<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, 2000
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 11, 2000:
Common Stock - 5,701,177
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements 3
Condensed Consolidated Balance Sheets as of June 30,
2000 (unaudited) and December 31, 1999 3
Unaudited Condensed Consolidated Statements of Operations
for the six months ended June 30, 2000 and 1999 4
Unaudited Condensed Consolidated Statements of Operations
for the three months ended June 30, 2000 and 1999 5
Unaudited Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 2000 and 1999 6
Notes to Unaudited Condensed Consolidated Financial
Statements 7 - 8
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9 - 12
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 13
ITEM 2. Changes in Securities and Use of Proceeds 13
ITEM 3. Defaults Upon Senior Securities 13
ITEM 4. Submission of Matters to a Vote of Security Holders 14
ITEM 5. Other Information 14
ITEM 6. Exhibits and Reports on Form 8-K 14
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2000 and December 31, 1999
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,647,645 $ 3,883,708
Accounts receivable, net 15,821,138 12,271,664
Prepaid expenses and other current assets 1,977,868 1,695,273
Deferred tax assets 173,000 128,000
------------ ------------
Total current assets 19,619,651 17,978,645
------------ ------------
Property and equipment, net 3,623,934 3,452,324
Goodwill, customer list and other intangibles, net 12,352,581 11,524,386
Investment in joint venture 1,545,873 2,002,032
Deferred tax assets 854,000 715,000
Other assets 1,422,700 1,309,805
------------ ------------
Total assets $ 39,418,739 $ 36,982,192
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 112,000 $ 128,517
Borrowings on credit facilities -- 2,000,000
Accounts payable 3,361,291 2,670,676
Accrued expenses and other current liabilities 3,489,554 1,590,778
Income taxes payable 957,644 472,372
------------ ------------
Total current liabilities 7,920,489 6,862,343
Long-term debt, net of current portion 139,535 182,831
Note payable - stockholder 50,000 50,000
------------ ------------
Total liabilities 8,110,024 7,095,174
------------ ------------
Stockholders' Equity:
Common stock; $.01 par value. Authorized 15,000,000 shares; issued and
outstanding 5,701,177 shares in 2000 and 5,636,859 shares in 1999 57,012 56,369
Additional paid-in capital 23,674,375 23,506,200
Retained earnings 7,794,641 6,516,357
Accumulated other comprehensive income (217,313) (191,908)
------------ ------------
Total stockholders' equity 31,308,715 29,887,018
------------ ------------
Total liabilities and stockholders' equity $ 39,418,739 $ 36,982,192
============ ============
</TABLE>
See notes to condensed consolidated financial statements
3
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2000 and 1999
2000 1999
---- ----
(Unaudited) (Unaudited)
Revenues $28,563,692 $21,717,188
Direct costs 10,605,185 7,094,274
----------- -----------
Gross Profit 17,958,507 14,622,914
Selling, general and administrative expenses 15,309,546 12,277,367
Loss from joint venture 498,095 --
----------- -----------
Operating income 2,150,866 2,345,547
Interest income, net 59,418 132,792
----------- -----------
Income before income taxes 2,210,284 2,478,339
Provision for income taxes 932,000 1,000,000
----------- -----------
Net income $ 1,278,284 $ 1,478,339
=========== ===========
Basic earnings per share $ 0.23 $ 0.27
=========== ===========
Diluted earnings per share $ 0.21 $ 0.25
=========== ===========
See notes to condensed consolidated financial statements
4
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2000 and 1999
2000 1999
---- ----
(Unaudited) (Unaudited)
Revenues $15,146,831 $11,819,051
Direct costs 5,599,376 3,951,027
----------- -----------
Gross Profit 9,547,455 7,868,024
Selling, general and administrative expenses 7,913,723 6,338,178
Loss from joint venture 255,000 --
----------- -----------
Operating income 1,378,732 1,529,846
Interest income, net 32,543 63,287
----------- -----------
Income before income taxes 1,411,275 1,593,133
Provision for income taxes 600,000 650,000
----------- -----------
Net income $ 811,275 $ 943,133
=========== ===========
Basic earnings per share $ 0.14 $ 0.17
=========== ===========
Diluted earnings per share $ 0.14 $ 0.16
=========== ===========
See notes to condensed consolidated financial statements
5
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,278,284 $ 1,478,339
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,449,959 1,107,796
Deferred income taxes (184,000) (189,000)
Equity loss from joint venture 498,095 --
Changes in assets and liabilities, net of acquisitions
Accounts receivable (3,611,517) (996,463)
Other assets (112,895) (208,844)
Prepaid expenses and other current assets (282,595) 26,643
Accounts payable and accrued expenses 1,882,191 (460,368)
Income taxes payable 485,272 (680,596)
----------- -----------
Net cash provided by operating activities 1,402,794 77,507
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash acquired, and acquisition costs (1,001,138) (573,704)
Purchase of property and equipment (678,362) (401,582)
----------- -----------
Net cash used in investing activities (1,679,500) (975,286)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock in connection
with the exercise of stock options 100,456 50,914
Repayments of long term debt (59,813) (534,703)
Payments on note payable - stockholder -- (88,664)
Payments on line of credit - bank (2,000,000) (200,000)
----------- -----------
Net cash used in financing activities (1,959,357) (772,453)
----------- -----------
Net decrease in cash and cash equivalents (2,236,063) (1,670,232)
Cash and cash equivalents at the beginning of period 3,883,708 8,593,392
----------- -----------
Cash and cash equivalents at end of period $ 1,647,645 $ 6,923,160
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
6
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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, 1999.
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, 2000 and 1999. The results for the
six and three month periods ended June 30, 2000 are not necessarily indicative
of the results expected for the full fiscal year.
(2) 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, 2000 and 1999 are as follows:
Weighted Average Shares Outstanding
For the six months ended June 30,
---------------------------------
2000 1999
---- ----
Basic 5,671,033 5,505,188
========= =========
Diluted 5,977,085 5,970,188
========= =========
For the three months ended June 30,
-----------------------------------
2000 1999
---- ----
Basic 5,696,124 5,520,001
========= =========
Diluted 5,930,490 6,028,998
========= =========
(3) Comprehensive Income
7
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The components of comprehensive income consist of the following:
For the six months ended June 30,
---------------------------------
2000 1999
---- ----
Net income $ 1,278,284 $ 1,478,339
Other comprehensive income (loss):
Foreign currency translation
adjustments (25,405) (210,573)
----------- -----------
Comprehensive income $ 1,252,879 $ 1,267,766
=========== ===========
For the three months ended June 30,
-----------------------------------
2000 1999
---- ----
Net income $ 811,275 $ 943,133
Other comprehensive income (loss):
Foreign currency translation
adjustments 2,164 (69,741)
----------- -----------
Comprehensive income $ 813,439 $ 873,392
=========== ===========
Accumulated other comprehensive income at June 30, 2000 and December 31, 1999
consists of foreign currency translation adjustments.
8
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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, 2000 compared to six months ended June 30, 1999
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 condition and
cash flows as though Delahaye had always been part of Medialink for all periods
presented.
Revenues increased by $6.85 million, or 32%, from $21.72 million in the six
months ended June 30, 1999 ("1999") to $28.56 million in the six months ended
June 30, 2000 ("2000"). This increase represented increases in production and
live broadcast services of $2.10 million, internet services, which increased by
$1.78 million, distribution services, which increased by $1.85 million and
research and other services, which increased by $1.12 million.
Direct costs increased by $3.51 million, or 49%, from $7.09 million in 1999 to
$10.61 million in 2000. Direct costs as a percentage of revenue increased from
33% in 1999 to 37% in 2000 mainly as a result of the increase in the proportion
of revenue from internet services and production and live broadcast services to
total revenue in 2000 as compared to 1999. Revenue on these projects generally
has lower gross profit margins as compared with revenue on distribution and
research services.
Selling, general and administrative expenses increased by $3.53 million or 29%,
from $12.28 million in 1999 to $15.81 million in 2000. Included in the increase
were costs related to Medialink's various investments including a loss of
$499,000 from Joint Venture (Newstream) as well as additional costs related to
Teletrax and NewsIQ. Selling, general and administrative expenses as a
percentage of revenue were 55% and 57% for 2000 and 1999, respectively. Selling,
general and administrative expenses in 1999 included approximately $350,000 of
costs relating to the acquisition of Delahaye.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
increased by $148,000, or 4%, from $3.45 million in 1999 to $3.60 million in
2000. As a percentage of revenue, EBITDA was 13% and 16% in 2000 and 1999,
respectively. The decrease is represented by lower gross margins related to the
increase in revenue from internet, live broadcast and production services as a
percentage of total revenue from 1999 to 2000.
Depreciation and amortization expense, which is included in general and
administrative expenses, increased by $342,000, or 31%, from $1.11 million in
1999 to $1.45 million in 2000. The increase was due primarily to amortization
expense arising from Medialink's various acquisitions.
9
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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 $195,000, or 8%,
from $2.35 million in 1999 to $2.15 million in 2000. As a percentage of revenue,
operating income was 8% and 11% in 2000 and 1999, respectively.
Interest and other income, net, decreased by $73,000 from $133,000 in 1999 to
$59,000 in 2000 as a result of lower balances in cash and cash equivalents in
2000 as compared to 1999.
Income tax expense was calculated using Medialink's effective tax rates of 42%
in 2000 and 40% in 1999. The increase in the rate reflects changes in state and
local taxes as a result of differences in income earned in certain
jurisdictions, the change in the proportion of tax-free investment income on
investments to total income before taxes and the increase in certain goodwill
amortization not deductible for tax purposes.
Net income decreased by $200,000 or 14%, from $1.48 million in 1999 to $1.28
million in 2000. Diluted earnings per share was $0.21 and $0.25 per share in
2000 and 1999, respectively.
Three months ended June 30, 2000 compared to three months ended June 30, 1999
Revenues increased by $3.33 million, or 28%, from $11.82 million in the three
months ended June 30, 1999 ("the 1999 Quarter") to $15.15 million in the three
months ended June 30, 2000 ("the 2000 Quarter"). This increase represented
increases in production and live broadcast services of $1.17 million, internet
services, which increased by $826,000, distribution services, which increased by
$713,000 and research and other services, which increased by $619,000.
Direct costs increased by $1.65 million, or 42%, from $3.95 million in the1999
Quarter to $5.60 million in the 2000 Quarter. Direct costs as a percentage of
revenue increased from 33% in the 1999 Quarter to 37% in the 2000 Quarter mainly
as a result of the increase in the proportion of revenue from internet services
and production and live broadcast services to total revenue in the 2000 Quarter
as compared to the 1999 Quarter. Revenue on these projects generally has lower
gross profit margins as compared with revenue on distribution and research
services.
Selling, general and administrative expenses increased by $1.83 million or 29%,
from $6.34 million in the 1999 Quarter to $8.17 million in the 2000 Quarter.
Included in the increase were costs related to Medialink's various investments
including a loss of $255,000 from Joint Venture (Newstream) as well as
additional costs related to Teletrax and NewsIQ. Selling, general and
administrative expenses as a percentage of revenue were 54% for both the 2000
and 1999 Quarters.
10
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
EBITDA increased by $61,000, or 3%, from $2.06 million in the 1999 Quarter to
$2.13 million in the 2000 Quarter. As a percentage of revenue, EBITDA was 14%
and 17% in the 2000 Quarter and the 1999 Quarter, respectively. This decrease
arose primarily as a result of the increase in revenues from lower margin
internet, live broaadcast and production services, as a percentage of total
revenue from the 1999 Quarter to the 2000 Quarter.
Depreciation and amortization expense, which is included in general and
administrative expenses, increased by $213,000, or 40%, from $535,000 in the
1999 Quarter to $748,000 in the 2000 Quarter. The increase was due primarily to
amortization expense arising from Medialink's various acquisitions.
As a result of the foregoing, operating income decreased by $151,000, or 10%,
from $1.53 million in the 1999 Quarter to $1.38 million in the 2000 Quarter. As
a percentage of revenue, operating income was 9% and 13% in the 2000 Quarter and
the 1999 Quarter, respectively.
Interest and other income, net, decreased by $30,000 from $63,000 in the 1999
Quarter to $33,000 in the 2000 Quarter as a result of lower balances in cash and
cash equivalents in the 2000 Quarter as compared to the 1999 Quarter.
Income tax expense was calculated using Medialink's effective tax rates of 43%
in the 2000 Quarter and 41% in the 1999 Quarter. The increase in the rate
reflects changes in state and local taxes as a result of differences in income
earned in certain jurisdictions, the change in the proportion of tax-free
investment income on investments to total income before taxes and the increase
in certain goodwill amortization not deductible for tax purposes.
Net income decreased by $132,000 or 14%, from $943,000 in the 1999 Quarter to
$811,000 in the 2000 Quarter. Diluted earnings per share was $0.14 and $0.16 per
share in the 2000 Quarter and the 1999 Quarter, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Medialink has financed its operations primarily through cash generated from
operations. Cash flow from operating activities amounted to $1.40 million for
the six month period ended June 30, 2000 and $78,000 for the comparable period
in 1999. Capital expenditures which are primarily incurred to support the
Company's sales and operations were $678,000 in 2000 and $402,000 in 1999.
Medialink has no capital expenditure plans other than in the ordinary course of
business. Cash flows related to investment in joint venture and the Company's
various acquisitions amounted to $1.00 million and $574,000 in 2000 and 1999,
respectively.
11
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
As of June 30, 2000 Medialink had $1.65 million in cash and cash equivalents as
compared to $3.88 million as of December 31, 1999. The decrease included the
repayment of $2 million of the Company's line of credit balance. As of June 30,
2000 long-term debt was $140,000.
The Company believes that it has sufficient capital resources, including $10
million available under its line of credit facility, 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.
12
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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, 2000, 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, 2000, $14,795,297 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, 2000 there
were no remaining proceeds. 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
13
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MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES
ITEM 4. Submission of Matters to a Vote of Security Holders.
An annual meeting of security holders was held on June 8, 2000. The
Company solicited proxies and 5,260,813 shares were present in person and
by proxy. Set forth is the number of votes cast for, against, withheld or
abstainedas to each item voted upon.
(i) Election of Three Directors to serve for a three-year term expiring
at the annual meeting in 2003 and until their successors are elected
and qualified.
Nominee For Authority Withhold
------- --- ------------------
J. Graeme McWhirter 4,761,195 499,618
James J. O'Neill 4,770,670 490,143
Paul Sagan 4,771,100 489,713
(ii) Amendment of the Company's Amended and Restated Stock Option Plan to
increase by 500,000 the number of shares of Common Stock reserved
for issuance thereunder.
For Against Abstain
--- ------- -------
2,152,126 1,742,002 3,257
(iii) Ratification of the appointment of KPMG LLP as the Company's
independent auditors for the fiscal year ended December 31, 2000.
For Against Abstain
--- ------- -------
5,238,481 20,420 1,912
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
14
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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 11, 2000
15
