<PAGE>
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1997
Commission File Number 0-21989
Medialink Worldwide Incorporated
(Exact name of registrant as specified in its charter)
Delaware 52-1481284
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
708 Third Avenue, New York, New York 10017
(Address of principal executive offices) (Zip Code)
(212) 682-8300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of business on May 13, 1997: Common Stock -
5,047,933
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements 3
Condensed Consolidated Balance Sheets for the three
months ended March 31, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations as of
March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
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MEDIALINK WORLDWIDE INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $6,408,413 $675,469
Short-term investments 10,000,000 --
Accounts receivable - net 4,289,805 4,317,177
Prepaid expenses and other current assets 287,117 131,703
Deferred tax assets - current portion 84,302 84,302
------------ -------------
Total current assets 21,069,637 5,208,651
------------ -------------
Property and equipment - net 959,777 911,318
Due from officers -- 7,000
Goodwill, net of amortization 635,550 646,668
Deferred tax assets 55,088 55,088
Other intangible assets 269,481 285,332
Deferred offering costs -- 908,767
Other assets 151,890 98,992
------------ -------------
Total assets $23,141,423 $8,121,816
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of obligations under capital leases $11,699 $11,699
Current portion of long-term debt 38,193 47,143
Current portion of covenant not to compete 58,031 70,000
Accounts payable 1,764,756 1,964,250
Accrued expenses 1,218,686 1,969,631
Income taxes payable 127,264 87,381
------------ -------------
Total current liabilities 3,218,629 4,150,104
Commitment not to compete, excluding current portion 248,946 236,977
Deferred rent payable 42,061 55,418
Obligation under capital leases, excluding current portion 24,892 27,817
Long-term debt, excluding current portion 273,815 273,950
------------ -------------
Total liabilities 3,808,343 4,744,266
------------ -------------
Stockholders' Equity:
Series A 10% cumulative convertible preferred stock. -- 983,126
Series B 10% cumulative convertible preferred stock. -- 641,500
Series C 10% cumulative convertible preferred stock. -- 1,730,107
Common stock. Authorized 15,000,000 shares; issued and outstanding
5,047,933 and 936,264 shares in 1997 and 1996, respectively 50,479 9,363
Additional paid-in capital 19,434,529 520,165
Accumulated deficit (117,251) (446,254)
Equity adjustment for foreign currency translation (34,677) (60,457)
------------ -------------
Total stockholders' equity 19,333,080 3,377,550
------------ -------------
Total liabilities and stockholders' equity $23,141,423 $8,121,816
============ =============
</TABLE>
See notes to condensed consolidated financial statements
3
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MEDIALINK WORLDWIDE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $4,422,727 $3,329,199
Direct costs 1,688,545 1,439,293
------------------ ------------------
Gross Profit 2,734,182 1,889,906
General and administrative expense 2,287,366 1,567,190
------------------ ------------------
Operating income 446,816 322,716
Interest and other income, net 66,952 6,917
------------------ ------------------
Income before income taxes 513,768 329,633
Income tax expense 184,765 134,495
------------------ ------------------
Net income $329,003 $195,138
================== ==================
Net income applicable to common stock $302,349 $111,270
================== ==================
Pro forma net income per common
and common equivalent share $0.07 $0.05
===== =====
</TABLE>
See notes to condensed consolidated financial statements
4
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MEDIALINK WORLDWIDE INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $329,003 $195,138
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 86,904 31,749
(Reversal of) provision for bad debts (5,788) 25,653
Equity adjustment for foreign currency translation 25,780 1,128
Deferred income taxes -- 107,486
Deferred rent payable (13,357) (13,061)
Decrease (increase) in accounts receivable 33,160 (411,161)
Decrease in due from officers 7,000 --
Decrease in deferred offering costs 908,767 --
Increase in other assets (52,898) (21,990)
(Increase) decrease in prepaid expenses and other current assets (155,414) 149,564
(Decrease) increase in accounts payable and accrued expenses (950,439) 214,996
Increase in income taxes payable 39,883 2,787
----------------- -----------------
Total adjustments (76,402) 87,151
----------------- -----------------
Net cash provided by operating activities 252,601 282,289
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments (10,000,000) --
Additions to property and equipment (108,394) (62,366)
----------------- -----------------
Net cash used in investing activities (10,108,394) (62,366)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock - net of offering costs 15,600,747 --
Principal payments under capital lease obligations (2,925) --
Repayments of long-term debt (9,085) --
----------------- -----------------
Net cash provided by financing activities 15,588,737 --
----------------- -----------------
Net increase in cash and cash equivalents 5,732,944 219,923
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 675,469 306,678
----------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $6,408,413 $526,601
================= =================
</TABLE>
See notes to condensed consolidated financial statements
5
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MEDIALINK WORLDWIDE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of presentation
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are adequate to
make the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's financial statements included in its
Form 10-K filing for the year ended December 31, 1996.
The unaudited condensed financial statements included herein reflect all
adjustments (which include only normal, recurring adjustments) which are, in the
opinion of management, necessary to state fairly the results for the three month
period ended March 31, 1997. The results for the three month period ended March
31, 1997 are not necessarily indicative of the results expected for the full
fiscal year.
(2) Cash and cash equivalents and short-term investments
Cash and cash equivalents consist of cash and investments with original
maturities of three months or less. At March 31, 1997 cash and cash equivalents
consisted principally of various money market accounts and commercial paper.
Their cost approximated their fair market value.
Short-term investments are marketable securities with original maturities
less than or callable within one year. The Company has classified all marketable
debt securities as held to maturity and has accounted for these investments at
amortized cost. At March 31, 1997, short-term investments consisted principally
of tax-free municipal bonds. The fair market value of these debt instruments
approximated the amortized cost.
(3) Stockholders' Equity
In July 1996, the Company effected a 1.2 for one stock split. In addition,
the Company restated its Certificate of Incorporation to increase its authorized
capitalization from 5,000,000 shares of common stock, par value $.0l per share
("Common Stock"), to 15,000,000 shares. These changes resulted in an increase in
Common Stock and corresponding decrease in additional paid-in capital. All per
share data and references to numbers of shares have been restated for all
periods presented to reflect these changes.
On February 4, 1997 the Company completed a public offering of 2,000,000
shares of its common stock, at a public offering price of $9 per share (the
"Offering"). The net proceeds of approximately $15,600,000 to the Company from
the Offering will be used for general corporate purposes and possible
acquisitions. Concurrent with the closing of the initial public offering each
share of the Company's Series A, Series B and Series C cumulative convertible
preferred stock was automatically converted into 2,111,669 shares of Common
Stock.
6
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MEDIALINK WORLDWIDE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(4) Net income per share
Pro forma net income per common and common equivalent share is calculated
using the weighted average number of shares of Common Stock outstanding during
the period, plus Common Stock issuable pursuant to options granted under the
Stock Option Plan. Stock options granted during the twelve-month period
immediately preceding the initial filing date of the Company's Registration
Statement for its public offering, were assumed to be outstanding for all
periods presented. In addition, shares of Common Stock issuable upon the
conversion of all shares of Series A, Series B and Series C Preferred Stock into
shares of Common Stock are included in the calculation as if they were
outstanding for all periods presented. The weighted average number of common and
common equivalent shares outstanding during the period ended March 31, 1997 and
1996 after reflecting a 1.2 for 1 stock split effective July 31, 1996 was
4,787,019 and 3,478,585, respectively.
7
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MEDIALINK WORLDWIDE INCORPORATED
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended March 31, 1997 compared to three months ended March 31, 1996
Revenues increased by $1.09 million, or 32.8%, from $3.33 million in the
three months ended March 31, 1996 (the "March 1996 Period") to $4.42 million in
the three months ended March 31, 1997 (the "March 1997 Period"), primarily due
to increased sales of distribution services, which increased by $530,000, live
broadcast services, which increased by $220,000 and research services, which
increased by $370,000. Revenue from Medialink PR Data Corporation ("PR Data"),
which acquired the assets of PR Data Systems, Inc. in July, 1996, was
approximately $450,000. Medialink believes that these increases resulted from
the growth of its sales and marketing team and its ability to provide clients
with a broader array of services as part of its four-part growth strategy.
That strategy includes the development of new services, leveraging
Medialink's existing client base through the cross-marketing of its services,
geographic expansion and growth through acquisitions and strategic alliances. In
the March 1997 Period, Medialink began posting its clients' video news releases
on the Internet enabling them to reach new audiences. Also during the March
1997 Period more of Medialink's clients used its new audio and research
services. In addition, Medialink has expanded its sales effort by opening a
sales office in Birmingham, England, while actively pursuing its acquisition
strategy.
Direct costs grew by $250,000, or 17.3%, from $1.44 million in the March
1996 Period to $1.69 million in the March 1997 Period. Direct costs as a
percentage of revenue decreased from 43.2% of revenue for the March 1996 Period
to 38.2% for the March 1997 Period. Direct costs for distribution and live
broadcast services increased in line with the increases in revenues from those
services. Direct costs as a percentage of revenue decreased as a result of an
improvement in the overall service mix, particularly the growth in the
Medialink research services which have minimal direct costs.
General and administrative expenses increased by $720,000, or 46.0%, from
$1.57 million in the March 1996 Period to $2.29 million in the March 1997
Period. General and administrative expenses as a percentage of revenues
increased from 47.1% for the March 1996 Period to 51.7% for the March 1997
Period. Salary-related costs increased by $650,000 in the March 1997 Period as a
result of the acquisition of PR Data Systems, Inc. in July, 1996 and the growth
of the Company's sales and operations staff in response to increased demand for
Medialink's services.
As a result of the foregoing, operating income increased by $124,000, or
38.5%, from $323,000 for the March 1996 Period to $447,000 for the March 1997
Period. As a percentage of revenue, operating income for the March 1997 Period
was 10.1% as compared with 9.7% for the March 1996 Period.
Interest and other income net of interest expense increased by $60,000 from
$7,000 for the March 1996 Period to $67,000 for the March 1997 Period. Of this
increase, $72,000 resulted from the investment of the net proceeds of $15.6
million from Medialink's initial public offering which was completed in
8
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MEDIALINK WORLDWIDE INCORPORATED
February 1997, after underwriting discounts and offering costs. The proceeds are
invested in short-term investments and money-market funds. In addition,
Medialink incurred $12,000 of interest expense as a result of obligations
incurred as part of the PR Data acquisition during the March 1997 Period.
Income tax expense was calculated using Medialink's effective tax rates of
36.0% for the March 1997 Period and 40.8% for the March 1996 Period. The
decrease in the rate reflects the investment of the net proceeds of the
Company's initial public offering in tax-free municipal securities and other
changes in state and local taxes as a result of differences in income earned in
certain jurisdictions.
Net income increased by $134,000, or 68.6%, from $195,000 for the March 1996
Period to $329,000 for the March 1997 Period. Pro forma net income per common
and common share equivalent increased from $0.05 per share for the March 1996
Period to $0.07 per share for the March 1997 Period.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through cash generated from
operations. Cash flow from operating activities amounted to $253,000 for the
March 1997 Period and $280,000 for the March 1996 Period. Capital expenditures
which are primarily incurred to support Medialink's sales and operations were
$108,000 for the March 1997 Period and $62,000 for the March 1996 Period.
Medialink has no capital expenditure plans other than in the ordinary course of
business.
As at March 31, 1997 the Company had $16.4 million in cash and short-term
investments as compared with $675,000 as December 31, 1996. The growth in cash
and short-term investments arose primarily because of the net proceeds of $15.6
million from Medialink's initial public offering. As at March 31, 1997,
long-term debt and commitments under covenants not to compete were $312,000 and
$307,000, respectively, and capital lease commitments were $36,000.
Medialink believes that it has sufficient capital resources and cash flow
from operations to fund its net cash needs for at least the next twelve months.
With the exception of the historical information contained in this Form 10-Q,
the matters described herein contain forward-looking statements that are made
pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such statements involve various risks and may cause actual
results to differ materially. These risks include, but are not limited to, the
ability of the Company to grow internally or by acquisition, and to integrate
acquired businesses, changing industry and competitive conditions, and other
risks outside the control of the Company referred to in the Company's
registration statement and periodic reports filed with the Securities and
Exchange Commission.
9
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MEDIALINK WORLDWIDE INCORPORATED
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27 - Financial Data Schedule
(b) Report on Form 8-K: None
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MEDIALINK WORLDWIDE INCORPORATED
By: /s/ LAURENCE MOSKOWITZ
Laurence Moskowitz,
Chairman of the Board, Chief
Executive Officer and President
By: /s/ J. GRAEME MCWHIRTER
J. Graeme McWhirter
Executive Vice President, Assistant
Secretary and Chief Financial Officer
Dated: May 14, 1997
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS IN FORM 10-Q FOR MEDIALINK WORLDWIDE INCORPORATED FOR THE
PERIOD ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 16,408,413
<SECURITIES> 0
<RECEIVABLES> 4,446,908
<ALLOWANCES> 157,103
<INVENTORY> 0
<CURRENT-ASSETS> 21,069,637
<PP&E> 1,652,706
<DEPRECIATION> 692,929
<TOTAL-ASSETS> 23,141,423
<CURRENT-LIABILITIES> 3,218,629
<BONDS> 0
0
0
<COMMON> 50,479
<OTHER-SE> 19,282,601
<TOTAL-LIABILITY-AND-EQUITY> 23,141,423
<SALES> 4,422,727
<TOTAL-REVENUES> 4,422,727
<CGS> 1,688,545
<TOTAL-COSTS> 1,688,545
<OTHER-EXPENSES> 2,287,366
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,917
<INCOME-PRETAX> 513,768
<INCOME-TAX> 184,765
<INCOME-CONTINUING> 329,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 329,003
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0
</TABLE>
