<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/ X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
/ / TRANSITION REPORT UNDER 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 April 30, 1999: 3,352,690
Transitional Small Business Disclosure Format (CHECK ONE) : Yes _____ No __X__
<PAGE>
PART I
FINANCIAL INFORMATION
TOMORROW'S MORNING, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET - MARCH 31, 1999
ASSETS
<TABLE>
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ (391)
Loan receivable, officer-shareholder 28,508
Software development costs 23,367
Prepaid expenses and other current assets 81,523
---------------
Total current assets $ 133,007
OTHER ASSETS:
Fixed assets, net of accumulated depreciation of $50,803 84,894
Deposits 32,772
---------------
Total other assets 117,666
---------------
$ 250,673
===============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,630,653
Current maturities of contracts payable 5,731
Loans payable, related parties 549,924
---------------
Total current liabilities $ 2,186,308
CONTRACTS PAYABLE, less current maturities 11,208
SHAREHOLDERS' DEFICIT:
Preferred stock; no par value, 1,000,000 shares
authorized, no shares issued and outstanding -
Common stock; no par value, 10,000,000 shares
authorized, 3,360,372 shares issued and outstanding 12,869,767
Deficit accumulated during development stage (14,816,610)
---------------
Total shareholders' deficit (1,946,843)
---------------
$ 250,673
===============
</TABLE>
2
<PAGE>
TOMORROW'S MORNING, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1999
----------------- ----------------- ------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUE:
SUBSCRIPTIONS $ 3,144 $ 273,646 $ -
PROVISION FOR REFUNDS AND COLLECTIBLES - 115,330 -
EDITORIAL, PRODUCTION AND
DISTRIBUTION COST 906 911,762 -
----------------- ------------------ ------------------
GROSS MARGIN 2,238 (753,446) -
OPERATING EXPENSES 393,706 2,618,297 95,235
RESEARCH AND DEVELOPMENT 2,000 551,876 -
----------------- ------------------ ------------------
LOSS FROM OPERATIONS (393,468) (3,923,619) (95,235)
NONCASH OPTION COMPENSATION AND
CONSULTING FEES - 2,026,204 -
LEGAL SETTLEMENT - 30,000 -
OTHER EXPENSES, NET 20,838 17,793 6,946
INTEREST EXPENSE 51,470 4,045 19,690
INTEREST INCOME 2,601 27,350 1,547
----------------- ------------------ ------------------
LOSS BEFORE INCOME TAXES (463,176) (5,974,311) (120,324)
INCOME TAXES - 800 -
----------------- ------------------ ------------------
NET LOSS $ (463,176) $ (5,975,111) $ (120,324)
================= ================== ==================
NET LOSS PER SHARE, basic and diluted $ (0.14) $ (2.14) $ (0.04)
================= ================== ==================
WEIGHTED AVERAGE SHARES OUTSTANDING,
basic and diluted 3,274,533 2,796,906 3,274,533
================= ================== ==================
</TABLE>
<TABLE>
<CAPTION>
FROM INCEPTION ON
THREE MONTHS ENDED JUNE 30, 1992 TO
MARCH 31, 1998 MARCH 31, 1999
------------------ -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUE:
SUBSCRIPTIONS $ 43,980 $ 552,845
PROVISION FOR REFUNDS AND COLLECTIBLES 115,530 115,530
EDITORIAL, PRODUCTION AND
DISTRIBUTION COST 373,770 3,313,352
---------------- ------------------
GROSS MARGIN (445,320) (2,876,037)
OPERATING EXPENSES 533,467 8,662,679
RESEARCH AND DEVELOPMENT 88,416 842,376
---------------- ------------------
LOSS FROM OPERATIONS (1,067,203) (12,381,092)
NONCASH OPTION COMPENSATION AND
CONSULTING FEES - 2,026,204
LEGAL SETTLEMENT - 30,000
OTHER EXPENSES, NET 6,619 77,895
INTEREST EXPENSE 1,578 364,948
INTEREST INCOME 1,485 68,329
---------------- ------------------
LOSS BEFORE INCOME TAXES (1,073,915) (14,811,810)
INCOME TAXES - 4,800
---------------- ------------------
NET LOSS $ (1,073,915) $ (14,816,610)
================ ==================
NET LOSS PER SHARE, basic and diluted $ (0.38)
================
WEIGHTED AVERAGE SHARES OUTSTANDING,
basic and diluted 2,818,692
================
</TABLE>
3
<PAGE>
TOMORROW'S MORNING, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1999
----------------- ----------------- ------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING
ACTIVITIES:
Net loss $ (463,176) $ (5,975,111) $ (120,324)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation 20,838 17,795 6,946
Amortization of debt issuance costs - - -
Amortization of loans payable discount 21,355 - 6,252
Non-cash litigation settlement - 30,000 -
Non-cash compensation 5,000 2,026,204 5,000
Non-cash payment for services rendered - - -
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable 444 (37,831) -
Prepaid expenses 42,587 324,258 -
Software development costs - (23,367) -
Deposits - (1,417) -
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable and accrued expenses 177,289 1,089,995 66,246
Deferred revenue - 36,415 -
------------- --------------- ----------------
Net cash used for operating activities (195,662) (2,513,059) (35,881)
------------- --------------- ----------------
CASH FLOWS PROVIDED BY (USED FOR) INVESTING
ACTIVITIES -
acquisition of fixed assets - (70,847) -
------------- --------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
FROM INCEPTION ON
THREE MONTHS ENDED JUNE 30, 1992 TO
MARCH 31, 1998 MARCH 31, 1999
------------------ -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) OPERATING
ACTIVITIES:
Net loss $ (1,073,715) $ (14,816,610)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation 6,916 57,804
Amortization of debt issuance costs - 138,168
Amortization of loans payable discount - 25,001
Non-cash litigation settlement - 30,000
Non-cash compensation - 4,643,481
Non-cash payment for services rendered - 132,500
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ASSETS:
Accounts receivable 287,051 -
Prepaid expenses 23,505 (81,523)
Software development costs (11,832) (23,367)
Deposits (300) (32,773)
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable and accrued expenses 667,073 1,636,527
Deferred revenue (184,767) -
----------------- ------------------
Net cash used for operating activities (286,069) (8,290,792)
----------------- ------------------
CASH FLOWS PROVIDED BY (USED FOR) INVESTING
ACTIVITIES -
acquisition of fixed assets 536 (142,697)
----------------- ------------------
</TABLE>
(Continued)
4
<PAGE>
TOMORROW'S MORNING, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1999
----------------- ----------------- ------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) FINANCING
ACTIVITIES:
Proceeds from issuance of common stock - - -
Proceeds from revolving line of credit - - -
Proceeds from loans payable and warrants 105,000 131,000 5,000
Proceeds from notes payable - - -
Proceeds from contracts payable - 71,396 -
Cash paid for debt issuance costs - - -
Proceeds from exercise of stock options 2,100 60,978 -
Proceeds from exercise of warrants - 1,074 -
Proceeds from shareholders 11,619 - 173
Repayment of revolving line of credit - - -
Repayment of loans payable - (6,000) -
Repayment of notes payable - - -
Repayment of contracts payable (2,241) (39,837) (392)
Repayment from shareholder, net of unpaid interest 32,639 22,257 26,652
Loans to shareholders - - -
Cash paid for offering costs - - -
Purchase of treasury stock - - -
------------- --------------- ----------------
Net cash provided by financing activities 149,117 240,868 31,433
------------- --------------- ----------------
NET DECREASE IN CASH (46,545) (2,343,038) (4,447)
CASH, beginning of period 46,154 2,342,849 4,056
------------- --------------- ----------------
CASH, end of period $ (391) $ (189) $ (391)
============= =============== ================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Decrease in debt issuance costs recorded in connection
with the issuance of convertible notes payable $ - $ - $ -
============= =============== ================
Conversion of notes payable to common stock $ - $ - $ -
============= =============== ================
Non-cash compensation $ 5,000 $ 2,026,204 $ 5,000
============= =============== ================
Issuance of warrants connected to debt conversion $ - $ - $ -
============= =============== ================
</TABLE>
<TABLE>
<CAPTION>
FROM INCEPTION ON
THREE MONTHS ENDED JUNE 30, 1992 TO
MARCH 31, 1998 MARCH 31, 1999
------------------ -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED FOR) FINANCING
ACTIVITIES:
Proceeds from issuance of common stock - 6,749,734
Proceeds from revolving line of credit - 50,000
Proceeds from loans payable and warrants 131,000 904,276
Proceeds from notes payable - 1,705,086
Proceeds from contracts payable 47,925 127,401
Cash paid for debt issuance costs - (210,757)
Proceeds from exercise of stock options 84,638
Proceeds from exercise of warrants 1,074 1,074
Proceeds from shareholders - 11,619
Repayment of revolving line of credit - (50,000)
Repayment of loans payable (6,000) (423,400)
Repayment of notes payable - (11,456)
Repayment of contracts payable (7,289) (110,462)
Repayment from shareholder, net of unpaid interest 7,621 56,825
Loans to shareholders - (96,952)
Cash paid for offering costs - (304,528)
Purchase of treasury stock - (50,000)
----------------- --------------------
Net cash provided by financing activities 174,331 8,433,098
----------------- --------------------
NET DECREASE IN CASH (111,202) (391)
CASH, beginning of period 111,013 -
----------------- --------------------
CASH, end of period $ (189) $ (391)
================= ====================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
Decrease in debt issuance costs recorded in connection
with the issuance of convertible notes payable $ - $ (72,589)
================= ====================
Conversion of notes payable to common stock $ - $ 1,532,707
================= ====================
Non-cash compensation $ - $ 2,048,124
================= ====================
Issuance of warrants connected to debt conversion $ - $ 18,750
================= ====================
</TABLE>
5
<PAGE>
TOMORROW'S MORNING, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1999
(1) SUMMARY 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 annual report of Tomorrow's Morning, Inc. (the
"Company") on Form 10-KSB for the year ended June 30, 1998.
NATURE OF BUSINESS:
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 March 31, 1999, the Company is a
development stage enterprise, as defined in Financial
Accounting Standards Board Statement No. 7. The Company is
devoting substantially all of its efforts toward establishing
new business and product.
In June 1996 the Company filed for an initial public offering
("IPO") of its common stock on Form SB-2 with the Securities
and Exchange Commission. That offering was successfully
completed in March 1997.
GOING CONCERN:
For the nine months ended March 31, 1999, the Company had
negative cash flows from operations of $195,662 and incurred a
net loss of $463,176. The Company's expenses continue to
greatly exceed its income, and its future depends on: (i)
finding a strategic partner; (ii) the development of
complementary products; (iii) completion and successful
marketing of the SCOOP CD-ROM journalism game; (iv) the
formation of joint-marketing alliances for corporate
sponsorship of schools through the Company's Reading Partners
Program and/or the sale of advertising space; (v) getting one
or more television shows, or interstitial news "flashes", on
the air; and (vi) expansion into ancillary publishing and
merchandising through redirecting the Company's content and/or
licensing the Company's characters and identity. The Company
has used all of the net proceeds of its initial public
offering and finds that it requires substantial additional
funds in order to reach the above long-term goals. In
addition, as discussed below in "Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources," the Company requires an
immediate infusion of working capital to continue operating.
There can, however, be no guarantee that the Company will be
able to obtain such additional long- and short-term funds or
that, if obtained, it will be able to achieve or sustain
significant revenues or profitability in the future.
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.
6
<PAGE>
TOMORROW'S MORNING, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NINE MONTHS ENDED MARCH 31, 1999
(2) LEGAL PROCEEDINGS:
On August 17, 1998, the Company received a notice of levy from the
Internal Revenue Service as to $30,761 for back taxes. Upon receipt of
the notice, the Company contacted that agency and negotiated a payment
plan. This amount was subsequently paid.
On December 17, 1998, Starbright Graphics, Inc. filed an action against
the Company in the Superior Court of New Jersey Law Division, Middlesex
County, seeking $699,231, included in accounts payable, for services
rendered in connection with the printing and distribution of the
newspaper. This action was dismissed in New Jersey by stipulation
without prejudice on March 23, 1999, and filed in Los Angeles County
Superior Court for breach of contract on July 13, 1999.
On March 10, 1999, Peter Li Inc. filed an action against the Company in
Los Angeles County Superior Court seeking $33,711 in damages for breach
of contract in connection with services provided to the Company.
On May 14, 1999, the Company's landlord filed an action in Los Angeles
County Superior Court, West District, against the Company and Adam
Linter seeking $238,519 in connection with the Company's breach of its
lease payment obligations. In December 1999, this action was settled by
a stipulated judgment providing for payments of $125,000 in cash and
20,000 shares of the Company's common stock. $30,000 of this amount has
subsequently been paid.
7
<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 March 31, 1999, revenues were zero and the
Company experienced a net loss of $120,324, as compared to revenues of $43,980
and a net loss of $1,073,716 for the three months ended March 31, 1998. For the
nine months ended March 31, 1999, revenues were $3,144 and the Company
experienced a net loss of $463,176, as compared to revenues of $273,646 and a
net loss of $5,975,111 for the nine months ended March 31, 1998. The Company
continues to sustain substantial losses, which have resulted in suspension of
publication of the Tomorrow's Morning newspaper (the "Newspaper"), the Company's
only product to date. As a result, such losses threaten the Company's ability to
continue as a going concern. In the long run, the Company's future depends on:
(i) finding a strategic partner; (ii) the development of complementary products;
(iii) completion and successful marketing of the SCOOP-TM- CD-ROM journalism
game; (iv) the formation of joint-marketing alliances for corporate sponsorship
of schools through the Company's READING PARTNERS PROGRAM and/or the sale of
advertising space in the Newspaper should publication resume; (v) getting one or
more television shows, or interstitial news "flashes", on the air; and (vi)
expansion into ancillary publishing and merchandising through redirecting the
Company's content and/or licensing the Company's characters and identity.
However, as discussed below in "Liquidity and Capital Resources," because
virtually all available cash has been exhausted due to continuing losses, the
Company requires an immediate infusion of working capital to remain in
operation. There can, however, be no guarantee that the Company will be able to
obtain such working capital.
RESULTS OF OPERATIONS.
THREE MONTH PERIODS ENDED MARCH 31, 1999 AND 1998. Revenues for the quarter
ended March 31, 1999 were zero, as compared to $43,980 for the three months
ended March 31, 1998. This decrease in revenues was the result of suspension of
Newspaper publication in May 1998. Costs and expenses decreased to $95,235
during the three months ended March 31, 1999, a 90% change from $995,385 during
the quarter ended March 31, 1998.
Total interest expense for the quarter ended March 31, 1999 was $19,690, as
compared to $1,578 for the same three month period in 1998. This over
twelve-fold increase is attributable to increased borrowing to satisfy existing
obligations.
For the three months ended March 31, 1999, the Company experienced a net loss of
$120,324, a decrease of approximately 89% from the $1,073,716 net loss incurred
in the three months ended March 31, 1998. The change in net loss was primarily
due to the factors described above with respect to costs and operating expenses,
partially offset by increased interest expense.
NINE MONTH PERIODS ENDED MARCH 31, 1999 AND 1998. Revenues for the nine months
ended March 31, 1999 were $3,144, as compared to $273,646 for the nine months
ended March 31, 1998. This decrease in revenues was the result of suspension of
Newspaper publication. Costs and expenses decreased to $396,612 during the nine
months ended March 31, 1999, a change of 90% from $4,081,935 during the nine
months ended March 31, 1998.
Total interest expense for the nine months ended March 31, 1999 was $51,470, as
compared to $4,045 for the same nine month period in 1997. This almost
thirteen-fold increase was attributable to increased borrowing to satisfy
existing obligations.
For the nine months ended March 31, 1999, the Company experienced a net loss of
$463,176, a decrease of approximately 92% from the $5,975,111 net loss incurred
in the nine months ended March 31, 1998. The change in net loss was primarily
due to the factors described above with respect to costs and operating expenses,
partially offset by increased interest expense.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES. To date, the Company's primary capital needs
have been to fund the development and growth of the Newspaper and the research
and development of synergistic children's media products. 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 were directed at schools (which were the source of most
subscriptions), such business was seasonal, with most sales taking place between
September and June. Seasonality was not believed to be a factor with non-school
sales.
As of March 31, 1999, the Company had current assets of $133,007. The Company
has been seeking approximately $500,000 to $1,000,000 in outside debt and/or
equity funding in order to be able to complete the development of SCOOP-TM-. To
date, the Company has obtained only $125,000 of that funding. The Company is
also in discussions with several prospective distributors of SCOOP, which could
result in a royalty advance to the Company which would be used to complete the
production of that product. As a result of its lack of working capital, the
Company is currently unable to meet its financial obligations to its lenders and
other creditors, including its landlord and the vendor which has printed the
Newspaper. In order to resume its proposed business activities, the Company must
immediately raise approximately $500,000 to $1,000,000 through private debt or
equity offerings. While the Company continues to engage in discussions with
prospective financing sources, there can be no guarantee that any of such
funding will become available on terms favorable to the Company or its
shareholders, if at all. Until such near-term funding is obtained, all of the
Company's operations will remain at minimal levels.
As to long-term funding requirements, the Company is continuing to pursue
opportunities for a private equity offering of up to $5 million. In addition,
the Company is also investigating other approaches to obtain long-term operating
funds while also maximizing shareholder value. To date, those approaches have
included a possible merger with the appropriate entity or a sale of the Company
or its assets. There can be no guarantee that any of the Company's efforts will
be successful or, if successful, that they will result in a transaction on terms
favorable to the Company or its shareholders. Even if the near-term funds
described above are obtained, unless long-term funds also become available, the
Company will be required to curtail its future operations, which would have a
material adverse effect on the Company's business, operating results and
financial condition.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.
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.
In March 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position No. 98-1, "Accounting for Costs of Computer
Software Developed or Obtained for Internal Use" which provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. SOP 98-1 is effective for financial statements for fiscal years beginning
after December 15, 1998. The Company does not anticipate that the adoption of
this statement will have a material effect on its financial statements.
In April 1998, the AICPA issued SOP No. 98-5 "Reporting on the Costs of Start-Up
Activities." This standard requires companies to expense the costs of start-up
activities and organization costs as incurred. In general, SOP 98-5 is effective
for fiscal years beginning after December 15, 1998. The Company does not
anticipate that the adoption of this statement will have a material effect on
its financial statements.
9
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 17, 1998, Starbright Graphics, Inc. filed an action against the
Company in the Superior Court of New Jersey Law Division, Middlesex County,
seeking $699,231.06 for services rendered in connection with the printing and
distribution of the Newspaper. That action was dismissed without prejudice on
March 23, 1999 pursuant to a stipulation of the parties.
On March 10, 1999, Peter Li Inc. filed an action against the Company in Los
Angeles County Superior Court seeking $33,711 in damages for breach of contract
in connection with services provided to the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) None.
(d) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company is in default in its obligations to virtually all of its creditors
and its landlord. The Company is also in default as to the payment of principal
and interest on a $125,000 loan from Wilmington Trust Company, Trustee for
Andrea B. Currier and a $250,000 loan from Michael Fuchs. Such defaults will
continue until funds are obtained as described in Part I above.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibit is attached hereto:
EXHIBIT NO. DESCRIPTION
----------- -----------
27 Financial Data Schedule
10
<PAGE>
(b) No reports on Form 8-K were filed during the Company's fiscal quarter
ended March 31, 1999.
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: May 2, 2000 By: /s/ ADAM LINTER
---------------------
Adam Linter
President and Treasurer
11
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
27 Financial Data Schedule
12
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> 9-MOS 9-MOS 3-MOS 3-MOS
OTHER
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998 JUN-30-1999 JUN-30-1998
JUN-30-1999
<PERIOD-START> JUL-01-1998 JUL-01-1997 JUL-01-1999 JUL-01-1998
JUL-01-1992
<PERIOD-END> MAR-31-1999 MAR-31-1998 MAR-31-1999 MAR-31-1998
MAR-31-1999
<CASH> (391) 0 0 0
0
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 28,508 0 0 0
0
<ALLOWANCES> 0 0 0 0
0
<INVENTORY> 0 0 0 0
0
<CURRENT-ASSETS> 133,007 0 0 0
0
<PP&E> 135,697 0 0 0
0
<DEPRECIATION> 50,803 0 0 0
0
<TOTAL-ASSETS> 250,673 0 0 0
0
<CURRENT-LIABILITIES> 2,186,308 0 0 0
0
<BONDS> 0 0 0 0
0
0 0 0 0
0
0 0 0 0
0
<COMMON> 12,869,767 0 0 0
0
<OTHER-SE> 0 0 0 0
0
<TOTAL-LIABILITY-AND-EQUITY> 250,673 0 0 0
0
<SALES> 0 0 0 0
0
<TOTAL-REVENUES> 3,144 273,646 0 43,980
552,845
<CGS> 0 0 0 0
0
<TOTAL-COSTS> 906 1,027,092 0 489,300
3,428,882
<OTHER-EXPENSES> 413,944 5,216,820 100,634 627,017
11,570,825
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> 51,470 4,045 19,690 1,578
364,948
<INCOME-PRETAX> (463,176) (5,974,311) (120,324) (1,073,915)
(14,811,810)
<INCOME-TAX> 0 800 0 0
4,800
<INCOME-CONTINUING> (463,176) (5,975,111) (120,324) (1,073,915)
(14,816,610)
<DISCONTINUED> 0 0 0 0
0
<EXTRAORDINARY> 0 0 0 0
0
<CHANGES> 0 0 0 0
0
<NET-INCOME> (463,176) (5,975,111) (120,324) (1,073,915)
(14,816,610)
<EPS-BASIC> (0.14) (2.14) (0.04) (0.38)
0
<EPS-DILUTED> (0.14) (2.14) (0.04) (0.38)
0
</TABLE>
