<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: AUGUST 12, 1994
(DATE OF EARLIEST EVENT REPORTED)
PC ETCETERA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-174719 13-3260705
-------- -------- ----------
(STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER
JURISDICTION OF INCORPORATION) IDENTIFICATION NUMBER)
462 SEVENTH AVENUE, NEW YORK, NEW YORK 10018
---------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 736-5870
--------------
<PAGE>
Item 7. Financial Statements, PRO FORMA Financial Statements and Exhibits
(a) (i) Consolidated Pro Forma Balance Sheet of the Company as of
June 30, 1994;
(ii) Consolidated Pro Forma Statements of Operations of the
Company for the six months ended June 30, 1994;
(b) FINANCIAL STATEMENT OF BUSINESS ACQUIRED.
(i) Balance Sheet of ACE as of June 30, 1994;
(ii) Statement of Operations of ACE for the six months ended June
30, 1994 and 1993;
(iii) Balance Sheets of ACE as of December 31, 1993 and 1992;
(iv) Statements of Income of ACE for the years ended December 31,
1993, 1992 and 1991.
(v) Statement of Cash Flows of ACE for the year ended December
31, 1993.
<PAGE>
ITEM 7(a ) PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Consolidated Balance Sheet as of June 30, 1994 and Pro
Forma Consolidated Statements of Operations for the year ended December 31, 1993
and the six months ended June 30, 1994 have been prepared to reflect the
acquisition transaction and the adjustments described in the accompanying notes.
The pro forma financial information is based on the historical consolidated
financial statements of PC Etcetera, Inc. and its subsidiaries (the "Company")
and the Ace Division of Elron Electronic Industries, Ltd. and should be read in
conjunction with the notes thereto. The Pro Forma Consolidated Balance Sheet
was prepared as if the acquisition transaction occurred on January 1, 1994. The
Pro Forma Consolidated Statements of Operations for the year ended December 31,
1993 and for the six months ended June 30, 1994 were prepared assuming the
transaction occurred on the first day of each of the periods presented.
The pro forma financial information is unaudited and not necessarily indicative
of the consolidated results which actually would have occurred if the
acquisition transaction had been consummated at the beginning of the period
presented, nor does it purport to represent the future financial position or
results of operations for future periods.
The proforma financial information does not give effect to the one-for-five
reverse split of the shares of Common Stock effectuated as of April 19, 1995
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1993 (UNAUDITED)
1. BASIS OF PRESENTATION:
The Company and its wholly-owned Israeli subsidiary, PC Etcetera Israel Ltd.
("PC Israel") entered into an Asset Purchase Agreement with Elron Electronic
Industries, Ltd. ("Elron"), Adar International Inc. ("Adar"), an indirect
wholly-owned subsidiary of Elron and Elron Technologies Inc. ("Technologies"), a
wholly-owned subsidiary of Elron pursuant to which (a) Elron sold to PC Israel
substantially all of the assets of its ACE Division ("Ace"), subject to certain
disclosed liabilities, and (b) Adar sold to the Company substantially all of the
assets of Adar, subject to certain disclosed liabilities.
The accompanying unaudited Pro Forma Consolidated Balance Sheet is presented as
if the acquisition transaction occurred on January 1, 1994. Certain amounts
have been reclassified to conform with the current presentation.
The accompanying unaudited Pro Forma Consolidated Statement of Operations are
presented as if the acquisition transaction occurred on the first day of each
period presented.
These pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto of the Company as of December
31, 1993 and June 30, 1994. In management's opinion, all material adjustments
necessary to reflect the effects of the acquisition by the Company have been
made.
The unaudited pro forma consolidated financial statements are not necessarily
indicative of what the actual financial position of the Company would have been
as of June 30, 1994 or what the actual results of operations of the Company
would have been assuming the acquisition had been completed as of January 1,
1993, nor are they necessarily indicative of the results of operations for
future periods.
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1993 (UNAUDITED)
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATED BALANCE SHEET:
(A) To reflect the pro forma value of the assets acquired and the related stock
and warrants issued in connection with the acquisition of the assets of Ace.
(B) To reflect the pro forma accumulated amortization of the patented software
and goodwill as if the acquisition had taken place on January 1, 1994.
(C) The $75,000 reported as property and equipment for the ACE Division at June
30, 1994 was the approximate fair market value of the assets acquired.
3. ADJUSTMENTS TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS:
(A) To reflect the pro forma amortization expense of goodwill and patented
software had the acquisition taken place on the first day of each of the periods
presented.
(B) Pro forma earnings per share consider the 3,300,000 shares and 200,000
warrants issued in connection with the acquisition, as if they were issued on
the first day of each of the periods presented.
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1994 ( NOTE 1)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------------------------------------------------------
PC ETC. ACE ADJUSTMENT COMBINED
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 106,335 $ 0 $ 0 $ 106,335
ACCOUNTS RECEIVABLE 1,816,341 414,039 0 2,230,380
PREPAID EXPENSES & OTHER RECEIVABLES 87,758 0 0 87,758
----------------------------------------------------------------------
TOTAL CURRENT ASSETS 2,010,434 414,039 0 2,424,473
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT 1,297,188 75,000 0 1,372,188
LEASEHOLD IMPROVEMENTS 222,590 0 0 222,590
----------------------------------------------------------------------
1,519,778 75,000 0 1,594,778
LESS: ACCUMULATED DEPRECIATION (708,563) 0 0 (708,563)
----------------------------------------------------------------------
TOTAL PROPERTY AND EQUIPMENT 811,215 75,000 0 886,215
OTHER ASSETS
OTHER ASSETS 39,489 0 0 39,489
SECURITY DEPOSITS 105,845 0 0 105,845
GOODWILL (NOTE 2) 0 0 338,333 (A) 338,333
PATENTS AND ASSORTED SOFTWARE (NOTE 2) 0 0 2,678,446 (A), (B) 2,678,446
----------------------------------------------------------------------
TOTAL OTHER ASSETS 145,334 0 3,016,779 3,162,113
TOTAL ASSETS $2,966,983 $489,039 $3,016,779 $6,472,801
----------------------------------------------------------------------
----------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 965,339 $303,845 0 $1,269,184
PAYROLL TAXES PAYABLE 81,162 0 0 81,162
LOANS PAYABLE-OTHERS 719,896 0 0 719,896
LOANS PAYABLE-AFFILIATE 33,333 0 0 33,333
CAPITAL EQUIPMENT OBLIGATIONS 129,660 0 0 129,660
DEFERRED REVENUE 125,807 0 0 125,807
----------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,055,197 303,845 0 2,359,042
OTHER LIABILITIES
CAPITAL EQUIPMENT OBLIGATIONS 86,935 0 0 86,935
LOANS PAYABLE-BANK 123,740 0 0 123,740
----------------------------------------------------------------------
TOTAL LIABILITIES 2,265,872 303,845 0 2,569,717
----------------------------------------------------------------------
STOCKHOLDERS' EQUITY
COMMON STOCK 63,374 0 33,000 (A) 33,000
PREFERRED STOCK 0 0 4,880 (A) 4,880
WARRANTS 0 0 178,000 (A) 178,000
ADDITIONAL PAID IN CAPITAL-COMMON STOCK 0 0 2,607,000 (A) 2,607,000
ADDITIONAL PAID IN CAPITAL-PREFERRED STOCK 1,374,209 0 483,120 (A) 483,120
RETAINED EARNINGS/(ACCUMULATED DEFICIT) (736,472) 185,194 (289,221) (289,221)
----------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 701,111 185,194 3,016,779 3,016,779
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,966,983 $489,039 $3,016,779 $6,472,801
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 (NOTE 1)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (NOTE 3)
----------------------------------------------------------------------
PC ETC. ACE ADJUSTMENTS COMBINED
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $5,447,049 $347,830 $ 0 $5,794,879
COST OF REVENUES 2,428,198 18,114 0 2,446,312
----------------------------------------------------------------------
GROSS PROFIT 3,018,851 329,716 0 3,348,567
0
RESEARCH & DEVELOPMENT EXPENSES (NET) 0 419,018 0 419,018
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,769,142 372,587 104,027 (A) 3,245,756
----------------------------------------------------------------------
OPERATING INCOME (LOSS) 249,709 (461,889) (104,027) (316,207)
OTHER (INCOME)/EXPENSES, NET 52,785 (25,853) 0 26,932
----------------------------------------------------------------------
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES AND EXTRAORDINARY ITEM 196,924 (436,036) (104,027) (343,139)
PROVISION FOR INCOME TAXES 67,520 0 0
----------------------------------------------------------------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 129,404 (436,036) (104,027) (410,659)
EXTRAORDINARY ITEM:
NET OPERATING LOSS CARRY FORWARD 56,270 0 0 56,270
----------------------------------------------------------------------
NET INCOME (LOSS) $ 185,674 $(436,036) $(104,027) $ (354,389)
----------------------------------------------------------------------
----------------------------------------------------------------------
EARNINGS PER SHARE $0.03 $0 ($0.03) ($0.04)
----------------------------------------------------------------------
----------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES 6,337,308 0 3,500,000 (B) 9,837,308
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1993 (NOTE 1)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (NOTE 3)
----------------------------------------------------------------------
PC ETC. ACE ADJUSTMENTS COMBINED
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES $9,154,564 $ 813,031 $ 0 $9,967,595
COST OF REVENUES 3,803,622 421,475 0 4,225,097
----------------------------------------------------------------------
GROSS PROFIT 5,350,942 391,556 0 5,742,498
RESEARCH & DEVELOPMENT EXPENSES (NET) 0 967,285 0 967,285
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 4,683,002 389,416 208,054 (A) 5,280,472
----------------------------------------------------------------------
OPERATING INCOME (LOSS) 667,940 (965,145) (208,054) (505,259)
OTHER (INCOME)/EXPENSES, NET 110,665 42,172 0 152,837
----------------------------------------------------------------------
NET INCOME (LOSS) BEFORE PROVISION FOR INCOME
TAXES AND EXTRAORDINARY ITEM 557,275 (1,007,317) (208,054) (658,096)
PROVISION FOR INCOME TAXES 222,910 0 0 222,910
----------------------------------------------------------------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 334,365 (1,007,317) (208,054) (881,006)
EXTRAORDINARY ITEM:
NET OPERATING LOSS CARRY FORWARD 222,910 0 0 222,910
----------------------------------------------------------------------
NET INCOME (LOSS) $ 557,275 $(1,007,317) $ (208,054) $ (658,096)
----------------------------------------------------------------------
----------------------------------------------------------------------
EARNINGS PER SHARE $0.09 $0 ($0.06) ($0.07)
----------------------------------------------------------------------
----------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES 6,245,641 0 3,500,000 (B) 9,745,641
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
<PAGE>
ITEM 7 (b) FINANCIAL STATEMENT OF BUSINESS ACQUIRED
ACE DIVISION OF ELRON ELECTRONIC INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
The financial information herein is unaudited. However, in the opinion of
management, such information reflects all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results of
operations for the periods being reported. Additionally, it should be noted
that the accompanying condensed financial statements do not purport to contain
complete disclosures in conformity with generally accepted accounting
principles.
<PAGE>
ACE DIVISION OF ELRON ELECTRONIC INDUSTRIES LTD.
BALANCE SHEET
JUNE 30, 1994
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
CURRENT ASSETS:
ACCOUNTS RECEIVABLE $414,039
--------
TOTAL CURRENT ASSETS 414,039
--------
PROPERTY AND EQUIPMENT:
PROPERTY AND EQUIPMENT (NET) 75,000
--------
TOTAL PROPERTY AND EQUIPMENT 75,000
--------
TOTAL ASSETS $489,039
--------
--------
LIABILITIES AND STOCKHOLDERS EQUITY:
CURRENT LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $303,845
--------
TOTAL LIABILITIES 303,845
--------
STOCKHOLDERS' EQUITY:
RETAINED EARNINGS 185,194
--------
TOTAL STOCKHOLDERS' EQUITY 185,194
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $489,039
--------
--------
</TABLE>
<PAGE>
ACE DIVISION OF ELRON ELECTRONIC INDUSTRIES LTD
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
REVENUES $385,575 $347,830
COST OF REVENUES 162,596 18,114
------------------------
GROSS PROFIT 222,979 329,716
------------------------
RESEARCH AND DEVELOPMENT EXPENSES (NET) 303,912 419,018
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 232,086 372,587
------------------------
OPERATING (LOSS) (313,019) (461,018)
OTHER INCOME 11,906 225,853
------------------------
NET (LOSS) ($301,113) ($436,036)
------------------------
------------------------
</TABLE>
<PAGE>
ELRON ELECTRONIC INDUSTRIES LTD. --
ACE DIVISION
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1993
<PAGE>
CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 2
FINANCIAL STATEMENTS
Balance Sheet as of December 31, 1993 3
Statement of Income for the period ended December 31, 1993 4
Statement of Cash Flows for the period ended December 31, 1993 5
Notes to the Financial Statements 6-11
# # # # #
<PAGE>
INDEPENDENT AUDITORS' REPORT
(EXTENDED FORM TO COMPLY WITH U. S. STANDARDS)
We have audited the balance sheets of ELRON ELECTRONIC INDUSTRIES LTD. -ACE
DIVISION (the "Division) (the "Company") as of December 31, 1993, and 1992 and
the statements of income for the years ended December 31, 1993, 1992 and 1991.
These financial statements are the responsibility of the Division's management.
Our responsibilities to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards, including those prescribed by the Auditors' (Mode of Performance)
Regulations (Israel),1973. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the aforementioned financial statements present fairly, in all
material respects, the financial position of the Division as of December 31,
1993, and 1992, and the results of its operations for the years ended December
31, 1993, 1992 and 1991, in conformity with accounting principles generally
accepted in Israel and in the United States(as applicable to the financial
statements of the Division, such accounting principles are practically
identical).
CERTIFIED PUBLIC ACCOUNTANTS (ISRAEL)
Tel-Aviv, Israel
March 9, 1994 except with respect to notes 1, 2
and statement of cash flow which the date is
August, 1995.
- --------------------------------------------------------------------------------
<PAGE>
BALANCE SHEETS
- --------------------------------------------------------------------------------
(In U S dollars)
<TABLE>
<CAPTION>
DECEMBER 31
-----------
NOTE 1993 1992
---- ---- ----
<S> <C> <C> <C>
CURRENT ASSETS
Cash 1,472 1,921
Accounts receivable (3) 330,971 234,796
Other receivable and prepayments (4) 137,064 350,088
------- -------
469,507 586,805
------- -------
FIXED ASSETS (5)
Cost 718,992 832,571
Less - accumulated depreciation 555,531 523,205
------- -------
163,431 309,366
------- -------
632,968 896,171
------- -------
------- -------
CURRENT LIABILITIES
Payroll and related expenses 30,082 29,534
Suppliers 12,335 25,491
Other payable and accrued expenses (6) 90,716 105,249
------- -------
133,133 160,274
------- -------
SEVERANCE PAY (7) 29,609 60,327
------- -------
HEAD OFFICE 470,266 675,570
------- -------
632,968 896,171
------- -------
------- -------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
3 ELRON ELECTRONIC INDUSTRIES LTD. - ACE DIVISION
<PAGE>
STATEMENT OF INCOME
- --------------------------------------------------------------------------------
(In U S. dollars)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
NOTE 1993 1992 1991
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues from sales and services (8) 813,031 974,107 402,535
Cost of sales and services (9) 421,475 121,157 179,406
---------- -------- ----------
Gross profit 391,556 852,950 223,129
Development expenses, net (10) 967,285 718,539 1,190,378
General, selling and
administrative expenses (11) 389,416 268,374 337,782
---------- -------- ----------
Loss from operations (965,145) (133,963) (1,305,031)
Other expenses (12A) 42,172 12,083 -
---------- -------- ----------
Net loss (1,007,317) (146,046) (1,305,031)
---------- -------- ----------
---------- -------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
4 ELRON ELECTRONIC INDUSTRIES LTD. - ACE DIVISION
<PAGE>
STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
(In U S dollars)
<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
DECEMBER 31
1993
----
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES (1,007,317)
Net loss
Adjustments to reconcile net loss to net cash used in
operating activities (see below) 234,555
----------
Net cash used in operating activities (772,762)
----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in fixed assets (29,660)
----------
CASH FLOWS FROM FINANCING ACTIVITIES
Transfers from parent company, net 801,973
----------
Decrease in cash (449)
Cash at the beginning of the year 1,921
----------
Cash at the end of the year 1,472
----------
----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Charges (credits) not affecting cash flows: 133,392
Depreciation (30,718)
Decrease in severance pay, net 42,173
Fixed assets written off
Changes in operating assets and liabilities:
Increase in accounts receivable (96,175)
Decrease in other receivable and prepayments 213,024
Increase in payroll and related expenses 548
Decrease in suppliers (13,156)
Decrease in other payable and accrued expenses (14,533)
----------
234,533
----------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
5 ELRON ELECTRONIC INDUSTRIES LTD. - ACE DIVISION
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(In U S dollars)
NOTE 1 - GENERAL
Elron Electronic Industries Ltd. ("Elron" or "the Company") is an
Israeli industrial holding company which operates mainly through
affiliates in the fields of advanced technology.
These statements are the statements of the Company's Ace Division (not
a separate legal entity). The Division is engaged in the fields of
Computer Based Training (CBT) and User Documentation, mainly for
computerized application. The Division develops technologies in these
areas and sells services and products using these technologies.
As the Division did not prepare cash flows statements in the past, no
comparative figures are presented in the cash flows statement.
A major part of the Division's sales are made pursuant to a
distributorship agreement with a company in Britain (Isys plc.). Sales
in the U.S. are made by a wholly owned subsidiary of Elron (Adar Inc.).
The operations of Adar Inc. are not included in these statements
Elron's financial statements are prepared in U.S. dollars, because the
currency of the primary economic environment in which the operations of
the Company and its principal affiliates are conducted is the U. S.
dollar.
Transactions and balances originally denominated in U.S. dollars are
presented at their original amounts. Transactions and balances in other
currencies are remeasured into U.S. dollars in accordance with
principles identical to those set forth in Statement No. 52 of the
Financial Accounting Standards Board of the United States (FASB).
Exchange gains and losses from the aforementioned remeasurements are
reflected in the statements of operations. The representative rate of
exchange prevailing on balance sheet date - U.S.$1 - New Israeli Shekel
("NIS") 2.986 (1992 - NIS 2,764; 1991 - NIS 2,283).
NOTE 2 - ACCOUNTING POLICIES
The significant accounting policies followed in the preparation of the
financial statements, applied on a consistent basis, are:
A. FIXED ASSETS
Fixed assets are stated at cost. Depreciation is computed by the
straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lease term.
- --------------------------------------------------------------------------------
6 ELRON ELECTRONIC INDUSTRIES LTD. - ACE DIVISION
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
(In U. S. dollars)
NOTE 2 - ACCOUNTING POLICIES (CONT.)
B. DEVELOPMENT EXPENSES
All expenses, net of royalty bearing participation's by the Chief
Scientist of the Government of Israel, are charged to operations as
incurred.
C REVENUES
The Division recognizes revenues from sales of software upon shipment
of the product and when collectibility is probable.
NOTE 3 - ACCOUNTS RECEIVABLE
DECEMBER 31
-----------
1993 1992
---- ----
Adar Inc. (subsidiary of Elron) 194,119 122,434
ISYS plc. 57,660 28,983
Other 79,192 83,379
------- -------
330,971 234,796
------- -------
------- -------
NOTE 4 - OTHER RECEIVABLE AND PREPAYMENTS
DECEMBER 31
-----------
1993 1992
---- ----
Government of Israel (mainly for
participation in research and
development) 108,542 327,622
Employees (1993 - mainly deposit in
bank for general manager loan) 15,239 6,400
Prepaid expenses 11,883 14,705
Other 1,400 1,361
------- -------
137,064 350,088
------- -------
------- -------
- --------------------------------------------------------------------------------
7 ELRON ELECTRONIC INDUSTRIES LTD. - ACE DIVISION
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
(In U S dollars)
NOTE 5 - FIXED ASSETS
<TABLE>
<CAPTION>
LEASEHOLD OFFICE INSTRUMENTS MOTOR TOTAL
IMPROVEMENTS FURNITURE AND VEHICLES
AND LABORATORY
EQUIPMENT EQUIPMENT
------------ --------- ---------- -------- ------
<S> <C> <C> <C> <C> <C>
Cost -
January 1, 1993 209,110 78,380 514,738 30,343 832,571
Additions - 419 29,241 - 29,660
Disposals - (43,910) (99,329) - (143,239)
------- ------- ------- ------ -------
December 31, 1993 209,110 34,889 444,650 30,343 718,992
------- ------- ------- ------ -------
Accumulated
depreciation -
January 1, 1993 92,327 45,123 376,850 8,905 523,205
Provision 53,028 5,937 68,207 6,220 133,392
Disposals - (30,484) (70,582) - (101,066)
------- ------- ------- ------ -------
December 31, 1993 145,355 20,576 374,475 15,125 555,531
------- ------- ------- ------ -------
Net book value -
December 31, 1993 63,755 14,313 70,175 15,218 163,461
------- ------- ------- ------ -------
------- ------- ------- ------ -------
Annual rates of
depreciation (mainly) 25% 6%-20% 20% 15%
-- ----- -- --
-- ----- -- --
</TABLE>
- --------------------------------------------------------------------------------
8 ELRON ELECTRONIC INDUSTRIES LTD. - ACE DIVISION
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
(In U.S. dollars)
NOTE 6 - OTHER PAYABLES AND ACCRUED EXPENSES
DECEMBER 31
-----------
1993 1992
---- ----
Accrued vacation pay 75,302 67,826
Other accrued expenses and deferred income 14,710 37,268
Other 704 155
------ -------
90,716 105,249
------ -------
------ -------
NOTE 7 - SEVERANCE PAY, NET
The Division's obligation for payment of severance pay to its employees
is mainly discharged by payments to approved funds and to an insurance
company under officers' insurance programs. The deposits with the
provident funds and the insurance programs are not under the control of
the Division and therefore are not reflected in the balance sheet.
NOTE 8 - REVENUES FROM SALES AND SERVICES
YEAR ENDED DECEMBER 31
----------------------
1993 1992 1991
---- ---- ----
Sales -
Adar Inc. (subsidiary of Elron) 200,657 316,220 271,254
ISYS Pic. 414,238 251,357 14,805
Other 140,454 310,673 23,294
------- ------- -------
755,349 878,250 309,353
Services 57,682 95,857 93,182
------- ------- -------
813,031 974,107 402,535
------- ------- -------
------- ------- -------
NOTE 9 - COST OF SALES AND SERVICES
YEAR ENDED DECEMBER 31
----------------------
1993 1992 1991
---- ---- ----
Cost of sales (*) 400,430 108,127 96,394
Cost of services 21,045 13,030 83,012
------- ------- -------
421,475 121,157 179,406
------- ------- -------
------- ------- -------
(*) Including to ISYS plc. 385,561 105,237 12,810
------- ------- -------
------- ------- -------
- --------------------------------------------------------------------------------
9 ELRON ELECTRONIC INDUSTRIES LTD. - ACE DIVISION
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
(In U S dollars)
NOTE 10 - DEVELOPMENT EXPENSES, NET
YEAR ENDED DECEMBER 31
----------------------
1993 1992 1991
---- ---- ----
Salaries and related expenses 619,693 690,614 873,319
Subcontractors 94,406 195,226 211,637
Depreciation 121,235 135,733 121,400
Materials 55,344 61,475 74,391
Other 10,101 31,792 44,804
------- ------- -------
900,779 1,114,840 1,325,551
Less - participation's received
(cancellation of provision),
net (*) (66,506) 396,301 135,173
------- ------- -------
967,285 718,539 1,190,378
------- ------- -------
------- ------- -------
(*) Net of royalties to the
Government of Israel 22,822 26,396 21,251
------- ------- -------
------- ------- -------
NOTE 11 - GENERAL, SELLING AND ADMINISTRATIVE EXPENSES
YEAR ENDED DECEMBER 31
----------------------
1993 1992 1991
---- ---- ----
Rent and office maintenance 129,857 129,858 116,607
Salaries and payroll taxes 73,426 65,338 73,863
Selling expenses 54,040 44,687 28,391
Depreciation 12,157 10,557 12,734
Other 95,257 77,674 106,187
------- ------- -------
364,737 328,114 337,782
Less - participation's received
(cancellation of provision) (24,679) 59,740 -
------- ------- -------
389,416 268,374 337,782
------- ------- -------
------- ------- -------
- --------------------------------------------------------------------------------
10 ELRON ELECTRONIC INDUSTRIES LTD. - ACE DIVISION
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS (CONT.)
- --------------------------------------------------------------------------------
(In U S dollars)
NOTE 12 - OTHER EXPENSES
A. Other expenses reflect fixed assets written off.
B. The statements of income include net expenses (net participation) in
respect of prior periods in the amount of $57,367 (1992 - $(64,118);
1991 - $77,608)
NOTE 13 - COMMITMENTS
A. The Division is committed to pay royalties to the Government of Israel
with respect to products in the development for which the Government
participated by way of grants. Royalties are computed at the rate of
2% of proceeds from sale of these products and services (including
sales by Adar Inc.) up to the amount of such grants.
B. The Division rents office space under a lease expiring on February 28,
1998 (including a renewal option). Annual rental payments are
approximately $60,000.
NOTE 14 - INCOME TAXES
The Division is not a separate entity for tax purposes and accordingly
the financial statements do not reflect a provision for income taxes
or tax benefit.
NOTE 15 - HEAD OFFICE ACCOUNT
DECEMBER 31
-----------
1993 1992
---- ----
Balance at the beginning of the year (*) 675,570 -
Net amounts paid by head office
in respect of the division 801,973 821,616
Net loss (1,007,317) (146,046)
---------- --------
Balance at the end of the year 470,226 675,570
---------- --------
---------- --------
(*) Up to December 31, 1991, the Division's assets and liabilities were not
separated from Elron's.
* * * *
- --------------------------------------------------------------------------------
11 ELRON ELECTRONIC INDUSTRIES LTD. - ACE DIVISION
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PC ETCETERA, INC.
Dated: October 23, 1995 By:/s/ Terry I . Steinberg
--------------------------
Terry I. Steinbert, President
