UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

AMENDMENT NO. 2

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-21989

Medialink Worldwide Incorporated

(Exact name of registrant as specified in its charter)

Delaware		52-1481284
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

708 Third Avenue, New York, NY		10017
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (212) 682-8300

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

Title of each class		Name of each exchange on which registered
Common Stock, par value $0.01 per share		National Market System of NASDAQ

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates based on the closing market price on June 30, 2008, was $6,200,010.

The number of shares of the registrant’s common stock outstanding as of February 28, 2009, was 6,428,059 shares.

DOCUMENTS INCORPORATED BY REFERENCE

None

TABLE OF CONTENTS

		Page

	Explanatory Note	3

	Forward Looking Statements	4

PART I

8	Financial Statements and Supplementary Data

9A(T)	Controls and Procedures	5

PART IV

15	Exhibits, Financial Statement Schedules	6

	Signatures	7

EXPLANATORY NOTE

The Registrant is filing this Amendment to its annual report on Form 10-K for the fiscal year ended December 31, 2008, as amended by Amendment No. 1 thereto on Form 10-K/A filed April 30, 2009, to supplement Exhibits 31.1 and 31.2 of that report by adding to the certifications of the Registrant’s principal executive officer and principal financial officer, statements as to these officers’ responsibility for internal control over financial reporting and their participation in the design of such controls. The foregoing amendments have not resulted in any modification to the consolidated financial statements included in Item 1 of Part I or the disclosure included in Item 9A(T) of Part I of this report on Form 10-K/A, or any of the information contained in Registrant’s Form 10-K, as amended by Amendment No. 1 thereto on Form 10-K/A filed April 30, 2009, for the fiscal year ended December 31, 2008 except for the new certifications filed as Exhibits 31.3 and 31.4 to Form 10-K/A.

FORWARD LOOKING STATEMENTS

Certain statements made in this report on Form 10-K/A are “forward looking” statements (within the meaning of the Private Securities Litigation Reform Act of 1995, as amended). Such statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, our actual results could differ materially from those set forth in the forward-looking statements. See “Item 1A – Risk Factors” of our Form 10-K filed April 15, 2009 for a description of certain factors that might cause such a difference.

Item 9A(T). Controls and Procedures.

Disclosure Controls and Procedures: The Company’s management evaluated, with the participation of the Company’s principal executive and principal financial officers, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2008. Based on their evaluation, the Company’s principal executive and principal financial officers concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2008.

Management’s annual report on internal control over financial reporting: The Company’s management is responsible for establishing and maintaining adequate internal controls over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act). The Company designed its internal controls over financial reporting and assessed such controls in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in “Internal Control – Integrated Framework.”

The design of any system of controls is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Therefore, even those internal control systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. A deficiency in internal controls over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness in internal controls over financial reporting exists when a deficiency, or a combination of deficiencies, in internal controls can result in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency in internal controls over financial reporting exists when a deficiency, or a combination of deficiencies, in internal controls is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the registrant's financial reporting.

The Company’s management assessed the effectiveness of the internal controls over financial reporting as of December 31, 2008. Based on this assessment, the Company’s management believes that the internal controls over financial reporting are effective as of December 31, 2008.

This annual report on Form 10-K does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report on such controls was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

Changes in internal control over financial reporting: There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended December 31, 2008, that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

PART IV

Item 15.	Exhibits, Financial Statement Schedules.

(a) Listed below are the documents filed as part of this report:

	1.	Financial Statements and the Report of Independent Registered Public Accounting Firm:	F-2

		Report of Independent Registered Public Accounting Firm	F-2

		Consolidated Balance Sheets as of December 31, 2008 and 2007	F-3

		Consolidated Statements of Operations for the years ended December 31, 2008 and 2007	F-4

		Consolidated Statements of Cash Flows for the years ended December 31, 2008 and 2007	F-5

		Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2008 and 2007	F-6

		Notes to consolidated financial statements	F-7

	2.	Financial Statement Schedules:

		Schedule II – Valuation and Qualifying Accounts for the years ended December 31, 2008 and 2007	S-1

	3.	Exhibits:

		See Exhibit Index commencing on page G-1 herein.	G-1

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/ James K. Lonergan
James K. Lonergan
Chief Executive Officer
Date: November 18, 2009

INDEX TO FINANCIAL STATEMENTS

	Page

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets as of December 31, 2008 and 2007		F-3

Consolidated Statements of Operations for the years ended December 31, 2008 and 2007		F-4

Consolidated Statements of Cash Flows for the years ended December 31, 2008 and 2007		F-5

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2008 and 2007		F-6

Notes to consolidated financial statements		F-7

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors

Medialink Worldwide Incorporated:

We have audited the accompanying consolidated balance sheets of Medialink Worldwide Incorporated and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. In connection with our audits of the consolidated financial statements, we have also audited the consolidated financial statement schedule included on page S-1. These consolidated financial statements and the consolidated financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and consolidated financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Medialink Worldwide Incorporated and subsidiaries as of December 31, 2008 and 2007 and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

The accompanying consolidated financial statements and consolidated financial statement schedule have been prepared assuming that the Company will continue as a going concern. As discussed in note 1 to the consolidated financial statements, the Company has suffered recurring losses and negative cash flows from operations and expects to incur operating losses and negative cash flows from operations in 2009. The Company’s sole source of capital is its working capital, which may not be sufficient to fund continuing operating losses and existing obligations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 1. The consolidated financial statements and the consolidated financial statement schedule do not include any adjustments that might result from the outcome of this uncertainty.

(signed) KPMG LLP

New York, New York

April 15, 2009

F-2

MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars, except share and per-share amounts)

	December 31,
	2008			2007
ASSETS
Current Assets:
Cash and cash equivalents	$	5,354		$	11,438
Accounts receivable, net of allowance for doubtful accounts of $84 and $118		2,190			2,655
Prepaid expenses		264			233
Prepaid and refundable taxes		627			743
Deferred income taxes		-			169
Other current assets		824			80
Current assets of discontinued operations		-			3,901
Total current assets		9,259			19,219

Property and equipment - net		-			1,863
Goodwill		-			3,429
Deferred income taxes		-			217
Other assets		211			568
Non-current assets of discontinued operations		-			2,849

Total assets	$	9,470		$	28,145

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	1,221		$	1,017
Accrued expenses and other current liabilities		3,172			3,625
Current liabilities of discontinued operations		-			2,684
Total current liabilities		4,393			7,326

Convertible debentures, net of unamortized discount of $133 and $422		2,517			3,928
Other long-term liabilities		379			720
Non-current liabilities of discontinued operations		-			45
Total liabilities		7,289			12,019

Commitments and contingencies

Stockholders' Equity:
Series A Preferred stock: $.01 par value, authorized 50,000 shares; none issued and outstanding		-			-
Common stock: $.01 par value, authorized 15,000,000 shares; issued 6,529,180 shares in 2008 and 2007		65			65
Additional paid-in capital		28,765			28,490
Accumulated deficit		(26,412	)		(11,826	)
Accumulated other comprehensive income (loss)		106			(260	)
Common stock in treasury (at cost, 101,121 shares)		(343	)		(343	)
Total stockholders' equity		2,181			16,126

Total liabilities and stockholders' equity	$	9,470		$	28,145

See notes to consolidated financial statements

F-3

MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per-share amounts)

	For the years ended December 31,
	2008			2007

Revenues	$	19,629		$	21,898

Operating expenses:
Direct costs		7,966			9,151
Selling, general, and administrative expenses		14,185			16,229
Depreciation and amortization		943			904
Goodwill impairment		3,429			-
Other impairment charges		1,118			-
Charge for exit activities		170			-
Loss on debt extinguishment		116			-

Total operating expenses		27,927			26,284

Operating loss		(8,298	)		(4,386	)
Interest expense - net		(465	)		(70	)

Loss from continuing operations before taxes		(8,763	)		(4,456	)
Income tax benefit		(627	)		(747	)

Loss from continuing operations		(8,136	)		(3,709	)
Loss from discontinued operations, net of tax		(6,450	)		(892	)

Net loss	$	(14,586	)	$	(4,601	)

Net loss	$	(14,586	)	$	(4,601	)
Other comprehensive income		366			34

Comprehensive loss	$	(14,220	)	$	(4,567	)

Basic and diluted income (loss) per common share:
Loss from continuing operations	$	(1.27	)	$	(0.58	)
Loss from discontinued operations		(1.00	)		(0.14	)

Net loss	$	(2.27	)	$	(0.72	)

Weighted average number of common shares:
Basic and diluted		6,428			6,392

See notes to consolidated financial statements

F-4

MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of dollars)

	For the years ended December 31,
	2008			2007

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(14,586	)	$	(4,601	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		943			904
Deferred income taxes		386			808
Loss from discontinued operations		6,450			892
Goodwill impairment		3,429			-
Other impairment charges		1,118			-
Loss on extinguishment of debt		116			-
Other		726			710
Changes in operating assets and liabilities:
Accounts receivable		484			897
Prepaid expenses and other assets		(468	)		1,862
Prepaid and refundable taxes		116			(4,241	)
Accounts payable and accrued expenses		(41	)		(1,001	)
Other liabilities		(419	)		(455	)
Net cash used in operating activities of discontinued operations		(1,787	)		(3,459	)
Net cash used in operating activities		(3,533	)		(7,684	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(198	)		(570	)
Proceeds (expenditures) on sale of businesses		(269	)		4,513
Net cash used in investing activities of discontinued operations		(384	)		(1,163	)
Net cash provided by (used in) investing activities		(851	)		2,780

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of convertible debentures		(1,700	)		-
Proceeds from the issuance of common stock in connection with the exercise of stock options and warrants		-			276

Net cash provided by (used in) financing activities		(1,700	)		276

Net decrease in cash and cash equivalents		(6,084	)		(4,628	)
Cash and cash equivalents at beginning of period		11,438			16,066

Cash and cash equivalents at end of period	$	5,354		$	11,438

See notes to consolidated financial statements

F-5

MEDIALINK WORLDWIDE INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands of dollars)

	Common Stock		Additional Paid-in Capital		Retained Earnings (Deficit)			Accumulated Other Comprehensive Income (Loss)			Common Stock in Treasury

Balance at January 1, 2007	$	63	$	27,327	$	(7,225	)	$	(294	)	$	(343	)
Issuance of 78,700 shares of common stock in connection with exercise of stock options and warrants		1		276
Issuance of 160,494 shares of common stock in connection with conversion of debentures		1		537
Unrealized gain from foreign currency translation adjustments									34
Compensation expense recognized on stock options				347
Income tax benefit associated with the exercise of stock options				3
Net loss						(4,601	)

Balance at December 31, 2007		65		28,490		(11,826	)		(260	)		(343	)
Unrealized loss from foreign currency translation adjustments									(199	)
Realized loss from foreign currency translation									565
Compensation expense recognized on stock options				265
Warrants re-priced in connection with debenture modification				10
Net loss						(14,586	)

Balance at December 31, 2008	$	65	$	28,765	$	(26,412	)	$	106		$	(343	)

See notes to consolidated financial statements

F-6

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per-share amounts)

1. Organization and Basis of Presentation

Medialink Worldwide Incorporated (the “Company”) provides media communications services to corporations and other organizations. Through its media communications operations in the United States, the Company offers news and marketing media strategies and solutions by providing consultation, production, distribution, and monitoring services that enable its clients to inform and educate their intended audiences through various media.

The Company has a history of operating losses and negative cash flows from operations, and expects to incur operating losses and have negative cash flows from operations in 2009 as revenues continue to decline in the current economic climate. The Company’s sole source of capital is its working capital, which may not be sufficient to fund continuing operating losses and existing obligations. The Company is currently pursuing various strategic alternatives, including obtaining additional financing or investment from potentially interested third-party investors or buyers. The Company also continues to take action to reduce its costs, and has completed, and will continue to initiate, various measures in an effort to achieve profitability.

The accompanying financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the ordinary course of business, and do not reflect adjustments that might result if the Company were unable to continue as a going concern. The Company's ability to continue as a going concern is dependent on the ability of the Company to achieve profitability or to obtain other sources of financing. There can be no assurance that the Company will be successful in such endeavors.

In August 2008, the Company transferred its 76% ownership interests in TTX (US) LLC and TTX Limited (collectively, “Teletrax”), its digital video monitoring services segment, to Philips Electronics North America Corporation and Koninklijke Philips Electronics N.V., respectively (collectively, “Philips”). In October 2008, the Company sold the client list of Medialink UK Limited (“Medialink UK”), its UK-based media communications services business, to World Television Group plc (“World”) and subsequently wound down the operation. The consolidated financial statements reflect both Teletrax and Medialink UK as discontinued operations in all periods presented.

2. Summary of Significant Accounting Policies

Principles of Consolidation: The consolidated financial statements include the accounts of the Company and all of its subsidiaries. The Company consolidates entities in which it owns greater than 50% of the voting equity of an entity or otherwise is able to exert control. The Company consolidated Teletrax and included 100% of the losses from these subsidiaries in its consolidated results of operations through the date of transfer since the minority shareholder had no future funding obligations. All intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Cash and Cash Equivalents: Cash and cash equivalents include all cash balances and highly liquid investments having original maturities of three months or less.

Allowance for Doubtful Accounts : The Company recognizes bad debt expense on trade receivables through an allowance account using estimates based on past experience, and writes off trade receivables against the allowance account when the Company believes it has exhausted all available means of collection.

Property and Equipment: Property and equipment is stated at cost less any write downs for impairments. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets, which generally range from three years for certain computer equipment and software to five years for certain non-desktop computer equipment, certain video equipment, and furniture and fixtures. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the terms of the leases.

F-7

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Long-lived Assets: In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company evaluates the recoverability of its long-lived assets by comparing their carrying value to the expected future undiscounted cash flows to be generated from such assets when events or circumstances indicate that an impairment may have occurred. At December 31, 2008, the Company’s long-lived assets were fully impaired and had no carrying value.

Goodwill and Other Intangible Assets: In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and other intangible assets with indefinite useful lives are not amortized, but rather are subject to an annual impairment test. The Company performs its annual impairment test on September 30 of each year, or more frequently if an event occurs or circumstances change to indicate that an impairment may have occurred. Intangible assets with finite useful lives are amortized over their useful lives. At December 31, 2008, the Company’s goodwill was fully impaired and had no carrying value.

Equity Investments: The Company accounts for its investments in other entities under the equity method when it owns between 20% and 50% of the voting equity and does not have the ability to exercise control over the other entity or is otherwise not required to consolidate the entity in accordance with Financial Accounting Standards Board Interpretation No. (“FIN”) 46(R), “Consolidation of Variable Interest Entities.” The Company accounts for its investments in other entities under the cost method when it owns less than 20% of the voting equity and does not exert significant influence. Equity investments are reviewed for impairment whenever events or changes in circumstances indicate that the fair value of an equity investment is less than its carrying amount and that such a decline in value is determined to be other than temporary. At December 31, 2008 and 2007, the Company’s equity investments were fully impaired and had no carrying value.

Revenue Recognition: Revenue is recognized when the Company has substantially completed performance and no longer has a consequential obligation to its clients. Revenue from the Company’s media communications services offerings, including the production of video and audio content and the broadcast of live events, is recognized upon substantial completion of the services being provided. Revenue from the distribution and monitoring of video and audio news releases is recognized upon distribution. Revenue from subscription-based services is recognized ratably over the term of the subscription.

Operating Costs: Direct costs primarily represent incremental third-party costs incurred in connection with providing services to clients, including production costs, as well as incremental costs incurred for commissions paid to salaried sales personnel. Selling, general, and administrative costs include all internal costs, including payroll-related and other internal costs incurred in connection with providing services to clients, including all internal production costs.

Advertising expenses: Advertising costs are expensed in the period in which the advertising appears in print or is broadcast. The Company incurred advertising expense, exclusive of sales and marketing efforts, of approximately $61and $155 for the years ended December 31, 2008 and 2007, respectively.

Income Taxes: The Company accounts for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes.” Foreign subsidiaries are taxed according to the regulations existing in the countries in which they do business. Provision has not been made for United States income taxes on distributions that may be received from foreign subsidiaries, which are considered to be permanently invested overseas. A valuation allowance is recorded if it is more likely than not that some portion or all of the deferred tax assets will not be realized in future periods.

Foreign Currency Translation: Assets and liabilities of foreign operations are translated from the functional currency into United States dollars using the exchange rate in effect at the balance sheet date. Revenues and expenses of foreign operations are translated from the functional currency into United States dollars using the average exchange rate for the period. Adjustments resulting from the translation into United States dollars are included as a component of “Other comprehensive income.”

F-8

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-Based Compensation: The Company accounts for stock-based compensation under the provisions of SFAS No. 123 (Revised 2004), “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R requires that all share-based payments to employees and non-employee directors, including grants of stock options, be recognized in the financial statements based on their fair values on the date of grant. The Company elected to use the modified prospective application for the transition upon the adoption of SFAS No. 123R, which requires compensation expense to be recognized on options granted subsequent to the adoption date as well as on options granted prior to the adoption date for which the requisite service period had not been completed as of December 31, 2005. The Company has also elected to treat option grants with graded vesting as a single award and accordingly recognizes the associated compensation expense ratably over the service period.

Estimates: The preparation of the Company’s consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications: Certain prior-period amounts in the accompanying financial statements have been reclassified to conform to the 2008 presentation.

3. Discontinued Operations

On August 29, 2008, the Company transferred its 76% ownership interests in TTX (US) LLC and TTX Limited, the two subsidiaries that comprised the Company’s digital video monitoring services business, to Philips. Prior to the transaction, Philips held a 24% ownership interest in each of the Teletrax entities, and upon closing of the transaction Philips owned 100% of the Teletrax entities. Upon closing of the transaction, the Company had no further involvement in the digital video monitoring services business and no further funding obligations for Teletrax.

In exchange for the ownership interests in Teletrax, Philips reimbursed the Company approximately $284 for net operating costs incurred prior to closing and $129 for cash balances transferred at closing, and the Company reimbursed Philips approximately $468 representing an adjustment related to working capital, resulting in a payment by the Company of $55 to Philips, which was paid in November 2008.

On October 1, 2008, the Company sold the client list of Medialink UK, its UK-based media communications services subsidiary, to World and subsequently wound down the operation. Under the terms of the agreement, the Company will receive from World a percentage of the gross profit derived from certain Medialink UK client revenue for a period of eighteen months from the closing date. In February 2009, the Company received a payment of approximately $6 related to such gross profit derived by World in the fourth quarter of 2008.

In September 2006, the Company sold the assets of its U.S. Newswire division to PR Newswire Association, LLC (“PR Newswire”), a wholly-owned subsidiary of United Business Media plc, for approximately $22,577. The final sale price of $22,577 included $3,307 based on the operating performance of U.S. Newswire for the twelve-month period prior to closing and $270 for additional working capital. In February 2007, the Company received additional cash proceeds of approximately $4,427, of which $3,307 represented additional sales price received directly from PR Newswire, $1,000 represented the release of the escrow balance representing deferred purchase price at closing, and $120 represented an adjustment for additional working capital. The Company recognized a pre-tax gain of $12,079 on the sale of U.S. Newswire, of which $7,566 was recognized in 2006 and $4,513 was recognized in 2007.

F-9

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In connection with the sale of U.S. Newswire, the Company entered into a three-year services agreement with PR Newswire under which PR Newswire committed to purchase media communications services aggregating a minimum of $750, $600, and $500 for the fiscal years ended September 30, 2007, 2008, and 2009, respectively, and the Company committed to provide PR Newswire with wire and photography services work aggregating a minimum of $200 for each of the fiscal years then ended. Each party is entitled to retain the full commitment amount for each fiscal year irrespective of the amount of work performed under the services agreement. For the years ended December 31, 2008 and 2007, the Company recognized $466 and $631, respectively, of revenue under this arrangement with PR Newswire for which no services were provided.

The operations of Teletrax and Medialink UK are reported as discontinued operations for all periods presented in the accompanying consolidated financial statements. The operating results of Teletrax and Medialink UK are reflected separately from the results of continuing operations through the dates of disposal. The results of operations of Teletrax and Medialink UK, the gain (loss) on the disposal of Teletrax and Medialink UK, and the additional gain on the sale of U.S. Newswire are presented as discontinued operations in the accompanying consolidated statements of operations as follows:

	For the years ended December 31,
	2008			2007

Revenues	$	5,535		$	11,507

Loss from operations before income taxes	$	(5,995	)	$	(4,685	)
Income tax benefit		(12	)		(1,190	)
Loss from operations		(5,983	)		(3,495	)

Gain (loss) on disposal before income taxes		(455	)		4,513
Income tax expense		12			1,910
Gain (loss) on disposal		(467	)		2,603

Loss from discontinued operations	$	(6,450	)	$	(892	)

The loss from operations of $5,983 for the year ended December 31, 2008, is comprised of a loss from operations of $3,738 and $2,245 for Teletrax and Medialink UK, respectively, and includes impairment charges of $1,808 and $605 for Teletrax and Medialink UK, respectively (see Note 5), and a charge for exit activities of $635 for Medialink UK (see Note 8). The loss on disposal of $467 for the year ended December 31, 2008, is comprised of a gain on disposal of $412 for Teletrax and a loss on disposal of $879 for Medialink UK. The loss on disposal of Medialink UK includes employee termination costs, costs incurred for winding down the operation, and the realization of foreign currency translation losses previously recognized as cumulative translation adjustments and reported as a component of stockholders’ equity.

The loss from operations of $3,495 for the year ended December 31, 2007, is comprised of a loss from operations of $2,994, $488, and $13 for Teletrax, Medialink UK, and U.S. Newswire, respectively. The gain on disposal of $2,603 for the year ended December 31, 2007, consists entirely of the remaining gain on disposal of U.S. Newswire recognized in 2007.

4. Goodwill

The Company’s intangible assets not subject to amortization under SFAS No. 142 consisted entirely of goodwill, all of which related to the media communications services segment. The goodwill was subjected to the Company’s annual impairment test in 2007, which resulted in no impairment for the year ended December 31, 2007.

Based on the Company’s planned actions with regard to Teletrax and Medialink UK at June 30, 2008, and the continued decline in the US-based media communications services business, the Company determined that its goodwill should be tested for impairment prior to the annual testing date of September 30. Based on the Teletrax and Medialink UK transactions resulting in the Company having a single operating segment, the determination of fair value for purposes of the goodwill impairment test was based on quoted market prices for the Company’s common stock. Based on this goodwill impairment test, the Company determined that the carrying value of its goodwill exceeded its fair value. Accordingly, the Company incurred a goodwill impairment charge of $3,429 as of June 30, 2008, resulting in no goodwill remaining as of that date.

F-10

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Other Impairment Charges

Based on the Company’s planned actions with regard to Teletrax and Medialink UK at June 30, 2008, and other market factors related to both Teletrax and Medialink UK, the Company determined that the carrying value of the long-lived assets used in these businesses was not recoverable and exceeded the fair value of such assets. In accordance with SFAS No. 144, the Company recognized impairment charges as of June 30, 2008, totaling $2,413, which consisted of an impairment charge of $1,808 related to Teletrax property and equipment and an impairment charge of $605 related to Medialink UK property and equipment. Such charges are included as a component of the loss from operations of discontinued operations (see Note 3).

Based on the Company’s current and projected cash flow losses attributable to is sole remaining business, the US-based media communications services business, resulting from the continued decline in revenues and the uncertain economic environment, the Company reviewed the long-lived assets of this business for impairment as of December 31, 2008. Based on this evaluation, the Company determined that the carrying value of its remaining long-lived assets was not recoverable and exceeded the fair value of such assets. Accordingly, the Company recognized an impairment charge of $1,118 related to property and equipment as of December 31, 2008, resulting in no net book value of fixed assets remaining as of that date.

6. Property and Equipment

The Company’s property and equipment at December 31, 2008, was fully impaired (see Note 5), resulting in no net book value as of that date. Property and equipment at December 31, 2007, consisted of the following:

Equipment	$	4,161
Furniture and fixtures		869
Licenses and software		1,535
Leasehold improvements		2,864

Total		9,429
Less: Accumulated depreciation and amortization		7,566

Net	$	1,863

F-11

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Accrued Expenses

Accrued expenses and other current liabilities at December 31 consisted of the following:

	2008		2007

Compensation and benefits	$	647	$	1,073
Direct costs		654		748
Client prepayments		126		167
Deferred revenue		639		623
Other taxes		-		295
Professional fees		275		246
Exit activities		407		132
Other accruals		424		341

Total	$	3,172	$	3,625

8. Liabilities for Exit Activities

The Company completed a plan in January 2008 to vacate a portion of its facility in New York (the “2008 Q1 Plan”). The results of operations for the year ended December 31, 2008, include a charge of $147 related to the 2008 Q1 Plan, which consisted entirely of costs associated with a contractual lease obligation. In addition, during 2006 the Company initiated and completed two separate exit activities in connection with the sale of U.S. Newswire (the “2006 Q3 Plan” and the “2006 Q4 Plan”) and in September 2003 initiated and completed an exit activity relating to one of its office locations in Norwalk, CT (the “2003 Plan”).

In connection with the disposal of Medialink UK, the Company completed certain exit activities in October 2008 (the “2008 Q4 Plan”) that included vacating its facility in London that served as the headquarters and sole facility of Medialink UK. The results of operations of discontinued operations for the year ended December 31, 2008, include a charge of $635 related to the 2008 Q4 Plan.

The remaining liability for future payments for these plans and the amounts charged against the liability were as follows:

	Total			2003 Plan			2006 Q3 Plan			2006 Q4 Plan			2008 Q1 Plan			2008 Q4 Plan

Balance at January 1, 2007	$	448		$	157		$	213		$	78
Facility closure cost payments		(338	)		(135	)		(157	)		(46	)
Adjustment to liability		22									22

Balance at December 31, 2007		132			22			56			54
Charge for exit activities		782			-			-			-		$	147		$	635
Facility closure cost payments		(530	)		(22	)		(56	)		(49	)		(160	)		(243	)
Adjustment to liability		23			-			-			23			-			-

Balance at December 31, 2008	$	407		$	-		$	-		$	28		$	(13	)	$	392

The adjustment to the liability for the 2006 Q4 Plan resulted from a change in estimate of the Company’s future contractual lease obligations. All remaining liabilities at December 31, 2008, pertain to facility closure costs and are included as a component of Other Current Liabilities.

F-12

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Long-term Debt

Long-term debt at December 31 consisted of the following:

	2008			2007

Convertible debentures	$	2,650		$	4,350
Unamortized discount		(133	)		(422	)

Net	$	2,517		$	3,928

In November 2004, the Company issued variable rate convertible debentures (the “Debentures”) with a face value of $5,000. The Debentures had an original maturity in November 2009 and bear interest at a rate equal to the higher of 7% or the 6-month LIBOR rate (as defined) plus 4.5% for the first three years and at an adjustable rate thereafter. The Debentures provide each holder with the option to convert the Debentures into shares of the Company’s common stock at a price of $4.05 per share. In addition, as part of the issuance of the Debentures, the holders received detachable warrants to purchase an aggregate of 582,929 shares of the Company’s common stock at a price of $3.99 per share. The Company was able to call the outstanding Debentures at the end of the first, second, and third years at a price equal to 115%, 110%, and 100%, respectively, of the face value. In addition, the Company can force the Debenture holders to convert into shares of the Company’s common stock if the market price of the common stock exceeds $7.09 per share, subject to certain other conditions.

The gross proceeds of $5,000 from the issuance of the Debentures and the detachable warrants were allocated between the two financial instruments based on their relative fair values at the date of issuance. The fair value of the warrants of $1,200 was estimated using the Black-Scholes option pricing model and the following assumptions: expected volatility of 81.1%, expected life of five years, risk free interest rate of 3.51%, and no dividend yield. The fair value of the warrants was recorded as additional paid-in capital and a discount on the Debentures, which is being amortized as a component of interest expense over the life of the Debentures. The remaining gross proceeds of $3,800 were ascribed to the fair value of the Debentures, which accretes in value as the discount is amortized.

In October 2008, the Company entered into Amendment and Waiver Agreements (the “Amendments”) with each of the Debenture holders. Under the terms of the Amendments, the Company made a $2,000 payment to the Debenture holders, $1,700 of which was applied to principal outstanding and $300 of which satisfies the Company’s future interest obligations on the Debentures for the fifteen-month period following the payment date. The Company also amended the exercise price from $3.99 to $0.50 on 524,637 warrants to purchase the Company’s common stock held by the Debenture holders. In exchange for the foregoing, the maturity date of the remaining principal balance of the Debentures of $2,650 was extended to June 30, 2010, and certain definitions relating to events of default under the Debentures were modified. In addition, simultaneous with the execution of the Amendments, the Company and the Debenture holders entered into a Security Agreement pursuant to which the Company granted the Debenture holders a security interest in the Company’s assets. The Company incurred a loss on debt extinguishment of approximately $116 in connection with the prepayment of principal on the Debentures.

The Company recorded deferred financing costs of $256 for fees incurred upon the original issuance of the Debentures and $10 for fees incurred on behalf of the Debenture holders in connection with the Amendments. In addition, the fair value of $10 associated with the re-pricing of the warrants was recorded as additional deferred financing costs and an increase in additional paid-in capital. The deferred financing costs are being amortized as a component of interest expense over the term of the Debentures. Interest expense for the years ended December 31, 2008 and 2007, included $191 and $213, respectively, from the amortization of the discount and $41 and $45, respectively, from the amortization of the deferred financing costs. The average interest rate on the Debentures was 9.7% and 9.8% for the years ended December 31, 2008 and 2007, respectively.

F-13

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In 2007, Debentures with an aggregate face value of $650 were converted into 160,494 shares of the Company’s common stock. In addition, warrants to purchase 46,200 shares of the Company’s common stock were exercised, generating proceeds of $184.

10. Leases

The Company leases certain property used in its operations under agreements that are classified as operating leases. Such agreements generally include provisions for inflation-based rate adjustments and, in the case of leases for office space, payments of certain operating expenses and property taxes.

Future minimum rental payments required under the operating leases that have initial or remaining non-cancelable lease terms in excess of one year are as follows:

2009	$	1,730
2010		1,349
2011		19

Total minimum lease payments	$	3,098

The Company has non-cancelable subleases related to certain properties under which it will receive minimum sublease rental payments through 2010 totaling approximately $418. Total rental expense under operating leases amounted to $1,694 and $2,151 for the years ended December 31, 2008 and 2007, respectively.

11. Preferred Stock

During 2001, the Company’s Board of Directors approved the adoption of a Preferred Stock Rights Agreement (the “Rights Agreement”), under which a dividend distribution of one preferred stock purchase right (the “Purchase Right”) was declared for each outstanding share of the Company’s common stock, payable to common stockholders of record at the close of business on August 30, 2001. Each Purchase Right has an exercise price of $50.00 and entitles the holder to purchase one one-thousandth of a share of the Company’s Series A Participating Preferred Stock (the “Series A Preferred”). The Purchase Rights continue to be represented by, and trade with, the Company's common stock certificates unless the Purchase Rights become exercisable, which will only occur, with certain exceptions, in the event that a person or group acquires, or announces a tender or exchange offer to acquire, a beneficial ownership of 15% or more of the Company's common stock then outstanding. As of December 31, 2008 and 2007, the Company’s Board of Directors had authorized 50,000 shares of the Series A Preferred, none of which was issued or outstanding.

F-14

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Income Taxes

The components of the provision (benefit) for income taxes were as follows:

	2008			2007
Current:
Federal	$	(1,050	)	$	(1,106	)
State and local		37			(449	)

Total current		(1,013	)		(1,555	)

Deferred:
Federal		386			575
State and local		-			233

Total deferred		386			808

Total benefit for income taxes	$	(627	)	$	(747	)

The provision (benefit) for income taxes varied from the Federal statutory income tax rate due to the following:

	2008			2007

Taxes at statutory rate	$	(2,979	)	$	(1,515	)
State and local income taxes, net of Federal benefit		(688	)		(356	)
Valuation allowance on deferred tax assets		3,661			377
Non-deductible expenses and other		(621	)		747

Benefit for income taxes	$	(627	)	$	(747	)

Federal statutory rate		34.00	%		34.00	%

Effective rate		7.16	%		16.76	%

The components of the net deferred tax asset at December 31 were as follows:

	2008		2007
Deferred tax assets:
Accounts receivable	$	36	$	14
Property and equipment		728		270
Goodwill		1,596		469
Other intangible assets		480		614
Minority interest		-		341
Equity investments		300		300
Accrued expenses		285		590
Net operating loss carryforwards		3,939		3,120

Total deferred tax assets before valuation allowance		7,364		5,718
Valuation allowance on deferred tax assets		7,364		5,332

Net deferred tax asset	$	-	$	386

F-15

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s losses from continued operations before taxes for the years ended December 31, 2008 and 2007, were generated entirely in the United States. At December 31, 2008, the Company had domestic state net operating loss carryforwards of approximately $10,949 that expire in 2016 through 2028, and Federal net operating loss carryforwards of approximately $5,421 that expire in 2028. The Company established a valuation allowance to fully reserve its deferred tax assets at December 31, 2008, based on its projections indicating that it is more likely than not that such benefit will not be fully realized. Due to the gain on sale of U.S. Newswire enabling the Company to realize certain deferred tax assets, the Company recognized net deferred tax assets totaling $386 at December 31, 2007. The increase in the valuation allowance of $2,032 for the year ended December 31, 2008, consists of an increase of $3,661 associated with continuing operations, which was recognized as additional tax provision for the period, and a write off of $1,629 associated with the disposal of Teletrax and Medialink UK.

On January 1, 2007, the Company adopted the provisions of FIN 48, "Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109." FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Under FIN 48, a two-step process is used to evaluate a tax position. The first step establishes a recognition criterion under which the tax position is recognized if it is more likely than not that it will be sustained upon examination. The second step establishes a measurement criterion under which the tax position is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

The changes in unrecognized tax positions for the years ended December 31, 2008 and 2007, were as follows:

Unrecognized tax positions at January 1, 2007	$	241
Increase in unrecognized tax benefits for tax positions taken during the year		659

Unrecognized tax positions at December 31, 2007		900
Increase in unrecognized tax benefits for tax positions taken during the year		20
Decrease in unrecognized tax benefits for tax positions taken in prior periods		(835	)

Unrecognized tax positions at December 31, 2008	$	85

The unrecognized tax positions at December 31, 2008 and 2007, are reflected as a reduction of “Prepaid and refundable taxes” in the Company’s balance sheet. In 2007, the Internal Revenue Service commenced an examination of the Company’s Federal income tax returns for the years ended December 31, 2004 and 2005. There were no proposed adjustments to the Company’s income tax return for the year ended December 31, 2004.

13. Stock Options

Under a stock option plan covering employees and other eligible participants (the “Employee Plan”), the Company grants stock options to purchase shares of the Company’s common stock. Stock options granted under the Employee Plan generally become exercisable under two alternative vesting schedules over a four-year period. One vesting schedule provides for 20% of the stock options granted being exercisable on the grant date and an additional 20% becoming exercisable on the anniversary of the grant date in each of the next four years. The second vesting schedule provides for 25% of the stock options granted becoming exercisable on the anniversary of the grant date in each of the next four years. Incentive stock options granted under the Employee Plan generally have a term of ten years and an exercise price equal to the fair market value of the Company’s common stock on the grant date. Incentive stock options issued to employees who own more than 10% of the voting power of all classes of equity of the Company have a term of five years and an exercise price equal to at least 110% of the fair market value of the Company’s common stock on the grant date. Non-qualified stock options granted under the Employee Plan can have a term of up to fifteen years and an exercise price that is determined for each individual grant by a committee appointed by the Company’s board of directors. There are 2,270,808 shares of the Company’s common stock reserved for the issuance of stock options under the Employee Plan. At December 31, 2008, 1,219,537 shares remained available for the issuance of stock options and 491,725 stock options were outstanding.

F-16

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Under a stock option plan covering members of its board of directors (the “Directors’ Plan”), the Company grants stock options to non-employee directors. Newly appointed non-employee directors are granted 10,000 stock options upon their appointment or election to the board of directors, and all non-employee directors are granted 3,000 stock options on the first business day of each year. Additional grants of stock options may be made at the discretion of a committee appointed by the Company’s board of directors. Stock options granted under the Directors’ Plan generally vest ratably over a three-year period, have a term of ten years, but cannot have a term that exceeds fifteen years, and have an exercise price equal to the fair market value of the Company’s common stock on the grant date. There are 430,000 shares of the Company’s common stock reserved for the issuance of stock options under the Directors’ Plan. At December 31, 2008, 179,400 shares remained available for the issuance of stock options and 217,200 stock options were outstanding.

The Company accounts for stock-based compensation associated with stock options in accordance with the provisions of SFAS No. 123R, which the Company adopted in January 2006. The Company uses a binomial lattice model for determining the fair value of stock options granted subsequent to the adoption of SFAS No. 123R. Prior to the adoption of SFAS No. 123R, the Company valued stock options using the Black-Scholes option-pricing model. During 2008, the Company granted 21,000 stock options under the Employee Plan, of which 15,000 stock options granted to an employee vest ratably over a four-year period and 6,000 stock options granted to non-employee directors of the Teletrax subsidiaries vest ratably over a three-year period. Also during 2008, the Company granted 24,000 stock options to non-employee directors of the Company that become exercisable over a three-year period, with one-third vesting on each anniversary of the grant date.

The following weighted average assumptions were used in calculating the fair value of stock options granted under the Employee Plan and the Directors’ Plan during the years ended December 31, 2008 and 2007:

	2008						2007
	Employee Plan			Directors’ Plan			Employee Plan			Directors’ Plan

Expected term		3.82			3.81			3.85			4.23
Expected volatility		.5818			.5630			.5891			.5969
Expected dividends		0	%		0	%		0	%		0	%
Risk-free interest rate		3.00	%		3.63	%		4.38	%		4.48	%

The expected term of stock options is based on historical data used to estimate the exercise of options prior to their expiration. Such early exercises primarily result either from a termination, after which employees and non-employee directors generally have a period of 90 days and nine months, respectively, to exercise stock options, or from exercises occurring when the ratio of the market price of the Company’s common stock to the exercise price of a stock option is attractive to the holder of the stock option. The expected volatility is based on the historical volatility of the Company’s common stock. The expected dividends are based on the historical dividends paid and the dividends the Company expects to pay in future periods. The risk-free interest rate is based on the yields of United States Treasury Notes at the time stock options are granted.

F-17

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Information relating to activity in the Employee Plan is summarized in the following table. All stock option grants included in the following table had exercise prices equal to market price on the grant date.

	Number of shares			Weighted Average Exercise Price		Weighted Average Fair Value		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term

Options outstanding at January 1, 2007		788,190		$	4.89
Options granted		113,000		$	4.49	$	2.18
Options exercised		(32,500	)	$	2.86			$	55
Options forfeited and expired		(106,610	)	$	5.50

Options outstanding at December 31, 2007		762,080		$	4.83
Options granted		21,000		$	2.86	$	1.32
Options forfeited and expired		(291,355	)	$	5.34

Options outstanding at December 31, 2008		491,725		$	4.44			$	0		6.33

Options exercisable at December 31, 2008		312,650		$	4.52			$	0		5.37

Information relating to options outstanding under the Employee Plan at December 31, 2008, is summarized as follows:

	Outstanding						Exercisable
Range of Exercise Prices	Options		Weighted Average Exercise Price		Weighted Average Remaining Life		Options		Weighted Average Exercise Price

$2.61 – $3.30		161,175	$	2.91		4.64		147,175	$	2.90
$4.06 – $5.38		301,450	$	4.48		7.81		136,375	$	4.56
$11.25 – $15.00		29,100	$	12.54		0.36		29,100	$	12.54

Information relating to activity in the Directors’ Plan is summarized in the following table. All option grants included in the following table had exercise prices equal to market price on the grant date.

	Number of shares			Weighted Average Exercise Price		Weighted Average Fair Value		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term

Options outstanding at January 1, 2007		224,600		$	5.39
Options granted		34,000		$	4.92	$	2.52
Options forfeited and expired		(18,000	)	$	8.20

Options outstanding at December 31, 2007		240,600		$	5.11
Options granted		24,000		$	4.25	$	1.94
Options forfeited and expired		(47,400	)	$	7.25

Options outstanding at December 31, 2008		217,200		$	4.55			$	0		5.80

Options exercisable at December 31, 2008		163,200		$	4.60			$	0		4.95

F-18

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Information relating to options outstanding under the Directors’ Plan at December 31, 2008, is summarized as follows:

	Outstanding						Exercisable
Range of Exercise Prices	Options		Weighted Average Exercise Price		Weighted Average Remaining Life		Options		Weighted Average Exercise Price

$2.61 – $3.86		112,000	$	3.37		5.30		102,667	$	3.35
$4.15 – $5.22		87,200	$	4.46		7.53		42,533	$	4.38
$8.06		9,000	$	8.06		1.00		9,000	$	8.06
$16.50		9,000	$	16.50		0.08		9,000	$	16.50

For the years ended December 31, 2008 and 2007, the Company recognized compensation expense related to stock options of $265 and $347, respectively, and recognized a tax benefit related to stock options exercised of $0 and $3, respectively. Compensation expense related to non-vested stock options under both the Employee Plan and the Directors’ Plan that was not recognized as of December 31, 2008, totaled $383 and is expected to be recognized over a weighted average period of 2.0 years. During the year ended December 31, 2007, the Company received $92 from the exercise of stock options. The Company has a policy of issuing new shares of common stock upon the exercise of stock options.

14. Earnings per Share

Basic earnings (loss) per share of common stock is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding. There were no reconciling items to net loss to arrive at loss available to common stockholders for the years ended December 31, 2008 and 2007. Diluted earnings (loss) per share of common stock is computed by giving effect to all dilutive potential common shares. The number of shares used in the calculation of diluted earnings (loss) per share for the years ended December 31, 2008 and 2007, excluded 246 and 268,140, respectively, of incremental shares related to stock options and warrants and excluded 969,136 and 1,086,989, respectively, of incremental shares related to the Debentures. Such incremental shares were excluded from the calculation of diluted earnings (loss) per share due to their antidilutive effect on income from continuing operations.

15. Retirement Plan

The Company has a defined contribution plan in which eligible employees who have attained 21 years of age may contribute on both a pretax and after-tax basis up to a maximum of 15% of their annual salary, subject to annual limits established by the Internal Revenue Service. The Company can make discretionary contributions. Employees are fully vested at all times in contributions they make to the plan, and employees who have completed at least one year of service and are employed with the Company on the last business day of the year fully vest in Company contributions. The Company made no discretionary contributions to its defined contribution plan for the years ended December 31, 2008 and 2007.

16. Commitments and Contingencies

The Company is contingently liable for transactions arising in the ordinary course of business and from time to time may become involved in various legal proceedings in which damages and other remedies are sought. In the opinion of Company management, after review with legal counsel, the ultimate resolution of these matters will not have a material effect on the Company’s consolidated financial statements.

F-19

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. Guarantees

In connection with the transfer of its ownership interests in Teletrax, the Company agreed to indemnify Philips for breaches of certain standard representations and warranties for a period of eighteen months following closing, except for indemnification obligations for representations and warranties related to organization and authorization matters, which survive indefinitely. The Company’s potential liability for such indemnification obligations is not triggered until damages incurred by Philips from any such breach of representations and warranties exceed $50. In such event, the Company will be liable for all such damages incurred, with the Company’s total liability limited to $1,500 in the aggregate. The Company also agreed to indemnify Philips indefinitely for certain tax and employee matters, for which there is no limit on potential liability. No amount has been recognized in connection with such potential indemnification obligations.

In connection with the sale of U.S. Newswire in 2006, the Company agreed to indemnify the purchaser for breaches of certain standard representations and warranties. In the event any such indemnification obligation were to be triggered, the Company may be liable when the damages incurred by the purchaser exceed $150. For certain such indemnification obligations, the Company would be liable for the amount of the damages incurred in excess of $150, with such damages limited to $5,000 in total. For certain other indemnification obligations, the Company would be liable for the full amount of the damages, including the first $150, with such damages limited to $5,000 in total. For still other indemnification obligations, there is no limit to the damages for which the Company would be ultimately liable. No amount has been recognized in connection with such potential obligations.

In connection with the sale of Delahaye, the Company’s research services division that was sold in December 2004, the Company agreed to indemnify the purchaser for breaches of certain standard representations and warranties. In the event any such indemnification obligation were to be triggered, the Company may be liable when the damages incurred by the purchaser exceed $100. The Company would be liable for the full amount of the damages incurred, including the first $100, with such damages limited to $2,000 in total. No amount has been recognized in connection with such potential liability.

The Company has entered into subleases with third parties relating to properties no longer occupied by the Company. Under an assignment of one of these subleases, the third party remits payment directly to the landlord, although the Company remains the primary obligor for the lease payments. If the third party ceased to remit payment directly to the landlord, the Company would be liable for such payments. The maximum potential amount for which the Company can be held liable is approximately $42. No amount has been recognized in connection with such potential liability.

18. Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash equivalents and trade receivables. The Company maintains cash balances and cash equivalents with high credit quality financial institutions.

The Company provides credit to clients on an uncollateralized basis after evaluating client creditworthiness. The Company’s clients are not concentrated in any specific geographic region, but are concentrated in the automotive, insurance, pharmaceutical, consumer products, and public relations agency businesses. The Company’s five largest clients provided approximately 24.8% and 20.5% of revenues for the years ended December 31, 2008 and 2007, respectively. In addition, amounts due from these clients represented 24.3% and 14.2% of trade accounts receivable at December 31, 2008 and 2007, respectively. The Company does not believe that a significant reduction in business from any of its clients would have a material adverse effect on its results of operations or financial condition since no single client or group of clients is responsible for a significant portion of the Company’s revenues or represents a significant portion of the Company’s trade receivables.

F-20

MEDIALINK WORLDWIDE INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. Supplemental Disclosure of Cash Flow Information

Payments of interest and income taxes were as follows:

	2008			2007

Interest paid	$	791		$	327

Income taxes paid (refunded) – net	$	(1,077	)	$	1,516

Non-cash investing and financing activities for the year ended December 31, 2008, consisted entirely of the fair value of $10 associated with the re-pricing of the warrants held by the Debenture holders. Non-cash investing and financing activities for the year ended December 31, 2007, consisted entirely of the conversion of $650 of the Debentures into 160,494 shares of the Company’s common stock.

20. Fair Value of Financial Instruments

The estimated fair values of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company would realize in a current market exchange.

The carrying amounts of cash and cash equivalents and non-trade receivables included as part of other current assets at December 31, 2008 and 2007, are a reasonable approximation of their fair values due to the short-term nature of these instruments. The Debentures do not have a quoted market price and are not rated by a credit-rating agency. Due to the current uncertainty in the Company’s financial condition, the uncertainty in the global financial markets, and the difficulty in identifying comparable financial instruments in the marketplace, it was not practicable to estimate the fair value of the Debentures.

21. Comprehensive Income

Comprehensive income includes all changes to equity that are not the result of transactions with shareholders and is comprised of net income and other comprehensive income. For the year ended December 31, 2008, other comprehensive income of $366 consisted of an unrealized loss of $199 for foreign currency translation adjustments during the year and the reversal of $565 for previously unrealized losses for foreign currency translation adjustments that were realized upon the disposal of Medialink UK. For the year ended December 31, 2007, other comprehensive income of $34 consisted entirely of unrealized foreign currency translation adjustments. At December 31, 2008 and 2007, accumulated other comprehensive income (loss) in the consolidated balance sheets consisted entirely of foreign currency translation adjustments.

F-21

EXHIBIT INDEX

Exhibit No.		Description

2.1		Asset Purchase Agreement dated as of September 29, 2006, between Medialink Worldwide Incorporated and PR Newswire Association, LLC (Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed on October 5, 2006).
2.2		Securities Purchase Agreement dated as of August 29, 2008, entered into by and among Philips Electronics North America Corporation, Koninklijke Philips Electronics N.V., and Medialink Worldwide Incorporated (Incorporated by reference to Exhibit No. 2.2 of Registrant’s Current Report on Form 8-K filed on September 4, 2008).
2.3		Agreement dated as of October 1, 2008, among Medialink UK Limited, World Television Group plc, and Medialink Worldwide Incorporated (Incorporated by reference to Exhibit No. 2.2 of Registrant’s Current Report on Form 8-K filed on October 7, 2008).
3.1		Amended and Restated Certificate of Incorporation of Medialink Worldwide Incorporated (Incorporated by reference to Exhibit No. 2.5 of Registrant’s Registration Statement on Form 8-A filed on January 16, 1997 (File No. 000-21989)).
3.2		Amended and Restated By-Laws of Medialink Worldwide Incorporated dated November 8, 2007 (Incorporated by reference to Exhibit No. 3.2 of Registrant’s Current Report on Form 8-K filed on November 13, 2007).
4.1		Preferred Stock Rights Agreement, dated as of August 16, 2001, between Medialink Worldwide Incorporated and Mellon Investor Services, LLC, including the Certificate of Designation, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B, and C, respectively (Incorporated by reference to Exhibit No. 4.1 of Registrant’s Registration Statement on Form 8-A filed on August 16, 2001 (File No. 000-21989)).
4.2		Form of Variable Rate Convertible Debenture due November 9, 2009 (Incorporated by reference to Exhibit No. 4.2 of Registrant’s Current Report on Form 8-K filed on November 9, 2004).
4.3		Form of Common Stock Purchase Warrant (Incorporated by reference to Exhibit No. 4.1 of Registrant’s Current Report on Form 8-K filed on November 9, 2004).
4.4		Form of Registration Rights Agreement, dated as of November 8, 2004 (Incorporated by reference to Exhibit No. 4.3 of Registrant’s Current Report on Form 8-K filed on November 9, 2004).
4.5		Form of Amendment and Waiver Agreement dated as of October 6, 2008 (Incorporated by reference to Exhibit No. 4.5 of Registrant’s Current Report on Form 8-K filed on October 10, 2008).
10.1		Amended and Restated Employment Agreement, dated as of December 31, 2005, by and between Medialink Worldwide Incorporated and Laurence Moskowitz (Incorporated by reference to Exhibit No. 10.1 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
10.3		Separation Agreement and General Release, dated as of December 30, 2005, by and between Medialink Worldwide Incorporated and J. Graeme McWhirter (Incorporated by reference to Exhibit No. 10.3 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
10.4		Asset Purchase Agreement, dated December 31, 2004, by and between Medialink Worldwide Incorporated and Bacon’s Information Inc. (Incorporated by reference to Exhibit No. 10.1 of the Registrant’s Current Report on Form 8-K/A filed on March 14, 2005).
10.5		Agreement for the Sale and Purchase of Certain Assets of Medialink UK Limited forming part of the Delahaye Business, dated December 31, 2004, by and between Medialink UK Limited and Romeike Limited (Incorporated by reference to Exhibit No. 10.2 of the Registrant’s Current Report on Form 8-K/A filed on March 14, 2005).
10.7		Medialink Worldwide Incorporated 401(k) Employee Savings Plan (Incorporated by reference to Exhibit No. 10.7 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006).
10.8		Medialink Worldwide Incorporated Amended and Restated Stock Option Plan (Incorporated by reference to Exhibit No. 10.8 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006).
10.9		Medialink Worldwide Incorporated Amended and Restated 1996 Directors Stock Option Plan (Incorporated by reference to Exhibit No. 10.9 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2006).
10.12		Amended and Restated Employment Agreement, dated as of November 12, 2008, by and between Medialink Worldwide Incorporated and Kenneth G. Torosian (Incorporated by reference to Exhibit No. 10.12 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2008).

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10.13		Employment Agreement, dated as of September 9, 2005, by and between Medialink Worldwide Incorporated and Lawrence A. Thomas (Incorporated by reference to Exhibit No. 10.13 of Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005).
10.15		Securities Purchase Agreement dated as of November 8, 2004 among Medialink Worldwide Incorporated, Iroquois Capital LP, Portside Growth and Opportunity Fund, Rockmore Investment Master Fund Ltd., and Smithfield Fiduciary LLC (Incorporated by reference to Exhibit No. 10.1 of Registrant’s Current Report on Form 8-K filed on November 9, 2004).
10.16		Security Agreement among Medialink Worldwide Incorporated, Iroquois Master Fund, Ltd., Portside Growth and Opportunity Fund, Rockmore Investment Master Fund Ltd., and Smithfield Fiduciary LLC (Incorporated by reference to Exhibit No. 10.16 of Registrant’s Current Report on Form 8-K filed on October 10, 2008).
21		Subsidiaries of the Registrant.
23		Consent of KPMG LLP.
31.1		Certification of the principal executive officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. (Incorporated by reference to Exhibit 31.1 of the Registrant’s Quarterly Report on Form 10-K filed on April 15, 2009)
31.2		Certification of the principal financial officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended. (Incorporated by reference to Exhibit 31.2 of the Registrant’s Quarterly Report on Form 10-K filed on April 15, 2009)
31.3		Certification of the principal executive officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 as amended.
31.4		Certification of the principal financial officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 as amended.
32		Certification of the principal executive officer and principal financial officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Incorporated by reference to Exhibit 32 of the Registrant’s Annual Report on Form 10-K filed on April 15, 2009)

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MEDIALINK WORLDWIDE INCORPORATED

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

For the years ended December 31, 2008 and 2007

(In thousands of dollars)

			Additions
Description	Balance at beginning of period		Charged to costs and expenses			Charged to other accounts (2)		Deductions (1)		Balance at end of period

Allowances deducted in the balance sheet from assets to which they apply:

For the year ended December 31, 2008:
Allowance for doubtful accounts	$	118	$	(19	)	$	-	$	15	$	84

Valuation allowance on deferred tax assets	$	5,332	$	3,661		$	-	$	1,629	$	7,364

For the year ended December 31, 2007:
Allowance for doubtful accounts	$	245	$	(27	)	$	-	$	100	$	118

Valuation allowance on deferred tax assets	$	4,403	$	929		$	-	$	-	$	5,332

(1) Represents amounts written off.

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MEDIALINK WORLDWIDE INC 10-K/A