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: July 31, 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.)
201 N. Service Road
Melville, New York
(Address of principal executive offices)
11747
(Zip Code)
(516) 423-9300
(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 July 31, 1997, was 5,000,000 shares.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the nine month period
ended July 31, 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 and
distribution, on an international basis, 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 its revenues primarily from
advertising. The Company maintains offices in both Los Angeles and
New York.
Historically, the magazine has been published monthly, with
the exception of the issues for January/February and July/August,
1997, for which one issue was published. However, management
intends to issue 12 magazines on a monthly basis in the future.
The magazine has been, in general, approximately 112 to 120
pages in length, comprised of about 30 to 45 pages of advertising,
with the balance in editorial pages. This reflects the limited,
but growing, advertising base which typifies new publications.
While no assurances can be provided, management anticipates that
the Company will increase the number of advertising pages (as well
as increase the advertising revenue per page) in the near future.
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
July 31, 1997.
Results of Operations
Comparison of Results of Operations for the three month period
ended July 31, 1997 and 1996.
During the three month period ended July 31, 1997, the
Company's revenues remained relatively constant, as it generated
revenues of $916,525, compared to revenues of $977,217 for the
similar period in 1996, a decrease of $60,692 (6.2%).
In the three month period ended July 31, 1997, costs of sales
were $573,477, compared to $705,738 for the similar period in 1996,
a decrease of $132,261 (18.7%). This was due to a decrease in the
Company's paper, printing and binding costs as well as decreased
costs for editorial expenses. Selling, general and administrative
expenses remained relatively constant, such expenses being $491,879
for the three months ended July 31, 1997, compared to $522,868 for
the similar period in 1996, a decrease of $30,989 (5.9%). For the
three month period ended July 31, 1997, the Company generated a net
loss of $(179,876) compared to a net loss of $(294,449) for the
three month period ended July 31, 1996, a decrease of $(114,573)
(38.9%), primarily due to the decrease in cost of sales and a
$12,013 decrease in interest expense during the period.
Comparison of Results of Operations for the nine month period
ended July 31, 1997 and 1996.
During the nine month period ended July 31, 1997, the
Company's revenues remained relatively constant, as it generated
revenues of $2,594,594, compared to revenues of $2,588,887 for the
similar period in 1996, an increase of $5,707 (.22%).
In the nine month period ended July 31, 1997, costs of sales
were $1,667,457, compared to $1,964,967 for the similar period in
1996, a decrease of $297,510 (15.1%). This was due primarily to a
decrease in the Company's paper costs. 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 July 31, 1997, as a result of settlement of an
outstanding litigation. General and administrative expenses were
$1,391,785 for the nine months ended July 31, 1997, compared to
$1,430,272 for the similar period in 1996, a decrease of $38,487
(2.7%). This decrease came about due to management's efforts to
implement cost cutting measures, including reducing labor costs.
As a result, the Company generated a net loss of $(464,648) for the
nine month period ended July 31, 1997, compared to a net loss of
$(806,352) for the nine month period ended July 31, 1996.
Liquidity and Capital Resources
In the nine month period ended July 31, 1997, the Company had
no available cash. It increased its accounts receivable to
$284,268 from $174,949 for the similar period in 1996, an increase
of $109,319 (62%). The Company also had two loans outstanding to
two of its officers in the aggregate principal amount of $68,080,
which loans are secured by second positions in each officer's
residential home. These loans accrue interest at the prime rate
and are due on demand.
Management has recognized the Company's need for operating
capital and, in response thereto, did issue 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.
These options expire on or about November 1997 and while no options
have been exercised to date, the option holder has advised
management that it intends to begin exercising a portion of its
options during the three month period ending October 31, 1997.
However, there can be no assurances that these options will be
exercised in the future.
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 notes aggregating
$1,067,862 are demand notes due to JCM Capital Corp., a non-
affiliate and accrue interest at the rate of 12% per annum.
The Company's securities are currently not liquid. There is
currently no market for the Company's securities; however, the
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 six months, but is
optimistic that the Company will begin generating profits from its
operations beginning in the second fiscal quarter of the fiscal
year ending October 31, 1998. This will occur as a result of
continued cost cutting measures adopted by management and
anticipation of increased circulation of 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 July 31, 1997.
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
Effective June 6, 1997, all of the Company's shareholders
executed a unanimous consent authorizing the merger of the Company
with Detour, Inc., a California corporation. No proxy was
disseminated to the Company's shareholders and no solicitation by
any of the Company's management was utilized to obtain these
consents.
ITEM 5. OTHER INFORMATION
Effective June 6, 1997, the Company, pursuant to a definitive
agreement, consummated a merger with Detour, Inc. ("Detour"), a
California corporation, and acquired all of the issued and
outstanding securities of Detour, issuing an aggregate of 4,500,000
shares of its "restricted" common stock to the former shareholders
of Detour in exchange for all of the issued and outstanding stock
of Detour.
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 May 2, 1997, which is
incorporated herein by reference as though fully set forth,
reporting the execution of a letter of intent on April 30, 1997,
with Detour, Inc. ("Detour"), a privately held California
corporation, whereby the Registrant agreed in principle to acquire
all of the issued and outstanding shares of Detour in exchange for
issuance by the Registrant of 4,500,000 previously unissued
"restricted" common stock of the Registrant. A copy of the letter
of intent with Detour was annexed to the Form 8-K as an Exhibit.
This transaction closed on June 6, 1997.
On or about June 20, 1997, the Company filed a report on
Form 8-K, which is incorporated herein by reference, which report
advised, among other things, of the consummation of the transaction
with Detour and that the pursuant to the terms of an Agreement and
Plan of Reorganization dated June 6, 1997, the Company acquired all
of the issued and outstanding securities of Detour and the issuance
of 4,500,000 shares of its "restricted" common stock to the former
shareholders of Detour in exchange for all of the issued and
outstanding stock of Detour. Detour did not survive the
transaction. The Company also changed its name to "Detour
Magazine, Inc." A copy of the Agreement and Plan of Reorganization
was annexed to the Form 8-K as an Exhibit.
Additionally, the report also advised of the following: (i) Kish,
Leake & Associates, P.C., the Registrant's independent accountant
for the Registrant's two most recent fiscal years, resigned and
were replaced with the accounting firm of Marcum & Kliegman LLP,
independent public accountants to audit the Registrant's fiscal
year ended October 31, 1997, as well as future financial
statements; (ii) the issuance of options to purchase an aggregate
of 2,000,000 shares of the Company's common stock in favor of
Anchor Capital Management, Inc., a corporation organized under the
laws of the Turks & Caicos Islands, pursuant to an exemption from
registration under Regulation S of the Securities Act of 1933; and
(iii) included the audited financial statements for the fiscal
years ended December 31, 1996 and 1995, of Detour, Inc., the
California corporation which merged with the Company as described
hereinabove. The balance of the disclosure included in both the
Form 8-K dated May 2, 1997 and June 20, 1997 are hereby
incorporated by referenced thereto.
<PAGE>
DETOUR MAGAZINE, INC.
BALANCE SHEET
ASSETS
(unaudited) (audited)
7/31/97 12/31/96
--------- ---------
CURRENT ASSETS
Cash 0 0
Accounts receivable 284,268 174,079
Loan receivable-officers 68,080 52,241
Prepaid expenses and
other current assets 65,848 36,778
--------- ---------
Total Current Assets 418,196 263,098
--------- ---------
PROPERTY AND EQUIPMENT, Net 131,515 148,885
--------- ---------
OTHER ASSETS
Security Deposits 19,730 19,520
--------- ---------
Total Other Assets 19,730 19,520
--------- ---------
TOTAL ASSETS 569,441 431,503
========= =========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Cash Overdrafts 10,404 23,062
Accounts payable and accrued expenses 904,960 500,751
Unexpired subscriptions 25,664 25,664
Note payable 176,700 190,000
Due to stockholder 13,381 28,590
Note payable stockholders 1,054,481 932,313
Interest payable stockholders 151,686 79,247
--------- ---------
Total Current Liabilities 2,337,276 1,779,627
(unaudited) (audited)
7/31/97 12/31/96
--------- ---------
EQUITY
Common stock, $.001 par value,
25,000,000 shares authorized,
5,000,000 issued and outstanding
at July 31, 1997 5,000
Detour, Inc. Common stock, $.001
par value, 100,000,000 shares
authorized, 9,365,760 issued and
outstanding at December 31, 1996
(Note 2) 9,366
Preferred Stock, $.01 par value,
10,000,000 shares authorized,
no shares issued and outstanding 0 -
Additional paid-in capital 859,527 855,161
Accumulated deficit (2,632,362) (2,212,651)
--------- ---------
TOTAL EQUITY (1,767,835) (1,348,124)
--------- ---------
TOTAL LIABILITIES
AND EQUITY 569,441 431,503
========= =========
<PAGE>
DETOUR MAGAZINE, INC.
INCOME STATEMENT
(unaudited)
For the
Three Months Ended
7/31/97 7/31/96
---------- ---------
SALES 916,525 977,217
COST OF SALES 573,477 705,738
--------- ---------
GROSS PROFIT 343,049 271,479
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 491,879 522,868
--------- ---------
OPERATING LOSS (148,830) (251,390)
Interest expense (31,046) (43,059)
--------- ---------
NET INCOME (179,876) (294,449)
========= =========
EARNINGS (LOSS) PER SHARE ($.04) ($.06)
========= =========
WEIGHTED AVERAGE
SHARES OUTSTANDING 5,000,000 5,000,000
========= =========
<PAGE>
DETOUR MAGAZINE, INC.
INCOME STATEMENT
(unaudited)
For the
Nine Months Ended
7/31/97 7/31/96
---------- ---------
SALES 2,594,594 2,588,887
COST OF SALES 1,667,457 1,964,967
--------- ---------
GROSS PROFIT 927,137 623,920
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,391,785 1,430,272
--------- ---------
OPERATING LOSS (464,648) (806,352)
Interest expense (92,534) (111,834)
--------- ---------
NET INCOME (557,182) (918,186)
========= =========
EARNINGS (LOSS) PER SHARE ($.11) ($.18)
========= =========
WEIGHTED AVERAGE
SHARES OUTSTANDING 5,000,000 5,000,000
========= =========
<PAGE>
DETOUR MAGAZINE, INC.
STATEMENT OF CASH FLOWS
Nine Nine
Months Months
Ended Ended
7/31/97 7/31/96
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (557,182) (825,828)
--------- ---------
Depreciation 22,884 33,093
Bad debt expense 0 5,000
Decrease (increase) in accounts
receivable (109,319) 88,818
Decrease (increase) in prepaid
expenses and other current assets (5,773) 40,009
Increase in accounts payable
and accrued expenses 514,937 86,756
Increase in unexpired subscriptions 9,944 9,944
Increase in interest payable,
stockholder 20,678 18,568
--------- ---------
TOTAL ADJUSTMENTS 453,351 282,188
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (103,831) (543,640)
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of fixed assets (23,294)
Loan to officer (53,996) (52,241)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (53,996) (75,535)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of note payable 176,700 190,000
Principal repayments of note payable (737,700) (300,000)
Proceeds from stockholder 0 28,590
Net proceeds of loan payable,
stockholder 0 0
Capital contributed upon inception 0 0
Proceeds from additional paid-in capital 700,207 700,207
--------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 139,207 618,797
--------- ---------
NET DECREASE IN CASH (18,620) (378)
CASH - beginning 8,216 (22,684)
--------- ---------
CASH (OVERDRAFT) - ending (10,404) (23,062)
========= =========
DETOUR MAGAZINE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(unaudited)
$.01 Par Value
Common Stock Additional
----------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
--------- ------ ------- --------- ---------
Balance-November 1, 1996 9,365,760 9,366 855,161 (2,075,180) (1,210,653)
Recapitalization
resulting from merger (4,365,780) (4,366) 4,368 - -
Net loss for the
nine months ended
July 31, 1997 - - - (557,182) (557,182)
--------- ------ ------- --------- ---------
Balance - July 31, 1997 5,000,000 5,000 859,527 (2,632,362) (1,767,835)
========= ====== ======= ========= =========
<PAGE>
DETOUR MAGAZINE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Month Period Ended July 31, 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.
However, the capital structure of Old Detour has been
retroactively restated to reflect the number of shares
received by Old Detour shareholders in the acquisition and
the Company's par value. Under purchase method accounting,
balances and results of operations of Old Detour will be
included in the accompanying consolidated financial statements
from the date of the transaction, June 6, 1997. The Company
recorded the assets and liabilities (excluding intangibles) at
2. Basis of Presentation (continued)
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.
Proforma results of operations (assuming the business
combination had been effectuated on January 1, 1997) are
not presented because Detour was inactive for the quarter
ended July 31, 1997. As a result, proforma results of
operations for the quarter ended July 31, 1997 would be no
different than the historical statement of operations
presented herewith.
Principles of consolidation
The accompanying consolidated financial statements include
the accounts of Old Detour for the quarter ended July 31,
1997 and of Detour effective with the date of the merger,
June 6, 1997. Significant intercompany transactions and
balances have been eliminated in consolidation.
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 received by the
shareholders of Old Detour in connection with such reverse
acquisition (4,500,000 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.
<PAGE>
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: October 1, 1997
By: /s/ James Turner
James Turner,
President
<PAGE>
DETOUR MAGAZINE, INC.
Exhibit Index to Quarterly Report on Form 10-QSB
For the Quarter Ended July 31, 1997
EXHIBITS Page No.
EX-27 Financial Data Schedule. . . . . . . . . . . . . . . 17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JULY 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 352,348
<ALLOWANCES> 0
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<CURRENT-ASSETS> 418,196
<PP&E> 131,515
<DEPRECIATION> 0
<TOTAL-ASSETS> 569,441
<CURRENT-LIABILITIES> 2,337,276
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> (1,772,835)
<TOTAL-LIABILITY-AND-EQUITY> 569,441
<SALES> 916,525
<TOTAL-REVENUES> 916,525
<CGS> 573,477
<TOTAL-COSTS> 573,447
<OTHER-EXPENSES> 491,879
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (31,046)
<INCOME-PRETAX> (179,876)
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<NET-INCOME> (179,876)
<EPS-PRIMARY> .04
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</TABLE>
