SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended 9/30/97 Commission file number 333-6440
DOWNSTREAM INCORPORATED-DSI
(Exact name of small business issuer as specified in its charter)
Utah 87-0567618
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
2046 E Murray Holladay Rd.
Suite 202
Salt Lake City, Utah 84117
Address of principal executive (Zip Code)
offices)
Issuer's telephone number, including area code (801) 272-5174
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
As of October 25, 1997, the issuer had outstanding 4,334,000 shares
of its Common Stock, $0.001 par value.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited balance sheet of Downstream Incorporated-DSI (the
"Company") as of September 30, 1997 and the related audited balance sheet of
the Company as of December 31, 1996, the unaudited related statements of
operations and cash flows for the three and nine month periods ended
September 30, 1997, and the notes to the financial statements are attached
hereto as Appendix "A" and incorporated herein by reference.
The accompanying financial statements reflect all adjustments which
are, in the opinion of management, necessary to present fairly the financial
position of the Company.
The Company was organized on November 26, 1996, and soon thereafter
issued 3,300,000 shares of its common stock to its founders and to other
shareholders. The Company commenced a public offering of its common stock on
April 28, 1997 pursuant to which it raised $51,700 in gross offering proceeds
and issued an additional 1,034,000 shares of its common stock at the public
offering price of $0.05 per share.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations.
During the three months ended September 30, 1997, the Company
experienced a net loss in the amount of $11,315. The Company's net loss for
the nine months ended September 30, 1997 was $14,726. Loss per share was
approximately $0.003 for the three months ended September 30, 1997, and
approximately $0.004 for the nine months ended September 30, 1997.
The Company's losses during the three and nine month periods ended
September 30, 1997 are attributed to incurring general and administrative
expenses during the time period in which the Company was seeking to complete
its initial public offering, and commence operations by locating and
beginning to work with its initial clients.
The Company had revenues of $240 from interest on a money market
account during the three and nine month time periods ended September 30,
1997. The Company had no other revenues during this time period. However, the
Company has developed a relationship with a large, national food and drug
company, and entered into contracts with that company, that the Company
believes will create significant revenues for at least the next two quarters.
Other such clients are being pursued.
General and administrative expenses for the three months ended
September 30, 1997, were $11,473. General and administrative expenses for the
nine months ended September 30, 1997 were $14,734.
General and administrative expenses should generally be viewed as
likely to recur in the normal course of business, although the amounts of
such expenditures will vary.
Professional fees represent one component of general and
administrative expenses. Professional fees reflect legal, accounting and
other consulting costs associated with the preparation and filing of reports
to the U.S. Securities and Exchange Commission, services rendered in
connection with capital raising and financing transactions, and other general
legal and accounting work.
Balance Sheet Information
Assets
As of September 30, 1997, the Company reported total assets of
$28,635, up $22,567, from the $6,068, reported as of December 31, 1996.
Current assets as of September 30, 1997 were $27,205, up $21,440,
from the $5,765 reported as of December 31, 1996. Fixed assets were $1,173 as
of September 30, 1997, up $1,173, from the $0.00 of fixed assets reported as
of December 31, 1996.
Other assets were $257 as of September 30, 1997, down $46 from the
$303 reported as of December 31, 1996. The change in total assets reflects
primarily an infusion of cash received as net offering proceeds from the
Company's initial public offering, less general and administrative costs
incurred during the quarter.
The change in current assets during the three months ended
September 30, 1997, reflects an increase in cash of $21,260.
Other assets represent organizational costs net of amortization.
Liabilities
The Company had liabilities of $2,639 as of September 30, 1997, an
increase of $2,080 from the $559 reported as of December 31, 1996.
Liquidity and Capital Resources - September 30, 1997
The Company received an infusion of a significant amount of capital
from the Company's initial public offering in the three months ended
September 30, 1997. This has provided the Company with the ability to
actively pursue its business purpose of general business and financial
consulting, and as previously stated, contracts have been entered into that
should produce significant revenues for the Company for at least the next 6
months.
The Company's most significant cash needs in 1997 will include
payment of general and administrative expenses, marketing expenses to expand
the Company's client base, and other expenses relating to the Company's
consulting business.
The Company may choose to seek in the future to expand its resources
to take advantage of other opportunities as they may develop. No assurance
can be given that the Company's resources will be adequate to take advantage
of any such opportunity, or that such opportunities will ever materialize.
(This Space Intentionally Left Blank)
<PAGE>
PART II - OTHER INFORMATION
Use of Proceeds from the Sale of Securities.
Effective September 2, 1997 the SEC rescinded the use of Form SR
stating that the forms were "no longer necessary or appropriate", but that
the use of proceeds was "to be reported in each periodic report thereafter
until the registrant has disclosed the use of all of the proceeds".
For the period ending July 28, 1997 a Form SR was filed by the
Company in which it reported that after deducting the expenses of its
underwriting the Company was left with net offering proceeds of $40,516.00.
Other expenses of approximately $5,450.00 were then reported in that filing.
Since that time, and for the period ending September 30, 1997, the Company
has spent net proceeds from the offering as follows:
Rent: 600.00
Legal: 74.00
Accounting: 132.00
Salaries: 4,000.00
Misc. G&A: 2,423.00
Travel expenses: 1,667.00
Expenses incurred in
search for new clients: 968.00
The aforementioned uses of proceeds do not represent a material
change in the use of proceeds described in the prospectus.
Item 6. Exhibits and Reports on Form 8-K.
(a) There are no exhibits included with this report.
(b) The Company has filed no reports on Form 8-K during the quarter
ended September 30, 1997.
(This Space Intentionally Left Blank)
<PAGE>
Appendix "A"
DOWNSTREAM, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
September 30, 1997 and December 31, 1996
1
<PAGE>
C O N T E N T S
Independent Auditors' Report .......................................... 3
Balance Sheets ........................................................ 4
Statements of Operations .............................................. 5
Statements of Stockholders' Equity .................................... 6
Statements of Cash Flows .............................................. 7
Notes to the Financial Statements ..................................... 9
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Downstream, Inc.
(A Development Stage Company)
Salt Lake City, Utah
The accompanying balance sheet of Downstream, Inc. (a development stage company)
as of September 30, 1997 and the related statements of operations, stockholders'
equity and cash flows for the three months and nine months ended September 30,
1997 and 1996 and from inception on November 26, 1996 through September 30, 1997
were not audited by us and, accordingly, we do not express an opinion on them.
The accompanying balance sheet as of December 31, 1996 was audited by us and we
expressed an unqualified opinion on it in our report dated August 7, 1997.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
October 16, 1997
3
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
September 30, December 31,
1997 1996
(Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash $ 27,205 $ 5,765
----------------- ------------------
Total Current Assets 27,205 5,765
----------------- ------------------
FIXED ASSETS, net (Note 7) 1,173 -
----------------- ------------------
OTHER ASSETS
Organizational cost, net (Note 4) 257 303
----------------- ------------------
Total Other Assets 257 303
----------------- ------------------
TOTAL ASSETS $ 28,635 $ 6,068
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,639 $ 559
----------------- ------------------
Total Current Liabilities 2,639 559
----------------- ------------------
TOTAL LIABILITIES 2,639 559
----------------- ------------------
STOCKHOLDERS' EQUITY
Preferred stock: 50,000,000 shares
authorized of $0.001 par value, -0-
shares issued and outstanding - -
Common stock: 100,000,000 shares authorized of
$0.001 par value, 4,334,000 and 3,300,000
shares issued and outstanding, respectively 4,334 3,300
Additional paid-in capital 47,379 13,200
Deficit accumulated during the development stage (25,717) (10,991)
----------------- ------------------
Total Stockholders' Equity 25,996 5,509
----------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,635 $ 6,068
================= ==================
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
For the Three For the Nine November 26,
Months Ended Months Ended 1996 Through
September 30, September 30, September 30,
1997 1996 1997 1996 1997
--------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
REVENUES $ 240 $ - $ 240 $ - $ 240
-------------- ---------------- ---------------- ---------------- ----------------
EXPENSES
General and administrative 11,473 - 14,734 - 25,705
Depreciation and
amoritization 82 - 232 - 252
--------------- ---------------- ---------------- ---------------- ----------------
Total Expenses 11,555 - 14,966 - 25,957
--------------- ---------------- ---------------- ---------------- ----------------
NET LOSS $ (11,315) $ - $ (14,726) $ - $ (25,717)
=============== ================ ================ ================ ================
NET LOSS PER SHARE $ (0.003) $ (0.00) $ (0.004) $ (0.00)
=============== ================ ================ ================
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 4,334,000 - 3,493,165 -
=============== ================ ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
(Unaudited)
Deficit
Accumulated
Additional During the
Common Stock Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----
<S> <C> <C> <C> <C>
Balance, November 26, 1996 $ - $ - $ - $ -
Common stock issued for services
rendered valued at $0.005 per share 1,500,000 1,500 6,000 -
Common stock issued for cash
valued at $0.005 per share 1,800,000 1,800 7,200 -
Net loss from inception on
November 26, 1996 through
December 31, 1996 - - - (10,991)
-------------- -------------- -------------- --------------
Balance, December 31, 1996 3,300,000 3,300 13,200 (10,991)
Common stock issued for cash
valued at $ 0.05 per share 1,034,000 1,034 50,666 -
Stock offering costs - - (16,487) -
Net loss for the nine months
ended September 30, 1997 - - - (14,726)
------------- -------------- -------------- --------------
Balance, September 30, 1997 4,334,000 $ 4,334 $ 47,379 $ (25,717)
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception on
For the Three For the Nine November 26,
Months Ended Months Ended 1996 Through
September 30, September 30, September 30,
1997 1996 1997 1996 1997
-------------- ---------------- ----------------- ----------------- -------------
CASH FLOWS FROM
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net loss $ (11,315) $ - $ (14,726) $ - $ (25,717)
Adjustments to Reconcile
Net Income
(Loss) to Net Cash Used in
Operating Activities:
Stock issued for services - - - - 7,500
Depreciation and amortization
expense 82 - 232 - 238
Increase (decrease) in
accounts payable 2,639 - 2,080 - 2,639
-------------- ---------------- ----------------- ----------------- -------------
Net Cash (Used) Provided
by Operating Activities (8,594) - (12,414) - (15,340)
-------------- ---------------- ----------------- ----------------- -------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Fixed assets purchased (170) - (1,359) - (1,359)
Organization costs paid - - - - (309)
-------------- ---------------- ----------------- ----------------- -------------
Net Cash (Used) Provided
By Investing Activities (170) - (1,359) - (1,668)
-------------- ---------------- ----------------- ----------------- -------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Stock offering costs (6,106) - (16,487) - (16,487)
Common stock issued for cash - - 51,700 - 60,700
---------------------------------- ----------------- ----------------- -------------
Net Cash Provided By
Financing Activities (6,106) - 35,213 - 44,213
-------------- ---------------- ----------------- ----------------- -------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS (14,870) - 21,440 - 27,205
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 42,075 - 5,765 - -
-------------- ---------------- ----------------- ----------------- -------------
CASH AND CASH
EQUIVALENTS AT END
OF PERIOD $ 27,205 $ - $ 27,205 $ - $ 27,205
============== =============== ================= ================= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
7
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
For the Three For the Nine November 26,
Months Ended Months Ended 1996 Through
September 30, September 30, September 30,
--------------------------------------------------------------------------- --------------
1997 1996 1997 1996 1997
-------------- ---------------- ----------------- ----------------- --------------
Cash Paid For:
<S> <C> <C> <C> <C> <C>
Interest $ - $ - $ - $ - $ -
Income taxes $ - $ - $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements
8
<PAGE>
DOWNSTREAM, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1997 and December 31, 1996
NOTE 1 - ORGANIZATION AND HISTORY
a. Organization
The financial statements presented are those of Downstream, Inc.
(a development stage company). The Company was incorporated under
the laws of the State of Utah on November 26, 1996. The Company
was incorporated to engage in the business of financial
consulting. This activity includes, but is not limited to,
assisting clients in assessing the client's current financial
condition as well as the client's future financial needs. The
Company is currently a development stage company.
b. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments
with maturities of three months or less at the time of
acquisition.
d. Net Loss Per Share
The computations of net loss per share of common stock are based
on the weighted average number of shares outstanding during the
period of the financial statements.
e. Provision for Taxes
At September 30,1997, the Company had net operating loss carry
forwards of approximately $23,078 that may be offset against
future taxable income through 2012. No tax benefit has been
reported in the financial statements because the Company believes
there is a 50% or greater chance the net operating loss
carryforwards will expire unused. Accordingly, the potential tax
benefits of the net operating loss carryforwards are offset by a
valuation allowance of the same amount.
f. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
9
<PAGE>
DOWNSTREAM, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1997 and December 31, 1996
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of
liabilities in the normal course of business. However, the Company
does not have significant cash or other material assets, nor does
it have an established source of revenues sufficient to cover its
operating costs and to allow it to continue as a going concern.
The accompanying financial statements do not include any
adjustments that might result from the outcome of this
uncertainty. Management has begun offering its services to
potential clients with the expectation that revenues will cover
future costs.
NOTE 3 - STOCK TRANSACTIONS
On December 10, 1996, the Company issued 1,500,000 shares of
common stock for services rendered by a related party. The shares
were valued at $0.005 per share.
On December 10, 1996, the Company issued 1,800,000 shares of stock
for cash at $0.005 per share.
NOTE 4 - ORGANIZATION COSTS
The Company is amortizing the non-recurring costs of organizing
the Company over a five year period. Amortization expense for the
nine months ended September 30, 1997 was $52.
NOTE 5 - PUBLIC OFFERING
The Company completed a public offering of 1,034,000 shares of its
previously unissued common stock to the public at $0.05 per share.
The Company received gross proceeds in the amount of $51,700 as a
result of the public offering.
NOTE 6 - COMMITMENTS
Rent - the Company presently pays $300.00 per month office rent to
Intermountain Mortgage. Intermountain Mortgage is owned by Mr. Joe
Thomas and Mr. Rob Karz. Mr. Thomas is an officer and director of
Downstream Inc., and Mr. Karz is a controlling shareholder.
Officer compensation - the Company has agreed to pay its President
a salary of $2,000 per month. In addition to the salaries the
Company has agreed to pay its President and the other officers a
commission of up to 20% of revenues generated by their efforts.
NOTE 7 - FIXED ASSETS
The Company purchased office equipment for the operations of its
business. The Company has capitalized these assets and is
depreciating them over a five year period using the straight line
method. Depreciation expense for the nine months ended September
30, 1997 was $180.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act
of 1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DOWNSTREAM INCORPORATED-DSI
(Registrant)
Date: October 25, 1997 By: /s/ Barry A. Ellsworth
-----------------------
Barry A. Ellsworth
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 27,205
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,205
<PP&E> 1,173
<DEPRECIATION> 257
<TOTAL-ASSETS> 28,635
<CURRENT-LIABILITIES> 2,639
<BONDS> 0
0
0
<COMMON> (4,334)
<OTHER-SE> 21,662
<TOTAL-LIABILITY-AND-EQUITY> 28,635
<SALES> 0
<TOTAL-REVENUES> 240
<CGS> 0
<TOTAL-COSTS> 11,315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,315)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
