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, 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 June 30, 1998, was 4,971,982 shares.

<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES

                                      INDEX

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

Item 1   Financial Statements (unaudited)

         Consolidated Balance Sheet
          - June 30, 1998                                                    3

         Consolidated Statements of Operations
          - Three and six months ended June 30, 1998 and 1997                4

         Consolidated Statements of Cash Flows
          - Six months ended June 30, 1998 and 1997                          5

         Notes to Consolidated Financial Statements                         6-12

Item 2  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                         13-14

PART II  -  OTHER INFORMATION                                              15-16

SIGNATURES                                                                  17


                                       2
<PAGE>

PART I  - Item 1

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                   (Unaudited)
                                  June 30, 1998
ASSETS
     Current Assets
     Cash .....................................................     $     3,016
     Accounts receivable, net of allowance for
     doubtful accounts of 32,315 ..............................       1,251,054
     Inventories ..............................................         288,670
     Prepaid advertising ......................................         776,550
     Other prepaid expenses ...................................          13,669
                                                                    -----------
        Total Current Assets ..................................       2,332,959
     Property, plant and equipment ............................         507,038
     Acquired software assets .................................       2,335,389
     Other assets .............................................         118,740
                                                                    -----------
TOTAL ASSETS ..................................................       5,294,126
                                                                    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
     Accounts payable and accrued expenses ....................       1,411,342
     Dividends payable ........................................          31,500
     Loans and notes payable ..................................       1,306,579
     Current maturities long-term debt ........................         394,081
     Current maturities lease obligations .....................           8,589
                                                                    -----------
        Total Current Liabilities .............................       3,152,091
     Long-term debt, less current portion .....................       1,572,876
     Lease obligations, less current portion ..................          17,975
                                                                    -----------
TOTAL LIABILITIES .............................................       4,742,942

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, 4,971,982 issued and outstanding .............             497
     Contributed capital ......................................         283,500
     Additional paid-in capital ...............................       7,785,531
     Accumulated deficit ......................................      (7,518,344)
                                                                    -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) ..........................         551,184
                                                                    -----------
TOTAL LIABILITIES AND EQUITY ..................................     $ 5,294,126
                                                                    ===========

                 See notes to consolidated financial statements


                                       3
<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                 Three Months Ended          Six Months Ended
                                                      June 30,                    June 30,
                                                1998          1997           1998           1997
                                            -----------    -----------    -----------    -----------
<S>                                         <C>            <C>            <C>            <C>        
Revenues ................................   $ 1,429,075    $ 1,063,323    $ 2,441,493    $ 1,645,586
     Cost of Goods Sold .................       703,391        432,756      1,195,128        696,696
                                            -----------    -----------    -----------    -----------
Gross Profit ............................       725,684        630,567      1,246,365        948,890
     Selling expenses ...................       552,412        342,616        851,609        627,270
     General & administrative expenses ..       675,416        326,129      1,123,919        675,908
                                            -----------    -----------    -----------    -----------
Operating Income (Loss) .................      (502,144)       (38,178)      (729,163)      (354,288)
     Miscellaneous income ...............           333              0            333              0
     Interest expense (net) .............       (98,640)       (82,131)      (179,357)      (169,323)
     Miscellaneous expenses .............       (10,000)        (5,000)       (10,000)        (5,000)
                                            -----------    -----------    -----------    -----------
Non-Operating Income (Expenses) .........      (108,307)       (87,131)      (189,024)      (174,323)

Total Net Loss ..........................   $  (610,451)    $ (125,309)   $  (918,187)   $  (528,611)
                                            ===========    ===========    ===========    ===========   

Net Loss per Common Share ...............   $     (0.12)   $     (0.08)   $     (0.22)   $     (0.40)
                                            ===========    ===========    ===========    ===========   
Weighted-Average Number of
     Common Shares Outstanding ..........     4,960,143      1,549,184      4,203,492      1,317,857

</TABLE>

                 See notes to consolidated financial statements


                                       4
<PAGE>

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

                                                      Six Months Ended June 30,
                                                         1998           1997
                                                     -----------    -----------
Cash Flows from Operating Activities
     Net income (loss) ...........................   $  (918,187)   $  (528,611)
     Adjustments to net income (loss)
        Depreciation and Amortization ............       144,891         53.076
     Decreases (increases) in Assets
        Accounts receivable ......................      (936,562)        55,659
        Inventories ..............................      (232,169)        20,900
        Prepaid advertising ......................      (776,550)             0
        Prepaid expenses .........................        33,935          8,369
        Other assets .............................           450            474
     Increases (decreases) in Liabilities
        Accounts payable and accrued expenses ....       202,765        (32,973)
                                                     -----------    -----------
Net Cash Provided (Used) by Operating Activities .    (2,481,427)      (423,106)

Cash Flows from Investing Activities
     Rolina & Vanity acquisitions ................    (2,404,280)             0
     Investment Input Technologies ...............       (25,776)             0
     Capital expenditures ........................      (147,345)       (41,655)
                                                     -----------    -----------
Net Cash Provided (Used) by Investing Activities .    (2,577,401)       (41,655)

Cash Flows from Financing Activities
     Proceeds from notes payable .................       225,000        101,849
     Conversion of equity subscriptions ..........      (275,000)             0
     Repayment of notes ..........................      (235,000)       (50,000)
     Repayment of long-term debt .................      (128,584)       (30,000)
     Change in subordinated debenture ............             0       (101,849)
     Issuance of common stock ....................     5,470,882        544,870
                                                     -----------    -----------
Net Cash Provided (Used) by Financing Activities .     5,057,298        464,870
Net Increase (Decrease) in Cash ..................        (1,530)           109
Cash at Beginning of Period ......................         4,546          1,507
                                                     -----------    -----------
Cash at End of Period ............................   $     3,016    $     1,616
                                                     ===========    ===========

                 See notes to consolidated financial statements


                                       5
<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 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  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.

ACQUISITION OF VANITY SOFTWARE PUBLISHING CORPORATION

          On April 30, 1998,  the Company  signed an agreement to acquire all of
          the  assets,  subject to the  assumption  of certain  liabilities,  of
          Vanity Software Publishing Corporation, in exchange for 224,000 shares
          of the  common  stock of the  Company  and  warrants  to  purchase  an
          additional  224,000  shares  at  a  price  of  $5.00  per  share.  The
          liabilities  assumed  by the  Company,  net of certain  other  assets,
          totaled  $131,500  and have been paid at time of  closing  during  the
          first week of May, 1998.

          The  major  asset  of  Vanity  Software  Publishing  Corporation  is a
          proprietary   ergonomic   software   package   sold   under  the  name
          ErgoBreak(TM)  which the Company is integrating  into its own software
          products  suite  marketed  under the  EMS(TM)  label.  This  asset was
          capitalized  at a  value  equal  to the  net  amounts  paid  in cash -
          together  $131,500  - plus  the fair  market  value at the time of the
          transaction of 224,000 new and  restricted  shares of the common stock
          of the Company issued to Vanity Software Publishing Corporation, for a
          total amount of $1,251,500.  While management  believes this amount to
          be fair value for the assets thus acquired,  it will move to obtain an
          independent  appraisal  of the  value  of  such  assets.  Should  this
          appraisal result in an assessment lower than the currently capitalized
          value,  a portion  thereof  will be  reclassified  in the books of the
          Company as goodwill.

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 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.


                                       8
<PAGE>

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

INVESTMENT IN INPUT TECHNOLOGIES L.L.C.

          Pursuant to verbal  agreement-in-principle  and subject to negotiation
          and  execution  of a final  agreement  the Company  will acquire a 20%
          equity interest in Input  Technologies  LLC, a privately held Colorado
          Limited Liability Company,  against payment of an aggregate $60,000 or
          delivery  of  product at  wholesale  prices in the same  amount,  or a
          combination  thereof.  At the time of this submission,  the investment
          has  substantially  been  completed.  In accordance with a Distributor
          Agreement which is being  negotiated in parallel,  Input  Technologies
          LLC  will  act as a  stocking  master  distributor  for the  Company's
          products, in certain areas of the western United States.


                                       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. No demand for payment has been made through the date of
     this submission.                                                  $ 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 June 30,  1998.  The balance of $24,730 is due upon demand
     and  accruing  interest at the rate of 12% per annum. The balance 
     of $64,730 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  remains  outstanding as of  June 30, 1998.  No demand
     for payment has been made through the date of this submission.      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  June 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 June 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. 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 a 6 months  deferment on
     principal  payments.  The  bank  retained  the  right  to  demand
     repayment  of the  remaining  principal at the earlier of (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
     June 30, 1998, a total $588,888 remain unpaid.                    $ 588,888

     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.             34,734

     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.            82,328
                                                                        --------
               Total                                                     816,957
                   Less current maturities                               394,081
                                                                        --------
                   Long-term debt, net of current maturities            $422,876
                                                                        ========
 

                                  11
<PAGE>

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

COMMITMENTS AND CONTINGENCIES

     Employment Agreements

          During the  Quarterly  Meeting of the Board of  Directors of Proformix
          Systems,  Inc. on May 14,  1998,  the Board by  unanimous  vote - with
          Michael Martin  abstaining - approved  certain changes in the July 18,
          1997,   employment   agreement  of  Mr.  Martin,   which  include  the
          cancellation of previously  stipulated  conditional stock awards of an
          aggregate 600,000 shares and instead decreed:  (i) a base compensation
          of $150,000 /year,  (ii) fully vested stock options with a term of ten
          years for the  purchase of 750,000  shares at a price of  $4.00/share,
          and (iii)  participation in an executive incentive plan effective 1998
          under  which he will  receive  4% of the  Company's  pre-tax  profits,
          providing  the net operating  profits - after  interest and after such
          bonus - pursuant to GAAP are at least $500,000.

          During the same meeting,  the Board  approved by unanimous vote - with
          Mr. Swon abstaining - a proposed two-year employment  agreement for J.
          Swon whereby (i) his base  compensation  for 1998 would be $1.00,  and
          (ii) he will be awarded  fully vested stock options with a term of ten
          years for the  purchase of 900,000  shares at a price of  $4.00/share,
          and (iii) he would participate in an executive incentive plan starting
          with the year 1998 under  which he will  receive  4% of the  Company's
          pre-tax profits,  providing the net operating profits - after interest
          and after such bonus - pursuant to GAAP are at least $500,000.

RELATED PARTY TRANSACTIONS

     During  the  Quarterly  Meeting  of the  Board of  Directors  of  Proformix
     Systems,  Inc. on May 14,  1998,  the Board by  unanimous  vote  approved a
     request of Royal Capital Inc.,  holder of certain stock options,  to assign
     its previously granted outstanding and unexercised options totaling 499,866
     shares to Jerry Swon, President and CEO of the Company.

MAJOR CUSTOMERS

     For the quarter  ended June 30,  1998,  the  Company had a major  customer,
     sales to which represented approximately 35% of the Company's revenues. The
     loss of  this  customer  would  have a  materially  adverse  effect  on the
     Company, at least in the short term.


                                  12
<PAGE>

Item 2.

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

Results of Operations:

During the first six months of the current fiscal year and in particular  during
the  quarter  ended  June  30,  1998,   Proformix  has  completed  a  series  of
acquisitions and  transactions  that have resulted in the first integrated suite
of software  products in the market which provides a complete  compliance system
for  evaluation and  management of ergonomic  risk factors  associated  with the
computerized  workplace. In the process, the Company has been transformed from a
manufacturer of specialized  keyboard  platforms to a technology company that is
currently  believed  to be the  only  supplier  who  can  offer  to  industry  a
comprehensive  horizontally  integrated  solution  that  addresses  existing  or
potentially  developing  ergonomic-based  problem  complexes  in today's  office
environment.  The new software  products  which are  marketed  under the EMS(TM)
("Ergonomic Management Systems") label additionally provide a user with a unique
and  effective  productivity   measurement  tool  that  can  make  a  verifiable
difference in a company's  bottom line. . In marketing the new product line, the
Company  directs  its  primary  sales  focus  towards  medium to large  national
companies which are believed to be more cognizant of the increasing health risks
to  office  personnel,  and of the  potential  financial  liabilities  to  their
companies in a rapidly solidifying  regulatory  environment that seeks to define
ergonomic  standards and enforce  compliance,  with the goal of  decreasing  the
health risks  associated with repetitive  stress injuries arising out of the use
of computers.  The timing of the Company's entry into this market therefore must
be considered optimal.

During the last  several  months the Company has started  implementing  software
pilot  programs  with a number of Fortune 500  companies.  Proformix  also moved
aggressively to expand its advertising and exhibition  program and  participated
with enhanced  presence in several national trade shows which provided  valuable
exposure in the market and generated  considerable  interest from both potential
enduser  clients  and  leading  consulting  organizations.  Simultaneously,  the
Company embarked on an ambitious program of establishing the  infrastructure and
a comprehensive  support  organization  for customer service and ongoing product
development in the software sector, and completely  revamped its sales tools and
literature as well as other promotional activities relating to the new products.
New  products  in  the  hardware   sector   include  the   revolutionary   Power
ErgoRanger(TM)  which is  rapidly  becoming a leading  product in the  Company's
keyboard  platform  product  line.  All of these  efforts  resulted in increased
expenditures - outlays that must be considered  necessary  up-front  expense and
not  unusual in  situations  where a new market is being  entered.  While  these
additional expenses depressed the period operating result, they also created the
basis for future growth and are already starting to generate higher sales.

Revenues  during the quarter  ended June 30,  1998,  totaled  $1,429,075,  a 34%
increase from the same period a year ago (1).. Revenues for the first six months
totaled  $2,441,493  which equates to an increase of 48% over the  corresponding
figure for last year.  The above  described  restructuring  caused  selling  and
general and  administrative  expenses to sharply increase,  from $668,745 during
the quarter last year to $1,227,828 during the second quarter this year. The net
result for the quarter ended June 30, 1998,  was a loss of $610,451 or $0.12 per
share,  which compares to a net loss of $125,309 or $0.08 per share for the same
quarter a year ago.  The six month'  result is a loss of  $918,187  or $0.22 per
share, compared to a loss of $528,611 or $0.40 per share last year.

-------------
 (1) Comparisons herein are based on the Company versus Proformix, Inc.


                                  13
<PAGE>

Liquidity and Capital Resources

During the second quarter in 1998 the Company  received a total of $1,550,000 in
new equity capital from the private  placement of its common equity.  These cash
infusions  permitted  the Company to finance  both a  considerable  expansion of
overall business  activity and the resultant  increase in receivables as well as
the acquisition of certain  proprietary  software assets. As described  earlier,
the Company made  considerable  investments in  establishing a presence in a new
market segment.  However,  the software business involves  relatively long sales
cycles,  and in view of the Company's  limited  financial  resources and until a
return on these  investments  in form of  increased  revenues  will be realized,
liquidity  will  remain  tight.  The  working  capital  deficit  which  stood at
$1,684,513 at March 31, 1998, decreased to $819,132 at June 30, 1998. While this
constitutes  a modest  relative  improvement,  management  is  seeking to obtain
additional  capital  funding  in the  months  ahead in order to  strengthen  the
Company's working capital position.


                                  14
<PAGE>

PART  II  -  OTHER INFORMATION

Item 1   LEGAL PROCEEDINGS

     In response to this item, reference is made to the Company's report on Form
10-QSB for the quarter ended March 31, 1998, as previously submitted.


Item 2   CHANGES IN SECURITIES

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

     (i)  224,000  shares  of  Common  Stock  to  Vanity   Software   Publishing
Corporation (see "Acquisition of Vanity Software Publishing  Corporation" in the
Notes to Financial  Statements  included herein).  The issuance of the aforesaid
shares was made pursuant to Section 4(2) of the Securities Act;

     (ii) 22,000  shares of Common Stock and warrants to purchase  22,000 shares
at a price of $4.50 per share,  to one of the Company's  board members in return
for an investment of $100,000  under Rule 506 of Regulation D promulgated  under
the Securities Act of 1933, as amended;

     (iii)  70,972  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;

     (iv) 15,000 shares of Common Stock to an outside consultant as compensation
for services  rendered,  with an agreement that the Company register such shares
through a Registration Statement on Form S-8.


Item 3   DEFAULTS ON SENIOR SECURITIES    -  None

Item 4   SUBMISSION OF MATTERS TO A VOTE OF
         SECURITIES' HOLDERS

On Thursday, June 18, 1998, the Company held its Annual Meeting of Shareholders.
Two maters were  submitted to a vote,  by proxy or in person at the Meeting,  of
the shareholders:

         (1)  Election of Directors

     Four  directors,  constituting  the entire Board of  Directors,  were to be
elected at the Meeting,  to hold office for a term until the next annual meeting
of shareholders and until their respective  successors have been duly qualified.
The  persons  named below were  nominated  for the Board of  Directors  and all,
except for Jerry Swon, were also incumbent directors of the Company.

           Peter B. Buscetto
           Paul Chernis
           Michael G. Martin
           Jerry Swon


                                       15
<PAGE>

     Total  shares  voted  were  3,238,263  representing  68.72%  of the  shares
eligible to vote.  Of the votes cast,  3,116,571 or 96.24% voted in favor of all
nominees,  121,691  or  3.76%  voted  against,  and 1 vote  abstained.  All four
nominees accepted the appointment.

     (2) Ratification of Appointment of Independent Certified Public Accountants

     The Board of Directors has appointed  the firm of Rosenberg,  Rich,  Baker,
Berman and Company as the Company's independent Certified Public Accountants and
auditors for the fiscal year ending December 31, 1998.

     Total  shares  voted  were  3,238,263  representing  68.72%  of the  shares
eligible to vote.  Of the votes cast,  3,116,572 or 96.24% voted in favor of the
appointment, 121,691 or 3.76% voted against, and no vote abstained.

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


                                       16
<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:   August 18, 1998                By:/s/ Jerry Swon
                                          ------------------------------------
                                           Jerry Swon
                                           President and Chief Executive Officer


                                       17