UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001 or
___ 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 0-10541
COMTEX NEWS NETWORK, INC.
(Exact name of registrant as specified in its charter)
New York 13-3055012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4900 Seminary Road
Suite 600
Alexandria, Virginia 22311
(Address of principal executive offices)
(703) 820-2000
Registrant's Telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
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 ___
As of May 11, 2001, 10,073,037 shares of the Common Stock of the
registrant, par value $0.01 per share, were outstanding.
COMTEX NEWS NETWORK, INC.
TABLE OF CONTENTS
Part I Financial Information: Page
No.
Item 1. Financial Statements
Balance Sheets 3
as of March 31, 2001 (unaudited)
and June 30, 2000
Statements of Operations 4
for the Three and Nine Months Ended
March 31, 2001 and 2000 (unaudited)
Statements of Cash Flows 5
for the Nine Months Ended
March 31, 2001 and 2000 (unaudited)
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis 8
of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosure about Market Risk 13
Part II Other Information:
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
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
SIGNATURES 15
COMTEX NEWS NETWORK, INC.
BALANCE SHEETS
March 31, June 30,
2001 2000
------------- -------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 381,963 $ 1,655,222
Accounts Receivable, Net of Allowance
of approximately $684,000 and $314,000
at March 31, 2001 and June 30, 2000, 2,143,694 2,086,701
respectively
Prepaid Expenses and Other Current Assets 434,869 185,692
------------- -------------
TOTAL CURRENT ASSETS 2,960,526 3,927,615
PROPERTY AND EQUIPMENT, NET 3,355,370 1,829,060
DEPOSITS AND OTHER ASSETS 370,690 219,978
------------- -------------
TOTAL ASSETS $ 6,686,586 $ 5,976,653
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 850,497 $ 570,817
Accrued Expenses 1,725,558 1,980,958
Notes Payable - 60,000
------------ -------------
TOTAL CURRENT LIABILITIES 2,576,055 2,611,775
LONG-TERM LIABILITIES:
Long-Term Notes Payable - Affiliate 962,954 986,954
------------- -------------
TOTAL LIABILITIES 3,539,009 3,598,729
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, $0.01 Par Value -
Shares Authorized: 18,000,000;
Shares issued and outstanding: 100,730 99,679
10,073,037 and 9,967,897, respectively
Additional Capital 11,502,070 11,403,826
Accumulated Deficit (8,455,223) (9,125,581)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 3,147,577 2,377,924
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,686,586 $ 5,976,653
============= =============
The accompanying "Notes to Financial Statements"
are an integral part of these financial statement
3
COMTEX NEWS NETWORK, INC.
STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED)
Three months ended Nine months ended
March 31, March 31,
--------------------------------- --------------------------------
2001 2000 2001 2000
------------- ------------- ------------- ------------
Revenues $4,306,391 $3,369,881 $12,792,136 $8,679,326
Cost of Revenues 1,171,588 967,280 3,487,740 2,709,526
------------- ------------- ------------- ------------
Gross Profit 3,134,803 2,402,601 9,304,396 5,969,800
Operating Expenses
Technical Operations & Support 862,970 472,127 2,545,469 1,408,062
Product Development 191,322 120,922 458,424 350,802
Sales and Marketing 687,373 703,064 2,081,465 1,424,778
General and Administrative 1,108,658 683,757 3,018,477 1,708,462
Depreciation and Amortization 201,889 70,390 516,207 134,911
------------- ------------- ------------- ------------
Total Operating Expenses 3,052,212 2,050,260 8,620,042 5,027,015
Operating Income 82,591 352,341 684,354 942,785
Other Income/(Expense)
Interest Expense/Other (24,149) (39,718) (74,885) (93,170)
Interest Income 12,615 22,171 62,992 28,076
------------- ------------- ------------- ------------
Other Income/(Expense), net (11,534) (17,547) (11,893) (65,094)
------------- ------------- ------------- ------------
Income Before Income Taxes 71,057 334,794 672,461 877,691
Income Taxes 878 17,700 2,103 18,143
------------- ------------- ------------- ------------
Net Income $ 70,179 $ 317,094 $ 670,358 $ 859,548
============= ============= ============= ============
Basic Earnings Per Common Share $ .01 $ .03 $ .07 $ .10
============= ============= ============= ============
Weighted Average Number
of Common Shares 10,062,307 9,728,062 10,004,446 8,771,563
============= ============= ============= ============
Diluted Earnings Per Common Share $ .01 $ .02 $ .05 $ .07
============= ============= ============= ============
Weighted Average Number
of Shares Assuming Dilution 13,270,990 13,015,757 13,629,447 12,483,208
============= ============= ============= ============
The accompanying "Notes to Financial Statements"
are an integral part of these financial statement
4
COMTEX NEWS NETWORK, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
March 31,
-----------------------------------
2001 2000
------------ ------------
Cash Flows from Operating Activities:
Net Income $ 670,358 $ 859,548
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and Amortization Expense 516,207 134,911
Bad Debt Expense 552,850 145,500
Loss on disposal of assets - 13,432
Changes in Assets and Liabilities:
Accounts Receivable (609,843) (444,506)
Prepaid Expenses and Other Current Assets (249,177) (117,010)
Deposits and Other Long Term Assets (150,712) (7,661)
Accounts Payable 279,680 (104,582)
Accrued Expenses (255,400) 720,134
------------ ------------
Net Cash provided by Operating Activities 753,963 1,199,766
Cash Flows from Investing Activities:
Purchases of Property and Equipment (2,042,517) (970,094)
------------ ------------
Net Cash used in Investing Activities (2,042,517) (970,094)
Cash Flows from Financing Activities:
Repayments on Notes Payable (84,000) (40,000)
Issuance of Stock - Private Placement - 1,262,739
Issuance of Stock under Employee Stock Purchase Plan 43,478 12,851
Exercise of Stock Options 55,817 54,427
------------ ------------
Net Cash provided by Financing Activities 15,295 1,290,017
Net Increase/(Decrease) in Cash and Cash Equivalents (1,273,259) 1,519,689
Cash and Cash Equivalents at Beginning of Period 1,655,222 95,283
------------ ------------
Cash and Cash Equivalents at End of Period $ 381,963 $1,614,972
============ ============
The accompanying "Notes to Financial Statements"
are an integral part of these financial statement
5
COMTEX NEWS NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 2001
1. Basis of Presentation
The accompanying interim financial statements of COMTEX News
Network, Inc. (the "Company" or "COMTEX") are unaudited, but in
the opinion of management reflect all adjustments (consisting
only of normal recurring accruals) necessary for a fair
presentation of the results for such periods. The results of
operations for any interim period are not necessarily indicative
of results for the full year. The balance sheet at June 30, 2000
has been derived from the audited financial statements at that
date but does not include all of the information and footnotes
required by accounting principles generally accepted in the
United States for complete financial statements. These financial
statements should be read in conjunction with the audited
financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30,
2000 ("2000 Form 10-K"), filed with the Securities and Exchange
Commission on September 28, 2000.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No.101, Revenue Recognition in
Financial Statements ("SAB 101"), which summarizes the SEC's
views in applying generally accepted accounting principles to
revenue recognition in financial statements. On June 26, 2000,
the Commission deferred the effective date of SAB 101 to require
adoption by the fourth quarter of the first fiscal year beginning
after December 15, 1999. Any required adoption will be accounted
for as a change in accounting principle in accordance with APB
Opinion No. 20, Accounting Changes, by cumulative catch-up
adjustment in the current fiscal year. COMTEX does not expect
the adoption of SAB 101 to have a material impact on the
Company's financial statements.
In June 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of SFAS No. 133, which is effective for
fiscal years beginning after June 15, 2000. COMTEX does not
anticipate that the adoption of SFAS No. 138 will have a
significant effect on its financial statements.
Certain amounts for the three and nine months ended March
31, 2000, have been reclassified to conform to the presentation
of the three and nine months ended March 31, 2001.
2. Net Income per Share
The following table sets forth the computation of basic and
diluted earnings per share:
Three Months Ended Nine Months Ended
March 31, March 31,
2001 2000 2001 2000
----------- ------------ ------------ -----------
Numerator:
Net Income
$ 70,179 $ 317,094 $ 670,358 $ 859,548
=========== ============ ============ ===========
Denominator:
Denominator for basic
earnings per share -
weighted average shares 10,062,307 9,728,062 10,004,446 8,771,563
Effect of dilutive
securities:
Stock Options 3,208,683 3,287,695 3,625,001 3,711,645
----------- ------------ ------------ -----------
Denominator for diluted
earnings per share 13,270,990 13,015,757 13,629,447 12,483,208
=========== ============ ============ ===========
Basic Earnings Per Share $ .01 $ .03 $ .07 $ .10
Diluted Earnings Per Share $ .01 $ .02 $ .05 $ .07
3. Income Taxes
The provision for income taxes is limited to the liability for
alternative minimum tax, as the majority of income for Federal
and state tax purposes has been offset by net operating loss and
investment tax credit carryforwards.
4. Commitments and Contingencies
The Company was named as a defendant in a lawsuit filed in the
United States District Court for the Northern District of
Alabama, Northeastern Division on August 25, 2000. The suit is
captioned Clyde Collins Pearson (the "Plaintiff") Individually
and In His Capacity As Representative of the Class of Emulex
Corporation Shareholders Similarly Situated v. Internet Wire,
Inc.; Comtex News Network, Inc.; and Emulex Corporation. The
suit related to Plaintiff's sale of Emulex Corporation stock in
response to a false news release disseminated by or on behalf of
various defendants, including the Company. The complaint alleged
that the defendants failed to take reasonably necessary
precautions to prevent the distribution of the false press
release attributed to Emulex. Plaintiff is seeking $120,000 in
actual damages, and additional punitive damages. The Company
filed a motion to dismiss the complaint, which was heard by the
Court on February 14, 2001. In an April 12, 2001 telephone
conference hearing, the judge granted the Motion to Dismiss and
indicated that a written opinion would be filed in the coming
months. It is not known whether the plaintiff will pursue an
appeal but counsel for the Company believes that an appeal is
unlikely.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of the three months ended March 31, 2001, to the three
months ended March 31, 2000
The Company earned operating income of approximately $83,000
during the three months ended March 31, 2001 compared to
operating income of approximately $352,000 during the three
months ended March 31, 2000. The Company earned net income of
approximately $70,000 during the three months ended March 31,
2001, compared to net income of approximately $317,000 for the
three months ended March 31, 2000. As discussed below, the
decline in operating income and net income is due to an increase
in operating expenses, partially offset by an increase in gross
revenues and an improvement of gross profit margins.
The Company's revenues consist primarily of royalty revenues
and fees from the licensing of content products to information
distributors. During the three months ended March 31, 2001, the
Company's total revenues were approximately $4,306,000, an
increase of approximately $937,000, or 28%, from total revenues
of approximately $3,370,000 for the three months ended March 31,
2000. Approximately 149% of this increase reflects revenues from
new customers obtained during the twelve months ended March 31,
2001. The increase in total revenues was partially offset by an
increase in existing customer churn, particularly in the Internet
and personal investor markets, due primarily to failing business
models and/or lack of funding.
The Company's cost of revenues consists primarily of content
license fees and royalties to information providers, as well as
data communication costs for the delivery of the Company's
products to customers. The cost of revenues for the three months
ended March 31, 2001 was approximately $1,172,000, an increase of
approximately $204,000, or 21%, from the cost of revenues for the
three months ended March 31, 2000. The increase in cost of
revenues is primarily due to an increase in royalties and fees
for the distribution of content related to the increase in
revenues for the period. The increase is offset partially by a
decrease in data communications costs resulting from the
continued implementation of a more cost-effective vehicle for the
delivery of the Company's products to customers.
Gross profit for the three months ended March 31, 2001 was
approximately $3,135,000, an increase of approximately $732,000,
or 30%, compared to the gross profit for the three months ended
March 31, 2000. The gross profit percentage improved for the
three months ended March 31, 2001 to approximately 73% from
approximately 71% for the three months ended March 31, 2000 due
to the decrease in data communications costs discussed above.
Total operating expenses for the three months ended March 31,
2001 were approximately $3,052,000, an increase of approximately
$1,002,000, or 49%, compared to the three months ended March 31,
2000. The increase in operating expenses is generally due to
investments in personnel, operations and infrastructure in all
areas, offset partially by a slight decrease in sales and
marketing expenditures. The increased expenses also include
additional reserves for doubtful accounts in the current three-
month period.
Technical operations and support expenses during the three
months ended March 31, 2001 increased approximately $391,000, or
83%, compared to the three months ended March 31, 2000. This
increase was due primarily to increased personnel and computer
leases, parts and software expenses, offset partially by
decreased consulting expenses related to the Company's legacy
hardware platform.
Product development expenses during the three months ended
March 31, 2001 increased by approximately $70,000, or 58%,
compared to the three months ended March 31, 2000. This increase
is the result of additional personnel in this department.
Product development activities include quality assurance,
enhancements to the Company's products and the development of
proprietary news products.
Sales and marketing expenses for the three months ended
March 31, 2001 decreased by approximately $16,000, or 2%,
compared to the three months ended March 31, 2000. This decrease
is the result of decreased advertising and promotional expenses
compared to initial design and consulting expenses in the same
quarter in the previous year and decreased sales commissions,
partially offset by increased personnel.
General and administrative expenses for the three months
ended March 31, 2001 increased by approximately $425,000, or 62%,
compared to the three months ended March 31, 2000. This increase
was due to additional personnel and related expenses, expanded
office space and increased legal fees. The Company also recorded
additional reserves for doubtful accounts related to the
significant number of customer cancellations due to their lack of
funding or failed businesses.
Depreciation and amortization expense for the three months ended
March 31, 2001 increased approximately $131,000, or 187%,
compared to the three months ended March 31, 2000. The increase
was due to the deployment of an upgraded production software and
hardware platform and increased capital expenditures related to
increasing capacity and redundancy of the production systems.
Other income for the three months ended March 31, 2001 decreased
approximately $6,000, or 34%, compared to the three months ended
March 31, 2000 due to reduced interest earned on the Company's
decreased cash balances.
Comparison of the nine months ended March 31, 2001, to the nine
months ended March 31, 2000
The Company earned operating income of approximately
$684,000 during the nine months ended March 31, 2001, compared to
operating income of $943,000 during the nine months ended March
31, 2000. The Company earned net income of approximately
$670,000 during the nine months ended March 31, 2001, compared to
net income of approximately $860,000 for the nine months ended
March 31, 2000. The decrease in operating income is due to
increased operating expenses, partially offset by increased
revenues. The decrease in net income was partially offset by
increased interest income earned on the Company's cash balances
and decreased interest expense as a result of principal payments
on the Company's long-term debt.
The Company's revenues consist primarily of royalty revenues
and fees from the licensing of content products to information
distributors. During the nine months ended March 31, 2001, the
Company's total revenues were approximately $12,792,000, an
increase of approximately $4,113,000, or 47%, compared to the
nine months ended March 31, 2000. Of the increase in revenues,
approximately 80% reflects revenues from new customers obtained
during the twelve months ended March 31, 2001, with the remaining
20% reflecting growth in revenues from the existing customer
base. The revenue growth was partially offset by the loss of
customers, primarily in the Internet and personal investor
markets, due to failed business models or their lack of funding.
The Company's cost of revenues consists primarily of content
license fees and royalties to the Company's information
providers, as well as data communication costs for the delivery
of the Company's products to customers. The cost of revenues for
the nine months ended March 31, 2001 was approximately
$3,488,000, an increase of approximately $778,000, or 29%,
compared to the nine months ended March 31, 2000. The increase
in cost is primarily due to an increase in royalties and fees
related to the increase in revenues for the period. The increase
is offset partially by a decrease in data communications costs
resulting from the continued implementation of a more cost-
effective vehicle for the delivery of the Company's products to
customers, as well as a favorably renegotiated contract with a
data communications provider.
Gross profit for the nine months ended March 31, 2001 was
approximately $9,304,000, an increase of approximately
$3,335,000, or 56%, compared to the nine months ended March 31,
2000. The gross profit percentage improved for the nine months
ended March 31, 2001 to approximately 73% from approximately 69%
for the nine months ended March 31, 2000, due to both an
improvement in earned minimum royalties paid to certain
information providers and the decrease in data communications
costs discussed above.
Total operating expenses for the nine months ended March 31,
2001 were approximately $8,620,000, an increase of approximately
$3,593,000, or 71%, compared to the nine months ended March 31,
2000. The increase in operating expenses is generally due to
investments in personnel, operations and infrastructure in all
areas and increases specifically in marketing and public
relations activities and expenditures. The Company also recorded
additional reserves for doubtful accounts during the nine months
ended March 31, 2001.
Technical operations and support expenses during the nine
months ended March 31, 2001 increased approximately $1,137,000,
or 81%, compared to the nine months ended March 31, 2000. This
increase was due primarily to increased personnel and computer
leases, parts and software expenses, offset partially by
decreased consulting expenses related to the Company's legacy
hardware platform.
Product development expenses during the nine months ended
March 31, 2001 increased by approximately $108,000, or 31%,
compared to the nine months ended March 31, 2000. This increase
is the result of additional personnel in this department.
Product development activities include quality assurance,
enhancements to the Company's products and the development of
proprietary news products.
Sales and marketing expenses during the nine months ended
March 31, 2001 increased by approximately $657,000, or 46%,
compared to the nine months ended March 31, 2000. This increase
was due to increased sales and marketing personnel, increased
marketing and public relations expenses related to the promotion
and branding of the Company's products and services and increased
travel related to business development, partially offset by
decreased commissions compared to the previous year's commissions
on greater revenue increases.
General and administrative expenses for the nine months
ended March 31, 2001 increased approximately $1,310,000, or 77%,
compared to the nine months ended March 31, 2000. This increase
was due to additional headcount and related expenses, expanded
office space, legal fees, recruitment expenses and investor
relations consulting, as well as increased bad debt expense due
to an increase in the number of customer cancellations related to
their lack of funding or failed businesses.
Depreciation and amortization expense for the nine months ended
March 31, 2001 increased approximately $381,000, or 283%,
compared to the nine months ended March 31, 2000. The increase
was due primarily to the deployment of upgraded production
software and hardware, as well as increased capital expenditures
related to increasing capacity and redundancy in the production
systems.
Other income during the nine months ended March 31, 2001
increased approximately $53,000, or 82%, compared to the nine
months ended March 31, 2000 due primarily to interest earned on
the Company's cash balances.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended March 31, 2001, the Company's
operations produced operating income of approximately $684,000
and net income of approximately $670,000. At March 31, 2001, the
Company had working capital of approximately $384,000 as compared
with working capital of approximately $1,316,000 at June 30,
2000. The Company also had net stockholders' equity of
approximately $3,148,000 at March 31, 2001, as compared to net
stockholders' equity at June 30, 2000, of approximately
$2,378,000. The decrease in working capital is primarily the
result of increased capital expenditures to increase the capacity
and redundancy of the Company's data production systems. The
increase in stockholders' equity is due to the retention of net
income, as well as the issuance of common stock under the
Employee Stock Purchase Plan and the exercise of stock options.
For the nine months ended March 31, 2001, the Company's operating
activities generated approximately $754,000 in cash. The Company
had cash of approximately $382,000 at March 31, 2001, compared to
approximately $1,655,000 at June 30, 2000. The decrease in cash
is the result of increased capital expenditures as discussed
above. To date, the Company's operations have generated cash
flow sufficient to cover its monthly expenses.
The Company has reinvested a significant portion of its operating
cash flows. This includes investments in administrative, sales,
marketing and technical staff; expansion of the contractual base
with information providers to improve the quality and flexibility
of information products; and expansion of contracts with
information distributor customers. All of these factors
contribute to improving the Company's ability to sell and deliver
quality products and services.
In addition, the Company has made capital expenditures of
approximately $2,043,000 in the nine months ended March 31, 2001,
primarily to upgrade and improve the redundancy of its software
and hardware platforms, thus expanding product capabilities,
reliability and its ability to meet future client and content
processing requirements. These expenditures included purchases
related to the expansion of office space and additional
headcount, as well as approximately $635,000 in expenditures
related to software development.
As discussed above, the Company has increased the accounts
receivable reserves in response to the significant customer
losses in the Internet and personal investor markets. Management
has implemented policies to more closely monitor all receivables,
but particularly the customers in these markets.
The Company anticipates continued investment in infrastructure,
products and distribution in support of its current and future
customers. While the Company anticipates funding these investments
with operating cash flows, it may undertake additional borrowings
or raise additional capital through the issuance of equity as the
need arises and to take advantage of market conditions.
EBITDA, as defined below, increased approximately 11% to
$1,201,000 for the nine months ended March 31, 2001 compared to
$1,078,000 for the nine months ended March 31, 2000. The
increase is due to the increase in revenues and the improvement
in gross profit margin, offset partially by increased operating
expenses, excluding depreciation and amortization.
EBITDA consists of earnings before interest expense, interest and
other income, income taxes and depreciation and amortization.
EBITDA does not represent funds available for management's
discretionary use and is not intended to represent cash flow from
operations. EBITDA should also not be construed as a substitute
for operating income or as a better measure of liquidity than
cash flow from operating activities, which are determined in
accordance with accounting principles generally accepted in the
United States. This measurement excludes components that are
significant to understanding and assessing the Company's results
of operations and cash flows. In addition, EBITDA is not a term
defined by generally accepted accounting principles and,
therefore, the Company's measure of EBITDA might not be
comparable to similarly titled measures used by other companies.
CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS
Except for the historical information contained herein, the
matters discussed in this Form 10-Q include forward-looking
statements within the meaning of Section 21E of the Securities
and Exchange Act of 1934. These forward-looking statements may
be identified by reference to a future period or by use of
forward-looking terminology such as "anticipate", "expect",
"could", "may" or other words of a similar nature. Forward-
looking statements, which the Company believes to be reasonable
and are made in good faith, are subject to certain risks and
uncertainties that could cause actual results to differ
materially from those expressed in any forward-looking statement
made by, or on behalf of, the Company.
Among such important external factors and risks are business
conditions and growth in the demand for real-time, aggregated
custom online news delivery services, and growth in the economy
in general; the impact of competitive products and pricing; the
proliferation of large, global information networks and the
evolution of the Internet. Among such important internal factors
and risks are continued success in the acquisition and growth of
new information re-distributor and corporate end-user client
accounts; the ability to continue the Company's program of
technical system upgrades; the timely creation and market
acceptance of new products; the Company's ability to continue to
increase the variety and quantity of sources of information
available to create its products; the Company's ability to
continue to recruit and retain highly skilled technical,
editorial, managerial and sales/marketing personnel; the
Company's ability to generate cash flow sufficient to cover its
current obligations while meeting its long-term debt obligations;
and the other risks detailed from time to time in the Company's
SEC reports, including quarterly reports on Form 10-Q, that could
cause results to differ materially from those anticipated by the
statements contained herein.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The information required by this item has been omitted as the
Company's market risk exposure is not material.
Part II. Other Information
Item 1. Legal Proceedings
The Company was named as a defendant in a lawsuit filed
in the United States District Court for the Northern
District of Alabama, Northeastern Division on August 25,
2000. The suit is captioned Clyde Collins Pearson (the
"Plaintiff") Individually and In His Capacity As
Representative of the Class of Emulex Corporation
Shareholders Similarly Situated v. Internet Wire, Inc.;
Comtex News Network, Inc.; and Emulex Corporation. The suit
related to Plaintiff's sale of Emulex Corporation stock in
response to a false news release disseminated by or on
behalf of various defendants, including the Company. The
complaint alleged that the defendants failed to take
reasonably necessary precautions to prevent the distribution
of the false press release attributed to Emulex. Plaintiff
is seeking $120,000.00 in actual damages, and additional
punitive damages. The Company filed a motion to dismiss the
complaint, which was heard by the Court on February 14,
2001. In an April 12, 2001 telephone conference hearing,
the judge granted the Motion to Dismiss and indicated that a
written opinion would be filed in the coming months. It is
not known whether the plaintiff will pursue an appeal but
counsel for the Company believes that an appeal is unlikely.
The Company is also involved in routine legal
proceedings occurring in the ordinary course of business,
which in the aggregate are believed by management to be
immaterial to the financial condition of the Company.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
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.
COMTEX NEWS NETWORK, INC.
(Registrant)
Dated: May 15, 2001 By: /S/CHARLES W. TERRY
Charles W. Terry
President and Chief Executive Officer
(Principal Executive Officer)
By: /S/ROBIN Y. DEAL
Vice President, Finance & Accounting
(Principal Financial and Accounting
Officer)