SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                              --------------------

                                    Form 10-K

                      [ X ] ANNUAL REPORT UNDER SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                     [ ] TRANSITION REPORT UNDER SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                           Commission File No. 0-7619

                              --------------------

                           POWERSOFT TECHNOLOGIES INC.
                         (Name of issuer in its charter)

         DELAWARE                                      93-063633
(State Or Other Jurisdiction                         (IRS Employer
      Of Incorporation)                           Identification No.)

         650 West Georgia Street, Suite 1600, P.O. Box 11586, Vancouver,
                        British Columbia, CANADA V6B 4N8
                                 (604) 685-8318
          (Address and telephone number of principal executive offices)

                              --------------------

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities  registered  pursuant to Section  12(g) of the Exchange  Act:  Common
Stock, $.01 par value per share.

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  twelve  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 ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure  will be contained,  to
the  best  of  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [  ]

The  Registrant's  revenues for the fiscal year ended  December 31, 1997 totaled
$571,921.

As of October 9, 1998 the  aggregate  market value of the voting and  non-voting
common equity held by  non-affiliates  of the  Registrant,  based on the closing
price of $.08 on that date, was approximately $582,648.

As of October 9, 1998 the Registrant had outstanding 15,559,542 shares of common
stock.

Documents  incorporated by reference:  Other than certain exhibits here to which
have been specifically incorporated by reference herein in Item 14 under Part IV
hereof, no other documents are incorporated by reference.

Transitional Small Business Disclosure Format:   YES [   ]     NO [ X ]

<PAGE>

                               INDEX TO FORM 10-K
                                       OF
                           POWERSOFT TECHNOLOGIES INC.
                                                                            Page

                                     PART I
                                     ------

Item 1.  Business..............................................................1

Item 2.  Description of Property...............................................6

Item 3.  Legal Proceedings.....................................................6

Item 4.  Submission of Matters to a Vote of Security Holders...................6

                                     Part II
                                     -------

Item 5.  Market for Common Equity and Related Stockholder Matters..............7

Item 6.  Selected Financial Data...............................................9

Item 7.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations...................................9

Item 8.  Financial Statements.................................................15

Item 9.  Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosures........................15

                                    Part III
                                    --------

Item 10.  Directors and Executive Officers of the Registrant..................16

Item 11.  Executive Compensation..............................................19

Item 12.  Security Ownership of Certain Beneficial Owners and Management......21

Item 13.  Certain Relationships and Related Transactions......................22

Item 14.  Exhibits and Reports on Form 8-K....................................23

     (a)  Exhibits
     (b)  Reports on Form 8-K


<PAGE>

                                     Part I
Item 1.  Business

Historical

     Powersoft  Technologies,  Inc.  ("Company")  was  originally  organized  in
California on March 24, 1958 as Time Saver Markets,  Inc. From 1958 to 1994, the
Company  effected  numerous  name changes and engaged in  businesses  other than
those it presently  operates.  In August 1994, the Company changed its corporate
domicile  to  Delaware.  In November  1994,  the  Company,  then known as Alpine
International Corp. changed its name to Heng Fai China Industries, Inc. On March
31,  1998,  Heng Fai  China  Industries,  Inc.  changed  its  name to  Powersoft
Technologies Inc.

     As of October 12, 1998, the Company's subsidiaries are as follows:

Name                               % Owned           State/Foreign Incorporation
----                               -------           ---------------------------

Vancouver Hong Kong                 100%             Canada
 Properties Ltd.

America & China Business            100%             Canada
 and Development Inc.

Heng Fai Management Inc.            100%             British Virgin Islands

Heng Fai China &                    100%             Hong Kong
 Asia Industries Limited

Heng Fai China                      100%             Hong Kong
 Industries Limited

Worldwide Container                 100%             Hong Kong
 Company Limited

Heng Fai China Industries           100%             Hong Kong
 Acquisition Limited

Greatly Hong Kong Limited           100%             Hong Kong

Wuhan Monkey King                    70%(1)          People's Republic of China
 Container Co., Ltd.


                                       1
<PAGE>

Cangzhou Min You                    100%(1)          People's Republic of China
 Cement Co., Ltd.
-------------
(1)  Represents  ownership prior to the  Divestiture,  as described below. As of
     July 24,  1998,  the Company  divested  all  ownership in Wuhan Monkey King
     Container  Co.,  Ltd.,  and 81% of its  interest in Cangzhou Min You Cement
     Co., Ltd.

     In 1994,  the Company  acquired  Vancouver  Hong Kong  Properties  Ltd.,  a
Canadian  corporation  ("Vancouver Hong Kong"), which owns an apartment building
in North Vancouver, British Columbia ("Apartment Building").

     In January 1995, the Company acquired a wholly-owned  subsidiary,  Heng Fai
China & Asia Industries Limited ("Asia"),  a company  incorporated in Hong Kong,
along with Asia's  wholly-owned  subsidiary,  Heng Fai China Industries  Limited
("China").  China is incorporated  in Hong Kong and owned options  ("Option") to
acquire, through its wholly owned subsidiary, Cangzhou Min You Cement Co., Ltd.,
a  foreign-owned  enterprise  registered  in  the  People's  Republic  of  China
("PRC")("Min  You"),  direct or joint venture  operating  lease interests in the
following  three cement  factories  in the Hebei  province of PRC: (i) the Hebei
Cangzhou  City  Chemical  Corporation  Factory  ("Cangzhou  Factory");  (ii) the
Qingxian Cement Factory ("Qingxian Factory");  and (iii) the Hebei Cangzhou Area
Construction  Materials Factory ("Hebei Factory").  Min You did not exercise its
Options to acquire interests in the Qingxian Factory and the Hebei Factory,  and
such Options have since expired.

     In April 1995,  Min You  exercised an Option to lease a production  line at
the Cangzhou Factory.  Such lease provided for the use of the production line at
Cangzhou Factory for a five year period commencing January 1, 1995.

     In  September  1996,  the  Company,  through its wholly  owned  subsidiary,
Worldwide  Container  Company,  Ltd.  ("Worldwide"),  acquired a 70% interest in
Wuhan Monkey King Container Co., Ltd. ("Wuhan"),  in exchange for 727,272 shares
of the Company's  restricted Common Stock. Wuhan is a sino-foreign  equity joint
venture registered in PRC which is engaged in the design, manufacture, lease and
repair of standard  and  non-standard  containers  and related  steel  structure
products.

     In  January  1997,  the  Company  acquired  from Fai H. Chan,  an  officer,
director and shareholder of the Company, 100% of the outstanding common stock of
Greatly Hong Kong Limited ("Greatly HK") in exchange for nominal  consideration.
Greatly HK had a 25% interest in Hebei Cherry Valley Duck Ltd. ("Duck Farm"),  a
cooperative  joint  venture  established  in the PRC  which was  engaged  in the
management  and  operation  of a duck farm in PRC.  The  investment  was  wholly
financed by an interest  free,  short term advance from Fai H. Chan.  Other than
the investment in the Duck Farm and advance from Fai H. Chan,  Greatly HK had no
other material assets and liabilities, or operations at the time of acquisition.


                                       2
<PAGE>

     In March 1997, the Company acquired from Fai H. Chan, an officer,  director
and shareholder of the Company,  100% of the  outstanding  common stock Heng Fai
China Industries  Acquisition  Limited ("Heng Fai  Acquisition") in exchange for
nominal consideration.  Heng Fai Acquisition had an option to form a cooperative
joint venture in PRC, but otherwise had no material assets and  liabilities,  or
operations  at the time of  acquisition.  Heng Fai  Acquisition  entered  into a
conditional  agreement  ("Agreement")  with an  unaffiliated  party in PRC ("PRC
Party") to establish a joint  venture,  Heng Li  (Zhangjiagang  Free Trade Zone)
International  Trading and  Development  Co.,  Ltd.  ("Heng Li"), to develop and
construct a commercial  building in Zhangjiagang  Free Trade Zone, PRC. However,
the Agreement was not completed and an application  has been submitted to cancel
the registration of Heng Li.

Reorganization

     After several years of direct  investments in PRC, as described  above, the
Company believes the returns on such investments are unsatisfactory. The Company
believes its best course of action is to write-off or  discontinue a substantial
part of its PRC operations ("Divestiture").  The Company intends to focus on the
acquisition of companies  operating in the fields of computer technology and the
Internet,  telecommunications,  and  financial  software  applications  for  the
securities  industry.  Pursuant to  reorganization,  the Company  commenced  the
Divestiture   and  entered  into  the  following   agreements  to  terminate  or
substantially reduce its interest in its PRC operations as:

Min You
-------

     In December  1997,  the  Company,  through  China,  transferred  81% of its
interest in Min You to two unrelated parties in Hong Kong and PRC. China retains
a 19%  interest  in Min You and full  provisions  have  been  made  against  the
remaining  cost  of  investment  in Min  You.  Applications  for the  change  in
ownership in Min You have been  submitted to the  respective  authorities in PRC
for consents and approval.

Wuhan
-----

     In  December  1997,  the  Company  effected  an  agreement  to reverse  the
acquisition  by  returning  its 70%  interest in Wuhan and to redeem the 727,272
shares of restricted Common Stock previously issued pursuant to the acquisition.
Applications  for the change in  ownership  in Wuhan have been  submitted to the
respective authorities for consents and approval.

Duck Farm
---------

     In December  23,  1997,  Greatly HK effected an agreement to dispose of its
25% interest in the Duck Farm.  Applications  for the change in ownership of the
Duck Farm have been  submitted to the  respective  authorities  for consents and
approval.


                                       3
<PAGE>

Heng Li
-------

     Heng Fai Acquisition did not exercise its option to form Heng Li as certain
conditions of the joint  venture  agreement  were not met. In December  1997, an
application   was  submitted  to  the  respective   authorities  to  cancel  the
registration of Heng Li.

Real Estate

     The Company operates an apartment building, Lord Highlands Apartments,  260
East 12 Street,  North Vancouver,  British Columbia,  Canada V7L 2J6 ("Apartment
Building"),  located  within  the  Central  Lonsdale  area of the  City of North
Vancouver,  British  Columbia.   Developments  in  the  immediate  area  consist
primarily  of  low  to  medium  density   residential   units,  with  commercial
development  focused along  Lonsdale  Avenue to the west and the more  prominent
cross  streets  such as 13th  Street and 15th  Street.  Lions Gate  Hospital,  a
principal medical facility,  is located just north of the apartment  building at
the intersection of East 13th Street and St. George Avenue.

     The Central Lonsdale  corridor serves as the primary  commercial centre for
the city and the surrounding areas of North Vancouver.  Residential  development
in the  surrounding  areas consist of variety of 3-story rental and strata tiled
apartments,  plus lower density townhouse developments.  The area also has signs
of higher density  development  spotted throughout the area. Thus, the apartment
building is located within a desirable and stable multiple  residential oriented
neighborhood,  located in close  proximity  to local  retail,  recreational  and
public amenities.

     The  following  information  has been  extracted  from the  Canada  Housing
Corporation's ("CMHC") Vancouver CMA Rental Market Report.

Vacancy Rates
-------------

Region                    12/97                 12/96
------                    -----                 -----

City of North              0.6%                  0.6%
Vancouver

District of North          0.2%                  0.2%
Vancouver

Metro Vancouver            1.5%                  1.2%


                                       4
<PAGE>

Apartment Rental Rates
----------------------

City of North Vancouver    12/97            12/96
-----------------------    -----            -----

Bachelor                   CDN$574          CDN$572

One Bedroom                CDN$703          CDN$688

Two Bedroom                CDN$971          CDN$967

     The  Apartment  Building  is a 60 unit,  three-story  wood  frame  building
constructed  in the  late  1960's.  The  building  has a  below  grade  basement
containing  the  mechanical   rooms,   various  storage  rooms,   workshops  and
recreational  areas. The apartment  building has a total of 60 suites consisting
of one bachelor suite, 38 one bedroom suites and 21 two bedrooms suites.  Twelve
of the two bedrooms  suites,  located on the corners of the building  offer wood
burning  fireplaces.  The suites are  generally  larger than  average and on the
whole,  have been well maintained.  General  finishing  details include hardwood
floors or  wall-to-wall  carpeting  with  vinyl  flooring  in the  kitchens  and
bathrooms,  adequate  cabinet/counter space in the kitchens with two appliances,
partly tiled shower  surrounds in the bathroom and covered  balconies or patios.
Paved open  parking for 60  vehicles  is  provided at the rear of the  apartment
building.  Access/egress  is  available  by a paved  rear  service  lane off St.
Andrews Avenue.

     Overall,  the property  provides  well  maintained  rental  accommodations,
consistent  with the quality of other projects  located within the general area.
The roof was replaced in 1992.  Since then,  there has been no major  upgrading,
but day to day maintenance as required.

Apartment Building Rental Rates
-------------------------------

     The current monthly rents* are as follows:

Suite Type                 Monthly Rent
----------                 ------------

Bachelor                   CDN$580
One Bedroom                CDN$680
Two Bedroom                CDN$800
------------
* Rent includes heat, hot water, parking and cable television.

     The above survey  supports the conclusion that the monthly rents within the
subject are  reasonably in line with market rents,  taking into account the size
and condition of the units plus the inclusions in the month rent.


                                       5
<PAGE>

Employees

     The Company currently employs 5 persons,  2 of which oversee the operations
of the  Apartment  Building,  and 1 monitors the  operations in PRC. The Company
believes that its relationship with its employees is good.

Government Regulation

     The Company is not aware of any government regulations in the United States
or Canada  which  materially  adversely  affects its business or  operations  in
Canada. The Company's  participation in the operations of the Apartment Building
are subject to significant governmental regulation in the Canada and the Company
believes it is in compliance  with such  regulations  to the extent the same are
applicable to the Company.

Item 2.  Description of Property

     The Company  maintains its principal  executive offices at 650 West Georgia
Street,  Vancouver,  British  Columbia,  Canada.  The Company  believes that the
office space is satisfactory for its needs.

     In June  1998,  the  Company  transferred  a lease for an office at 45 Wall
Street, New York, New York to Fronteer Financial Holdings, Ltd.

     The Company also operates the Apartment Building, composed of 60 individual
residential units in a three story frame building situated at the corner of East
12 Street and St. Andrews Avenue in North Vancouver,  British Columbia,  Canada.
The Apartment  Building is  approximately  57,340 square feet and is situated on
approximately 1,109 acres of land. It is owned by the Company,  subject to first
and second mortgages.  The land underlying the Apartment  Building is leased and
such lease terminates on May 31, 2032, subject to earlier termination in certain
circumstances.  The annual lease cost for the land is fixed at $80,321 until the
year 2010, after which time it will be renegotiated for the remaining term.

Item 3.  Legal Proceedings

     The Company is not a party to any pending or ongoing litigation.

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

     During the quarter  ended  December 31, 1997, no matters were placed before
the stockholders of the Company for consideration.


                                       6
<PAGE>

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

     The  Company's  Common  Stock is quoted on NASDAQ OTC  Electronic  Bulletin
Board  ("Bulletin  Board").  The  following  table sets  forth,  for the periods
indicated,  the reported high and low bid price  quotations for the Common Stock
for the periods such securities  have been reported on the Bulletin Board.  Such
quotations  reflect  inter-dealer  prices,  but do not include retail  mark-ups,
mark-downs or commissions and may not necessarily represent actual transactions.

                                  Common Stock
                                  ------------

                              High Bid              Low Bid
                              --------              -------
Fiscal 1996:
------------

First Quarter                  6.25                  5.25
Second Quarter                 7.50                  1.50
Third Quarter                  2.50                  1.00
Fourth Quarter                 1.375                  .53

Fiscal 1997:
------------

First Quarter                  1.875                  .53
Second Quarter                  .813                  .34
Third Quarter                   .60                   .24
Fourth Quarter                  .265                  .11

Fiscal 1998:
------------

First Quarter                   .245                  .10
Second Quarter                  .21                   .12


     The Company's  Common Stock  commenced  quotation on the Bulletin  Board in
March 1994.  Prior thereto,  the Common Stock was quoted in the so-called  "Pink
Sheets" issued by the National  Quotation Bureau.  Information  relating to that
period of time that the  Company's  Common Stock has been quoted on the Bulletin
Board,  was received from NASDAQ Market  Research.  Information  relating to the
prior period was provided by the National Quotation Bureau.

     As of October 9, 1998, there were approximately  1,438 holders of record of
the Common  Stock based upon  information  furnished  by  OTR/Oxford  Transfer &
Registrar  Securities Agent, 


                                       7
<PAGE>

the transfer  agent for the Common Stock.  The number of record holders does not
include  holders whose  securities are held in street name. The closing price of
the Common Stock as reported on the Bulletin  Board on October 9, 1998 was $.08.
As of October 9, 1998, there were 15,559,542 shares of Common Stock outstanding.

     The  Company  has  never  paid  and  does not  anticipate  paying  any cash
dividends on its Common Stock in the foreseeable  future. The Company intends to
retain all  earnings for use in the  Company's  business  operations  and in the
expansion of its business.


                                       8
<PAGE>

                          Powersoft Technologies, Inc.
                                December 31, 1997

Item 6.  Selected Financial Data

     The following  table sets forth selected  financial data of the Company and
its subsidiaries.  The selected consolidated financial data in the table for the
Company's five fiscal years ended December 31, 1993,  1994, 1995, 1996 and 1997,
are  derived  from the  consolidated  financial  statements  included  elsewhere
herein. The data should be read in conjunction with "Management's Discussion and
Analysis of Results of Operations  and Financial  Condition,"  the  Consolidated
Financial  Statements  of the  Company  and  related  Notes  thereto  and  other
financial information included elsewhere herein. All dollar amounts reflect U.S.
Dollars.

<TABLE>
<CAPTION>

                               1997             1996              1995             1994              1993
                               ----             ----              ----             ----              ----
<S>                            <C>              <C>               <C>              <C>               <C>     
Net operating revenues         $571,921         $428,858          $354,952         $333,319          $336,377
(Loss) income from
 continuing operations         $(1,217,418)     $(2,061,732)      $(1,880,672)     $27,315           $(43,822)
Total assets                   $2,388,062       $10,625,380       $1,723,856       $1,129,696        $988,256
Long-term obligations:
   Mortgage loans payable      $837,966         $865,594          $975,108         $971,611          $986,396
   Long-term payable              --             $88,744           $91,415            --                --
Per common share:
   (Loss) income from
    continuing operations      $(0.08)          $(0.18)           $(0.18)          $0.02             $(0.17)
   Cash dividends per
    common share                  --               --                --              --                 --
</TABLE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

     The  following   discussion   should  be  read  in  conjunction   with  the
Consolidated  Financial Statements of the Company and related Notes thereto, and
other financial  information included elsewhere herein. The financial statements
of the Company are prepared in conformity with United States generally  accepted
accounting principles.

Introduction

     The Company  was  originally  incorporated  in 1958 and until June 1994 had
been engaged in business other than those it presently operates.

     The  Company  owns  an  Apartment  Building  in  North  Vancouver,  British
Columbia,  and until June 1995 the Company's  operations  were comprised of that
single segment.  In 1995 and 1996, the Company,  through  various  subsidiaries,
acquired certain interests in PRC, including 


                                       9
<PAGE>

(i) Min You, which has an option to lease a production line in Cangzhou  Factory
for  cement  manufacturing;  (ii)  a 70%  interest  in  Wuhan,  a PRC  container
manufacturer;  (iii) an interest in the Duck Farm  pursuant to which the Company
operated  a duck  farm in PRC;  and (iv) an  option  to form Heng Li in order to
develop a commercial building in Zhangjiagang Free Trade Zone, PRC.

     In the  fourth  quarter  of  1997,  the  Company  determined  that it would
discontinue substantially all of its operations in PRC. The Divestiture included
(i) the transfer of 81% of the  Company's  interest in Min You to two  unrelated
parties;  (ii)  effecting  an  agreement  to reverse  the  acquisition  of a 70%
interest in Wuhan;  (iii) the termination of the Company's  interest in the Duck
Farm; and (iv) the termination of the Heng Li joint venture agreement.

     As of July 25,  1998,  the Company  retains a 19%  interest in Min You, but
full  provisions  have been made against the remaining cost of investment in Min
You, and 100% of the outstanding capital stock of Vancouver Hong Kong.

Results of Continuing Operations

Year Ended December 31, 1997 as Compared to the Year Ended December 31, 1996

     The  Company's  net loss  from  continuing  operations  for the year  ended
December 31, 1997 was $1,217,418, a change of $844,314 compared to a net loss of
$2,061,732  for the year ended  December 31, 1996.  The decrease in the net loss
was primarily due to (i) an increase in  investment  income;  (ii) a decrease in
consulting fees paid.

     Consolidated revenues increased to $571,921 for the year ended December 31,
1997,  from  $428,858 for the year ended  December 31, 1996.  This is due to the
gains that have been recorded in connection with its investment securities.

     In the  operation  of  Vancouver  Hong  Kong's  real  estate,  the  Company
experienced  an  increase  in rental  income of $9,884  from 1996 to 1997.  Also
property  expenses  decreased  by $20,637 in 1997 as compared  to 1996.  This is
because of cost  controls  applied to  repairs,  utilities  and  management  fee
expenses.

     Operating expenses decreased from $2,490,590 in 1996 to $1,789,339 in 1997.
The decrease is  primarily  due to the reduced use of  consultants  for investor
relations and financial  advice.  Such expenses have declined from $1,368,567 in
1996 to an aggregate of $272,250 in 1997.

     In addition  to the above  consulting  fees,  there has been an increase in
interest  expense,  from $121,436 in 1996 to $309,201 in 1997. This is primarily
due to the increase in margin  borrowings in 1997, from $489,193 at December 31,
1996, to $3,058,295 at December 31, 1997.


                                       10
<PAGE>

     The Company holds certain  equity  securities  that are available for sale.
The Company records  unrealized gains and losses, as a component of equity.  The
net  unrealized  losses so recorded  during 1997  amounted  to  $2,228,442.  The
cumulative net losses charged to equity as of December 31, 1997 are $2,307,267.

Year Ended December 31, 1996 as Compared to the Year Ended December 31, 1995

     The  Company's  net loss  from  continuing  operations  for the year  ended
December 31, 1996 was $2,061,732, a change of $181,060 compared to a net loss of
$1,880,672  for the year ended  December 31, 1995.  The increase in the net loss
was primarily due to an increase in consulting fees.

     Consolidated revenues increased to $428,858 for the year ended December 31,
1996,  from $354,952 for the year ended  December 31, 1995. The increase was due
to gains  recorded in connection  with its  investment  securities  amounting to
$56,552, and other income amounting to $34,172.

     In the  operation  of  Vancouver  Hong  Kong's  real  estate,  the  Company
experienced  a decline  in  rental  income of  $10,390  from 1995 to 1996.  Also
property expenses increased by $14,335 in 1996 as compared to 1995.

     Operating expenses increased from $2,235,624 in 1995 to $2,490,590 in 1996.
Although  the  consulting  fees  incurred to outside  consultants  decreased  by
approximately  $250,000,  there was an  increase  in fees  incurred to a related
company in the amount of $500,000 for services.

     The Company holds certain  equity  securities  that are available for sale.
The Company records  unrealized gains and losses,  net of applicable taxes, as a
component of equity.  The  cumulative  net  unrealized  losses so recorded as of
December 31, 1996 amounted to $78,825.

Inflation

     The general  inflation rate in China was  approximately  15%, 8% and 3% per
annum in 1995, 1996 and 1997, respectively.  In recent years, 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. The austerity measures implemented by the PRC Government
have continued to affect the operations of Min You and Wuhan Container. Although
there was a sign of easing in such austerity measures,  both turnover and profit
margin of Min You and Wuhan Container were still severely affected.


                                       11
<PAGE>

Discontinued Operations

Year Ended December 31, 1997 as Compared to the Year Ended December 31, 1996

     In 1997,  the  cement  operation  of Min You  recorded  sales  of  $306,398
compared to $540,191 in the year ended  December 31, 1996.  At the same time the
net loss  amounted to  $157,117 in fiscal 1997  compared to a loss of $62,487 in
fiscal 1996.

     In  fiscal  1997,  the  container  operation  of  Wuhan  recorded  sales of
$2,934,871  as compared to  $1,082,317  in fiscal 1996. At the same time the net
loss  amounted  to  $248,210  in fiscal  1997  compared to a loss of $241,208 in
fiscal 1996.

     During 1997,  the Company  acquired and later disposed of a 25% interest in
the Duck Farm. The aggregate of the Company's share of the loss in the Duck Farm
and the loss on disposition was approximately $300,000.

Year Ended December 31, 1996 as Compared to the Year Ended December 31, 1995

     The cement  operation  of Min You  commenced  in the  second  half of 1995.
Cement sales  increased  from  $278,622 in 1995 to $540,191 in 1996. At the same
time the net loss decreased from $75,107 in 1995 to $62,487 in 1996.

     Wuhan operated from  September  through  December  1996.  Sales amounted to
$1,082,317. The net loss for this period amounted to $241,208.

Liquidity and Capital Resources

     The net cash used in  operating  activities  cash  flows for the year ended
December 31, 1997  amounted to  $4,034,680.  The  discontinued  operations  were
responsible  for  the  cash  used  in  operating  activities.  The  discontinued
operations experienced increases in receivables and inventories.  Increases were
experienced in trade receivables, receivables from related parties and sales tax
receivable amounting and inventories.

     The 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 $3,279,186 for year
ended December 31, 1997. This is primarily due to the use of cash to pay for the
purchase of available for sale securities.

     The net cash provided by financing  activities  amounted to $7,179,780  for
the year ended  December  31, 1997.  This is due to the  increases in short term
borrowings and margin loans and the issuance of common shares.


                                       12
<PAGE>

     On June 15, 1998, the Company renewed its mortgage  obligation,  in effect,
extending  the  obligation  for a five year period  under  terms and  conditions
similar to the existing note.

     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.

Exchange Rate Risk

     At present,  the Company's  revenues and expenses are  denominated  in U.S.
dollars and Hong Kong dollars.  In view of the exchange rate pegged between Hong
Kong dollars and U.S. dollars, the Company is not subject to any direct exposure
from the  fluctuation  of U.S.  dollars.  Also,  the  Company's  disposal of its
operations in PRC nearly eliminates  exposure to exchange rate risk with the PRC
Renminbi.

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

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 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.


                                       13
<PAGE>

     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 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.


                                       14
<PAGE>

Item 8.  Financial Statements

     The  following  financial  statements  are filed at the end of this report,
beginning on page F-1:

                          POWERSOFT TECHNOLOGIES, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



CONTENT                                                                  PAGE(S)


REPORT OF INDEPENDENT AUDITORS.........................................    F - 1


CONSOLIDATED BALANCE SHEETS............................................    F - 2


CONSOLIDATED STATEMENTS OF INCOME......................................    F - 4


CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
  (DEFICIT) EQUITY.....................................................    F - 5


CONSOLIDATED STATEMENTS OF CASH FLOWS..................................    F - 6


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.........................    F - 7


Item 9. Changes in and Disagreements with Accountants on Accounting and 
        Financial Disclosures

     There  have  been  no  changes  in or  disagreements  with  accountants  on
accounting,   financial  disclosure  or  other  matters,   which  would  require
disclosure herein.


                                       15
<PAGE>

                                    PART III

Item  10.  Directors,   Executive  Officers,   Promoters  and  Control  Persons;
           Compliance with Section 16(a) of the Exchange Act

     The names and ages of all directors  and executive  officers of the Company
are as follows:

Name                   Age       Position
----                   ---       --------

Fai H. Chan            53        President, Chief Executive Officer and Director

Robert H. Trapp        42        Secretary, Treasure and Director

Management Biographies
----------------------

     Fai H. Chan has been the president and a director of the Company since June
1994 and has served as the Company's Chief Executive Officer since June 1995. In
1998, Mr. Chan was appointed president and chairman of the board of directors of
Fronteer  Financial  Holdings,  Ltd.,  a  securities  broker/dealer  located  in
Colorado.  From June 1993 to the present,  he has been a director of  Inter-Asia
Equities,  Inc., a Canadian company. Since September 1992 to the present, he has
been a director of Heng Fung Holdings Co., Ltd. ("Heng Fung"),  a public company
in Hong Kong which is listed on the Hong Kong Stock Exchange.  In 1995, Mr. Chan
was appointed  managing  director and chairman of Heng Fung,  for which he still
serves.  In May 1998,  he was  appointed a director of Global Med  Technologies,
Inc.  Since  March  1988,  he has been  chairman  of the board of  directors  of
American Pacific Bank, a bank in Oregon,  and between April 1991 and April 1993,
he was the chief executive officer of said bank.

     Robert H. Trapp has been the  secretary and treasurer and a director of the
Company  sine June 1994.  In 1997 and 1998,  Mr.  Trapp was  appointed  managing
director and director of Fronteer Financial  Holdings,  Ltd. Since May 1995, Mr.
Trapp has been a director of Heng Fung  Holding Co.,  Ltd., a public  company in
Hong Kong,  which is listed on the Hong Kong Stock  Exchange.  Since April 1994,
Mr. Trapp has been the secretary of the Company.  Since February 1995, Mr. Trapp
has been a director of Inter-Asia Equities,  Inc. a Canadian company. Since July
1991,  he has also been the  Canadian  operational  manager of  Pacific  Concord
Holding  (Canada) Ltd.,  responsible  for management,  marketing,  and financial
reporting  operations  of such company to Pacific  Concord  Holding Ltd. of Hong
Kong. Between March and June 1991, Mr. Trapp was a securities trainee at Pacific
International Securities in Vancouver,  B.C., Canada. Between September 1985 and
June 1989, Mr. Trapp served as an executive officer and a director of Inter-Asia
Equities, Inc.

     On January 1, 1998,  the Company  accepted the  resignation  of a director,
Ronald M.T. Lau. There were no disputes or disagreements between the Company and
Mr. Lau.


                                       16
<PAGE>

     All officers of the Company are elected to serve in such  capacities  until
the next annual meeting of the Board of Directors of the Company and until their
successors are duly elected and qualified.

     The Board of Directors met five times during the fiscal year ended December
31, 1997. No incumbent  director attended fewer than all of the meetings held by
the Board of Directors.

     There  are no  material  proceedings  to which  any  director,  officer  or
affiliate of the Company, any owner of record or beneficially of more than 5% of
any class of voting  securities  of the  Company,  or any  associate of any such
director,  officer,  affiliate  of the  Company  or  security  holder is a party
adverse to the Company or any of its subsidiaries.

Indemnification of Directors and Officers

     Section 145 of the Delaware General  Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase  insurance  with respect
to liability  arising out of their  capacity or status as directors and officers
provided  that this  provision  shall not  eliminate of limit the liability of a
director:  (i)  for  any  breach  of  the  director's  duty  of  loyalty  to the
corporation or its shareholders; (ii) for acts or omissions not in good faith or
which  involve  intentional  misconduct  or a knowing  violation  of law;  (iii)
arising under Section 174 of the Delaware  General  Corporation Law; or (iv) for
any transaction  from which the director derived an improper  personal  benefit.
The Delaware General  Corporation Law provides further that the  indemnification
permitted  thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's  by-laws, any
agreement,  vote of  shareholders  or otherwise.  The Company's  Certificate  of
Incorporation  eliminates the personal  liability of directors to fullest extent
permitted by Section 102(b)(7) of the Delaware General Corporation Law.

     The effect of the  foregoing  is to require  the Company to  indemnify  the
officers and directors of the Company for any claim arising against such persons
in their official  capacities if such person acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
corporation,  and,  with respect to any criminal  action or  proceeding,  had no
reasonable cause to believe his conduct was unlawful.

     Insofar as indemnification for liabilities arising under the Securities Act
may be  permitted  to  directors,  officers or persons  controlling  the Company
pursuant to the foregoing provisions,  the Company has been informed that in the
opinion of the  Securities  and Exchange  Commission,  such  indemnification  is
against   public  policy  as  expressed  in  Securities  Act  and  is  therefore
unenforceable.

Committees of the Board of Directors

     The Board of Directors has not established any committees.


                                       17
<PAGE>

Compliance with Section 16(a) of the Exchange Act of 1934

     Section  16(a) of the  Securities  Exchange  Act of 1934,  as amended  (the
"Exchange Act"), requires the Company's officers and directors,  and persons who
own  more  than ten  percent  of a  registered  class  of the  Company's  equity
securities,  to file  reports of  ownership  and changes in  ownership of equity
securities  of the Company  with the  Securities  and Exchange  Commission  (the
"Commission")  and NASDAQ.  Officers,  directors  and  greater-than-ten  percent
stockholders  are required by  regulation  to furnish the Company with copies of
all Section 16(a) forms that they file.

     Based solely upon a review of Form 3, Forms 4, and Forms 5 furnished to the
Company  pursuant to Rule 16a-3  under the  Exchange  Act,  it is the  Company's
belief that,  other than that as set forth below,  any such forms required to be
filed  pursuant  to Section  16(a) of the  Exchange  Act were timely  filed,  as
necessary, by the officers,  directors and security holders required to file the
same.


                                       18
<PAGE>

Item 11. Executive Compensation

Summary Compensation Table

     During the year ended  December  31,  1997,  Heng Fai  Management,  Inc., a
wholly  owned  subsidiary  of the  Company,  paid  $500,000  in  consulting  and
management fees to Tight Hold Investment  Limited, a company wholly owned by Fai
H. Chan, the Company's chief executive officer.

              For the Years Ended December 31, 1997, 1996 and 1995
                       Annual Compensation Awards Payouts


                                                                   Other
Name                                                               Annual
and                                          Compen-               Compen-
Principal                  Year              sation                sation
Position                   Ended             Salary                ($)
--------                   -----             ------                -------
Fai H. Chan,               1997              $500,000
 President, CEO            1996              $500,000
 and Director              1995               --

Stock Option Plans

     The Company currently has no stock option plans.

Option/SAR Grants in Last Fiscal Year

     There were no options  granted  during the fiscal year ended  December  31,
1997 as set forth below.

Aggregate Option/SAR Exercises in Last Fiscal Year And Fiscal Year-End 
Options/SAR Values

     No options were exercised during the fiscal year ended December 31, 1997 as
set forth  below  and there  were no  unexercised  options  as of the end of the
fiscal year ended December 31, 1997.

Employment Agreements

     Heng Fai  Management,  Inc.,  a wholly  owned  subsidiary  of the  Company,
entered into a consultation and management  agreement with Tight Hold Investment
Limited,  a company 


                                       19
<PAGE>

wholly  owned by Fai H.  Chan,  president  and chief  executive  officer  of the
Company.  The term of this agreement is for ten years having commenced  November
1, 1996 and ending October 31, 2006. The  remuneration the Company shall pay for
services  rendered  pursuant to this  agreement  is as  follows:  (i) the sum of
$500,000 per year for the duration of employment, a rate of $41,666.67 per month
over 12 equal payments; and (ii) upon the Company meeting NASDAQ National Market
System ("NASDAQ")  requirements of having $4,000,000 in net tangible assets, and
obtaining  the  other  requirements  which  allow  the  Company's  stock  to  be
marginable  on NASDAQ and  having  declared  at least a minimum  $0.10 per share
earning and $0.05  dividend to common  shareholders,  the fee shall  increase to
$1,000,000  per year for the duration of  employment,  a rate of $83,333.00  per
month.

Remuneration of Directors

     Directors do not receive  compensation  for  attendance  at meetings of the
Board of Directors.  All directors are entitled to  reimbursement  of reasonable
travel and  lodging  expenses  related  to  attending  meetings  of the Board of
Directors.


                                       20
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth, as of October 9, 1998, certain  information
with respect to stock  ownership  of: (i) all persons known by the Company to be
beneficial owners of five percent or more of its outstanding  common stock: (ii)
each of the Company's directors and executive officers;  and (iii) all directors
and executive officers as a group.  Unless otherwise  indicated,  the beneficial
owners have sole  voting and  investment  power over the shares of common  stock
listed below.

                                                            % of Outstanding
Name and Address                  Number of Shares           of Common Stock
of Beneficial Owner(1)            Beneficially Owned(1)    Beneficially Owned(1)
----------------------            ---------------------    --------------------
                                                          
Fai H. Chan                       6,392,886(2)(4)                  40.3%
Robert H. Trapp                     100,000                         **
Ronald M.T. Lau                     100,000(5)                      **
                                                          
Keow Y. Chan                      2,772,886(3)(4)                  17.5%
 Unit B, 13/Floor                                         
 Lippo, Leighton Tower                                    
 103-109 Leighton Road                                    
 Causeway Bay, Hong Kong                                  
                                                          
All Executive Officers & Directors  6,492,886                      40.9%
   as a Group (2 Persons)(5)                              
-------------
     **   Less than 1%

(1)  Unless  otherwise  noted,  the Company believes that all of such shares are
     owned of record by each individual  named as beneficial owner and that such
     individual has sole voting and dispositive power with respect to the shares
     of common stock owned by each of them. Such person's  percentage  ownership
     is determined by assuming that the options or convertible  securities  that
     are held by such person which are  exercisable  within 60 days from October
     9, 1998 have been exercised or converted, as the case may be.

(2)  Includes  5,800,000  shares owned of record by Mr. Chan.  Also includes (i)
     37,500   shares  of  common  stock  held  by  Inter-Asia   Equities,   Inc.
     ("Inter-Asia"); (ii) 37,500 shares of common stock underlying warrants held
     by Inter-Asia;  (iii) 258,943 shares of common stock held by Excess Pension
     Fund,  Inc.  ("Fund");  (iv)  258,943  shares  of common  stock  underlying
     warrants held by the Fund. Mr. Chan is an officer, director and stockholder
     of Inter-Asia,  and a beneficial owner of the Fund.  Excludes the 2,180,000
     shares owned of record by Mr. Chan's wife. See Footnote (3) below.

(3)  Includes (i) 258,943 shares of common stock held by the Fund; (iii) 258,943
     shares of common stock  underlying  warrants held by the Fund;  (iv) 37,500
     shares of common 


                                       21
<PAGE>

     stock held by Inter-Asia; and (v) 37,500 shares of common stock  underlying
     warrants  held by  Inter-Asia.  Ms. Chan is the president and a director of
     Inter-Asia,  and a beneficial  owner of the Fund.  Excludes  (i)  5,800,000
     shares owned of record by Ms. Chan's husband, Fai H. Chan. See Footnote (2)
     above.

(4)  In the event that Mr. Chan is deemed to beneficially  own all of the shares
     owned of record by his spouse, Mr. Chan would be deemed to beneficially own
     8,572,886  shares or approximately  54% of the outstanding  common stock of
     the Company.

(5)  Mr. Lau  resigned as a director  of the Company as of January 1, 1998.  Mr.
     Lau is not  considered  an officer or director of the Company for affiliate
     computation purposes.

     There are no agreements or other  arrangements or  understandings  known to
the  Company  concerning  the  voting  of the  Common  Stock of the  Company  or
otherwise  concerning  control of the Company  which are not  disclosed  herein.
There are no preemptive rights applicable to the Company's securities.

Item 13. Certain Relationships and Related Transactions

     On February 1, 1997, the Company issued an aggregate of 1,700,000 shares of
common stock at $.60 per share to Fai H. Chan (1,300,000 shares),  Ronald M. Lau
(100,000  shares),  Robert H. Trapp  (100,000  shares) and Keow Y. Chan (200,000
shares) pursuant to subscription  agreements,  for total proceeds of $1,020,000.
Except for Keow Y. Chan (Fai H. Chan's  wife),  all of the above parties are, or
were, directors of the Company.

     On June 25, 1997,  the Company issued  2,500,000  shares of common stock at
$.24 per share to Fai H. Chan pursuant to a  subscription  agreement,  for total
proceeds of $600,000.

     The Company maintains deposits in accounts at American Pacific Bank. Fai H.
Chan (an officer,  director and stockholder of the Company) is an officer and/or
director of such bank.  See Note 12 of the Notes to the  Consolidated  Financial
Statements.

     The Company owns  48,535,276  shares of common stock of Heng Fung  Holdings
Company  Limited.  Messrs.  Chan,  Trapp,  and Lau (officers,  directors  and/or
stockholders  of the Company) are officers,  directors and /or  stockholders  of
such company.  See Note 5 of the Notes to the Consolidate  Financial  Statements
included elsewhere herein.


                                       22
<PAGE>

                                     PART IV

Item 14. Exhibits and Reports on Form 8-K

(a)(1)(2)      Financial  Statements  and  Schedules  - See  Index to  financial
               statements and financial  statement  schedules on page 15 of this
               Annual Report.

(a)(3)         Exhibits marked with an (*) are filed  herewith.  Other exhibits,
               incorporated  by  reference,   were  previously  filed  with  the
               Securities and Exchange Commission ("SEC") as indicated.


Exhibit No.       Description
-----------     -----------

3.1(a)         Certificate  of   Incorporation   of   Registrant,   as  amended,
               incorporated  by reference  from the  Company's  Annual Report on
               Form 10-K for the year ended December 31, 1996.
3.1(b)         Agreement  and  Plan  of  Merger,  as  amended,  incorporated  by
               reference  from the Company's  Annual Report on Form 10-K for the
               year ended December 31, 1996.
3.2            By-laws of Registrant, as amended, incorporated by reference from
               the  Company's  Annual  Report  on Form  10-K for the year  ended
               December 31, 1996.
4.1            Specimen Certificate representing Registrant's Common Stock.
10.1           Wuhan Container Acquisition  Agreement  incorporated by reference
               to Exhibit 2 of the Registrant's Current Report on Form 8-K filed
               with the SEC on September 20, 1996, as amended.
10.2           Consulting  Agreement  between  Registrant  and  Thomas E.  Waite
               incorporated by reference to Exhibit 4.1 of the Registrant's Form
               S-8 filed with the SEC on March 20, 1997.
10.3           Consulting and Management  Agreement between Heng Fai Management,
               Inc. and Tight Hold  Investment  Limited  dated  November 4, 1996
               incorporated  by reference  from the  Company's  Annual Report on
               Form 10-K for the year ended December 31, 1996.
21*            Subsidiaries of the Registrant.
27*            Financial Data Schedule.


     Reports on Form 8-K
     -------------------

     The Company  had not filed any reports on Form 8-K during the last  quarter
of the fiscal year ended December 31, 1997.


                                       23
<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, on October 22, 1998.


                                           HENG FAI CHINA INDUSTRIES, INC.

                                           By: s\ Fai H. Chan
                                               --------------------------------
                                                  Fai H. Chan, President


     In  accordance  with  Exchange  Act,  this  report  has been  signed by the
following  persons on behalf of the  Registrant,  in the  capacities  and on the
dates indicated


Signature                    Title                              Date
---------                    -----                              ----

s\ Fai H. Chan               President, CEO & Director          October 22, 1998
-----------------------
Fai H. Chan


s\ Robert H. Trapp           Secretary, Treasurer & Director    October 22, 1998
-----------------------
Robert H. Trapp


                                       24
<PAGE>

                  POWERSOFT TECHNOLOGIES, INC.
                  (Formerly known as Heng Fai China Industries, Inc.)

                  Index to consolidated financial statements
                  For each of the three years in the period
                    ended December 31, 1997


<PAGE>

POWERSOFT TECHNOLOGIES, INC.
(Formerly known as Heng Fai China Industries, Inc.)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997


CONTENT                                                               PAGE(S)
-------                                                               -------

REPORT OF INDEPENDENT AUDITORS..................................       F - 1


CONSOLIDATED BALANCE SHEETS.....................................       F - 2


CONSOLIDATED STATEMENTS OF INCOME...............................       F - 4


CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
  (DEFICIT) EQUITY..............................................       F - 5


CONSOLIDATED STATEMENTS OF CASH FLOWS...........................       F - 6


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS..................  F - 7 - F - 22


<PAGE>

REPORT OF INDEPENDENT AUDITORS

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
POWERSOFT TECHNOLOGIES, INC.
(Formerly known as Heng Fai China Industries, Inc.)

We have audited the accompanying consolidated balance sheets of Powersoft
Technologies, Inc. (the Company) and its subsidiaries as of December 31, 1997
and 1996 and the related consolidated statements of income, shareholders'
(deficit) equity and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Powersoft Technologies, Inc. and
its subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and cash flows for each of the three years in the period ended
December 31, 1997 in conformity with accounting principles generally accepted in
the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's recurring losses from operations and minimal
net tangible assets raise substantial doubt as to its ability to continue as a
going concern, however, the principal shareholder has commited to continue
providing financial support. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

s\ Deloitte Touche Tohmatsu

Hong Kong
June 30, 1998 (except for note 19 as to which the date is August 31, 1998)


                                      F-1
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                           CONSOLIDATED BALANCE SHEETS
                             (United States Dollars)

                                     ASSETS

                                                           As of December 31,
                                                       -------------------------
                                                          1997           1996
                                                          ----           ----
Current assets:
  Cash and cash equivalents ........................   $    36,173   $   170,259
  Available-for-sale securities (note 5) ...........     1,507,345       682,331
  Accounts receivable, trade, less allowance
    for doubtful accounts of $nil in 1997 and
    $70,258 in 1996 ................................         7,521       980,172
  Inventories (note 6) .............................          --       4,403,682
  Prepaid and other current assets .................        32,153       151,722
  Amounts receivable from related parties (note 12)         18,950       136,439
  Value added taxes recoverable ....................          --         611,790
                                                       -----------   -----------

Total current assets ...............................     1,602,142     7,136,395
Property, plant and equipment, net (note 7) ........       785,920     3,402,238
Prepaid rental (note 3) ............................          --          86,747
                                                       -----------   -----------

    Total assets ...................................   $  2,388,062  $10,625,380
                                                       ============  ===========

                 LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY

Current liabilities:

  Short-term borrowings (note 9) ...................   $      --     $ 2,403,026
  Mortgage loans payable - current portion (note 13)       115,251       108,069
  Accounts payable .................................        48,701       837,596
  Bills payable (note 10) ..........................          --         722,892
  Margin loan payable (note 11) ....................     3,058,295       489,193
  Interest payable .................................        43,319        40,212
  Other accrued expenses ...........................       100,247       360,749
  Security deposits payable ........................        11,190        11,992
  Amounts payable to related parties (note 12) .....       904,756     1,110,544
                                                       -----------   -----------

    Total current liabilities ......................     4,281,759     6,084,273
                                                       -----------   -----------

Long-term liabilities:
  Mortgage loans payable (note 13) .................       837,966       865,594
  Long-term payable (note 3) .......................          --          88,744
                                                       -----------   -----------

    Total long-term liabilities ....................       837,966       954,338
                                                       -----------   -----------


                                      F-2
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                           CONSOLIDATED BALANCE SHEETS
                             (United States Dollars)

                 LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY

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

Minority interests .................................  $      --     $ 3,583,399
                                                      -----------   -----------

Commitments and contingencies (note 18)

Shareholders' (deficit) equity:
  Preferred stock, $5 par value, 25,000,000 shares
    authorized, unissued ...........................         --            --
  Common stock, $.01 par value, 30,000,000 shares
     authorized; issued and outstanding 1997:
     15,559,542 shares and 1996: 11,986,814 shares .      155,595       119,868
  Additional paid-in capital .......................    5,385,296     4,701,023
  Unrealized loss on available-for-sale securities
    (note 5) .......................................   (2,307,267)      (78,825)
  Cumulative exchange adjustments ..................        1,516         6,968
  Accumulated deficit ..............................   (5,904,303)   (4,510,914)
                                                      -----------   -----------

                                                       (2,669,163)      238,120
  Common stock issued for consulting services to
    be received (note 8) ...........................      (62,500)     (234,750)
                                                      -----------   -----------

Total shareholders' (deficit) equity ...............   (2,731,663)        3,370
                                                      -----------   -----------

Total liabilities and shareholders' (deficit) equity  $ 2,388,062   $10,625,380
                                                      ===========   ===========


        See accompanying notes to the Consolidated Financial Statements.


                                      F-3
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                        CONSOLIDATED STATEMENTS OF INCOME
                             (United States Dollars)

<TABLE>
<CAPTION>
                                                               Year ended December 31,
                                                    -----------------------------------------
                                                        1997           1996           1995
                                                        ----           ----           ----
<S>                                                 <C>            <C>            <C>        
Revenues:
  Rental income .................................   $   346,528    $   336,644    $   347,034
  Interest ......................................           515          1,490          4,187
  Investment income - securities ................       210,380         56,552          3,731
  Others ........................................        14,498         34,172           --
                                                    -----------    -----------    -----------

Total revenues ..................................       571,921        428,858        354,952
                                                    -----------    -----------    -----------

Expenses:
  Depreciation ..................................        41,161         41,815         43,573
  Legal and professional fees ...................       149,900         82,831        133,101
  Consulting fees (note 8) ......................       272,250      1,368,567      1,620,433
  Consulting fees paid to a related company
    (note 12) ...................................       500,000        500,000           --
  Interest on long-term debt ....................          --           85,990         89,650
  Interest on short-term debt ...................       309,201         35,446         15,785
  Investment bank fees ..........................       164,252           --             --
  Utilities .....................................        23,522         48,924         40,169
  Foreign exchange (gain) loss ..................        (1,695)        10,477         11,965
  Land lease ....................................        80,321         80,321         80,321
  Real estate management fees ...................        36,784         13,056         15,845
  Salaries ......................................         4,527          4,358           --
  Travelling ....................................        17,717         40,841         35,147
  Other operating and administrative expenses ...       191,399        177,964        149,635
                                                    -----------    -----------    -----------

Total expenses ..................................     1,789,339      2,490,590      2,235,624
                                                    -----------    -----------    -----------

Net loss from continuing operations .............    (1,217,418)    (2,061,732)    (1,880,672)
                                                    -----------    -----------    -----------

Discontinued operations (note 3)
  Loss from Cangzhou cement .....................      (157,117)       (62,487)       (75,107)
  Gain on disposal of Cangzhou cement ...........       148,775           --             --
  Loss from Wuhan ...............................      (248,210)      (241,208)          --
  Gain on reversal of Wuhan acquisition .........       307,442           --             --
  Share of loss for the investment in Duck Farm .      (107,229)          --             --
  Loss on disposal of the investment in Duck Farm      (194,095)          --             --
                                                    -----------    -----------    -----------

Net loss from discontinued operations ...........      (250,434)      (303,695)       (75,107)
                                                    -----------    -----------    -----------

Net loss before income taxes ....................    (1,467,852)    (2,365,427)    (1,955,779)
Provision for income taxes (note 15) ............          --             --           16,947
                                                    -----------    -----------    -----------

Net loss before minority interest ...............    (1,467,852)    (2,365,427)    (1,972,726)

Minority interest from discontinued operations ..        74,463         77,099           --
                                                    -----------    -----------    -----------

Net loss ........................................   $(1,393,389)   $(2,288,328)   $(1,972,726)
                                                    ===========    ===========    ===========

Earnings per share (Basic)
  From continuing operations ....................   $     (0.08)   $     (0.18)   $     (0.18)
  Effect of discontinued operations .............         (0.01)         (0.02)         (0.01)
                                                    -----------    -----------    -----------
  Net loss per share ............................   $     (0.09)   $     (0.20)   $     (0.19)
                                                    ===========    ===========    ===========

Weighted average number of shares of common
  stock outstanding .............................    14,873,091     11,223,288     10,624,064
                                                    ===========    ===========    ===========
</TABLE>

        See accompanying notes to the Consolidated Financial Statements.


                                      F-4
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
                             (United States Dollars)
<TABLE>
<CAPTION>

                                                                             Unrealized              Common stock
                               Common stock                                    loss on                issued for
                          ---------------------   Additional                  available   Cumulative  consulting
                          Number of                paid-in    Accumulated     for sale     exchange   services to
                           shares       Amount     capital      deficit      securities   adjustments be received    Total
                           ------       ------     -------      -------      ----------   ---------- ------------    -----
<S>                       <C>          <C>        <C>         <C>             <C>        <C>        <C>          <C>       
At December 31, 1994....  10,384,542   $103,845   $  193,296  $  (249,860)    $   -      $      -   $        -   $   47,281
Issued to effect a
  consulting agreement
  (notes 14a) (note 8a).     400,000      4,000    2,320,000         -            -          -      (2,324,000)        -
Amortization of
  consulting fees.......        -          -            -            -            -          -       1,620,433    1,620,433
                          ----------    -------    ---------    ---------    ---------     ------    ---------    ---------
                          10,784,542    107,845    2,513,296     (249,860)        -          -        (703,567)   1,667,714
Private placement
  (note 14b)............      75,000        750      299,250         -            -          -            -         300,000
                          ----------    -------    ---------    ---------    ---------     ------    ---------    ---------
                          10,895,542    108,595    2,812,546     (249,860)        -          -        (703,567)   1,967,714
Foreign exchange
  translation
  adjustments...........        -          -            -            -            -         6,968         -           6,968
Net loss................        -          -            -      (1,972,726)        -          -            -      (1,972,726)
                          ----------    -------    ---------    ---------    ---------     ------    ---------    ---------
                          10,859,542    108,595    2,812,546   (2,222,586)        -         6,968     (703,567)       1,956
Unrealized loss on
  securities available-
  for-sale..............        -          -            -            -         (43,941)      -            -         (43,941)
                          ----------    -------    ---------    ---------    ---------     ------    ---------    ---------
At December 31, 1995....  10,859,542    108,595    2,812,546   (2,222,586)     (43,941)     6,968     (703,567)     (41,985)

Issued to effect
  consulting agreements
  (note 14c)(note 8b)...     400,000      4,000      895,750         -            -          -        (899,750)        -
Amortization of
  consulting fees.......        -          -            -            -            -          -       1,368,567    1,368,567
Issued for acquisition of
  a subsidiary (note 14d)               727,272        7,273      992,727         -          -            -            -
1,000,000
                          ----------    -------    ---------    ---------    ---------     ------    ---------    ---------
                          11,986,814    119,868    4,701,023   (2,222,586)     (43,941)     6,968     (234,750)   2,326,582

Net loss................        -          -            -      (2,288,328)        -          -            -      (2,288,328)
                          ----------    -------    ---------    ---------    ---------     ------    ---------    ---------
                          11,986,814    119,868    4,701,023   (4,510,914)     (43,941)      -        (234,750)      38,254
Unrealized loss on
  securities available-
  for-sale..............        -          -            -            -         (34,884)      -            -         (34,884)
                          ----------    -------    ---------    ---------    ---------     ------    ---------    ---------
At December 31, 1996....  11,986,814    119,868    4,701,023   (4,510,914)     (78,825)     6,968     (234,750)       3,370
Private placements
  (note 14e)............   1,700,000     17,000    1,003,000         -            -          -            -       1,020,000
Private placement
  (note 14f)............   2,500,000     25,000      575,000         -            -          -            -         600,000
Issue to effect a 
  consulting agreement 
  (notes 8c and 14g)....     100,000      1,000       99,000         -            -          -        (100,000)        -
Amortization of consulting
  fees..................        -          -            -            -            -          -         272,250      272,250
Redemption to reverse the
  purchase of a subsidiary
  (note 14h)............    (727,272)    (7,273)    (992,727)        -            -        (5,452)        -      (1,005,452)
                          ----------    -------    ---------    ---------    ---------     ------    ---------    ---------
                          15,559,542    155,595    5,385,296   (4,510,914)     (78,825)     1,516      (62,500)     890,168
Net loss................        -          -            -      (1,393,389)        -          -            -      (1,393,389)
                          ----------    -------    ---------    ---------    ---------     ------    ---------    ---------
                          15,559,542    155,595    5,385,296   (5,904,303)     (78,825)     1,516      (62,500)    (503,221)
Unrealized loss on
  securities available-
  for-sale..............        -          -            -           -       (2,228,442)      -            -      (2,228,442)
                          ----------    -------    ---------    ---------    ---------     ------    ---------    ---------
At December 31, 1997      15,559,542   $155,595   $5,385,296  $(5,904,303) $(2,307,267)    $1,516   $  (62,500) $(2,731,663)
                          ==========   ========   ==========  ===========  ===========     ======   ==========  =========== 
</TABLE>

        See accompanying notes to the Consolidated Financial Statements.


                                      F-5
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (United States Dollars)
<TABLE>
<CAPTION>
                                                                     1997             1996             1995
                                                                     ----             ----             ----
<S>                                                               <C>              <C>             <C>         
Cash flow from operating activities
  Net loss....................................................     $(1,393,389)    $(2,288,328)    $(1,972,726)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
      Minority interest.......................................         (74,463)        (77,099)           -
      Depreciation and amortization...........................         208,214         194,939          43,573
      Consulting fees.........................................         772,250       1,868,567       1,620,433
      Allowance for doubtful accounts.........................            -             70,258            -
      Provision for stock obsolescence........................            -             52,322            -
      Gain on disposal of a subsidiary........................        (148,775)           -               -
      Gain on the reversal of the purchase of a
        subsidiary............................................        (307,442)           -               -
      Loss on investment in Duck Farm.........................         301,324            -               -
      Changes in working capital components:
        Accounts receivable...................................      (3,033,177)     (1,021,123)        (27,024)
        Inventories...........................................       2,364,197      (1,935,180)        (62,955)
        Prepaid and other current assets......................        (799,162)          4,851         (17,654)
        Amounts receivable from related parties...............      (1,653,988)       (124,800)        (11,639)
        Value added taxes recoverable.........................        (177,674)       (611,790)           -
        Accounts payable......................................         649,881         576,792         164,646
        Bills payable.........................................        (481,928)        722,892            -
        Interest payable......................................           3,107           7,229          12,490
        Other accrued expenses................................         411,983         197,553         116,327
        Security deposits payable.............................            (802)          1,897          (1,208)
        Unearned rent.........................................            -               -            (12,053)
        Amounts payable to related parties....................        (703,752)        487,258         (10,383)
        Prepaid rental........................................          28,916          28,683        (115,430)
                                                                   -----------     -----------    ------------
  Net cash used in operating activities.......................      (4,034,680)     (1,845,079)       (273,603)
                                                                   -----------     -----------    ------------
Cash flow from investing activities:
  Purchase of available-for-sale securities...................      (6,098,426)       (264,688)       (480,835)
  Proceeds from sale of available-for-sale securities.........       3,044,970          28,308            -
  Purchase of property, plant and equipment...................         (91,414)       (158,987)           -
  Cash paid on purchase of subsidiary (note 4)................            -             21,940            -
  Cash given up on the reversal of the purchase of
    a subsidiary..............................................        (142,973)           -               -
  Proceeds from disposal of a subsidiary......................           8,657            -               -
                                                                   -----------     -----------    ------------
Net cash used in investing activities.........................      (3,279,186)       (373,427)       (480,835)
                                                                   -----------     -----------    ------------
Cash flow from financing activities:
  Common stock issued for cash................................       1,620,000            -            300,000
  Increase in margin loan payable.............................       2,569,102         243,081         274,420
  Repayment of margin loan....................................            -            (28,308)           -
  Increase in short-term borrowings...........................       3,056,287       1,092,930          60,120
  Repayment of mortgage loans.................................         (20,446)        (18,770)        (16,832)
  Repayment of long-term payable..............................         (45,163)         (2,671)           -
  Advance from a minority shareholder.........................            -          1,047,502            -
                                                                   -----------     -----------    ------------
Net cash provided by financing activities.....................       7,179,780       2,333,764         617,708
                                                                   -----------     -----------    ------------
Net (decrease) increase in cash and cash equivalents.(134,086)         115,258         185,713
Cash and cash equivalents:
  Beginning of the period.....................................         170,259          55,001         191,731
                                                                   -----------     -----------    ------------
  End of the period...........................................     $    36,173     $   170,259    $     55,001
                                                                   ===========     ===========    ============
Cash paid during the year for:
  Interest....................................................     $   301,972     $   184,078    $     89,650
Non-cash financing activities:
  Advances from a related party for investment
    in Duck Farm (note 3).....................................         301,324         -               -
  Issuance of common stock for consulting services............         100,000       1,368,567       2,324,000
  Inventories (note 3)........................................         -               -                91,415
                                                                   ===========     ===========    ============
</TABLE>

        See accompanying notes to the Consolidated Financial Statements.


                                      F-6
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)


1.   ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS

     In June 1994, Alpine International Corporation ("Alpine") 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's 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's
     operations are included only from the date of such reverse acquisition.
     Subsequent to the business combination the name of the legal parent Alpine
     was firstly changed to Heng Fai China Industries Inc and then to Powersoft
     Technologies, Inc., on March 23, 1998. (the "Company").

     At December 31, 1997, the Company and its subsidiaries' principal activity
     is the operation of a rental property in North Vancouver, British Columbia
     in Canada. As a result, changes in the economic environment in which the
     operation exist, including changes in the cost or availability of labor or
     materials, could have a material impact on the Company. See Note 16 for
     information on the geographic location of the Company's accounts.

     At December 31, 1997, details of the subsidiary companies are as follows:


<TABLE>
<CAPTION>
                                                           Percentage of
                                            Place of      equity interest
                                         incorporation/   attributable to    Principal
Name of subsidiary                        establishment     the Company      activities
------------------                        -------------     -----------      ----------
<S>                                     <C>                    <C>           <C>                      
Heng Fai China & Asia Industries        Hong Kong              100%          Investment holding
  Limited
Heng Fai China Industries               Hong Kong              100%          Inactive
  Acquisition Limited
Heng Fai China Industries Limited       Hong Kong              100%          Investment holding
Greatly Hong Kong Limited               Hong Kong              100%          Investment holding
Worldwide Container Company             Hong Kong              100%          Investment holding
  Limited                                                                      trading
Vancouver Hong Kong Properties          Canada                 100%          Property investment
  Ltd.                                                                         and management
America & China Business Development    Canada                 100%          Inactive
  Inc.
Heng Fai Management Inc.                British Virgin         100%          Provision of management
                                          Islands                              services
</TABLE>

The Company holds certain investments in marketable equity securities, which are
carried at fair value. Future changes in the market value of these securities
could materially affect the Company's financial position.


                                      F-7
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)


2.   CONTINUING OPERATIONS

     These 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 minimal 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's ability to continue as a going concern is dependent on the
     continued financial support of its principal shareholder, Fai H. Chan, who
     has signed a letter of financial support to the Company.


3.   ACQUISITIONS, REVERSAL AND DISPOSAL

     During 1996 and 1995 the Company made two acquisitions both of which have
     either been reversed or disposed of in 1997. The acquisitions were
     accounted for as a purchase and their operating results are included in the
     consolidated statements of income from their respective dates of
     acquisition.

     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 for 727,272 shares of the Company's restricted common stock. No
     goodwill arose on the acquisition. Wuhan is a joint venture incorporated in
     the People's Republic of China ("PRC") which was formed to engage in the
     design, manufacture, lease and repair of standard and non-standard
     containers and related steel structure products.

     As a result of the unsatisfactory performance of Wuhan in both 1996 and
     1997, the Company effected an agreement on December 29, 1997 to reverse the
     acquisition by returning a 70% interest in Wuhan to redeem the 727,272
     shares of restricted common stock previously issued for the acquisition.
     Applications for the change in ownership in Wuhan have been lodged to
     respective authorities in PRC for consents and approval. The 1997 results
     of Wuhan have been disclosed under discontinued operations and the
     comparatives have been restated accordingly.

     The 727,272 shares of restricted common stock were still outstanding at the
     balance sheet date and appropriate procedures to cancel the restricted
     common stock are to be made by the Company.

     Revenue from the discontinued operation in Wuhan was $2,934,871, $1,082,317
     and $nil in 1997, 1996 and 1995, respectively.

     On January 9, 1995, the Company acquired from Fai H. Chan, an officer,
     director and stockholder of the Company, 100% of the issued ordinary share
     capital 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.


                                      F-8
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)


3.   ACQUISITIONS, REVERSAL AND DISPOSAL - continued

     Heng Fai Asia, through its wholly-owned subsidiary, Cangzhou Min You Cement
     Co., Ltd. (the "Cangzhou Cement") 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"). Cangzhou Cement 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 years term of the lease.

     Amortization was $28,683 in both 1997 and 1996, and $28,750 in 1995. 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 December 10, 1997, the Company disposed of a 75% and a 6% interest in
     the Cangzhou Cement to the Chinese joint venture partner and an
     unaffiliated company for a consideration of $nil and $8,657, respectively.
     At December 31, 1997, the Company's interest in Cangzhou Cement has been
     reduced from 100% to 19% and full provision was made against the remaining
     cost of investment in the Cangzhou Cement. Applications for the change in
     ownership in Cangzhou Cement have been lodged with the respective
     authorities in PRC for consents and approval.

     Revenue from discontinued operation in Cangzhou Cement was $306,398,
     $540,191 and $278,622 in 1997, 1996 and 1995, respectively.

     In January 1997, the Company acquired from Fai H. Chan, an officer,
     director and stockholder of the Company, 100% of the issued ordinary share
     capital of Greatly Hong Kong Limited ("Greatly HK") in exchange for nominal
     consideration. Greatly HK had a 25% interest in HebeiCherry Valley Duck
     Ltd. ("Duck Farm"), a cooperative joint venture established in the PRC
     which was engaged in the management and operation of a duck farm in PRC.
     The investment was wholly financed by an interest free, short term advance
     of RMB2,500,000, from Fai H. Chan. Other than the investment in the Duck
     Farm and the advance from Fai H. Chan, Greatly HK had no other material
     assets and liabilities or operations at the time of acquisition.

     As a result of the unsatisfactory performance of the Duck Farm, Greatly HK
     effected an agreement in December 1997 to dispose of its 25% interest in
     the Duck Farm at a consideration of $nil. Applications for the change in
     ownership in the Duck Farm have been lodged with the respective authorities
     in PRC for consents and approval.

     The share of 1997 results and the loss on disposal of the Duck Farm have
     been disclosed under discontinued operations.

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

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


                                      F-9
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)

4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying 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 consolidated financial statements:

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

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

     The following supplemental schedule summarizes the fair value of assets
     acquired, cash paid net of cash acquired, common stock issued and the
     liabilities assumed in conjunction with the acquisition of equity interests
     in subsidiaries in 1997 and 1996:

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

     Fair value of non-cash assets acquired..........  $    --       $5,083,943
     Cash acquired...................................       --           21,940
     Common stock issued.............................       --       (1,000,000)
                                                       ----------    ----------
     Liabilities assumed.............................  $    --       $4,105,883
                                                       ==========    ==========

     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 labor 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.

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

     Building in Canada       5% declining balance method
     Buildings in the PRC     5% straight line method
     Leasehold land           Amortized over the term of the lease which expires
                                on 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.

     Upon sale or retirement, the costs and related accumulated depreciation or
     amortization are eliminated from the accounts and any resulting gain or
     loss is included in income.


                                      F-10
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)


4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     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.

     Revenues recognition - Rental income is recognized on a straight-line basis
     over the periods of the leases. Investment income from the sale of
     securities is recognized on the transaction date when title of the
     securities has passed. Dividend income from investments is recognized when
     shareholders' rights to receive payment have been established.

     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 year.

     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.

     Reclassifications - Certain prior year amounts have been reclassified to
     conform to the current year's presentation.

     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 be affected by implementation of
     this new standard.


                                      F-11
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)


4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

     New accounting standards not yet adopted - continued

     In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
     an Enterprise and Related Information, which supersedes SFAS No. 14,
     Financial Reporting for Segments of Business Enterprise, and which
     established 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 this 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 Group's
     financial statement disclosures.

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
     Instruments and Hedging Activities, which amends SFAS No. 52, Foreign
     Currency Translation, to permit special accounting for a hedge of a foreign
     currency forecasted transaction with a derivative. It supersedes SFAS No.
     80, Accounting for Futures Contracts, No. 105, Disclosure of Information
     about Financial Instruments with Off-Balance-Sheet Risk and Financial
     Instruments with Concentrations of Credit Risk, and No. 119, Disclosure
     about Derivative Financial Instruments and Fair Value of Financial
     Instruments. It amends SFAS No. 107 Disclosure about Fair Value of
     Financial Instruments, to include in No. 107 the disclosure provisions
     about concentrations of credit risk from No. 105. It also establishes
     reporting standards for derivative instruments and for hedging activities.
     Adoption of the standard will not significantly change the Group's
     financial statement disclosures.

     The new standards not yet adopted are effective for financial statements
     for periods beginning after December 15, 1997 for SFAS No. 130, 131 and
     132, and June 15, 1999 for SFAS No. 133 and require comparative information
     for earlier years to be restated.


                                      F-12
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)

5.   AVAILABLE-FOR-SALE SECURITIES

     The cost and approximate market value of investment securities were as
follows:

                                                           As of December 31,
                                                      -------------------------
                                                         1997            1996 
                                                         ----            ---- 
     Corporate equity securities:
     Cost...........................................  $3,814,612       $761,156
     Less: Gross unrealized losses..................  (2,307,267)       (78,825)
                                                      ----------       --------
     Estimated fair value...........................  $1,507,345       $682,331
                                                      ----------       --------
     Carrying value.................................  $1,507,345       $682,331
                                                      ==========       ========

     All investment securities are pledged to secure the Company's margin loan
     payable (See Note 11).

     Included in the above securities are 48,535,276 shares at December 31, 1997
     (1996: 7,492,000 shares) representing 3.9% (1996: 1.9%) of the outstanding
     common stock of Heng Fung Holdings Company Limited, ("Heng Fung"). These
     securities were acquired in 1997 at a cost of $3,814,612 (1996: $484,778)
     and had a carrying value of $1,507,345 at December 31, 1997 and $426,342 at
     December 31, 1996. Fai H. Chan and Robert H. Trapp, directors of Heng Fung,
     are also officers, directors and/or shareholders of the Company.

     The investment securities held by the Company are not subject to any
     contractual or statutory resale restrictions and any portion of these
     securities can be reasonably expected to qualify for sale within one year.


6.   INVENTORIES

     Inventories by major categories are summarized as follows:


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

     Raw materials and supplies...................  $     --         $3,176,209
     Work-in-progress.............................        --          1,070,066
     Finished goods...............................        --            157,407
                                                    ----------       ----------
                                                    $     --         $4,403,682
                                                    ===========      ==========


                                      F-13
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)

7.   PROPERTY, PLANT AND EQUIPMENT

     The components of property, plant and equipment are as follows:

                                                          As of December 31,
                                                       ------------------------
                                                          1997          1996
                                                          ----          ----
     Buildings........................................ $   722,538   $2,316,819
     Leasehold land...................................     580,922      548,333
     Plant and machinery..............................       --       1,276,853
     Furniture and equipment..........................      11,347       50,024
     Motor vehicles...................................       --          55,816
     Construction in progress.........................       --           1,231
                                                       -----------   ----------
     Total............................................   1,314,807    4,249,076
     Less: Accumulated depreciation and amortization..    (528,887)    (846,838)
                                                       -----------   ----------
                                                       $   785,920   $3,402,238
                                                       ===========   ==========

8.   DEFERRED EXPENDITURE

     (a)  In June 1995, the Company entered into a consulting agreement with a
          previously unaffiliated party pursuant to which it receives various
          investor relations and financial advisory services. The consulting
          agreement had a term of 12 months, subject to earlier termination
          thereof or renewal for subsequent periods. Pursuant to the terms of
          the agreement, the Company: (a) in June 1995, issued to the consultant
          an aggregate of 260,000 shares of common stock and (b) is obligated to
          issue to the consultant 20,000 shares of common stock each month
          during the term of the agreement.

          The unamortized portion of the amount recorded for the 260,000 shares
          of common stock initially issued brought forward from 1995 of $703,567
          was fully amortized in 1996 and recognized as consulting fees.

          During 1996, 100,000 shares of common stock were issued to the
          consultant pursuant to the terms of the agreement in (b) above. The
          value attributable to the 100,000 shares of common stock issued of
          $581,000 was charged to the statement of income in 1996 and recognized
          as consulting fees.


                                      F-14
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)

8.   DEFERRED EXPENDITURE - continued

     (b)  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 had 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 initially issued brought forward from 1996 of $234,750
          was fully amortized in 1997 and recognized as consulting fees.

     (c)  In August 1997, the Company entered into a consulting agreement with a
          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 is obligated to issue 100,000 shares of
          common stock to the consultant.

          During 1997, 100,000 shares of common stock were issued to the
          consultant pursuant to the terms of the agreement above. The value
          attributable to the 100,000 shares of common stock issued was $100,000
          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 100,000 shares of common stock issued is
          presented as a reduction of shareholders' equity.

9.   SHORT-TERM BORROWINGS 

                                                          As of December 31, 
                                                        --------------------
                                                        1997            1996
                                                        ----            ----
         Short-term borrowings consist of:
         Unsecured bank overdraft................... $    --         $    2,977
         Unsecured bank borrowings..................      --          2,400,049
                                                     ---------       ----------
                                                     $    --         $2,403,026
                                                     =========       ==========

     The weighted average interest rate as of December 31, 1996 was 13.21% per
annum.


                                      F-15

<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)

10.  BILLS PAYABLE

     Bills payable represented accounts payable in the form of bills of exchange
     whose acceptances and settlements were handled by banks.

11.  MARGIN LOAN PAYABLE

     The margin loan payable is collateralized by the Company's investment
     securities with a carrying value of $1,507,345. The loan is repayable on
     demand and bears interest at Hong Kong best lending rate (10.25% at
     December 31, 1997) plus 3.5% per annum.

12.  RELATED PARTY TRANSACTIONS

     At the balance sheet date the Company had the following balances with
     related parties, which are interest-free, repayable on demand and unsecured
     unless otherwise stated:


                                                          As of December 31,
                                                        -----------------------
                                                          1997          1996
                                                          ----          ----
     Amounts receivable from:                         
       Certain directors...........................     $  --        $   12,409
       Parties related to certain directors........       18,950        124,030
                                                        --------     ----------
                                                        $ 18,950     $  136,439
                                                        ========     ==========
     Amounts payable to:                              
       A director..................................     $620,067     $  688,987
       Parties related to certain directors........      284,689        421,557
                                                        --------     ----------
                                                        $904,756     $1,110,544
                                                        ========     ==========
                                                      
     In addition at December 31, 1997 and 1996, the second mortgage of $87,623
     and related interest payable of $38,623 and $3,522, respectively, are
     payable to the Silverstein Foundation, Inc., a Panama company, in which Fai
     H. Chan's children have beneficial ownership interests. The related
     interest expense was $7,774 in 1997, $8,947 in 1996 and $11,066 in 1995.

     On November 1, 1996, the Company entered into a 10 year consulting and
     managerial agreement with Tight Hold Investment Limited ("Tight Hold"), a
     company in which Fai H. Chan has a beneficial ownership interest.

     According to the consulting and managerial agreement, Tight Hold shall
     provide consulting and managerial services to the Company in return for an
     annual consulting fees of $500,000.

     Consulting fees paid to Tigh Hold during years ended December 31, 1997,
     1996 an 1995 were $500,000, $500,000 and $0, respectively.


                                      F-16
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)

12.  RELATED PARTY TRANSACTIONS - continued

     On February 1, 1997, the Company issued an aggregate of 1,700,000 shares of
     common stock at $0.6 per share to Fai H. Chan (1,300,000 shares), Ronald M.
     Lau (100,000 shares), Robert H. Trapp (100,000 shares) and Keow Y. Chan
     (200,000 shares) pursuant to private placements for aggregate proceeds of
     $1,020,000. Except for Keow Y. Chan who is Fai H. Chan's wife, all of the
     above parties are directors of the Company. (See note 14 (e))

     On June 25, 1997, the Company issued 2,500,000 shares of common stock at
     $0.24 per share to Fai H. Chan pursuant to a private placement for proceeds
     of $600,000. (See note 14 (f))

     The Company maintains deposits in accounts at American Pacific Bank and Fai
     H. Chan is an officer and a director of such bank.

13.  MORTGAGE LOANS PAYABLE

                                                            As of December 31,
                                                            ------------------
                                                             1997        1996
                                                             ----        ----
     First mortgage, principal due monthly through        
       June 15, 1998 with fixed interest at 8.75%........  $865,594    $886,040
     Second mortgage, principal repayable on demand       
       with interest at Canadian prime (6.00% and 4.75%   
       as at December 31, 1997 and 1996) plus 4%.........    87,623      87,623
                                                           --------    --------
                                                            953,217     973,663
     Less: Current portion...............................  (115,251)   (108,069)
                                                           --------    --------
                                                           $837,966    $865,594
                                                           ========    ========

     On June 5, 1998, the first mortgage loan was renewed for another 5 years
     and the principal is repayable monthly through June 15, 2003 at the
     Canadian Government five year bond rate plus 1.45%

     The mortgage loans are denominated in Canadian dollars. The maturities of
     the mortgage loans as at December 31, 1997 are as follows:

     1998............................................................  $115,251
     1999............................................................    35,668
     2000............................................................    37,947
     2001............................................................    40,683
     2002............................................................    43,454
     2003............................................................   680,214
                                                                       --------
                                                                       $953,217
                                                                       ========

     The Company has pledged property with a net book value of $775,834 at
     December 31, 1997 to secure the mortgage loans.


                                      F-17
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)

14.  CAPITAL STOCK

     During the three years ended December 31, 1997 there were several changes
     of the Company's capital as set out below:

     In 1995,

     a)   the Company issued 400,000 shares of common stock at $5.81 per share
          pursuant to a consulting agreement. (see note 8).

     b)   the Company issued 75,000 shares of common stock at $4 per share
          pursuant to private placements for proceeds of $300,000.

     In 1996,

     c)   the Company issued 100,000 and 300,000 shares of common stock at $5.81
          and $1.0625 pursuant to consulting agreements (See note 8).

     d)   the Company issued 727,272 shares of common stock at $1.375 to acquire
          a 70% interest in a subsidiary (See note 3).

     In 1997,

     e)   the Company issued 1,700,000 shares of common stock to related parties
          at $0.6 per share pursuant to private placements for proceeds of
          $1,020,000. (See note 12)

     f)   the Company issued 2,500,000 shares of common stock to Fai H. Chan at
          $0.24 per share pursuant to a private placement for proceeds of
          $600,000. (See note 12)

     g)   the Company issued 100,000 shares of common stock at $1.00 per share
          pursuant to a consulting agreement (see note 8).

     h)   the Company redeemed 727,272 shares of common stock at $1.375 to
          reverse the purchase of a 70% interest in a subsidiary (See note 3).

     As of December 31, 1997, there were also outstanding warrants to purchase
     an aggregate of 296,443 shares of common stock, at an exercise price of
     $3.20 per share through September 2, 1999. No warrants were issued or
     exercised during 1997.


                                      F-18
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)

15.  INCOME TAXES

     No provision for income taxes for 1996 and 1997 has been made as the
     Company and its subsidiaries made losses in those years. The 1995 provision
     for income taxes consists of Canadian taxes for 1995.

     Under current PRC regulations, the Company's subsidiaries receive a full
     exemption from enterprise income tax for two years starting from the first
     profitable year, followed by 50% reduction in income taxes for the next
     three profitable years. At December 31, 1997 the subsidiaries had not
     reported any operating profits.

     At December 31, 1997 certain of its subsidiaries had operating tax loss
     carry forwards for income tax purposes which may be applied to reduce
     future taxable income of the same company. At December 31, 1997 there were
     tax loss carryforwards in Hong Kong Special Administrative Region ("Hong
     Kong") of approximately $375,000 with no expiration date.

     The Company has established a valuation allowance for the entire amount of
     these losses. There were no other material temporary differences.


                                      F-19
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)

16.  SEGMENT INFORMATION

     The following is a summary of information regarding the Company's
operations by principal activities for each of the three years ended December
31, 1997:

<TABLE>
<CAPTION>
 
                                                           1997                                          1996                     
                                        -------------------------------------------   ------------------------------------------- 
                                          Rental       Investment                       Rental       Investment                   
                                          income         income      Consolidated       income         income       Consolidated  
                                          ------         ------      ------------       ------         ------       ------------  
<S>                                       <C>             <C>             <C>           <C>            <C>          <C>           
Revenues................................  $346,528        $225,393    $    571,921      $336,644       $ 92,214      $   428,858  

Income (loss) from operations...........   116,404         138,794         255,198        85,883        (59,955)          25,928  
General corporate expenses..............      -               -         (1,163,415)         -              -          (1,966,224) 
Interest expense........................      -               -           (309,201)         -              -            (121,436) 
                                                                      ------------                                   -----------  
Net loss from continuing
  operations............................      -               -         (1,217,418)         -              -          (2,061,732) 
                                                                      ------------                                   -----------  
Discontinued operations
  - Cement..............................      -               -             (8,342)         -              -             (62,487) 
  - Containers..........................      -               -             59,232          -              -            (241,208) 
  - Investment in Duck Farm.............      -               -           (301,324)         -              -                -     
                                                                      ------------                                   -----------  
Net loss from discontinued
  operations............................      -               -           (250,434)         -              -            (303,695) 
                                                                      ------------                                   -----------  
Net loss before income taxes............      -               -       $ (1,467,852)         -              -         $(2,365,427) 
                                                                      ------------                                   -----------  
Identifiable assets
  Continuing operations.................   803,754       1,531,620      $2,335,374       787,920        710,307       $1,498,227  
  Discontinued operations
  - Cement..............................      -               -               -             -              -             395,955  
  - Containers..........................      -               -               -             -              -           8,560,939  
  - Investment in Duck Farm.............      -               -               -             -              -                -     
                                                                      ------------                                   -----------  
                                              -               -          2,335,374          -              -          10,455,121  
Corporate assets........................      -               -             52,688          -              -             170,259  
                                                                      ------------                                   -----------  
                                                                        $2,388,062                                   $10,625,380  
                                                                      ------------                                   -----------  
Supplemental information
  Depreciation                              40,320             841    $     41,161        41,395            420      $    41,815  
  Capital expenditures                        -               -       $       -             -             3,363      $     3,363  
                                                                      ------------                                   -----------  
</TABLE>


                                                        1995
                                     -----------------------------------------
                                      Rental       Investment
                                      income         income       Consolidated
                                      ------         ------       ------------

Revenues............................ $347,034       $   7,918     $    354,952

Income (loss) from operations.......  110,608         (52,612)          57,996
General corporate expenses..........     -               -          (1,833,233)
Interest expense....................     -               -            (105,435)
                                                                  ------------
Net loss from continuing
  operations........................     -               -          (1,880,672)
                                                                  ------------
Discontinued operations
  - Cement..........................     -               -             (75,107)
  - Containers......................     -               -                -
  - Investment in Duck Farm.........     -               -                -
                                                                  ------------
Net loss from discontinued
  operations........................     -               -             (75,107)
                                                                  ------------
Net loss before income taxes........     -               -        $ (1,955,779)
                                                                  ------------
Identifiable assets
  Continuing operations.............  877,265         492,483     $  1,369,748
  Discontinued operations
  - Cement..........................     -               -             299,107
  - Containers......................     -               -                -
  - Investment in Duck Farm.........     -               -                -
                                                                  ------------
                                         -               -           1,668,855
Corporate assets....................     -               -              55,001
                                                                  ------------

                                                                  $  1,723,856
                                                                  ------------
Supplemental information
  Depreciation                         43,573            -        $     43,573
  Capital expenditures                   -               -        $       -
                                                                  ------------


                                      F-20
<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)

16.  SEGMENT INFORMATION (Continued)

     The following is a summary of information regarding the Company's
operations by geographical area for each of the three years ended December 31,
1997:

                                      1997          1996              1995
                                     ----          ----              ----
     Revenues
       North America ...........  $   360,030     $   342,112     $   349,698
       Hong Kong ...............      211,891          86,746           5,254
                                  -----------     -----------     -----------
                                  $   571,921     $   428,858     $   354,952
                                  ===========     ===========     ===========

     Operating income (loss)
       North America ...........  $  116,404      $    91,351     $   104,640
       Hong Kong ...............     (170,407)       (186,859)       (152,079)
     General corporate expenses    (1,163,415)     (1,966,224)     (1,833,233)
                                  -----------     -----------     -----------
                                  $(1,217,418)    $(2,061,732)    $(1,880,672)
                                  ===========     ===========     ===========

     Identifiable assets
       North America ...........  $   803,754     $   787,920     $   877,265
       PRC                               --         8,956,894         299,107
       Hong Kong ...............    1,531,620         710,307         492,483
     Corporate assets ..........       52,688         170,259          55,001
                                  -----------     -----------     -----------
                                  $ 2,388,062     $10,625,380     $ 1,723,856
                                  ===========     ===========     ===========

17.  ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following disclosure of the estimated fair value of financial
     instruments is made in accordance with the requirements of the SFAS No. 107
     "Disclosure about Fair Value of Financial Instruments". The estimated fair
     value amounts have been determined by the Company, using available market
     information and appropriate valuation methodologies. However, considerable
     judgment is necessarily required in interpreting market data to develop
     estimates of fair value. Accordingly, the estimates presented herein are
     not necessarily indicative of the amounts that the Company could realize in
     a current market exchange.

     The carrying amounts of cash and cash equivalents, short-term borrowings,
     current portion of mortgage loans payable and margin loan payable, are a
     reasonable estimate of their fair value due to the short maturity of the
     instruments. The fair value for the available-for-sale securities is based
     primarily on quoted market prices and such securities are carried at fair
     value.


                                      F-21

<PAGE>

                          POWERSOFT TECHNOLOGIES, INC.
               (Formerly known as Heng Fai China Industries, Inc.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                             (United States Dollars)


18.  COMMITMENTS AND CONTINGENCIES

     The Company had no capital commitments as of December 31, 1997.

     The Company leases land in North Vancouver, British Columbia on which the
     Company's rental property is located. The annual rent of CDN$110,000
     ($80,321) is fixed until May 31, 2010. The Company has the option to extend
     the lease to May 31, 2032 at a rent to be negotiated.

     Total rental expense charged to operations was $125,201 in 1997, $131,813
     in 1996 and $108,891 in 1995.

     At December 31, 1997, the minimum future rental commitments under non
     cancelable leases payable over the remaining lives of the leases are:

     1998.........................................................  $   105,171
     1999.........................................................       80,321
     2000.........................................................       80,321
     2001.........................................................       80,321
     2002.........................................................       80,321
     2003 through 2010............................................      642,568
                                                                     ----------
                                                                     $1,069,023
                                                                     ==========

19.  SUBSEQUENT EVENTS

     As of August 31, 1998, the market value of the available-for-sale
     securities held by the Company at the balance sheet date had fallen to
     approximately US$350,000. These securities were carried at market value of
     US$1,507,345 at the balance sheet date.


                                      F-22