SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended June 30, 2004
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from _________ to _________
Commission File Number: 0-32589
COMTEX NEWS NETWORK, INC.
-------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3050512
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
625 N. Washington Street, Suite 301, Alexandria, Virginia 22314
- --------------------------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
(703) 820-2000
--------------
(Registrant's Telephone Number including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
----
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
---------------------------------------
(Title of Class)
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 twelve months (or for such shorter period that the
Registrant was required to file reports) and (2) has been subject to such
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 amendments to
this Form 10-K. [ ]
As of October 15, 2004, there were issued and outstanding 13,598,836 shares
of the Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
1. None.
PART III
ITEM 10. Directors and Executive Officers of the Corporation
- ------------------------------------------------------------
The Board of Directors of Comtex News Network, Inc. ("Comtex" or the
"Company") consists of five persons and is divided into three classes, with one
class of directors elected each year. Directors of the Company are generally
elected to serve for a three-year term and until their respective successors
shall have been elected and shall qualify.
The business experience for the past five years of each of Comtex's
directors and executive officers is as follows:
C.W. GILLULY, Ed.D., 58, has served as a director of the Company since
1992. He served as President from June 1992 until September 1997, as Chairman of
the Board from June 1992 until December 2002 and from February 2004 until the
present, as Vice-Chairman from December 2002 through June 2003 and as interim
Chief Executive Officer from February 2004 until the present. Dr. Gilluly has
served as Chairman of the Board and President of AMASYS and its predecessor,
Infotechnology, Inc., since June 1992. Dr. Gilluly also served as a director of
Analex Corporation until March 2003, an engineering services firm primarily
involved with homeland security and bio-defense.
WILLIAM J. HOWARD, 57, has served as a director of the Company since
January 2003. Mr. Howard has extensive experience in journalism and is currently
President of Discovery Tours LLC, a firm providing the tourism industry with
documentaries on historical communities in the mid-Atlantic and southern United
States. Mr. Howard has also participated in real estate development and the
restoration of historical sites. In Maryland, he has received Governor's
Citations from three different governors for his community service work,
particularly in Talbot County.
ROBERT J. LYNCH, JR., 71, has served as a director of the Company since
January 2003. Mr. Lynch has been President of American & Foreign Enterprises,
Inc. ("AFE"), an investment firm, for more than 20 years. Among its many
enterprises, AFE is partnered with Hochtief, A.G., Germany's largest
engineering/construction group. AFE has worked with international investment
banks such as Goldman Sachs & Co., BV Bank of Munich and Citibank. Mr. Lynch has
been a director of many public companies in various industries, including Dames
& Moore (environmental/geotechnical engineering), Data Broadcasting Corporation
(real-time financial market data) and Turner Construction Company.
ERIK HENDRICKS, 60, has served as a director of the Company since 1991.
Since 1979 he has served as the Executive Director and Chief Operating Officer
of the Pennsylvania Society for the Prevention of Cruelty to Animals, a
non-profit humane society.
PIETER VANBENNEKOM, 59, has served as a director of the Company since
February 2004. Mr. VanBennekom has extensive experience in the news, information
and publishing industries and has worked with Progressive Business Publications,
Inc. ("PBP") a diversified business information services publishing company,
since 1994. He joined PBP as Senior Editor, became Group Publisher in 1996 and
was promoted to Editorial Director, in 1998. Prior to joining PBP, Mr.
VanBennekom worked with the worldwide wire service United Press International
("UPI") for more than 20 years. He started with UPI as a foreign correspondent,
moved up to various management positions and ended his UPI tenure as its
President and CEO. Mr. VanBennekom speaks five languages and his volunteer
activities include membership on the Board of Directors of Junior Achievement,
the national organization dedicated to teaching children about ethical business
practices.
Executive Officers
The following table contains information as of October 15, 2004 as to the
executive officers of the Company who are not also directors of the Company:
Name Age Office Held With Company
- ---- --- ------------------------
Matthew Ball 42 Vice President, Chief Financial Officer
Kathy Ballard 39 Vice President, Content
Chip Brian 33 Vice President, Operations
Mr. Ball has more than nineteen years of accounting and finance experience.
From 2002 until 2004, he served as Assistant and acting Controller of an
international manufacturing company, Cambridge International, Inc. From 2001
until 2002, he was the Finance Director of Channel Marker, Inc. and from 1998
through 1999, Mr. Ball served as Chief Operating Officer and Controller of
Treesource, Inc. From 1993 through the present, Mr. Ball has also provided
financial management services to various entities. His career also included
positions as a public accountant with Aronson, Fetridge & Weigle and Arthur
Andersen & Company.
Ms. Ballard's career includes more than twenty years in various research
and management positions in the information industry. She has been with Comtex
since 1999, where she served as Director, Product Operations/Client Services
until assuming her present position in 2004. Previously, she worked with
LEXIS/NEXIS for more than twelve years, held positions in the education arena
and worked with the New York Times Information Service.
Mr. Brian has extensive experience in providing operating management and
technology solutions to companies in the financial services industry. From 2003
until 2004, he was the Manager, Product Operations Group for Nyfix Incorporated,
where his responsibilities included providing "first line, high exposure"
management to technicians serving the broker community on the floor of the New
York Stock Exchange. From the end of 2000 until 2003, Mr. Brian was the Manager,
Trading Support Operations for the BNY Brokerage division of The Bank of New
York. During 2000, Mr. Brian worked with HotJobs.com, a Yahoo company, as
Manager of Systems Operations. From 1997 until 2000 he worked with Fluxmedia
Solutions, as Project Manager responsible for network operations centers,
facilities, client support and vendor relationship management.
There are no family relationships among the directors or executive officers
of the Company.
Meetings of the Board of Directors
The Board of Directors held a total of six meetings during the Company's
fiscal year ended June 30, 2004. Each director attended in person or
telephonically at least 80% of the meetings held.
Committees of the Board of Directors
The Audit Committee
The Audit Committee, which held four meetings during fiscal year 2004, is
comprised of Messrs. Lynch, Hendricks and Howard.
Report of the Audit Committee of the Board of Directors
The Audit Committee has issued a report that states as follows:
2
o We have reviewed and discussed with management the Company's audited
consolidated financial statements for the fiscal year ended June 30,
2004;
o We have discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61; and
o We have received the written disclosures and the letter from the
independent accountants required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," and
have discussed with the independent accountants their independence.
o Based on the review and discussions referred to above, we recommend to
the Board of Directors that the audited consolidated financial
statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 2004.
Submitted by the Audit Committee
Robert J. Lynch, Jr., Chairman
Erik Hendricks
William J. Howard
The Compensation Committee
The Compensation Committee of the Board of Directors, which held eight
meetings during fiscal year 2004, is comprised of Messrs. Howard, Hendricks and
Lynch. The Compensation Committee evaluates management's recommendations and
makes its own recommendations to the Board of Directors concerning the
compensation of the Company's executive officers. It is also responsible for the
formulation of the Company's executive compensation policy and the research,
analysis and subsequent recommendation regarding the administration of the
Company's 1995 Stock Option Plan and 2003 Stock Incentive Plan. (Also see
section below including the "Report of the Compensation Committee of the Board
of Directors.")
The Executive Committee
The Executive Committee of the Board of Directors, which held one meeting
during fiscal year 2004, is comprised of Messrs. Howard, Hendricks and Lynch.
The Executive Committee is chartered to act in place of the full Board between
Board meetings, if actions are required, and to fulfill the function of
reviewing any initial merger and acquisition and/or partnering proposals.
The Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board of
Directors, which held two meetings during fiscal year 2004, is comprised of
Messrs. Hendricks, Howard and Lynch. The Nominating and Corporate Governance
Committee meets in order to evaluate and nominate candidates for membership to
the Board of Directors and as officers of the Company.
Independent Directors
The Board of Directors has determined that all of its Directors are
"independent" as defined in the Nasdaq corporate governance listing standards
except for Director Gilluly due to his position as an employee of Comtex.
Attendance at Annual Meetings of Stockholders
The Company does not have a policy regarding director attendance at annual
meetings of stockholders. All of the Company's directors attended the prior
year's annual meeting of stockholders.
3
Ownership Reports by Officers and Directors
The Common Stock of the Company is registered with the SEC pursuant to
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act"). The
officers and Directors of the Company and beneficial owners of greater than 10%
of the Company's Common Stock are required to file reports on Forms 3, 4 and 5
with the SEC disclosing beneficial ownership and changes in beneficial ownership
of the Common Stock. SEC rules require disclosure in the Company's Proxy
Statement or Annual Report on Form 10-K of the failure of an officer, director
or 10% beneficial owner of the Company's Common Stock to file a Form 3, 4, or 5
on a timely basis. Based on the Company's review of such ownership reports, the
Company believes that no officer, director or 10% beneficial owner of the
Company failed to file such ownership reports on a timely basis for the fiscal
year ended June 30, 2004.
Code of Ethics
The Company has adopted a Code of Ethics (the "Code") that is applicable to
the officers, directors and employees of the Company, including the Company's
principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. Amendments to
and waivers from the Code will also be disclosed on the Company's website.
ITEM 11. Executive Compensation
- -------------------------------
Summary Compensation Table
The following table sets forth information concerning all compensation paid
or accrued by the Company to its Chief Executive Officer and the other executive
officers of the Company who earned total salary and bonus in excess of $100,000
during the fiscal year ended June 30, 2004 (collectively, the "Named Executive
Officers"):
...................................... ........ .................................. .........................................
Long-Term
Annual Compensation Compensation Awards
...................................... ........ ................... .............. ...................... ..................
Name and Fiscal Shares Underlying All Other
Principal Position Year Salary Bonus Options Compensation
------------------ ---- ------ ----- ------- ------------
...................................... ........ ................... .............. ...................... ..................
C.W. Gilluly (1) 2004 $ 923 -- 10,000 --
Chairman and 2003 -- -- -- --
Interim Chief Executive Officer 2002 -- -- -- --
...................................... ........ ................... .............. ...................... ..................
Raymond Capece (2) 2004 $ 8,852 -- -- --
2003 24,231 -- -- --
2002 -- -- -- --
...................................... ........ ................... .............. ...................... ..................
Stephen W. Ellis (3) 2004 $ 89,135 13,000 825,000 --
2003 36,346 -- 710,000 --
2002 -- -- -- --
...................................... ........ ................... .............. ...................... ..................
Robin Deal (4) 2004 $ 114,019 -- 62,000 --
2003 110,000 -- 11,748 --
2002 106,369 -- 58,000 --
...................................... ........ ................... .............. ...................... ..................
Deirdre D. McGonagle (5) 2004 $ 125,221 -- 32,000 --
2003 103,204 -- 11,748 --
2002 100,500 -- 48,100 --
...................................... ........ ................... .............. ...................... ..................
Steven Brosnihan (6) 2004 $ 105,404 -- 100,000 $ 33,469 (7)
...................................... ........ ................... .............. ...................... ..................
<FN>
- ---------------------
(1) Mr. Gilluly was appointed interim Chief Executive Officer in February 2004.
(2) Mr. Capece was appointed Chief Executive Officer in April 2003 and resigned
his position in July 2003.
(3) Mr. Ellis was appointed Chairman of the Board in December 2002. He was
appointed Chief Executive Officer in July 2003. Mr. Ellis resigned his
positions in February 2004.
(4) Ms. Deal resigned from the Company in May 2004.
(5) Ms. McGonagle resigned from the Company in May 2004.
(6) Mr. Brosnihan was initially employed by the Company in October 2003 and
resigned from the Company in July 2004.
(7) Consists of sales commissions.
</FN>
4
Stock Option Grants
The following table provides details regarding all stock options granted to
the Named Executive Officers during the fiscal year ended June 30, 2004:
Option Grants in Fiscal Year 2004
....................................................................................................................................
Potential
Realizable Value at Assumed
Annual Rates of Stock Price
Number of % of Total Options Appreciation for Option Term (1)
Shares Underlying Granted Exercise Expiration --------------------------------
Name Options Granted in Fiscal Year Price Date 5% 10%
- ---- ---------------- -------------- ----- ---- -- ---
....................................................................................................................................
C.W. Gilluly 10,000 0.50% $0.22 10/12/2013 $1,384 $3,506
....................................................................................................................................
Stephen W. Ellis 250,000 12.48% $0.26 07/01/2013 $40,878 $103,593
575,000 28.71% $0.26 07/31/2013 $94,020 $238,265
....................................................................................................................................
Raymond Capece -- -- -- -- -- --
....................................................................................................................................
Robin Deal 62,000 3.10% $0.16 08/28/2004 $6,239 $15,810
....................................................................................................................................
Deirdre D. McGonagle 32,000 1.60% $0.16 08/28/2004 $3,220 $8,160
....................................................................................................................................
Steve Brosnihan 100,000 4.99% $0.26 10/01/2013 $16,351 $41,437
....................................................................................................................................
<FN>
- ----------------
(1) Amounts represent hypothetical gains that could be achieved, if exercised
at the end of the option term. The dollar amounts under these columns
assume 5% and 10% compounded annual appreciation in the Common Stock from
the date the respective options were granted. These calculations and
assumed realizable values are required to be disclosed under Securities and
Exchange Commission rules and, therefore, are not intended to forecast
possible future appreciation of common stock or amounts that may be
ultimately realized upon exercise. The Company does not believe this method
accurately illustrates the potential value of a stock option.
</FN>
Set forth below is certain information as of June 30, 2004 regarding equity
compensation plans for directors and executive officers of the Company that have
been approved by stockholders.
- --------------------------------------------------------------------------------------------------------------
Weighted
Number of securities to be issued average Number of securities
Equity compensation plans upon exercise of outstanding exercise remaining available for
approved by stockholders options and rights price issuance under plan
- --------------------------------------------------------------------------------------------------------------
1995 Stock Option Plan 953,851 $0.37 2,123,871
- --------------------------------------------------------------------------------------------------------------
2003 Stock Option Plan 350,000 $0.26 650,000
- --------------------------------------------------------------------------------------------------------------
5
Options Exercised and Year-End Option Values
The following table sets forth certain information regarding the value of
exercised and unexercised options held by the Named Executive Officers as of
June 30, 2004.
Fiscal Year-End Option Values
.................................................................................................................................
Shares Number of Shares Value of Unexercised
Acquired upon Value Realized Underlying Unexercised In-the-Money Options
Exercise of From Exercise Options at June 30, 2004 at June 30, 2004(2)
Name Options Of Options (1) ------------------------ -------------------
- ---- ------- -------------- Exercisable Unexercisable Exercisable Unexercisable
.................................................................................................................................
C.W. Gilluly -- -- 103,300 6,700 $10,000 --
.................................................................................................................................
Stephen W. Ellis -- -- -- -- -- --
.................................................................................................................................
Raymond Capece -- -- -- -- -- --
.................................................................................................................................
Robin Deal -- -- 73,748 -- $2,715 --
.................................................................................................................................
Deirdre D. McGonagle -- -- 43,748 -- $1,515 --
.................................................................................................................................
Steve Brosnihan -- -- -- -- -- --
.................................................................................................................................
<FN>
- ------------------
(1) Represents the difference between the exercise price and the market value
price on the date of exercise.
(2) Represents the difference between the exercise price of the outstanding
options and the closing bid price of the common stock on June 30, 2004,
which was $0.20 per share. Options that have an exercise price greater than
the fiscal year-end market value are not included in the value calculation.
</FN>
Stock Option Plan
In October 1995, the Board of Directors approved the Comtex News Network,
Inc. 1995 Stock Option Plan, which was approved by stockholders in December
1995. In July 2003, the Board of Directors approved the Comtex News Network,
Inc. 2003 Incentive Stock Plan, which was approved by stockholders in October
2003. The Plans provide for the issuance of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code and non-qualified stock
options and stock awards in order to recruit and retain key employees,
consultants and directors.
Compensation of Directors
During fiscal year 2004, the Company's directors were reimbursed for travel
expenses in connection with attendance at Board of Directors' meetings.
Non-employee directors of the Company also received a fee of $1,000 for each
Board of Directors' meeting attended. Employee directors did not receive
additional compensation for Board of Directors' meeting attendance. The
Company's directors received $500 for each committee meeting attended during
fiscal year 2004, unless such meeting occurred on the same day as a Board
meeting, in which case no additional compensation was paid.
Agreements with Executives
Comtex entered into letter agreements in April 2004 with each of Matthew
Ball and Chip Brian regarding their employment at the Company. These letter
agreements provide for a base salary (currently $100,000 for Mr. Ball and
$130,000 for Mr. Brian) prorated based on the number of days worked compared to
actual workdays and the grant of 250,000 stock options to each of Messrs. Ball
and Brian, of which 150,000 options vested subsequent to June 30, 2004, 50,000
options of which will vest December 31, 2004 and 50,000 options of which will
vest on March 31, 2005, provided that each individual remains employed under the
provisions of the respective letter agreements. Subsequent to the end of fiscal
2004, Mr. Brian assumed additional responsibilities including management of
Sales and Marketing for the Company, and received an additional grant of 250,000
options, 100,000 of which vested immediately and the remainder of which vest
equally over three quarters beginning on April 1, 2005. Messrs. Ball and Brian
are employees at will. In the event that the executive's employment is
involuntarily terminated for other than
6
cause or the executive resigns for refusal to perform unlawful accounting or
business practices, then the executive's stock option will become fully vested
and the Company will provide the executive a prorated severance payment
depending on the length of the executive's employment with Comtex.
Report of the Compensation Committee of the Board of Directors
General. The Company believes its compensation policies are designed to
provide competitive levels of compensation that integrate with the Company's
annual and long-term quantitative and qualitative performance factors. The
compensation policies reward above-average corporate performance, recognize
individual initiative and achievements and assist the Company in attracting and
retaining qualified executives.
The Company establishes compensation, including compensation for the Chief
Executive Officer, based on both objective and subjective criteria. Objective
criteria include actual versus target annual operating budget performance and
actual versus target revenue growth, either as to the Company as a whole, or as
to the officer's particular operating unit. Subjective performance criteria
encompass evaluation of each officer's initiative and contribution to overall
corporate performance, the officer's managerial ability, and the officer's
performance in any special projects that the officer may have undertaken. The
Company also endorses the position that stock ownership by management and
stock-based performance compensation arrangements are beneficial in aligning
managements' and stockholders' interests in the enhancement of stockholder value
and therefore uses its Stock Option and Stock Purchase Plans to recruit and
retain senior management.
Compliance with Internal Revenue Code Section 162(M)
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for compensation paid to certain of their executive
officers, to the extent that compensation, whether payable in cash or stock,
exceeds $1 million per covered officer in any fiscal year. The limitation
applies only to compensation that is not considered to be performance-based.
Non-performance-based compensation paid to our executive officers for the 2003
fiscal year did not exceed the $1 million limit per officer, and the
Compensation Committee does not anticipate that any non-performance-based
compensation payable to the executive officers for the 2004 fiscal year will
exceed that limit. Because it is unlikely that the actual compensation payable
to any of our executive officers in the foreseeable future will approach the $1
million limit, the Compensation Committee has decided at this time not to take
any action to limit or restructure the elements of cash compensation payable to
the executive officers. The Compensation Committee shall reconsider this
decision should the individual cash compensation of any executive officer ever
approach the $1 million level.
Submitted by the Compensation Committee
William J. Howard
Erik Hendricks
Robert J. Lynch, Jr.
Board of Directors Interlocks and Insider Participation
General. Dr. Gilluly serves as a Director and interim Chief Executive
Officer of the Company. Dr. Gilluly also serves as Chairman and Chief Executive
Officer of AMASYS, which beneficially owns approximately 22% of the Company's
Common Stock. (See "Beneficial Ownership of Common Stock.") Mr. Lynch also
serves as a director of AMASYS.
Note Payable to AMASYS
On December 9, 2003, AMASYS and Comtex executed an amendment to the
Amended, Consolidated and Restated 10% Senior Subordinated Secured Note (the
"Amended Note"), payable to AMASYS (said amendment the "Third Amendment") for
the purpose of reducing the price at which the Amended Note may be converted
into common stock of the Company. Pursuant to the Third Amendment, AMASYS agreed
to subordinate the Amended Note to both the Company's note payable to its former
landlord and to the Accounts Receivable Purchase Agreement. In consideration for
these subordination agreements, the Company agreed to reduce the conversion
price stipulated in the Amended Note from the previously-stated conversion price
of $1.20 per share to $0.75 per share, and to increase this conversion price by
$0.05 every one hundred and eighty (180) days thereafter. At the date of the
7
transaction the conversion price of the Amended Note was in excess of the stock
price. As of June 30, 2004, the Amended Note had a principal balance of
$856,954. Interest paid to AMASYS totaled approximately $86,000, $88,000 and
$93,000 for the fiscal years 2004, 2003 and 2002, respectively.
This Amended Note bears interest at a rate of 10% on the principal balance
of approximately $857,000 at June 30, 2004 and 2003. The Amended Note is
collateralized by a continuing interest in all receivables, all products of such
receivables and the proceeds thereof, all purchase orders, and all patents and
technology now or hereafter held or received by Comtex. The Amended Note is
subordinated to Comtex's Accounts Receivable Purchase Agreement with a third
party financial institution and the Company's note payable to its former
landlord. The outstanding principal balance of the Amended Note is due in July
2008.
8
Stock Performance Graph
The graph below depicts the Company's stock price as an index assuming $100
invested on July 1, 1999 along with the composite prices of companies listed in
the Nasdaq Stock Market (U.S. Companies) Index and a composite of peer group
companies in the Internet Information Providers Index. The Nasdaq Stock Market
Index and Internet Information Providers Index were prepared by CoreData, LLC, a
source believed to be reliable, although the Company is not responsible for any
errors or omissions in such information.
The Internet Information Providers Index includes the following companies:
A.D.A.M., America Online Latin American, Aptimus Inc., Bankrate Inc.,
Chinadotcom Corp, CNET Networks, Inc., Edgar Online, Findwhat.com, Homestore
Inc., Infospace Incorporated, Internet Gold-Golden, Knot Inc., Lastminute.com
PLC, Looksmart LTD, Marketwatch.com Inc., Netlease.com Inc., Paid, Inc.,
Quotesmith.com Inc., Rediff.com India Ltd Ads, Sabre Holdings Corp., Sohu.com
Inc., Sportsline.com Inc., Stockscape Technologies, Theglobe.com Inc., Tucows
Inc., US Dataworks Inc., Verticalnet, Inc., World Gaming Plc, Yahoo! Inc.
The comparisons are required by regulations of the Securities and Exchange
Commission and are not intended to forecast or to be indicative of the possible
future performance of the Company's Common Stock.
- -------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDING
- -------------------------------------------------------------------------------------------------------------
COMPANY / INDEX / MARKET 1999 2000 2001 2002 2003 2004
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Comtex News Network, Inc. 100.00 145.45 32.48 14.06 12.12 9.70
- -------------------------------------------------------------------------------------------------------------
Internet Information Providers 100.00 101.81 22.41 12.03 26.55 53.81
- -------------------------------------------------------------------------------------------------------------
Nasdaq Market Index 100.00 150.47 83.33 56.52 62.85 79.93
- -------------------------------------------------------------------------------------------------------------
[Graphic Omitted]
The preceding report on executive compensation and the stock performance
graph shall not be deemed incorporated by reference into any of our previous
filings under the Securities Act of 1933 or the Securities Exchange Act of 1934
which might incorporate filings made by us under those acts, nor will such
report or graph be incorporated by reference into any future filings made by us
under those acts, except to the extent that we specifically incorporate this
information by reference.
9
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
and Related Shareholder Matters
-------------------------------
Persons and groups who beneficially own in excess of 5% of the common stock
are required to file certain reports with the Securities and Exchange Commission
(the "SEC") regarding such ownership. Based on these reports, the following
table sets forth, as of October 15, 2004, the shares of common stock
beneficially owned by persons who beneficially own more than 5% of the Company's
outstanding shares of common stock.
Beneficial Ownership of Common Stock
The following table sets forth information as of October 15, 2004 regarding
the beneficial ownership of shares of the Company's common stock, par value $.01
per share (the "Common Stock"), of (i) each person known to the Company to be
the beneficial owner, within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), of more than 5% of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
each executive officer of the Company named in the Summary Compensation Table
(see "Executive Compensation") and (iv) all executive officers and directors of
the Company as a group. Unless otherwise indicated, the address of each named
beneficial owner is c/o Comtex News Network, Inc., 625 N. Washington Street,
Suite 301, Alexandria, Virginia 22314. Except to the extent indicated in the
footnotes, each of the beneficial owners named below has sole voting and
investment power with respect to the shares of Common Stock listed.
10
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership (1) Percentage of Class
- -------------------------------------- -------------------------------- --------------------------------
AMASYS Corporation 3,224,629 (2) 22.0%
625 N. Washington St., Ste. 301
Alexandria, VA 22314
C.W. Gilluly, Ed.D., Chairman and 2,174,106 (3) 15.9%
Interim Chief Executive Officer
Erik Hendricks, Director 81,600 (4) *
William J. Howard, Director 9,900 (5) *
Robert J. Lynch, Jr., Director 9,900 (5) *
Pieter VanBennekom, Director 3,300 (6) *
Raymond Capece 0 --
Stephen W. Ellis 750,000 (7) 5.3%
Steve Brosnihan 0 --
Robin Y. Deal 14,641(8)
Deirdre D. McGonagle 23,455(9)
Charles W. Terry 764,408 (10) 5.6%
All Directors and executive officers 2,089,763 (11) 19.4%
as a group (8 Persons)
<FN>
- -------------------------
* Less than 1%.
(1) Beneficial ownership is direct unless otherwise indicated.
(2) Includes 1,071,192 shares that may be acquired upon the conversion of a
Convertible Note held by AMASYS. The principal balance of $856,954 as of
June 30, 2004 is convertible at $0.80 per share, which is to increase by
$0.05 every 180 days from December 4, 2003. (See "Note Payable to AMASYS.")
(3) Includes 106,600 shares of Common Stock that may be acquired upon the
exercise of vested options granted under the Comtex News Network, Inc. 1995
Stock Option Plan, and 2,067,506 shares of Common Stock held jointly by Dr.
Gilluly and his spouse.
(4) Includes 66,600 shares of Common Stock that may be acquired upon the
exercise of vested options granted under the Comtex News Network, Inc. 1995
Stock Option Plan.
(5) Includes 9,900 shares of Common Stock that may be acquired upon the
exercise of vested options granted under the Comtex News Network, Inc. 1995
Stock Option Plan.
(6) Includes 3,300 shares of Common Stock that may be acquired upon the
exercise of vested options granted under the Comtex News Network, Inc. 1995
Stock Option Plan.
(7) Includes 450,000 shares of Common Stock that may be acquired upon the
exercise of vested non-qualified options granted under the Comtex News
Network, Inc. 1995 Stock Option Plan and 2003 Stock Incentive Plan. On
February 5, 2004, Mr. Ellis resigned as a director and Chief Executive
Officer of the Company.
(8) Ms. Deal resigned as an officer of the Company in May 2004.
(9) Ms. McGonagle resigned as an officer of the Company in May 2004.
(10) On April 24, 2003, Mr. Terry resigned as President and Chief Executive
Officer and entered into a Separation and Release Agreement with the
Company. (See "Executive Compensation" section.)
(11) Includes 680,454 shares of Common Stock that may be acquired upon the
exercise of vested options granted under the Comtex News Network, Inc. 1995
Stock Option Plan.
</FN>
11
ITEM 13. Certain Relationships and Related Transactions
- --------------------------------------------------------------
Certain relationships and related transactions involving directors of the
Company and certain other entities are described in "Executive Compensation -
Board of Directors Interlocks and Insider Participation."
ITEM 14. Principal Accountant Fees and Services
- ------------------------------------------------------
The Company's Audit Committee is responsible for appointment of the
Company's independent auditors. During the year ended June 30, 2004 the Company
engaged Goldstein Golub Kessler LLP and ceased using Ernst & Young LLP to
conduct its annual audit and quarterly reviews of the financial statements and
to provide services in connection with the SEC proxy statement filing.
Additionally, the Company engaged the services of Envision Business Solutions
LLC to perform its tax compliance work for the years ended June 30, 2004 and
2003.
The following table sets forth the aggregate fees billed to the Company by
its principal accountants for the fiscal years ended June 30, 2004 and 2003.
Fiscal Year Ended
June 30,
-------------------------------
2004 2003
-------------- --------------
Audit Fees $ 53,500 $ 85,139
Tax Compliance Fees 8,037 7,838
-------------- --------------
Total Fees $ 61,537 $ 92,976
============== ==============
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of
Independent Auditor
The Audit Committee's policy is to pre-approve all audit and non-audit
services provided by the independent auditors, either by approving an engagement
prior to the engagement or pursuant to a pre-approval policy with respect to
particular services. These services may include audit services, review services
and other services. The independent auditors and management are required to
periodically report to the full Audit Committee regarding the extent of services
provided by the independent auditors in accordance with the pre-approval, and
the fees for the services performed to date.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining Goldstein Golub Kessler, LLP's
independence. The Audit Committee concluded that performing such services does
not affect Goldstein Golub Kessler, LLP's independence in performing its
function as auditor of Comtex.
12
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
- ------------------------------------------------------------
(b) Exhibits
--------
31.1 Certification of C.W. Gilluly Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Matthew Ball Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
13
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Corporation has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: October 28, 2004
COMTEX NEWS NETWORK, INC.
By: /s/ C.W. Gilluly By: /s/ Matthew Ball
----------------------------- -----------------------------
C.W. Gilluly, Ed.D. Matthew Ball
Chairman and Interim Chief Vice President and Chief
Executive Officer Financial Officer (Principal
(Principal Executive Officer) Financial and Accounting Officer
Pursuant to the requirements of the Securities Exchange of 1934, the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated have signed this report below.
Directors:
Signatures Title Date
- ---------- ----- ----
/s/ C.W. Gilluly Chairman and Interim October 28, 2004
- --------------------------- Chief Executive Officer
C.W. Gilluly
/s/ Erik Hendricks Director October 28, 2004
- ---------------------------
Erik Hendricks
/s/ William J. Howard Director October 28, 2004
- ---------------------------
William J. Howard
/s/ Robert J. Lynch, Jr. Director October 28, 2004
- ----------------------------
Robert J. Lynch, Jr.
/s/ Pieter VanBennekom Director October 28, 2004
- ----------------------------
Pieter VanBennekom