<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB/A
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 0-28088
MODACAD, INC.
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(Exact name of small business issuer as specified in its charter)
California 95-4145930
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
3861 Sepulveda Blvd., Culver City 90230
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(310) 751-2100
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(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
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(Title of Class)
Check whether the registrant (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 there is no 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. [X]
The registrant's revenues for its most recent fiscal year were $6,681,280.
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $48,277,215 based on the average bid and asked prices of $9.06
per share as quoted on the Nasdaq National Market on May 26, 1999.
The number of outstanding shares of the registrant's common stock, as of May 26,
1999, was 7,401,515.
Transitional Small Business Disclosure Format: Yes No X
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PART III
Item 10. Executive Compensation
Summary Compensation Table
The following table summarizes the compensation paid during each of 1998, 1997
and 1996 to the Company's chief executive officer and other executive officers
whose compensation exceeded $100,000 in 1998:
<TABLE>
<CAPTION>
Long-Term
Other Compensation Awards
Annual -------------------------
Compen- Restricted Securities
Name and Fiscal sation Stock Awards Underlying
Principal Position Year Salary Bonus (1) (2) Options
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joyce Freedman 1998 $200,000 $100,000 $7,200 $ 0 200,000
Chairman of the 1997 $150,000 $20,999 $4,800 $ 0 37,227
Board and Chief 1996 $150,000 $36,619 $4,800 $ 0 0
Executive Officer
Maurizio Vecchione 1998 $200,000 $100,000 $7,200 $ 0 200,000
President & Chief 1997 $150,000 $20,999 $4,800 $ 0 37,227
Operating Officer 1996 $150,000 $36,619 $4,800 $ 0 0
Lee Freedman 1998 $125,000 $ 0 $4,800 $ 0 50,000
Vice President, 1997 $125,000 $ 0 $4,800 $ 0 0
Finance & Chief 1996 $125,000 $ 0 $4,800 $ 0 0
Financial Officer
Linda Freedman 1998 $125,000 $ 0 $4,800 $ 0 85,000(3)
Vice President, 1997 $100,000 $32,261 $4,800 $ 0 55,000
Marketing 1996 $106,029 $24,710 $4,800 $25,965 0
Steven Gentry 1998 $120,000 $ 0 $ 0 $39,687(4) 25,000
Vice President, 1997 $100,000 $ 0 $ 0 $ 0 0
Engineering 1996 $90,833 $ 0 $ 0 $19,470 180,000
</TABLE>
____________________
(1) Other Annual Compensation consists of automobile allowances.
(2) As of December 31, 1998, Linda Freedman held 2,596 restricted shares valued
at $44,132, and Steven Gentry held 6,490 restricted shares valued at $110,330,
which values are based on the market value of the Company's Common Stock of
$17.00 per share at December 31, 1998. The Company currently pays no dividends
on Common Stock.
(3) Consists of options to purchase 25,000 shares granted during 1998 and
options to purchase 60,000 shares granted in previous years which were repriced
during 1998.
(4) Consists of 2,597 shares of restricted Common Stock granted to Steven Gentry
during 1998, all of which shares were vested as of December 31, 1998. The
Company currently pays no dividends on Common Stock.
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Option Grants in Last Fiscal Year
The following table sets forth information concerning option grants during
fiscal year 1998 to each of the executive officers named in the Summary
Compensation Table who received stock option grants in 1998. The Company has not
granted any stock appreciation rights (SARs). Unless otherwise indicated in the
footnotes, all options had vested and were exercisable as of December 31, 1998.
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------------
Number of Percent of Total Exercise or
Shares Underlying Options Granted Base Price Expiration
Name Options Granted to Employees in ($/Sh) Date
Fiscal Year (1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joyce Freedman 200,000(2) 23.8% $15.88 4/7/08
Maurizio Vecchione 200,000(2) 23.8% $15.88 4/7/08
Lee Freedman 25,000 3.0% $15.88 4/7/08
Lee Freedman 25,000 3.0% $16.13 4/15/08
Linda Freedman 25,000 3.0% $9.50 4/15/08
Linda Freedman 10,000(3)(4) 1.5%(5) $9.50 8/27/07
Linda Freedman 50,000(3) 7.7%(5) $9.50 10/26/07
Steven Gentry 25,000 3.0% $9.50 4/15/08
</TABLE>
____________________
(1) The Company granted options to purchase an aggregate of 840,000 shares to
employees in 1998.
(2) As of December 31, 1998, no options had vested or become exercisable.
(3) Represent options granted during 1998 in connection with option repricings,
which repricings were effected through the cancellation of options granted in
previous fiscal years and the grant of repriced options.
(4) As of December 31, 1998, 4,000 options had vested and were exercisable, and
the balance will vest and become exercisable in three 2,000 share installments
on October 24 of 1999, 2000 and 2001.
(5) The Company repriced options to purchase an aggregate of 649,000 shares in
1998.
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Option Exercises and Year End Value Table
The following table sets forth information concerning option exercises during
the last fiscal year by the executive officers named in the Summary Compensation
Table and the value of options held by such officers as of December 31, 1998:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Options In-the-Money Options
at December 31, 1998 at December 31, 1998
(1)
-------------------- ---------------------
Shares Value
Acquired Realized
Name on Exercise ($) Unexercisable Unexercisable
(#) Exercisable Exercisable
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joyce Freedman 0 0 37,227 200,000 0 $224,000
Maurizio Vecchione 0 0 37,227 200,000 0 $224,000
Lee Freedman 0 0 50,000 0 $50,000 0
Linda Freedman 0 0 82,000 6,000 $625,890 $45,000
Steven Gentry 35,000 $406,875 160,000 0 $1,807,500 0
</TABLE>
____________________
(1) Dollar value is based on the market value of the Company's Common Stock of
$17.00 per share at December 31, 1998 minus the per share exercise price.
Compensation of Directors
Three non-employee members of the Board of Directors, Leslie Saleson, Peter
Frank and Andrea Vecchione, received compensation in the form of warrants to
purchase shares of Common Stock from the Company in 1998 for their service on
the Board. In October 1998, the Company granted to each of Peter Frank, Leslie
Saleson and Andrea Vecchione ten-year warrants to purchase 6,000 shares of
Common Stock at an exercise price of $9.50 per share, 2,000 shares of which
vested immediately and the balance of which vest in two 2,000 share installments
on October 9 of 1999 and 2000. In October 1998, the Company repriced five-year
warrants which had been granted to F. Stephen Wyle during 1997 to purchase a
total of 8,000 shares of Common Stock, changing the exercise price on such
warrants from $16.375 per share to $9.50 per share, which price was
approximately equal to the average closing price of the Company's Common Stock
on the NASDAQ National Market for the five trading days ended October 9, 1998.
Also in October 1998, the Company repriced ten-year warrants that had been
granted during 1997 to each of Leslie Saleson and Andrea Vecchione to purchase
2,000 shares of Common Stock at an exercise price of $17.25 per share, changing
such exercise price to $9.50 per share, which price was approximately equal to
the average closing price of the Company's Common Stock on the NASDAQ National
Market for the five trading days ended October 9, 1998.
Employment Contracts
Effective January 1, 1998, the Company entered into employment agreements with
Joyce Freedman, as Chairman of the Board and Chief Executive Officer, and
Maurizio Vecchione, as President and Chief Operating Officer, which have terms
expiring December 31, 2005. The employment agreements each provide for an annual
salary of $200,000, a signing bonus of $100,000 and a monthly automobile
allowance of $600. Each employment agreement further provides for an annual
performance bonus payable for each calendar year during the term of the
agreement, in an amount to be determined by the Compensation Committee of the
Board. In addition, in connection with the employment agreements, the Company
granted to each of Ms. Freedman and Mr. Vecchione a five-year option to purchase
200,000 shares of Common Stock. Such options vest and become exercisable as
follows: if the closing sale price of the Company's Common Stock is greater than
$10 per share for a period of 20 consecutive trading days in any fiscal year
during the term of the employment agreement, options to purchase 50 shares of
Common Stock for each $1,000 of net income (before deductions for taxes and
executive bonuses) of the Company in such calendar year vest and become
exercisable at an exercise price equal to the market value per share on the
grant date. No options granted under these employment agreements vested or
became exercisable for either Ms. Freedman or Mr. Vecchione during 1998.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company's Board of Directors currently
consists of F. Stephen Wyle, Leslie Saleson and Peter Frank. None of these
individuals was an officer or employee of the Company at any time during the
1998 Fiscal Year or at any other time. No current executive officer of the
Company has ever served as a member of the board of directors or compensation
committee of any other entity that has or has had one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
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SIGNATURE
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ModaCAD, Inc.
Date: May 28, 1999 By: /s/ JOYCE FREEDMAN
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Joyce Freedman
Chairman of the Board and
Co-Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ JOYCE FREEDMAN Chairman of the Board and May 28, 1999
- ------------------------ Co-Chief Executive Officer --------------
Joyce Freedman Date
/s/ MAURIZIO VECCHIONE President, May 28, 1999
- ------------------------ Co-Chief Executive Officer --------------
Maurizio Vecchione and Director Date
/s/ LEE FREEDMAN Vice President, Finance, May 28, 1999
- ------------------------ Chief Financial Officer and ---------------
Lee Freedman Director Date
/s/ ANDREA VECCHIONE Secretary and Director May 28, 1999
- ------------------------ --------------
Andrea Vecchione Date
/s/ STEPHEN WYLE Director May 28, 1999
- ------------------------ --------------
Stephen Wyle Date
/s/ PETER FRANK Director May 28, 1999
- ------------------------ --------------
Peter Frank Date
/s/ LESLIE SALESON Director May 28, 1999
- ------------------------ --------------
Leslie Saleson Date
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