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, 1997

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the Transition Period from _______ to _______

                         Commission file number 33-20432

                             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)

                           WHITESTONE INDUSTRIES, INC.
                             (Former Conformed Name)
                                  July 14, 1997
                              (Date of Name Change)

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, 1997, was 2,800,646 shares.

<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES

                                      INDEX

                                                                         Page
                                                                        Number
                                                                        ------

PART  1  -  FINANCIAL INFORMATION

Item 1   Financial Statements (unaudited)

         Consolidated Balance Sheet
          - September 30, 1997                                             3

         Consolidated Statements of Operations
          - Three and nine months ended September 30, 1997 and 1996        4

         Consolidated Statements of Cash Flows
          - Nine months ended September 30, 1997 and 1996                  5

         Notes to Consolidated Financial Statements                      6 - 10

Item 2  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                      11 - 12

PART II  -  OTHER INFORMATION                                           13 - 14

SIGNATURES                                                                 15


                                       2
<PAGE>


PART I  - Item 1

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

                                                              September 30, 1997
                                                              ------------------
ASSETS
   Current Assets
   Cash ....................................................     $    18,474
   Accounts receivable, net of allowance for                    
   Doubtful accounts of 43,394 .............................         227,287
   Inventories .............................................         320,039
   Prepaid expenses ........................................          43,428
                                                                 -----------
   Total Current Assets ....................................         609,228
   Property, plant and equipment ...........................         708,711
   Other assets ............................................         111,296
                                                                 -----------
TOTAL ASSETS ...............................................       1,429,235
                                                                 ===========
LIABILITIES AND STOCKHOLDERS' EQUITY                            
LIABILITIES                                                     
   Accounts payable and accrued expenses ...................       1,572,907
   Dividends payable .......................................          24,750
   Prepayments received ....................................         335,750
   Loans and notes payable .................................       1,271,579
   Current maturities long-term debt .......................         740,894
   Current maturities lease obligations ....................           7,660
                                                                 -----------
   Total Current Liabilities ...............................       3,953,540
   Long-term debt, less current portion ....................       1,309,741
   Lease obligations, less current portion .................          26,518
                                                                 -----------
TOTAL LIABILITIES ..........................................       5,289,799
                                                                
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, 2,800,646 issued and outstanding ............             280
   Contributed capital .....................................         222,750
   Additional paid-in capital ..............................       1,909,116
   Accumulated deficit .....................................      (5,992,710)
                                                                 -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) .......................      (3,860,564)
TOTAL LIABILITIES AND EQUITY ...............................     $ 1,429,235
                                                                 ===========
                                                               
                 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,
                                          1997           1996           1997           1996
                                      -----------    -----------    -----------    -----------
<S>                                   <C>            <C>            <C>            <C>        
Revenues ..........................   $   744,177    $   627,531    $ 2,389,763    $ 2,488,161
   Cost of Goods Sold .............       329,697        220,930      1,026,393        854,086
                                      -----------    -----------    -----------    -----------

Gross Profit ......................       414,480        406,601      1,363,370      1,634,075

   Selling expenses ...............       251,909        321,374        879,179      1,043,902
   General & adminstrative expenses       550,708        319,334      1,226,616      1,152,322
                                      -----------    -----------    -----------    -----------

Operating Income (Loss) ...........      (388,137)      (234,107)      (742,425)      (562,149)

   Miscellaneous income ...........        79,653              0         79,653              0
   Interest expense (net) .........       (83,035)       (87,191)      (252,358)      (257,791)
   Loss on disposal of assets .....       (31,724)        (1,769)       (31,724)        (1,769)
   Amortization debt issue cost ...             0        (39,324)             0       (117,972)
   Miscellaneous expenses .........       (15,946)             0        (20,946)             0
Non-Operating Income (Expenses) ...       (51,052)      (128,284)      (225,375)      (377,532)
                                      -----------    -----------    -----------    -----------

Loss from Continuing Operations ...      (439,189)      (362,391)      (967,800)      (939,681)

Loss from Discontinued Operations .             0       (232,055)       (12,060)      (761,745)
                                      -----------    -----------    -----------    -----------

Net Loss ..........................   $  (439,189)   $  (594,446)   $  (978,860)   $(1,701,426)
                                      ===========    ===========    ===========    ===========

Loss per Common Share
   Continuing operations ..........   $     (0.17)   $     (0.31)   $     (0.52)   $     (0.80)
   Dicontinued operations .........             0          (0.20)         (0.01)         (0.64)
                                      -----------    -----------    -----------    -----------
Net Loss per Common Share .........   $     (0.17)   $     (0.51)   $     (0.53)   $     (1.44)
                                      ===========    ===========    ===========    ===========
Weighted Average Number of
   Common Shares Outstanding ......     2,646,561      1,163,108      1,843,129      1,183,748
</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,
                                                       1997          1996
                                                     ---------     ---------
Cash Flows from Operating Activities
   Net income (loss) ............................... $(967,800)    $(939,681)
   Adjustments to net income (loss)
      Depreciation and Amortisation ................    76,741       192.927
      Loss on disposition of assets ................    25,341         1,769
   Decreases (increases) in Assets
      Accounts receivable ..........................   232,249       427,436
      Inventories ..................................   (52,399)      172,388
      Prepaid expenses .............................    15,513        28,311
      Other assets .................................      (156)     (423,734)
   Increases (decreases) in Liabilities
      Accounts payable and accrued expenses ........   (39,738)      371,238
                                                     ---------     ---------
Net Cash Provided (Used) by Operating Activities ...  (710,249)     (169,346)

Cash Flows from Investing Activities
   Capital expenditures ............................   (49,653)      (68,379)
                                                     ---------     ---------
Net Cash Provided (Used) by Investing Activities ...   (49,653)      (68,379)

Cash Flows from Investing Activities
   Proceeds from loans payable .....................    51,250       314,730
   Proceeds from notes payable .....................   436,349             0
   Proceeds from issue of long-term debt ...........         0       111,007
Repayment of loans .................................         0      (100,307)
   Repayment of notes ..............................  (100,000)      (12,163)
   Repayment of long-term debt .....................   (53,751)      (90,000)
   Change in subordinated debentures ...............   101,849)          (47)
   Issuance of common stock ........................   544,870             0
                                                     ---------     ---------
Net Cash Provided (Used) by Financing Activities ...   776,869       223,220
Net Cash Flows from Continuing Operations ..........    16,967       (14,505)
Net Cash Flows from Discontinued Operations ........         0        (1,134)
                                                     ---------     ---------
Net Increase (Decrease) in Cash ....................    16,967       (15,639)
Cash at Beginning of Period ........................     1,507        18,934
Cash at End of Period ..............................    18,474         3,295

                 See notes to consolidated financial statements


                                       5
<PAGE>

                    PROFORMIX SYSTEMS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1997
                                   (Unaudited)

NOTE 1 - BUSINESS COMBINATION AND PRINCIPLES OF CONSOLIDATION

On July 2,  1997,  Whitestone  Industries,  Inc.,  incorporated  in the State of
Delaware on April 19, 1988, extended an offer to all holders of the common stock
of Proformix,  Inc., a company  incorporated in the State of Delaware in October
1991,  to  exchange  their  shares  into  newly  to be  issued  common  stock of
Whitestone  Industries,  Inc. at the rate of 3.4676  shares of Proformix  common
stock to 1 share of Whitestone  common stock, and subsequently  changed its name
to  Proformix  Systems,  Inc.  ("the  Company"),  and to  holders  of  Proformix
Cumulative  Preferred  Stock to  exchange  their  shares into newly to be issued
Cumulative Preferred Stock of Whitestone Industries, Inc. at the rate of 1 to 1.
The exchange  transaction  when completed  will result in the former  Proformix,
Inc.  shareholders owning approximately 90% of the combined entity. Prior to the
offer, Whitestone Industries had divested itself of all assets and substantially
all liabilities. At the time of this submission, holders of approximately 97% of
Proformix,  Inc.  common  stock have agreed to the stock  exchange  and tendered
their  shares.  The  business  combination  which  took  the  form of a  reverse
acquisition  has been  accounted for as a Purchase.  Subsequent to the exchange,
the Company and Proformix,  Inc.  remain as two separate legal entities  whereby
Proformix,  Inc. operates as a subsidiary of Proformix Systems,  Inc.,  however,
the  operations  of the  newly  combined  entity  are  comprised  solely  of the
operations of Proformix,Inc.  The accompanying  financial statements include the
accounts of Proformix Systems, Inc. and of Proformix,  Inc. and its wholly owned
subsidiary Corporate Ergonomic  Solutions,  Inc. In the process of compiling the
balance sheet, the amounts for Retained  Deficit and Additional  Paid-In Capital
lastly shown in the  Company's  June 30,  1997,  10-QSB  report (for  Whitestone
Industries,  Inc.)  were  offset to zero.  The past  results of  operations  for
Whitestone  Industries,  Inc. are  summarized as  Discontinued  Operations.  All
intercompany accounts and transactions have been eliminated in consolidation.

NOTE 2 - BASIS OF PRESENTATION

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


                                       6

<PAGE>

NOTE 3 - EARNINGS (LOSS) PER SHARE

For time  periods  preceding  the July 2, 1997,  stock  exchange,  the per share
information  is computed  based on the sum of the  weighted  average  numbers of
shares outstanding during the periods for both Whitestone  Industries,  Inc. and
Proformix,  Inc.,  whereby  the  Whitestone  shares  were  restated to take into
account a June 1997  reverse  stock split and the  Proformix,  Inc.  shares were
restated for the equivalent number of shares of Proformix Systems, Inc. pursuant
to the July 2, 1997,  stock exchange  offer.  After June 30, 1997, the number of
shares represents the shares of the combined entity only.

NOTE 4 - GOING CONCERN UNCERTAINTY

The audited  financial  statements for the year ended December 31, 1996, for the
Company's subsidiary Proformix, Inc. contain an opinion of the auditors that due
to negative  working  capital as of December 31, 1996,  and negative  cash flows
from  operations for the year ended December 31, 1996,  there exist  substantial
doubts about the company's  ability to continue as a going  concern.  During the
first 9 months in 1997,  Proformix,  Inc. and the Company experienced  continued
negative cash flows from  operations.  The  Company's  present plans to overcome
these difficulties, for which realization can not be assured, include raising of
$1,000,000  to  $1,500,000  in new equity  capital in addition  to the  $515,750
raised through September 30, 1997. In addition,  the Company expects to increase
sales from the introduction of new products,  hopefully resulting in profits and
positive cash flow sufficient to pay current and future obligations.

NOTE 5 - DETAILS OF ASSETS AND LIABILITIES AND SUMMARY OF
         SIGNIFICANT ACCOUNTING POLICIES

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.

Property, Plant and Equipment:

Property,  plant  and  equipment  as of  September  30,  1996,  consist  of  the
following:

            Molds                                             $756,579
            Equipment                                          137,522
            Furniture and fixtures                              49,436
            Leasehold improvements                              16,035
                                                              --------
                                                               959,572
            Less accumulated depreciation                      250,861
                                                              --------
                                                               708,711
                                                              ========
                                             
Molds are being  depreciated using the units of production method based upon the
estimated  useful  life  of  1,000,000  units.  Depreciation  on the  equipment,
furniture and fixtures,  and leasehold  improvements is computed on the straight
line method over the  estimated  useful lives of such  assets,  between 5 and 10
years.


                                       7

<PAGE>

Prepayments Received:

During the quarter ended  September  30, 1997,  the Company has offered for sale
shares of its common stock and units  comprised of common  shares and  warrants,
pursuant to exemptions from the registration provisions of the Securities Act of
1933, as amended, (the "Act"). Pending completion of such transactions any funds
received have been accounted for as Prepayments.

Loans and Notes Payable:

During April  through June 1995  Proformix,  Inc.  sold a total of sixteen units
consisting of an aggregate  $1,600,000  one-year 12%  promissory  notes,  all of
which remain  outstanding  as of September 30, 1997,  and 160,000  shares of its
common  stock  (equivalent  to 46,141  post-exchange  shares of the  Company) to
private investors.  The notes were subsequently  extended and $1,175,000 of such
notes were 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) paying future interest in cash on a quarterly
basis. The remaining $425,000 of such notes are shown in current liabilities. 

On March 4, 1996, Proformix, Inc. secured a line-of-credit facility from a local
bank,  guaranteed by the Company's  President and which is  cross-collateralized
with the below  mentioned  $1,000,000  long-term  debt,  under which it borrowed
$250,000  which were to be repaid within 12 months but remain  outstanding as of
September 30, 1997. In May 1997 Proformix,  Inc. obtained an extension,  through
September  30, 1997,  and is currently  negotiating  with the bank for a further
extension  of the maturity of this loan. A verbal  moratorium  of principal  has
been  agreed to by the company  and the bank  pending a review of the  Company's
future ability to pay.

On April 17, 1997, Proformix, Inc. issued a $318,849 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.

In addition, Proformix, Inc. has borrowed funds under short term loan agreements
under the following terms and conditions:

Pursuant to six  promissory  notes signed  throughout  1996,  several  investors
advanced the company a total of $145,000  payable  upon demand with  interest at
12% per annum.

Pursuant to a  promissory  note dated  September 5, 1996,  an investor  advanced
Proformix,  Inc. $20,000 accruing interest at the rate of 10% per annum with the
outstanding  principal balance and interest due and payable upon the date of the
earliest  occurrence of any one of the following events.  (1) the closing of any
financing or refinancing  of the Company's  debt, (2) the closing of any sale by
Proformix,  Inc.  of any of its equity or debt,  (3) the  closing of any sale by
Proformix,  Inc. of any of its assets or (4) January 2, 1997.  The note was paid
in full on April 18, 1997.

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  and  accruing  interest at 5% per annum and due  December 4,
1997.

Pursuant to a promissory  note dated January 22, 1996,  the Company's  president
advanced the sum of $64,730  which is due upon demand and  accruing  interest at
the rate of 12% per annum.

Long-Term Debt:

Long-term  liabilities  include  $1,175,000 of 8% promissory  notes as described
above.

Pursuant to a promissory note signed on July 28, 1993, Proformix,  Inc. borrowed
a total of $1,000,000 with interest at 2% above the lending  institutions' prime
lending rate. Principal


                                       8
<PAGE>

payments on such note commenced on July 31, 1994.  Such note matured on June 30,
1997 and is secured by a first security  interest in all tangible and intangible
assets of Proformix, Inc. Payments of all principal, interest, and other related
expenses  have  been   guaranteed   by  the  Company's   President  who  further
collateralized  these obligations with a $300,000 certificate of deposit and his
100% interest in his equity in the Company. In addition,  the loan is guaranteed
by the New Jersey Economic  Development  Authority  (NJEDA) which will assume an
amount equal to seventy-five  percent of the then  outstanding  principal amount
upon an event of default.  The note was  originally  payable in thirty-six  (36)
consecutive monthly  installments of $27,778. On September 26, 1994,  Proformix,
Inc.  negotiated a nine month  principal  moratorium on such note effective with
the principal  payment that was due and not made on July 31, 1994. The principal
payments deferred  pursuant to the moratorium  amounted to $250,002 and were due
June 30, 1997.  As of December 31, 1995,  Proformix,  Inc. was not in compliance
with  certain  covenants  related to the loan  agreement  with the lender.  As a
result,  Proformix,  Inc.  requested  and obtained a waiver from the lender from
June 30, 1994 through December 30, 1995.

On March 4, 1996,  Proformix,  Inc.  refinanced its long-term  debt. The balance
remaining 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 have been guaranteed by the Company's  President who is further
required to collateralize this obligation with $225,000 consisting of marketable
securities and/or certificates of deposit.  In addition,  the loan is 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' waiver on principal payments.
In May 1997, Proformix, Inc. requested another 3 months' deferment for principal
payments on 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.  Proformix,  Inc.,  has
resumed  principal  payments  in  September,  1997.  The  balance  remaining  on
September 30, 1997, is $708,888.

In May, 1997, Proformix,  Inc. settled litigation with a former associate of the
Company by agreeing to a $75,000 settlement,  of which $55,739 is outstanding as
of September 30, 1997, payable in monthly installments of $2,917.

NOTE 6 -  DISCONTINUED OPERATIONS

On June 16, 1997, Royal Capital,  Inc.  ("Royal") entered into an agreement with
the Company and its then  president,  Donald R. Yu,  whereby  Royal (i) acquired
100,000  shares  of the  Company's  preferred  stock  held by Mr.  Yu,  and (ii)
acquired the voting proxy of 1,120,000  (pre-split)  shares of common stock. The
consideration paid to Mr. Yu was $100,000.  As a result, Royal obtained a voting
majority of the Company's  capital stock. On June 24, 1997, the Company,  Royal,
and Proformix,  Inc. entered into an acquisition  agreement  whereby the Company
acquired all or substantially all of the outstanding  shares of capital stock of
Proformix,  and changed its name to  Proformix  Systems,  Inc. In order to enter
into the aforesaid agreement, the Company's then Board of Directors authorized a
137 : 1 reverse split of its outstanding shares of common stock, and spin off of
the shares of its wholly owned subsidiary Golden Bear Entertainment  Corporation
to its then current shareholders in form of a stock dividend.  This distribution
effectively eliminated all assets and liabilities from the books of the Company.

The accompanying  financial statements classify the results of all operations of
Whitestone   Industries,   Inc.  prior  to  the  acquisition,   as  discontinued
operations.


                                       9
<PAGE>

NOTE 7  -  MATERIAL EVENTS

On May 12,  1997,  the  Company's  subsidiary  Proformix,  Inc.  entered  into a
financial and marketing consulting agreement with Royal Capital, Inc. ("Royal"),
whereby Royal would act as a consultant  to the company,  seeking to attract new
equity  capital  totaling  between  $1,500,000  and $2,000,000 on a best efforts
basis to provide working capital, fund further product development and marketing
efforts, and finance the expected growth in business. These efforts have to-date
resulted  in the  receipt by the  Company of  $200,000  in equity,  and  another
$505,750  in  equity-designated  funds  (see  Notes  to  Consolidated  Financial
Statements).

Royal agreed to provide the  services of its Chairman and  President in order to
more  closely work with  Proformix'  management  in  achieving  the critical and
strategic objectives of the Company. For the most part, such services are to the
exclusion  of any other  ergonomic  company  engaged  in the  business  in which
Proformix  is  currently  engaged,  and  shall  continue  until the  earlier  of
Proformix  receiving  not less than $2.0  million or such other  amounts as both
Royal and  Proformix  shall agree upon in writing,  or for a period of three (3)
years.

Royal and  Proformix  recognized  that the success and future of  Proformix  are
dependent upon Proformix  obtaining  sufficient  capital over a relatively short
time period in order to maintain continuing operations and build ongoing revenue
from a revamped sales  organization.  Royal and Proformix also acknowledged that
Proformix did not have the capital resources to recruit and provide current cash
compensation  to  experienced  and proven  executive  personnel  such as Royal's
Chairman and President.  Thus, given these issues and circumstances,  both Royal
and  Proformix  agreed that Royal will  provide the  services as outlined  above
based on Royal's ability to work with Proformix towards  increasing the value of
the Company to its  shareholders.  In  consideration  of such services Royal was
awarded  a stock  grant of 2.9  million  shares  (pre-split,  equal  to  836,313
post-split shares) of the common stock of Proformix, Inc. In addition, Royal was
granted options to purchase common shares of the Company or of any succeeding or
acquiring entity..

On May 8,  1997,  the  Company's  subsidiary  Proformix,  Inc.  entered  into an
agreement with Schweiger & Associates,  a management consulting company, whereby
that firm's principal, Anthony W. Schweiger ("Schweiger"),  would act as interim
operations  consultant  for the  purpose of (i)  effecting  a  restructuring  of
Proformix'  operations  towards  improved  profitability,  and (ii) changing its
capital  structure in order to diminish the threat of immediate  insolvency.  In
consideration  of such services,  Schweiger was awarded a stock grant of 700,000
shares  (pre-split,  equal to 201,869  post-split shares) of the common stock of
Proformix, Inc., and is receiving monthly fee payments.

On August 29,  1997,  the Company  signed a letter of intent to acquire  Cornell
Ergonomics,  a software developer of a unique ergonomic assessment tool based on
the  "Rapid  Upper  Limb  Assessment"  (RULA)  methodology.   Pursuant  to  that
understanding  as  subsequently  revised,  Proformix  will  obtain an  exclusive
license  from  Cornell  Ergonomics  to the  software and will have the option to
acquire the licensor at a later time.

On  September  10,  1997,  the  Company  signed a letter of  intent  to  acquire
Magnitude  LLP of Chester,  New Jersey,  a software  developer  specializing  in
ergonomic  monitoring  and alarm  software which will be marketed in conjunction
with  Proformix'  patented  keyboarding  systems,  subject  to  negotiation  and
execution of a final agreement.


                                       10
<PAGE>

Item 2.

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

Business Acquisition

On July 2, 1997, the Company extended an offer to all shareholders of Proformix,
Inc.  for an exchange  of their  common  shares  into newly to be issued  common
shares  of the  Company  at the rate of  3.4676  to 1. At  September  30,  1997,
approximately  97%  of  the  outstanding  stock  of  Proformix,  Inc.  has  been
exchanged.

Proformix,  Inc.,  a privately  held  company,  was founded in October  1991 and
incorporated  in the State of  Delaware.  The  Company is engaged in the design,
manufacture,  and  marketing of research  based  ergonomic  accessories  for the
computerized  workplace.  Its primary product is a patented  keyboarding  system
which independent  research has confirmed eliminates the incidence of repetitive
trauma injuries believed to be associated with computer use. To fund the further
expansion of product design and marketing activities Proformix in May 1996 filed
for an Initial Public Offering which however did not come to fruition due to the
business failure of its designated underwriter.

In late 1996 the Company  introduced the second generation of its keyboard tray.
The  IntelliTray(TM)  incorporates  a  state-of-the-art  pointing  device  in an
ergonomically optimal position. The GlidePoint(TM) technology employed herein is
provided  by Cirque  Corporation,  which has worked with  Proformix  to mesh the
respective  products.  GlidePoint(TM)  obviates  the  need  for a mouse or other
pointing  device  in  a  cost-effective  and  technologically  superior  manner.
Coinciding  with the  evolution of the company's  keyboarding  system and in the
aftermath of recent  widely  publicized  litigation  for injuries  suffered from
extended  computer  use,  is an  awakening  in the  marketplace  to  the  issues
associated  with repetitive  trauma injuries and the benefits,  both in terms of
employee  productivity  and  liability  avoidance,  which are  offered  by sound
ergonomic planning and products such as those made by Proformix. A substantially
enhanced version of the GlidePoint(TM) technology was released to the Company by
Cirque  late  in  the  third  quarter.  The  Company  expects  to  release  this
enhancement to its customers sometime in the fourth quarter of 1997.

Simultaneously with the stock exchange offer, the former management and Board of
Directors of the Company resigned,  and the members of the executive  management
of Proformix, Inc. assumed their respective functions as executive management of
the Company.  Simultaneously,  a new Board of Directors was appointed which will
serve until the next annual meeting of the shareholders of the Company.

Results of Operations:

Prior to the  acquisition  of  Proformix,  Inc. in July 1997 the Company had not
realized any sales  revenues this year.  Thus,  the  accompanying  statements of
operations for 1997 reflect only the operations of Proformix, Inc.


                                       11
<PAGE>

Revenues during the quarter and the nine months period ended September 30, 1997,
totaled  $744,177  and  $2,389,763  respectively,  as compared  to $627,531  and
$2,488,161  for the same periods a year ago.  Decreases  in selling  expenses of
between 15 and 20% for the quarter and the nine months  period  compared to last
year, which were attributable to cost savings measures particularly in the sales
promotion area,  were largely offset by increases in general and  administrative
expenses.  These increases have  predominantly  non-recurring  character and are
associated with the restructuring and repositioning of the Company's operations.
The  operating  results for the quarter  and for the nine  months  period  ended
September 30, 1997, are losses of $388,137 and $742,425  respectively,  compared
to losses of $234,107 and $562,149 for the same periods a year ago. The net loss
for the quarter was $439,189 and for the nine months period was $978,860,  which
compares  with a net loss of $594,446 for the same quarter a year ago and with a
loss of $1,701,426  for the nine months ended  September  30, 1996.  Last year's
figures include losses from discontinued  operations,  in the amount of $232,055
and $761,745 for the quarter and the nine months, respectively.

The Company is currently  introducing to the market its new ErgoRanger(TM)  line
of keyboarding  systems which has already  received  encouraging  responses from
existing  and  potential  new  customers.  At the same time the  Company is well
underway in a process of reorganizing  its sales force, and changing 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 the
potential financial  liabilities to their companies,  associated with repetitive
stress injuries arising out of the use of computers. These efforts take place in
the face of a continuing liquidity constraint. While the lack of working capital
is slowing the Company's  ability to restructure its operations  towards renewed
growth and  profitability,  Management  expects a positive  growth trend to take
hold in the next two quarters.

Liquidity and Capital Resources

During the last  quarter  the  Company  has  received a total of $515,750 in new
equity funding.  At October 10, 1997, an additional $190,000 in funding has been
received.

Despite this cash  infusion the Company's  working  capital  deficit  remains in
excess of $3 million,  primarily as a consequence  of cash losses from operating
activities which resulted from lower than expected sales caused by delays in the
introduction of the new products due to the shortage of funds.  Cash consumed by
operations  during 1997  amounted to $710,249,  compared to $169,346  during the
same period  last year.  The cash  outflow  was largely  financed by issuance of
common  stock and by short  term  borrowings,  the  latter  contributing  to the
working capital deficit.

At September 30, 1997, the Company's short term  liabilities  exceed its current
assets by $3,344,312 . A large portion of accounts  payable and accrued expenses
are  either  overdue  or  otherwise  beyond  original  terms.  The  Company  has
negotiated  extended payment terms with key suppliers,  and entered into several
pay-out  agreements with other  creditors.  A formal  extension of its revolving
credit with its primary lending bank,  however,  has not yet been obtained,  and
most of its  promissory  notes and  other  obligations  are to be repaid  within
relatively short time periods of less than twelve months.  Management expects to
obtain additional  liquidity by continuing to pursue additional outside funding,
and to realize  positive cash flow from increased  revenues  during the upcoming
quarters, so as to be able to meet its maturing obligations in a timely fashion.


                                       12
<PAGE>

PART  II  -  OTHER INFORMATION

Item 1   LEGAL PROCEEDINGS

     (a) In October 1996,  the Company  entered into an agreement with a Latvian
company to obtain certain financing. The Latvian company agreed to buy equity in
the Company and to provide loan financing,  against transfer of 2,183,750 shares
(pre-split,  equal to 15,940  post-split  shares).  Subsequent  to the issue and
transfer of these shares the Company  learned that the agreed to funding was not
provided.  In February 1997 the Company filed lawsuit  challenging the Latvian's
company entitlement to the 2,183,750 shares transferred. Since then, transfer of
these  shares has been  enjoined  by the United  States  District  Court for the
Northern District of California pending resolution.

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

     (c) In November 1996,  Proformix,  Inc.  became the subject of two lawsuits
instituted  by a  shareholder.  One  suit  asserts  that the  shareholder  had a
consulting  agreement with the Company  pursuant to which the Company had agreed
to pay  $125,000 a year for five years and that the  Company  has  defaulted  in
performance of its obligations  under that  agreement.  The Company never signed
such an agreement. The Company denies any obligation and is vigorously defending
this litigation.  The shareholder has also started suit along with other members
of his family  alleging  that he has been  damaged  because  the  Company  acted
against the best interest of its  stockholders.  The claimants have not provided
any details in support of these allegations, nor specified the claimed amount of
damages.  The Company  denies in engaging in any  activity  contrary to the best
interests of its shareholders, including the claimants.

Item 2   CHANGES IN SECURITIES

     On July 15, 1997, the Company  effected a reverse split of its  outstanding
Common  Stock in the ratio 137 : 1 and  changed its name to  Proformix  Systems,
Inc. The reverse  split has no effect on the par value or  authorized  number of
shares of Common Stock.  The Company effected this reverse split and name change
in connection  with the  acquisition of Proformix,  Inc.  through an exchange of
common stock at the ratio of one share of Common  Stock for every 3.4676  shares
of Proformix, Inc. common stock.

     In July 1997, the Company issued 173,600  unregistered shares of its Common
Stock to designees of Royal Capital,  Inc.  against a grant of 313,597 shares to
Royal for services rendered,  pursuant to a resolution of the Company's Board of
Directors of June 16, 1997.

     Between  July and  September  1997,  the  Company  issued an  aggregate  of
1,143,562  unregistered shares of its Common Stock to holders of common stock of
Proformix,  Inc.  pursuant to a stock  exchange offer extended by the Company on
July 2, 1997.


                                       13
<PAGE>

     Between July and October  1997,  the Company  issued  345,000  unregistered
shares of its Common Stock to designees of Royal Capital,  Inc.  against a grant
of 836,313 shares to Royal pursuant to a consulting agreement of May 8, 1997.

     In September  1997 the Company issued  179,600  unregistered  shares of its
Common Stock to designees of Royal Capital, Inc. against an equity investment of
$200,000 made by Royal in May, 1997.

     In  September  1997 the Company  issued  1,869  unregistered  shares of its
Common Stock to A.W. Schweiger for services rendered.

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

         Form 8-K filed on July 17, 1997 
         Form 8-K filed on July 31, 1997
         Information Statement filed on Form 14-C on July 1, 1997


                                       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 14, 1997              By: /s/ Michael G. Martin
                                           -------------------------------------
                                           Michael G. Martin
                                           President and Chief Executive Officer