FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


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

                         For Quarter Ended June 30, 1997

                                       OR

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

                 For the transition period from ______ to ______

                        Commission file number: 33-20432

                           WHITESTONE INDUSTRIES, INC.
             (Exact Name of Registrant as Specified in its Charter)

                               Delaware 75-2228828
                 State or other jurisdiction of(I.R.S. Employer
                incorporation or organization Identification No.)

          19200 Von Karmen Avenue, Suite 550, Irvine, California 92715
               (Address of Principal Executive Office) (Zip Code)

                                 (714) 622-5565
               (Registrant's telephone number including area code)

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes _x_ No ___

The number of shares of registrant's Common Stock, $.0001 par value, outstanding
as of June 30, 1997 was 38,173 shares.

<PAGE>

                           WHITESTONE INDUSTRIES, INC.

                                      INDEX

                                                                           Page
                                                                          Number
                                                                          ------
PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

Balance Sheet -- June 30, 1997                                              2

Statement of Operations -- Three and six months ended 
  June 30, 1997 and 1996                                                    3

Statement of Cash Flows  -- Six months ended June 30, 1997 and 1996         4

Notes to Financial Statements                                              5-6

Item 2.  Management's Discussion and Analysis of
           Financial Condition and Results of Operations                    7

PART II - OTHER INFORMATION                                                 8

SIGNATURES                                                                  9


                                       1
<PAGE>

                           WHITESTONE INDUSTRIES, INC.

                                  BALANCE SHEET

                                  JUNE 30, 1997

                                   (Unaudited)

                                     ASSETS


                                                                    $      --
                                                                    ===========


                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

   LIABILITIES:                                                     $      --
                                                                    -----------
   STOCKHOLDERS' EQUITY:
     Preferred stock, $ .01 par value; 3,000,000 shares;
       authorized, 100,000 shares issued and outstanding                    100
     Common stock, $ .0001 par value; 30,000,000 shares
       authorized, 43,063 shares issued, 38,173 shares
       outstanding and 4,890 shares in treasury                               4
     Additional paid-in capital                                       2,556,278
     Accumulated deficit                                             (2,555,796)

       TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                                --
                                                                    $      --
                                                                    ===========

                        See notes to financial statements


                                       2
<PAGE>

                           WHITESTONE INDUSTRIES, INC.

                            STATEMENTS OF OPERATIONS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                        Three Months Ended June 30,    Six Months Ended June 30,
                                        ---------------------------   ---------------------------
                                            1997           1996           1997           1996
                                        ------------   ------------   ------------   ------------
<S>                                     <C>            <C>            <C>            <C>          
NET LOSS FROM DISCONTINUED OPERATIONS   $     (6,892)  $    282,372)  $    (12,060)  $   (529,690)
                                        ============   ============   ============   ============
NET LOSS PER COMMON SHARE:
     Discontinued operations            $      (0.18)  $      (9.34)  $      (0.32)  $     (18.76)
                                        ============   ============   ============   ============
WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING                       38,173         30,247         38,173         28,230
                                        ============   ============   ============   ============

</TABLE>

                        See notes to financial statements


                                        3

<PAGE>

                           WHITESTONE INDUSTRIES, INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

                                                       Six Months Ended June 30,
                                                       ------------------------
                                                          1997          1996
                                                       ----------    ----------
                                                     
CASH FLOWS FROM DISCONTINUED OPERATIONS:             
  Loss from discontinued operations                    $  (12,060)   $ (529,690)
    Amortization of unearned consulting fees               81,250
    Common stock issued for services                       96,200
    Changes in assets and liabilities of             
      discontinued business                                12,060       349,969
                                                       ----------    ----------
                                                     
NET CASH (USED IN) DISCONTINUED OPERATIONS                   --          (2,271)
                                                     
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Capital expenditures                                       --        (270,000)
                                                     
NET CASH (USED IN) INVESTING ACTIVITIES                      --        (270,000)
                                                     
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Sale of common stock                                       --         187,485
  Stockholder's loan                                         --          17,355
  Bank debt                                                  --          36,000
  Cash overdraft                                             --          30,297
                                                     
CASH PROVIDED BY FINANCING ACTIVITIES                        --         271,137
                                                     
NET (DECREASE) IN CASH                                       --          (1,134)
                                                     
CASH AT BEGINNING OF PERIOD                                  --           1,134
                                                     
CASH AT END OF PERIOD                                  $     --      $     -- 
                                                       ==========    ==========
                                                     
                        See notes to financial statements


                                        4
<PAGE>

                           WHITESTONE INDUSTRIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                  JUNE 30, 1997
                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance
with  the  instructions  on Form  10-QSB  and,  therefore,  do not  include  all
information  and  footnotes  necessary  for a  fair  presentation  of  financial
position,  results of  operations  and cash flows in conformity  with  generally
accepted  accounting  principles.  In the opinion of management,  such financial
statements  reflect all  adjustments  necessary for a fair  presentation  of the
results of operations and financial  position for the interim periods presented.
Operating results for the interim periods are not necessarily  indicative of the
results that may be expected for the full fiscal year.

For a more  complete  understanding  of the  Company's  financial  position  and
results of operations, reference is made to the financial statements and related
notes thereto previously filed with the Company's Form 10-KSB for the year ended
December 31, 1996.

The financial  statements  for the period ended June 30, 1996 have been restated
to conform to the current year's presentation.

NOTE 2 - EARNINGS (LOSS) PER SHARE

Per share information is computed based on the weighted average number of shares
outstanding  during  the period  restated  to reflect  the  Company's  June 1997
reverse stock split.

NOTE 3 - LITIGATION

A. In October 1996, the Company entered into an agreement with a Latvian company
to obtain certain financing. The Latvian company agreed to buy 700,000 shares of
Company's  common stock for $500,000 and to additionally  provide loan financing
of  $400,000,  to be  secured  by  1,483,750  shares of stock  owned by  certain
shareholders.  Subsequent to the issue and transfer of the 2,183,750 shares, the
Company learned that the agreed to funds were not provided.

In February  1997,  the Company  filed  lawsuit as to ownership of the 2,183,750
shares  transferred.  Since then,  these shares have been enjoined by the United
States  District  Court  for  the  Northern   District  of  California   pending
resolution.  The Company has challenged  the record  owner's  entitlement to the
shares in question.


                                        5

<PAGE>

B. In June 1997, the Company was named,  among other parties,  in a lawsuit by a
shareholder. The Company believes it has jurisdictional defenses in this matter,
and does not believe that any loss would be material.

NOTE 4 - DISCONTINUED OPERATIONS

On June 16, 1997,  Royal Capital,  Inc.("Royal")  entered into an agreement with
the Company and its president,  Donald R. Yu, whereby Royal (i) acquired 100,000
shares of the  Company's  preferred  stock held by Mr. Yu; and (ii) acquired the
voting proxy of 1,120,000 shares of common stock. The consideration  paid to Mr.
Yu was $100,000.  As a result, Royal obtained a voting majority of the Company's
capital stock.

On June 24, 1997,  the Company,  Royal and Proformix,  Inc., a Delaware  company
("Proformix")  entered into an  acquisition  agreement  whereby the Company will
acquire all or substantially  all of the outstanding  shares of capital stock of
Proformix,  Inc. In order to enter into the aforesaid  agreement,  the Company's
Board of Directors authorized a 137:1 reverse split of its outstanding shares of
Common  Stock.  Such reverse  split is  retroactively  reflected for all periods
presented.  The Company  then  intends to exchange one share of its Common Stock
with 3.4676 shares Proformix  common stock.  The aforesaid  acquisition will not
include Golden Bear  Entertainment  Corporation  ("Golden Bear"),  the Company's
wholly owned subsidiary.  The Company's Board has authorized a 5% stock dividend
consisting of the Common Stock of Golden Bear to the current shareholders of the
Company.  Accordingly, the accompanying financial statements reflect the results
of the previous business  operations as discontinued  operations.  In connection
with the distribution of Golden Bear, the recipient  shareholder received assets
consisting of patents with a book value of $13,704,  assumed accounts payable of
$95,941  and bank debt in amount of $67,254  and  forgave  loans to the  Company
totaling  $162,689.  The excess of liabilities  assumed and forgiven over assets
distributed  was  $312,180.  This amount is accounted for as a  contribution  to
capital.  The Company remains  contingently  liable for the accounts payable and
bank debt assumed.


                                        6

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

The Company entered into a new line of business  commencing December 7, 1995 and
discontinued  the development of this business in June 1997. The Company had not
realized any sales revenues from its new  activities as of June 30, 1997.  Costs
incurred to date have been primarily for the research and development of its new
toy products and general and administrative  expenses incurred in setting up the
organizational  structures,  developing  its market entries and putting in place
its financing  structures.  During the six months ended June 30, 1997,  the only
cost incurred was general and administrative costs in the amount of $12,060.

Liquidity and Capital Resources

As of June 30, 1997, the Company had neither assets nor liabilities.

The Company funded its previous  development stage activities  primarily through
the sale of common stock, from bank debt and loans from its officer.  Stock sold
since the inception of development  stage activities  aggregated  525,000 shares
and has  provided net  proceeds to the Company of  $287,470.  Of these  amounts,
325,000 shares, providing net proceeds of $187,485, were sold during the quarter
ended March 31, 1996. In April 1996,  the Company  obtained an overdraft  credit
line from its commercial  bank totaling  $50,000.  In December 1996, the Company
obtained a $67,254  note from the same  bank.  This note has not been paid since
its due date of January 21, 1997.  In June 1997,  the Company's  previous  major
shareholder  was distributed  assets  consisting of patents with a book value of
$13,704,  assumed  accounts  payable of  $95,941  and bank debt in the amount of
$67,254 and forgave loans to the Company totaling $162,689.


                                        7

<PAGE>

PART II - OTHER INFORMATION

Item 1.   LEGAL PROCEEDINGS -

          (a) In October  1996,  the Company  entered into an  agreement  with a
          Latvian  company to obtain  certain  financing.  The  Latvian  company
          agreed to buy 700,000  shares of  Company's  common stock for $500,000
          and to additionally provide loan financing of $400,000,  to be secured
          by 1,483,750 shares of stock owned by certain shareholders. Subsequent
          to the issue and transfer of the 2,183,750 shares, the Company learned
          that the agreed to funds were not provided.

          In February  1997,  the Company  filed  lawsuit as to ownership of the
          2,183,750  shares  transferred.  Since  then,  these  shares have been
          enjoined by the United States District Court for the Northern District
          of  California  pending  resolution.  The Company has  challenged  the
          record owner's entitlement to the shares in question.

          (b) In June 1997,  the Company was named,  among other  parties,  in a
          lawsuit by a shareholder.  The Company believes it has  jurisdictional
          defenses in this  matter,  and does not believe that any loss would be
          material.

Item 2.   CHANGES  IN  SECURITIES  - On July 15,  1997 the  Company  effected  a
          reverse  split of its  outstanding  Common Stock in the ratio of 137:1
          ("Reverse Split") and changed its name to Proformix Systems,  Inc. The
          Reverse Split has no effect on the par value or  authorized  number of
          shares of Common Stock. The Company is effecting the Reverse Split and
          name  change  in  connection   with  the  stock   exchange   agreement
          ("Agreement")  entered into with  Proformix,  Inc. and Royal  Capital,
          Inc. whereby the Company will acquire all or substantially  all of the
          outstanding  shares of  Proformix,  Inc.  by  exchanging  one share of
          Common Stock for every 3.4676 shares of Proformix,  Inc. common stock.
          The primary  reason for the Reverse  Split is to reflect the  relative
          contribution  of Proformix,  Inc., a viable  business,  which is being
          acquired by the Company. In order to consummate this acquisition,  the
          Company  must   recapitalize   and  the  Board   believes   that  this
          recapitalization  and acquisition will ultimately  provide for greater
          shareholder value. Moreover, it is necessary in order to convey to the
          present Proformix,  Inc.  shareholders  additional shares constituting
          control of the Company.

Item 3.   DEFAULTS UPON SENIOR SECURITIES - None

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS - None

Item 5.   OTHER INFORMATION - None

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K - None


                                        8

<PAGE>

                                   SIGNATURES

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


                                        WHITESTONE INDUSTRIES, INC.


Date: July 18, 1997                     By:     /s/     Donald Yu
                                           -------------------------------------
                                           President and Chief Executive Officer


                                        9