8-K/A 1 doc1.txt =========================================================== SECURITIES AND EXCHANGE COMMISSION FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act June 18, 2001 (Date of Earliest Event Reported) EXPORT EREZ USA, INC. ------------------------------------- (Exact Name of Registrant as Specified in its Charter) Industrial Zone Erez P.O. Box 779 Ashkelon, Israel 78101 ---------------------------------------- (Address of principal executive offices) 011 972 7 689 1611 ------------------------------ (Registrant's telephone number) Delaware 333-39254 52-2237043 ------- ----------- ---------- (State or (Commission (I.R.S. Employer other File Number Identification jurisdiction of incorporation) ITEM 7. Filed herewith are the financial statements that relate to the Company's Form 8-K filed with the Securities and Exchange Commission on August 3, 2001. FINANCIAL STATEMENTS EXPORT EREZ USA, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 (UNAUDITED) EXPORT EREZ USA, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2000 (UNAUDITED) ----------------------------------------

EXPORT EREZ USA, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2000 (UNAUDITED) ----------------------------------------

EXPORT EREZ USA, INC. AND SUBSIDIARIES PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2000 (UNAUDITED) -------------------------------------------------------

EXPORT EREZ USA, INC. AND SUBSIDIARIES NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 (UNAUDITED)

ACHIDATEX NAZARETH ELITE (1977) LTD. FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 ACHIDATEX NAZARETH ELITE (1977) LTD. FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 TABLE OF CONTENTS Auditors' Report 3 Balance Sheets 4-5 Statements of Operations 6 Statements of Changes in Shareholders' Equity (Deficit) 7 Statements of Cash Flows 8 Notes to Financial Statements 9-20 INDEPENDENT AUDITORS' REPORT To the Board of Directors of: Achidatex Nazareth Elite (1977)ltd. We have audited the accompanying balance sheet of Achidatex Nazareth Elite (1977)ltd. as of December 31, 2000, and the related statements of operations, changes in shareholders' equity(deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Achidatex Nazareth Elite (1977)ltd. as of December 31,1999, were audited by other auditors whose report dated October 3,2000, expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 2000 financial statements referred to above, present fairly, in all material respects, the financial position of Achidatex Nazareth Elite (1977)ltd. as of December 31, 2000, and the results of its operations and its cash flows for the year then ended in conformity with United States generally accepted accounting principles. KRIHELI EDEN & CO Ashkelon , July 25 , 2001 Certified Public Accountant

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

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

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

(*) See Note 15. ------------------- The accompanying notes are an integral part of the financial statements.

ACHIDATEX NAZARETH ELITE (1977) LTD. NOTES TO FINANCIAL STATEMENTS DECEMBER 31,2000 NOTE 1 - GENERAL ------------------- A. DESCRIPTIONS OF BUSINESS OPERATIONS Achidatex Nazareth Elite (1977) Ltd. (hereinafter - "the Company") is a private company incorporated in Israel in 1977. The company's factories are in Nazareth Elite and its offices are in Petach Tikva. The Company's business is, inter alia, the manufacture and marketing of ballistic shields (including bullet - proof vests), long - term storage systems , combat flak - jackets and tents. B. DEFINITIONS Related Parties - as defined in FASB 57 - of the institute of Certified Public Accounts in U.S.A. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES --------------------------------------------- The significant accounting policies, applied on a consistent basis are as follows: A. ACCOUNTING PRINCIPLES These financial statements are presented in Israeli Shekels and have been prepared on the basis of historical cost in conformity with generally accepted accounting principles ("GAAP") in U.S.A B. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclose the Nature of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. C. CASH EQUIVALENTS The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. D. FOREIGN CURRENCY TRANSLATION AND TRANSACTION Foreign currency transaction gains or losses from transactions denominated in currencies other then N.I.S are recognized in net income in the period the gain or loss occurs. E. ALLOWANCE FOR DOUBTFUL ACCOUNTS The allowance for doubtful accounts has been determined by specifically identifying debts which collectability is uncertain. F. INVENTORIES Inventories are valued at the lower of cost or market value using the first-in first-out method for raw materials. The cost includes expenses of transporting the goods, and is determined on a specific basis. ACHIDATEX NAZARETH ELITE (1977) LTD. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31,2000 NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES(CONTINUED) --------------------------------------------- G. INCOME TAXES The Company accounts for income taxes under the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109. "Accounting for Income Taxes" ("Statement No. 109"). Under Statement No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In view of considerable losses carried forward for tax purposes and the absence of certainty as to their use in the future , the Company does not fully adjust the tax burden in respect of differences in the timing of inclusion of income and expenses between the financial statements and the income tax deductibles. Recording of an asset due to deferred taxes is made up to the amount of the tax reserve only. H. FIXED ASSETS Fixed assets are stated at cost (after setoff of investment grants), less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the assets. I. REVENUE RECOGNITION Revenues from sales of products are recognized upon shipment. J. PER SHARE DATA Basic net loss per share is computed based on the total shares outstanding during the year as defined by Statement of Financial Accounting Standards, No. 128, "Earnings Per Share" ("SFAS 128"). Diluted net income per total share is computed based on the total shares and stock equivalents outstanding during the year as defined by SFAS 128. There were no stock equivalents outstanding at December 31, 2000 and 1999. Accordingly, a reconciliation between basic and diluted earnings per share is not presented.

NOTE 6 - BUSINESS SEGMENTS ------------------------------ During 2000 and 1999 the Company operated and managed two strategic units: the civilian market and the military market . The military market is further broken down between local and export sales in order to better analyze trends in sales and profit margins. The Company does not allocate assets between segments because several assets are used in more than one segment and any allocation would be impractical (See Note 18a for segment information).

The overdraft credit is a revolving credit facility due on demand. The loans linked to CPI consists of 3,016,598 N.IS due in full in January 2001 and 4,909,947 N.I.S due in full in March 2001 and interest installments totaling approximately 26,545 N.I.S . B. With respect to liens - see Note 11.

TRADE ACCOUNTS PAYABLE- RELATED PARTIES ARE DUE TO A COMPANY (THE "AFFILIATE " ) WHEREBY THE SHAREHOLDERS OF THE COMPANY ARE SHAREHOLDERS OF THIS AFFILIATE COMPANY. THE PAYABLE RESULTED FROM THE RENT PAYMENT FOR THE LEASE OF BUILDING FROM THE AFFILIATE COMPANY.

(*) - Including a provision of NIS 509,585 for vacation and supplementary holiday pay (31.12.99-NIS 485,000). ACHIDATEX NAZARETH ELITE (1977) LTD. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31,2000 NOTE 11 - PROVISION FOR THE SEVERANCE OF EMPLOYER-EMPLOYEE RELATIONS ----------------------------------------------------------------------------- The following balances are presented in the balance sheets as follows: December 31, ---------------- 2000 1999 ---- ---- Provision for the severance of employer-employee relations 1,047,307 962,098 Deposits for the severance of employer- employee relations 955,131 974,779 --------- --------- 92,176 (12,681) ========= ========= Under Israeli law, the Company is required to make severance payments to terminated employees. The calculation is based on the employee's latest salary and the period employed. For certain employees, including officers, the obligation for severance pay is discharged by payment of premiums to insurance companies under approved plans. On April 1,1980, most of the employees joined a collective comprehensive pension agreement . Pursuant to that agreement, the Company pays 6% of the employees salaries into the pension fund. The liability included in the financials statements reflects the liabilities in respect of the employees who joined the arrangement at 8.33% of their salary for the period prior to joining, and at 2.33% of their salary for the period since joining ,as well as a liability in respect of employees who did not join the arrangement, on the basis of the period of their employment and their last salary. Also included are liabilities in respect of employees for whom the Company makes a regular provision to senior employees insurance policies in the amount of the insurance shortfall. The amounts maintained with insurance companies and the pension fund are not under control of the Company and therefore are not reflected in the financial statements. The deposits presented in the balance sheet include profits accumulated to balance sheet date. The amounts deposited may be withdrawn only after fulfillment of the obligations under the Severance Pay Law. NOTE 12- LONG-TERM LOAN -------------------------- A. On March 7, 2000, Achidatex Nazareth Elite (1977) Ltd . borrowed 27,500 $ at an interest rate of 8.18% . The terms are 36 monthly payments commencing April 1, 2000 with each payment consisting of a fixed amount of principal along with accrued interest. As of December 31,2000 the balance of the loan was 83,801 N.I.S of which 37,584 N.I.S is included in short - term bank credit and 46,217 N.I.S is included in long - term loan.

ACHIDATEX NAZARETH ELITE (1977) LTD. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31,2000 NOTE 13 - TAXES ON INCOME ------------------------------ A. THE TAX LAWS APPLICABLE TO THE COMPANY 1. The Company's plant and the expansions made were granted "approved enterprise" status under the law for the Encouragement of capital investments, in two separate approvals. The Company's taxable income will be allocated in accordance with that law, according to the additional turnover deriving from each plan, partly to the "approval part" and partly to the "unapproved part" which originates in investment in assets which were not approved and in plans in which the benefit period has ended. The "approved part" income will be taxable at a corporate tax rate of only 25%. Receipt of the benefits is contingent upon fulfillment of the provisions of the law and the terms of the notes of approval, which in principle are conditional upon 30% financing from the investment in fixed assets in paid up share capital. The benefit period has not yet started. The period is 7 years, with a proviso of 14 years from the year in which each plan was approved and 12 years from the year in which it was put into operation. The benefit period will end in 2003 at the latest. The Company has received final implementation approval for the two plans. 2. Measurement of results for tax purposes in accordance with the income tax (inflationary adjustments) law 1985. The Company is subject to the Income Tax Law (Inflationary Adjustment), 1985. Under this law, results for tax purposes are measured in real terms, in accordance with the changes in the CPI. B. LOSES CARRIED FORWARD FOR TAX PURPOSES The Company has a loss from business carried forward to the coming years, in total amount of NIS 8,363,540 and capital losses carried forward to next year in the amount of approximately NIS 482,435. C. COMPOSITION AND PRESENTATION OF DEFERRED TAXES, NET

ACHIDATEX NAZARETH ELITE (1977) LTD. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31,2000 NOTE 14 - LIENS, CONTINGENT LIABILITIES AND COMMITMENTS -------------------------------------------------------------- A. LIENS 1. To secure its short- term liabilities, the Company has registered unlimited charges on its assets the rights on insurance, the unpaid share capital of the company and goodwill in favor of Bank Hapoalim, Ltd. and Union Bank Ltd as detailed below. 2. The amounts of credit secured with these liens are shown in the following items of the Company's balance sheets: December 31, ------------ 2000 1999 --------- --------- Short-term credit 7,926,546 6,109,555 --------- --------- 3. In addition, liens remain on the Company's assets in favor of the State of Israel in respect of grants which the Company received in the past and for which the Company received final implementation approval in the past. These liens have not yet been removed. B. GUARANTEES 1. Guarantee in amount of NIS 10,000 to the court of labor in a suit of Ben Ami former employee of the Company the guarantee due to April 2001. 2. Guarantee in amount of $16,099 to the supplier in Greece the guarantee due To Mai 2001. 3. Guarantee in amount of $ 22,500 to the supplier in India the guarantee due To Mai 2001. C. LEASED BUILDINGS The Company's factories and offices are in leased buildings. Most of the lease periods end in 2002-2003. The annual rent is linked to the CPI and as the balance sheet date amounted to approximately NIS 1,538,436 per year. Some of the leased buildings are owned by related parties. D. CONTINGENCIES 1. The Company was sued for NIS 2 million by former employee, who claimed payments of commissions plus withholding differentials linkage and interest. The Company filed counter- claim against the employee, for a declaratory verdict of breach of employment contract. The Company also filed a claim against the same employee in the amount of NIS 550,000 for breach of trust. In the opinion of management, the Company need not expect any significant expense in respect of this claim, beyond those already recorded. 2. The Company received grants in the past from the fund for Encouragement of Foreign Sales at the Ministry of I industry and Trade. The Company is required to pay royalties of 3% from the additional export each year compared with the calendar year in which its plan was submitted. The balance of the grants received less the royalties paid as at December 31, 2000 is 229,921. ACHIDATEX NAZARETH ELITE (1977) LTD. NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31,2000

See Note 19 for subsequent increase in registered ordinary shares. B. CAPITAL NOTES In January ,1993 the Company issued long term capital notes to Achidatex Ltd., a related company, for the acquisition of all of the fixed assets of Achidatex ltd. The capital notes are interest - free and unlinked . In June 2001, 2,358,976 ordinary shares were issued to extinguish the debt under all of the capital notes. NOTE 16 - FINANCIAL INSTRUMENTS ----------------------------------- A. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company's financial instruments are principally non-derivative assets and non-derivative liabilities (non-derivative assets include cash and cash equivalents, deposits in banks and other financial institutions, trade accounts receivable, receivables and other debit balances. Non-derivative liabilities include short-term credit from banks and others, trade accounts payable, and payables and other credit balances). Because of the nature of these financial instruments, fair value generally equals or approximates the amounts presented in the financial statements. B. INTEREST RATE RISK The interest rates of the loans are disclosed in Note - 7 , 11 to the financial statements. C. CONCENTRATIONS OF CREDIT RISK The majority of the Company's sales are made to government institutions and the private market in Israel. Consequently the exposure to credit risks relating to trade receivables is limited. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. An appropriate allowance for doubtful accounts is included in the accounts. NOTE 17 - RELATED AND INTERESTED PARTIES ---------------------------------------------- A. TRANSACTIONS WITH RELATED PARTIES Iurit assets Ltd. is a related party. The Company has signed lease agreements with Iurit assets Ltd. See also Note 9b.

NOTE 18 - SUPPLEMENTARY INFORMATION TO STATEMENTS OF OPERATIONS ----------------------------------------------------------------------- A. SALES:

(*) - Income from management fee are from affiliate company . The fees are for years 1999-2000. NOTE 19 - SUBSEQUENT EVENTS ------------------------------- On June 18, 2001 the current shareholders of the Company sold to Export Erez U.S.A 76% of their shares in the Company in exchange for 5% of the shares in Export Erez USA Inc. In June 2001, the Company increased the registered shares up to 3,339,000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned hereunto duly authorized. EXPORT EREZ USA, INC. By: /S/ JOSEPH POSTBINDER President Date: August 30, 2001

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