<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 the quarterly period ended March 31, 1998
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
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(Address of principal executive offices) (Zip Code)
(212) 682-8300
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(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 15, 1998:
Common Stock - 5,204,041
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TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements 3
Condensed Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 3
Condensed Consolidated Statements of Operations
for the three months ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6 - 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 2. Changes in Securities and Use of Proceeds 11
ITEM 3. Defaults Upon Senior Securities 12
ITEM 4. Submission of Matters to a Vote of Security Holders 12
ITEM 5. Other Information 12
ITEM 6. Exhibits and Reports on Form 8-K 12
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 1998 and December 31, 1997
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---- ----
(Unaudited)
ASSETS
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Current Assets:
Cash and cash equivalents $ 12,377,800 $ 11,580,928
Accounts receivable, net 7,397,580 8,243,823
Prepaid expenses and other current assets 1,004,953 634,038
Deferred tax assets 147,000 119,000
------------ ------------
Total current assets 20,927,333 20,577,789
------------ ------------
Property and equipment, net 1,762,906 1,449,901
Goodwill, customer list and other intangibles, net 5,845,284 6,118,677
Deferred tax assets 255,000 200,000
Other assets 319,684 321,347
------------ ------------
Total assets $ 29,110,207 $ 28,667,714
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 122,651 $ 122,651
Accounts payable 2,919,140 2,300,664
Accrued expenses and other current liabilities 2,592,548 2,883,905
Income taxes payable 297,534 782,645
------------ ------------
Total current liabilities 5,931,873 6,089,865
Long-term debt, net of current portion 435,780 449,892
Deferred rent payable 16,106 4,413
------------ ------------
Total liabilities 6,383,759 6,544,170
------------ ------------
Stockholders' Equity:
Common stock. Authorized 15,000,000 shares; issued and outstanding
5,200,441 and 5,182,037 shares in 1998 and 1997, respectively 52,004 51,820
Additional paid-in capital 20,271,707 20,222,255
Retained earnings 2,485,978 1,928,268
Accumulated other comprehensive income (83,241) (78,799)
------------ ------------
Total stockholders' equity 22,726,448 22,123,544
------------ ------------
Total liabilities and stockholders' equity $ 29,110,207 $ 28,667,714
============= ============
See notes to condensed consolidated financial statements
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3
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1998 and 1997
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<CAPTION>
1998 1997
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(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 8,910,855 $ 4,422,727
Direct costs 3,634,770 1,688,545
----------- -----------
Gross Profit 5,276,085 2,734,182
General and administrative expenses 4,473,679 2,287,366
----------- -----------
Operating income 802,406 446,816
Interest and other income, net 115,304 66,952
----------- -----------
Income before income taxes 917,710 513,768
Provision for income taxes 360,000 184,765
----------- -----------
Net income $ 557,710 $ 329,003
=========== ===========
Net income applicable to common stock $ 557,710 $ 302,349
=========== ===========
Basic earnings per share $ 0.11 $ 0.08
=========== ===========
Diluted earnings per share $ 0.10 $ 0.07
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See notes to condensed consolidated financial statements
4
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1998 and 1997
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<CAPTION>
1998 1997
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(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income $ 557,710 $ 329,003
------------- ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 372,897 86,904
Equity adjustment for foreign currency translation (4,442) 25,780
Deferred income taxes (83,000) -
Deferred rent payable 11,693 (13,357)
Decrease in accounts receivable 846,243 27,372
Decrease (increase) in other assets 1,663 (52,898)
Increase in prepaid expenses and other current assets (370,915) (148,414)
Increase (decrease) in accounts payable and accrued expenses 460,849 (41,672)
(Decrease) increase in income taxes payable (485,111) 39,883
------------- ------------
Total adjustments 749,877 (76,402)
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Net cash provided by operating activities 1,307,587 252,601
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CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in acquisitions (133,730) -
Additions to property and equipment (412,509) (108,394)
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Net cash used in investing activities (546,239) (108,394)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of employee stock options 49,636 -
Payments on long term debt (14,112) (12,010)
Proceeds from issuance of common stock - net of offering costs - 15,600,747
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Net cash provided by financing activities 35,524 15,588,737
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Net increase in cash and cash equivalents 796,872 15,732,944
Cash and cash equivalents at the beginning of period 11,580,928 675,469
------------- ------------
Cash and cash equivalents at end of period $ 12,377,800 $ 16,408,413
============= ============
</TABLE>
See notes to condensed consolidated financial statements
5
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of presentation
The condensed consolidated financial statements included herein have been
prepared by Medialink Worldwide Incorporated and Subsidiary
(collectively, the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations. The Company believes that the disclosures are
adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included
in the Company's Form 10-K filing for the year ended December 31, 1997.
The unaudited condensed consolidated 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, 1998. The
results for the three month period ended March 31, 1998 are not
necessarily indicative of the results expected for the full fiscal year.
(2) Merger of Subsidiary
On January 1, 1998, the Company merged the assets and liabilities of
Medialink PR Data Corporation, a wholly owned subsidiary, into Medialink
Worldwide Incorporated. Simultaneously, Medialink PR Data Corporation was
legally dissolved.
6
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(3) Earnings per Share
The Company adopted SFAS No. 128, "Earnings per Share", beginning with
the Company's fourth quarter of 1997. All prior period earnings per share
data has been restated to conform to the provisions of this statement.
Basic earnings per common share is computed using net income applicable
to common stock and the weighted average number of shares outstanding.
Diluted earnings per common share is computed using the weighted average
number of shares outstanding adjusted for the incremental shares
attributed to outstanding options to purchase common stock. 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 1997 diluted calculation as if they were
outstanding for all of 1997. The weighted average number of shares for
the three months ended March 31, 1998 and 1997 are as follows:
Weighted Average Shares Outstanding For the three months ended March 31,
1998 1997
---- ----
Basic 5,187,097 3,677,383
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Diluted 5,691,828 4,787,019
========= =========
(4) Comprehensive Income
The components of comprehensive income consist of the following:
For the three months ended March 31,
1998 1997
---- ----
Net income $557,710 $329,003
Other comprehensive income (loss)
Foreign currency translation
adjustments (4,442) 25,780
---------- --------
Comprehensive income $553,268 $354,783
========= ========
Accumulated other comprehensive income at March 31, 1998 and December 31,
1997 consists of foreign currency translation adjustments.
7
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended March 31, 1998 compared to three months ended March
31, 1997
Revenues increased by $4.49 million, or 102%, from $4.42 million in the
three months ended March 31, 1997 ("1997") to $8.91 million in the three
months ended March 31, 1998 ("1998"), primarily due to increased sales of
production services, which increased by $2.56 million, distribution
services, which increased by $1.31 million and live broadcast services
which increased by $576,000. Included in the increase of production and
live broadcast services revenue above is revenue of approximately $2.87
million from the Medialink Corporate Television Division which acquired
certain assets of Corporate TV Group, Inc. ("CTV") on June 17, 1997. In
addition to this acquisition, Medialink believes that the increased
revenue 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.
Direct costs increased by $1.94 million, or 115%, from $1.69 million in
1997 to $3.63 million in 1998. Direct costs as a percentage of revenue
increased from 38% of revenue in 1997 to 41% in 1998 mainly as a result
of the increase in the proportion of production and live broadcast
service revenue, which generally have lower gross profit margins as
compared with revenue from distribution services, to total revenue in
1998 as compared to 1997.
General and administrative expenses increased by $2.18 million or 95%,
from $2.29 million in 1997 to $4.47 million in 1998. General and
administrative expenses as a percentage of revenues were 50% and 52% for
1998 and 1997, respectively. Salary-related costs increased by $1.26
million in 1998, of which $416,000 was the result of the acquisition of
CTV in June 1997. The balance of the increase was due primarily to the
growth of Medialink's sales and operations staff in response to increased
demand for its services.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $642,000, or 120%, from $534,000 in 1997 to $1.18 million in
1998. As a percentage of revenue, EBITDA in 1998 was 13% as compared with
12% in 1997.
Depreciation and amortization expense, which is included in general and
administrative expenses, increased by $286,000, or 329%, from $87,000 in
1997 to $373,000 in 1998. The increase was due primarily to amortization
expense arising from the acquisition of CTV in June, 1997.
8
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
As a result of the foregoing, operating income increased by $355,000, or
79%, from $447,000 in 1997 to $802,000 in 1998. As a percentage of
revenue, operating income in 1998 was 9% as compared with 10% in 1997.
Interest and other income, net increased by $48,000 from $67,000 in 1997
to $115,000 in 1998. This increase was primarily due to the investment of
the net proceeds of $15.6 million from Medialink's initial public
offering which was completed in February 1997, after underwriting
discounts and offering costs. The remaining proceeds are invested in
short-term investments and money-market funds.
Income tax expense was calculated using Medialink's effective tax rates
of 39% in 1998 and 36% in 1997. The increase in the rate reflects changes
in state and local taxes as a result of differences in income earned in
certain jurisdictions.
Net income increased by $229,000 or 70%, from $329,000 in 1997 to
$558,000 in 1998. Diluted earnings per share increased from $0.07 per
share in 1997 to $0.10 per share in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Medialink has financed its operations primarily through cash generated
from operations. Cash flow from operating activities amounted to $1.31
million in 1998 and $253,000 in 1997. Capital expenditures which are
primarily incurred to support the Company's sales and operations were
$413,000 in 1998 and $108,000 in 1997. Medialink has no capital
expenditure plans other than in the ordinary course of business.
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. Earn-out provisions allow for up to
an additional $6.2 million to be paid 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 80 percent cash and
20 percent in Medialink common stock.
As at March 31, 1998 Medialink had $12.38 million in cash and cash
equivalents as compared with $11.58 million as at December 31, 1997. As
at March 31, 1998, long-term debt was $436,000.
The Company 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.
9
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
With the exception of the historical information contained in this Form
10-Q, the matters described herein may 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 Medialink to grow
internally or by acquisition, and to integrate acquired businesses,
changing industry and competitive conditions, and other risks outside the
control of Medialink referred to in its registration statement and
periodic reports filed with the Securities and Exchange Commission.
10
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MEDIALINK WORLDWIDE INCORPORATED
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
None
ITEM 2. Changes in Securities and Use of Proceeds.
The registrant's initial public offering commenced on January
29, 1997. The managing underwriters of the offering were Dean
Witter Reynolds, Inc. and Wheat First Union (formerly, Wheat
First Butcher Singer). The class of securities registered was
common stock. The registrant registered 2,000,000 shares, of
common stock; the aggregate price of the offering amount
registered was $18,000,000; the amount of shares sold was
2,000,000; and the aggregate offering price of the amount sold
was $18,000,000. For the account of selling stockholders, there
were registered 300,000 shares of common stock; the aggregate
price of the offering amount registered was $2,700,000; the
amount of shares sold was 300,0000; and the aggregate offering
price of the amount sold was $2,700,000.
Through March 31, 1998, the registrant incurred expenses in
connection with the issuance and distribution of the securities
registered for underwriting discounts and commissions of
approximately $1,260,000; finders fees of $0; expenses paid to
or for underwriters of $0; other expenses of approximately
$1,160,000; and total expenses of approximately $2,420,000.
These were direct or indirect payments to others. There were
expenses of approximately $189,000 for underwriting discounts
and commissions in connection with the sale of shares by selling
stockholders, $0 for finders fees, $0 for expenses paid to or
for underwriters and total expenses of approximately $189,000.
These payments were direct or indirect payments to others.
The net offering proceeds to the registrant, after deducting the
total expenses described above, were $15,580,000. From January
29, 1997 to March 31, 1998, $4,383,000 of net offering proceeds
were used for the acquisition of other businesses, namely,
certain assets of CTV and all of the outstanding shares of
common stock of On Line Broadcasting Limited. At March 31, 1998
the remaining proceeds were invested in temporary investments;
$7,566,000 in tax free municipals and $3,631,000 in a tax free
money market account and interest bearing bank accounts. No
proceeds were used for the construction of plant, building and
facilities, the purchase and installation of machinery and
equipment, the purchase of real estate, or the repayment of
indebtedness or working capital.
11
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ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information.
None
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: Exhibit 27 - Financial Data Schedule
(b) Report on Form 8-K:
None
12
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MEDIALINK WORLDWIDE INCORPORATED
SIGNATURES
Pursuant to the requirements 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,
Chief Financial Officer and Director
Dated: May 15, 1998
13
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<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, 1998 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-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 12,377,800
<SECURITIES> 0
<RECEIVABLES> 7,656,134
<ALLOWANCES> 258,554
<INVENTORY> 0
<CURRENT-ASSETS> 20,927,333
<PP&E> 2,820,957
<DEPRECIATION> 1,058,051
<TOTAL-ASSETS> 29,110,207
<CURRENT-LIABILITIES> 5,931,873
<BONDS> 0
0
0
<COMMON> 52,004
<OTHER-SE> 22,674,444
<TOTAL-LIABILITY-AND-EQUITY> 29,110,207
<SALES> 8,910,855
<TOTAL-REVENUES> 8,910,855
<CGS> 3,634,770
<TOTAL-COSTS> 3,634,770
<OTHER-EXPENSES> 4,473,679
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,379
<INCOME-PRETAX> 917,710
<INCOME-TAX> 360,000
<INCOME-CONTINUING> 557,710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 557,710
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.10
</TABLE>
