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 September 30, 2008 or
 
 o
              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)
  Delaware
              13-3055012(State
      or other jurisdiction
              (I.R.S.
      Employerof
      incorporation or organization)
              Identification
      No.)
 
 625 North Washington Street,
Suite 301, Alexandria, Virginia 22314
 (Address
of principal executive office)
 
 Registrant's
telephone number, including area code: (703)
820-2000
 
 Check
whether the Registrant (1) filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the past 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 o
  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 the definitions for large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company in
Rule 12b-2 of the Exchange Act.  (check one):
 
 
 Large
      accelerated filer  o
              Accelerated
      filer  oNon-accelerated
      filer  o
              Smaller
      reporting company x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.)    Yes o  No x
 
 As of
October 24, 2008, 15,294,200 shares of the Common Stock of the registrant, par
value $0.01 per share, were outstanding.
 
 Transitional
Small Business Disclosure Format (check one):   Yes o  No x
  
  COMTEX
NEWS NETWORK, INC.
 TABLE OF
CONTENTS
  Part
      I
              Financial
      Information:
              Page
      No.Item
      1.
              Condensed
      Financial StatementsCondensed Balance
      Sheets as of September 30, 2008 (unaudited) and June 30,
      2008
              2Condensed
      Statements of Operations for the Three Months Ended September 30, 2008 and
      2007 (unaudited)
              3Condensed
      Statements of Cash Flows for the Three Months Ended September 30, 2008 and
      2007 (unaudited)
              4Notes
      to Condensed Financial Statements (unaudited)
              5Item
      2.
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
              7Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              11Item
      4.
              Controls
      and Procedures
              11Part
      II
              Other
      Information:Item
      1.
              Legal
      Proceedings
              11Item
      1A.
              Risk
      Factors
              12Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              12Item
      3.
              Defaults
      Upon Senior Securities
              12Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              12Item
      5.
              Other
      Information
              12Item
      6.
              Exhibits
              12SIGNATURES
              
              13
 
 1
 
 Part
I   Financial Information
 
 Item 1.  Condensed
Financial Statements
  COMTEX
      NEWS NETWORK, INC.BALANCE
      SHEETSSeptember
      30,
              
              
              June
      30,2008
              
              
              2008(Unaudited)ASSETSCURRENT
      ASSETS:Cash
      and Cash Equivalents
              
              $
              1,610,799
              
              
              $
              1,520,831Accounts
      Receivable, Net of Allowance for Doubtful Accounts of
    $115,396
              
              
              777,257
              
              
              
              855,266Prepaid
      Expenses
              
              
              19,840
              
              
              
              25,097TOTAL
      CURRENT ASSETS
              
              
              2,407,896
              
              
              
              2,401,194PROPERTY
      AND EQUIPMENT, NET
              
              
              368,499
              
              
              
              394,927DEPOSITS
      AND OTHER ASSETS
              
              
              43,253
              
              
              
              43,253TOTAL
      ASSETS
              
              $
              2,819,648
              
              
              $
              2,839,374LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      Payable and Other Accrued Expenses
              
              $
              720,894
              
              
              $
              833,175Accrued
      Payroll Expenses
              
              
              230,046
              
              
              
              159,208Deferred
      Revenue
              
              
              17,228
              
              
              
              20,574TOTAL
      LIABILITIES
              
              
              968,168
              
              
              
              1,012,957COMMITMENTS
      AND CONTINGENCIES (Note 3)STOCKHOLDERS'
      EQUITY:Perferred
      Stock, $0.01 Par Value - Shares Authorized:5,000,000:
      No Shares issued and outstanding
              
              
              -
              
              
              
              -Common
      Stock, $0.01 Par Value - Shares Authorized:25,000,000:
      Shares issued and outstanding 15,294,200 at September 30, 2008 and June
      30, 2008
              
              
              152,942
              
              
              
              152,942Additional
      Paid-In Capital
              
              
              13,566,637
              
              
              
              13,566,637Accumulated
      Deficit
              
              
              (11,868,099
              )
              
              
              (11,893,162
              )Total
      Stockholders' Equity
              
              
              1,851,480
              
              
              
              1,826,417TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              2,819,648
              
              
              $
              2,839,374
 
 The
accompanying “Notes to Condensed Financial Statements” are an integral part of
these financial statements
 2
 
 COMTEX
      NEWS NETWORK, INC.STATEMENTS
      OF OPERATIONSThree
      Months EndedSeptember
      30,(unaudited)2008
              
              
              2007Revenues
              
              $
              1,662,248
              
              
              $
              1,855,521Cost
      of Revenues(including
      depreciation and amortization expense of$0
      and $6,364, respectively)
              
              
              641,733
              
              
              
              711,960Gross
      Profit
              
              
              1,020,515
              
              
              
              1,143,561Operating
      ExpensesTechnical
      Operations and Support (inclusive of stock-basedcompensation
      of $0 and $1,182, respectively)
              
              
              405,009
              
              
              
              329,946Sales
      and Marketing (inclusive of stock-based compensationof
      $0 and $1,684, respectively)
              
              
              192,766
              
              
              
              121,135General
      and Administrative (inclusive of stock-basedcompensation
      of $0 and $431, respectively)
              
              
              362,156
              
              
              
              370,026Depreciation
      and Amortization
              
              
              29,119
              
              
              
              15,115Total
      Operating Expenses
              
              
              989,050
              
              
              
              836,222Operating
      Income
              
              
              31,465
              
              
              
              307,339Other
      Income (Expense), NetInterest
      Expense
              
              
              -
              
              
              
              (2,321
              )Interest
      Income
              
              
              5,543
              
              
              
              6,960Realized
      and Unrealized Loss on Marketable Securities
              
              
              -
              
              
              
              (65,157
              )Other
      Income
              
              
              105
              
              
              
              -Total
      Other Income (Expense), net
              
              
              5,648
              
              
              
              (60,518
              )Income
      Before Provision for Income Taxes
              
              
              37,113
              
              
              
              246,821(Provision)
      for Federal and State Income Taxes
              
              
              (24,650
              )
              
              
              (88,363
              )Tax
      Benefit of Net Operating Loss Carry forward
              
              
              12,600
              
              
              
              84,000Net
      Income
              
              $
              25,063
              
              
              $
              242,458Basic
      Earnings Per Common Share
              
              $
              0.00
              
              
              $
              0.02Weighted
      Average Number of Common Shares
              
              
              15,294,200
              
              
              
              15,294,200Diluted
      Earnings Per Common Share
              
              $
              0.00
              
              
              $
              0.02Weighted
      Average Number of Shares Assuming Dilution
              
              
              15,562,438
              
              
              
              15,462,061
  The
accompanying “Notes to Condensed Financial Statements” are an integral part of
these financial statements
 3
  COMTEX
      NEWS NETWORK, INC.STATEMENTS
      OF CASH FLOWSThree
      Months EndedSeptember
      30,(unaudited)2008
              
              
              2007Cash
      Flows from Operating Activities:Net
      Income
              
              $
              25,063
              
              
              $
              242,458Adjustments
      to reconcile net income to netcash
      provided by operating activities:Depreciation
      and Amortization
              
              
              29,119
              
              
              
              21,478Realized
      and Unrealized Loss on Marketable Securities
              
              
              
              
              
              
              65,157Stock-Based
      Compensation
              
              
              -
              
              
              
              3,297Accounts
      Receivable
              
              
              78,009
              
              
              
              (116,744
              )Prepaid
      Expenses
              
              
              5,257
              
              
              
              (939
              )Purchase
      of Marketable Securities
              
              
              
              
              
              
              (1,258,181
              )Proceeds
      from Sale of Marketable Securities
              
              
              
              
              
              
              1,716,327Accounts
      Payable and Other Accrued Expenses
              
              
              (112,281
              )
              
              
              (145,597
              )Accrued
      Payroll Expenses
              
              
              70,838
              
              
              
              29,017Deferred
      Revenue
              
              
              (3,346
              )
              
              
              (5,176
              )Net
      Cash Provided By Operating Activities
              
              
              92,659
              
              
              
              551,097Cash
      Flows from Investing Activities:Purchase
      of Property and Equipment
              
              
              (2,691
              )
              
              
              (35
              )Net
      Cash Used in Investing Activities
              
              
              (2,691
              )
              
              
              (35
              )Cash
      Flows from Financing Activities:Decrease
      in Broker Margin Account
              
              
              
              
              
              
              (30,163
              )Net
      Cash Used in Financing Activities
              
              
              -
              
              
              
              (30,163
              )Net
      Increase in Cash and Cash Equivalents
              
              
              89,968
              
              
              
              520,899Cash
      and Cash Equivalents at Beginning of Period
              
              
              1,520,831
              
              
              
              581,131Cash
      and Cash Equivalents at End of Period
              
              $
              1,610,799
              
              
              $
              1,102,030
  The
accompanying “Notes to Condensed Financial Statements” are an integral part of
these financial statements
 4
  COMTEX
NEWS NETWORK, INC.
 NOTES TO
CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 September
30, 2008
 
 1.
              Basis of
      Presentation
 
 The accompanying condensed 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 adjustments) necessary for (i) a fair
presentation of results for such periods and (ii) in order to make the financial
statements not misleading.  The results of operations for any interim
period are not necessarily indicative of results for the full
year.  The balance sheet at June 30, 2008 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 of America for complete financial statements. These
condensed interim financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company’s Annual Report
on Form 10-KSB for the fiscal year ended June 30, 2008 (“2008 Form 10-KSB”),
filed with the Securities and Exchange Commission on September 29,
2008.
 
 Earnings
per common share is presented in accordance with the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 128, "Earnings Per Share"
("EPS").  Basic EPS excludes dilution for potentially dilutive securities
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. 
Diluted EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock and resulted in the issuance of common stock. Diluted EPS was equal to
basic EPS for the three month period ended September 30,
2008.  Diluted EPS for the three month period ended September 30, 2008
does not include the effects of options to purchase approximately 1.7 million
shares of the total 3.2 million options outstanding, due to the options’
exercise prices being greater than the average market price of the Company's
common shares during the period.
 
 2.
              Income
      Taxes
 
 The
provision for income taxes is calculated at normal Federal and State rates for
the three month periods ended September 30, 2008 and 2007.
 
 In June
2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes-an Interpretation of FASB
Statement No. 109” (“FIN 48”). FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
tax positions taken or expected to be taken in a tax return. The Company adopted
FIN 48 effective July 1, 2007 and determined the adoption to have no effect on
results of operations or financial position at or for the three month period
ended September 30, 2008. The Company will record any future penalties and tax
related interest expense as a component of provision for income
taxes.
 
 The
Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income
Taxes.  Under this method, deferred tax liabilities and assets
are determined based on the difference between the financial statement and tax
bases of assets and liabilities using the enacted tax rates in effect for the
period in which the differences are expected to reverse.  Deferred tax
assets are reduced by a valuation allowance when the Company cannot make the
determination that it is more likely than not that some portion or all of the
related tax asset will be realized.
  5
  3.
              Commitments and
      Contingencies
 
 The
Company leases office space and certain equipment under non-cancelable operating
leases that expire at various dates through May 2012.  The leases
require fixed escalations and payment of property taxes, insurance and
maintenance costs.
 
 The
future minimum rental commitments under operating leases are as
follows:
 
 Fiscal
      year ending
                June
      30,
              
              Minimum
      Rental Commitments2009
              
              $
              218,7492010
              
              
              174,7212011
              
              
              115,6812012
              
              
              7,4822013
              
              
              -$
              516,633
 
 Rent
expense, included in general and administrative expenses, under all operating
leases totaled approximately $72,000 and $65,000 for the three months ended
September 30, 2008 and 2007, respectively.
 
 On
October 31, 2008, Comtex News Network, Inc. (the “Company”) entered into a new
employment agreement (the “Agreement”) with its President and Chief Executive
Officer, Mr. Chip Brian, (the “Officer”).  The Agreement is for a
two-year term, effective October 1, 2008, and may be extended by written
agreement between the parties.  The Officer will receive an annual
base salary of $235,000, to be increased to $250,000 on October 1,
2009.  The Officer is eligible for annual and incentive bonuses, and
is eligible to participate in Company-sponsored employee benefit
plans.
 
 The
Officer currently owns an option to purchase Seven Hundred Fifty Thousand shares
of Company common stock (“Option”) granted under the Company’s option plans, the
exercise price of which is higher than the current trading price of the
Company’s shares.  Officer has agreed to forfeit said Option in
exchange for a grant of Five Hundred Thousand (500,000) shares of unregistered
Company common stock, par value $0.01, all of which was effective as of October
31, 2008.
 
 Under the Agreement, upon the
Officer’s termination for any reason other than for cause or voluntarily by the
Officer without good reason during the one-year period subsequent to an
occurrence of a change in control (as defined in the Agreement), the Company
shall pay the Officer a cash lump sum equal to the greater of his annual base
salary or the remainder of the term of the Agreement.  The Agreement
also contains non-competition and non-solicitation provisions.
 
 6
 
 On April
15, 2004, the Company’s former Chairman/CEO and President, both of whom resigned
on February 5, 2004, filed separate demands for arbitration against the Company
related to the terms of their employment agreements.  The demands
alleged breaches of the employment agreements and requested payment of
approximately $129,000 to the former employees.  On August 8, 2006, an
arbitrator denied the former President’s claim, awarding only a bonus, vacation
pay and certain previously granted options, none of which was in
dispute.  On September 26, 2007, a different arbitrator denied all of
the former Chairman/CEO’s claims, and instructed the former Chairman/CEO to pay
Comtex half of the fees charged by the American Arbitration Association
pertaining to the arbitration. The Company received partial payment and is
currently pursuing collection of the remaining balance due to it by the former
Chairman/CEO.
The Company had accrued approximately $61,000 in expenses in previous periods,
which were reversed in the fiscal year ended June 30, 2008 and recorded as a
reduction of general and administrative expenses.
 
 4.
              Subsequent
      Events
 
 Effective
October 30, 2008, the statute of limitations expired on an accrued liability to
a vendor that ceased independent operations through a bankruptcy
proceeding.  The court did not request
payment.  Consequently, the Company expects to realize approximately
$138,000 of reduction in expense during the second quarter due to the
extinguishment of this liability.
 
 Item
2.
 MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 The
following discussion of our financial condition and results of operations should
be read in conjunction with the financial statements and the related notes
included elsewhere in this Form 10-Q and the financial statements and related
notes and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in our annual report on Form 10-KSB for the
fiscal year ended June 30, 2008 filed with the Securities and Exchange
Commission on September 29, 2008. Historical results and percentage
relationships among any amounts in the interim condensed Financial Statements
are not necessarily indicative of trends in operating results for any future
period.
 
 Forward-looking
Statements
 
 This Form
10-Q contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These statements are subject to a variety of
risks and uncertainties, many of which are beyond our control, which could cause
actual results to differ materially from those contemplated in these
forward-looking statements.  These forward-looking statements may be
identified by reference to a future period by use of forward-looking terminology
such as “anticipate,” “expect,” “could,” “intend,” “may” and other words of a
similar nature.  In particular, the risks and uncertainties include
those described in our annual report on Form 10-KSB for the fiscal year ended
June 30, 2008 and in other periodic Securities and Exchange Commission filings.
These risks and uncertainties include, among other things, the fact that Comtex
is in a highly competitive industry subject to rapid technological, product and
price changes; the consolidation of the Internet news market; competition within
our markets; the financial stability of our customers; maintaining a secure and
reliable news-delivery network; maintaining relationships with key content
providers; attracting and retaining key personnel; the volatility of our common
stock price; successful marketing of our services to current and new customers;
the overall volatility of the economy and equity markets; and operating expense
control.
  7
 Existing and prospective investors are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof.  We undertake no obligation to
update or revise the information contained in this Form 10-Q, whether as a
result of new information, future events or circumstances or
otherwise.
 
 RESULTS OF
OPERATIONS
 
 Comparison of the three
months ended September 30 , 2008 to the three months ended September 30,
2007
 
 During
the three months ended September 30, 2008, we reported net income of
approximately $25,000 compared to a net income of approximately $242,000 for the
three months ended September 30, 2007.  The decrease in net income for
the three months ended September 30, 2008 compared to the net income for the
three months ended September 30, 2007 was primarily due to the realization of
approximately $181,000 of prior years revenue from a customer as a result of an
internal audit by the customer during the three months ended September 30,
2007.  Also included in the net income for the three months ended
September 30, 2007 was the reversal of accrued expenses related to a legal
settlement of approximately $61,000.
 
 During
the three months ended September 30, 2008, revenues were approximately
$1,662,000 or approximately $193,000 (10.4%) less than the revenues of
$1,856,000 for the three months ended September 30, 2007. The decrease was
primarily due to the realization of approximately $181,000 of prior years
revenue from a customer in the three months ended September 30, 2007 and the
consolidations of database customers.
 
 Our cost of revenues consisted
primarily of content license fees and royalties to information providers,
amortization expense on our production software, and data communication costs
for the delivery of our products to customers.  The cost of revenues
for the three months ended September 30, 2008 was approximately $642,000 or
approximately $70,000 (9.9%) less than the cost of revenues of $712,000for the
three months ended September 30, 2007.  The decreased costs were
primarily due to decreased royalty usage fees and reduced fixed costs associated
with certain content providers.
 
 Gross
profit for the three months ended September 30, 2008 was approximately
$1,021,000 or approximately $123,000 (10.8%) less than the gross profit of
$1,144,000 for the same period in the prior year.   The gross
profit as a percentage of revenue for the three months ended September 30, 2008
and September 30, 2007 were approximately 61.4% and approximately 61.6%,
respectively.
 
 Total
operating expenses for the three months ended September 30, 2008 were
approximately $989,000 representing an approximate $153,000 (18.3%) increase in
operating expenses of $836,000 from the three months ended September 30, 2007.
The increase in expenses resulted primarily from an increase in salaries and
related expenses, mainly in our technology and sales staff.
  8
  Technical operations and support
expenses during the three months ended September 30, 2008 increased to
approximately $405,000, which was approximately $75,000 (22.8%) greater than the
$330,000 for the three months ended September 30, 2007.  The increase
was primarily due to increased personnel and related expenses.  This
increase in personnel cost was slightly offset by a reduction in outside
consulting expenses.
 
 Sales and
marketing expenses increased by approximately $72,000 (59.1%) to approximately
$193,000 for the three months ended September 30, 2008 compared to $121,000 for
the three months ended September 30, 2007.  The increase was mainly
due to the expansion of our sales and marketing team.
 
 General and administrative expenses
for the three months ended September 30, 2008 decreased approximately $8,000
(2.1%), to approximately $362,000, from G&A expenses of $370,000 for the
comparable quarter of the prior year.  The decrease was primarily
attributable to a decrease in other professional and legal fees due to the
settlement of an outstanding arbitration with the Company’s former CEO and a
decrease in public accounting fees, offset by an increase in salaries and
related expenses.
 
 Depreciation
and amortization expenses for the three months ended September 30, 2008
increased approximately $14,000 (92.7%) to approximately $29,000 from $15,000
for the same period in the prior year.  The increase was due primarily
to the implementation of equipment upgrades planned in the Company’s capital
budget.
 
 Other
income (expense), net, for the three months ended September 30, 2008 was
approximately $6,000, compared to approximately ($61,000) for the three months
ended September 30, 2007.  The increase in net other income was
primarily due to the securities loss recognized in the three months ended
September 30, 2007.
 
 FINANCIAL CONDITION,
LIQUIDITY AND CAPITAL RESOURCES
 
 For the three months ended September
30, 2008, we had operating income of approximately $31,000 and net income of
approximately $25,000.  At September 30, 2008, we had working capital
of approximately $1,440,000, compared to working capital of approximately
$1,388,000 at June 30, 2008.  We had total stockholders’ equity of
approximately $1,851,000 and $1,826,000 at September 30, 2008 and June 30, 2008,
respectively.  The increase in stockholders’ equity was primarily due
to $25,000 in net income for the three months ended September 30,
2008.
 
 We had
cash and cash equivalents of approximately $1,611,000 at September 30, 2008,
compared to approximately $1,521,000 of cash at June 30, 2007.  For
the three months ended September 30, 2008, the Company had an increase of
approximately $90,000 in cash and cash equivalents.
 
 We made capital expenditures of
approximately $3,000 for computer upgrades during the three months ended
September 30, 2008, compared to none for the three months ended September 30,
2007.
 
 9
 
 The
Company’s future contractual obligations and commitments as of September 30,
2008 are as follows:
 
 Contractual
      ObligationsFY
      2009
              
              
              FY
      2010
              
              
              FY
      2011
              
              
              FY
      2012
              
              
              FY
      2013
              
              
              TotalOperating
      Leases
              
              $
              218,749
              
              
              $
              174,721
              
              
              $
              115,681
              
              
              $
              7,482
              
              
              $
              0
              
              
              $
              516,633
 
 Currently
we are dependent on our cash reserves to fund operations. We have the option
available to use accounts receivable financing through a
bank.  Although we recorded net income for the quarter ended September
30, 2008 of approximately $25,000 compared to net income of $242,000 for the
prior year period, when prior period revenues and accrual reversals are
excluded, our net income remained fairly consistent compared to the first three
months of the prior fiscal year.  Considering the probable erosion of
revenue due to the current market conditions, without an infusion of capital,
the Company is at risk of being unable to generate sufficient liquidity to meet
its obligations.  The Company will utilize its bank financing
agreement, should the need arise, to meet its liquidity
needs.  Further corporate consolidation or sustained market
deterioration affecting our customers could impair our ability to generate such
revenues.  No assurance may be given that we will be able to maintain
the revenue base or the profitable operations that may be necessary to achieve
our liquidity needs.
 
 EBITDA,
as defined below, was approximately $61,000 for the three months ended September
30, 2008 compared to EBITDA of approximately $331,000 for the three months ended
September 30, 2007.  The decrease in EBITDA during the three months
ended September 30, 2008 compared to the three-month period in the prior year
was due to the collection and recognition of revenue from prior periods and the
reversal of accrued expense related to a legal settlement discussed earlier in
the report.
  The table
below shows the reconciliation from net income to EBITDA (in
thousands);
  Three
      MonthsEnded
      September 30,2008
              
              
              2007Reconciliation
      to EBITDA:Net
      Income
              
              $
              25
              
              
              $
              242Stock-Based
      Compensation
              
              
              -
              
              
              
              3Depreciation
      and Amortization
              
              
              29
              
              
              
              21Interest/Other
      Expenses, net
              
              
              (5
              )
              
              
              61Income
      Taxes, net
              
              
              12
              
              
              
              4EBITDA
              
              $
              61
              
              
              $
              331
  10
 
 EBITDA
consists of earnings before stock-based compensation, interest expense, interest
and other income, unrealized and realized gains (losses) in marketable
securities, 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 a better measure of
liquidity than cash flow from operating activities, which are determined in
accordance with U.S. generally accepted accounting principles.  EBITDA
excludes components that are significant in understanding and assessing our
results of operations and cash flows.  In addition, EBITDA is not a
term defined by U.S. generally accepted accounting principles, and as a result,
our measure of EBITDA might not be comparable to similarly titled measures used
by other companies.
  However,
we believe that EBITDA is relevant and useful information, which is often
reported and widely used by analysts, investors and other interested parties in
our industry.  Accordingly, we are disclosing this information to
permit a more comprehensive analysis of our operating performance, as an
additional meaningful measure of performance and liquidity, and to provide
additional information with respect to our ability to meet future debt service,
capital expenditure and working capital requirements.  See the
condensed financial statements and notes thereto contained elsewhere in this
report for more detailed information.
  Item
3.
  Quantitative and Qualitative
Disclosure About Market Risk
 Not applicable to smaller reporting
companies.
  Item
4.
 
 CONTROLS AND
PROCEDURES
 
 The
Company’s Chief Executive Officer and Principal Accounting Officer have
concluded, based on their evaluation as of the end of the period covered by this
report, that the Company’s disclosure controls and procedures (as defined in
Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) are effective to ensure
that information required to be disclosed in the reports that the Company files
or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms.  There have been no significant
changes during the last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Company’s internal controls over
financial reporting.
 
 Part
II.  Other Information
 
 Item
1.  Legal Proceedings
 
 On April
15, 2004, the Company’s former Chairman/CEO and President, both of whom resigned
on February 5, 2004, filed separate demands for arbitration against the Company
related to the terms of their employment agreements.  The demands
alleged breaches of the employment agreements and requested payment of
approximately $129,000 to the former employees.  On August 8, 2006, an
arbitrator denied the former President’s claim, awarding only a bonus, vacation
pay and certain previously granted options, none of which was in
dispute.  On September 26, 2007, a different arbitrator denied all of
the former Chairman/CEO’s claims, and instructed the former Chairman/CEO to pay
Comtex half of the fees charged by the American Arbitration Association
pertaining to the arbitration.  The Company received partial payment
and is currently pursuing collection of the remaining balance due to it by the
former Chairman/CEO.  The Company had accrued approximately $61,000 in
expenses in previous periods, which were reversed in the first quarter of fiscal
2008 and recorded as a reduction of general and administrative
expenses.
  11
  Item 1A.
              Risk
    Factors.
  Risk
factors that may affect future results were discussed in the Company’s 2008
Annual Report on Form 10-K.  The Company’s evaluation of its risk
factors has not changed materially since June 30, 2008
 
 Item
      2.
              Unregistered
      Sales of Equity Securities and Use of ProceedsNone.Item
      3.
              Defaults
      Upon Senior SecuritiesNone.Item
      4.
              Submission
      of Matters to a Vote of Security HoldersNone.Item
      5.
              Other
      InformationNone.Item
      6.
              Exhibits10.1
              Employment
      Agreement with Mr. Chip Brian effective October 1, 200831.1
              Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
              Certification
      of Principal Financial and Accounting Officer 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 Principal Financial and Accounting Officer pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.
  12
  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)November
      12, 2008
              By:
              /s/ Chip BrianChip
      BrianPresident
      and Chief Executive Officer(Principal
      Executive Officer)November
      12, 2008
              By:
              /s/ Paul SledzPaul
      SledzCorporate
      Controller & Treasurer(Principal
      Financial and Accounting
Officer)






13