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 March 31, 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 March 31, 1998, was 3,824,965 shares.

<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES

                                      INDEX

                                                                           Page
                                                                          Number
                                                                          ------

PART  1  -  FINANCIAL INFORMATION

Item 1   Financial Statements (unaudited)

         Consolidated Balance Sheet
          - March 31, 1998                                                   3

         Consolidated Statements of Operations
          - Three months ended March 31, 1998 and 1997                       4

         Consolidated Statements of Cash Flows
          - Three months ended March 31, 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

PART II  -  OTHER INFORMATION                                              14-15

SIGNATURES                                                                  16

FINANCIAL DATA SCHEDULE                                                     17


                                       2
<PAGE>

PART I  - Item 1

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

                                                                  March 31, 1998
                                                                  --------------
ASSETS
     Current Assets
     Cash .....................................................     $     5,246
     Accounts receivable, net of allowance for
     doubtful accounts of 27,038 ..............................         734,923
     Inventories ..............................................         216,641
Prepaid expenses ..............................................         826,357
                                                                    -----------
        Total Current Assets ..................................       1,783,167
     Property, plant and equipment ............................         470,217
     Acquired software assets .................................       1,133,567
     Other assets .............................................          99,698
                                                                    -----------
TOTAL ASSETS ..................................................     $ 3,486,649
                                                                    ===========
LIABILITIES AND STOCKHOLDERs' EQUITY
LIABILITIES
     Accounts payable and accrued expenses ....................     $ 1,414,181
     Dividends payable ........................................          29,250
     Prepayments received .....................................         100,000
     Loans and notes payable ..................................       1,521,579
     Current maturities long-term debt ........................         394,081
     Current maturities lease obligations .....................           8,589
                                                                    -----------
        Total Current Liabilities .............................       3,467,680
     Long-term debt, less current portion .....................       1,643,210
     Lease obligations, less current portion ..................          17,975
                                                                    -----------
TOTAL LIABILITIES .............................................       5,128,865

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,
     10 shares issued and outstanding .........................               0
     Common Stock, $0.0001 par value, 30,000,000 shares
     authorized, 3,824,965 issued and outstanding .............             383
     Contributed capital ......................................         263,250
     Additional paid-in capital ...............................       4,979,543
     Accumulated deficit ......................................      (6,885,392)
                                                                    -----------
TOTAL STOCKHOLDERs' EQUITY (DEFICIT) ..........................      (1,642,216)
                                                                    ----------- 
TOTAL LIABILITIES AND EQUITY ..................................     $ 3,486,649
                                                                    ===========

                 See notes to consolidated financial statements


                                       3
<PAGE>

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

                                                        Three Months Ended
                                                              March 31,
                                                    ---------------------------
                                                       1998            1997
                                                       ----            ----
Revenues .....................................     $ 1,012,418      $   582,263
     Cost of Goods Sold ......................         491,737          263,940
                                                   -----------      -----------
Gross Profit .................................         520,681          318,323
     Selling expenses ........................         299,197          284,654
     General & administrative expenses .......         448,503          349,779
                                                   -----------      -----------

Operating Income (Loss) ......................        (227,019)        (316,110)
     Miscellaneous income ....................               0                0
     Interest expense (net) ..................         (80,717)         (87,192)
     Miscellaneous expenses ..................               0                0
                                                   -----------      -----------
Non-Operating Income (Expenses) ..............         (80,717)         (87,192)
                                                   -----------      -----------
Net Loss .....................................     $  (307,736)     $  (403,302)
                                                   ===========      ===========
Loss per Common Share ........................     $     (0.09)     $     (0.37)
                                                   ===========      ===========
Weighted Average Number of
     Common Shares Outstanding ...............       3,361,736        1,086,530

                 See notes to consolidated financial statements


                                       4
<PAGE>

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

                                                    Three Months Ended March 31,
                                                       1998           1997
                                                       ----           ----

Cash Flows from Operating Activities
     Net income (loss) .........................   $  (307,736)   $  (403,302)
     Adjustments to net income (loss)
        Depreciation and Amortization ..........        50,889         24.784
     Decreases (increases) in Assets
        Accounts receivable ....................      (420,431)       254,903
        Inventories ............................        39,860          7,135
        Prepaid advertising ....................      (750,000)             0
        Prepaid expenses .......................       (28,753)        17,022
        Other assets ...........................             0            472
     Increases (decreases) in Liabilities
        Accounts payable and accrued expenses ..         5,605        127,361
                                                   -----------    -----------
Net Cash Provided (Used) by Operating Activities    (1,410,566)        28,375

Cash Flows from Investing Activities
     Rolina acquisition ........................    (1,152,780)             0
     Capital expenditures ......................       (72,484)        (7,593)
                                                   -----------    -----------
Net Cash Provided (Used) by Investing Activities    (1,225,264)        (7,593)

Cash Flows from Financing Activities
     Proceeds from notes payable ...............       225,000              0
     Conversion of equity subscriptions ........      (175,000)             0
     Repayment of notes ........................       (20,000)        (5,000)
     Repayment of long-term debt ...............       (58,250)       (15,000)
     Issuance of common stock ..................     2,664,780              0
                                                   -----------    -----------
Net Cash Provided (Used) by Financing Activities     2,636,530        (20,000)
Net Increase (Decrease) in Cash ................           700            782
Cash at Beginning of Period ....................         4,546          1,507
                                                   -----------    -----------
Cash at End of Period ..........................   $     5,246    $     2,289
                                                   ===========    ===========

                 See notes to consolidated financial statements


                                       5
<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 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  designs,  manufactures,   markets  and
    distributes 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.  Prior  to  that,  its
    operations had 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 software assets are depreciated on a straight-line basis over an
    estimated useful life of 10 years (see "Acquisition of Rolina 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 ROLINA CORPORATION

    On February 2, 1998,  Proformix  Software,  Inc.,  Proformix Systems,  Inc.,
    Rolina  Corporation  (a New Jersey  corporation),  and its sole  shareholder
    entered into an Agreement and Plan of Merger whereby Proformix Systems, Inc.
    acquired  100% of the  outstanding  stock of Rolina and merged  Rolina  into
    Proformix  Software,  Inc. The only material  asset of Rolina were rights to
    certain  ergonomic  software  packages known as "ErgoSentry" and "Surveyor",
    and  associated  customer  lists.  These assets were  capitalized at a value
    equal to the amounts  paid in cash and notes - together  $375,000 - plus the
    fair  market  value  at the  time  of the  transaction  of  155,556  new and
    restricted  shares of the common  stock of the Company  issued to the former
    Rolina  principal,  for a  total  amount  of  $1,152,780.  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.

    In addition,  the Company issued to Rolina's sole  shareholder  common stock
    purchase  options for the purchase of an aggregate  250,000 shares at prices
    ranging  from  $4.04  to  $5.00,  and  also  entered  into an  agreement  to
    repurchase, under certain circumstances,  the 155,556 shares mentioned first
    above, or portions thereof (see "Commitments and Contingencies").

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 next three years.


                                       8
<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 March 31, 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% $ 316,849 note to
    that investor.                                                     $ 316,849

    Pursuant to five  promissory  notes signed  throughout 1995 and
    1996,  several investors  advanced  Proformix,  Inc. a total of
    $190,000 payable upon demand with interest at 12% per annum.         125,000

    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. This note is
    overdue at December 31, 1997 and no demand for payment has been
    made through May 14, 1998.                                            75,000

    Pursuant  to a  promissory  note dated  January  22,  1996,  an
    officer of the Company advanced  $64,730,  of which $10,000 has
    been  repaid as per March 31,  1998.  The sum of $54,730 is due
    upon demand and accruing interest at the rate of 12% per annum.       54,730

    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  as quoted 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 is overdue as of March 31, 1998
    and no demand for payment has been made through May 14, 1998.        250,000

    Pursuant to a promissory note dated November 17, 1997, accruing
    interest at 12% per annum,  an investor,  who was a consultant,
    advanced  the  Company  $50,000,  a  portion  of which  remains
    outstanding  as of March 31, 1998.  The note bears  interest at
    12% and is due  January 7, 1998.  This note was not paid on the
    scheduled due date but has been  extended  pursuant to a verbal
    agreement.                                                            25,000
                                                                       ---------
               Total                                                   $ 846,579
                                                                       =========

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                  $ 225,000
                                                                       =========

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  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 March 31,
    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  interest  rates from 12% to 8%, (iii)  convert all
    interest  accrued  until  April 30,  1997 into shares of common
    stock of  Proformix,  Inc. and (iv) paying  future  interest in
    cash an a quarterly basis. One such note, however, for $100,000
    was still being negotiated for purchase and restructuring as of
    March 31,  1998.  The  remaining  $450,000 of  non-restructured
    notes are shown in current liabilities and are in default as of
    March 31, 1998                                                    $1,600,000
                                                                      ==========


                                 9
<PAGE>

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

LONG-TERM DEBT

    Long-term  debt as of  December  31, 1997 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  remaining  balance of
    $663,888 is payable  with fixed  principal  payments of $15,000
    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.  Such
    marketable  securities with a value of $242,951 have been taken
    by the lending institution as collateral. 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 February 1997,  Proformix,
    Inc.  requested and obtained a 3 months  deferment on principal
    payments.  In May 1997,  Proformix,  Inc.  requested  another 3
    month deferment for principal  payments as to which it obtained
    approval,  subject to 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.       $   633,888

    Note  payable 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.                                  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.                                                                40,567

    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.             101,829
                                                                     -----------
          Total                                                          887,291
              Less current maturities                                    394,081
                                                                     -----------
              Long-term debt, net of current maturities              $   493,210
                                                                     ===========
                 

                                10
<PAGE>

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

COMMITMENTS AND CONTINGENCIES

  Licensing Agreement

    On August 29, 1997, the Company signed a letter of intent to acquire Cornell
    Ergonomics ("Cornell") a software developer of a unique ergonomic assessment
    tool. This agreement was subsequently  revised, on December 1, 1997, through
    a Software  Distribution and Option Agreement whereby the Company obtained a
    two-year  exclusive license to distribute and sub-license a certain software
    product.   The  Company  also  has  the  exclusive   right,   under  certain
    circumstances, to purchase either the assets of Cornell or all of the issued
    and outstanding capital stock of Cornell.

  Put Option pursuant to Rolina  Agreement and Plan of Merger

    In connection with the February 2, 1998,  Merger  Agreement for the purchase
    of Rolina Corporation, the Company issued 155,556 shares of its common stock
    to the former principal of Rolina.  Pursuant to the terms of this Agreement,
    the  Company  issued a Common  Stock Put Option  which if  exercised  by the
    holder during a 90 day time period beginning two years after the date of the
    Agreement,  would  require the Company to purchase the above common stock at
    the price of $2.41 per share.

  Acquisition of Vanity Software Publishing Corporation

    On March 6, 1998, the Company executed a letter of intent,  to offer a block
    of the  Company's  stock  for  the  outstanding  stock  of  Vanity  Software
    Publishing  Corporation,  a Canadian  privately  held firm.  Vanity owns all
    rights to a certain  ergonomic  software  package known as "ErgoBreak".  The
    letter  of  intent  was  subsequently  modified  to  reflect  the  Company's
    intention to acquire all of the assets,  subject to certain  liabilities  of
    Vanity Software Publishing  Corporation,  against issuance of 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 Vanity  transaction  was
    consummated after the end of the first quarter. (see "Subsequent Events").

  Employment Agreements

    Pursuant to the Rolina Agreement,  the Company on February 2, 1998,  entered
    into a five year  employment  agreement with the former  principal of Rolina
    whereby  it  employs  him in  the  capacity  as  president  of its  software
    operations.  The agreement,  among other things,  calls for a minimum annual
    salary of $120,000.

    On February  16,  1998,  the  Company  entered  into a five year  employment
    agreement  with a former  associate of Rolina  whereby it employs him in the
    capacity as development manager for its software operations.  The agreement,
    among other things, calls for a minimum annual salary of $80,000.

RELATED PARTY TRANSACTIONS

  Subscriptions Payable

    During July 1997 one of the  Company's  board  members  advanced the Company
    $100,000 as evidenced by two 8% promissory notes. It was subsequently agreed
    that the notes would be converted to common  shares which were to be offered
    privately  pursuant to an  exemption  provided by Rule 504 of  Regulation  D
    promulgated  under the  Securities  Act of 1933,  as amended.  The  Company,
    however, decided not to consummate such offering, and



                                       11
<PAGE>

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

    instead the shares were offered  under Rule 506 of  Regulation D promulgated
    under the Securities Act of 1933, as amended,  under which the notes will be
    converted  to  common  shares  and  warrants.  Pending  completion  of  such
    transactions,  any funds received have been  accounted for as  subscriptions
    payable.

  MAJOR CUSTOMERS

    For the quarter  ended  March 31,  1998,  the Company had a major  customer,
    sales to which represented  approximately 59% 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.

  CHANGES IN KEY PERSONNEL

    In January 1998, Michael Martin, the CEO and Chairman of the Company's Board
    of Directors  recommended to the Board that the position of CEO be held by a
    separate  individual.  Accordingly,  Jerry Swon, the former  Chairman of the
    Board of  Directors  of Royal  Capital,  Inc.  became  President  and CEO of
    Proformix Systems, Inc. and its subsidiaries.

    In February  1998,  John Perry,  the  Company's  Executive  Vice  President,
    resigned his position with the Company.

  SUBSEQUENT EVENTS

    Asset Purchase Agreement with Vanity Software Publishing Corporation

    On April 30,  1998,  the Company  signed an  agreement to acquire all of the
    assets,  subject to the assumption  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 $5.00 per  share.  The  liabilities  assumed  by the  Company,  all
    payable in cash at the time of closing, total approximately US$ 150,000. The
    transaction meets the requirements of pertinent  Canadian laws governing the
    sale of Canadian  businesses.  The  closing  took place in 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 plans to integrate  into its own software  products  suite  marketed
    under the EMS(TM) label.

  Capital Raising Activities

    Between April 1, 1998, and May 12, 1998,  the Company  received an aggregate
    $1,550,000 in additional  equity capital through the private sale of 387,500
    shares of its common  stock.  In  addition,  500,000  shares were issued for
    consulting services.  This additional capital and the cash flow generated by
    expected  increases in sales are  considered  by management to be sufficient
    for the Company to meet its current and anticipated future obligations.


                                       12
<PAGE>

Item 2.

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

Results of Operations:

Revenues  during the quarter  ended March 31, 1998,  totaled  $1,012,418,  a 74%
increase  over  the same  period a year  ago.(1) Selling  expenses  amounted  to
$299,197  compared to $284,654  during the same period last year,  while general
and  administrative  expenses  increased  from $349,779 for the first quarter in
1997 to $448,503 this year.  The  relatively  large  increase in G&A expenses is
attributable  to the ongoing  program of  repositioning  the  Company  towards a
technological  enterprise capable of delivering overall integrated  solutions to
the commercial market for ergonomic risk complexes and productivity enhancements
in the office  environment,  encompassing  both  hardware  and  software.  These
increases  are  expected to  continue  into the second and third  quarters.  The
operating  result for the quarter ended March 31, 1998,  was a loss of $227,019,
compared to a loss of $316,110  for the same period a year ago. The net loss for
the quarter was  $307,736  or $0.09 per share,  which  compares to a net loss of
$403,302 or $0.11 per share for the same quarter a year ago.

The Company is currently  introducing  to the market its new  Proformix  EMS(TM)
suite of software  products which complement its patented  keyboarding  systems.
This  unique  product  is the first  integrated  suite of  software  tools  that
provides a complete compliance system for evaluation and management of ergonomic
risk factors in the workplace. The software also provides a unique and effective
productivity tool that can make a verifiable  difference in any company's bottom
line. In marketing this product, the Company directs its primary marketing focus
towards  medium  to large  national  companies  which  are  believed  to be more
cognizant  of the  increasing  health  risks to office  personnel,  and of their
potential  exposure resulting from repetitive stress injuries arising out of the
use of computers.  This package  enables a company to not only address the issue
of  health  risks  involving  employees  and  to  minimize  resulting  potential
liabilities, but delivers a powerful tool to increase overall productivity.

The sales  cycle for larger  projects  involving  software  related  products is
relatively  long,  and the new  products  therefore  are not  expected  to yield
significant  new revenues before later in this fiscal year.  Management  however
expects its core  keyboarding  systems  business to show  further  increases  in
revenues during the upcoming quarters.

Liquidity and Capital Resources

During the first  quarter in 1998 the Company has received a total of $1,137,000
in new equity capital, of which $962,000 was received in cash, and $175,000 from
the  closing of certain  equity  subscriptions  where  funds had  actually  been
received  prior to December 31, 1997. At May 12, 1998, an additional  $1,550,000
in funding has been received.

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 which are
considered  crucial  by  management  for  the  Company's  medium-  to  long-term
profitability  see  "Acquisition  of Rolina  Corporation"  in the  footnotes  to
Financial Statements.  The equity additions from private placements,  the Rolina
acquisition,  and the BNN transaction (see section "Prepaid  Expenses" in "Notes
to Financial  Statements")  significantly  improved the Company's balance sheet.
The working  capital  deficit  which stood at  $2,806,682  on December 31, 1997,
decreased to  $1,684,513 at March 31, 1998. A  significant  further  improvement
took place during April when the Company received an additional cash infusion of
amounts in excess of $1.5 million from new private equity placements.

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


                                       13
<PAGE>

PART  II  -  OTHER INFORMATION

Item 1   LEGAL PROCEEDINGS

      In November  1996,  Proformix,  Inc.  became the  subject of two  lawsuits
instituted by a shareholder  and members of his family.  One suit alleged breach
of contract and was seeking  damages of $1,250,000.  The other suit alleged that
plaintiff  and members of his family have been  damaged  because the company did
not act in the best  interest  of its  shareholders  in  failing to enter into a
merger with an entity named Regency,  Affiliates.  It is the Company's  position
that both of these suits were without merit.  However, in order to save time and
management  resources the Company agreed to a settlement  with the plaintiffs in
both cases pursuant to which the claims will be dismissed against payment by the
Company of $20,000.

      In February  1997, the Company  instituted a lawsuit in the U.S.  District
Court  for the  Northern  District  of  California,  (Donald  Yu and  Whitestone
Industries,  Inc.  vs.  Alex  Vilnis,  Baltic  Trust  Company  et al;  Case  No.
C97-0484MHP)  against Mr. Alex Vilnis,  Vilnis Laurins, The Baltic Trust Company
and the International  Exchange Co. Ltd. of Latvia.  Both of these companies are
controlled by Mr. Alex Vilnis. The Company is alleging fraud and is also seeking
to obtain  equitable  relief involving the cancellation of 15,940 current common
shares  (equivalent  to  pre-split  2,183,750  shares)  issued to  International
Exchange  Co.  Ltd.  The  Company had sought to enter into a loan and stock sale
financing agreement with Baltic Trust Co. and subsequently  ascertained that the
transaction  involved a scheme  pursuant to which the Company  would not receive
the negotiated  consideration for the issuance of its shares. As a result of the
initiation  of the  lawsuit,  the Company  has been  successful  in  obtaining a
temporary  restraining  order with regard to any possible transfer of the shares
at issue,  and is in the  process of  obtaining a default  judgment  against the
above  defendants.  While the Company  anticipates  that it will be difficult to
obtain and enforce any damages awarded to the Company, it believes that it would
be in a  position  to  successfully  preempt  any  effort by the  Defendants  to
transfer or liquidate the shares.

Item 2   CHANGES IN SECURITIES

During the first  quarter of 1998 and through May 12, 1998,  the Company  issued
the following unregistered securities:

      (i) 150,000  shares of Common Stock to an entity which provides a platform
for advertising the Company's  products.  The Company  received as consideration
advertising  credits equivalent to $900,000 in retail value. The issuance of the
aforesaid shares was made pursuant to Section 4(2) of the Securities Act;

      (ii) 50,000 shares of Common Stock at a purchase  price of $2.00 per share
to an individual.  The Company issued the aforesaid  shares  pursuant to Section
4(2) of the Securities Act.

      (iii)  4,758  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) 100,644  shares of Common Stock to Royal  Capital,  Inc.  pursuant to
Royal's  exercise of a stock  option at $1.7338 per share.  The stock option was
granted for services  rendered,  and the shares were issued  pursuant to Section
4(2) of the Securities Act;

      (v) 1,353,000 shares of Common Stock issued to foreign  entities,  thereby
raising $2,412,000 in gross proceeds, pursuant to Regulation S of the Securities
Act;


                                       14
<PAGE>

      (vi)  155,556  shares of Common  Stock  pursuant  to  Section  4(2) of the
Securities  Act, to the  principal of Rolina  Corporation  in the course of that
entity's acquisition by the Company.

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 - None


                                       15
<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:   May 13, 1998               By: /s/ Jerry Swon
                                           -------------------------------------
                                           Jerry Swon
                                           President and Chief Executive Officer


                                       16