<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 3
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 0-17419 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) FINANCIAL STATEMENTS 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) Statement of Cash Flows of ACE for the six months ended
June 30, 1994 and 1993;
(iv) Balance Sheets of ACE as of December 31, 1993 and 1992;
(v) Statements of Income of ACE for the years ended
December 31, 1993, 1992 and 1991.
(vi) Statements of Cash Flows of ACE for the years ended
December 31, 1993, 1992 and 1991
No separate financial information is presented with respect to Adar
International, Inc. ("Adar") since it is not a "significant subsidiary" for
financial reporting purposes within the meaning of the rules and regulations of
the Securities and Exchange Commission.
(b) PRO FORMA FINANCIAL INFORMATION
(i) Pro Forma Consolidated Balance Sheet of the Company as
of June 30, 1994;
(ii) Pro Forma Consolidated Statement of Operations of the
Company for the six months ended June 30, 1994;
(iii) Pro Forma Consolidated Statement of Operations of the
Company for the year ended December 31, 1993.
<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: February 12, 1996 By:/s/ Terry I . Steinberg
-----------------------
Terry I. Steinberg, President
<PAGE>
ITEM 7 (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
ACE DIVISION OF ELRON ELECTRONIC INDUSTRIES LTD.
NOTES TO FINANCIAL STATEMENTS
The financial information herein as of June 30, 1994 and for the six months
ended June 30, 1994 and 1993 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.
The balance sheet presented reflects the assets and liabilities before the
acquisition by PC Israel. It does not reflect the balances prior to the
acquisition. The Company has been informed by Elron that the account balances
were transferred back to the parent company as follows:
Assets and liabilities transferred to PC Israel were closed out through an
investment in the Company.
Assets and liabilities not transferred to PC Israel were closed out against
the intercompany (Head Office) account.
The property and equipment acquired was valued at the fair market value and
represents certain computers. The substantial increase in accounts payable and
accrued expenses from December 31, 1993 to June 30, 1994 is primarily related to
salary increases given to employees. In accordance with Israel law, for each
salary increase given to employees, the accrued vacation liability is increased
to the new rates retroactively.
<PAGE>
ACE DIVISION OF ELRON ELECTRONIC INDUSTRIES LTD.
BALANCE SHEET
JUNE 30, 1994
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $911
ACCOUNTS RECEIVABLE 313,912
--------
PREPAID EXPENSES 39,245
--------
TOTAL CURRENT ASSETS 354,068
--------
PROPERTY AND EQUIPMENT:
PROPERTY AND EQUIPMENT 517,397
LEASEHOLD IMPROVEMENTS 209,110
--------
726,507
LESS: ACCUMULATED DEPRECIATION (601,638)
--------
TOTAL PROPERTY AND EQUIPMENT 124,869
--------
TOTAL ASSETS $478,937
--------
--------
LIABILITIES AND STOCKHOLDER'S EQUITY:
CURRENT LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $220,919
PAYROLL TAXES PAYABLE 57,098
DEFERRED REVENUE 19,950
--------
TOTAL LIABILITIES 297,967
--------
STOCKHOLDERS' EQUITY:
HEAD OFFICE 180,970
--------
TOTAL STOCKHOLDERS' EQUITY 180,970
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $478,937
--------
--------
</TABLE>
<PAGE>
ACE DIVISION OF ELRON ELECTRONIC INDUSTRIES LTD
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
------------------------
<S> <C> <C>
REVENUES $347,830 $814,410
COST OF REVENUES 18,114 400,430
------------------------
GROSS PROFIT 329,716 413,980
------------------------
RESEARCH AND DEVELOPMENT EXPENSES (NET) 419,018 857,420
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 372,587 531,952
------------------------
OPERATING (LOSS) (461,889) (975,392)
OTHER INCOME 25,853 73,755
------------------------
NET (LOSS) $(436,036) $(901,637)
------------------------
------------------------
</TABLE>
<PAGE>
ACE DIVISION OF ELRON ELECTRONIC INDUSTRIES LTD.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1994 1993
-----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ($440,118) ($901,637)
ADJUSTMENTS TO RECONCILE NET (LOSS) TO
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Depreciation and Amortization 46,107 32,326
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(Increase) Decrease in Accounts Receivable (7,747) 85,855
Decrease in Other Receivable and Prepayments 122,625 228,596
(Decrease) in Accounts Payable (3,452) (14,200)
(Decrease) in Payroll and Related Expenses (526) (1,187)
(Decrease) in Other Payables and Accrued Expenses (34,629) (15,237)
Increase in Head Office 150,854 502,174
Increase (Decrease) in Severance Pay 173,840 (30,718)
-----------------------------
Net Cash Provided by (Used in) Operating Activities 6,954 (114,028)
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) Disposal of Fixed Assets (7,515) 113,579
-----------------------------
Net Cash Provided by (Used In) Investing Activities (7,515) 113,579
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES: 0 0
-----------------------------
Net Cash Provided by Financing Activities 0 0
-----------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (561) (449)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,472 1,921
-----------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $911 $1,472
-----------------------------
-----------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for
Interest (Net of Amount Capitalized) $0 $0
Income Taxes $0 $0
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON- CASH INVESTING AND FINANCING ACTIVITIES
NONE
DISCLOSURE OF ACCOUNTING POLICY
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid instruments with a maturity of three months or less to be cash
equivalents.
<PAGE>
ITEM 7(b) 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 Adar
International, Inc. 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 June 30, 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 January 1,
1993.
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 pro forma 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
AND SIX MONTHS ENDED JUNE 30, 1994
(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 June 30, 1994. Certain amounts have
been reclassified to conform with the current presentation.
The accompanying unaudited Pro Forma Consolidated Statements of Operations are
presented as if the acquisition transaction occurred on January 1, 1993.
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
AND SIX MONTHS ENDED JUNE 30, 1994
(UNAUDITED)
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATED BALANCE SHEET:
(A) To reflect the pro forma value of the assets acquired including software of
$1,717,286 and the related stock and warrants issued in connection with the
acquisition of the assets of Ace. The amortization period is 5 years.
(B) The $65,000 and $10,000 reported as property and equipment for ACE and
Adar, respectively, at June 30, 1994 net of proforma adjustments was the
approximate fair market value of the assets acquired. The Company has been
informed by Elron that the account balances were transferred back to the parent
company as follows:
- Assets and liabilities transferred to PC Israel were closed out through
an investment in the Company account.
- Assets and liabilities not transferred to PC Israel were closed out
against the intercompany (Head Office) account.
3. ADJUSTMENTS TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS:
(A) To reflect the pro forma amortization expense of software had the
acquisition taken place on January 1, 1993. The software is being amortized over
a five year period.
(B) Pro forma earnings per share consider the 3,300,000 shares issued in
connection with the acquisition, as if they were issued on January 1, 1993.
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1994 ( NOTE 1)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------
PRO FORMA
PC ETC. ACE ADAR ADJUSTMENTS ELIMINATIONS COMBINED
NOTE 2
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $106,335 $911 $0 ($911) (B) $0 $106,335
ACCOUNTS RECEIVABLE 1,816,341 313,912 55,000 45,127 (B) (55,000) 2,175,380
PREPAID EXPENSES & OTHER RECEIVABLES 87,758 39,245 (39,245) (B) 87,758
-------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 2,010,434 354,068 55,000 4,971 (55,000) 2,369,473
PROPERTY AND EQUIPMENT:
PROPERTY AND EQUIPMENT (NOTE 2) 1,297,188 517,397 10,000 (452,397) (B) 0 1,372,188
LEASEHOLD IMPROVEMENTS 222,590 209,110 0 (209,110) (B) 0 222,590
-------------------------------------------------------------------------------------
1,519,778 726,507 10,000 (661,507) 0 1,594,778
LESS: ACCUMULATED DEPRECIATION (708,563) (601,638) 0 601,638 (B) 0 (708,563)
-------------------------------------------------------------------------------------
TOTAL PROPERTY AND EQUIPMENT 811,215 124,869 10,000 (59,869) 0 886,215
OTHER ASSETS:
OTHER ASSETS 39,489 0 0 0 0 39,489
SECURITY DEPOSITS 105,845 0 0 0 0 105,845
SOFTWARE (NOTE 2) 0 0 0 1,717,286 (A) 0 1,717,286
-------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 145,334 0 1,717,286 0 1,862,620
-------------------------------------------------------------------------------------
TOTAL ASSETS $2,966,983 $478,937 $65,000 $1,717,286 $(55,000) $5,118,308
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 965,339 $220,919 0 82,926 (B) ($55,000) $1,214,184
PAYROLL TAXES PAYABLE 81,162 57,098 0 (57,098) (B) 0 81,162
LOANS PAYABLE-OTHERS 719,896 0 0 0 0 719,896
LOANS PAYABLE-AFFILIATE 33,333 0 0 0 0 33,333
CAPITAL EQUIPMENT OBLIGATIONS 129,660 0 0 0 0 129,660
DEFERRED REVENUE 125,807 19,950 0 (19,950) (B) 0125,807
-------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,055,197 297,967 0 5,878 (55,000) 2,304,042
OTHER LIABILITIES
CAPITAL EQUIPMENT OBLIGATIONS 86,935 0 0 0 0 86,935
LOANS PAYABLE-BANK 123,740 0 0 0 0 123,740
-------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,265,872 297,967 0 5,878 (55,000) 2,514,717
-------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
COMMON STOCK 63,374 0 33,000 (A) 0 96,374
PREFERRED STOCK 0 0 488 (A) 0 488
ADDITIONAL PAID IN CAPITAL 1,374,209 0 1,868,992 (A) 0 3,243,201
(ACCUMULATED DEFICIT) (736,472) 0 0 0 0 (736,472)
HEAD OFFICE 0 180,970 65,000 (245,970) 0 0
-------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 701,111 180,970 65,000 1,656,510 2,603,591
-------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $2,966,983 $478,937 $65,000 $1,662,388 $(55,000) $5,118,308
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 (NOTE 1)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------
PRO FORMA
PC ETC. ACE ADAR ADJUSTMENTS ELIMINATIONS COMBINED
NOTE 2
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $5,447,049 $347,830 $61,754 $0 $(36,178) $5,820,455
COST OF REVENUES 2,428,198 18,114 18,067 0 (36,178) 2,428,201
-------------------------------------------------------------------------------------
GROSS PROFIT 3,018,851 329,716 43,687 0 0 3,392,254
0
RESEARCH & DEVELOPMENT EXPENSES (NET) 0 419,018 0 0 0 419,018
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 2,769,142 372,587 276,903 171,729 (A) 0 3,590,361
-------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 249,709 (461,889) (233,216) (171,729) (617,125)
OTHER (INCOME)/EXPENSES, NET 52,785 (25,853) (916) 0 0 26,016
NET INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES 196,924 (436,036) (232,300) (171,729) 0 (643,141)
-------------------------------------------------------------------------------------
PROVISION FOR INCOME TAXES 11,250 0 98 0 0 11,348
-------------------------------------------------------------------------------------
NET INCOME (LOSS) $185,674 $(436,036) $(232,398) $(171,729) $0 $(654,489)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
EARNINGS PER SHARE $0.03 $0 $0 $(0.05) $0 $(0.07)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES 6,337,308 0 0 3,300,000 (B) 0 9,637,308
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 (NOTE 1)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------
PRO FORMA
PC ETC. ACE ADAR ADJUSTMENTS ELIMINATIONS COMBINED
NOTE 2
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES $9,154,564 $813,031 614,864 $0 $(225,295) $10,357,164
COST OF REVENUES 3,803,622 421,475 277,678 0 (225,295) 4,277,480
-------------------------------------------------------------------------------------
GROSS PROFIT 5,350,942 391,556 337,186 0 0 6,079,684
RESEARCH & DEVELOPMENT EXPENSES (NET) 0 967,285 0 0 0 970,492
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 4,683,002 389,416 766,793 343,457 (A) 0 6,179,462
-------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 667,940 (965,145) (429,607) (343,457) 0 (1,070,270)
OTHER EXPENSES, NET 110,665 42,172 37,196 0 0 190,033
-------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 557,275 $(1,007,317) $(466,803) $(343,457) $0 $(1,260,303)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
EARNINGS PER SHARE $0.09 $0 $0 $(0.10) $0 $(0.13)
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES 6,337,308 0 3,300,000 (B) 9,637,308
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1993
ELRON ELECTRONIC INDUSTRIES LTD. -
ACE DIVISION
CONTENTS
PAGE
----
INDEPENDENT AUDITORS' REPORT 2
FINANCIAL STATEMENTS
Balance Sheets as of December 31, 1993 and 1992 3
Statement of Income for the years ended December 31, 1993,
1992 and 1991 4
Statement of Cash Flows for the years ended December 31, 1993,
1992 and 1991 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 and cash flows for the years ended December 31, 1993,
1992 and 1991. These financial statements are the responsibility of the
Division's management. Our responsibility is 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 and its cash flows 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).
LUBOSHITZ, KASIERER & CO
CERTIFIED PUBLIC ACCOUNTANTS (ISRAEL)
Tel-Aviv, Israel
March 9, 1994 except with respect to notes 1, 2, 7, 12, 15
and statement of cash flow which the date is
November 30, 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
-------- --------
163,461 309,366
-------- --------
$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) 90,676 105,249
-------- --------
133,093 160,274
-------- --------
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>
YEAR ENDED DECEMBER 31
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,007,317) $(146,046) $(1,305,031)
Adjustments to reconcile net loss to net cash used in operating
activities (see below) 234,555 (159,482) 87,706
----------- --------- -----------
Net cash used in operating activities (772,762) (305,528) (1,217,325)
----------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in fixed assets (29,660) (81,718) (47,563)
----------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Transfers from parent company, net 801,973 387,958 1,266,097
----------- --------- -----------
Increase(decrease)in cash (449) 712 1,209
----------- --------- -----------
Cash at the beginning of the year 1,921 1,209 -
----------- --------- -----------
Cash at the end of the year $ 1,472 $ 1,921 $ 1,209
----------- --------- -----------
----------- --------- -----------
Adjustments to reconcile net loss to net cash used in operating
activities:
Charges (credits) not affecting cash flows:
Depreciation $133,393 $146,290 $ 134,134
Increase(decrease) in severance pay, net (30,718) 60,327 -
Fixed assets written off 42,173 12,083 -
Changes in operating assets and liabilities:
Increase in accounts receivable (96,175) (69,034) (165,762)
Increase(decrease)in other receivable
and prepayment 213,024 (253,706) (96,382)
Increase in payroll and related expenses 548 27,519 2,015
Increase(decrease)in suppliers (13,156) 25,491 -
Increase(decrease)in other payable
and accrued expenses (14,533) (108,452) 213,701
----------- --------- -----------
$ 234,556 $(159,482) $ 87,706
----------- --------- -----------
----------- --------- -----------
</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.
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 International Inc.). The operations of
Adar International 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 participations 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. The Division has
no significant obligations to customers subsequent to shipment.
NOTE 3 - ACCOUNTS RECEIVABLE DECEMBER 31
-----------
1993 1992
---- ----
Adar International 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 Division is the owner of the
above mentioned insurance policies. 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 International 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 - participations 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 - participations 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). These net expenses (net participation) result from revising
accounting estimates in respect of participation in research and development
expenses and other items and were reflected in the relevant income statement
items in the year in which they became evident.
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
