SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 8-K/A
AMENDMENT NO. 3
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 13, 1997
PC ETCETERA, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-17419 13-3260705
- ---------------------------- ------------------------ ------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
462 Seventh Avenue, New York, New York 10018
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(212) 736-5870
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On February 13, 1997, a change of control of PC ETCERERA, INC. ( the
"Registrant", "PC Etcetera" or "PC") occurred, pursuant to a Stock Purchase
Agreement dated February 6, 1997 and effective February 13, 1997 (the "Stock
Purchase Agreement") between the Registrant and Mashov Computers Marketing Ltd.,
a corporation incorporated under the laws of the State of Israel ("Mashov")
publicly traded on the Tel-Aviv stock exchange. Mashov is a subsidiary of Mashov
Computers Ltd., an Israeli corporation ("MCL"). MCL is a public company which is
traded on the Tel-Aviv stock exchange and which also controls Magic Software
Enterprises Ltd. (NASDAQ: MGICF). Pursuant to the Stock Purchase Agreement,
Mashov acquired 8,438,924 shares of Common Stock and 658,412 shares of Preferred
Stock of the Registrant (the Preferred Stock together with the Common Stock, the
"Sale Stock"), where each such share of Preferred Stock is convertible into 10
shares of Common Stock and has 10 to 1 voting rights in relation to shares of
Common Stock. As a result of the foregoing and other transactions provided for
in the Stock Purchase Agreement, Mashov owns 69% of the Registrant's equity and
voting securities on a fully diluted basis, subject to a price adjustment
mechanism described in the Stock Purchase Agreement. The Stock Purchase
Agreement and all exhibits thereto were previously filed on the Registrant's
Current Report on Form 8-K filed February 27, 1997.
In consideration for the Sale Stock, the Registrant acquired two of
Mashov's subsidiaries, Sivan Computers Training Center (1994) Ltd., a
corporation incorporated under the laws of the State of Israel ("Sivan"), which
is Israel's largest provider of computer training courses, operating over 60
classrooms in 11 different locations, and Mashov Computer Based Training
(C.B.T.) Ltd., a corporation incorporated under the laws of the State of Israel
("Mashov CBT" or "CBT"), a joint venture together with Elron Electronic
Industries Ltd. (NASDAQ : ELRNF). Sivan and Mashov CBT are engaged in
instructor-led personal computer training and the development and sale of
technology-based training products and services.
For a more detailed description of the transaction, see the Registrant's
Current Report on Form 8-K filed February 27, 1997.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Items 7 (a) and 7 (b) immediately follow the signature page of this Current
Report.
(a) Financial Statements of Businesses Acquired.
(i) Combined Balance Sheet of Sivan and Mashov CBT as of December 31,
1996;
(ii) Combined Statement of Operations of Sivan and Mashov CBT for the
years ended December 31, 1996 and 1995; and
(iii) Combined Statement of Cash Flows of Sivan and Mashov CBT for the
year ended December 31, 1996;
(b) Pro Forma Financial Information.
(i) Pro Forma Consolidated Balance Sheet of the Registrant as of
December 31, 1996; and
(ii) Pro Forma Consolidated Statement of Operations of the Registrant
for the year ended December 31, 1996.
(c) Exhibits.
* 1 - Stock Purchase Agreement dated February 6, 1997 by and between
Mashov and the Registrant.
* 16 - Arthur Andersen letter dated March 7, 1997 pursuant to Item
304(a)(3) of Regulation S-K.
- --------------------
* Previously filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
PC ETCETERA, INC.
(Registrant)
By:/s/ Roy Machnes
-------------------------
Roy Machnes
Chief Executive Officer
Date: April 24, 1997
<PAGE>
ITEM 7(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND
MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
COMBINED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996
IN U.S. DOLLARS
INDEX OF COMBINED FINANCIAL STATEMENTS
Page
-----
Report of Independent Auditors 2
Combined Balance Sheet 3-4
Combined Statements of Operations 5
Combined Statements of Changes in
Shareholders' Deficiency 6
Combined Statements of Cash Flows 7-8
Notes to the Combined Financial 9-16
Statements
- - - - - - - - - -
-1-
<PAGE>
KOST LEVARY & FORER
A MEMBER OF
ERNST & YOUNG INTERNATIONAL
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
We have audited the accompanying combined balance sheet of Sivan Computers
Training Center (1994) Ltd. (hereafter "Sivan") and Mashov Computer Based
Training (C.B.T.) Ltd. (hereafter "CBT") (together , hereafter the "Companies")
as of December 31, 1996, and the related combined statements of operations,
changes in shareholders' deficiency and cash flows for the year ended December
31, 1996 and the statements of operations, changes in shareholders' deficiency
and cash flow for Sivan for the year ended December 31, 1995. These combined
financial statements are the responsibility of the Companies' managements. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America and Israel, including those prescribed
by the Auditors Regulations (Mode of Performance) (Israel), 1973. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Companies as of December 31, 1996, and the results of their operations and their
cash flows for the periods referred to above in conformity with generally
accepted accounting principles in the United States of America.
/s/Kost Levary & Forer
----------------------
Tel Aviv, Israel KOST LEVARY & FORER
March 26, 1997 Certified Public Accountants (Israel)
A member of Ernst & Young International
-2-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
COMBINED BALANCE SHEET
- --------------------------------------------------------------------------------
U.S. Dollars in thousands
December 31,
1996
------------
ASSETS
Current assets:
Cash and cash equivalents $ 283
Trade receivables, (net of allowance for
doubtful accounts of $12 in 1996) 2,279
Other receivables and prepaid expenses 326
Inventories 91
------
Total current assets 2,977
------
Investment in affiliate 178
------
Severance pay fund 362
------
Property and equipment (Note 3):
Cost 2,227
Less - accumulated depreciation 587
------
1,640
------
Goodwill, net of accumulated amortization
(1996 - $211, 1995 - $114) 1,811
------
Total assets $6,970
======
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
COMBINED BALANCE SHEET
- --------------------------------------------------------------------------------
U.S. Dollars in thousands
December 31,
1996
------------
LIABILITIES LESS SHAREHOLDERS' DEFICIENCY:
Current liabilities:
Trade payables $ 717
Related parties 1,478
Deferred income 1,624
Accrued expenses and other payables (Note 4) 778
------
Total current liabilities 4,597
------
Long-term liabilities:
Accrued severance pay (Note 5) 455
Shareholders loan (Note 6) 2,665
------
3,120
------
Shareholders' deficiency:
Share capital: Authorized 25,200
Ordinary Shares NIS 1.0 par value;
Issued and outstanding:
1,000 shares as of December 31, 1996, and 1995 *
Share premium 150
Foreign currency translation adjustments 23
Accumulated deficit (920)
------
Total shareholders' deficiency (747)
------
Total liabilities and shareholders' deficiency $6,970
======
- ------------
* Less than $1.
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
COMBINED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
U.S. Dollars in thousands
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 before income taxes 821 368
Income taxes 45 -
------ ------
Loss before equity in earnings of affiliate 866 368
Share in profit of affiliate 68 61
------ ------
Net loss $ 798 $ 307
====== ======
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
- --------------------------------------------------------------------------------
U.S. Dollars in thousands
<TABLE>
<CAPTION>
Foreign Retained Total
currency earnings shareholders'
Share translation (accumulated equity
Share capital premium adjustment deficit) (deficiency)
------------- ------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance as of January 1, 1995 $ * - $ 2 $ 185 $ 187
Foreign currency translation - - 5 - 5
adjustment
Net loss - - - (307) (307)
------------ ------- ----------- ----------- -----------
Balance as of December 31, 1995 * - 7 (122) (115)
Share premium - 150 - - 150
Foreign currency translation - - 16 - 16
adjustment
Net loss - - - (798) (798)
------------ ------- ----------- ------------ -----------
Balance as of December 31, 1996 $ * $150 $23 $(920) $(747)
============ ======= =========== ============ ===========
- ----------
* Less than $1.
</TABLE>
The accompanying notes are an integral part of the financial statements.
-6-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
U.S. Dollars in thousands
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss for the year $(798) $(307)
Adjustments to reconcile net loss
to net cash provided by (used in)
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 (decrease) in deferred income 606 490
Increase (decrease) in accrued expenses and other liabilities 183 108
Accrued interest on shareholders' loan 265 182
------ ------
Net cash provided by operating activities $ 665 $ 755
------ ------
</TABLE>
The accompanying notes are an integral part of the financial statements.
-7-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
U.S. Dollars in thousands
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995
-------------- -----------
<S> <C> <C>
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 debt, net -- (11)
Increase in related parties 382 --
------- ------
Net cash provided by financing activities 532 (11)
------- ------
Net increase in cash and cash equivalents 193 93
Effect of exchange rate changes on cash and cash equivalents (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.
</TABLE>
-8-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1:- GENERAL
a. Basis of Presentation
Effective February 13, 1997, Mashov Computers Marketing Ltd.
(hereafter "Mashov") the parent company of Sivan Computer Training
Center (1994) Ltd. ("Sivan") and Mashov Computer Based Training
(C.B.T.) Ltd. ("CBT") transferred to PC ETCETERA, INC. ("PC") all of
its holdings in Sivan and CBT and $1.2 million in consideration of
8,438,924 shares of common stock and 658,412 shares of preferred stock
par value $0.001 of PC, each share of preferred convertible into ten
shares of common stock has a ten to one voting right in relation to
shares of common stock.
The transaction will be accounted for as a reverse acquisition, and as
such, Sivan and CBT are effectively the acquirers for accounting
purposes. 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 operations (including
intangible assets see Note 2f hereafter) from Sivan Computers Ltd. for
approximately $ 2.7 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. After the
balance sheet date, the shareholders of Sivan Computers Ltd. received
an order from the Israeli tax authorities to pay NIS 1 million. In the
opinion of Mashov management, based on the opinion of its legal
advisors, Mashov will not be liable for this amount.
-9-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
c. Mashov Computer Based Training (C.B.T.) Ltd.
CBT was incorporated in March 1996.
CBT is engaged in developing technology based training products and
content. In addition to content development, CBT develops 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. CBT commenced operations on April 1, 1996, and therefore the 1995
statements of operations and cash flows include only Sivan.
NOTE 2:- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The combined financial statements have been prepared in accordance
with United States generally accepted accounting principles.
a. Financial statements in United States dollars:
The Companies' transactions are recorded in New Israeli Shekels
("NIS"). All of the Companies' sales are made in Israel in NIS, and
substantially all of the Companies' costs are incurred in NIS. The
Companies' management believes that the NIS is the functional currency
of the Companies.
The Companies have elected to prepare their financial statement in
U.S. dollars. Accordingly, the Companies' financial statements have
been translated into U.S. dollars, in accordance with FASB Statement
No. 52, "Foreign Currency Translation". All balance sheet accounts
have been translated using the exchange rates in effect at the balance
sheet date. Income statement 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 shareholders' 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.
-10-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
c. Inventories:
Inventories, mainly finished products, are presented at the lower of
cost of market value. Cost is determined using the "first-in,
first-out" method.
d. Investments in affiliates:
The investments in affiliate is accounted for by the equity method of
accounting.
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 5 - 6.7
Motor vehicles 6.7
Leasehold improvements According to
the lease period
f. Goodwill
Goodwill is stated at cost and amortized by the straight-line method
over a period of 20 years.
g. Income taxes:
Income taxes are provided by the asset and liability method of
accounting in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes".
h. Revenue recognition:
Revenue from training services is recognized upon performance of the
services.
Revenue from sales of products is recognized upon shipment of the
software provided no significant vendor obligations remain and
collection of the related receivable is probable.
Deferred revenue represents unearned amounts received under training
services.
-11-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
i. Concentrations of credit risk:
Financial instruments which potentially subject the Companies to
concentrations of credit risk consist primarily of cash and accounts
receivable. The Companies maintains their cash balances on deposit
with major banks in Israel. Concentrations of credit risk with respect
to trade receivables are limited because the Companies' customers are
from a wide range of industries and no one customer accounts for more
than five percent of total revenue or accounts receivable as of
December 31, 1996.
j. Fair value of financial instruments:
The financial instruments of the Companies consist of non-derivative
assets: cash and cash equivalents, marketable securities and trade
receivables. In view of their nature, the fair value of financial
instruments is usually identical to their carrying value.
k. 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.
l. Long-lived assets
It is the Companies' 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.
-12-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3:- PROPERTY AND EQUIPMENT
December 31,
1996
----------
Cost:
Computers and peripheral equipment $1,469
Office furniture and equipment 330
Motor vehicles 198
Leasehold improvements 230
------
2,227
------
Accumulated depreciation:
Computers and peripheral equipment $ 481
Office furniture and equipment 47
Motor vehicles 21
Leasehold improvements 38
------
$ 587
------
Depreciated cost $1,640
======
NOTE 4:- ACCRUED EXPENSES AND OTHER PAYABLES
Employees and payroll accruals $ 618
Government institutions 112
Accrued expenses and other 48
------
$ 778
======
-13-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5:- ACCRUED SEVERANCE PAY
Under Israeli law, the Companies are 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
Companies' liability for required severance payments is covered by
funding into approved severance pay funds, insurance policies and by
an accrual.
NOTE 6:- SHAREHOLDERS' LOAN
Linked to the Israel Consumer Price Index and bears interest at a rate
of 6% per annum.
NOTE 7:- CONTINGENT LIABILITIES AND COMMITMENTS
Lease commitments:
The Companies lease machinery and equipment and conduct certain
operations in leased facilities which expire on various dates through
2005 including a renewal option. Future minimum lease under
non-cancelable operating leases for the years ending December 31, are
as follows:
U.S. dollars
(in thousands)
----------------
1997 40
1998 26
1999 24
2000 2
-----
92
=====
-14-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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.
b. Tax Assessments:
The Companies have not received final assessments since their
incorporation.
c. Reconciliation of the Theoretical Tax Expenses
A reconciliation between the theoretical tax expenses, assuming all
income is taxed at the statutory rate applicable to income of the
Companies 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 benefit $(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 $ 45 $ --
income
======= =====
-15-
<PAGE>
SIVAN COMPUTERS TRAINING CENTER (1994) LTD.
AND MASHOV COMPUTER BASED TRAINING (C.B.T.) LTD.
NOTES TO THE COMBINED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9:- RELATED PARTY TRANSACTIONS
Year ended December 31,
1996 1995
-------- --------
Revenues: $ 50 $ 19
Expenses:
Cost of revenues $ 41 $145
Rent* $138 --
Management fees to Mashov* $748 $181
Interest(see Note 6) $484 $355
- ---------
* The management fees and rent were paid according to an agreement which was
ended at December 31, 1996.
-16-
<PAGE>
ITEM 7(b) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated pro forma information gives pro
forma effect to the acquisition by Mashov of PC Etcetera. The unaudited pro
forma consolidated balance sheet as of December 31, 1996 and the unaudited pro
forma consolidated statement of operations for the year ended December 31, 1996
combine the consolidated historical balance sheet of PC Etcetera and the
historical balance sheet of Sivan and Mashov CBT as if the acquisition of PC
Etcetera had been completed on December 31, 1996 and combine the consolidated
historical statement of operations of PC Etcetera, Sivan and Mashov CBT as if
the acquisition had been completed on January 1, 1996. This pro forma
information should be read in conjunction with the respective consolidated
historical financial statements (including notes thereto) of PC Etcetera, and
the combined historical financial statements of Sivan and Mashov CBT appearing
elsewhere herein.
The pro forma adjustments reflecting the consummation of the acquisition on the
purchase method of accounting are based on available financial information and
certain estimates and assumptions set forth in the notes to unaudited pro forma
consolidated financial information. The assumptions include the acquisition of
69% of all of the outstanding shares of PC Etcetera Common Stock on a fully
diluted basis for all of the outstanding stock of both Sivan and Mashov CBT
(Sivan and Mashov CBT each own one share of the other to comply with Israeli law
of stock ownership). The pro forma adjustments do not reflect any operating
efficiencies and cost savings that may be achievable with respect to the
combined companies and new management of PC Etcetera.
The following information is not necessarily indicative of the future financial
position or operating results of the combined company or the financial positions
or operating results of the combined company had the acquisition occurred on
December 31, 1996, or at the beginning of the year. For purposes of preparing
its consolidated financial statements, Mashov will establish a new basis for PC
Etcetera's assets and liabilities based upon the fair values thereof, and the
purchase price thereof, including the costs of the acquisition. A final
determination of required purchase accounting adjustments, including the
allocation of the purchase price to the identifiable tangible and intangible
assets, acquired assets of the combined company and liabilities assumed based on
their respective fair values has not yet been made. Accordingly, the purchase
accounting adjustments made in connection with the preparation of the unaudited
pro forma consolidated financial information are preliminary and have been made
solely for the purposes of presenting the pro forma consolidated financial
information. Mashov will undertake a study to determine the fair value of
certain of PC Etcetera's assets and liabilities and will make appropriate
purchase accounting adjustments upon completion of that study. The pro forma
statements reflect Mashov's best estimates, and the actual financial position
and results of operations may differ significantly from the pro forma amounts
reflected herein because of various factors, including without limitation,
access to additional information, changes in value and changes in operating
results between the date of preparation of the pro forma financial data and the
date on which the acquisition closed.
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
PC Etcetera, Inc. (hereafter the "Company" or "PC Etcetera") entered into a
Stock Purchase Agreement effective February 13, 1997 to sell 69% of the
outstanding equity of PC Etcetera Inc. to Mashov Computers Marketing Limited.
The accompanying unaudited Pro Forma Consolidated Balance Sheet is presented as
if the sale transaction occurred on December 31, 1996. Certain amounts have been
reclassified to conform with the current presentation. All references herein to
numbers of shares of Common Stock and per share amounts, and all references
herein to dollar amounts that are based upon the number of shares of Common
Stock that are issued, give retroactive effect to the one-for-five reverse split
of the shares of Common Stock effectuated as of April 19, 1995.
The accompanying unaudited Pro Forma Consolidated Statement of Operations is
presented as if the sale transaction occurred on January 1, 1996.
These pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto of the Company, Sivan and
Mashov CBT (combined) as of December 31, 1996 and for the year then ended. In
management's opinion, all material adjustments necessary to reflect the effect
of the transaction by the Company have been made.
The unaudited pro forma consolidated financial statements are not necessarily
indicative of what the actual financial position of the Company would have been
as of December 31, 1996, or what the consolidated results of operations would
have been for the year then ended had the sale transaction occurred on January
1, 1996 nor are they necessarily indicative of the financial position or results
of operations for future periods.
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
NOTES AND MANAGEMENT'S ASSUMPTIONS
TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATED BALANCE SHEET:
(A) To reflect the transaction pursuant to the stock purchase agreement whereby
Mashov acquired 8,438,924 shares of common stock and 658,412 shares of preferred
stock of PC Etcetera. In consideration for the issuance of the common and
preferred stock, the Company acquired Sivan and Mashov CBT, which are
subsidiaries of Mashov.
(B) To reflect the conversion of the $437,000 loans from certain related parties
into 1,750,000 shares of common stock. This transaction was required by the
purchase agreement between Mashov and PC Etcetera.
(C) To reflect the issuance of 344,464 shares of common stock in connection with
the conversion of outstanding warrants.
(D) To reflect the conversion of 1,000,000 shares of preferred stock into
200,000 shares of common stock.
(E) To record the issuance of 668,531 shares of common stock to the investment
banker that coordinated the acquisition.
(F) To record legal and travel expenses incurred in connection with the
acquisition.
(G) To reclassify the stockholders' deficit of PC Etcetera.
(H) To reflect the issuance of 428,922 shares of common stock due to certain
antidilution provisions.
(I) To reflect the $1,200,000 cash investment made by Mashov.
3. 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>
PC ETCETERA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------
PCE SIVAN AND PROFORMA PROFORMA
CONSOLIDATED MASHOV CBT ADJUSTMENTS NOTES AS ADJUSTED
------------ ---------- ----------- ----- -----------
(in thousands except for share and per share data)
<S> <C> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and Cash Equivalents $ 50 $ 283 $ (30) F $ 1,503
$1,200 I
Marketable Securities 101 101
Accounts Receivable 947 2,279 3,226
Inventories 91 91
Prepaid Expenses and other
Current Assets 32 225 (16) F 241
-- --- --- ---
Total Current Assets 1,029 2,979 1,154 5,162
------- ------ ------ ------
PROPERTY AND EQUIPMENT: 320 1,640 1,960
--- ----- -----
OTHER ASSETS:
Security Deposits 38 38
Investments in Subsidiaries 178 178
Goodwill 1,811 5,451 A 7,262
Severance Pay Funds 362 362
--- ---
Total Other Assets 38 2,351 5,451 7,840
------ ------- ------- -------
TOTAL ASSETS $1,387 $6,970 $6,605 $14,962
====== ====== ======= =======
LIABILITIES AND
STOCKHOLDERS EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts Payable and Accrued
Expenses $1,585 $1,495 $ 3,080
Loans Payable - Current Portion 664 664
Loans Payable - Related Party 471 1,478 (437) B 1,512
Capital Equipment Obligations -
Current Portion 36 36
Deferred Revenue 120 1,624 1,744
------- ------ ------
Total Current Liabilities 2,876 4,597 (437) 7,036
------- ----- ----- -----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL
----------
PCE SIVAN AND PROFORMA PROFORMA
CONSOLIDATED MASHOV CBT ADJUSTMENTS NOTES AS ADJUSTED
------------ ---------- ----------- ----- -----------
(in thousands except for share and per share data)
<S> <C> <C> <C> <C> <C>
OTHER LIABILITIES:
Capital Equipment Obligations 7 7
Accounts Payable - Long Term 325 325
Accrued Severance Pay 455 455
Shareholder Loans 2,665 2,665
Deferred Revenue 67 67
Minority Interest
------- ------ ------ -------
Total Liabilities 3,275 7,717 (437) 10,555
------- ------ ------ -------
STOCKHOLDERS' EQUITY:
Preferred Stock 1 1 A 1
(1) D
Common Stock 32 84 A 150
18 B
3 C
2 D
7 E
4 H
Additional Paid in Capital 5,279 173 5,366 A 5,262
419 B
83 C
(1) D
(7) E
(46) F
(7,200) G
(4) H
1,200 I
Accumulated Deficit (7,200) (920) (86) C (1,006)
7,200 G
------ ---- ----- ------
Total Stockholders' Equity
(Deficit) (1,888) (747) 7,042 4,407
------ ------ ----- --------
Total Liabilities and
Stockholders' Equity
(Deficit) $1,387 $6,970 $6,605 $14,962
====== ====== ====== =======
</TABLE>
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------
PCE SIVAN AND PROFORMA PROFORMA
CONSOLIDATED MASHOV CBT ADJUSTMENTS NOTES AS ADJUSTED
------------ ---------- ----------- ----- -----------
(in thousands except for share and per share data)
<S> <C> <C> <C> <C>
Net Sales $7,042 $9,400 $16,442
Cost of Sales 4,964 4,713 9,677
------- ------- -------
Gross Profit 2,078 4,687 0 6,765
Selling, General and
Administrative Expenses 3,207 4,805 273 A 8,485
Research and Development 58 248 200 C 306
------ ------ ------ ------
Operating (Loss) (1,187) (366) (473) (2,026)
Gain on Sale of Subsidiary 182 0 182
Other Income 67 67
Interest (Expense) (net) (174) (455) 34 B (595)
------ ------ ------ -----
Net (Loss) Before Provision
for Income Taxes (1,112) (821) (439) (2,372)
Provision for Income Taxes 0 (45) (45)
Equity in Earnings of Affiliate 68 68
------ ------ ----- ------
Net (Loss) $(1,112) $ (798) $(439) $(2,349)
======= ====== ====== =======
Earnings Per Share:
Net (Loss) $ (0.35) $ (0.16)
======= =======
Weighted Average Number of
Shares 3,138 15,000
</TABLE>
