SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                                   FORM 10-KSB
                   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1998

                         Commission File Number: 333-64623

                                 MENTORTECH INC.
                 (Name of small business issuer in its charter)

           Delaware                                       13-3260705
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

           462 Seventh Avenue                                     10018
           New York, New York                                   (Zip Code)
(Address of principal executive offices)

Issuer's telephone number:  (212) 736-5870

Securities registered under Section 12(b) of the Exchange Act:  None

Securities  registered  under Section  12(g) of the Exchange Act:  Common Stock,
$.01 par value

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.

                                                   Yes [X] No[  ]

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

Issuer's  revenues for its most recent  fiscal year:  $19,951,000  
The aggregate market value of the voting stock held by non-affiliates  computed,
as of March 25,1999 was: 4,066,187(using the average of the bid and ask price)

Number of shares  outstanding of each of the issuer's  classes of common equity,
as of the latest practicable date:  3,578,208 shares outstanding as of March 25,
1999

Transitional Small Business Disclosure Format                 Yes ___  No X 
                                                                          

<PAGE>


                                     PART I


Item 1.  Description of Business.

General

     Mentortech Inc. (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, primarily to large business and
public sector organizations.  The Company's ILT programs include a wide range of
introductory and advanced classes in operating  systems  (including  Windows 98,
Windows NT,  UNIX and  Netware),  programming  languages  (including  C, C++ and
COBOL), databases (including Oracle and MS SQL Server),  communication software,
integrated  software  packages,   computer  graphics,  desktop  publishing,  and
groupware  products,  (including  Outlook  clients,  Exchange  Server  and Lotus
Notes). In Israel the Company offers an extensive curriculum,  including courses
in information  technology ("IT") vocational  training which provide full change
of career opportunities for individuals seeking to become IT professionals.  The
Company's TBT software line includes offerings on Lotus Notes, Microsoft Office,
and other end-user titles.  The Company's  Consulting  Services Division ("CSD")
provides  short to medium  term  technical  consulting  to large  and  mid-sized
corporations  in the Northeast  region of the U.S. No single client accounts for
more than 10% of the Company's revenues.

     The  Company  has been  authorized  as a  training  center  by a number  of
software  developers,  including  Microsoft  (US and Israel),  Novell (in Israel
only), Autocad (in Israel only), Corel, Apple, Lotus (in the United States only)
and Magic. The Company offers an extensive curriculum of Microsoft courses under
its Microsoft  Certified 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 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
some of its ILT classes.  The Company  supplies TBT programs on floppy disks and
compact disks for stand-alone  PC's, as well as LANs, WANs,  Intranets,  and the
Internet via  InterTrainer.  The Company  develops custom TBT projects for large
corporations.  These custom TBT titles assist  corporations  in the training and
integration of internal applications and other non-IT related training topics.

     The Company's 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


                                       2


<PAGE>

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) end-user help desk support.

     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 technologies,  thus
absorbing the  continuing  introduction  of new  products.  Publishers of tools,
operating systems and applications produce new versions.

Background

     Effective February 13, 1997, the Company's predecessor,  PC Etcetera,  Inc.
("PCE  U.S.")  underwent  a  change  in  control  pursuant  to a Stock  Purchase
Agreement  (the  "Stock  Purchase  Agreement")  between it and Mashov  Computers
Marketing Ltd. ("Mashov"). Mashov acquired 68.5% of the common stock of PCE U.S.
on a fully diluted basis,  in  consideration  for which PCE U.S.  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.  The  stock  purchase
transaction  was  accounted  for as a reverse  acquisition  such that  Sivan and
Mashov CBT were considered the surviving entity, although Mentortech remains the
Registrant  for  purposes of filing  periodic  reports with the  Securities  and
Exchange Commission. Accordingly, for ease of reference in this Report, when the
U.S.  historical  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."  On  March  3,  1998,  a
one-for-eight  reverse  split of the Company's  Common Stock was  effected.  All
references  to the  Company's  Common  Stock in this report  reflect the reverse
split.

     In  October  1997,  the  Company  acquired  the  assets  of  GLTN  Computer
Consultants,  Inc.("GLTN"),  a Long Island,  New York,  ILT training  company in
consideration of $130,000 and the issuance of 15,909 shares of Common Stock.

United States ILT 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.  PCE U.S.  grew
serving the training requirements  generated by the propagation of the PC at the
corporate desktop.


                                       3

<PAGE>


Israeli Operations

     ILT

     The  Company's ILT  activities  in Israel are conducted by Sivan,  a wholly
owned  subsidiary  of the Company,  founded in 1977.  At the  initiation  of its
activities,   Sivan   principally   offered  classes  in  systems  analysis  and
programming.  The operations of Sivan were acquired by Mashov in 1994. Under the
leadership of the Company's  current  management  team,  Sivan's sales increased
from  approximately $4 million in 1994 to $9.2 million in 1996, $11.2 million in
1997 and $13 million in 1998.

     Sivan  is a  leading  Israeli  ILT  training  company,  with  over  seventy
classrooms  in twelve cities  throughout  Israel.  Sivan  trained  approximately
42,000  students in 1997 and over 43,000  students  in 1998.  Sivan  employs 148
full-time  people and uses a combination of in-house and free-lance  trainers to
fulfill the demand for its services.


     One of Sivan's major strengths is its vocational  training programs.  These
programs  accounted for over 40% of Sivan's  revenues in 1998.  These  programs,
developed by Sivan experts,  provide full vocational training to individuals who
want to become IT professionals.

     Sivan offers its training through six academic departments:

     o    Professional training: Vocational courses in Programming in C and C++,
          real-time Programming,  PC technicians,  Communication Technicians and
          Application  Specialists.  These  courses  provide  between  400 - 900
          classroom hours.
 
     o    System  Analysts:  The course is approved by the System Analysts Guild
          in Israel.

     o    Continuing Professional Update: Courses for IT professionals providing
          incremental  technology and products updates. Among these courses are:
          JAVA for C++ programmers,  ActiveX, new SQL database versions,  Delphi
          for  programmers,  PowerBuilder,  VB, Access and Windows NT and Novell
          Networking and Administration courses.

     o    Full  curriculum  of Novell,  Microsoft as well as UNIX  communication
          protocols.

     o    Graphics:  Courses offered in all popular  graphics  packages both for
          the print and the  multi-media  industries.  These courses are offered
          both for the  Macintosh  and  WINTEL  (Intel  Architecture  based  PCs
          running Windows operating system) environments.

     o    End-Users:  Courses offered in the popular  end-user  packages such as
          Microsoft Office and web site development using html.



                                       4


<PAGE>



     The model that Sivan employs to deliver most 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.

     During  1998,  Sivan  launched  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.  Leading Israeli
technology  companies and the Israeli  Government's  Ministry of Labor recognize
Sivan's  diplomas  for  employment  classification.  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

     In order to provide its students and recent graduates with work experience,
the Company has  recently  established  a software  development  business.  This
business  activity is conducted by Mentortech  Systems (1996) Ltd.  ("Mentortech
Systems"),  a wholly owned  subsidiary of the Company which was previously known
as Mashov CBT.

     On March  15,  1999,  the  Company  sold its New  York  ILT  activities  to
Knowledge Alliance, Inc. for total consideration of $335,000, including earn-out
provisions  of $115,000 if certain  revenue  targets are  achieved in the twelve
months  following the date of sale. As a result of the sale, the Company will no
longer provide ILT services in the United States.

     TBT

     The  Company is engaged in the  development  of  technology-based  training
products in Israel.  The  Company'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.  The Company  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.  Mentortech TBT is currently
engaged in the  development of TBT products to work in conjunction  with Sivan's
ILT offerings

     Mentortech  TBT  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.




                                       5


<PAGE>



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 8 people on a SMS  implementation  project for a
large, multinational food and healthcare corporation.  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, daily,
weekly, or monthly basis.

     Projects undertaken by the CSD have included:

     o    The  development of computer  programs in accordance with the client's
          specifications.

     o    The  installation  of network  operating  systems and  networking  and
          communication software tools.

     o    Troubleshooting software problems and help-desk support.

     o    Staffing end-user help desks.


     The CSD provides various services for its corporate customers including:

     o    Temporary  consulting  services  provided by the  Company's  full time
          employees.

     o    Temporary consulting services provided by the Company to its corporate
          clients using independent subcontractors.

     o    Project  development  services in which the Company provides fixed-bid
          software  development  projects.  The Company  executes these projects
          using either its full time employees or independent subcontractors.

     o    Recruiting  individuals  identified  by the Company for  permanent  IT
          positions.

     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.  Management  believes  that 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.



                                       6


<PAGE>




Training Programs

     Methodology

     The  Company's  training  programs  incorporate  traditional  ILT  classes,
varying in length  from  several  hours to several  months.  The  Company's  ILT
programs offer a wide range of courses in operating systems, including Microsoft
Windows,  Windows NT, Novell  NetWare,  programming in basic languages such as C
and 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 currently offers over 160 different courses.

     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.

     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.



                                       7


<PAGE>



     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.

     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 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.

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 is authorized
by Lotus Development Corporation ("Lotus") as a LAEC for its "Notes" product and
was recently  upgraded to Premium Business Partner status. As a Premium Business
Partner,  the Company is entitled to receive specific referrals for new students
from Lotus.

Courseware and TBT Product Development

     The  Company's TBT products are  currently  developed by  Mentortech  TBT's
group in Israel,  which  consists  of 8  programmers,  designers  and  education
specialists with extensive experience in training and education development. The
Company's  training staff provides the product and educational design expertise,
while the  designers  supply the  authoring  tool  expertise.  The team develops
titles for the end-users market,  which are sold under the Sivan brand name. The
Company  also  sells its  titles to OEM  clients in Israel who bundle the titles
with their computers.  In addition, the Company develops  general-purpose titles
and provides adaptations to the titles according to the requirements of a client
and develops  custom  projects for its corporate  clients.  In such projects the
Company's  education designers develop a specific curriculum for the client. The
Company has developed many custom projects in various areas.


                                       8

<PAGE>


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.  The Company has client relations  resulting
from its 18 years of operation in Israel and 12 years of operation in the United
States.

     Direct  mail is the primary  media which is used to reach the small  office
and home office market  segment.  The Company  believes that  word-of-mouth,  as
generated by individual  and corporate  clients,  has the largest  potential for
gaining new customers.

     The  Company,  in  conjunction  with  software  vendors,   has  established
informational seminars on new software products. These seminars inform potential
customers  about the  Company's  training  programs  and staffing  services.  In
addition to these  efforts,  the  Company's  account m managers' act as liaisons
with  customers  to  ensure  that  the  customers  select  appropriate  training
programs. These account managers are knowledgeable about the customer's specific
computer  training needs, and can therefore  recommend and promote newly offered
services.

     The Company's marketing efforts include:

     o    Direct mail solicitation
 
     o    Telephone contact

     o    Radio and print advertisement

     o    Computer trade show exhibits throughout the U.S. and Israel 

          World Wide Web site. 



                                       9


<PAGE>


Program Costs

     In the U.S.,  the Company  typically  charges its  customers  from $75 (for
introductory  classes) to $5,000 per  participant  to conduct ILT  programs.  In
Israel,  the Company  typically  charges from $200 to $5,000 per  participant to
conduct ILT programs.  Pricing  considerations  vary depending on the length and
complexity of the program,  the number of participants,  whether the 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 repeat the same program without charge.

Pricing of Courseware and TBT Products

     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

Customers

     No one  customer  accounted  for more  than ten  percent  of the  Company's
revenues during the two years ended December 31, 1998.

Competition

     The Company's primary  competitors are providers of training and consulting
services,  including education and training  specialists,  internal corporate IT
departments,  software vendors and Big Four 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  training  products  that they could then
distribute through their existing  distribution channels to their current client
base.  Management believes that the Company is not a major competitor in the ILT
or CSD markets in the New York metropolitan area, but believes that Sivan is the
largest ILT provider of IT in Israel.

Employees

     As of  December  31,  1998,  in its US  operations,  the  Company  employed
approximately  44  full-time  persons.  Specifically,  the  Company  employed 11
persons as full-time trainers,  26 persons as consultants,  12 persons in sales,
marketing  and sales  administration  and 8 persons in  management,  finance and
operations.  In addition,  the Company occasionally uses subcontractors on an as
needed basis. Sivan employed approximately 124 part-time persons as trainers, 42
persons in sales,  marketing and sales administration,  27 persons in management
and finance and 63 in operations.  Sivan also contracts  with  approximately  65
freelance   trainers.   Mentortech   TBT  employs  8  persons  in  



                                       10


<PAGE>



research  and  development,  1 person  in sales  and  marketing  and 1 person in
administration. Mentortech Systems employs 13 full-time persons.

Item 2.  Description of Property.

     The  Company  occupies  approximately  8,000  square  feet of  space at 462
Seventh  Avenue,  New York, New York where the Company's  executive  offices and
classrooms  are located.  These  premises are occupied  under a lease  agreement
expiring on October 31, 2003 at a current  base annual  rental of  $170,000.  In
addition,  the Company leases approximately 3,915 square feet of classroom space
in  Melville,  New York at an annual  rental  of  $86,130  under a lease,  which
expires on October 31, 2005.

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

<TABLE>
<CAPTION>
                                                                                      Square       Monthly
       Location                  Lease expiration           Renewal Option            Footage        Rent
       --------                  ----------------           --------------            -------        ----

<S>                              <C>                         <C>                      <C>         <C>    
Tel-Aviv, Sderot Yehudit         May 31, 2003                        --                9,900      $15,000

Tel-Aviv, Beit Hilel             December 31, 1999          Two options of 2           8,500      $12,850
                                                            years each
Tel-Aviv, Barak                  August 31, 1999            Two options of 2 and      10,000      $15,000
                                                            3 years
Rishon Le' Zion                  February 28, 2000                   --                2,000      $ 1,250
Rishon Le' Zion                  December 31, 2003          5 year option              2,760      $ 4,300
Jerusalem                        March 31, 2004             59 month option            6,300      $ 7,560

Tel-Aviv, Beit Hilel             December 31, 1999          18 month option            2,500      $ 4,500
Tel-Aviv, Beit Hilel             December 31, 1998          Two options                  750      $ 1,125
                                                            of 1 year each
</TABLE>


Item 3.  Legal Proceedings.

     The Company is not party to any material litigation.

Item 4.  Submission of Matters to a Vote of Security Holders.

     None.


                                       11



<PAGE>




                                     PART II

Item 5.  Market For Common Equity and Related Stockholder Matters.

     (a) Market Information.

     The Company's shares of common stock (the "Common Stock") are 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 high and low bid prices for the  Company's  Common  Stock as  reported by the
National  Quotation Bureau Inc. The quotations  below reflect the  one-for-eight
reverse  split  effected on March 3, 1998  inter-dealer  prices  without  retail
markup,  markdown  or  commission  and  may  not  necessarily  represent  actual
transactions.

                                                   High                 Low
                                                   ----                 ---
          1998
          ----
          First Quarter                          $ 4-3/4                $ 4
          Second Quarter                           4-3/4              4-1/2
          Third Quarter                            4-1/2                  3
          Fourth Quarter                           4-1/4              2-1/2

          1997
          ----
          First Quarter                                3                  2
          Second Quarter                           2-1/2                  2
          Third Quarter                            1-3/4              1-1/2
          Fourth Quarter                               4                3/4

     (b) Holders.

     As of March 25,  1999,  there were 91  holders  of record of the  Company's
Common Stock.

     (c) Dividends.

     The Company has neither  declared  nor paid any  dividends on its shares of
Common  Stock  since  inception.  Any  decisions  as to the  future  payment  of
dividends will depend on the earnings and financial  position of the Company and
such  other  factors  as the Board of  Directors  deems  relevant.  The  Company
anticipates  that it will retain  future  earnings,  if any, in order to finance
expansion  of its  operations.  Accordingly,  it is not  anticipated  that  cash
dividends  will  be  paid  in  the  foreseeable  future.  



                                       12



<PAGE>

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

     This Report contains  forward-looking  statements within the meaning of the
Private Securities Litigation Reform Act of 1995, which are subject to risks and
uncertainties.  Actual results could differ materially from the  forward-looking
statements  in this  report.  Factors  that could  cause or  contribute  to such
differences  include, but are not limited to, those discussed in "Description of
Business," as well as those  discussed  elsewhere in this Report.  The following
discussion  and  analysis  should  be read in  conjunction  with  the  Company's
financial statements and notes thereto included elsewhere in this report.

Overview

     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  majority-owned  subsidiary of Mashov Computers Ltd., whose shares are also
publicly  traded on the  TASE.  Based on the Stock  Purchase  Agreement,  Mashov
acquired  1,054,865  shares  of  Common  Stock  and  658,412  shares of Series C
Preferred Stock of PCE U.S. (collectively, the "Sale Stock"), with each share of
Series C  Preferred  Stock  convertible  into 1.25  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 the equity and voting  securities of PCE U.S. 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  43,199  shares of Common  Stock to the
capital of the Company.  In addition,  on August 4, 1997,  Mashov  converted the
658,412 shares of Series C Preferred Stock into 823,015 shares of Common Stock.

     The Stock  Purchase  Agreement  required that Sivan and Mashov CBT have net
tangible assets of $2,200,000  including cash of $1,500,000.  In connection with
the execution of the Stock Purchase Agreement,  PCE U.S. executed the Conversion
Agreement  effective  February  13, 1997 with certain  holders of the  Company's
equity  securities  and  debt  (the  "Conversion  Parties").   Pursuant  to  the
Conversion  Agreement,  the Conversion Parties received 340,423 shares of Common
Stock in  consideration  for the  cancellation of the debt owed them by PCE U.S.
and as a result of antidilution  provisions  relating to the securities owned by
the Conversion Parties.

     In  October  1997,  the  Company  acquired  the  assets  of  GLTN  Computer
Consultants,   Inc.,  a  Long  Island,   New  York,  ILT  training   company  in
consideration of $130,000 and the issuance of 15,909 shares of Common Stock.

     In  1996,   1997  and  1998  the  Company  and  its   predecessor   derived
substantially  all of their revenues from ILT training and consulting  services.
As  reflected in the  following



                                       13


<PAGE>



table,  revenues  in the  U.S.  from ILT  training  services  improved  in 1998,
following a decline in 1997, while steadily increasing in Israel.  Revenues from
U.S.  consulting  services diminished in 1998 following an increase in 1997 over
1996 levels.

                                              Year ended December 31,
                                              -----------------------
                                 1996(1)            1997(2)                 1998
                                 -------            -------                 ----
                                                  (Pro forma)
                                                 (in thousands)
                                                 --------------
   U.S. ILT                     $3,038             $1,972                 $2,306
   Israel ILT                    9,158             11,231                 13,162
   Consulting services           4,003              4,435                  3,717
   TBT                             242                523                    766


(1)  Includes the  operations of PCE U.S. for the period January 1, 1996 through
     December 31, 1996

(2)  Includes the  operations of PCE U.S. for the period January 1, 1997 through
     February 13, 1997, the effective date of the Stock Purchase Agreement.

The Company's revenues are derived from ILT services,  contractual  consultation
services,  and TBT product sales. The Company's ILT revenues are recognized over
the life of the training course.  Contract  consulting and development  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.


Year Ended December 31, 1998 as Compared with the Year Ended December 31, 1997.


     The Company's  revenues for the year ended  December 31, 1998 increased 14%
to  $19,951,000  from  $17,560,000 in the  comparable  1997 period.  Sivan's ILT
revenues  increased by 17% to $13,162,000 in 1998 from  $11,231,000 in 1997. The
increase  in  Sivan's  revenues  in 1998 was due  primarily  to its  success  in
offering  more  technical



                                       14


<PAGE>




courses as well as an increase in the number of application courses offered. TBT
revenues for the year ended December 31, 1998 were $766,000 compared to $523,000
in 1997.

     The Company's U.S. operations  generated revenues of $6,023,000  (exclusive
of intercompany revenue, which has been eliminated in consolidation) in 1998, an
increase of 4%, compared to revenues of $5,806,000 in 1997.  Consulting revenues
for  the New  York  metropolitan  area  decreased  to  $3,717,000  in 1998  from
$4,435,000 in 1997, a decrease of 16%. To halt the decline,  the Company's  U.S.
operation  began to place a  greater  emphasis  on the  growth of its CSD in the
second half of 1998. To spearhead the effort,  the Company recruited a President
of the Consulting  Services  Division.  The new CSD President joined the Company
with a team of four  additional  employees.  Management  expects CSD revenues to
increase substantially in 1999.

     The decrease in CSD revenues was partially offset by an increase in the ILT
revenues. ILT revenues in 1998 rose to $2,306,000,  an increase of 17%, compared
to revenues of $1,972,000  in 1997.  Management  attributes  the increase in ILT
revenues to the acquisition of GLTN and to the adoption of new operating systems
by its clients, which resulted in increased demand for training.

     The cost of ILT revenues consists primarily of the expenses of instructors,
classroom space costs as well as depreciation  of classroom  equipment.  Cost of
revenues for consulting  services  consists  primarily of the labor costs of the
consultants performing the work at clients' facilities. Cost of revenues for TBT
revenues include  packaging and  manufacturing  costs of the products as well as
design expenses for custom TBT projects and development  costs. Cost of revenues
rose to 63% in 1998  compared to 62% of revenues in 1997.  Cost of revenues  for
Sivan was 61% of revenues in 1998 compared to 58% in 1997.  Cost of revenues for
the U.S. operation was 67% in 1998 compared to 72% in 1997,  primarily resulting
from the  termination  of a lease for classroom  space  resulting in approximate
savings of $20,000 per month to the Company.  In addition,  as training revenues
increase,  cost of revenues as a percentage  of sales has  decreased  due to the
fixed costs of classroom facilities and depreciation.

     Prior to 1998,  the  Company had  included  the  salaries of the  employees
engaged in ongoing  research and  development of TBT materials and other related
costs as research and development  expenses.  Research and development  expenses
amounted to $450,000 for the year ended  December 31, 1997.  All of this work is
currently  directed to client  projects  and thus such  expenses are included in
TBT's cost of revenues.

     Sales and marketing  expenses consist  primarily of compensation of the CSD
personnel as well as travel and related  expenses.  Such  expenses  also include
promotion,  advertising,  trade  shows  and  exhibitions.  Sales  and  marketing
expenses  increased 33% to $3,582,000  during 1998 from  $2,698,000 in 1997. The
increased  revenues are a result of the increased sales and marketing  expenses.
Sales and  marketing  expenses in the U.S.  increased  68% to $1,582,000 in 1998
from  $943,000 in 1997. A substantial  portion of the  increased  expenses are a
result of the costs  associated with recruiting and supporting the 



                                       15


<PAGE>


Company's new CSD President and a team of additional employees. The cost of this
new team is considered a startup cost by management and as such, the team is not
projected  to produce  revenues in excess of its costs  until mid 1999.  Sivan's
sales and marketing expenses include advertising expenses which were $543,000 or
28% of total sales and  marketing  expenses in 1998.  Total sales and  marketing
expenses of Sivan  increased by 9% in 1998  compared to 1997.  This increase was
due to  management's  decision to increase  the  Company's  sales and  marketing
budget in an attempt to obtain increased revenues.

     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 3% to $4,306,000 during 1998, from $4,171,000 in 1997.  General and
administrative  expenses were approximately  $1,198,000 for the U.S.  operation,
$3,092,000 for Sivan,  and $117,000 for TBT in 1998,  compared with  $1,869,000,
$2,468,000 and $85,000,respectively in 1997. General and administrative expenses
for Sivan increased by 25%, offset by a 36% decrease in administrative  expenses
for the US operation.  This was due, in part, to the appointment of Elan Penn as
chief  Operating  Officer  of Sivan.  Mr.  Penn had  previously  served as Chief
Financial  Officer of the Company and  compensation  expenses had been allocated
between Sivan and the US operation.

     Based upon the  subsequent  sale of the New York ILT assets  (see Note 15),
management  determined  that goodwill had been impaired and recorded a writedown
of $300,000 for the year ended December 31, 1998.

     The Company  incurred an operating  loss of $789,000 in 1998 compared to an
operating  loss of $618,000 in 1997.  Excluding  the effect of the  writedown of
goodwill,  there would have been a decrease in the Company's  operating  loss in
1998.  This  decrease was  principally  due to Sivan's  increased  ILT revenues,
partially offset by an increase in sales and marketing expenses.

     In 1998, the Company paid $107 in income taxes.

     Interest  expenses  net,  consists  primarily  of bank charges and interest
expenses offset by interest income.  Interest expenses  decreased 5% to $221,000
in 1998 from $233,000 in 1997.

     Sivan's operations generated a net loss of $141,000 in 1998 compared to net
income of  $226,000  in 1997.  During  the year ended  December  31,  1998,  the
Company's U.S.  operation incurred a loss of $370,000 and TBT incurred a loss of
$199,000  compared with losses of $1,165,000 and $48,000,  respectively  for the
year ended December 31, 1997. As a result of the foregoing, the Company incurred
a net loss of $1,010,000 in 1998 compared to a net loss of $851,000 in 1997.


                                       16


<PAGE>



Liquidity and Capital Resources

     At December 31, 1998, the Company had $220,000 in cash and cash equivalents
and a working capital  deficiency of $268,000,  compared with $1,659,000 in cash
and cash  equivalents and a working  capital  deficiency of $147,000 at December
31, 1997.

     In 1998 the Company  obtained an oral  commitment  from its Israeli bank to
provide Sivan up to $1.2 million in working  capital  loans.  As of December 31,
1998, Sivan had borrowed approximately $596,000 from such bank.

     The  Company's  operating  activities  used $0.9 million of net cash in the
year ended December 31, 1998.  Accounts  receivable  increased by  approximately
$2.1 million and other receivables and prepaid expenses increased by $0.6 during
the same period.  This increase in receivables was due primarily to the increase
in sales volume. Accounts payable and accrued expenses increased by $0.5 million
during the same period.  The Company's  investing  activities  used $1.2 million
mainly for the purchase of fixed  assets.  On October 28, 1998 Mashov  Computers
Marketing Ltd.  exercised  warrants to purchase  132,045 shares of the Company's
common stock. The Company received $600,000 as a result of this transaction.

     Based on its working capital  commitment,  the Company believes that it has
sufficient  working capital to fund its current level of operational and capital
requirements  through  1999.  The  Company  does not have any  material  capital
commitments  for 1999.  To the extent  the  Company  increases  the scope of its
activities significantly, it may be required to obtain additional financing.

Seasonality

     While  the  Company's  revenues  have not been  substantially  affected  by
seasonal  variations,  the revenues of the Company's Israeli subsidiary,  Sivan,
are affected by the timing of the national holidays, when classes are suspended.

The Year 2000 Issue

     Some of the Company's older computer programs were written using two digits
rather than four to define the  applicable  year.  As a result,  those  computer
programs have  time-sensitive  software that  recognize a date using "00" as the
year 1900  rather  than the year  2000.  This  could  cause a system  failure or
miscalculations  causing  disruptions  of  operations,  including,  among  other
things, a temporary inability to process transactions,  send invoices, or engage
in similar normal business activities.

     The Company has completed an assessment  and is in the process of modifying
and  replacing  portions  of its  software  so that its  computer  systems  will
function  properly  with respect to dates in the year 2000 and  thereafter.  The
total Year 2000 project cost is 



                                       17


<PAGE>


estimated  at  approximately   $90,000.   The  Company  has  incurred  costs  of
approximately $75,000 to date.

     We  cannot   presently  assess  the  likelihood  that  we  will  experience
significant  problems due to the unresolved  year 2000 problems of third parties
with  which we do  business.  Although  we have not been put on notice  that any
known  third-party  problem  will  not  be  timely  resolved,  we  have  limited
information  and no assurance can be made  concerning the year 2000 readiness of
third parties.  If third parties fail to achieve year 2000 compliance,  the year
2000 issue may have an adverse effect on our business and results of operations.
Similarly,  there can be no  assurance  that we can  timely  mitigate  our risks
related to a third party's  failure to resolve its year 2000 issues.  If we fail
to timely  mitigate such risks,  that failure may have an adverse  effect on our
business and results of operations.


                                       18

<PAGE>



Item 7.  Financial Statements.


                          Index to Financial Statements



Report of Independent Auditors                                         F-1

Financial Statements:

         Consolidated Balance Sheet                                    F-2

         Consolidated Statements of Operations                         F-4

         Consolidated Statements of Stockholders' Equity (Deficit)     F-5

         Consolidated Statements of Cash Flows                         F-6

         Notes to Consolidated Financial Statements                    F-7


                                       19


<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Mentortech Inc.

We have audited the accompanying  consolidated  balance sheet of Mentortech Inc.
and  Subsidiaries  as  of  December  31,  1998,  and  the  related  consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the two  years  in the  period  ended  December  31,  1998.  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.  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 consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Mentortech Inc. and  Subsidiaries  as of December 31, 1998 and the  consolidated
results  of their  operations  and their cash flows for each of the two years in
the period  ended  December  31,  1998 in  conformity  with  generally  accepted
accounting principles.


                                                            /s/Ernst & Young LLP

New York, New York
January 21, 1999, except for Note 15,
as to which the date is March 15, 1999

                                      F-1


<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1998
                (In thousands except share and per share amounts)

ASSETS

CURRENT ASSETS:
         Cash and cash equivalents                                    $   220
         Accounts  receivable,  net of allowance for doubtful
              Accounts of $64                                           5,132
         Prepaid expenses and  other current assets                       791
         Inventory                                                        148
                                                                       ------
           Total current assets                                         6,291

PROPERTY AND EQUIPMENT:
         Property and equipment, at cost                                4,215
         less accumulated depreciation and amortization                (1,868)
                                                                      -------
                                                                        2,347
OTHER ASSETS:
           Goodwill,  net of accumulated amortization of $969           4,185
           Other assets, net                                              410
                                                                      =======
TOTAL ASSETS                                                          $13,233
                                                                      =======

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
         Accounts payable and accrued expenses                         $3,158
         Deferred revenue                                               2,088
         Loan payable -  bank                                             596
         Loan payable - related party                                      33
         Due to related parties                                           684
                                                                      -------
           Total current liabilities                                    6,559

LONG-TERM LIABILITIES:
         Accounts payable - long-term                                     154
         Accrued severance pay                                            525
         Loan payable - long-term                                         125
                                                                      -------
           Total liabilities                                            7,363


                                      F-2
<PAGE>



COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
         Common stock,  $.01 par value, 20,000,000
            Shares authorized, 3,578,208 issued and 
            outstanding                                                    36
         Preferred Stock, $0.001 par value, 5,000,000 shares
            Authorized, none issued
         Additional paid-in capital                                     9,215
         Accumulated other comprehensive income (loss)                   (600)
         Accumulated deficit                                           (2,781)
                                                                      -------
           Total stockholders' equity                                   5,870

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $13,233
                                                                      =======










                             See Accompanying Notes

                                      F-3

<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        FOR THE YEARS ENDED DECEMBER 31,
                      (In thousands, except for share data)

                                                       1998        1997
                                                     --------    -------

Net revenues                                         $19,951     $17,560
Cost of  revenues                                     12,552      10,859
                                                     -------     -------
Gross profit                                           7,399       6,701

General and administrative expenses                    4,306       4,171
Sales and marketing expenses                           3,582       2,698
Write-down of Goodwill                                   300           -
Research and development                                   -         450
                                                     --------    -------

Operating loss                                          (789)       (618)

Interest expense,  net                                  (221)       (233)
                                                     --------    -------

Net loss                                             $(1,010)      $(851)
                                                     ========    =======

Basic loss per share                                  $(0.29)     $(0.40)

Weighted average number of shares                      3,468       2,124
                                                       =====       =====








                             See Accompanying Notes


                                      F-4

<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                                     ACCUMULATED
                                                                                                        OTHER
                                                                             ADDITIONAL              COMPREHENSIVE     STOCKHOLDERS'
                                    PREFERRED   STOCK      COMMON    STOCK    PAID-IN   ACCUMULATED  INCOME (LOSS)        EQUITY
                                      SHARES    AMOUNT     SHARES    AMOUNT   CAPITAL     DEFICIT                        (DEFICIT)

<S>                                   <C>        <C>       <C>        <C>      <C>        <C>            <C>             <C>
Balance as of  December 31, 1996         -       $-            -       $-        $150       $(920)        $23             $(747)
                                    --------------------------------------------------------------------------------------------
Net loss                                 -        -            -        -           -        (851)          -              (851)
Foreign currency translation             -        -            -        -           -           -        (168)             (168)
                                    --------------------------------------------------------------------------------------------
  Comprehensive income (loss)            -        -            -        -           -           -           -            (1,019)
                                         
Acquisition of PC Etcetera, Inc.     
   and related conversions (Note 9)      -        -          820        8       (1640)          -           -            (1,632)
Issuance of preferred and common     
   stock to Mashov                                1        1,012       10       6,967                       -             6,978
Conversion of Mashov preferred
   stock to common stock (Note 9)     (658)      (1)         823        8          (7)          -           -                 -
Acquisition of GLTN (Note 9)             -        -           16        -          47           -           -                47
Private placement offering (Note 9)      -        -          511        5       2,046           -           -             2,051
Mashov loan conversion to
   common stock  (Note 9)                -        -          264        3       1,159           -           -             1,162
                                    --------------------------------------------------------------------------------------------
Balance as of December 31, 1997          -        -        3,446       34       8,722      (1,771)        (145)           6,840
                                    --------------------------------------------------------------------------------------------
Net loss                                 -        -            -        -           -      (1,010)           -           (1,010)
Foreign currency translation             -        -            -        -           -           -         (455)            (455)
                                    --------------------------------------------------------------------------------------------
     Comprehensive income (loss)         -        -            -        -           -           -            -           (1,465)
Exercise of Warrants                     -        -          132        2         580           -            -              582
Costs associated with Registration
    Statement                            -        -            -        -         (87)          -            -              (87)
                                    --------------------------------------------------------------------------------------------
Balance as of December 31, 1998          -       $-        3,578      $36      $9,215     $(2,781)       $(600)          $5,870
                                    ============================================================================================


</TABLE>

                             See Accompanying Notes


                                      F-5
<PAGE>


                        MENTORTECH INC. AND SUBISIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 1998
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                1998            1997
                                                                            --------         -------
<S>                                                                         <C>             <C>     
Cash flows from operating activities:
       Net (loss) for the period                                            $(1,010)        $  (851)

       Adjustments  to  reconcile  net  (loss) to net cash  
        (used in)  operating activities:

           Depreciation and amortization                                      1,100           1,114
           Gain on sale of fixed asset                                            -               5
           Write-down of goodwill                                               300               -

       Changes in operating assets and liabilities:

           Accounts receivable                                               (2,144)           (100)
           Prepaid expenses and other current assets                           (634)             42
           Inventory                                                           (120)             50
           Other assets                                                          38             (53)
           Accounts payable and accrued expenses                                503            (523)
           Due to related parties                                               632            (771)
           Deferred revenue                                                     295             454
           Accrued severance pay                                                143             (70)
                                                                            -------         -------

                Net cash (used in) operating activities                        (897)           (703)
                                                                            -------          ------

 Cash flows from investing activities:
       Purchase of property and equipment                                    (1,267)         (1,235)
       Proceeds from sale of property and equipment                             113              71
       Purchase of subsidiaries, net of cash acquired                             -            (119)
                                                                            -------         -------

                Net cash (used in) investing activities                      (1,154)         (1,283)
                                                                            -------         -------

 Cash flows from financing activities:
       Proceeds from loan payable -  bank                                        90             601
       Proceeds from loan payable - related party                                 -              42
       Repayment of capital equipment obligations                                (5)            (68)
       Cash received from Mashov transaction, 
           net of expenses of $140                                                -             760
       Net proceeds from issuance of common stock                               495           2,051
                                                                            -------         -------

                Net cash provided by financing activities                       590           3,386
                                                                            -------         -------

       Net (decrease) increase  in cash and cash equivalents                 (1,471)          1,400
       Cash and cash equivalents, beginning of the year                       1,659             283
       Effect of exchange rate changes on cash and
           cash equivalents                                                      32             (24)
                                                                            -------          ------

       Cash and cash equivalents, end of the year                            $  220         $ 1,659
                                                                            =======         =======

 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
       Cash paid during the year for:
           Interest                                                          $  160           $ 282
           Income Taxes                                                      $  107           $  53


</TABLE>

                             See Accompanying Notes



                                      F-6

<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 1 - THE COMPANY

     Mentortech Inc. (the "Company") develops and offers instructor-led training
and technology-based  training 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 a multitude of subjects  ranging from
full vocational  training  programs which are geared to training  individuals to
become  information   technology  ("IT")   professionals  to  end-user  computer
proficiency courses. The Company's Consulting Services Division ("CSD") provides
short to medium term technical consulting to large and mid-sized corporations in
the  Northeast  region of the U.S. The Company  develops and offers TBT programs
for use in conjunction  with its ILT classes,  as well as for home and corporate
users who use  self-study  tools for training and  reference.  The Company's TBT
software line includes offerings on Lotus Notes, cc:Mail,  Microsoft Office, and
other  end-user  titles.  In  addition,  the Company  develops  TBT products for
corporations in Israel and the United States.

     For the years ended December 31, 1998 and 1997, revenues from ILT comprised
78% and 74% of total revenues,  respectively,  while consulting services and TBT
revenues   accounted  for  19%  and  23%  and  3%  and  3%  of  total  revenues,
respectively.

     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.

     Effective February 13, 1997, Mashov Computer Marketing Ltd. ("Mashov"), the
parent  company of Sivan  Computers  Training  Center (1994) Ltd.  ("Sivan") and
Mashov Computer Based Training (C.B.T.) Ltd.  ("Mashov CBT"),  transferred to PC
Etcetera,  Inc. all of its holdings in Sivan and Mashov CBT for 8,438,924 shares
of Common Stock  (1,054,866  after giving effect to the stock  split-see Note 9)
and 658,412 shares of  convertible  preferred  stock of PC Etcetera,  Inc. ("PCE
U.S").  Under  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  Inc.
(formerly  PCE U.S.)  remained the  Registrant  for purposes of filing  periodic
reports with the Securities and Exchange Commission.

     As  reflected in the  Consolidated  Financial  Statements,  the Company has
experienced  continuing  net losses,  negative  cash flows from  operations  and
negative working capital. The Company's principal shareholder,  Mashov Computers
Ltd. 


                                      F-7


<PAGE>



                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                               DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 1 - THE COMPANY (continued)

("Mashov  Computers"),  intends  to  provide  continued  support  in the form of
additional  capital  contributions,  extensions  if credit  facilities  or other
necessary  action to ensure the  continued  financial  viability  of the company
throughout 1999.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Foreign Currency

     The financial  statements of the Company's  foreign  subsidiaries 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 (deficit).

Cash equivalents

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

Inventory

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


                                      F-8


<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Property and equipment

     Property and equipment 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                      3 -  5
   Office furniture and equipment                          5 - 10
   Automobiles                                             2 -  7
   Leasehold improvements                The  lesser  of  the  remaining   lease
                                         period or useful life

Goodwill

     Goodwill,  which is attributable to the acquisitions of PCE, Inc.,  Sivan's
personal computer tutorial services and GLTN, is stated at cost and amortized by
the straight-line method over 15 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 the subsequent sale of the New York ILT
assets (see Note 15), management  determined that goodwill had been impaired and
recorded a writedown of $300,000 for the year ended December 31, 1998.

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


                                      F-9


<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Revenue recognition

     Revenues  related  to ILT are  recognized  over  the  life of the  training
course. TBT revenues are recognized upon delivery of the program.  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.  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 the  Company's  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 costs

     Research  and  development  costs are  expensed 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.

Concentrations 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  in the U.S. and several  major banks in Israel.  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 net revenues or accounts  receivable
as of December 31, 1998.



                                      F-10

<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Fair value of financial instruments

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

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.

Loss per share

     The  basic  loss per share  calculation  is based on the  weighted  average
number of shares of common stock outstanding.  Diluted earnings per share is not
presented as the effect of including the impact of outstanding stock options and
warrants would be antidilutive.

     All references to per share data have been  retroactively  adjusted to give
effect to a one-for-eight  reverse stock split effective March 3, 1998 (see Note
9).

Comprehensive Income

     Effective  January 1, 1998,  the Company  adopted FASB  Statement  No. 130,
"Reporting  Comprehensive Income" ("FAS 130"). The new rules establish standards
for the  reporting  of  comprehensive  income and its  components  in  financial
statements.  Comprehensive  income  consists  of net income and other  gains and
losses affecting  stockholders' equity that, under generally accepted accounting
principles, are excluded from net income. For the Company, such items consist of
foreign currency  translation gains and losses.  The adoption of FAS 130 did not
have an effect on the Company's primary financial statements, but did effect the
presentation of the accompanying  consolidated statement of stockholders' equity
(deficit).



                                      F-11

<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)

Segment Information

     On  December  31,  1998,  the  Company  adopted  FASB  Statement  No.  131,
"Disclosure  about  Segments of an  Enterprise  and Related  Information"  ("FAS
131"). The new rules establish revised  standards for public companies  relating
to the reporting of financial and descriptive  information about their operating
segments in financial statements. The adoption of FAS 131 did not have an effect
on the Company's primary financial statements,  but did effect the disclosure of
segment information contained elsewhere herein (See Note 12).


NOTE 3 - PROPERTY AND EQUIPMENT

     Major classifications of property and equipment at December 31, 1998 are as
follows:

          Computers and peripheral equipment and
            related systems                                      $ 3,100
           Office furniture and equipment                            509
          Automobiles                                                164
          Leasehold improvements                                     442
                                                                 -------
                                                                   4,215
          Accumulated depreciation and amortization               (1,868)
                                                                 -------
                                                                 $ 2,347
                                                                 =======

     Depreciation  and  amortization  expense,  was $797 and $763 for the  years
ended December 31, 1998 and 1997, respectively.




                                      F-12

<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 4 - 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,  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, 1998 and 1997 was $130
and $22, respectively.


NOTE 5 - 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  ($2,088 at December 31, 1998) which is recognized
as revenues as classes are attended.


NOTE 6 - LOANS PAYABLE

Bank Debt

     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,  1998 is $125 and  carries an interest  rate of 10% per
annum and will mature in the year 2000.

     In 1998, the Company  obtained an oral  commitment from its Israeli bank to
provide Sivan up to $1,200 in working capital loans.  The loan is not secured by
any assets but the  Company  has agreed to a negative  pledge,  which  means the
Company  can not apply  for any other  credit  of any kind  without  the  bank's
permission. The loan is a demand loan and is included in the current liabilities
section of the consolidated  balance sheet. The interest rate was  approximately
14.6% at December 31,  1998.  The balance  outstanding  at December 31, 1998 was
$596.



                                      F-13


<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)

NOTE 6 - LOANS PAYABLE (continued)

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 owed to the vendor.  Class A creditors (total  indebtedness in excess of $3
each) will be paid in full  through a four-year  payment  plan.  Those  payments
which will be paid during periods  greater than 12 months  (amounting to $154 at
December 31, 1998) have been reflected as long-term.

Loan from Related Party

     In 1991, the Company  obtained a loan from an unrelated party in the amount
of $100 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.  At December 31, 1998, the loan
balance was $33.

NOTE 7 - LEASES

     The Company leases its office and classroom  space under  operating  leases
that expire on various dates through the year 2005. 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, 1998 are as follows:

                                  Capital       Operating
                          --------------------------------
1999                                 $  2          $  358
2000                                    -             354
2001                                    -             353
2002                                    -             267
2003                                    -             268
Thereafter                              -             189
                          --------------------------------

                                     $  2         $ 1,789
                          ================================

     Rental  expense for the years ended December 31, 1998 and 1997 was $709 and
$945, respectively.



                                      F-14

<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 8 - COMMITMENTS AND CONTINGENCIES

     The Company and its  Executive  Vice  President are parties to an agreement
which requires the Company,  upon the death of 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 person.


NOTE 9 - STOCKHOLDERS' EQUITY

     Effective March 3, 1998, the Company  effectuated a  one-for-eight  reverse
stock  split.  The number of shares  issued at December  31,  1997 after  giving
effect to the split was  3,446,176  (27,569,404  shares  before the split).  All
share and per share data, including stock options and warrants has been restated
to reflect the split.

     Effective  February 13,  1997, a change of control of the Company  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,  whose shares are also publicly  traded on
the TASE.  Based on the Stock  Purchase  Agreement,  Mashov  acquired  1,054,866
shares of Common  Stock and 658,412  shares of Series C  Preferred  Stock of PCE
U.S.  (collectively,  the "Sale  Stock"),  where the share of Series C Preferred
Stock was convertible into 823,015 of Common Stock and proportionate 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 the equity
and  voting  securities  of PCE U.S.  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  43,199  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 823,015 shares of Common Stock.

     In connection with the execution of the Stock Purchase Agreement,  PCE U.S.
executed a conversion agreement (the "Conversion  Agreement") effective February
13, 1997 with certain prior holders of 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 by PCE


                                      F-15


<PAGE>




                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                               DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 9 - STOCKHOLDERS' EQUITY (continued)

U.S. (amounting to $437) and as a result of antidilution  provisions relating to
the securities owned by the Conversion Parties.  These transactions  resulted in
the issuance of a total of 340,423 shares of common stock.  In addition,  83,566
shares of Common Stock were issued to Helix Capital,  LLC, the financial adviser
to PCE U.S. in the transaction.  Prior to the acquisition date there was 396,141
of shares of Common Stock  outstanding,  resulting in a total shares outstanding
of 820,131 after the Conversion Agreement was executed on February 13, 1997.

     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) authorize the conversion
of the 658,412 outstanding shares of the Company's Series C Preferred Stock into
823,015 of Common Stock; and (iii) ratify the Company's 1997 Stock Option Plan.

     On October 24, 1997, the Company acquired  substantially  all of the assets
of GLTN Computer  Consultants,  Inc., ("GLTN") a Long Island, New York-based ILT
Company, for $130 in cash and 15,909 shares of Common Stock.

     Effective  December 11, 1997, the Company  completed a private placement of
255,682  Units,  each Unit  consisting  of two  shares  of Common  Stock and one
two-year  Warrant to  purchase a share of Common  Stock.  The price per Unit was
$8.80 and the exercise price of the Warrant  contained in each Unit is $4.40 per
share of Common Stock.

     In connection  with,  but  separately  from the private  placement,  Mashov
converted  $1,162  of debt  owed to it by the  Company  into  132,045  Units (or
264,090  shares of Common  Stock) and  warrants  to purchase  132,045  shares of
Common  Stock at $4.40 per share.  On November 15, 1998,  Mashov  exercised  its
warrants and purchased 132,045 shares of common stock at $4.40 per share.

OPTIONS

     Under the Company's 1997 Stock Option Plan, 625,000 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


                                      F-16



<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 9 - STOCKHOLDERS' EQUITY (continued)

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 loss and net loss per share is required
by FASB  Statement  No.  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  1998 and  1997:  risk  free  interest  rate of 4.7% and  5.6%,
respectively,  volatility  factor of the expected  market price of the Company's
Common Stock of .84 and 1.11,  respectively,  and the weighted-average  expected
life of the options of 2 and 3 years,  respectively.  Dividends are not expected
in the future. For purposes of pro forma  disclosures,  the estimated fair value
of the options is amortized to expense over the  options'  vesting  period.  The
Company's  pro forma net loss is $826 and $881 for 1998 and 1997,  respectively,
and net loss per share is $.24 and $.41 for 1998 and 1997, respectively.

     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
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.



                                      F-17


<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 9 - STOCKHOLDERS' EQUITY (continued)

         Stock option activity is summarized as follows:
                                                                    WEIGHTED-
                                                               AVERAGE EXERCISE 
                                                    SHARES           PRICE
                                                    ------           -----
Outstanding December 31, 1996 (19,250 
  exercisable at option prices $7.52 to $50.00)     19,250           $28.48
Options Granted                                     98,125            $5.60
Options Canceled                                    (9,700)          $19.12
                                                   -------
Outstanding December 31, 1997 (43,925  
  exercisable at option prices $4.67 to $50.00)    107,675            $8.74

Options Granted                                    173,750            $4.99
Options Canceled                                    (1,300)          $24.80
                                                   -------
Outstanding December 31, 1998 (106,874 
  exercisable at option prices $4.67 to $50.00)    280,125            $6.34
                                                   =======

Options outstanding and exercisable at December 31, 1998 are as follows:

                                                              WEIGHTED-
                                                               AVERAGE
                                                              REMAINING
                                                             CONTRACTUAL
            SHARES            EXERCISE PRICE                    LIFE
            ------            --------------                    ----
            63,750                $4.67                         4.09
            32,374                $5.25                         4.99
             7,500               $40.00                         1.37
             3,250               $50.00                         3.75
             -----
           106,874

     At December 31, 1998, 344,875 options are available for grant.



                                      F-18

<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)

NOTE 9 - STOCKHOLDERS' EQUITY (continued)

     The  following  is a summary of warrants  outstanding  and  exercisable  at
December 31, 1998:

                             NUMBER OF
EXPIRATION DATE              WARRANTS          EXERCISE PRICE      DESCRIPTION
---------------              --------          --------------      -----------
December 11, 1999             255,682             $4.40                 (1)

(1)  Warrants issued in connection with the December 11, 1997 private  placement
     and Mashov loan conversion

     At December  31,  1998,  the Company  has  255,682  shares of Common  Stock
reserved for issuance to the warrant holders.


NOTE 10 - TAXES ON INCOME

     There was no income tax  expense or benefit  recorded  for the years  ended
December 31, 1998 and 1997.

     The Company has net operating loss  carryforwards of  approximately  $7,768
expiring  from  2006 to 2013.  In  addition,  the  Company  has a  capital  loss
carryforward of approximately  $1,202, which expires in 2000. However,  pursuant
to  Section  382 of  the  Internal  Revenue  Code,  the  future  utilization  of
approximately  $6,708 of the net  operating  loss  carryforwards  and the entire
capital loss  carryforward is  significantly  limited due to an ownership change
which  occurred in 1997.  The full  utilization of these losses in the future is
dependent  upon the  Company's  ability to generate  taxable  income and also is
subject to certain annual limitations due to the change in control; accordingly,
valuation allowances of equal amounts have been established.

     Components  of the  Company's  deferred tax asset and liability at December
31, 1998 is as follows:

                Net operating loss carryforwards           $3,340
                Capital loss carryforward                     481
                                                           ------
                                                            3,821
                Valuation allowance                        (3,821)
                                                           ------
                Net deferred tax asset                          -
                                                           ======


                                      F-19



<PAGE>



                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 11 - PRO FORMA RESULTS OF OPERATIONS (Unaudited)

     The  consolidated  financial  statements  for 1997  included in this report
reflect the  operations of Sivan and Mashov CBT for the year ended  December 31,
1997,  and  Mentortech  Inc.  since  February  13,  1997,  the date of the stock
purchase  transaction.  Because of the  change in  control,  the stock  purchase
transaction  between Mashov and  Mentortech  Inc. was accounted for as a reverse
acquisition.  Based  on such  accounting  treatment,  Sivan is  reported  as the
surviving entity.

     On a pro forma basis had the acquisition  occurred January 1, 1997, the pro
forma results of operations for the year ended December 31, 1997 would have been
as follows:

                     Revenues                                      $18,161
                     Net (loss)                                      ($959)
                     Net (loss) per share                           ($0.45)


NOTE 12 - SEGMENT INFORMATION

     Information as to the Company's operations in different  geographical areas
is as follows:

<TABLE>
<CAPTION>
                           Revenues for the years     Identifiable assets as of     Net income (loss) for the
                                     ended                      December 31,                years ended
                              1998           1997           1998          1997          1998           1997
                           ----------------------------------------------------------------------------------
<S>                        <C>            <C>            <C>           <C>           <C>            <C>      
United States              $ 6,023        $ 5,806        $10,799       $ 6,025        $ (670)       $(1,029)
Israel                      13,928         11,754          2,434         7,472          (340)           178
                           ----------------------------------------------------------------------------------
Consolidated
total                      $19,951        $17,560        $13,233       $13,497       $(1,010)        $ (851)
                           ==================================================================================

</TABLE>


                                      F-20

<PAGE>


                        MENTORTECH INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                DECEMBER 31, 1998
              (All amounts are in thousands except for share data)


NOTE 13 - 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 contributions of $13 and $14 in 1998 and 1997, respectively.


NOTE 14 - RELATED PARTY TRANSACTIONS

                                                         Year Ended December 31,
                                                               1998    1997
                                                         -----------------------
Revenues                                                        $50     $ -

Expenses
     Rent                                                       127       -
     Internet site                                               46       -
     General and administrative                                   3       -
                                                         -----------------------
                             Total Expenses                    $176     $ -

The above revenue and expense  items  represent  transactions  between Sivan and
Mashov.


NOTE 15 - SUBSEQUENT EVENT

     On March  15,  1999,  the  Company  sold its New  York  ILT  activities  to
Knowledge Alliance, Inc. for total consideration of $335,000, including earn-out
provisions  of $115,000 if certain  revenue  targets are  achieved in the twelve
months  following the date of sale. As a result of the sale, the Company will no
longer provide ILT services in the United States.



                                      F-21
<PAGE>



Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure.

     None.



                                       20



<PAGE>


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
        with Section 16(a) of the Exchange Act.


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

                                                                        Director
Name                    Age    Position with the Company                  Since
----                    ---    -------------------------                  -----
Roy Machnes             38     Chairman, President, Chief Executive       1997
                               Officer and Director
Elan Penn               45     Chief Financial Officer and Director       1997
Terry I. Steinberg      43     Secretary and Director                     1985
David Assia             46     Director                                   1997
Jack Dunietz            44     Director                                   1997
Martin F. Kahn          47     Director                                   1995
Joseph Musacchio        41     President, Consulting Services Division

     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  Mr.  Kahn has  served  as  Chairman  of  OneSource  Information
Services,  which develops and markets a comprehensive set of integrated business
information  and



                                       21



<PAGE>


software products.  Mr. Kahn has since April 1995, served as Chairman and CEO of
Shoppers  Express,  Inc., which offers home grocery shopping through dial-up and
on-line services and has since March 1996 served as Managing Director of Cadence
Information Associates L.L.C. (and its predecessor), a consulting and management
services  firm.  Mr.  Kahn  also  serves  as a  Director  of  Vista  Information
Solutions,  Inc.  (formerly DataMap,  Inc.),  which supplies  site-specific risk
information  about real estate for the  insurance,  banking,  and  environmental
engineering  markets.  Mr.  Kahn  holds a  Bachelors  Degree  in  Administrative
Sciences from Yale College and an M.B.A. from Harvard Business School.

     Roy Machnes. Mr. Machnes has served as the Company's Chairman of the Board,
President 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.

     Joseph  Musacchio.  Mr.  Musacchio  joined the company as  President of the
Consulting  Services  Division in August  1998.  Previously,  he was Senior Vice
President of Volt  Services  Group for four years,  President,  Chief  Executive
Officer  and  director of Career  Management  International  for six years,  and
Regional Vice President of Butler Services Group for seven years.  Mr. Musacchio
holds a B.S. from the State University of NY.

     Elan Penn. Mr. Penn served as the Company's Chief  Financial  Officer and a
director  since  February  1997.  In  October,  1998 Mr.  Penn  became the Chief
Operating  Officer  of  the  Company's  Israeli  operations.  Mr.  Penn  assumed
responsibility of Chief Financial Officer of the Company as of April 1, 1999. He
also serves as the Chief  Financial  Officer of Mashov  Computers  Ltd. 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. 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 a director since 1985 and
he currently  serves as  Secretary.  He served as the Company's  Executive  Vice
President, responsible for North American Sales and Marketing from February 1997
until March 31 1999,  and as President and Chief  Executive  Officer of PCE U.S.
since  its  inception  in  1985  until  February  1997.  Mr.  Steinberg  holds a
Bachelor's  Degree in Applied  Mathematics  and Computer  Science and an M.B.A.,
both from McGill University.


                                       22



<PAGE>



Item 10.  Executive Compensation

     The following  table sets forth  information  concerning  the  compensation
during the last three fiscal years of the  Company's  executive  officers  whose
total  salary  during any of the three prior  fiscal years was $100,000 or more.
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.

<TABLE>
<CAPTION>
                           Summary Compensation Table

                                                                        Long-Term 
                                                      Annual           Compensation
                                                   Compensation    Securities Underlying
Name and Principal Position              Year        Salary ($)        Options (#)
---------------------------              ----        ----------        -----------
<S>                                      <C>        <C>                 <C>     
Roy Machnes                              1998       $155,000            40,625
  President and Chief Executive          1997        163,789            45,000
  Officer

Elan Penn                                1998        120,000            25,000
  Chief Operating Officer - Israeli      1997        120,000            22,500
  operations (1)

Terry Steinberg                          1998        155,000            30,000
  Executive Vice President (2)           1997        168,500            22,500
                                         1996            (3)              --   

Joseph Musacchio                         1998        115,935            33,000 
   President CSD                         

</TABLE>

(1)  Mr. Penn served as Chief  Financial  Officer until  October  1998,  when he
     became Chief Operating Officer of the Company's Israeli operations.

(2)  Effective  February 13, 1997, Mr.  Steinberg,  the former  President of the
     Company,  was named Executive Vice  President.  Mr.  Steinberg  resigned as
     Executive Vice President effective March 31, 1999.

(3)  Less than $100,000.


     Except as reported elsewhere,  the aggregate value of all other perquisites
and other personal benefits furnished in each of the last three years to each of
these  executive  officers was less than 10% of each  officer's  salary for such
year.  The  Company  has not paid any cash  remuneration  to any of its  outside
directors as directors in the last three years.



                                       23

<PAGE>


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.

Stock Options

     The following  table  provides  information  concerning  exercises of stock
options during 1997 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, 1998.

<TABLE>
<CAPTION>
                                       Aggregated Option Exercises in Last
                                  Fiscal Year and Fiscal Year-End Option Values

                                                      Number of shares underlying        Value of unexercised
                                                     unexercised options at FY-end      in-the-money options at
                                   Shares acquired       (#) exercisable/               FY-end ($)(1) exercisable/
Name                                on exercise (#)          unexercisable                   unexercisable
----                                ---------------          -------------                   -------------
<S>                                      <C>                 <C>                                  <C> 
Roy Machnes                              --                  42,084/43,541                        --
Elan Penn                                --                  24,166/23,334                        --
Terry I. Steinberg                       --                  27,500/25,000                        --
Joseph Musacchio                         --                      --/33,000                        --
 
</TABLE>


(1)  None of the outstanding options were in the money at December 31, 1998. The
     exercise  price of the  outstanding  options was $4.67 while the average of
     the bid and the asked  prices of a share of Common  Stock on  December  31,
     1998 was $3.44.

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  Operating  Officer  of  Sivan,
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  40,625,   30,000  and  25,000  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 $4.672 per share.  In 1998,
Messrs.  Machnes,  Penn and Steinberg were granted 



                                       24


<PAGE>


additional incentive stock options to purchase 45,000, 22,500, and 22,500 shares
of common stock respectively.

     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'  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' 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'  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'  home in  Israel,  net of  associated
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' relocation to Israel.

     During the year ended December 31, 1998, the Company pre-paid approximately
$23,682  for  tuition  for  Mr.  Machnes'   children.   The  Company  also  paid
approximately $45,963 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 


  


                                     25


<PAGE>


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.

Stock Option Plan

     The Company's 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 625,000 shares of
Common  Stock have been  reserved  for  issuance  under the Option  Plan.  As of
December 31, 1998,  268,075 shares were subject to outstanding  Incentive  Stock
Options  under the Option  Plan.  In  addition,  12,050  shares were  subject to
outstanding  options  under the  Company's  1987 Stock Option  Plan.  No further
options may be granted under the 1987 Stock 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.



                                       26


<PAGE>


401(k) Plan

     Effective  as of January 1, 1993,  the  Company  adopted a 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 2% 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.

                                       27

<PAGE>


Item 11.  Security Ownership of Certain Beneficial Owners and Management.

     The  following  table sets forth certain  information  as of March 25, 1999
with respect to each person known to the Company to be the  beneficial  owner of
more than 5% of the outstanding  shares of the Company's  Common Stock, for each
executive  officer  named in the  Summary  Compensation  Table,  for each of the
Company's directors, and for the Company's officers and directors as a group.


                                                                   Percentage of
                                                      Number of        Shares
                                                     Shares(1)       Outstanding
                                                     ---------       -----------
    Mashov Computers
    Ltd.(2)(3)                                       2,171,079         59.1%
    Elron Electronic Industries Ltd.(3)(4)             231,300          6.3%
    David Assia (5)(6)                                  14,785            *
    Jack Dunietz (5)(6)                                 73,258          2.0
    Martin F. Kahn (5)                                                   --
    Roy Machnes (5)(6)                                  68,105(7)       1.9
    Elan Penn (5)(6)                                    54,020(8)       1.5
    Terry I. Steinberg (5)                              63,182(9)       1.7%
    Joseph Musacchio                                        --           --
    All executive officers and directors as a group    273,350(10)      7.4%
----------------
*  Less than 1%

(1)  Calculated  pursuant  to Rule 13d-3  promulgated  under the  Exchange  Act.
     Accordingly,  with respect to each particular  beneficial owner, the number
     of shares of Common  Stock  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 5 HaPlada  Street,  Or-Yehuda,  Israel.  Mashov  Computers  is a
     software and information  technology  services company holding interests in
     the Company and certain  other  Israeli  technology  corporations.  Formula
     Systems  (1985)  Ltd.   ("Formula   Systems"),   an  Israeli  software  and
     information  techology  services  company  whose  ADRs are listed on the US
     Nasdaq Stock Market,  owns approximately 45% of the voting shares of Mashov
     Computers, the parent of the Company.



                                       28


<PAGE>



(3)  Includes  shares  of Common  Stock  issuable  upon  exercise  of  currently
     exercisable  warrants held by: Mashov (132,045 shares) and Elron Electronic
     Industries Ltd. (22,500 shares).

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

(5)  Serves as a director of the Company.

(6)  Serves as a director of Mashov.

(7)  Includes 42,084 shares issuable upon currently exercisable options.

(8)  Includes 24,166 shares issuable upon currently exercisable options.

(9)  Includes 27,500 shares issuable upon currently exercisable options.

(10) Include 93,750 shares issuable upon currently exercisable options.


Item 12.  Certain Relationships and Related 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, whose shares are also publicly traded on the TASE. Based on the Stock
Purchase Agreement, Mashov acquired 1,054,866 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  1.25  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 the equity and voting  securities of PCE U.S. 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  43,199  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 823,015  shares of common stock.
As a result  of the  adjustment  discussed  above  and such  conversion,  Mashov
currently owns 60.7% of the common stock.

     In  1996  certain  departments  of  PCE  Israel  (including  employees  and
equipment) were transferred to 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 


                                       29



<PAGE>




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.  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  in
consideration of approximately $175,000.

     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 of $434,000 in 1996. In addition,  in
1996 Mashov charged Sivan and Mashov CBT management fees of $691,000 and $57,000
respectively.  In December 1997, Mashov converted  $1,162,000 of debt owed to it
by Sivan into 265,965 shares of Common Stock and 132,045 warrants.

     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.  Specifically:  (i) the  1,000,000  shares of
Series A Preferred  Stock held by Elron were  converted  into  25,000  shares of
common  stock;   (ii)  the  Bridge  Loans  the  Company  received  from  certain
stockholders  aggregating  $436,000 as of December 31, 1996 were  converted into
218,700 shares of common stock; and (iii) the holders of Company warrants agreed
to  convert  a  total  of  179,064  warrants  (consisting  of  115,315  warrants
outstanding as of December 31, 1996 which were subsequently adjusted pursuant to
the Conversion and Waiver Agreement under anti-dilution provisions) into 340,423
shares of common stock.

     On December 14, 1998, Mashov distributed to its public shareholders, by way
of a dividend,  all of the  Company's  common stock then held by Mashov.  At the
time of the dividend  distribution,  Mashov Computers owned approximately 81% of
the voting  securities of Mashov.  In January 1999,  Mashov  Computers  acquired
189,501  shares of Common  Stock and 56,818  Warrants in a private  transaction.
Mashov  Computers  also has  acquired  28,432  shares of Common  Stock in public
transactions. Based on the foregoing, Mashov Computers holds 2,171,079 shares of
Common Stock and 56,818 Warrants,  which Common Stock  constitutes  60.7% of the
outstanding Common Stock of the Company.



                                       30

<PAGE>


Item 13.  Exhibits and Reports on Form 8-K.

Exhibit
Number           Description of Exhibit

3.1  Certificate of Incorporation, as amended (1)

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 (2)

3.3  Certificate of Amendment of Certificate of  Incorporation  with regard to a
     reverse stock split (3)

3.4  By-Laws (4)

10.1 Lease for premises situated at 462 Seventh Avenue, 4th Floor, New York, New
     York (5)

10.2 1997 Stock Option Plan (6)

10.3 Employment Agreement of Roy Machnes (7)

10.4 Employment Agreement of Elan Penn (7)

21   Subsidiaries

27   Financial Data Schedule

99   Additional Information Regarding Forward Looking Statements


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

(2)  Filed as an exhibit to the  Company's  Quarterly  Report on Form 10-QSB for
     the quarter ended  September 30, 1997 and hereby  incorporated by reference
     thereto.

(3)  Filed as an exhibit to the  Company's  Annual Report on Form 10-KSB for the
     year ended December 31, 1997 and hereby incorporated by reference thereto.

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







                                       31
<PAGE>

(5)  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.  

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

(7)  Filed as a  "Related  Agreement"  to the Stock  Purchase  Agreement,  which
     Related  Agreement 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.


 (b)  Reports on Form 8-K.

    None.



                                       32

<PAGE>


                                   SIGNATURES

In accordance  with Section 13 or 15(d) of the Exchange Act, the Company  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                       Mentortech Inc.


Dated:  April 15, 1999                 By:/s/Roy Machnes                       
                                          --------------                       
                                          Roy Machnes
                                          President and Chief Executive Officer

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  Company  and in the  capacities  and on the
dates indicated.


/s/Roy Machnes
--------------
Roy Machnes               Chairman, President, and             April 15, 1999
                          Chief  Executive Officer

/s/Elan Penn
------------
Elan Penn                 Chief Financial and Accounting       April 15, 1999  
                          Officer and Director

/s/Terry Steinberg
------------------
Terry Steinberg           Secretary and Director               April 15, 1999

/s/David Assia
--------------
David Assia               Director                             April 15, 1999  


/s/Jack Dunietz
---------------
Jack Dunietz              Director                             April 15, 1999


/s/Martin Kahn
--------------
Martin Kahn               Director                             April 15, 1999

 


                                      33
<PAGE>



                                  EXHIBIT INDEX


Exhibit         
   No.                       Description
   ---                       -----------


3.1  Certificate of Incorporation, as amended (1)

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 (2)

3.3  Certificate of Amendment of Certificate of  Incorporation  with regard to a
     reverse stock split (3)

3.4  By-Laws (4)

10.1 Lease for premises situated at 462 Seventh Avenue, 4th Floor, New York, New
     York (5)

10.2 1997 Stock Option Plan (6)

10.3 Employment Agreement of Roy Machnes (7)

10.4 Employment Agreement of Elan Penn (7)

10.5 Employment Agreement of Terry I. Steinberg (7)

27   Financial Data Schedule

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

(2)  Filed as an exhibit to the  Company's  Quarterly  Report on Form 10-QSB for
     the quarter ended  September 30, 1997 and hereby  incorporated by reference
     thereto.

(3)  Filed as an exhibit to the  Company's  Annual Report on Form 10-KSB for the
     year ended December 31, 1997 and hereby incorporated by reference thereto.

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

(5)  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.  

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

(7)  Filed as a  "Related  Agreement"  to the Stock  Purchase  Agreement,  which
     Related  Agreement 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.