U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: September 30, 1997
Commission File Number: 0-25388
DETOUR MAGAZINE, INC.
(Exact name of small business issuer as specified in its charter)
Colorado
(State or other jurisdiction of incorporation or organization)
84-1156459
(IRS Employer Identification No.)
6855 Santa Monica Boulevard
Suite 400
Los Angeles, California
(Address of principal executive offices)
90038
(Zip Code)
(213) 469-9444
(Issuer's Telephone Number)
Check whether the issuer (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 ____.
The number of shares of the registrant's only class of common stock
issued and outstanding, as of September 30, 1997, was 5,000,000
shares.
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the nine month period
ended September 30, 1997, are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the Financial Statements and notes thereto included herein.
Overview
Detour Magazine, Inc., f/k/a Ichi-Bon Investment Corporation
(the "Company"), was incorporated under the laws of the State of
Colorado on May 18, 1990. On June 6, 1997, pursuant to the terms
of an Agreement and Plan of Reorganization, the Company acquired
all of the issued and outstanding securities of Detour, Inc., a
California corporation, in exchange for 4,500,000 "restricted"
common shares of the Company. As a result, the Company was the
surviving entity. As part of the terms of the aforesaid
transaction, the Company amended its Articles of Incorporation,
changing its name to its present name.
Detour Magazine, Inc. is engaged in publishing of a monthly
magazine entitled Detour, which includes advertisements and
articles relating to fashion, contemporary music and entertainment
and social issues. Management describes the magazine as an "urban,
avant-garde" publication. It derives approximately 90% of its
revenues from advertising, with the balance from circulation. The
Company maintains offices in both Los Angeles and New York City.
The magazine is been published monthly, with the exception of
the issues for January/February and July/August, 1997, for which
one issue is published. The magazine has been, in general,
approximately 192 pages in length, comprised of about 60 to 70
pages of advertising, with the balance in editorial pages. This
reflects the limited, but growing, advertising base which typifies
new publications.
The following information is intended to highlight
developments in the Company's operations to present the results of
operations of the Company, to identify key trends affecting the
Company's businesses and to identify other factors affecting the
Company's results of operations for the nine month period ended
September 30, 1997.
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Results of Operations
Comparison of Results of Operations for the nine month period
ended September 30, 1997 and 1996.
During the nine month period ended September 30, 1997, the
Company's revenues were $3,029,351, compared to revenues of
$2,052,155 for the similar period in 1996, an increase of $977,196
(47.6%) from the similar period in 1996. Management believes that
this increase was attributable to the increased size of the
Company's magazine, which allowed for additional advertising.
Further, the economic climate in the United States was relatively
favorable and the Company's advertising clients tend to spend more
on advertising during good economic times. During this period,
costs of sales were $1,731,754, compared to $1,482,050 for the
similar period in 1996, an increase of $249,704 (14.4%). This was
also due primarily to the increased size of the Company's magazine,
which resulted in increased printing and paper costs as a factor of
such growth. During this period, however, there was a decrease in
the Company's paper costs. Further, the Company did incur
approximately $50,000 in professional fees over and above fees
normally incurred during previous quarterly periods during the nine
month period ended September 30, 1997, as a result of settlement of
an outstanding litigation. General and administrative expenses
were $1,724,476 for the nine months ended September 30, 1997,
compared to $1,099,052 for the similar period in 1996, an increase
of $625,424 (36.3%). This increase was attributable to numerous
factors, including the retention of a new President, John Evans,
who assumed his duties on August 1, 1997, the execution of a
consulting agreement and fees payable thereon, also which took
place on August 1, 1997 and increase commisions payable due to the
increase advertising revenues. The Company's sales advertising
staff is paid on a commission basis. As a result, the Company
generated a net loss of $(536,879) for the nine month period ended
September 30, 1997, compared to a net loss of $(619,371) for the
nine month period ended September 30, 1996.
Liquidity and Capital Resources
In the nine month period ended September 30, 1997, the Company
had $157,165 in cash. It also increased its accounts receivable to
$351,773 from $197,534 for the similar period in 1996, an increase
of $154,239 (43.8%), which management attributes to increased
advertising.
The Company has two outstanding notes payable, each payable to
non-affiliates, including one note with an outstanding balance of
$176,700, which accrues interest at the rate of 12% per annum and
is due on demand. The remaining outstanding note aggregating
$1,219,438 is payable to an unaffiliated entity. Relevant thereto,
in 1995, a stockholder of the Company loaned the Company $932,313
which bears interest at the rate of 12% per annum and is due upon
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demand. The obligation is secured by all of the assets of the
Company. The note holder agreed to subordinate this security
position relevant to the Company's accounts receivable. This
stockholder subsequently assigned this Note to JCM Capital Corp.
It is the intention of the Company to repay this obligation in full
with the proceeds derived from the private equity Offering
described herein.
During the three month period ending September 30, 1997, an
outstanding loan receivable from one of the Company's officers and
directors was repaid in full.
The Company presently factors its monthly domestic accounts
receivable with Riviera Financial, Inc., Los Angeles, California
("Riviera"). The majority of factoring provided by Riviera is on
a non-recourse basis. On average, the Company pays a fee to
Riviera of approximately 4.5% per month. Historically, the Company
factors approximately $3 million per annum in accounts receivable
with Riviera. Riviera's maximum fee for factoring the Company's
receivables is 9% per month, with a hold back of 11% on each
invoice until receipt of funds. Therefore, Riviera is only
factoring 89% of the Company's total eligible domestic advertising
receivables. In addition, Riviera also acts the capacity of credit
manager for the Magazine by performing credit checks, mailing
invoices, making collection calls and posting receivables. It is
anticipated that, provided the Company successfully sells a
substantial portion of its common stock in the private offering
described herein, the factoring relationship with Riviera will be
terminated, as management believes that it will no longer be
necessary due to sufficient cash then available to the Company.
However, there are no assurances that the Company will sell a
sufficient number of shares of its common stock to allow it to
terminate.
Management intends to undertake a plan of expansion and in
order to effectuate the same, has recognized the Company's need for
additional operating capital. In response thereto, in November
1997 the Company will undertake a private offering of its common
stock wherein it intends to offer up to 2,350,000 shares of the
Company's common stock at a price of $1.50 per share, for aggregate
gross proceeds of $3,500,000. There can be no assurances that all
of the Shares to be offered will be sold, or that the Company will
generate sufficient interest in this offering to solve its cash
shortage. Previously, the Company issued options to an overseas
entity, allowing such entity to acquire up to 2,000,000 shares of
the Company's common stock at an exercise price of $1.50 per share.
However, options expired prior to exercise of the same as a result
of a mutual decision between the subscriber and the Company, as the
Company elected to proceed with the private offering instead.
The Company's securities are currently not liquid. There is
currently no market for the Company's securities; however, the
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Company has recently filed an application to list its securities on
the OTC Bulletin Board and is presently engaged in responding to
various comments and concerns expressed by the NASD relevant
thereto. While no assurances can be provided, management believes
that the Company's common stock will begin trading on the Bulletin
Board in the very near future.
Trends
Management believes that the Company will continue to operate
the Company's business at a loss for the next twelve months, but is
optimistic that the Company will begin generating profits from its
operations beginning in the 1998 fiscal year. This will occur as
a result of cost cutting measures which have been adopted by
management and anticipation of increased circulation of and
advertising in the Company's magazine and corresponding revenues
therefrom. However, there can be no assurances that the Company
will become profitable within the time parameters described herein,
or at all.
Inflation
Although the operations of the Company are influenced by
general economic conditions, the Company does not believe that
inflation had a material affect on the results of operations during
the nine month period ended September 30, 1997.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - NONE
ITEM 2. CHANGES IN SECURITIES - 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
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant filed a Form 8-K on November 4, 1997,
which is incorporated herein by reference as though fully set
forth, reporting of an amendment to the Company's bylaws, changing
the Company's fiscal year end from October 31, to December 31.
This was done to provide continuity, as the Company's predecessor,
Detour, Inc., had a calendar fiscal year.
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DETOUR MAGAZINE, INC.
BALANCE SHEET
ASSETS
(unaudited) (unaudited) (audited)
9/30/97 9/30/96 12/31/96
--------- --------- ---------
CURRENT ASSETS
Cash 157,165 0 0
Accounts receivable 351,773 197,534 174,079
Loan receivable-officers 0 39,181 52,241
Prepaid expenses and
other current assets 31,819 46,965 36,778
--------- --------- ---------
Total Current Assets 540,757 283,680 263,098
--------- --------- ---------
PROPERTY AND EQUIPMENT, Net 134,501 151,335 148,885
--------- --------- ---------
OTHER ASSETS
Security Deposits 20,750 19,335 19,520
--------- --------- ---------
Total Other Assets 20,750 19,335 19,520
--------- --------- ---------
TOTAL ASSETS 696,008 454,350 431,503
========= ========= =========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Cash Overdrafts 0 22,684 23,062
Accounts payable and
accrued expenses 1,159,209 479,062 500,751
Unexpired subscriptions 25,664 23,178 25,664
Note payable 176,700 300,000 190,000
Due to stockholder 0 464,381 28,590
Note payable stockholders 1,030,191 932,313 932,313
Interest payable stockholders 189,247 74,605 79,247
--------- --------- ---------
Total Current Liabilities 2,581,011 2,296,223 1,779,627
--------- --------- ---------
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LIABILITIES AND EQUITY (Continued)
EQUITY
Common stock, $.001 par value
25,000,000 shares authorized,
5,000,000 issued and
outstanding 5,000
Detour, Inc. Common stock,
$.001 par value, 100,000,000
shares authorized, 9,365,760
issued and outstanding 8,445 9,366
Additional paid-in capital 855,161 155,875 855,161
Accumulated deficit (2,745,164) (2,006,193) (2,212,651)
--------- --------- ---------
TOTAL EQUITY (1,885,003) (1,841,873) (1,348,124)
--------- --------- ---------
TOTAL LIABILITIES
AND EQUITY 696,008 454,350 431,503
========= ========= =========
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DETOUR MAGAZINE, INC.
STATEMENT OF OPERATIONS
(unaudited) (unaudited)
For the For the
Nine Months Ended Three Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
---------- --------- --------- ---------
SALES 3,029,351 2,052,155 1,009,784 684,052
COST OF SALES 1,731,754 1,482,050 577,251 494,017
--------- --------- --------- ---------
GROSS PROFIT 1,297,597 570,105 432,532 190,035
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,724,476 1,099,052 574,825 366,351
--------- --------- --------- ---------
OPERATING LOSS (426,879) (528,947) (142,293) (176,316)
Interest expense (110,000) (90,424) (36,667) (30,141)
--------- --------- --------- ---------
NET (LOSS) (536,879) (619,371) (178,960) (206,457)
========= ========= ========= =========
NET LOSS PER SHARE (.11) (.12) (.04) (.04)
========= ========= ========= =========
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DETOUR MAGAZINE, INC.
STATEMENT OF CASH FLOWS
Nine Nine
Months Months
Ended Ended
9/30/97 9/30/96
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) (536,879) (619,371)
--------- ---------
Depreciation 28,684 24,820
Bad debt expense 0 3,750
Decrease (increase) in accounts
receivable (177,694) 66,614
Decrease (increase) in prepaid
expenses and other current assets 3,729 30,007
Increase in accounts payable
and accrued expenses 658,458 65,067
Increase in unexpired subscriptions 0 7,458
Increase in interest payable,
stockholder 110,000 13,926
--------- ---------
TOTAL ADJUSTMENTS 623,177 211,641
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES 86,298 (407,730)
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of fixed assets (14,300) (17,471)
Loan to officer 52,241 (39,181)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES 37,941 (56,651)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of note payable 0 0
Principal repayments of note payable (13,300) 0
Proceeds from stockholder 0 0
Net proceeds of loan payable,
stockholder 69,288 464,381
Capital contributed upon inception 0 0
Proceeds from additional paid-in capital 0 0
--------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 55,988 464,381
--------- ---------
NET DECREASE IN CASH 180,227 0
CASH - beginning (23,062) (22,684)
--------- ---------
CASH (OVERDRAFT) - ending 157,165 (22,684)
========= =========
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DETOUR MAGAZINE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Month Period Ended September 30, 1997
1. Unaudited Interim Financial Statements
The accompanying unaudited financial statements have been
prepared in accordance with the instructions for Form 10-QSB
and do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of management,
all adjustments, consisting only of normal recurring
adjustments considered necessary for a fair presentation,
have been included. Operating results for any quarter are
not necessarily indicative of the results for any other
quarter or for the full year.
2. Basis of Presentation
Business combination
On June 6, 1997, pursuant to the terms of an Agreement and
Plan of Reorganization, Ichi-Bon Investment Corporation
("IBI") acquired all of the outstanding common stock of
Detour, Inc. ("Old Detour") in exchange for 4,500,000
unregistered shares of IBI's common stock. As a result
of the transaction, the former shareholders of Old Detour
received shares representing an aggregate of 90% of IBI's
outstanding common stock, resulting in a change in control of
IBI. As a result of the merger, IBI was the surviving entity
and Old Detour ceased to exist. Simultaneously therewith,
IBI amended its articles of incorporation to reflect a change
in IBI's name to "Detour Magazine, Inc." References to the
"Company" or "Detour" refer to Detour Magazine, Inc. together
with the predecessor company, Old Detour.
The acquisition of Old Detour has been accounted for as a
reverse acquisition. Under the accounting rules for a reverse
acquisition, Old Detour is considered the acquiring entity.
As a result, historical financial information for periods
prior to the date of the transaction are those of Old Detour.
Under purchase method accounting, balances and results of
operations of Old Detour will be included in the accompanying
financial statements from the date of the transaction, June 6,
1997. The Company recorded the assets and liabilities
(excluding intangibles) at their historical cost basis which
was deemed to be approximate fair market value. The reverse
acquisition is treated as a non-cash transaction except to the
extent of cash acquired, since all consideration given was in
the form of stock.
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Earnings per share
Earnings per share have been computed based on the weighted
average number of common shares outstanding. For the nine
month period prior to the reverse acquisition discussed in
the business combination section of Note 2 above, the number
of common shares outstanding used in computing earnings per
share is the number of common shares outstanding as a result
of such reverse acquisition (5,000,000 shares).
3. History and Business Activity
Detour was originally incorporated as Ichi-Bon Investment
Corporation on May 18, 1990, under the laws of the State of
Colorado. The name was changed to Detour Magazine, Inc.
concurrent with the business combination described in Note 2.
Prior to such business combination, Detour had not engaged in
any operations or generated any revenue.
Old Detour was a publisher of a nationally distributed
magazine entitled "Detour" which is published monthly and
contains articles and pictorial displays on fashion, music
and social commentary.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
and Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DETOUR MAGAZINE, INC.
(Registrant)
Dated: November 13, 1997
By:/s/ John C. Evans
John C. Evans, President
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DETOUR MAGAZINE, INC.
Exhibit Index to Quarterly Report on Form 10-QSB
For the Quarter Ended September 30, 1997
EXHIBITS Page No.
EX-27 Financial Data Schedule . . . . . . . . . . . . 15
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