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 Commission file number 333-6440
6/30/97
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)
6337 Highland Drive
Salt Lake City, Utah 84121
Address of principal executive (Zip Code)
offices)
Issuer's telephone number, including area code (801) 567-1196
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 August 13, 1997, the issuer had outstanding 4,334,000 shares of
its Common Stock, $0.001 par value.
Page 001 of ___
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited balance sheet of Downstream Incorporated-DSI (the
"Company") as of June 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 six month periods ended June 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 June 30, 1997, the Company experienced a
net loss in the amount of $1,433. The Company's net loss for the six months
ended June 30, 1997 was $3,411. Loss per share was approximately $0.00 for the
three months ended June 30, 1997, and approximately $0.00 for the six months
ended June 30, 1997.
The Company's losses during the three and six month periods ended June
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 during which time period the Company had no revenues.
The Company had no revenues during the three and six month time periods
ended June 30, 1997.
General and administrative expenses for the three months ended June 30,
1997, were $1,358. General and administrative expenses for the six months ended
June 30, 1997 were $3,261.
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 June 30, 1997, the Company reported total assets of $43,417, up
$37,349 from the $6,068 reported as of December 31, 1996. Current assets as of
June 30, 1997 were $42,075, up $36,310 from the $5,765 reported as of December
31, 1996. Fixed assets were $1,070 as of June 30, 1997, up $1,070 from the $0.00
of fixed assets reported as of December 31, 1997. Other assets were $272 as of
June 30, 1997, down $31 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.
2
<PAGE>
The change in current assets during the three months ended June 30,
1993, reflects an increase in cash of $36,010.
Other assets represent organizational costs net of amortization.
Liabilities
The Company had no liabilities as of June 30, 1997, a decease of $559
from that reported as of December 31, 1996.
Liquidity and Capital Resources - June 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 June 30,
1997. This has provided the Company with the ability to actively pursue its
business purpose of financial consulting.
The Company's most significant cash needs in 1997 include payment of
general and administrative expenses, marketing expenses to expand the Company's
client base,and other expenses relating to the Company's financial 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)
3
<PAGE>
DOWNSTREAM, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
June 30, 1997 and December 31, 1996
4
<PAGE>
C O N T E N T S
Independent Auditors' Report ......................................... 6
Balance Sheet ........................................................ 7
Statement of Operations .............................................. 8
Statement of Stockholders' Equity .................................... 9
Statement of Cash Flows .............................................. 10
Notes to the Financial Statements .................................... 12
5
<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 June 30, 1997 and the related statements of operations, stockholders'
equity and cash flows for the six months ended June 30, 1997 and 1996 and from
inception on November 26, 1996 through June 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
August 12, 1997
6
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
June 30, December 31,
1997 1996
---------------- ------------
(Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash $ 42,075 $ 5,765
----------------- ------------------
Total Current Assets 42,075 5,765
----------------- ------------------
FIXED ASSETS, net (Note 7) 1,070 -
----------------- ---------------
OTHER ASSETS
Organizational cost, net (Note 4) 272 303
----------------- ------------------
Total Other Assets 272 303
----------------- ------------------
TOTAL ASSETS $ 43,417 $ 6,068
================= ==================
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ - $ 559
----------------- ------------------
Total Current Liabilities - 559
----------------- ------------------
TOTAL LIABILITIES - 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 53,485 13,200
Deficit accumulated during the development stage (14,402) (10,991)
----------------- ------------------
Total Stockholders' Equity 43,417 5,509
----------------- ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 43,417 $ 6,068
================= ==================
</TABLE>
The accompanying notes are an integral part of these financial statements
7
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception on
For the three For the Six November 26,
months ended Months Ended 1996 Through
June 30, June 30, June 30,
1997 1996 1997 1996 1997
--------------- ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ - $ -
EXPENSES
General and administrative 1,358 - 3,261 - 14,246
Depreciation and
amoritization 75 - 150 - 156
--------------- ---------------- ---------------- ---------------- ----------------
Total Expenses 1,433 - 3,411 - 14,402
--------------- ---------------- ---------------- ---------------- ----------------
NET LOSS $ (1,433) $ - $ (3,411) $ - $ (14,402)
=============== ================ ================ ================ ================
NET LOSS PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (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
8
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
(Unaudited)
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit
----------- ------------ ------------ ----------
<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 - - (10,381) -
Net loss for the six months
ended June 30, 1997 - - - (3,411)
------------- -------------- -------------- --------------
Balance, June 30, 1997 4,334,000 $ 4,334 $ 53,485 $ (14,402)
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements
9
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception on
For the Three For the Six November 26,
Months Ended Months Ended 1996 Through
June 30, June 30, June 30,
1997 1996 1997 1996 1997
-------------- ---------------- ----------------- ----------------- --------------
CASH FLOWS FROM
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net loss $ (1,433) $ - $ (3,411) $ - $ (14,402)
Adjustments to Reconcile
Net Income
(Loss) to Net Cash Used in
Operating Activities:
Stock issued for services - - - - 7,500
Depreciation and amortization
expense 75 - 150 - 156
Increase (decrease) in
accounts payable (356) - (559) - -
-------------- ---------------- ----------------- ----------------- -------------
Net Cash (Used) Provided
by Operating Activities (1,714) - (3,820) - (6,746)
-------------- ---------------- ----------------- ----------------- -------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Fixed assets purchased - - (1,189) - (1,189)
Organization costs paid - - - - (309)
-------------- ---------------- ----------------- ----------------- -------------
Net Cash (Used) Provided
By Investing Activities - - (1,189) - (1,498)
-------------- ---------------- ----------------- ----------------- -------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Stock offering costs (8,622) - (10,381) - (10,381)
Common stock issued for cash 51,700 - 51,700 - 60,700
-------------- ---------------- ----------------- ----------------- -------------
Net Cash Provided By
Financing Activities 43,078 - 41,319 - 50,319
-------------- ---------------- ----------------- ----------------- -------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 41,364 - 36,310 - 42,075
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 711 - 5,765 - -
-------------- ---------------- ----------------- ----------------- -------------
CASH AND CASH
EQUIVALENTS AT END
OF PERIOD $ 42,075 $ - $ 42,075 $ _ $ 42,075
============== =============== ================= ================= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
10
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
From
Inception on
For the Three For the Six November 26,
Months Ended Months Ended 1996 Through
June 30, June 30, June 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
11
<PAGE>
DOWNSTREAM, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 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 their clients in assessing their client's current
financial condition as well as the client's future financial
needs. The Company is currently a development stage company as
operations have not commenced.
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 June 30,1997, the Company had net operating loss carry forwards
of approximately $14,402 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.
12
<PAGE>
DOWNSTREAM, INC.
(A Development Stage Company)
Notes to the Financial Statements
June 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
six months ended June 30, 1997 was $31.
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 has agreed to pay its President $300 per month
for the use of his home as its office until the completion of the
public stock offering.
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 six months ended June
30, 1997 was $119.
13
<PAGE>
PART II - OTHER INFORMATION
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 June 30, 1997.
(This Space Intentionally Left Blank)
14
<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: August 13, 1997 By: /s/ Barry A. Ellsworth
-----------------------
Barry A. Ellsworth
President
15
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 42,075
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,189
<DEPRECIATION> 119
<TOTAL-ASSETS> 43,417
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 4,334
<OTHER-SE> 53,485
<TOTAL-LIABILITY-AND-EQUITY> 43,417
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,411
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,411)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,411)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,411)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
