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, 1997

                         Commission File Number: 0-17419

                                 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: $17,560,000

The aggregate market value of the voting stock held by non-affiliates  computed,
as of March 18,  1998 was:  $7,505,897  (using the  average of the bid and asked
price)

Number of shares  outstanding of each of the issuer's  classes of common equity,
as of the latest practicable date:  3,446,176 shares outstanding as of March 18,
1998

Transitional Small Business Disclosure Format            Yes ___          No X
                                                                             --



                                                    

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                                     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 95,
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,  cc: Mail,
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,  Novell,  Autocad (in Israel only),
Corel, Borland,  Apple, Lotus (in the United States only) and Magic. The Company
offers an extensive curriculum of Microsoft courses under its Microsoft Advanced
Technical & Education  Center  Authorization,  and Lotus Notes courses under the
Company's Lotus Premium Partner and Lotus  Authorized  Education Center ("LAEC")
Status. The authorization status 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.  InterTrainer is Mentortech's platform for delivering
just-in-time,  continuous learning directly to the desktop through web browsers.
In addition to end-user  applications,  the  Company  also  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 programs in accordance with the client's specifications;
(ii)



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installation of network  operating  systems,  and networking and  communications
software  tools;  (iii)  troubleshooting  software  problems;  and (iv) staffing
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, on average, once a year
and  some  even  maintain  a pace of  twice a year or  more.  For  example,  the
emergence  of the  Internet  has created an urgent  need to develop  appropriate
tools and also train  programmers  in the platform  languages  and  environment.
Following the initial implementation,  new technologies have emerged,  including
HTML, Java,  ActiveX,  audio and video support.  The need to master new versions
and products creates continued demand for training and consulting services.

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.,  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.   The  massive  migration  from  text-  based  DOS  PC's  to
Windows-based operating systems generated another growth spurt. Corporations



                                       -3-

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and  individuals  making the change from DOS to Windows  required  the  training
services that companies such as PCE U.S.  offered.  PCE U.S.'s main focus was on
end-user  applications  training  via ILT and TBT.  PCE U.S.  followed a typical
training  model,  offering  day-long,   multi-day  sessions.  PCE  U.S.  trained
approximately  33,000  students in 1995 and 28,000 students in 1996. The Company
trained 31,000 students in the United States in 1997.

     In the late  1980s and  early  1990s,  PCE U.S.  embarked  on a  geographic
expansion plan that resulted in substantial losses.  Throughout this period, PCE
U.S.'s  operations  in  the  New  York  metropolitan   market  continued  to  be
profitable.  In the  mid-1990s,  PCE U.S.  began to  experience a decline in its
traditional  ILT business  which trend  continued in 1997.  In addition,  failed
investments had left PCE U.S. with an  insufficient  amount of capital to expand
internally,  particularly  in its growing CSD business.  In an attempt to reduce
expenses  and  improve  its  financial  condition,  PCE U.S.  sold its  Canadian
subsidiary in January 1996,  shut-down PC Etcetera Ltd., its  Israeli-based  R&D
center in March 1996 and sold its San Francisco branch in April 1996.

Israeli Operations

     ILT

     The  Company's ILT  activities in Israel are conducted by Sivan,  which was
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 and $11.2  million in 1997.  Sivan is a leading  Israeli
ILT  training  company,  with over sixty  classrooms  in ten  cities  throughout
Israel.  Sivan is certified by numerous software  publishers,  including Novell,
Microsoft,  Borland,  SCO, Lotus,  MSE,  Autocad and others.  Several of Sivan's
sites  have  been  awarded  Microsoft's   Advanced  Technical  Education  Center
Authorization, with the remainder expected to be authorized in the near future.

     Sivan trained  approximately  42,000  students in 1995,  55,000 students in
1996,  and 42,000  students in 1997.  In 1997,  Sivan's  training  revenues were
derived  84%  from   individual   students   and  16%  from   governmental   and
corporate-sponsored  training.  Sivan  employs 220  full-time  people and uses a
combination  of in-house and  free-lance  trainers to fulfill the demand for its
services.  Due to Sivan's size and its ability to provide many teaching hours to
its free-lance contractors, Sivan's agreements with them stipulate that they can
only teach at Sivan's  locations and can not maintain  their Sivan  contracts if
they teach for other training  companies.  This arrangement  ensures that, while
Sivan maintains its adjunct professional teaching faculty, it does not incur the
benefits cost associated with full-time employment contracts.

     One of Sivan's major strengths is its vocational  training programs.  These
programs  accounted for over 40% of Sivan's  revenues in 1997.  These  programs,
developed by Sivan experts,  provide full vocational training to individuals who
want to become IT professionals and are accredited by the Israeli government and
recognized by leading high-tech employers in Israel. The



                                       -4-

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vocational training arena will grow with the demand for IT professionals and the
Company  intends to launch  vocational  programs in the U.S. based on the proven
Sivan model.  The creation of such programs in the U.S. will allow Mentortech to
develop  talent  internally  and then offer it to  corporations  on a consulting
basis.

     Sivan offers its training through six academic departments:

     o    Professional  acquisition:  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 only course 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 others.

     o    Communications:  Full  curriculum  of  Novell,  Microsoft  as  well as
          AS/400, Mainframe and 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.

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

     Currently,  Sivan is investing substantial efforts in increasing the number
of  its  value-added  technical  courses.  Sivan  offers  one-year  professional
acquisition   programs,   training   participants  to  become  programmers,   PC
technicians,  communication technicians,  system analysts and end-user help desk
support professionals.  Sivan is currently launching new communications training
programs in cooperation with leading networking  equipment  companies,  Internet
design and programming,  ActiveX and Java professional training programs.  These
courses  have been  extremely  effective  and  generate  continued  demand  from
graduates who require technical updates during their professional career. During
1996 and 1997, Sivan graduated 2,000 and 2,200 individuals,  respectively,  from
such courses.  Sivan's  diplomas are  recognized by leading  Israeli  technology
companies and the Israeli Government's  Ministry of Labor. Sivan supplements its
ILT  end-user  training  courses  with TBT  materials,  thus  reducing  end-user
training costs and freeing up instructors to teach technical courses.




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     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., which company
was known as Mashov CBT until year-end 1997.

     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.  From April 1996 until year-end 1997,
the Company's TBT activities  were  conducted by Mashov CBT.  Beginning in 1998,
these  activities were  transferred to Mentortech TBT Ltd.  ("Mentortech  TBT"),
which company was previously known as PC Etcetera Ltd. 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's products are targeted at  corporations  who utilize LANs,
WANs,  Intranet and Internet.  The TBT products are  network-compatible  and are
easily integrated into clients'  systems.  Mentortech TBT intends to continue to
expand  its  product  line to  capitalize  on the  increasing  capacity  of such
networks,  ultimately leading to  fully-interactive  network video and audio. As
the Internet becomes a more pervasive  platform,  Mentortech TBT offers Internet
delivery  of  training  and  know-how.  The  content is viewed  through  popular
Internet  browsers  such as Netscape and Microsoft  Explorer,  and supports full
simulation  mode,  drag  and  drop  simulations,   audio,  and  video  delivery.
Intertrainer  allows an  organization to maintain and support a single point TBT
server accessible for any user with network access.  Mentortech TBT is preparing
content and technical competency to exploit this developing platform in the U.S.
and Israeli markets.

     In  addition  to its  activity  in the IT arena,  Mentortech  TBT  provides
training titles and tools to various other industries:

     o    Banking:  The Company  developed a number of titles for leading banks,
          both in Israel and in the U.S., providing training for human resources
          personnel and bank tellers,  and titles supporting the  implementation
          of, and training in, process and procedures.

     o    Defense: The Company develops custom projects for the Israeli Ministry
          of Defense on various non-IT subjects.

     o    Insurance:  The Company developed a training program supporting remote
          agents in developing proposals based on a clients' products.



                                       -6-

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Consulting Services

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

     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
          communications 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.




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     Management believes that the key for success in this area is the ability to
recruit and retain suitable consultants. Currently demand for professionals with
advanced  skills far exceeds  supply.  Management  believes that  supporting the
Company's  consulting services with vocational training offerings will allow the
Company to expand both its training activity and its CSD operation.

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



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identical to the standardized  curriculum provided at public seminars;  however,
the curricula may be adapted to accommodate customer specifications.

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

     In  furtherance  of the  Company's  belief  that  hands-on  application  is
essential to computer training, a personal computer is furnished to each student
for his or her exclusive use during ILT programs.  Classes that are conducted on
a customer's  premises  utilize either the customer's own personal  computers or
computers  furnished  by the  Company.  The  Company  either  owns or leases the
computers utilized for its training  programs,  with lease terms generally being
three years or less due to the rapid  obsolescence  of  technology.  The Company
also provides, without charge, a post-class telephone support line during normal
business hours to answer questions from any enrollees or former enrollees in the
Company's  training  programs.  In providing ILT services,  the Company utilizes
professional  trainers who possess both teaching skills and a technical  command
of the subject matter.

Software Manufacturers' Authorized Training Centers

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

Courseware and TBT Product Development

     The Company's TBT products are currently  developed by Mentortech TBT's R&D
group in Israel, which group consists of 15 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 Company's R&D 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



                                       -9-

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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.


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

     Direct mail as well as print and radio  advertising  are the primary  media
which are 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 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

     o    World Wide Web site.



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Program Costs

     In the U.S.,  the Company  typically  charges its  customers  from $75 (for
introductory classes) to $5,000 per enrollee to conduct ILT programs. In Israel,
the Company  typically  charges  from $200 to $5,000 per enrollee to conduct ILT
programs.  Pricing considerations vary depending on the length and complexity of
the  program,  the number of  enrollees,  whether the course is a private one or
offered on an open enrollment  basis, and the physical location of the training.
The Company's  refund  policy  provides  that  dissatisfied  trainees may either
attend the same program  without charge or the trainee's  employer may request a
full refund.

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.  The Company also offers  custom TBTs to its customers at
prices ranging from $8,000 to $15,000 per hour of TBT training.

Customers

     No one  customer  accounted  for more  than ten  percent  of the  Company's
revenues during the two years ended December 31, 1997.

Competition

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

Employees

     As of December 31, 1997, the Company employed  approximately  292 full-time
persons,  including  72  full-time  employees  in its New  York  operations  and
approximately 220 full-time persons in its Israeli  operations.  In its New York
operations, the Company employed 17 persons as full-time trainers, 19 persons as
consultants,  19 persons in sales,  marketing  and sales  administration  and 17
persons in  management,  finance and  operations  and also  employs 12 freelance
trainers.  Sivan employed  approximately  85 part-time  persons as trainers,  64
persons in sales, marketing and



                                      -11-

<PAGE>



sales  administration,  and 54 persons in  management,  finance and  operations.
Sivan also employs  approximately 33 freelance trainers.  Mentortech TBT employs
15 persons in research and  development,  2 persons in sales and marketing and 2
persons in administration.

Item 2.  Description of Property.

     The  Company  occupies  approximately  16,000  square  feet of space at 462
Seventh Avenue, New York, New York where the Company's executive offices and ten
classrooms  are located.  These  premises are occupied  under a lease  agreement
expiring on January 14, 2004 at a current base annual rental of $288,000, with a
rental  increase to $320,000 per annum  effective  January 14, 1999. The Company
leases  approximately  2,500 square feet of classroom  space in Garden City, New
York at a base annual rental of $50,260 under a lease which expires on September
30, 1998. In addition,  the Company  leases  approximately  1,200 square feet of
classroom  space in Melville,  New York at an annual  rental of $28,700  under a
lease which expires on October 14, 1998.

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


<TABLE>
<CAPTION>
                                                                                  Square           Monthly
Location                         Lease Expiration           Option                 Footage           Rent
--------                         ----------------           ------                 -------           ----
<S>                              <C>                        <C>                    <C>             <C>
Tel-Aviv, Sderot                 August 31, 1998                 --                 9,900          $17,000
Yehudit
Tel-Aviv, Beit Hilel             December 31, 1999          Two options of 2        7,650          $15,300
                                                            years each
Tel-Aviv, Barak                  August 31, 1998                 --                36,000          $ 8,500
Rishon Le' Zion                  December 31, 1998               --                 2,000          $ 3,400
Rishon Le' Zion                  February 28, 1998          Two options of 1          900          $ 1,200
                                                               year each
Jerusalem                        July 31, 1998              1 year option           1,300          $ 2,100
Jerusalem                        December 31, 1998          1 year option           2,000          $ 2,580
Or-Yehuda                        February 28, 2000               --                 1,110          $ 2,056

</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.




                                      -12-

<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  "MNTKD".  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
                                                            ----          ---
1997
----
First Quarter...........................................     $3          $2
Second Quarter..........................................      2-1/2       2
Third Quarter...........................................      1-3/4       1-1/2
Fourth Quarter..........................................      4             3/4

1996
----
First Quarter...........................................     $2-1/4      $2-1/4
Second Quarter..........................................      4           4
Third Quarter...........................................      4           2
Fourth Quarter..........................................      2           2

     (b) Holders.

     As of March 10,  1998,  there were 111  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.

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



                                      -13-

<PAGE>



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 PCE  U.S.'s  equity and  voting  securities  on a fully
diluted basis,  subject to an adjustment based upon the fiscal year 1996 audited
balance  sheets of PCE U.S.,  Sivan and Mashov CBT. Such  adjustment was made on
August 4, 1997 when  Mashov  contributed  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.

     The Stock  Purchase  Agreement  provided that Sivan and Mashov CBT have net
tangible assets of $2.2 million,  including cash of $1.5 million.  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  1995,   1996  and  1997  the  Company  and  its   predecessor   derived
substantially  all of their revenues from ILT training and consulting  services.
As  reflected  in the  following  table,  revenues  from ILT  training  services
declined in the U.S. during this period while  increasing in Israel and revenues
from U.S. consulting services grew.



                                      -14-

<PAGE>





                                                 Year ended December 31,
                                                 -----------------------
                                            1995       1996(1)          1997(2)
                                            ----       -------          -------
                                                                     (Pro forma)
                                                       (in thousands)
U.S. ILT................................. $8,136         $3,038        $ 1,972
Israel ILT...............................  6,651          9,158         11,231
Consulting services......................  3,940          4,003          4,435
TBT......................................     --            242            523

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

(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.


Year Ended December 31, 1997 as Compared with the Year Ended December 31, 1996.

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

     The Company's  revenues for the year ended  December 31, 1997 increased 87%
to $17.6 million from $9.4 million in the  comparable  1996 period.  Sivan's ILT
revenues  increased  by 22% to $11.2  million in 1997 from $9.2 million in 1996.
Sivan Jerusalem, a company in which Sivan had held a 50% equity investment until
January  1997,  when  Sivan  purchased  the  remaining  equity,   accounted  for
approximately  $1  million  of  Sivan's  increased  revenues  for the year ended
December 31, 1997. Sivan's share of Sivan Jerusalem's results of operations were
reported as equity in earnings of an affiliate in 1996. The remaining $1 million
increase in Sivan's revenues in 1997 was



                                      -15-

<PAGE>



due primarily to its success in offering more  profitable  technical  courses as
well as an increase in the number of application courses offered.  The Company's
1996 financials  reflect nine months of operations for Mashov CBT, as it did not
begin operations until April 1996.

     The revenues of the Company's U.S.  operations were $6.4 million in 1997, a
decrease of 9%,  compared to revenues of $7 million in 1996.  In 1997,  the U.S.
operation  placed a greater  emphasis on the growth of its  Consulting  Services
Division.  Consulting  revenues for the New York  metropolitan area increased to
$4.4  million in 1997 from $4 million in 1996,  an increase of 10%.  The rate of
growth in consulting revenues decreased in the third quarter and fourth quarters
of 1997  primarily due to  termination  of  assignments  and delays in the start
dates of new  assignments.  In 1997 management  engaged a consultant's  advocate
whose primary role is to communicate with consultants,  increase their retention
rate and improve expected termination  reporting.  Management believes that this
action should reduce future turnover.

     During  the  year  ended  December  31,  1997,  the  Company  continued  to
experience declining ILT revenues in the U.S. ILT revenues in the U.S. decreased
by  approximately  35% in 1997  compared to the same period in 1996.  Management
attributes  the decline in ILT  revenues to increased  competition  and the slow
pace at which companies  migrated their installed base to new  applications  and
product versions.  The Company's U.S. operation had anticipated that the release
of a new application software entitled Office 97 would have a positive impact on
ILT revenues. However, many clients continued to delay such conversions, pending
the market's experiences with Office 97.

     The U.S.  operation is pursuing a move into the higher end training  market
as many  organizations  require  certification  training for Microsoft and Lotus
back office  applications and operating systems.  Management  believes that this
higher technical  training  environment will have a better synergy with the U.S.
Operation's growing consulting business.  The U.S. operation has been authorized
as a Lotus  Authorized  Education  Center,  and its status has been  upgraded to
Premium  Business  partner  and  has  received  Microsoft  Authorized  Technical
Education Center status.  During 1997,  technical training revenues increased by
25% compared to 1996.

     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.  Cost of  revenues  rose to 62% of
revenues in 1997 compared to 50% of revenues in 1996. Cost of revenues for Sivan
was 58% of revenues in 1997 compared to 51% in 1996. This increase was primarily
due  to an  increase  in  depreciation  expense  as a  result  of a  substantial
investment  in  new  classroom  computer  equipment.  Depreciation  expense  for
classroom  computers  increased  by 64% in 1997 as  compared  to  1996.  Cost of
revenues for the U.S.  operation was 72% in 1997. As training revenues decrease,
cost of revenues as a percentage  of sales has  increased due to the fixed costs
of classroom facilities and depreciation.




                                      -16-

<PAGE>



     Sales  and  marketing  expenses  consist  primarily  of costs  relating  to
promotion,  advertising, trade shows and exhibitions. Such expenses also include
compensation of sales support, travel and related expenses.  Sales and marketing
expenses  increased to $2.7 million during 1997 from $1.4 million in 1996. Sales
and marketing expenses of Sivan, excluding Sivan Jerusalem,  increased by 16% in
1997  compared  to 1996.  This  increase  was due to  Management's  decision  to
increase  the  Company's  sales and  marketing  budget in an  attempt  to obtain
increased revenues.  Sivan's increase in sales and marketing expenses correlates
with its increase in revenue. Sales and marketing expenses in the U.S. increased
to $943,000 in 1997 from $881,000 in 1996.

     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 to $4.2 million during 1997,  from $3.4 million in 1996. This increase
was due to the expansion  and the  inclusion of the results of Sivan  Jerusalem,
Mentortech TBT and the U.S. operation.  General and administrative expenses were
approximately $1.9 million for the U.S.  operation,  $2.2 million for Sivan, and
$232,000 for Mashov CBT in 1997. General and  administrative  expenses for Sivan
(excluding Sivan Jerusalem)  decreased by $1.2 million (37%) in 1997 compared to
1996.

     Research  and  development  expenses  consist  primarily of salaries of the
employees who are engaged in ongoing research and development  activities of TBT
materials and other related costs. Research and development expenses amounted to
$450,000 in 1997, compared to $248,000 in 1996.

     The Company  incurred an operating  loss of $618,000 in 1997 compared to an
operating loss of $366,000 in 1996. The increase in the Company's operating loss
in 1997 was  principally  due to decreased  revenues in the U. S.,  coupled with
increased sales and marketing expenses,  and research and development  expenses.
Management  believes  that the  increased  investment  in sales,  marketing  and
research and development  should permit the Company to attain  profitability  in
1998.

     Equity in earnings of  affiliates  represented  Sivan's 50%  investment  in
Sivan  Jerusalem  during 1996.  Effective  January 1, 1997,  Sivan purchased the
remaining equity,  and Sivan Jerusalem became a wholly-owned  subsidiary.  Sivan
Jerusalem's  results of operations are consolidated in the financial  statements
for 1997.

     In 1996, the Company paid $45,000 in income taxes.

     Interest  expenses,  net,  consists  primarily of bank charges and interest
expenses offset by interest income.  Interest expenses  decreased to $233,000 in
1997 from $455,000 in 1996.  This decrease was due principally to the conversion
by Sivan of $4.1 million of  shareholder  loans into equity in the first quarter
of 1997 and the repayment of the U.S. operation's receivables financing facility
with Rosenthal and Rosenthal during the second quarter of 1997.

     As a result of the foregoing,  the Company  incurred a net loss of $851,000
in 1997  compared  to a net loss of  $798,000  in 1996.  The  Company's  Israeli
operations achieved a profit of $226,000



                                      -17-

<PAGE>



in  1997  compared  to a net  loss of  $798,000  in  1996.  The  Company's  U.S.
operations  incurred a loss of $1 million  during  the year ended  December  31,
1997.

Liquidity and Capital Resources

     At  December  31,  1997,  the  Company  had $1.7  million  in cash and cash
equivalents and a working capital deficiency of $147,000.  At December 31, 1996,
the  Company's  Israeli  subsidiaries  held  $283,000  in cash and had a working
capital  deficiency  of $1.6  million,  while PCE U.S. had $50,000 in cash and a
working capital deficiency of $1.9 million. The Company's improved cash position
at  December  31, 1997 was a result of a private  placement  of  securities,  as
discussed below, as well as Mashov's  infusion of approximately  $1.2 million in
cash and equity into the Company pursuant to the Stock Purchase Agreement. These
capital  infusions  were  offset by  operating  losses as well as an increase in
accounts  receivable  and the  purchase  of computer  equipment  and other fixed
assets.

     The Company  completed a private  placement of securities in December 1997,
wherein  it issued  and sold  511,364  shares of Common  Stock and  warrants  to
purchase  255,682 shares of Common Stock.  The Company  obtained net proceeds of
approximately  $2 million from the private  placement.  The Company's  financial
position was further improved by Mashov's  conversion of $1,162,000 of debt into
264,090 shares of Common Stock and warrants to purchase 132,045 shares of Common
Stock.

     In 1997 the Company  obtained an oral  commitment  from its Israeli bank to
provide Sivan up to $1.1 million in working  capital  loans.  As of December 31,
1997, Sivan had borrowed approximately $601,000 from such bank.

     The Company's operating activities used $703,000 net cash in the year ended
December 31, 1997.  Accounts  receivable  increased by $100,000  during the same
period.  This increase was due  primarily to the increase in revenues.  Accounts
payable and accrued expenses  decreased by $523,000 during the same period.  The
Company's  investing  activities  used $1.3 million  mainly from the purchase of
$1.2 million in fixed assets and $119,000 used to purchase  Sivan  Jerusalem and
GLTN. Financing  activities provided $3.4 million,  principally from the private
placement sale of securities as well as the Mashov transactions.

     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  (post-split)  shares of
Common Stock.

     Based on its improved financial  condition and working capital  commitment,
the  Company  believes  that it has  sufficient  working  capital  to  fund  its
operational and capital requirements through 1998. The Company does not have any
material capital  commitments for 1998. To the extent the Company  increases the
scope of its activities  significantly,  it may be required to obtain additional
financing.



                                      -18-

<PAGE>



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 will have to modify or replace
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 estimated at  approximately  $75,000.  the costs the Company has
incurred to date  primarily for assessment of the Year 2000 issues have not been
significant.



                                      -19-

<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




                                      -20-

<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,  1997,  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,  1997.  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, 1997 in  conformity  with
generally accepted accounting principles.


                                            /s/Ernst & Young LLP

New York, New York 
January 27, 1998, except for the 
First paragraph in Note 9, as to 
which the date is March 3, 1998




                                       F-1

<PAGE>




                        MENTORTECH INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1997
                (In thousands except share and per share amounts)

ASSETS
CURRENT ASSETS:
         Cash and cash equivalents                                       $1,659
         Accounts  receivable,  net of allowance for doubtful
         accounts of $93                                                  3,503
         Prepaid expenses and  other current assets                         351
         Inventory                                                           34
                                                                          -----
           Total current assets                                           5,547
                                                                          -----

PROPERTY AND EQUIPMENT:
         Property and equipment, at cost                                  3,900
         less accumulated depreciation and amortization                  (1,536)
                                                                         ------ 
                                                                          2,364
OTHER ASSETS:
         Goodwill,  net of accumulated amortization of $446               5,001
         Other assets, net                                                  585
                                                                          -----
                                                                          5,586
TOTAL ASSETS                                                            $13,497
                                                                        =======

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
         Accounts payable and accrued expenses                           $2,831
         Deferred revenue                                                 2,155
         Loans payable -  current portion                                   601
         Loans payable - related party                                       33
         Due to related parties                                              69
         Capital equipment obligations - current portion                      5
                                                                          -----
           Total current liabilities                                      5,694
                                                                          -----

LONG-TERM LIABILITIES:
         Accounts payable - long-term                                       271
         Accrued severance pay                                              556
         Loans payable - long-term                                          136
                                                                          -----




                                       F-2

<PAGE>



                        MENTORTECH INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1997
               (In thousands except share and per share amounts)

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
         Common stock,  $.01 par value, 20,000,000
            shares authorized, 3,446,176 issued and outstanding              34
         Preferred Stock,
           $.001 par value, 5,000,000 shares authorized,
            none issued
         Additional paid-in capital                                       8,722
         Cumulative foreign currency translation adjustment                (145)
         Accumulated deficit                                             (1,771)
                                                                        -------
           Total stockholders' equity                                     6,840

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                              $13,497
                                                                        =======













                             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)


                                                            1997         1996
                                                            ----         ----

Net revenues                                             $17,560       $9,400

Cost of revenues                                          10,859        4,713
                                                          ------        -----

Gross profit                                               6,701        4,687


General and administrative expenses                        4,171        3,359

Sales and marketing expenses                               2,698        1,446

Research and development                                     450          248
                                                             ---          ---


Operating loss                                              (618)        (366)

Interest expense, net                                       (233)        (455)
                                                            ----         ---- 

Loss before income taxes                                    (851)        (821)
                                                            ----         ---- 




Income taxes                                                   0           45

Loss before equity in earnings of affiliate                 (851)        (866)

Equity in earnings of affiliate                                0           68
                                                             ---          --- 

Net loss                                                   ($851)       ($798)
                                                           =====        ===== 

Basic loss per share                                       ($.40)      ($0.43)

Weighted average number of shares                          2,124        1,875
                                                           =====        =====








                             See Accompanying Notes



                                       F-4

<PAGE>



                        MENTORTECH INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (In thousands)

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

<S>                                   <C>         <C>    <C>        <C>      <C>       <C>            <C>                 <C> 
Balance as of  December 31, 1995        -         $-        -        $-        $ -       ($122)         $ 7                ($115)
Issuance of shares of CBT               -          -        -         -         150         -             -                  150
Foreign currency translation            -          -        -         -          -          -            16                   16
Net loss                                -          -        -         -          -        (798)           -                 (798)
                                    ------------------------------------------------------------------------------------------------
Balance as of December 31, 1996         -          -        -         -         150       (920)          23                 (747)
Acquisition of PC Etcetera, Inc.
  and related conversions (Note 9)      -          -       820        8      (1,640)        -             -               (1,632)
Issuance of preferred and common
  stock to Mashov                      658         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
Mashov loan conversion to common
  stock (Note 9)                        -          -       264        3       1,159         -             -                1,162

Private placement offering (Note 9)     -          -       511        5       2,046         -             -                2,051
Foreign currency translation            -          -        -         -          -          -          (168)                (168)
Net loss                                -          -        -         -          -        (851)           -                 (851)
                                    ------------------------------------------------------------------------------------------------
Balance as of December 31, 1997         -         $-     3,446      $34      $8,722    ($1,771)       ($145)              $6,840
                                    ================================================================================================


</TABLE>

                             See Accompanying Notes



                                       F-5

<PAGE>



                        MENTORTECH INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31,
                                 (In Thousands)
<TABLE>
<CAPTION>

                                                                               1997         1996
                                                                               ----         ----
<S>                                                                          <C>          <C>   
Cash flows from operating activities:
Net loss                                                                      ($851)       ($798)
Adjustments to reconcile net  loss to net
  cash (used in)  provided by operating activities:
Depreciation and amortization                                                 1,114          456
Gain on sale of fixed assets                                                      5            -
Equity in earnings of affiliate                                                   -          (68)
Changes in operating assets and liabilities:
Accounts receivable                                                            (100)        (721)
Prepaid expenses and other current assets                                        42           29
Inventory                                                                        50          (91)
Accounts payable and accrued expenses                                          (523)         768
Due to related parties                                                         (771)         454
Deferred revenue                                                                454          606
Other assets                                                                    (53)           -
Accrued severance pay                                                           (70)          30
                                                                                ---           --
Net cash  (used in) provided by operating activities                           (703)         665
                                                                               ----          ---
Cash flows from investing activities:
Purchase of  property and equipment                                          (1,235)      (1,006)
Proceeds from sale of  property and equipment                                    71            2
Purchase of subsidiaries, net of cash acquired                                 (119)           -
                                                                               ----          ---
Net cash used in investing activities                                        (1,283)      (1,004)
                                                                             ------       ------ 
Cash flows from financing activities:
Proceeds from loans  payable - related party                                     42          382
Proceeds from short-term bank credit borrowings                                 601            -
Repayment of capital equipment obligations                                      (68)           -
Cash received from Mashov transaction, net of expenses of  $140                 760            -
Net proceeds  from issuance of  Common Stock                                  2,051          150
                                                                              -----          ---
Net cash provided by financing activities                                     3,386          532
                                                                              -----          ---
Net  increase in cash and cash equivalents                                    1,400          193
Cash and cash equivalents, beginning of year                                    283           93
Effect of exchange rate changes on cash and cash equivalents                    (24)          (3)
                                                                                ---           -- 

Cash and cash equivalents, end of year                                       $1,659         $283
                                                                             ======         ====

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:
Interest                                                                       $282           $-
Income taxes                                                                    $53          $16

</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
--------------------------------------------------------------------

     Loans from  Mashov in the amount of $2,961 and  $1,162  were  converted  to
equity during the year ended December 31, 1997 

                             See Accompanying Notes


                                       F-6

<PAGE>



                        MENTORTECH INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
              (All amounts are in thousands except for share data)



NOTE 1 - THE COMPANY

     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.  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, 1997 and 1996, revenues from ILT comprised
74% and 97% of total revenues,  respectively,  while consulting services and TBT
revenues accounted for 23% and 0% 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.






                                       F-7

<PAGE>



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A summary of the Significant  Accounting Policies  consistently  applied in
the preparation of the accompanying 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 cost of
market value. Cost is determined using the "first-in, first-out" method.

Investments in affiliate

     Sivan's 50% investment in Sivan  Computers  Jerusalem  (1988) Ltd.  ("Sivan
Jerusalem")  is presented by the equity method of accounting  for the year ended
December 31, 1996.  On January 1, 1997,  Sivan  purchased  the  remaining 50% of
Sivan Jerusalem for $45.

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
Leasehold improvements                     The lesser of the remaining lease
                                           period or useful life


                                      F-8


<PAGE>


Goodwill

     Goodwill,  which is attributable to the acquisitions of PC Etcetera,  Inc.,
Sivan Computers  Ltd.'s personal  computer  tutorial  services and GLTN Computer
Consultants  Inc., is stated at cost and amortized by the  straight-line  method
over 20 years.

     The carrying value of goodwill is periodically reviewed by management based
on the expected  future  undiscounted  operating  cash flows over the  remaining
goodwill  amortization period.  Based upon its most recent analysis,  management
believes that no impairment of goodwill exists at December 31, 1997.

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.

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.




                                       F-9

<PAGE>



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 revenue or accounts receivable as of
December 31, 1997.

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 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.

Earnings (loss) per share

     The basic earnings 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).

Impact of recently issued accounting standards

     In October 1997,  the American  Institute of Certified  Public  Accountants
("AICPA")  issued SOP 97-2,  Software  Revenue  Recognition,  which  changes the
requirements for revenue  recognition,  effective for transactions  entered into
beginning  January  1,  1998.  This  statement  will not have an  impact  on the
Company's financial statements.

     In June 1997, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statements  of  Financial  Accounting  Standards  No. 130 (FAS 130),  "Reporting
Comprehensive  Income", and No. 131 (FAS 131),  "Disclosure About Segments of an
Enterprise and Related Information". These



                                       F-10

<PAGE>



statements  are effective for fiscal years  beginning  after  December 15, 1997.
These statements do not have measurable effects on the financial  statements but
require additional disclosure.


NOTE 3 - PROPERTY AND EQUIPMENT

     Major classifications of property and equipment at December 31, 1997 are as
follows:


  Computers and peripheral equipment                 $3,531

  Office furniture and equipment                        187
  Leasehold improvements                                182
                                                        ---
                                                      3,900
Accumulated depreciation and amortization            (1,536)
                                                     ====== 

                                                     $2,364
                                                     ======


     Depreciation  and  amortization  expense,  was $763 and $356 for the  years
ended December 31, 1997 and 1996,  respectively.  At December 31, 1997, property
and equipment  includes  computer  equipment under capital leases with a cost of
$48 and accumulated amortization of $43.


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, 1997 and 1996 was $22 and
$157, 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, 1997) which is recognized
as revenues as classes are attended.

     In connection with the sale of the Canadian subsidiary in 1996, the Company
sold a non-refundable  license fee for certain computer  software for $200. This
license fee has been deferred



                                      F-11

<PAGE>



and is  being  recognized  over  three  years  which is equal to the term of the
license.  At December 31,  1997,  the deferred  revenue  amounted to $67,  which
amount has been included in current liabilities in the accompanying consolidated
balance sheet.


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,  1997 is $136 and  carries an interest  rate of 10% per
annum and will mature in the year 2000.

     In 1997,  the Company  obtained a line of credit  from its Israeli  bank to
provide  Sivan up to $1.1  million 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 is in
New Israeli  Shekels  linked to the U.S.  dollar which was  approximately  7% at
December 31, 1997. The balance outstanding at December 31, 1997 was $601.

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 $271 at
December 31, 1997) have been reflected as long-term.

Loans from Related Parties

     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, 1997, 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 2004. 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, 1997 are as follows:



                                      F-12

<PAGE>



                                                  Capital           Operating
                                                  -------           ---------
1998                                                $7              $  701
1999                                                 0                 549
2000                                                 0                 339
2001                                                 0                 331
2002                                                 0                 322
Thereafter                                           0                 320
                                                    --                 ---
                                                    $7              $2,562

Less: amounts representing interest                  2                   0
                                                    --                  --
                                                    $5              $2,562
                                                    ==              ======


     Rental  expense for the years ended December 31, 1997 and 1996 was $945 and
$608, respectively.


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 persons.


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 is stated 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 Ltd., 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 PCE U.S.'s
equity and voting securities on a fully diluted basis,  subject to an adjustment
based upon the fiscal year 1996 audited  balance  sheets of PCE U.S.,  Sivan and
Mashov CBT. Such  adjustment was made on August 4, 1997 when Mashov  contributed
43,199 shares of Common Stock



                                      F-13

<PAGE>



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 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 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 PCE U.S.'s  financial
adviser,  Helix Capital, LLC, 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 $130,000 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  $1,162,000  of debt owed to it by the Company into 132,045  Units (or
264,090  shares of Common  Stock) and  warrants  to purchase  132,000  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 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.



                                      F-14

<PAGE>



     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  1997 and  1996:  risk  free  interest  rate of 5.6% and  6.6%,
respectively,  volatility  factor of the expected  market price of the Company's
Common Stock of 1.11 and .72,  respectively,  and the weighted-average  expected
life of the options of 3 and 5 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  1997 pro forma  net loss is $881 and net loss per share is $.41.  The
fair value of the  options was  determined  to be  deminimus  for the year ended
December 31, 1996.

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

     Stock option activity is summarized as follows:

                                                                    WEIGHTED-
                                                                     AVERAGE
                                                      SHARES      EXERCISE PRICE
                                                      ------      --------------
Outstanding December 31, 1995 (36,012
exercisable at option prices $7.52 to $50.00)         55,150          $25.36
Options Granted                                        2,500          $40.00
Options Canceled                                     (38,400)         $16.24
                                                     -------
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
                                                     =======














                                      F-15

<PAGE>



     Options outstanding and exercisable at December 31, 1997 are as follows:


                                                    WEIGHTED-
                                                    AVERAGE
                                                   REMAINING
                                                  CONTRACTUAL
   SHARES               EXERCISE PRICE                LIFE
   ------               --------------                ----

    425                     $20.00                    1.5
    625                     $22.00                     .01
    250                     $40.00                     .01
  7,500                     $40.00                    2.5
 31,875                      $4.67                    4.6
  3,250                     $50.00                    4.75
-------
 43,925

     At December 31, 1997 517,325 options are available for grant.


WARRANTS

     The  following  is a summary of warrants  outstanding  and  exercisable  at
December 31, 1997:


                           NUMBER OF
EXPIRATION DATE             WARRANTS              EXERCISE PRICE     DESCRIPTION
---------------             --------              --------------     -----------

December 11, 1999            387,727                  $4.40          (1)

December 31, 1998              4,500                 $20.00          (2)
         Total               392,227
                             =======


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

(2)  Warrants granted to a consultant

     At December  31,  1997,  the Company  has  392,227  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 year ended
December 31, 1997. The income tax expense of $45 for the year ended December 31,
1996 was incurred in the State of Israel.

     The Company has net operating loss  carryforwards of approximately  $10,344
expiring  from  2006 to 2012.  In  addition,  the  Company  has a  capital  loss
carryforward of approximately $1,202,



                                      F-16

<PAGE>



which expires in 2000. However,  pursuant to Section 382 of the Internal Revenue
Code, the future  utilization of approximately  $9,475 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, 1997 is as follows:


Net operating loss carryforwards                     $4,197
Capital loss carryforward                               481
                                                      4,678
                                                      -----
Valuation allowance                                  (4,678)
                                                     ------ 
Net deferred tax asset                                   --
                                                     ====== 


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.  The  year  ended  December  31,  1996  includes  the year of
operations of Sivan and the six months of operations (since inception) of Mashov
CBT. It does not include the operations of PCE U.S.

     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)













                                      F-17

<PAGE>



NOTE 12 - GEOGRAPHIC DATA

<TABLE>
<CAPTION>
     For the year ended December 31, 1997
                                                             %                          %
                                               U.S.       OF TOTAL       ISRAEL      OF TOTAL
                                            -------------------------------------------------
<S>                                         <C>           <C>           <C>             <C>
Revenue from unrelated
    third parties                           $ 5,806         33%         $11,754         67%
Intercompany revenue                              0                           0
                                            -------                         ---
Total revenue                               $ 5,806         33%         $11,754         67%
                                            =======                     =======
Net income (loss)                           ($1,029)      (122%)        $   178         22%
                                            =======                     =======
Identifiable assets                         $ 6,025         45%         $ 7,472         55%
                                            =======         ===         =======
</TABLE>

<TABLE>
<CAPTION>
     For the year ended December 31, 1996

                                                             %                          %
                                               U.S.       OF TOTAL       ISRAEL      OF TOTAL
                                            -------------------------------------------------
<S>                                             <C>          <C>         <C>           <C>
Revenue from unrelated
     third parties                              $ 0          0%          $9,400        100%
Intercompany revenue                              0                           0
                                                ---                         ---
Total revenue                                     0          0%          $9,400        100%
                                                ===                      ======
Net income (loss)                               $ 0          0%          $ (798)       100%
                                                ===                      ======
Identifiable assets                             $ 0          0%          $6,970        100%
                                                ===         ===          ====== 
</TABLE>


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 $14 and $16 in 1997 and 1996, respectively.















                                      F-18

<PAGE>



NOTE 15 - RELATED PARTIES


                                                          Year Ended
                                                         December 31,
                                                         ------------
                                                       1997        1996
                                                       ----        ----
Revenues (1)                                           $-          $50
Expenses (1):
     Cost of revenues                                  $-          $41
     Rent (2)                                          $-          $138
     Management fees to Mashov (2)                     $-          $748
     Interest on Shareholder loans                     $-          $434

(1)  Related balances are unlinked and do not bear interest

(2)  The  management  fees and rent were paid  according to an  agreement  which
     ended December 31, 1996



                                      F-19

<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          37       Chairman, President, Chief              1997
                              Executive Officer and Director
Elan Penn            45       Chief Financial Officer and             1997
                                Director
Terry I. Steinberg   42       Executive Vice President and            1985
                                Director
Adrienne Haber       40       Controller and Chief Accounting           --
                                Officer
David Assia          45       Director                                1997
Jack Dunietz         42       Director                                1997
Martin F. Kahn       46       Director                                1995

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

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

     Adrienne  Haber.  Ms. Haber has served as the  Company's  Controller  since
February  1997 and served as  Controller  of PCE U.S.  for the eight years prior
thereto.  Ms.  Haber holds a B.S.  in  Accounting  from Lehman  College and is a
Certified Public Accountant.

     Martin F. Kahn.  Mr. Kahn has served as a director of the Company since May
1995 and was Chairman of the Board of the Company  from May 1995 until  February
1997. He has served since 1989 as Chairman of Ovid Technologies, Inc., a leading
producer of medical, scientific and technical CD-ROM and network products; since
September 1993 as Chairman of OneSource Information Services, which develops and
markets a comprehensive set of integrated business information and



                                      -21-

<PAGE>



software products; since 1991 as a Director of Vista Information Solutions, Inc.
(formerly  DataMap,  Inc.,  a successor  through  merger to Vista  Environmental
Information,  Inc.) which supplies  site-specific  risk  information  about real
estate for the insurance,  banking, and environmental engineering markets; since
April 1995 as Chairman  and CEO of Shoppers  Express,  Inc.,  which  offers home
grocery shopping through dial-up and on-line  services;  and since March 1996 as
Managing   Director  of  Cadence   Information   Associates   L.L.C.   (and  its
predecessor),  a  consulting  and  management  services  firm.  Mr. Kahn holds a
Bachelors Degree in Administrative Sciences from Yale College and an M.B.A. from
Harvard Business School.

     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.

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

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

     Messrs.  Machnes, Penn, Assia, and Dunietz own 1.51%, 0.4%, 0.56% and 3.15%
of the voting equity of Mashov, respectively.  Mashov is an 80%-owned subsidiary
of Mashov Computers Ltd., a publicly-held  company in Israel.  Messrs. Assia and
Dunietz are directors of Mashov Computers Ltd. and are the beneficial  owners of
approximately 30% of its issued and outstanding shares.

     Mr.  Machnes  is  a  resident  of  New  York  City  and  expects  to  spend
approximately 50% of his work time in the U.S. and the remainder in Israel.  Mr.
Penn is a resident of Israel and expects to spend  approximately 75% of his work
time in Israel and the  remainder  in the U.S.  Mr.  Steinberg  is a resident of
Nassau  County,  New  York  and  devotes  substantially  all of his  time to the
Company's



                                      -22-

<PAGE>



operation  in the  U.S.  Due to the  fact  that  a  substantial  portion  of the
Company's  operations are located in Israel and the  availability  of facsimile,
Internet and telephone communications technologies, the Company expects that the
domicile  arrangements of the Company's officers will have no material impact on
the operations of the Company.

     Section  16(a)  Beneficial  Ownership  Reporting  Compliance.  The  federal
securities  laws require  directors and  executive  officers and persons who own
more than 10% of the  Company's  common  stock to file with the  Securities  and
Exchange  Commission  initial  reports of  ownership  and  reports of changes of
ownership of any equity securities of the Company.  To the Company's  knowledge,
based  solely on a review of the copies of filings  furnished to the Company and
written  representations that no other reports were required,  during the fiscal
year ended December 31, 1997, all Section 16(a) filing  requirements  applicable
to the Company's officers, directors and 10% stockholders were complied with.

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.

                           Summary Compensation Table

                                                                    Long-Term
                                                                    Compensation
                                                                    ------------
                                                        Annual      Securities
                                                     Compensation   Underlying
Name and Principal Position                  Year     Salary ($)     Options (#)
---------------------------                  ----     ----------    -----------
Roy Machnes
  President and Chief Executive
  Officer................................... 1997     $163,789       40,625
Elan Penn
  Chief Financial Officer................... 1997      120,000       25,000
Terry Steinberg
  Executive Vice President (1).............. 1997      168,500       30,000
                                             1996          (2)           --
                                             1995      131,700           --
--------------

(1)  Effective  February 13, 1997, Mr.  Steinberg,  the former  President of the
     Company,  was named  Executive  Vice  President  pursuant to an  employment
     contract dated February 6, 1997.

(2)  Less than $100,000.



                                      -23-

<PAGE>



     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.

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 1996 by each of the executive officers named above in the Summary
Compensation Table, and the number and value of unexercised options held by each
of them at December 31, 1997.

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

<TABLE>
<CAPTION>
                                                              Number of shares               Value of unexercised
                                                           underlying unexercised            in-the-money options
                                  Shares                   options at FY-end (#)               at FY-end ($)(1)
                                  acquired on                   exercisable/                     exercisable/
Name                              exercise (#)                 unexercisable                     unexercisable
----                              ------------                 -------------                     -------------
<S>                                    <C>                     <C>                                    <C>
Roy Machnes.....................       --                      13,542/27,083                          --
Elan Penn.......................       --                       8,333/16,667                          --
Terry I. Steinberg..............       --                      10,000/20,000                          --

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

(1)  None of the outstanding options were in the money at December 31, 1997. 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,
     1997 was $4.56.

Employment Agreements

     Pursuant to the Stock Purchase  Agreement and effective  February 13, 1997,
the Company entered into employment contracts with each of Roy Machnes, Terry I.
Steinberg  and Elan Penn,  providing  for their  employment  as Chief  Executive
Officer, Executive Vice President and Chief Financial Officer,  respectively, of
the Company.  Pursuant to such  contracts,  and  effective as of August 4, 1997,
Messrs.  Machnes,  Steinberg  and Penn were granted  incentive  stock options to
purchase 40,625, 30,000 and 25,000 shares of Common Stock,  respectively,  which
options vest over



                                      -24-

<PAGE>



a three-year  period commencing in August 1997. The exercise price of such stock
options is $4.672 per share.

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

     Mr. Machnes's  employment  agreement provides that, although he may perform
the services  contemplated by such agreement in the U.S. or Israel,  the Company
will  pay for or  reimburse  certain  of Mr.  Machnes's  relocation  and  living
expenses  should Mr. Machnes choose to live in the U.S. during the period of his
employment.  Specifically, the Company must pay (or reimburse Mr. Machnes) if he
incurs such expenses for the following: (1) $20,000 for expenses incurred during
any relocation of Mr. Machnes, his family and their possessions to New York; (2)
all expenses  associated with the education of Mr. Machnes's  children including
private school tuition and associated  expenses (estimated at $20,000 per annum)
in the United  States;  (3) an apartment in Manhattan,  New York,  including any
associated  real estate  broker's fees,  less the amount of any rental  payments
received  from the lease of Mr.  Machnes's  home in  Israel,  net of  associated
expenses;  and (4) any expenses  incurred by Mr.  Machnes in  connection  with a
visit by his  family to Israel  once each year.  If any of the above  constitute
taxable income to Mr. Machnes,  such amounts are to be grossed up to account for
the  payment of any taxes due,  and are to be  adjusted  upwards  annually  in a
percentage  amount equal to the Consumer Price Index for all urban  consumers in
the New York,  New Jersey and  Connecticut  area as  published  by the Bureau of
Labor Statistics.  Should Mr. Machnes'  employment be terminated for any reason,
Mr. Machnes is to be reimbursed for relocation  expenses of no more than $20,000
in connection with Mr. Machnes's relocation to Israel.

     During the year ended  December  31, 1997,  the Company paid  approximately
$19,000  for  Mr.  Machnes's  relocation  expenses  to  New  York  and  pre-paid
approximately  $15,000 for tuition for Mr. Machnes'  children.  The Company also
pre-paid  approximately $76,000 for the rental of an apartment in New York which
it leased  for the use of its  executives.  The  apartment  is being used by Mr.
Machnes at the present  time.  No expenses have been incurred by the Company for
any  visits by Mr.  Machnes  (or his  family) to Israel.  Any  amounts  that are
taxable to Mr.  Machnes  will be grossed up to  compensate  Mr.  Machnes for any
taxes due.

Indemnification of Directors and Officers

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



                                      -25-

<PAGE>



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, 1997,  95,625 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.


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

     The  following  table sets forth certain  information  as of March 16, 1998
with respect to any  stockholder  who owns  greater  than 5% of the  outstanding
Common  Stock,  each of the Company's  directors and the Company's  officers and
directors as a group.



                                                    Number        Percentage of
                                                      of             Shares
                                                    Shares(1)      Outstanding
                                                    ---------      -----------
                                                                     
Mashov Computers
  Marketing Ltd.(2)(3)...........................  2,214,567           59.9%
Elron Electronic Industries Ltd.(3)(4) ..........    253,800            7.3%
David Assia (5)(6)...............................         --           --
Jack Dunietz (5)(6)..............................         --           --
Martin F. Kahn (5)...............................      2,500            *
Roy Machnes (5)(6)...............................     14,166(7)         *
Elan Penn (5)(6).................................      8,333(8)         *




                                      -27-

<PAGE>



                                                    Number        Percentage of
                                                      of             Shares
                                                    Shares(1)     Outstanding
                                                    ---------     -----------
                                                                     
Terry I. Steinberg (5)...........................     48,807(9)         1.4%
All executive officers and directors as a group..     67,557(10)        2.0%
----------------
*  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 Marketing
     Ltd. is an 80% owned  subsidiary of Mashov  Computers  Ltd.,  which is also
     located at 5 HaPlada Street,  Or-Yehuda,  Israel. Mashov Computers Ltd. may
     be deemed  the  beneficial  owner of the shares  registered  in the name of
     Mashov Computers Marketing Ltd.

(3)  Includes  shares  of Common  Stock  issuable  upon  exercise  of  currently
     exercisable  warrants held by: Mashov  Computers  Marketing  Ltd.  (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 Mentortech.

(6)  Serves as a director of Mashov Computers Marketing Ltd.

(7)  Includes 13,542 shares issuable upon currently exercisable options.

(8)  Includes 8,333 shares issuable upon currently exercisable options.

(9)  Includes 10,000 shares issuable upon currently exercisable options.

(10) Include 31,875 shares issuable upon currently exercisable options.



                                      -28-

<PAGE>



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 Ltd.,  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 PCE  U.S.'s  equity and  voting  securities  on a fully
diluted basis,  subject to an adjustment based upon the fiscal year 1996 audited
balance  sheets of PCE U.S.,  Sivan and Mashov CBT. Such  adjustment was made on
August 4, 1997 when  Mashov  contributed  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 60.4% of the Common Stock. All dollar amounts in this section are
in thousands.

     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 Elron upon the  execution of the
Stock Purchase Agreement.  Pursuant to the Stock Purchase Agreement, 100% of the
ownership of Mashov CBT was transferred to PCE U.S.

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

     Mashov granted Sivan a shareholders'  loan in October 1994 of approximately
$2.6 million  which was  converted  into equity in the first  quarter of 1997 as
part of the  Stock  Purchase  Agreement.  The loan  was  linked  to the  Israeli
Consumer Price Index and interest was charged at a rate of 6% per annum.  Mashov
charged Sivan interest and linkage charges of $434,000 in 1996. In addition,  in
1996 Mashov charged Sivan and Mashov CBT management fees of $691,000 and



                                      -29-

<PAGE>



$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.





                                      -30-

<PAGE>



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


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

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

2.2  Form of Subscription Agreement (2)

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

3.2  Certificate  of Amendment of Certificate  of  Incorporation  with regard to
     reverse split

3.3  Certificate of Incorporation, as amended (4)

3.4  By-Laws (5)

4.1  Specimen Common Stock Certificate (6)

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

10.2 Lease for premises  situated at 462 Seventh Avenue,  18th Floor,  New York,
     New York (8)

10.3 Amended and Restated 1987 Stock Option Plan (8)

10.4 1997 Stock Option Plan (3)

10.5 Employment Agreement of Roy Machnes (9)

10.6 Employment Agreement of Elan Penn (9)

10.7 Employment Agreement of Terry I. Steinberg (9)

21   Subsidiaries

21.2 Published Report Regarding Matters Submitted to Vote of Security Holders

27   Financial Data Schedule

99   Additional Information Regarding Forward Looking Statements

_________

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



                                      -31-

<PAGE>



(2)  Filed as an exhibit to the  Company's  Registration  Statement on Form SB-2
     (File No. 333- 45173) and hereby incorporated by reference thereto.

(3)  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.

(4)  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, as amended by document
     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, as amended by document filed herewith.

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

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

(7)  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.

(8)  Filed as an exhibit to the  Company's  Annual Report on Form 10-KSB for the
     fiscal year ended  December 31, 1992 and hereby  incorporated  by reference
     thereto.

(9)  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.

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


     (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:  March 23, 1998                 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           March 23, 1998
                             Chief  Executive Officer

/s/Terry Steinberg
------------------
Terry Steinberg              Executive Vice President,          March 23, 1998
                             and Director

/s/Elan Penn
------------
Elan Penn                    Chief Financial Officer            March 23, 1998
                             and Director

/s/Adrienne Haber
-----------------
Adrienne Haber               Controller (Principal              March 23, 1998
                             Accounting Officer)

/s/David Assia
--------------
David Assia                  Director                           March 23, 1998


/s/Jack Dunietz
---------------
Jack Dunietz                 Director                           March 23, 1998


/s/Martin Kahn
--------------
Martin Kahn                  Director                           March 23, 1998


                                      -33-


<PAGE>



                                  Exhibit Index


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

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

2.2  Form of Subscription Agreement (2)

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

3.2  Certificate  of Amendment of Certificate  of  Incorporation  with regard to
     reverse split

3.3  Certificate of Incorporation, as amended (4)

3.4  By-Laws (5)

4.1  Specimen Common Stock Certificate (6)

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

10.2 Lease for premises  situated at 462 Seventh Avenue,  18th Floor,  New York,
     New York (8)

10.3 Amended and Restated 1987 Stock Option Plan (8)

10.4 1997 Stock Option Plan (3)

10.5 Employment Agreement of Roy Machnes (9)

10.6 Employment Agreement of Elan Penn (9)

10.7 Employment Agreement of Terry I. Steinberg (9)

21   Subsidiaries

21.2 Published Report Regarding Matters Submitted to Vote of Security Holders

27   Financial Data Schedule

99   Additional Information Regarding Forward Looking Statements

___________

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


<PAGE>


(2)  Filed as an exhibit to the  Company's  Registration  Statement on Form SB-2
     (File No. 333- 45173) and hereby incorporated by reference thereto.

(3)  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.

(4)  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, as amended by document
     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, as amended by document filed herewith.

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

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

(7)  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.

(8)  Filed as an exhibit to the  Company's  Annual Report on Form 10-KSB for the
     fiscal year ended  December 31, 1992 and hereby  incorporated  by reference
     thereto.

(9)  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.

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