-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J730PdABWc/mXbk7LwGizW0o1uiBQSuTnQFvtaBRLZZz2DeFbikBLJW2Rn6qohW7 anOPCL6qcLgASCVj/lIhog== /in/edgar/work/0000352988-00-000027/0000352988-00-000027.txt : 20001116 0000352988-00-000027.hdr.sgml : 20001116 ACCESSION NUMBER: 0000352988-00-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMTEX NEWS NETWORK INC CENTRAL INDEX KEY: 0000352988 STANDARD INDUSTRIAL CLASSIFICATION: [7380 ] IRS NUMBER: 133055012 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-10541 FILM NUMBER: 768897 BUSINESS ADDRESS: STREET 1: 4900 SEMINARY RD STE 600 CITY: ALEXANDRIA STATE: VA ZIP: 22311 BUSINESS PHONE: 703-820-2000 MAIL ADDRESS: STREET 1: 4900 SEMINARY RD STREET 2: SUITE 600 CITY: ALEXANDRIA STATE: VA ZIP: 22311 FORMER COMPANY: FORMER CONFORMED NAME: COMTEX SCIENTIFIC CORP DATE OF NAME CHANGE: 19920703 10-Q 1 0001.txt 1ST QTR FY 2001 10-Q 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, 2000 or ___ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period from __________ to ___________ Commission file number 0-10541 COMTEX NEWS NETWORK, INC. (Exact name of registrant as specified in its charter) New York 13-3055012 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4900 Seminary Road Suite 600 Alexandria, Virginia 22311 (Address of principal executive offices) (703) 820-2000 Registrant's Telephone number including area code --------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No ___ As of November 10, 2000, 9,980,737 shares of the Common Stock of the registrant were outstanding. COMTEX NEWS NETWORK, INC. TABLE OF CONTENTS Part I Financial Information: Page No. Item 1. Financial Statements Balance Sheets 3 as of September 30, 2000 (unaudited) and June 30, 2000 Statements of Operations 4 for the Three Months Ended September 30, 2000 and 1999 (unaudited) Statements of Cash Flows 5 for the Three Months Ended September 30, 2000 and 1999 (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 11 Part II Other Information: Item 1. Legal Proceedings 12 Item 2. Changes in Securities and Use of Proceeds 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 COMTEX NEWS NETWORK, INC. BALANCE SHEETS September 30, June 30, 2000 2000 ------------- ------------- (Unaudited) ASSETS CURRENT ASSETS Cash and Cash Equivalents $1,393,601 $1,655,222 Accounts Receivable, Net of Allowance of approximately $404,000 and $314,000 at September 30, 2000 and June 30, 2000, respectively 2,303,215 2,086,701 Prepaid Expenses and Other Current Assets 255,441 185,692 ------------- ------------- TOTAL CURRENT ASSETS 3,952,257 3,927,615 PROPERTY AND EQUIPMENT, NET 2,404,584 1,829,060 DEPOSITS AND OTHER ASSETS 91,549 219,978 ------------- ------------- TOTAL ASSETS $6,448,390 $5,976,653 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable $ 907,104 $ 570,817 Accrued Expenses 1,694,442 1,980,958 Notes Payable - 60,000 ------------- ------------- TOTAL CURRENT LIABILITIES 2,601,546 2,611,775 LONG-TERM LIABILITIES: Long-Term Notes Payable - Affiliate 980,954 986,954 ------------- ------------- TOTAL LONG-TERM LIABILITIES 980,954 986,954 ------------- ------------- TOTAL LIABILITIES 3,582,500 3,598,729 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common Stock, $0.01 Par Value - Shares Authorized: 18,000,000; Shares issued and outstanding: 9,968,237 and 9,967,897, respectively 99,682 99,679 Additional Capital 11,403,998 11,403,826 Accumulated Deficit (8,637,790) (9,125,581) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 2,865,890 2,377,924 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $6,448,390 $5,976,653 ============= =============
The accompanying "Notes to Financial Statements" are an integral part of these financial statements - 3 - COMTEX NEWS NETWORK, INC. STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended September 30, ------------------------------------------ 2000 1999 --------------- --------------- Revenues $ 4,161,097 $ 2,408,894 Cost of Revenues 1,160,221 809,578 --------------- --------------- Gross Profit 3,000,876 1,599,316 Operating Expenses Technical Operations & Support 759,945 417,463 Product Development 140,305 118,989 Sales and Marketing 628,577 289,844 General and Administrative 851,680 438,842 Depreciation and Amortization 133,432 29,697 --------------- --------------- Total Operating Expenses 2,513,939 1,294,835 Operating Income 486,937 304,481 Other Income/(Expense) Interest Expense (26,362) (27,781) Interest Income/Other 28,441 609 Other Income/(Expense), net 2,079 (27,172) --------------- ------------- Income Before Income Taxes 489,016 277,309 Income Taxes 1,225 444 --------------- ------------- Net Income $ 487,791 $ 276,865 =============== ============= Basic Earnings Per Common Share $ .05 $ .03 =============== ============= Weigted Average Number of Common Shares 9,968,150 8,125,102 =============== ============= Diluted Earnings Per Common Share $ .04 $ .02 =============== ============= Weighted Average Number of Shares Assuming Dilution 13,754,506 12,100,225 =============== =============
The accompanying "Notes to Financial Statements" are an integral part of these financial statements - 4 - COMTEX NEWS NETWORK, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended September 30, ----------------------------------------- 2000 1999 -------------- -------------- Cash Flows from Operating Activities: Net Income $ 487,791 $ 276,865 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and Amortization Expense 133,432 29,697 Bad Debt Expense 104,350 32,000 Changes in Assets and Liabilities: Accounts Receivable (320,864) 20,552 Prepaid Expenses and Other Current Assets (69,749) (44,869) Deposits and Other Long Term Assets 128,430 - Accounts Payable 336,288 101,853 Accrued Expenses (286,516) 57,093 -------------- -------------- Net Cash provided by Operating Activities 513,162 473,191 Cash Flows from Investing Activities: Purchases of Property and Equipment (708,956) (254,027) -------------- -------------- Net Cash used in Investing Activities (708,956) (254,027) Cash Flows from Financing Activities: Repayments on Notes Payable (66,000) (40,000) Exercise of Stock Options 173 309 -------------- -------------- Net Cash used in Financing Activities (65,827) (39,691) -------------- -------------- Net Increase/(Decrease) in Cash and Cash Equivalents (261,621) 179,473 Cash and Cash Equivalents at Beginning of Period 1,655,222 95,283 -------------- -------------- Cash and Cash Equivalents at End of Period $ 1,393,601 $ 274,756 ============== ===============
The accompanying "Notes to Financial Statements" are an integral part of these financial statements - 5 - COMTEX NEWS NETWORK, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) September 30, 2000 1. Basis of Presentation The accompanying interim financial statements of COMTEX News Network, Inc. (the "Company" or "COMTEX") are unaudited, but in the opinion of management reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. The balance sheet at June 30, 2000 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000 ("2000 Form 10-K"), filed with the Securities and Exchange Commission on September 28, 2000. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No.101, Revenue Recognition in Financial Statements ("SAB 101"), which summarizes the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. On June 26, 2000, the Commission deferred the effective date of SAB 101 to require adoption by the fourth quarter of the first fiscal year beginning after December 15, 1999. Any required adoption will be accounted for as a change in accounting principle in accordance with APB Opinion No. 20, Accounting Changes, by cumulative catch-up adjustment in the current fiscal year. COMTEX does not expect the adoption of SAB 101 to have a material impact on the Company's financial statements. In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of SFAS No. 133, which is effective for fiscal years beginning after June 15, 2000. COMTEX does not anticipate that the adoption of SFAS No. 133, as amended, will have a significant effect on its financial statements. Certain amounts for the three months ended September 30, 1999, have been reclassified to conform to the presentation of the three months ended September 30, 2000. 2. Net Income per Share The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended September 30, 2000 1999 ------------ ----------- Numerator: Net Income $ 487,791 $ 276,865 ============ =========== Denominator: Denominator for basic earnings per share - weighted average shares 9,968,150 8,125,102 Effect of dilutive securities: Stock Options 3,786,356 3,975,123 ----------- ---------- Denominator for diluted earnings per share 13,754,506 12,100,225 =========== ========== Basic Earnings Per Share $ .05 $ .03 Diluted Earnings Per Share $ .04 $ .02
3. Income Taxes The provision for income taxes is limited to the liability for alternative minimum tax as the majority of income for Federal and state tax purposes has been offset by net operating loss and investment tax credit carryforwards. 4. Commitments and Contingencies The Company has been named as a defendant in a lawsuit filed in the United States District Court for the Northern District of Alabama, Northeastern Division on August 25, 2000. The parties are Clyde Collins Pearson Individually and In His Capacity As Representative of the Class of Emulex Corporation Shareholders Similarly Situated v. Internet Wire, Inc.; Comtex News Network, Inc.; and Emulex Corporation. The suit relates to Plaintiff's sale of Emulex Corporation stock in response to a false news release disseminated by or on behalf of various defendants, including the Company. The complaint alleges that the defendants failed to take reasonably necessary precautions to prevent the distribution of the false press release attributed to Emulex. The Plaintiff seeks to maintain the lawsuit as a class action. Plaintiff is seeking $120,000.00 in actual damages, and additional punitive damages. The Company has filed a motion to dismiss the complaint and believes the suit has no merit. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Comparison of the three months ended September 30, 2000, to the three months ended September 30, 1999 The Company earned operating income of approximately $487,000 during the three months ended September 30, 2000 compared to operating income of approximately $304,000 during the three months ended September 30, 1999. The Company earned net income of approximately $488,000 during the three months ended September 30, 2000, compared to net income of approximately $277,000 for the three months ended September 30, 1999. As discussed below, the improvement in operating income and net income is due primarily to an increase in gross revenues and an improvement of gross profit margins, offset partially by higher operating expenses. Also contributing to the improvement in net income was increased interest income earned on cash balances. The Company's revenues consist primarily of royalty revenues and fees from the licensing of content products to information distributors. During the three months ended September 30, 2000, the Company's total revenues were approximately $4,161,000, or approximately $1,752,000 (73%) greater than the total revenues for the three months ended September 30, 1999. Of the increase in revenues, approximately 90% reflects revenues from new customers obtained during the twelve months ended September 30, 2000, and approximately 10% reflects growth in revenues from existing customers. The Company's cost of revenue consists primarily of content license fees and royalties to information providers, as well as data communication costs for the delivery of the Company's products to customers. The cost of revenue for the three months ended September 30, 2000 was approximately $1,160,000, or approximately $351,000 (43%) greater than the cost of revenue for the three months ended September 30, 1999. The increase in cost is primarily due to an increase in royalties and fees for the distribution of content related to the increase in revenues for the period. The increase is offset partially by a decrease in data communications costs resulting from the continued implementation of a more cost-effective vehicle for the delivery of the Company's products to customers, as well as a favorably renegotiated contract with a data communications provider. The gross profit for the three months ended September 30, 2000 was approximately $3,001,000 or approximately $1,402,000 (88%) better than the gross profit for the same period in the prior year. The gross profit percentage improved for the three months ended September 30, 2000 to approximately 72% from approximately 66% for the three months ended September 30, 1999 due to both a decrease in the royalty percentage paid for content and the decrease in data communications costs. The decrease in the royalty percentage paid for content was a result of the improvement in earned minimum royalties paid to certain information providers. Total operating expenses for the three months ended September 30, 2000 were approximately $2,514,000, representing an approximately $1,219,000 (94%) increase in operating expenses over the three months ended September 30, 1999. The increase in operating expenses is generally due to investments in personnel, operations and infrastructure in all areas, as well as increases in sales commissions on increased revenues. In addition, the Company increased its marketing and public relations activities and expenditures to promote the Company and its products and services. The Company also recorded additional reserves for doubtful accounts in the current three month period. Technical operations and support expenses during the three months ended September 30, 2000 increased approximately $342,000 (82%) over these expenses in the three months ended September 30, 1999. This increase was due primarily to increased personnel and computer leases, parts and software expenses, offset partially by decreased consulting expenses. Product development expenses increased by approximately $21,000 (18%) for the three months ended September 30, 2000 compared to the three months ended September 30, 1999. This increase is the result of additional personnel in this department, as well as expenses relating to the development of new products and services. Product development activities include quality assurance, enhancements to the Company's products, and the development of proprietary news products. Sales and marketing expenses increased by approximately $339,000 (117%) for the three months ended September 30, 2000 compared to the three months ended September 30, 1999. This increase was due primarily to increased compensation arising from the addition of sales and marketing personnel, additional commissions based on the increase in revenues during the period, increased travel and conference expenses related to business development and marketing and public relations expenses related to the promotion and branding of the Company and its products and services. General and administrative expenses for the three months ended September 30, 2000 were approximately $413,000 (94%) greater than these expenses during the three months ended September 30, 1999. This increase was due to additional personnel and related expenses, expanded office space and recruitment fees. The Company also recorded additional reserves for doubtful accounts related primarily to the significant increase in revenues and the number of new contracts executed. Depreciation and amortization expense for the three months ended September 30, 2000 was approximately $104,000 (349%) higher than the expense during the same period in the prior year. The increase was due primarily to the deployment of new platforms for the Company's products and services and increased capital expenditures related to office expansion and increased headcount. Other income increased approximately $29,000 (108%) due primarily to interest earned on the Company's cash balances. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES For the three months ended September 30, 2000, the Company's operations produced operating income of approximately $487,000 and net income of approximately $488,000. At September 30, 2000, the Company had working capital of approximately $1,351,000 as compared with working capital of approximately $1,316,000 at June 30, 2000. The Company also had net stockholders' equity of approximately $2,866,000 at September 30, 2000, as compared to net stockholders' equity at June 30, 2000, of approximately $2,378,000. The increase in working capital and stockholders' equity was due to the increase in, and retention of, net income. For the three months ended September 30, 2000, the Company's operating activities generated approximately $513,000 in cash. The Company had cash of approximately $1,394,000 at September 30, 2000, compared to approximately $1,655,000 at June 30, 2000. To date, the Company's operations have generated cash flow sufficient to cover its monthly expenses. The Company has reinvested a significant portion of its operating cash flows. This includes investments in administrative, sales, marketing and technical staff; expansion of the contractual base with information providers to improve the quality and flexibility of information products; and expansion of contracts with information distributor customers. All of these factors contribute to improving the Company's ability to sell and deliver quality products and services. In addition, the Company has made capital expenditures of approximately $709,000 in the three months ended September 30, 2000, primarily to upgrade its software and hardware platforms, thus expanding both its product capabilities and its ability to meet future client and content processing requirements. These expenditures also included purchases related to the expansion of office space and additional headcount. The Company anticipates continued investment in operations and infrastructure including, but not limited to, investments in additional human resources and consulting services, product development, sales, marketing and branding and software and hardware. While the Company anticipates funding these investments with operating cash flows, it may undertake additional borrowings or raise additional capital through the issuance of equity as the need arises and to take advantage of market conditions. EBITDA, as defined below, increased approximately 86% to $620,000 for the three months ended September 30, 2000 compared to $334,000 for the quarter ended September 30, 1999. The increase is due to the increase in revenues and the improvement in gross profit margin, offset partially by increased operating expenses, excluding depreciation and amortization. EBITDA consists of earnings before interest expense, interest and other income, income taxes and depreciation and amortization. EBITDA does not represent funds available for management's discretionary use and is not intended to represent cash flow from operations. EBITDA should also not be construed as a substitute for operating income or a better measure of liquidity than cash flow from operating activities, which are determined in accordance with accounting principles generally accepted in the United States. This caption excludes components that are significant in understanding and assessing the Company's results of operations and cash flows. In addition, EBITDA is not a term defined by generally accepted accounting principles and, therefore, the Company's measure of EBITDA might not be comparable to similarly titled measures used by other companies. CAUTIONARY STATEMENTS CONCERNING FORWARD-LOOKING STATEMENTS Except for the historical information contained herein, the matters discussed in this 10-Q include forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements may be identified by reference to a future period or by use of forward-looking terminology such as "anticipate", "expect", "could", "may" or other words of a similar nature. Forward-looking statements, which the Company believes to be reasonable and are made in good faith, are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, the Company. Among such important external factors and risks are business conditions and growth in the demand for real-time, aggregated custom online news delivery services, and growth in the economy in general; the impact of competitive products and pricing; the proliferation of large, global information networks and the evolution of the Internet. Among such important internal factors and risks are continued success in the acquisition and growth of new information re-distributor and corporate end-user client accounts; the ability to continue the Company's program of technical system upgrades; the timely creation and market acceptance of new products; the Company's ability to continue to increase the variety and quantity of sources of information available to create its products; the Company's ability to continue to recruit and retain highly skilled technical, editorial, managerial and sales/marketing personnel; the Company's ability to generate cash flow sufficient to cover its current obligations while meeting its long-term debt obligations; and the other risks detailed from time to time in the Company's SEC reports, including quarterly reports on Form 10-Q, that could cause results to differ materially from those anticipated by the statements contained herein. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. The information required by this item has been omitted as the Company's market risk exposure is not material. Part II. Other Information Item 1. Legal Proceedings The Company has been named as a defendant in a lawsuit filed in the United States District Court for the Northern District of Alabama, Northeastern Division on August 25, 2000. The parties are Clyde Collins Pearson Individually and In His Capacity As Representative of the Class of Emulex Corporation Shareholders Similarly Situated v. Internet Wire, Inc.; Comtex News Network, Inc.; and Emulex Corporation. The suit relates to Plaintiff's sale of Emulex Corporation stock in response to a false news release disseminated by or on behalf of various defendants, including the Company. The complaint alleges that the defendants failed to take reasonably necessary precautions to prevent the distribution of the false press release attributed to Emulex. The plaintiff seeks to maintain the lawsuit as a class action. Plaintiff is seeking $120,000.00 in actual damages, and additional punitive damages. The Company has filed a motion to dismiss the complaint and believes the suit has no merit. The Company is also involved in routine legal proceedings occurring in the ordinary course of business, which in the aggregate are believed by management to be immaterial to the financial condition of the Company. Item 2. Changes in Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized. COMTEX NEWS NETWORK, INC. (Registrant) Dated: November 14, 2000 By: /S/ CHARLES W.TERRY Charles W. Terry President and Chief Executive Officer (Principal Executive Officer and Acting Principal Financial and Accounting Officer) EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q. 3-MOS JUN-30-2001 JUL-01-2000 SEP-30-2000 1,393,601 0 2,707,139 (403,924) 0 3,952,257 3,594,257 (1,189,673) 6,448,390 2,601,546 0 0 0 99,682 2,766,208 6,448,390 4,161,097 4,161,097 1,160,221 2,513,939 0 0 (2,079) 489,016 1,225 487,791 0 0 0 487,791 .05 .04
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