<PAGE>
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 1934
For the quarterly period ended September 30, 1997
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: 0-29050
TOMORROW'S MORNING, INC.
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 95-4379805
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
125 South Barrington Place, Los Angeles, California 90049
(Address of principal executive offices)
Issuer's telephone number: (310) 440-2778
Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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
---
Number of shares of common stock outstanding at October 15, 1997: 2,785,998
Transitional Small Business Disclosure Format (check one) : Yes No X
--- ---
<PAGE>
PART I
FINANCIAL INFORMATION
TOMORROW'S MORNING, INC.
COMPARATIVE BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30, 1997 JUNE 30, 1997
------------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 859,710 $ 2,342,849
Accounts receivable 753,807 5,380
Prepaid expenses 503,969 408,221
----------- -----------
Total current assets 2,117,486 2,756,450
----------- -----------
Fixed assets, net of accumulated depreciation of $20,840
and $16,786, respectively 93,205 52,769
Noncurrent assets:
Deposits 57,647 31,355
Software development costs 355,140 72,500
----------- -----------
Total noncurrent assets 412,787 103,855
----------- -----------
Total assets $ 2,623,478 $ 2,913,074
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses 375,862 257,385
Deferred revenue 689,425 52,603
Contracts payable 35,916 31,114
Loans payable 268,299 264,299
----------- -----------
Total liabilities 1,369,502 605,401
----------- -----------
Commitments and Contingencies
Shareholders' equity:
Preferred Stock, no par, 1,000,000 shares authorized,
no shares issued. - -
Common Stock, no par, 4,540,000 shares authorized, 2,785,998
shares issued and outstanding 11,059,293 10,484,681
Loan receivable - shareholder (89,725) (96,952)
Accumulated deficit (9,715,592) (8,080,056)
----------- -----------
Total shareholders' equity 1,253,976 2,307,673
----------- -----------
Total liabilities and shareholders' equity $ 2,623,478 $ 2,913,074
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2
<PAGE>
TOMORROW'S MORNING, INC.
COMPARATIVE STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1997 1996
---- ----
<S> <C> <C>
Revenue:
Subscriptions $ 120,382 $ 5,929
Reading Partners Program 350 -
Sponsorships 7,500 -
----------- ----------
Total revenue 128,232 5,929
Editorial, Production and Distribution Cost 207,662 102,548
----------- ----------
Gross margin (79,430) (96,619)
Operating expenses 1,569,968 171,684
----------- ----------
Loss from Operations (1,649,398) (268,303)
Other expenses, net (4,591) (1,230)
Interest expense (1,082) (54,056)
Interest income 20,335 605
----------- ----------
Loss before income taxes (1,634,736) (322,984)
Income taxes 800 800
----------- ----------
Net loss $(1,635,536) $ (323,784)
=========== ==========
Net loss per share $ (0.59) $ (0.27)
=========== ==========
Weighted average number
of shares outstanding 2,785,998 1,199,189
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE>
TOMORROW'S MORNING, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM JUNE 30, 1996 THROUGH SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
COMMON STOCK
------------------------------- LOAN RECEIVABLE ACCUMULATED
SHARES AMOUNT SHAREHOLDER DEFICIT TOTAL
------------ --------------- --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance - June 30, 1996 1,026,494 3,268,800 (27,575) (5,124,377) (1,883,152)
Issuance of common stock 1,167,277 5,347,724 5,347,724
Stock issuance costs (304,528) (304,528)
Conversion of 6% convertible notes 105,144 262,500 262,500
Conversion of 7% convertible notes 432,083 1,080,207 1,080,207
Debt issuance costs (202,589) (202,589)
Capital contribution-compensation 166,667 166,667
Shareholder loans (69,377) (69,377)
Stock option compensation 733,400 733,400
Issuance of common stock for services 55,000 132,500 132,500
Net loss, 1997 (2,955,679) (2,955,679)
--------- ----------- ---------- ----------- -----------
Balance - June 30, 1997 2,785,998 $10,484,681 $ (96,952) $(8,080,056) $ 2,307,673
Stock option compensation 574,612 574,612
Repayments - shareholder loans 7,227 7,227
Net loss, quarter ended September 30, 1997 (1,635,536) (1,635,536)
--------- ----------- ---------- ----------- -----------
Balance - September 30, 1997 2,785,998 $11,059,293 $ (89,725) $(9,715,592) $ 1,253,976
========= =========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE>
TOMORROW'S MORNING, INC.
COMPARATIVE STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
1997 1996
------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,635,536) $(323,784)
Items reconciling net loss to cash used by operating activities:
Depreciation 4,591 1,230
Amortization of debt issuance costs - 28,204
Noncash compensation 574,612 62,500
Changes in operating assets and liabilities:
Accounts receivable (748,427) 2,091
Prepaid expenses (95,748) -
Deposits (26,292) -
Accounts and interest payable and accrued expenses 118,477 83,419
Deferred revenue 636,822 (5,952)
----------- ---------
Net cash used by operating activities (1,171,501) (152,292)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of fixed assets (45,028) -
Software development costs (282,640) -
----------- ---------
Net cash used by investing activities (327,668) -
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable 4,000 150,000
Proceeds from contract payable 23,471 -
Shareholder loans repaid 7,227 -
Repayments under contract payable (18,668) -
Loans to shareholder - (5,605)
Cash paid for offering costs - (18,733)
----------- ---------
Net cash provided by financing activities 16,030 125,662
----------- ---------
Change in cash and cash equivalents (1,483,139) (26,630)
Cash and cash equivalents at beginning of period 2,342,849 24,526
----------- ---------
Cash and cash equivalents at end of period $ 859,710 $ (2,104)
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5
<PAGE>
TOMORROW'S MORNING, INC.
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Financial Statements:
The accompanying financial statements include all adjustments (consisting
of only normal recurring accruals) which are, in the opinion of management,
necessary for a fair presentation of the results of operations for the
periods presented. Interim results are not necessarily indicative of the
results to be expected for a full year. The financial statements should be
read in conjunction with the financial statements included in the Company's
annual report on Form 10-KSB for the year ended June 30, 1997.
Nature of Business:
Tomorrow's Morning, Inc. (the "Company") was incorporated in June 1992 in
the State of California and is engaged in the publication of a children's
weekly newspaper. As of September 30, 1997, the Company is no longer a
development stage enterprise, as defined in Financial Accounting Standards
Board Statement No. 7. The Company was previously devoting substantially
all of its efforts toward establishing new business and product. During the
three months ended September 30, 1997, significant orders were received
for its current product.
Basis of Presentation:
The Company's March 1997 initial public offering (the "IPO") has created a
positive working capital position as well as positive shareholders' equity
at September 30, 1997. For the three months ended September 30, 1997, the
Company had negative cash flows from operations of $1,454,141 and incurred
a net loss of $1,435,992. Management's plans to achieve profitability
include its Fall 1997 direct response advertising campaign, expanding its
Reading Partners Program Adopt-a-School Program and adding other products
and revenue-generating items, such as the CD-ROM game currently in
development and corporate-sponsored inserts, with the objective of
achieving multiple potential sales to each of its customers. The Company's
management believes that its current cash balances and cash provided by
future operations, if any, are sufficient to meet its working capital needs
through at least September 30, 1998.
Revenue Recognition:
Subscription sales are recorded as deferred revenue at the time of sale.
Revenues from subscriptions are recognized ratably over the subscription
period as newspapers are delivered. Deferred revenue represents unfulfilled
subscription sales at period-end.
Advertising:
The Company expenses the costs of all general advertising in the period
incurred. Advertising expense was approximately $33,000 and $19,000 for the
three months ended September 30, 1997 and 1996, respectively. In accordance
with the American Institute of Certified Public Accountants' Statement of
Position 93-7 "Reporting on Advertising Costs", costs associated with the
Company's direct response marketing efforts have been deferred and will be
amortized over the period in which the related revenue is recognized. At
September 30, 1997 and June 30, 1997, these deferred costs were
approximately $393,000 and $106,000, respectively with $284,194 of related
amortization having been recorded in the three month ended September 30,
1997 and no amortization at June 30, 1997. At September 30, 1996, there
were no deferred direct marketing costs. Management periodically reviews
the recoverability of deferred advertising costs.
Page 6
<PAGE>
TOMORROW'S MORNING, INC.
NOTES TO THE FINANCIAL STATEMENTS
2. LOANS PAYABLE:
These loans payable are demand loans that have no stated repayment
schedule. As such, they are being carried as current liabilities. These
loans bear no interest and are unsecured. Included in loans payable as of
September 30, 1997 and June 30, 1997 are loans of $202,799 and $198,799,
respectively, due to related parties which include certain shareholders.
3. CONTRACTS PAYABLE:
In March 1997, the Company entered into a short-term financing contract for
an insurance policy covering its directors and officers. As of September
30, 1997, the balance of the contract was $12,445.
In the period ended September 30, 1997, the Company entered into financing
contracts to purchase office equipment and a telephone system. The
contracts provide for a fair-market-value purchase at the end of the lease
terms. In accordance with Statement of Financial Accounting Standards No.
13 (SFAS 13), the Company has capitalized the cost of the equipment.
At September 30, 1996, no such financing contracts were in place.
Lease commitments for capital leases with remaining terms of more than one
year at September 30, 1997 are as follows:
<TABLE>
<CAPTION>
FYE June 30:
------------
<S> <C>
1998 $ 4,298
1999 5,731
2000 5,731
2001 3,586
2002 299
-------
Total $19,645
=======
</TABLE>
4. COMMITMENTS AND CONTINGENCIES:
Leases:
On July 1, 1997, the Company entered into an operating lease for new office
facilities in Los Angeles. The lease continues until June 30, 2001 with
monthly rent of $7,130 beginning September 1, 1997. The lease provides for
annual base rent increases of 3% commencing July 1, 1998. The chief
executive officer of the Company has signed a personal guarantee of the
lease that expires after the second year of the lease. Rent expense
incurred on this lease was $7,130 for the quarter ended September 30, 1997.
The Company also leases office facilities in Ann Arbor, Michigan on a one-
year operating lease that commenced May 1997. The monthly rental is $252
for twelve months expiring May 31, 1998.
Rent expense for the quarters ended September 30, 1997 and 1996 was $9,130
and $11,250, respectively.
Page 7
<PAGE>
TOMORROW'S MORNING, INC.
NOTES TO THE FINANCIAL STATEMENTS
4. COMMITMENTS AND CONTINGENCIES (CONTINUED):
In addition to the above office leases, the Company also leases an auto and
office equipment under operating leases with remaining terms of more than
one year.
Lease commitments for operating leases with remaining terms of more than
one year at June 30, 1997 are as follows:
<TABLE>
<S> <C>
1998 $ 73,256
1999 97,889
2000 91,751
2001 93,494
--------
Total $356,390
========
</TABLE>
Software Development Agreement:
During the year ended June 30, 1996, the Company entered into a software
development agreement for the development of a CD-ROM journalism game
called "SCOOP/TM/". Pursuant to the agreement, the budgeted costs to
develop the CD-ROM game shall not exceed $1,210,000; through September 30,
1997, expenditures for "SCOOP/TM/" were approximately $639,000, including
capitalized costs.
5. INCOME TAXES:
The Company had deferred tax assets of approximately $2,785,000 and
$2,665,000 as of September 30, 1997 and June 30, 1997, respectively, which
have been offset by 100% valuation allowances of $2,785,000 and $2,665,000,
respectively. The deferred tax assets are primarily due to the Company's
federal and state net operating loss (NOL's) carryforwards available to
offset future taxable income, if any, of approximately $6,517,000, which
expire in years up to 2012. However, ultimate utilization of these NOL's is
dependent on future taxable income of the Company, subject to certain
limitations, as defined under Section 382 of the Internal Revenue Code.
Page 8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion contains trend information and other forward-looking
statements within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 that involve a number of risks and
uncertainties. The Company's actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those identified
below in "Overview."
OVERVIEW. For the quarter ended September 30, 1997, revenues were $128,232 and
the Company experienced a net loss of $1,635,536 as compared to revenues of
$5,929 and a net loss of $323,784 for the three months ended September 30, 1996.
Until recently, the Company has been limited in its ability to increase its
sales due to (i) lack of working capital, (ii) the early stage development of
its products, (iii) limited market awareness and (iv) a relative lack of history
compared to its competitors in the marketplace. On March 28, 1997, the Company
completed its initial public offering which had commenced on February 10, 1997
(the "IPO"). As a result of the IPO, the Company sold 1,167,277 shares of Common
Stock and 900,000 Common Stock Purchase Warrants (the "Warrants"), resulting in
net proceeds of $5,347,724 (before deducting certain expenses payable by the
Company). However, in addition to the losses noted above, the Company continues
to sustain substantial losses, which are expected to continue for at least the
short term as the Company's expenses continue to greatly exceed its income. In
order to move from losses to profitability, management believes that the Company
will need to achieve the formation of strategic alliances for cooperative
marketing and distribution of its Tomorrow's Morning newspaper (the "Newspaper")
to schools nationwide. The Company's future growth also depends on: (i) the
development of complementary products; (ii) completion and successful marketing
of the SCOOP/TM/ journalism game; (iii) the formation of joint-marketing
alliances for corporate sponsorship of schools through the Company's Reading
Partners Program; (iv) getting one or more television shows, or interstitial
news "flashes", on the air; and (v) expansion into ancillary publishing and
merchandising through redirecting the Company's content and/or licensing the
Company's characters and identity. The Company's intended use of the net
proceeds of the IPO has been developed to help reach those goals. There can,
however, be no guarantee that the Company will be able to achieve or sustain
significant revenues or profitability.
RESULTS OF OPERATIONS:
Revenues for the quarter ended September 30, 1997 were $128,232, as compared to
$5,929 for the three months ended September 30, 1996. This increase in revenues
of approximately 2200% was primarily the result of the Company's Spring 1997 and
Fall 1997 direct response advertising campaigns (the "1997 Advertising
Campaigns"), which have generated orders for approximately 325,000 subscriptions
through September 30, 1997. In the three months ended September 30, 1996, no
formalized marketing was occurring. Costs and expenses increased to $1,777,630
during the three months ended September 30, 1997, well up from $274,232 during
the quarter ended September 30, 1996. The bulk of this approximately 650%
increase was the result of the increased operational activity after the
Company's IPO, including adding staff and additional marketing and consulting
expenditures related to the 1997 Advertising Campaigns, as well as $574,612 of
compensation expense recognized in connection with the nondilutive stock options
previously granted by the Company.
Total interest expense for the quarter ended September 30, 1997 was $1,082, as
compared to $54,056 for the same three month period in 1996. This decrease of
approximately 98% is attributable to the IPO, which resulted in all of the
Company's convertible notes (6% Convertible Notes due 1996, 6% Convertible Notes
due 1997 and 7% Convertible Notes due 1999) to be automatically converted into
537,227 shares of Common Stock. Due to those conversions, all interest costs
associated with those notes stopped accruing in March 1997.
For the three months ended September 30, 1997, the Company experienced a net
loss of $1,635,536, an increase of approximately 500% from the $323,784 net loss
incurred in the three months ended September 30, 1996. The increase in net loss
was primarily due to the factors described above with respect to costs and
expenses, partially offset by a decrease in interest expense.
LIQUIDITY AND CAPITAL RESOURCES. To date, the Company's primary capital needs
have been to fund the development and growth of the Newspaper (including the
costs of its marketing campaign in Fall 1995 and the 1997
Page 9
<PAGE>
Advertising Campaigns) and the research and development of synergistic
children's media products. Prior to the IPO, the Company's primary sources of
financing were proceeds from the sale of Common Stock and certain promissory
notes convertible into Common Stock, as well as various short-term loans. Since
inception, sales of the Newspaper and certain custom-published Newspaper inserts
have been essentially the sole source of Company revenue. To the extent that
sales of the Newspaper are directed at schools, such business is seasonal, with
most sales taking place between September and June. Seasonality is not believed
to be a factor with non-school sales.
In June 1997, the Company completed the first of its 1997 Advertising Campaigns,
which resulted in the Company receiving orders approximating $150,000 for
approximately 50,000 subscriptions beginning in September 1997. As of September
30, 1997, the remainder of the Company's 1997 Advertising Campaigns had
generated orders for approximately 275,000 additional subscriptions. As of
October 15, 1997, total orders generated by all 1997 Advertising Campaigns were
approximately 350,000. Based on the Company's past experience, it is expected
that a portion of those subscriptions will eventually be canceled. While it is
not presently known how much of this potential revenue will actually be
realized, the results of the 1997 Advertising Campaigns are encouraging and may
indicate a trend towards increased subscription revenue in the future.
As of September 30, 1997, the Company had current assets of $2,317,030,
virtually all of which were derived from the IPO and results of its 1997
Advertising Campaigns. To date, the Company has implemented a number of specific
plans for the use of a large portion of those current assets. Although there
can be no guarantees, such use should, in time, provide increased funds from
operations through avenues such as (i) increased bulk subscription sales to
schools, libraries and hospitals, and individual subscription sales for home
delivery, (ii) periodic revenue from Newspaper inserts sponsored by corporate
and philanthropic organizations, plus additional contract publishing for
distribution through such sponsors' own channels, (iii) sales of the SCOOP/TM/
game/learning system and other related products, (iv) revenues from proposed on-
line activities, including subscription dues, sponsorship of specific areas of
the Company's website and advertising, (iv) royalties from, and direct sales of,
the Company's proposed ancillary publishing products, such as supplemental
educational materials, calendars, posters, playing cards and games, (v) fees
from the creation, production and syndication of proposed TV shows and
(vi) revenues from direct sales and licensing royalties of Company-related
merchandise.
The Company believes that its current cash balances and cash provided by future
operations, if any, are sufficient to meet its working capital needs through at
least September 30, 1998, although the Company is currently seeking
approximately $500,000 to $1,000,000 in outside debt and/or equity funding to be
able to complete the development of "SCOOP" without having to use existing
funds. To the extent that existing funds and cash provided by operations in
periods beyond September 30, 1998, if any, are insufficient to fund the
Company's planned and prospective activities, the Company will need to raise
additional funds through bank borrowings, public or private debt or equity
offerings, or otherwise. There can be no guarantee that such additional funding
will be available on terms favorable to the Company or its shareholders, if at
all. If needed funds are not available, the Company may be required to curtail
its operations (including, but not limited to, the ongoing development of
"SCOOP"), which could have a material adverse effect on the Company's business,
operating results and financial condition.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS. In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("FAS 128"). FAS 128 will change the computation,
presentation and disclosure requirements for earnings per share. FAS 128
requires presentation of "basic" and "diluted" earnings per share, as defined,
on the face of the income statement for all entities with complex capital
structures. FAS 128 is effective for financial statements issued for periods
ending after December 15, 1997 and requires restatement of all prior period
earnings per share amounts. Management does not believe that this pronouncement
will have a material impact on its earnings per share amounts when adopted in
fiscal 1998.
On June 30, 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Comprehensive Income" ("FAS 130"). FAS
130 establishes standards for reporting and display of comprehensive income and
its components in a full set of general purpose financial statements. FAS 130 is
effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented. Management is currently evaluating the
requirements of FAS 130.
Page 10
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
- ---------------------------
The legal proceeding referred to in Item 3 of the Company's Annual Report on
Form 10-KSB for the fiscal year ended June 30, 1997 has recently been settled
for an immaterial amount.
Item 2. Changes in Securities and Use of Proceeds
- ---------------------------------------------------
With respect to the IPO, the Company's registration statement under the
Securities Act of 1933 became effective on February 10, 1997 (File No.
333-04792-LA) and commenced on that date, offering up to 2,000,000 shares of no
par value Common Stock (aggregate offering price: $10,000,000) and up to 900,000
Warrants (aggregate offering price: $225,000). The Warrants entitle the holder
to purchase one share of Common Stock at an exercise price of $6.50 per share
until February 10, 2000 and are redeemable for $0.35 each commencing January 1,
1998 under certain circumstances. The offering was conducted on a "best efforts"
basis (minimum of 1,100,000 shares of Common Stock), with J.E. Liss & Company
Incorporated as the Managing Placement Agent. The IPO terminated on March 28,
1997, at which point the Company had sold 1,167,277 shares of Common Stock
(aggregate offering price: $5,836,385) and all 900,000 Warrants (aggregate
offering price: $225,000). All securities were sold for the account of the
Company.
From the effective date of the IPO until September 30, 1997, the following
expenses were incurred for the Company's account in connection with the IPO
(none of which are estimates) All such payments were direct or indirect payments
to persons or entities other than directors, officers, affiliates or 10% or
greater security holders of the Company:
<TABLE>
<CAPTION>
TYPES OF EXPENSE Amount
- ---------------- --------
<S> <C>
Underwriting discounts and commissions $566,739
Finder's fees - 0 -
Expenses paid to or for the Managing Placement Agent 121,228
Other expenses 228,283
--------
Total Expenses $916,250
========
</TABLE>
As a result of the above expenses, the IPO resulted in net offering proceeds to
the Company of $5,145,135.
From the effective date of the IPO until September 30, 1997, the Company has
used IPO proceeds for the following purposes (none of which are estimates):
<TABLE>
<CAPTION>
TYPES OF EXPENSE Amount
- ---------------- ----------
<S> <C>
Construction of plant, building and facilities $ 8,261
Purchase and installation of machinery and equipment 57,302
Purchase of real estate - 0 -
Acquisition of other businesses - 0 -
Repayment of indebtedness 398,732
Working capital 3,836,243
Temporary investments:
Money market account 61,178
Repurchase agreements-U.S. Treasury Notes 1,000,000
Other purposes in excess of $100,000:
Development costs of Interactive CD-ROM Game 588,895
</TABLE>
Page 11
<PAGE>
Except for $50,000 of debt repayment and $231,917 in salaries paid to the
Company's officers and a director who is also an employee, all of the above
payments were made directly or indirectly to persons or entities other than
directors, officers, affiliates or 10% or greater security holders of the
Company. The above use of proceeds does not represent a material change from the
use of proceeds described in the IPO prospectus.
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) The following Exhibits are attached hereto:
EXHIBIT NO. DESCRIPTION
----------- -----------
11 Computation of earnings per share.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the Company's fiscal quarter ended
September 30, 1997.
Page 12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
TOMORROW'S MORNING, INC.
Dated: November 12, 1997 By: /s/ STEVEN RAFT
---------------------
Steven Raft
Chief Financial Officer
Page 13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBER DESCRIPTION NUMBERED PAGE
- ----------------- ---------------------------------- -------------
<S> <C> <C>
11 Computation of earnings per share. 15
27 Financial Data Schedule 16
</TABLE>
Page 14
<PAGE>
TOMORROW'S MORNING, INC.
(A Development Stage Enterprise)
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three months ended Three months ended
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Net loss $(1,635,536) $ (323,784)
Basis for computation of primary earnings per common and
common equivalent share:
Weighted average number of shares outstanding during period 2,785,998 1,026,494
Weighted average (incremental) common share equivalent after
considering the effects of options and warrants outstanding
during the period ended September 30, 1997 and 1996 and
after assumed repurchase of treasury shares as required by
Securities and Exchange Commission Staff Accounting
Bulletin No. 83 - 0 - 172,695
----------- ----------
Total weighted average number of shares 2,785,998 1,199,189
=========== ==========
Loss per share $ ( 0.59) $ ( 0.27)
=========== ==========
</TABLE>
Page 15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUARTERS
ENDED SEPTEMBER 30, 1997 AND 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
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<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997
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<PERIOD-END> SEP-30-1997 JUN-30-1997
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0 0
0 0
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<EPS-DILUTED> (0.59) (1.84)
</TABLE>