comprehensive loss
Stock options exercised 700 7 1,958 -
Issuances of common stock in connection
with acquisitions of businesses 125,622 1,256 357,144 -
Treasury Stock Transaction - - - -
---------- ------- ----------- ----------
Balance at December 31, 2002 5,947,036 59,470 24,768,762 2,930,754
========== ======= =========== ==========

Accumulated Other
Comprehensive
Loss - Foreign Common Total
Currency Translation Stock in Stockholders'
Adjustment Treasury Equity
------------------------------------------------------------------------

Balance at January 1, 2000 $ (191,908) $ - $ 29,887,018
Comprehensive income:
Net income - - 2,056,586
Foreign currency translation adjustment (7,566) - (7,566)
----------
Total comprehensive income 2,049,020
Stock options exercised - - 102,886
Issuances of common stock in connection
with acquisitions of businesses - - 530,749
--------- --------- ----------
Balance at December 31, 2000 (199,474) - 32,569,673
Comprehensive income:
Net loss - - (3,773,479)
Foreign currency translation adjustment (21,775) - (21,775)
----------
Total comprehensive loss (3,795,254)
Stock options exercised - - 121,663
Issuances of common stock in connection
with acquisitions of businesses - - 150,000
--------- --------- ----------
Balance at December 31, 2001 (221,249) - 29,046,082
Comprehensive income:
Net loss - - (1,868,710)
Foreign currency translation adjustment (134,055) - (134,055)
----------
Total comprehensive loss (2,002,765)
Stock options exercised - - 1,965
Issuances of common stock in connection
with acquisitions of businesses - - 358,400
Treasury Stock Transaction - (199,934) (199,934)
--------- --------- ----------
Balance at December 31, 2002 (355,304) (199,934) 27,203,748
========= ========= ==========

See accompanying notes to consolidated financial statements.

F-4

MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2002, 2001 and 2000

2002 2001 2000
---- ---- ----

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (1,868,710) $(3,773,479) $ 2,056,586
------------- ------------ -----------
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 2,605,804 3,571,943 2,893,361
Loss on sale of subsidiary - 495,905 -
Deferred income taxes 245,000 (900,000) (356,000)
Equity loss from joint venture 350,000 728,268 1,079,095
Changes in assets and liabilities, net of acquisitions:
Accounts receivable 1,555,115 5,142,857 (2,281,235)
Other assets (642,848) (645,199) (225,993)
Prepaid expenses and other current assets 334,005 (263,908) 39,776
Prepaid and refundable income taxes (526,145) (1,743,659) -
Accounts payable and accrued expenses 1,895,598 (730,740) 1,567,872
Income taxes payable -- (1,312,628) 840,256
------------- ------------ -----------
Net cash provided by operating activities 3,947,819 569,360 5,613,718
------------- ------------ -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid on acquisitions (850,000) (1,058,600) (2,789,327)
Capital contribution in joint venture (250,000) (500,000) -
Cash received for sale of subsidiary, net of cash included in assets sold - 29,908 -
Purchases of property and equipment (1,353,126) (2,187,756) (3,163,176)
------------- ------------ -----------
Net cash used in investing activities (2,453,126) (3,716,448) (5,952,503)
------------- ------------ -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Advances on line of credit 267,984 4,268,681 2,000,000
Payments on line of credit - - (2,000,000)
Proceeds from the issuance of common stock in connection
with the exercise of stock options 1,965 121,663 102,886
Repayments of long term debt (55,067) (105,438) (105,552)
------------- ------------ -----------
Net cash provided by (used in) financing activities 214,882 4,284,906 (2,666)
------------- ------------ -----------
Net increase (decrease) in cash and cash equivalents 1,709,575 1,137,818 (341,451)
Cash and cash equivalents at the beginning of year 4,680,075 3,542,257 3,883,708
------------- ------------ -----------
Cash and cash equivalents at end of year $ 6,389,650 $ 4,680,075 $ 3,542,257
============= ============ ============

See accompanying notes to consolidated financial statements.

F-5

MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Description of Business and Basis of Presentation
Medialink Worldwide Incorporated (the "Company") is a provider of worldwide
video and audio production and distribution services and public relations
research services for businesses and other organizations that seek to
communicate and evaluate their news through television, radio, the Internet and
other media. Additionally, through its subsidiary, Teletrax, Ltd., the Company
is deploying a global video tracking, and monitoring system. The Company, a
Delaware corporation formed on September 24, 1986, is headquartered in New York
with offices in the United States and the United Kingdom.

The consolidated financial statements include the accounts of Medialink
Worldwide Incorporated, its wholly owned subsidiaries and its 76% owned
subsidiary. All significant intercompany transactions and balances have been
eliminated in consolidation.

Revenue Recognition
Revenue earned from the distribution and monitoring of video news releases and
the distribution of printed news releases is recognized in the period that the
release is distributed. Fees earned for webcasts, satellite media tours and
other live events and the production of video news releases and still
photographs are recognized in the period that the services are performed. Fees
earned from research services are recognized using the percentage of completion
method.

Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions by
management related to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities. Actual results could differ from these
estimates.

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

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

Office equipment 3-5 years
Furniture and fixtures 10 years
Leasehold improvements 5 to 10 years

F-6

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

Goodwill and Intangible Assets
Goodwill represents the excess of purchase price and related costs over the
value assigned to the net tangible and intangible assets of businesses acquired.
In 2001 and 2000, goodwill was amortized on a straight-line basis over its
expected useful life, not to exceed 40 years, and we periodically reviewed the
recoverability of goodwill and intangible assets. Effective January 1, 2002, we
adopted the provisions of Financial Accounting Standards Board (FASB) Statement
of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets, which required us to cease amortizing goodwill and to assess goodwill
for impairment at least annually in the absence of an indicator of possible
impairment and immediately upon an indicator of possible impairment. The annual
impairment testing required by SFAS No. 142 will also requires the Company to
use its judgement and could require the Company to write down the carrying value
of its goodwill and other intangible assets in future periods.

Other intangible assets, including customer lists and covenants not to compete,
are being amortized on a straight-line basis over the term of the agreement or
the estimated future period of benefit, which ranges from 3 to 7 1/2 years.

The agreements pursuant to which the Company acquired certain companies include
provisions that could require the Company to issue additional cash or shares of
common stock if certain performance targets are met. The value of any such
additional consideration will be added to the goodwill related to such
acquisition.

Long-lived Assets
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

Major Customers
Revenues from one customer amounted to approximately 14% and 11% of total
revenues in 2002 and 2001, respectively. No customer amounted to 10% or more in
2000.

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

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

F-7

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

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

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

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

Reclassifications
For comparability, certain 2001 and 2000 amounts have been reclassified, where
appropriate, to conform to the financial statement presentation used in 2002.

Earnings per Share
Basic earnings (loss) per share ("EPS") is computed by dividing net income
(loss) attributable to common stock by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
from the exercise or conversion of securities to common stock. For the year
ended December 31, 2002 and 2001 the Company had common stock equivalents of
64,349 and 32,075, respectively, related to stock options that were not included
in the computation of EPS because they were antidilutive. Weighted average
shares outstanding used for computing EPS for the years ended December 31, 2002,
2001 and 2000 are as follows:

Weighted Average Shares Outstanding 2002 2001 2000
- ----------------------------------- ---- ---- ----

Basic 5,909,312 5,797,679 5,700,721
Dilutive effect of stock options - - 231,128
--------- --------- ---------
Diluted 5,909,312 5,797,679 5,931,849
========= ========= =========

Stock-Based Compensation
In 2002, 2001, and 2000, we had two stock option plans, which are described more
fully in Note 7. As allowed by SFAS No. 123, Accounting for Stock-Based
Compensation, as amended by SFAS No. 148, we have retained the compensation
measurement principles of Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and its related interpretations for
stock options. Under APB Opinion No. 25, compensation expense is recognized
based upon the difference, if any, at the measurement date between the market
value of the stock and the option exercise price. The

F-8

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

measurement date is the date at which both the number of options and the
exercise price for each option are known.

If the Company had elected to recognize compensation cost at the grant date,
based on the fair value of the options granted, in 2002, 2001 and 2000, as
prescribed by SFAS 123, the Company's net income (loss) and earnings (loss) per
share for the years ended December 31, 2002, 2001 and 2000 would approximate the
pro forma amounts as indicated below:

For the year ended December 31,
-------------------------------
2002 2001 2000
---- ---- ----

Net income (loss) - as reported $(1,868,710) $(3,773,479) $2,056,586
Deduct: total stock-based
employee compensation expense
determined under the fair
value method, net of related tax
effects (110,000) (64,200) (16,000)
----------- ----------- ----------
Net income (loss) - pro forma $(1,978,710) $(3,837,679) $2,040,586
=========== =========== ==========

Basic EPS - as reported $ (.32) $ (.65) $ .36
Basic EPS - pro forma $ (.33) $ (.66) $ .36

Diluted EPS - as reported $ (.32) $ (.65) $ .35
Diluted EPS - pro forma $ (.33) $ (.66) $ .34

The fair value of each grant is estimated using the Black-Scholes Options
Pricing Model with the following assumptions: dividend yield of 0% for all
grants, expected volatility of 10% in 2002, 71% in 2001 and 53% for 2000 grants,
risk free interest rates of 4.25% for 2002, 4.50% for 2001 and 6.55% for 2000
grants and expected lives of 5 years for all grants.

EFFECTS OF NEWLY-ISSUED ACCOUNTING STANDARDS

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived
Assets," which is effective January 1, 2002. SFAS 144 supersedes FASB Statement
No 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," and the accounting and reporting provisions relating
to the disposal of a segment of a business of Accounting Principles Board
Opinion No. 30. The adoption of SFAS 144 did not have a significant impact on
the Company's financial statements.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure" which amended SFAS 123, "Accounting
for Stock-Based Compensation." SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method of

F-9

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

accounting for stock-based compensation and amends the disclosure requirements
of SFAS 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. SFAS No. 148
is effective for periods ending after December 15, 2002. We have adopted the
disclosure provisions of SFAS 148 and we account for stock- based compensation
under APB No.25, therefore, SFAS No. 148 will have no effect on our financial
position, results of operations or cash flows (See note 7).

2. Property and Equipment

Property and equipment, at cost, consists of:

December 31,
2001 2000
---- ----

Office equipment and software $7,472,254 $6,593,308
Furniture and fixtures 1,409,793 1,225,412
Leasehold improvements 3,696,943 3,533,880
---------- ----------
12,578,990 11,352,600
---------- ----------
Less accumulated depreciation
and amortization (6,689,150) (5,224,935)
---------- ----------

Property and equipment, net $5,889,840 $6,127,665
========= ==========

3. Business Transactions

(a) Acquisitions, Goodwill and Other Intangibles

On June 16, 1997 the Company acquired certain assets of Corporate TV Group, Inc.
("CTV"), a provider of strategic video communications to corporations and other
organizations for internal and external audiences. As consideration for the
purchase, the Company paid $3.55 million in cash and issued 37,037 shares of the
Company's common stock valued at $333,333. Earn-out provisions allow for up to
an additional $6.2 million to be paid based upon certain revenue and
profitability targets through 2002. Assuming the targets are met, the additional
consideration will be paid in the form of cash and the Company's common stock,
as specified in the agreement. Through December 31, 2002 approximately $6.01
million of additional consideration has been recorded under the earn-out
provision. Additionally, in connection with this acquisition, the Company paid
$300,000 to the stockholder of CTV for a non-compete agreement which expires in
2004. This amount has been recorded as an intangible asset and is being
amortized using the straight-line method over the term of the agreement.

During 1999 the Company made an acquisition of a news-related company. As
consideration for this purchase, the Company paid $1.26 million in cash and
55,348 shares of the Company's common stock valued at $800,000. Earn-out
provisions allow for additional payments of purchase price of up to $1.50
million, based on reaching certain profitability levels, to be paid in the form
of cash and the Company's common stock as specified in the agreement, over a
period of three years. Through December 31, 2002 $1.13 million of additional
consideration has been recorded under the earn-out provisions. Additionally, in
connection with one of the acquisition the Company entered into covenants not to
compete with two of the significant shareholders with terms of five years.

F-10

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

Two executive officers of the Company had an interest in one of the acquisitions
aggregating approximately 20%. In order to avoid an apparent conflict of
interest, an independent member of the Board of Directors and an independent
employee negotiated the agreement.

At December 31, 2002 the maximum future earn-out payments on the above
acquisitions are approximately $375,000 ($225,000 in the form of cash and
$125,000 in the form of Medialink common stock) through March 2003.

All of the above acquisitions have been accounted for under the purchase method
of accounting and the results of operations of the acquisitions have been
included in the consolidated statements of operations from the dates of
acquisition. As of December 31, 2002 the aggregate purchase price, including
acquisition costs and amounts paid as a result of earn-out agreements, exceeded
the estimated fair value of the total net assets acquired by $19.32 million for
all of the acquisitions. Of this amount $4 million has been allocated to
customer lists and has been fully amortized and $15.32 million have been
allocated to goodwill.

In March 2001 the Company sold a component of its UK photography business and as
a result incurred a loss from the sale of a subsidiary amounting to
approximately $496,000.

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, "Business Combinations" ("Statement
141"), and Statement No. 142, "Goodwill and Other Intangible Assets" ("Statement
142"). Statement 141 requ