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, 2004 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)

                 Delaware                                13-3055012
      (State or other jurisdiction of                 (I.R.S. Employer
      incorporation or organization)                   Identification No.)

                            625 N. Washington Street
                                    Suite 301
                           Alexandria, Virginia 22314
                    (Address of principal executive offices)

                                 (703) 820-2000
               Registrant's Telephone number, including area code

          _____________________________________________________________
                                 Former address:
                          4900 Seminary Road, Suite 800
                           Alexandria, Virginia 22311

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).  Yes      No  X
                                                 ---     ---

As of November 5, 2004 13,598,836 shares of the Common Stock of the registrant,
par value $0.01 per share, were outstanding.


<PAGE>



                            COMTEX NEWS NETWORK, INC.
                                TABLE OF CONTENTS


Part I  Financial Information:                                          Page No.
                                                                        --------
         Item 1.  Financial Statements

                  Consolidated Balance Sheets                                 3
                   as of September 30, 2004 (unaudited)
                   and June 30, 2004

                  Consolidated Statements of Operations                       4
                   for the Three Months Ended
                   September 30, 2004 and 2003 (unaudited)

                  Consolidated Statements of Cash Flows                       5
                   for the Three Months Ended
                   September 30, 2004 and 2003 (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  12

         Item 4.  Controls and Procedures                                    12

Part II  Other Information:

         Item 1.  Legal Proceedings                                          12
         Item 2.  Unregistered Sales of Equity Securities and Use of
                  Proceeds                                                   12
         Item 3.  Defaults Upon Senior Securities                            13
         Item 4.  Submission of Matters to a Vote of Security Holders        13
         Item 5.  Other Information                                          13
         Item 6.  Exhib13s and Reports on Form 8-K                           13


SIGNATURES                                                                   14


                                       1

<PAGE>


                            COMTEX NEWS NETWORK, INC.
                           CONSOLIDATED BALANCE SHEETS
                         SEPTEMBER 30 and JUNE 30, 2004


<TABLE>
<CAPTION>
                                                                             (unaudited)
                                                                             September 30,     June 30,
                                                                                 2004            2004
                                                                             ------------    ------------


ASSETS

CURRENT ASSETS
<S>                                                                          <C>             <C>
  Cash                                                                       $    455,302    $    461,419
  Accounts Receivable, Net of Allowance of approximately $200,961 and
  $155,961, at September 30, 2004 and June 30, 2004 respectively                  984,354         807,079
  Prepaid Expenses and Other Current Assets                                        32,764          38,397
                                                                             ------------    ------------

      TOTAL CURRENT ASSETS                                                      1,472,420       1,306,895

  PROPERTY AND EQUIPMENT, NET                                                     810,304         975,620

  RESTRICTED CASH                                                                 360,000         360,000

  DEPOSITS AND OTHER ASSETS                                                        28,617          28,617
                                                                             ------------    ------------

TOTAL ASSETS                                                                 $  2,671,341    $  2,671,132
                                                                             ============    ============

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

  CURRENT LIABILITIES:
    Accounts Payable and Other Accrued Expenses                              $    962,041    $  1,260,669
    Accrued Payroll Expense                                                       124,003         142,695
    Amount due under Bank Financing Agreement                                     474,491         201,911
    Deferred Revenue                                                               64,330         100,297
    Note Payable - Other, Current                                                  90,000          60,000
    Capital Lease Obligations, Current                                             25,596          36,599
                                                                             ------------    ------------

      TOTAL CURRENT LIABILITIES                                                 1,740,461       1,802,171

 LONG-TERM LIABILITIES:
    Capital Lease Obligations, Long-Term                                           19,548          23,355
    Long-Term Note Payable - Affiliate                                            856,954         856,954
    Long-Term Note Payable - Other                                                270,000         300,000
    Deferred Rent                                                                  10,738          11,290
                                                                             ------------    ------------

      TOTAL LONG-TERM LIABILITIES                                               1,157,240       1,191,599
                                                                             ------------    ------------

TOTAL LIABILITIES                                                               2,897,701       2,993,770

COMMITMENTS AND CONTINGENCIES (Note 3)

STOCKHOLDERS' DEFICIENCY

  Common Stock, $0.01 Par Value - 25,000,000 Shares Authorized; Shares
  issued and outstanding: 13,598,836 at September 30, 2004 and June 30, 2004     135,988         135,988
  Additional Paid-In Capital                                                  12,311,672      12,311,672
  Accumulated Deficit                                                        (12,674,020)    (12,770,298)
                                                                             -----------     -----------

      Total Stockholders' Deficiency                                            (226,360)       (322,638)
                                                                             -----------     -----------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                               $ 2,671,341     $ 2,671,132
                                                                             ===========     ===========
</TABLE>




The accompanying "Notes to Consolidated Financial Statements" are an integral
part of these consolidated financial statements


                                       2

<PAGE>



                            COMTEX NEWS NETWORK, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                        Three months ended
                                                                                           September 30,
                                                                                  ----------------------------
                                                                                      2004            2003
                                                                                  ------------    ------------

<S>                                                                               <C>             <C>
Revenues                                                                          $  1,987,349    $  2,172,921

Cost of Revenues
  (including depreciation and amortization expense of approximately $99,000 for
   the three months ended September 30, 2004 and 2003)                                 979,782         932,257

                                                                                  ------------    ------------
    Gross Profit                                                                     1,007,567       1,240,664

Operating Expenses
  Technical Operations and Support                                                     331,740         606,961
  Sales and Marketing                                                                  141,170          85,279
  General and Administrative                                                           322,376         596,280
  Stock-based Compensation                                                                   -          27,864
  Depreciation and Amortization                                                         80,549         152,770
                                                                                  ------------    ------------
    Total Operating Expenses                                                           875,835       1,469,154

    Operating (Loss)/Income                                                            131,732        (228,490)

Other Income (Expense)
  Interest Expense                                                                     (35,239)        (24,138)
  Interest Income/Other                                                                   (215)            916
                                                                                  ------------    ------------

    Other Income (Expense), net                                                        (35,454)        (23,222)
                                                                                  ------------    ------------

Income (Loss) Before Income Taxes                                                       96,278        (251,712)

Income Taxes                                                                                 -             425
                                                                                  ------------    ------------

Net Income (Loss)                                                                 $     96,278    $   (252,137)
                                                                                  ============    ============



Basic Earnings (Loss) Per Common Share                                            $       0.01    $      (0.02)
                                                                                  ============    ============

Weigted Average Number of Common Shares                                             13,598,836      13,507,851
                                                                                  ============    ============

Diluted Earnings (Loss) Per Common Share                                          $       0.01    $      (0.02)
                                                                                  ============    ============

Weighted Average Number of Shares Assuming Dilution                                 14,706,989      13,507,851
                                                                                  ============    ============
</TABLE>



The accompanying "Notes to Consolidated Financial Statements" are an integral
part of these consolidated financial statements


                                       3

<PAGE>


                           COMTEX NEWS NETWORK, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      Three Months Ended
                                                                         September 30,
                                                                  ---------------------------
                                                                      2004           2003
                                                                  ---------        ---------
Cash Flows from Operating Activities:
<S>                                                               <C>              <C>
  Net Income (Loss)                                               $  96,278        $(252,137)
Adjustments to reconcile net (loss)/income to net cash
  (used in) provided by operating activities:
    Depreciation and Amortization Expense                           179,945          252,166
    Bad Debt Expense                                                 15,000          (28,680)
    Stock Based Compensation                                              -           27,864
    Changes in Assets and Liabilities:
      Accounts Receivable                                          (192,275)          12,712
      Prepaid Expenses and Other Current Assets                       5,633           26,537
      Deposits and Other Assets                                        --                333
      Accounts Payable and Accrued Expenses                        (298,628)         279,446
      Accrued Payroll Expense                                       (18,692)        (166,306)
      Deferred Revenue                                              (35,967)         (43,750)
      Deferred Rent                                                    (552)           8,084
                                                                  ---------        ---------

  Net Cash (used in) provided by Operating Activities              (249,258)         116,269

Cash Flows from Investing Activities:
  Purchases of Property and Equipment                               (14,629)         (42,666)
                                                                  ---------        ---------

  Net Cash used in Investing Activities                             (14,629)         (42,666)

Cash Flows from Financing Activities:
  Repayments - Capital Lease Obligations                            (14,810)         (13,411)
  Net Proceeds from Bank Financing Agreement                        272,580                -
                                                                                   ---------
  Proceeds from Exercise of Stock Options                                 -           33,773
                                                                  ---------        ---------

    Net Cash provided by Financing Activities                       257,770           20,362
                                                                  ---------        ---------

Net (Decrease) Increase in Cash                                      (6,117)          93,965

Cash at Beginning of Period                                         461,419          464,981
                                                                  ---------        ---------

Cash at End of Period                                             $ 455,302        $ 558,946
                                                                  =========        =========
</TABLE>





The accompanying  "Notes to Consolidated  Financial  Statements" are an integral
part of these consolidated financial statements



                                       4
<PAGE>


                            COMTEX NEWS NETWORK, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               September 30, 2004

1.       Basis of Presentation
         ---------------------

The accompanying interim consolidated financial statements of Comtex News
Network, Inc. (the "Company" or "Comtex") and its wholly owned subsidiary,
nFactory Comtex, S.L. (inactive as of December 31 2002), are unaudited, but in
the opinion of management reflect all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of 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, 2004 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 financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2004 ("2004 Form 10-K"), filed with the Securities
and Exchange Commission on September 28, 2004, as amended and filed with the
Securities and Exchange Commission on October 28, 2004.

In December 2002, the FASB issued SFAS No. 148 (SFAS 148), Accounting for
Stock-Based Compensation-Transition and Disclosure, which amends SFAS No. 123
(SFAS 123), Accounting for Stock-Based Compensation. SFAS 148 provides
alternative methods of transition for a voluntary change to the fair value-based
method of accounting for stock-based employee compensation and amends the
disclosure requirements of SFAS 123 to require disclosures in both the annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. In
contrast, the Company will continue to account for its employee stock option
plans in accordance with APB 25 and related interpretations, which results in no
charge to earnings when options are issued at fair market value. As of the
quarter ended March 31, 2003, the Company has adopted the disclosure rules of
SFAS No. 148 and does not expect that this statement will have a material impact
on its financial statements.

Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS 123, the Company's net income (loss)
and net income (loss) per share would have been adjusted to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                           September 30,
                                                                    2004                 2003
                                                               ---------------------------------------
<S>                                                            <C>                 <C>
Net Income (Loss), as reported                                 $      96,278       $    (252,137)
Deduct:  Total stock-based employee compensation expense
  determined under fair-value-based method for all awards,
  net of related tax effects                                          82,919             169,236
                                                               ---------------------------------------
Pro Forma Net Income (Loss)                                    $      13,359       $    (421,373)
                                                               =======================================

Basic and Diluted Income (Loss) Per Share, as reported         $        0.01       $       (0.02)
Basic and Diluted Income (Loss) Per Share, pro forma           $        0.00       $       (0.03)
</TABLE>

                                       5

<PAGE>


The per share weighted-average fair value of stock options granted for the three
month periods ended September 30, 2004 and 2003 was $0.17 and $0.26
respectively, on the grant date with the following weighted average assumptions:

                                               Three Months Ended
                                                  September 30,
                                         2004                      2003
                                  -------------------       --------------------
   Expected dividend yield                0%                        0%
   Risk-free interest rate          4.12% - 4.48%              3.56% - 4.49%
   Expected life (in years)               10                        10
   Volatility                            1.5                        1.5

The Company accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued based
on the fair value of the equity instruments issued in accordance with the EITF
96-18, Accounting For Equity Instruments That Are Issued To Other Than Employees
For Acquiring, or in Conjunction With Selling Goods or Services.

Income (loss) per share is presented in accordance with the provisions of SFAS
No. 128, "Earnings Per Share" ("EPS"). Basic EPS excludes dilution for
potentially dilutive securities and is computed by dividing income (losses)
available to common shareholders 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 net loss per share is equal to basic net loss per share since all
potentially dilutive securities are anti-dilutive for each of the periods
presented with a net loss. Diluted net income (loss) per common share for the
three months ended September 30, 2004 and 2003 do not include the effects of
options to purchase approximately 1.2 million and 3.1 million shares of common
stock in 2004 and 2003, respectively, and approximately 1.1 million shares of
common stock in 2003 related to the note payable to AMASYS, on an "as if"
converted basis, since their inclusion would have an antidilutive effect.

Certain amounts for the three months ended September 30, 2003, and as of June
30, 2004, have been reclassified to conform to the presentation as of and for
the three months ended September 30, 2004.


2.       Income Taxes
         ------------

There is no provision for income taxes for the three months ended September 30,
2004 due to the utilization of federal and state net operating loss
carryforwards.

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 year 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.

                                       6

<page>

3.       Commitments and Contingencies
         -----------------------------

In July 2003, the Company commenced negotiations with its landlord regarding the
proposed termination of the lease obligation at 4900 Seminary Road. On December
9, 2003, the Company and Plaza I-A executed a settlement agreement terminating
the subject lease and the above lawsuit was dismissed on or about December 17,
2003. The total remaining liability on the lease was approximately $2.6 million
prior to the settlement agreement. Pursuant to the terms of the settlement
agreement, the Company paid rent and legal fees of approximately $147,000 and
entered into a four-year note payable to Plaza I-A for $360,000 which is secured
by a $360,000 certificate-of-deposit-backed standby letter of credit (Note 4).

On April 15, 2004, the Company's former Chairman/CEO and President, who both
resigned on February 5, 2004, filed a demand for arbitration against the Company
related to the terms of their employment agreements. The demand alleges a breach
of the employment agreements and requests payment of approximately $129,000 to
the former employees. The Company denies the allegations and intends to
vigorously defend this action.

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 our financial condition.


4.       Notes Payable
         -------------

In December 2003, in connection with the lease termination discussed above (see
"Commitments and Contingencies"), the Company executed a four-year note payable
in the amount of $360,000 to Plaza I-A, effective November 1, 2003, with
interest payable monthly at 4% per annum and principal payments of $10,000 per
month, beginning January 1, 2005. The note is secured by a letter of credit
provided by Silicon Valley Bank (the "Bank"). The letter of credit is secured by
the Company's $360,000 certificate of deposit held by the Bank.

Also in December 2003, the Company entered into an Accounts Receivable Purchase
Agreement with the Bank (the "Financing Agreement"), which provides for a
revolving line of credit of up to $1 million collateralized by the Company's
accounts receivable. At September 30, 2004, approximately $474,000 was due to
the Bank related to advances under the Financing Agreement.

On December 9, 2003, the Company executed an amendment to the Amended,
Consolidated and Restated 10% Senior Subordinated Secured Note (the "Amended
Note"), payable to Amasys Corporation ("Amasys"), an affiliated company, (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 Financing 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 transaction the conversion price of

                                       7

<PAGE>


the Amended Note was in excess of the stock price. As of September 30, 2004, the
Amended Note had a principal balance of $856,954.


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 consolidated financial statements and the
related notes included elsewhere in this Form 10-Q and the consolidated
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-K for the year ended June 30, 2004 filed with the Securities and
Exchange Commission on September 28, 2004, as amended and filed with the
Securities and Exchange Commission on October 28, 2004. Historical results and
percentage relationships among any amounts in the Consolidated Financial
Statements are not expected to be 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. In particular, the risks and uncertainties include
those described in our annual report on Form 10-K, as amended, for the year
ended June 30, 2004 and in other periodic Securities and Exchange Commission
filings. These risks and uncertainties include, among other things, 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; and
operating expense control.

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, 2004, to the three months
----------------------------------------------------------------------------
ended September 30, 2003
------------------------

During the three months ended September 30, 2004, we reported an operating
profit of approximately $132,000, compared to an operating loss of approximately

                                       8

<PAGE>


$228,000 during the three months ended September 30, 2003. We reported a net
profit of approximately $96,000 during the three months ended September 30,
2004, compared to a net loss of approximately $252,000 for the three months
ended September 30, 2003. As discussed below, the incremental improvements in
operating and net income are due primarily to decreased operating expenses,
partially offset by decreases in gross revenues and gross profit margins.

Revenues consist primarily of royalty revenues and fees from the licensing of
content products to information distributors. During the three months ended
September 30, 2004, total revenues were approximately $1,987,000 or
approximately $186,000 (9%) less than the total revenues for the three months
ended September 30, 2003. The decline in revenues is due to a loss of clients as
a result of business closures and business consolidations, primarily in the
Internet and personal investor markets, as well as reductions in our distributor
clients' royalty costs due to a decline in their revenues.

Our cost of revenues consists primarily of content license fees and royalties to
information providers, depreciation and 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, 2004
was approximately $980,000 or approximately $48,000 (5%) more than the cost of
revenues for the three months ended September 30, 2003. The increase in cost is
due to an increase in content royalties of approximately $100,000 which was
offset by a decrease in content fixed fees of approximately $34,000 and a
decrease of approximately $20,000 in data transmission costs.

Gross profit for the three months ended September 30, 2004 was approximately
$1,008,000 or approximately $233,000 (19%) less than the gross profit for the
same period in the prior year. The gross profit as a percentage of revenue
declined for the three months ended September 30, 2004 to approximately 51% from
approximately 57% for the three months ended September 30, 2003. The decline is
due to a decrease in revenues and a net increase in content royalty costs which
was offset by a decrease in data transmission costs as discussed above.

Total operating expenses for the three months ended September 30, 2004 were
approximately $876,000 representing an approximate $593,000 (40%) decrease in
operating expenses from the three months ended September 30, 2003. The decrease
in expenses resulted from a decrease in technical operations support expenses, a
decrease in general and administrative expenses, a decrease in stock-based
compensation, and a decrease in depreciation and amortization expenses, offset
in part by an increase in sales and marketing expenses.

Technical operations and support expenses during the three months ended
September 30, 2004 decreased approximately $275,000 (45%) from the three months
ended September 30, 2003. The decrease is primarily due to expenses incurred for
outsourced technology services during the three months ended September 30, 2003
for technical consultants (to provide management, systems administration, and
programming services and to move the production data center to an offsite,
hosted facility), and was partially offset by increases in personnel expenses in
the current period.

Sales and marketing expenses increased by approximately $56,000 (66%) for the
three months ended September 30, 2004 compared to the three months ended
September 30, 2003. The increase is the result of increases in personnel and
related expenses over the same period in the prior year.

                                       9

<PAGE>


General and administrative expenses for the three months ended September 30,
2004 were approximately $274,000 (46%) less than these expenses during the three
months ended September 30, 2003. The decrease resulted primarily from a decrease
in personnel and recruiting costs of approximately $167,000; a decrease in rent
and occupancy costs of approximately $102,000; a decrease in professional and
consulting fees of approximately $36,000; and a decrease in board of director
fees of approximately $10,000 due to a decrease in the number of meetings in the
current period. The decrease was partially offset by increases in bad debt
expense due to the recovery in the prior period of previously written-off
accounts receivable

Stock-based compensation was approximately $28,000 during the three months ended
September 30, 2003 and was related to the conversion of an incentive stock
option to a non-qualified stock option to a member of the Board of Directors and
to warrants granted to a consultant. There was no such activity during the same
period in the current year.

Depreciation and amortization expense for the three months ended September 30,
2004 was approximately $72,000 (47%) lower than the expense during the same
period in the prior year. The decrease was due primarily to the disposal of
assets related to the office move and the move of our data center to an offsite,
hosted facility during the three months ended September 30, 2003.

Other expense, net of other income, for the three months ended September 30,
2004 increased approximately $12,000, or 53%, compared to the three months ended
September 30, 2003 mainly due to an increase in interest expenses related to the
bank financing agreement and the note payable to our former landlord.


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
----------------------------------------------------

For the three months ended September 30, 2004, we had an operating profit of
approximately $132,000 and a net profit of approximately $96,000. At September
30, 2004, we had a working capital deficit of approximately $268,000, compared
to a working capital deficit of approximately $495,000 at June 30, 2004. We had
a net stockholders' deficiency of approximately $226,000 at September 30, 2004,
compared to a net stockholders' deficiency at June 30, 2004 of approximately
$323,000. The decrease in stockholders' deficiency is due to net income earned
during the three months ended September 30, 2004.

For the three months ended September 30, 2004, operating activities resulted in
approximately $249,000 cash flow deficit. We had cash of approximately $455,000
at September 30, 2004, compared to approximately $461,000 at June 30, 2004.

We made capital expenditures of approximately $15,000 during the three months
ended September 30, 2004, primarily for computer and communications equipment.
Financing activities resulted in approximately $258,000 in cash from Accounts
Receivable Purchase Agreement with Silicon Valley Bank (the "Financing
Agreement") described under Notes Payable above, partially offset by payments
made on capital leases.

                                       10

<PAGE>


The Company's future contractual obligations and commitments as of September 30,
2004 are as follows:

<TABLE>
<CAPTION>
                                                            Amounts Due by Period:
                                      2005           2006            2007           2008            2009
                                 --------------- -------------- --------------- -------------- ---------------
<S>                                     <C>            <C>             <C>              <C>             <C>
Operating Leases                       $100,098        $80,731         $23,865          $   -           $   -
Capital Leases                           27,449         20,219           6,833              -               -
Note Payable Other                       60,000        120,000         120,000         60,000               -
Note Payable Affiliate                                                                                856,954
                                 --------------- -------------- --------------- -------------- ---------------
             Total                     $187,547       $220,950        $150,698        $60,000        $856,954
                                 =============== ============== =============== ============== ===============
</TABLE>

Currently we are dependent on our cash reserves to fund operations; despite
making a profit for the quarter ended September 30, 2004, we incurred net losses
for the years ended June 30, 2004 and 2003 and our revenue base has been
declining. Assuming no immediate increase in revenue or an infusion of capital,
the Company is at risk of being unable to generate sufficient liquidity to meet
its obligations. The Company utilized and continues to utilize its Financing
Agreement to meet its liquidity needs. Further corporate consolidation or 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 $311,000 for the three months ended
September 30, 2004 compared to EBITDA of approximately $51,000 for the three
months ended September 30, 2003. The increase in EBITDA during the three months
ended September 30, 2004 compared to the three-month period in the prior year is
the net result of reduced revenues, increased cost of revenues, and reduced
operating expenses. The table below shows the reconciliation from net income
(loss) to EBITDA.

                                                    Three Months
                                                Ended September 30,
                                                2004            2003
                                           --------------- ---------------
                                           --------------- ---------------
        Reconciliation to EBITDA:
          Net Income (Loss)                $         96    $       (252)
        Stock Based Compensation                      -              28
        Depreciation and Amortization               180             252
        Interest/Other Expense                       35              23
        Income Taxes                                  -               -
                                           --------------- ---------------
        EBITDA                             $        311    $         51

EBITDA consists of earnings before interest expense, interest and other income,
income taxes, 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 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.

                                       11

<PAGE>


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 financial
statements and notes thereto contained elsewhere in this report for more
detailed information.


Item 3.

         QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
         ---------------------------------------------------------
         None.


Item 4.

         CONTROLS AND PROCEDURES
         -----------------------

         The Company's Chief Executive Officer and Chief Financial Officer have
 concluded, based on their evaluation within 90 days prior to the filing date of
 this report, that the Company's disclosure controls and procedures (as defined
 in Securities Exchange Act Rules 13a-15(e) or 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 in the Company's internal controls or in other factors that
 could significantly affect these controls subsequent to the date of the
 foregoing evaluation.


Part II.  Other Information


 Item 1.  Legal Proceedings

         In July 2003, the Company commenced negotiations with its former
landlord, Plaza I-A Associates ("Plaza I-A") regarding the proposed termination
of the lease obligation at 4900 Seminary Road, Alexandria, Virginia. As part of
the negotiations, on September 3, 2003, Plaza I-A filed a lawsuit in Alexandria
General District Court in the Commonwealth of Virginia for approximately $92,000
in unpaid rent and late fees through September 30, 2003.

         On December 9, 2003, the Company and Plaza I-A executed a settlement
agreement terminating the subject lease and the above lawsuit was dismissed on
or about December 17, 2003. The total remaining liability on the lease was
approximately $2.6 million prior to the settlement agreement. Pursuant to the
terms of the settlement agreement, the Company paid rent and legal fees of
approximately $147,000 and entered into a four-year note payable to Plaza I-A
for $360,000. Settlement expense with Plaza I-A for the nine months ended March
31, 2004 includes the $360,000 expense for the four-year note, approximately
$143,000 in commissions

                                       12

<PAGE>


and legal fees, as well as an expense related to the forfeiture of the Company's
security deposit in the face amount of approximately $62,000, partially offset
by the recovery of deferred rent expense of approximately $87,000.

         On April 15, 2004, the Company's former Chairman/CEO and President, who
both resigned on February 5, 2004, filed a demand for arbitration against the
Company related to the terms of their employment agreements. The demand alleges
a breach of the employment agreements and requests payment of approximately
$129,000 to the former employees. The Company denies the allegations and intends
to vigorously defend this action.

         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 our financial condition.


Item 2. Unregistered Sales of Equity 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.

        (a) Exhibits

        31.1     Certification of Chief Executive Officer pursuant to
                 Section 302 of the Sarbanes-Oxley Act of 2002.

        31.2     Certification of Chief Financial 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.

                                       13
<PAGE>


        32.2     Certification of Chief Financial Officer pursuant to Section
                 906 of the Sarbanes-Oxley Act of 2002.

        (b) Reports on Form 8-K

                  None.






                                       14
<PAGE>


                                   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:  November 15, 2004    By:   /S/   C.W. GILLULY
                                   ------------------
                                   C.W. Gilluly, Ed.D.
                                   Interim Chairman and
                                   Chief Executive Officer
                                   (Principal Executive Officer)

                             By:   /S/   MATTHEW BALL
                                   ------------------
                                   Matthew Ball
                                   Vice President and Chief Financial Officer
                                   (Principal Financial and Accounting Officer)