UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-QSB
 (Mark
One)
 
 x
              Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934For
      the quarterly period ended December 31, 2007 oro
              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 shell company (as defined in Rule
12b-2 of the Exchange Act.)    Yes o  No x
 
 As of
February 7, 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
      Sheetsas of December 31, 2007 (unaudited) and June 30,
      2007
              2Condensed
      Statements of Operations for the Three and Six Months Ended December 31,
      2007 and 2006 (unaudited)
              3Condensed
      Statements of Cash Flows for the Six Months Ended December 31, 2007 and
      2006 (unaudited)
              4Notes
      to Condensed Financial Statements (unaudited)
              5Item
      2.
              Management's
      Discussion and Analysis or Plan of OperationItem
      3.
              Controls
      and Procedures
              11Part
      II
              Other
      Information:Item
      1.
              Legal
      Proceedings
              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
              Condensed
      Financial InformationItem
      1.
              Condensed
      Financial Statements
 
 Comtex
      News Network, Inc.Condensed
      Balance SheetsDecember
      31,
              
              
              June
      30,2007
              
              
              2007ASSETS
              
              (Unaudited)CURRENT
      ASSETSCash
              
              $
              1,504,203
              
              
              $
              581,131Marketable
      Securities
              
              
              -
              
              
              
              523,303Accounts
      Receivable, Net of Allowance for Doubtful Accounts
      of   $115,396
              
              
              838,407
              
              
              
              938,080Prepaid
      Expenses
              
              
              32,478
              
              
              
              15,826TOTAL
      CURRENT ASSETS
              
              
              2,375,088
              
              
              
              2,058,340PROPERTY
      AND EQUIPMENT, NET
              
              
              156,052
              
              
              
              178,758DEPOSITS
      AND OTHER ASSETS
              
              
              43,253
              
              
              
              43,253TOTAL
      ASSETS
              
              $
              2,574,393
              
              
              $
              2,280,351LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      Payable and Other Accrued Expenses
              
              $
              778,672
              
              
              $
              913,850Accrued
      Payroll Expense
              
              
              157,628
              
              
              
              197,899Broker
      Margin Account
              
              
              -
              
              
              
              30,163Deferred
      Revenue
              
              
              14,753
              
              
              
              28,805TOTAL
      LIABILITIES
              
              
              951,053
              
              
              
              1,170,717COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS'
      EQUITYCommon
      Stock, $0.01 Par Value - 25,000,000 Shares Authorized;15,294,200
      Shares issued and outstanding
              
              
              152,942
              
              
              
              152,942Additional
      Paid-In Capital
              
              
              13,566,637
              
              
              
              13,563,340Accumulated
      Deficit
              
              
              (12,096,239
              )
              
              
              (12,606,648
              )Total
      Stockholders' Equity
              
              
              1,623,340
              
              
              
              1,109,634TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              2,574,393
              
              
              $
              2,280,351
 
 
 
 The
accompanying “Notes to Condensed Financial Statements” are an integral part of
these financial statements
  2
 
 Comtex
      News Network, Inc.Condensed
      Statements of Operations(Unaudited)Three
      months ended
              
              
              Six
      months endedDecember
      31,
              
              
              December
      31,2007
              
              
              2006
              
              
              2007
              
              
              2006Revenues
              
              $
              1,800,258
              
              
              $
              1,699,227
              
              
              $
              3,655,779
              
              
              $
              3,450,202Cost
      of Revenues(including
      depreciation and amortization expense of  $4,300 and $11,257,
      for the three months ended December 31, 2007 and 2006, respectively and
      $10,664 and $25,137, for the six months ended December 31, 2007 and 2006,
      respectively)
              
              
              635,514
              
              
              
              764,465
              
              
              
              1,347,474
              
              
              
              1,526,753Gross
      Profit
              
              
              1,164,744
              
              
              
              934,762
              
              
              
              2,308,305
              
              
              
              1,923,449Operating
      Expenses:Technical
      Operations and Support (Inclusive of stock-based
      compensation of $0 and $1,851 for the three months ended December 31, 2007
      and 2006, respectively and $1,182 and $3,702, for the six months ended
      December 31, 2007 and 2006, respectively)
              
              
              342,586
              
              
              
              287,723
              
              
              
              672,532
              
              
              
              574,398Sales
      and Marketing (Inclusive of
      stock-based compensation of $ 0 and $2,289, for the three months ended
      December 31, 2007 and 2006, respectively and $1,684 and $4,616, for the
      six months ended December 31, 2007 and 2006,
      respectively)
              
              
              143,958
              
              
              
              205,925
              
              
              
              265,093
              
              
              
              383,982General
      and Administrative (Inclusive of stock-based
      compensation of $ 0 and $6,573, for the three months ended December 31,
      2007 and 2006, respectively and $431 and $14,343, for the six months ended
      December 31, 2007 and 2006, respectively)
              
              
              406,627
              
              
              
              477,203
              
              
              
              776,653
              
              
              
              904,738Depreciation
      and Amortization
              
              
              14,604
              
              
              
              17,784
              
              
              
              29,719
              
              
              
              38,941Total
      Operating Expenses
              
              
              907,775
              
              
              
              988,635
              
              
              
              1,743,997
              
              
              
              1,902,059Operating
      Income (Loss)
              
              
              256,969
              
              
              
              (53,873
              )
              
              
              564,308
              
              
              
              21,390Other
      income (expense), net:Interest
      Expense
              
              
              (244
              )
              
              
              (21,424
              )
              
              
              (2,565
              )
              
              
              (43,080
              )Interest
      Income
              
              
              11,912
              
              
              
              5,181
              
              
              
              18,871
              
              
              
              10,097Realized
      and unrealized loss on marketable securities
              
              
              -
              
              
              
              (7,681
              )
              
              
              (65,157
              )
              
              
              (7,681
              )Other
      Income
              
              
              -
              
              
              
              1,613
              
              
              
              -
              
              
              
              9,842Other
      Income (Expense), net
              
              
              11,668
              
              
              
              (22,311
              )
              
              
              (48,851
              )
              
              
              (30,822
              )Income
      (Loss) Before Income Taxes
              
              
              268,637
              
              
              
              (76,184
              )
              
              
              515,458
              
              
              
              (9,432
              )Income
      Tax Expense (Benefit)
              
              
              686
              
              
              
              (2,900
              )
              
              
              5,049
              
              
              
              2,359Net
      Income (Loss)
              
              $
              267,951
              
              
              $
              (73,284
              )
              
              $
              510,409
              
              
              $
              (11,791
              )Basic
      Earnings (Loss) Per Common Share
              
              $
              0.02
              
              
              $
              (0.01
              )
              
              $
              0.03
              
              
              $
              0.00Weighted
      Average Number of Common Shares
              
              
              15,294,200
              
              
              
              13,702,247
              
              
              
              15,294,200
              
              
              
              13,701,290Diluted
      Earnings (Loss) Per Common Share
              
              $
              0.02
              
              
              $
              (0.01
              )
              
              $
              0.03
              
              
              $
              0.00Weighted
      Average Number of Shares Assuming Dilution
              
              
              15,462,541
              
              
              
              13,702,247
              
              
              
              15,462,303
              
              
              
              13,701,290
 
 
  
 
 The
accompanying “Notes to Condensed Financial Statements” are an integral part of
these financial statements
  3
 
 Comtex
      News Network, Inc.Condensed
      Statements of Cash Flows(Unaudited)Six
      Months EndedDecember
      31,2007
              
              
              2006Cash
      Flows from Operating Activities:Net
      Income (Loss)
              
              $
              510,409
              
              
              $
              (11,791
              )Adjustments
      to reconcile net income (loss) to net cashprovided
      by (used in) operating activities:Depreciation
      and Amortization
              
              
              40,382
              
              
              
              64,078Provision
      for doubtful accounts
              
              
              20,463
              
              
              
              22,667Realized
      and unrealized loss on marketable securities
              
              
              65,157
              
              
              
              7,681Stock
      Based Compensation
              
              
              3,297
              
              
              
              22,661Changes
      in Assets and Liabilities:Accounts
      Receivable
              
              
              79,210
              
              
              
              (57,125
              )Prepaid
      Expenses
              
              
              (16,652
              )
              
              
              (5,350
              )Deposits
      and Other Assets
              
              
              -
              
              
              
              (6,331
              )Accounts
      Payable and Other Accrued Expenses
              
              
              (135,178
              )
              
              
              (230,954
              )Accrued
      Payroll Expense
              
              
              (40,271
              )
              
              
              (39,667
              )Deferred
      Revenue
              
              
              (14,052
              )
              
              
              529Deferred
      Rent
              
              
              -
              
              
              
              (2,014
              )Net
      Cash Provided by (Used in) Operating Activities
              
              
              512,765
              
              
              
              (235,616
              )Cash
      Flows from Investing Activities:Purchases
      of Marketable Securities
              
              
              (1,258,181
              )
              
              
              (998,070
              )Proceeds
      from Sale of Marketable Securities
              
              
              1,716,327
              
              
              
              662,862Purchases
      of Property and Equipment
              
              
              (17,676
              )
              
              
              (84,650
              )Net
      Cash Provided by (Used In) Investing Activities
              
              
              440,470
              
              
              
              (419,858
              )Cash
      Flows from Financing Activities:Repayments
      of - Capital Lease Obligations
              
              
              -
              
              
              
              (6,633
              )Repayment
      of Broker Margin Account
              
              
              (30,163
              )
              
              
              -Proceeds
      from Exercise of Stock Options
              
              
              -
              
              
              
              520Net
      Cash Used in Financing Activities
              
              
              (30,163
              )
              
              
              (6,113
              )Net
      Increase (Decrease) in Cash
              
              
              923,072
              
              
              
              (661,587
              )Cash
      at Beginning of Period
              
              
              581,131
              
              
              
              1,881,739Cash
      at End of Period
              
              $
              1,504,203
              
              
              $
              1,220,152Supplemental
      Disclosure of Cash Flow Information:Cash
      paid for income taxes
              
              $
              5,049
              
              
              $
              2,359Cash
      paid for interest
              
              $
              2,565
              
              
              $
              28,798
 
 
  
 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)
 December
31, 2007
  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 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, 2007 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
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, 2007 (“2007 Form 10-KSB”), filed with the Securities
and Exchange Commission on September 24, 2007.
 
 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 and six month periods ended December 31, 2006 since all
potentially dilutive securities are anti-dilutive.  Diluted net loss
per common share for the three and six month periods ended December 31, 2006
does not include the effects of options to purchase approximately 3.3 million
shares as the inclusion of these options would have been
anti-dilutive.  Diluted EPS for the three and six month periods ended
December 31, 2007 does not include the effects of options to purchase
approximately 2.2 million shares due to the options’ exercise prices being
greater than the average market price of the Company's common shares during the
respective periods.
 
 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 for the three and six month periods
ended December 31, 2007. The Company will record any future penalties and tax
related interest expense as a component of provision for income
taxes.
 
 2. Income
Taxes
 
 There is
no provision for regular income taxes for the three and six month periods ended
December 31, 2007 and 2006 due to the utilization of federal and state net
operating loss carryforwards.  The provision for income taxes for the
three and six month periods ended December 31, 2007 and 2006 is due to the
alternative minimum tax.
  5
 
 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.
 
 
 3. Commitments and
Contingencies
 
 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 is pursuing collection of
the amounts 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 six month period ended December 31, 2007 and recorded as a
reduction of general and administrative expenses.
 
 
 Item
2.
 MANAGEMENT’S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION
 
 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-QSB 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, 2007 filed with the Securities and Exchange
Commission on September 24, 2007. Historical results and percentage
relationships among any amounts in the interim Financial Statements are not
expected to be indicative of trends in operating results for any future
period.
 
 
 Forward-looking
Statements
 
 This Form
10-QSB 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, 2007 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;
and operating expense control.
  6
 
 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-QSB, whether as a result of new
information, future events or circumstances or otherwise.
  RESULTS OF
OPERATIONS
 
 Comparison of the three
months ended December 31, 2007 to the three months ended December 31,
2006
 
 
 During
the three months ended December 31, 2007, we reported net income of
approximately $268,000 compared to a net loss of approximately $73,000 for the
three months ended December 31, 2006.  The increase in net income
resulted from increased sales from existing customers and reduced cost of
revenue and fees from the licensing of content products to information
distributors as well as a reduction in operating expenses and an increase in
other income.  During the three months ended December 31, 2007, total
revenues were approximately $1,800,000 or approximately $101,000 (6%) greater
than the total revenues for the three months ended December 31,
2006.  The increased revenues were the result of increased sales to
existing 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 December 31, 2007 was approximately $636,000 or
approximately $129,000 (17%) less than the cost of revenues for the three months
ended December 31, 2006.  The decrease in cost was primarily due to a
decrease in royalty usage fees, renegotiation of fixed costs associated with
certain content providers, and a decrease in software amortization
expense.
 
 Gross
profit for the three months ended December 31, 2007 was approximately $1,165,000
or approximately $230,000 (25%) greater than the gross profit for the same
period in the prior year.   The gross profit as a percentage of
revenue increased for the three months ended December 31, 2007 to approximately
65% from approximately 55% for the three months ended December 31,
2006.  The increase, as noted in the above paragraphs, was due to the
renegotiation of lower fixed costs and decreased software amortization expenses
combined with the increased sales to clients.
 
 Total
operating expenses for the three months ended December 31, 2007 were
approximately $908,000 representing an approximate $81,000 (8%) decrease in
operating expenses from the three months ended December 31, 2006. The decrease
in expenses resulted primarily from a decrease in stock-based compensation,
decreased sales and marketing expenses, lower general and administrative
expenses and depreciation and amortization expenses partially offset by an
increase in technical operations and support expenses.
  7
 
 Technical operations and support
expenses during the three months ended December 31, 2007 increased to
approximately $343,000, which was approximately $55,000 (19%) greater than the
three months ended December 31, 2006.  The increase was primarily due
to an approximate $43,000 increase resulting from the use of outside consultants
and increased product development costs.
 
 Sales and
marketing expenses decreased by approximately $62,000 (30%) to approximately
$144,000 for the three months ended December 31, 2007 compared to the three
months ended December 31, 2006.  The decrease was due to an
approximate $73,000 decrease in payroll expense and related commission expenses
over the same period in the prior year.
 
 General and administrative expenses
for the three months ended December 31, 2007 decreased approximately $71,000
(15%) to approximately $407,000 from G&A expenses for the comparable quarter
of the prior year.  The decrease was primarily attributable to an
approximate $31,000 decrease in bonuses paid as compared to the prior year and a
decrease of approximately $32,000 in other professional and legal fees due to
the settlement of outstanding litigation with the Company’s former
CEO.
 
 Depreciation
and amortization expense for the three months ended December 31, 2007 decreased
approximately $3,000 (18%) to approximately $15,000 from the same period in the
prior year.  The decrease was due primarily to assets reaching the end
of their depreciable lives.
 
 Other
income (expense), net, for the three months ended December 31, 2007 was
approximately $12,000, compared to approximately ($22,000) for the three months
ended December 31, 2006.  The increase in net other income was
primarily due to the Company settling its long term note payable with AMASYS and
eliminating the associated interest expense.
 
 
 Comparison of the six months
ended December 31, 2007, to the six months ended December 31,
2006
 
 During the six months ended December
31, 2007, we reported net income of approximately $510,000 compared to a net
loss of approximately $12,000 during the six months ended December 31,
2006.  The increase in net income resulted primarily from increased
sales, discussed below, combined with decreased cost of revenue and decreased
operating expenses.
 
 During
the six months ended December 31, 2007, total revenues were approximately
$3,656,000 or approximately $206,000 (6%) greater than revenues for the six
months ended December 31, 2006.  The increase was primarily due to the
realization of approximately $181,000 of prior year revenue from a customer as a
result of an internal audit by the customer.  The remaining increase
was due to increased sales to existing database customers.
 
 The cost of revenues for the six
months ended December 31, 2007 was approximately $1,347,000, or approximately
$179,000 (12%) less than the cost of revenues for the six months ended December
31, 2006.  The decrease in cost was primarily due to a decrease in
royalty usage fees, renegotiation of fixed costs associated with certain content
providers, and a decrease in software amortization expense.
  8
 
 Gross
profit for the six months ended December 31, 2007 was approximately $2,308,000
or approximately $385,000 (20%) greater than the gross profit for the same
period in the prior year.   The gross profit as a percentage of
revenue increased for the six months ended December 31, 2007 to approximately
63% from approximately 56% for the six months ended December 31,
2006.  The increase, as noted in the above paragraphs, was due to
increased revenues 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
and the renegotiation of lower fixed costs and the decrease in software
amortization expense.
 
 Total
operating expenses for the six months ended December 31, 2007 were approximately
$1,744,000 representing an approximate $158,000 (8%) decrease in operating
expenses from the six months ended December 31, 2006. The decrease in expenses
resulted primarily from a decrease in stock-based compensation, decrease in
sales and marketing expenses, general and administrative expenses, and
depreciation and amortization expenses partially offset by an increase in
technical operations and support expenses.
 
 Technical operations and support
expenses during the six months ended December 31, 2007 increased approximately
$98,000 (17%) to approximately $673,000 from the six months ended December 31,
2006.  The increase was primarily due to an approximately $64,000
increase in product development expenses, the use of outside consultants and an
increase in bonuses paid of $23,000 over the prior year period.
 
 Sales and
marketing expenses decreased by approximately $119,000 (31%) to approximately
$265,000 for the six months ended December 31, 2007 compared to the six months
ended December 31, 2006.  The decrease was due to an approximate
$136,000 decrease in payroll and commission expense and a revised commission
plan from the same period in the prior year.  These decreases were
partially offset by an increase in the use of outside consultants.
 
 General and administrative expenses
for the six months ended December 31, 2007 decreased by approximately $128,000
(14%) to approximately $777,000 from G&A expenses for the comparable period
of the prior year.  The decrease was primarily attributable to an
approximate $72,000 decrease in other professional and legal fees and a decrease
of approximately $47,000 in salaries as compared to the same period in the prior
year.  These decreases were partially due to the settlement of
litigation with the Company’s former CEO and the reversal of the related accrued
expenses in the current six month period.
 
 Depreciation
and amortization expense for the six months ended December 31, 2007 decreased
approximately $9,000 (24%) to approximately $30,000 from the same period in the
prior year.  The decrease was due primarily to assets reaching the end
of their depreciable lives.
 
 Other
expense, net of other income, for the six months ended December 31, 2007 was
approximately $49,000, compared to approximately $31,000 for the six months
ended December 31, 2006.  This change from the prior year was mainly
due to realized and unrealized losses on marketable securities partially offset
by a decrease in interest expense.
 
 9
  FINANCIAL CONDITION,
LIQUIDITY AND CAPITAL RESOURCES
 
 For the six months ended December 31,
2007, we had operating income of approximately $564,000 and net income of
approximately $510,000.  At December 31, 2007, we had working capital
of approximately $1,424,000, compared to working capital of approximately
$888,000 at June 30, 2007.  We had total stockholders’ equity of
approximately $1,623,000 and $1,110,000 at December 31, 2007 and June 30, 2007
respectively.  The increase in stockholders’ equity was primarily due
to the increase in net income for the six months ended December 31,
2007.
 
 We had
cash of approximately $1,504,000 at December 31, 2007, compared to approximately
$581,000 of cash at June 30, 2007.  For the six months ended December
31, 2007, the Company provided approximately $923,000 in cash, which was mainly
due to the sale of all marketable securities and the cash provided by operations
for the six month period.
 
 We made capital expenditures of
approximately $18,000 during the six months ended December 31, 2007, compared to
approximately $85,000 for the six months ended December 31,
2006.  Significant capital expenditures are likely in the near future
for the upgrading of equipment required to generate the Company’s
products.
 
 The
Company’s future contractual obligations and commitments as of December 31, 2007
are as follows:
 
 Contractual
      Obligations2008
              
              
              2009
              
              
              2010
              
              
              2011
              
              
              2012
              
              
              TotalOperating
      Leases
              
              $
              110,035
              
              
              $
              140,337
              
              
              $
              4,656
              
              
              $
              4,656
              
              
              $
              3,104
              
              
              $
              262,788
 
 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 December
31, 2007 compared to a net loss for the prior year period, when prior period
revenues are excluded our revenue base remained fairly consistent compared to
the first six months of the prior fiscal year.  Considering the
possible 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 utilized
and will continue to 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 $607,000 for the six months ended December
31, 2007 compared to EBITDA of approximately $108,000 for the six months ended
December 31, 2006.  The increase in EBITDA during the six months ended
December 31, 2007 compared to the six-month period in the prior year was due to
the collection and recognition of revenue from prior periods, the reversal of
accrued expense related to a legal settlement, and the reduction in the cost of
revenue as discussed earlier.
 
 10
 
 The table
below shows the reconciliation from net income to EBITDA (in
thousands);
 
 Six
      MonthsEnded
      December 31,2007
              
              
              2006Reconciliation
      to EBITDA:Net
      Income (Loss)
              
              $
              510
              
              
              $
              (12
              )Stock
      Based Compensation
              
              
              3
              
              
              
              23Depreciation
      and Amortization
              
              
              40
              
              
              
              64Interest/Other
      Expense, net
              
              
              49
              
              
              
              31Income
      Taxes
              
              
              5
              
              
              
              2EBITDA
              
              $
              607
              
              
              $
              108
 
 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
financial statements and notes thereto contained elsewhere in this report for
more detailed information.
 
 Item
3.
 
 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.
 
 11
 
 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 is pursuing collection of
the amounts 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 six month period ended December 31, 2007 and recorded as a
reduction of general and administrative expenses.
  
 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.
              Exhibits31.1
              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)February
      12, 2008
              By:
              /s/ Chip BrianChip
      BrianPresident
      and Chief Executive Officer(Principal
      Executive Officer)February
      12, 2008
              By:
              /s/ Paul SledzPaul
      SledzCorporate
      Controller & Treasurer(Principal
      Financial and Accounting
Officer)