<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the period ended September 30, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the transition period from ______________ to ______________
Commission File Number: 0-16052
Quadrax Corporation
(Exact name of registrant as specified in its charter)
Delaware 05-0420158
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
300 High Point Avenue Portsmouth, Rhode Island 02871
(Address of principal executive offices) (Zip Code)
(401) 683-6600
(Registrant's telephone number, including area code)
----------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at October 31, 1995
----------------------- -------------------------------
<S> <C>
Common Stock, par value 16,462,084 shares
$.000009 per share
</TABLE>
-1-
<PAGE> 2
QUADRAX CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
<S> <C>
Item 1 - Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at September 30, 3-4
1995 and at December 31, 1994
Condensed Consolidated Statements of Operations for the 5
three months and nine months ended September 30, 1995,
and September 30, 1994
Condensed Consolidated Statements of Cash Flows for the 6-7
nine months ended September 30, 1995, and September
30, 1994
Notes to Condensed Consolidated Financial Statements 8-11
Item 2 - Management's Discussion and Analysis of Financial 12-14
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
-2-
<PAGE> 3
QUADRAX CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,146,248 $ 382,721
Accounts receivable 1,048,786 224,180
Inventories:
Raw materials 316,344 1,059,213
Work in process 732,281 212,573
---------- ----------
1,048,625 1,271,786
Other current assets 211,870 81,756
---------- ----------
TOTAL CURRENT ASSETS 3,455,529 1,960,443
---------- ----------
Property and equipment, at cost:
Machinery and equipment 4,117,905 3,875,955
Office equipment 820,401 689,944
Leasehold improvements 1,038,075 1,035,513
---------- ----------
5,976,381 5,601,412
Less accumulated depreciation and amortization 2,808,529 2,984,104
---------- ----------
NET PROPERTY AND EQUIPMENT 3,167,852 2,617,308
---------- ----------
Receivables from officers and employees (Note 6) - 0 - 54,728
Non-competition agreement (Note 6) - 0 - 641,250
Goodwill (Note 6) - 0 - 709,142
Other assets 367,855 507,855
Wimbledon license agreement, net of amortization 566,667 600,000
Patents, net of amortization 163,543 169,437
---------- ----------
TOTAL ASSETS $7,721,446 $7,260,163
========== ==========
</TABLE>
See accompanying notes.
-3-
<PAGE> 4
QUADRAX CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,075,955 $ 1,166,178
Accrued expenses (Note 6) 1,589,738 1,547,986
Current maturities of capital lease obligations 26,382 - 0 -
Notes payable to related party 150,000 135,000
Notes payable 250,000 310,000
------------ ------------
TOTAL CURRENT LIABILITIES 3,092,075 3,159,164
Long-term capital lease obligations 64,952 - 0 -
Note payable to related party - 0 - 540,000
------------ ------------
TOTAL LIABILITIES 3,157,027 3,699,164
------------ ------------
Stockholders' equity:
Original convertible preferred stock 7 7
Class A convertible preferred stock - 0 - 0
Common stock 167 92
Additional paid-in capital 57,046,598 48,356,319
Retained earnings (deficit) (51,126,451) (44,090,478)
------------ ------------
5,920,321 4,265,940
Less:
Treasury stock, at cost: (993,009) (243,009)
Unearned compensation and deferred expenses (362,893) (123,932)
Note receivable for options (Note 6) - 0 - (338,000)
TOTAL STOCKHOLDERS' EQUITY 4,564,419 3,560,999
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,721,446 $ 7,260,163
============ ============
</TABLE>
See accompanying notes.
-4-
<PAGE> 5
QUADRAX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
Ended Ended Ended Ended
September 30, 1995 September 30, 1994 September 30, 1995 September 30, 1994
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Revenue:
Product sales $ 1,160,994 - 0 - $ 3,470,059 $ 73,300
Evaluation and testing - 0 - 291,000 - 0 - 424,036
Interest income 9,941 101 19,301 2,316
Other income - 0 - 21,230 - 0 - 21,230
------------ ----------- ------------ -----------
TOTAL REVENUE 1,170,935 312,331 3,489,360 520,882
------------ ----------- ------------ -----------
Expenses:
Cost of goods sold 768,596 0 2,526,224 41,258
Research and development 215,640 471,279 426,881 1,159,720
Selling, general and administrative 1,517,521 1,478,036 4,351,460 2,921,683
Depreciation and amortization 183,956 371,956 607,873 708,531
Interest expense 3,482 171,701 12,895 204,551
Financing related expenses - 0 - (5,491) - 0 - 1,444,360
Reserve for restructuring costs 2,600,000 - 0 - 2,600,000 - 0 -
------------ ----------- ------------ -----------
TOTAL EXPENSES 5,289,195 2,487,481 10,525,333 6,480,103
------------ ----------- ------------ -----------
NET LOSS $ (4,118,260) $(2,175,150) $ (7,035,973) $(5,959,221)
============ =========== ============ ===========
NET LOSS PER COMMON SHARE (1) $ (0.29) $ (0.40) $ (0.53) $ (1.40)
============ =========== ============ ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (1) 14,189,979 5,399,588 13,392,893 4,241,171
============ =========== ============ ===========
</TABLE>
(1) Gives effect for all periods to a 1-for-10 reverse split effective July
20, 1994. See Note 6.
See accompanying notes.
-5-
<PAGE> 6
QUADRAX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
September 30, 1995 September 30, 1994
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(7,035,973) $(5,959,221)
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation & amortization of fixed assets 537,660 708,531
Amortization of intangibles 62,865 - 0 -
Amortization of unearned compensation 61,070 - 0 -
Amortization of deferred expense 191,430 189,152
Common stock issued for expenses 529,864 812,447
Write-off of goodwill 685,504 - 0 -
Cancellation of indebtedness - 0 - 107,342
Effect on cash flows of changes in assets and liabilities:
Accounts receivable (824,606) 29,623
Inventories 223,161 (20,746)
Prepaid expenses and other assets (130,114) (38,260)
Receivables/payables from related parties (300,000) (1,420,000)
Accounts payable (90,223) 67,448
Accrued expenses 68,134 494,446
Non-current liabilities - 0 - 348,995
----------- -----------
Net cash used in operating activities (6,021,228) (4,680,243)
----------- -----------
Cash flows from investing activities:
Notes receivable - officers and employees 54,728 - 0 -
Capital expenditures, net (374,969) (366,781)
Other intangible assets - 0 - (9,570)
Payments for businesses acquired
net of cash acquired 140,000 - 0 -
----------- -----------
Net cash provided by (used in) investing activities (180,241) (376,351)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of common stock options 25,300 - 0 -
Buy back of original preferred stock - 0 - (3)
Sales of common stock 5,569,162 4,806,998
Issuance of preferred stock 1,339,200 - 0 -
Issuance of debt 91,334 1,777,001
Repayment of debt (60,000) (1,250,000)
----------- -----------
Net cash provided by financing activities 6,964,996 5,333,996
----------- -----------
Net increase in cash and cash equivalents 763,527 277,402
Cash and cash equivalents at beginning of period 382,721 668,781
----------- -----------
Cash and cash equivalents at end of period $ 1,146,248 $ 946,183
=========== ===========
</TABLE>
See accompanying notes
-6-
<PAGE> 7
QUADRAX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
(UNAUDITED)
SUPPLEMENTAL SCHEDULE OF SIGNIFICANT NON-CASH TRANSACTIONS:
1995:
The Company assumed $750,000 of debt due its former Chairman from Conagher
& Co., Inc. (See Note 4) , for Conagher's purchase of the original
preferred stock in 1994.
1994:
The Company issued common stock to Applied Laser Systems, Inc. to reduce
principal indebtedness and accrued interest totaling $958,094.
-7-
<PAGE> 8
QUADRAX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited Condensed Consolidated Financial Statements presented herein
have been prepared in accordance with the instructions to Form 10-Q and do
not include all of the information and note disclosures required by
generally accepted accounting principles. In the opinion of management,
such condensed consolidated financial statements include all adjustments
necessary to present fairly the Company's financial position as of
September 30, 1995 and the results of operations for the nine and three
months ended September 30, 1995 and September 30, 1994. The results of
operations for the nine and three month periods ended September 30, 1995
may not be indicative of the results that may be expected for the year
ending December 31, 1995. It is suggested that these Condensed Consolidated
Financial Statements be read in conjunction with the Consolidated Financial
Statements and the notes thereto included in the Company's latest annual
report to the Securities and Exchange Commission on Form 10-KSB, as
amended, for the year ended December 31, 1994.
The Company converted its fiscal year, effective December 31, 1994, from a
52-53 week period ending on the Sunday closest to December 31 to a calendar
year ending December 31. By accounting for its activities on a 52-53 week
period in prior years, its fiscal year end and the fiscal quarters did not
necessarily fall on the respective month-ends for each fiscal quarter. All
references to years in these notes to Condensed Consolidated Financial
Statements represent fiscal years unless otherwise noted.
2. Notes Payable
The Company's note payable is a non-interest bearing note for $250,000 due
regarding the acquisition of certain assets and liabilities of Time Sports,
Inc., dba the Wimbledon division.
3. Shareholders Equity
The Company's capital shares are as follows:
Original Convertible Preferred Stock, $.01 par value, 1,172 shares
authorized at September 30, 1995 and December 31, 1994, 318 and 516 shares
issued and outstanding at September 30, 1995 and December 31, 1994,
respectively. During the nine months ended September 30, 1995, 198 shares
of the Original Convertible Preferred Stock were converted to 75,268 shares
of Common Stock.
Class A Convertible Preferred Stock, First Series, $10.00 par value,
300,000 shares and -0- shares authorized at September 30, 1995 and December
31, 1994, respectively, and -0- shares issued and outstanding at September
30, 1995 and December 31, 1994. During the three month period ending
September 30, 1995, 150,000 shares of Class A Convertible Preferred Stock
were converted into 1,489,946 shares of Common Stock.
Common Stock, $.000009 par value, 90,000,000 shares authorized at September
30, 1995 and December 31, 1994, 16,876,048 and 10,249,066 shares issued at
September 30, 1995 and December 31, 1994, respectively and 16,362,084 and
9,928,261 shares outstanding at September 30, 1995 and December 31, 1994,
respectively.
-8-
<PAGE> 9
On July 20, 1994, the Company amended its Certificate of Incorporation
to provide for a 1-for-10 reverse stock split, effective July 20, 1994.
All data regarding numbers of shares of Common Stock and related per
share amounts in the accompanying and notes thereto have been adjusted
to reflect this reverse split.
4. Changes in Control
On February 13, 1995, the Company entered into an agreement with
Pattinson Hayton, III, the Company's former Chairman, and two of his
affiliated companies, Conagher & Co., Inc., a California corporation,
Allied-Asian Consolidated Limited, a Hong Kong corporation, Richard A.
Fisher, who preceded Mr. Hayton as the Company's Chairman of the
Board, and who was also the Company's former Chief Executive Office
and General Counsel, and James J. Palermo, the Company's current
Chairman of the Board and Chief Executive Officer. The details of
this transaction have been described in the Company's Form 10-KSB for
the fiscal year 1994 (See Changes in Control and Related Transactions
and Note 10 to the Consolidated Financial Statements -- Changes in
Control).
5. Related Party Transactions
During the nine months ended September 30, 1995, the Company's former
Chief Executive Officer, Richard A. Fisher, exercised options covering
216,326 shares of the Company's common stock by delivering notes
therefore aggregating $336,441. These notes are payable with interest
in five equal annual installments.
In connection with the sale of certain securities transferring control
of the Company from Pattinson Hayton, III and his affiliated corporate
entities (See Note 4 above), the Company assumed the obligation of
Conagher & Co. under a promissory note to pay Mr. Fisher $750,000 for
convertible preferred stock which he had previously sold to Conagher &
Co. The convertible preferred stock was transferred in trust for the
benefit of the common stockholders. The note is payable in monthly
installments of $75,000 plus interest, over a 10 month period
commencing April 1995, provided that payments are not due if the
Company does not have working capital of at least $500,000, and
provided further that additional payments are due if the Company
receives certain levels of additional equity financing. For the
period ending September 30, 1995, the Company had paid $300,000 under
this agreement. In July, 1995 the Company agreed to amend this
agreement as follows:
1) The Company would issue 275,000 shares of new common stock to
Mr. Fisher upon the effective date of a registration statement
which was filed with the Securities and Exchange Commission in
July 1995. These shares would be covered by the registration
statement.
2) Mr. Fisher agreed that the Company could suspend further
payments on its note payable of $450,000 until such time as
the registration statement becomes effective and the common
shares described in (1), above, can be sold. In addition, the
lien placed on the original preferred stock was released, and
Mr. Fisher surrendered his right to retake control of the
board of directors in the event of the Company's delinquency
in repaying the note. Subsequent to September 30, 1995, and
in recognition of delays in the effective date of the
registration statement, the Company paid an additional
$150,000 plus all interest
-9-
<PAGE> 10
in arrears on this agreement for a total of $182,000 to Mr.
Fisher.
3) All of the common shares described in (1) are to be sold
within a period of 150 days after the registration statement
becomes effective. If the net proceeds realized on the sale
of the common stock to be issued to Mr. Fisher are less in
total than $300,000, the Company agreed to pay any deficiency
in cash. Conversely, if the net proceeds realized exceed
$300,000, the excess will be rebated to the Company.
Also during the nine months ended September 30, 1995, Mr. Fisher's
consulting agreement with the Company dated September 30, 1994 was
amended to reflect an increase in consulting fees to $12,500 per month
and on agreement to issue him an additional 100,000 shares of common
stock.
6. Reserve for Restructuring Costs
After amending the preferred stock repurchase agreement in the period
ending September 30, 1995, the Company determined that its long-term
objectives did not require the services of its former chairman and
chief executive officer, Richard A. Fisher, and other executives.
Additionally, it was determined that certain intangibles acquired in
the McManis Sports acquisition in 1994 should be revalued as of
September 30, 1995. Therefore in connection with this determination,
all such liabilities to Mr. Fisher and other executives reflected in
the books and records of the Company as of September 30, 1995 were
reserved for. The total amount reserved for at September 30, 1995 was
$2,600,000 and consists of the following:
<TABLE>
<S> <C> <C>
1) A consulting agreement for Mr. Fisher's
services from July 1, 1995 to December
31, 1996 along with the related employee
benefits, the issuance of 100,000 shares
of common stock, and interest paid in
arrears to Mr. Fisher pursuant to acquisition
of the Company's original preferred stock
(See Note 5 above). $ 482,000
2) Write-off of unamortized portion of
Mr. Fisher's non-competition agreement
from July 1, 1995 to September 30, 1999 575,000
3) Expenses and other costs incurred or to
be incurred in terminating company executives
and the Company's relationship with its
investor relations consultant. 608,000
4) Write-off of unamortized costs and related
expenses for CMI machinery and equipment
initially capitalized in 1989. 250,000
5) Write-off of unamortized portion of goodwill
associated with acquisition of McManis Sports
Associates 685,000
----------
Total Restructuring Costs $2,600,000
==========
</TABLE>
Additionally, the Company for financial statement purposes offset the
notes receivable for exercise of stock options due from its former
Chairman and Chief Executive Officer, Richard A. Fisher, in the
approximate amount of $675,000 against the notes payable due him for a
-10-
<PAGE> 11
covenant not to compete in the same approximate amount of $675,000.
The details of the original transaction have been described in the
Company's Form 10-KSB as amended for fiscal year 1994.
7. Earnings Per Share
For the fiscal periods ending September 30, 1995 and 1994, the net
loss per share was computed using the weighted number of average
shares outstanding during the respective periods. Common Stock
equivalents were not taken into account in this computation because
the impact would have been anti-dilutive.
-11-
<PAGE> 12
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for Quarter Ended September 30, 1995
as compared to Quarter Ended September 30, 1994
The Company's net loss from operations for the quarter ended September 30, 1995
("1995 Third Quarter") of approximately $4,115,000 was $1,940,000 more than its
net loss from operations of $2,175,000 for the quarter ended September 30, 1994
("1994 Third Quarter"). This increase is the result of the Company setting up
a reserve for restructuring costs for expenses that were incurred in the 1995
Third Quarter and will be incurred in future periods (see Note 6 to the
September 30, 1995 Condensed Consolidated Financial Statements).
Total revenue recognized during the 1995 Third Quarter was $1,171,000 compared
to $312,000 in the 1994 Third Quarter. This increase of $859,000 or 275
percent from the 1994 Third Quarter results from the Company shipping
additional product to its defense related customers in the approximate amount
of $600,000. Additionally, $364,000 of tennis and golf products were sold in
the 1995 Third Quarter. The Company does not now expect to earn significant
revenues from sales to defense related customers in periods subsequent to
fiscal 1995.
Costs of goods sold for the Third Quarter of 1995 of $769,000 reflect costs
associated with the defense and consumer products which the Company shipped in
the 1995 Third Quarter. The cost of goods sold for the 1994 Third Quarter was
negligible because the Company had no product revenues.
Research and development costs decreased approximately $256,000 in the 1995
Third Quarter from the comparable period in 1994. The reason for this decrease
is that the Company is no longer a development stage company and as such is
amortizing its product development costs, primarily molds, over a three year
period rather than expensing these costs as incurred.
Selling general and administrative costs increased $39,000, from $1,478,000 in
the 1994 Third Quarter to $1,517,000 in the 1995 Third Quarter.
Depreciation and amortization expense decreased approximately $188,000 in the
1995 Third Quarter from $372,000 to $184,000. The primary reason for this
decrease is that the Company wrote off approximately $188,000 worth of fixed
assets in the 1994 Third Quarter which were determined to be no longer usable.
Interest expense in the 1995 Third Quarter decreased $168,000 to approximately
$3,000. The reason for this decrease was twofold; one, the indebtedness the
Company incurred in unwinding the proposed Applied Laser Systems transaction in
1994, and two the interest incurred when the Company issued subordinated
debentures pursuant to Regulation D during the 1994 Third Quarter.
The fluctuation of $5,000 between the 1995 and 1994 Third Quarters for
financing related expenses is negligible.
-12-
<PAGE> 13
Expenses related to restructuring costs increased $2,600,000, from $-0- in the
1994 Third Quarter to $2,600,000 in the 1995 Third Quarter. The Company
established this reserve after evaluating the carrying value of its assets and
determining that certain of its intangibles, in particular goodwill associated
with the acquisition of McManis Sports Associates, were overvalued. The Company
further decided that it would not use the services of its former Chairman and
Chief Executive Officer, Richard Fisher, in future periods. Thus, in order
not to penalize future financial results for past decisions, the Company has
expensed in the 1995 Third Quarter, all future costs it is potentially
obligated to pay to Mr. Fisher.
Results of Operations for the Nine Months Ended September 30, 1995
as compared to the Nine Months Ended September 30, 1994
The Company's net loss from operations for the nine months ended September 30,
1995 ("1995 Nine Month Period") of approximately $7,036,000 was approximately
$1,077,000 greater than its net loss from operations of approximately
$5,959,000 for the nine months ended September 30, 1994 ("1994 Nine Month
Period"). This increase is the result of the Company setting up a reserve for
expenses that were incurred in the 1995 Third Quarter and will be incurred in
future periods (see Note 6, Reserve for Restructuring Costs, to the Condensed
Consolidated Financial Statements).
Total revenue recognized during the 1995 Nine Month Period was $3,489,000
compared to $521,000 in the 1994 Nine Month Period. This increase of
$2,968,000 or 570 percent from the 1994 Nine Month Period results from the
Company shipping product to its defense related customers in the amount of
$1,947,000. An additional $814,000 of Wimbledon and McManis products were sold
in the 1995 Nine Month Period.
Costs of goods sold for the 1995 Nine Month Period of $2,526,000 reflect costs
associated with the defense and consumer products which the Company shipped in
the 1995 Period. The cost of goods sold for the 1994 Period was negligible.
Research and development costs decreased $733,000, from $1,160,000 in the 1994
Nine Month Period to approximately $427,000 in the 1995 Nine Month period.
The reason for this decrease is that the Company is no longer a development
stage company and as such is amortizing its product development costs,
primarily molds, over a three year period rather than expensing these costs as
incurred.
During the 1995 Nine Month Period, the Company's selling general and
administrative costs were $4,351,000, an increase of approximately $1,430,000
from $2,922,000 in the 1994 Nine Month Period. The principal reason for this
increase is the monies the Company expended for its McManis Sports Associates
division, $583,000 and its Wimbledon division, $770,000, which were acquired in
November, 1994.
Depreciation and amortization expense decreased $101,000 from $709,000 in the
1994 Nine Month Period to $608,000 in the 1995 Nine Month Period. The
principal reason for this is that the Company wrote off approximately $190,000
worth of fixed assets in the 1994 Nine Month period. This decrease was offset
by increased amortization of intangibles in 1995 of the
-13-
<PAGE> 14
Wimbledon trademark license, $34,000, and the Richard Fisher covenant not to
compete, $68,000 (see Note 6 to the Condensed Consolidated Financial
Statements).
Interest expense decreased $192,000 in the 1995 Nine Month Period to $13,000
from $205,000 in the 1994 Nine Month Period. The reason for this decrease was
the interest paid by the Company in 1994 relating to the Applied Laser Systems
indebtedness and interest paid to Holders of subordinated debentures issued by
the Company in 1994 pursuant to Regulation D.
Financing related expenses decreased approximately $1,444,000, in the 1995 Nine
Month Period to negligible amounts from $1,444,000 in the 1994 Nine Month
Period. The reason for this fluctuation is the termination of the Applied
Laser Systems agreement whereby the Company was to be acquired by Applied Laser
Systems in the Spring of 1994. The costs associated with this termination are
professional consultant fees such as legal services and stock issued by the
Company to its investor relations consultant in lieu of fees.
Financial Position, Liquidity and Capital Resources
The Company's working capital at September 30, 1995, was $363,000, an increase
of approximately $1,562,000 from December 31, 1994 where working capital was a
deficit of $1,199,000. This increase was due to the Company's successful
efforts to raise money from outside third party sources and the additional
sales the Company has generated during the first nine months of fiscal 1995.
The Company is continuing to pursue the goal of changing its strategic
objective to becoming a vertically integrated supplier to OEM's and end users
of consumer products and components manufactured from its proprietary materials
systems.
Cash provided by financing activities during the first nine months of 1995
totaled approximately $6,965,000 compared to $5,334,000 during the same period
of 1994. The primary source of these funds in 1995 was $6,908,000 from sales
of common stock and convertible preferred stock to outside third parties. The
1994 financing monies raised were attributable to monies advanced by Applied
Laser Systems. This indebtedness was subsequently discharged by Conagher & Co.,
Inc. for the benefit of the Company.
The Company received a going concern qualification from its outside independent
auditors on its 1994 audited financial statements. While the Company believes
it has made and will continue to make substantial progress towards achieving
profitability, the results to date have not yet been sufficient to negate the
auditors' qualifications. The Company's management is of the opinion that it
will be able to continue to raise money from outside third party sources in
sufficient amounts to support its operations until the time that the forecasted
revenues for future periods materialize from programs in which the Company is
involved and are sufficient to support the Company's operations. There is no
assurance that the Company's efforts to raise money will be successful or that
the forecasts will be achieved. There will usually be differences between the
forecast and actual results because events and circumstances frequently do not
occur as expected and those differences may be material. It is difficult for
the Company to predict accurately the amount of revenues that will be
generated, the amount of expenses that will be required by its operations or
its ability to raise additional capital.
-14-
<PAGE> 15
QUADRAX CORPORATION
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K filed since August 14, 1995, the date
of the Company's Form 10Q for its second quarter.
None
-15-
<PAGE> 16
QUADRAX CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUADRAX CORPORATION
--------------------------------------
(Registrant)
November 16, 1995 /s/ James J. Palermo
- - ------------------------------------- --------------------------------------
(Date) James J. Palermo, President and
Chief Executive Officer
November 16, 1995 /s/ Edward A. Stoltenberg
- - ------------------------------------- --------------------------------------
(Date) Edward A. Stoltenberg,
Chief Financial Officer and
Principal Accounting Officer
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,146,248
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0
7
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</TABLE>
