<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.
       -----------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)

            California                                  95-4145930
 -------------------------------          ------------------------------------
 (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
                           ---------------------------
                           (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
                                ----------------
                                (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. [ ]

The registrant's revenues for its most recent fiscal year were $7,781,280.

The aggregate market value of the voting stock held by non-affiliates of the 
registrant was $56,532,146 based on the average bid and asked prices of $13.81 
per share as quoted on the Nasdaq National Market on March 25, 1999.

The number of outstanding shares of the registrant's common stock, as of March 
25, 1999, was 6,163,874.

Documents Incorporated by Reference: Portions of the registrant's definitive 
Proxy Statement to be delivered to shareholders in connection with their Annual 
Meeting of Shareholders to be held in June 1999 are incorporated into Part III
of this Annual Report.

Transitional Small Business Disclosure Format: Yes    No  X
                                                  ---    ---           
<PAGE>

                                    PART III

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

Directors

The Directors of the Company,  and certain information about them, are set forth
below:

<TABLE>
<CAPTION>
<S>                        <C>               <C>
Name                       Age                      Positions
Joyce Freedman              64               Chairman of the Board and Chief 
                                             Executive Officer
Maurizio Vecchione          37               President, Chief Operating Officer 
                                             and Director
Lee Freedman                75               Vice President, Finance, Chief 
                                             Financial Officer and Director
Andrea Vecchione            42               Secretary and Director
F. Stephen Wyle(1)(2)       55               Director
Peter Frank(1)              73               Director
Leslie Saleson(1)(2)        46               Director
</TABLE>
-----------------------------
(1)  Member of the Compensation Committee
(2)  Member of the Audit Committee

Joyce  Freedman is a founder of the  Company and has served as a director  since
its  incorporation  in February 1988. Ms. Freedman has served as Chairman of the
Board of the  Company  since  its  incorporation,  a  position  to which she was
formally  elected in January  1996.  From February  1988 to December  1997,  Ms.
Freedman  also served as President of the Company and, in January  1998,  became
Chief  Executive  Officer.  From January 1986 to February 1988, Ms. Freedman was
the Chief Executive  Officer of Compu-Arch,  a sole  proprietorship in which she
authored and marketed computer software for architects,  interior  designers and
engineers.  Ms. Freedman holds a Master of Architecture degree from the Southern
California  Institute  of  Architecture  and  engaged in private  practice as an
architect  from December 1984 to January 1986.  Ms. Freedman  is the wife of Lee
Freedman.

Maurizio  Vecchione  is a founder  of the  Company  and has served as a director
since its  incorporation.  From February 1988 to December  1997, he served as an
Executive Vice President of the Company and became President and Chief Operating
Officer of the Company in January 1998.  From March 1982 to February  1988,  Mr.
Vecchione held various executive,  technical and marketing  positions with CAECO
Inc.   (subsequently  acquired  by  Mentor  Graphics),  a  large  computer-aided
design/computer-aided  manufacture software developer,  Tektronix Corporation, a
Fortune  500  computer  graphics  systems  and   instrumentation   manufacturer,
Photomatrix  Engineering,  Inc.,  an  imaging  and  computer  graphics  software
developer,  and Proprietary Software Systems Inc., an imaging software developer
and  subsidiary of General  Dynamics,  a defense  contractor.  Prior to entering
industry,  Mr.  Vecchione  performed  computer science research for a variety of
scientific   institutions,   including  the  NASA  Space   Science   Laboratory.
Mr. Vecchione is the husband of Andrea Vecchione.

Lee  Freedman  has  served  as the  Company's  Vice  President,  Finance,  Chief
Financial Officer and as a director since its incorporation.  From 1983 to 1988,
Mr. Freedman was engaged in private practice as a business consultant. From 1957
to 1983, he was employed by HRT Industries  Inc., then a New York Stock Exchange
listed  company,  which  operated  a chain of  discount  department  and  retail
specialty stores,  and held the position of Executive Vice President for most of
that time.  Mr. Freedman is the husband of Joyce Freedman.  

                                       1
<PAGE>

Andrea  Vecchione has served as the Company's  Secretary and as a director since
its  incorporation.  Since 1991,  she has served as Executive Vice President and
Treasurer  and a  director  of  Synthetic/A/Ltd.,  a small  multimedia  software
developer which she and her husband, Maurizio Vecchione, own.

F. Stephen Wyle became a director of the Company in January 1996.  Since January
1999,  Mr.  Wyle  has  been  Chairman  and  Chief  Executive   Officer  of  Wyle
Telemedicine,  a  developmental  stage  company  producing  portable  diagnostic
telemedicine for primary health care application.  From December 1994 to January
1999, Mr. Wyle was Chairman of Wyle Laboratories,  a diversified engineering and
testing company serving aerospace,  nuclear power and commercial  markets.  From
February 1991 to December 1994, Mr. Wyle was an independent consultant providing
strategic  marketing and financing  assistance to early-stage,  technology-based
companies.  From October 1988 to February  1991,  Mr. Wyle was the  President of
Trancel  Corporation  (formerly  Cell  Biotech,  Inc.)  which was engaged in the
development of a long-term treatment for Type I diabetes.


Peter Frank became a director of the Company in November  1996.  Since 1965, Mr.
Frank has been President of Los Angeles-based Managing Directors, Ltd., which he
founded as an independent investment banking firm specializing in the funding of
small cap companies as well as in mergers and  acquisitions.  In 1993, Mr. Frank
founded,  and is President of, Baltic Treasures,  Ltd. (operating as Bamburi), a
manufacturer  and importer of antique  furniture  from Latvia and Western Russia
which is sold to retail stores in the United States.

Leslie Saleson became a director of the Company in November 1997. Since November
1998,  Ms.  Saleson has been  President  and Chief  Operating  Officer of Abbott
Resource Group, Inc., a privately held company based in Irvine, California. From
April 1997 to November 1998,  Ms.  Saleson  served as an  independent  financial
advisor to several  corporations.  From February 1994 to April 1997, Ms. Saleson
was a managing  director of The Westcott Group, a Beverly  Hills-based  merchant
bank. From 1990 to 1993 Ms. Saleson was an owner, Co-Chief Executive Officer and
Chief  Financial  Officer of Pogens,  Inc., a packaged cookie  manufacturer.  In
1981, Ms. Saleson founded Saleson and Company, Inc., an investment banking firm,
where she served as President until 1990.

Executive Officers

The executive officers of the Company,  and certain  information about them, are
as follows:
<TABLE>
<CAPTION>
<S>                  <C>       <C>
   Name              Age               Positions
Joyce Freedman        64       Chairman of the Board and Chief Executive Officer
Maurizio Vecchione    37       President, Chief Operating Officer and Director
Lee Freedman          75       Vice President, Finance, Chief Financial Officer 
                               and Director
Linda Freedman        40       Vice President, Marketing
Steven Gentry         39       Vice President, Engineering
</TABLE>

Officers are appointed by and serve at the discretion of the Board of Directors.
All officers were  appointed  for terms ending upon their deaths,  resignations,
removal  or  appointment  and  qualification  of a  successor.  For  information
concerning Joyce Freedman,  Maurizio Vecchione and Lee Freedman, see "Directors"
above.

Linda  Freedman has served in the capacity of Vice  President,  Marketing of the
Company  since  October  1988, a position to which she was  formally  elected in
January 1996.  From February 1984 to September  1988,  she served as Advertising
Director for Baker  Communications,  Inc., which publishes  Beverly Hills 213, a
Beverly Hills-based  newspaper.  Linda Freedman is the daughter of Joyce and Lee
Freedman.

                                       2
<PAGE>

Steven Gentry joined the Company in June 1992 as a Senior  Product  Manager,  in
March 1995 became the Company's  Director of  Engineering,  in April 1997 became
the Company's  Director of Research and Development,  in October 1997 became the
Company's  Chief  Technology  Officer and, in February 1998 was appointed to the
position of Vice President, Engineering. From June 1989 to June 1992, Mr. Gentry
was  self-employed,  using the trade name Segtec, and engaged in the development
of software for the consumer entertainment market.

Section 16(a) Beneficial Ownership Reporting Compliance

Under  Section  16(a) of the  Securities  Exchange Act of 1934,  as amended (the
"Exchange Act"),  the Company's  directors and officers and persons holding more
than ten percent of the  Company's  Common  Stock are  required to report  their
ownership of the Company's Common Stock and any changes in that ownership to the
Securities and Exchange Commission (the "SEC"). The specific due dates for these
reports  have been  established  by the SEC,  and the  Company  is  required  to
disclose  in this report any failure to file by the  established  dates.  To the
knowledge  of the  Company  and based  solely on a review of the  Section  16(a)
reports  furnished to the Company during 1998, none of the Company's  directors,
officers or persons holding more than ten percent of the Company's  Common Stock
were delinquent in filing reports pursuant to Section 16(a) of the Exchange Act.

                                       3
<PAGE>

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             0
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             0
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 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 pays no dividends on Common Stock.

                                       4
<PAGE>

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 to   Base Price   Expiration
    Name         Options Granted     to Employees in       ($/Sh)       Date
                                      Fiscal Year (1)
--------------------------------------------------------------------------------
<S>                  <C>                 <C>             <C>            <C>
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(2)(3)        1.5%(4)          $9.50          8/27/07
Linda Freedman       50,000(2)           7.7%(4)          $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) 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.

(3) 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.

(4) The Company  repriced  options to purchase an aggregate of 649,000 shares in
1998.

                                       5
<PAGE>

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      0             0           0
Maurizio Vecchione   0          0        37,227      0             0           0
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,  Andrea Vecchione,  Leslie
Saleson,  and Peter  Frank,  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 Andrea  Vecchione,
Peter Frank and Leslie  Saleson  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.

                                       6
<PAGE>


Item 11.   Security Ownership of Certain Beneficial Owners and Management

The  following  table  sets  forth  certain  information   regarding  beneficial
ownership of the Company's  Common Stock as of April 9, 1999 by: (i) each person
who is known by the Company to own beneficially  more than 5% of the outstanding
shares of the  Company's  Common Stock;  (ii) each of the  Company's  directors;
(iii) each of the executive  officers named in the Summary  Compensation  Table;
and (iv) the current directors and executive officers of the Company as a group:

<TABLE>
<CAPTION>
                                  
Name and Address of                Amount and Nature of
Beneficial Owner (1)              Beneficial Ownership (2)   Percent of Class(3)
-------------------------------   ------------------------   -------------------
<S>                                       <C>                            <C>
Joyce Freedman                            1,593,474 (4)                  21.3%
Lee Freedman                              1,364,134 (5)                  18.2%
Intel Corporation                           581,534 (6)                   7.7%
2200 Mission College Blvd
Santa Clara, CA  95052
Maurizio and Andrea Vecchione               458,846 (7)                   6.2%
Castle Creek Technology Partners, LLC       455,218 (8)                   6.2%
77 W. Wacker Drive, Suite 4040
Chicago, IL 60601
Steven Gentry                               166,490 (9)                   2.2%
Linda Freedman                               84,596 (10)                  1.1%
F. Stephen Wyle                               6,000 (11)                    *
128 Maryland Street
El Segundo, California  90245
Peter Frank                                   2,000 (12)                    *
9903 Santa Monica Blvd., Suite 327
Beverly Hills, California  90210
Leslie Saleson                                4,000 (13)                    *
9925 Anthony Place
Beverly Hills, California 90210
All current directors and officers        2,455,358                      31.6%
as a group (9 persons)
</TABLE>
____________________

* Less than one percent.

(1) The business address for Joyce Freedman,  Lee Freedman,  Maurizio and Andrea
Vecchione,  Steven Gentry and Linda  Freedman is 3861  Sepulveda  Blvd.,  Culver
City, California 90230.

(2) Except to the extent the shares owned are subject to community property laws
or as otherwise indicated,  beneficial ownership represents sole voting and sole
investment  power with  respect to the  Company's  Common  Stock.  Shares that a
person is deemed to  beneficially  own by reason of having  the right to acquire
within 60 days are deemed to be  outstanding  for the purpose of  computing  the
percentage of such person's beneficial ownership.

(3) Based on 7,399,515 total shares outstanding as of April 9, 1999.

                                       7
<PAGE>

(4) Consists of 369,292 shares held by Joyce  Freedman as her separate  property
and with respect to which she does not share voting or investment power with her
husband,  Lee Freedman,  1,136,955 shares held jointly by Joyce Freedman and Lee
Freedman,  as to which shares they share  voting and  investment  power,  37,227
shares  which  may  be  purchased  by  Joyce  Freedman   pursuant  to  currently
exercisable  stock  options at an  exercise  price of $20.06  per share,  25,000
shares which may be purchased by Lee Freedman pursuant to currently  exercisable
stock  options at an exercise  price of $15.88 per share and 25,000 shares which
may be purchased by Lee Freedman pursuant to currently exercisable stock options
at an exercise price of $16.13 per share.

(5) Consists of 139,952 shares held by Lee Freedman as his separate property and
with  respect  to which he does not share  voting or  investment  power with his
wife,  Joyce Freedman,  1,136,955  shares held jointly by Lee Freedman and Joyce
Freedman,  as to which shares they share  voting and  investment  power,  25,000
shares which may be purchased by Lee Freedman pursuant to currently  exercisable
stock options at an exercise price of $15.88 per share,  25,000 shares which may
be purchased by Mr. Freedman pursuant to currently  exercisable stock options at
an exercise price of $16.13 per share,  and 37,227 shares which may be purchased
by Joyce Freedman pursuant to currently exercisable stock options at an exercise
price of $20.06 per share.

(6)  Consists  of  455,218  shares of  Common  Stock  held by Intel  Corporation
("Intel")  and 126,316  shares which may be purchased by Intel upon the exercise
of a currently  exercisable five-year warrant at an exercise price of $19.00 per
share.  Amount excludes 538,674 shares of Common Stock which may be purchased by
Intel,  subject to shareholder  approval at the Company's  1999 Annual  Meeting,
upon the  exercise of common stock  purchase  warrants  which were  purchased by
Intel in April, 1999. If such shares had been included in this table, the amount
of Intel's  beneficial  ownership and percent of class held by Intel as of April
9, 1999 would be 1,120,208 shares and 13.9%, respectively.

(7)  Consists of 417,619  shares of Common  Stock held  jointly by Maurizio  and
Andrea  Vecchione,  37,227  shares which may be purchased by Maurizio  Vecchione
pursuant to currently  exercisable  stock options at an exercise price of $20.06
per share,  and 4,000 shares which may be purchased by Andrea Vecchione upon the
exercise of vested and currently  exercisable  warrants at an exercise  price of
$9.50 per share.

(8) Consists of 455,218  shares of Common Stock held by Castle Creek  Technology
Partners LLC ("Castle Creek"). Excludes 538,674 shares of common stock which may
be purchased by Castle Creek subject to shareholder approval,  upon the exercise
of common stock purchase  warrants which were purchased by Castle Creek in April
1999.  If such  shares had been  included  in this  table,  the amount of Castle
Creek's  beneficial  ownership  and percent of class held by Castle  Creek as of
April 9, 1999 would be 993,892  shares and 12.5%,  respectively.  Pursuant  to a
management agreement,  Castle Creek Partners,  LLC may be deemed to beneficially
own the securities held by Castle Creek. Castle Creek Partners, L.L.C. disclaims
such beneficial ownership.  John Ziegelman and Daniel Asher, as managing members
of Castle Creek Partners,  L.L.C., may be deemed to be beneficial owners of such
securities. Messrs. Asher and Ziegelman disclaim such beneficial ownership.

(9) Consists of 6,490 shares of Common Stock held by Mr. Gentry,  135,000 shares
which may be purchased by Mr.  Gentry  pursuant to currently  exercisable  stock
options at an exercise price of $5.00 per share,  and 25,000 shares which may be
purchased by Mr. Gentry  pursuant to currently  exercisable  stock options at an
exercise price of $9.50 per share.

(10)  Consists of 2,596  shares of Common Stock held by Linda  Freedman,  79,000
shares  which  may  be  purchased  by  Linda  Freedman   pursuant  to  currently
exercisable  stock  options  at an  exercise  price of $9.50 per share and 3,000
shares  which  may  be  purchased  by  Linda  Freedman   pursuant  to  currently
exercisable stock options at an exercise price of $5.87 per share.

(11) Consists of 2,000 shares of Common Stock which may be purchased by Mr. Wyle
upon the exercise of vested and  currently  exercisable  warrants at an exercise
price of $4.25  per  share,  and  4,000  shares  of  Common  Stock  which may be
purchased  by Mr.  Wyle upon the  exercise of vested and  currently  exercisable
warrants at an exercise price of $9.50 per share.

(12)  Consists of 2,000  shares of Common  Stock which may be  purchased  by Mr.
Frank upon the  exercise  of vested and  currently  exercisable  warrants  at an
exercise price of $9.50 per share.

(13)  Consists of 4,000  shares of Common  Stock which may be  purchased  by Ms.
Saleson upon the  exercise of vested and  currently  exercisable  warrants at an
exercise price of $9.50 per share. 

                                       8
<PAGE>

Item 12. Certain  Relationships and Related Transactions

The Company has  employment  agreements  with certain  executive  officers.  See
"Executive Compensation-Employment Contracts" above.

                                       9