<PAGE> 1
As filed with the Securities and Exchange Commission on June 9, 1997
Registration No. 333-26349
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------
Amendment No. 1
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MODACAD, INC.
(Name of small business issuer as specified in its charter)
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CALIFORNIA 7372 95-4145930
(State or jurisdiction Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number Identification Number)
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1954 COTNER AVENUE, LOS ANGELES, CALIFORNIA 90025 (310) 312-6632
(Address and telephone number of principal executive offices and
principal place of business)
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JOYCE FREEDMAN
PRESIDENT
MODACAD, INC.
1954 COTNER AVENUE
LOS ANGELES, CALIFORNIA 90025
(310) 312-6632
(Name, address and telephone number of agent for service)
--------------------------------------------
Copies to:
JOHN A. ST. CLAIR, ESQ.
ROBERT R. JESUELE, ESQ.
SYLVIA K. BURKS, ESQ.
COUDERT BROTHERS
1055 WEST SEVENTH STREET, 20TH FLOOR
LOS ANGELES, CALIFORNIA 90017
(213) 688-9088
--------------------------------------------
Approximate date of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [ ]
<PAGE> 2
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF PROPOSED
EACH CLASS OF PROPOSED MAXIMUM
SECURITIES AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER SHARE PRICE FEE
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Common Stock,
no par value 1,610,000 (1) $6.50 (2) $10,465,000(3) $3,171
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(1) Such shares are issuable upon exercise of the outstanding warrants (the
"Warrants") held by the Warrant holders. Pursuant to Rule 416, there is
also being registered such indeterminate number of shares of Common Stock
as may be issuable pursuant to the anti-dilution and adjustment provisions
of the Warrants.
(2) Based on the per share exercise price of the warrants of $6.50.
(3) Assumes exercise of all outstanding warrants at an exercise price of
$6.50 per share.
The Company hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Company shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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SUBJECT TO COMPLETION
JUNE , 1997
MODACAD, INC.
1,610,000 SHARES OF COMMON STOCK
This Prospectus relates to 1,610,000 shares of Common Stock, without
par value (the "Shares") of ModaCAD, Inc. ("ModaCAD" or the "Company"), issuable
upon the exercise of the outstanding warrants to purchase Common Stock of the
Company (the "Warrants") previously issued by the Company in its initial public
offering in March, 1996, and such additional number of shares of Common Stock as
may become issuable pursuant to the anti-dilution provisions of the Warrants.
Each Warrant is presently exercisable to purchase one share of Common
Stock at a price of $6.50 per share, subject to earlier redemption of the
Warrants, and the Warrants expire on March 27, 2001. The Warrants are redeemable
at the Company's option upon 30 days' notice to holders of the Warrants (the
"Warrantholders") at a redemption price of $0.01 per Warrant if the closing bid
price of the Common Stock averages in excess of $7.50 for a period of 20
consecutive trading days ending within 15 days of the notice of redemption.
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THE SECURITIES OFFERED HEREBY INVOLVE
A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
COMMENCING ON PAGE 3 OF THIS PROSPECTUS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Underwriting Discounts Proceeds to
Public and Commissions Company(1)
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Per share ............... $6.50 $0.00 $6.50
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Total ................... $10,465,000(2) $0.00 $10,465,000(2)
==========================================================================================
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(1) Before deducting expenses payable by the Company estimated at $50,000.
(2) Assumes the exercise of all outstanding Warrants.
The date of this Prospectus is June __, 1997
<PAGE> 4
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN
ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
ModaCAD, Inc. ("ModaCAD" or the "Company") is subject to the
informational reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices located at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Company
is an electronic filer, and the Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov.
The Company has filed with the Commission a registration statement on
Form S-3 (herein together with all amendments and exhibits thereto called the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities covered by this Prospectus.
This Prospectus does not contain all of the information set forth in the
Registration Statement as permitted by the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement, including the exhibits filed or incorporated as a part thereof.
Statements contained herein concerning the provisions of certain documents filed
with, or incorporated by reference in, the Registration Statement are not
necessarily complete and each such statement is qualified in its entirety by
reference to the applicable document filed with the Commission. The Registration
Statement may be inspected without charge at the offices of the Commission at
450 Fifth Street, N.W., Washington D.C. 20549, and copies of all or any part
thereof may be obtained from such office upon the payment of the fees prescribed
by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission under the Exchange Act are hereby incorporated by reference in this
Prospectus: (i) the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996; (ii) the Company's Quarterly Reports on Form 10-QSB for the
quarter ended March 31, 1997; (iii) the description of the Company's Common
Stock as set forth in Item 1 of the Company's Registration Statement on
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<PAGE> 5
Form 8A, filed with the Commission on March 28, 1996, including any amendments
or reports filed for the purpose of updating such description.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering made by this Prospectus
shall be deemed to be incorporated in this Prospectus by reference and to be a
part of this Prospectus from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any and all of the documents referred to above which have been
or may be incorporated by reference in this Prospectus (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into the information this Prospectus incorporates). Requests for such copies
should be directed to ModaCAD, Inc., 1954 Cotner Avenue, Los Angeles, California
90025, Attention: President (Telephone: (310) 312-6632).
THE COMPANY
The Company was incorporated in February 1988. The Company's executive
offices are located at 1954 Cotner Avenue, Los Angeles, California 90025, and
its telephone number is (310) 312-6632. The Company designs, markets and
supports advanced virtual reality, rendering and modeling software for
industrial design and retail customers primarily in the apparel, textile, home
furnishings and home design industries.
RISK FACTORS
In addition to the other information in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company and its
business before exercising the Warrants to purchase the Shares registered
hereunder.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT. The Company was
incorporated in February 1988 and until 1992 was primarily engaged in research
and development and had limited revenues. Beginning in 1993, the Company began
broader marketing efforts to commercial accounts, which efforts were increased
in 1994 and 1995. After incurring a loss of approximately $886,500 in 1993, the
Company had net income of approximately $382,600 in 1994, net income of
approximately $8,100 in 1995, and net income of approximately $645,440 in 1996.
As of March 31, 1997, the Company had working capital of $2,489,328,
shareholders' equity of
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$6,591,740, and an accumulated deficit of approximately $5,115,165. The Company
reported a net loss of $182,593 for the three months ended March 31, 1997. The
Company's limited operating history makes the prediction of future operating
results difficult, and there is no assurance that the Company will continue to
experience revenue growth or that the Company will be profitable in the future.
FLUCTUATIONS IN OPERATING RESULTS. The Company has experienced, and
expects to continue to experience, substantial fluctuations in revenues and
other operating results due to a variety of factors. The Company's quarterly
results of operations can be substantially affected by factors such as demand
for the Company's products, research and development expenditures, the timing of
receipt of software license fees, and customer acceptance of new products and
product enhancements and product promotions by the Company or by its
competitors. The Company's quarterly results of operations are also affected by
changes in pricing policies by the Company and by its competitors, product
returns, changes in general economic conditions and other factors. The Company
ships products as orders are received and therefore operates with little or no
backlog.
In view of such fluctuations and changes in the Company's business
strategy to concentrate its efforts on its electronic merchandising and consumer
software product lines, the Company believes that quarterly comparisons of its
financial results are not necessarily meaningful and should not be relied on as
an indication of future performance. The Company's 1996 operating results were
materially affected by nonrecurring, nonrefundable advance royalty payments
earned in the third and fourth quarters of 1996. The Company anticipates
incurring losses in the second quarter of 1997 because of increased research and
development expenditures and sales and marketing efforts associated with the
completing development of and marketing new products derived from the Company's
core technology that are targeted at retailers, mass merchants, OEM users and
Internet applications for 3-D visualization. The Company's business strategy has
been focused on increased research and development and sales and marketing
activities relating to enhanced versions of its electronic merchandising
products and its new consumer software product line, and the Company's efforts
with respect to sales of its CAD software have been somewhat more limited. The
Company's operating results during the third and fourth quarters of 1997 are
expected to be significantly affected by the timing of the completion of
development and introduction of new products as well as the Company's first
consumer software product line formerly referred to internally as ModaCAD's
"Home Decorator Series" and currently referred to as "3-D Home Interiors."
Introduction of such products into the market and the revenues received by the
Company from such products will be dependent upon the timing of release for
products and marketing plans, including 3-D Home Interiors published by
Broderbund Software, Inc. ("Broderbund"), the price established for such
products as well as the levels and timing of product sales and other factors,
many of which are uncertain.
UNCERTAINTY OF DEMAND FOR EXISTING PRODUCTS AND MARKET ACCEPTANCE OF
NEW PRODUCTS. The Company's success will to a large extent be affected by the
successful introduction and market acceptance of 3-D Home Interiors, the
Company's ability to grow its electronic merchandising business and the
Company's ability to generate continued revenues from CAD product sales.
In 1996, the Company completed development of 3-D Home Interiors,
the initial title in its consumer home decorating software series, which
utilizes the Company's proprietary visualization technology. There is no
assurance, however, that the Company will be able to
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generate additional consumer product titles. In March 1996, the Company licensed
to Broderbund the right to publish 3-D Home Interiors (the "Broderbund
Agreement"). Broderbund unveiled the product during the first quarter of 1997
and released the product commercially in the Spring of 1997. As with any new
consumer software, it is impossible to predict the level of demand for 3-D Home
Interiors.
Sales of the Company's commercial products (CAD products and electronic
merchandising products) have begun to represent a declining percentage of the
Company's total revenues. The Company believes that its revenue growth in the
CAD market will depend substantially on (i) its ability to produce inexpensive
shrink-wrapped design software for use in standard PC's and which is available
through mass-market software distribution and (ii) increased sales of CAD
products used to create digital product catalogs for use with the Company's
electronic merchandising and consumer software products. There is no assurance
that the Company will be able to produce shrink-wrapped CAD software which will
be competitive in the marketplace or that it will be able to increase its sales
of CAD products for catalog production.
Revenue growth for the Company's electronic merchandising products is
substantially dependent upon the continued support of those products by
manufacturers and vendors in the home furnishings and home design industries.
The Company has established relationships with major home furnishing
manufacturers and vendors to feature their products or product lines in catalogs
utilizing the Company's electronic merchandising software. In addition,
retailers such as Sears Roebuck and Co. ("Sears"), J.C. Penney Company, Inc.
("J.C. Penney") and Levitz Furniture Corporation ("Levitz") have conducted or
are conducting trial uses of the Company's electronic merchandising software.
The trial use conducted by Levitz has been completed, and Levitz has licensed
the Company's software. The Sears and J.C. Penney trial uses of the Company's
electronic merchandising software are in the latter stages of their respective
six to 12-month trial periods. There is no indication whether Sears and/or J.C.
Penney will license the Company's electronic merchandising software upon
completion of the trial use periods. There is no assurance that manufacturers or
vendors whose products are represented in electronic merchandising catalogs for
in-store use will continue to support the Company's electronic merchandising
software or that such companies will support the use of the 3-D Home Interiors
products by licensing their digital product catalogs for use with the 3-D Home
Interiors. If a vendor decides not to use the Company's electronic merchandising
products, the Company would not expect it to support 3-D Home Interiors. The
rejection of either or both product lines by one or more of the vendors named
above could have a material adverse effect on the success of such products due
to the significance of such vendors in the home furnishings and fixtures
marketplace.
RAPID TECHNOLOGICAL CHANGES AND DEPENDENCE ON NEW PRODUCT DEVELOPMENT.
The Company is focusing its near-term product development and marketing efforts
primarily on new electronic merchandising products, commercial and consumer
product lines as well as new Internet software applications, all based on the
Company's core rendering and modeling technology. The markets for such products
are characterized by rapid changes in technology, customer needs and preferences
and evolving industry standards. In addition, the consumer market for personal
productivity software is relatively young and unpredictable. Consequently, the
Company expects that it will encounter rapid product obsolescence and the
necessity for frequent new and enhanced product introductions. The introduction
of new technologies, including new operating systems, platforms and the means of
distributing consumer software and electronic merchandising products
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could render the Company's products obsolete or unmarketable. The Company's
future success will depend significantly on its ability to enhance its current
products, to develop new products that meet changing customer needs on a timely
and cost-effective basis, and to respond to emerging industry standards and
other technological changes. The development of new products involves
considerable expenditures and can take from several months to several years.
Accordingly, new product development requires a long-term forecast of market
trends and customer needs and often a substantial commitment of capital
resources with no assurance that such products will be commercially viable.
There can be no assurance that the Company will be successful in enhancing its
existing products or developing new products on a timely basis or that such new
or enhanced products will achieve market acceptance or sustain any such
acceptance for any significant period. Any failure by the Company to anticipate
or respond adequately to changes in technology and customer requirements and
preferences, or any significant delays in development of enhanced and new
products, will have a material and adverse effect on the Company's business,
financial condition and results of operations.
Software products as complex as those offered by the Company may
contain undetected programming errors or "bugs" when introduced or as new
versions are released. Despite significant testing by the Company and by current
and potential distributors and customers, there is no assurance that errors will
not be found in new products after commencement of commercial shipments,
resulting in loss of or delay in market acceptance. Furthermore, from time to
time the Company and others may announce new products, capabilities or
technologies that have the potential to replace or shorten the life cycles of
the Company's existing products. Announcements of currently planned or other new
products by the Company or its competitors may cause customers to defer
purchasing the Company's existing products or cause distributors to return
products to the Company.
DEPENDENCE ON A SINGLE CORE TECHNOLOGY; LIMITED PRODUCT LINES. The
Company has derived substantially all of its revenues to date from sales of its
CAD products for industrial design applications and electronic merchandising
products, and from its new consumer product. Each of these products is based on
the Company's core rendering and modeling technology. The Company anticipates
that, in the foreseeable future, its enhanced and new products will also be
based on that technology and expected enhancements to that technology. Thus, the
Company's revenues are, and for the foreseeable future will be, based on the
market acceptance of products utilizing the Company's core technology. Any
decline in demand for products based on such technology, whether as a result of
competition, technological change or any other reason, would have a material and
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION. The markets for the Company's products are intensely and
increasingly competitive. Existing software developers and publishers may
broaden their product lines to compete with the Company's products, and
potential new competitors, including software and book publishers, and
diversified media companies, may enter the market for, or increase their focus
on, CAD and electronic merchandising software in the industries served by the
Company
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and consumer software for home decorating and design. Some of the companies with
which the Company currently competes or may in the future compete, have or may
have greater financial, technical, sales and marketing and customer support
resources, as well as better access to consumers and electronic merchandising
customers than the Company. Some of the companies also have longer operating
histories than the Company and better brand name recognition.
There are a number of successful home design software products on the
market, including 3-D Home Architect by Broderbund, Picture this Home! Kitchen
by Autodesk, Inc., Design Center 3-D by SoftKey Software, Inc., and Home Design
3-D by Expert Software, Inc., which are expected to compete with the Company's
3-D Home Interiors. In addition to the companies whose products are mentioned
above, the Company's competitors in this market include several large companies
with substantially greater resources, as well other companies of varying sizes
and resources, including Softdesk, Inc. and Books-that-Work. There can be no
assurance that one or more of those companies will not produce products which
are more attractive to consumers than any developed by the Company or will not
be more successful than the Company in their marketing of such products.
Although Broderbund and ModaCAD have entered into the Broderbund Agreement for
the publication of 3-D Home Interiors of products which contains certain mutual
noncompetition covenants, such agreement does not prohibit Broderbund from
publishing or distributing similar products which could compete with the
Company's products, including Broderbund's 3-D Home Architect, which Broderbund
currently publishes. Additionally, the Company expects increased competition
from new competitors who may in the future publish competitive home decorating
software products.
DEPENDENCE ON SIGNIFICANT CUSTOMERS. During 1995 and 1996, the
Company's largest commercial product purchaser, ModaCad Europe, accounted for
approximately 16% and 12%, respectively, of the Company's total revenues. During
1996, the publisher of the Company's first consumer product, Broderbund,
accounted for approximately 45% of the Company's total revenues. The Company may
continue to be dependent on these two or additional significant customers, the
loss of which could have a material and adverse effect on the Company's
business.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. The Company distributes
its products in approximately 33 countries and revenues from sales outside the
United States represented 16% and 12% of the Company's revenues in 1995 and
1996, respectively. Adaptation of the Company's products for distribution in
foreign countries can be time consuming and costly. In distributing its products
in non-domestic markets, the Company faces the additional risks of unexpected
changes in regulatory requirements, tariffs and other trade barriers, longer
accounts receivable payment cycles, difficulties in managing international
operations, potentially adverse tax consequences, repatriation of earnings and
the burdens of complying with a wide variety of foreign laws. Although to date
such risks have not materially and adversely affected the Company's business,
there is no assurance that they may not do so in the future.
LACK OF CONSUMER PRODUCT EXPERIENCE AND NAME RECOGNITION; DEPENDENCE ON
DISTRIBUTOR. 3-D Home Interiors is the Company's first significant foray into
the consumer
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products market. It will be necessary for the Company or its publisher,
Broderbund, to develop a positive consumer identity in order to successfully
market its 3-D Home Interiors line of products at the retail level. The cost of
developing a high-level of consumer awareness will be substantial, and the
success of advertising and other brand-awareness efforts cannot be assured. None
of the Company's executives has substantial experience in the publication or
distribution of consumer software products. Market acceptance of 3-D Home
Interiors will depend on many factors, including the product's appeal at an
acceptable price and the release and marketing strategies and support of the
Company's publisher. Broderbund will bear the marketing costs in connection with
the 3-D Home Interiors product. The Company is not currently engaging in any
independent marketing activities with respect to this product.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a
significant extent on the continued service of its key technical and management
personnel, particularly Joyce Freedman, its President, Maurizio Vecchione, its
Executive Vice President, and Steven Gentry, its Director of Engineering. The
Company's growth and future success will depend in large part on its ability to
continue to hire, motivate and retain those and other qualified employees. The
competition for such personnel is intense, and the loss of key employees could
have an adverse effect on the Company. Although Ms. Freedman and Mr. Vecchione
each have an employment agreement with the Company, there can be no assurance
that the Company will be able to retain them in the future.
PATENTS; RELIANCE ON INTELLECTUAL PROPERTY PROTECTION. The Company's
ability to compete effectively depends in large part on its ability to develop
and maintain as proprietary the essential parts of its technology. The Company
holds two United States patents. The first patent covers the Company's rendering
and modeling technology. The second patent covers 3-D modeling techniques. In
addition to patent protection, the Company relies on a combination of (i) trade
secret, copyright and trademark laws, (ii) confidentiality and nondisclosure
agreements, and (iii) other contractual and technical measures to protect its
proprietary rights. Although the Company intends to enforce aggressively its
intellectual property rights, such protection may not preclude competitors from
developing products with features similar to the Company's products, and there
can be no assurance that such protection will be available or be enforceable in
any particular instance of competition or that the Company will have the
financial resources necessary to enforce its patent, trade secret or other
intellectual property rights which may be infringed. The Company employs a "lock
and key" system with respect to the proprietary information underlying its
software. This system is designed to ensure that only certain key employees have
access to such information, all of whom have signed confidentiality and
nondisclosure agreements. There can be no assurance that any confidentiality and
nondisclosure agreements between the Company and its employees and others will
provide adequate protection for the Company's proprietary information in the
event of any unauthorized use or disclosure of such proprietary information. The
Company has seven registered trademarks, including the mark ModaCAD. The Company
is aware that the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States.
Furthermore, the Company has not sought or received patent protection in any
foreign jurisdiction nor trademark protection for its product
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trademarks in most foreign jurisdictions. Some aspects of the Company's products
are not subject to intellectual property protection. The costs to the Company of
maintaining its trade secret and intellectual property rights protection program
have not been and are not expected to be significant. The Company has not had to
enforce its patent rights against any third party but expects that it would have
sufficient capital resources to do so depending on the third party involved and
nature of the action.
PRODUCT INFRINGEMENT. The Company believes that its products,
trademarks and other proprietary rights do not infringe on the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not assert infringement claims against the Company in the future. The
Company has agreed to defend and indemnify Broderbund against certain
infringements, unfair competition and similar claims relating to the 3-D Home
Interiors software product and the components developed by the Company. The
successful assertion of one or more infringement claims would have a material
adverse effect on the Company's business, operating results and financial
condition. While the Company is not currently engaged in any intellectual
property litigation or proceedings, there can be no assurance that it will not
become so involved in the future. An adverse outcome in litigation or similar
proceedings could subject the Company to significant liabilities to third
parties, require disputed rights to be licensed from others or require the
Company to cease marketing or using certain products, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. If the Company is required to obtain licenses under
patents or proprietary rights of others, there can be no assurance that any
required licenses would be made available on terms acceptable to the Company, if
at all. In addition, the cost of responding to an intellectual property
litigation claim both in legal fees and expenses and the diversion of management
resources, whether or not the claim is valid, could have a material adverse
effect on the Company's results of operations.
POSSIBLE VOLATILITY OF STOCK AND WARRANT PRICES. The trading price of
the Company's Common Stock and Warrants could be subject to significant
fluctuation in response to variations in quarterly results of operations,
announcements of technological innovations or new products by the Company or its
competitors, developments or disputes with respect to proprietary rights,
general trends in the industry and overall market conditions and other factors.
The market for securities of early stage, small-market capitalization companies
has been highly volatile in the first quarter of 1997 and in recent years, often
as a result of factors unrelated to a company's operations. The price of the
Company's Common Stock ranged, in the quarter ended March 31, 1997, from a low
of 5-5/8 to a high of 10. The price of the Company's Warrants ranged, in the
quarter ended March 31, 1997, from a low of 1-7/16 to a high of 4-11/16.
SHARES ELIGIBLE FOR FUTURE SALE. As of June 6, 1997, the Company had
3,923,290 shares of Common Stock issued and outstanding, and if all of the
Warrants are exercised, the Company will have 5,533,290 shares of Common Stock
issued and outstanding. Of these shares, 1,662,500 shares of Common Stock are
freely tradeable pursuant to an effective registration statement on Form SB-2
under the Securities Act and 5,000 shares are freely tradeable pursuant to an
effective registration statement on Form S-8 under the Securities Act. Upon the
effectiveness of the Registration Statement of which this Prospectus forms a
part, the 1,610,000 shares issuable upon exercise of the Warrants will be freely
tradeable without restriction or further registration under the Securities Act
by persons other than "affiliates" of the Company (as that term is defined in
Rule 144 under the Securities Act) who are subject to Rule 144 notice and manner
of sale requirements and volume restrictions. As of June 6, 1997, 163,500 shares
of Common Stock were subject to issuance upon exercise of outstanding and
exercisable options granted under the Company's 1995 Stock Option Plan and,
except to the extent that shares issued upon exercise of such options are held
by affiliates (who, as noted above, are subject to Rule 144
- 9 -
<PAGE> 12
notice and manner of sale requirements and volume restrictions), will be
eligible for immediate resale in the public market upon exercise of such
options.
The balance of 2,255,790 shares of outstanding Common Stock previously
issued by the Company which have not been registered under the Securities Act as
described above are "restricted securities," as that term is defined under Rule
144 promulgated under the Securities Act, and may be publicly sold only if
registered under the Securities Act or sold in accordance with an applicable
exemption from registration such as Rule 144. Each holder of Common Stock who at
the time of the Company's initial public offering was an officer, director or
key employee of the Company has entered into a "lock-up" agreement providing
that such shareholder will not offer, sell, pledge, contract to sell, grant any
option for the sale of, or otherwise dispose of, directly or indirectly, any
shares of the Company's Common Stock or any security or other instrument which
by its terms is convertible into, exercisable for, or exchangeable for shares of
the Company's Common Stock until after September 26, 1997 without the prior
written consent of the underwriter for the Company's initial public offering in
March 1996. As a result of these contractual restrictions, notwithstanding
possible earlier eligibility for sale under the provisions of Rule 144,
2,185,501 shares of Common Stock will be eligible for sale after September 26,
1997, subject to satisfaction of the applicable conditions of Rule 144, and
70,289 shares of Common Stock are currently eligible for immediate sale. In
addition, the Company plans to register 287,500 shares of Common Stock issuable
upon exercise of warrants held by the underwriter for the Company's initial
public offering and an investor in the Company; and upon the effectiveness of
such registration, such shares, when issued, will be freely tradeable. Sales of
substantial amounts of such shares in the public market following the expiration
of the lock-up agreements or the prospect of such sales could adversely affect
the market price of Common Stock.
CONCENTRATION OF OWNERSHIP. Assuming all of the Warrants are exercised,
the current executive officers and directors of the Company and their affiliates
will beneficially own or have voting control over approximately 41% of the
outstanding Common Stock. Accordingly, these individuals will have the ability
to influence the election of the Company's directors and effectively to control
most corporate actions. This concentration of ownership may also have the effect
of delaying, deterring or preventing a change in control of the Company.
ABSENCE OF DIVIDENDS. The Company has never paid cash dividends on its
Common Stock and does not anticipate paying cash dividends on its Common Stock
in the foreseeable future.
DILUTION. Assuming the exercise of all of the Warrants at the exercise
price of $6.50 per share, and the issuance of the 1,610,000 shares of Common
Stock registered hereunder, and the receipt of the estimated net proceeds
therefrom, the Company's existing shareholders will experience an immediate
increase in net tangible book value of approximately $1.65 per share and
purchasers of Common Stock upon exercise of the Warrants will experience
immediate dilution in net tangible book value of approximately $4.03 per share.
- 10 -
<PAGE> 13
PRESENT INTENTION TO REDEEM WARRANTS. The Warrants are redeemable at
the Company's option upon 30 days' notice to Warrantholders at $0.01 per Warrant
if the closing bid price of the Company's Common Stock averages in excess of
$7.50 for a period of 20 consecutive trading days ending within 15 days of the
notice of redemption. As of the effective date of the Registration Statement of
which this Prospectus is a part, the average closing bid price of the Company's
Common Stock satisfied the minimum price condition to the Company's redemption
of the Warrants. Subject to consideration and action by the Company's Board of
Directors with respect to such redemption, it is the Company's intention to call
the Warrants for redemption following the effectiveness of the Registration
Statement of which this Prospectus is a part.
LIMITATIONS ON LIABILITY OF DIRECTORS. The Company's Articles of
Incorporation substantially limits the liability of the Company's directors to
the Company and its shareholders for breach of fiduciary and other duties to the
Company.
DISCRETIONARY USE OF PROCEEDS. The Company currently intends to use the
proceeds from the offering, in addition to its $2,138,963 of cash and
cash-equivalents on hand at December 31, 1996, for working capital purposes,
investment in additional development and acquisition opportunities and to
finance expansion of the Company's business. The Company's management will have
broad discretion as to the use of such proceeds and management reserves the
right to reallocate all proceeds to working capital. The Company has not yet
determined in which of its existing or future development opportunities it will
ultimately invest. The Company does not currently have any pending acquisitions,
nor does it have any specific planned acquisitions. See "Use of Proceeds."
ADDITIONAL CAPITAL. Assuming the exercise of all of the Warrants at a
per share exercise price of $6.50, and the receipt of the estimated net proceeds
therefrom, the Company believes that such proceeds will allow the Company to
conduct its planned operations for at least 24 months. While the Company has no
plans that would require it to seek additional funding, it may be required to do
so to complete or accelerate certain software development and marketing
programs. There can be no assurance that such funding will be available on terms
acceptable to the Company, and failure to procure such funding on acceptable
terms could materially and adversely affect the Company and the Company's
results of operations.
USE OF PROCEEDS
The net proceeds to the Company from the offering are estimated to be
approximately $10,415,000 (after deducting estimated offering expenses of
approximately $50,000), assuming all Warrants are exercised for shares of Common
Stock. There is no assurance that any or all of the Warrants will be exercised.
The Company expects to use the net proceeds from the exercise of the Warrants
for working capital purposes, investment in additional development and
acquisition opportunities and to finance expansion of the Company's business. If
only a portion of the Warrants is exercised, the following allocation of use or
proceeds is expected to be reduced proportionately.
The Company expects to use approximately $2,000,000 of the net proceeds
from the exercise of the Warrants to develop further and to enhance its existing
software products, and to expand its product lines by developing new software
products principally directed at the consumer marketplace. Such uses are
expected to include development of updates and enhancements to its consumer
software to permit use with existing and emerging on-line communications media
and creation of additional digital catalogs of products for use with the
software.
The Company anticipates using approximately $1,000,000 of the net
proceeds from the exercise of the Warrants to expand its marketing of existing
and future commercial products and future consumer products and to penetrate
additional commercial and consumer markets with the
- 11 -
<PAGE> 14
Company's products and patented core software programs. The Company also expects
to use a portion of the $1,000,000 to implement the Company's strategy of
licensing its core technology to unaffiliated software product developers.
The Company plans to finance expansion of the Company's business with
approximately $5,000,000 of the net proceeds. These proceeds may be used to make
acquisitions of, and strategic alliances with, other software product
developers, publishers and distributors in transactions intended to expand the
use of the Company's core technology, although no specific opportunities have
been identified. There is no assurance that the Company will be able to identify
a suitable acquisition or strategic alliance partner and, if such an opportunity
is identified, there is no assurance that the Company will be able to enter into
any such transaction on acceptable terms.
Approximately $2,000,000 of the net proceeds from the exercise of the
Warrants will be held as a cash-flow reserve for working capital needs and
miscellaneous future uses not now identifiable, to the extent such needs are not
satisfied through the Company's operations. The Company expects to use its
working capital to develop further and to expand its distribution network and
its sales and marketing forces within the United States and internationally.
Pending such uses, the net proceeds will be invested in short-term,
investment grade, interest-bearing securities.
- 12 -
<PAGE> 15
RECENT DEVELOPMENTS
In May 1997, ModaCAD announced that Broderbund commenced shipping 3-D
Home Interiors, a new consumer software product designed and developed by the
Company which is being published by Broderbund. In June 1997, ModaCAD announced
the unveiling of a new product line, called ModaVision, targeted at retailers
and mass merchants. ModaVision is designed to enable the retailer to create and
view three-dimensional, photo-realistic renderings of store-featured products
to enable customers to visualize such products in a virtual room scene.
PLAN OF DISTRIBUTION
The Company will sell the Shares only to the registered holders of the
Warrants, in accordance with the terms of such Warrants, if and when such
holders exercise the Warrants.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California General Corporation Law (the "GCL")
provides that a corporation may indemnify corporate "agents" (including
directors, officers and employees of the corporation) against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with defending non-derivative actions if such person acted in good
faith and in a manner such person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of such person was unlawful, and against
expenses actually and reasonably incurred in connection with defending
derivative actions if such person acted in good faith and in a manner such
person believed to be in the best interests of the corporation and its
shareholders. Indemnification is obligatory to the extent that an agent of a
corporation has been successful on the merits in defense of any such proceeding
against such agent, but otherwise may be made only upon a determination in each
instance either by a majority vote of a quorum of the Board of Directors (other
than directors involved in such proceeding), by independent legal counsel if
such a quorum of directors is not obtainable, by the shareholders (other than
shareholders to be indemnified), or by the court, that indemnification is proper
because the agent has met the applicable statutory standards of conduct.
Corporations may also advance expenses incurred in defending proceedings against
corporate agents, upon receipt of an undertaking that the agent will reimburse
the corporation unless it is ultimately determined that the agent is entitled to
be indemnified against expenses reasonably incurred.
The indemnification provided by Section 317 of the GCL is not deemed to
be exclusive of any other rights to which agents of the Company seeking
indemnification may be entitled under any bylaw, agreement, vote of shareholders
or disinterested directors, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent such
additional rights are authorized in the Company's articles of incorporation.
Article IV of the Company's Amended and Restated Articles of Incorporation
provides that the liability of the directors of the Company for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Article V of the Company's Amended and Restated Articles of Incorporation
authorizes the Company to provide for indemnification of its agents for breach
of duty to the Company and its shareholders, through bylaw provisions or through
agreements with such agents, or both, in excess of the indemnification otherwise
permitted by Section 317 of the GCL, subject to the limits on such excess
indemnification set forth in Section 204 of the GCL.
Section 5.7 of the Company's bylaws provides that the Company will
indemnify each of its agents against expenses, judgments, fines, settlements or
other amounts, actually and
- 13 -
<PAGE> 16
reasonably incurred by such person by reason of such person having been made or
threatened to be made a party to a proceeding to the fullest extent permissible
by the provisions of Section 317 of the GCL and the Company will advance the
expenses reasonably expected to be incurred by such agent upon receipt of an
undertaking that the agent will reimburse the Company unless it is ultimately
determined that the agent is entitled to be indemnified against expenses
reasonably incurred.
The Company has obtained directors and officers insurance with a
maximum coverage of $2,000,000.
Insofar as indemnification for liability arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Coudert Brothers, Los Angeles, California.
EXPERTS
The audited financial statements and schedules incorporated by
reference in this Prospectus and elsewhere in the Registration Statement have
been audited by Singer Lewak Greenbaum & Goldstein LLP, independent public
accountants, as indicated in the report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
- 14 -
<PAGE> 17
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and, if given or
made, such information or representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or any offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
----------
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information................................... 2
Incorporation of Certain Documents by
Reference............................................ 2
The Company............................................. 3
Risk Factors............................................ 3
Use of Proceeds......................................... 11
Recent Developments..................................... 12
Plan of Distribution.................................... 13
Indemnification of Directors and Officers............... 13
Legal Matters........................................... 14
Experts................................................. 14
</TABLE>
1,610,000 Shares
MODACAD, INC.
Common Stock
PROSPECTUS
June , 1997
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with the sale
and distribution of the securities being registered. All the amounts shown are
estimates except for the SEC registration fee:
<TABLE>
<CAPTION>
Registration
------------
<S> <C>
SEC registration fee ...........................................$3,171
Accounting fees and expenses ...................................$2,000
Legal fees and expenses ........................................$30,000
Cost of printing ...............................................$2,700
Miscellaneous expenses .........................................$12,129
Total ..................................................$50,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California General Corporation Law (the "GCL")
provides that a corporation may indemnify corporate "agents" (including
directors, officers and employees of the corporation) against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with defending non-derivative actions if such person acted in good
faith and in a manner such person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of such person was unlawful, and against
expenses actually and reasonably incurred in connection with defending
derivative actions if such person acted in good faith and in a manner such
person believed to be in the best interests of the corporation and its
shareholders. Indemnification is obligatory to the extent that an agent of a
corporation has been successful on the merits in defense of any such proceeding
against such agent, but otherwise may be made only upon a determination in each
instance either by a majority vote of a quorum of the Board of Directors (other
than directors involved in such proceeding), by independent legal counsel if
such a quorum of directors is not obtainable, by the shareholders (other than
shareholders to be indemnified), or by the court, that indemnification is proper
because the agent has met the applicable statutory standards of conduct.
Corporations may also advance expenses incurred in defending proceedings against
corporate agents, upon receipt of an undertaking that the agent will reimburse
the corporation unless it is ultimately determined that the agent is entitled to
be indemnified against expenses reasonably incurred.
The indemnification provided by Section 317 of the GCL is not deemed to
be exclusive of any other rights to which agents of the Company seeking
II-2
<PAGE> 19
indemnification may be entitled under any bylaw, agreement, vote of shareholders
or disinterested directors, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent such
additional rights are authorized in the Company's articles. Article IV of the
Company's Amended and Restated Articles of Incorporation provides that the
liability of the directors of the Company for monetary damages shall be
eliminated to the fullest extent permissible under California law. Article V of
the Company's Amended and Restated Articles of Incorporation authorizes the
Company to provide for indemnification of its agents for breach of duty to the
Company and its shareholders, through bylaw provisions or through agreements
with such agents, or both, in excess of the indemnification otherwise permitted
by Section 317 of the GCL, subject to the limits on such excess indemnification
set forth in Section 204 of the GCL.
Section 5.7 of the Company's bylaws provides that the Company will
indemnify each of its agents against expenses, judgments, fines, settlements or
other amounts, actually and reasonably incurred by such person by reason of such
person having been made or threatened to be made a party to a proceeding to the
fullest extent permissible by the provisions of Section 317 of the GCL and the
Company will advance the expenses reasonably expected to be incurred by such
agent upon receipt of an undertaking that the agent will reimburse the Company
unless it is ultimately determined that the agent is entitled to be indemnified
against expenses reasonably incurred.
The Company has obtained directors and officers insurance with a
maximum coverage of $2,000,000.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Exhibit Number
--------------
<S> <C>
5.1 Opinion of Coudert Brothers.
23.1 Consent of Singer Lewak Greenbaum & Goldstein LLP
23.2 Consent of Coudert Brothers (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4 of the initial filing of this
Registration Statement).
</TABLE>
ITEM 17. UNDERTAKINGS
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
II-3
<PAGE> 20
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement of any material change to such information in the
Registration Statement;
Provided, however, That paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liability arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 21
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS OF FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED IN THE CITY OF LOS ANGELES, STATE OF CALIFORNIA, ON JUNE 6, 1997.
MODACAD, INC.
By: /s/ JOYCE FREEDMAN
----------------------------------
Joyce Freedman, President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Joyce Freedman and Lee Freedman,
or either of them, his or her attorneys-in-fact and agents, each with full power
of substitution for him or her and in his or her name, place and stead, in any
and all capacities, to sign any or all amendments to this Registration
Statement, and to file the same with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each of said attorneys-in-fact and agents full power and authority to do so and
perform each and every act and thing requisite and necessary to be done in
connection with this Registration Statement, as fully to all intents and
purposes as he or her might or could do in person, hereby ratifying and
confirming all that either of said attorneys-in-fact and agents, or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT, THIS
REGISTRATION STATEMENT WAS SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
President and Director June 6, 1997
/s/ JOYCE FREEDMAN (Principal Executive Officer)
- -------------------------------------
Joyce Freedman
Vice President, Finance and June 6, 1997
Director (Principal Financial and
/s/ LEE FREEDMAN Accounting Officer)
- -------------------------------------
Lee Freedman
Director and
/s/ MAURIZIO VECCHIONE * Executive Vice President June 6, 1997
- -------------------------------------
Maurizio Vecchione
/s/ ANDREA VECCHIONE * Director June 6, 1997
- -------------------------------------
Andrea Vecchione
/s/ F. STEPHEN WYLE * Director June 6, 1997
- -------------------------------------
F. Stephen Wyle
/s/ PETER FRANK * Director June 6, 1997
- -------------------------------------
Peter Frank
*By: /s/ JOYCE FREEDMAN
----------------------------------
Joyce Freedman, President
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------- ------------
<S> <C> <C>
5.1 Opinion of Coudert Brothers 1
23.1 Consent of Singer Lewak Greenbaum & Goldstein LLP 3
23.2 Consent of Coudert Brothers (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4 of the initial filing
of this Registration Statement)
</TABLE>
II-5
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Numbered
Number Description Page
-------------
<S> <C> <C>
5.1 Opinion of Coudert Brothers 1
23.1 Consent of Singer Lewak Greenbaum & Goldstein LLP 3
23.2 Consent of Coudert Brothers (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-4 of the initial filing of this
Registration Statement)
</TABLE>
II-5
<PAGE> 1
EXHIBIT 5.1
June 6, 1997
ModaCAD, Inc.
1954 Cotner Avenue
Los Angeles, California 90025
Re: ModaCAD, Inc. - Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as securities counsel for ModaCAD, Inc. (the "Company") in
connection with the preparation of a registration statement on Form S-3, as
amended (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), that was filed with the Securities and Exchange
Commission (the "Commission") on May 8, 1997, in connection with the
registration of (i) 147,500 shares of the Company's Common Stock and warrants to
purchase an additional 147,500 shares of the Company's Common Stock (the "Blosch
Underlying Warrants"), all issuable upon exercise of certain warrants issued to
R. Kirk Blosch by the Company (the "Blosch Warrants"); (ii) 52,500 shares of the
Company's Common Stock issuable upon the exercise of outstanding Blosch
Underlying Warrants which were issued upon exercise of a portion of the Blosch
Warrants; (iii) 140,000 shares of the Company's Common Stock and 140,000
warrants to purchase an additional 140,000 shares of the Company's Common Stock
(the "Underwriter Underlying Warrants"), all issuable upon exercise of certain
warrants issued to W.B. McKee Securities, Inc. (the "Underwriter") by the
Company; and (iv) such indeterminate number of Blosch Underlying Warrants,
Underwriter Underlying Warrants and Common Stock as may be issuable pursuant to
the anti-dilution and adjustment provisions of the warrant pursuant to which
each such security is issuable. The Blosch Underlying Warrants, the Underwriter
Underlying Warrants and the Common Stock registered are hereinafter collectively
referred to as the "Securities."
In connection with the preparation of the Registration Statement, we
have examined such documents, instruments, records, certificates and matters as
we have considered appropriate and necessary to render this opinion. We have
assumed for the purpose of this opinion the authenticity of all documents
submitted to us as originals and the conformity with the originals of all
documents submitted to us as copies, and the genuineness of all signatures
thereon.
<PAGE> 2
ModaCAD, Inc.
June 6, 1997
Page 2
Based on the foregoing and in reliance thereon, it is our opinion that
the Securities have been duly authorized and, after the Registration Statement
becomes effective and after any post-effective amendment required by law is
duly completed, filed and becomes effective (such Registration Statement as it
finally becomes effective or, if required to be post-effectively amended, then
as it is so amended, is referred to hereinafter as the "Final Registration
Statement"), and when the applicable provisions of "Blue Sky" and other state
securities laws shall have been complied with, and when the Securities are
issued and/or sold in accordance with the prospectus forming a part of the
Final Registration Statement, the Securities will be validly issued, fully paid
and nonassessable.
We hereby consent to the inclusion of our opinion as Exhibit 5.1 to the
Registration Statement and further consent to the references to this firm in
the Registration Statement. In giving this consent, we do not hereby admit that
we are in the category of persons whose consent is required under Section 7 of
the Securities Act, or the rules and regulations of the Commission thereunder.
We are opining herein as to the
effect on the subject transaction only of United States federal law and the
internal (and not the conflict of law) laws of the State of California, and we
assume no responsibility as to the applicability thereto, or the effect thereon,
of the laws of any other jurisdiction.
Very truly yours,
/s/ COUDERT BROTHERS
--------------------------------
COUDERT BROTHERS
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 7, 1997, accompanying the financial
statements included in the Annual Report of ModaCAD, Inc. on Form 10-KSB for
the year ended December 31, 1996. We hereby consent to the incorporation by
reference of said report in the Registration Statement of ModaCAD, Inc. on Form
S-3 and to the use of our name as it appears under the caption "Experts."
/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
- ------------------------------------------
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
June 6, 1997
