SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

   For the fiscal quarter ended                    Commission file number
           09/30/98                                      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                                 84117
         Salt Lake City, Utah                       (Zip Code)
(Address of Principal Executive Offices)

                    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 ____


                      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 September  31,  1998,  the issuer had  outstanding  approximately
4,334,000 shares of its Common Stock, $0.001 par value.

<PAGE>


                         PART I - FINANCIAL INFORMATION


ITEM 1.  Financial Statements.

         The  unaudited  balance  sheet  of  Downstream   Incorporated-DSI  (the
"Company") as of September 30, 1998 and the related audited balance sheet of the
Company as of December 31, 1997, the unaudited related  statements of operations
and cash flows for the three and nine month  periods  ended  September 30, 1998,
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.

History

         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  $51,000 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.  During the third quarter of 1997, a Security
Division was created when the Company was presented with an opportunity from the
Security Project Manager of U.S. Satellite,  a division of American Stores, when
the Company  approached  that  individual  as a potential  client.  The Security
Division has been the primary source of revenue for the Company since inception.
During the last  quarter of 1997,  and the first  quarter of 1998,  the  Company
received and completed 12 Contacts for U.S. Satellite.  However, due to a change
in  management  at U.S.  Satellite,  no further  contracts  were  awarded to the
Company.  The Security Division was subsequently closed during the third quarter
of 1998.


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

Results of Operations

         During the three month period ended  September 30, 1998 the Company had
operating  revenues of $000.00 compared to operating revenues of $000.00 for the
three months ended  September 30, 1997.  The Company had  operating  revenues of
$104,017 for the nine month period ended September 30, 1998, compared to $000.00
revenues  for  the  same  nine  month  period  in  1997.   Loss  per  share  was
approximately  $0.00 for the quarter ended September 30, 1998, and approximately
$0.00 for the nine months ended  September 30, 1998.  The notable  difference in
revenues  from the first vs. the second  and third  quarters  of 1998 was due to
security  contracts  the  Company was  awarded  during the first  quarter vs. no
contracts being awarded during the second and third quarters.

         Costs of sales for the three month period ended September 30, 1998 were
$000.00  compared to $000.00 for the same period during 1997. For the nine month
period  ended  September  30,  1998,  costs of sales were  $45,473,  compared to
$000.00 costs of sales for the same nine month period in 1997.

         For the three month period ended  September 30, 1998, the Company had a
net loss of $(18,710), resulting in a net loss per share of approximately $0.00,
compared to a net loss of $(11,315) during the third quarter of 1997,  resulting
in a net loss per share of $0.00.  For the nine month period ended September 30,
1998,  the  Company  had a net profit of $1,453,  resulting  in a net profit per
share of $0.00,  compared to a net loss of  $(14,726)  for the nine month period
ended September 30, 1997, resulting in a net loss of $0.00 per share.

<PAGE>


         General and administrative  expenses for the third quarter of 1998 were
$18,872, compared to general and administrative expenses of $11,473 for the same
period in 1997.  General and  administrative  expenses for the nine months ended
September 30, 1998 were $57,917, compared to general and administrative expenses
of $14,734 for the same nine month period in 1997.

         The  Company's  losses  during the third  quarter of 1998 were due to a
lack of revenue and costs  associated with sales and general and  administrative
expenses.  The Company's  profits for the nine month period ended  September 30,
1998 were  attributed to 10 security  contracts  completed in the first quarter,
less costs of sales and  general  and  administrative  expenses  incurred in the
first three quarters of the year.

         At the end of the  second  quarter  of 1998 it  became  clear  that the
Company  was not going to  receive  any  further  security  contracts  from U.S.
Satellite.  The Security  Division of the Company was  subsequently  closed down
during the third quarter of 1998. At that time, the Company's Board of Directors
determined  it  would be in the  best  interest  of the  Company  to seek  other
opportunities to create revenues for the Company.

         Negotiations  were entered  into during the third  quarter of 1998 with
three different physicians concerning opening and operating hair removal centers
across the country using a machine  known as the EpiLight  Hair Removal  System.
During  said  negotiations,  Robert W.  Later,  M.D.  was made an officer  and a
director  of the  Company  on a  interim  basis to act as a  consultant  for the
Company until such  negotiations  could be finalized.  However,  due to the high
cost of the  machines  themselves,  and  numerous  difficulties  encountered  in
attempting to negotiate  agreements  with  physicians  that would be financially
beneficial to the Company, it was decided not to enter the cosmetic hair removal
business,  and  said  negotiations  were  terminated.  The  Company's  Board  of
Directors is presently exploring other opportunities to generate revenues.

         General  and  administrative  expenses  should  generally  be viewed as
likely to recur in the normal  course of business,  although the amounts of such
expenditures will vary.

         Professional fees represent one component of general and administrative
expenses. Professional fees reflect legal, accounting and other consulting costs
associated with the preparation and filing of reports to the U.S. Securities and
Exchange  Commission,  services  rendered in connection with capital raising and
financing transactions, and other general legal and accounting work.


Balance Sheet Information.

Assets

         As of September 30, 1998, the Company reported total assets of $19,520,
up $1,453 from the $18,067  reported as of December 31, 1997.  Current assets as
of September  30, 1998 were $18,604,  up $1,898 from the $16,706  reported as of
December 31, 1997.  The changes in total and current  assets as of September 30,
1998 from those  reported as of December 31, 1997 reflect  primarily an increase
in cash  due to  revenues  generated  during  the  first  quarter  of 1998  from
completed security contracts, less costs of sales and general and administrative
expenses incurred during the first three quarters of the year.

         Fixed  assets were $916 as of September  30,  1998,  down $204 from the
$1,120 of fixed assets  reported as of December 31, 1997. This change was due to
accumulated depreciation.

<PAGE>


         Other assets were $000.00 as of September 30, 1998,  down $241 from the
$241 reported as of December 31, 1997.

         Other assets represent organizational costs net of amortization. During
the nine months ended September 30, 1998 the organizational costs of the Company
were expensed.


Liabilities

         The Company had  liabilities  of $000.00 as of September 30, 1998.  The
same amount was reported as of December 31, 1997.



Liquidity and Capital Resources as of September 30, 1998.

         The Company received an infusion of capital during the first quarter of
the year from  contracts  awarded  to the  Company by U.S.  Satellite  that were
completed during that quarter.  Said capital has allowed the Company to continue
as a "going concern" over the past nine months.  However,  that capital has been
reduced  significantly  due to costs of sales  and  general  and  administrative
expenses  incurred over the past nine months and no further  contracts have been
received.  To continue as a "going  concern" the Company will need to find other
sources of revenue and/or debt or equity financing of some kind.

         The Company's most  significant  cash needs in the  foreseeable  future
will include payment of general and administrative expenses, expenses related to
the  Company's  search  for other  revenue  producing  opportunities,  and other
expenses related to the Company's business.

         The  Company  is  currently   looking  for  other   revenue   producing
opportunities.  No  assurance  can be given  that such  opportunities  will ever
materialize,  or that the Company's resources will be adequate to take advantage
of any such opportunities if they were to materialize.



                           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 filed no reports on Form 8-K during the quarter.





                      (This Space Intentionally Left Blank)


<PAGE>

[LETTERHEAD]


                        INDEPENDENT ACCOUNTANTS' REPORT



The Board of Directors
Downstream, Inc. 
(A Development Stage Company)
Salt Lake City, Utah 

The accompanying balance sheet of Downstream, Inc. (a development stage company)
as of September 30, 1998 and the related statements of operations, stockholders'
equity and cash flows for the three months and nine months ended  September  30,
1998 and 1997 and from inception on November 26, 1996 through September 30, 1998
were not audited by us and,  accordingly,  we do not express an opinion on them.
The accompanying  balance sheet as of December 31, 1997 was audited by us and we
expressed an unqualified opinion on it in our report dated February 25, 1998.


/s/ Jones, Jensen & Company 

Jones, Jensen & Company 
Salt Lake City, Utah 
October 15, 1998

<PAGE>
<TABLE>
<CAPTION>




                                                 DOWNSTREAM, INC.
                                           (A Development Stage Company)
                                                  Balance Sheets


                                                      ASSETS

                                                                             September 30,         December 31,
                                                                              1998                    1997
                                                                            (Unaudited)
CURRENT ASSETS
<S>                                                                      <C>                   <C>              
  Cash                                                                   $          18,604     $          16,706
                                                                         -----------------     -----------------

     Total Current Assets                                                           18,604                16,706
                                                                         -----------------     -----------------

 FIXED ASSETS, net (Note 7)                                                            916                 1,120
                                                                         -----------------     -----------------

OTHER ASSETS

  Organizational cost, net (Note 4)                                                 -                        241
                                                                         -----------------     -----------------

     Total Other Assets                                                             -                        241
                                                                         -----------------     -----------------

     TOTAL ASSETS                                                        $          19,520     $          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: 100,000,000 shares authorized of
   $0.001 par value, 4,334,000 shares issued and
    outstanding                                                                      4,334                 4,334
  Additional paid-in capital                                                        50,170                50,170
  Deficit accumulated during the development stage                                 (34,984)              (36,437)
                                                                         -----------------     -----------------

     Total Stockholders' Equity                                                     19,520                18,067
                                                                         -----------------     -----------------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $          19,520     $          18,067
                                                                         =================     =================
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                                 DOWNSTREAM, INC.
                                           (A Development Stage Company)
                                              Statements of Operations
                                                     (Unaudited)

                                                                                                                        From
                                                                                                                    Inception on
                                               For the Three                          For the Nine                  November 26,
                                               Months Ended                           Months Ended                  1996 Through
                                               September 30,                          September 30,                 September 30,
                                         1998               1997                1998                1997                 1998
                                       ---------         -----------         -----------         -----------          ---------
<S>                              <C>                <C>                 <C>                 <C>                 <C>             
REVENUES                         $        -         $         -         $        104,017    $         -         $        116,282

COST OF SALES                             -                   -                   45,473              -                   45,473
                                 ---------------    ----------------    ----------------    ----------------    ----------------

   Gross Profit                           -                   -                   58,544              -                   70,809
                                 ---------------    ----------------    ----------------    ----------------    ----------------

EXPENSES

   General and administrative             18,872              11,473              57,667              14,734             106,062
   Depreciation and
     amortization                             83                  82                 250                 232                 557
                                 ---------------    ----------------    ----------------    ----------------    ----------------

       Total Expenses                     18,955              11,555              57,917              14,966             106,619
                                 ---------------    ----------------    ----------------    ----------------    ----------------

NET INCOME (LOSS) FROM
 OPERATIONS                              (18,955)            (11,555)                627             (14,966)            (35,810)
                                 ---------------    ----------------    ----------------    ----------------    ----------------

OTHER INCOME                                 245                 240                 826                 240                 826
                                 ---------------    ----------------    ----------------    ----------------    ---------------- 

NET INCOME (LOSS)                $       (18,710)   $        (11,315)   $          1,453    $        (14,726)   $        (34,984)
                                 ===============    ================    ================    ================    ================

BASIC NET EARNINGS
 (LOSS) PER SHARE                $         (0.00)   $          (0.00)   $           0.00    $          (0.00)
                                 ===============    ================    ================    ================   

BASIC WEIGHTED
  AVERAGE NUMBER OF
  SHARES OUTSTANDING                   4,334,000           4,334,000           4,334,000           3,493,165
                                 ===============    ================    ================    ================   
</TABLE>

<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                                   -                -               (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)

Net income for the nine months ended
 September 30, 1998 (unaudited)                        -                -                -                 1,453
                                                    ---------   --------------    -------------   --------------

Balance, September 30, 1998 (unaudited)             4,334,000   $        4,334   $       50,170   $      (34,984)
                                                    =========   ==============   ==============   ==============
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                                         DOWNSTREAM, INC.
                                                   (A Development Stage Company)
                                                     Statements of Cash Flows
                                                           (Unaudited)
                                                                                                                    From
                                                                                                                 Inception on
                                             For the Three                         For the Nine                  November 26,
                                             Months Ended                          Months Ended                 1996 Through
                                             September 30,                         September 30,                September 30,
                                         1998               1997                 1998               1997            1998
                                      ----------        ------------         -----------        ------------    --------------

CASH FLOWS FROM
 OPERATING ACTIVITIES
<S>                              <C>                <C>                 <C>                 <C>                 <C>              
  Net loss                       $       (18,710)   $        (11,315)   $          1,453    $        (14,726)   $        (34,984)
  Adjustments to reconcile
    Net income (loss) to net cash 
     used in operating activities:
  Stock issued for services               -                   -                   -                   -                    7,500
  Depreciation and amortization
    expense                                   83                  82                 250                 232                 557
  Organizational costs                       195              -                      195              -                      195
  Increase (decrease) in
    accounts payable                      -                    2,639              -                    2,080              -
                                 ---------------    ----------------    ----------------    ----------------    ----------------

     Net Cash (Used) Provided
       by Operating Activities           (18,432)             (8,594)              1,898             (12,414)            (26,732)
                                 ---------------    ----------------    ----------------    ----------------    ----------------

CASH FLOWS FROM
  INVESTING ACTIVITIES

  Fixed assets purchased                  -                     (170)             -                   (1,359)             (1,359)
  Organization costs paid                 -                   -                   -                   -                     (309)
                                 ---------------    ----------------    ----------------    ----------------    ----------------

     Net Cash (Used) Provided
       By Investing Activities            -                     (170)             -                   (1,359)             (1,668)
                                 ---------------    ----------------    ----------------    ----------------    ----------------

CASH FLOWS FROM
  FINANCING ACTIVITIES

  Stock offering costs                    -                   (6,106)             -                  (16,487)            (13,696)
  Common stock issued for cash            -                   -                   -                   51,700              60,700
                                 ---------------    ----------------    ----------------    ----------------    ----------------

     Net Cash Provided By
       Financing Activities               -                   (6,106)             -                   35,213              47,004
                                 ---------------    ----------------    ----------------    ----------------    ----------------

NET INCREASE IN CASH AND
   CASH EQUIVALENTS                      (18,432)            (14,870)              1,898              21,440              18,604

CASH AND CASH EQUIVALENTS
   AT BEGINNING OF PERIOD                 37,036              42,075              16,706              5,765               -
                                 ---------------    ----------------    ----------------    ----------------    ----------------

CASH AND CASH
  EQUIVALENTS AT END
  OF PERIOD                      $        18,604    $         27,205    $         18,604    $         27,205    $         18,604
                                 ===============    ================    ================    ================    ================
</TABLE>


<PAGE>
<TABLE>
<CAPTION>



                                                                        DOWNSTREAM, INC.
                                                                  (A Development Stage Company)
                                                             Statements of Cash Flows (Continued)
                                                                       (Unaudited)
                                                                                                                        From
                                                                                                                    Inception on
                                              For the Three                          For the Nine                   November 26,
                                              Months Ended                           Months Ended                   1996 Through
                                              September 30,                          September 30,                  September 30,
                                          1998              1997                1998                1997                1998
                                       ---------         -----------         -----------         -----------         ------------
Cash Paid For:
<S>                              <C>                <C>                 <C>                 <C>                 <C>          
  Interest                       $          -       $           -       $           -       $           -       $           -
  Income taxes                   $          -       $           -       $           -       $           -       $           -
</TABLE>


<PAGE>

                                DOWNSTREAM, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                    September 30, 1998 and December 31, 1997


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.  Basic Net Loss Per Share

              The  computations  of basic net loss per share of common stock are
              based on the weighted average number of shares  outstanding during
              the period of the financial statements.

              e.  Provision for Taxes

              At  September  30,  1998,  the  Company  had  net  operating  loss
              carryforwards of approximately  $35,000 that may be offset against
              future  taxable  income  through  2013.  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.

<PAGE>


                                DOWNSTREAM, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                    September 30, 1998 and December 31, 1997


NOTE 1 -      ORGANIZATION AND HISTORY (Continued)

              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.

              h.  Unaudited Financial Statements

              The accompanying unaudited financial statements include all of the
              adjustments which, in the opinion of management, are necessary for
              a fair presentation.  Such adjustments are of a normal,  recurring
              nature.

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.  During
              the nine months ended September 30, 1998 the organizational  costs
              were expensed.

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.

<PAGE>

                                DOWNSTREAM, INC.
                          (A Development Stage Company)
                        Notes to the Financial Statements
                    September 30, 1998 and December 31, 1997


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  September  30,  1998  and  December  31,  1997
               consisted of the following:

                                                 September 30,   December 31,
                                                     1998            1997
                                                 -------------   ------------- 
                Fax Machine                       $      424     $       424
                Televisions                              935             935
                                                         ---             ---
                                                       1,359           1,359

                Less accumulated depreciation           (443)           (239)
                                                        ----            ----

                Net fixed assets                  $      916     $     1,120
                                                  =      ===     =     =====

               Depreciation expense for the nine months ended September 30, 1998
               and for the year  ended  December  31,  1997  was $204 and  $239,
               respectively.


<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
                                      (Registrant)


Date:  October 21, 1998                By  /s/ Barry A. Ellsworth
                                          ----------------------------------
                                           Barry A. Ellsworth
                                           President