SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

                 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                               OF THE EXCHANGE ACT

                     FOR THE QUARTERLY PERIOD ENDED 6/30/99

                                    333-6440
                            (Commission file number)

                              Q-SEVEN SYSTEMS, INC.
        (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)                       No.)

              FROHNKAMP 18                          011-49-2173-330360
          40789 MONHEIM, GERMANY                (Issuer's telephone number)
     (Address of Principal Executive
                Offices)

                          DOWNSTREAM INCORPORATED - DSI
                 6337 HIGHLAND DRIVE, SALT LAKE CITY, UTAH 84121
              (Former Name, Former Address and Former Fiscal Year,
                          if changed since last Report)

     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 [ ]

                                                      SHARES OUTSTANDING
              CLASS                                   AT AUGUST 1, 1999
              -----                                   ------------------

           COMMON STOCK                                    12,500,000
     $0.001 PAR VALUE PER SHARE

              THIS REPORT OMITS ITEM 1 (FINANCIAL STATEMENTS) AND
         CERTAIN PARTS OF ITEM 2 (MANAGEMENT'S DISCUSSION AND ANALYSIS)
         OF PART I PURSUANT TO RULE 12b-25(b)(i) UNDER THE EXCHANGE ACT.

<PAGE>

PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

          [TO BE PROVIDED]

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     On May 24, 1999, the Company acquired all issued and outstanding  shares of
common stock of Q-Seven Systems,  Inc. ("Q-Seven Nevada"),  a Nevada corporation
(the  "Q-Seven  Acquisition").  Q-Seven  Nevada,  which  is now a  wholly  owned
subsidiary of the Company, owns the exclusive, worldwide rights to market the so
called User Management  Software (the  "software")  developed by Q-Seven Systems
GmbH,  a German  corporation,  and all of the issued and  outstanding  shares of
X-Real Intertainment, a Bahamian corporation ("X-Real"), which owns and operates
six adult entertainment websites.

     The software is a modulized  suite  offering users a system for the backend
administration  of various types of e-commerce sites on the Internet,  including
online gaming,  adult  entertainment,  and online  shopping.  The software gives
frequent  and,  management  believes,  accurate  feedback  to the  administrator
concerning clients and their activities.  Management  believes that the software
is extremely easy to use and that non-computer  professionals can administer the
system. The software also allows for secure online billing over the Internet.

     Portions  of the  software  are still being  developed  and no sales of the
software have yet been made. The main server and three of the casino modules for
the use with an online gaming  application  of the software are currently in the
beta testing phase,  and management  believes that it will be ready for shipment
by the end of August 1999.

     The next  modules  that the Company  plans to develop  include a sportsbook
module,  a  multi-player  casino games  module,  a live video module and several
client-specific  modules. The number of programmers assisting in the development
of the software has been increased in an effort to make the development  process
quicker and more efficient.

     The Company believes that its main competitors in the area of online gaming
software are Starnet  Communications  International Inc., in Vancouver,  British
Columbia, and Bossmedia AB, a Swedish company.

     Starnet's  products are the most common online gaming software  products at
the  moment.  They  offer the  largest  number of  different  games.  Management
believes that Starnet's products differ from the products

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of the Company in the following ways: Starnet only licenses co-hosted casinos on
their own servers in Antigua  which  requires  the licensee to obtain an Antigua
gaming license.  In addition,  Management believes that Starnet's licensees must
share up to 40% of their net gaming revenues with Starnet.

     Bossmedia  was  one of the  first  companies  that  offered  online  gaming
software that featured multi-player games.  Management believes that Bossmedia's
gambling  software also can be used only on Bossmedia's  own servers in Antigua.
In addition,  management believes that Bossmedia's customers are required to pay
a high  setup fee and a royalty  fee  based on a certain  percentage  of the net
gaming revenues.

     The Company's wholly owned indirect  subsidiary,  X-Real, owns and operates
six adult entertainment  websites directed to viewers in Germany.  Four of these
websites operate on a subscription  basis. The other two pages operate both on a
subscription  and a  per-minute  basis.  In April 1999,  X-Real  entered into an
affiliate  program with  webmasters  that advertise its websites.  Participating
webmasters  can share in up to 50% of the revenues that were generated by X-Real
as a result of their  advertising of X-Real's  websites.  The affiliate  program
increased  subscriptions  for X-Real's websites by over 200% within one month of
inception. No assurances can be given that this increase is premanent.

     The  competition  in the area of adult  entertainment  websites is steadily
increasing.  X-Real's  sites  were some of the first to enter this  market,  and
management believes that some of its websites have achieved a significant market
brand  recognition  in Germany.  Although the number of X-Real's  competitors in
this  area  is  increasing,  management  believes  that  X-Real  will be able to
maintain and perhaps extend its market position in Germany.

     German  regulators  impose  strict  regulations  on the  content  of  adult
entertainment  websites that are published on the Internet. An organization with
the name Jugendschutz.net has been formed which tries to ensure that minors will
not be able to gain access to adult content on webpages.  X-Real cooperates with
Jugendschutz.net  as well as the German regulators to maintain a process for its
webpages  that  ensures  that  only  adults  are  able to gain  access  to those
webpages.  We believe that the areas of X-Real's  webpages  which are accessible
for every viewer comply with German law and are suitable for every viewer.

     [RESULTS OF OPERATIONS -- TO BE PROVIDED]

     [LIQUIDITY AND CAPITAL RESOURCES -- TO BE PROVIDED]

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     Year 2000. Many currently  installed computer systems and software products
are coded to accept  only two digit  entries  in the date code  field and cannot
distinguish  21st century dates from 20th century dates.  These date code fields
will need to  distinguish  21st century  dates from 20th century dates and, as a
result, many companies' software and computer systems may need to be upgraded or
replaced in order to comply with such "Year 2000" requirements.

     The Company has completed  assessing  the Year 2000 issue.  The Company has
not incurred material costs to date in this analysis,  and management  currently
does not believe  that the cost of any  additional  actions will have a material
effect on the Company's results of operations or financial condition. Management
currently  believes  that the  Company's  systems  and  products  are Year  2000
compliant  in all material  respects;  however,  those  systems and products may
contain  undetected  errors or defects  with Year 2000 date  functions  that may
result in  material  costs.  Although  management  is not aware of any  material
operational  issues or costs associated with preparing the Company's systems and
products for the Year 2000,  the Company may  experience  serious  unanticipated
negative  consequences  (such as  significant  downtime  for one or more  X-Real
servers)  or  material  costs  caused by  undetected  errors or  defects  in the
technology  used in the  Company's  systems  and  products,  which  could have a
material  adverse  effect on the  Company's  business,  results of operation and
financial condition.

     In  addition,  the Company  utilizes  third-party  equipment,  software and
content,  including non-information  technology systems ("non-IT systems"), such
as the Company's  telephone system,  that might not be Year 2000 compliant.  The
Company is in the process of  developing  a plan to assess  whether  these third
parties  are  adequately  addressing  the Year 2000 issue and whether any of the
Company's non-IT systems have material Year 2000 compliance problems. Failure of
such third-party equipment,  software or content to operate properly with regard
to the year 2000 and thereafter could require the Company to incur unanticipated
expenses to remedy any problems,  which could have a material  adverse effect on
the Company's business, results of operation, and financial condition.

     The Company has not yet fully developed a comprehensive contingency plan to
address situations that may result if the Company is unable to achieve Year 2000
readiness of its critical  operations.  The cost of developing and  implementing
such a plan may itself be material.

     Forward-Looking  Statements.  The Company has made certain  forward-looking
statements in this report. They use such words

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as "may," "will,"  "expect,"  "believe,"  "plan" and other similar  terminology.
These statements reflect  management's current expectations and involve a number
of risks and  uncertainties.  Actual results could differ  materially due to the
success of operating initiatives, advertising and promotional efforts, Year 2000
compliance  efforts,  as well as  changes  in:  global  and local  business  and
economic  conditions;  currency  exchange  and interest  rates;  labor and other
operating   costs;   political  or  economic   instability   in  local  markets;
competition;  consumer  preferences,  spending patterns and demographic  trends;
legislation and government regulation; and accounting policies and practices.

PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          Not applicable.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

     In connection with the Q-Seven  Acquisition,  the Company issued on May 25,
1999, a total of 7,900,000 shares of its common stock to the three  shareholders
of Q-Seven  Nevada in exchange  for their  transfer to the Company of all issued
and  outstanding   shares  of  common  stock  of  Q-Seven  Nevada.  Mr.  Philipp
Kriependorf  received  2,634,000,  and  Messrs.  Philip Kamp and Olaf Cordt each
received 2,633,333 shares of the Company's common stock.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          Not applicable.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     A special shareholders' meeting was held on June 10, 1999. The shareholders
present  at that  meeting  approved  the  proposal  of the  Company's  board  of
directors to change the Company's  name from  Downstream  Incorporated  - DSI to
Q-Seven Systems, Inc.

ITEM 5.   OTHER INFORMATION

     Material  Contracts.  Q-Seven Nevada and Q-Seven  Systems GmbH have entered
into an Agreement  (the "License  Agreement")  which grants  Q-Seven  Nevada the
exclusive  and unlimited  right to sell  licenses of the software  worldwide for
perpetuity. The License Agreement provides that Q-Seven Nevada shall pay Q-Seven
Systems  GmbH a  royalty  fee of 90% of the  revenue  generated  by the  sale of
licenses for the software.  A copy of the License Agreement has been filed as an
exhibit to this report. For a

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complete  understanding of the terms of the License  Agreement,  you should read
this exhibit.

     Change of Independent  Accountant.  The Company has changed its independent
accountant  as part of the process of  preparing  to  establish an office in New
York. The new  independent  account is the accounting firm Salibello & Broder in
New York.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits

          EXHIBIT NO.         DESCRIPTION

                  3.1         Articles of Incorporation, as amended

                  3.2         By-laws

                 10.1         License Agreement between Q-Seven Systems GmbH and
                              Q-Seven Nevada

                 27.1         Financial Data Schedule [TO BE PROVIDED]

          (b)  Reports on Form 8-K

     On June 8,  1999,  the  Company  filed a report  on Form  8-K in which  the
following items were reported:  (i) the Q-Seven Acquisition;  (ii) the change in
control that  resulted  from the issuance of 7,900,000  shares of the  Company's
common stock to the three shareholders of Q-Seven Nevada;  (iii) the resignation
of then serving directors and officers and (iv) the appointment of new directors
and officers.

     On June 15, 1999,  the Company filed another report on Form 8-K in which it
was reported that (i) a special  shareholders' meeting was held on June 10, 1999
during  which it was  decided  to change  the  Company's  name  from  Downstream
Incorporated  - DSI  to  Q-Seven  Systems,  Inc.;  (ii)  Articles  of  Amendment
regarding  the change of the  Company's  name were filed with the State of Utah;
and (iii) that the  Company's OTC Bulletin  Board trading  symbol was changed to
QSSY.

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<PAGE>

     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused  this  request to be signed on its behalf by the  undersigned,  thereunto
duly authorized.


     Date:  August 16, 1999                       /s/ Philipp Kriependorf
                                                  ----------------------------
                                                  Philipp Kriependorf
                                                  President


     Date: August 16, 1999                        /s/ Philip Kamp
                                                  ----------------------------
                                                  Philip Kamp
                                                  Vice President and Treasurer

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<PAGE>

                                INDEX TO EXHIBITS

          EXHIBIT NUMBER      DESCRIPTION

          3.1                 Articles of Incorporation, as amended

          3.2                 By-laws

          10.1                License Agreement between Q-Seven Systems GmbH and
                              Q-Seven Nevada

          27.1                Financial Data Schedule [TO BE PROVIDED]

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