MENTORTECH INC, SB-2/A, 1997-10-14

MENTORTECH INC
SB-2/A, 1997-10-14
EDUCATIONAL SERVICES

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As filed with the Securities and Exchange Commission on October 14, 1997
Registration No. 333-33677

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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MENTORTECH INC.
(Exact name of Registrant as specified in its charter)

Delaware 8243 13-3260705
(State or other (Primary standard (I.R.S. employer
jurisdiction of industrial classification identification no.)
incorporation or organization) code number)
-------

Terry I. Steinberg, Secretary
Mentortech Inc.
462 Seventh Avenue
New York, New York 10018
(212) 736-5870
(Name, address, including zip code, and telephone number, including area code,
of agent for service; Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
-------
Copies to:

Steven J. Glusband, Esq.
CARTER, LEDYARD & MILBURN
2 Wall Street
New York, New York 10005
(212) 732-3200
Fax: (212) 732-3232

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|

Pursuant to Rule 429 under the Securities Act of 1933 the combined
Prospectus contained in this Registration Statement applies and shall be used in
connection with the registrant's Registration Statement on Form S-2, Commission
File No. 33-93482.

<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION: DATED OCTOBER 14, 1997

PROSPECTUS

MENTORTECH INC.
2,957,838 Shares of
Common Stock
$.01 Par Value Per Share
-----------

This Prospectus relates to the resale of 2,957,838 shares (the "Shares") of
Common Stock, $.01 par value per share (the "Common Stock"), of Mentortech Inc.
(the "Company") by certain stockholders of the Company (the "Selling
Stockholders"). See "Principal and Selling Stockholders." The Shares may be
offered from time to time in transactions effected through the over-the-counter
market on the National Association of Securities Dealers, Inc.'s OTC Bulletin
Board, in negotiated transactions, or a combination of such methods of sale, at
fixed prices that may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, or at negotiated
prices. The Selling Stockholders and certain persons who purchase shares from
them, including broker-dealers acting as principals who may resell the Shares,
may be deemed "underwriters," as that term is defined in the Securities Act of
1933, as amended (the "Securities Act"). See "Plan of Distribution."

The Selling Stockholders acquired the Shares through (i) a March 1995
private placement of Convertible Preferred Stock and warrants to purchase Common
Stock ("Warrants") of the Company (the "1995 Private Placement"); (ii) the
issuance of Warrants as a result of the Company's noncompliance with the terms
of the 1995 Private Placement which required that a Registration Statement on
Form S-2 be declared effective on a specific date (the "Penalty Securities");
(iii) the issuance of Warrants pursuant to antidilution provisions (the
"Antidilution Securities"); and (iv) the conversion of bridge loans made to the
Company in December 1995 (the "1995 Bridge Loans") and October 1996 (the "1996
Bridge Loans" and together with the 1995 Bridge Loans, sometimes collectively
referred to as the "Bridge Loans"). The above-mentioned Convertible Preferred
Stock, Warrants and Bridge Loans were converted into Common Stock pursuant to a
Conversion and Waiver Agreement dated February 6, 1997 and effective February
13, 1997 (the "Conversion Agreement").

The Company will not receive any of the proceeds from the sale of any of
these Shares. The Company has agreed to bear the expenses in connection with the
registration of the Shares being offered by the Selling Stockholders which are
estimated to be $50,000. The Company has agreed to indemnify the Selling
Stockholders against certain liabilities, including liabilities under the
Securities Act.

The Company's Common Stock is quoted on the over-the-counter market on the
National Association of Securities Dealers, Inc.'s OTC Bulletin Board, under the
symbol "MNTK." On October 13, 1997, the average of the bid and the asked prices
of the Common Stock as reported by the National Quotation Bureau Inc. was $0.297
per share.

<PAGE>

The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors" beginning on page 7.
----------

No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus in connection with
the offering made hereby, and if given or made, such information or
representation must not be relied upon as having been authorized by the Company.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that information herein is correct as
of any time subsequent to the date hereof.
----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------

The date of this Prospectus is , 1997.

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the"Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the following regional offices of the Commission: Seven World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Avenue, Suite 1400, Chicago, Illinois 60611-2511. Copies of such material can
also be obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington D.C. 20549 at prescribed rates.

The Commission also maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.

The Company has filed with the Commission a Registration Statement on Form
SB-2 (including all amendments thereto, the "Registration Statement") under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information regarding the Company and the Shares
offered hereby, reference is hereby made to the Registration Statement and to
the exhibits and schedules filed therewith. Descriptions in this Prospectus
regarding the contents of any contract, agreement or other document filed as an
exhibit to the Registration Statement are summaries of all their material
provisions but may not necessarily be complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected at the pubic reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and copies of all or any part thereof
may be obtained from such office upon payment of the prescribed fees.

-------

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus.

The Company

The Company develops and offers instructor-led training ("ILT") and
technology-based training ("TBT") courses for information technology
professionals and end-users and also provides consulting services, in both the
State of Israel and the New York tri-state area. The Company's ILT programs
include a wide range of introductory and advanced classes in operating systems
(Windows 95, Windows NT, UNIX, Netware), word processing, spreadsheets,
databases, communication software, integrated software packages, computer
graphics, desktop publishing, and groupware products, including Lotus Notes. The
Company's TBT software line includes offerings on Lotus Notes, cc: Mail,
Microsoft Office, and other end-user titles.

The Company has been authorized as a training center by many software and
hardware manufacturers, including Aldus, Apple, Borland, Corel, Lotus, Magic
Software Enterprises Ltd., Microsoft, and Novell. The Company offers an
extensive curriculum of Microsoft courses under its Microsoft Advanced Technical
& Education Center Authorization, and Lotus Notes courses under the Company's
Lotus Premium Partner and Lotus Authorized Education Center ("LAEC") Status. The
authorization status entitles the Company to preview new products, and thus
enables the Company to coordinate the introduction of training products
concurrently with product releases. In addition, the authorization status allows
the Company to purchase training manuals from the software publishers and offer
official vendor courses.

The Company develops and offers TBT programs for use in conjunction with
ILT classes, as well as for home and corporate users who use self-study tools
for training and reference. The Company believes that certain software packages
and other computer-related topics are particularly suited to being taught in
this manner. TBT programs, for example, are an economical approach to training
users on new features of software upgrades.

The Company's Consulting Services Division ("CSD") is responsible for
identifying and providing computer personnel, on a temporary basis, to the
Company's client base for special projects. The Company provides its clients
with its own full-time employees, as well as with independent contractors.
Consultants' projects include (i) development of computer programs in accordance
with the client's specifications; (ii) installation of network operating
systems, and networking and communications software tools; (iii) troubleshooting
software problems; and (iv) staffing end-user help desk support.

As discussed in detail in this Prospectus, effective February 13, 1997,
Mentortech Inc. (formerly PC Etcetera Inc.) underwent a change in control
pursuant to a Stock Purchase Agreement

<PAGE>

between Mashov Computers Marketing Ltd. ("Mashov") and PC Etcetera, Inc. (the
"Stock Purchase Agreement"). Mashov acquired 68.5% of the common stock of PC
Etcetera, Inc. on a fully diluted basis, in consideration for which PC Etcetera,
Inc. acquired Sivan Computers Training Center (1994) Ltd. ("Sivan") and Mashov
Computer Based Training (C.B.T.) Ltd. ("Mashov CBT"), both of which corporations
are incorporated under the laws of the State of Israel. Under regulations of the
Commission and generally accepted accounting principles, the stock purchase
transaction has been accounted for as a reverse acquisition such that Sivan and
Mashov CBT are considered the surviving entity, although Mentortech remains the
Registrant for purposes of filing periodic reports with the Commission.
Accordingly, for ease of reference in this Prospectus, when the historical U.S.
operations of Mentortech are discussed, the entity will be referred to as "PCE
U.S." When the historical operations of Sivan and Mashov CBT are discussed, the
entity will be referred to as "Mentortech." When the current consolidated
operations of Mentortech Inc. and its subsidiaries are discussed, the entity
will be referred to as the "Company."

The Company was incorporated in New York in March 1985 as PC Executive
Center, Inc. It changed its corporate domicile to Delaware in December 1987, at
which time it assumed the name PC Etcetera, Inc. The Company changed its name to
Mentortech Inc. on August 4, 1997. The Company's executive offices are located
at 462 Seventh Avenue, New York, New York 10018 (telephone number: (212)
736-5870).

The Offering

Common Stock offered by the Selling Stockholders........ 2,957,838 shares
Common Stock to be outstanding after the offering....... 21,238,495 shares
Use of proceeds......................................... The Company will not
receive any of the
proceeds from the
Offering
Nasdaq Bulletin Board symbol............................ MNTK

Risk Factors

The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."

<PAGE>

Selected Historical and Pro Forma Consolidated Statements of
Operations and Balance Sheets
(in thousands, except per share data)

Six Months
Year Ended December 31, Ended June 30,
----------------------- --------------
Pro Pro
Forma Forma
1995 1996 1996 1996 1997 1997
---- ---- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:

Revenues................................ $6,651 $9,400 $16,442 $4,209 $8,687 $9,289
Cost of revenues........................ 3,849 4,713 9,677 2,224 5,375 5,779
------ ------ ------- --------- ------- ------
Gross profit............................ 2,802 4,687 6,765 1,985 3,312 3,510
Operating expenses:
Selling and Marketing 921 1,446 2,428 556 1,205 1,280
General and Administrative 1,816 3,359 6,049 1,231 1,789 2,054
Research and development............. -- 248 306 102 230 230
----- ---- ------- --------- ------- ------

Income (loss) from operations........... 65 (366) (2,018) 96 88 (54)

Equity in earnings of affiliate......... 61 68 68 32 -- --
Gain on sale of subsidiary -- -- 192 27 33
Financial expenses (net) (433) (455) (595) (307) (97) (111)
Income Taxes (45) (45)
--- --- --- --- --- ---

Net Income (loss) (307) (798) (2,398) (179) 18 (132)
==== ==== ====== ==== == ====

Net income per common share...... $(0.02) $(0.05) $(0.16) $(0.012) $0.001 $(0.01)
====== ====== ====== ======= ====== ======
Weighted average common shares
outstanding.................. 15,000 15,000 15,000 15,000 12,092 15,000
====== ====== ====== ====== ====== ======
Dividends............................... -- -- -- -- -- --

</TABLE>

December 31, 1996 June 30, 1997
----------------- -------------
Balance Sheet Data:

Working capital (deficiency)............ $ (1,618) $ (1,903)
Total assets............................ 6,970 11,430
Total debt.............................. 7,717 6,833
Stockholders' equity (deficit).......... (747) 4,589

<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus.

Operating Results May Fluctuate. The Company has experienced and may in the
future experience significant fluctuations in revenues and operating results
from quarter to quarter due to a combination of factors, many of which are
beyond the Company's control. These factors include: the timing of significant
revenues for the Company's services; new services introductions by the Company
or its competitors; changes in the Company's product or service mix that may
affect revenues, prices, margins or both; further expansion of the Company's
marketing and service operations; disruptions in sources of personnel; changes
in personnel costs; regulatory changes; general economic conditions and other
factors. The Company's operating expenses are based on anticipated revenue
levels, and a high percentage of such expenses are relatively fixed. The Company
believes that its quarterly operating results will continue to be subject to
significant fluctuations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

History of Unprofitable Operations; Accumulated Deficit; Working Capital
Deficiency. During the fiscal years ended December 31, 1995 and 1996, the
Company's operations were unprofitable. In addition, as of June 30, 1997, the
Company had an accumulated deficit of $902,000 and a working capital deficiency
of $1,903,000. Although the Company operated on a marginally profitable basis
during the six month period ended June 30, 1997, no assurance can be given that
it will operate on a profitable basis in the future. The ability of the Company
to continue its operations successfully is materially dependent upon the
marketing of its services and products in a profitable manner and the raising of
any additional capital which it may require. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

Recent Merger; Failure to Manage Growth Effectively Could Have a Material
Adverse Effect on the Company. The Company has grown significantly in 1997 as a
result of the Stock Purchase Agreement. The Company's ability to manage its
growth will require it to continue to improve its operational, financial and
management information systems, and to motivate and manage its employees
effectively. In addition, the Company's management must manage operations which
are international in scope. If the Company's management is unable to manage the
Company's growth and geographically dispersed operations effectively, the
quality of the Company's services, its ability to retain key personnel and its
business and operating results and financial condition could be materially and
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

Company Depends upon Major Customers. There can be no assurance that the
Company's current customers will continue to retain the Company or that the
Company will be able to sell services to new customers. The loss of any one or
more of the Company's major customers could

<PAGE>

materially and adversely affect the Company's business, operating results and
financial condition. See "Business - Marketing."

Market for Company's Services is Highly Competitive. The market for the
Company's services is highly competitive and subject to rapid technological
change. The Company faces competition from a number of entities which presently
provide computer training and consulting services, or market TBT and
computer-based training ("CBT") products, similar to those furnished by the
Company. The Company also encounters competition from educational institutions
providing personal computer training programs, including universities, colleges
and adult education centers, and customers' in-house training staffs. Many of
the entities which provide ILT and consulting services, and market TBT and CBT
products, have greater financial and marketing resources than the Company.
Increased competition could materially and adversely effect the Company's
results of operations through price reductions and loss of market share. There
can be no assurance that the Company will be able to continue to compete
successfully against its existing competitors or that it will be able to compete
successfully against new competitors. See "Business--Competition."

Cancellation of Software Manufacturers' Authorizations. The Company is
authorized to act as a training center by various software manufacturers.
Management believes that such authorizations have several advantages, including
referrals from the software manufacturers and free listings in the advertising
literature published or distributed by such manufacturers. No assurance can be
given that the Company will continue to maintain its authorizations or that it
will be successful in obtaining new authorizations in the future. The inability
to maintain such authorization or obtain new ones could make the Company's
training courses and consulting services less attractive to its clients and thus
materially adversely effecting its financial results and financial condition.
See "Business - Software Manufacturers' Authorized Training Centers."

The Loss of Key Employees Could Have a Material Adverse Effect on the
Company's Business. The Company's success depends to a significant degree upon
its executive officers. The loss of any of Roy Machnes, Chairman and Chief
Executive Officer, Terry I. Steinberg, Executive Vice President for North
American Sales and Marketing, or Elan Penn, Chief Financial Officer, could have
a material adverse effect on the Company's business. The Company's success also
depends upon its ability to attract and retain highly skilled technical,
management and other personnel. Competition for such personnel is intense, and
the inability to attract and retain additional qualified employees or the loss
of current key employees could materially and adversely affect the Company's
business, operating results and financial condition. See "Business - Employees"
and "Management."

Company's Proprietary Technology Has Limited Protection. The Company
possesses limited patent or registered intellectual property rights with respect
to its TBT technology. The Company depends in part upon its proprietary
technology and know-how to differentiate its products and service from those of
its competitors. The Company relies on a combination of contractual rights and
trade secret laws to protect its proprietary technology. There can be no
assurance that the

<PAGE>

Company will be able to protect its technology or that third parties will not be
able to develop similar technology independently. See "Business - Protection of
Proprietary Technology."

Risks Associated with Allegations of Patent Infringement in the Software
Industry. The software industry is characterized by the existence of a large
number of patents and frequent litigation based on allegations of patent
infringement. There can be no assurance that third parties will not assert
infringement claims against the Company in connection with its products, that
any such assertion of infringement will not result in litigation, or that the
Company would prevail in such litigation or be able to license any valid and
infringed patents of third parties on commercially reasonable terms.
Furthermore, litigation, regardless of its outcome, could result in substantial
cost to and diversion of effort by the Company. Any infringement claims or
litigation against the Company could materially and adversely affect the
Company's business, results of operations and financial condition. See "Business
- - Protection of Proprietary Technology."

Company Will Continue to be Controlled by its Principal Stockholder. Upon
completion of this offering, Mashov will beneficially own an aggregate of
approximately 68.5% of the Company's outstanding Common Stock. As a result,
Mashov will be able to exert controlling influence over the outcome of actions
requiring stockholder approval, such as the election of the Company's directors,
amendments to the Company's Certificate of Incorporation and mergers. Roy
Machnes, Chairman of the Board of Directors and the Company's Chief Executive
Officer is also the Chairman of the Board and Chief Executive Officer of Mashov,
and Elan Penn, a Director and the Company's Chief Financial Officer is also the
Chief Financial Officer and a Director of Mashov. In addition, David Assia and
Jack Dunietz are both Directors of the Company and of Mashov. Messrs. Machnes,
Penn, Assia, and Dunietz own 1.51%, 0.4%, 0.56% and 3.15% of voting equity of
Mashov, respectively. Mashov is an 80%-owned subsidiary of Mashov Computers
Ltd., a publicly-held company in Israel. Messrs. Assia and Dunietz are directors
of Mashov Computers Ltd. and are the beneficial owners of approximately 30% of
its issued and outstanding shares. See "Management," "Principal and Selling
Stockholders" and "Description of Capital Stock."

Impact of the Securities Enforcement and Penny Stock Reform Act of 1990.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure in connection with trades in any stock defined as a penny
stock. The Commission has adopted regulations that generally define a penny
stock to be any equity security that has a price of less than $5.00 per share,
subject to certain exceptions (such exceptions including an equity security
listed on Nasdaq) and an equity security issued by an issuer that has (i) net
tangible assets of at least $2,000,000, if such issuer has been in continuous
operation for three years, (ii) net tangible assets of at least $5,000,000, if
such issuer has been in continuous operation for less than three years, or (iii)
average annual revenue of at least $6,000,000, if such issuer has been in
continuous operation for less than three years. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.

<PAGE>

As a result of the Company's common stock not being quoted on Nasdaq and
its failure to have $2,000,000 in net tangible assets, trading in the Company's
common stock is covered by Rule 15cg-9 promulgated under the Exchange Act for
non-Nasdaq and non-exchange listed securities. Under the rule, broker-dealers
who recommend such securities to persons other than established customers and
accredited investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities also are exempt from this rule if the market price is
at least $5.00 per share. The regulations on penny stocks could limit the
ability of broker-dealers to sell the Company's common stock and thus the
ability of purchasers to sell their Shares in the secondary market.

Illiquidity of Trading Market; Sales of Shares Eligible for Future Sale
Could Adversely Affect Market Prices for the Company's Common Stock. The Company
does not currently meet the initial listing requirements for the Nasdaq SmallCap
Market. Accordingly, trading in the Company's Common Stock is conducted in the
over-the-counter market on the Nasdaq Bulletin Board where there is presently
only a limited trading market for such securities. As a consequence, purchasers
of the Shares could find it difficult to dispose of, or obtain accurate
quotations as to the market value of such Shares. In addition, the 2,957,838
shares available for resale pursuant to this Prospectus represent approximately
14% of the outstanding shares of Common Stock of the Company. Sales of
substantial amounts of Common Stock of the Company in the public market
following the effective date of the Registration Statement of which this
Prospectus forms a part could adversely affect the market price for such Common
Stock. At present, less than 2% of the Company's outstanding shares are believed
to be in the public market. See "Price Range of Common Stock" and "Shares
Eligible for Future Sale."

Anti-takeover Provisions of the Company's Certificate of Incorporation and
By-Laws May Adversely Affect Holders of Common Stock or Delay or Prevent
Corporate Takeovers. Certain provisions of the Company's Certificate of
Incorporation and By-Laws could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, control of the Company. Certain of such provisions allow the Company to
issue preferred stock with rights senior to those of the Common Stock and impose
various procedural and other requirements which could make it more difficult for
stockholders to effect certain corporate actions. The issuance of preferred
stock and certain of the provisions in the Company's Certificate of
Incorporation and By-Laws may delay, defer or prevent a change in control of the
Company. The mere existence of these provisions could limit the price that
certain investors might be willing to pay in the future for shares of the Common
Stock and therefore may have a depressive effect on the market price of the
Common Stock. See "Description of Capital Stock."

Delaware Anti-takeover Provisions May Adversely Affect Holders of Common
Stock or Delay or Prevent Corporate Takeovers. Section 203 of the Delaware
General Corporation Law restricts certain business combinations with any
"interested stockholder" as defined in such law. This statute may delay, defer
or prevent a change in control of the Company. See "Description of Capital
Stock."

<PAGE>

Company Does Not Anticipate Paying Dividends. The Company does not
anticipate paying any cash dividends in the foreseeable future. See "Dividend
Policy."

Risks Relating to the Company's Operations in Israel

Operations in Israel. The Company's two Israeli-based subsidiaries were
responsible for 62% of the Company revenues for the first six months of 1997 on
a pro forma basis, and 57% of the combined revenues of PCE U.S., Sivan and
Mashov CBT for the year ended December 31, 1996. Accordingly, the Company's
operations are directly affected by economic, political and military conditions
in Israel. For information with respect to certain factors concerning the State
of Israel, and risks related to its economic and political situation, see
"Conditions in Israel."

Some of the Company's employees are currently obligated to perform annual
reserve duty in the Israeli Defense Forces and are subject to being called for
active duty at any time upon the outbreak of hostilities. While the Company has
operated effectively under these requirements, no shareholder prediction can be
made as to the effect on the Company of any expansion of such obligation. See
"Business - Conditions in Israel."

Impact of Inflation and Currency Fluctuations. In 1995 and 1996
substantially all of Mentortech's expenses were in unlinked New Israeli Sheckels
("NIS") and all of the expenses of the Company's Israeli subsidiaries continued
to be denominated in unlinked NIS. The Company's results are influenced by the
extent to which any inflation in Israel is not offset (or is offset on a lagging
basis) by the devaluation of the NIS in relation to the dollar. The inflation
rate in Israel was 8.1% in 1995 and 10.6% in 1996. At the same time, the
devaluation of the NIS against the dollar was limited to 3.9% in 1995 and 3.7%
in 1996. In the first half of 1997, rate of devaluation increased to 10.3%. The
Company could be adversely affected in the future as a result of currency
fluctuations. See "Management's Discussions and Analysis of Financial Conditions
and Results of Operations" and "Conditions in Israel."

<PAGE>

USE OF PROCEEDS

The Company will receive no part of the proceeds from the sale of any of
the Shares by any of the Selling Stockholders.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1997. This table should be read in conjunction with the Company's Pro Forma
Financial Data and Consolidated Financial Statements and notes thereto and the
other information included elsewhere in this Prospectus.

<TABLE>
(In Thousands)

Adjusted
June 30,
June 30, 1997 Adjustments 1997
------------- ----------- ----
<CAPTION>

<S> <C> <C> <C>
Long-term liabilities............................ $1,138 $1,138
------ ------

Stockholders' equity:
Preferred Stock, $.01 par value; 5,000,000
shares authorized, no shares issued or
outstanding.................................... $ 1 (1)(A) $ --
Common Stock, $.01 par value; 45,000,000 shares
authorized; 15,000,000 shares issued and
outstanding at June 30, 1997 and 21,238,495
shares issued and outstanding
as adjusted (A) (B)............................ 150 62(A) 212

Additional paid-in capital....................... 5,559 50(C) 5,448
Cumulative foreign currency translation 61(A)
adjustment....................................... (211) (211)
Accumulated deficit.............................. (902) (902)
----- ------
Total stockholders' equity................... 4,597 4,547
----- ------
Total capitalization.......................... $5,735 $5,685
===== =====

</TABLE>
__________

(A) To give effect to the conversion of 658,412 shares of Series C Preferred
Stock to 6,584,120 shares of Common Stock in August 1997.

(B) The 21,238,495 shares issued and outstanding as adjusted: (i) excludes
765,000 shares of Common Stock issuable upon exercise of outstanding
options; (ii) excludes 4,235,000 shares

<PAGE>

of Common Stock reserved for issuance pursuant to the Company's 1997 Stock
Option Plan; and (iii) includes 345,595 shares of Common Stock subsequently
contributed to the capital of the Company by Mashov pursuant to the Stock
Purchase Agreement (See Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Background").

DIVIDEND POLICY

The Company currently intends to retain all of its earnings, if any, to
finance future growth, and therefore does not anticipate paying any cash
dividends in the foreseeable future.

PRICE RANGE OF COMMON STOCK

The Common Stock is traded in the over-the-counter market on the National
Association of Securities Dealers' Bulletin Board under the symbol "MNTK". The
following table sets forth the range of the closing high and low bid prices for
the Company's Common Stock as reported by the National Quotation Bureau, Inc.
The quotations below reflect inter-dealer prices without retail markup, markdown
or commission and may not necessarily represent actual transactions.

High Low
1997 Calendar Year
First Quarter................................ $ 3/8 $ 1/4
Second Quarter............................... 5/16 1/4
Third Quarter................................ 7/32 3/16
Fourth Quarter (through October 13, 1997) 7/32 7/32

1996 Calendar Year
First Quarter................................ $ 9/16 $ 9/16
Second Quarter............................... 1/2 1/2
Third Quarter................................ 1/2 1/4
Fourth Quarter............................... 1/4 1/4

1995 Calendar Year
First Quarter................................ $2-1/8 $ 5/16
Second Quarter............................... 2-1/4 1
Third Quarter................................ 1-1/2 1/2
Fourth Quarter............................... 1 1/4

<PAGE>

UNAUDITED PRO FORMA FINANCIAL DATA
Year Ended December 31, 1996

The following unaudited pro forma condensed statements of operations for
the year ended December 31, 1996 give effect to the reverse acquisition by Sivan
and Mashov CBT of PCE U.S. as if the stock purchase transaction occurred on
January 1, 1996.

These pro forma financial statements should be read in conjunction with the
audited financial statements and notes thereto of PCE U.S., Sivan and Mashov CBT
as of and for the year ended December 31, 1996. In management's opinion, all
material adjustments necessary to reflect the effect of the stock purchase
transaction have been made.

The unaudited pro forma consolidated financial statements are not
necessarily indicative of what the consolidated results of operations would have
been for the year ended December 31, 1996 had the sale stock purchase
transaction occurred on January 1, 1996 nor are they necessarily indicative of
the financial position or results of operations for future periods.

<PAGE>

MENTORTECH INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1996
(UNAUDITED)

MENTORTECH SIVAN AND PRO FORMA PRO FORMA
CONSOLIDATED MASHOV CBT ADJUSTMENTS NOTES AS ADJUSTED
------------ ---------- ----------- ----- -----------

(in thousands except for share and per share data)
<S> <C> <C> <C> <C> <C>
Revenue...................... $ 7,042 $ 9,400 $16,442

Cost of revenue.............. 4,964 4,713 9,677
----- ----- ------

Gross profit................. 2,078 4,687 6,765

Selling and Marketing........ 982 1,446 2,428
General and administrative
expenses..................... 2,326 3,359 364 (A)(C) 6,049

Research and development..... 58 248 306
------ ----- ----

Operating loss............... (1,288) (366) (364) (2,018)

Gain on sale of subsidiary... 182 0 182
Other income................. 67 67
Financial expenses, net...... (174) (455) 34 (B) (595)
----- ----- -- ----

Net loss before provision
for income taxes........... (1,213) (821) (330) (2,364)
Income taxes................. 0 (45) (45)
Equity in earnings of affiliate -- 68 68
------ ------ ----- ------
Net loss..................... $(1,213) $ (798) $(330) $(2,341)
======= ====== ===== ======

Loss per share: $ (0.39) $ (0.05) $(0.16)
========== ========== ======
Weighted average number of
shares outstanding 3,138 15,000 15,000

</TABLE>

Adjustments to Pro Forma Consolidated Statement of Operations:

(A) To record the amortization of goodwill for the year as if the transaction
occurred as of January 1, 1996. The goodwill is being amortized over 20
years.

(B) To reverse interest expense related to loans payable - related party which
was converted to equity.

(C) To record additional salary and wages expense that would have been incurred
had the employment contracts with the Executive Vice President and Chief
Financial Officer been effective January 1, 1996.

<PAGE>

UNAUDITED PRO FORMA FINANCIAL DATA
Six Months Ended June 30, 1997

The following unaudited pro forma condensed statements of operations for
the six months ended June 30, 1997 give effect to the reverse acquisition by
Sivan and Mashov CBT of PCE U.S. as if the stock purchase transaction occurred
on January 1, 1997.

These pro forma financial statements should be read in conjunction with the
unaudited financial statements of the Company as of June 30, 1997. In
management's opinion, all material adjustments necessary to reflect the effect
of the stock purchase transaction have been made.

The unaudited pro forma consolidated financial statements are not
necessarily indicative of what the consolidated results of operations would have
been for the six months ended June 30, 1997 had the sale stock purchase
transaction occurred on January 1, 1997 nor are they necessarily indicative of
the financial position or results of operations for future periods.

<PAGE>

MENTORTECH INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>

MENTORTECH PRO FORMA PRO FORMA
CONSOLIDATED ADJUSTMENTS NOTES AS ADJUSTED
------------ ----------- ----- -----------
(in thousands except for per share data)

<S> <C> <C> <C> <C>
Revenues..................... $8,687 602 B $9,289

Cost of revenues............. 5,375 404 B 5,779
------ ----- ------

Gross profit................. 3,312 198 3,510

Selling and Marketing........ 1,205 75 1,280
General and administrative
expenses..................... 1,789 14 A 2,054
251 B
Research and development..... 230 -- 230
----- ------- -----

Operating income (loss)...... 88 (142) (54)
Gain on sale of subsidiary... 27 6 33
Financial expense, net....... (97) (14) B (111)
------ ------- -----

Net income (loss) before
provision for income taxes 18 (150) (132)
Income taxes................. -- -- --
Equity in earnings of affiliate -- -- --
----- ----- ------
Net income (loss)............ $18 $(150) $(132)
====== ====== ======

Earnings (loss) per share:... $.001 $ (.01)
===== =======

Weighted average number of
shares outstanding......... 12,092 15,000

</TABLE>

Adjustments to Pro Forma Consolidated Statement of Operations:

(A) To record the amortization of goodwill for the six months as if the
transaction occurred as of January 1, 1997. The goodwill is being amortized over
20 years.

(B) To record the results of operations for PCE U.S. for the period January
1, 1997 through the acquisition effective February 13, 1997.

<PAGE>

SELECTED FINANCIAL DATA

The selected financial data of the Company set forth below are qualified by
reference to, and should be read in conjunction with, the financial statements
and notes thereto included elsewhere in this Prospectus. The financial
statements for the years ended December 31, 1995 and 1996 included in this
Prospectus reflect the operations of Sivan and Mashov CBT. Because of the change
in control, the stock purchase transaction between Mashov and PCE U.S. was
accounted for as a reverse acquisition. Based on such accounting treatment,
Sivan is reported as the surviving entity. The unaudited financial statements
for the six months ended June 30, 1997 included in this Prospectus reflect the
operations of Sivan and Mashov CBT since January 1, 1997, and PCE U.S. and PC
Etcetera Israel since February 1, 1997, the date of the stock purchase
transaction used for accounting purposes. The unaudited financial statements for
the six months ended June 30, 1996 reflect the operations of Sivan and Mashov
CBT. Mashov CBT did not begin operations until the second quarter of 1996. In
the opinion of management, the unaudited financial information of the Company
has been prepared on the same basis as the audited financial statements and
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial data for such periods.

<PAGE>

Selected Historical and Pro Forma Consolidated Statements of
Operations and Balance Sheets
(in thousands, except per share data)

Six Months
Year Ended December 31, Ended June 30,
----------------------- --------------
Pro Pro
Forma Forma
1995 1996 1996 1996 1997 1997
---- ---- ---- ---- ---- ----

<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:

Revenues................................ $6,651 $9,400 $16,442 $4,209 $8,687 $9,289
Cost of revenues........................ 3,849 4,713 9,677 2,224 5,375 5,779
------ ------ ------- ------- ------- -------
Gross profit............................ 2,802 4,687 6,765 1,985 3,312 3,510
Operating expenses:
Selling and Marketing 921 1,446 2,428 556 1,205 1,280
General and Administrative 1,816 3,359 6,049 1,231 1,789 2,054
Research and development............. -- 248 306 102 230 230
--- --- --- --- --- ---

Income (loss) from operations........... 65 (366) (2,018) 96 88 (54)

Net income per common share...... $(0.02) $(0.05) $(0.16) $(0.012) $0.001 $(0.01)
====== ======= ======= ======== ====== ======
Weighted average common shares
outstanding.................. 15,000 15,000 15,000 15,000 12,092 15,000
====== ====== ====== ====== ====== ======
Dividends............................... -- -- -- -- -- --

</TABLE>

December 31, 1996 June 30, 1997
----------------- -------------
Balance Sheet Data:

<PAGE>

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

This Prospectus contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Such
forward-looking statements involve known and unknown risks and uncertainties
that may cause the actual results, performance, levels of activity, or
achievements of the Company and its consolidated subsidiaries, or industry
results, to be materially different from any future results, performance, levels
of activity, or achievements of the Company expressed or implied by such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, general and economic business
conditions, changes in the industry, and the ability of the Company to implement
its business strategy, as well as those discussed elsewhere in this Prospectus.
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto of the Company, PCE U.S. and Mentortech
(formerly Sivan and Mashov CBT) included elsewhere in this Prospectus. All
dollar amounts referred to herein are in thousands.

Background

Effective February 13, 1997, a change of control of PCE U.S. occurred
pursuant to the Stock Purchase Agreement between PCE U.S. and Mashov, whose
shares are publicly traded on the Tel-Aviv Stock Exchange (the "TASE"). Mashov
is a subsidiary of Mashov Computers Ltd., whose shares are also publicly traded
on the TASE. Based on the Stock Purchase Agreement, Mashov acquired 8,438,924
shares of Common Stock and 658,412 shares of Series C Preferred Stock of PCE
U.S. (collectively, the "Sale Stock"), where each share of Series C Preferred
Stock is convertible into 10 shares of Common Stock and has 10 to 1 voting
rights in relation to shares of Common Stock. In consideration for the Sale
Stock, PCE U.S. acquired two of Mashov's subsidiaries, Sivan and Mashov CBT.
Pursuant to the Stock Purchase Agreement, Mashov acquired 69% of PCE U.S.'s
equity and voting securities on a fully diluted basis, subject to an adjustment
based upon the fiscal year 1996 audited balance sheets of PCE U.S., Sivan and
Mashov CBT. Such adjustment was made on August 4, 1997 when Mashov contributed
345,595 shares of Common Stock to the capital of the Company. In addition, on
August 4, 1997, the 658,412 shares of Series C Preferred Stock were converted by
Mashov into 6,584,120 shares of Common Stock. As a result of the adjustment
discussed above and such conversion, Mashov currently owns 68.5% of the Common
Stock.

As a result of the execution of the Stock Purchase Agreement with Mashov,
PCE U.S.'s working capital position improved. The Stock Purchase Agreement
provided that Sivan and Mashov CBT have net tangible assets of $2,200, where
such assets included a cash contribution by Mashov of $1,500 to PCE U.S.

In connection with the execution of the Stock Purchase Agreement, PCE U.S.
executed the Conversion Agreement effective February 13, 1997 with certain prior
holders the Company's equity securities and debt (the "Conversion Parties").
Pursuant to the Conversion Agreement, the Conversion Parties received Common
Stock in consideration for the cancellation of the debt owed

<PAGE>

by PCE U.S. and as a result of antidilution provisions relating to the
securities owned by the Conversion Parties. After giving effect to the
Conversion Agreement, and aggregating their prior holdings, the Conversion
Parties held 4,812,509 shares of Common Stock. In addition, 668,531 shares of
Common Stock were issued to PCE U.S.'s financial adviser, Helix Capital, LLC, in
the transaction.

Recent Corporate Events

At the Company's 1997 Annual Meeting held August 4, 1997, the Company's
stockholders voted to (i) amend the Company's Certificate of Incorporation to
change the name of the Company to Mentortech Inc.; (ii) amend the Company's
Certificate of Incorporation to increase the number of authorized shares of
capital stock of the Company from 20,000,000 to 45,000,000 comprised of
40,000,000 shares of Common Stock, par value $.01 per share, and 5,000,000
shares of Preferred Stock, par value of $.001 per share; (iii) authorize the
conversion of each of the 658,412 outstanding shares of the Company's Series C
Preferred Stock into ten shares of Common Stock; and (iv) ratify the Company's
1997 Stock Option Plan.

Six Month Period Ended June 30, 1997 as Compared with the Six Month Period Ended
June 30, 1996.

Revenues. The Company's revenues are derived from training services,
contractual consultation services, and TBT product sales. The Company's revenues
relating to ILT are recognized over the life of the training course. Franchise
revenues from centers operating with the Sivan trade name in Israel and
utilizing Sivan's training materials are included in ILT revenues. Contract
consulting revenues are recognized as the services are performed. TBT revenues
are recognized upon shipment of the software provided that no significant vendor
obligations remain and collection of the related receivable is probable. The
Company's refund policy provides that dissatisfied trainees may either attend
the same course without charge or the trainee's employer may request a full
refund. It is Company policy to reserve for potential refunds; however, an
allowance for refunds has not been established because historically minimal
refunds have been issued. Retakes of a course are provided on a seat available
basis. Accordingly, the Company does not incur any financial exposure with
respect to such retakes.

Revenues for the six months ended June 30, 1997 increased 106% to $8,687
from $4,209 for the comparable 1996 period. Sivan training revenues increased by
32% from $4,166 for the six months ended June 30, 1996 to $5,491 for the six
months ended June 30, 1997. Sivan Computers Jerusalem (1988) Ltd. ("Sivan
Jerusalem"), a company in which Sivan had held a 50% equity investment until
January 1997 when Sivan purchased the remaining equity, accounted for 38% of
Sivan's increased revenues. Sivan's share of Sivan Jerusalem's results of
operations were reported as equity earnings of an affiliate in 1996. The
remaining increase in Sivan's revenues was due primarily to its success in
offering more profitable technical courses as well as to an increase in the
number of application courses offered.

<PAGE>

The operations of Mashov CBT began in April 1996, therefore the 1996
amounts only reflect three months of operations rather than six.

As indicated above, for accounting purposes Sivan and Mashov CBT acquired
PCE U.S. in February 1997. PCE U.S.'s revenues for the six months ended June 30,
1997 were $3,359 and accounted for 75% of the Company's increased revenues for
the period. The Company has placed more emphasis on the growth of the CSD
business of PCE U.S. in 1997. Consulting revenues for PCE U.S. were $2,473 for
the six months ended June 30, 1997. During the six months ended June 30, 1997,
PCE U.S. continued to experience declining ILT revenues as ILT revenues totaled
$886. Management attributes the declining ILT revenues to the fact that software
vendors did not release many new versions of existing software during the
period. The Company has recently begun to experience an increase in ILT revenue
in the New York metropolitan area due to the continued implementation of Office
97 products.

The Company is pursuing a move into the higher end training market as many
organizations require certification training for Microsoft and Lotus back office
applications and operating systems which historically have had higher margins.
Management believes that this higher technical training environment has a better
synergy with the Company's growing consulting business.

Cost of Revenues. Cost of revenues for ILT consists primarily of the
expenses of instructors, classroom space costs as well as amortization of
classroom equipment. Cost of revenues for consulting services consists primarily
of the labor costs of the consultants performing the work at our clients'
facilities. Cost of revenues for TBT sales include packaging and manufacturing
costs of the products.

Cost of revenues rose to 62% of revenues for the six months ended June 30,
1997 as compared to 53% of revenues for the six months ended June 30, 1996. Cost
of revenues for Sivan was 61% of revenues for the six months ended June 30, 1997
as compared to 51% for the comparable period in 1996. This increase was
primarily due to an increase in amortization expense as a result of a
substantial investment in new classroom computer equipment. Amortization expense
for classroom computers increased by 59% for the six months ended June 30, 1997
as compared to the 1996 comparable period. Cost of revenues for PCE U.S. were
59% of revenues for the six months ended June 30, 1997.

Selling and marketing expense. Selling and marketing expenses consist
primarily of costs relating to promotion, advertising, trade shows and
exhibitions. Such expenses also include compensation of sales support, travel
and related expenses. Sales and marketing expenses increased by $649 to $1,205
during the six months ended June 30, 1997, from $556 for the six months ended
June 30, 1996. Selling and marketing expenses of Sivan increased by 47% for the
six months ended June 30, 1997, compared to the same period in 1996. This
increase is due to Management's decision to increase sales and marketing
expenses in order to obtain increased revenues. Sivan's increase in sales and
marketing expenses correlates with its increase in revenue. Selling and
marketing

<PAGE>

expenses for PCE U.S. increased to $321 for the six months ended June 30, 1997,
from $185 for the six months ended June 30, 1996.

General and administrative expense. General and administrative expenses
include compensation costs for administration, finance and general management
personnel and office maintenance and administrative costs. General and
administrative costs for the Company increased by $558 to $1,789 during the six
months ended June 30, 1997, from $1,231 for the six months ended June 30, 1996.
These increases were due entirely to the expansion and the inclusion of the
results of Sivan Jerusalem, Mashov CBT and PCE U.S. General and administrative
expenses were $558 for PCE U.S., $1,098 for Sivan, and $132 for Mashov CBT for
the six months ended June 30, 1997. General and administrative expenses for
Sivan decreased by $101 for the six months ended June 30, 1997, compared to the
same period in 1996.

Research and development. Research and development expenses consist
primarily of salaries of employees engaged in ongoing research and development
activities of TBT materials and other related costs. Research and development
expenses amounted to $230 for the six months ended June 30, 1997 compared to
$102 for the six months ended June 30, 1996. Research and development is
primarily incurred by Mashov CBT which did not begin operating until the second
quarter of 1996.

Financial expenses, net. Financial expenses consist primarily of bank
charges and interest expenses. Financial expenses decreased to $97 for the six
months ended June 30, 1997 from $307 for the six months ended June 30, 1996.
This decrease was due principally to the conversion of $2,578 of shareholder
loans into equity by Sivan in the first quarter of 1997 and the repayment of PCE
U.S.'s receivables financing with Rosenthal and Rosenthal during the second
quarter of 1997.

Income from operations. As a result of the foregoing, the Company had
income from operations of $88 for the six months ended June 30, 1997 compared to
$96 for the six months ended June 30, 1996.

Equity in earnings of an affiliate. The Company recognized income and loss
from its affiliate, Sivan Jerusalem, which corporation was 50% owned until
January 1997, when Mentortech acquired all of the outstanding shares of such
company. In the six months ended June 30, 1996 the Company recognized $32 in
income from its equity interest in Sivan Jerusalem Ltd.

Net income (loss). Sivan's income was $165 for the six months ended June
30, 1997 compared to a net loss of $69 for the six months ended June 30, 1996.
During both the first and second quarters of 1997, both Sivan and PCE U.S.
operated on a profitable basis, which profits were offset by the unprofitable
operations of Mashov CBT, which incurred losses of approximately $257 during the
period. Management expects Mashov CBT to continue to operate at a loss for the
remainder of 1997 while the Company invests in the subsidiary's future.

<PAGE>

Year Ended December 31, 1996 Compared with Year Ended December 31, 1995.

Revenues. In 1995, the revenues of Mentortech were derived exclusively from
training services while a limited amount of revenues were recorded from product
sales in 1996. Mashov CBT was established in 1996 and therefore there were no
CBT revenues in 1995. Revenues increased by 41% to $9.4 million in 1996 from
$6.7 million in 1995. In 1996, $9.2 million of revenues were attributable to the
operations of Sivan while $242 related to the operations of Mashov CBT. The
increase in revenues in 1996 was principally attributable to the substantial
growth in demand for most of the courses offered by Sivan. In addition, a new
branch was opened in Or-Yehuda in the last quarter of 1995 and a new franchisee
was appointed in Raananna.

Cost of revenues. Cost of revenues increased 22.4% to $4.7 million in 1996
from $3.8 million in 1995, substantially all of which related to Sivan's
operations. The increase was principally due to increased payroll, teaching
materials, classroom leasing costs and depreciation of classroom equipment. In
1996, Mashov CBT's cost of revenues was $34, which amount principally related to
CD duplication and packaging costs. Mentortech's cost of revenues in 1996 were
50.1% of revenues. In 1995, Sivan's cost of revenues was 57.9%. The reduction in
Sivan's costs of revenues as a percentage of revenues in 1996 was principally
due to larger class enrollment in Sivan's course offerings as compared to 1995.

Research and development. Research and development costs consist primarily
of salaries of employees engaged in ongoing research and development activities
and other related costs. Such costs amounted to $248 in 1996. Research and
development costs are primarily attributable to Mashov CBT.

Selling and marketing. Selling and marketing expenses increased 57% to $1.4
million in 1996 from $921 in 1995 as a result of an increase in Sivan's
advertising costs, which costs include telemarketing costs and salaries of
telesales personnel. In 1996, Sivan's selling and marketing expenses totaled
$1.3 million while Mashov CBT's selling and marketing expenses were $176. As a
percentage of revenues, Sivan's selling and marketing expenses remained at 14%
for both 1995 and 1996.

General and administrative. General and administrative expenses increased
85% to $3.4 million in 1996 from $1.8 million in 1995. Sivan's general and
administrative expenses increased 78% to $3.2 million in 1996 from $1.8 million
in 1995. Mashov CBT general and administrative expenses totaled $130 in 1996.
Sivan's general and administrative expenses increased to $2.5 million in 1996
from $1.6 million in 1995, a 55% increase. These figures do not give effect to
the Mashov management fees, thus the total 1996 and 1995 general and
administrative expenses were $3.2 million and $1.8 million, respectively. During
1996 and 1995, Sivan was charged management fees by Mashov in the amounts of
$691 and $181, respectively. In those years Messrs. Machnes and Penn devoted a
substantial portion of their time to the day-to-day management of Sivan, which
was the principal subsidiary of Mashov, and to a lesser extent to the start-up
activities of Mashov CBT.

<PAGE>

During 1995 and 1996, the salaries, benefits and perquisites of Messrs. Machnes
and Penn were paid by Mashov, which gave rise to the billing of the management
fees. The fees were calculated based on the levels of compensation previously
paid to these managers, including associated expenses.

As a percentage of revenues, Sivan's general and administrative expenses,
without giving effect to the Mashov management fees, was 27.7% in 1996 and 24.6%
in 1995. The increase in general and administrative expenses was principally due
to the increase in sales as Sivan attempted to manage its continued growth which
included the opening of the Or-Yehuda branch in late 1995. Beginning in 1997,
Mashov ceased charging management fees. In 1996, Mashov CBT's general and
administrative expenses totaled $73, of which $57 were management fees paid to
Mashov. Similarly, beginning in 1997, Mashov ceased charging Mashov CBT any
management fees.

Financial expenses, net. Financial expenses, net, consisted primarily of
interest expenses on a loan provided by Mashov. Financial expenses increased 5%
to $455 in 1996 from $433 in 1995. In 1996, substantially all of the financial
expenses of Mentortech related to the operations of Sivan, except for $3
attributable to Mashov CBT. The interest charged to Sivan by Mashov in 1996 was
$434 as compared to $355 in 1995.

Income taxes. In 1996, Mentortech incurred income taxes of $45. Mentortech
did not incur any taxes in 1995. Although Mentortech incurred a pretax loss from
operations of $821 in 1996, a tax liability arose from a tax adjustment in
respect of inflation in Israel, taxes assessed in previous year's operations and
nondeductible expenses.

Equity in earnings of an affiliate. Mentortech recognized income and
loss from its affiliate, Sivan Jerusalem, which corporation was 50% owned until
January 1997, when Mentortech acquired all of the outstanding shares of such
company. In 1996, Mentortech recognized $68 from its equity interest as compared
to $61 in 1995.

Net loss. As a result of the foregoing Mentortech incurred a net loss of
$798 in 1996, of which $452 was attributable to Sivan and $346 attributable to
Mashov CBT. In 1995 Sivan incurred a net loss of $307.

Liquidity and Capital Resources

At June 30, 1997, the Company had $121 in cash and cash equivalents and a
working capital deficiency of $1,903. At December 31, 1996, the cash and cash
equivalents and working capital deficiency was $50 and $1,946, respectively, for
PCE U.S., and $283 and $1,618, respectively, for Mentortech. The improvement of
the Company's cash position was a result of Mashov's infusion of $1,200 pursuant
to the Stock Purchase Agreement. The increase in cash was offset by an increase
in accounts receivable and an investment in computer equipment and other fixed
assets.

The Company used net cash of $510 in operating activities in the six months
ended June 30, 1997. Accounts receivable increased by $199 during the period.
This increase was due primarily

<PAGE>

to the increase in revenues. Trade payables decreased by $594 during the period.
The Company's investing activities provided $550 mainly from the cash received
in connection with the Stock Purchase Agreement offset by the purchase of $657
in fixed assets and $45 used to purchase Sivan Jerusalem. Financing activities
used $201, principally for the repayment of debt.

In 1997, the Company obtained an oral commitment from its Israeli bank to
provide Sivan up to $1 million in working capital loans. As of June 30, 1997,
Sivan had borrowed $331 from such bank. The Company expects to invest
approximately $400 in new computer equipment during the remainder of 1997. Based
on the commitment of its Israeli bank and the representation by Mashov that it
will provide continued financial support, if necessary, to meet the Company's
obligations for the remainder of 1997, the Company believes it has sufficient
capital to meet its obligations through at least the end of 1997.

In order to facilitate its planned growth, the Company intends to seek
additional equity or other financing later this year. No assurance can be given
that it will be successful in obtaining such financing. If such financing is not
obtained, no assurance can be given that the Company will be able to implement
its planned growth.

<PAGE>

BUSINESS

Introduction

The Company develops and offers ILT and TBT courses for information
technology professionals and end-users and also provides consulting services, in
both the State of Israel and the New York tri-state area. The Company's
instructor-led training programs include a wide range of introductory and
advanced classes in operating systems (Windows 95, Windows NT, UNIX, Netware),
word processing, spreadsheets, databases, communication software, integrated
software packages, computer graphics, desktop publishing, and groupware
products, including Lotus Notes. The Company's TBT software line includes
offerings on Lotus Notes, cc: Mail, Microsoft Office, and other end-user titles.
The Company's CSD provides short to medium term technical consulting to large
and mid-sized corporations in the Northeast region of the U.S., although no
single client accounts for more than 10% of the Company's revenues.

The Company has been authorized as a training center by many software and
hardware manufacturers, including Novel, Microsoft, Aldus, Apple, Borland,
Corel, Lotus and Magic Software Enterprises Ltd. The Company offers an extensive
curriculum of Microsoft courses under its Microsoft Advanced Technical &
Education Center Authorization, and Lotus Notes courses under the Company's
Lotus Premium Partner and LAEC Status. The authorization status entitles the
Company to preview new products, and thus enables the Company to coordinate the
introduction of training products concurrently with product releases. In
addition, the authorization status allows the Company to purchase training
manuals from the software publishers and offer official vendor courses.

The Company develops and offers TBT programs for use in conjunction with
ILT classes, as well as for home and corporate users who use self-study tools
for training and reference. The Company believes that certain software packages
and other computer-related topics are particularly suited to being taught in
this manner. In addition, the Company develops custom TBT titles providing
training for applications developed in-house by clients.

Demand for training in information technology products is generated by the
rapid pace of technology's product cycles. The pace of emerging technologies has
increased dramatically and this has fueled a demand for IT training and
consulting. The business community continues to adopt the

<PAGE>

technologies, thus absorbing the continuing introduction of new products.
Publishers of tools, operating systems and applications produce new versions, on
average, once a year and some even maintain a pace of twice a year or more. For
instance, the emergence of the Internet has created an urgent need to train
programmers in the platform language. Following the initial implementation, new
technologies have emerged, including HTML, Java, ActiveX, audio and video
support. The need to master new versions creates continued demand for training.

Background

U.S. Operations

PCE U.S. was founded in 1985 to serve the growing demand for PC training
following the introduction and proliferation of the IBM PC. Later, the Company
grew serving the training requirements generated by the propagation of the PC at
the corporate desktop. The massive migration from text-based DOS PC's to
Windows-based operating systems generated another growth spurt. Corporations and
individuals making the change from DOS to Windows required the training services
that PCE U.S. offered. PCE U.S.'s main focus was on end-user applications
training via instructor-led training and technology-based training. PCE U.S.
followed a typical training model, offering day-long, multi-day sessions. PCE
U.S. trained approximately 45,000 students in 1994, 33,000 students in 1995,
28,000 students in 1996, and 11,194 students for the nine months ended,
September 30, 1997. As disclosed herein, the ILT revenues of the U.S. operations
have been decreasing.

In the late 1980s and early 1990s PCE U.S. embarked on a geographic
expansion plan that resulted in substantial losses. Throughout this period PCE
U.S.'s operations in the New York metropolitan market continued to be
profitable. PCE U.S. sold a Canadian subsidiary in January 1996, shut-down its
Israeli-based R&D center in March 1996 and sold a San Francisco branch in April
1996.

Prior to the stock purchase transaction with Mashov, PCE U.S. began to
experience a decline in its traditional ILT business which trend has continued
into 1997. In addition, failed investments had left the Company with an
insufficient amount of capital to expand internally, particularly in its growing
CSD business. The stock purchase transaction with Mashov has allowed the Company
to expand its ILT business and has provided the Company with additional capital
for expansion.

Israeli Operations

Sivan

Sivan was founded in 1977. At such time it principally offered classes in
systems analysis and programming. The operations of Sivan were acquired by
Mashov in 1994. Under the leadership of the current management team, Sivan's
sales increased from approximately $4 million in 1994 to $9.2 million in 1996.
Sivan is a leading Israeli IT training company, with over sixty classrooms in

<PAGE>

ten cities throughout Israel. Sivan is certified by numerous software
publishers, including Novell, Microsoft, Borland, SCO, Lotus, MSE and others.
Several of Sivan's sites have been awarded Microsoft's Advanced Technical
Education Center Authorization, with the remainder expected to be authorized in
the near future.

Sivan trained approximately 31,000 students in 1994, 42,000 students in
1995, 55,000 students in 1996, and 40,000 students for the eight months ended
August 31, 1997. In 1996, training revenues were split 60% for individual
students and 40% for governmental and corporate-sponsored training. The
subsidiary employs 75 full time people and uses a combination of in-house and
free-lance trainers to fulfill the demand for its services. Due to Sivan's size
and its ability to provide many teaching hours to its free-lance contractors,
Sivan's agreements with them stipulate that they can only teach at Sivan's
locations and can not maintain their Sivan contracts if they teach for other
training companies. This arrangement ensures that, while Sivan maintains its
adjunct professional teaching faculty, it does not incur the benefits cost
associated with full-time employment contracts.

The model that Sivan employs to deliver all of its ILT courses is based on
a four-hour session model, rather than one-day courses as is the prevalent model
in the U.S. Management believes that teaching a course in four-hour sessions
over a greater length of time with added content, exercises, and homework is a
more effective way of learning technology.

Currently, Sivan is investing substantial efforts in increasing the number
of its value-added technical courses. Sivan offers one-year professional
acquisition programs, training participants to become programmers, PC
technicians, communication technicians, system analysts and help-desk end-user
support professionals. Sivan is currently launching new communications training
programs in cooperation with leading networking equipment companies, Internet
design and programming, ActiveX and Java professional training programs. These
courses have been extremely effective and generate continued demand from
graduates who require technical updates during their professional career. During
the last two years, Sivan has graduated over 2,000 individuals from such
courses. Its diplomas are recognized by leading Israeli technology companies and
the Israeli Government's Ministry of Labor. Sivan supplements its ILT end-user
training courses with TBT materials, thus reducing end-user training costs and
freeing up instructors to teach technical courses.

Mashov CBT

Mashov CBT is engaged in the development of technology-based training
products. Mashov CBT's products include TBT titles for end-user applications,
custom projects, Hebrew and English titles for training in Microsoft Office,
Lotus Notes and cc:Mail. Mashov CBT provides full service custom development of
training concepts, supporting materials, delivery media and tools. Custom
projects are tailored to corporate needs, such as training for bank tellers,
insurance agents, product scheduling. Mashov CBT is currently engaged in the
development of TBT products to work in conjunction with Sivan's ILT offerings.

<PAGE>

Mashov CBT's products are targeted at corporations who utilize LANs, WANs,
Intranet and Internet. The TBT products are network-compatible and are easily
integrated into clients' systems. Mashov CBT intends to continue to expand its
product line to capitalize on the increasing capacity of such networks,
ultimately leading to fully-interactive network video and audio. As the Internet
becomes a more pervasive platform, Mashov CBT intends to offer Internet delivery
of training and know-how. Content will be delivered anytime, anyplace and
on-demand to users. Mashov CBT is preparing content and technical competency to
exploit this developing platform in the U.S. and Israeli markets. Intertrainer
is a tool developed by Mashov CBT for Internet delivery of training. The content
is viewed through popular Internet browsers such as Netscape and Microsoft
Explorer, and supports full simulation mode, drag and drop simulations, audio,
and video delivery. Intertrainer allows an organization to maintain and support
a single point TBT server accessible for any user with network access.

Consulting Services

CSD identifies and provides independent computer professionals, on a
temporary basis, to the Company's client base for special projects. For example,
the Company currently has six help-desk professionals on assignment at large
pharmaceutical company, three end-user analysts on assignment at a multinational
consumer products company and three Lotus Notes application specialists on
assignment at a "Big Six" accounting firm. Such projects include the development
of computer programs in accordance with the client's specifications and
requirements, the linking of client computers to allow the client's employees to
share information, files and devices, providing expertise for the client's
software programs, and providing troubleshooting services for software problems.
The Company charges its clients for such services on an hourly or daily basis.
The Company currently furnishes its full-time employees, as well as independent
contractors, to satisfy its clients' requirements.

The Company is expanding its U.S.-based consulting practice by implementing
an incentive program for consultants and by developing a database of active IT
professionals, in addition to increasing recruiting initiatives, advertising,
and expanding the sales force. This strategy will enable the Company to retain a
cadre of qualified, highly-trained IT professionals for placement into
short-term and long-term consulting assignments or permanent positions.

The Company believes that the key for success in this area is the ability
to recruit and retain suitable consultants. Currently demand for professionals
with advanced skills far exceeds supply. The Company has adopted two incentive
programs in order to attract loyal IT professionals. These programs offer
employees reduced training fees and incremental pay raises based on the number
of consulting hours each has logged through the Company. The reduced training
fees will enable the consultants to stay current with changing technologies and
further equip them for assignments. Management believes that linking pay raises
with accumulated consulting hours will encourage consultants to dedicate their
services to the Company's clients. It is hoped that increased consultant loyalty
will result in improved skills and repeat placement in consulting assignments.

<PAGE>

Business Strategy

In 1995, 1996 and the six months ended June 30, 1997, the Company and its
predecessor derived substantially all of their revenues from training and
consulting services. As reflected in the following table, revenues from U.S.
training service declined in this period while increasing in Israel and revenues
from U.S. consulting services grew.

Revenues
--------
Six months
Year ended December 31, ended June 30,
----------------------- --------------
1995 1996 1997
---- ---- ----
(in thousands)
U.S. training................... $8,136 $3,038 $1,109
Israel training................. 6,651 9,158 5,491
U.S. consulting................. 3,940 4,003 2,474
Israel CBT...................... -- 242 227

Management believes that the Company's future growth will most likely be
attributable to its operations in the U.S., where it believes substantial
opportunities exist for growth. Management believes that Sivan has captured
approximately 50% of the Israeli ILT market and that future growth will be
constrained by the size of the Israeli training market. Management believes that
Sivan's operating results will improve in the future due to it ability to
attract additional students who are seeking added-value technical course
training. The Company is presently attempting to increase its U.S. training
revenues by utilizing Sivan's successful training model in its training
operations and through the acquisition of smaller training companies, initially
in the tri-state New York metropolitan area. No assurance can be given that the
Company will be successful in introducing Sivan's model program into the U.S.,
will be able to acquire such businesses or that such acquisitions, if any, will
be successful.

Management also believes that there is a significant opportunity for its
U.S. based consulting practice to expand its operations. The Company is
attempting to accelerate the growth of this business by developing a data base
of IT professionals, increasing its recruiting initiatives and advertising, and
by expanding its sales force. The strategy is geared to the Company assembling a
group of highly trained professionals for placement into short-term and
long-term temporary assignments as well as permanent positions.

Based on industry research, management expects that the TBT market will
continue to grow for the immediate future. The Company's strategy is to capture
a larger segment of this market by continuing to expand its product line of TBT
products.

<PAGE>

The Company has begun to implement its strategies and during the six months
ended June 30, 1997 its operations were marginally profitable. Management
expects that if it is successful in increasing the Company's revenues, its
operating results will improve further.

Training Programs

Methodology

The Company has developed a variety of computer training programs utilizing
different methods. One method utilizes traditional ILT classes, varying in
length from several hours to several months. Another training method utilizes
the computer and interactive video instruction tapes to teach the student.
Certain employers request a combination of these training methods. The Company
currently provides both live ILT classes and TBT software products, since it
believes that these are the best methods for teaching personal computer skills.

The Company's ILT programs offer a wide range of courses in operating
systems, including Microsoft Windows, Windows NT workstation and server, Novell
NetWare, programming in basic languages such as G, C++ and programming courses
in new development tools such as Microsoft, VB, J++ and other development tools,
word processing, spreadsheets, databases, communications, executive overviews,
integrated software packages, computer graphics, desktop publishing and
groupware products including Lotus Notes. Such programs generally are devised
for use in connection with computing based on networks.

The Company has developed a standardized curriculum designed to promote
uniformity and consistency in its training programs in both the traditional
classroom environment and across its TBT product line. Such uniformity is
generally desired by the Company's customers such that all of the customer's
employees participating in the training receive similar information and
instruction on particular software packages. In addition, the standard
curriculum, for both ILT and TBT, may be customized to meet the exact
specifications of individual clients or market requirement. In addition to an
original curriculum, the Company uses programs developed by software developers
such as Microsoft, Novell, Lotus and others. Each of the Company's live
classroom training programs is divided into modules consisting of introductory
lectures, computer exercises with the assistance of a trainer, and independent
exercises without a trainer. Each of the Company's TBT products is divided into
tasks and sub-tasks. This format allows the product to be used as either a
training tool, where the entire TBT is followed from beginning to end, or as a
reference tool, where an end-user directly accesses the task or sub-task that
needs to be studied.

The Company's training model is based on a training model developed by
Sivan in Israel. Sivan's model differs from the prevalent approach to technical
training of IT professionals in two key respects: (i) duration of courses and
(ii) emphasis on practical applications. Unlike most training centers, Sivan
offers students a choice of full-day sessions compressed into a few days or
shorter sessions stretched over a longer period of time. Management believes
that the additional absorption time has resulted in graduates attaining higher
knowledge retention rates The shorter

<PAGE>

sessions also accommodate the schedules of most working professionals. This
training model has proven to be effective in Israel as Sivan has become the
largest ILT provider in Israel. Sivan's experience has indicated that higher
knowledge retention generates increased customer satisfaction and word-of-mouth
recommendations. Management believes that by implementing this training model
the Company will obtain an advantage over its competitors who mostly offer a
traditional approach. The common delivery model for skill training in the U.S.
involves full-day sessions spanning three to five days. Most leading software
developers, such as Microsoft, Novell, SUN and others, develop and offer such
courses for delivery through their respective authorized training centers. The
Company believes that the prevalent model has a number of disadvantages,
including, the assumption that individuals can take time off work and attend the
courses and a low level of knowledge retention due to compressed teaching and
absorption time.

Sivan is completing the development of a new administrative application.
This new application will allow Sivan to centralize the information
distribution, registration and scheduling activities for the entire Sivan chain
of schools. Moreover, the new application will provide online information to
potential students and enable online course registration via the Internet.

Training Services

The Company offers several ILT programs to satisfy customer needs,
including public and private courses and special tutorial services.

Public seminars are scheduled on a regular basis at the Company's own
training facilities. The Company offers a variety of public courses that are
designed to accommodate varied levels of expertise, background and objectives.
The Company distributes its public seminar schedule to existing and potential
customers on a quarterly basis and publishes its schedule in its Internet sites.

Private seminars are classes which are designed specifically for groups of
employees from one business on a specific topic. Private courses generally are
held either at the Company's training facilities or at the customer's premises.
The curriculum for such private seminars is generally identical to the
standardized curriculum provided at public seminars; however, the curricula may
be adapted to accommodate customer specifications.

The Company also provides special tutorial services to address particular
needs of customers requiring individual attention for their employees.
Consulting services, which are provided either at the Company's own facilities
or those of its customers, typically provide for a trainer to meet with one to
three employees and may involve a customized curriculum. The Company also
develops customized applications for certain software programs utilized by its
customers.

In furtherance of the Company's belief that hands-on application is
essential to computer training, a personal computer is furnished to each student
for his or her exclusive use during ILT programs. Classes that are conducted on
a customer's premises utilize either the customer's own personal computers or
computers furnished by the Company. The Company either owns or leases

<PAGE>

the computers utilized for its training programs, with lease terms generally
being three years or less due to the rapid obsolescence of technology. The
Company also provides, without charge, a post-class telephone support line
during normal business hours to answer questions from any enrollees or former
enrollees in the Company's training programs. In providing ILT services, the
Company utilizes professional trainers who possess both teaching skills and a
technical command of the subject matter. The Company presently has over 250
trainers available.

Software Manufacturers' Authorized Training Centers

The Company is authorized to act as a training center by many software
manufacturers, including Novell, Lotus and Microsoft. The Company was the
recipient of the LAEC Award for training the most students in Lotus' Windows
application software. The Company also received a Top Performing Microsoft
Authorized Training Center Award for training the most students in Microsoft
products. The Company was recently authorized by Lotus Development Corporation
("Lotus") as a LAEC for its "Notes" product and was recently upgraded to
Platinum Business Partner. "Notes" is a popular document database product which
provides a means of organizing documents and making them accessible to a group
of people. A "Notes" document can be read, revised, and responded to by many
people. As a Platinum Business Partner, the Company is entitled to receive
specific referrals for new students from Lotus, such that Lotus actually
forwards the name of the student prospect to the Company. Additionally, Lotus
provides marketing support to the Company including payment of a proportion of
the cost of promotional materials. The Company expects that training with regard
to Lotus Notes software products specifically, and work group computing in
general, will be an increasing percentage of its revenues. Work group computing
refers to the software that enables groups of people to collaborate together.

The Company expends substantial efforts in seeking authorization as a
training center by software manufacturers, including recently established and
start-up software vendors. Management believes that such authorizations have
several advantages, including referrals from software manufacturers and free
listings in the advertising literature published or distributed by such
manufacturers. As an authorized training center, the Company also receives
pre-release copies of new software products enabling the development of
instruction programs prior to the public distribution of these products. The
Company also engages in joint promotions with software manufacturers relating to
specific products. To secure designation as an authorized training center, the
Company is required to pay certain software manufacturers an annual fee of
between $300 to $5,000 per facility and is obligated to furnish manufacturers
with periodic reports on the number of trainees and similar statistical
information.

Program Costs

In the U.S., the Company typically charges its customers from $75 per
enrollee (for introductory classes) to $5,000 per enrollee to conduct ILT
programs. In Israel, the Company typically charges from $200 to $5,000 per
enrollee to conduct ILT programs. Pricing considerations vary depending on the
length and complexity of the program, the number of enrollees, whether the

<PAGE>

course is a private one or offered on an open enrollment basis, and the physical
location of the training. The Company's refund policy provides that dissatisfied
trainees may either attend the same program without charge or the trainee's
employer may request a full refund.

The Company's Mentortrain Technology Series products are currently marketed
in the U.S. under various site license agreements at prices of between $1,000
and $10,000 per title. The Company also offers custom TBTs to its customers at
prices ranging from $8,000 to $15,000 per hour of TBT training.

Courseware and TBT Product Development

There has been a general consolidation in the software market such that
most of the Company's corporate clients have standardized on either Microsoft
Office or Lotus Smartsuite. This consolidation has allowed the Company to
downsize its courseware development group and to purchase high quality,
customizable courseware from third party vendors. Some trainers occasionally
develop special courseware for clients and work at customizing an off the shelf
curriculum.

The Company's TBT products are currently developed by the R&D group located
at Mashov CBT in Israel and comprises 13 programmers and 2 education specialists
with extensive experience in training and education development. The Company's
training staff provides the product and educational design expertise, while the
designer supplies the authoring tool expertise.

Unlike certain of its competitors, the Company provides only training and
consulting services and does not sell any computer hardware, software or related
products other than TBT programs as discussed above. This enables the Company to
focus on the development of its training programs, without preference to any
specific computer-related products except as merited by performance.

Protection of Proprietary Technology

The protection of proprietary information developed by the Company and used
in its training programs is limited to the protection that the Company is able
to secure under copyright laws and confidentiality agreements. However, there is
no assurance that the scope of the protection that the Company is able to secure
will be adequate to protect its proprietary information, or that the Company
will have the financial resources to engage in litigation against parties who
may infringe on copyrights. In addition, there is no assurance that competitors
will not develop similar training programs independently of the Company.

Marketing

The Company directs its ILT, TBT and CSD marketing efforts to those
industries and public sector organizations that devote substantial resources to
computer technology for employees. In particular, the Company's marketing
activities are aimed at national and international corporations,

<PAGE>

since these companies have a greater awareness of the advantages of uniform and
consistent training programs and have a need for consulting services in order to
remain on the leading edge of technology. In addition, these companies have
established centralized decision-making authority regarding employee computer
training programs, facilitating ongoing training relationships and scheduling of
training programs. The Company recently retained an advertising agency in order
to enhance is marketing efforts. In addition, the company's marketing efforts
are directed at the IT professional, independent or employee, who are required
to refresh and up-date their skills continuously in order to maintain and
improve their skills and earning power.

The Company's marketing efforts consist of direct solicitation of potential
customers through direct mailing of brochures and seminar schedules followed by
telephone contact. Such direct mailing is generally done on a quarterly basis.
The Company also conducts exhibits at computer trade shows throughout the U.S.
The Company, in conjunction with software vendors, has established informational
seminars on new software products to inform potential customers about the
Company's training programs and consulting services.

In addition, the Company's account managers act as liaisons with customers
to ensure that customers select appropriate training programs. These account
managers are knowledgeable as to the customer's specific industry needs relative
to computer training programs and consulting opportunities. Since the Company
markets its training programs in the United States and Israel to businesses and
public sector organizations for the benefit of their employees, and the costs of
training, in most instances, are borne by such employers rather than the
individual trainees, the Company believes that it is not a school and
consequently is not subject to educational licensing requirements under
applicable state laws and regulations. No assurances may be given, however, as
to the validity of such belief or the Company's ability to comply with any such
laws or regulations, if applicable.

Customers

The Company's present customer base includes companies from a wide range of
industries including banking, finance, manufacturing, insurance and government,
as well as, regarding retail TBT distribution, software retailers and office
supply stores. No one customer accounted for more than ten percent of the
Company's revenues during the year ended December 31, 1996.

Competition

The Company's primary competitors are providers of training products and
services, including education and training specialists, internal corporate IT
departments, software vendors and Big Six consulting practices. Some of these
competitors offer course titles and programs covering similar topics as those of
the Company. Many competitors have significant financial, technical, sales,
marketing and other resources, as well as widespread name recognition. In
addition, some of the larger instructor-led training organizations have the
capacity to develop technology-based

<PAGE>

training products that they could then distribute through their existing
distribution channels to their current client base.

Employees

As of August 1, 1997, the Company employed approximately 310 full-time
persons, including 70 full-time employees in its New York operations and
approximately 240 full-time persons in its Israeli operations. In its New York
operations, the Company employed approximately 16 persons as full time trainers,
34 persons as consultants, 7 persons in sales, marketing and sales
administration and 15 persons in management, finance and operations and also
employs 17 freelance trainers. Sivan employed approximately 145 full-time
persons as trainers, 52 persons in sales, marketing and sales administration,
and 23 persons in management, finance and operations. Sivan also employs
approximately 60 freelance trainers. Mashov CBT employed 15 persons in research
and development, 4 persons in sales and marketing and 1 person in
administration. See also "Conditions in Israel."

Properties

The Company occupies approximately 16,000 square feet of space at 462
Seventh Avenue, New York, New York where the Company's executive offices and ten
classrooms are located. These premises are occupied under a lease agreement
expiring on January 14, 2004 at a current base annual rental of $288,000, with a
rental increase to $320,000 per annum effective January 14, 1999.

Sivan and Mashov CBT lease space in Israel in accordance with the following
table:

Square Monthly
Location Lease Expiration Option Footage Rent
- --------------------- -------------------- --------------------- --------- --------
<S> <S> <S> <C> <C>
Tel-Aviv, Sderot March 31, 1998 Six options of 1 9,900 $17,000
Yehudit year each
Tel-Aviv, Beit Hilel December 31, 1999 Two options of 2 9,000 $15,300
years each
Tel-Aviv, Barak August 31, 1997 None 900 $ 3,800
Rishon Le Tsion December 31, 1997 One option of 1 2,000 $ 3,400
year
Rishon Le Tsion February 28, 1998 Two options of 1 900 $ 1,200
year each.
Jerusalem July 31, 1998 1 year option 1,300 $ 2,100
Jerusalem December 31, 1997 1 year option 2,000 $ 2,580
Or-Yehuda February 28, 2000 None 1,110 $ 2,056
Or-Yehuda April 1, 1998 February 28, 2000 870 $ 2,390

</TABLE>

<PAGE>

MANAGEMENT

Executive Officers and Directors

The executive officers and directors of the Company are as follows:

Director
Name Age Position with the Company Since
- ---- --- ------------------------- -----
Roy Machnes 37 Chairman, President, Chief 1997
Executive Officer and Director
Elan Penn 45 Chief Financial Officer and 1997
Director
Terry I. Steinberg 42 Executive Vice President and 1985
Director
David Assia 45 Director 1997
Jack Dunietz 42 Director 1997
Martin F. Kahn 46 Director 1995

David Assia. Mr. Assia has served as a director of the Company since
February 1997. He is a co-founder with Mr. Dunietz of Mashov Computers Ltd. and
has been its Chairman since 1989. Mr. Assia has been Managing Director, since
its inception in 1983, of Magic Software Enterprises Ltd. ("Magic"), a developer
and provider of network software products and services for departmental,
client/server and Internet/Intranet applications, and has been Chairman of Magic
since 1986. He also serves as a director of Mashov and Aladdin Knowledge Systems
Ltd. Mr. Assia holds a B.A. and an M.B.A. from the Tel-Aviv University.

Jack Dunietz. Mr. Dunietz has served as a director of the Company since
February 1997. He is a co-founder with Mr. Assia of Mashov Computers Ltd. of
which he has been the Chief Executive Officer since 1987. Mr. Dunietz also
serves as a director and interim Chief Executive Officer of Magic and a director
of Mashov and Paradigm Geophysical Ltd. & Data Automation Ltd. Mr. Dunietz holds
a B.SC. in Computer Science from the Technion Israel Institute of Technology.

Martin F. Kahn. Mr. Kahn has served as a director of the Company since May
1995 and was Chairman of the Board of the Company from May 1995 until February
1997. He has served since 1989 as Chairman of Ovid Technologies, Inc., a leading
producer of medical, scientific and technical CD-ROM and network products; since
September 1993 as Chairman of OneSource Information Services, which develops and
markets a comprehensive set of integrated business information and software
products; since 1991 as a Director of Vista Information Solutions, Inc.
(formerly DataMap, Inc., a successor through merger to Vista Environmental
Information, Inc.) which supplies site-specific risk information about real
estate for the insurance, banking, and environmental engineering markets; since
April 1995 as Chairman and CEO of Shoppers Express, Inc., which offers home
grocery shopping through dial-up and on-line services; and since March 1996 as
Managing Director of Cadence Information Associates L.L.C. (and its
predecessor), a consulting and management services firm. Mr. Kahn holds a
Bachelors Degree in Administrative Sciences from Yale College and an M.B.A. from
Harvard Business School.

<PAGE>

Roy Machnes. Mr. Machnes has served as the Company's Chairman of the Board
and Chief Executive Officer and a director since February 1997. Since January
1994, he has been Chairman and Chief Executive Officer of Mashov, and prior
thereto, from 1988, he served as Vice President Sales of Mashov Computers Ltd.
Mr. Machnes is also a director of Mashov Computers Ltd. He holds a B.A. from the
University of California at Berkeley.

Elan Penn. Mr. Penn has served as the Company's Chief Financial Officer and
a director since February 1997. He also serves as the Chief Financial Officer of
Mashov Computers Ltd. and Mashov. Mr. Penn joined Mashov Computers Ltd. and
Magic as their Vice President of Finance and Administration in June 1992. In
February 1997, he resigned his position at Magic to assume the position of Chief
Financial Officer of the Company. From January 1991 until May 1992, Mr. Penn was
employed by Solgood Representatives Ltd., an electronics equipment sales
representative firm, where he acted in an executive capacity. Prior to January
1991, he was Vice President of Finance of Mashov Computers. Mr. Penn holds a
B.A. in Economics from the Hebrew University of Jerusalem and a Ph.D. in
Management Science from the University of London.

Terry I. Steinberg. Mr. Steinberg has served as the Company's Executive
Vice President, responsible for North American Sales and Marketing since
February 1997, and a director since 1985. He served as President and Chief
Executive Officer of PCE U.S. since its inception in 1985 until February 1997
and has served as its Treasurer from August 1991. He currently serves as
Secretary. For more than five years prior to the Company's inception, he was the
Director of Decision Support for Paramount Pictures Corporation, with
responsibility for all end-user computing. Mr. Steinberg holds a Bachelor's
Degree in Applied Mathematics and Computer Science and an M.B.A., both from
McGill University.

Messrs. Assia, Dunietz, Machnes and Penn are also directors of Mashov, a
controlling stockholder of the Company, and own 0.56%, 3.15,% 1.51% and 0.4% of
the voting equity of Mashov, respectively. Mashov Computers Ltd. owns 79.3% of
the voting equity of Mashov. Messrs. Assia, Dunietz and Machnes are directors of
Mashov Computers Ltd.

Mr. Machnes is a resident of New York City and expects to spend
approximately 50% of his work time in the U.S. and the remainder in Israel. Mr.
Penn is a resident of Israel and expects to spend approximately 75% of his work
time in Israel and the remainder in the U.S. Mr. Steinberg is a resident of
Nassau County, New York and devotes substantially all of his time to the
Company's operation in the United States. Due to the fact that a substantial
portion of the Company's operations are located in Israel and the availability
of facsimile, Internet and telephone communications technologies, the Company
expects that the domicile arrangements of the Company's officers will have no
material impact on the operations of the Company.

Directors' Compensation

Directors, whether or not they are also employees of the Company, are not
paid any fees or other remuneration for service on the Board. The Company
reimburses all of its directors for their out-of-pocket expenses incurred in the
performance of their duties as directors of the Company.

<PAGE>

Executive Compensation

The following table sets forth information concerning the compensation
during the last three fiscal years of the Company's chief executive officer and
its only other executive officer who served as such in 1996 and whose total
salary during any of the three prior fiscal years was $100,000 or more. The
Company did not pay any bonuses or make any restricted stock grants in 1994,
1995 or 1996 and the Company has a 401(k) savings plan for its executives which
is available to all Company employees. The current value of all perquisites and
other personal benefits furnished in each of such years to each of the executive
officers named below was less than 10% of such officer's salary for such year.

Summary Compensation Table
Annual Compensation -
Name and principal position (1) Year Salary ($)
- --------------------------- ---- --------------------

Terry I. Steinberg 1996 90,000
President and Chief Executive Officer (2) 1995 99,360
1994 131,750

- ------------

(1) Please refer to "Employment Agreements" at page 41 for information
regarding the current officers of the Company.

(2) Effective February 13, 1997, Mr. Steinberg was appointed Executive Vice
President.

Stock Options

The following table provides information concerning exercises of stock
options during 1996 by each of the executive officers named above in the Summary
Compensation Table, and the number and value of unexercised options held by each
of them at December 31, 1996. No options were granted to these persons in 1996.

<PAGE>

Aggregated Option Exercises in Last
Fiscal Year and Fiscal Year-End Option Values

<TABLE>
<CAPTION>
Number of shares
underlying Value of unexercised
unexercised options at in-the-money options
Shares FY-end (#) at FY-end ($)(1)
acquired on exercisable/ exercisable/
Name exercise (#) unexercisable unexercisable
- ---- ------------ ------------- -------------
<S> <C> <C> <C>
Terry I. Steinberg -- 20,000/0 --/--

</TABLE>
- ----------------

(1) Difference between the aggregate market value of the underlying shares
(based on the average ($.47) of the bid and the asked prices of a share of
Common Stock on December 31, 1996) and the aggregate exercise price of such
shares.

Employment Agreements

Pursuant to the Stock Purchase Agreement and effective February 13, 1997,
the Company entered into employment contracts with each of Roy Machnes, Terry I.
Steinberg and Elan Penn, providing for their employment as Chief Executive
Officer, Executive Vice President and Chief Financial Officer, respectively, of
the Company. Pursuant to such contracts, and effective as of August 4, 1997,
Messrs. Machnes, Steinberg and Penn were granted incentive stock options to
purchase 325,000, 240,000 and 200,000 shares of Common Stock, respectively,
which options vest over a three-year period commencing in August 1997. The
exercise price of such stock options is $0.584 per share.

The base salaries of Messrs. Machnes and Steinberg are each $155,000. Mr.
Penn's salary is paid at a rate of $10,000 per month, adjusted monthly in a
percentage amount equal to the increase in the Consumer Price Index as published
by the Israeli Bureau of Labor Statistics.

Mr. Machnes's employment agreement provides that, although he may perform
the services contemplated by such agreement in the U.S. or Israel, the Company
will pay for or reimburse certain of Mr. Machnes's relocation and living
expenses should Mr. Machnes choose to live in the U.S. during the period of his
employment. Specifically, the Company must pay (or reimburse Mr. Machnes) if he
incurs such expenses for the following: (1) $20,000 for expenses incurred during
any relocation of Mr. Machnes, his family and their possessions to New York; (2)
all expenses associated with the education of Mr. Machnes's children including
private school tuition and associated expenses (estimated at $20,000 per annum)
in the United States; (3) an apartment in Manhattan, New York, including any
associated real estate broker's fees, less the amount of any rental payments
received from the lease of Mr. Machnes's home in Israel, net of associated

<PAGE>

expenses; and (4) any expenses incurred by Mr. Machnes in connection with a
visit by his family to Israel once each year. If any of the above constitute
taxable income to Mr. Machnes, such amounts are to be grossed up to account for
the payment of any taxes due, and are to be adjusted upwards annually in a
percentage amount equal to the Consumer Price Index for all urban consumers in
the New York, New Jersey and Connecticut area as published by the Bureau of
Labor Statistics. Should Mr. Machnes' employment be terminated for any reason,
Mr. Machnes is to be reimbursed for relocation expenses of no more than $20,000
in connection with Mr. Machnes's relocation to Israel.

During the eight months ended August 31, 1997, the Company paid
approximately $19,000 for Mr. Machnes's relocation expenses to New York and
pre-paid approximately $15,000 for tuition for Mr. Machnes' children. The
Company also pre-paid approximately $56,000 for the rental of an apartment in
New York which it leased for the use of its executives. The apartment is being
used by Mr. Machnes at the present time. No expenses have been incurred by the
Company for any visits by Mr. Machnes (or his family) to Israel. Any amounts
that are taxable to Mr. Machnes will be grossed up to compensate Mr. Machnes for
any taxes due.

Indemnification of Directors and Officers

Under Section 145 of the Delaware General Corporation Law, the Company has
broad powers to indemnify its directors and officers against liabilities that
they may incur in such capacities, including liabilities under the Securities
Act. The Company's By-Laws provide that the Company will indemnify its directors
and officers to the fullest extent permitted by law and require the Company to
advance litigation expenses upon receipt by the Company of an undertaking from
the director or officer to repay such advances if it is ultimately determined
that the director or officer is not entitled to indemnification. The By-Laws
further provide that rights conferred under the By-Laws will not be deemed to be
exclusive of any other right such persons may have or acquire under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise.

The Company's Certificate of Incorporation provides that, pursuant to
Delaware law, its directors will not be liable for monetary damages for breach
of the directors' fiduciary duty to the Company and its stockholders. This
provision in the Certificate of Incorporation does not eliminate the duty of
care, and, in appropriate circumstances, equitable remedies such as injunctive
or other forms of non-monetary relief will remain available under Delaware law.
In addition, each director will continue to be subject to liability for breach
of the director's duty of loyalty to the Company or its stockholders, for acts
or omissions not in good faith or involving intentional misconduct or knowing
violations of law, for actions leading to improper personal benefits to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.

<PAGE>

Stock Option Plan

The PC Etcetera, Inc. 1997 Stock Option Plan (the "Option Plan") was
adopted by the Board of Directors on June 25, 1997 and ratified by the Company's
stockholders on August 4, 1997. The Option Plan provides for the granting of
incentive stock options ("Incentive Stock Options"), within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, to employees, and
for the granting of nonstatutory stock options ("Nonstatutory Stock Options") to
employees, non-employee directors, consultants and advisors. A total of
5,000,000 shares of Common Stock have been reserved for issuance under the
Option Plan. To date, 765,000 shares are subject to outstanding Incentive Stock
Options under the Option Plan. These Incentive Stock Options were granted
contingent upon stockholder approval of the Option Plan.

The exercise price of all Incentive Stock Options must be at least equal to
the fair market value of the Common Stock on the date of grant and the option
term may not exceed ten years. The exercise price of all Nonstatutory Stock
Options granted under the Option Plan may be less than the fair market value of
the Common Stock on the date of grant and the option term may be greater than
ten years. Incentive Stock Options and Nonstatutory Stock Options ("Options")
may be exercised by delivery to the Company at its principal office of written
notice of the number of shares with respect to which the Option is being
exercised. Such notice must be accompanied by payment of the full option price
of such shares with a check payable to the order of the Company in such amount.
The Option Plan may be amended or terminated by the Board or the Company's
stockholders, but no such action may impair rights under a previously granted
Option. No Options may be granted under the Option Plan after June 25, 2007.

401(k) Plan

Effective as of January 1, 1993, the Company adopted the PC Etcetera, Inc.
401(k) Employee Savings Plan (the "401(k) Plan"). The 401(k) Plan covers all
employees of the Company who have attained the age of 21 and are employed by the
Company six months after their employment commences, except those employees who
work sixteen or fewer days per month. A participating employee (a "Participant")
may elect to defer, in the form of pre-tax contributions to the 401(k) Plan, an
amount up to 15% of his or her compensation for each year. A Participant's
before-tax contributions cannot exceed $9,500 per year, as adjusted for
inflation. For each year, the Company may contribute for each Participant a
matching contribution equal to 25% of so much of the Participant's before-tax
contributions for the year as does not exceed 4% of his or her compensation. In
addition, for each year, the Company may make a contribution, in any amount
determined by the Company in its sole discretion, to the 401(k) Plan that will
be allocated to Participants in accordance with a formula set forth in the
401(k) Plan.

Contributions to the 401(k) Plan made on behalf of a Participant are
invested in the manner directed by the Participant. Before-tax contributions and
Company matching contributions are fully vested and nonforfeitable at all times.
Company discretionary contributions vest according to a five-year graded vesting
schedule, based on a Participant's years of service.

<PAGE>

CERTAIN TRANSACTIONS

Effective February 13, 1997, a change of control of PCE U.S. occurred
pursuant to the Stock Purchase Agreement between PCE U.S. and Mashov, whose
shares are publicly traded on the TASE. Mashov is a subsidiary of Mashov
Computers Ltd., whose shares are also publicly traded on the TASE. Based on the
Stock Purchase Agreement, Mashov acquired 8,438,924 shares of Common Stock and
658,412 shares of Series C Preferred Stock of PCE U.S., where each share of
Series C Preferred Stock is convertible into 10 shares of Common Stock and has
10 to 1 voting rights in relation to shares of Common Stock. In consideration
for such stock issuances, PCE U.S. acquired two of Mashov's subsidiaries, Sivan,
and Mashov CBT. Pursuant to the Stock Purchase Agreement, Mashov acquired 69% of
PCE U.S.'s equity and voting securities on a fully diluted basis, subject to an
adjustment based upon the fiscal year 1996 audited balance sheets of PCE U.S.,
Sivan and Mashov CBT. Such adjustment was made on August 4, 1997 when Mashov
contributed 345,595 shares of Common Stock to the capital of PCE U.S. In
addition, on August 4, 1997, the 658,412 shares of Series C Preferred Stock was
converted by Mashov into 6,584,120 shares of Common Stock. As a result of the
adjustment discussed above and such conversion, Mashov currently owns 68.5% of
the Common Stock. All dollar amounts in this section are in thousands.

In 1996 certain departments of PC Israel (including employees and
equipment) were joined together to form Mashov CBT. PCE U.S. originally owned
30% of the ordinary shares of Mashov CBT. This ownership was subsequently sold
to Elron Electronics Industries Ltd. ("Elron"). Mashov owned 70% of the ordinary
shares of Mashov CBT. Pursuant to a purchase agreement dated February 6, 1997,
between Mashov and Elron, Mashov purchased the remaining 30% of the outstanding
shares of Mashov CBT held by Elron. In consideration of the purchase, Mashov
transferred 130,000 shares of Common Stock to Elron upon the execution of the
Stock Purchase Agreement. Pursuant to the Stock Purchase Agreement, 100% of the
ownership of Mashov CBT was transferred to PCE U.S.

Prior to the execution of the Stock Purchase Agreement, Sivan owned 312,547
shares of Mashov and 234,918 options to purchase shares of Mashov (collectively,
the "Mashov Option Shares"). Pursuant to an agreement dated February 5, 1997,
Sivan granted to Mashov Computers Ltd. the option to purchase the Mashov Option
Shares at the average market value of the Mashov Options Shares during the five
day period immediately following the consummation of the transactions
contemplated by the Stock Purchase Agreement, as quoted on the Tel Aviv Stock
Exchange. The Mashov Option Shares were purchased by Mashov Computers Ltd. in
consideration of approximately $175.

Mashov granted Sivan a shareholders' loan in October 1994 of approximately
$2.6 million which was converted into equity in the first quarter of 1997 as
part of the Stock Purchase Agreement. The loan was linked to the Israeli
Consumer Price Index and interest was charged at a rate of 6% per annum. Mashov
charged Sivan interest and linkage charges in 1996 and 1995 of $434 and $355
respectively. In addition, Mashov charged Sivan management fees of $691 and $181

<PAGE>

in 1996 and 1995, respectively. In 1996 Mashov charged Mashov CBT management
fees of $57. At June 30, 1997 Mashov was owed a total of $1,112 by Sivan and
Mashov CBT. In the event of a rights offering by the Company, Mashov may call
due and payable $600 of such debt for use in the purchase by Mashov of
securities of the Company offered pursuant to such rights offering.

In connection with the execution of the Stock Purchase Agreement, the
Company executed the Conversion Agreement, which provides that the Conversion
Parties (Elron, Rho Management Trust I (formerly Gibraltar Trust), the Star
Group (comprised of Justy Ltd., SVE STAR Ventures Enterprises No. II Gbr, SVE
STAR Ventures Enterprises No. III Gbr, SVE STAR Ventures Enterprises No. IIIA
Gbr, and Yozma Venture Capital Ltd)., Gilbert H. Steinberg, Special Situations
Fund III, L.P., and Special Situations Cayman Fund, L.P.), receive Common Stock
for the cancellation of debt owed by the Company and the dilution of warrants
owned by the Conversion Parties. See "Principal and Selling Stockholders."
Specifically: (i) the 1,000,000 shares of Series A Preferred Stock held by Elron
were converted into 200,000 shares of Common Stock; (ii) the Bridge Loans the
Company received from certain stockholders aggregating $436 as of December 31,
1996 were converted into 1,750,000 shares of Common Stock; and (iii) the holders
of Company warrants agreed to convert a total of 1,432,519 Warrants (consisting
of 922,508 Warrants outstanding as of December 31, 1996 which were subsequently
adjusted pursuant to the Conversion and Waiver Agreement under anti-dilution
provisions) into 344,464 shares of Common Stock.

The Company, Terry I. Steinberg and Joseph Sabrin are parties to an
agreement which requires the Company, upon the death of either such person, to
purchase from the estate of such person up to $500 of the Company's Common Stock
at a price per share equal to the Company's revenues for the last four completed
fiscal quarters immediately preceding the date of death divided by the number of
outstanding shares of Common Stock at the time of death. The Company's purchase
obligation is conditioned upon its receipt of, and is only to the extent of,
life insurance proceeds on such persons.

<PAGE>

EQUITY OWNERSHIP OF
PRINCIPAL AND SELLING STOCKHOLDERS
AND OFFICERS AND DIRECTORS

The following table sets forth certain information as of October 9, 1997
with respect to the Shares to be sold by each Selling Stockholder, any
stockholder who owns greater than 5% of the outstanding Common Stock and the
Company's officers and directors. The Shares may be offered from time to time by
any of the Selling Stockholders, their transferees and their distributees. See
"Plan of Distribution."

<TABLE>
<CAPTION>
Beneficial
Ownership
Prior to Beneficial Ownership
Offering (1) After Offering (1)
------------ -----------------------------
Number of Percentage of
Number of Shares Number of Shares
Name and Address Shares to be Sold Shares Outstanding
---------------- ------ ---------- ------ -----------

<S> <C> <C> <C> <C>
Elron Electronic Industries Ltd. (2) 1,490,405 1,490,405 -- --
Helix Capital, LLC (3)......... 668,531 668,531 -- --
Justy Ltd. (4)................. 261,392 261,392 -- --
Mashov Computers
Marketing Ltd. (5)......... 14,547,449 -- 14,547,449 68.5%
Rho Management Trust I (6)..... 1,166,671 1,166,671 -- --
Rho Management Trust Partners
L.P. (6)(7)................. 1,166,671 -- -- --
Special Situations Cayman Fund,
L.P. (8).................... 151,731 151,731 -- --
Special Situations
Fund III, L.P. (8).......... 455,191 455,191 -- --
SVE STAR Ventures Enterprises
No. II Gbr (4).............. 112,610 112,610 -- --
SVE STAR Ventures Enterprises
No. III Gbr (4)............. 297,422 297,422 -- --
SVE STAR Ventures Enterprises
No. IIIA Gbr (4)............ 25,620 25,620 -- --
Yozma Venture Capital Ltd. (4). 174,260 174,260 -- --
David Assia (9)(10)(11)........ -- -- -- --
Jack Dunietz (9)(10)(11)....... -- -- -- --

</TABLE>

<PAGE>

Beneficial
Ownership
Prior to Beneficial Ownership
Offering (1) After Offering (1)
------------ -----------------------------
Number of Percentage of
Number of Shares Number of Shares
Name and Address Shares to be Sold Shares Outstanding
---------------- ------ ---------- ------ -----------

Martin F. Kahn (10)(12)........ 20,000 -- 20,000 --
Roy Machnes (9)(10)(11)(13).... 113,334 -- 113,334 --
Elan Penn (9)(10)(11)(14)...... 66,667 -- 66,667 --
Gilbert H. Steinberg (15)...... 807,207 559,749 247,458 1.2%
Terry I. Steinberg (9)(10)(16). 390,458 -- 390,458 1.8%
All executive officers and directors
as a group.................. 590,459 -- 570,459 2.7%
----------
5,363,582

</TABLE>
- ----------------------

(1) Calculated pursuant to Rule 13d-3 promulgated under the Exchange Act.
Accordingly, with respect to each particular beneficial owner, the number
of shares gives effect to the deemed exercise of such owner's options and
warrants (which are currently exercisable or exercisable within 60 days).
Except as otherwise disclosed in the footnotes below, the shares listed in
this column for a person named in this table are directly held by such
person, with sole voting and dispositive power.

(2) Address is Advanced Technology Center, P.O. Box 1573, Haifa, Israel.

(3) Address is 98 Battery Street #600, San Francisco, California.

(4) Address is Star Group Management Ltd., Herzelia Pitauch, Israel.

(5) Address is 5 Haplada Street, Or-Yehuda, Israel. Mashov Computers Ltd.,
which company is located at the same address as Mashov Computers Marketing
Ltd. may be deemed the beneficial owner of the shares registered in the
name of Mashov Computers Marketing Ltd., which is its 80% owned subsidiary.

(6) Address is c/o Rho Management Co., Inc., 767 Fifth Avenue, New York, New
York.

<PAGE>

(7) Rho Management Partners L.P. may be deemed the beneficial owner of shares
registered in the name of Rho Management Trust I (formerly known as
Gibraltar Trust), pursuant to an investment advisory agreement that confers
sole voting and dispositive power over such shares to Rho Management
Partners L.P.

(8) Address is 153 East 53rd Street, New York, New York.

(9) Address is c/o Mentortech Inc., 736 Seventh Avenue, New York, New York
10018, except for Messrs. Assia and Dunietz, whose address is c/o Mashov
Computers Ltd., 5 Haplada Street, Or-Yehuda, Israel.

(10) Serves as a Director of Mentortech.

(11) Serves as a Director of Mashov Computers Marketing Ltd.

(12) Address is c/o Cadence Information Associates LLC, 767 Fifth Avenue, New
York, New York.

(13) Includes 108,334 shares issuable upon currently exercisable options.

(14) Includes 66,667 shares issuable upon currently exercisable options.

(15) Address is Six Nevada Drive, Lake Success, New York.

(16) Includes 100,000 shares issuable upon currently exercisable options.

SHARES ELIGIBLE FOR FUTURE SALE

As of October 9, 1997, there were 21,238,495 shares of Common Stock
outstanding. Of these, 5,611,040 shares will be freely tradeable without
restriction under the Securities Act, except for any shares purchased by an
"affiliate" of the Company (as that term is defined under the rules and
regulations under the Securities Act), which will be subject to the resale
limitations of Rule 144 adopted under the Securities Act. The remaining
outstanding shares were issued by the Company in transactions not involving a
public offering, and are thus treated as "restricted securities" within the
meaning of Rule 144 under the Securities Act. Sales of significant numbers of
shares of Common Stock in the public market could adversely affect the market
price of the Common Stock and could impair the Company's future ability to raise
capital through an offering of its equity securities.

In general, under Rule 144, as currently in effect, a stockholder (or
stockholders whose shares are aggregated), who has beneficially owned his or her
restricted securities (as that term is defined in Rule 144) for at least 1 year
from the later of the date such securities were acquired from

<PAGE>

the Company or (if applicable) the date they were acquired from an affiliate, is
entitled to sell, within any three-month period, a number of such shares that
does not exceed the greater of 1% of the then outstanding shares of Common Stock
(212,385 shares) or the average weekly trading volume in the Common Stock during
the four calendar weeks preceding the date on which notice of such sale was
filed under Rule 144, provided certain requirements concerning availability of
public information, manner of sale and notice of sale are satisfied. In
addition, affiliates of the Company must comply with the restrictions and
requirements of Rule 144, other than the one year holding period requirement, in
order to sell shares of Common Stock that are not restricted securities. Under
Rule 144(k), if a period of at least two years has elapsed between the later of
the date restricted securities were acquired from the Company and the date they
were acquired from an affiliate of the Company, a stockholder who is not an
affiliate of the Company at the time of sale and has not been an affiliate at
any time during the 90 days prior to the sale would be entitled to sell the
shares immediately without compliance with the foregoing requirements under Rule
144.

As of October 9, 1997, options to purchase 765,000 shares of Common Stock
were outstanding under the Option Plan (of which options to purchase 255,001
shares were then exercisable). An additional 4,235,000 shares were available for
future stock option grants under the Option Plan.

DESCRIPTION OF CAPITAL STOCK

At October 9, 1997, there were outstanding an aggregate of 21,238,495
shares of Common Stock, and no shares of Preferred Stock of the Company. At
October 9, 1997, there were 69 holders of record of the Company's Common Stock.

Common Stock

The Company is authorized to issue up to 45,000,000 shares of Common Stock,
$.01 par value per share. Holders of Common Stock are entitled to one vote for
each share held on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Accordingly, holders of a majority of the shares
of Common Stock entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available therefor, subject to any preferential
dividend rights of outstanding Preferred Stock. Upon the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive ratably the net assets of the Company available after the
payment of all debts and other liabilities and subject to the prior rights of
any outstanding Preferred Stock. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of Common
Stock are, and the shares offered by the Company in this offering will, when
issued and paid for, be, fully paid and nonassessable. The rights, preferences
and privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future.

<PAGE>

Preferred Stock

The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock, $.001 par value per share. The Board of Directors is authorized, subject
to any limitations prescribed by law, without further stockholder approval, to
issue such shares of Preferred Stock in one or more series. Each such series of
Preferred Stock will have such rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as are determined by the Board of
Directors.

The purpose of authorizing the Board of Directors to issue Preferred Stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, a majority of the outstanding voting stock of the Company. The
existence of the authorized but undesignated Preferred Stock may have a
depressive effect on the market price of the Common Stock. The Company has no
present plans to issue any shares of Preferred Stock.

Delaware Law and Certain Provisions of the Company's Certificate of
Incorporation and By-Laws

The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. In general, this statute prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless the
business combination is approved in a prescribed manner. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within the prior three years did own) 15% or more of the corporation's voting
stock.

The Company's By-Laws provide that the Company shall have a single class of
directors. The Company's By-Laws further provide that vacancies on the Board of
Directors may be filled only with the approval of a majority of the Board of
Directors then in office, except vacancies occurring as a result of the removal
of directors by stockholders, without cause, shall be filled by a vote of the
stockholders.

The Company's By-Laws provide that, after the closing of this offering, any
action required or permitted to be taken by the stockholders of the Company may
be taken only at a duly called annual or special meeting of the stockholders.
This provision could have the effect of delaying until the next stockholders'
meeting stockholder actions that are favored by the holders of a majority of the
outstanding voting securities of the Company. This provision may also discourage
another person or entity from making a tender offer for the Common Stock because
such person or entity, even if it acquired a majority of the outstanding voting
securities of the Company, would be able to

<PAGE>

take action as a stockholder only at a duly called meeting of stockholders, and
not by written consent. The mere existence of this provision may have a
depressive effect on the market price of the Common Stock. See "Risk Factors -
Anti-takeover Provisions."

Transfer Agent and Registrar

The transfer agent and registrar for the Company's Common Stock is
Continental Stock Transfer & Trust Company, 2 Broadway, New York, New York.

<PAGE>

CONDITIONS IN ISRAEL

Political Environment

Since the establishment of the State of Israel in 1948, a state of
hostility has existed, varying in degree and intensity, between Israel and the
Arab countries. In addition, Israel and companies doing business with Israel
have been the subject of an economic boycott by the Arab countries since
Israel's establishment. Furthermore, following the Six-Day War in 1967, Israel
commenced administering the territories of the West Bank and the Gaza Strip and,
since December 1987, increased civil unrest has existed in these territories.
Although, as described below, Israel has entered into various agreements with
Arab countries and the Palestine Liberation Organization ("PLO") and various
declarations have been signed in connection with efforts to resolve some of the
abovementioned problems, no prediction can be made whether a full resolution of
these problems will be achieved or regarding the nature of any such resolution.
To date, these problems have not had a material adverse impact on the financial
condition or operations of the Company, although there can be no assurance that
continuation of these problems will not have such an impact in the future.

In 1979, a peace agreement between Israel and Egypt was signed under which
full political relations were established; however, economic relations have been
very limited. In September 1993, a joint Israeli-Palestinian Declaration of
Principles (the "September 1993 Declaration") was signed by Israel and the PLO
in Washington, D.C., outlining interim Palestinian self-government arrangements.
Prior to the signing of that declaration, PLO Chairman Arafat sent a letter to
Israeli Prime Minister Rabin in which the PLO recognized Israel's right to exist
in peace and security, renounced terrorism and violence, and affirmed that the
clauses of the PLO Covenant denying Israel's right to exist are no longer valid.
In reply, Israel recognized the PLO as the representative of the Palestinian
people in the peace negotiations.

In May 1994, Israel and the PLO signed an agreement in Cairo in which the
principles of the September 1993 Declaration were implemented. In accordance
with this agreement, Israel has transferred the civil administration of the Gaza
Strip and Jericho to the Palestinian Authority and the Israeli army has
withdrawn from these areas. In September 1995, Israel and the PLO signed an
additional agreement regarding the withdrawal by the Israel Defense Forces from
the heavily Palestinian populated areas and the transfer of the Civil
Administration to the Palestinian Authority in other areas in the West Bank.

In July 1994, the Israeli Prime Minister and the King of Jordan signed a
joint declaration as the first step towards a peace treaty between Israel and
Jordan. The declaration provides for the cessation of belligerency between the
states, the mutual opening of airspace to civil aviation, the opening of border
crossings (the first of which was opened on August 8, 1994) and the commencement
of joint projects with respect to electricity and water resources. On October
26, 1994, Israel and Jordan signed a peace treaty, under which full political
and economic relations were formally established.

<PAGE>

Although Israel has entered into agreements with certain Arab countries and
the PLO, and declarations have been signed to resolve some of the economic and
political problems in the Middle East, no prediction can be made whether a full
resolution of these problems will be achieved or regarding the nature of any
such resolution. To date, Israel has not entered into a peace treaty with either
Lebanon or Syria.

On November 4, 1995, Prime Minister Yitzhak Rabin was assassinated. In June
1996, following general elections a new Israeli government was formed, headed by
the newly elected Prime Minister Benjamin Netanyahu of the Likud Party. Since
the formation of the new government, peace negotiations between Israel and both
the Palestinian Authority and with Syria have been in a state of flux. In
January 1997, Israel and the Palestinian Authority reached an accord with
respect to the Israeli withdrawal from Hebron, but no prediction can be made
whether this accord will be successful or whether a failure to reach additional
accords with the Palestinian Authority or Syria will lead to events which could
have a negative impact upon the Israeli business environment in general, and on
the operations and financial condition of the Company in particular.

Army Service

All male adult permanent residents of Israel under the age of 54 are,
unless exempt, obligated to perform military service duty annually.
Additionally, all such residents are subject to being called to active duty at
any time under emergency circumstances. Some of the employees of the Company are
currently obligated to perform annual reserve duty. While Mentortech has
operated effectively under these and similar requirements in the past, no
assessment can be made of the full impact of such requirements on the Company in
the future, particularly if emergency circumstances occur.

Economic Conditions

In 1996, for the seventh consecutive year, the economy of Israel
experienced significant expansion. During the years 1991 through 1996, Israel's
gross domestic product increased by 6.3%, 6.8%, 3.4%, 6.5%, 7.06% and 4.4%,
respectively. The Bank of Israel's and the Israeli Government's fiscal and
monetary policy contributed to relative price and exchange rate stability during
most of these years despite fluctuating rates of economic growth and a high rate
of unemployment. The inflation rate for calendar years 1994, 1995 and 1996 was
14.5%, 8.1% and 10.6%, respectively. There can be no assurance that the Israeli
Government will be successful in its attempt to keep prices and exchange rates
stable.

Israel's economy has been subject to numerous destabilizing factors,
including a period of rampant inflation in the early to mid-1980s, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts
and civil unrest. In response to these problems, the Israeli Government has
intervened in various sectors of the economy, employing, among other means,
fiscal and monetary policies, import duties, foreign currency restrictions and
controls of wages, prices and foreign currency exchange rates. The Israeli
Government frequently has changed its policies in all of these areas.

<PAGE>

The State of Israel receives significant amounts of economic and military
assistance from the United States, averaging approximately $3 billion annually
over the last several years. In addition, in 1992, the United States approved
the issuance of up to $10 billion of loan guarantees during U.S. fiscal years
1993-1998 to help Israel absorb a large influx of new immigrants, primarily from
the republics of the former Soviet Union. Under the loan guarantee program,
Israel may issue up to $2 billion in principal amount of guaranteed loans each
year, subject to reduction in certain circumstances. There is no assurance that
foreign aid or other assistance from the United States will continue at or near
the amounts received in the past. If the grants for economic and military
assistance or the United States loan guarantees are eliminated or reduced
significantly, the Israeli economy could suffer material adverse consequences.

Israel is a member of the United Nations, the International Monetary Fund,
the International Bank for Reconstruction and Development and the International
Finance Corporation. Israel is a signatory to the General Agreement on Tariffs
and Trade, which provides for reciprocal lowering of trade barriers among its
members. In addition, Israel has been granted preferences under the Generalized
System of Preferences from the United States, Australia, Canada and Japan. These
preferences allow Israel to export the products covered by such programs either
duty-free or at reduced tariffs.

Israel and the European Union concluded a Free Trade Agreement in July,
1975 which confers certain advantages with respect to Israeli exports to most
European countries and obligates Israel to lower its tariffs with respect to
imports from these countries over a number of years.

In 1985, Israel and the United States entered into an agreement to
establish a Free Trade Area ("FTA"). Under the FTA, most products received
immediate duty-free status, and by 1995 all other tariffs and certain nontariff
barriers on most trade between the two countries were eliminated.

On January 1, 1993, an agreement between Israel and the EFTA, which
includes Austria, Norway, Finland, Sweden, Switzerland, Iceland and
Liechtenstein, established a free-trade zone between Israel and the EFTA
nations.

In recent years, Israel has established commercial and trade relations with
a number of other nations, including Russia, China and nations in Eastern
Europe, with which Israel had not previously had such relations.

<PAGE>

PLAN OF DISTRIBUTION

The Shares offered hereby may be sold from time to time by or for the
account of any of the Selling Stockholders or by their pledgees, donees,
distributees or transferees or other successors in interest. The Company will
not receive any of the proceeds from this offering. The distribution of the
Shares by the Selling Stockholders is not subject to any underwriting agreement.
The Shares may be sold hereunder directly to purchasers by the Selling
Stockholders in negotiated transactions; by or through brokers or dealers in
ordinary brokerage transactions or transactions in which the broker solicits
purchasers; block trades in which the broker or dealer will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal;
transactions in which a broker or dealer purchases as principal for resale for
its own account; or through underwriters or agents. The Shares may be sold at a
fixed offering price, which may be changed, at the prevailing market price at
the time of sale, at prices related to such prevailing market price or at
negotiated prices. Any brokers, dealers, underwriters or agents may arrange for
others to participate in any such transaction and may receive compensation in
the form of discounts, commissions or concessions from the Selling Stockholders
and/or the purchasers of the Shares. Each Selling Stockholder will be
responsible for payment of any and all commissions to brokers. The Company has
agreed to indemnify certain of the Selling Stockholders against certain
liabilities, including liabilities under the Securities Act and Exchange Act.

Pursuant to the Conversion Agreement, the Company has agreed, at its
expense, to file the Registration Statement to which this Prospectus is a part
and to take certain other actions to permit the Selling Stockholders to sell the
Shares under the Securities Act and applicable state securities laws. The
aggregate proceeds to any Selling Stockholder from the sale of the Shares
offered by the Selling Stockholder hereby will be the purchase price of such
Shares less any broker's commissions.

In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdiction only through registered
or licensed brokers or dealers. In addition, in certain states the Shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

If and when any Shares covered by this Prospectus qualify for sale pursuant
to Rule 144 under the Securities Act, they may be sold under Rule 144 rather
than pursuant to this Prospectus.

Any Selling Stockholder and any broker-dealer, agent or underwriter that
participates with the Selling Stockholder in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any commissions received by such broker-dealers, agents or
underwriters and any profit on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.

The Selling Stockholders are not restricted as to the price or prices at
which they may sell Shares. Sales of such Shares at less than the market prices
may depress the market price of the

<PAGE>

Company's securities. Moreover, the Selling Stockholders are not restricted as
to the number of Shares which may be sold at any one time, and it is possible
that a significant number of Shares could be sold at the same time which may
also have a depressive effect on the market price of the Company's securities
Common Stock.

Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares offered hereby may not simultaneously
engage in market making activities with respect to the Shares for a period of
two business days prior to the commencement of such distribution. In addition,
and without limiting the foregoing, each Selling Stockholder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of the Shares by the Selling
Stockholders.

There is no assurance that any Selling Stockholder will sell any or all of
the Shares described herein and may transfer, devise or gift such securities by
other means not described herein.

Expenses of preparing and filing the registration statement and all
post-effective amendments will be borne by the Company. It is expected that such
costs will be approximately $50,000.

The Company is permitted to suspend the use of this Prospectus in
connection with sales of the Shares by holders during periods of time under
certain circumstances relating to pending corporate developments and public
filings with the Commission and similar events.

LEGAL MATTERS

Certain legal matters with respect to the Shares offered hereby will be
passed upon for the Company by Carter, Ledyard & Milburn, New York, New York.

EXPERTS

The consolidated financial statements of PC Etcetera, Inc. at December 31,
1996 and for the year then ended appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon said report given upon the authority of such firm as an expert in
accounting and auditing.

The combined financial statements of Mentortech Inc. (formerly Sivan
Computers Training Center (1994) Ltd. and Mashov Computer Based Training
(C.B.T.) Ltd. at December 31, 1996 and 1995 and for the years then ended
appearing in this Prospectus and Registration Statement have been audited by
Kost Levary and Forer, a member of Ernst & Young International, independent
accountants in Israel, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon said report given upon the authority
of such firm as an expert in accounting and auditing.

<PAGE>

The consolidated statements of operations, stockholders' equity and cash
flows of PC Etcetera, Inc. at December 31, 1995 and for the year then ended
appearing in this Prospectus have been audited by Arthur Andersen LLP,
independent auditors, as set forth in their report thereon (which contains an
explanatory paragraph with respect to the going concern mentioned in Note 1 to
such financial statements) appearing elsewhere herein, and are included in
reliance upon said report given upon the authority of such firm as an expert in
accounting and auditing.

CHANGE IN ACCOUNTANTS

On February 24, 1997, the Company dismissed the accounting firm of Arthur
Andersen LLP, which was previously engaged as principal independent auditors. On
February 25, 1997, the Company engaged Ernst & Young LLP to audit the Company's
financial statements. Kost Levary & Forer, C.P.A.s, a member of Ernst & Young
International, independent accountants in Israel, were the auditors of Mashov,
Sivan and Mashov CBT at such time. The decision to change accountants was
recommended and approved by the Board of Directors of the Company. Arthur
Andersen LLP's report on the financial statements for fiscal year ended December
31, 1995 contained a qualification as to uncertainty regarding PCE U.S.'s
ability to continue as a going concern. Such qualification was made due to its
continuing net losses, negative cash flows from operations, negative working
capital and stockholders' deficiency. During the two most recent fiscal years
there were no disagreements with the former accountant of PCE U.S. on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of the former accountant, would have caused it to make reference to
the subject matter of the disagreements in connection with its report.

ADDITIONAL INFORMATION

The Company has filed with the Commission, a Registration Statement on Form
SB-2 under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed therewith. Descriptions in this Prospectus regarding the contents of any
contract, agreement or any other document filed as an exhibit to the
Registration Statement are summaries of all their material provisions but may
not necessarily be complete. With respect to each such contract or other
document filed as an exhibit to the Registration Statement, reference is made to
the copy of the exhibit for a more complete description. A copy of the
Registration Statement may be inspected without charge at the offices of the
Commission at 450 Fifth Street, N.W. Washington, D.C. 20549, and copies of all
or any part of the Registration Statement may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W. Washington, D.C.
20549 upon the payment of the fees prescribed by the Commission.

<PAGE>

INDEX TO FINANCIAL STATEMENTS

Mentortech Inc. (formerly Sivan and Mashov CBT) Audited Financial
Statements Page
----
Report of Independent Auditors............................................. F-2
Balance Sheets at December 31, 1996 and 1995............................... F-3
Statements of Operations for the years ended December 31, 1995 and 1996.... F-5
Statements of Stockholders' Deficiency for the years ended December 31,
1995 and 1996.............................................................. F-6
Statements of Cash Flows for the years ended December 31, 1995 and 1996.... F-7
Notes to Financial Statements.............................................. F-9

Mentortech Inc. Unaudited Financial Statements:

Balance Sheet at June 30, 1997.............................................F-21
Statements of Operations for the six months ended June 30, 1996 and 1997...F-23
Statements of Cash Flows for the six months ended June 30, 1996 and 1997...F-24
Notes to Unaudited Financial Statements....................................F-26

PC Etcetera, Inc. Audited Financial Statements:

Reports of Independent Auditors............................................F-28
Consolidated Balance Sheet at December 31, 1996............................F-30
Consolidated Statements of Operations for the years ended
December 31, 1995 and 1996................................................F-31
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1995 and 1995...........................F-32
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1996................................................F-33
Notes to Consolidated Financial Statements.................................F-35

F-1

<PAGE>

REPORT OF INDEPENDENT AUDITORS

KOST LEVARY & FORER
A MEMBER OF
ERNST & YOUNG INTERNATIONAL

To the Shareholders of MENTORTECH INC.

(Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.

AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.)

We have audited the accompanying balance sheet of (Mentortech Inc.
(formerly Sivan Computers Training Center (1994) Ltd.) ("Sivan" or "the
Company") and Mashov Computer Based Training (C.B.T.) Ltd. ("CBT") as of
December 31, 1996 (see note 1a) and 1995, and the related statements of
operations, changes in stockholders' deficiency and cash flows for each of the
two years in the period ended December 31, 1996. These financial statements are
the responsibility of the Company'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 in Israel, including those prescribed by the Israeli Auditors
Regulations (Mode of Performance) 1973 which do not differ in any significant
respect from United States generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement either originating within the financial statements themselves or
due to any misleading statement included therein. 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 financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles in the United States.

Tel Aviv, Israel /s/KOST LEVARY and FORER
March 26, 1997 Certified Public Accountants (Israel)
A member of Ernst & Young International

F-2

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

BALANCE SHEET
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

<TABLE>

December 31,
------------
1996 1995
---- ----
<S> <C> <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 283 $ 93
Trade receivables, (net of allowance for doubtful
accounts of $12 in 1996) 2,279 1,618
Other receivables and prepaid expenses 326 368
Inventories 91 -
----- -----

Total current assets 2,979 2,079
------ ------

INVESTMENT IN AFFILIATE 178 100
----- ------

SEVERANCE PAY FUND (NOTE 5) 362 212
----- ------

PROPERTY AND EQUIPMENT (NOTE 3):
Cost 2,227 1,269
Less - accumulated depreciation 587 240
----- ------

1,640 1,029
----- ------
GOODWILL, NET OF ACCUMULATED AMORTIZATION
(1996 - $211, 1995 - $ 114) 1,811 1,982
----- ------

Total assets $6,970 $5,402
====== ======

</TABLE>

The accompanying notes are an integral part of the financial statements.

F-3

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

BALANCE SHEET (continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

<TABLE>

<CAPTION>
December 31,
------------
1996 1995
---- ----
<S> <C> <C>
LIABILITIES LESS STOCKHOLDERS'
DEFICIENCY

CURRENT LIABILITIES
Short-term bank credit $ - $ -
Trade payables 717 412
Related parties 1,478 666
Deferred income 1,624 1,056
Accrued expenses and other payables (Note 4) 778 617
------ ------

Total current liabilities 4,597 2,751
------ -------

LONG-TERM LIABILITIES:
Accrued severance pay (Note 5) 455 277
Shareholder's loan (Note 6) 2,665 2,489
------ ------

Total long-term liabilities 3,120 2,766
------ ------

STOCKHOLDERS' DEFICIENCY:
Share capital (Note 10)
Additional paid in capital 150 -
Cumulative foreign currency translation adjustment 23 7
Accumulated deficit (920) (122)
------- -------

Total shareholders' (deficiency) (747) (115)
------- -------

Total liabilities less shareholders' deficiency $6,970 $5,402
====== ======

</TABLE>

The accompanying notes are an integral part of the financial statements.

F-4

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

Year ended December 31,
-----------------------
1996 1995
---- ----
Revenues $ 9,400 $ 6,651
Cost of revenues 4,713 3,849
------- -------
Gross profit 4,687 2,802
Operating expenses:
Research and development 248 --
Selling and marketing 1,446 921
General and administrative 3,359 1,816
------- -------
Total operating expenses 5,053 2,737
------- -------
Operating income (loss) (366) 65
Financial expenses, net 455 433
------ ------
Loss from ordinary operations (821) (368)
Income taxes 45 --
------- -------

Loss before equity in earnings of affiliate (866) (368)

Equity in earnings of affiliate 68 61
------- -------
Net loss $ (798) $ (307)
======= =======
Net loss per share $ (0.05) $ (0.02)
======= ========
Number of Shares used in computing
loss per share 15,000 15,000
====== ======

The accompanying notes are an integral part of the financial statements.

F-5

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

<TABLE>

Cumulative
foreign
Additional currency Total
Share paid in translation Accumulated shareholders'
capital capital adjustment deficit deficiency
------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Balance as of December 31,
1994 -- -- $ 2 $ 185 $ 187
Foreign currency translation
adjustment -- -- 5 -- 5
Loss for the year -- -- -- (307) (307)
------ ------- ---- ----- -----

Balance as of December 31,
1995 -- -- $ 7 $(122) $(115)
Issuance of shares of CBT -- 150 -- -- 150
Foreign currency translation
adjustment -- -- 16 -- 16
Loss for the year -- -- -- (798) (798)
------ ------ ---- ----- ----

Balance as of December 31,
1996 -- $150 $23 $(920) $(747)
====== ==== === ===== =====

</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

Year ended
December 31,
------------
1996 1995
---- ----
Cash flows from operating activities:
- -------------------------------------
Net loss for the period $(798) $(307)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 456 300
Capital gain - 6
Equity in earnings of affiliate (68) (61)
Increase (decrease) in accrued severance pay, net 30 (27)
Increase in trade receivables (721) (514)
Decrease (increase) in other receivables and
prepaid expenses 29 (18)
Increase in inventories (91) -
Increase in trade payables 320 150
Increase in related parties 454 446
Increase in deferred income 606 490
Increase in accrued expenses and other
payables 183 108
Accrued interest on shareholders' loan 265 182
------ ---

Net cash provided by operating activities 665 755
----- -----

Cash flows from investing activities:
- -------------------------------------
Purchase of property and equipment (1,006) (666)
Proceeds from sales of property and equipment 2 15
------ -----
Net cash used in investing activities (1,004) (651)
------- -----

Cash flows from financing activities:
- -------------------------------------
Proceeds from issuance of shares 150 -
Short-term bank credit, net - (11)
Increase in related parties 382 -
------ ---

Net cash provided by (used in) financing activities 532 (11)
------ -----

The accompanying notes are an integral part of the financial statements.

F-7

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

STATEMENTS OF CASH FLOWS (continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

Year ended
December 31,
------------
1996 1995
---- ----
Net increase in cash and cash equivalents $193 $ 93
Effect of changes in exchange rate on cash and
cash equivalent (3) -
Cash and cash equivalents at the beginning of the
year 93 -
---- -----

Cash and cash equivalents at the end of the year 283 93
==== =====

Supplemental disclosure of cash flow activities:
- ------------------------------------------------
Income taxes paid during the year $ 16 $ 150
==== =====

The accompanying notes are an integral part of the financial statements.

F-8

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

NOTE 1: - GENERAL

a. Basis of presentation:

Effective February 6, 1997, Mashov Computer Marketing Ltd. ("Mashov"),
the parent company of Sivan Computer Training Center (1994) Ltd.
("Sivan" or "the Company") and Mashov computer Based Training (CBT)
Ltd. ("CBT") transferred to PC Etcetera, Inc. ("PC") all of its
holdings in Sivan and in CBT and $1.2 million in consideration of
8,438,924 shares of common stock and 658,412 shares of convertible
preferred stock par value $0.001, each preferred share can be
converted into ten shares of common stock having a ten to one voting
right in relation to shares of common stock bringing Mashov holdings
in PC to 69%.

In view of the above, the transaction has been accounted for as a
reverse acquisition, and as such, Sivan and C.B.T are effectively the
acquirers. Since Sivan and CBT are under the common control of Mashov,
the combination of their financial statements was prepared in a manner
similar to a pooling of interests.

b. Sivan Computer Training Center (1994) Ltd.:

Sivan is engaged in personal computer training services in Israel.

Sivan implements an original teaching method which is based on a
session model and provides substantial practice, lab and project work.

In October 1994, Sivan purchased all the activities (including
intangible assets, see Note 2f) from Sivan Computers Ltd. for
approximately $2.5 million. As part of the purchase agreement, Mashov
made a commitment to the shareholders of Sivan Computers Ltd. to
reimburse them for any excess taxes resulting from the sale.
Subsequent to the balance sheet date, the shareholders of Sivan
Computers Ltd. received a demand from the Israeli tax authorities to
pay NIS 1 million. In the opinion of Mashov's management, based on the
opinion of its legal advisors, Mashov will not be liable for this
amount.

c. Mashov Computer Based Training (CBT) Ltd.:

F-9

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

CBT - an Israeli corporation - was incorporated in March 1996. CBT is
engaged in developing technology based training products and content.
In addition to content development, CBT develops delivery technology
for delivering training via the Internet and other public networks.
Its Intertrainer 1.0 product supports delivery of training content on
the Internet supporting full simulation, interactivity, sound and
graphics.

d. Since CBT commenced operations on April 1, 1996, the 1995 balance
sheet and statements of operations and cash flows include only Sivan.
The 1996 balance sheet and statements of operations and cash flows
includes a combination of Sivan and CBT.

F-10

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

NOTE 2: - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Financial statements are in United States dollars:

The Company's transactions are recorded in new Israeli shekels
("NIS"). All of the Company's sales are made in Israel in NIS, and
substantially all of the Company's costs are incurred in NIS.
Accordingly, the NIS is the functional currency of the Company.

The Company has elected to prepare its financial statements in U.S.
dollars.

Accordingly, the Company's financial statements have been translated
into U.S. dollars, in accordance with FASB Statement No. 52, "Foreign
Currency Translation." All balance sheet amounts have been translated
using the exchange rates in effect at the balance sheet date.
Statement of operations amounts have been translated using the average
exchange rate for the year. The gains and losses resulting from the
change in exchange rates from year to year have been reported
separately as a component of stockholders' equity.

b. Cash equivalents:

Cash equivalents are short-term highly liquid investments that are
readily convertible to cash and with maturities when purchased of
three months or less.

c. Inventories:

Inventories, mainly finished products are presented at the lower cost
of market value. Cost is determined using the "first-in, first-out"
method.

d. Investments in affiliate:

F-11

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

Sivan's 50% investment in Sivan Computers Jerusalem (1988) Ltd.
(hereafter "Sivan Jerusalem") is presented by the equity method of
accounting. After the balance sheet date, Sivan purchased the
remaining 50% of Sivan Jerusalem for $135,000.

e. Property and equipment:

These assets are stated at cost. Depreciation is computed by the
straight-line method, on the basis of the estimated useful lives of
the assets, as follows:

Years
-----
Computers and peripheral equipment 4 - 5
Office furniture and equipment 7 - 10
Motor vehicles 7
Leasehold improvements According to the leasing period

f. Goodwill

Goodwill, which is attributed to Sivan Computers Ltd.'s personal
computer tutorial services, is stated at cost and amortized by the
straight-line method over a period of 20 years.

The carrying value of goodwill is periodically reviewed by management
based on the expected future undiscounted operating cash flows over
the remaining goodwill amortization period. Based upon its most recent
analysis, management believes that no impairment of goodwill exists at
December 31, 1996.

g. Income taxes:

The Company follows the asset and liability method of accounting for
income taxes in accordance with Israeli accounting principles. Under
Israeli accounting principles, deferred income taxes are provided for
differences resulting from changes in the Israeli Consumer Price Index
("CPI") (the basis for the Company's tax reporting) and changes in the
exchange rate of the NIS to the U.S. dollar. SFAS No. 109, "Accounting
for Income Taxes," does not allow deferred income taxes to be

F-12

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

recognized for this difference which, with respect to the Company's
financial statements, is immaterial.

h. Revenue recognition:

Revenues from training services are recognized upon performance of the
services. Revenues from sales of products are recognized upon shipment
of the software provided no significant vendor obligations remain and
collection of the related receivable is probable.

Deferred revenues are unearned amounts received under training
services.

i. Research and development costs:

Research and development costs are charged to the statement of
operations as incurred. Statement of Financial Accounting Standard
(SFAS) No. 86 "Accounting for the Costs of Computer Software to be
Sold, Licensed or Otherwise Marketed," requires capitalization of
certain software development costs subsequent to the establishment of
technological feasibility.

Based on the Company's product development process, technological
feasibility is established upon completion of a working model. Costs
incurred by the Company between completion of the working model and
general release of the product have been insignificant.

j. Concentrations of credit risk:

Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents and accounts receivable. The Company maintains its cash
balances on deposit with major banks in Israel. Although all trade
receivables are in Israel, concentrations of credit risk with respect
to trade receivables are limited because the Company's customers are
from a wide range of industries and no one customer accounts for more
than five percent of total revenue or accounts receivable in the
two-year period ended December 31, 1996.

F-13

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

k. Fair value of financial instruments:

The financial instruments of the Company consist of non-derivative
assets: cash and cash equivalents, marketable securities, trade
receivables and loans payable in view of their nature, the fair value
of financial instruments approximates their carrying value.

l. Use of estimates:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.

m. Earnings (loss) per share:

Earnings (loss) per share are computed based on the number of shares
issued by PC to Mashov in consideration for Sivan and CBT in 1997 (see
note 1).

n. Impact of recently issued accounting standards:

In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128 (FAS 128),
"Earnings Per Share". This statement is effective for the Company's
quarter ending December 31, 1997. The statement redefines earnings per
share under generally accepted accounting principles. Under the new
standard, primary earnings per share is replaced by basic earnings per
share and fully diluted earnings per share is replaced by diluted
earnings per share.

The impact of FAS 128 on the calculation of primary and fully diluted
earnings per share for the years ended December 31, 1996 and 1995 is
not material.

In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 129 (FAS 129), "Disclosure of Information About Capital
Structure". This statement is effective for financial statements for
periods ending after December 15,

F-14

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

1997. The additional disclosure required by FAS 129 on the Company's
financial statements for the year ended December 31, 1996 and 1995 is
not material.

In June 1997, the FASB issued Statements of Financial Accounting
Standards No. 130 (FAS 130), "Reporting Comprehensive Income", and No.
131 (FAS 131), "Disclosure About Segments of an Enterprise and Related
Information". These statements are effective for fiscal years
beginning after December 15, 1997. These statements do not have
measurable effects on the financial statements but require additional
disclosure.

The impact of these two statements on the financial statements of the
company has not yet been determined.

NOTE 3: - PROPERTY AND EQUIPMENT

December 31,
------------
1996 1995
---- ----

Cost:
Computers and peripheral equipment $1,469 $ 841
Office furniture and equipment 330 229
Motor vehicles 198 41
Leasehold improvements 230 158
------ ------

2,227 1,269
------ ------
Accumulated depreciation:
Computers and peripheral equipment 481 198
Office furniture and equipment 47 21
Motor vehicles 21 5
Leasehold improvements 38 16
------ ------

587 240
------ ------

Depreciated cost $1,640 $1,029
====== ======
Depreciation expenses $ 356 $ 195
======= =======

F-15

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

NOTE 4: - ACCRUED EXPENSES AND OTHER PAYABLES

December 31,
------------
1996 1995
---- ----

Employees and payroll accruals $ 618 $ 380
Government authorities 112 122
Accrued expenses and others 48 115
----- ------

$ 778 $ 617
====== ======

NOTE 5: - ACCRUED SEVERANCE PAY

Under Israeli law, the Company is required to make severance payments to
dismissed employees (including officers) and to employees leaving
employment under certain other circumstances. This liability is calculated
based on the years of employment for each employee respectively, in
accordance with the "severance pay laws." The Company's liabilities for
required severance payments are covered by funding into severance pay
funds, insurance policies and by an accrual. Severance pay expense for the
years ended December 31, 1995 and 1996 was $52 and $157, respectively.

NOTE 6: - STOCKHOLDERS' LOANS

Stockholder loans are linked to the Israeli consumer Price Index and bear
interest at a rate 6% per annum. Repayment terms have not yet been
determined.

NOTE 7: - COMMITMENTS AND CHARGES

a. Lease commitments:

The Company leases its operating facilities under non-cancelable
leases terminating in 1997-2000, with a five-year extension option.
The amounts of future minimum lease payments for the years subsequent
to December 31, 1996, are as follows:

F-16

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

1997 $ 475
1998 306
1999 292
2000 18
------
$1,091

Rent expense for the years ended December 31, 1995 and 1996 was
approximately $413 and $608, respectively.

b. Charges:

As collateral for bank credit, balances due from Israel Credit Cards
Ltd. and Isracard Ltd. (as of December 31, 1996, such amount was $565
thousand) are pledged in favor of Israel Discount Bank Ltd.

NOTE 8: - TAXES ON INCOME

a. Measurement of results for tax purposes:

Results for tax purposes are measured in terms of earnings in NIS
after certain adjustments for increases in the CPI. As explained in
Note 2a, the financial statements are presented in U.S. dollars. The
difference between the annual change in the Israeli CPI and in the
NIS/dollar exchange rate causes a difference between taxable income
and the income shown in the financial statements. This is because
taxable income is measured in NIS adjusted for inflation and
translated into U.S. dollars at the applicable exchange rate for tax
purposes, while net income for financial statement purposes is
measured in U.S. dollars.

b. Tax assessments:

The Companies have not received final assessments since their
incorporation.

c. Reconciliation of the theoretical tax expenses:

F-17

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

A reconciliation between the theoretical tax expenses, assuming all
income is taxed at the statutory rate applicable to income of the
Company and the actual income tax as reported in the statements of
operations, is as follows:

Year ended
December 31,
------------
1996 1995
---- ----
Loss before taxes as reported in the
statements of income $ (821) $ (368)
======= =======

Statutory tax rate 36% 37%
=== ===

Theoretical tax expenses (benefits) $ (295) $ (136)

Increase (decrease) in taxes resulting from:
Taxes in respect of previous years 38 -

Tax adjustment in respect of inflation in
Israel 250 94
Non-deductible expenses 52 42
----- ----
Taxes on income as reported in the
statements of income $ 45 $ -
===== ====

d. Tax loss carryforward:

Net operating loss carryforward in CBT amounted to approximately $370
at December 31, 1996 and according to Israeli tax laws can be carried
forward indefinitely.

Deferred tax assets in the amount of $200 and $30 as of December 31,
1996 and 1995, respectively, which are mainly due to operating loss
carryforwards were offset by a valuation allowance in the same
amounts.

NOTE 9: - RELATED PARTY TRANSACTIONS

F-18

<PAGE>

MENTORTECH INC. (Formerly - SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T) LTD.)

NOTES TO FINANCIAL STATEMENTS (Continued)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands

Year ended
December 31,
------------
1996 1995
---- ----

Revenues (2) $ 50 $ 19

Expenses (2)
Cost of revenues $ 41 $145
Rent (1) $138 $ -
Management fees to Mashov (1) $748 $181
Interest (see Note 6) $434 $355

(1) The management fees and rent were paid according to an agreement
which was ended on December 31, 1996.

(2) Related balances are unlinked and do not bear interest.

NOTE 10: - CAPITAL STOCK

As explained in Note 1a, the transaction between PC and Mashov is treated
as a reverse acquisition. As such, the number of shares outstanding as of
December 31, 1996 and 1995 is the number of shares issued to Mashov in the
transaction.

F-19

<PAGE>

This Page Intentionally Left Blank

F-20

<PAGE>

MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>

JUNE 30, DECEMBER 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
ASSETS:
Current Assets:
- ---------------

Cash and cash equivalents $ 121 $ 283
Accounts receivable 3,494 2,279
Prepaid expenses 151 326
Inventory 26 91
---- ----

Total current assets 3,792 2,979
------- -----

Property and Equipment:
- -----------------------
Property and equipment 3,600 2,227
Accumulated depreciation and amortization (1,378) (587)
------ -----
Total property and equipment 2,222 1,640
------ -----

Other Assets:
- -------------
Other assets, net 479 362
Investment in affiliate -- 178
Goodwill (net of accumulated amortization of $279 -
1997 and $211 - 1996) 4,937 1,811
----- -----
TOTAL ASSETS $11,430 $6,970
======= ======

</TABLE>

See accompanying notes to consolidated financial statements.

F-21

<PAGE>

MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
(In thousands)
<TABLE>

<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)

Current Liabilities:
- --------------------
Accounts payable and accrued expenses $ 2,931 $ 1,495
Deferred revenue 1,666 1,624
Loans payable - others - current portion 531 --
Loans payable - affiliate - current portion 546 1,478
Capital equipment obligations 21 --
------- -------
Total current liabilities 5,695 4,597
------- -------

Other Liabilities
- -----------------
Loans payable affiliates (shareholders) 600 2,665
Other liabilities 538 455
------- -------
Total liabilities 6,833 7,717
------- -------

Stockholders' Equity (Deficiency):
- ----------------------------------
Common stock 150 150
Preferred stock 1 --
Additional paid in capital - common stock 5,559 --
Accumulated deficit (902) (920)
Cumulative foreign currency
translation adjustment (211) 23
------- ----
Total Stockholders' Equity (Deficiency) 4,597 (747)
------- ------
Total Liabilities and Stockholders' Equity
(Deficiency) $11,430 $6,970
======= ======

</TABLE>

See accompanying notes to consolidated financial statements.

F-22

<PAGE>

MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)

Six Months Ended
June 30,
--------
1996 1997
---- ----
(Unaudited)

Revenues $4,209 $8,687

Cost of revenues 2,224 5,375
----- -----

Gross profit 1,985 3,312

Selling and marketing 556 1,205
General and administrative 1,231 1,789
Research and development 102 230
--- ---
Operating income 96 88
---- ----
Equity in earnings of affiliate 32 --
Gain on sale of subsidiary -- 27
Financial expense, net (307) (97)
----- ----

Net income (loss) $ (179) $18
====== ===

Net income (loss) per share $(0.01) $0.001
====== ======

Weighted average number of shares 15,000 12,092
====== ======

See accompanying notes to consolidated financial statements.

F-23

<PAGE>

MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>

<CAPTION>
Six Months Ended
June 30
-------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) for the period $ 18 $ (179)

Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities
Depreciation and amortization 366 230
Capital gain (2) --
Equity in earnings of affiliate -- (38)
Increase in accrued severance pay, net 41 45
Increase in deferred income taxes (72) --
Increase in trade receivables (199) (162)
Decrease in prepaid expenses 211 --
Decrease (increase) in other receivables 154 (132)
Decrease in other assets 79 --
Decrease (increase) in inventories 65 (20)
Increase in trade payables -- 158
Increase (decrease) in related payables (452) 78
Increase in deferred income (125) 246
(Decrease) in accounts payable and accrued expenses (594) (18)
Accrued interest on shareholders' loan -- 173
----- ----
Net cash (used in) provided by operating activities (510) 381
----- ----

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment (657) (539)
Proceeds from sales of property and equipment 35 --
Purchase of subsidiary (45) --
Cash acquired in acquisition 1,217 --
------ -----
Net cash provided by (used in) investing activities 550 (539)
------ -----

</TABLE>

F-24

<PAGE>

MENTORTECH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)

<TABLE>

<CAPTION>
Six Months Ended
June 30
-------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of shares -- 151
Capital equipment obligation repayments (52) --
Decrease in loans payable (480) --
Increase in short-term bank credit 331 --
----- -----
Net cash (used in) provided by financing activities (201) 151
----- ----

NET DECREASE IN CASH AND CASH EQUIVALENTS (161) (7)
Effect of exchange rate changes on cash and cash equivalent -- (2)
Cash and cash equivalents at the beginning of the period 282 93
-----

Cash and cash equivalents at the end of the period $121 $ 84
==== =====

Supplemental disclosure of cash flow information:
Cash paid during the period for
Income taxes $ 28 16
Interest 98 --

Supplemental disclosure of non-cash and financing activities:
Two shareholder loans in the amount of $2,578 and $438 were
converted to equity in 1997

</TABLE>

See accompanying notes to consolidated financial statements.

F-25

<PAGE>

MENTORTECH INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Interim Financial Statements

The accompanying financial information is unaudited, but in the opinion of
management, reflects all adjustments (which include only normal recurring
adjustments) necessary to present fairly the Company's financial position,
operating results and cash flows for those periods presented. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulation of the Securities and
Exchange Commission. The comparative figures for the consolidated balance sheet
for the year ended December 31, 1996, consolidated statements of operations for
the three and six month periods ended June 30, 1996 and the consolidated
statements of cash flows for the six months ended June 30, 1996 combines the
data of Sivan Computers Training Center (1994) Ltd. ("Sivan") and Mashov
Computer Based Training (C.B.T.) Ltd. ("Mashov CBT"). The financial information
should be read in conjunction with the audited financial statements and notes
thereto for the year ended December 31, 1996 included in the Company's most
recent Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission. Results for the interim period are not necessarily indicative of
results for the entire year.

Note 2. Recent Accounting Pronouncement

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (FAS 128), "Earnings Per Share". This
statement is effective for the Company's quarter ending December 31, 1997. The
statement redefines earnings per share under generally accepted accounting
principles. Under the new standard, primary earnings per share is replaced by
basic earnings per share and fully diluted earnings per share is replaced by
diluted earnings per share.

The impact of FAS 128 on the calculation of primary and fully diluted
earnings per share for the six months ended June 30, 1997 and 1996 is not
material.

Note 3. Pro Forma Results of Operations

The unaudited financial statements for 1997 included in this report reflect
the operations of Sivan and Mashov CBT for the six months ended June 30, 1997
and the operations of PC Etcetera, Inc. since February 13, 1997, the date of the
stock purchase transaction (See Management's Discussion and Analysis,
"Background"). Because of the change in control, the stock purchase transaction
between Mashov and PC Etcetera, Inc. was accounted for as a reverse acquisition.
Based on such accounting treatment, Sivan is reported as the surviving entity.
The six months ended June 30, 1996 includes the six months operations of Sivan
and the three months of operations (since inception) of Mashov CBT. It does not
include the operations of PC Etcetera, Inc.

F-26

<PAGE>

MENTORTECH INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On a pro forma basis had the acquisition occurred January 1, 1997, the pro
forma results of operations for the six months ended June 30, 1997 would have
been as follows:

Revenues $9,289
Net Loss $(132)
Net Loss Per Share $(.01)

Note 4. Accounting Policy

For purposes of the Statement of Cash Flows, the Company considers all
highly liquid instruments with maturity of three months or less when purchased
to be cash equivalents.

F-27

<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
PC Etcetera, Inc.:

We have audited the accompanying consolidated balance sheet of PC Etcetera, Inc.
as of December 31, 1996, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of PC
Etcetera, Inc. as of December 31, 1996, and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

/s/ERNST & YOUNG LLP

New York, New York
March 28, 1997

F-28

<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
PC Etcetera, Inc.:

We have audited the accompanying consolidated statements of operations,
stockholders' equity (deficit) and cash flows of PC Etcetera, Inc. and
subsidiaries for the year ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the result of operations and cash flows of PC Etcetera,
Inc. and subsidiaries for the year ended December 31, 1995 in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, certain factors raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

/s/ARTHUR ANDERSEN LLP

New York, New York
March 8, 1996

F-29

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996

Assets:
Current Assets:
Cash and cash equivalents $50,445
Accounts receivable,
net of allowance for doubtful accounts of $20,189 947,327
Prepaid expenses and other current assets 31,985
---------
Total current assets 1,029,757
---------

Property and equipment net of accumulated
depreciation and amortization of $446,038 319,730
Other assets 37,667
----------
Total assets $1,387,154
==========

Liabilities and Stockholders' Deficit:
Current Liabilities:
Accounts payable and accrued expenses $1,685,391
Loans payable - current portion 663,589
Loans payable - related party 470,833
Capital equipment obligations - current portion 36,299
Deferred revenue 120,308
---------
Total current liabilities 2,976,420
---------

Long-Term Liabilities:
Capital equipment obligations 6,834
Accounts payable - long-term 324,980
Deferred revenue 66,656
---------
Total Liabilities 3,374,890
---------

Commitments and Contingencies

Stockholders' Deficit:
Preferred stock, $.001 par value, 5,000,000
Shares authorized, 1,000,000 Series A Shares
Issued and outstanding 1,000
Common Stock, $.01 par value, 15,000,000
Shares authorized, 3,169,129 shares issued and outstanding 31,691
Additional paid-in capital 5,279,367
Accumulated deficit (7,299,794)
----------
Total stockholders' deficit (1,987,736)
----------
Total Liabilities and Stockholders' Deficit $1,387,154
==========

See Accompanying Notes

F-30

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,

<TABLE>

<CAPTION>
1996 1995
---- ----

<S> <C> <C>
Net revenues $7,042,089 $11,148,929
Cost of revenues 4,964,144 7,231,364
---------- -----------
Gross profit 2,077,945 3,917,565

Selling, general and administrative expenses 3,307,242 5,521,837
Research and development 58,214 891,686
Write down of software investment -- 1,202,100
---------- -----------
Operating loss (1,287,511) (3,698,058)

Gain on sales of subsidiaries 181,771 --
Other income 66,672 --
Interest expense, net of interest income of
$3,476 and $34,944 (174,067) (147,917)
----------- -----------
Net loss ($1,213,135) ($3,845,975)
=========== ===========
Net loss per share: ($0.39) ($1.36)
=========== ===========
Weighted average number of shares 3,137,879 2,827,462
=========== ===========

</TABLE>

See Accompanying Notes

F-31

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>

<CAPTION>
ADDITIONAL STOCKHOLDERS'
PREFERRED STOCK COMMON STOCK PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
------ ------ ------ ------ ------- ------- ---------

<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 1,000,000 $1,000 9,637,308 $96,374 $3,754,689 $(2,240,684) $ 1,611,379
One for five reverse stock split -- -- (7,709,846) (77,099) 77,099 -- --
Issuance of common stock -- -- 1,200,000 12,000 1,452,495 -- 1,464,495
Net Loss -- -- -- -- -- (3,845,975) (3,845,975)
--------- ------ ---------- ------- ---------- ---------- ----------
Balance December 31, 1995 1,000,000 1,000 3,127,462 31,275 5,284,283 (6,086,659) (770,101)
Issuance of common stock -- -- 41,667 416 (416) -- --
Expenses related to 1995 share
registrations -- -- -- -- (4,500) -- (4,500)
Net loss -- -- -- -- -- (1,213,135) (1,213,135)
--------- ------ ---------- ------- ---------- ----------- ----------
Balance December 31, 1996 1,000,000 $1,000 3,169,129 $31,691 $5,279,367 ($7,299,794) ($1,987,736)
========= ====== ========= ======= ========== ============ ===========

</TABLE>

See Accompanying Notes

F-32

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,

<TABLE>

<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net Loss ($1,213,135) ($3,845,975)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH (USED IN) OPERATING ACTIVITIES:
Write down of software investment -- 1,202,100
Depreciation and amortization 236,091 814,591
Provision for (recovery of) doubtful accounts (12,246) 32,435
Gain on sale of property and equipment -- (6,690)
Gain on sale of subsidiaries (181,771) --
Amortization of deferred revenue (66,672) --

Changes in operating assets and liabilities: (204,198) 93,584
Prepaid expenses and other current assets (10,030) (58,329)
Inventories 32,467 (32,467)
Assets held for sale 379,611 --
Accounts payable and accrued expenses 760,156 402,946
Deferred revenue 23,254 (49,588)
Liabilities held for sale (564,818) --
--------- ----------
NET CASH (USED IN) OPERATING ACTIVITIES (821,295) (1,447,393)
--------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets 35,330 32,116
Purchase of property and equipment (49,306) (160,640)
Proceeds from sale of property and equipment -- 72,672
Proceeds from sale of license 200,000 --
Proceeds from sale of subsidiaries, net 546,191 --
------- ----------

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 732,215 (55,852)
-------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayment of loans payable - related party (252,374) (53,774)
Proceeds from loans payable - related party 187,500 500,000
Net proceeds (repayment ) - short term borrowings 209,587 (118,693)
Repayment of capital equipment obligations (152,152) (183,541)
Net proceeds (expenses) from issuance of common and preferred stock (4,500) 1,464,495
---------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (11,939) 1,608,487
--------- ---------

</TABLE>

F-33

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE YEARS ENDED DECEMBER 31
<TABLE>

<CAPTION>
1996 1995
---- ----

<S> <C> <C>
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (101,017) 105,242
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 151,462 77,777
LESS CASH AND CASH EQUIVALENTS INCLUDED IN NET ASSETS HELD FOR SALE 0 (31,557)
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $50,445 $151,462
======= ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for
Interest $142,101 $173,758
Income taxes $10,733 $4,217

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Capital lease obligations of $150,026 were incurred when the Company entered
into lease arrangements for new equipment during the year ended December 31,
1995.
The Company effectuated a 1 for 5 reverse stock split in April 1995 resulting
in a reclassification between common stock and paid in capital of $77,099.
Concurrent with the reverse stock split, 1,000,000 shares of preferred stock
were converted into 1,000,000 (post reverse split) shares of common stock.

</TABLE>

See Accompanying Notes

F-34

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

PC ETCETERA, Inc. (the "Company") develops and offers instructor-led and
computer-based personal computer training programs, and provides contract
consulting services, primarily to large business and public sector
organizations. For the years ended December 31, 1996 and 1995, revenues from
instructor led training comprised 39% and 61% of total revenues, respectively,
while consulting services and computer-based training ("CBT") revenues accounted
for 56% and 27% and 5% and 12% of total revenues, respectively.

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries until the time they were either sold or
closed. All material intercompany balances and transactions have been eliminated
in consolidation.

As of December 31, 1996, the Company had two facilities operating in New
York City.

As reflected in the Consolidated Financial Statements, the Company has
experienced continuing net losses, negative cash flows from operations, a
negative working capital and a stockholders' deficiency. The Company is
currently working under a plan which has reduced overhead and expenses and
improved profitability Additionally, the Company sold its Canadian subsidiary
and California and Idaho training facilities and suspended operations at its
Israeli subsidiary. Further, as described in Note 13, in February 1997, Mashov
Computers Marketing Ltd. (MCM) acquired 69% of the common stock of the Company.
It is the intent of MCM to provide continued financial support to the Company,
if necessary, to meet its obligations for the next twelve months.

A summary of the Significant Accounting Policies consistently applied in
the preparation of the accompanying financial statements is as follows:

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-35

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cash and Cash Equivalents

The Company considers all highly liquid financial instruments with a
maturity of three months or less when purchased to be cash equivalents.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and accounts receivable.
The Company maintains its cash balances on deposit with one financial
institution. Concentrations of credit risk with respect to accounts receivable
are limited because the Company's customers are from a wide range of industries
and no one customer accounts for more than ten percent of total revenue or
accounts receivable as of December 31, 1996.

Property and Equipment

Property and equipment are carried at cost. Depreciation is computed using
the straight-line method over the useful lives of the assets. Amortization of
leasehold improvements is computed on the straight-line basis over the shorter
of the period of the lease or the useful life of the asset.

Revenue Recognition

Revenues related to instructor-led training are recognized over the life of
the training course. CBT revenues are recognized upon delivery of the program.
Contract consulting revenue is recognized as the services are performed. The
Company's refund policy provides that dissatisfied trainees may either attend
the same course without charge or the trainee's employer may request a full
refund. It is Company policy to reserve for potential refunds; however, an
allowance for refunds has not been established because historically minimal
refunds have been issued. Retakes are provided on a seat availability basis and
as such the Company incurs no financial exposure related to these retakes.

Research and Development

All research and development costs are charged to expenses when incurred.

Income Taxes

Income taxes are accounted for under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Under this method, deferred
tax assets and liabilities are determined based on differences between the
financial reporting and income tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the

F-36

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

differences are expected to reverse. Valuation allowances are established, when
necessary, to reduce deferred tax assets to the amount expected to be realized.

Foreign Currency

As of December 31, 1996, the Company suspended operations in Israel and
sold its Canadian subsidiary. The financial records of the Israeli subsidiary
are maintained in U.S. dollars because the currency of the primary economic
environment in which the operations of the subsidiary are conducted (the
functional currency) is the U.S. dollar. Transactions and balances in the
Canadian subsidiary were maintained in Canadian dollars and translated into U.S.
dollars in accordance with the principles set forth in Statement of Financial
Accounting Standards No 52. Exchange gains and losses were not material for the
years ended December 31, 1996 and 1995.

Reverse Split

Except as otherwise indicated, all references herein to numbers of shares
of Common Stock and per share amounts give retroactive effect to the Company's
one-for-five reverse split effectuated on April 19, 1995.

Earnings per Share

Earnings per share calculations are based on the weighted average number of
shares of common stock outstanding and dilutive common stock equivalents
outstanding. All earnings per share amounts have been adjusted to give effect to
the reverse stock split.

Long-Lived Assets

It is the Company's policy to estimate future gross revenues from and costs
related to long-lived assets and to write off any amount in excess of the net
realizable value. No such write off was necessary at December 31, 1996.

Inventories

Inventories consist of computer software and components. Inventories are
carried at the lower of cost or market determined by the first-in, first-out
method.

F-37

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 2 - PROPERTY AND EQUIPMENT

Major classifications of property and equipment and their respective lives
are summarized below:

December 31, 1996 Depreciable lives
----------------- -----------------
Furniture and Fixtures $191,188 5-8 years
Computer Equipment 373,898 3 years
Shorter of term of lease
Leasehold Improvements 200,682 or useful life
-------
Accumulated Depreciation
and Amortization (446,038)
--------

Net Property and Equipment $319,730
========

Depreciation and amortization expense for the years ended December 31, 1996 and
1995 were $236,091 and $458,284, respectively. During the year ended December
31, 1996, $437,415 of property and equipment was fully depreciated and written
off.

At December 31, 1996, property and equipment includes computer equipment under
capital leases with a cost of $200,713 and accumulated amortization of $130,079.

NOTE 3 - LOANS PAYABLE

Short-Term Financing

In 1990, the Company entered into a financing arrangement to finance its
trade receivables (excluding those from the Company's subsidiaries). The
arrangement expires on April 30, 1997. The balance outstanding under the
arrangement is limited to 75% of eligible receivables and bears interest at the
rate of 4% above prime per annum . In addition, the Company pays a facility fee
of $7,500 per contract year or 2% of the average monthly daily cash balances of
the loan, whichever is less. Borrowings under the arrangement are secured by the
Company's accounts receivable. At December 31, 1996, the loan balance was
$441,428.

Bank Debt

In 1994, the Company obtained a bank loan for the purchase of
state-of-the-art computer equipment and other fixed assets. The bank loan
matures in May 1997 and carries an interest rate of 9% per annum. The bank loan
at December 31, 1996 was $38,161 (all current).

F-38

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In 1994, the Company's wholly-owned Israeli subsidiary obtained a working
capital loan from a bank in Israel which was guaranteed by the Company. The loan
balance at December 31, 1996 is $184,000 (all current) and carries an interest
rate of 10% per annum.

Accounts Payable - Long Term

In October 1996, the Company entered into an agreement with certain
vendors. The agreement provided for specific payment terms based on the total
debt to the vendor. Class A creditors (total indebtedness in excess of $3,000
each) will be paid in full through a four-year payment plan.

Loans from Related Parties

In 1991, the Company obtained a loan from an unrelated party in the amount
of $100,000 with a 10% interest rate. During the year ended December 31, 1993,
the note was assigned to a then member of the Company's Board of Directors. The
loan is payable on demand and is currently unsecured . The security agreement
whereby the loan was secured by all personal property, other than that property
secured pursuant to the financing agreement described above, was subsequently
released. At December 31, 1996, the loan balance was $33,333.

In 1995, the Company obtained a loan from certain related parties in the
amount of $500,000 with a 10% interest rate. The loan is due on October 25, 1997
and is currently unsecured until such time as the Company is able to obtain
waivers from certain lien holders of the Company. Simultaneously, in
consideration of the loans, the lenders were issued warrants for the purchase of
an aggregate of 75,000 shares of the Company's common stock at a price of $1.50
per share. These warrants were issued at a price in excess of market value. The
loan agreement also provided that additional warrants be issued to the lenders
equal to 11.25% of the outstanding principal amount on June 5, 1996, divided by
$1.50. At June 5, 1996, the principal balance was $250,000 and as such, 18,750
additional warrants were issued. The total warrants issued of 93,750 are subject
to certain anti-dilution provisions which increased the number of warrants
outstanding at December 31, 1996 to 97,656. At December 31,1996, the loan
balance was $250,000.

In 1996, the Company obtained an additional loan from certain related
parties in the amount of $187,500 with a 10% interest rate. Simultaneously with
the receipt of the loan, each lender extended the maturity of the loans made by
them pursuant to the above described 1995 loan agreement, to October 25, 1997.
In consideration for making the loans, the Company agreed to issue to the
lenders warrants for the purchase of an aggregate of 150,000 shares of Common
Stock of the Company at a price of $0.25 per share. The fair value of the loan
was estimated to be approximately $213,000. The warrants are subject to certain
anti-dilution provisions.

F-39

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Fair Value

The following methods and assumptions were used by the Company in
estimating its fair value disclosure for loans payable:

Short Term Financing: The carrying amount of the Company's borrowings
under its short term financing agreement approximates fair value.

Bank Debt: The carrying amount of the Company's borrowings under its
bank loans approximates fair value.

Accounts Payable - Long Term: The carrying amount of the Company's
long term accounts payable approximate fair value.

Loans from Related Parties: The carrying amount of the Company's loans
from related parties approximate fair value.

NOTE 4 - STOCKHOLDERS' EQUITY

Effective April 19, 1995, the Company effectuated a one-for-five reverse
split of the shares of Common Stock.

In August 1994, the Company issued 3,300,000 shares of common stock in
connection with the acquisition of substantially all of the assets of the ACE
Division of Elron Electronic Industries Ltd. ("Elron") and Adar International,
Inc. ("Adar"). PC Etcetera Israel, Ltd., ("PC Israel"), the Company's
wholly-owned subsidiary, which operated the acquired businesses, suspended
operations on March 31, 1996. In connection with the acquisition, the Company
issued, or subsequently issued upon exercise of warrants, which were also issued
in connection with the transaction with Elron, 1,000,000 shares of Series A
preferred stock. After the above transactions there were 40,000 warrants
outstanding.

In March 1995, the Company issued an aggregate of 1,000,000 shares of
Series B preferred stock and four-year warrants for the purchase of an aggregate
of 2,500,000 shares of common stock (500,000 post split) at an exercise price of
$.55 per share ($2.75 post split) for an aggregate purchase price of $1,500,000.
Effective with the April 19, 1995 reverse split, the shares of Series B
preferred stock were converted into 1,000,000 shares of common stock (post
split) and the warrants became exercisable. These warrants were issued at an
exercise price above market value. In addition, pursuant to the Series B
preferred stock agreement the Company had undertaken to file a registration
statement with the SEC to register the shares issuable upon conversion of the
Series B preferred stock and upon exercise of the warrants. Since this
registration statement had not been declared

F-40

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

effective by December 31, 1995, the Company issued 200,000 additional shares of
common stock and 101,103 additional warrants at an exercise price of $2.75 per
share, in accordance with the Series B preferred stock agreement. The above
mentioned common stock and warrants were issued with anti-dilution provisions if
either common stock or warrants are subsequently issued by the Company below
specific amounts. Based on certain 1995 and 1996 transactions described in Note
3, 41,667 shares of common stock and 33,749 warrants to purchase additional
shares of common stock were issued.

OPTIONS

The Company has adopted an Amended and Restated 1987 Stock Option Plan
under which 600,000 shares of the Company's common stock have been reserved for
issuance to employees and non-employee Directors, among others.

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No, 123, "Accounting for Stock-Based Compensation" requires use of
options valuation models that were not developed for use in valuing employee
stock options. The exercise price of the Company's employee stock options was
equal to or above the market price of the underlying stock on the date of grant
and, therefore, no compensation expense was recognized.

Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its stock options under the fair value method of that statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1995 and 1996: risk free interest rate of 6.6%, volatility
factor of the expected market price of the Company's common stock of .72, and
the weighted-average expected life of the options of 5 years. Dividends are not
expected in the future. Since the fair value for the options was determined to
be de minimis, proforma information is not disclosed.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's stock options have characteristics of
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

All of the options were granted at or above fair market value as of the
date of grant and no compensation expense was recorded.

F-41

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock option activity is summarized as follows:

Weighted-
Average
Shares Exercise Price
------ --------------

Outstanding December 31, 1994 435,800 $3.31

Options Granted 30,000 $3.90
Options Canceled (24,600) $3.79
-------
Outstanding December 31, 1995 (288,100 exercisable
at option prices $.94 to $6.25) 441,200 $3.17

Options Granted 20,000 $5.00
Options Canceled (307,200) $2.03
--------
Outstanding December 31, 1996 (154,000 exercisable
at option prices $.94 to $6.25) 154,000 $3.56
========

Options outstanding and exercisable at December 31, 1996 are as follows:

Weighted-
Average
Remaining
Contractual
Shares Exercise Price Life
- ------ -------------- -----
16,900 $.94 .2
30,000 $1.05 .2
5,100 $2.50 1
10,000 $2.75 1
66,000 $5.00 3
26,000 $6.25 5.75
- -------
154,000

At December 31, 1996, 600,000 options are available for grant.

WARRANTS

The following is a summary of warrants outstanding and exercisable at
December 31, 1996

Number of
Expiration Date Warrants Exercise Price Description
- --------------- -------- -------------- -----------
August 12, 1999 40,000 $5.00 (1)

F-42

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

March 15, 1999 634,852 $2.60 (2)
December 31, 1998 36,000 $2.50 (3)
December 5, 2000 97,656 $1.44 (4)
October 25, 2001 150,000 $0.25 (5)
-------
Total 958,508

(1) Warrants issued in connection with the Elron acquisition
(2) Warrants issued with the Series B preferred stock agreement, as adjusted
for anti-dilution provisions
(3) Warrants granted to a consultant
(4) Warrants issued in connection with the 1995 loan from related parties
(Note 3), as adjusted for anti-dilution provisions
(5) Warrants issued in connection with the 1996 loan from related parties
(Note 3)

Subsequent to the balance sheet date 922,508 of the above noted warrants
were converted into shares of common stock (See Note 13)

At December 31, 1996, the Company has 958,508 shares of common stock
reserved for issuance to the warrant holders.

NOTE 5 - LEASES

The Company conducts its operations principally from leased facilities.
These facilities consist of office and classroom space at eight locations
pursuant to leases which expire through the year 2003. The Company has also
entered into capital lease arrangements for certain fixed assets. Future minimum
lease payments with respect to leases in effect at December 31, 1996 are as
follows:

Capital Operating
------- ---------
1997 $44,566 $316,426
1998 8,215 298,794
1999 0 330,794
2000 0 330,794
2001 0 330,794
Thereafter 0 641,799
--------- ---------
$52,781 $2,249,401
Less: Amounts representing interest (9,648) ----------
------
$43,133
=======

Rental expense for the years ended December 31, 1996 and 1995 was $456,083 and
$1,010,138, respectively.

F-43

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 6 - DEFERRED REVENUE

The Company enters into agreements with certain clients whereby blocks of
training coupons are purchased in advance at discount prices. The purchases are
recorded as deferred revenue ($53,636 at December 31, 1996) which is recognized
as revenues as classes are attended.

In connection with the sale of the Canadian Subsidiary (see Note 12), the
Company sold a nonrefundable license fee for certain computer software for
$200,000. This license fee has been deferred and is being recognized over three
years which is equal to the term of the license. At December 31, 1996, the
deferred revenue amounted to $133,328 of which $66,672 has been included in
current liabilities in the accompanying consolidated balance sheet.

NOTE 7 - SOFTWARE

The Company's capitalized software consisted of the authoring tool used to
develop the Company's CBT products. The total amount of software costs amortized
for the year ended December 31, 1995 was $343,457. These costs are included in
research and development since the software is only used for the development of
CBT products. It is the Company's policy to project future gross revenues from,
and costs related to, the software and to write off any amount in excess of the
net realizable value. During the fourth quarter of 1995, in connection with the
decision to suspend operations of PC Israel, the Company determined there would
be no continuing value to the asset. As a result, it wrote off the entire
remaining net book value of $1,202,100 in December, 1995.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

The Company, and its former President and Executive Vice President are
parties to an agreement which requires the Company, upon the death of either
such person, to purchase from the estate of such person up to $500,000 of the
Company's Common Stock at a price per share equal to the Company's revenues for
the last four completed fiscal quarters immediately preceding the date of death
divided by the number of outstanding shares of Common Stock at the time of
death. The Company's purchase obligation is conditioned upon its receipt of, and
is only to the extent of, life insurance proceeds on such persons.

F-44

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 9 - FOREIGN OPERATIONS

RESULTS OF FOREIGN OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996

ELIMINA- CONSOLI-
US CANADA ISRAEL TIONS DATED
------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUE FROM UNRELATED $6,982,928 $0 $59,161 -- $7,042,089
THIRD PARTIES
INTERCOMPANY REVENUE 0 0 0 -- 0
--- --- --- ---

TOTAL REVENUE $6,982,928 $0 $59,161 -- $7,042,089
========== === ======= ==========
NET LOSS ($889,289) $0 ($323,846) -- $(1,213,135)
=========== === ========= ===========
IDENTIFIABLE ASSETS $1,387,154 $0 $0 -- $1,387,154
========== === === ==========
</TABLE>

FOR THE YEAR ENDED DECEMBER 31, 1995

ELIMINA- CONSOLI-
US CANADA ISRAEL TIONS DATED
------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUE FROM UNRELATED $7,097,409 $3,335,461 $716,059 -- $11,148,929
THIRD PARTIES
INTERCOMPANY REVENUE 0 0 174,517 (174,517) --
--- --- -------- --------- ---
TOTAL REVENUE $7,097,409 $3,335,461 $890,576 $174,517 $11,148,929
========== ========== ======== ======== ===========
NET INCOME (LOSS) ($3,166,529) ($23,106) ($656,340) $3,845,975
=========== ========== ========= ==========
IDENTIFIABLE ASSETS $1,542,285 $644,771 $379,611 $2,566,667
========== ========= ======== ==========
</TABLE>

NOTE 10 - RETIREMENT PLAN

The Company sponsors a defined contribution plan under Section 401(k) of the
Internal Revenue Code for its employees. Participants can make elective
contributions subject to certain limitations. The Company can make a
discretionary matching contribution on behalf of all participants. The Company
made a contribution of $15,824 and $11,064 in 1996 and 1995, respectively.

NOTE 11 - INCOME TAXES

There was no income tax expense or benefit recorded for the years ended
December 31, 1996 or 1995.

The Company has a net operating loss ("NOL") carry forward for income tax
purposes which is available to offset future taxable income. This NOL totals
$5,485,000 and expires in the years

F-45

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2006 through 2011. The Company has a capital loss carry forward for income tax
purposes, which totals $1,202,000 and expires in 2000.

Components of the Company's deferred tax asset and liability at December
31, 1996 is as follows:

Net operating loss carry forwards $2,194,000
Capital loss carry forward 481,000
Deferred revenue (53,000)
------------
2,622,000
Valuation allowance (2,622,000)
----------
Net deferred tax asset --

The change in valuation allowance amounted to $828,000 and $1,559,000
respectively, for the years ended December 31, 1996 and 1995.

The change in stock ownership discussed in Note 13 will result in a
limitation on the annual utilization of net operating loss carry forwards.

NOTE 12 - GAIN ON SALE OF SUBSIDIARY

Effective January 1, 1996, all of the outstanding stock of the Company's
Canadian subsidiary was sold to a private company for net proceeds of $504,000.

Effective April 1, 1996 the Company sold the San Francisco California and
Boise Idaho training operations for net proceeds of $42,000.

NOTE 13 - SUBSEQUENT EVENTS

Effective February 6, 1997, Mashov Computers Marketing Ltd., ("MCM")
acquired a 69% interest in the Company. In consideration of the foregoing, MCM
transferred to the Company all of its interest in Sivan Computers Training
Center ("Sivan") and Mashov Computer Based Training ("Mashov CBT"). MCM received
8,438,924 shares of common stock and 658,412 shares of preferred stock par value
$.001, each share of preferred being convertible into ten shares of common stock
having a ten to one voting right in relation to shares of common stock. This
transaction will be accounted for as a reverse acquisition.

Concurrently with the above purchase transaction, the Company entered into
a conversion and waiver agreement whereby the following took place:

F-46

<PAGE>

PC ETCETERA, INC. (PCE U.S.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The 1,000,000 shares of Series A Preferred Shares held by Elron Electronic
Industries was converted into 200,000 shares of common stock. (See Note 4).

The loans the Company received from certain stockholders aggregating
$437,500 as of December 31, 1996 were converted into 1,750,000 shares of common
stock. (See Note 3).

The holder of warrants (See Note 4) agreed to convert a total of 1,432,519
warrants (consisting of 922,508 warrants outstanding at December 31, 1996 (See
Note 4) which were subsequently adjusted in 1997 under anti dilution provisions)
into 344,464 shares of common stock.

F-47

<PAGE>

<TABLE>
<CAPTION>
============================================= ==========================================

<S> <C>
No person has been authorized in connection with the MENTORTECH INC.
offering made hereby to give any information or to make any
representation not contained in this Prospectus, and, if 2,957,838 Shares
given or made, such information or representation must not
be relied upon as having been authorized by the Company or Common Stock
any Underwriter. This Prospectus does not constitute an
offer to sell or a solicitation of any offer to buy any of
the securities offered hereby to any person or by anyone in
any jurisdiction in which it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances,
create any implication that the information contained herein
is correct as of any date subsequent to date hereof.

TABLE OF CONTENTS
Page
----
Prospectus Summary........................... 4
Risk Factors................................. 7
Use of Proceeds.............................. 12
Capitalization............................... 12
Dividend Policy.............................. 13 PROSPECTUS
Price Range of Common Stock.................. 13
Unaudited Pro Forma Financial Data........... 14
Selected Financial Data...................... 18
Management's Discussion and Analysis of
Financial Condition and Results of Operations 20
Business..................................... 27
Management................................... 38
Certain Transactions......................... 44
Equity Ownership of Principal and Selling
Stockholders and Officers and Directors.... 46
Shares Eligible for Future Sale.............. 48
Description of Capital Stock................. 49
Conditions in Israel ........................ 52
Plan of Distribution......................... 55
Legal Matters................................ 56
Experts...................................... 56 , 1997
Change in Accountants........................ 57
Additional Information....................... 57
Index to Financial Statements................ F-1

============================================= ==========================================
</TABLE>

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The expenses incurred by the Company in connection with the issuance and
distribution of the securities being registered are estimated as follows:

Amount
------
Securities and Exchange Commission registration fee........... $ 296
Legal fees and expenses....................................... 30,000
Accounting fees and expenses.................................. 10,000
Printing...................................................... 2,500
Transfer agent's fees 2,000
Miscellaneous................................................. 5,204
---------
Total................................................. $50,000

None of the above expenses will be paid by the Selling Stockholders.

Item 24. Indemnification of Directors and Officers.

Pursuant to the provisions of Section 145 of the Delaware General
Corporation Law the Company has the power to indemnify certain persons,
including its officers and directors, under stated circumstances and subject to
certain limitations, for liabilities incurred in connection with services
performed in good faith for the Company or for other organizations at the
request of the Company.

Article VIII of the Company's Certificate of Incorporation, as amended,
provides that no director of the Company shall be liable for monetary damages
for breach of fiduciary duty, except to the extent that the DGCL prohibits the
elimination of liability of directors for breach of fiduciary duty.

Article IX of the Company's Certificate of Incorporation, as amended,
provides that a director or officer of the Company (a) shall be indemnified by
the Company against all expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement incurred in connection with any litigation or
other legal proceeding (other than an action by or in the right of the Company)
brought against him by virtue of his position as a director or officer of the
Company if he acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interests of

II-1

<PAGE>

the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Company against all expenses (including attorneys' fees) and
amounts paid in settlement incurred in connection with any action by or in the
right of the Company brought against him by virtue of his position as a director
or officer of the Company if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Company, except that no indemnification shall be made with respect to any matter
as to which such person shall have been adjudged to be liable to the Company,
unless a court determines that despite such adjudication but in view of all of
the circumstances, he is entitled to indemnification of such expenses.

Notwithstanding the foregoing, to the extent that a director or officer has
been successful, on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, he is required to be indemnified by
the Company against all expenses (including attorneys' fees) incurred in
connection therewith. Expenses shall be advanced to a director or officer at his
request, provided that he undertakes to repay the amount advanced if it is
ultimately determined that he is not entitled to indemnification for such
expenses.

Article IX of the Company's Certificate of Incorporation, as amended,
further provides that the indemnification provided therein is not exclusive and
provides that in the event that the Delaware General Corporation Law is amended
to expand or limit the indemnification permitted to directors or officers, the
Company must indemnify those persons to the fullest extent permitted by such
law, as so amended.

Item 26. Recent Sales of Unregistered Securities.

All share amounts give effect to the April 19, 1995 five for one reverse
split of the share capital of the Registrant.

Aggregate
Offering Subscriber Amount of Securities Consideration
- -------- ---------- -------------------- -------------
<S> <S> <C> <C>
August 1994 Elron Electronic 600,000 Common Stock
Private Industries Ltd. 1,000,000 Series A Preferred Stock
Placement 40,000 Warrants $1.6 million
March 1995 Special Situations Group 556,863 Series B Preferred Stock
Private 355,269 Warrants (1)(2) $500,000
Placement
Rho Management Trust I 556,863 Series B Preferred Stock
355,269 Warrants(1)(2) $500,000

Star Group 556,863 Series B Preferred Stock
355,269 Warrants(1)(2) $500,000

</TABLE>

II-2

<PAGE>

<TABLE>
<CAPTION>
Aggregate
Offering Subscriber Amount of Securities Consideration
- -------- ---------- -------------------- -------------
<S> <S> <C> <C>
December 1995 Rho Management Trust I 250,000 Common Stock
Bridge Loans 39,062 Warrants (1)(2) $67,000

Star Group 250,000 Common Stock
39,062 Warrants (1)(2) $67,000

Elron Electronic Industries 250,000 Common Stock
39,062 Warrants (1)(2) $67,000

Gilbert H. Steinberg 250,000 Common Stock
39,062 Warrants (1)(2) $67,000

October 1996 Rho Management Trust I 250,000 Common Stock
Bridge Loans 56,820 Warrants (1)(2) $125,000

Elron Electronic Industries 250,000 Common Stock
56,820 Warrants (1)(2) $125,000

Gilbert H. Steinberg 250,000 Common Stock
56,820 Warrants (1)(2) $125,000

February Rho Management Trust I 109,808 Common Stock (3)
1997 Star Group 64,444 Common Stock (3)
Conversion Elron Electronic Industries 60,405 Common Stock (3)
Gilbert H. Steinberg 59,749 Common Stock (3)
Special Situations Group 50,059 Common Stock (3)

February 1997 Mashov Computers 763,329 Common Stock (4)
Stock Purchase Marketing Ltd. 658,412 Series C Preferred Stock (4)
Transaction
Helix Capital, LLC 668,532 Common Stock (5)

</TABLE>
- ---------------------------------

(1) Includes associated Penalty Securities.

(2) Includes associated Antidilution Securities.

(3) Received Common Stock in exchange for conversion of outstanding Preferred
Stock or Warrants.

(4) Issued in connection with the Stock Purchase Agreement.

(5) Acted as financial advisor to PCE U.S. in connection with the stock
purchase transaction.

II-3

<PAGE>

Item 27. Exhibits.

Exhibit
Number Description of Exhibit
- ------ ----------------------

2.1 Stock Purchase Agreement dated February 6, 1997 and effective February 13,
1997 by and between the Company and Mashov (1)

3.1 Certificate of Incorporation, as amended (2)

3.2 Certificate of Amendment of Certificate of Incorporation with regard to the
change of the Company's name and the increase in the Company's authorized
capital stock (3)

3.3 By-Laws (4)

4.1 Specimen Common Stock Certificate (5)

5.1 Opinion of Carter, Ledyard & Milburn

10.1 Lease for premises situated at 462 Seventh Avenue, 18th Floor, New York,
New York (6)

10.2 Lease for premises situated at 462 Seventh Avenue, 4th Floor New York, New
York (7)

10.3 1997 Stock Option Plan (3)

10.4 Employment Agreement of Roy Machnes (8)

10.5 Employment Agreement of Elan Penn (8)

10.6 Employment Agreement of Terry I. Steinberg (8)

23.1 Consent of Kost, Levary & Forer

23.2 Consent of Ernst & Young LLP

23.3 Consent of Arthur Andersen LLP

23.4 Consent of Carter, Ledyard & Milburn (contained in Exhibit 5.1)

24.1 Power of Attorney*

- --------------

* Previously filed

(1) Filed as an exhibit to the Company's Current Report on Form 8-K for an
event dated February 13, 1997 and hereby incorporated by reference thereto.

II-4

<PAGE>

(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989 and incorporated herein by reference,
as amended by document filed as an exhibit to the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1993 and hereby
incorporated by reference thereto.

(3) Filed as exhibit to the Company's quarterly report on Form 10-QSB for the
quarter ended June 30, 1997 and hereby incorporated by reference thereto.

(4) Filed as an exhibit to the Company's Registration Statement on Form S-18
(File No. 33- 19521) and hereby incorporated by reference thereto.

(5) Filed as an exhibit to the Company's Registration Statement No. 33-93842 on
Form S-2 and incorporated herein by reference.

(6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1993 and hereby incorporated by reference
thereto.

(7) Filed as an exhibit to the Company's Current Report on Form 8-K/A Amendment
No. 2 for an event dated February 24, 1997 and hereby incorporated by
reference thereto.

(8) Filed as a "Related Agreement" to the Stock Purchase Agreement, which was
filed as an exhibit to the Company's Current Report on Form 8-K for an
event dated February 13, 1997 and hereby incorporated by reference thereto.

Item 28. Undertakings.

(a) The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent

II-5

<PAGE>

change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;

(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;

provided however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer of controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person n connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

II-6

<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on the 14th day of
October, 1997.

MENTORTECH, INC.

By: /s/Roy Machnes
--------------
Roy Machnes
President and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons on behalf of the Company and in the capacities and on the dates
indicated.

Signature Title
- --------- -----

/s/Roy Machnes Chairman, President, and October 14, 1997
- --------------- Chief Executive Officer
Roy Machnes

/s/Terry I. Steinberg Executive Vice President, October 14, 1997
- ---------------------- and Director
Terry I. Steinberg

* Chief Financial Officer and October 14, 1997
- ---------- Director
Elan Penn

/s/Adrienne Haber Controller (Principal October 14, 1997
- ------------------ Accounting Officer)
Adrienne Haber

II-7

<PAGE>

Signature Title
- --------- -----

* Director October 14, 1997
- -----------
David Assia

* Director October 14, 1997
- -------------
Jack Dunietz

*
- ------------ Director October 14, 1997
Martin Kahn

*By: /s/Terry Steinberg
-----------------
Terry Steinberg,
Attorney-in-fact

II-8

<PAGE>

EXHIBIT INDEX

Exhibit
Number Description of Exhibit
- ------ ----------------------

2.1 Stock Purchase Agreement dated February 6, 1997 and effective February 13,
1997 by and between the Company and Mashov (1)

3.1 Certificate of Incorporation, as amended (2)

3.2 Certificate of Amendment of Certificate of Incorporation with regard to the
change of the Company's name and the increase in the Company's authorized
capital stock (3)

3.3 By-Laws (4)

4.1 Specimen Common Stock Certificate (5)

5.1 Opinion of Carter, Ledyard & Milburn

10.1 Lease for premises situated at 462 Seventh Avenue, 18th Floor, New York,
New York (6)

10.2 Lease for premises situated at 462 Seventh Avenue, 4th Floor New York, New
York (7)

10.3 1997 Stock Option Plan (3)

10.4 Employment Agreement of Roy Machnes (8)

10.5 Employment Agreement of Elan Penn (8)

10.6 Employment Agreement of Terry I. Steinberg (8)

23.1 Consent of Kost, Levary & Forer

23.2 Consent of Ernst & Young LLP

23.3 Consent of Arthur Andersen LLP

23.4 Consent of Carter, Ledyard & Milburn (contained in Exhibit 5.1)

24.1 Power of Attorney*

- --------------
* Previously filed

(1) Filed as an exhibit to the Company's Current Report on Form 8-K for an
event dated February 13, 1997 and hereby incorporated by reference thereto.

<PAGE>

(3) Filed as exhibit to the Company's quarterly report on Form 10-QSB for the
quarter ended June 30, 1997 and hereby incorporated by reference thereto.

(4) Filed as an exhibit to the Company's Registration Statement on Form S-18
(File No. 33- 19521) and hereby incorporated by reference thereto.

(5) Filed as an exhibit to the Company's Registration Statement No. 33-93842 on
Form S-2 and incorporated herein by reference.

(6) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1993 and hereby incorporated by reference
thereto.

(7) Filed as an exhibit to the Company's Current Report on Form 8-K/A Amendment
No. 2 for an event dated February 24, 1997 and hereby incorporated by
reference thereto.

EXHIBIT 5.1
CARTER, LEDYARD & MILBURN
COUNSELLORS AT LAW
2 WALL STREET
NEW YORK, N.Y. 10005

-----------

(212) 732-3200
FAX: (212) 732-3232

October 14, 1997

Mentortech Inc.
462 Seventh Avenue
New York, New York 10018

Re: Registration Statement on Form SB-2
of Mentortech Inc. (formerly PC Etcetera, Inc.)

Ladies and Gentlemen:

We have acted as counsel to Mentortech Inc. (formerly PC Etcetera, Inc.), a
Delaware corporation (the "Registrant"), in connection with the above-captioned
Registration Statement filed with the Securities and Exchange Commission on the
date hereof relating to the registration under the Securities Act of 1933 of up
to 2,957,838 shares of its common stock, par value $.01 per share (the "Common
Stock") offered by certain selling stockholders (the "Selling Stockholders") of
the Registrant.

We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and officers of the Registrant and such other instruments as we have
deemed necessary or advisable for the purpose of this opinion.

On the basis of the foregoing, we are of the opinion that the 2,957,838
shares of Common Stock which may be offered for the account of the Selling
Stockholders are legally issued, fully paid and non-assessable.

<PAGE>

Mentortech Inc. -2-

We hereby consent to the filing of this opinion as an exhibit to the above
Registration Statement and to the reference to our name under the caption "Legal
Opinion" in the Prospectus included therein.

Very truly yours,
/s/Carter, Ledyard & Milburn
SJG/md

EXHIBIT 23.1

KOST LEVARY & FORER
A member of
Ernst & Young International

CONSENT OF INDEPENDENT ACCOUNTANTS

Mentortech Inc. (formerly Sivan Computers Training Center (1994) Ltd. and Mashov
Computer Based Training (C.B.T.) Ltd.).

We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated March 26, 1997 in the Registration Statement
(Form SB-2) and related Prospectus of Mentortech Inc. for the registration of
2,957,838 shares of common stock.

/s/KOST LEVARY & FORER
KOST, LEVARY & FORER
Certified Public Accountants (Israel)
A member of Ernst & Young International

Tel-Aviv, Israel
October 14, 1997

EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the reference to our firm under the caption "Experts" and
to the use of our report dated March 28, 1997 in the Registration Statement
(Form SB-2) and related Prospectus of Mentortech Inc. for the registration of
2,957,838 shares of common stock.

/s/ERNST & YOUNG LLP

October 14, 1997
New York, New York

EXHIBIT 23.3

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made part of this
registration statement (File No. 333-33677).

/s/ARTHUR ANDERSEN LLP

New York, New York
October 14, 1997