SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
             FOR THE TRANSITION PERIOD FROM __________ TO __________

                          Commission File Number 0-7619

                         HENG FAI CHINA INDUSTRIES, INC.
             (Exact name of Registrant as specified in its charter)

         Delaware                                                93-063633
(State or other jurisdiction                                 (I.R.S. Employer
 corporation or organization)                               Identification No.)

650 West Georgia Street, Suite 1600, Vancouver, British Columbia Canada V6B 4N8 
(Address of principal                                                 (Zip Code)
executive offices)

Registrant's telephone number, including area code (604) 685-8318

Not Applicable
(Former name, former address and former fiscal year, if changed since last 
report.

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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 ___    No __X__

13,686,814  shares of common stock,  $.01 par value, were issued and outstanding
as of March 31, 1997.

<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.

                                    FORM 10-Q

                                     FOR THE

                          QUARTER ENDED MARCH 31, 1997

                                      INDEX

PART I.  FINANCIAL INFORMATION                                              PAGE

Item 1. Financial Statements.................................................  1

        Condensed Consolidated Balance Sheets as at
        March 31, 1997 and December 31, 1996.................................  2

        Condensed Consolidated Statements of Operations for the
        three months ended March 31, 1997 and 1996...........................  3

        Condensed Consolidated Statements of Cash Flows for the
        three months ended March 31, 1997 and 1996...........................  4

        Notes to the Condensed Consolidated Financial Statements.............  5

Item 2. Management Discussion and Analysis of Financial
        Condition and Results of Operations.................................. 12

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings.................................................... 18

Item 2. Changes in Securities................................................ 18

Item 3. Defaults Upon Senior Securities...................................... 18

Item 4. Submission of Matters to a Vote of Security Holders.................. 18

Item 5. Other Information.................................................... 18

Item 6. Exhibits and Reports on Form 8-K..................................... 18

Signature Page............................................................... 19


                                        i


<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

        The following  financial  statements of Heng Fai China Industries,  Inc.
        (the "Company") are provided herewith:

        (a)   Condensed Consolidated Balance  Sheets  as at March  31,  1997 and
              December 31, 1996;

        (b)   Condensed Consolidated Statements  of  Operations  for  the  three
              months ended March 31, 1997 and 1996;

        (c)   Condensed Consolidated Statements  of  Cash  Flows  for  the three
              months ended March 31, 1997 and 1996; and

        (d)   Notes to the Condensed Consolidated Financial Statements.


                                       1

<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                             (United States Dollars)
<TABLE>
<CAPTION>
                                                                     As at             As at
                                                                March 31, 1997   December 31, 1996
                                                                --------------   -----------------
<S>                                                              <C>                <C>         
Current assets:
    Cash and cash equivalents ................................   $    191,626       $    170,259
    Available-for-sale securities (note 4) ...................      1,989,351            682,331
    Accounts receivable, trade, less allowance for doubtful                       
      accounts of $0 in 1997 and $70,258 in 1996 .............      3,271,544            980,172
    Inventories (note 5) .....................................      2,502,823          4,403,682
    Prepaid and other current assets .........................        210,876            151,722
    Amounts receivable from related parties (note 10) ........        231,360            136,439
    Value added taxes recoverable ............................        809,922            611,790
                                                                 ------------       ------------
      Total current assets ...................................      9,207,502          7,136,395
Property, plant and equipment, net (note 6) ..................      3,368,077          3,402,238
Prepaid rental ...............................................         79,518             86,747
                                                                 ------------       ------------
     Total Assets ............................................   $ 12,655,097       $ 10,625,380
                                                                 ============       ============
Current liabilities:                                                              
    Short-term borrowings (note 8) ...........................   $  3,062,367       $  2,403,026
    Margin loan payable (note 9) .............................      1,739,938            489,193
    Interest payable .........................................         43,335             40,212
    Mortgage payable - ST ....................................         23,849            108,069
    Accounts payable .........................................        963,578            837,596
    Bills payable ............................................        642,169            722,892
    Accrued expenses .........................................        385,916            360,749
    Security deposits payable ................................         11,183             11,992
    Amounts payable to related parties (note 10) .............        555,780          1,110,544
                                                                 ------------       ------------
        Total current liabilities ............................      7,428,115          6,084,273
                                                                 ------------       ------------
Long-term liabilities:                                                            
    Mortgage loans payable ...................................        944,867            865,594
    Long-term payable ........................................         88,744             88,744
                                                                 ------------       ------------
      Total long-term liabilities ............................      1,033,611            954,338
                                                                 ------------       ------------
Minority interest ............................................      3,550,267          3,583,399
                                                                 ------------       ------------
Stockholders' equity                                                              
    Preferred stock, $10 par value, 500,000 share authorized,                     
       unissued ..............................................           --                 --
    Common stock, $.01 par value, 30,000,000 share authorized;                    
       issued and outstanding 1997: 13,686,814 shares and                         
       1996: 11,986,814 shares (note 11) .....................        136,868            119,868
    Contributed surplus ......................................      5,704,023          4,701,023
    Unrealized loss on available-for-sale securities (note 4)        (190,936)           (78,825)
    Cumulative exchange adjustments ..........................          6,968              6,968
    Accumulated deficit ......................................     (4,867,069)        (4,510,914)
                                                                 ------------       ------------
                                                                      789,854            238,120
     Common stock issued for consulting services                                  
       to be received (note 7) ...............................       (146,750)          (234,750)
                                                                 ------------       ------------
     Total stockholders' equity ..............................        643,104              3,370
                                                                 ------------       ------------
     Total liabilities and stockholders' equity ..............   $ 12,655,097       $ 10,625,380
                                                                 ============       ============
</TABLE>

    See accompanying notes to the Condensed Consolidated Financial Statements


                                       2
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                             (United States Dollars)

                                                   Three Months    Three Months
                                                       Ended           Ended
                                                  March 31, 1997  March 31, 1996
                                                   ------------   --------------
Revenues:
    Rental  income .............................   $     84,739    $     86,367
    Sales of containers ........................      2,037,158            --
    Sales of  cement ...........................         42,163          84,158
    Investment income ..........................         78,081            --
    Other  Income ..............................          1,827           1,429
                                                   ------------    ------------ 
       Total revenues ..........................      2,243,968         171,954
                                                   ------------    ------------ 
Expenses:
    Cost of sales of containers ................      1,736,449            --
    Cost of sales of cement ....................         49,049          76,531
    Machinery lease rental .....................          7,229           7,171
    Depreciation ...............................         11,431          10,671
    Legal and professional fees ................          9,547          15,997
    Consulting fees (note7) ....................         88,000         845,041
    Consulting fees paid to a related company ..        125,000            --
    Interest on long-term debt .................           --            21,998
    Interest on short-term debt ................        172,716          11,653
    Land lease .................................         20,080          20,221
    Rental estate management fees ..............          4,089           3,529
    Salaries ...................................         13,125            --
    Other operating and administrative expenses         396,540          53,166
                                                   ------------    ------------ 
       Total expenses ..........................      2,633,255       1,065,978
                                                   ------------    ------------ 
Net loss before income taxes ...................       (389,287)       (894,024)
Provision for income taxes .....................           --              --
                                                   ------------    ------------ 
Net loss before minority interest for the year .       (389,287)       (894,024)
Minority interest ..............................         33,132            --
Net loss .......................................   $   (356,155)   $   (894,024)
                                                   ============    ============ 
Net loss per share .............................   $     (0.027)   $     (0.082)
                                                   ============    ============ 
Weighted average number of shares of common
  stock outstanding ............................     13,120,147      10,901,300
                                                   ============    ============ 

    See accompanying notes to the Condensed Consolidated Financial Statements


                                       3
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (United States Dollars)

                                                    Three Months   Three Months
                                                        Ended         Ended
                                                   March 31, 1997 March 31, 1996
                                                   -------------- --------------
Cash flow from operating activities
Net loss .......................................... $   (356,155)    $(894,024)
Adjustments to reconcile net loss to net cash used                  
  in operating activities:                                             
    Minority interest .............................      (33,132)         --
    Depreciation and amortization .................       40,372        10,671
    Consulting fee paid in common stock ...........       88,000       845,041
    Changes in working capital components:                        
    Accounts receivable ...........................   (2,291,372)      (19,092)
    Inventories ...................................    1,900,859        17,573
    Prepaid and other current assets ..............      (59,154)      (64,074)
    Amounts receivable from related parties .......      (94,921)         --
    Value added  taxes recoverable ................     (198,132)         --
    Prepaid rental ................................        7,229          --
    Accounts payable ..............................      125,982       (32,995)
    Bills payable .................................      (80,723)         --
    Interest payable ..............................        3,123         2,527
    Accrued expenses ..............................       25,167        (6,194)
    Security deposits payable .....................         (809)         (150)
    Amounts payable to related parties ............     (554,764)       81,684
    Exchange difference ...........................         --           1,492
                                                    ------------     ---------
    Net cash used in operating  activities ........   (1,478,430)      (57,541)
                                                    ------------     ---------
Cash flow from investing activities:                                
    Purchase of available for sale securities .....   (2,710,936)         --
    Proceeds from sale of available-for-sale                        
      securities ..................................    1,291,805          --
    Purchases of property, plant and  equipment ...       (6,211)         --
                                                    ------------     ---------
    Net cash used in investing activities .........   (1,425,342)         --
                                                    ------------     ---------
Cash flow from financing activities:                                
    Common stock issued for cash ..................    1,020,000    
    Increase in short-term borrowings .............      659,341        36,145
    Increase in margin loan  payable ..............   11,842,704         7,923
    Margin loan  repaid ...........................  (10,591,959)         --
    Mortgage loan repaid ..........................       (4,947)       (4,574)
                                                    ------------     ---------
    Net cash provided by financing  activities ....    2,925,139        39,494
                                                    ------------     ---------
Net increase (decrease) in cash and cash                            
  equivalents .....................................       21,367       (18,047)
Cash and cash equivalents:                                          
    Beginning of the period .......................      170,259        55,001
                                                    ------------     ---------
    End of the period ..................  ......... $    191,626     $  36,954
                                                    ============     =========
Analysis of the balance of cash and cash                            
  equivalents:                                                      
    Bank balances and cash ........................ $    191,626     $  36,954
                                                    ============     =========
Non-cash financing activities:                                    
Issuance of common stock for consulting  services .         --       $ 464,800
                                                    ============     =========
                                                                     
    See accompanying notes to the Condensed Consolidated Financial Statements


                                       4
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United Stated Dollars)

1.    BASIS OF PRESENTATION

            In June 1994, Heng Fai China Industries,  Inc., then known as Alpine
      International  Corporation  ("Apline") entered into a business combination
      with Vancouver Hong Kong Properties Limited ("Vancouver Hong Kong"), which
      owns and  operates  a  residential  rental  property  in North  Vancouver,
      British Columbia. The business combination resulted in the shareholders of
      Vancouver  Hong Kong being issued  10,357,700  shares of common stock (the
      "Common  Stock")  and  10,357,700  common  stock  purchase  warrants  (the
      "Warrants")  of Alpine.  As a part of the business  combination  a company
      related to Vancouver Hong Kong agreed to subscribe for 1,500,000 shares of
      common stock and 1,500,000 common stock purchase warrants for an aggregate
      of $120,000 in cash. The foregoing share numbers are before the effects of
      the Company subsequent  one-for-four reverse stock split and a one-for-ten
      reverse  stock split.  The business  combination  was  accounted  for as a
      reverse  acquisition  whereby the purchase  method of accounting  was used
      with Vancouver Hong Kong being the accounting parent. Accordingly, results
      of operations  for periods prior to the reverse  acquisition  are those of
      Vancouver  Hong Kong,  and the results of Alpine  operations  are included
      only from the date of such reverse acquisition. Subsequent to the business
      combination,  the name of the legal parent  Alpine was changed to Heng Fai
      China Industries, Inc. (the "Company").

            The condensed consolidated financial statements include the accounts
      of  the  Company  and  its   wholly-owned   subsidiaries.   The  condensed
      consolidated  financial  statements  included herein have been prepared by
      the Company,  without audit,  pursuant to the rules and regulations of the
      Securities  and  Exchange  Commission.  Certain  information  and footnote
      disclosures   normally  included  in  financial   statements  prepared  in
      accordance  with  generally  accepted  accounting   principles  have  been
      condensed or omitted pursuant to such rules and regulations,  although the
      Company believes that the disclosures are adequate to make the information
      presented not misleading.  The condensed consolidated financial statements
      and the notes thereto should be read in conjunction  with the consolidated
      financial  statements included in the Company's Annual Report on Form 10-K
      for the year ended December 31, 1996.

            In the opinion of the  management of the Company,  the  accompanying
      condensed   consolidated   financial   statements  contain  all  necessary
      adjustments  to present  fairly the  financial  position,  the  results of
      operations and cash flows for the periods reported.  All adjustments are a
      normal recurring nature.

            The  results of  operations  for the three  months  periods  are not
      necessarily indicative of the results to be expected for the full year.


                                       5
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United Stated Dollars)

1.    BASIS OF PRESENTATION - Continued

            On September 4, 1996, through a wholly-owned subsidiary, the Company
      acquired a 70% interest in Wuhan Monkey King Container Co., Ltd. ("Wuhan")
      in exchange of 727,272 shares of the Company's restricted common stock. No
      goodwill arose on the acquisition.  Wuhan is a joint venture  incorporated
      in the PRC which was formed to engage in the  design,  manufacture,  lease
      and repair of standard  and  non-standard  containers  and  related  steel
      structure products.

            On  January 9,  1995,  the  Company  acquired  from Fai H. Chan,  an
      officer, director and stockholder of the Company, 100% of the common stock
      of Heng Fai China & Asia Industries  Limited ("Heng Fai Asia") in exchange
      for  nominal  consideration.   Heng  Fai  Asia  through  its  wholly-owned
      subsidiaries  had various  options to acquire  interests in various  lease
      interests or operating  joint  ventures in the PRC, but  otherwise  had no
      material assets and liabilities or operations at the time of acquisition.

            Heng Fai Asia, through its wholly-owned subsidiary formed in January
      1995  exercised  its  option to enter  into a lease,  for a period of five
      years  commencing  January  1,  1995,  of a  production  line at the Hebei
      Cangzhou City Chemical Corporation Factory (the "Cangzhou  Factory").  The
      subsidiary was entitled to lease the production  line for five years for a
      rental  of RMB1.2  million  ($144,288)  payable  through  expenditures  to
      renovate and modernize the Cangzhou Factory. The expenditures were made in
      1995 and the resulting  prepaid  rental is being  amortized  over the five
      year term of the leases.  At the initiation of the Cangzhou Factory lease,
      the lessor  provided  certain raw materials and finished  goods  totalling
      $91,415,  payment of which is due, without interest,  at the expiration of
      the lease in December 1999. Heng Fai Asia's other options lapsed in 1995.

            On March 3, 1997, the Company acquired from Fai H. Chan, an officer,
      director and stockholder of the Company,  100% of the common stock of Heng
      Fai China  Industries  Acquisition  Limited  ("Heng Fai  Acquisition")  in
      exchange for nominal consideration.  Heng Fai Acquisition had an option to
      form a  co-operative  joint  venture  in the  PRC,  but  otherwise  had no
      material assets and liabilities or operations at the time of acquisition.

            On March 19, 1997, the Company entered into a conditional  agreement
      (the "Agreement")  through Heng Fai Acquisition with an unaffiliated party
      in PRC, to establish a joint venture,  (the "JV"),  in  Zhangjiagang  Free
      Trade Zone, PRC. However,  the Agreement was not completed and the Company
      has  lodged an  application  to cancel the  registration  of the JV during
      1997.


                                       6
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United Stated Dollars)

2.    CONTINUING OPERATIONS

            These condensed consolidated financial statements have been prepared
      on the going concern  basis of  accounting  which assumes the Company will
      realize its assets and discharge its  liabilities  in the normal course of
      business.  The  Company  is  currently  operating  at a  loss  and  has  a
      deficiency  in net  tangible  assets.  Should  the  Company  be  unable to
      continue  as a going  concern it may be required to realize its assets and
      settle its liabilities at amounts substantially different from the current
      carrying values.

            The Company  ability to continue as a going  concern is dependent on
      continued financial support from its principal shareholder, who has signed
      a letter of financial support to the Company.

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            The accompanying  condensed  consolidated  financial statements have
      been prepared in accordance with accounting  principles generally accepted
      in the United States. The following sets forth the significant  accounting
      principles  utilized  in the  preparation  of the  condensed  consolidated
      financial statements:

            Use of  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 the  disclosures  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 these estimates.

            Principles of consolidation - The consolidated  financial statements
      of Heng Fai  China  Industries,  Inc.  include  the  assets,  liabilities,
      revenues  and expenses of the Company and its  subsidiaries.  All material
      intercompany transactions and balances have been eliminated.

            Cash flows - The Company's cash and cash equivalents include cash on
      hand and  short-term  bank  deposits,  with  original  maturities of three
      months or less.

            Inventories - Inventories are stated at the lower of cost determined
      by the weighted  average method or market.  Work-in-progress  and finished
      goods consist of raw materials, direct labour and overhead associated with
      the manufacturing process.

            Investment  securities - The Company has  classified  the marketable
      equity securities it holds as available-for-sale. Accordingly, pursuant to
      Statement of Financial  Accounting  Standard  No. 115 the  securities  are
      measured  at  fair  value,  with  unrealized  gains  and  losses,  net  of
      applicable taxes, reported as a separate component of equity.


                                       7
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United Stated Dollars)

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

            Properties,  plant and equipment -  Properties,  plant and equipment
      are  stated  at  cost.  Depreciation  and  amortization  is  based  on the
      respective estimated useful live, as calculated on the following rates:

                  Building in Canada          5% declining balance

                  Buildings in PRC            5% declining balance

                  Leasehold  improvements     amortized over the term of the  
                                              lease which  expires May 31, 2032 
                                              using the straight line method

                  Plant and machinery         10% straight line method

                  Furniture and equipment     10% to 20% straight line method

                  Motor vehicles              20% straight line method

                  No depreciation is provided for construction in progress.

            Foreign currency translation - Financial statements of international
      subsidiaries  are translated into U.S.  dollars using the exchange rate at
      each balance sheet date for assets and liabilities and a weighted  average
      exchange  rate for each period for revenue and  expenses.  Where the local
      currency is the functional currency,  translation adjustments are recorded
      as a separate component of shareholders'  equity. Where the U.S. dollar is
      the  functional  currency,   the  financial  statements  of  international
      subsidiaries   are   translated  at  historical   rates  and   translation
      adjustments are recorded in income.

            Revenue  recognition - Sales of cement and containers are recognized
      when  merchandise is shipped and title has passed to the customer.  Rental
      income is  recognized  on a straight  line  basis over the  periods of the
      leases.

            Income taxes - Certain items are treated  differently  for financial
      reporting purposes than for income tax purposes. Pursuant to the provision
      of Statement of Financial  Accounting  Standards No. 109  "Accounting  for
      Income Taxes",  deferred tax is provided,  under the liability method, for
      the resulting  temporary  differences  between the financial reporting and
      tax bases of assets and liabilities, using the tax rates expected to be in
      effect when the related temporary difference reverse.

            Earnings  per share - Earnings  per share are based on the  weighted
      average number of common stock outstanding during the period.


                                       8
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United Stated Dollars)

4.    AVAILABLE-FOR-SALE SECURITIES

      The cost and approximate market value of investment securities as of March
      31, 1997 were as follows:

                                          Gross          Estimated     Carrying
                            Cost     Unrealized Loss    Fair Value       Value
                            ----     ---------------    ----------       -----
      Corporate equity
      securities         $2,180,287     $(190,936)      $1,989,351    $1,989,351
                         ==========     ==========      ==========    ==========

            The Company  acquired the  investment  securities  for cash financed
      partially by the  Company's  internal  resources and partially by a margin
      loan (See Note 9).

            These  investment  securities are not subject to any  contractual or
      statutory  resale  restrictions  and any  portion  of these  stock  can be
      reasonably expected to qualify for sale within one year.

5.    INVENTORIES

      Inventories by major categories are summarized as follows:

                                                 As of               As of
                                            March 31, 1997     December 31, 1996
                                            --------------     -----------------
           Raw materials and supplies          $1,478,660         $3,176,209
           Work-in-progress                       902,175          1,070,066
           Finished goods                         121,988            157,407
                                               ----------         ----------
                    Total inventories          $2,502,823         $4,403,682
                                               ==========         ==========


                                       9
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United Stated Dollars)

6.    PROPERTIES, PLANT AND EQUIPMENT

      The components of properties, plant and equipments are as follows:

                                                 As of            As of
                                            March 31, 1997   December 31, 1996
                                              -----------    -----------------

      Buildings                               $ 2,316,819       $ 2,316,819
      Leasehold improvements                      548,333           548,333
      Furniture and equipment                      55,491            50,024
      Plant and machinery                       1,277,597         1,276,853
      Motor vehicles                               55,816            55,816
      Construction-in-progress                      1,231             1,231
                                              -----------       -----------
      Total Cost                                4,255,287         4,249,076
      Less :  accumulated depreciation                        
        and amortization                         (887,210)         (846,838)
                                              -----------       -----------
                                              $ 3,368,077       $ 3,402,238
                                              ===========       ===========
                                                            
            All premises and equipment are pledged to secure banking  facilities
      extended to the Company.

7.    DEFERRED EXPENDITURE

            In September 1996, the Company  entered into a consulting  agreement
      with another  previously  unaffiliated party pursuant to which it receives
      various investor relations and financial advisory services. The consulting
      agreement has a term of 12 months,  subject to earlier termination thereof
      or renewal for subsequent periods. Pursuant to the terms of the agreement,
      the Company  issued an aggregate of 300,000  shares of common stock to the
      consultant in September 1996. The value attributable to the 300,000 shares
      of common  stock  issued was $319,500  which has been  capitalized  and is
      being amortized over the 12 months term of the consulting  agreement.  The
      unamortized  portion  of the amount  recorded  for the  300,000  shares of
      common stock issued is presented as a reduction of shareholders' equity.

8.    SHORT-TERM BORROWINGS

            Short-term borrowings at March 31, 1997 represent bank overdrafts on
      which the Company pays interest based on the "besting lending" rate in the
      PRC. The effective interest rate at March 31, 1997 was 8.415%.


                                       10
<PAGE>

                         HENG FAI CHINA INDUSTRIES, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                             (United Stated Dollars)

9.    MARGIN LOAN PAYABLE

            The margin loan payable is to a third party and is collateralized by
      the Company's investment securities with a carrying value of US$1,989,351.
      The loan is  repayable  on  demand  and bears  interest  at Hong Kong best
      lending rate (8.75% at March 31, 1997) plus 3.5 per cent per annum.

10.   RELATED PARTIES TRANSACTIONS

            These  amounts  are  unsecured,  interest-free  and  have  no  fixed
      repayment date.

11.   CAPITAL STOCK

            The changes in share capital during the three months ended March 31,
      1997 were as follows:

                                             Common Stock                     
                                        ---------------------      
                                         Number of    Amount   Contributed
                                          Shares                 Surplus
                                          ------      ------     -------
      Balance as of December 31, 1996   11,986,814   $119,868   $4,701,023
      Common stock issued for cash       1,700,000     17,000    1,003,000
                                        ----------   --------   ----------
      Balance as of March 31, 1997      13,686,814   $136,868   $5,704,023
                                        ==========   ========   ==========

            As of March 31, 1997, there were outstanding warrants exercisable to
      purchase 296,443 shares of common stock, at an exercise price of $3.20 per
      share through September 2, 1999.

12.   SUBSEQUENT EVENTS

            Subsequent to the balance sheet date, the Company disposed a 70% and
      a 81% interests in its subsidiaries in Wuhan and Cangzhou, respectively.


                                       11
<PAGE>

                         Heng Fai China Industries, Inc.
                                 March 31, 1997

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

Introduction

The Company  was  originally  incorporated  in 1958 and until June 1994 had been
engaged in business other than those it presently operates, or, since its Alpine
1992 emergence from reorganization under Chapter 11 of the U.S. Bankruptcy code,
had been inactive.

Vancouver Hong Kong owns and operates an apartment  building in North Vancouver,
British Columbia, and until June 1995 the Company's operations were comprised of
that single  segment.  In January 1995,  the Company  acquired from Fai Chan (an
officer,  director and  principal  stockholder  of the Company) the ownership of
100% of the common stock of Heng Fai China and Asia Industries  Limited ("Asia")
and  Asia's  wholly-owned  subsidiaries  and Heng Fai China  Industries  Limited
("China"). China, through its subsidiary Cangzhou Min You Cement Company Limited
("Min  You"),  obtained the right to acquire the use, for a period of five years
commencing  January 1, 1995, of a production line at Min You in the PRC. Min You
was entitled to lease the production  line for five years by expending  Renminbi
("RMB"),  the  currency  of the  PRC,  RMB  1.2  million  on the  expansion  and
modernization  of Min You.  The option was  exercised  and the  required RMB 1.2
million was expended in fiscal 1995,  and  beginning in June 1995 the  Company's
operations  included  a second  business  segment,  the  production  and sale of
cement.

On September 4, 1996, the Company through a wholly  owned-subsidiary  acquired a
70%  interest in Wuhan  Monkey King  Container  Co.  ("Wuhan"),  in exchange for
727,272  shares  of the  Company's  restricted  common  stock.  Wuhan is a joint
venture  incorporated  in the PRC  which was  formed  to  engage in the  design,
manufacture,  lease and  repair of  standard  and  non-standard  containers  and
related steel structure products.

On February 19, 1997, the Company entered into a conditional  agreement  through
Heng Fai China Industries  Acquisition  Limited with a an unaffiliated  party in
PRC, (the "PRC Party") to establish a joint venture, the "JV"), in Zhangjiagang.
However,  the  Agreement  was  not  completed  and the  Company  has  lodged  an
application to cancel the registration of the JV in 1997.

During  December  1997  the  Company   effected  an  agreement  to  reverse  the
acquisition of Wuhan. Also, in December 1997, the Company disposed of 81% of its
interest  in  Cangzhou  Cement  and  submitted  its  application  for  change in
ownership to the respective authorities in PRC for consensus and approval.

During March 1998, pursuant to a resolution passed on March 23, 1998, by written
consent  in  lieu  of a  meeting  pursuant  to  section  141(f)  of the  General
Corporations  Law of the State of Delaware,  the  Company's  name was changed to
Powersoft Technologies, Inc.


                                       12
<PAGE>

Subsequent events

During May 1997, the  shareholders  voted to amend the Company's  Certificate of
Incorporation for the following items:

(i)   To  increase  the  number of  authorized  shares of  preferred  stock from
      500,000  to  25,000,000  shares,  and  decreasing  the  par  value  of the
      preferred stock from $10.00 to $5.00.

(ii)  To adopt a Stock  Option  Plan that  provides  for the  issuance  of up to
      2,000,000  employee  stock  options over a ten year  period.  The ten year
      period commences on the date the plan was ratified.  The plan provides for
      the grant of both incentive and non-statutory stock options.  The exercise
      price of the  incentive  stock options under the plan may not be less than
      the fair market  value at the common  stock,  and in some cases may not be
      less  than  110%  of  such  fair  market  value.  The  exercise  price  of
      non-statutory  options under the plan may not be less than 85% of the fair
      market value of the common  stock.  The maximum term of options  under the
      plan is ten years and in certain cases may be five years.

Subsequent to March 31, 1997,  the Company  disposed of 70% and 81% interests in
its subsidiaries in Wuhan and Cangzhou, respectively.

Results of  Operations  - Period  Ended March 31, 1997 as Compared to the Period
Ended March 31, 1996

Consolidated revenues increased to US$2,243,968 for the three months ended March
31, 1997,  from  US$171,954  for the three  months  ended March 31, 1996.  Wuhan
Container Co., Ltd., a majority owned  subsidiary that was acquired in September
1996,  represents the primary reason for this increase.  Sales of Wuhan amounted
to US$2,037,158 for the first quarter of 1997.

Cement sales  amounted to  US$42,163  and  US$84,158  for the three months ended
March 31, 1997 and 1996,  respectively.  The  decrease is because the  austerity
measures  implemented  by the PRC  government in late 1995  continued to have an
impact  on the  economic  developments  in the  PRC  which  in turn  affect  the
infrastructure  activities  and the building  developments.  Although there is a
sign of easing in such  austerity  measures,  both turnover and profit margin of
the cement sector are still severely affected.

There were no significant  changes in the revenues and expenses  attributable to
the operation of Vancouver  Hong Kong's real estate between the first quarter of
fiscal 1997 and fiscal 1996.

Investment  income  amounted to  US$78,081  for the first  quarter of 1997.  The
income is derived from the increased holdings in available for sale securities.

Operating  expenses  includes  the  increase  in cost of  sales  of  containers,
US$1,736,449  in 1997 and the decrease in cost of sales of cement from US$76,531
in 1996 to  US$49,049  in 1997  that  are  associated  with the  revenue  trends
described above.


                                       13
<PAGE>

Fees are paid to a related party for consulting and management services.  During
the period ended March 31, 1997 such fees amounted to US$125,000.

Consulting  fees amounting to US$88,000  represents a consulting fee paid in the
form of common stock for public relations and related  financial  services.  The
consulting agreement was entered into in September 1996.

Interest  expense  increased to US$172,716  for the three months ended March 31,
1997 as compared to US$33,651  for the three  months ended March 31, 1996.  This
reflects the increase in short-term  borrowings  and margin loans  payable.  The
increase in  financing  was used to fund  increases in accounts  receivable  and
available-for-sales securities.

Other  operating and  administrative  expenses  increased from US$53,166 for the
three months ended March 31, 1996 to US$396,540 for the three months ended March
31, 1997. The increase  reflects  increased  expenditures  for  amortization  of
deferred   charges,   amounting   to   approximately   US$173,000   and  various
administrative and general expenses.

The charge for  minority  interests  is  primarily  due to the  interests of the
minority shareholders of Wuhan.

The  Company's  net loss for the period ended March 31, 1997 was  US$356,155,  a
change of US$537,869  compared to a net loss of US$894,024 for the corresponding
period  in 1996.  The  decrease  in the net loss was the net  result  of (i) the
operating loss of the container segment;  (ii) lower consulting expenses;  (iii)
increased administrative and interest expenses.

As at March 31, 1997,  the Company held shares of corporate  equity  securities.
The quoted market price of these securities, in the aggregate,  US$190,936 lower
than their initial  costs.  The  securities are classified as available for sale
and, accordingly,  the increase in their market value has been credited directly
to stockholders' equity as a separate component thereof.

Liquidity and Capital Resources

The net cash used in operating activities cash flows for the three months period
ended  March 31,  1997  amounted  to  US$1,478,430.  This  primarily  due to the
operating  losses  experienced,  increases  in  receivables  from the  container
segment and the payment of amounts that were payable to related parties. Company
met its working  capital  requirements  from the proceeds of bank borrowings and
the issuance of common shares.

The net cash used in investing activities amounted to US$1,425,342 for the three
months ended March 31, 1997. This is primarily due to the use of cash to pay for
the purchase of investments.

The net cash provided by financing  activities  amounted to US$2,925,139 for the
three months ended March 31,  1997.  This is due to the  increases in short term
borrowings and margin loans and the issuance of common shares.

As discussed in Note 2 of the Notes to the  Consolidated  Financial  Statements,
the  Company's  operating  losses and  deficiency  in net tangible  assets raise
substantial  doubts  concerning  the  Company's  ability to  continue as a going
concern.  However, the Company's principal shareholder has agreed to continue to
provide the Company with necessary financial support. 


                                       14
<PAGE>

Exchange Rate Risk

At present,  the Company's  sales and purchases are  denominated  in US dollars,
Hong Kong dollars and  Renminbi  ("Rmb").  In view of the  exchange  rate pegged
between  Hong Kong  dollars  and US  dollars,  the Company is not subject to any
direct exposure from the fluctuation of US dollars.

Rmb is currently not freely  convertible.  Prior to January 1, 1994, all foreign
exchange transactions  involving Rmb in the PRC were placed through the People's
bank of China or authorized financial institutions at the official exchange rate
set by the State  Administration of Exchange Control (the "SAEC").  In addition,
Rmb could also be converted at swap centers  established by the SAEC open to PRC
enterprises and foreign investment enterprises,  subject to the SAEC approval of
each foreign  currency  transaction,  at exchange rate  influenced by the actual
demand and supply of foreign  currency in the PRC. The  exchange  rate quoted by
the SAEC generally differs from the exchange rate quoted by the swap centers.

On January 1, 1994, the PRC government unified the two-tier system by adopting a
unified floating exchange rate system largely based on market supply and demand.
In place of the  official  rate and swap rate,  the  People's  Bank of China now
publishes a daily  exchange  rate (the "PBOC  Exchange  Rate").  Banks and other
financial  institutions  authorized  to deal in foreign  currency may enter into
foreign exchange transactions at exchange rates within an authorized range above
or below the PBOC Exchange Rate  according to the market  conditions.  While the
new system has removed the two-tier  exchange  rate  system,  Rmb is still not a
freely convertible currency.

As a matter of policy,  the Company  sources  supply of raw  materials  from PRC
domestic producers whenever  possible.  The management  believes that the policy
allows the Company to utilize the Rmb received  from its  customers and minimize
the Company's  exposure to Rmb exchange  risks.  The Company  therefore does not
anticipate any exchange rate  fluctuation  which would have an adverse effect on
the financial performance and assets value of the Company when measured in terms
of U.S. Dollars.

The Company is not involved in any hedging activities in foreign currencies.

Inflation

The general inflation rate in China was  approximately  24%, 15% and 8%per annum
in 1994, 1995 and 1996, respectively.  Accordingly, the PRC Government has taken
steps to control inflation by means of credit restrictions, increase in interest
rates and open  market  operations,  which in turn,  lead to a  slowdown  of the
Chinese  economy.  As a result  of the PRC  inflation,  the  austerity  measures
implemented by the PRC Government have continued to affect the operations of Min
You and Wuhan  Container.  Although  there is a sign of easing in such austerity
measures,  both  turnover and profit  margin of Min You and Wuhan  Container are
still severely affected.

New accounting standards not yet adopted

In June 1997 the Financial  Accounting  Standards Board ("FASB") issued SFAS No.
130 "Reporting Comprehensive Income" which requires information on comprehensive
income to be provided in the financial  statements.  Results of  operations  and
financial position will not 


                                       15
<PAGE>

be affected by implementation of this new standard.

Also, in June 1997, the FASB issued SFAS No. 131 "Disclosures  about Segments of
an Enterprise and Related Information", which supercedes SFAS No. 14, "Financial
Reporting  for  Segments  of  a  Business  Enterprise",  and  which  establishes
standards for the way that public enterprises report information about operating
segments  in  financial  statements  issued to the public.  It also  establishes
standards for disclosures regarding products and services,  geographic areas and
major  customers.  SFAS No. 131 defines  operating  segments as components of an
enterprise  about which  separate  financial  information  is available  that is
evaluated  regularly by the chief  operating  decision  maker in deciding how to
allocate  resources  and in assessing  performance.  Results of  operations  and
financial position will not be affected by implementation of the new standard.

In February 1998,  the FASB issued SFAS No. 132,  Employers'  Disclosures  about
Pensions  and  Other  Postretirement   Benefits,  which  amends  the  disclosure
requirements  for pensions and other  postretirement  benefits.  Adoption of the
standard  will  not  significantly  change  the  Company's  financial  statement
disclosures.

The above new standards  not yet adopted are effective for financial  statements
for  periods  beginning  after  December  15,  1997,  and  require   comparative
information for earlier years to be restated.

During April 1998, the AICPA  Accounting  Standards  Executive  Committee issued
Statement of Position  98-5,  "Reporting  on the Costs of Start-up  Activities".
Generally the Statement requires that the costs of start-up  activities shall be
expensed as incurred,  and that upon initial  adoption an  adjustment to reflect
the  cumulative  effect of a change in accounting  principle  shall be recorded.
This statement will be effective for periods  beginning after December 15, 1998,
with earlier application permitted.

The Company  believes that the effect of adopting  these  standards  will not be
material to the Company's financial position or results of operations.

Regional economic developments

Several countries in Asia have recently experienced significant adverse economic
developments including substantial exchange rate fluctuations, inflation, social
unrest,  increased  interest rates,  reduced  economic  growth rates,  corporate
bankruptcies,  declines in the market value of shares listed on stock exchanges,
emergency   loan   agreements   with  the   International   Monetary   Fund  and
government-imposed  austerity  measures.  To date, neither the PRC nor Hong Kong
has experienced these  developments to the same extent as many other major Asian
countries.  However,  there can be no assurance that these economic developments
in other  countries  will not  adversely  affect the  economy of the PRC or Hong
Kong, or that similar adverse economic developments will not occur in the PRC or
Hong  Kong in the  future,  which  could  have a  material  adverse  effect on a
Company's financial condition or results of operations.

The year 2000

The  use of  computer  systems  that  rely  on  two-digit  programs  to  perform
computations  or other  functions  may cause such  systems to  malfunction  with
respect to the year 2000 and 


                                       16
<PAGE>

subsequent years. Like many other entities,  the Company is currently  assessing
its computer software and database with respect to its functionality  beyond the
turn of the century.  The extent and estimated cost of the  modifications  which
will be required  cannot yet be  determined,  although it is expected  that such
expenditures  will not have a material  effect on the  financial  condition  and
results of operations of the Company.  There can be no assurance,  however, that
the year 2000 problem will be resolved  successfully  and in a timely fashion or
that any failure or delay by the  Company or any third  parties  which  interact
with the  Company in  achieving  year 2000  compliance  will not have an adverse
effect on its operations.


                                       17
<PAGE>

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         None

Item 2.  Changes in Securities

         None

Item 3.  Defaults in Senior Securities

         None

Item 4.  Submission of Matters to a Vote of Security Holders

         None

Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

         None


                                       18
<PAGE>

                                   SIGNATURES

      Pursuant  to the  requirements  of the  Securities  Exchange  Act of 1934,
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                            HENG FAI CHINA INDUSTRIES, INC.



Dated:  November 19, 1998                   By:  /s/ Robert H. Trapp
                                                 ------------------------------
                                                 Robert H. Trapp
                                                 Secretary and Treasurer


                                       19