<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 June 30, 1999
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 August 13, 1999:
Common Stock - 5,533,444
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements 3
Condensed Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998 3
Condensed Consolidated Statements of Operations
for the six months ended June 30, 1999 and 1998 4
Condensed Consolidated Statements of Operations
for the three months ended June 30, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1999 and 1998 6
Notes to Condensed Consolidated Financial Statements 7 - 9
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 15
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 16
ITEM 2. Changes in Securities and Use of Proceeds 16
ITEM 3. Defaults Upon Senior Securities 16
ITEM 4. Submission of Matters to a Vote of Security Holders 16
ITEM 5. Other Information 17
ITEM 6. Exhibits and Reports on Form 8-K 17
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---- ----
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,923,160 $ 8,593,392
Accounts receivable, net 11,111,886 10,188,675
Prepaid expenses and other current assets 1,238,272 1,248,917
Deferred tax assets 286,000 286,000
------------ ------------
Total current assets 19,559,318 20,316,984
------------ ------------
Property and equipment, net 2,795,335 2,621,293
Goodwill, customer list and other intangibles, net 10,161,100 9,543,871
Deferred tax assets 652,000 463,000
Other assets 756,494 547,650
------------ ------------
Total assets $ 33,924,247 $ 33,492,798
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 122,956 $ 213,831
Line of credit - bank - 200,000
Accounts payable 2,155,058 1,928,222
Accrued expenses and other current liabilities 2,690,919 2,629,376
Income taxes payable 722,407 1,403,003
------------ ------------
Total current liabilities 5,691,340 6,374,432
Long-term debt, net of current portion 245,805 689,633
Note payable - stockholder - 88,664
------------ ------------
Total liabilities 5,937,145 7,152,729
------------ ------------
Stockholders' Equity:
Common stock. Authorized 15,000,000 shares; issued and outstanding
5,523,124 and 5,482,077 shares in 1999 and 1998, respectively 55,231 54,821
Additional paid-in capital 22,239,781 21,860,924
Retained earnings 6,002,212 4,523,873
Accumulated other comprehensive income (310,122) (99,549)
------------ ------------
Total stockholders' equity 27,987,102 26,340,069
------------ ------------
Total liabilities and stockholders' equity $ 33,924,247 $ 33,492,798
============= ============
</TABLE>
See Notes to condensed consolidated financial statements
3
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1999 and 1998
1999 1998
---- ----
(Unaudited) (Unaudited)
Revenues $ 21,717,188 $ 22,429,853
Direct costs 7,094,274 8,806,350
------------ ------------
Gross Profit 14,622,914 13,623,503
General and administrative expenses 12,277,367 11,180,634
------------ ------------
Operating income 2,345,547 2,442,869
Interest and other income, net 132,792 158,841
------------ ------------
Income before income taxes 2,478,339 2,601,710
Provision for income taxes 1,000,000 1,073,000
------------ ------------
Net income $ 1,478,339 $ 1,528,710
============ ============
Basic earnings per share $ 0.27 $ 0.28
============ ============
Diluted earnings per share $ 0.25 $ 0.26
============ ============
See Notes to condensed consolidated financial statements
4
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 1999 and 1998
1999 1998
---- ----
(Unaudited) (Unaudited)
Revenues $ 11,819,051 $ 12,488,793
Direct costs 3,951,027 4,954,879
------------ ------------
Gross Profit 7,868,024 7,533,914
General and administrative expenses 6,338,178 5,852,183
------------ ------------
Operating income 1,529,846 1,681,731
Interest and other income, net 63,287 57,340
------------ ------------
Income before income taxes 1,593,133 1,739,071
Provision for income taxes 650,000 733,000
------------ ------------
Net income $ 943,133 $ 1,006,071
============ ============
Basic earnings per share $ 0.17 $ 0.19
============ ============
Diluted earnings per share $ 0.16 $ 0.17
============ ============
See Notes to condensed consolidated financial statements
5
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,478,339 $ 1,528,710
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,107,796 809,830
Deferred income taxes (189,000) (138,000)
Increase in accounts receivable (996,463) (929,237)
(Increase) decrease in other assets (208,844) 32,786
Decrease (increase) in prepaid expenses and other current assets 26,643 (532,443)
(Decrease) increase in accounts payable and accrued expenses (460,368) 944,748
(Decrease) increase in income taxes payable (680,596) 276,327
------------ ------------
Total adjustments (1,400,832) 464,011
------------ ------------
Net cash provided by operating activities 77,507 1,992,721
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash used in acquisitions (573,704) (1,822,113)
Additions to property and equipment (401,582) (687,172)
------------ ------------
Net cash used in investing activities (975,286) (2,509,285)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 50,914 117,240
Payments on long-term debt (534,703) (173,651)
Payments on note payable - stockholder (88,664) (10,701)
Payments on line of credit - bank (200,000) 98,493
------------ ------------
Net cash (used in) provided by financing activities (772,453) 31,381
------------ ------------
Net decrease in cash and cash equivalents (1,670,232) (485,183)
Cash and cash equivalents at the beginning of period 8,593,392 11,581,323
------------ ------------
Cash and cash equivalents at end of period $ 6,923,160 $ 11,096,140
============ ============
</TABLE>
See Notes to condensed consolidated financial statements
6
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
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 Subsidiaries (collectively, the
"Company" or "Medialink"), 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, 1998.
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
six and three month periods ended June 30, 1999 and 1998. The results for the
six and three month periods ended June 30, 1999 are not necessarily indicative
of the results expected for the full fiscal year.
(2) Recent Acquisitions
On March 12, 1999, through a wholly owned subsidiary, the Company acquired 100%
of the outstanding shares of The Delahaye Group, Inc. ("Delahaye"). The
acquisition, which was accounted for as a pooling of interests, was completed
through the issuance of 185,666 shares of Medialink common stock valued at
approximately $2,800,000. Accordingly, all prior period consolidated financial
statements have been restated to include the combined results of operations,
financial position and cash flows of Delahaye as though it had always been part
of Medialink.
In connection with the acquisition, the Company recorded a first quarter charge
to operating expenses of approximately $350,000 for direct and other
acquisition-related costs pertaining to the transaction.
7
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
The results of operations previously reported by the separate companies and the
combined amounts presented in the accompanying consolidated financial statements
are summarized as follows:
For the six months For the three months
Ended June 30, 1998 Ended June 30, 1998
------------------- -------------------
(Unaudited) (Unaudited)
Net sales:
Medialink $20,366,000 $11,455,000
Delahaye 2,064,000 1,034,000
---------- ----------
Combined $22,430,000 $12,489,000
========== ==========
Net income (loss):
Medialink $1,645,000 $1,087,000
Delahaye (116,000) (81,000)
--------- ---------
Combined $1,529,000 $1,006,000
========= =========
8
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(3) Earnings per Share
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. The weighted average number of shares for the
six and three month periods ended June 30, 1998 have been restated to reflect
the Delahaye acquisition (see Note 2). The weighted average number of shares for
the six and three month periods ended June 30, 1999 and 1998 are as follows:
Weighted Average Shares Outstanding
For the six months ended June 30,
---------------------------------
1999 1998
---- ----
Basic 5,505,188 5,365,898
========= =========
Diluted 5,970,188 5,919,241
========= =========
For the three months ended June 30,
-----------------------------------
1999 1998
---- ----
Basic 5,520,001 5,388,697
========= =========
Diluted 6,028,998 5,966,828
========= =========
9
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(4) Comprehensive Income
The components of comprehensive income consist of the following:
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1999 1998
---- ----
<S> <C> <C>
Net income $1,478,339 $1,528,710
Other comprehensive income (loss):
Foreign currency translation
adjustments (210,573) 18,275
--------- ---------
Comprehensive income $1,267,766 $1,546,985
========= =========
For the three months ended June 30,
-----------------------------------
1999 1998
---- ----
Net income $943,133 $1,006,071
Other comprehensive income (loss):
Foreign currency translation
adjustments (69,741) 22,717
------- ---------
Comprehensive income $873,392 $1,028,788
======= =========
</TABLE>
Accumulated other comprehensive income at June 30, 1999 and December 31, 1998
consists of foreign currency translation adjustments.
10
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Six months ended June 30, 1999 compared to six months ended June 30, 1998
On March 12, 1999, through a wholly owned subsidiary, the Company acquired 100%
of the outstanding shares of The Delahaye Group, Inc. ("Delahaye"). The
acquisition, which was accounted for as a pooling of interests, was completed
through the issuance of 185,666 shares of Medialink common stock valued at
approximately $2,800,000. Accordingly, the following management discussion and
analysis includes the combined results of operations, financial position and
cash flows as though Delahaye had always been part of Medialink for all periods
presented.
In connection with the acquisition, the Company recorded a first quarter charge
to operating expenses of approximately $350,000 for direct and other
acquisition-related costs pertaining to the transaction.
Revenues decreased by $713,000, or 3%, from $22.43 million in the six months
ended June 30, 1998 ("1998") to $21.72 million in the six months ended June 30,
1999 ("1999"), due to decreased sales of distribution and live broadcast
services, which decreased by an aggregate of $1.11 million, net of increased
sales of productions services which increased by $401,000. There were several
unusually large projects that occurred in 1998.
Direct costs decreased by $1.71 million, or 19%, from $8.81 million in 1998 to
$7.09 million in 1999. Direct costs as a percentage of revenue decreased from
39% in 1998 to 33% in 1999, mainly as a result of several larger scale projects,
which occurred in 1998 with lower gross profit margins.
General and administrative expenses increased by $1.10 million or 10%, from
$11.18 million in 1998 to $12.28 million in 1999. Included in the increase was
approximately $350,000 for direct and other acquisition-related costs pertaining
to the Delahaye transaction. General and administrative expenses as a percentage
of revenues were 57% and 50% for 1999 and 1998, respectively. The increase is
the result of the decrease in revenues in 1999 from 1998.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $200,000, or 6%, from $3.25 million in 1998 to $3.45 million in
1999. As a percentage of revenue, EBITDA was 16% and 14% in 1999 and 1998,
respectively.
Depreciation and amortization expense, which is included in general and
administrative expenses, increased by $297,000, or 37%, from $810,000 in 1998 to
$1.11 million in 1999. The increase was due primarily to additional amortization
expense arising from the Company's various acquisitions.
11
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
As a result of the foregoing, operating income decreased by $97,000, or 4%, from
$2.44 million in 1998 to $2.35 million in 1999. Operating income in 1999
included approximately $350,000 of direct and other acquisition related costs
pertaining to the Delahaye transaction. As a percentage of revenue, operating
income was 11% in both 1999 and 1998.
Interest and other income, net, decreased by $26,000 from $159,000 in 1998 to
$133,000 in 1999 as a result of lower balances in cash and cash equivalents in
1999 as compared to 1998
Income tax expense was calculated using Medialink's effective tax rates of 40%
in 1999 and 41% in 1998. The decrease in the rate reflects changes in state and
local taxes as a result of differences in income earned in certain jurisdictions
offset by the effect of the decrease in the proportion of tax-free investment
income on investments to total income before taxes.
Net income decreased by $50,000 or 3%, from $1.53 million in 1998 to $1.48
million in 1999. Diluted earnings per share decreased from $0.26 per share in
1998 to $0.25 per share in 1999.
Three months ended June 30, 1999 compared to three months ended June 30, 1998
Revenues decreased by $670,000, or 5%, from $12.49 million in the three months
ended June 30, 1998 (the "1998 Quarter") to $11.82 million in the three months
ended June 30, 1999 (the "1999 Quarter"). This net decrease represented
decreases in sales of distribution and live broadcast services, which decreased
by $1.11 million, net of increases in sales of production and research and
analysis services, which increased by $442,000. There were several unusually
large projects that occurred in the 1998 Quarter.
Direct costs decreased by $1.00 million, or 20%, from $4.95 million in the 1998
Quarter to $3.95 million in the 1999 Quarter. Direct costs as a percentage of
revenue decreased from 40% in the 1998 Quarter to 33% in the 1999 Quarter,
mainly as a result of several large projects with low margins that occurred in
the 1998 Quarter.
General and administrative expenses increased by $486,000 or 8%, from $5.85
million in the 1998 Quarter to $6.34 million in the 1999 Quarter. General and
administrative expenses as a percentage of revenues were 54% and 47% for the
1999 Quarter and the 1998 Quarter, respectively. The increase in the percentage
was primarily the result of the decrease in revenues in the 1999 Quarter
as compared to the 1998 Quarter.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
decreased less than 1%, from $2.07 million in the 1998 Quarter to $2.06 million
in the 1999 Quarter. As a percentage of revenue, EBITDA was 17% in both the 1999
and 1998 Quarters.
12
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Depreciation and amortization expense, which is included in general and
administrative expenses, increased by $150,000, or 39%, from $384,000 in the
1998 Quarter to $534,000 in the 1999 Quarter. The increase was due primarily to
additional amortization expense arising from Medialink's various acquisitions.
As a result of the foregoing, operating income decreased by $152,000, or 9%,
from $1.68 million in the 1998 Quarter to $1.53 million in the 1999 Quarter. As
a percentage of revenue, operating income was 13% in both the 1999 and 1998
Quarters.
Interest and other income, net, increased by $6,000 from $57,000 in the 1998
Quarter to $63,000 in the 1999 Quarter as a result of the March 1999 pay-off of
certain debt balances, acquired in the Delahaye acquisition, net of a reduction
in interest income resulting from lower balances in cash and cash equivalents in
the 1999 Quarter as compared to the 1998 Quarter.
Income tax expense was calculated using Medialink's effective tax rates of 41%
in the 1999 Quarter and 42% in the 1998 Quarter. The decrease in the rate
reflects changes in state and local taxes as a result of differences in income
earned in certain jurisdictions offset by the effect of the decrease in the
proportion of tax-free investment income on investments to total income before
taxes.
Net income decreased by $63,000 or 6%, from $1.01 million in the 1998 Quarter to
$943,000 in the 1999 Quarter. Diluted earnings per share was $0.16 and $0.17 per
share in the 1999 Quarter and the 1998 Quarter, respectively.
13
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
Medialink has financed its operations primarily through cash generated from
operations. Cash flow from operating activities amounted to $78,000 for the six
month period ended June 30, 1999 and $1.99 million for the comparable period in
1998. Capital expenditures which are primarily incurred to support the Company's
sales and operations were $402,000 in 1999 and $687,000 in 1998. Medialink has
no capital expenditure plans other than in the ordinary course of business.
As of June 30, 1999 Medialink had $6.92 million in cash and cash equivalents as
compared with $8.59 million as of December 31, 1998. As of June 30, 1999,
long-term debt was $369,000.
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,
including those related to the above-mentioned acquisitions.
14
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
YEAR 2000 UPDATE
Management, along with a Year 2000 sub-committee of the Board of Directors has
initiated an enterprise-wide program to prepare the Company's computer systems
and applications for the Year 2000, as well as to identify and address any other
Year 2000 operational issues which may affect the Company. Updates on the
Company's Year 2000 program are presented regularly to senior management and the
Board of Directors. The Year 2000 program of Delahaye is set forth separately
below.
The Company's Year 2000 program began in the first quarter of 1998 and is
currently being administered by internal staff. The program consists of the
following three components relating to the Company's operations: (i) Information
Technology ("IT") computer systems and applications that may be impacted by the
Year 2000 problem, (ii) non-IT systems and equipment which include embedded
technology that may be impacted by the Year 2000 problem and (iii) third-party
relationships with which the Company has material relationships.
IT Systems and Applications
The Company has classified IT systems and applications into two categories:
hardware and software.
Hardware: The Company has completed an inventory of all of its IT
hardware and is currently assessing the impact of the Year 2000 on it. The
Company has initiated the remediation phase of the process and estimates that it
is 98% complete. The Company is targeting the completion of the remediation
phase to be the middle of the 3rd quarter of 1999. The Company estimates that it
is 95% complete in the testing phase and is targeting to be completed in the 3rd
quarter of 1999.
Software: The Company has completed an inventory of all of its IT
software applications and is currently assessing the impact of the Year 2000 on
it. The Company is currently in the remediation phase and estimates that it is
98% complete. The Company is targeting to complete the remediation phase in the
3rd quarter of 1999. The Company has accelerated the planned upgrading of its
financial and accounting software as a result of the Year 2000 issue and has
targeted the completion of the installation of a Year 2000 compliant financial
and accounting application in the 3rd quarter of 1999. However, the Company also
intends to make its current accounting software Year 2000 compliant early in 3rd
quarter of 1999. The Company estimates that it has tested approximately 95% of
its IT software and is targeting to be completed in the 3rd quarter of 1999.
However, the Company anticipates that software vendors will continue to issue
Year 2000 software patches during the rest of 1999. The Company will continue to
update its software with these patches as appropriate.
15
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Excluding normal system upgrades, the Company estimates that total costs for
conversion and testing of new or modified IT systems and applications will
aggregate approximately $250,000 to $350,000, including approximately $200,000
to $300,000 on the accelerated purchase of a financial and accounting software
application, through fiscal 2000. Costs related to the acquisition of new
hardware and software are expected to be capitalized and amortized consistent
with the Company's accounting policies. Consulting and other costs will be
expensed as incurred.
Non-IT Systems and Applications
The Company has completed an inventory of all of its non-IT systems and
applications. The Company has completed the remediation and testing. The Company
does not anticipate that the costs to rectify any Year 2000 issues as they
relate to non-IT systems and applications to have a material impact on the
Company's operations or financial condition.
Third Party Relationships
The Company has requested certification letters from all of its key vendors,
including facilities providers and financial institutions. The Company is
currently reviewing its responses and preparing follow-up requests where either
no or inadequate responses were received. In certain instances, the Company has
relied upon public disclosure of Year 2000 compliance by certain of its key
vendors and clients/customers. The Company has also developed a list of mission
critical vendors and is in the process of performing face-to-face meetings with
the appropriate individuals at these vendors to discuss their readiness
regarding Year 2000. The Company is targeting the completion of its contingency
plans with respect to its principal third party suppliers by the end of 3rd
quarter of 1999.
Additionally, the Company has generated a list of key clients/customers. Since
the Company's client base includes public and private enterprises, public
relations agencies, governments and not-for-profits the Company has not been
able to nor is it certain that it will be able to satisfactorily establish the
Year 2000 compliance of all of its customers. Also, the Company has surveyed key
broadcast media, to whom the Company distributes video and audio material, on
their Year 2000 compliance. The survey concluded that the majority of
broadcasters are implementing a Year 2000 program. However, the Company cannot
guarantee that these plans will be completed or successfully implemented on a
timely basis. Costs to the Company in this area, excluding costs due to
unanticipated third party Year 2000 problems, will principally consist of
internal staff costs, which are not expected to be material.
On March 12, 1999 the Company merged with Delahaye. As of the date of this
report, the Company has completed an inventory of Delahaye's hardware and
software and is currently assessing the impact of the Year 2000 on them. The
Company estimates that it will have completed remediation and testing of
Delahaye's hardware and software by the end of the 3rd quarter of 1999.
Excluding normal system upgrades, the Company estimates that the total costs for
conversion and testing of
16
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
new or modified IT systems and applications will aggregate less than $50,000.
Costs related to the acquisition of new hardware and software are expected to be
capitalized and amortized consistent with the Company's accounting policies.
Consulting and other costs will be expensed as incurred.
Not including the purchase of a financial and accounting software application,
the Company estimates that total program costs for implementing its Year 2000
program will be $75,000 to $125,000, of which approximately $40,000 has been
incurred to date. These costs include costs related to the matters above, as
well as consulting and other expenses related to infrastructure and facilities
enhancements necessary to prepare the Company for the Year 2000. The costs do
not include internal staff costs incurred or to be incurred in connection with
the implementation of the program. Costs related to the acquisition of new
hardware and software are expected to be capitalized and amortized consistent
with the Company's accounting policies. Consulting and other costs will be
expensed as incurred. All Year 2000 costs will be paid in cash and generated
from the Company's operations. The above-stated amounts have been budgeted for
the appropriate fiscal years. Based on the current progress of the Company's
Year 2000 program, the Company is targeting the substantial completion of its
Year 2000 program to be the end of the 3rd quarter of 1999. The cost of the
Company's Year 2000 program and the dates provided herein are based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, many of which are beyond the Company's control.
The failure to correct a material Year 2000 problem could result in an
interruption in certain normal business activities or operations of the Company.
Such interruptions could materially and adversely affect the Company's financial
condition, results of operations and cash flows. Based on current plans and
assumptions, the Company does not expect that the Year 2000 issue will have an
adverse impact on the Company as a whole. Due to the general uncertainty
inherent in the Year 2000 problem, however, there can be no assurance that all
Year 2000 problems will be foreseen and corrected, or if foreseen, corrected on
a timely basis, or that no material disruption to the Company's business or
operations will occur. Further, the Company's expectations are based on the
assumption that there will be no general failure of external local, national or
international systems (including power, communication, postal or other
transportation systems) necessary for the ordinary conduct of business. The
Company is currently assessing those scenarios in which unexpected failures
would have a material adverse effect on the Company and will attempt to develop
contingency plans designed to deal with such scenarios. There can be no
assurance, however, that successful contingency plans can, in fact, be developed
or implemented.
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.
17
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
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 was $18,000,000; the amount of shares sold was
2,000,000; and the aggregate offering price 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 was $2,700,000;
the amount of shares sold was 300,000; and the aggregate offering price
was $2,700,000.
Through June 30, 1999, 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
June 30, 1999, $9,401,375 of net offering proceeds were used for the
acquisition of other businesses and $784,703 was used to pay down
various debt balances acquired in the Delahaye acquisition. At June 30,
1999 the remaining proceeds were invested in temporary investments;
$4,450,000 in tax free municipals and $943,922 in tax free money market
accounts 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
working capital.
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
18
<PAGE>
MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
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
19
<PAGE>
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: August 13, 1999
20
<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 JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,923,160
<SECURITIES> 0
<RECEIVABLES> 11,306,886
<ALLOWANCES> 195,000
<INVENTORY> 0
<CURRENT-ASSETS> 19,559,318
<PP&E> 5,572,490
<DEPRECIATION> 2,777,155
<TOTAL-ASSETS> 33,924,247
<CURRENT-LIABILITIES> 5,691,340
<BONDS> 0
0
0
<COMMON> 55,231
<OTHER-SE> 27,931,871
<TOTAL-LIABILITY-AND-EQUITY> 33,924,247
<SALES> 21,717,188
<TOTAL-REVENUES> 21,717,188
<CGS> 7,094,274
<TOTAL-COSTS> 7,094,274
<OTHER-EXPENSES> 12,277,367
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,908
<INCOME-PRETAX> 2,478,339
<INCOME-TAX> 1,000,000
<INCOME-CONTINUING> 1,478,339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,478,339
<EPS-BASIC> 0.27
<EPS-DILUTED> 0.25
</TABLE>
