SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended 12/31/97 Commission file number 333-6440
DOWNSTREAM INCORPORATED - DSI
(Name of small business issuer in its charter)
Utah 87-0567618
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
2046 E. Murray Holladay Road, Suite 202
Salt Lake City, Utah 84117
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (801) 272-5174
Securities registered under Section 12(b) of the Exchange Act:
Common Stock - Par Value: $0.001 Per Share
(Title of class)
Check whether the issuer (1) 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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year: $12,675.
The aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the average bid and asked prices
($0.05 per share) on December 31, 1997 was approximately $61,700.
As of March 23, 1998, the issuer had outstanding approximately
4,334,000 shares of its Common Stock, $0.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
HISTORY
The Company was organized under the laws of the State of Utah on
November 26, 1996 under the name Downstream Incorporated - DSI. In 1997 the
Company conducted a public offering of its common stock which was completed in
July 1997, and pursuant to which the Company raised approximately $51,700 in
gross offering proceeds. Downstream Incorporated - DSI will sometimes be
referred to hereafter as the Company.
Downstream Incorporated was organized to act primarily as a financial
consulting firm. However, the Company is authorized to, and retains the right
to, engage in any type of lawful business. On September 3, 1997, a new division
of the Company was formed to engage in the business of Security Consulting.
The address and telephone number of the principal offices of the
Company are 2046 E. Murray Holladay Rd. Suite 202, Salt Lake City, Utah 84117,
and (801) 272-5174.
BUSINESS - INDUSTRY SEGMENTS
1. The Company was formed on November 26, 1996 to engage primarily in
the business of financial consulting. Such consulting services focus primarily
in the area of mergers and acquisitions.
2. A second division of the Company was formed in September 1997, to
act as a security consulting business, when the Company was presented with an
opportunity by an individual the Company had approached as a prospective client
in its financial consulting business. The security division focuses primarily in
the area of commercial security systems. Nearly all of the Company's revenues
through December 31, 1997 have been generated from this division.
The Company believes, as it continues to search for clients in either
or both areas, it will locate suitable clients from which revenues can be
generated. However, there can be no assurance that such clients will be found by
the Company, or that future revenues of any kind will be generated
GENERAL DESCRIPTION OF BUSINESS - FINANCIAL CONSULTING
The financial consulting division of the Company is engaged primarily
in locating clients that are interested in growing their businesses through
mergers and acquisitions. After locating such clients, the Company searches for
suitable acquisitions for its clients. Once the Company has located a suitable
business to be acquired by its clients, the Company assists its clients in
negotiating agreements and in completing the acquisitions. Through December 31,
1997, clients have been located. However, no mergers or acquisitions have yet
been completed.
GENERAL DESCRIPTION OF BUSINESS - SECURITY CONSULTING
The Security Consulting Division of the Company seeks out commercial
clients that want security systems designed for them and/or installed in their
places of business. After locating such clients, the Company then subcontracts
with other security companies to have such systems designed and installed. The
types of security systems the Company deals with primarily are Burglar Alarm
Systems, Fire Detection Systems and Closed Circuit TV Systems.
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In October 1997, the Company entered into and completed its first 2
contracts with its first client - U. S. Satellite, a division of American Stores
Company. These contracts were for the installation of Burglar Alarm Systems in 2
Osco Drug Stores, in Helena, Montana. The Company subcontracted with a Montana
company specializing in the installation of security systems to have these
projects completed. The Montana contracts were the major source of revenues for
the Company in the year ended December 31, 1997. Since that time the Company has
received 10 more contracts from U. S. Satellite for the installation of similar
systems in other Osco Drug Stores in various states. It is anticipated that the
newly received contracts will be completed during the first quarter of 1998.
The Company does not install such systems itself, but rather acts only
as a consultant and overseer. The Company subcontracts with qualified
contractors in various locations where projects are being completed to have the
actual systems installed. Once the Company has received a contract for the
installation of such a system, it locates a suitable contractor in the area
where the project is to be completed, then contracts with them to have the work
done. The Company oversees such projects until they are completed in a manner
which is acceptable and satisfactory to its clients.
The Company does not manufacture or deliver any products, other than
its services and expertise as either financial or security consultants. To the
present, its only products are of a service nature.
PRICING - FINANCIAL CONSULTING
The Company works on a fee and/or commission basis with its financial
consulting clients. Fees and commissions are negotiated with each client on an
individual basis. The Company anticipates that fees will range from 2 to 10
percent of the value of any acquisition completed, depending on the size of the
purchase to be made and the agreement reached, or that such fees may be
negotiated on an hourly or other fee basis. Such fees are to be paid to the
Company once the Company has located a suitable business to be acquired, and the
acquisition is successfully completed, or when the services are completed.
PRICING - SECURITY CONSULTING
Once the Company has located a potential client, the Company bids on
specific projects. In submitting bids the Company takes into consideration the
general costs of doing business, the wholesale costs of the systems to be
installed, the sums it will be charged by its subcontractors for labor, and the
margins it wishes to retain as profit. The Company tries to maintain gross
margins of at least 50%. However, to be awarded bids, lesser margins are
sometimes considered. The Company's bids can be accepted or rejected. If
accepted, the Company then proceeds to complete said projects by purchasing the
systems to be installed and making agreements with subcontractors to have said
systems installed. The Company oversees all such installations.
SALES AND MARKETING; DEPENDENCE ON MAJOR CUSTOMER
The Company's CEO and President, Barry A. Ellsworth, does the majority
of the Company's sales and marketing work. He does this primarily by phone, fax,
mail, attendance at various conventions and conferences, and by utilizing the
internet. He also maintains numerous professional relationships that refer
potential clients to the Company.
Approximately 97% of the Company's gross revenues in 1997 were derived
from one major account, U. S. Satellite, a division of American Stores Company.
Loss of this account would have an extremely adverse affect on the Company's
business.
The Company is generally paid for its services thirty days net (payment
will be due thirty days from receipt of the invoices for services rendered), 60
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days net and in some cases as late as 90 days net. These terms vary from account
to account depending on the agreement arrived at between the Company and its
clients.
BACKLOG
Since the Company does not produce or market products, other than its
services, it does not experience problems with backlog. The Company does not
consider backlog to be an indicator of future performance.
MERCHANDISING AND ADVERTISING
The Company's ability to promote and market its services is important
to the success of the Company. However, at present the only type of
merchandising and advertising the Company engages in is through the efforts of
the Company's President as he markets the Company's services. The Company
believes its ability to establish and maintain favorable relations with its
clients is essential to the success of the Company. It is hoped that as, and if,
the Company continues to grow, that moneys can be allocated to more effectively
market and advertise the Company's services to potential clients.
SEASONALITY
Neither of the areas of business in which the Company is engaged is
sensitive to seasonality. The Company does not anticipate its business will be
affected by any seasonal factors or changes.
PRODUCT PROTECTION
The Company does not produce or manufacture any products, other than
its services as financial or security consultants. It does not own any
intellectual properties, trademarks, copyrights or patents of any kind.
Therefore, product protection is not something the Company believes will
influence its future success or failure.
GOING CONCERN OPINION
The Company's independent accountant has issued a "going concern"
opinion in which the independent accountant stated "the Company is a development
stage company with no significant operating results to date which raises
substantial doubt about its ability to continue as a going concern."
The Company presently has no financing arrangements with any persons or
institutions. Nor is the Company indebted to any person or institution for any
amount. However, the Company's financial resources are limited at this time. The
Company's only foreseeable sources of revenue are 10 contracts it has been
awarded by U. S. Satellite. These contracts require the Company to have burglar
alarm systems and CCTV systems installed in 10 different Osco Drug Stores in
various states throughout the U.S. The Company anticipates fulfilling these
contracts during the first quarter of 1998. It is believed that the revenues to
be received from these contracts will be sufficient to allow the Company to
continue as a going concern for a period of approximately 9 to 12 months. After
this time, the Company's future success will depend on continued sales, the
Company's ability to secure financing of some kind, or to produce sufficient
revenues from other sources to allow the Company to continue its operations.
FACILITIES; RELATED PARTY TRANSACTION
The Company presently owns no facilities. It rents office space,
located at 2046 E. Murray Holladay Road, Suite 202, Salt Lake City, Utah, from
Intermountain Mortgage, for the sum of $300. per month. This is not an arm's
length transaction. Intermountain Mortgage is owned by Joe Thomas who is an
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officer and director of the Company and Rob Karz who owns a significant amount
of stock in the Company. The sum of $300. per month is considered a favorable
rate for the Company when compared to other available office space in the
surrounding area. The Company's President also maintains an office of the
Company at his private residence, for which no rent is charged.
EMPLOYEES
The Company presently has 1 full-time employee, Barry A. Ellsworth, the
Company's CEO and President. None of the Company's employees are represented by
a union or a collective bargaining agreement, and the Company believes its
employee relations are excellent.
COMPETITION
There are many large companies, as well as small companies and
individuals, engaged in the businesses of financial consulting and security
consulting. The Company faces significant competition in both areas from such
companies and individuals. Many of the Company's competitors have much greater
financial and human resources than the Company. Competition is intense and there
are many intangibles, including pricing, locating clients, locating suitable
acquisitions, and bringing those acquisitions to fruition. It is difficult to
predict whether the Company will be successful at its business in the future.
Many of the Company's competitors also have much greater resources to
market and merchandise their services. There can be no assurance given that the
Company will be able to overcome the many obstacles it faces and to continue as
a going concern. However, it is the belief of management that it will be able to
continue as a business and continue to grow the Company and its businesses.
RISK FACTORS
The Company considers the following matters to be risks which could
have a material adverse effect on the financial condition and operations of the
Company:
Financing Source Needed; Current Financing Limited The Company's
available resources are extremely limited. The Company's only foreseeable
sources of revenue are 10 contracts it has been awarded by U. S. Satellite.
These contracts are for the Company to arrange to have burglar alarm systems and
CCTV systems installed in 10 different Osco Drug Stores in various states
throughout the country. The Company anticipates fulfilling these contracts
during the first quarter of 1998. It is believed the revenues to be received
from these contracts will be sufficient to allow the Company to continue as a
going concern for a period of approximately 9 to 12 months. However, to continue
as a going concern after that time it will be essential for the Company to
generate additional sales, or secure either debt or equity financing from some
source. The Company presently has no commitments from any lender to provide
credit financing to the Company. No assurance can be given that the Company will
be able to obtain any debt or equity financing to permit expansion or continued
operations.
Competition. The Company is engaged in highly competitive businesses
and competes directly with many companies which have substantially greater
financial resources, experience and more substantial marketing organizations
than the Company. The Company's ability to compete will depend on its ability to
obtain clients and secure contracts in both areas of business. On the financial
consulting side of the business, the Company also must locate suitable
acquisitions for its clients after obtaining clients. The competition to do this
is intense.
Current Trends in the Economy. The Company's profitability and sales
are primarily dependent on the strength of the U.S. economy. To the extent that
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weaknesses in the U. S. economy occur, sales of the Company's services, may be
adversely impacted. If weakness in the economy were to occur, the Company cannot
predict if, and, if so, to what extent, or for what period, such a trend will
adversely impact sales of its services.
Earnings Fluctuations. Because the services provided by the Company
often take a significant amount of time to complete, due to the personal
relationships that must be fostered to gain the trust of clients, especially in
the area of financial consulting, the Company expects that it will experience
frequent and perhaps large fluctuations in both revenues and operating results.
Dependence on Management and Key Personnel; No Key Man Insurance; No
Director's and Officer's Insurance. Although Joe Thomas and Jim Slater, who are
both officers and directors of the Company, participate in the management
decisions affecting the Company, the Company's day to day operations are
primarily dependent on the efforts of Mr. Barry A. Ellsworth, the Company's CEO
and President. The Company's success will be dependent on the ability of the
Company's President to locate clients in both areas of the Company's businesses.
This will include locating suitable acquisitions for the Company's financial
consulting clients and to assist those clients in completing such acquisitions.
His efforts will also be required to secure contracts for the installation of
security systems for the security division of the Company. To accomplish the
goals of the Company the officers and directors must also secure either debt or
equity financing to finance the Company's operations and to market its services.
This must be done with terms that are favorable to the Company.
The Company has no written employment agreement with any of its
officers. The Company presently has no key man insurance or director's and
officer's liability insurance.
Control by Current Management. Current directors of the Company
collectively own approximately 48.5% of the Company's outstanding Common Stock.
By virtue of their share holdings, as well as their position as directors and
officers of the Company, they have a significant influence over the power to
elect the entire Board of Directors and to approve or disapprove of corporate
action submitted to a vote of the Company's stockholders.
Shares Eligible for Future Sale. Of the 4,334,000 shares of Common
Stock outstanding, approximately 23.85% are unrestricted and can be sold at any
time and approximately 76.15% are "restricted" shares within the meaning of Rule
144 under the Securities Act of 1933 (the "Securities Act" or "Act"). Of the
restricted shares, approximately 3,100,000 are beneficially owned by directors
or executive officers or other affiliates of the Company. Generally, under Rule
144, a person who has held restricted shares for one year may sell such shares,
subject to certain volume limitations and other restrictions, without
registering them under the Act. Rule 144 generally also permits sales of shares,
without any volume limitations, by a person who is not an "affiliate" of the
Company and who has held restricted shares for at least two years.
Sales of shares of the Company's Common Stock may have an adverse
affect on the market price of the Common Stock. Sales of such securities could
also adversely affect the Company's ability to raise additional capital in the
equities market in the future.
OTHER OPPORTUNITIES
The Company continues to conduct evaluations of business opportunities
in other areas of industry, and continues to explore the possibilities of
obtaining funding for such opportunities. Most of this activity is conducted by
the Company's CEO and President Barry A. Ellsworth. However, no agreements have
been reached with any person for the commencement of any such activities. No
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assurance can be given as to when or whether any such opportunities may become
available to the Company, or as to the nature of any such opportunities.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company does not own any facilities at this time. It currently
rents office space from Intermountain Mortgage for a sum of $300 per month on a
month to month basis. The office space consists of one private office occupied
by the Company's president, and the shared use of a computer, photocopy machine,
fax machine and reception services. The agreement concerning this rental
arrangement is verbal. Intermountain Mortgage is owned by Mr. Joe Thomas, an
officer and director of the Company, and Mr. Rob Karz, a shareholder of a
significant amount of common stock of the Company.
The Company has purchased and owns a small amount of office equipment
to run the day to day operations of the Company.
The Company's CEO and President, Mr. Barry Ellsworth, also maintains an
office of the Company at his private residence, for which the Company pays no
rent.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal proceedings.
The Company's property is not subject to any material pending legal proceedings.
To the best of the Company's knowledge, no governmental authority or other party
has threatened or is contemplating the filing of any material legal proceedings
against the Company. To the best of the Company's knowledge, no director,
officer, affiliate of the Company or any owner of record or beneficially of more
than 5% of the Company's common stock is a party adverse to the Company or has a
material interest adverse to the Company in any material legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no meetings of the Company's shareholders held during the
fourth quarter of the year ended December 31, 1997. No matters were submitted to
a vote of security holders, through the solicitation of proxies or otherwise,
during the fourth quarter of the year ended December 31, 1997.
(This Space Intentionally Left Blank)
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Company's initial public offering was completed in July 1997.
However, the Company's common stock did not trade in any recognized public
market until December 24, 1997. From December 24, 1997 through December 31, 1997
the Company's Common Stock traded on the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") Bulletin Board, under the
symbol "DWNS." The following table sets forth, for the respective periods
indicated, the prices of the Company's Common Stock in the over-the-counter
market, based on inter-dealer bid prices, without retail markup, markdown,
commissions, or adjustments (which may not necessarily represent actual
transactions). The quotations have been provided by market makers of the
Company's Common Stock and/or the National Quotation Bureau.
Quarter Ended High Bid Low Bid
------------- -------- -------
December 31, 1997 $0.05 $0.05
NO. OF STOCKHOLDERS OF RECORD
As of December 31, 1997, there were approximately 42 holders of record
of the Company's Common Stock. The Company believes that a few beneficial owners
of its Common Stock hold their shares in street name.
DIVIDEND INFORMATION
The Company has not paid any dividends in the past. The Company
currently intends to retain all earnings to finance the development and
expansion of its operations and does not anticipate paying cash dividends or
making any other distributions on its shares of Common Stock in the foreseeable
future. The Company's future dividend policy will be determined by its Board of
Directors on the basis of various factors, including the Company's results of
operations, financial condition, business opportunities and capital
requirements.
Under Utah state corporate law, no dividends may be paid if, after giving
effect to the dividends: (a) the Company would not be able to pay its debts as
they become due in the usual course of business; or (b) except as otherwise
specifically allowed by the Company's Articles of Incorporation, the Company's
total assets would be less than the sum of its total liabilities plus the amount
that would be needed, if the Company were to be dissolved at the time of
distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
dividend.
RECENT SALES OF UNREGISTERED SECURITIES
During the year ended December 31, 1997, the only equity securities of
the Company sold by the Company that were not registered under the Securities
Act of 1933 (other than any unregistered sales made in reliance on Regulation S)
are described as follows: None.
INITIAL PUBLIC OFFERING
On April 28, 1997, the Company's registration statement on Form SB-2
was declared effective (Registration No. 333-6440). The offering then promptly
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commenced, and was terminated in July 1997 after the sale of 1,034,000 shares of
the Company's common stock (before the sale of all 4,000,000 shares of common
stock offered), for which the Company received $51,700 in gross offering
proceeds. The offering was sold by the Company's president who received no
commissions or other offering compensation for is sale efforts. All shares sold
in the offering were sold by the Company. There were no selling shareholders
involved.
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 the underwriting, the
Company was left with net offering proceeds of approximately $40,516.00. Other
expenses of approximately $5,450.00 were then reported in the filing. For the
three month period ending September 30, 1997, the Company reported other net
proceeds uses of approximately $9,864 that were reported in the Company's Form
10-QSB covering that period. Since that time, and for the three month period
ending December 31, 1997, the Company has spent net proceeds from the offering
approximately as follows:
Rent: $ 900.00(1)
Legal: 1,431.00
Accounting: 1,381.00
Salaries: 6,000.00(1)
Misc. G&A: 2,050.00
Travel Expenses: 0.00
Search for new clients: 114.00
---------
Total: $ 11,876.00
(1) These amounts were paid to officers, directors or other affiliates of the
Company.
The aforementioned uses of proceeds do not represent a material change
in the use of proceeds described in the prospectus.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERAL
The Company was formed on November 26, 1996 to engage primarily in the
business of financial consulting. Its corporate charter authorizes it to seek
out and assist clients in evaluating their current financial condition and
future financial needs, and to assist such clients in furthering their business
plans and goals. The Company has a very limited operating history. Much of the
Company's time and efforts over the past year were devoted to completing an
offering of its Common Stock to fund the operations of the Company.
PLAN OF OPERATION
The Company's plan of operations for the next twelve months is to focus
on the following:
1. Complete the existing contracts with U.S. Satellite to arrange for
the installation of certain security systems in Osco Drug Stores.
2. Increase the Company's clientele in the security consulting
business, and attempt to obtain additional contracts from U.S. Satellite and any
future clients.
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3. Increase the Company's financial consulting clientele, and begin to
provide financial consulting services to clients.
The Company should be able to continue as a going concern for the first
9 to 12 months of 1998 based solely on the existing contracts with U.S.
Satellite which the Company intends to complete during the first quarter of
1998. Thereafter, the Company will need to generate revenues from additional
security contracts which the Company will seek to obtain or from providing
financial consulting services. Otherwise, the Company would need to seek capital
through loans or through the issuance of debt or equity securities to continue
as a going concern. The Company has no present plans to seek loans or raise
capital through the sale of its securities. No assurance can be given that the
Company will be able to obtain any loans or raise capital through securities
issuances if it seeks to do so.
The Company does not expect: (a) to engage in any research and
development of any kind during 1998; (b) to purchase or sell any plant or
significant equipment during 1998; or (c) any significant changes in the number
of employees during 1998.
RESULTS OF OPERATIONS
For the year ended December 31, 1997, the Company experienced a net
loss of approximately $25,446 compared to a net loss of $10,991 in 1996.
Management attributes the 1997 loss, as well as the increased loss compared to
1996, to costs associated with the Company's initial public offering of its
Common Stock, and increased operating costs due primarily to the fact that the
Company was in business for an entire year during 1997 in contrast to
approximately only one month in 1996. This resulted in increased operating
expenses in 1997.
Revenues
The Company generated its first revenues during the months of October
and November of 1997. These revenues were the result of contracts awarded to the
Security Division of the Company by U. S. Satellite, a division of American
Stores Company, to have burglar alarm systems installed in 2 Osco Drug Stores in
Helena, Montana. These were the only revenues generated by the Company during
the year ended December 31, 1997, other than interest income on funds received
from the sale of stock which were invested in a money market account. The
Security Division of the Company was formed on September 3, 1997 at a meeting of
the Board of Directors after the Company's President had been presented with an
opportunity to have security systems installed for U. S.
Satellite, a Division of American Stores Company.
The Company was awarded 10 more contracts by U. S. Satellite in
December 1997. These contracts require the Company arrange to have burglar alarm
systems and CCTV systems installed in 10 new Osco Drug Stores in various states
throughout the U.S. It is anticipated by the Company that these contracts will
be completed during the first quarter of 1998.
General and administrative costs of $37,820, were offset by revenues of
$12,675, in 1997, in contrast with general and administrative costs of $10,985,
with no revenues to offset those costs in 1996. General and administrative costs
consisted of costs associated with the Company's initial public offering, the
salary paid to the Company's President, rent and general office expenses,
expenses associated with locating new clients, and travel expenses. These were
the major portions of general and administrative expenses incurred during the
year ended December 31, 1997.
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Expenses
General and administrative expenses of $37,820 in 1997, increased
$26,835 from the $10,985 of general and administrative expenses incurred during
the period from inception on November 26, 1996 until December 31, 1996. This is
due primarily to the salary being paid to the Company's President and the fact
that the Company was conducting business for a longer period of time during
1997. General and administrative costs consisted of costs associated with the
Company's initial public offering, the salary paid to the Company's President,
rent and general office expenses, expenses associated with locating new clients,
and travel expenses.
Cash and Cash Equivalents
During 1997, the Company's cash position increased as the Company's
cash amounts were increased to $16,706 from moneys received from the Company's
sale of its Common Stock to the public, and revenues generated, less costs of
the offering and general and administrative costs, as compared to cash of $5,765
at years end in 1996.
GOING CONCERN OPINION
The Company's independent accountant has issued a "going concern"
opinion in which the independent accountant stated "the Company is a development
stage company with no significant operating results to date which raises
substantial doubt about its ability to continue as a going concern."
The Company presently has no financing arrangements with any persons or
institutions. Nor is the Company indebted to any person or institution for any
amount. However, the Company's financial resources are limited at this time. The
Company's only foreseeable sources of revenue are 10 contracts it has been
awarded by U. S. Satellite. These contracts require the Company to have burglar
alarm systems and CCTV systems installed in 10 different Osco Drug Stores in
various states throughout the U.S. The Company anticipates fulfilling these
contracts during the first quarter of 1998. It is believed that the revenues to
be received from these contracts will be sufficient to allow the Company to
continue as a going concern for a period of approximately 9 to 12 months. After
this time, the Company's future success will depend on continued sales, the
Company's ability to secure financing of some kind, or to produce sufficient
revenues from other sources to allow the Company to continue its operations.
FORWARD LOOKING STATEMENTS
This document includes various forward-looking statements with respect
to future operations of the Company that are subject to risks and uncertainties.
Forward-looking statements include the information concerning expectations of
future results of operations and such statements preceded by, followed by or
that otherwise include the words "believes," "expects," "anticipates,"
"intends," "estimates" or similar expressions. For those statements, the Company
claims the protection of the safe harbor for forward-looking statements
contained in the Private Litigation Reform Act of 1995.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements required by this Item No. 7 are attached to
this Report as Appendix "A."
ITEM 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The table below sets forth the name, age, and position of each director
and executive officer of the Company, and all persons nominated or chosen to
become such:
- - - --------------------------------------------------------------------------------
Year First
Became
Name Age Position* Director
- - - ---- --- --------- --------
Barry A. Ellsworth 44 President, Chief Executive Officer, 1996
Treasurer, Chairman of the Board,
Director
James G. Slater 50 Vice President, Director 1996
Joe D. Thomas 43 Secretary, Director 1996
================================================================================
* The term of office of each director is one year, or until his successor
is elected at the Company's annual shareholders' meeting and is
qualified. Each director is subject to removal by the shareholders. The
term of office for each officer is for one year, and, until a successor
is elected at the annual meeting of the Board of Directors and is
qualified. Each officer is subject to removal by the Board of
Directors.
BIOGRAPHICAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain biographical information regarding each of
the Company's officers and directors.
BARRY A. ELLSWORTH assumed his present positions with the Company in
November of 1996 when the Company was first organized. Mr. Ellsworth worked as a
stock broker for the firms of Dean Witter Reynolds, Wilson-Davis, and
Prudential-Bache Securities in the early 1980s. In 1984 he formed the financial
consulting firm of Ellsworth & Associates. The firm specialized in mergers and
acquisitions. In 1988, Mr. Ellsworth wrote a best-selling book and focused the
majority of his time and efforts on writing and speaking, until the fall of
1996. At that time he helped organize Downstream Incorporated - DSI, the
Company. He has since acted as the Company's President, CEO, Treasurer, Chairman
of the Board and as a director.
JAMES G. SLATER has acted as the Company's Vice President and as a
director since the Company's inception. In the mid and late 1980s, Mr. Slater
worked as a consultant for the financial consulting firm of Ellsworth &
Associates. From February 1990 to October 1995 he served as Vice President of
Theatrical and Ancillary Sales for Imperial Entertainment of Los Angeles, CA.
From October 1995 to August 1997 he worked at Full Moon Studios in Los Angeles,
CA. as Director of TV Sales. Since February 1, 1998 he has worked as a Sales
Representative at 24/7 Media, Inc. in Los Angeles, CA.
JOE D. THOMAS has served as Secretary and as a director of the Company
since its organization in November 1996. From 1983 - 1991 Mr. Thomas was a
senior partner in the accounting firm of Jones and Thomas - a Utah accounting
firm. Mr. Thomas supervised, reviewed and performed all aspects of the audit
engagements of the firm's clientele - which included over fifty public and
12
<PAGE>
private companies - ranging in size from less than $10 million to $100 million
in gross assets. For the past 6 years Mr. Thomas has acted as Vice President and
co-founder of Intermountain Mortgage, a Park City, Utah, based, multi-office
mortgage company whose loan production has exceeded $400,000,000 in the last six
years.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 does not presently
apply to the Company's officers and directors, or persons who own more than 10%
of the Company's Common Stock.
ITEM 10. EXECUTIVE COMPENSATION
The only officer or director of the Company that currently receives a
salary is the Company's President and CEO, Barry A. Ellsworth. The Company pays
Mr. Ellsworth a yearly salary of $24,000, plus, up to a 20% bonus on any and all
revenues generated by the Company as a result of Mr. Ellsworth's efforts. No
officers or directors of the Company have been paid sums of $100,000 or more
since the Company's inception.
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
------------------------------------------- --------------------------------
Securities
Restricted Underlying
Other Annual Stock Awards Options / All Other
Year Salary Bonus Compensation SARs(#) Compensation
- - - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Barry A. Ellsworth 1997 $12,000 $2,535 0 - - 0
1996 $ 2,500 $ 0 0 - - $7,500(1)
- - - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Ellsworth received 1,500,000 shares of the Company's common
stock in 1996 for his efforts in organizing and founding the Company, which at
that time was valued at $7,500.
STOCK OPTIONS
The Company currently has no Stock Option Plans of any kind with any of
its officers or directors, or with anyone else. No options have been granted to
any officer, director or principal stockholder of the Company.
COMPENSATION OF DIRECTORS
Directors of the Company are not compensated for serving on the board
of directors or on committees. All persons currently serving as directors of the
Company also serve as officers and/or employees of the Company. Mr. Ellsworth
receives compensation as an employee, but he receives no separate compensation
for the services he provides to the Company as a director, nor do any of the
other officers of the Company. They receive no additional compensation for any
committee participation or special assignments. The Company presently has no
committees.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
There currently are no written employment contracts between the Company
and a Named Executive Officer. The employment of each Named Executive Officer is
on an "at will" basis. The Company has however agreed to pay Mr. Ellsworth, the
Company's President, a salary of $24,000, for his services in running the day to
day operations of the Company. He, as well as any other officer and/or director,
13
<PAGE>
is allowed to receive a bonus of up to 20% on any and all revenues generated by
the Company as a direct result of his or their efforts.
There currently are no compensatory plans or arrangements including
payments to be received from the Company, with respect to a Named Executive
Officer, which plan or arrangement results or will result from the resignation,
retirement or any other termination of such Named Executive Officer's employment
with the Company or from a change-in-control of the Company or a change in the
Named Executive Officer's responsibilities following a change in control.
RETIREMENT AND REIMBURSEMENT PLANS
The Company has no retirement, pension, profit sharing or medical
reimbursement plans covering its officers and directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of March 23, 1998, there were outstanding 4,334,000 shares of the
Company's Common Stock, $0.001 par value per share. The following table sets
forth the names, addresses and stock ownership of all persons known to the Board
of Directors of the Company who own, of record or beneficially, five per cent
(5%) or more the Company's outstanding Common Stock, together with the stock
ownership of the Company's directors individually, and all officers and
directors as a group, as of March 23, 1998.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership(1) Class
---------------- ----------------------- -----
<S> <C> <C> <C>
5% Beneficial Owners:
Barry A. Ellsworth 1,500,000 34.6%
2046 E. Murray Holladay Road, Suite 202
Salt lake City, Utah 84117
Joe D. Thomas 500,000 11.5%
2046 E. Murray Holladay Road, Suite 202
Salt Lake City, Utah 84117
Rob Karz
2536 Aspen Springs Drive 500,000 11.5%
Park City, Utah 84060
CMI, L.L.C. (2) 11.5%
406 W. South Jordan Pky. 500,000
Suite 500
South Jordan, Utah 84095
Directors (3)
Barry A. Ellsworth 1,500,000 34.6%
2046 E. Murray Holladay Road, Suite 202
Salt lake City, Utah 84117
14
<PAGE>
Joe D. Thomas 500,000 11.5%
2046 E. Murray Holladay Road, Suite 202
Salt Lake City, Utah 84117
James G. Slater 100,000 2.3%
6331 Langdon Ave.
Van Nuys, CA 91411
All Officers and Directors 2,100,000 48.5%
as a Group (3 persons)
-------------------------------------------------------------------------------------------------------
</TABLE>
(1) Except as otherwise indicated, all shares represent Common Stock held
of record and beneficially.
(2) CMI, L.L.C. is a limited liability company that is engaged in the
commercial mortgage business. Its principal owner is Dan E.
Christensen. CMI, L.L.C. is not affiliated with the Company or its
management other than through CMI, L.L.C.'s stock ownership in the
Company.
(3) All common shares held by the Officers, Directors and Principal
Shareholders listed above are "restricted or control securities" and as
such are subject to limitations on resale. The shares may be sold
pursuant to Rule 144 under certain circumstances. There are no
contractual arrangements or pledges of the Company's securities, known
to the Company, which may at a subsequent date result in a change of
control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
RENT
From September 1997 through the present, the Company has paid $300 per
month to Intermountain Mortgage as rent for its office space which consists of
one private office of the Company's president, and the shared use of a computer,
photocopy machine, fax machine and reception services. The agreement concerning
this rental arrangement is verbal. Intermountain Mortgage is owned by Joe D.
Thomas, an officer and a director of the Company, and Rob Karz, a major
shareholder of the Company. The sum of $300 dollars a month is considered a
favorable rate to the Company when compared to the prices of similar office
space in the surrounding area.
From December 1996 through August 1997, the Company paid Mr. Ellsworth
a total of $2,700 in rent for the use of an office at Mr. Ellsworth's home.
Beginning September 1997, the Company's primary office was moved to 2046 E.
Murray-Holladay Road, Suite 202, Salt Lake City, Utah 84107. The Company still
maintains a secondary office at Mr. Ellsworth's home for which no rent is
presently charged.
ISSUANCE OF STOCK
Mr. Ellsworth received 1,500,000 shares of the Company's common stock
in 1996 for his efforts in organizing and founding the Company. At that time the
shares were valued at a total of $7,500.
15
<PAGE>
MANAGEMENT'S OPINION
Each of the above described transactions when entered into, were, in
the opinion of management, as favorable to the Company as could have been
obtained from independent third parties.
16
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(1) Reports on Form 8-K
Registrant filed no reports on Form 8-K during the quarter ended
December 31, 1997.
(2) Exhibits
ANNUAL REPORT ON FORM 10-KSB
DOWNSTREAM INCORPORATED - DSI
SEC FILE NO.
EXHIBIT INDEX
Exhibit Exhibit
Number Description Location
3.1 Certificate of Incorporation of Registrant -
Incorporated by reference from Registrant's
Registration Statement on Form SB-2 Incorporated
as filed on April 28, 1997 by Reference
3.2 Bylaws of Registrant - Incorporated by reference
from Registrant's Registration Statement on Form Incorporated
SB-2 as filed on April 28, 1997 by Reference
3.3 Amendment of Articles of Incorporation of Downstream
Incorporated - DSI Incorporated by reference from Incorporated
Registrant's Registration Statement on Form SB-2 by Reference
as filed on April 28, 1997
3.4 Amendment of Bylaws of Downstream Incorporated - Incorporated
DSI - Incorporated by reference from Registrant's by Reference
Registration Statement on Form SB-2 as filed on
April 28, 1997
10.1 Material Contract with U. S. Satellite to have Page 19
burglar alarm systems installed in 2 Osco Drug
Stores in Helena, Montana.
10.2 Material Contract with U. S. satellite to have Page 20
burglar alarm systems and closed circuit TV systems
installed in 4 Osco Drug Stores in the Kansas
City, KS area.
10.3 Material Contract with U. S. satellite to have Page 21
burglar alarm systems and closed circuit TV
systems installed in 2 Osco Drug Stores in the
South Boston, MA area.
10.4 Material Contract with U. S. satellite to have Page 22
burglar alarm systems and closed circuit TV systems
installed in 2 Osco Drug Stores - one in Des Moines,
IA, another in Davenport, IA.
10.5 Material Contract with U. S. satellite to have a Page 23
burglar alarm system and a closed circuit TV system
installed in an Osco Drug Store in South Bend, IN.
10.6 Material Contract with U. S. satellite to have a Page 24
burglar alarm system and a closed circuit TV system
installed in an Osco Drug Store in Waukesha, WI.
27.1 Financial Data Schedule Page 25
17
<PAGE>
DOWNSTREAM, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1997 and 1996
F-1
<PAGE>
CONTENTS
Independent Auditors' Report ............................................F-3
Balance Sheet ...........................................................F-4
Statements of Operations ................................................F-5
Statements of Stockholders' Equity ......................................F-6
Statements of Cash Flows ................................................F-7
Notes to the Financial Statements .......................................F-8
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Downstream, Inc.
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheet of Downstream, Inc. (a
development stage company) as of December 31, 1997 and the related statements of
operations, stockholders' equity and cash flows for the years ended December 31,
1997 and 1996 and from inception on November 26, 1996 through December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Downstream, Inc. (a development
stage company) as of December 31, 1997 and the results of its operations and its
cash flows for the years ended December 31, 1997 and 1996 and from inception on
November 26, 1996 through December 31, 1997 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company is a development stage company with no
significant operating results to date which raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
February 25, 1998
F-3
<PAGE>
DOWNSTREAM, INC.
(A Development Stage Company)
Balance Sheet
ASSETS
December 31,
1997
----
CURRENT ASSETS
Cash $ 16,706
------------
Total Current Assets 16,706
FIXED ASSETS (Note 7) 1,120
OTHER ASSETS (Note 4) 241
------------
TOTAL ASSETS $ 18,067
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ -
-----------
Total Current Liabilities -
-----------
TOTAL LIABILITIES -
-----------
STOCKHOLDERS' EQUITY
Preferred stock: 50,000,000 shares
authorized of $0.001 par value, -0-
shares issued and outstanding -
Common stock: 100,000 shares authorized
of $0.001 par value, 4,334,000 shares
issued and outstanding 4,334
Additional paid-in capital 50,170
Deficit accumulated during the development stage (36,437)
------------
Total Stockholders' Equity 18,067
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,067
============
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Operations
From
Inception on
November 26,
For the Years Ended 1996 through
December 31, December 31,
1997 1996 1997
---- ---- ----
REVENUES $ 12,675 $ - $ 12,675
------------ ------- ------------
EXPENSES
General and administrative 37,820 10,985 48,805
Depreciation and amortization 301 6 307
------------ --------- -----------
Total Expenses 38,121 10,991 49,112
------------ --------- -----------
NET LOSS $ (25,446) $ (10,991) $ (36,437)
============ ========= ===========
NET LOSS PER SHARE $ (0.01) $ (0.00)
============ =========
WEIGHTED AVERAGE NUMBERS
OF SHARES OUTSTANDING 3,814,912 1,980,000
============ =========
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Stockholders' Equity
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 - - (13,696) -
Net loss for the year ended
December 31, 1997 - - - (25,446)
--------- --------- ----------- ---------
Balance, December 31, 1997 4,334,000 $ 4,334 $ 50,170 $ (36,437)
========= =========== ============ =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
DOWNSTREAM, INC.
(A Development Stage Company)
Statements of Cash Flows
From
Inception on
November 26,
For the Years Ended 1996 Through
December 31, December 31,
1997 1996 1996
---- ---- ----
CASH FLOWS FROM
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (25,446) $ (10,991) $ (36,437)
Adjustments to Reconcile Net Income
(Loss) to Net Cash Used in Operating Activities:
Stock issued for services - 7,500 7,500
Depreciation and amortization 301 6 307
(Increase) decrease in fixed assets (1,359) - (1,359)
Increase (decrease) in accounts payable (559) 559 -
------------ ---------- ---------
Net Cash (Used) By Operating Activities (27,063) (2,926) (29,989)
------------ ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Organization costs paid - (309) (309)
------------ ---------- ---------
Net Cash (Used) By Investing Activities - (309) (309)
------------ ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issuance costs (13,696) - (13,696)
Common stock issued for cash 51,700 9,000 60,700
------------ ---------- ---------
Net Cash Provided By Financing Activities 38,004 9,000 47,004
------------ ---------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 10,941 5,765 16,706
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 5,765 - -
------------ ---------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 16,706 $ 5,765 $ 16,706
============ ========== ===========
Cash Paid For:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
DOWNSTREAM, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1997 and 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.
During 1997, the Company formed a dba named Security Solutions,
Inc. to engage in the business of installing security systems.
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 December 31, 1997, the Company had net operating loss
carryforwards of approximately $36,000 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.
g. Property, Equipment and Depreciation
Property and equipment are carried at cost. Depreciation is
calculated using the straight-line method over their estimated
useful life of 5 years. Depreciation expense for December 31, 1997
and 1996 was $239 and $0, respectively.
F-8
<PAGE>
DOWNSTREAM, INC.
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1997 and 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. The Company
has begun its primary operations. Management feels that sales will
provide sufficient cash for the operation of the Company.
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 December
31, 1997 and 1996 was $62 and $6, respectively.
NOTE 5 - PUBLIC OFFERING
The Company has completed an offering of 1,034,000 shares of its
previously unissued common stock to the public at $0.05 per share.
The Company incurred offering costs of $13,696 which were offset
against the proceeds of the offering.
NOTE 6 - COMMITMENTS
Officer Compensation - The Company has committed to paying the
President $2,000 per month since more than $50,000 was raised in
the public offering. 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
Fixed assets at December 31, 1997 and 1996 consisted of the
following:
1997 1996
Fax Machine $ 424 $ -
Televisions 935 -
--------- -------
1,359 -
Less accumulated depreciation (239) -
--------- -------
Net fixed assets $ 1,120 $ -
========= =======
Depreciation expense for the years ended December 31, 1997 and 1996
was $239 and $0, respectively.
F-9
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DOWNSTREAM INCORPORATED - DSI
Date: March 28, 1998 By /s/ Barry A. Ellsworth
------------------------------------
Barry A. Ellsworth President, Treasurer,
Chief Executive Officer, Principal
Financial Officer, Chairman of the Board
of Directors
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Date: March 28, 1998 By /s/ Barry A. Ellsworth
------------------------------------
Barry A. Ellsworth President, Treasurer,
Chief Executive Officer, Principal
Financial Officer, Chairman of the Board
of Directors
Date: March 28, 1998 /s/ James G. Slater
-------------------
James G. Slater
Vice President, Director
Date: March 28, 1998 /s/ Joe D. Thomas
-----------------
Joe D. Thomas
Secretary, Principal Accounting Officer,
Director
18
This was a verbal contract made between the Security Project
Manager of U. S satellite and the President of Downstream
Incorporated, doing business as, SSI - Security Solutions
Incorporated, to have burglar alarm systems installed in Osco Drug
Stores #922 and #924 in Helena, Montana for the price of $5850 per
store. U. S. Satellite provided and shipped all equipment to be
installed to the store locations, and SSI contracted with a Montana
company to have the equipment installed.
19
This contract was a verbal contract between the Security Project Manager of U.
S. Satellite and the President of Downstream, doing business as, SSI - Security
Solutions Incorporated, that was outlined and confirmed in a letter sent from
the Company to the Project Manager of U. S. Satellite. The letter was dated and
addressed to the Security Project Manager of U. S. Satellite and read:
Please have the equipment to be installed in the Osco Drug Stores
#2251; #2279; #2287; and #2288, in the KS, MO area, sent to our affiliate in
Topeka, KS:
PSI Alarm Systems
Attn: Mr. Joel Culberson
2901 S. W. Burlingame Rd.
Topeka, KS 66611
As discussed, SSI will install burglar alarm systems and CCTV
monitoring systems in each of these stores for the price of $9556 (nine thousand
five hundred fifty six dollars) per store. It is understood that USSC/American
Stores will supply all equipment to be installed and that American Stores will
have each store prewired, with all necessary boxes and conduit laid prior to our
installation of these systems. If for some reason American Stores fails to
prewire said facilities, SSI, and/or its affiliates, will run the wire, lay the
conduit and install the boxes for an additional price of $1800 (one thousand
eight hundred dollars) per store, for a total price of $11,356 (eleven thousand
three hundred fifty dollars) per store. SSI shall provide on sight inspection of
all stores, and USSC/American Stores shall pay SSI the agreed upon amounts for
its services within 30 days after the completion of the installation of said
systems. Thank you for allowing SSI to serve you.
Warmest Regards,
Barry A. Ellsworth
20
This contract was a verbal contract between the Security Project Manager of U.
S. Satellite and the President of Downstream, doing business as, SSI - Security
Solutions Incorporated, that was outlined and confirmed in a letter sent from
SSI to the Project Manager of U. S. Satellite. The letter was dated and
addressed to the Security Project Manager of U. S. Satellite and read:
Please have the equipment to be installed in the Osco Drug Stores #362
and #374, in Mansfield and Amesbury, MA, sent to our affiliate in Saugus, MA:
Davco Security Systems
Attn: Mr. Mike O'Connell
#6 Webb Place
Saugus, MA 01906
As agreed, SSI will install burglar alarm systems and CCTV monitoring
systems in each of these stores for the price of $9375 (nine thousand three
hundred seventy five dollars) per store. It is understood that USSC/American
Stores will supply all equipment to be installed and that American Stores will
have each store prewired, with all necessary boxes and conduit laid prior to our
installation of these systems. If for some reason American Stores fails to
prewire said facilities, SSI, and/or its affiliates, will run the wire, lay the
conduit and install the boxes for an additional price of $1800 (one thousand
eight hundred dollars) per store, for a total price of $11,175 (eleven thousand
one hundred seventy five dollars) per store. SSI shall provide on sight
inspection of all stores, and USSC/American Stores shall pay SSI the agreed upon
amounts for its services within 30 days after the completion of the installation
of said systems. Thank you for allowing SSI to serve you.
Warmest Regards,
Barry A. Ellsworth
21
This contract was a verbal contract between the Security Project Manager of U.
S. Satellite and the President of Downstream, doing business as, SSI - Security
Solutions Incorporated, that was outlined and confirmed in a letter sent from
SSI to the Project Manager of U. S. Satellite. The letter was dated and
addressed to the Security Project Manager of U. S. Satellite and read:
Please have the equipment to be installed in the Osco Drug Stores #516
in Davenport, IA and #533 in Des Moines, IA sent to our affiliate in Cedar
Rapids, IA:
ASI - All Secure, Inc.
Attn: Mr. Sonny Friis
5925 Council St. NE, Suite 160
Cedar Rapids, IA 52410
As agreed, SSI will install burglar alarm systems and CCTV monitoring
systems in each of these stores for the price of $9250 (nine thousand two
hundred fifty dollars) per store. It is understood that USSC/American Stores
will supply all equipment to be installed and that American Stores will have
each store prewired, with all necessary boxes and conduit laid prior to our
installation of these systems. If for some reason American Stores fails to
prewire said facilities, SSI, and/or its affiliates, will run the wire, lay the
conduit and install the boxes for an additional price of $1500 (one thousand
five hundred dollars) per store, for a total price of $10,750 (ten thousand
seven hundred fifty dollars) per store. SSI shall provide on sight inspection of
all stores, and USSC/American Stores shall pay SSI the agreed upon amounts for
its services within 30 days after the completion of the installation of said
systems. Thank you for allowing SSI to serve you.
Warmest Regards,
Barry A. Ellsworth
22
This contract was a verbal contract between the Security Project Manager of U.
S. Satellite and the President of Downstream, doing business as, SSI - Security
Solutions Incorporated, that was outlined and confirmed in a letter sent from
SSI to the Project Manager of U. S. Satellite. The letter was dated and
addressed to the Security Project Manager of U. S. Satellite and read:
Please have all equipment to be installed in the Osco Drug Store #813
in South Bend, IN shipped to our affiliate in that area:
American Eagle Security
Attn: Mr. Tom Kio
22570 Adams Road
South Bend, IN 46628
As agreed, SSI, and or its affiliates, will install a burglar alarm
system and a CCTV monitoring system in the aforementioned store for the price of
$9975 (nine thousand nine hundred seventy five dollars). It is understood that
USSC/American Stores will supply all equipment to be installed and that American
Stores will have each store prewired, with all necessary junction boxes and
conduit laid prior to our installation of these systems. If for some reason
American Stores fails to prewire said facilities, SSI, and/or its affiliates,
will run the wire, lay the conduit and install the needed boxes for an
additional price of $1800 (one thousand eight hundred dollars) per store, for a
total price of $11,775 (eleven thousand seven hundred seventy five dollars). SSI
shall provide on sight inspection of the store, and USSC/American Stores shall
pay SSI the agreed upon amounts for its services within 30 days after the
completion of the installation of said systems. Thank you for allowing SSI to be
of service.
Warmest Regards,
Barry A. Ellsworth
23
This contract was a verbal contract between the Security Project Manager of U.
S. Satellite and the President of Downstream, doing business as, SSI - Security
Solutions Incorporated, that was outlined and confirmed in a letter sent from
SSI to the Project Manager of U. S. Satellite. The letter was dated and
addressed to the Security Project Manager of U. S. Satellite and read:
Please have all equipment to be installed in the Osco Drug Stores #1305
in Waukesha, WI shipped to our affiliate in that area:
Advanced Technologies, LLC
Attn: Mr. Joe Natale
7400 Waukegan Road
Niles, IL 60714
As agreed, SSI, and/or its affiliates, will install a burglar alarm
system and a CCTV monitoring system in the aforementioned store for the price of
$9975 (nine thousand nine hundred seventy five dollars). It is understood that
USSC/American Stores will supply all equipment to be installed and that American
Stores will have each store prewired, with all necessary junction boxes and
conduit laid prior to our installation of these systems. If for any reason
American Stores fails to pre-wire said facilities, SSI, and/or its affiliates,
will run the wire, lay the conduit and install the needed boxes for an
additional price of $1800 (one thousand eight hundred dollars) per store, for a
total price of $11,775 (eleven thousand seven hundred seventy five dollars). SSI
shall provide on sight inspection of the store, and USSC/American Stores shall
pay SSI the agreed upon amounts for its services within 30 days after the
completion of the installation of said systems. Thank you for allowing SSI to be
of service.
Warmest Regards,
Barry A. Ellsworth
24
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 16,706
<SECURITIES> 0
<RECEIVABLES> 0
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<CURRENT-ASSETS> 16,706
<PP&E> 1,359
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0
0
<COMMON> 4,334
<OTHER-SE> 13,733
<TOTAL-LIABILITY-AND-EQUITY> 18,067
<SALES> 12,675
<TOTAL-REVENUES> 12,675
<CGS> 0
<TOTAL-COSTS> 38,121
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> (25,446)
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