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 September 30, 1998

                                       OR

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

                For the Transition Period from _______ to _______

                         Commission file number 33-20432

                             PROFORMIX SYSTEMS, 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.)

                  50 Tannery Road, Branchburg, New Jersey 08876
               (Address of Principal Executive Office) (Zip Code)

                                 (908) 534-6400
               (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, $0.0001 par value,
          outstanding as of September 30, 1998, was 5,081,613 shares.

<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES

                                      INDEX

                                                                           Page
                                                                          Number
                                                                          ------
PART 1 - FINANCIAL INFORMATION

Item 1 Financial Statements (unaudited)

       Consolidated Balance Sheet
       - September 30, 1998                                                  3

       Consolidated Statements of Operations
       - Three and nine months ended September 30, 1998 and 1997             4

       Consolidated Statements of Cash Flows
       - Nine months ended September 30, 1998 and 1997                       5

       Notes to Consolidated Financial Statements                           6-11

Item 2 Management's Discussion and Analysis of Financial Condition
       and Results of Operations                                           12-13

PART II - OTHER INFORMATION                                                  14

SIGNATURES                                                                   15


                                       2
<PAGE>

PART I - Item 1

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                   (Unaudited)

                                                             September 30, 1998
                                                             ------------------
ASSETS
  Current Assets
  Cash ......................................................   $    63,490
  Accounts receivable, net of allowance for
  doubtful accounts of 30,533 ...............................       411,935
  Inventories ...............................................       313,982
  Prepaid advertising .......................................       759,084
  Other prepaid expenses ....................................        31,860
                                                                -----------
     Total Current Assets ...................................     1,580,351
  Property, plant and equipment .............................       488,208
  Acquired software assets ..................................     2,275,282
  Other assets ..............................................       146,681
                                                                -----------
TOTAL ASSETS ................................................   $ 4,490,522
                                                                ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
  Accounts payable and accrued expenses .....................   $ 1,636,486
  Dividends payable .........................................         9,000
  Loans and notes payable ...................................     1,306,579
  Current maturities long-term debt .........................       387,180
  Current maturities lease obligations ......................         8,589
                                                                -----------
     Total Current Liabilities ..............................     3,347,834
  Long-term debt, less current portion ......................     1,498,888
  Lease obligations, less current portion ...................        17,975
                                                                -----------
TOTAL LIABILITIES ...........................................     4,864,697

STOCKHOLDERS' EQUITY
  Preferred Stock Ser.A, $0.01 par value, 3,000,000
  shares authorized, 0 and 100,000 shares issued and
  outstanding ...............................................          --
  Cumulative Preferred Stock, $0.001 par value, 2,500
  shares authorized, 10 shares issued and outstanding .......             0
  Common Stock, $0.0001 par value, 30,000,000 shares
  authorized, 5,081,613 issued and outstanding ..............           508
  Contributed capital .......................................        81,000
  Additional paid-in capital ................................     7,785,520
  Accumulated deficit .......................................    (8,241,203)
                                                                -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) ........................      (374,175)
                                                                -----------
TOTAL LIABILITIES AND EQUITY ................................   $ 4,490,522
                                                                ===========

                 See notes to consolidated financial statements


                                       3
<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     Three Months Ended                     Nine Months Ended
                                                                        September 30,                         September 30,
                                                               ------------------------------        ------------------------------
                                                                  1998               1997               1998               1997
                                                               -----------        -----------        -----------        -----------
<S>                                                            <C>                <C>                <C>                <C>        
Revenues ...............................................       $   334,876        $   744,177        $ 2,776,369        $ 2,389,763
  Cost of Goods Sold ...................................           251,807            329,697          1,446,935          1,026,393
  Disposition obsolete inventories .....................           120,343                  0            120,343                  0
                                                               -----------        -----------        -----------        -----------
Gross Profit ...........................................           (37,274)           414,480          1,209,091          1,363,370
  Selling expenses .....................................           266,623            251,909          1,118,232            879,179
  General & administrative expenses ....................           569,737            550,708          1,693,656          1,226,616
                                                               -----------        -----------        -----------        -----------
Operating Income (Loss) ................................          (873,634)          (388,137)        (1,602,797)          (742,425)
  Miscellaneous income .................................               103             79,653                436             79,653
  Interest expense (net) ...............................           (41,782)           (83,035)          (221,139)          (252,358)
  Miscellaneous expenses ...............................           (32,547)           (47,670)           (42,547)           (52,670)
                                                               -----------        -----------        -----------        -----------
Non-Operating Income (Expenses) ........................           (74,226)           (51,052)          (263,250)          (225,375)
                                                               -----------        -----------        -----------        -----------
Total Net Loss .........................................       $  (947,860)       $  (439,189)       $(1,866,047)       $  (967,800)
                                                               ===========        ===========        ===========        =========== 

Net Loss per Common Share ..............................       $     (0.19)       $     (0.17)       $     (0.41)       $     (0.53)
                                                               ===========        ===========        ===========        =========== 
Weighted-Average Number of
  Common Shares Outstanding ............................         5,061,977          2,569,750          4,539,511          1,843,129

</TABLE>

                 See notes to consolidated financial statements


                                       4
<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                           Nine Months Ended
                                                             September 30,
                                                       ------------------------
                                                           1998         1997
                                                       -----------    ---------
Cash Flows from Operating Activities
   Net income (loss) ...............................   $(1,866,047)   $(967,800)
   Adjustments to net income (loss)
      Depreciation and Amortization ................       235,414       76,741
      Loss on disposal of certain assets ...........         7,776       25,341
   Decreases (increases) in Assets
      Accounts receivable ..........................       (97,443)     232,249
      Inventories ..................................       (57,481)     (52,399)
      Prepaid advertising ..........................      (763,275)           0
      Prepaid expenses .............................        19,935       15,513
      Other assets .................................           450         (156)
   Increases (decreases) in Liabilities
      Accounts payable and accrued expenses ........       227,912      (39,738)
                                                       -----------    ---------
Net Cash Provided (Used) by Operating Activities ...    (2,292,759)    (710,249)

Cash Flows from Investing Activities
   Rolina & Vanity acquisitions ....................    (2,404,280)           0
   Investment Input Technologies ...................       (60,000)           0
   Capital expenditures ............................      (160,425)     (49,653)
                                                       -----------    ---------
Net Cash Provided (Used) by Investing Activities ...    (2,624,705)     (49,653)

Cash Flows from Financing Activities
   Proceeds from notes payable .....................       225,000      487,599
   Conversion of equity subscriptions ..............      (275,000)           0
   Repayment of notes ..............................      (295,000)    (100,000)
   Repayment of long-term debt .....................      (149,474)     (53,751)
   Change in subordinated debenture ................             0     (101,849)
   Issuance of common stock ........................     5,470,882      544,870
                                                       -----------    ---------
Net Cash Provided (Used) by Financing Activities ...     4,976,408      776,869
Net Increase (Decrease) in Cash ....................        58,944       16,967
Cash at Beginning of Period ........................         4,546        1,507
                                                       -----------    ---------
Cash at End of Period ..............................   $    63,490    $  18,474
                                                       ===========    =========

                 See notes to consolidated financial statements


                                       5
<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998

BACKGROUND

    Proformix Systems, Inc. (the "Company" or "Proformix") was incorporated as a
    Delaware corporation on April 19, 1988 under the name "Fortunistics,  Inc.",
    subsequently changed to "Whitestone Industries, Inc."(Whitestone).

    On July 2,  1997,  the  Company  submitted  a stock  exchange  offer  to the
    shareholders of Proformix, Inc., a Delaware corporation. Prior to this stock
    exchange,  the Company  spun off the shares of its wholly  owned  subsidiary
    Golden Bear  Entertainment  Corporation to its then current  shareholders in
    the form of a stock dividend.  This distribution  effectively eliminated all
    assets  and  liabilities  from  the  books  of  the  Company  prior  to  the
    acquisition of Proformix, Inc.

    The  exchange  offer to the  Proformix,  Inc.  shareholders  called  for the
    exchange  of the common  stock in  Proformix,  Inc.  into newly to be issued
    common stock of Whitestone  at the rate of 3.4676 shares of Proformix,  Inc.
    common  stock to 1 share of  Whitestone  common  stock,  and to  holders  of
    Proformix Cumulative Preferred Stock, to exchange their shares into newly to
    be issued  Cumulative  Preferred  Stock of Whitestone at the rate of 1 to 1.
    Holders of approximately 97% of Proformix,  Inc. common stock have agreed to
    the  stock  exchange  and  tendered  their  common  shares in  exchange  for
    Whitestone common shares. The remaining 3% of Proformix,  Inc.  stockholders
    hold a minority interest which is valued at $0.

    For accounting purposes,  the acquisition has been treated as an acquisition
    of Whitestone by Proformix,  Inc. and a recapitalization of Proformix,  Inc.
    The  historical  financial  statements  prior to July 2,  1997 are  those of
    Proformix,  Inc. Proforma information is not presented since the combination
    is considered a  recapitalization.  Subsequent to the exchange,  the Company
    and Proformix, Inc. remain as two separate legal entities whereby Proformix,
    Inc. operates as a subsidiary of the Company, however, the operations of the
    newly combined  entity are currently  comprised  solely of the operations of
    Proformix,  Inc.  Concurrent  with the stock  exchange  offer,  the  Company
    changed its name to Proformix Systems, Inc.

    Proformix develops, manufactures and markets ergonomically designed computer
    keyboard trays,  peripheral items and accessories  (together, a "Keyboarding
    System")  designed to alleviate and prevent certain health problems believed
    to be  related  to the use of  computers.  Proformix  also  markets a unique
    proprietary  software  suite  under  the name  EMS(TM)  which  represents  a
    comprehensive  ergonomic-based  productivity  solution  developed  to  train
    people working on computers,  monitor  computer-use  related  activities and
    evaluate a user's risk  exposure and  propensity  towards  injury or loss of
    effectiveness in connection with his/her day-to-day work.

    Proformix Inc.'s wholly owned  subsidiary,  Corporate  Ergonomic  Solutions,
    Inc. (Ergonomics) was incorporated in the State of New Jersey during October
    1992.  Ergonomics,  which commenced operations in September 1997, was formed
    primarily to market Proformix's  products.  To date, its operations have not
    been significant.


                                       6
<PAGE>

                    Proformix Systems, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Principles of Consolidation

        The consolidated  financial statements include the accounts of Proformix
        Systems,  Inc.  and its  subsidiaries,  Proformix,  Inc.  and  Corporate
        Ergonomic  Solutions,  Inc. All  significant  intercompany  balances and
        transactions have been eliminated.

    Inventories

        Inventory  consists of product  components  and finished goods which are
        stated  at the  lower of cost  (determined  by the  first-in,  first out
        method) or market.

    Depreciation and Amortization

        Property,  plant and equipment are recorded at cost.  Certain molds were
        being  depreciated  using the units of  production  method based upon an
        estimated  useful  life of 300,000  units.  Depreciation  on  equipment,
        furniture  and fixtures and  leasehold  improvements  is computed on the
        straight  line method  over the  estimated  useful  lives of such assets
        between 5-10 years. Maintenance and repairs are charged to operations as
        incurred.

        System  design  costs are  amortized  on a  straight-line  basis over an
        estimated  useful  life of 10 years.  Organization  costs  and  deferred
        finance  charges are  amortized  using the  straight  line method over a
        period of 4-5 years.

        Capitalized  acquired software assets are depreciated on a straight-line
        basis over an  estimated  useful life of 10 years (see  "Acquisition  of
        Vanity Software Publishing Corporation").

    Securities Issued for Services

        The  Company  accounts  for stock and  options  issued for  services  by
        reference to the fair market value of the Company's stock on the date of
        stock issuance or option grant. Compensation expense is recorded for the
        fair market value of the stock  issued,  or in the case of options,  for
        the  difference  between  the stock's  fair market  value on the date of
        grant and the option exercise price.

        Effective  January 1, 1996, the Company  adopted  Statement of Financial
        Accounting   Standard  (SFAS)  No.  123,   "Accounting  for  Stock-based
        Compensation".  The statement generally suggests,  but does not require,
        employee stock-based compensation transactions be accounted for based on
        the fair value of the  consideration  received  or the fair value of the
        equity instruments  issued,  whichever is more reliably  measurable.  As
        permitted  by the  statement,  the  Company  has  elected to continue to
        follow the  requirements of Accounting  Principles Board Opinion No. 25,
        "Accounting  for Stock  Issued to  Employees",  which  does not  require
        compensation  to be recorded if the  consideration  to be received is at
        least equal to the fair value at the  measurement  date. The adoption of
        SFAS  No.  123  does  not  have  a  material  impact  on  the  financial
        statements.

    Income Taxes

        The  Company  provides  for income  taxes  based on enacted  tax law and
        statutory  tax rates at which items of income and  expenses are expected
        to be  settled in the  Company's  income tax  return.  Certain  items of
        revenue and  expense are  reported  for Federal  income tax  purposes in
        different  periods  than  for  financial  reporting  purposes,   thereby
        resulting in deferred  income taxes.  Deferred taxes are also recognized
        for operating losses that are available to offset future


                                       7
<PAGE>

                    Proformix Systems, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

        taxable income.  Valuation  allowances are established when necessary to
        reduce  deferred tax assets to the amount  expected to be realized.  The
        Company has incurred net operating  losses for  financial-reporting  and
        tax-reporting  purposes.  The benefit  for income  taxes has been offset
        entirely by a valuation  allowance  against  the  related  deferred  tax
        asset.

    Net Loss Per Share

        Net loss per share,  in  accordance  with the  provisions  of  Financial
        Accounting Standards Board No. 128, "Earnings Per Share", is computed by
        dividing  net loss by the  weighted-average  number  of shares of Common
        Stock outstanding  during the period.  Common Stock equivalents have not
        been   included  in  this   computation   since  the  effect   would  be
        anti-dilutive.

    Revenue Recognition

        Revenue  from  product  sales  is  recognized  at the  time of  shipment
        provided that the resulting receivable is deemed probable of collection.

PREPAID EXPENSES

        Prepaid  expenses  include a  position  of  $750,000  resulting  from an
        agreement  in February  1998 with BNN  Business  News  Network  Inc.,  a
        nationwide  media  advertising  and radio network  company , whereby the
        Company  purchased  advertising  time  on the  Business  News  Network's
        broadcasts  ,  usable  over a period  of  three  years  and  aggregating
        $900,000 in retail value, against issuance of 150,000 new and restricted
        common shares.  The services purchased were capitalized at the then fair
        market value of the stock issued, for a total of $750,000. The resulting
        asset will be  amortized  as  utilized,  over the  timeframe of the next
        three years.  As per the date of this  report,  no portion of this asset
        has been  utilized.  The Company is currently  analyzing  the utility of
        this  advertising  credit in light of current  business  strategies.  If
        management  deems that it may not be able to  economically  utilize  the
        entire  amount  during  the time  allotted,  it may  elect to  effect an
        accelerated amortization or write-down of this asset position.

INVESTMENT IN INPUT TECHNOLOGIES L.L.C.

        During the  quarter,  the Company  completed  its  investment  for a 20%
        equity  interest in Input  Technologies  LLC, a privately  held Colorado
        Limited Liability Company, against delivery of products in the aggregate
        of $60,000 at  wholesale  prices.  In  addition  to being the  Company's
        premier  supplier  of  touch-pads  for  its   Intellitray(TM)   keyboard
        platforms,  Input Technologies LLC acts as a stocking master distributor
        for the  Company's  products  for certain  areas of the  western  United
        States.

CHANGES IN KEY PERSONNEL

        None


                                       8
<PAGE>

                    Proformix Systems, Inc. and Subsidiaries
                 Notes to the Consolidated Financial Statements

SUBSEQUENT  EVENTS

    CONVERSION OF NOTE PAYABLE

    In October 1998, a creditor in possession of a past-due  $316,849.05  demand
    note issued by the  Company,  with such note  bearing a  conversion  option,
    elected to convert the note  including  accrued  interest  of  approximately
    $24,000 , into 342,000 shares of the Company's common stock.

    ASSET PURCHASE AGREEMENT WITH 1320236 ONTARIO INC. D/B/A OFFICE SPECIALTY

    On November 18, 1998, the Company and its wholly owned subsidiary Proformix,
    Inc. entered into an Asset Purchase Agreement and several related agreements
    with  1320236  Ontario  Inc.("OS"),  a publicly  traded  Canadian  designer.
    manufacturer  and distributor of office  furniture based in Holland Landing,
    Ontario,  Canada,  pursuant to which OS acquires  Proformix  Inc.'s hardware
    product line comprised of the Company's ergonomic keyboard platform products
    and  accessories,  and all  related  inventory  and  production  tooling and
    warehousing  assets,  and all  intellectual  property  rights  including the
    Proformix  name,  against a cash  consideration  and an  ongoing  contingent
    stream of  royalty  payments  on OS' sales of the  Proformix  products.  The
    Company will continue to market its proprietary software under the Proformix
    label.  The  Agreement  with OS also  provides  for  the  retirement  of the
    Company's  existing  bank  debt,  out of the  proceeds  of the  transaction.
    Further  details  regarding  this  transaction  may  be  obtained  from  the
    Company's  related  filing on Form 8-K (See:  "Management's  Discussion  and
    Analysis").


                                       9
<PAGE>

                    Proformix Systems, Inc. and Subsidiaries

                 Notes to the Consolidated Financial Statements

LOANS AND NOTES PAYABLE

Proformix,  Inc.  had  borrowings  under  short  term loan  agreements  with the
following terms and conditions at June 30, 1998:

    On April 17, 1997, Proformix, Inc. issued a $316,849 one-year
    5%  promissory  note to a private  investor in  exchange  for
    retiring other  promissory  notes and the repayment of a past
    due subordinated  debenture,  with the face value of all such
    obligations  to third  parties  equaling  the 5% note to that
    investor.  Such note had  subsequently  been  changed  into a
    convertible  note in the same amount,  with the holder having
    the option of  converting it into common stock of the Company
    at a rate mutually to be agreed upon. In November  1998,  the
    holder of this note served notice that he intends to exercise
    the conversion option (see "Subsequent Events").                 $   316,849

    Pursuant to three promissory notes signed throughout 1995 and
    1996, an investor advanced Proformix, Inc. a total of $90,000
    payable upon demand with interest at 12% per annum.                   90,000

    On  December 4, 1996,  Proformix,  Inc.  repurchased  500,000
    shares of its common stock and retired same against  issuance
    of  a  promissory  note  maturing  twelve  months  thereafter
    accruing  interest at 5% per annum and due  December 4, 1997.
    No demand for payment has been made  through the date of this
    submission.                                                           75,000

    Pursuant to a  promissory  note dated  January 22,  1996,  an
    officer of the Company advanced 64,730, of which $40,000 have
    been repaid as per September 30, 1998. The balance of $24,730
    is due upon  demand and  accrues  interest at the rate of 12%
    per annum.                                                            24,730

    Line of credit  extended  by  Carnegie  Bank on March 4, 1996
    amounting to $250,000 due to be repaid March 4, 1997,  unless
    demanded earlier, accruing interest at the prime rate plus 2%
    per annum  with the prime  rate  defined  by the Wall  Street
    Journal.  The  agreement  requires  that  the  line  shall be
    completely  out of debt for at least one  thirty  consecutive
    day  period  annually  and  is   collateralized  by  all  the
    inventory,  accounts  receivable,  equipment,  and  financial
    instruments  of Proformix,  Inc. This  obligation  was repaid
    after September 30, 1998 (see "Subsequent Events").                  250,000

                                                                     -----------
         Total                                                       $   756,579
                                                                     ===========
LOANS AND NOTES PAYABLE  (Proformix Systems, Inc.)
    Pursuant   to   the   Acquisition   Agreement   with   Rolina
    Corporation, a portion of the cash payments are to be made on
    a deferred payment schedule, between June and September 1998.
    At present, the outstanding balance under this arrangement is    $   100,000
                                                                     ===========

NOTES PAYABLE FROM PRIVATE PLACEMENT OFFERING
    During February  through June 1995, an underwriter  acting as
    placement  agent  offered on behalf of  Proformix,  Inc. in a
    private  placement  offering  a  minimum  of  five  (5) and a
    maximum of twenty (20) units,  resulting in the  placement of
    $1,600,000 in promissory  notes, all of which are outstanding
    as of September  30, 1998,  and 160,000  shares of Proformix,
    Inc.  common  stock.  In May 1997 a  restructuring  agreement
    caused the  reclassification  of $1,150,000 of these notes to
    long-term debt. These notes were extended and modified to (i)
    mature by April 30,  2000,  (ii) change from 12% to 8%, (iii)
    convert all interest accrued until April 30, 1997 into shares
    of  common  stock of  Proformix,  Inc.  and  (iv) pay  future
    interest  in cash an a  quarterly  basis.  One such  note for
    $25,000 is shown under  current  liabilities.  The  remaining
    $425,000  of  non-restructured  notes  are  shown in  current
    liabilities pending finalization of ongoing negotiations.        $ 1,600,000
                                                                     ===========


                                       10
<PAGE>

                    Proformix Systems, Inc. and Subsidiaries
                        Notes to the Financial Statements

LONG-TERM DEBT

    Long-term  debt as of September  30, 1998 is comprised of the following:

    Pursuant  to a  promissory  note  signed  on July  28,  1993,
    Proformix, Inc. borrowed a total of $1,000,000 repayable with
    interest at 2% above the lending  institutions' prime lending
    rate.  O On March 4, 1996,  Proformix,  Inc.  refinanced  the
    repayment of its long-term  debt. The balance is payable with
    fixed  principal  payments of $15,000 per month plus interest
    at  Wall  Street  Journal  prime  plus  2%.  Payments  of all
    principal, interest and other related expenses continue to be
    guaranteed   by  an   officer   of  the   Company   who   has
    collateralized  this obligation  with $225,000  consisting of
    marketable  securities  and/or  certificates  of deposit.  In
    addition, the loan remains guaranteed by the NJEDA which will
    assume an amount  equal to  seventy-five  percent of the then
    outstanding  principal  amount upon an event of  default.  In
    1997,  Proformix,  Inc.  requested and obtained  cumulative 6
    months  deferments on principal  payments.  The bank retained
    the right to demand  repayment of the remaining  principal at
    the earlier (a) the receipt by Proformix,  Inc. of new equity
    in an amount no less than $1,500,000 or (b) June 30, 1998. No
    demand  for  payment  has  been  made  by the  time  of  this
    submission.  The  Company  continues  to repay the  principal
    balance at $15,000 per month and as of September  30, 1998, a
    total  $528,888   remained   unpaid.   The  entire  remaining
    principal  balance was repaid after  September  30, 1998 (see
    "Subsequent Events").                                            $   528,888

    Note to an officer of the Company  issued in place of accrued
    royalties,  principal due April 14, 1998 accruing interest at
    a rate of 5% per annum. No demand for payment has been made.         111,007

    Discounted  present value of a non-interest  bearing  $70,000
    settlement  with a former  investor of Proformix,  Inc. to be
    paid in 24 equal monthly  payments  commencing  July 1, 1997.
    The imputed interest rate used to discount the note is 8% per
    annum.                                                                31,818

    Discounted  present value of a non-interest  bearing $176,000
    settlement with former counsel of Proformix,  Inc. to be paid
    in 24 monthly  payments  commencing  September  1, 1997.  The
    imputed  interest  rate used to  discount  the note is 8% per
    annum.                                                                64,355
                                                                     -----------
         Total                                                           736,068
            Less current maturities                                      387,180
                                                                     -----------
            Long-term debt, net of current maturities                $   348,888
                                                                     ===========


                                       11
<PAGE>

Item 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations:

As already indicated in the quarterly report for the period ended June 30, 1998,
the Company has been  experiencing  a working  capital  shortage  which  imposed
considerable  constraints on its liquidity.  Management was not able to overcome
this cash shortage during the third quarter through  additional capital funding.
At the same time, the continuing build-up of the Company's new software division
created  additional  demands on  available  resources.  As a  consequence,  cash
available to support the traditional keyboard platform business was insufficient
to maintain and support  activities at the level of the previous  quarters.  The
quarter  therefore saw a significant  decrease in revenues derived from sales of
the traditional hardware products, while revenues from the new software division
were not yet material.

To cope with these  developments and at the same time safeguard an economic base
for its emerging  software business which is considered by management to be most
important for the Company's success in the future,  management decided to seek a
strategic  partnership  with another entity which could provide needed  funding,
promote the  Company's  patented  keyboarding  system  products,  and permit the
Company  to  continue   developing  its  software  business  and  enhancing  the
underlying products, primarily its suite of ergonomic software programs marketed
under the Proformix  EMS(TM) label. This search lead to negotiations with Office
Specialty,  a leading Canada-based  manufacturer of office furniture,  to form a
strategic  alliance  which,  at the time of this  submission,  culminated  in an
agreement  by the Company to sell its hardware  product line and related  assets
and  intellectual  property  rights  to  Office  Specialty  in  exchange  for  a
combination of $1.25 million up front payment plus ongoing  participation in the
success  of  the  national  and  international  distribution  effort  by  Office
Specialty as related to the Proformix keyboard platform  products,  in form of a
royalty stream on such sales by Office  Specialty.  The duration of this royalty
stream is governed by the sales volume achieved for these products as it relates
to certain benchmarks, however, in no case will be less than 17 months.

As a result of the above  mentioned  factors  revenues  during the quarter ended
September 30, 1998, decreased significantly, to $334,876 from 744,177 during the
same period a year ago.  Revenues for the first nine months  totaled  $2,776,369
which equates to an increase of 16% over the corresponding figure for last year.
Efforts by  management  to curtail  expenses in light  decreasing  revenues were
largely  successful.  Selling  and  general and  administrative  expenses  which
included  expenditures  related to the new software  division  totaled  $836,360
during the  quarter,  compared  to  $802,617  for the same  period last year and
$1,227,828  during the second  quarter this year. The net result for the quarter
ended  September  30,  1998,  was a loss of $947,860  or $0.19 per share,  which
compares  to a net loss of  $439,189  or $0.17 per share for the same  quarter a
year ago.  The nine month'  result is a loss of  $1,866,047  or $0.41 per share,
compared to a loss of $967,800 or $0.53 per share last year.

Management's  plans with  regard to the  upcoming  periods are  centered  around
aggressive efforts to promote its software products which the Company deems very
promising in terms of both  profitability  and growth  potential.  A significant
step in establishing a basis for this growth was a marketing  agreement  reached
in September 1998 between the Company and one of the largest  insurance and risk
management companies in the world, whereby this leader in the insurance industry
will market and sell the Proformix Ergonomic  Management System (EMS) to its own
subsidiaries,  business units, and clientele.  In addition, the recent agreement
with  Office  Specialty  not only  provides  for  needed  cash but also  enables
management  to  streamline  the  Company's  operations  by  divesting  itself of
presently  unneeded  overhead,  and permits management to focus all resources on
what it considers its most attractive growth opportunities.  Management realizes
that the  Company's  software  business is just  emerging,  and that due to long
sales cycles in this business  profitability  may not yet be achieved  until the
upcoming  fiscal  year,  however,  is confident  that the Company is  positioned
extremely  well to  capitalize  on the  growing  awareness  in  industry  of the
financial and legal risk associated  with  repetitive  stress injuries caused by
computer use.


                                       12
<PAGE>

Liquidity and Capital Resources

As stated above, during the quarter the Company's liquidity was under increasing
pressure due to a shortage of working  capital  which  hampered  operations  and
affected sales.  Slower sales in turn worsened the shortage of working  capital.
The working  capital  deficit  increased  from  $819,132 at the beginning of the
quarter to $1,767,483 at September 30, 1998.

As a consequence, management decided on drastic steps to stabilize the Company's
financial  situation and bolster capital resources,  with the objective being to
(i) stabilize debt, (ii) obtain additional  funding,  (iii) shed portions of its
operations  which  constitute  a cash drain and are not as promising in terms of
future expected return on investment, and (iv) permit the Company to channel all
available  resources into the most attractive growth segment of its operations -
its ergonomic software business.

These efforts lead to negotiations with Office Specialty, a leading Canada-based
manufacturer  of  office  furniture,  and  culminated  in  the  above  described
arrangement  with that company.  Management  believes that as a result,  it made
significant  progress towards achieving the four above objectives.  In addition,
the  conversion  of  approximately  $340,000  in current  debt into  equity,  as
described in section  "Subsequent  Events",  further  improved  working capital.
Management  is of the  opinion  that the new  liquidity  obtained as a result of
these  events,  together  with the  royalty  stream on sales of its  traditional
hardware  products,   will  be  sufficient  to  finance  the  Company's  planned
operations during the upcoming quarters,  and bridge the time until its software
business generates cash flow on its own. Nevertheless,  management will continue
its  efforts  to  obtain  additional  capital  funding,  to  increase  available
resources.


                                       13
<PAGE>

PART II - OTHER INFORMATION

Item 1  LEGAL PROCEEDINGS

      In response to this item,  reference is made to the  Company's  reports on
Form  10-QSB for the  quarters  ended  March 31,  1998,  and June 30,  1998,  as
previously submitted.

Item 2  CHANGES IN SECURITIES

During  the time from the  Company's  last  report on Form  10-QSB  and  through
October 31, 1998, the Company issued the following unregistered securities:

      (i) 272,000  shares of Common Stock to a creditor of the Company  pursuant
to that  party's  exercise of an option to convert  debt into common  stock (see
"Subsequent Events" in the "Notes to Consolidated  Financial Statements" in Part
I).

      (ii)  14,419  shares  of  Common  Stock to  Proformix,  Inc.  shareholders
pursuant to the  Company's  acquisition  of Proformix,  Inc. and its  subsequent
exchange offer to Proformix, Inc. shareholders.  The Company issued these shares
pursuant to Section 4(2) of the Securities Act;

      (iii)  10,000  shares  of  Common  Stock  to  an  outside   consultant  as
compensation  for services  rendered,  and an  aggregate  5,035 shares of Common
Stock to independent sales representatives and clients as awards for outstanding
sales performance for the Company's products.

Item 3  DEFAULTS ON 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

        (a) Exhibit 27 - Financial Data Schedule - is attached hereto.

        (b) Reports on Form 8-K: - None


                                       14
<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.

                                       PROFORMIX SYSTEMS, INC.

Date: November 20, 1998                By: /s/ Jerry Swon
                                          --------------------------------------
                                           Jerry Swon
                                           President and Chief Executive Officer


                                       15