QUADRAX CORP /DE/, SB-2, 1995-07-24

QUADRAX CORP /DE/
SB-2, 1995-07-24
ABRASIVE, ASBESTOS & MISC NONMETALLIC MINERAL PRODS

Previous: DREYFUS NEW YORK TAX EXEMPT INTERMEDIATE BOND FUND, 24F-2NT, 1995-07-24

Next: NEWELL CO, POS AM, 1995-07-24

<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

--------------

FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

--------------

QUADRAX CORPORATION
(Name of Small Business Issuer in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 3998 05-0420158
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>

300 HIGH POINT AVENUE
PORTSMOUTH, RHODE ISLAND 02871
(401) 683-6600
(Address and Telephone Number of
Principal Executive Offices and Principal Place of Business)

JAMES J. PALERMO
QUADRAX CORPORATION
300 High Point Avenue
Portsmouth, Rhode Island 02871
(401) 683-6600
(Name, Address and Telephone
Number of Agent for Service)

--------------
Copies to:

TIMOTHY P. MACDONALD MARK L. JOHNSON, ESQ.
QUADRAX CORPORATION FOLEY, HOAG & ELIOT
300 High Point Avenue One Post Office Square
Portsmouth, Rhode Island 02871 Boston, Massachusetts 02109
(401) 683-6600 (617) 832-1000
--------------

Approximate Date of Proposed Sale to the Public: As soon as practicable
after the Registration Statement becomes effective.

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 statement 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:
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
==================================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.000009 per share ............... 1,290,858 shares $2.02 $2,607,534 $900
==================================================================================================================
<FN>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933.
</TABLE>

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
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 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 registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION, DATED JULY 21, 1995

QUADRAX

1,290,858 SHARES

COMMON STOCK

All of the 1,290,858 shares (the "Shares") of common stock, $.000009 par
value ("Common Stock"), of Quadrax Corporation ("Quadrax" or the "Company") to
which this Prospectus relates may be offered for the account of the Selling
Stockholders named herein on a delayed or continuous basis. See "PRINCIPAL AND
SELLING STOCKHOLDERS." The Company will not receive any of the proceeds from
sales of the Shares by the Selling Stockholders. The Company will bear the
costs, estimated at $125,000, relating to the registration of the Shares offered
hereby.

The Company has been advised by each Selling Stockholder that such Selling
Stockholder expects to offer shares registered hereby through brokers and
dealers selected from time to time by the Selling Stockholder. The Shares may be
offered for sale through the Nasdaq Stock Market, in the over-the-counter
market, in one or more private transactions, or a combination of such methods of
sale, at prices and on terms then prevailing, at prices related to such prices,
or at negotiated prices. Each Selling Stockholder may pledge all or a portion of
its Shares as collateral in loan transactions and, in the event of a default by
such Selling Stockholder, the pledgee in such loan transaction would have the
same rights of sale under this Prospectus as the Selling Stockholder. Each
Selling Stockholder may also transfer its Shares by gift under this Prospectus
and upon any such transfer the donee would have the same rights of sale under
this Prospectus as such Selling Stockholder. Each Selling Stockholder and any
brokers and dealers through whom sales of the Shares are made may be deemed to
be "underwriters" within the meaning of the Securities Act of 1933, as amended,
and the commissions or discounts and other compensation paid to such persons may
be regarded as underwriters' compensation.

The Common Stock is listed on the Nasdaq SmallCap Market under the symbol
"QDRX." On July 14, 1995, the reported last sale price of the Common Stock on
the Nasdaq SmallCap Market was $2-1/16 per share.

------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGES 4 THROUGH 9.

------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

------------------

The date of this Prospectus is , 1995.

<PAGE> 3
AVAILABLE INFORMATION

The Company is subject to the informational 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"). Reports, proxy statements
and other information filed by the Company may be inspected without charge and
copied, at prescribed rates, at the Commission's Public Reference Section at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New
York 10048, and Northwestern Atrium Center, 500 W. Madison Street, Chicago,
Illinois 60661. The Common Stock is listed on the Nasdaq SmallCap Market.
Reports, proxy statements and other information concerning the Company may be
inspected at the offices of the National Association of Securities Dealers, Inc.
at Nasdaq Operations, 1735 K Street, N.W., Washington D.C. 20006.

This Prospectus constitutes a part of a Registration Statement on Form
SB-2 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus omits certain of the information contained in the Registration
Statement and the exhibits and schedule thereto, in accordance with rules and
regulations of the Commission. For further information concerning the Company
and the Common Stock offered hereby, reference is made to the Registration
Statement and the exhibits and schedule thereto, which may be inspected without
charge and copied, at prescribed rates, at the Commission's Public Reference
Section at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Any
statements contained herein concerning the contents of any contract or other
document are not necessarily complete; in each instance in which such a contract
or document is filed as an exhibit to the Registration Statement, reference is
made to the copy of such contract or document so filed and each such statement
is qualified in its entirety by such reference.

------------------

The Company distributes to its stockholders annual reports containing
audited consolidated financial statements examined by its independent
accountants.

------------------

QUADRAX is a registered trademark of the Company, and CONQUEROR, QUADRAX
AXIAL TAPE, QUADRAX BIAXIAL TAPE and QUADRAX COMPOSITES are trademarks of the
Company.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements appearing elsewhere in this
Prospectus. Except as otherwise noted, all information in this Prospectus has
been adjusted to reflect a one-for-ten reverse split of the Common Stock
effected as of July 20, 1994.

THE COMPANY

Quadrax designs, develops, fabricates and sells fiber-reinforced
thermoplastic polymer composite materials ("Quadrax Composites") and products
manufactured from Quadrax Composites. Quadrax Composites are synthetic materials
made using patented and other proprietary, as well as non-proprietary, chemical
processes and manufacturing technologies. The Company believes that Quadrax
Composites are functionally superior to other structural substrates for most
applications in which abrasion resistance and extreme heat tolerance are not
critical. Quadrax Composites' functional advantages include high
strength-to-weight ratios, chemical stability in a variety of ambient conditions
(imperviousness to rust, rot or reaction with most commonly used chemical
solvents), ease and safety of manufacture using modified conventional heat and
compression molding techniques, virtually unlimited shelf life without special
storage or handling requirements, and recyclability.

The Company has been a development stage company since its inception in
March 1986. The Company has not achieved profitability in any fiscal quarter and
has been required to raise substantial amounts of capital in order to support
its on-going development activities. Although the Company historically was
dedicated to the formatting of composite materials for defense and aerospace
markets, it began redirecting its business in 1993 and 1994 to focus on
commercial and consumer markets for value-added, high-performance products. It
commenced limited commercial production in mid-1993. Quadrax did not generate
significant revenue in fiscal 1994, and its independent accountants have
included a "going concern" qualification in their report on the Company's
Consolidated Financial Statements for fiscal 1994. See "RISK FACTORS" and
Consolidated Financial Statements.

<TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA

<CAPTION>
Three Months Ended Fiscal Year Ended
-------------------- --------------------------------------------------------
Mar. 31, Apr. 3, Dec. 31, Jan. 2, Jan. 3, Dec. 29, Dec. 30,
1995 1994 1994 1994 1993 1991 1990
-------- -------- -------- -------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue ............... $ 1,084 $ 76 $ 860 $ 1,555 $ 850 $ 756 $ 1,227
Net loss from continuing
operations ................ (1,487) (2,673) (11,517) (5,713) (7,266) (3,612) (5,887)
Net loss .................... (1,487) (2,673) (11,517) (5,713) (7,333) (5,375) (7,147)
Net loss from continuing
operations per common share $ (0.14) $ (0.73) $ (2.09) $ (2.15) $ (5.13) $ (3.33) $ (6.50)
Net loss per common share ... (0.14) (0.73) (2.09) (2.15) (5.18) (4.90) (7.90)
Weighted average common
shares outstanding ........ 10,779 3,650 5,506 2,697 1,417 1,098 899
</TABLE>

<TABLE>
<CAPTION>
March 31, 1995
--------------
(In thousands)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents .................................... $ 1,186
Working capital (deficiency) ................................. (303)
Total assets ................................................. 8,756
Total stockholders' equity ................................... 4,372
</TABLE>

3
<PAGE> 5
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 purchasing any of the shares of Common Stock offered hereby.

OPERATING LOSSES; LIMITED REVENUES

Quadrax Corporation is a development stage company that has not achieved
profitability in any fiscal quarter since its incorporation in March 1986. From
incorporation through March 31, 1995, the Company incurred a cumulative net loss
from continuing operations of $42,282,097. During the quarter ended March 31,
1995 and fiscal 1994, 1993 and 1992, the Company incurred net losses from
continuing operations of $1,486,524, $11,517,000, $5,713,000 and $7,266,000,
respectively.

The Company has generated only limited revenue to date. In particular,
Quadrax has redirected its development and marketing efforts to commercial
markets and, as a result, only commenced limited commercial production in
mid-1993. During the quarter ended March 31, 1995 and fiscal 1994, 1993 and
1992, the Company's total revenue was $1,083,638, $860,000, $1,555,000 and
$850,000, respectively. There can be no assurance that sales of the Company's
products and services will generate significant revenue in the future.
Consequently, there can be no assurance that the Company will achieve or sustain
profitability in the future. The future operating results of the Company will
depend on its ability to develop and market new products in the commercial
markets. The Company's independent accountants have included a "going concern"
qualification in their report on the Company's financial statements for fiscal
1994, reflecting the Company's history of losses as a development stage company
and its continuing dependence on financing activities to provide the cash needed
to meet its expenses. See "--Dependence on New Products" and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Results of Operations."

DEPENDENCE ON NEW PRODUCTS

The Company historically has marketed its products to the U.S.
Government. The Company began to apply its technology in consumer and other
commercial markets in 1993, and since that time has taken a number of actions
aimed at entering the sporting goods and athletic equipment market.

As a result of the Company's recent redirection of its business toward
commercial markets, the Company has only commenced limited commercial production
and therefore has not had an opportunity to evaluate or establish the extent to
which Quadrax Composites can be successfully applied to the development and
production of products for commercial markets. While the Company believes that
Quadrax Composites are functionally superior to other structural substrates for
many commercial applications, any failure or inability of Quadrax Composites to
perform to standards anticipated by the Company would have a material adverse
effect on the Company's operations and financial condition.

Although the Company has entered into several joint development and
exclusive manufacturing contracts to sell goods in the consumer sporting goods
market, the contracts are contingent on the Company being able to meet
contractual specifications on a timely basis. While the Company has completed
prototypes of certain of its sporting good products, the Company has not been
able to meet contractual specifications in a timely manner and there can be no
assurance that the Company will be able to do so in the future. A delay in the
successful development, completion or production of any of the Company's
sporting good products may result in the cancellation of existing contracts and
prevent the Company from

4
<PAGE> 6

entering into additional contracts. This would have a material adverse effect on
the Company's operations and financial condition. See "BUSINESS--Product Line."

In addition, in selling Quadrax Composites and products manufactured from
Quadrax Composites to consumer and commercial markets, the Company faces
significant institutional resistance to working with new materials and products
and to investing in the re-tooling needed to integrate these materials and
products into existing production and product lines. Successful entrance into
new markets will require substantial investments by the Company in fabrication
and marketing of Quadrax Composites and in the design, development, fabrication
and marketing of products manufactured from Quadrax Composites. There can be no
assurance that the Company will be able to overcome such institutional
resistance or that it will have sufficient resources to make the necessary
investments in its new products. See "--Capital Requirements" and
"BUSINESS--Marketing and Sales."

CAPITAL REQUIREMENTS

The Company has not achieved profitability in any fiscal quarter and has
been required to raise substantial amounts of capital in order to support its
on-going development activities. As the Company continues to focus on commercial
markets and progresses from the development of prototypes of products
manufactured from Quadrax Composites to the production of finished goods, it
will continue to be dependent on outside financing sources.

From its incorporation in March 1986 through March 31, 1995, Quadrax
raised a total of $45.6 million in equity capital. The Company raised
approximately $5.0 million of equity capital in fiscal 1994 and an additional
$3.7 million through sales of stock during the first half of fiscal 1995. It
expects to raise approximately $1.5 million in the third quarter of fiscal 1995
through additional sales of preferred stock, for which it obtained a commitment
in June 1995. While the Company believes that these funds, together with cash
provided by revenues, will be sufficient to meet the Company's cash requirements
for the remainder of fiscal 1995, there can be no assurance that it will be
successful in raising such funds or that such funds, if raised, will be
sufficient to finance the Company's planned operations during the remainder of
fiscal 1995. If the Company is unable to meet its cash requirements, it may be
required to defer for a period of time, or indefinitely, the design,
development, fabrication and marketing of new products and the marketing of
existing products and materials in new markets.

In addition, the Company's capital requirements may increase materially
from those now planned depending on numerous factors, including the level of its
research and development expenses, the rate of market acceptance of the
Company's products, and the success of the Company's sales, marketing and
distribution strategy. If the Company exceeds its sales objectives, it may still
require additional capital to finance its growth. There can be no assurance that
the Company would be successful in raising such additional capital.

See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Financial Position, Liquidity and Capital Resources."

LIMITED PRODUCTION AND SALES EXPERIENCE

Quadrax has limited experience producing Quadrax Composites and
fabricating finished products and components made from Quadrax Composites. The
Company has delivered significant quantities of Quadrax Composites for
evaluation and testing, but has completed only one production contract to date,
for a subcontractor to the Department of the Navy, which it completed at a
substantial loss. Quadrax is currently performing several production contracts,
including one contract under which composite tape

5
<PAGE> 7

fabrication is being performed at a third party's facility. While management
believes that significant technological barriers to full scale production have
been overcome, there can be no assurance that significant unforeseen
difficulties will not be encountered at commercial production levels. See
"BUSINESS--Manufacturing and Distribution Systems."

Prior to 1994, Quadrax concentrated all its product marketing and customer
calling efforts on the sale of materials, primarily within the defense
contracting community. Efforts to move into commercial and consumer applications
were limited to attendance at trade shows sponsored by various members of the
plastics and advanced materials industries. The Company currently has only a
small sales and marketing force. While initial efforts have been successful,
there can be no assurance that these successes can be duplicated and expanded
upon to the extent necessary for Quadrax to achieve a profitable level of
operation. See "BUSINESS--Marketing and Sales."

COMPETITION

Quadrax Composites compete with conventional materials (including wood,
stone, steel and aluminum), less common metals (such as titanium), and thermoset
(epoxy-based) composites. While Quadrax Composites offer several advantages over
competing materials, they are also more expensive. In addition, Quadrax
Composites also suffer from institutional resistance to working with new
materials and investing in the re-tooling needed to integrate Quadrax Composites
into existing product and production lines. See "BUSINESS--Technologies--
Competitive Advantages and Disadvantages" and "BUSINESS--Competition."

The Company faces competition from three of the world's largest
multinational chemical companies -- E.I. du Pont de Nemours & Co., Imperial
Chemical Industries PLC and Saint Goban -- each of which develops composite
product offerings that may compete with the Company's product offerings. In
addition, the Company faces potential competition from new companies as well as
from established companies that may migrate from related industries. Many of the
Company's current and prospective competitors, including E.I du Pont de Nemours
& Co., Imperial Chemical Industries PLC and Saint Goban, have significantly
greater financial, manufacturing and marketing resources than the Company. There
can be no assurance that the Company's products will compete effectively with
products offered by established and new competitors of the Company.

Competition in the sporting goods and athletic equipment market is
intense. The industry consists primarily of major domestic and international
companies that have financial, technical, marketing, sales, manufacturing,
distribution and other resources substantially greater than those of the
Company. Many of the Company's competitors in this industry have entrenched
market positions and established trade names, trademarks and other intellectual
property rights. There can be no assurance that the Company's competitors in
this industry will not devote their significantly greater financial, technical,
marketing and other resources to develop and market sporting goods and athletic
equipment more aggressively than the Company.

The Company believes that its ability to compete depends on elements both
within and outside its control, including the success and timing of new product
development and introduction by the Company and its competitors, product
performance and price, distribution, and customer support. There can be no
assurance that the Company will be able to compete successfully with respect to
these factors. Although the Company believes that it has certain technological
advantages over its competitors, maintaining such advantages will require
continued investment by the Company in design and development, sales and
marketing, and customer service and support. There can be no assurance that the
Company will have sufficient resources to make such investments or that the
Company will be able to make the technological

6
<PAGE> 8

advances necessary to maintain its competitive advantages. In addition, as the
Company enters new markets, distribution channels, technical requirements and
levels and bases of competition may be different than those in the Company's
current markets and there can be no assurance that the Company will be able to
compete favorably. See "BUSINESS--Competition."

PATENTS AND PROPRIETARY TECHNOLOGIES

The Company currently holds patents on its Quadrax Biaxial Tape materials
formats and on certain aspects of tennis racquets manufactured from Quadrax
aXial Tape. The Company either owns, licenses or has applied for patents on
certain aspects of the other technology underlying the Company's products. The
Company's patents, patent rights and patent applications do not ensure a
competitive advantage to the Company, particularly inasmuch as several of the
patents are licensed on a non-exclusive basis. No assurance can be given that
any issued or licensed patents will not be designed around, infringed or
successfully challenged by others, or that the Company will have sufficient
resources to enforce any proprietary protection afforded by its patents.
Furthermore, there can be no assurance that patents will issue with respect to
any pending patent application. Moreover, various of the Company's actual and
potential competitors have obtained patents and could seek to enforce them
against the Company. An infringement action, if brought, would be costly to
defend and there can be no assurance that the Company would prevail. Failure to
obtain or to be able to enforce patent protection in favor of the Company, or
failure to defend successfully a patent infringement claim against the Company,
could have a material adverse effect on the Company's business. In addition,
despite the Company's precautions to the contrary, there can be no assurance
that the trade secrecy protections which may be asserted by the Company to
protect other aspects of its intellectual property will not be breached or will
be enforceable.

KEY EMPLOYEES

The Company's success depends to a significant extent upon a number of key
management and technical personnel, including James J. Palermo, the Company's
Chief Executive Officer, and David Soules, the Company's Vice
President-Manufacturing Operations. Mr. Palermo has signed an employment
agreement with the Company that is effective through December 1996. See
"MANAGEMENT--Compensation Plans and Arrangements." Mr. Soules is not a party to
an employment agreement with Quadrax. The loss of the services of a key employee
could have a material adverse effect on the Company's business and financial
condition. In addition, the Company's future success will depend in part on its
ability to attract and retain highly skilled technical, managerial and marketing
personnel. Competition for such personnel is intense, and there can be no
assurance that the Company will be successful in hiring or retaining the
personnel it requires to continue to grow and operate profitably.

POTENTIAL DILUTION

Quadrax has a complex capital structure that includes a number of classes
of outstanding warrants and options to purchase Common Stock and the Company's
convertible preferred stock, $.01 par value (the "Voting Preferred Stock"),
which is convertible into Common Stock. If all of the warrants and options
having exercise prices less than the reported last sale price of the Common
Stock on the Nasdaq SmallCap Market on July 14, 1995 were to be exercised, an
aggregate of 1,821,447 shares of Common Stock would be issuable for a total of
$3,121,838, resulting in a reduction in the percentage of voting rights and
interests in profits represented by a share of Common Stock.

In addition, the Company is authorized to issue up to a total of
90,000,000 shares of Common Stock, of which fewer than 15,000,000 shares are
outstanding as of the date hereof. Issuance of a significant number of
additional shares of Common Stock would result in a substantial reduction in the
percentage of

7
<PAGE> 9

voting rights and interests in profits currently represented by a share of
Common Stock. See "DESCRIPTION OF CAPITAL STOCK."

TECHNOLOGICAL OBSOLESCENCE

The structural composites market in which Quadrax competes is
characterized by rapid technological development. There can be no assurance that
Quadrax's products will not be rendered obsolete or that Quadrax will be
successful in developing new products to meet changing market needs. See
"BUSINESS--Technologies and Competition."

PRODUCT LIABILITY

Sales of Quadrax Composites and parts manufactured therefrom may expose
the Company to liability for substantial damages in the event of accident or
injury shown to have been caused by defective materials. Quadrax believes that
its limited product liability insurance is currently adequate, but no assurance
can be given that such insurance is sufficient in scope and amount to cover any
and all damages that are incurred in the future. Further, the Company expects
that it will be necessary for the Company to increase its product liability
insurance coverage as shipments to commercial markets increase, and there can be
assurance that such coverage will be available or, if available, that it will be
available on terms that are economically acceptable to the Company.

VOLATILITY OF STOCK PRICE; DEPRESSIVE EFFECT OF FUTURE SALES OF COMMON STOCK

The trading price of the Common Stock has been subject to wide
fluctuations for a number of reasons, including the financial difficulties and
subsequent cessation in 1991 of market-making activities by its former principal
market maker and changes in control of the Company in 1994 and 1995. In
addition, the stock market has from time-to-time experienced extreme price and
volume fluctuations that particularly affected the market price for many
technology companies and that often have been unrelated to operating performance
of these companies. These broad market fluctuations may adversely affect the
market price of the Common Stock. In addition, future sales by the Company of
newly issued Common Stock (or securities convertible into or exchangeable for
Common Stock) in the public market could place downward pressure on the market
price of the Common Stock. See "PRICE RANGE OF COMMON STOCK."

POSSIBLE DELISTING OF COMMON STOCK FROM NASDAQ SMALLCAP MARKET

The Common Stock is listed on the Nasdaq SmallCap Market. Listing on the
Nasdaq SmallCap Market permits a company's securities to be quoted over the
automated electronic quotation system maintained by the National Association of
Securities Dealers, Inc., which makes current quotations of an issuer's
securities available to brokers and dealers nationwide. The requirements for
continued listing of common stock on the Nasdaq SmallCap Market include (i) the
presence of at least two registered and active market makers for the stock, (ii)
total assets of the issuer of at least $2,000,000, (iii) total capital and
surplus of the issuer of at least $1,000,000, (iv) a minimum bid price per share
of the stock of at least $1.00 (or, alternatively, $1,000,000 market value of
public float and $2,000,000 in total capital and surplus), (v) the existence of
at least 300 record holders of the stock, and (vi) the existence of at least
100,000 publicly-held shares of the stock. The National Association of
Securities Dealers, Inc. also has discretionary power to delist companies for
other reasons in keeping with the integrity of the market system. Although the
Company believes it is currently in compliance with each of these requirements
with respect to the Common Stock, and management is prepared to take steps to
assure continued compliance with the listing requirements for the Nasdaq
SmallCap Market, no assurance can be provided that management's efforts, if
required, would be successful or that the Common Stock will continue to be
listed on the Nasdaq SmallCap Market.

8
<PAGE> 10

If the Common Stock were to be delisted from the Nasdaq SmallCap Market,
current information regarding the bid and asked prices for the Common Stock
would become less readily available to brokers, dealers and their customers. As
a result of the reduced availability of current information, it is likely that
there would be a reduction in the liquidity of the market for the Common Stock
which could, in turn, result in decreased demand for the Common Stock, a
decrease in the price of the Common Stock, and an increased spread between the
bid and asked prices for the Common Stock.

9
<PAGE> 11
THE COMPANY

Quadrax is a development stage company that designs, develops, fabricates
and sells Quadrax Composites and products manufactured from Quadrax Composites.
Quadrax Composites are fiber-reinforced thermoplastic polymer composite
materials made using patented and other proprietary, as well as non-proprietary,
chemical processes and manufacturing technologies. The Company believes that
Quadrax Composites are functionally superior to other structural substrates for
most applications in which abrasion resistance and extreme heat tolerance are
not critical. Quadrax Composites' functional advantages include high
strength-to-weight ratios, chemical stability in a variety of ambient conditions
(imperviousness to rust, rot or reaction with most commonly used chemical
solvents), ease and safety of manufacture using modified conventional heat and
compression molding techniques, virtually unlimited shelf life without special
storage or handling requirements, and recyclability.

The Company commenced limited commercial production in mid-1993. Although
the Company historically was dedicated to the formatting of composite materials
for defense and aerospace markets, it began redirecting its business in 1993 and
1994 to focus on commercial and consumer markets for value-added,
high-performance products. The Company did not generate significant revenues in
fiscal 1994 (the period from January 3, 1994 to December 31, 1994), and the
Company's independent accountants, Livingston & Haynes, P.C., have included a
"going concern" qualification in their report on the Company's financial
statements for fiscal 1994, reflecting the Company's history of losses as a
development stage company and its continuing dependence on financing activities
to provide the cash needed to meet its expenses. See Consolidated Financial
Statements.

Quadrax Corporation is organized in a holding company structure, operating
through three wholly owned subsidiaries: Quadrax Advanced Materials Systems,
Inc., Quadrax Advanced Structures, Inc. and McManis Sports Associates, Inc.
("McManis Sports"). It also operates a wholly owned subsidiary, Quadrax
Sports, Inc., as a marketing company. Unless the context requires otherwise,
references herein to "Quadrax" or the "Company" refer collectively to Quadrax
Corporation and its subsidiaries.

The Company was incorporated under the laws of Delaware in March 1986. Its
principal executive offices are located at 300 High Point Avenue, Portsmouth,
Rhode Island 02871, and its telephone number is (401) 683-6600.

USE OF PROCEEDS

None of the shares of Common Stock offered hereby are being sold by the
Company, and the Company will not receive any of the proceeds from sales of
shares of Common Stock by the Selling Stockholders. All or a portion of the
principal amount of, and accrued interest on, a currently outstanding note
payable to a related party may be exchanged for certain of the shares of Common
Stock offered hereby. See "PRINCIPAL AND SELLING STOCKHOLDERS."

10
<PAGE> 12
DIVIDEND POLICY

The Company has never declared or paid cash dividends on its capital
stock. The Company currently intends to retain all of its earnings, if any, for
use in its business and does not anticipate paying any cash dividends in the
foreseeable future. Any future determination relating to dividend policy will be
made in the discretion of the Company's Board of Directors after taking into
account various factors, including the Company's financial condition, operating
results, and then-current and anticipated cash needs.

<TABLE>
PRICE RANGE OF COMMON STOCK

The Common Stock is listed on the Nasdaq SmallCap Market under the symbol
"QDRX." The following table sets forth, for the periods indicated, the high and
low bid prices per share of the Common Stock on the Nasdaq Stock Market. Bid
prices prior to July 20, 1994 have been adjusted to reflect a one-for-ten
reverse split of the Common Stock effected on that date.

<CAPTION>
High Bid Low Bid
-------- --------
<S> <C> <C>
Fiscal 1992
-----------
First Quarter.......................... $11 7/8 $8 1/8
Second Quarter......................... 10 5/8 7 13/16
Third Quarter.......................... 13 3/4 7 3/16
Fourth Quarter......................... 13 7/16 8 1/8

Fiscal 1993
-----------
First Quarter.......................... 11 9/16 8 7/16
Second Quarter......................... 11 7/8 6 7/8
Third Quarter.......................... 12 3/16 8 7/16
Fourth Quarter......................... 10 5/16 6 9/16

Fiscal 1994
-----------
First Quarter.......................... 7 1/2 2 1/2
Second Quarter......................... 5 3/8 4 3/8
Third Quarter.......................... 5 1/8 2 5/16
Fourth Quarter......................... 4 1/2 2 3/8

Fiscal 1995
-----------
First Quarter.......................... 3 9/16 2 7/16
Second Quarter......................... 2 11/32 2
Third Quarter (through July 14, 1995).. 2 1 25/32
</TABLE>

The prices set forth above reflect inter-dealer prices without retail mark-up,
mark-down, or commissions and may not necessarily represent actual transactions.

On July 14, 1995, the reported last sale price of the Common Stock was
$2 1/16. As of July 7, 1995, there were 14,298,326 shares of Common Stock
issued and outstanding and held of record by approximately 1,475 stockholders.

11
<PAGE> 13
<TABLE>
CAPITALIZATION

The Company will not receive any proceeds from the sale of any of the
shares of Common Stock offered hereby. The following table sets forth the
capitalization of the Company at March 31, 1995 and as adjusted to give effect,
on a pro forma basis, to the issuance of 275,000 of the shares of Common Stock
being offered hereby in payment of a portion of the outstanding principal
amount of a note payable to a related party. See "CERTAIN TRANSACTIONS--
Directors, Executive Officers and Five Percent Stockholders."

<CAPTION>
March 31, 1995
----------------------
Actual As Adjusted
--------- -----------
(Dollars in thousands)
<S> <C> <C>
Note payable to related party, net of current portion ...................................... $ 540 $ 90
-------- --------
Stockholders' equity:
Convertible preferred stock, $.01 par value;
1,172 shares authorized, 317.99 shares issued and outstanding ......................... 0 0
Common stock, $.000009 par value; 90,000,000 shares
authorized; 12,452,061 shares issued and outstanding(1)
and 12,727,061 shares issued and outstanding as adjusted .............................. 0 0
Additional paid-in capital .............................................................. 51,512 51,962
Deficit accumulated during development stage ............................................ (45,577) (45,577)
Less:
Treasury stock, at cost: convertible preferred stock, 172 shares;
common stock, 32,036 shares ....................................................... (993) (993)
Unearned compensation and deferred expenses ........................................... (86) (86)
Note receivable for option ............................................................ (484) (484)
-------- --------
Total stockholders' equity .................................................... 4,372 4,912
-------- --------
Total capitalization .......................................................... $ 4,912 $ 4,912
======== ========
<FN>
(1) Excludes as of March 31, 1995, (i) 1,821,447 shares of Common Stock
issuable upon exercise of stock options outstanding at a weighted average
exercise price per share of $1.71, (ii) 573,560 shares of Common Stock
reserved for issuance under the Company's stock plans, and (iii) 2,021,850
shares of Common Stock issuable upon exercise of warrants outstanding at a
weighted average exercise price per share of $9.17.
</TABLE>

12
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data at December 31, 1994 and for the
year then ended have been derived from Consolidated Financial Statements audited
by Livingston & Haynes, P.C., independent auditors, and appearing elsewhere in
this Prospectus. The report of Livingston & Haynes, P.C. on the Consolidated
Financial Statements for the year ended December 31, 1994, which appears
elsewhere herein, includes an explanatory paragraph with respect to the
Company's ability to continue as a going concern, as described in Note 1 to the
Consolidated Financial Statements. The following selected financial data for the
four years ended January 2, 1994 are derived from the consolidated financial
statements of Quadrax which have been audited by Ernst & Young LLP, independent
auditors. The report of Ernst & Young LLP on the consolidated financial
statements for the two years ended January 2, 1994, which appears elsewhere
herein, includes an explanatory paragraph with respect to the Company's ability
to continue as a going concern, as described in Note 1 to the Consolidated
Financial Statements. The selected consolidated financial data at March 31, 1995
and for the three months ended March 31, 1995 and 1994 have been derived from
unaudited Consolidated Financial Statements appearing elsewhere in this
Prospectus, which statements have been prepared on a basis substantially
consistent with the Company's audited Consolidated Financial Statements and, in
the opinion of the Company's management, include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
Company's financial position at March 31, 1995 and its results of operations for
the three months ended March 31, 1995 and 1994. The results for the three months
ended March 31, 1995 are not necessarily indicative of future results. All of
the selected consolidated financial data are qualified in their entirety by the
more detailed Consolidated Financial Statements appearing elsewhere in this
Prospectus, and should be read in conjunction with such Consolidated Financial
Statements and the discussion under "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

13
<PAGE> 15
<TABLE>
<CAPTION>
Three Months Ended Fiscal Year Ended
------------------- ----------------------------------------------------
Mar. 31, Apr. 3, Dec. 31, Jan. 2, Jan. 3, Dec. 29, Dec. 30,
1995 1994 1994 1994 1993 1991 1990
-------- ------- -------- ------- ------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Sales production contracts $ 1,075 $ 27 $ 74 $ 1,097 $ 146 $ -- $ --
Sales of materials for
evaluation and testing -- 47 760 430 239 293 599
Research income -- -- -- -- 432 401 489
Interest income 9 2 -- 24 32 31 136
Other income -- -- 26 4 1 31 3
-------- ------ -------- -------- ------- ------- -------
Total revenue 1,084 76 860 1,555 850 756 1,227
Expenses:
Cost of goods sold 715 27 106 987 806 -- --
Research and development 236 399 1,691 2,144 1,677 1,233 3,206
Selling, general and
administrative 1,412 673 3,982 3,140 2,681 1,910 3,079
Depreciation and
amortization 204 196 824 963 2,647 1,191 827
Interest 4 4 205 18 156 34 2
Loss on investment -- -- -- 16 149 -- --
Non-recurring financing
related expenses(1) -- 1,450 5,569 -- -- -- --
-------- ------ -------- -------- ------- ------- -------
Total expenses 2,571 2,749 12,377 7,268 8,116 4,368 7,114
-------- ------ -------- -------- ------- ------- -------
Net loss from continuing
operations (1,487) (2,673) (11,517) (5,713) (7,266) (3,612) (5,887)
Loss from discontinued operations -- -- -- -- (67) (1,763) (1,260)
-------- ------ -------- -------- ------- ------- -------
Net loss $ (1,487) $(2,673) $(11,517) $ (5,713) $(7,333) $(5,375) $(7,147)
======== ======= ======== ======== ======= ======= =======
Per common share(2):
Net loss from continuing
operations $ (.14) $ (.73) $ (2.09) $ (2.15) $ (5.13) $ (3.33) $ (6.50)
Net loss $ (.14) $ (.73) $ (2.09) $ (2.15) $ (5.18) $ (4.90) $ (7.90)
======== ======= ======== ======== ======= ======= =======
Weighted average common
shares outstanding 10,779 3,650 5,506 2,697 1,417 1,098 899
</TABLE>

Mar. 31, Dec. 31, Jan. 2, Jan. 3, Dec. 29, Dec. 30,
1995 1994 1994 1993 1991 1990
-------- -------- ------- ------- -------- --------
(In thousands)

<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,186 $ 383 $ 669 $ 1,050 $ 14 $ 77
Working capital (deficiency) (303) (1,199) 103 (68) (685) 149
Total assets 8,756 7,260 4,318 5,690 3,501 5,511
Total stockholders' equity 4,372 3,561 3,208 653 2,259 4,503
<FN>
(1) Represents financing-related costs incurred in connection with the
termination of a proposed acquisition of the Company by Applied Laser
Systems during fiscal 1994 and the termination of a funding relationship
with Conagher & Co., Inc. See "BUSINESS--Changes in Control and Related
Transactions," "CERTAIN TRANSACTIONS--Pattinson Hayton, III and Affiliates,"
and Notes 9 and 10 to Consolidated Financial Statements.
(2) Computed as described in Note 2 to Consolidated Financial Statements.
</TABLE>
14
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company is a development stage enterprise and has completed only one
production contract to date. The Company commenced limited commercial production
in mid-1993. Although the Company historically was dedicated to the formatting
of composite materials for defense and aerospace markets, it began redirecting
its business in 1993 and 1994 to focus on commercial and consumer markets for
value-added, high-performance products. The Company did not generate significant
revenues in fiscal 1994 (the period from January 3, 1994 to December 31, 1994),
and the Company's independent accountants, Livingston & Haynes, P.C., have
included a "going concern" qualification in their report on the Company's
financial statements for fiscal 1994, reflecting the Company's history of losses
as a development stage company and its continuing dependence on financing
activities to provide the cash needed to meet its expenses.

In 1994, the Company converted its fiscal year from a 52-53 week period
ending on the Sunday closest to December 31 to a calendar year ending December
31.

FIRST QUARTER OF FISCAL 1995 COMPARED TO FIRST QUARTER OF FISCAL 1994

The Company's net loss from operations for the quarter ended March 31,
1995 (the "1995 first quarter") of approximately $1,487,000 was approximately
$1,186,000 less than its net loss from operations of approximately $2,673,000
for the quarter ended April 3, 1994 (the "1994 first quarter"). This decrease
was the result of the non-recurring costs associated with the proposed
acquisition of the Company's assets by Applied Laser Systems ("ALS") which was
terminated in May 1994. See "CERTAIN TRANSACTIONS--Pattinson Hayton, III and
Affiliates".

Total revenue recognized during the 1995 first quarter was $1,084,000
compared to $76,000 in the 1994 first quarter. This increase of $1,008,000 or
1,326 percent from the 1994 first quarter results from the Company shipping
product to its defense related customers in the approximate amount of $725,000.
Additionally, $181,000 of Wimbledon related products were sold in the 1995 first
quarter and the balance of the sales increase results primarily from consumer
related sporting goods customers who were beginning to utilize the Company's
materials in their products.

Costs of goods sold for the first quarter of 1995 of $715,000 reflected
costs associated with the defense and consumer products which the Company
shipped in the 1995 first quarter. The cost of goods sold for the 1994 first
quarter reflected monies the Company expended relating to an athletic shoe
program which began in 1993 and terminated in early 1994.

Research and development expenses were $236,000 in the 1995 first quarter,
a decrease of $163,000 as compared to $399,000 in the 1994 first quarter. The
reason for this decrease is that the Company capitalized $175,000 of tooling
development expenditures it incurred during the 1995 first quarter for
commercial products which had no shipments during this period.

Selling, general and administrative expenses increased by $739,000 to
$1,412,000 in the 1995 first quarter. The reasons for this increase were as
follows:

(1) The Company's sales and marketing costs increased $357,000 in the 1995
first quarter. These expenditures were monies the Company used for its
Wimbledon division, which it acquired in November 1994.

15
<PAGE> 17

(2) The Company's general and administrative costs increased $338,000. The
reasons for this were two fold. First, the general and administrative
costs attributable to the Wimbledon and McManis Sports divisions, which
were acquired in November 1994, were $100,000 and $97,000,
respectively. Second, the corporate general and administrative costs
increased $141,000 in the 1995 first quarter as a result of increased
travel costs, rent, and utilities. The rent and utility cost increases
were due to accounting reclassifications. In the 1994 first quarter,
these costs were allocated to various overhead departments in cost of
sales and research and development, while in the 1995 first quarter
they were not.

Depreciation and amortization expense increased by $8,000 to $204,000 in
the 1995 first quarter.

Interest expense for both the 1995 first quarter and the 1994 first
quarter was $4,000.

Non-recurring financing related costs recognized in the 1994 first quarter
totalled $1,450,000 and related to the Asset Acquisition Agreement between the
Company and ALS, which was terminated by mutual agreement in May 1994. Included
in these costs were 170,000 shares of Common Stock valued at $1,116,000 ($6.56
per share) issued or to be issued to the Company's investor relations
consultant. Other costs incurred were for various professional services.

FISCAL 1994 COMPARED TO FISCAL 1993

The Company's net loss from continuing operations in fiscal 1994 of
$11,517,000 increased by $5,804,000 as compared to the fiscal 1993 loss from
continuing operations of $5,713,000. This increase primarily resulted from
non-recurring financing costs of $5,569,000 (see Note 9 to Consolidated
Financial Statements) and a write-off of obsolete equipment of $190,000.

Total revenue recognized during fiscal 1994 was $860,000 compared to
$1,555,000 in fiscal 1993. The primary reason for this decrease was that the
Company substantially completed its initial production contract in fiscal 1993
and that follow-on production contracts are not expected to generate revenues
until fiscal 1995. Sales of material for evaluation and testing totalled
$760,000 in fiscal 1994 compared to $430,000 in fiscal 1993.

Cost of goods sold for fiscal 1994 was $106,000, which related to the
Company's initial production contracts completed in fiscal 1994.

Research and development expenses were $1,691,000 in fiscal 1994 as
compared to $2,144,000 in fiscal 1993, a decrease of $453,000. This decrease
reflected reduced development activities during the first half of fiscal 1994
and the Company's accelerated shift in strategic focus away from defense and in
favor of commercial and consumer applications in the second half of fiscal 1994.

Sales, general and administrative expenses of $3,982,000 in fiscal 1994
increased approximately $842,000 over fiscal 1993. This increase reflects the
addition of executive personnel, particularly in the area of sales and
marketing, and approximately $380,000 of costs related to product publicity
campaigns.

Depreciation and amortization expense decreased $139,000 in fiscal 1994.
The reason for this decrease was the non-recurrence of amortization of deferred
expense and deferred debt expense recognized in fiscal 1993 of approximately
$180,000. Included in fiscal 1994 expenses was the write-off of $190,000 of
obsolete fixed assets and equipment.

16
<PAGE> 18

Interest expense increased $187,000 in fiscal 1994 to $205,000. The
primary reasons for this increase were the $65,000 of costs associated with the
proposed acquisition of the Company by ALS and interest of $132,000 paid on
debentures issued in private placement transactions during fiscal 1994.

Loss on investment incurred during fiscal 1994 was negligible, a reduction
of $16,000 from fiscal 1993. During fiscal 1993, the Company realized a $16,000
loss upon the sale of 123,400 shares of 3D Systems, Inc. stock acquired in
settlement of patent litigation involving Quadrax Laser.

Non-recurring financing-related costs of $5,569,000 in fiscal 1994 were
incurred in connection with the proposed acquisition of the Company by ALS,
which was terminated during May 1994, and the termination of a funding
relationship with Conagher & Co., Inc. ("Conagher"). See "BUSINESS--Changes in
Control and Related Transactions," "CERTAIN TRANSACTIONS--Pattinson Hayton, III
and Affiliates" and Notes 9 and 10 to Consolidated Financial Statements. The
Company incurred costs of approximately $1,481,000 in connection with the
proposed purchase of the Company's assets by ALS, primarily as a result of the
issuance of Common Stock to its investor relations consultant along with
professional fees. As a result of the financing with Conagher, the Company
incurred one-time costs of $4,087,000.

FISCAL 1993 COMPARED TO FISCAL 1992

The Company's net loss from continuing operations in fiscal 1993 of
$5,713,480 decreased by $1,552,643 as compared to the fiscal 1992 net loss from
continuing operations of $7,266,123. This reduction resulted primarily from an
improvement in gross margin on production contracts of approximately $771,000
and reductions in depreciation and amortization expense of approximately
$1,684,000, offset by increases in research and development expenses of
approximately $467,000 and selling, general and administrative expenses of
$459,000.

Sales of material for testing and evaluation in fiscal 1993 were $430,000,
an increase of approximately $190,000 compared to fiscal 1992. This increase was
principally the result of sales of the Company's unidirectional tape products
acquired in the fourth quarter of fiscal 1992 and revenues generated from
developmental efforts for recreational products. Sales from production contracts
in fiscal 1993 were $1,098,000, which represented an increase of $952,000
compared to fiscal 1992. The Company completed its first major production
contract in the second quarter of fiscal 1993 and recorded sales from a smaller
production contract during the fourth quarter of fiscal 1993.

The Company recognized no research income during fiscal 1993. During
fiscal 1992, the Company completed a $250,000 research contract performed
pursuant to settlement of litigation.

Cost of goods sold for fiscal 1993 of $987,000 reflect costs incurred on
production contracts during fiscal 1993, offset by the reversal of a $500,000
loss reserve established in fiscal 1992 for estimated losses on a subsurface
naval vessel contract realized in fiscal 1993 and a $145,000 provision for a
loss reserve on an athletic shoe program for sales to be made in fiscal 1994.
The forecasted loss on the shoe program was attributable to production start-up
costs in excess of those forecasted and greater than expected scrap rates.

The Company believes that manufacturing economies, particularly as they
relate to scrap materials, realized in the manufacture of laminates for the
subsurface naval vessel contract and for the shoe program will significantly
reduce the cost of raw materials and the amount of rework required on future
such programs. In addition, since the completion of certain asset and license
acquisitions in 1992, the Company has been vertically integrated and therefore,
if cost effective, can use its own materials for these and other production
programs. Moreover, the Company is currently negotiating revised specifications
for these

17
<PAGE> 19

programs which, if accepted, will reduce manufacturing costs. Accordingly, the
Company projects that it will realize a positive gross margin on future such
production contracts, if awarded.

Research and development expenses increased by $467,000 to $2,144,000,
primarily as a result of salaries for new applications development and
processing engineers and increased spending for development projects relating to
sporting goods products.

Selling, general and administrative expenses for fiscal 1993 increased
by approximately $459,000 to $3,140,000. Selling and marketing expenses
increased by $733,000, attributable principally to increases in payroll and
payroll related expenses resulting from the hiring of additional sales and
marketing personnel and the redirection of members of the Company's engineering
staff to support the sales effort ($464,000), increased professional and
consulting fees ($103,000), increased travel expenses ($85,000) and increased
sample expenses ($32,000). General and administrative expenses decreased by
$274,000, attributable principally to reduced fees for investment banking and
financial relations services ($169,000), the non-recurrence of certain state
license fees ($162,000) and reduction in commission expenses ($34,000), offset
by an increase ($95,000) for directors and officers liability insurance.

Interest expense incurred in fiscal 1993 of $18,000 was $137,000 less than
fiscal 1992. Interest expense in fiscal 1992 was primarily attributable to the
Company's senior convertible notes, which were issued in April 1992 and
converted into Voting Preferred Stock in July 1992.

Depreciation and amortization in fiscal 1993 decreased by $1,684,000 to
$963,000. This decrease is attributable to a reduction in unearned compensation
on compensatory stock options ($1,160,000) which had resulted from an
acceleration of vesting provisions in fiscal 1992, a reduction in the
amortization of deferred debt expense related to the issuance of debt during
fiscal 1992 ($259,000), a decrease in amortization of deferred expenses
($158,000) and $171,000 related to the acceleration of amortization for certain
braiding patent acquisition costs, offset by increased depreciation for
machinery and equipment placed in service during fiscal 1993 ($64,000).

Other expense for fiscal 1993 of $16,000 reflects a $19,000 loss realized
of the sale of 3D Systems, Inc. stock acquired in settlement of patent
litigation with Quadrax Laser. In fiscal 1992, other expense of $149,000
reflected an adjustment to the market value of the 3D Systems, Inc. stock.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

As a development stage company, Quadrax continues to rely on financing
activities for the cash required to fund its operations. Net funds provided by
financing activities in fiscal 1994, after giving effect to the repayment of
debt, totalled $5,893,000, as compared with $4,510,000 in fiscal 1993 and
$6,817,000 in fiscal 1992.

As a result of its inability to raise additional capital in the first
quarter of fiscal 1994, the Board of Directors of the Company approved an asset
acquisition agreement pursuant to which ALS would have acquired all of the
assets of the Company in exchange for ALS stock. Negotiations for this
acquisition were terminated in May 1994, and the Company subsequently was party
to financings and other transactions that resulted in a change in control of
the Company. See "BUSINESS--Changes in Control and Related Transactions,"
"CERTAIN TRANSACTIONS--Pattinson Hayton, III and Affiliates" and Note 10 to
Consolidated Financial Statements.

Quadrax will continue to be substantially dependent on outside financing
sources as it progresses from the development of prototypes to the production of
finished goods and components. The Company raised approximately $3,700,000
through sales of Common Stock during the first half of fiscal 1995. It expects

18
<PAGE> 20

to seek to raise approximately $1,500,000 through additional equity sales in the
third quarter of fiscal 1995, for which it received commitments in June 1995.

The Company generated revenues of approximately $860,000 in fiscal 1994,
and as a result operations were not a source of funds or liquidity for the
Company. The Company shipped in excess of $1,000,000 during the first quarter of
fiscal 1995.

The Company believes that the proceeds of approximately $1,500,000
expected to be received from additional equity sales in the third quarter of
fiscal 1995, together with funds provided by operations and cash on hand
(approximately $2,486,000 at July 14, 1995), will be sufficient to meet the
Company's cash requirements through the end of fiscal 1995.

The Company received a going concern qualification from its outside
independent auditors on its fiscal 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. 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 forecasted and actual
results because events and circumstances frequently do not occur as expected and
those differences may be material. Because the Company is still in the
development stage, it is difficult 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.

19
<PAGE> 21

BUSINESS

GENERAL

Quadrax Corporation designs, develops, fabricates and sells Quadrax
Composites and products manufactured from Quadrax Composites. Quadrax Composites
are fiber-reinforced thermoplastic polymer composite materials made using
patented and other proprietary, as well as non-proprietary, chemical processes
and manufacturing technologies. The Company believes that Quadrax Composites are
functionally superior to other structural substrates for most applications in
which abrasion resistance and extreme heat tolerance are not critical. Quadrax
Composites' functional advantages include high strength-to-weight ratios,
chemical stability in a variety of ambient conditions (imperviousness to rust,
rot or reaction with most commonly used chemical solvents), ease and safety of
manufacture using modified conventional heat and compression molding techniques,
virtually unlimited shelf life without special storage or handling requirements,
and recyclability.

The Company, which has been a development stage company since its
inception in March 1986, commenced limited commercial production in mid-1993.
The Company has not achieved profitability in any fiscal quarter and has been
required to raise substantial amounts of capital in order to support its
on-going development activities. Although the Company historically was dedicated
to the formatting of composite materials for defense and aerospace markets, it
began redirecting its business in 1993 and 1994 to focus on commercial and
consumer markets for value-added, high-performance products. The Company did not
generate significant revenues in fiscal 1994 (the period from January 3, 1994 to
December 31, 1994), and the Company's independent accountants, Livingston &
Haynes, P.C., have included a "going concern" qualification in their report on
the Company's financial statements for fiscal 1994, reflecting the Company's
history of losses as a development stage company and its continuing dependence
on financing activities to provide the cash needed to meet its expenses. See
Consolidated Financial Statements.

CHANGES IN CONTROL AND RELATED TRANSACTIONS

Contemporaneous with the acquisition of the Voting Preferred Stock, Mr.
Hayton also agreed to purchase newly issued shares of Common Stock through
Conagher. Pursuant to a stock purchase agreement dated July 8, 1994, Conagher
purchased 1,500,000 shares of Common Stock in exchange for a $3,000,000
promissory note from Conagher (the "July Promissory Note") payable in five equal
consecutive monthly installments beginning August 16, 1994. Thereafter, pursuant
to a stock purchase agreement dated August 26, 1994 and subsequently amended on
September 16, 1994, Conagher purchased an additional 2,250,000 shares of Common
Stock in exchange for a $4,500,000 promissory note from Conagher (the "August
Promissory Note"), payable in equal consecutive monthly installments beginning
October 30, 1994. Thus, as a result of these purchases, Conagher acquired
3,750,000 shares of Common Stock in exchange for promissory notes aggregating
$7,500,000.

In September 1994, Conagher satisfied its obligations under the July
Promissory Note by paying to the Company an aggregate of $1,742,675 and by
arranging for the discharge of notes payable by the Company to ALS in the amount
of $1,257,325. Conagher also made aggregate payments of approximately $3,500,000
in connection with the August Promissory Note. The remaining balance of
approximately $1,000,000, which was due and owing as of January 30, 1995, was
not paid by Conagher.

20
<PAGE> 22

In connection with Conagher's failure to pay the balance due on the August
Promissory Note, the Company entered into negotiations which led to a Settlement
Agreement (the "Settlement Agreement") among Conagher, Mr. Hayton, Richard A.
Fisher, James J. Palermo, the Company's Chief Executive Officer, and
Allied-Asian Consolidated Limited ("Allied"), a company of which Mr. Hayton was
a director and stockholder, dated February 13, 1995 and subsequently amended on
March 17, 1995 and May 30, 1995. Pursuant to the Settlement Agreement, record
ownership of the Voting Preferred Stock owned by Conagher was transferred to Mr.
Palermo, as trustee for the holders of Common Stock. Mr. Palermo is required to
vote the Voting Preferred Stock as directed by the holders of the Common Stock,
and as a result holders of Common Stock are now able to elect all of the
Company's directors. In conjunction with the acquisition of the Voting Preferred
Stock from Conagher, Mr. Palermo replaced Mr. Hayton as Chairman of the Board
and Mr. Hayton resigned as a director of the Company. For a description of the
terms of the Settlement Agreement and related transactions see "CERTAIN
TRANSACTIONS--Pattinson Hayton, III and Affiliates" and Note 10 to Consolidated
Financial Statements.

REDIRECTION OF BUSINESS

The Company historically was dedicated to the formatting of composite
materials for defense and aerospace markets. Beginning in 1993, the Company
began to redirect its business toward commercial and consumer applications.
After negotiations for the proposed sale of the Company to ALS were terminated
in May 1994, the Company sought to accelerate the redirection of its business
during the second half of fiscal 1994 through acquisitions of assets and license
rights and through strategic arrangements with manufacturers of sporting goods
and athletic equipment.

Quadrax was originally organized in March 1986 to acquire and complete the
development of the Composite Materials Interlacer, a device designed to format
thermoplastic composite tapes into continuous broad sheet goods. Sheet goods
formatted using the Composite Materials Interlacer have been among those
marketed by Quadrax under the brand name "Quadrax Biaxial Tape." The Company's
target market for Quadrax Biaxial Tape formatted on the Composite Materials
Interlacer originally consisted primarily of aerospace defense contractors
seeking a seamless composite material for use in wing skins on the advanced
design "next generation" tactical fighters then under development. The Composite
Materials Interlacer can format sheet goods up to ten feet wide and having
virtually any length, a significant advantage over other weaving technologies,
which generally cannot produce sheets wider than four feet. The use of the
Composite Materials Interlacer to date generally has been uneconomical, however,
except for a limited number of applications for customers in the aerospace
industry.

At the time of its initial public offering in July 1987, Quadrax was
focused on becoming an integral part of the advanced materials community serving
the defense industry. In subsequent years, the Company obtained contracts from
defense contractors and airframe manufacturers for the sale of Quadrax Biaxial
Tape for evaluation and test purposes.

As defense funding for advanced research was curtailed in the late 1980s
and early 1990s, a number of companies abandoned their participation in the
composite materials industry. Quadrax sought to take advantage of this situation
by acquiring manufacturing equipment and a license of related technology in the
manufacture of thermoplastic composite materials from Phillips Petroleum Company
("Phillips") in 1992 and from Amoco Performance Products Inc. ("Amoco"), a
subsidiary of Amoco Corporation, in 1993. These acquisitions provided Quadrax
with the benefits of research and development conducted over the course of
several years, as well as additional defense industry contacts and a database of
materials performance specifications.

The Phillips and Amoco acquisitions provided Quadrax with the ability to
fabricate tape marketed under the brand name "Quadrax aXial Tape." Quadrax aXial
Tape enabled the Company to begin

21
<PAGE> 23

redirecting its business from defense to commercial and consumer applications.
Quadrax initially targeted sporting goods applications, because it believed that
the improved performance characteristics offered by Quadrax Composites could
overcome the cost premium of its materials and the familiarity of customers with
more conventional composite materials.

In mid-1993, Quadrax signed a joint development and exclusive
manufacturing contract with Kunnan Enterprise Limited ("Kunnan"), a Taiwanese
corporation that is one of the largest manufacturers of tennis racquets in the
world. Kunnan markets products under its house brands (such as "Kennex" and
"ProKennex") and serves as an original equipment manufacturer for other
internationally recognized brands. Quadrax completed the design, development and
prototype production of tennis racquet frames made of Quadrax Composites. In
light of a soft worldwide market for tennis racquets, however, Kunnan determined
not to commit the resources necessary to bring the racquet to market.

As a result of its joint development and manufacturing relationship with
Kunnan, Quadrax developed technologies that can be utilized for manufacturing
value-added products from Quadrax Composites for a number of sporting goods
markets. One of the Company's strategies is to focus its resources on the
design, development and prototyping of these sporting goods products in order to
demonstrate the performance attributes of Quadrax Composites and to build demand
for the Company's materials. The Company will then determine on a
product-by-product basis whether to undertake manufacturing of a product or
component, outsource manufacturing once commercial production levels are
achieved or seek to enter into strategic relationships with established
companies with experience in manufacturing and marketing for the relevant
market.

In November 1994, Quadrax took a number of steps aimed at accelerating the
redirection of its business:

- The Company acquired from Time Sports, Inc., a subsidiary of Kunnan,
the exclusive rights in the United States and Canada to make and
market tennis racquets under the "Wimbledon" brand name and to make
and market certain apparel under the "Wimbledon" brand name, all
pursuant to an underlying licensing agreement with the All-England
Lawn Tennis and Croquet Club of Wimbledon, England. In connection with
the acquisition of the Wimbledon license rights, Quadrax also
acquired certain other assets and assumed certain liabilities of Time
Sports, Inc. The Company believes that the acquisition of the
Wimbledon license rights has provided Quadrax with immediate brand
name recognition within the tennis industry.

- The Company acquired all of the stock of McManis Sports, a recently
organized development stage company that had been formed to design and
develop golf clubs. This acquisition provided the Company with lines of
golf products, including irons marketed under the "Tour Technology" and
other brand names, as well as expertise in the design and development
of golf equipment. See "CERTAIN TRANSACTIONS--Pattinson Hayton, III and
Affiliates."

- Quadrax signed two joint development/exclusive manufacturing contracts
with Cannondale Corporation, a manufacturer of high-performance
bicycles. These contracts call for the design, development and
production of bicycle frames, forks and other components using Quadrax
Composites. The Company currently estimates that prototypes of these
components will be completed in the second half of 1995.

In February 1995, the Company entered into a joint design/exclusive
manufacturing contract with Brine, Inc., a supplier of lacrosse equipment in the
United States, under which the Company has completed

22
<PAGE> 24

testing of lacrosse sticks and commenced shipments in April 1995. The Company is
currently working to develop the manufacturing process necessary to produce
lacrosse equipment in quantity.

As Quadrax progresses from the development of prototypes to the production
of finished products and components, it will continue to be dependent on outside
financing sources. The Company raised approximately $5 million of equity capital
in fiscal 1994 and an additional $3.7 million through sales of Common Stock
during the first half of fiscal 1995. It expects to raise approximately $1.5
million through additional equity sales during the remainder of 1995 and
believes that these funds, together with cash provided by revenues, will be
sufficient to meet the Company's cash requirements for the remainder of fiscal
1995. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS--Financial Position, Liquidity and Capital Resources."

TECHNOLOGIES

CORE TECHNOLOGIES

The Company is simultaneously exploiting three distinct, but intimately
related, core technologies:

- fabrication of thermoplastic composite tapes and laminates;

- design, development and prototype production of piece parts made out of
thermoplastic composite tapes and laminates; and

- manufacture of piece parts using thermoplastic composite materials.

Quadrax is seeking to deliver the performance advantages of Quadrax
Composites to the market place in one or more of three formats:

- as a material to be engineered by the customer;

- as a fully engineered piece part that can be manufactured by the
customer in its own operations; or

- as piece parts manufactured by Quadrax for incorporation by the
customer into a finished product.

Quadrax fabricates and formats several standard tape products for which
data sheets have been prepared, including tape formats sold under the brand name
"Quadrax aXial Tape" ("QXT") and broad sheet goods sold under the brand name
"Quadrax Biaxial Tape" ("QBT"). In addition, tape products can be customized
through varying combinations of fibers, resins, fiber areal weight and resin
percentages in order to meet customers' specific needs.

The Company also seeks new product applications for its materials through
its new Quadrax Professional Design ("QuadPro-D") program. QuadPro-D makes the
Company's experience in thermoplastic composites available on a contract basis
for the design, development and prototype production of piece parts manufactured
to the customer's specifications using Quadrax Composite materials. Successful
completion of a QuadPro-D contract is expected to result in either new orders
for materials (in either QXT or QBT format) or production orders for piece parts
manufactured by Quadrax.

The third principal product line offered by the Company is manufacturing
services. For customers who want the performance advantages of Quadrax
Composites, but do not want to establish their own

23
<PAGE> 25

manufacturing facility, Quadrax will contract to produce quantities of piece
parts to the customers' specifications. Manufacturing services offered by the
Company include thermoformed or compression molded flat laminates, rolled
laminates, and preformed parts.

Although the Company's primary product focus is on materials, design
services and manufacturing services, it also promotes two consumer brands: the
Wimbledon brand of tennis racquets and related items, which Quadrax markets
under license from the All-England Lawn Tennis and Croquet Club, and a line of
golf clubs, principally putters and irons, marketing under the McManis Sports
label. Some of the products offered under the Wimbledon and McManis labels,
principally tennis racquet frames and putter heads, are manufactured out of
Quadrax Composites, while others are made out of conventional materials.

These technologies are based on insights into the chemical processes by
which a variety of man-made polymer resins (plastics) can be made to bond with
continuous fibers to produce a material that is strong, lightweight, easy to
handle, and easy to shape using modified conventional heat and compression
molding techniques. This material is also distinguished by the manner in which
it bends on impact, providing it with strength, durability and vibration
dampening characteristics that the Company believes will also provide
significant advantages in the manufacture of other sporting equipment such as
lacrosse sticks.

The principal fibers used in making Quadrax Composites are carbon, glass
and aramid (for example, duPont's brand of aramid fiber that it markets under
the name "Kevlar").

FUNCTIONAL ADVANTAGES AND LIMITATIONS OF QUADRAX COMPOSITES

The principal functional advantage offered by Quadrax Composites is the
ability to provide equivalent strength at lower weights than competing
materials. By varying mixes of resin, fiber, fiber areal weight, resin
percentage, number of plies, and axial orientation of the different plies,
Quadrax can deliver materials that meet a wide range of minimum threshold
strength requirements at a fraction of the weight of more conventional materials
such as steel and aluminum.

Quadrax Composites use continuous fibers aligned at uniform intervals
parallel to a single axis of orientation within the polymer resin matrix,
permitting the formation of tape of virtually any length. The result is a
material that presents a uniformly high strength profile along the longitudinal
axis, making it possible to design a multiple ply material that displays very
precisely engineered structural properties along its entire planar horizon.

Quadrax Composites can be engineered to deliver a variety of other
characteristics, including chemical stability (no rust), moisture and heat
resistance (no rotting or, within certain tolerances, melting), vibration
dampening, and electrical insulation. Unlike epoxy-based composite materials,
Quadrax Composites are fully recyclable. Scrap material can be ground up, melted
down and reformed using conventional compression and injection molding
techniques, retaining sufficient strength and other structural characteristics
to make it suitable for use in a wide variety of "lower tier" applications.

Quadrax Composites are thermoplastic, so they will lose their shape under
prolonged exposure to high temperatures. Like all composites, they are
fiber-reinforced and therefore subject to disintegration through abrasion that
exposes the fibers. These disadvantages are irrelevant for most structural
applications, but limit the utility of Quadrax Composites in high-temperature
applications.

24
<PAGE> 26

APPLICATIONS

The high strength-to-weight ratio and other functional advantages of
Quadrax Composites make them superior structural materials for a wide range of
applications. The Company has targeted a number of applications for which high
strength-to-weight ratios are critical, including:

- athletic and recreational equipment, such as racquet frames, lacrosse
and hockey sticks, bats, bicycle frames, and panel and frame
assemblies for a wide variety of recreational vehicles;

- truck and trailer components and systems; and

- military equipment, primarily outer body panels and reinforcing
members for aircraft, armored vehicles and marine vessels.

COMPETITIVE ADVANTAGES AND DISADVANTAGES

The characteristics of Quadrax Composites offer several processing
efficiencies that enable Quadrax Composites to present an attractive
price/performance profile, when measured on a total-cost-of-finished-goods
basis. These characteristics include:

- their light weight, which makes Quadrax Composites easy to move and
handle;

- structural characteristics that make them easy to form using modified
conventional cutting, thermoforming or compression molding techniques;

- their chemical stability, which makes Quadrax Composites easy and
quick to process with virtually no restrictions on shelf life, no
lengthy cure periods, no toxicity, and no refrigerated storage
requirements; and

- for certain resins, the ability of Quadrax Composites to be bonded
through heat and pressure alone, without the need for glues or other
bonding agents.

Quadrax Composites, like most composites, are more expensive than
competing conventional materials. Quadrax Composites also suffer from
institutional resistance to working with new materials and to investing in the
re-tooling needed to integrate the materials into existing product and
production lines. The Company believes that these disadvantages will dissipate
over time as Quadrax Composites gain recognition in the marketplace and as
economies of scale lower unit costs.

See "--Competition--Materials Competition."

MANUFACTURING AND DISTRIBUTION SYSTEMS

PRODUCTION

Materials, Machinery, Energy and Personnel. All materials, machinery,
energy and personnel needed to build and operate production facilities at
Quadrax are readily available from conventional sources, with specialized
expertise limited to the proprietary processes themselves. Raw materials consist
only of fibers and resins produced by a number of established chemical companies
and sold primarily for applications other than composites. Machinery
requirements are limited to tape fabrication lines (which are specially
assembled using conventional machinery), molds and dies (which are custom-made,
using conventional

25
<PAGE> 27

machine tool technologies) and various die cutters, thermoformers, ovens and
presses that are in common use throughout the plastics industry.

All machinery and processes are powered by electricity, which is available
in adequate quantities from the local utility. Production personnel include
materials and process engineers, skilled and semi-skilled machine operators, and
various shop hands. The Company believes that any necessary additional
production personnel can be recruited at competitive rates from within the
existing plastics, defense and general manufacturing communities.

Physical Plant and Processing Systems. Production of Quadrax Composites
and pre-formed parts is a light manufacturing process. The three principal steps
in the process are:

- tape fabrication -- typically a water- and heat-based process in which
fibers are imbedded in the resin matrix;

- lay-up -- either a manual or mechanical process, depending on design
specifications, in which multiple layers of tape are assembled to
present the required strength, flexibility and other engineering
characteristics; and

- consolidation -- a heat- and pressure-based process through which
lay-ups are fused to form laminated material.

These processes typically are completed at Quadrax's manufacturing facilities in
Portsmouth, Rhode Island. See "--Facilities."

Quadrax is developing the capacity to thermoform or compression mold
customer-specified component parts or frame assemblies on proof-of-concept,
pre-production prototype and pilot production bases at its Portsmouth facility.
Quadrax currently contemplates that it will outsource parts manufacturing once
commercial production levels are achieved.

DISTRIBUTION

Inventories. Quadrax maintains a small inventory of fabricated tape in
standard configurations at its Portsmouth facility. Sheet goods and pre-formed
parts are manufactured on a contract basis only. Finished goods (currently
limited to tennis and golf equipment) are outsourced either overseas or
domestically, and drop-shipped to the wholesale/retail distributor as orders are
received.

Delivery and Installation. Unlike thermoset composite materials systems,
Quadrax Composites do not require refrigeration or other special handling. They
can be boxed and shipped by express delivery or common carrier at standard
ground rates.

Customer Service and Support. Members of Quadrax's engineering staff are
available to visit a customer and consult on proper processing techniques or
special engineering challenges, on an as-needed basis, but generally post-sale
support is not required.

PRODUCT LINE

Quadrax fabricates and formats several standard Quadrax Composites tape
products for which data sheets have been prepared, including tape formats sold
under the brand name "Quadrax aXial Tape" and tapes sold in broad sheet format
under the brand name "Quadrax Biaxial Tape." In addition, Quadrax

26
<PAGE> 28

Composites tape products can be customized through varying combinations of
resins, fibers, fiber areal weights and resin percentages in order to meet
customers' specific needs.

Although Quadrax's initial proprietary expertise was in the fabrication
and formatting of composite tape products, the Company is expanding its range of
know-how and capabilities to include expertise in finished goods and piece parts
for the consumer sporting goods market:

- The Company is currently marketing a high-performance model of tennis
racquet, the "Conqueror," under the Wimbledon brand name. This racquet
model features "Dynamic Positioning," a strategic use of weight
distribution that takes advantage of the strength-to-weight advantages
of Quadrax Composites. As a result of its acquisition of Wimbledon
license rights, the Company is also selling tennis-related soft goods
in the United States under the "Wimbledon" brand name.

- The Company has completed a prototype for lacrosse stick handles
utilizing Quadrax Composites. These handles are being developed under
a joint design/exclusive manufacturing contract entered into in
February 1995 with Brine, Inc. The Company commenced shipping lacrosse
stick handles to Brine, Inc. in the second quarter of 1995.

- The acquisition of McManis Sports provided Quadrax with golf product
lines that include irons marketed under the "Tour Technology" and
other brand names. These irons do not incorporate Quadrax Composites.
The Company expects to commence a mass marketing campaign for Tour
Technology irons in August 1995. Using design and development
expertise obtained in the McManis Sports transaction, the Company has
completed a prototype of a putter produced with Quadrax Composites and
is seeking to enter into a strategic marketing relationship with a
company that is established in the golf equipment market.

- Quadrax has signed two joint development/exclusive manufacturing
contracts with Cannondale Corporation, a manufacturer of
high-performance bicycles. These contracts call for the design,
development and production of bicycle frames, forks and other
components using Quadrax Composites. The Company has
computer-engineered the design of the bicycle frames and forks, and
currently estimates that prototypes of these components will be
completed in the second half of 1995. If the Company is successful in
timely providing frames and forks that meet contractual
specifications, Cannondale Corporation will be contractually obligated
to purchase specified quantities of components from Quadrax over an
18-month period. The development and production of these components
will require the Company to design and implement new production
processes different from those used in connection with the Company's
other finished goods. To date, the Company has not been able to meet
contractual specifications on a timely basis, and there can be no
assurance that the Company will be successful in meeting the
contractual specifications at all.

The Company seeks to identify, on a regular basis, additional sports equipment
that may benefit from the functional advantages of Quadrax Composites.

In producing tennis and golf equipment, the Company intends to integrate
production vertically, from the manufacture of the feedstock materials (Quadrax
Composites) through distribution to product retailers. With respect to other
finished goods for the sporting goods markets, however, the Company currently
anticipates that it will seek to enter into strategic development and marketing
relationships, such as those

27
<PAGE> 29

with Brine, Inc. and Cannondale Corporation. This strategy will facilitate the
Company's entry into new sporting goods markets in a cost-effective manner, by
enabling the Company to focus its resources on applications for its tape
products. The Company believes that this approach will increase demand for the
Company's tape products both directly, by creating needs for specific components
and goods, and indirectly, by demonstrating the advantages and potential of
Quadrax Composites.

Quadrax continues to supply advanced composite materials systems to
branches of the United States military through three materials supply contracts
with defense contractors. Under these contracts, Quadrax Composites are being
incorporated in:

- the F-22 "Air Superiority" tactical fighter being produced by Lockheed
Aeronautical Systems Company under contract with the United States Air
Force;

- the Seawolf class of submarines being constructed by the Electric Boat
Division of General Dynamics Corporation under contract with the
United States Navy; and

- the "Composite Armored Vehicle," an experimental armored troop carrier
(known as CAV) being developed by United Defense LP under contract
with the United States Army.

MARKETS

ATHLETIC AND RECREATIONAL EQUIPMENT

Quadrax intends to execute a two-pronged marketing strategy in the
sporting goods market. In both cases, it is pursuing the same targeted market:
serious athletes, both professional and amateur, who are willing to pay a
premium for the better "feel" that Quadrax Composites can deliver.

A high profile approach is being launched through the Conqueror tennis
racquet and tennis-related soft goods being sold under the Wimbledon brand name.
This approach may also be used to market the golf club product lines obtained by
the Company through the acquisition of McManis Sports.

A lower profile approach is being implemented through joint development
and manufacturing contracts with leading suppliers of high-performance equipment
for various games and activities. The Company is currently engaged in a bicycle
frame and fork program with Cannondale Corporation and a lacrosse stick program
with Brine, Inc.

TRUCKS AND TRANSPORTATION

The truck and transportation market represents a medium- to long-term
opportunity for Quadrax. In May 1995, the Company entered into a product
development agreement with Wabash National Corporation that provides for the
design and prototype development of a specialized, lightweight system for use on
certain specialty trailers produced by Wabash National Corporation.

DEFENSE

Through a combination of internal initiatives and the acquisitions from
Phillips and Amoco, Quadrax has established itself as a supplier of advanced
composite materials systems to branches of the United States military. Quadrax
Composites are currently being incorporated in products provided under contracts
with

28
<PAGE> 30

the United States Air Force, the United States Navy and the United States Army.
The Company is selectively pursuing additional defense contracts, particularly
for products that will necessitate relatively short testing periods.

AEROSPACE

Quadrax continues to receive orders for unformatted Quadrax aXial Tape
from companies active in the non-defense aerospace industries. Most of these
orders have been, and any future orders are expected to be, for purposes of
testing and evaluation in connection with research and development products,
with a limited number of sales being made for commercial production purposes.

MARKETING AND SALES

REPUTATION

As one of a small number of fabricators in the relatively new
thermoplastic composite tapes market, Quadrax is often sought out by customers
interested in purchasing its tapes. This is particularly true in the defense
market, where Quadrax receives invitations to bid on projects in which Quadrax
Composites may be used to advantage, and in aerospace markets, where Quadrax
periodically receives unsolicited orders, usually from advanced prototyping
engineers purchasing the material for testing and evaluation. These orders
historically have not been received in volumes sufficient to support profitable
operations, and they are not expected to become profitable without an increase
in acceptance of Quadrax Composites by the market through successful marketing
of the Company's finished goods. See "--Product Line."

Quadrax works to maintain and enhance its reputation within these market
sectors by periodic advertising in trade publications, the regular submission of
technical papers for publication in professional journals and frequent
attendance at industry conferences, conventions and trade shows.

DIRECT SALES

Quadrax's marketing and sales programs are the responsibility of its Vice
President--Sales and Marketing, who, supported by the Company's engineering
staff and other sales personnel, is charged with calling directly on decision
makers at manufacturing companies that the Company has identified as attractive
candidates for the incorporation of components made out of Quadrax Composites
into finished goods or parts assemblies. The Company is currently seeking to
develop off-site sales locations at which Quadrax employees will solicit sales
from assigned geographic territories.

CONSUMER MARKETING

With the acquisitions of McManis Sports and the Wimbledon licensing rights
previously held by Time Sports, Inc., Quadrax added expertise to assist it in
its efforts to begin marketing finished goods directly to consumers. The Company
distributes its tennis equipment through specialty retailers (such as pro
shops), with sales being supported by limited-scope promotional campaigns. The
Company contemplates that distribution of golf equipment will initially be made
through specialty retailers, with support from a mass marketing campaign to
commence in August 1995. Promotional campaigns for tennis and golf equipment may
include sponsoring tournaments and other competitive events, high-profile
advertisements in limited circulation specialty magazines, and other techniques
calculated to associate the Quadrax name with a performance advantage.

29
<PAGE> 31

COMPETITION

MATERIALS COMPETITION

Thermoplastic composites (such as Quadrax Composites) compete with
conventional materials (including wood, stone, steel and aluminum), less common
metals such as titanium, and thermoset (epoxy-based) composites. The materials
considered by Quadrax to be most vulnerable to displacement are thermosets.
Thermosets are an earlier form of polymer resin/fiber matrix composite material
that are the accepted standard for a variety of sporting goods and recreational
equipment. Weight savings alone will not give thermoplastics the edge over
thermosets, but improved strength, durability and vibration dampening qualities,
combined with the ability to achieve a strategic distribution of weight through
the precision engineering of Quadrax aXial Tape, can provide an improved "feel"
and more precise control, particularly in the critical follow-through swing. In
addition, thermoplastics are safer to manufacture and use.

Compared with metals such as steel and, to a lesser extent, aluminum and
titanium, thermoplastic composites offer substantial weight savings at
equivalent tensile and mechanical strength levels, making thermoplastic
composites easier to handle and transport. Since thermoplastic composites do not
oxidize, they do not require paints or other special coatings as protection
against rust or corrosion, making them cheaper to maintain. Compared with wood
and other laminates, thermoplastic composites offer substantial weight savings
and, more importantly, structural characteristics that enable them easily to
assume almost any shape through heat and compression molding, while presenting
aesthetic and acoustic qualities comparable to wood. The primary competitive
disadvantage of thermoplastic composites is their comparatively high cost.

SUPPLIER COMPETITION

Composite materials are an emerging industry, and it is difficult to
identify those competitors that will be the most successful. A significant part
of the early discovery and development work in thermoplastic composites was
performed by major international oil companies, many of which subsequently
exited the business as the size of the defense market decreased. Three of the
largest multinational chemical companies -- E.I. du Pont de Nemours & Co.,
Imperial Chemical Industries PLC and Saint Goban -- continue to develop
composite product offerings that may compete with the Company's product
offerings. The Company faces potential competition from new companies as well as
established companies that may migrate from related industries. Many of the
Company's current and prospective competitors, including E.I. du Pont de Nemours
& Co., Imperial Chemical Industries PLC and Saint Goban, have significantly
greater financial, manufacturing and marketing resources than the Company. There
can be no assurance that the Company's products will compete effectively with
products offered by established and new competitors of the Company.

The Company believes that its ability to compete depends on elements both
within and outside its control, including the success and timing of new product
development and introduction by the Company and its competitors, product
performance and price, distribution and customer support. There can be no
assurance that the Company will be able to compete successfully with respect to
these factors. Although the Company believes that it has certain technological
and other advantages over its competitors, maintaining such advantages will
require continued investment by the Company in design and development, sales and
marketing and customer service and support. There can be no assurance that the
Company will have sufficient resources to make such investments or that the
Company will be able to make the technological advances necessary to maintain
such competitive advantages. In addition, as the Company enters new markets,
distribution channels, technical requirements and levels and bases of
competition may

30
<PAGE> 32

be different than those in the Company's current markets and there can be no
assurance that the Company will be able to compete favorably.

FACILITIES

The Company's corporate headquarters and manufacturing facilities are
located in Portsmouth, Rhode Island, in a leased building comprising
approximately 49,000 square feet. The Company has occupied all or a portion of
this building since the building was constructed in 1988. In connection with its
initial lease of the facilities, the Company acquired a one-third interest as a
limited partner in the limited partnership that owns the building and pledged a
$250,000 certificate of deposit to secure its obligations to the institution
that provided construction financing for the building. Under the terms of a
revised operating lease executed in October 1993, the Company agreed to lease
the Portsmouth building at an annual rent of approximately $100,000 for a
ten-year term expiring in 2003. The Company has responsibility for all repairs,
maintenance and operating expenses for the building during the lease term. In
connection with the execution of the revised lease, the Company's pledge of its
$250,000 certificate of deposit was released and the Company advanced $250,000
to the limited partnership. Under the revised lease, Quadrax has the right to
purchase the building at any time during the lease term for a price of
approximately $1,000,000 (approximately 50% of the construction cost of the
building), a portion of which may be paid through cancellation of the advance to
the limited partnership.

The Company believes that its existing leased facilities are adequate to
meet its currently anticipated requirements and that suitable additional or
substitute facilities would be available if required.

LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to
claims arising out of its operations in the normal course of business. The
Company is not currently a party to any legal proceedings, the adverse outcome
of which, in management's opinion, individually or in the aggregate, would have
a material adverse effect on the Company's results of operations or financial
position.

31
<PAGE> 33
<TABLE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James J. Palermo 58 Chairman of the Board and Chief Executive Officer
Terrance J. Lanning 49 Vice President-Marketing and Sales
Gerard J. McDonald 46 Vice President
John A. McQuade 52 Vice President and Chief Administrative Officer
David L. Park 45 Vice President-Product Development
David A. Soules 35 Vice President-Manufacturing Operations
Edward A. Stoltenberg 56 Consultant and Acting Chief Financial Officer
William G. Conway 53 Director
Sven Kraumanis 49 Director
Gordon Werner 63 Director
</TABLE>

JAMES J. PALERMO has been a member of the Board of Directors since July
1994. Mr. Palermo has been Chief Executive Officer of the Company since
September 1994 and Chairman of the Board of the Company since February 1995. He
previously served as President and Chief Operating Officer of the Company from
May 1994 to September 1994. From January 1990 to May 1994, Mr. Palermo was a
Principal of J.P. Associates, Inc., an investment banking firm.

TERRANCE J. LANNING has been the Vice President-Marketing and Sales of the
Company since October 1994. From April 1991 to October 1994, Mr. Lanning was a
Principal in Corporate Partners, a consulting firm providing services in public
relations, sales and marketing, and business planning. From August 1990 to April
1991, he was Vice President, Sales and Marketing of Advatex Associates, a
business providing services for asbestos abatement. From January 1989 to August
1990, Mr. Lanning was New England Regional Sales Director, Sales and Marketing
of The Brand Company, a business providing services for asbestos abatement and
hazardous waste management.

GERARD J. MCDONALD has been a Vice President of the Company since May
1995. From September 1994 to April 1995, Mr. McDonald was Materials Manager of
Bird Machine Co. and from December 1990 to August 1994, he was Operations
Manager for After Market Sales of Bird Machine Co., a manufacturer of equipment
for the chemical, mining oil, environmental, pulp and paper industries. Prior to
that time, including the period from July 1990 to November 1990, Mr. McDonald
held various management level positions in production engineering at Bird
Machine Co.

JOHN A. MCQUADE has served as Vice President and Chief Administrative
Officer of the Company since May 1994. From October 1990 to May 1994, Mr.
McQuade was an Executive Vice President of J.P. Associates, Inc., an investment
banking firm. From April 1984 to September 1990, he served as Vice President,
Manufacturing of New England Digital Corporation, a manufacturer and distributor
of computer equipment.

32
<PAGE> 34

DAVID L. PARK has been Vice President-Product Development of the Company
since October 1994. From January 1989 to October 1994, Mr. Park was Vice
President and Technical Director of Bird Machine Company, a manufacturer of
equipment for the chemical, mining, oil, environmental, pulp and paper
industries.

DAVID A. SOULES has served as Vice President-Manufacturing Operations of
the Company since April 1995. He previously served as the Company's Director of
Tape Products and Technology from August 1992 to September 1994 and as the
Company's Director of Operations from September 1994 to April 1995. From
September 1991 to September 1992, Dr. Soules was a Research Chemist for Phillips
Petroleum Company in the Petroleum Products Division, and from November 1987 to
September 1991, he was a Research Chemist for Phillips Petroleum Company in the
Plastics Division. Dr. Soules has published numerous technical papers and
articles, and is a member of the American Chemical Society and the Society for
the Advancement of Material and Process Engineering. Dr. Soules received his PhD
from North Dakota State University.

EDWARD A. STOLTENBERG has been a consultant to the Company since July 1994
and, in connection with his consultancy, has served as the Acting Chief
Financial Officer of the Company since April 1995. Since October 1990, Mr.
Stoltenberg has been a Partner of Aegis Business Consultants, a financial
consulting firm. From December 1988 to October 1990, he was the Vice
President-Finance and Chief Financial Officer of Progressive Custom Wheels,
Inc., a manufacturer and distributor of custom automotive wheels. Since
September 1988, Mr. Stoltenberg has been a director of RJE Enterprises, Inc.,
which filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code in
September 1993; a reorganization plan for RJE Enterprises, Inc. was approved by
the bankruptcy court in October 1994. Since June 1994, he has been the President
and a director of Nuvo Corporation of America, which was the subject of an
involuntary filing under Chapter 7 of the U.S. Bankruptcy Code in April 1994.
Mr. Stoltenberg was appointed by Nuvo's prior management to serve as President
of Nuvo to operate Nuvo under Chapter 11; during Mr. Stoltenberg's engagement,
it was determined to liquidate Nuvo and a liquidation plan was filed with the
court in February 1995.

WILLIAM G. CONWAY was elected to the Board of Directors in October 1994.
Since April 1991, Mr. Conway has served as the President of The Conway Company,
Inc. of Santa Fe, New Mexico, a firm engaged in real estate development,
financing and consulting. From June 1986 to February 1991, Mr. Conway was
Managing Director of Jones Lang Wootton, USA, LP, an international real estate
consulting group. From September 1994 to November 1994, Mr. Conway was a
director of Apogee Robotics, Inc., a publicly held company engaged in the
fabrication of mechanical robotic materials handling systems that subsequently
filed for bankruptcy protection on December 13, 1994.

SVEN KRAUMANIS has been a member of the Board of Directors since July
1994. Mr. Kraumanis has been employed by Brassie Golf Corporation as General
Counsel since May 1993, as Vice President-Acquisitions since May 1994 and as
Secretary since June 1994. Brassie Golf Corporation is engaged in the design,
construction, purchase, ownership and management of golf courses, and its common
stock is listed on the Nasdaq SmallCap Market and the Toronto Stock Exchange.
From August 1994 to December 1994, Mr. Kraumanis has been a director of Apogee
Robotics, Inc., a publicly held company engaged in the fabrication of mechanical
and robotic materials handling systems that filed for bankruptcy protection on
December 13, 1994. From 1979 until May 1993, Mr. Kraumanis served as President
and General Counsel of Harvest Consultants, Ltd., a land development and
consulting company that he founded.

GORDON WERNER has been a director of the Company since April 1995, and
also was a director of the Company from May 1994 to July 1994. Since March 1995,
Mr. Werner has been the Chairman and a director of Reddi Brake Supply
Corporation, a distributor of automobile replacement parts. From October 1991 to
February 1995, Mr. Werner was the Vice Chairman and a director of Reddi Brake
Supply

33
<PAGE> 35

Corporation. The common stock of Reddi Brake Supply Corporation is listed on the
Nasdaq National Market. Since July 1993, Mr. Werner has been the Vice Chairman
and a director of BioLase Technology Corporation, a manufacturer of dental and
medical laser instruments. The common stock of BioLase Technology Corporation is
listed on the Nasdaq SmallCap Market.

DIRECTORS' COMPENSATION

Directors who are also employees of the Company do not receive any
additional remuneration for their services as directors. Effective January 1,
1995, each director who is not an employee of the Company (currently William G.
Conway, Sven Kraumanis and Gordon Werner) is paid $1,200 per month.

Upon initial election to the Board of Directors, each non-employee
director is awarded, as of October 1 of the year in which elected, non-qualified
stock options under the Quadrax Corporation 1993 Stock Plan (the "1993 Stock
Plan") to purchase 10,000 shares of Common Stock at a price equal to the market
price of Common Stock on the date of election. On October 1 of each year, each
non-employee director of the Company (other than a director who was first
elected in that year) is automatically awarded non-qualified stock options to
purchase 3,333 shares of Common Stock at the market price on that date.

34
<PAGE> 36
<TABLE>
EXECUTIVE COMPENSATION

The following table sets forth certain information with respect to the
compensation paid to the Chief Executive Officer of the Company, the sole
executive officer of the Company whose total salary and bonus exceeded $100,000
in fiscal 1994, and the only other current executive officer of Company whose
salary and bonus for a portion of fiscal 1994 exceeded $100,000 on an annualized
basis (collectively, the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<CAPTION>
Long Term
Compensation
Shares
Underlying
Principal Fiscal Other Annual Options All Other
Name Position Year Salary Bonus Compensation(1) Granted(2) Compensation
---- --------- ---- ------ ----- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James J. Palermo Chairman of the 1994 $ 91,715 -- $2,100 175,500 $ 6,502(4)
Board and Chief 1993 -- -- -- -- --
Executive Officer(3) 1992 -- -- -- -- --

David Park Vice President- 1994 $24,077 -- $1,000 45,000 --
Product 1993 -- -- -- -- --
Development(5) 1992 -- -- -- -- --

Richard A. Fisher Former Chairman of 1994 $174,058 -- $6,000 242,468 $ 58,432(7)
the Board, Chief 1993 271,952 $ 4,808 -- 201,137 100,670(8)
Executive Officer and 1992 225,000 35,000 -- 90,189 59,541(9)
General Counsel(6)
<FN>
- ---------------
(1) Consists of automobile allowances. No other perquisites or other benefits
to any Named Executive Officer for any specified year totaled more than
the lesser of $50,000 and 10% of the total annual salary and bonus
reported for the Named Executive Officer for that year.

(2) All stock option numbers give effect to a one-for-ten reverse split of the
Common Stock effected on July 20, 1994.

(3) In fiscal 1994, Mr. Palermo served as President and Chief Operating
Officer from May 1994 to September 1994 and as Chief Executive Officer from
September 1994 to December 1995. He has been Chairman of the Board and
Chief Executive Officer since February 1995.

(4) Consists of $6,002 of premiums paid by the Company for life and long-term
disability insurance, and $500 of contributions by the Company under the
Quadrax Corporation 401(k) Plan.

(5) Mr. Park has been Vice President-Product Development of the Company since
October 1994. He entered into an employment agreement with the Company on
September 26, 1994, pursuant to which he receives a base salary of
$119,000 per year.

(6) Mr. Fisher served as Chairman of the Board, Chief Executive Officer and
General Counsel from January 1992 to July 1994 and as Chief Executive
Officer and General Counsel from July 1994 to September 1994. Since
September 1994, he has served as a consultant to the Company; he received
compensation totalling $70,000 in cash and $8,878 in benefits (consisting
of premiums for life, long-term disability and health insurance and
automobile lease payments) with respect to consulting services provided
during fiscal 1994. See "CERTAIN TRANSACTIONS--Directors, Executive
Officers and Five Percent Stockholders."

(7) Consists of (a) $15,407 of premiums paid by the Company for life and
long-term disability insurance and $500 of contributions by the Company
under the Quadrax Corporation 401(k) Plan, all of which compensation
related to the period from January 1994 to September 1994 during which Mr.
Fisher was employed by the Company, and (b) $42,525 of payments under a
Severance Agreement dated September 30, 1994. See "--Compensation Plans
and Arrangements--Employment and Termination Agreements."

(8) Consists of $18,976 of premiums paid by the Company for life and long-term
disability insurance and $81,694 of indebtedness canceled by the Company
in consideration for Mr. Fisher's personal guarantee of a $1,173,000
performance bond issued by the Company in connection with a materials
purchase contract and for other consideration.

(9) Consists of $5,078 of premiums paid by the Company for life and long-term
disability insurance and $54,463 of indebtedness and advances canceled by
the Company in consideration for Mr. Fisher's personal guarantee of a
$1,173,000 performance bond issued by the Company in connection with a
materials purchase contract and for other consideration.
</TABLE>
35
<PAGE> 37

The following table sets forth certain information regarding stock options
granted by the Company to the Named Executive Officers during fiscal 1994:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Percent of Total
Number of Shares Options Granted to
Underlying Employees
Name Options Granted(1) In Fiscal Year(2) Exercise Price Per Share Expiration Date
- ---- ------------------ ------------------ ------------------------ ---------------
<S> <C> <C> <C> <C>
James J. Palermo 150,000(3) 10.8% $1.56 5/09/04
50,000(4) 3.6% $2.31(5) 8/09/04

David Park 72,000(6) 5.2% $2.00(5) 9/26/04

Richard A. Fisher 391,326(7) 28.1% $1.56 5/09/04
250,000(8) 18.0% $2.31(5) 8/09/04
</TABLE>

- ----------
(1) Represents shares of Common Stock issuable upon exercise of stock options
granted under the 1993 Stock Plan and the 1994 Stock Plan. All stock
option numbers give effect to a one-for-ten reverse split of the Common
Stock effective July 20, 1994.

(2) The Company granted options in fiscal 1994 exercisable to acquire an
aggregate of 1,391,197 shares, including options for a total of 365,747
shares that represented re-grants of previously outstanding options. See
discussion following this table.

(3) Options became fully vested upon change in control of the Company in July
1994.

(4) Options vest at the rate of 33-1/3% on each of December 31, 1994,
September 30, 1995 and September 30, 1996.

(5) On May 9, 1995, the options were re-granted at an exercise price per share
of $1.181. The outstanding options were canceled in exchange for the
granting of new options exercisable on the same vesting schedules as the
previously outstanding options but having an exercise price of $11.81 per
share. See discussion following this table.

(6) Options vest at the rate of 50% on each of December 31, 1994 and September
26, 1995.

(7) Options became fully vested upon change in control of the Company in July
1994. All of these options represent re-grants of previously outstanding
options. See discussion following this table.

(8) Options vest at the rate of 50% on each of the date of grant (August 9,
1994) and January 1, 1996.

On May 6, 1994, the Compensation Committee of the Board of Directors
re-granted options to acquire an aggregate of 365,747 shares of Common Stock by
canceling options outstanding under the Quadrax Corporation 1987 Incentive Stock
Option Plan, the Quadrax Corporation 1989 Non-Qualified Stock Option Plan and
the 1993 Stock Plan in exchange for the granting under the 1993 Stock Plan of
new options exercisable on the same vesting schedules as the previously
outstanding options but having an exercise price of $1.56. These re-grants were
effected as part of an incentive program providing for grants and re-grants of
options to key executives, including grants of options to new members of the
Company's management, following the termination of negotiations with ALS for the
sale of all of the assets of the Company. See "BUSINESS--Changes in Control and
Related Transactions" and "CERTAIN TRANSACTIONS--Pattinson Hayton, III and
Affiliates." As a part of this program, the Company issued to Richard A. Fisher,
one of the Named Executive Officers, incentive stock options to acquire a total
of 45,000 shares of Common Stock and non-qualified stock options to acquire a
total of 346,326 shares of Common Stock, all of which were exercisable at a
price of $1.56 per share. These options were issued to Mr. Fisher in exchange
for the cancellation of incentive stock options to acquire 4,000 shares of
Common Stock at an exercise price of $8.40 per share, incentive stock options to
acquire 51,137 shares at an exercise price of $6.50 per share, non-qualified
stock options to acquire 86,189 shares at an exercise price of $8.40 per share,
and non-qualified stock options to acquire 150,000 shares at an exercise price
of $5.40 per share.

On May 9, 1995, the Company granted 330,000 incentive stock options with a
$2.00 (approximately 110% of the market price of Common Stock on the date of
grant) exercise price per share to James J. Palermo.

36
<PAGE> 38

On May 9, 1995, the Compensation Committee of the Board of Directors
re-granted options to acquire an aggregate of 688,000 shares of Common Stock by
canceling options outstanding under the 1993 Stock Plan and the 1994 Stock Plan
in exchange for the granting under the 1993 Stock Plan and the 1994 Stock Plan
of new options exercisable on the same vesting schedules as the previously
outstanding options but having an exercise price of $1.81 per share. These
re-grants were effected as incentives for employees of and consultants to the
Company.

<TABLE>
The following table shows aggregated option exercises in the fiscal 1994
and fiscal 1994 year-end option values for the Named Executive Officers:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES

<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-The-Money
Shares Options At Year-End Options At Year-End(1)
Acquired Value ----------------------------- --------------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James J. Palermo -- 166,667 33,333 $165,000 $10,550
--
David Park -- -- 36,000 36,000 22,500 22,500

Richard A. Fisher 240,000 $558,100 276,326 125,000 200,537 39,375
<FN>

(1) Value is based on the last sales price per share of Common Stock on
December 31, 1994 ($2.625), as reported on the NASDAQ SmallCap Market,
less the applicable option exercise price. These values have not been, and
may never be, realized. Actual gains, if any, on exercise will depend on
the value of the Common Stock on the date of the sale of the shares.
</TABLE>

COMPENSATION PLANS AND ARRANGEMENTS

EMPLOYMENT AND TERMINATION ARRANGEMENTS

The Company has entered into certain employment and termination agreements
with the Named Executive Officers.

James J. Palermo, the Chairman and Chief Executive Officer of the Company,
entered into an employment agreement with the Company on August 9, 1994. Under
the terms of this agreement, Mr. Palermo receives a base salary of $150,000 per
year (subject to increase based on certain periodic revenue targets), a bonus
based on the profitability of the Company, and certain benefits, including
payment by the Company of premiums for life insurance on Mr. Palermo and an
automobile allowance. Mr. Palermo also received 200,000 shares of Common Stock
and options exercisable for a total of 50,000 shares of Common Stock. Upon
termination of his employment, Mr. Palermo will be entitled to receive a lump
sum severance payment equal to 25% of his base salary and will be bound by
certain non-competition provisions. The agreement terminates on December 31,
1996.

David Park, the Vice President-Production of the Company, entered into an
employment agreement with the Company on September 26, 1994, pursuant to which
he receives a base salary of $119,000 per year, a bonus based on the achievement
of certain milestones agreed upon by Mr. Park and the President of the Company,
and certain benefits, including payment by the Company of premiums for life
insurance on Mr. Palermo and an automobile allowance. In addition, Mr. Park was
issued an option exercisable to acquire 72,000 shares of Common Stock. Upon
termination or expiration of the agreement, Mr. Park will receive 50% of his
base salary payable over four months in arrears and will be subject to certain
non-competition provisions. The agreement expires on September 30, 1996, but
provides that the term will be renewed annually until either party provides
notice of termination in accordance with the terms thereof.

37
<PAGE> 39

During fiscal 1994, certain former executive officers of the Company
terminated their employment with the Company. Richard A. Fisher resigned as
Chairman on July 8, 1994 and as Chief Executive Officer, General Counsel and
Director on September 30, 1994. Mr. Fisher initially was party to an employment
agreement with the Company, pursuant to which his annual base salary was set at
$250,000 through the end of 1995 and which provided him with severance payments
for 30 months after termination at 150% of his base salary rate. In May 1994,
the annual base salary under this employment agreement was reduced to $150,000
pursuant to a cost-reduction program. As a result of certain change-in-control
transactions effective in July 1994 (see "BUSINESS--Changes in Control and
Related Transactions" and "CERTAIN TRANSACTIONS--Pattinson Hayton, III and
Affiliates"), Mr. Fisher relinquished his rights to severance payments under his
employment agreement. In connection with his resignation as Chief Executive
Officer and General Counsel of the Company in September 1994, (a) Mr. Fisher
relinquished his employment agreement as of September 30, 1994, (b) Mr. Fisher
executed a five-year non-competition agreement in exchange for a fee of $675,000
payable over five years, (c) Mr. Fisher entered into a consulting agreement with
the Company that extends from October 1, 1994 to December 31, 1996, (d) Mr.
Fisher and the Company entered into a severance agreement providing for the
continuing payment of certain benefits, including the payment of premiums for
life, long-term disability and health insurance and automobile lease payments,
during the term of the consulting agreement and for a period of two years after
the termination of Mr. Fisher's consultancy to the Company (whether pursuant to
the consulting agreement or otherwise), (e) the Company accelerated the
cancellation of approximately $40,000 due from him, and (f) the Company agreed
to accept payment for stock to be acquired by Mr. Fisher upon the exercise of
stock options in promissory notes payable over five years. Mr. Fisher's
consulting agreement with the Company provides for compensation at a bi-weekly
rate of $10,000 for the period from October 1, 1994 to December 31, 1994 and a
bi-weekly rate of $5,768 for the period from January 1, 1995 to December 31,
1996. See "--Executive Compensation--SUMMARY COMPENSATION TABLE" for information
with respect to compensation paid to Mr. Fisher under his employment and
consulting agreements during fiscal 1994.

STOCK OPTION PLANS

1993 Stock Plan. The Quadrax Corporation 1993 Stock Plan (the "1993 Stock
Plan") was adopted by the Board of Directors on March 31, 1993 and approved by
the Company's stockholders on June 7, 1993. The 1993 Stock Plan originally
provided for the grant of awards covering a maximum of 446,299 shares of Common
Stock, of which up to 150,000 shares were available for grant as incentive stock
options. On May 6, 1994, the Board of Directors voted to amend the 1993 Stock
Plan to provide that each non-employee director shall receive a formula award of
options as of the date of his or her initial election to the Board, rather than
October 1 of the year of initial election. An amendment to the 1993 Stock Plan
adopted by the Board of Directors on August 2, 1994 and approved by the
Company's stockholders on October 26, 1994 increased the number of shares of
Common Stock available for award under the 1993 Stock Plan by 358,510 shares to
804,809 shares. All or any portion of the additional 358,510 shares were
available for grant as incentive stock options. An amendment to the 1993 Stock
Plan adopted by the Board of Directors on March 28, 1995 and approved by the
Company's stockholders on May 31, 1995 increased the number of shares available
for award under the 1993 Stock Plan by 581,949 shares, all or any portion of
which can be granted as incentive stock options, to 1,386,758 shares.

As of June 30, 1995, options to purchase a total of 836,871 shares of
Common Stock were outstanding under the 1993 Stock Plan, options for a total of
401,326 shares of Common Stock had been exercised under the 1993 Stock Plan, and
133,561 shares of Common Stock remained available for award under the 1993 Stock
Plan.

1994 Stock Plan. The Quadrax Corporation 1994 Non-Qualified Stock Option
Plan (the "1994 Stock Plan") and reserved a total of 500,000 shares of Common
Stock for issuance under the 1994 Stock Plan. On April 14, 1995, the Board of
Directors increased to 1,000,000 the number of shares for issuance under

38
<PAGE> 40

the 1994 Stock Plan. As of June 30, 1995, options to purchase a total of 560,000
shares of Common Stock at a weighted average of exercise price of $1.81 per
share were outstanding under the 1994 Stock Plan, no options issued under the
1994 Stock Plan had been exercised, and 440,000 shares of Common Stock remained
available for award under the 1994 Stock Plan.

1989 Stock Plan. The Quadrax Corporation 1989 Non-Qualified Stock Option
Plan (the "1989 Stock Plan") was approved by the Board of Directors on November
9, 1989. In connection with the adoption of the 1993 Stock Plan, the Board of
Directors terminated the 1989 Stock Plan with respect to future option grants.
As of June 30, 1995, options to acquire an aggregate of 71,606 shares of Common
Stock were outstanding under the 1989 Stock Plan.

CERTAIN TRANSACTIONS

PATTINSON HAYTON, III AND AFFILIATES

As a result of its inability to raise additional capital in the first
quarter of 1994, the Company and ALS entered into a senior loan agreement in
March 1994, under which ALS made a bridge loan of $1,000,000 to the Company. In
conjunction with the Senior Loan Agreement, the Board of Directors approved an
asset acquisition agreement pursuant to which ALS would have acquired all of the
assets in exchange for ALS stock. In May 1994 Quadrax and ALS mutually agreed to
terminate its proposed acquisition of the Company, and as a result the Company
required substantial additional capital to meet its operating expenses and
continue its operations.

On July 8, 1994, Pattinson Hayton, III, through Conagher, a California
corporation controlled by Mr. Hayton, purchased a majority of the Voting
Preferred Stock from the Company's founder and then Chief Executive Officer,
Richard A. Fisher. Conagher's ownership of the Voting Preferred Stock entitled
it to elect three-fifths of the Board of Directors until December 31, 1996.
Thereafter, on July 11, 1994, Mr. Hayton was elected by Conagher as a member of
the Board, and was nominated to serve as Chairman. William G. Conway and Sven
Kraumanis were also elected by Conagher, pursuant to the terms of the Voting
Preferred Stock, as members of the Company's then five-member Board.

Contemporaneous with the acquisition of the Voting Preferred Stock, Mr.
Hayton also agreed to purchase newly issued shares of Common Stock through
Conagher. Pursuant to a stock purchase agreement dated July 8, 1994, Conagher
purchased 1,500,000 shares of Common Stock in exchange for a $3,000,000
promissory note from Conagher (the "July Promissory Note"), payable in five
equal consecutive monthly installments beginning August 16, 1994. Thereafter,
pursuant to a stock purchase agreement dated August 26, 1994 and subsequently
amended on September 16, 1994, Conagher purchased an additional 2,250,000 shares
of Common Stock in exchange for a $4,500,000 promissory note from Conagher (the
"August Promissory Note"), payable in equal consecutive monthly installments
beginning October 30, 1994. Thus, as a result of these purchases, Conagher
acquired 3,750,000 shares of Common Stock in exchange for promissory notes
aggregating $7,500,000.

In connection with Conagher's failure to pay the balance due on the August
Promissory Note, the Company entered into negotiations which led to the
Settlement Agreement on February 13, 1995 with

39
<PAGE> 41

Conagher, Mr. Hayton, Richard A. Fisher, James J. Palermo, the Company's Chief
Executive Officer, and Allied-Asian Consolidated Limited ("Allied"), a company
of which Mr. Hayton was a director and stockholder. Mr. Hayton was a director
and stockholder of Allied, one of the parties to the Settlement Agreement.
Pursuant to the Settlement Agreement, record ownership of the Voting Preferred
Stock owned by Conagher was transferred to Mr. Palermo, as trustee for the
holders of Common Stock. Mr. Palermo is required to vote the Voting Preferred
Stock as directed by the holders of the Common Stock, and as a result holders of
Common Stock are now able to elect all of the Company's directors. In
conjunction with the acquisition of the Voting Preferred Stock from Conagher,
Mr. Palermo replaced Mr. Hayton as Chairman of the Board and Mr. Hayton resigned
as a director of the Company.

To induce Mr. Hayton to surrender the Voting Preferred Stock and to settle
outstanding obligations relating to Mr. Hayton's transactions in the Company's
securities and other obligations among the Company, Allied, Conagher, Mr.
Hayton, and Mr. Fisher, the Company agreed to issue to Allied 1,150,000
restricted shares of Common Stock. The Company, among other things, also agreed
to: (i) retain Allied or its nominee as a financial advisor and agent pursuant
to a Financial Advisor and Distribution Agreement (the "Advisor Agreement") for
the placement of a new class of preferred stock, (ii) assume the outstanding
obligations of Conagher to Mr. Fisher, including obligations represented by a
$750,000 promissory note issued to Mr. Fisher, and indemnify and hold harmless
Conagher, Allied and Mr. Hayton against any liability thereof, (iii) enter into
employment agreements with certain Company employees, (iv) transfer certain
office leases and equipment, automobile leases and insurance policies to Allied,
(v) assume liability for the lease of an automobile, and (vi) release Conagher,
Allied and Mr. Hayton and their successors, assigns, agents and attorneys from
any and all claims. The Company also agreed to cancel Conagher's remaining
payment obligations under the August Promissory Note in exchange for Allied's
execution and delivery of a promissory note in the amount of $621,563 (the
"February Promissory Note"), payable in installments with the final payment due
on January 1, 1997.

On February 28, 1995, Allied failed to pay $150,000 due under the February
Promissory Note. The Company subsequently declared Allied to be in default on
the note and the entire principal amount due and payable. In addition, the
Company determined not to pay Allied $10,000 that Allied claimed was due March
1, 1995 under the Advisor Agreement. In connection therewith, the Company
entered into the amendment dated March 17, 1995 with Allied, Conagher, Mr.
Hayton, Mr. Palermo and Mr. Fisher (the "Amendment") whereby (i) the Advisor
Agreement was terminated, (ii) the Company agreed to pay Allied 4 percent of any
net proceeds realized by the Company from the sale of any shares of any new
issue of preferred stock issued and sold by the Company between February 13,
1995 and May 19, 1995, (iii) Allied agreed to pay $150,000 to the Company upon
execution of the Amendment and to deliver a promissory note to the Company in
the amount of $311,563 in exchange for the cancellation of the February
Promissory Note. The sum of $311,563 was paid in full on April 3, 1995, as
required. Accordingly, all of the payment obligations of Allied under all of the
promissory notes issued in connection with the financing provided by Conagher
and Allied for the Company, and in connection with the Settlement Agreement and
the First Amendment thereto have been fully satisfied.

On various occasions beginning in April 1995, representatives of the
Company, Conagher, Allied and Mr. Hayton met and conferred regarding certain
matters, principally issues regarding expenses incurred by or on behalf of the
Company during the Company's fiscal year 1994 and the satisfaction of certain
obligations under the Settlement Agreement entered into on February 13, 1995 and
the First Amendment to the Settlement Agreement dated March 17, 1995 by Mr.
Hayton, Conagher and Allied, the Company and certain others.

In November, 1994, the Company acquired all of the outstanding stock of
McManis, a manufacturer of and marketing representative for manufacturers of
golfing equipment, for $1,465,600 in Common Stock of the Company and $109,500 in
cash. In connection therewith, the Company issued to the designee of

40
<PAGE> 42

Allied 150,000 shares of common stock (see Notes 9 and 10 to Consolidated
Financial Statements) as compensation for acting as an agent in bringing this
opportunity to the Company. Also in November, 1994, the Company acquired certain
assets and liabilities of Time Sports, Inc. for approximately $360,000 in cash
and notes payable to facilitate transfer of a license to use the Wimbledon
trademark. The Company issued 100,000 shares of Common Stock to the designee of
Allied (see Notes 9 and 10 to Consolidated Financial Statements) as compensation
for acting as an agent in bringing this opportunity to the Company. The total
value of the 250,000 shares of stock issued to the designee of Allied as
compensation in connection with these has been expensed in fiscal year 1994 as a
financing-related cost (see Notes 9 and 10 to Consolidated Financial
Statements).

DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT STOCKHOLDERS

The Company is a party to certain employment and termination arrangements
with James J. Palermo, the Chairman of the Board and Chief Executive Officer of
the Company, David Park, the Vice President-Production of the Company and
Richard A. Fisher, the former Chairman of the Board, Chief Executive Officer and
General Counsel of the Company. See "MANAGEMENT--Compensation Plans and
Arrangements--Employment and Termination Arrangements."

In addition, two other former executive officers of the Company terminated
their employment with the Company during fiscal 1994. Andrew J. MacGowan, the
former Senior Vice President of the Company, entered into a Release, Settlement
and Severance Agreement with the Company and Mr. Fisher effective July 5, 1994,
pursuant to which Mr. MacGowan (i) relinquished his employment agreement with
the Company, which agreement provided a base annual salary of $175,000 through
December 31, 1994 and severance payments at the rate of his base salary for two
years after termination, (ii) relinquished his Special Termination Agreement
with the Company, which agreement provided for termination benefits equal to
three times his base salary in the event of a change-in-control, and (iii)
provided the Company with a general release of any claim. In exchange, the
Company agreed to (a) pay Mr. MacGowan $150,000 in 60 bi-weekly installments of
$2,500 each, (b) accelerate all non-vested options previously granted to Mr.
MacGowan, and (c) provide Mr. MacGowan with a general release of any claims.

Joseph R. Langley, the former Vice President and Chief Financial Officer
of the Company, entered into a letter agreement with the Company effective May
5, 1994, pursuant to which Mr. Langley (i) resigned his office as Vice President
and Chief Financial Officer, (ii) continued as an employee of the Company for 90
days at his then-effective salary of $69,000 per year, (iii) relinquished his
rights under his Special Termination Agreement, and (iv) received reissued
options to acquire 10,505 shares of Common Stock at a price of $1.56 per share.
In May, 1995, the Company and Mr. Langley entered into a two-year consulting
agreement pursuant to which Mr. Langley agreed to provide services relating to
accounting and financial matters in exchange for compensation consisting of a
fully vested option to purchase 50,000 shares of Common Stock at a price of
$1.81 per share.

From January 1994 to May 1994, the Company retained J.P. Associates, Inc.
to provide operational consulting services. Aggregate fees under this
arrangement totalled $60,000 in fiscal 1994. Mr. Palermo was a Principal of J.P
Associates from January 1990 to May 1994; John A. McQuade, the Vice President
and Chief Administrative Officer of the Company, was Executive Vice President of
J.P. Associates from October 1990 to May 1994; and Harry A. Schult, the Acting
Chief Financial Officer of the Company from May 1994 to August 1994, was a
Principal of J.P. Associates from October 1993 to May 1994.

During fiscal 1994, Mr. Fisher exercised options covering 240,000 shares
of Common Stock for an aggregate purchase price of $338,000. Between January 1,
1995 and June 30, 1995, Mr. Fisher exercised options covering 216,326 shares of
Common Stock for an aggregate purchase price of $337,469. The

41
<PAGE> 43

purchase price was paid by Mr. Fisher's delivery of promissory notes in
accordance with the terms of his severance agreement.

Pursuant to the Settlement Agreement, the Company assumed the
outstanding obligations owed by Allied to Mr. Fisher and executed and delivered
to Mr. Fisher a promissory note in the amount of $750,000. The principal amount
outstanding is payable in ten equal monthly installments, which began on April
7, 1995, and interest on unpaid principal and interest is payable monthly at
the rate of eight percent per year. The note is subject to mandatory prepayment
in part in the event that the Company consummates certain equity financings,
and certain installment payments on the note are subject to deferral in the
event the Company's available working capital (as defined) is less than
$500,000. In addition, as part of this transaction, all of the outstanding
shares of Voting Preferred Stock were transferred to James J. Palermo as
Trustee for the holders of Common Stock. In connection with the execution of
the Settlement Agreement, a Declaration of Trust dated February 13, 1995 was
delivered, pursuant to which the Trustee is obligated to vote the shares of
Voting Preferred Stock as instructed by the holders of Common Stock. Under the
original terms of such Declaration of Trust, the Trustee would have been
required to vote the shares of Voting Preferred Stock in accordance with the
instructions of Mr. Fisher if, at the time of a vote, the Company had omitted
to pay any three installments of principal due under a promissory note issued
by the Company to Mr. Fisher in connection with the Settlement Agreement (the
"Promissory Note"). As a result, Mr. Fisher might have been able to elect
three-fifths of the Board of Directors and control certain matters requiring
approval of the stockholders of the Company.

On July 13, 1995, the Company, Mr. Fisher and the Trustee entered into an
agreement (the "Repayment Agreement") providing for the termination as of such
date of Mr. Fisher's contingent rights to instruct the Trustee as to the voting
of the Voting Preferred Stock and the amendment of the payment terms of the
Promissory Note. Under the Repayment Agreement, each of the scheduled monthly
principal installments has been deferred by one month until, as of the date of
this Prospectus, the outstanding principal of and accrued interest on the
Promissory Note was paid or shall be paid through the issuance of an estimated
275,000 of the shares of Common Stock offered hereby. A cash adjustment will be
payable by Quadrax to Mr. Fisher (or by Mr. Fisher to Quadrax) in the event that
the total net proceeds received by Mr. Fisher from the sale of such shares
pursuant to this Prospectus are less than (or greater than) the outstanding
principal of and accrued interest on the Promissory Note as of the date of this
Prospectus.

Gordon Werner, a director of the Company from May 1994 to July 1994 and
from April 1995 to date, has entered into a letter agreement with the Company
dated March 28, 1995 whereby he will receive a success fee of 4% of the net
proceeds that the Company receives from financing sources introduced to the
Company by Mr. Werner. Pursuant to this letter agreement, Mr. Werner was paid
$55,800 in June 1995 in connection with a sale of preferred stock by the Company
that generated gross proceeds of $1,500,000. The Company has a commitment for
the purchase of additional shares of preferred stock that would generate an
additional $1,500,000 in gross proceeds; if this sale is consummated, Mr. Werner
would be entitled to an additional payment of approximately $55,800.

42
<PAGE> 44
<TABLE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of July 7, 1995, and as adjusted to
reflect the sale of shares offered hereby, by (i) each person or entity known to
the Company to own beneficially five percent or more of the Company's Common
Stock, (ii) each of the Company's directors, (iii) the Company's Chief Executive
Officer and each of the other Named Executive Officers, (iv) all directors and
executive officers of the Company as a group and (v) each Selling Stockholder.

<CAPTION>
Beneficial Ownership Beneficial Ownership
Before Offering(1) After Offering(1)
--------------------- Shares to ---------------------
Name Shares Percent be Sold Shares Percent
---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
DIRECTORS, OFFICERS AND
5% STOCKHOLDERS:
James J. Palermo(2)(3) 501,667 3.3 -- 501,667 3.3
Richard A. Fisher(2)(4) 475,187 3.2 275,000 196,274 1.4
David Park(2)(5) 36,000 * -- 36,000 *
Gordon Werner(2) 457 * 457 -- --
William G. Conway(2) -- -- -- -- --
Sven Kraumanis(2) -- -- -- -- --
All directors and executive officers 616,791 4.0 457 616,334 4.0
as a group (10 persons)(6)

OTHER SELLING STOCKHOLDERS
Mont Gilbert Adams 2,487 * 2,487 -- --
568 N. Downs Lane
Fallon, Nevada 89406

Air Filter Systems, Inc. 1,540 * 1,540 -- --
350 Kinsley Avenue
Providence, Rhode Island 02903

Robert Backstrom 252 * 252 -- --
74-361 Highway 111, Suite 1
Palm Desert, California 92260

Kirt Bailey 10,400 * 10,400 -- --
1472 North Heights Lane
Sheridan, Wyoming 82801

David T. Brais 3,353 * 3,353 -- --
72 Marine Drive
Narragansett, Rhode Island 02882

Gary E. Bryant 4,782 * 4,782 -- --
7840 Runaway Bay
Bermuda Dunes, California 92201

Harvey S. Bryant 4,782 * 4,782 -- --
3111 Bel Aire Drive, Suite 21H
Las Vegas, Nevada 89109
</TABLE>

43
<PAGE> 45
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Before Offering(1) After Offering(1)
--------------------- Shares to ---------------------
Name Shares Percent be Sold Shares Percent
---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Rob Campbell 12,826 * 12,826 -- --
260D Country Club Drive
Simi Valley, California 93065

Ronald E. Capalbo 111 * 111 -- --
One Dogwood Drive
Westerly, Rhode Island 02891

James C. Carter 2,100 * 2,000 100 *
167 Atlantic Avenue
North Hampton, New Hampshire 03862

Paul D. and Margaret Cashion 111 * 111 -- --
449 Ocean Road
Narragansett, Rhode Island 02882

James Chatham 96 * 96 -- --
4915 Alameda Drive
Oceanside, California 92056

Frank Kuo Yu Chiang(7) 212,098 1.5 212,098 -- --
c/o TA Chiang Spinning Co., Ltd.
15F Universal Enterprise Building
No. 109 Jen Ai Road Sec. 4
Taipei, Taiwan

Li-Chiun Chiang 87,368 * 87,368 -- --
c/o TA Chiang Spinning Co., Ltd.
15F Universal Enterprise Building
No. 109 Jen Ai Road Sec. 4
Taipei, Taiwan

DeAnn Clark 398 * 398 -- --
P.O. Box 1199
Ketchum, Idaho 83340

James Connell(2)(8) 122,000 * 89,000 33,000 *

Michael Coristine 1,650 * 1,400 250 *
219 Windword Drive
Portsmouth, Rhode Island 02871

Margaret DeFrancq Trust(9) 87,205 * 87,205 -- --
79776 Arnold Palmer Drive
La Quinta, California 92252

Dennis A. DeGrazia 6,000 * 5,000 1,000 *
34 Highridge Road
Westport, Massachusetts 02790

Robert Eng 11,829 * 11,829 -- --
200 West 60 Street, Apt. 17H
New York, New York 10023

First Flushing Securities, Inc. 15,000 * 15,000 -- --
136-21 Roosevelt Avenue
Flushing, New York 11354

</TABLE>

44
<PAGE> 46
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Before Offering(1) After Offering(1)
--------------------- Shares to ---------------------
Name Shares Percent be Sold Shares Percent
---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Roland O. and Evangeline A. Fournier 6,000 * 3,000 3,000 *
835 Great Road
North Smithfield, Rhode Island 02896

Trust of Ivan W. Fuqua 111 * 111 -- --
25 Kingston Avenue
Providence, Rhode Island 02906

Frank Gallagher 1,570 * 1,570 -- --
2331 Canyon Vista
Fallsbrooks, California 92028

Arolyn Margaret Garnell 14,332 * 5,087 9,245 *
11 Beach Street
Beverly Farms, Massachusetts 01915

Rosalie M. and Joseph E. Gruetzke 111 * 111 -- --
2947 E. Church Street
Eden, New York 14057

Wayne Hamersly 2,391 * 2,391 -- --
811 SW. Front Street, Suite 200
Portland, Oregon 97204

In the Blk, Ltd. 25,652 * 25,652 -- --
620 Central Avenue, Suite 1A
Hot Springs, Arkansas 71901

Clyde Jacobsen 1,462 * 1,462 -- --
9900 SW Wilshire, Suite 140
Portland, Oregon 97225

Jacobson, Price, Holman & Stern 10,000 * 10,000 -- --
400 Seventh Street, N.W.
Washington, D.C. 20004

Joseph B. Johnson 3,538 * 2,000 1,538 *
301 North Avenue
Wakefield, Massachusetts 01880

Chao Joue 15,000 * 15,000 -- --
4FL No. 261
Sec. 3, Nanking East Road
Taipei, Taiwan R.O.C.

Stanley Kornetsky 6,000 * 5,000 1,000 *
c/o Standen Contractor Co., Inc.
445 Faunce Corner Road
No. Dartmouth, Massachusetts 02474

Howard T. Krainin 4,000 * 4,000 -- --
78 Pemberton Avenue
Jamestown, Rhode Island 02835

Donald Kunesh 8,563 * 8,563 -- --
13518 NE 42nd Avenue
Vancouver, Washington 98686

</TABLE>

45
<PAGE> 47
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Before Offering(1) After Offering(1)
--------------------- Shares to ---------------------
Name Shares Percent be Sold Shares Percent
---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Joe Lai 15,000 * 15,000 -- --
3, 18th Fl. No. 315, Ming Hwa Road
Gu San Dist.
Kaohsiung, 804 Taiwan, R.O.C.

Landlocked Limited(10) 156,200 1.1 156,200 -- --
Murdoch House
South Quay, Douglas
Isle of Man IMI 5AS

Albert Leavitt 729 * 389 340 *
30 Overlook Drive
Madison, Connecticut 06443

Charles P. Lee 9,034 * 3,927 5,107 *
215 East 79th Street
Apartment 13A
New York, New York 10021

J. Philip Lee 31,887 * 16,986 14,901 *
Sweetwater Farm
587 River Road
Westport, Massachusetts 02790

Lydia Lai Co. 17,962 * 17,962 -- --
3, 18th F. No. 315 Ming HWA Road
Gu San Dist
Kaohsiung, 804 Taiwan, R.O.C.

Timothy P. MacDonald 25,000 * 20,000 5,000 *
691 Main Street
Hingham, Massachusetts 02043

Jack McLeod 2,391 * 2,391 -- --
4317 Caughlin Parkway
Reno, Nevada 89509-0626

Carl McManis 12,598 * 12,598 -- --
5025 East Mt. Pleasant
Flagstaff, Arizona 86004

Christine McManis 53,130 * 53,130 -- --
720 Burton Street
Sheridan, Wyoming 82801

Allen and Vicki Merchant 4,432 * 4,432 -- --
79768 Arnold Palmer Drive
La Quinta, California 92253

Craig and Karen Nelson 1,491 * 1,491 -- --
5288 Jomar Drive
Concord, California 94521

Nelson Irrevocable Trust(9) 87,205 * 87,205 -- --
79776 Arnold Palmer Drive
La Quinta, California 92253

Laurie Nelson 616 * 616 -- --
6044 SE Bush
Portland, Oregon 97206

</TABLE>

46
<PAGE> 48
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Before Offering(1) After Offering(1)
--------------------- Shares to ---------------------
Name Shares Percent be Sold Shares Percent
---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Roger Nelson(9) 87,205 * 87,205 -- --
79776 Arnold Palmer Drive
La Quinta, California 92253

Franklyn B. Neville 12,851 * 9,349 3,502 *
2046 Main Road
Tiverton, Rhode Island 02878

John O'Brien 62,500 * 50,000 12,500 *
403 North Lane
Bristol, Rhode Island 02908

Harry C. Offutt, Trustee 20,000 * 5,000 15,000 *
Pension Plan for Employees of
Offutt & Barton CPAs
3003 Cardinal Drive, Suite C
Vero Beach, Florida 32963

Michael Pillsbury 7,611 * 7,611 -- --
7235 SE Label Lane
Portland, Oregon 97206

Elaine Prober 6,150 * 5,000 1,150 *
9 Hawthorne Place, 4N
Boston, Massachusetts 02114

Salvatore Puglisi 12,552 * 1,201 11,351 *
80417 Oak Tree
La Quinta, California 92253

R&A Capital Partners Limited(10) 156,200 1.1 156,200 -- --
Murdoch House
South Quay, Douglas
Isle of Man IMI 5AS

George Reiser 25,550 * 13,611 11,939 *
99 Trapelo Road
Lincoln, Massachusetts 01773

Roger Mears Racing, Inc. 12,700 * 12,700 -- --
416 West Fairview Road
Bakersfield, California 93307

Harry Schult(11) 18,331 * 8,331 10,000 *
125 Benefit Street
Providence, Rhode Island 02903

Serafini, Serafini & Darling 5,800 * 5,800 -- --
Profit Sharing Plan and Trust
63 Federal Street
Salem, Massachusetts 01970

Paul F. Singer 5,403 * 3,353 2,050 *
28 Carolina Main Street
Carolina, Rhode Island 02812

Pearl Singer 111 * 111 -- --
16 Happy Valley Road
Westerly, Rhode Island 02891

</TABLE>

47
<PAGE> 49
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Before Offering(1) After Offering(1)
--------------------- Shares to ---------------------
Name Shares Percent be Sold Shares Percent
---- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Sally Slater, IRA 2,840 * 2,840 -- --
54-440 Inverness
La Quinta, California 92253

David Soules(12) 14,217 * 7,500 6,717 *
97 West View Road
Middletown, Rhode Island 02840

Earl C. Sparks, Jr. 611 * 111 500 *
111 Gale Drive
Wakefield, Rhode Island 02879

Richard S. Stone 6,393 * 2,000 4,393 *
75 Randolph Avenue
Tiverton, Rhode Island 02878

Stephen Tsai(13) 66,119 * 17,252 48,867 *
101 Alma Street, Apt. 703
Palo Alto, California 94301

John H. Van Kirk 8,800 * 5,000 3,800 *
43 W. Front Street, Suite 19A
Red Bank, New Jersey 07701

Adlyn White 2,501 * 2,501 -- --
3308 NE Peerless Place
Portland, Oregon 97232
<FN>
- ----------
* Less than 1%.

(1) Each stockholder possesses sole voting and investment power with respect
to the shares listed, except as otherwise noted and subject to community
property laws where applicable. Amounts shown include (i) shares issuable
within sixty days following July 7, 1995 pursuant to the exercise of
options, (ii) an estimated 275,000 shares issuable as of the date of this
Prospectus in payment of an outstanding promissory note (see note (4)
below) and (iii) 306,870 shares of Common Stock issuable by Quadrax as of
July 7, 1995 for consideration received previously by Quadrax. Amounts
shown exclude shares of Common Stock that may be deemed to be beneficially
owned by the named stockholders as a result of the ownership of 317.99
shares of Voting Preferred Stock by the Trustee.

(2) Address is in care of Quadrax Corporation, 300 High Point Avenue,
Portsmouth, Rhode Island 02871.

(3) Includes 496,667 shares of Common Stock subject to outstanding options
exercisable within sixty days after July 7, 1995. Excludes 56,761 shares
of Common Stock issuable upon conversion of 317.99 shares of the Voting
Preferred Stock of which Mr. Palermo, as the Trustee, is the holder of
record; Mr. Palermo possesses no discretionary authority to vote or
dispose of these shares and therefore disclaims beneficial ownership of
them.

(4) Includes 125,000 shares of Common Stock subject to outstanding options
exercisable within sixty days after July 7, 1995 and an estimated 275,000
shares of Common Stock issuable as of the date of this Prospectus in
payment of an outstanding promissory note. See "CERTAIN
TRANSACTIONS--Directors, Executive Officers and Five Percent
Stockholders."

(5) Represents shares of Common Stock subject to outstanding options
exercisable within sixty days after July 7, 1995.

(6) Includes 611,334 shares of Common Stock subject to outstanding options
exercisable within sixty days after July 7, 1995.

(7) Includes 87,368 shares of Common Stock held of record by Li-Chiun Chiang,
the sister of Mr. Chiang.

(8) Includes 33,000 shares of Common Stock subject to outstanding options
exercisable within sixty days after July 7, 1995.

(9) Represents 603 shares of Common Stock held of record by Nancy Nelson, as
Trustee for the Margaret DeFrancq Trust; 66,602 shares held of record by
the Nelson Irrevocable Trust, and 20,000 shares held of record by Roger
Nelson.

(10) Represents 125,000 shares of Common Stock held of record by Landlock
Limited and 31,200 shares held of record by R&A Capital Partners Limited.

(11) Includes 10,000 shares of Common Stock subject to outstanding options
exercisable within sixty days after July 7, 1995.

(12) Includes 6,667 shares of Common Stock subject to outstanding options
exercisable within sixty days after July 7, 1995.

(13) Includes 48,867 shares of Common Stock subject to outstanding options
exercisable within sixty days after July 7, 1995.
</TABLE>
48
<PAGE> 50
DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Company is authorized to issue 90,000,000 shares of Common Stock,
$.000009 par value per share. As of July 7, 1995, there were 14,298,326 shares
of Common Stock issued and outstanding and held of record by approximately 1,475
stockholders.

Subject to the voting rights that are granted to the holders of the Voting
Preferred Stock as described below, which rights are currently being exercised
by a trustee for the benefit of the holders of the Common Stock, the holders of
Common Stock have one vote for each share held of record on all matters to be
voted on by stockholders, including the election of directors. Stockholders are
not entitled to cumulate their votes in the election of directors.

Holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor and,
upon liquidation of the Company, to share ratably in the net assets available
for distribution after the payment of any liquidation preferences to the holders
of preferred stock. Shares of Common Stock are not redeemable and have no
preemptive, conversion or similar rights. All outstanding shares of Common Stock
are, and the Shares offered hereby upon issuance and receipt of payment in full
by the Company will be, fully paid and nonassessable.

VOTING PREFERRED STOCK

The Company is authorized to issue 1,172 shares of the Voting Preferred
Stock. As of July 7, 1995, there were 319.9 shares of the Voting Preferred Stock
issued and outstanding, all of which were held in a voting trust for the benefit
of the holders of Common Stock and for which James J. Palermo is the trustee
(the "Trustee"). The holders of a majority of the outstanding shares of Voting
Preferred Stock (currently, the Trustee) elect three-fifths of the Company's
Board of Directors until December 31, 1996, at which time the class of the
Voting Preferred Stock is to be automatically canceled under the Company's
Certificate of Incorporation. Prior to December 31, 1996, the Voting Preferred
Stock is to be voted by the Trustee as directed by the holders of Common Stock,
such that the holders of Common Stock will elect all of the directors of the
Company.

Holders of the Voting Preferred Stock have no other voting rights (subject
to the provisions of Delaware law), are not entitled to receive any dividends,
and have a liquidation preference of $.01 per share.

Each share of Voting Preferred Stock is convertible into 178.5 shares of
Common Stock (57,102 shares of Common Stock in the aggregate) at the option of
the holder. If converted upon expiration on December 31, 1996, the Common Stock
issued will become treasury stock.

CLASS A PREFERRED STOCK

The Certificate of Incorporation authorizes the issuance of up to
10,000,000 shares of Class A Preferred Stock, $.01 par value per share (the
"Class A Preferred Stock"). Under the terms of the Certificate of Incorporation,
the Board of Directors is authorized, subject to any limitations prescribed by
law, without stockholder approval, to issue such shares of the Class A Preferred
Stock in one or more series. Each such series of the Class A Preferred Stock
shall have such rights, preferences, privileges and restrictions, including
voting rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences, as shall be determined by the Board of Directors.

49
<PAGE> 51

The purpose of authorizing the Board of Directors to issue Class A
Preferred Stock and determine its rights and preferences is to eliminate delays
associated with a stockholder vote on specific issuances. The issuance of Class
A Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company.

In June 1995, the Board of Directors established a series of Class A
Preferred Stock called "Class A Preferred Stock - First Series" and consisting
of 300,000 shares, $10.00 par value per share (the "First Series Stock"). The
First Series Stock is convertible at the option of the holders on and after the
forty-first day following issuance into a number of shares of Common Stock that
can be purchased for a price equal to seventy percent of the closing bid price
of the Common Stock on the trading day immediately prior to the conversion date.
If not previously converted, the First Series Stock is automatically convertible
according to the above formula on the second anniversary of the date of
issuance. Holders of First Series Stock have no voting rights (subject to the
provisions of Delaware law) and have no preferences as to dividends or in
liquidation. As of July 7, 1995, there were 150,000 shares of First Series Stock
issued and outstanding and held of record by one stockholder.

WARRANTS AND OPTIONS

At July 7, 1995, there were outstanding warrants to purchase 2,021,850
shares of Common Stock at a weighted average exercise price of $9.17 per share
and approximately 1,468,477 shares of Common Stock were reserved for issuance
under the Company's stock option plans, all which were outstanding as of that
date at a weighted average exercise price of $2.04 per share. See "RISK
FACTORS--Potential Dilution." Shares of Common Stock underlying a total of
approximately 3,220,327 warrants and options have been previously registered
under the Securities Act and, upon acquisition through the exercise thereof,
will be freely transferable.

BLAIR UNIT PURCHASE OPTION

In connection with the Company's offering of Senior Convertible Notes in
1992, D.H. Blair & Co., Inc., ("Blair"), the Company's placement agent for its
initial public offering in 1987, asserted a right of first refusal to act as
placement agent for the Company's 1992 offering of Senior Convertible Notes. To
settle this dispute, and in exchange for a general release from Blair of any
other claims it may have against the Company, the Company issued a "Unit
Purchase Option" to Blair in December 1992. The Unit Purchase Option entitles
Blair to purchase 6,466 units for $16.50 per unit. Each unit consists of 3
shares of Common Stock and an A Warrant, which entitles the holder to purchase a
second unit which consists of 3 shares of Common Stock and a B Warrant. Each B
Warrant entitles the holder to purchase 3 shares of Common Stock. Each A Warrant
is exercisable at $17.00 per Unit, and each B Warrant is exercisable at $23.70
per share. The Company granted to Blair, or its assignee, certain "demand" and
"piggyback" registration rights regarding the securities comprising the Unit
Purchase Option. The Unit Purchase Option, the A Warrants and the B Warrants
expire on September 1, 1997.

CLASS C WARRANTS

The Company's Class C Warrants are registered under the Securities Act and
trade on the Nasdaq Market under the trading symbol "QDRXZ." The Class C
Warrants provide for adjustment of the exercise price and for a change in the
number of shares issuable upon exercise to protect holders against dilution in
the event of a stock dividend, stock split, combination or reclassification of
the Common Stock or upon issuance of shares of Common Stock for cash
consideration at prices lower than 133% of the warrant exercise price then in
effect, subject to a number of exceptions, including issuances of Common Stock
upon

50
<PAGE> 52

exercise of stock options. As of the date hereof, Class C Warrant certificates
have been issued which, with adjustments for dilution, entitle the holders to
purchase, in the aggregate, approximately 484,716 shares of Common Stock at an
exercise price of $7.95 per share.

CLASS D WARRANTS

In connection with the Company's private placement of 10% Notes in January
1993, the Company issued warrants to subscribers to purchase, in the aggregate,
322,500 shares of Common Stock exercisable at $5.50 per share (the "Class D
Warrants"). The Class D Warrants do not contain any anti-dilution provisions,
although the Company is required to give holders of the Class D Warrants notice
in the event the Company declares a dividend on its Common Stock, and holders
may exchange their Class D Warrants for other appropriate securities in the
event of merger, reclassification and similar events. The shares of Common Stock
underlying the Class D Warrants have been registered under the Securities Act.
The Class D Warrants expire on August 31, 1997.

CLASS E AND F WARRANTS

In connection with a $4,640,000 private placement of Common Stock in May
1993, the Company issued 819,527 Class E Common Stock Purchase Warrants
exercisable at $10.00 per share and 819,527 Class F Common Stock Purchase
Warrants exercisable at $15.00 per share. Subsequently, the Company issued an
additional 30,000 Class E Warrants and Class F Warrants. Approximately 200,000
of the Class E Warrants were exercised in October 1993 at a reduced offering
price of $5.50 per share, and the remainder expired on December 31, 1994. All
the Class F Warrants are outstanding and expire on March 31, 1997.

MISCELLANEOUS WARRANTS

The Company has issued additional warrants to purchase shares of Common
Stock, as follows: 23,000 shares at $5.50 per share, expiring November 1996;
270,000 shares at $3.00 per share, expiring November 1999; and 13,913 shares at
$7.19 per share, expiring May 1998.

REGISTRATION RIGHTS

Pursuant to the terms of a Unit Purchase Option that was granted by the
Company to D.H. Blair Investment Banking Corp. ("D.H. Blair") on September 1,
1992, D.H. Blair has the right to require the Company to file a registration
statement to register all or any of the 64,660 Units underlying the Unit
Purchase Option, the 19,398 shares of Common Stock and 19,398 Class A Warrants
included in the Units, the 19,398 shares of Common Stock and 19,398 Class B
Warrants issuable upon the exercise of the Class A Warrants, and the 19,398
shares of Common Stock issuable upon the exercise of the Class B Warrants
(collectively, the "Registrable Securities") one time prior to September 1,
1997. The Company must keep such registration statement effective for a period
of at least six months, and for up to an additional three months if requested by
D.H. Blair. In addition, if the Company files a registration statement before
September 1, 1997, D.H. Blair has the right to include the Registrable
Securities in such registration to the extent the registration statement is a
permissible form therefor.

In connection with Company's $500,000 offering of unsecured promissory
notes and common stock described in a Confidential Offering Memorandum dated
July 22, 1994, the holders (the "Holders") of 20 Units, each Unit consisting of
a promissory note and 5,000 shares of Common Stock issuable upon maturity of
such promissory note, have the right to demand that the Company file a
registration statement to register all of the Common Stock to be issued in
connection with the Units. In addition, upon written request of the Holders, the
Company must use its best efforts to cause all of the shares of Common Stock

51
<PAGE> 53
issuable in connection with the Units to be registered on any registration
statement the Company proposes to file before August 1, 1996.

Pursuant to the terms of a Stock Option Agreement dated May 3, 1993, Wall
Street Consultants, Inc. has the right through May 3, 2000 to include 13,913
shares of Common Stock in any registration statement (other than as to
securities issued pursuant to an employee benefit plan or as to a merger,
acquisition or similar transaction subject to Rule 145 promulgated under the
Securities Act) filed by the Company.

Certain of the Company's other stockholders have the right to include
additional shares of Common Stock in any registration statement filed by the
Company, to the extent such registration statement is a permissible form
therefor.

DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.

The Company's Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions which involve intentional misconduct or a knowing violation of
law. Further, the Certificate of Incorporation contains provisions to indemnify
the Company's directors and officers to the fullest extent permitted by the
General Corporation Law of Delaware.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer and Trust Company.

52
<PAGE> 54

PLAN OF DISTRIBUTION

This Prospectus, and the Registration Statement of which it is a part, is
in furtherance of a "shelf" registration pursuant to Rule 415 promulgated by the
Commission under the Securities Act. The Company intends to keep the "shelf"
registration effective for a period of at least 180 days after the date on which
the Registration Statement is declared effective by the Commission, or such
shorter period that will terminate when all securities covered by the
Registration Statement have been sold.

The shares may be sold from time to time by the Selling Stockholders, or
by pledgees, donees, transferees or other successors in interest. Such sales may
be made on one or more exchanges or in the over-the-counter market, or otherwise
at prices and at terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. The shares may be sold by one or
more of the following: (a) a block trade in which the broker or dealer so
engaged will attempt to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction; (b) purchases
by a broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) an exchange distribution in accordance
with the rules of such exchange; and (d) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. In effecting sales,
brokers or dealers engaged by the Selling Stockholders may arrange for other
brokers or dealers to participate. Brokers or dealers will receive commissions
or discounts from Selling Stockholders in amounts to be negotiated immediately
prior to the sale. Such brokers or dealers and any other participating brokers
or dealers may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Act") in connection with such sales. In
addition, any securities covered by this Prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
Prospectus.

LEGAL MATTERS

The validity of the shares offered hereby will be passed upon for the
Company and the Selling Stockholders by Timothy P. MacDonald, General Counsel of
the Company. As of the date hereof, Mr. MacDonald owns 25,000 shares of Common
Stock, of which 20,000 shares may be offered hereby. See "PRINCIPAL AND SELLING
STOCKHOLDERS."

EXPERTS

The consolidated balance sheet as of December 31, 1994 and the
consolidated statements of operations, stockholders' equity and cash flows the
year then ended, included in this Prospectus and Registration Statement, have
been audited by Livingston & Haynes, P.C., independent auditors, as set forth
in their report thereon (which contains an explanatory paragraph with respect
to the Company's ability to continue as a going concern, as referenced in Note
1 to the Consolidated Financial Statements) appearing elsewhere herein and are
included in reliance upon such report given upon authority of such firm as
experts in accounting and auditing. The consolidated financial statements at
January 2, 1994, and for each of the two years in the period ended January 2,
1994, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon (which contains an explanatory paragraph with respect to the
Company's ability to continue as a going concern, as referenced in Note 1 to
the Consolidated Financial Statements) appearing elsewhere herein and are
included in reliance upon such report given upon authority of such firm as
experts in accounting and auditing.

53
<PAGE> 55
<TABLE>

QUADRAX CORPORATION

INDEX TO FINANCIAL STATEMENTS

<CAPTION>
Page
----
<S> <C>
Report of Livingston & Haynes, P.C., Independent Accountants.......................................... F-2

Report of Ernst & Young, LLP, Independent Accountants................................................. F-3

Consolidated Balance Sheets at December 31, 1994 and January 2, 1994.................................. F-4

Consolidated Statements of Operations for the fiscal years ended December 31,
1994, January 2, 1994 and January 3, 1993........................................................ F-6

Consolidated Statements of Changes in Stockholders' Equity (Deficiency) for
fiscal years ended December 31, 1994, January 2, 1994 and January 3, 1993........................ F-7

Consolidated Statements of Cash Flows for the fiscal years ended December 31,
1994, January 2, 1994 and January 3, 1993........................................................ F-10

Notes to Consolidated Financial Statements............................................................ F-13

Condensed Interim Financial Statements (unaudited): Consolidated Balance Sheets .....................
at March 31, 1995 (unaudited).................................................................... F-31

Condensed Consolidated Statements of Operations for the Three Months ended
March 31, 1995 and April 3, 1994 (unaudited)..................................................... F-33

Consolidated Statements of Cash Flows for the Three Months ended March 31,
1995 and April 3, 1994 (unaudited)............................................................... F-34

Notes to Condensed Consolidated Financial Statements.................................................. F-36
</TABLE>

F-1
<PAGE> 56

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of Quadrax Corporation:

We have audited the accompanying consolidated balance sheet of Quadrax
Corporation, (a development stage corporation) and subsidiaries at December 31,
1994, and the related consolidated statements of operations, shareholders'
equity and cash flows for the year then ended. We have also examined the
consolidated statements of operations, shareholder's equity and cash flows for
the period March 6, 1986 to December 31, 1994, insofar as they relate to the
year ended December 31, 1994. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Quadrax
Corporation and subsidiaries at December 31, 1994, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1,
the Company is a development state company that since inception has expended
cash in excess of cash generated from operations. Additionally, the Company has
not achieved sufficient revenues to support future operations without additional
financing. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management plans in regard to these matters are
also described in Note 1. The 1994 financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/Livingston & Haynes, P.C.
- ------------------------------

Wellesley Hills, Massachusetts
April 6, 1995

F-2
<PAGE> 57

Report of Independent Auditors

The Board of Directors and Stockholders
Quadrax Corporation

We have audited the accompanying consolidated balance sheet of Quadrax
Corporation (a development stage company) as of January 2, 1994, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the two years in the period ended January 2, 1994, and for
the period March 6, 1986 to January 2, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Quadrax Corporation at January 2, 1994 and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
January 2, 1994, and for the period March 6, 1986 to January 2, 1994, in
conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1, the
Company is a development stage company that since inception has expended cash
in excess of cash generated from operations. Additionally, the Company has not
achieved sufficient revenues to support future operations without additional
financing. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management plans in regard to these matters are
also described in Note 1. The 1993 financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Ernst & Young LLP

ERNST & YOUNG LLP

Providence, Rhode Island
February 25, 1994

F-3

<PAGE> 58
<TABLE>
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

ASSETS
<CAPTION>

December 31, January 2,
1994 1994
------------ ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 382,721 668,781
Accounts receivable 224,180 139,140

Inventories:
Raw materials 1,059,213 120,067
Work in process 212,573 191,255
---------- ----------
1,271,786 311,322

Investments, at market value -- 11,550
Other current assets 81,756 81,499
---------- ----------
TOTAL CURRENT ASSETS 1,960,443 1,212,292

Property and equipment, at cost:
Machinery and equipment 3,875,955 3,448,965
Office equipment 689,944 663,900
Leasehold improvements 1,035,513 1,000,187
---------- ----------
5,601,412 5,113,052
Less accumulated depreciation and amortization 2,984,104 2,601,974
---------- ----------
NET PROPERTY AND EQUIPMENT 2,617,308 2,511,078

Receivables from officers and employees (Note 11) 54,728 162,070

Non-competition agreement (Note 11) 641,250 --

Goodwill (Note 8) 709,142 --

Other assets 507,855 269,000

License agreement (Note 8) 600,000 --

Patents, less amortization of $28,627 and $21,145 169,437 163,417
---------- ----------
TOTAL ASSETS $7,260,163 $4,317,857
========== ==========
</TABLE>

See accompanying notes to the consolidated financial statements.

LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>

December 31, January 2,
1994 1994
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,166,178 $ 383,672
Accrued expenses (Note 3) 1,547,986 580,815
Note payable to related party (Note 11) 135,000 --
Loss contract reserve -- 145,000
Notes payable (Note 13) 310,000 --
------------ ------------
TOTAL CURRENT LIABILITIES 3,159,164 1,109,487
Commitments and contingencies (Note 6) -- --

Note payable to related party (Note 11) 540,000 --
------------ ------------
TOTAL LIABILITIES 3,699,164 1,109,487

Stockholders' equity (Note 4):
Original convertible preferred stock, $.01 par
value; 1,172 shares authorized, 688 and 1,045
issued at December 31, 1994 and January 2, 1994,
respectively 7 10
Class A convertible preferred stock, $.01 par
value; 10,000,000 shares authorized, 1,800,074
shares issued at January 2, 1994 -- 18,001
Common stock, $ .000009 par value, 90,000,000 shares
authorized at December 31, 1994 and January 2,
1994 92 322
Additional paid-in capital 48,356,319 36,146,539
Deficit accumulated during development stage (44,090,478) (32,524,341)
------------ ------------
4,265,940 3,640,531
Less:
Treasury stock, at cost:
Original convertible preferred stock, 172
shares; common stock, 32,036 shares (243,009) (243,009)
Unearned compensation and deferred expenses (123,932) (189,152)
Note receivable for option (Note 11) (338,000) --
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 3,560,999 3,208,370
------------ ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,260,163 $ 4,317,857
============ ============
</TABLE>

See accompanying notes to the consolidated financial statements.

F-4
<PAGE> 60
<TABLE>
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended Cumulative
------------------------------- ------------- March 6, 1986
December 31, January 2, January 3, to December 31,
1994 1994 1993 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue:
Sales - production contracts
(Note 12) $ 73,990 $ 1,097,624 $ 145,688 $ 1,317,302
Sale of materials for
evaluation and testing 760,009 429,688 239,260 2,686,161
Research income -- -- 431,846 1,322,339
Interest income -- 24,098 31,486 1,391,362
Other income 26,420 3,738 1,444 68,408
------------- ------------- ------------- -------------
TOTAL REVENUE 860,419 1,555,148 849,724 6,785,572

Expenses:
Cost of goods sold (Note 12) 106,453 986,830 806,357 1,899,640
Research and development 1,690,871 2,143,514 1,676,805 13,425,818
Selling, general and
administrative 3,981,999 3,140,311 2,681,408 19,183,316
Depreciation and amortization 824,298 963,366 2,647,038 6,888,149
Interest 204,700 18,432 155,064 450,139
Loss on investment -- 16,175 149,175 165,350
Non-recurring financing
related expenses (Note 9) 5,568,733 -- -- 5,568,733
------------- ------------- ------------- -------------
TOTAL EXPENSES 12,377,054 7,268,628 8,115,847 47,581,145
------------- ------------- ------------- -------------

NET LOSS FROM
CONTINUING OPERATIONS (11,516,635) (5,713,480) (7,266,123) (40,795,573)

Discontinued operations:
Loss from discontinued
operations -- -- (66,928) (2,509,968)
Loss on disposal of laser
segment -- -- -- (579,848)
------------- ------------- ------------- -------------

NET LOSS $ (11,516,635) $ (5,713,480) $ (7,333,051) $ (43,885,389)
============= ============= ============= =============
Per common share:
Net loss from continuing
operations $ (2.09) $ (2.15)* $ (5.13)*

Loss from discontinued
operations -- -- (.05)*
------------- ------------- -------------

NET LOSS $ (2.09) $ (2.15)* $ (5.18)*
============= ============= =============
Weighted average common shares
outstanding 5,506,121 2,697,081* 1,417,024*
============= ============= =============

<FN>

* Adjusted for 1 for 10 reverse split, effective July 20, 1994.

</TABLE>

See accompanying notes to the consolidated financial statements.

F-5
<PAGE> 61
<TABLE>
Quadrax Corporation
(A Development Stage Corporation)

Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
<CAPTION>

Shares Outstanding Common Shares Preferred Stock Common
Original Series A Issued Outstanding Original Class A Stock
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sale of common stock 1,652 1,652
Acquisitions and retirement $16
of common stock (230) (230) (2)
Net loss for the period
--------------------------------------------------------------------------------
Balances, December 31, 1986 1,422 1,422 14

Stock split, approximately 1,100-for-one 1,573,849 1,573,849 2
Issuance of preferred stock 1,172 $12
Issuance of common stock in initial public offering 3,450,000 3,450,000 31
Shares acquired for treasury, at cost (172) (231,527)
Net loss for the year
--------------------------------------------------------------------------------
Balances, January 3, 1988 1,000 5,025,271 4,793,744 12 47

Exercise of 1,000 options 1,000 1,000
Exercise of common stock Class A warrants 3,445,500 3,445,500 27
Exercise of common stock Class B warrants 200 200
Net loss for the year
--------------------------------------------------------------------------------
Balances, January 1, 1989 1,000 8,471,971 8,240,444 12 74

Exercise of 25,793 options 25,793 25,793
Issuance of 1,000 shares of common stock 1,000 1,000
Issuance of 153,900 shares of common stock 153,900 153,900 1
Unearned compensation associated with the grant of
362,174 shares of common stock options
Net loss for the year
--------------------------------------------------------------------------------
Balances, December 31, 1989 1,000 8,652,664 8,421,137 12 75

Exercise of common stock Class B warrants 1,554,693 1,554,693 15
Repurchase of common stock Class A warrants
Unearned compensation associated with the grant of
155,000 shares of common stock options
Amortization of unearned compensation
Net loss for the year
--------------------------------------------------------------------------------
Balances, December 30, 1990 1,000 10,207,357 9,975,830 $12 $90
<CAPTION>
Deficit
Additional Accumulated
Paid In During the Treasury Deferred
Capital Development Stage Stock Expense
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sale of common stock
Acquisitions and retirement $ 148,197
of common stock (52,199)
Net loss for the period $ (350,218)
------------------------------------------------------------------
Balances, December 31, 1986 95,998 (350,218)

Stock split, approximately 1,100-for-one (2)
Issuance of preferred stock
Issuance of common stock in initial public offering 4,739,991
Shares acquired for treasury, at cost $(175,000)
Net loss for the year (1,031,185)
------------------------------------------------------------------
Balances, January 3, 1988 4,835,987 (1,381,403) (175,000)

Exercise of 1,000 options 360
Exercise of common stock Class A warrants 8,658,894
Exercise of common stock Class B warrants 800
Net loss for the year (1,873,248)
------------------------------------------------------------------
Balances, January 1, 1989 13,496,041 (3,254,651) (175,000)

Exercise of 25,793 options 13,910
Issuance of 1,000 shares of common stock 2,750
Issuance of 153,900 shares of common stock 423,224
Unearned compensation associated with the grant of
362,174 shares of common stock options 746,305
Net loss for the year (3,545,650)
------------------------------------------------------------------
Balances, December 31, 1989 14,682,230 (6,800,301) (175,000)

Exercise of common stock Class B warrants 4,436,339
Repurchase of common stock Class A warrants (225)
Unearned compensation associated with the grant of
155,000 shares of common stock options 161,250
Amortization of unearned compensation
Net loss for the year (7,146,542)
------------------------------------------------------------------
Balances, December 30, 1990 $19,279,594 $(13,946,843) $(175,000)
<CAPTION>
Notes
Unearned Receivable
Compensation From Officers Total
-----------------------------------------------
<S> <C> <C> <C>
Sale of common stock
Acquisitions and retirement $ 148,213
of common stock (52,201)
Net loss for the period (350,218)
-----------------------------------------------
Balances, December 31, 1986 (254,206)

Stock split, approximately 1,100-for-one
Issuance of preferred stock 12
Issuance of common stock in initial public offering 4,740,022
Shares acquired for treasury, at cost (175,000)
Net loss for the year (1,031,185)
-----------------------------------------------
Balances, January 3, 1988 3,279,643

Exercise of 1,000 options 360
Exercise of common stock Class A warrants 8,658,921
Exercise of common stock Class B warrants 800
Net loss for the year (1,873,248)
-----------------------------------------------
Balances, January 1, 1989 10,066,476

Exercise of 25,793 options 13,910
Issuance of 1,000 shares of common stock 2,750
Issuance of 153,900 shares of common stock 423,225
Unearned compensation associated with the grant of
362,174 shares of common stock options $(746,305)
Net loss for the year (3,545,650)
-----------------------------------------------
Balances, December 31, 1989 (746,305) 6,960,711

Exercise of common stock Class B warrants 4,436,354
Repurchase of common stock Class A warrants (225)
Unearned compensation associated with the grant of
155,000 shares of common stock options (161,250)
Amortization of unearned compensation 253,054 253,054
Net loss for the year (7,146,542)
-----------------------------------------------
Balances, December 30, 1990 $(654,501) $ 4,503,352

</TABLE>
See accompanying notes to the consolidated financial statements

F-6

<PAGE> 62
<TABLE>
Quadrax Corporation
(A Developmental Stage Company)
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)

<CAPTION>
Additional
Shares Outstanding Common Shares Preferred Stock Common Paid In
Original Series A Issued Outstanding Original Class A Stock Capital
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 30, 1990 1,000 10,207,357 9,975,830 $12 $ 90 $19,279,594
Sale of common stock in conjunction with 2,593,659 2,593,659
rights offering 23 2,684,194
Common stock issued for services to be performed 444,900 444,900 4 365,071
Unearned compensation associated with the grant of
1,707,500 shares of common stock options 1,216,594
Forfeiture of unearned compensation in the
form of 215,000 common stock options (400,000)
Amortization of unearned compensation and
deferred expenses
Net loss for the year
-----------------------------------------------------------------------------------
Balances, December 29, 1991 1,000 13,245,916 13,014,389 12 117 23,145,453

Common stock issued for services to be performed 100,000 100,000 1 99,999
Common stock issued for services performed 100,000 100,000 1 84,374
Issuance of Series A preferred stock upon
conversion of convertible debt, net of expenses 7,970,989 79,710 3,973,552
Exercise of 107,455 shares of common stock options 107,455 107,455 1 53,726
Exercise of lenders' warrants 93,286 93,286 1 55,970
Conversion of preferred stock to common stock
Original preferred (51) 90,605 90,605 (1) 1
Series A preferred (5,850,766) 5,850,766 5,850,766 (58,508) 55 58,453
Exercise of warrants issued for services rendered 172,727 172,727 1 94,999
Issuance of stock options for services performed 6,812
Exercise of stock options 10,000 10,000 1,000
Forfeiture of unearned compensation in the form of
30,000 common stock options
Amortization of unearned compensation and (21,375)
deferred expenses
Dividend paid on Class A preferred stock 106,008 1,060 57,244
Net loss for the year
-----------------------------------------------------------------------------------
Balances, January 3, 1993 949 2,226,231 19,770,755 19,539,228 $11 $22,262 $178 $27,610,207

Balances, January 3, 1993 949 2,226,231 19,770,755 19,539,228 $11 $22,262 $178 $27,610,207
Common stock issued for services to be performed 100,000 100,000 1 88,999
Common stock issued for services performed 170,096 170,096 2 161,936
Issuance of common stock in private placement,
net of expenses 8,195,269 8,195,269 74 4,740,305
Issuance of common stock in overseas offering
pursuant to Regulation S, net of expenses 2,058,459 2,058,459 19 1,170,235
Exercise of common stock Class B warrants,
net of expenses 3,891,488 3,891,488 35 1,768,202
Exercise of 270,000 shares of common stock options 270,000 270,000 2 26,998
Conversion of preferred stock to common stock
Original perferred (76) 136,837 136,837 (1) 1
Series A preferred (603,032) 603,032 603,032 (6,030) 5 6,025
Exercise of warrants issued for services rendered 552,723 552,273 5 303,745
Amortization of unearned compensation and
deferred expenses
Dividend paid on Class A preferred stock 176,875 1,769 95,512
Unearned compensation associated wtih the grant of
1,500,000 shares of common stock options 174,375
Interest receivable on notes receivable-officers
Shares acquired for treasury upon settlement of
officer's indebtedness (88,828)
Net loss for the year
-----------------------------------------------------------------------------------
Balances, January 2, 1994 873 1,800,074 35,748,659 35,427,854 10 18,001 322 36,146,539

<CAPTION>
Deficit
Accumulated Notes
During the Treasury Deferred Unearned Receivable
Development Stage Stock Expense Compensation From Officers Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 30, 1990 $(13,946,843) $(175,000) $ (654,501) $ 4,503,352
Sale of common stock in conjunction with
rights offering 2,684,217
Common stock issued for services to be performed (351,325) 13,750
Unearned compensation associated with the grant of
1,707,500 shares of common stock options (1,216,594)
Forfeiture of unearned compensation in the
form of 215,000 common stock options 400,000
Amortization of unearned compensation and
deferred expenses 152,000 281,480 433,480
Net loss for the year (5,375,380) (5,375,380)
---------------------------------------------------------------------------------
Balances, December 29, 1991 (19,322,223) (175,000) (199,325) (1,189,615) 2,259,419

Common stock issued for services to be performed (100,000)
Common stock issued for services performed 84,375
Issuance of Series A preferred stock upon
conversion of convertible debt, net of expenses 4,053,262
Exercise of 107,455 shares of common stock options (53,727)
Exercise of lenders' warrants 55,971
Conversion of preferred stock to common stock
Original preferred
Series A preferred
Exercise of warrants issued for services rendered 95,000
Issuance of stock options for services performed 6,812
Exercise of stock options 1,000
Forfeiture of unearned compensation in the form of
30,000 common stock options
Amortization of unearned compensation and 21,375
deferred expenses 261,825 1,168,240 1,430,065
Dividend paid on Class A preferred stock (58,306) (2)
Net loss for the year (7,333,051) (7,333,051)
---------------------------------------------------------------------------------
Balances, January 3, 1993 $(26,713,580) $(175,000) $(37,500) $(53,727) $ 652,851

Balances, January 3, 1993 $(26,713,580) $(175,000) $(37,500) $(53,727) $ 652,851
Common stock issued for services to be performed (89,000)
Common stock issued for services performed 161,938
Issuance of common stock in private placement,
net of expenses 4,740,379
Issuance of common stock in overseas offering
pursuant to Regulation S, net of expenses 1,170,254
Exercise of common stock Class B warrants,
net of expenses 1,768,237
Exercise of 270,000 shares of common stock options (10,000) 17,000
Conversion of preferred stock to common stock
Original perferred
Series A preferred
Exercise of warrants issued for services rendered 303,750
Amortization of unearned compensation and
deferred expenses 104,250 7,473 111,723
Dividend paid on Class A preferred stock (97,281)
Unearned compensation associated wtih the grant of
1,500,000 shares of common stock options (174,375)
Interest receivable on notes receivable-officers (4,282) (4,282)
Shares acquired for treasury upon settlement of
officer's indebtedness (68,009) 68,009
Net loss for the year (5,713,480) (5,713,480)
---------------------------------------------------------------------------------
Balances, January 2, 1994 (32,524,341) (243,009) (22,250) (166,902) 3,208,370

</TABLE>
See accompanying notes to the consolidated financial statements

F-7
<PAGE> 63
<TABLE>
Quadrax Corporation
(A Development Stage Company)
Consolidated Statements of Changes in Stockholders' Equity (Deficiency)
<CAPTION>
Additional
Shares Outstanding Common Shares Preferred Stock Common Paid In
Original Series A Issued Outstanding Original Class A Stock Capital
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Reflect 1-for-10 reverse stock split (31,885,068) (31,885,068) (287) 287
Common stock issued for services performed 556,199 556,199 5 2,218,608
Issuance of common stock for financing services
(Note 9) 625,000 625,000 6 1,528,607
Issuance of common stock in private placement to
Conagher Co., Inc. net of monies not paid as of 3,750,000 3,750,000 34 5,893,088
December 31, 1994, of $1,606,878
Exercise of 240,000 shares of common stock options 240,000 240,000 2 337,998
Conversion of preferred stock to common stock
Original preferred (357) 63,725 63,725 (3) 3
Series A preferred (1,800,074) 402,351 402,351 (18,001) 4 67,499
Conversion of previously granted compensatory
options to market value options (174,375)
Amortization of unearned compensation and
deferred expenses
Warrants Exercised 5,835
Issuance of stock for commissions (Notes 8&9) 250,000 250,000 2 499,998
Issuance of stock for acquisitions of assets 450,000 450,000 4 1,699,996
Interest paid on Regulation D convertible debentures 48,200 48,200 0 132,236
Net loss for the year
----------------------------------------------------------------------------------
Balances, December 31, 1994 516 10,249,066 9,928,261 $ 7 $ 0 $ 92 $48,356,319
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
9,799,822 9,479,015 7 92 48,356,319
449,244 449,246
<CAPTION>
Deficit
Accumulated Notes
During the Treasury Deferred Unearned Receivable
Development Stage Stock Expense Compensation From Officers Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Reflect 1-for-10 reverse stock split
Common stock issued for services performed (171,599) 2,047,014
Issuance of common stock for financing services
(Note 9) 1,528,613
Issuance of common stock in private placement to
Conagher Co., Inc. net of monies not paid as of 5,893,122
December 31, 1994, of $1,606,878
Exercise of 240,000 shares of common stock options (338,000)
Conversion of preferred stock to common stock
Original preferred
Series A preferred (49,502)
Conversion of previously granted compensatory
options to market value options 166,902 (7,473)
Amortization of unearned compensation and
deferred expenses 69,917 69,917
Warrants Exercised 5,835
Issuance of stock for commissions (Notes 8&9) 500,000
Issuance of stock for acquisitions of assets 1,700,000
Interest paid on Regulation D convertible debentures 132,236
Net loss for the year (11,516,635) (11,516,635)
------------------------------------------------------------------------------
Balances, December 31, 1994 $(44,090,478) $(243,009) $(123,932) $(338,000) $ 3,560,999
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(44,090,478) (243,009) (123,932) (338,000) 3,560,999
</TABLE>
See accompanying notes to the consolidated financial statements

F-8
<PAGE> 64
<TABLE>

QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>

Cumulative
Year Ended March 6, 1986
---------------------------------------------
December 31 January 2, January 3, to December 31,
1994 1994 1993 1994
--------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(11,516,635) $ (5,713,480) $ (7,333,051) $(43,885,389)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization
of fixed assets 798,106 721,977 571,804 3,696,462
Amortization of intangibles 7,482 7,266 263,960 676,276
Amortization of unearned
compensation (7,473) 7,473 1,168,240 1,702,774
Amortization of deferred expense 33,750 104,250 261,825 551,825
Amortization of deferred
financing cost 69,917 122,400 381,209 573,526
Common stock issued for expenses 2,047,014 161,938 91,187 2,313,889
Common stock issued for
financing related expenses (Note 9) 2,028,607 -- -- 2,028,607
Common stock issued for interest 132,236 -- -- 132,236
Loss on retirement of fixed assets -- -- -- 74,089
Loss on disposal of laser segment -- -- -- 579,848
Loss on investment 11,550 16,175 149,175 176,900
Cancellation of indebtedness
(Note 11) 107,342 107,342 71,561 286,245
Provision for loss contract(Note 12) (145,000) (355,000) 500,000 --
Effect on cash flows of
changes in assets and
liabilities, net of effects
of businesses acquired:
Accounts receivable and other 94,049 49,960 (118,396) (270,364)
Inventories (330,464) 140,504 (383,021) (935,037)
Prepaid expenses and other (257) 303,652 (323,730) (37,344)
Receivables from officers
and employees -- 19,418 (90,346) 39,657
Accounts payable 382,506 142,879 (296,720) 1,088,367
Accrued expenses 967,171 (226,531) 477,457 1,502,986
--------------------------------------------------------------
Net cash used in operating activities (5,320,099) (4,389,777) (4,608,846) (29,704,447)
--------------------------------------------------------------
</TABLE>

See accompanying notes to the consolidated financial statements.

F-9
<PAGE> 65
<TABLE>
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<CAPTION>
Year Ended Cumulative
----------------------------------------------- March 6, 1986
December 31 January 2, January 3, to December 31,
1994 1994 1993 1994
---------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTING ACTIVITIES
Notes receivable - officers and
employees -- -- -- (90,783)
Investments -- 134,775 13,325 148,100
Capital expenditures (388,396) (617,315) (1,164,436) (6,410,936)
Other intangible assets (111,357) (18,811) (21,397) (874,492)
Payments for businesses
acquired, net of cash acquired (359,172) -- -- (400,029)
---------------------------------------------------------------
Net cash used in investing activities (858,925) (501,351) (1,172,508) (7,628,140)
---------------------------------------------------------------

FINANCING ACTIVITIES
Proceeds from exercise of
common stock warrant -- 303,750 150,971 13,550,571
Proceeds from exercise of
common stock options -- 17,000 1,000 32,270
Net proceeds from rights offering -- -- -- 2,684,217
Sales of common stock -- -- -- 98,762
Issuance of preferred stock -- -- -- 12
Net proceeds from initial
public offering -- -- -- 4,740,022
Net proceeds from sale of stock
and warrants 4,932,964 4,818,870 9,811,834
Issuance of debt, net of costs 1,491,000 -- 7,034,653 8,521,653
Repayment of debt (531,000) (629,409) (369,622) (1,549,031)
Shares acquired for treasury stock -- -- -- (175,000)
Dividend payment on preferred
stock (Class A) -- -- (2) (2)
---------------------------------------------------------------
Net cash provided by financing
activities 5,892,964 4,510,211 6,817,000 37,715,308
---------------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents (286,060) (380,917) 1,035,646 382,721
Cash and cash equivalents at
beginning of period 668,781 1,049,698 14,052 --
---------------------------------------------------------------
Cash and cash equivalents at
end of period $ 382,721 $ 668,781 $ 1,049,698 $ 382,721
===============================================================
</TABLE>

See accompanying notes to the consolidated financial statements.

F-10
<PAGE> 66

QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

SUPPLEMENTAL SCHEDULE OF SIGNIFICANT NONCASH TRANSACTIONS:

1992:

The Company issued notes for costs associated with Class A convertible
preferred stock of $554,000.

Common stock was issued for consulting services totaling $91,187.

The Company converted $4,080,000 of Notes to Class A convertible preferred
stock.

Warrants with a value of $55,821 were issued to settle a dispute.

1993:

Common stock was issued for consulting services totaling $161,938.

Common stock totaling $369,764 was issued for commission earned in
connection with a private offering of common stock and warrants.

The Company accepted the tender of notes payable totaling $2,860,000 into
units in the Company's private placement of common stock and warrants.

1994:

Common stock was issued for consulting services, commissions and expenses
totaling $4,075,621.

Common stock was issued to ALS for debt reduction and accrued interest
totaling $958,094.

The Company agreed to issue common stock valued at $600,000 to acquire the
right to use the Wimbledon trademark license in the United States.

Common stock was issued to acquire assets which were valued at $1,100,000.

The Company entered into a non-competition agreement with its founder and
former chairman and chief executive officer for $675,000.

Company stock was issued to pay interest on Regulation D debentures in the
amount of $132,236.

Interest paid was $14,220, $166,262 and $49,013 for 1994, 1993 and 1992,
respectively.

See accompanying notes to the consolidated financial statements.

F-11
<PAGE> 67

QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1994

1. DEVELOPMENT STAGE COMPANY

The consolidated financial statements include the accounts of Quadrax
Corporation (the Company) and its wholly-owned subsidiaries. All intercompany
transactions have been eliminated.

The Company was incorporated in the State of Delaware on March 6, 1986, for the
purpose of converting and selling composite materials.

The consolidated financial statements have been prepared on a going-concern
basis. The Company is a development stage company that from its inception,
through December 31, 1994, has expended cash in excess of cash generated from
operations. Additionally, the Company has not achieved sufficient revenues to
support future operations. Management believes that to continue as a going
concern the Company will require additional financing and anticipates adequate
additional financing will be available in fiscal 1995. The 1994 consolidated
financial statements do not include any adjustments related to the uncertainty
of future financing. As of April 1995, the Company has raised approximately
$2,200,000 from the sale of its common stock in exempt transactions with private
parties and believes that sufficient additional funds will be available to meet
its cash needs in 1995.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR

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. The fiscal year ended January 3, 1993 was a 53 week year.
All references to years in these notes to consolidated financial statements
represent fiscal years unless otherwise noted.

REVENUE RECOGNITION

Revenues received from research contracts, grants and uncompleted contracts are
recognized to reflect the stage of completion of the project. Estimated losses
expected to be incurred to complete contracts are accrued.

F-12

<PAGE> 68

QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CASH EQUIVALENTS

The Company considers all short term investments, consisting of money market
funds and certificates of deposits, with original maturities of three months or
less, to be cash equivalents for purposes of the statements of cash flows.

ACCOUNTS RECEIVABLE

The Company performs periodic credit evaluations and generally does not require
collateral.

INVENTORIES

Inventories are valued at the lower of first-in, first-out cost or market.
Market for raw materials is determined based on replacement cost; market for
work-in-process is determined based on net realizable value.

PROPERTY AND EQUIPMENT

Depreciation is provided on the straight-line method over the estimated useful
lives of the assets, ranging from three to five years. Amortization of leasehold
improvements is provided on the straight-line method over the remaining term of
the lease.

PATENTS

The Company capitalizes certain patent costs related to patent applications. The
costs of these assets are amortized using the straight-line method over the
lesser of the useful life of the asset or its statutory life. Costs relating to
patent applications are written off to expense at the time such costs are deemed
to have no continuing value. During 1992, the Company accelerated and fully
amortized certain patents and technology totaling $197,000.

GOODWILL

The Company has classified as goodwill the cost in excess of the fair value of
the net assets of companies acquired in purchase transactions. Goodwill is
amortized on a straight-line method over 15 years. The carrying value of
goodwill is evaluated in relation to the operating performance of the underlying
business. Adjustments are made if the sum of expected future net undiscounted
cash flows is less than book value.

F-13

<PAGE> 69

QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred. These expenses include
costs related to product development, engineering and other wages, overhead and
materials used. All costs associated with revenues from sale of materials for
evaluation and testing and research income have been classified as research and
development.

INCOME TAXES

In February 1992, the Financial Accounting Standards Board issued Statement No.
109, "Accounting for Income Taxes." The Company adopted the provisions of the
new standard in its financial statements for the year ended January 3, 1993.
Prior year financial statements were not restated and there was no cumulative
effect of adopting the new standard.

Under Statement 109, the liability method is used in accounting for income
taxes. Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities as well as
net operating loss carryforwards and are measured using the enacted tax rates
and laws that will be in effect when the differences reverse. Deferred tax
assets may be reduced by a valuation allowance to reflect the uncertainty
associated with their ultimate realization. Prior to the adoption of Statement
109, income tax expense was determined using the deferred method.

NET LOSS PER COMMON SHARE

Net loss per common share is based on net loss, after the allowance for
dividends on preferred stock outstanding, divided by the weighted average number
of common shares outstanding during the period. No effect has been given to
outstanding stock options and warrants and to the conversion of preferred stock
since the effect would be antidilutive. Net loss per common share has been
retroactively adjusted for 1-for-10 reverse split effective July 20, 1994.

EMPLOYEE BENEFIT PLAN

Effective February 1, 1993, the Company implemented a deferred compensation plan
under Section 401(k) of the Internal Revenue Code (the Plan). Under the Plan,
eligible employees are permitted to contribute up to 15% of their gross salary,
subject to certain limitations imposed by law. The Company matches one quarter
of the first 6% of

F-14
<PAGE> 70
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

employee contributions up to a maximum of $500 per employee. Company
contributions to the Plan were approximately $7,000 and $13,000 for the years
ended December 31, 1994 and January 2, 1994, respectively.

<TABLE>
3. ACCRUED EXPENSES

Accrued expenses consist of the following:

<CAPTION>
December 31, January 2,
1994 1994
---------------------------
<S> <C> <C>
Payroll $ 239,451 $ 139,774
Professional fees 555,022 123,986
Insurance 46,531 40,414
Research grant -0- 20,000
Royalties and license fees 212,000 162,000
Expenses and professional fees related to
financing arrangements (Note 9) 400,000 -0-
Other 94,982 94,641
---------------------------
$1,547,986 $ 580,815
===========================
</TABLE>

4. STOCKHOLDERS' EQUITY

On July 20, 1994, the Company amended its Certificate of Incorporation to
provide for a 1-for-10 reverse split, effective July 20, 1994. All number of
shares of common stock and related per share amounts in the accompanying
consolidated financial statements except for the consolidated statements of
changes in stockholders' equity (deficiency), and notes thereto have been
adjusted to reflect this reverse split.

ORIGINAL CONVERTIBLE PREFERRED STOCK

On April 24, 1987, the stockholders of the Company authorized the issuance of
1,172 shares of convertible preferred stock, $.01 par value per share. The terms
of the convertible preferred stock permit the holders to elect three-fifths of
the Company's Board of Directors until December 31, 1996. Each share of
convertible preferred stock is convertible into 178.5 shares of common stock at
the option of the holder. Holders of convertible preferred stock have no other
voting rights and are not entitled to receive any dividends, but have a
liquidation preference of $.01 per share upon dissolution.

F-15
<PAGE> 71
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. STOCKHOLDERS' EQUITY (CONTINUED)

Effective December 31, 1994, 196.58 shares of convertible preferred stock were
converted into 35,090 shares of common stock by the five holders thereof, who
were issued an additional 40,000 shares of restricted common stock in connection
with this transaction. In addition, on March 20, 1995, an additional share of
convertible preferred stock was converted into 178 shares of common stock. All
of the remaining convertible preferred stock has been conveyed to a trust to be
voted at the direction of the common stockholders.

CLASS A CONVERTIBLE PREFERRED STOCK

During the first quarter of 1992, the Company initiated a private placement of
25,000 units of its 10% senior convertible notes. The notes were convertible
into a new issue of the Company's Class A convertible preferred stock on the
date that the new issuance was approved by the stockholders. The notes were
convertible into preferred stock at a rate of $5.50 per share; the preferred
stock is convertible into common stock on a ten shares for one share basis. On
July 20, 1992, the Company issued 560,005 shares of Class A preferred stock (the
First Series) upon conversion of $3,080,000 of the Company's senior convertible
notes. On September 8, 1992, the Company issued an additional 237,093 shares of
the First Series in connection with a $1.0 million private placement.

As of September 15, 1994, all of the Class A convertible preferred stock,
1,800,074 shares including all accrued stock dividends due and payable, was
converted into 402,351 new shares of the Company's common stock. The holders of
the Class A convertible preferred stock also received 47,251 Class C warrants.

INITIAL PUBLIC OFFERING AND COMMON STOCK WARRANTS

On July 7, 1987, the Company consummated an initial public offering (IPO) of
1,150,000 units, (including the exercise of the underwriter's over-allotment
option for 150,000 units in September 1987). Each unit consisted of 0.30 shares
of the Company's common stock and 0.30 Redeemable Class A Common Stock Purchase
Warrants (the Class A warrants). Net proceeds from the IPO amounted to
approximately $4,740,000, some of which were used to repay short-term debt and
purchase treasury stock.

F-16
<PAGE> 72
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. STOCKHOLDERS' EQUITY (CONTINUED)

On April 22, 1988, 344,455 Class A warrants were exercised at a per warrant
exercise price of $26.25 resulting in the issuance of 344,455 shares of common
stock and 344,455 Class B warrants. The proceeds from the exercise of the Class
A warrants amounted to approximately $8,660,000, net of related costs of
approximately $385,000. Each Class B warrant initially entitled the holder to
purchase one share of common stock at an exercise price of $40.00 per share.
During 1988, 20 Class B warrants were exercised. During 1990, 110 Class B
warrants were exercised. Pursuant to a warrant reduction offer in 1990, a total
of 155,359 Class B warrants were exercised at the reduced price of $30.00 per
share of common stock. Proceeds from the exercise of the Class B warrants
amounted to approximately $4,436,000, net of related costs of approximately
$230,000. The remaining 1,890,607 Class B warrants expired March 31, 1993.

The Company issued warrants to purchase 20,000 shares of the Company's common
stock to the licensor of the Composite Materials Interlacer (CMI). During 1989,
warrants as to 103 shares were exercised at $16.70 per share. The remaining
warrants expired in July 1992.

As consideration for short-term financing prior to the IPO, the Company issued
warrants to purchase 14,000 shares of the Company's common stock at an exercise
price of $7.00 per share. The warrants provided certain anti-dilutive rights
which reduced the exercise price to $6.00 per share and increased the number of
shares of common stock purchasable upon exercise of each warrant by a multiple
of 1.166. In October 1992, 8,000 warrants were exercised resulting in the
issuance of 9,329 shares of common stock. Proceeds from the exercise amounted to
approximately $56,000. The remaining warrants expired in October 1992.

SUBSEQUENT EQUITY OFFERINGS AND COMMON STOCK WARRANTS

In August 1991, the Company completed a rights offering to its shareholders in
which 862,226 units were sold at $3.30 per unit. Each unit consisted of 0.30
shares of common stock and 0.10 Class C warrant to purchase shares at $14.60 per
share. Net proceeds from the Rights Offering amounted to approximately
$2,684,000. The 86,223 Class C warrants issued in conjunction with the rights
offering, with adjustment for dilution, enable the holders to purchase, in the
aggregate, 158,338 shares of common stock at an exercise price of $7.95 per
share. The Class C warrants expire in July 2001.

F-17
<PAGE> 73
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. STOCKHOLDERS' EQUITY (CONTINUED)

During 1991 and the first quarter of 1992, the Company raised interim capital by
engaging in three private offerings for a total of $1,042,000. In conjunction
with the 1991 offering, the Company issued warrants to purchase a total of
45,000 shares of common stock at exercise prices ranging from $13.30 to $14.60
per share. The warrants expire in July 2001. These warrants contain
anti-dilution provisions, which adjust the exercise price and the number of
shares of common stock issuable upon exercise. With adjustment for dilution,
holders may purchase, in the aggregate, 56,999 shares of common stock at the per
share exercise price of $10.50 per share. In addition, the holders of these
warrants were entitled to convert these warrants to 60,799 Class C warrants at
an exercise price of $11.20 per share which has happened for a total
consideration to the Company of $680,950.

In connection with the Company's offering of senior convertible notes in 1992,
D. H. Blair & Co., Inc. (Blair), the Company's placement agent for the initial
public offering in 1987, asserted a right of first refusal to act as placement
agent for the offering of senior convertible notes. To settle this dispute, and
in exchange for a general release from Blair of any other claims it may have
against the Company, the Company issued a "Unit Purchase Option" to Blair in
December 1992. The Unit Purchase Option entitles Blair to purchase 6,466 units
for $16.50 per unit. Each unit consists of 3 shares of common stock and an A
warrant entitling the holder to purchase a unit, which consists of 3 shares of
common stock and a B warrant. The B warrant entitles the holder to purchase 3
shares of common stock. The A warrant is exercisable at $17.00 per share, and
the B warrant is exercisable at $23.70 per share. The Company granted to Blair,
or its assignee, certain "demand" and "piggyback" registration rights regarding
the securities comprising the Unit Purchase Option. The Unit Purchase Option,
the A Warrants and the B Warrants expire on September 1, 1997.

In conjunction with offerings in December 1991, and the first quarter of 1992,
the Company issued 25,200 Class C warrants. With adjustment for dilution, these
Class C warrants entitle holders to purchase 46,277 shares of common stock at an
exercise price of $7.95 per share.

During the fourth quarter of 1992, the Company engaged in a $3,225,000 private
offering of 10% short-term notes and Class D warrants (including $250,000 in
notes paid as commission to the placement agent). In connection with the notes,
the Company incurred debt issuance costs of $306,000 of which $122,400 were
deferred at January 3, 1993, and recognized as interest expense in 1993.

F-18
<PAGE> 74
Quadrax Corporation
(A Development Stage Company)

Notes to Consolidated Financial Statements (continued)

4. STOCKHOLDERS' EQUITY (CONTINUED)

In May 1993, the Company closed a $4,890,000 private placement of common stock
and warrants for the purchase of common stock. Subscribers and the placement
agent received a total of 819,527 shares of common stock, Class E and Class F
warrants. The Class E warrants have expired. The Class F warrants are
exercisable at $15.00 per share and expire on March 31, 1997. Of the $4,890,000
in proceeds, $2,860,000 resulted from the conversion of 10% notes issued in
1992. The Company paid $365,000 in cash to those holders of the 10% notes who
chose not to convert. In connection with this offering, the Company issued
67,230 shares to an agent for placement services. Subsequent to this private
placement, the Company issued an additional 30,000 Class E and F warrants.

In September 1993, the Company closed a $1,338,000 offering of common stock to a
selected group of non-U.S. persons within the meaning of Regulation S. A total
of 205,846 shares were issued to subscribers.

In the fourth quarter of 1993, the Company issued 389,149 shares of its common
stock for proceeds of approximately $1,946,000 in connection with a Class E
warrant reduction offer. During the period of the offering, the Company
temporarily reduced the exercise price of its Class E warrants to $5.00 per
share.

During the fourth quarter of 1994, in conjunction with the Conagher & Co., Inc.,
financing, (Notes 9 and 10), the Company issued warrants to purchase 270,000
shares of its common stock to Manbey Partners. These warrants are exercisable at
$3.00 per share commencing December 1, 1995, and expire on November 30, 1999.

F-19
<PAGE> 75
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
4. STOCKHOLDERS' EQUITY (CONTINUED)

A summary of shares issuable upon exercise of warrants at December 31, 1994, is
as follows:

<CAPTION>
Number of Exercise Expiration
Class Shares Price Date
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class C (traded OTC as QDRXZ*) 484,716 $7.95 July 2001
Class D 322,500 5.50 October 1998
Class F 849,527 15.00 December 1995
D.H. Blair Unit Purchase Option 19,398 5.50 September 1997
D.H. Blair "A" Warrants 19,398 17.00 September 1997
D.H. Blair "B" Warrants 19,398 23.70 September 1997
Emanuel Co. Warrants 23,000 5.50 March 1997
The Wall Street Group 13,913 7.19 May 1998
Manbey Partners 270,000 3.00 November 1999
-------
Total 2,021,850
=========
<FN>
* There is a total of 263, 949 warrants outstanding with each warrant entitling
the holder to purchase 1.8364 shares of common stock
</TABLE>

On January 20, 1994, the Company entered into an agreement with a consultant
pursuant to which the consultant agreed to provide financial communications and
merger acquisition services. Pursuant to this agreement, the Company agreed to
issue the consultant 390,000 shares of common stock over a two year period. As
of December 31, 1994, the Company had issued 310,555 shares of common stock to
the consultant.

SUPPLEMENTAL LOSS PER SHARE

Supplemental loss per share was $2.00 for fiscal 1993 based upon 2,866,484
weighted average shares of common stock outstanding. Supplemental loss per share
gives effect to actual conversions of convertible securities and repayment of
debt as if they had occurred at the beginning of fiscal 1993.

5. STOCK OPTION PLANS

The Company has three stock option plans; a 1989 Plan, a 1993 Plan and a 1994
Plan. The 1989 Plan has been terminated except with respect to options to
purchase 139,106 shares of common stock which are outstanding.

F-20
<PAGE> 76
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. STOCK OPTION PLANS (CONTINUED)

The 1993 Plan provides for the grant of options to purchase stock in the form of
incentive stock options, non-qualified stock options and stock appreciation
rights. As of December 31, 1994, the stockholders of the Company had authorized
the issuance of 615,710 options pursuant to the 1993 Plan.

During 1994, the Company adopted a Non-Qualified Stock Option Plan which permits
the issuance of up to 500,000 shares of the Company's common stock to key
executives. Under the terms of the plan, options granted are non-qualified stock
options and are issued at prices as determined by the Company's Board of
Directors. Options granted under the Plan are exercisable as determined by the
Board of Directors of the Company. As of December 31, 1994, the Board of
Directors had authorized the issuance of 438,000 options pursuant to the 1994
Plan.

Also during 1994, the Company terminated the 1987 Incentive Stock Plan.

<TABLE>
Stock Option activity for the three prior years is summarized as follows:

<CAPTION>
Price Per
Options Share
-------------------------------
<S> <C> <C>
Outstanding at December 29, 1991 259,057 $1.00 to $41.90
Granted 260,460 $8.40
Exercised (11,746) $1.00 to $5.00
Canceled and forfeited (46,962) $1.00 to $41.19
-------------------------------
Outstanding at January 3, 1993 460,809 $1.00 to $40.00
Granted 273,025 $5.40 to $8.80
Exercised (27,000) $1.00
Canceled and forfeited (25,895) $8.40 to $29.80
-------------------------------
Outstanding at January 2, 1994 680,939 $1.00 to $40.00
Granted 1,371,197 $2.00 to $3.13
Exercised (240,000) $1.00 to $1.56
Canceled and forfeited (539,433) $1.00 to $40.00
-------------------------------
Outstanding at December 31, 1994 1,272,703 $1.00 to $8.00
===============================
</TABLE>

At December 31, 1994, options to purchase 932,149 shares were exercisable under
all option plans.

F-21
<PAGE> 77
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS

At December 31, 1994, the Company has outstanding employment agreements with
four senior officers and two other personnel. One agreement for one senior
officer expires on December 31, 1996 and provides for a base salary of $150,000
with severance pay in the amount of $37,500. The other three agreements for
senior officers expire on September 30, 1996 and provide for base compensation
ranging from $90,000 to $119,000 and severance pay equal to one-half of base
compensations.

The Company has a commitment, under the agreement to acquire the outstanding
stock of McManis Sports Associates (Note 8) to issue additional shares of common
stock if, at the date of registration of the 250,000 shares issued, the average
market value for the previous thirty days is less than $4.40 per share.

Rent expense amounted to approximately $133,000, $222,000, and $302,000 in
fiscal 1994, 1993, and 1992, respectively.

<TABLE>
Minimum rental payments under operating leases in future years are as follows:

<S> <C>
1995 $208,716
1996 $164,241
1997 $157,885
1998 $145,325
1999 $132,009
Thereafter $411,362
</TABLE>

7. INCOME TAXES

Due to net losses incurred by the Company in each year since its inception, no
provision for income taxes has been recorded. The Company has net operating loss
carryforwards in the amount of approximately $37,540,000 and $27,773,000, and
research and development tax credit carryforwards in the amount of $325,000 and
$265,000 at December 31, 1994 and January 2, 1994, respectively. These
carryforwards expire at various times from 2002 to 2009. The utilization of
these carryforwards may be limited by Internal Revenue Code Section 382. Under
Section 382, losses and other carryforwards are limited whenever a Company
experiences a greater than 50% change in ownership. The amount, if any, of such
limitation has not been determined at this time.

F-22
<PAGE> 78
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
7. INCOME TAXES (CONTINUED)

The relationship of tax expense to loss before income taxes differs from the
U.S. statutory rate primarily because of the net operating loss carryforward. A
valuation allowance has been recognized to offset net deferred tax assets which
consist primarily of the tax benefits associated with the net operating losses,
since the realization of tax benefits of net operating loss carryforward is not
assured. The valuation allowance has been increased by $4,109,000, $3,427,000 in
1994 and 1993, respectively, to recognize the increases in deferred tax benefits
that may not be fully realized prior to expiration.

<CAPTION>
December 31, January 2,
1994 1994
-----------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss $ 15,677,000 $ 11,598,000
Other 1,700,000 1,640,000
-----------------------------
17,377,000 13,238,000
Less valuation allowance (17,192,000) (13,083,000)
-----------------------------
Total deferred tax assets 185,000 155,000

Deferred tax liabilities:
Other (185,000) (155,000)
-----------------------------
Total deferred tax liabilities (185,000) (155,000)
-----------------------------
Net deferred taxes $ ----0---- $ ----0----
=============================
</TABLE>

8. ACQUISITIONS

In November, 1994, the Company acquired all of the outstanding stock of McManis
Sports Associates, a manufacturer of and marketing representative for golf
equipment, for $1,465,600 in common stock of the Company and $109,500 in cash.
Included therein, the Company issued to Ablewood European Services, Limited,
150,000 shares of common stock (see Notes 9 and 10) as compensation for acting
as an agent in bringing this opportunity to the Company. The acquisition was
accounted for using the purchase method. Accordingly, the purchase price was
allocated to the assets acquired based on their estimated fair values. This
treatment results in approximately $709,100 of cost in excess of assets acquired
based on their estimated fair values as of December 31, 1994. This excess of
$709,100, net of the common stock issued to Ablewood European Services,

F-23
<PAGE> 79
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. ACQUISITIONS (CONTINUED)

Limited will be amortized on a straight-line basis over 15 years. McManis Sports
Associates is a development stage business and did not have significant
operations in fiscal 1994. Therefore, no results of operations have been
included in the Company's financials for the year ended December 31, 1994.

<TABLE>
A summary of the assets acquired from McManis Sports Associates at December 31,
1994 is as follows:

<S> <C>
Current assets $ 149,100

Other assets, primarily
molds and equipment 416,900

Intangibles, primarily
goodwill 709,100
----------
$1,275,100
==========
</TABLE>

In November, 1994, the Company acquired the exclusive right to utilize the
Wimbledon trademark in the United States for tennis rackets, and in North
America for certain apparel for $600,000 by the issuance of 200,000 shares of
its common stock. This asset is being recorded on the books of the Company as an
intangible asset.

Also in November, 1994, the Company acquired certain assets and liabilities of
Time Sports for approximately $360,000 in cash and notes payable to facilitate
transfer of the Wimbledon license. The Company also issued to Ablewood European
Services, Limited, 100,000 shares of common stock (see Notes 9 and 10), as
compensation for acting as an agent in bringing this opportunity to the Company.
This acquisition is being accounted for as a purchase of assets. Accordingly,
the purchase price was allocated to the assets acquired based on their estimated
net realizable values.

<TABLE>
The Time Sports assets acquired at December 31, 1994 are as follows:

<S> <C>
Current assets $660,000

Equipment 100,000

Liabilities assumed (400,000)
--------
Net value of assets $360,000
========
</TABLE>

F-24
<PAGE> 80
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. ACQUISITIONS (CONTINUED)

The 250,000 shares of stock issued to Ablewood European Services, Limited as
compensation for acting as the Company's agent for the Company acquiring McManis
Sports Associates, certain assets and liabilities of Time Sports and the
trademark rights has been expensed in fiscal 1994 as a financing cost (Notes 9
and 10).

<TABLE>
9. FINANCING RELATED EXPENSES

Financing related costs during fiscal 1994 were incurred in connection with two
transactions that the Company entered into during the fiscal year which were
subsequently terminated. The first financing transaction was a proposed
acquisition of the Company by Applied Laser Systems (ALS). The cost of the
termination of this agreement was approximately $1,482,000 and consisted of
170,000 shares of common stock issued to the Company's investor relations
consultant and other professional costs. The second financing transaction was
the Conagher & Co., Inc. funding relationship which was terminated in February,
1995, (Note 10 ). The expenses incurred during this relationship were as
follows:

<S> <C>
Non-recurring expenses incurred in maintaining the office of Pattinson
Hayton, III, the Company's former Chairman, during July through December 1994 $1,133,000

Reserve for advances made to Apogee Robotics Inc., at the direction of
Pattinson Hayton, III, the Company's former Chairman, from August to
October, 1994 365,000

Reserve for expenses incurred for maintenance of the office of Pattinson
Hayton, III, the Company's former Chairman, in fiscal 1995 300,000

Common stock issued to consultants at the direction of Pattinson Hayton, III,
the Company's former Chairman 1,689,000

Other miscellaneous professional fees incurred in ending the relationship
with Conagher & Co., Inc. 100,000

Common stock issued at the direction of Pattinson Hayton, III, the Company's
former Chairman, for commissions payable in connection with the acquisition
of McManis Sport Associates, the assets of Time Sports, Inc. and the Wimbledon
trademark license (Note 8 ) 500,000
----------
</TABLE>

F-25
<PAGE> 81
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
9. FINANCING RELATED EXPENSES (CONTINUED)

<S> <C>
Total Conagher & Co., Inc. financing costs 4,087,000

ALS financing costs 1,482,000
----------

Total financing related expenses $5,569,000
==========
</TABLE>

10. CHANGES IN CONTROL

- a reduction in amount and an extension of the time for payment of certain
notes due from Conagher for the purchase of common stock of the Company;

- the issuance to Allied-Asian, or its nominees, of 1,150,000 shares of
common stock of the Company, in restricted form; and

- the assumption by the Company of certain outstanding obligations owed by
Conagher and guaranteed by Mr. Hayton, personally, to Richard A. Fisher
(see Note 11), the founder and former Chief Executive Officer of the
Company.

Mr. Hayton had acquired financial and voting control over the Company in July,
1994, when Conagher purchased 1,500,000 restricted shares of the Company's
common stock for an aggregate price of $3 million, and also purchased from Mr.
Fisher approximately 62% of the Company's original preferred stock (the Control
Block), which gave Conagher the right to elect 3/5 of the members of the
Company's Board of Directors.

In connection with these transactions, Mr. Hayton reconstituted the Board of
Directors, and had himself elected Chairman. Mr. Fisher resigned as Chairman and
subsequently terminated his employment with the Company due to the change in
control of the Company, although he remains available under an agreement with
the Company to consult with the Company as needed.

F-26
<PAGE> 82
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. CHANGES IN CONTROL (CONTINUED)

Subsequently, in September, 1994, Conagher purchased an additional 2,250,000
shares for an additional $4.5 million, bringing its total commitment to $7.5
million for 3,750,000 shares. Each of these stock purchases were paid for
through promissory notes issued by Conagher. The stock was re-sold by Conagher
to various off-shore investors in a series of transactions that Conagher advised
the Company had been structured by Conagher to comply with the exemption from
registration available pursuant to Regulation S promulgated by the Securities
and Exchange Commission under the Securities Act of 1933.

Conagher failed to meet the payment schedule under its promissory notes to the
Company, although it did pay its initial note in full ahead of final maturity,
in large part because Conagher assumed the Company's obligations to Applied
Laser Systems in the amount of approximately $1,300,000. By December, 1994,
Conagher was sufficiently delinquent on its second note that the Company's
operations were suffering from a shortage of working capital. Subsequent to
January 31, 1995, Conagher missed the final payment due, the Board of Directors
demanded, and received, Mr. Hayton's resignation as Chairman and a member of the
Board of Directors of the Company and the surrender by Conagher of its Control
Block in exchange for the consideration described above.

During the approximately 7 month period in which Mr. Hayton controlled the
Company, he directed substantial resources away from the Company's core business
and into activities that the current management was either unaware of or did not
endorse and does not consider indicative of the Company's ongoing operations.
These included the hiring of various "consultants" and various product
promotional campaigns that management does not believe were in the best
interests of the Company or its stockholders. In the wake of Mr. Hayton's
relinquishing of control, these activities have ceased. In order to present an
accurate representation of the Company's ongoing cost of continuing operations,
management has reported these items, as well as certain expenses associated with
the terminated Applied Laser Systems transaction, as a separate line item
entitled "Financing Related Expenses" on its Statement of Operations.

F-27
<PAGE> 83
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. RELATED PARTY TRANSACTIONS

In connection with the change of control (Note 10), the Company's founder
resigned as a director and chief executive officer in September, 1994 and the
Company retained him as a consultant at the rate of $6,250 per month which may
be increased based on level of effort under a contract that extends through
December 31, 1996; secured a non-competition agreement extending for a five year
period for a fee of $675,000 payable over five years; accelerated the
cancellation of certain amounts due from him in the amount of approximately
$40,000; and agreed to accept payment for stock to be acquired by him upon
exercise of stock options in promissory notes payable over five years.

During fiscal 1994, the former chief executive officer exercised options
covering 240,000 shares of the Company's common stock, delivering notes therefor
aggregating $338,000.

The Company has also entered into a severance agreement with its former chief
executive officer which provides for the continuing payment of certain benefits,
including medical and life insurance.

In connection with the repurchasing of the voting control over the Company from
Pattinson Hayton, III and his affiliated corporate entities (Note 10 ), the
Company assumed the obligation of Conagher & Co. to pay the former chief
executive officer $750,000 for the convertible preferred stock which he had
previously sold to Conagher & Co. 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.

During 1988, the Company entered into a limited partnership agreement and,
accordingly, has a one-third interest in a limited partnership that is the
lessor of the Company's operating facility. In 1992, the Company pledged a
$250,000 certificate of deposit as security for rent under a lease that secures
a mortgage loan agreement entered into by the limited partnership in connection
with the construction of the facility. The Company's $250,000 certificate of
deposit was advanced to the partnership. As consideration for the Company
advancing the $250,000, the Company's lease was extended through 2003, its
annual lease payments were significantly reduced and options to purchase the
building were modified. The Company's investment in the limited partnership is
carried at cost.

F-28
<PAGE> 84
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. RELATED PARTY TRANSACTIONS (CONTINUED)

The Company has made advances to certain directors and officers. In November
1992, these individuals provided their personal guarantees of a performance bond
for the Company's submarine laminate contract totaling approximately $1,173,000.
The guarantees were several in nature. In addition, these individuals agreed to
provide similar guarantees, if required, for bonds assuring the Company's
performance of other contracts. There is no dollar limit on the amount of
guarantees these individuals agreed to provide.

In partial consideration of the submarine laminate contract guarantee and the
agreement to guarantee, the Company agreed to cancel the existing notes and
security agreements, classified the unpaid amounts as advances and approved a
schedule providing for the cancellation of the indebtedness ending in January
1995 (25% effective January 1, 1993, 37.5% effective January 1, 1994, and 37.5%
effective January 1, 1995). The total amount of advances and accrued interest to
be canceled was $286,244. As of January 2, 1994, 62.5% of these amounts were
canceled in accordance with the schedule as noted above.

On February 28, 1992, these individuals exercised 107,455 stock options, at an
exercise price of $.50 per share. The Company accepted unsecured notes totaling
$53,727 as payment. These notes have been included as a reduction of
stockholders' equity at January 3, 1993. On July 14, 1993, an officer/director
exercised 100,000 stock options at an option price of $.10 per share. With
consent of the Board of Directors, these individuals tendered 88,829 shares of
the Company's common stock in full payment for the unsecured notes of $53,727,
employee advances of $10,000 and interest receivable on the notes of $4,282. The
shares were retained by the Company as treasury stock.

During 1992, the Company granted $50,000 to Stanford University directed to the
development of thermoplastic composite processing technologies. Dr. Stephen
Tsai, a director of the Company, is a professor at Stanford University.

F-29
<PAGE> 85
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. PRODUCTION CONTRACTS

During the fourth quarter of 1992, the Company began its first production scale
contract totaling approximately $1,173,000. During fiscal 1992, the Company
recorded revenues of approximately $145,700 and cost of goods sold of
approximately $806,400 relating to this contract. Included in the cost of goods
sold is a charge of $500,000 representing the estimated costs in excess of
revenues to complete this contract.

During the fourth quarter of 1993, the Company began its second production scale
contract totaling approximately $117,000. During fiscal 1993, the Company
recorded revenues of approximately $64,700 and cost of goods sold of
approximately $326,300 relating to this contract. Included in the cost of goods
sold is a charge of $145,000 representing the estimated costs in excess of
revenues to complete the contract. This contract was completed in the second
quarter of fiscal 1994 and no new production contracts were commenced during the
balance of fiscal 1994. Subsequent to December 31, 1994, the Company commenced
sales under five production contracts.

13. NOTES PAYABLE

The Company's notes payable consist of notes due totaling $310,000; one is a
non-interest bearing note for $250,000 due regarding the acquisition of certain
assets and liabilities of Time Sports, (see Note 8); the others are 10% interest
bearing notes totaling $60,000 due to the holders of subordinated debentures
issued by the Company pursuant to Regulation D.

F-30

<PAGE> 86
<TABLE>
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

ASSETS

<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
---------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,186,361 $ 382,721
Accounts receivable 1,258,699 224,180

Inventories:
Raw materials 464,581 1,059,213
Work in process 555,890 212,573
---------- ----------
1,020,741 1,271,786
Other current assets 74,782 81,756
---------- ----------
TOTAL CURRENT ASSETS 3,540,583 1,960,443
---------- ----------

Property and equipment, at cost:
Machinery and equipment 4,053,480 3,875,955
Office equipment 733,458 689,944
Leasehold improvements 1,035,513 1,035,513
---------- ----------
5,822,451 5,601,412
Less accumulated depreciation and amortization 3,105,033 2,984,104
---------- ----------
NET PROPERTY AND EQUIPMENT 2,717,418 2,617,308
---------- ----------

Receivables from officers and employees 54,728 54,728

Non-competition agreement 607,500 641,250

Goodwill 700,244 709,142

Other assets 367,855 507,855

License agreement 600,000 600,000

Patents, net of amortization 167,472 169,437
---------- ----------
TOTAL ASSETS $8,755,800 $7,260,163
========== ==========
</TABLE>

See accompanying notes.

F-31
<PAGE> 87
<TABLE>
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS' EQUITY

<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,672,735 $ 1,166,178
Accrued expenses 996,148 1,547,986
Notes payable to related party 885,000 135,000
Notes payable 290,000 310,000
------------ ------------
TOTAL CURRENT LIABILITIES 3,843,883 3,159,164

Note payable to related party 540,000 540,000
------------ ------------
TOTAL LIABILITIES 4,383,883 3,699,164

Stockholders' equity:
Original convertible preferred stock 7 7
Common stock 104 92
Additional paid-in capital 51,512,117 48,356,319
Deficit accumulated during development stage (45,577,002) (44,090,478)
------------ ------------
5,935,226 4,265,940
Less:
Treasury stock, at cost: (993,009) (243,009)
Unearned compensation and deferred expenses (85,800) (123,932)
Note receivable for options (484,500) (338,000)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 4,371,917 3,560,999

------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,755,800 $ 7,260,163
============ ============
</TABLE>

See accompanying notes.

F-32
<PAGE> 88
<TABLE>
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Cumulative
March 6, 1986
Three months Three months (Date of
Ended Ended incorporation) to
March 31, 1995 April 3, 1994 March 31, 1995
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Revenue:
Product sales $ 1,074,643 $ 74,047 $ 6,400,445
Interest income 8,995 2,007 1,400,357
Other income 0 0 68,408
-------------------- -------------------- --------------------
TOTAL REVENUE 1,083,638 76,054 7,869,210
-------------------- -------------------- --------------------

Expenses:
Cost of goods sold 714,420 27,012 2,614,060
Research and development 236,074 399,309 13,661,892
Selling, general and
administrative 1,411,606 672,646 20,594,922
Depreciation and
amortization 203,672 195,827 7,091,821
Interest expense 4,390 4,239 454,529
Loss on investment 0 0 165,350
Non-recurring financial
related expenses 0 1,449,851 5,568,733
-------------------- -------------------- --------------------
TOTAL EXPENSES 2,570,162 2,748,884 50,151,307
-------------------- -------------------- --------------------
NET LOSS FROM CONTINUING OPERATIONS $ (1,486,524) $ (2,672,830) $ (42,282,097)

Discontinued operations:
Net loss from discounted
operations 0 0 (2,509,968)
Loss on disposal of laser
segment 0 0 (579,848)
-------------------- -------------------- --------------------
NET LOSS $ (1,486,524) $ (2,672,830) $ (45,371,913)
==================== ==================== ====================
NET LOSS PER COMMON SHARE $ (0.14) $ (0.73)
==================== ====================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 10,779,444 3,649,857
==================== ====================

</TABLE>

See accompanying notes.

F-33
<PAGE> 89
<TABLE>
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Cumulative
March 6, 1986
Three months Three months (date of Incorp-
Ended Ended oration) to
March 31, 1995 April 3, 1994 March 31, 1995
-------------------- -------------------- --------------------
Cash flows from operating activities
<S> <C> <C> <C>
Net loss $ (1,486,524) $ (2,672,830) $ (45,546,913)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation & amortization of fixed assets 120,929 156,776 3,817,391
Amortization of intangibles 44,613 1,155 720,889
Amortization of unearned compensation 0 14,946 1,702,774
Amortization of deferred expense 38,132 22,250 589,957
Amortization of deferred debt expense 0 0 573,526
Common stock issued for consulting services 34,615 787,500 2,348,505
Common stock issued for interest 0 0 132,236
Common stock issued for financing
related expenses 0 0 2,028,607
Loss on retirement of fixed assets 0 0 74,089
Loss on disposal of laser segment 0 0 579,848
Loss on investment 0 0 176,900
Cancellation of indebtedness 0 26,835 286,245
Provision for loss contract 0 (142,394) 0
Effect on cash flows of changes in
assets and liabilities:
Accounts receivable and other (1,034,519) 69,723 (1,304,883)
Inventories 251,045 (42,079) (683,992)
Prepaid expenses and other assets 6,974 9,812 (30,370)
Receivables/payables from officers
and employees 0 0 39,657
Accounts payable 506,557 184,431 1,594,924
Accrued expenses (551,838) 85,147 951,148
Non-current liabilities 0 328,125 0
-------------------- -------------------- --------------------
Net cash used in operating activities (2,070,015) (1,170,603) (31,949,462)
-------------------- -------------------- --------------------

Cash flows from investing activities:
Notes receivable - officers and employees 0 0 (90,783)
Investments 0 11,550 148,100
Capital expenditures, net (221,039) (208,995) (6,456,975)
Other intangible assets 0 (793) (874,492)
Payments for businesses acquired net of
cash acquired 140,000 0 (260,029)
-------------------- -------------------- --------------------
Net cash provided by (used in)
investing activities (81,039) (198,239) (7,534,179)
-------------------- -------------------- --------------------

Cash flows from financing activities:
Proceeds from exercise of common stock warrants, net 0 2,400 13,550,571
Proceeds from exercise of common stock options 25,300 0 57,570
Net proceeds from rights offering 0 0 2,684,217
Sales of common stock 0 0 98,762
Issuance of preferred stock 0 0 12
Net proceeds from initial public offering 0 0 4,740,022
Net proceeds from sale of stock and warrants 2,949,384 0 12,761,228
Issuance of debt 0 1,000,000 8,521,653
Repayment of debt (20,000) 0 (1,569,031)
Shares acquired for treasury stock 0 0 (175,000)
Dividend payment on preferred stock (series A) 0 0 (2)
-------------------- -------------------- --------------------
Net cash provided by
financing activities 2,954,694 1,002,400 40,670,002
-------------------- -------------------- --------------------
Net increase (decrease) in cash and cash equivalents 803,640 (366,442) $ 1,186,361
====================
Cash and cash equivalents at beginning of period 382,721 668,781
-------------------- --------------------
Cash and cash equivalents at end of period $ 1,186,361 $ 302,339
==================== ====================
</TABLE>
See accompanying notes

F-34
<PAGE> 90

QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED
MARCH 31, 1995 AND APRIL 3, 1994

SUPPLEMENTAL SCHEDULE OF SIGNIFICANT NONCASH 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:

None.

F-35
<PAGE> 91
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)

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,
consisting only of normal recurring adjustments, necessary to present
fairly the Company's financial position as of March 31, 1995 and the
results of operations for the three months ended March 31, 1995 and April
3, 1994. The results of operations for the three month period ended March
31, 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 and amended by Form 10-KSB/A for the year ended December 31,
1994.

The Company changed 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 consolidated financial statements
represent fiscal years unless otherwise noted.

2. Notes Payable

The Company's notes payable consist of notes due totaling $290,000; one is
a non-interest bearing note for $250,000 due regarding the acquisition of
certain assets and liabilities of Time Sports, the others are 10% interest
bearing notes totaling $40,000 due to the holders of subordinated
debentures issued by the Company pursuant to Regulation D during fiscal
1994.

3. Shareholders Equity

The Company's capital shares are as follows:

Original Convertible Preferred Stock, $.01 par value, 1,172 shares
authorized at March 31, 1995 and December 31, 1994, 318 and 516 shares
issued and outstanding at March 31, 1995 and December 31, 1994,
respectively. During the three months ended March 31, 1995, 198 shares of
the Original Convertible Preferred Stock were converted to 75,268 shares of
Common Stock.

Common Stock, $.000009 par value, 90,000,000 shares authorized at March 31,
1995 and December 31, 1994, 12,772,866 and 10,249,066 shares issued at
March 31, 1995 and December 31, 1994, respectively and 12,452,061 and
9,928,261 shares outstanding at March 31, 1995 and December 31, 1994,
respectively.

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 number of shares of Common Stock and related per share amounts in the
accompanying consolidated financial statements and notes thereto have been
adjusted to reflect this reverse split.

F-36
<PAGE> 92

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 (Conagher),
Allied-Asian Consolidated Limited, a Hong Kong corporation (Allied-Asian),
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 Officer 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/A for the fiscal year 1994
(See Changes in Control and Related Transactions and Note 10 to the
Consolidated Financial Statements -- Changes in Control) which are
incorporated here and by this reference.

5. Related Party Transactions

During the period ended March 31, 1995, the Company's former Chief
Executive Officer, Richard A. Fisher, exercised options covering 93,918
shares of the Company's common stock delivering notes therefore aggregating
$146,500.

In connection with the repurchasing of the voting control over the Company
from Pattinson Hayton, III and his affiliated corporate entities (See Note
4 above), the Company assumed the obligation of Conagher & Co. to pay the
former chief executive officer $750,000 for the convertible preferred
stock which he had previously sold to Conagher & Co. 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.

Also during the period ended March 31, 1995, the Company's former Chief
Executive Officer, Richard A. Fisher's severance agreement dated September
30, 1994 was amended to reflect a commitment by the Company to issue an
additional 100,000 shares of its common stock upon the effective date of a
registration statement to be filed with the Securities and Exchange
Commission.

6. Earnings Per Share

For the fiscal quarters ending March 31, 1995 and April 30, 1994, the net
loss per share was computed using the weighted number of average shares
outstanding during the respective periods. Common Stock equivalents did
not enter into the computation because the impact would have been
anti-dilutive.

F-37
<PAGE> 93

NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION
WITH THIS OFFERING 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 BY THE COMPANY OR ANY SELLING STOCKHOLDER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER
TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION 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 OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Price Range of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Principal and Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Index to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>

QUADRAX

1,290,858 SHARES

COMMON STOCK
<PAGE> 94
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article ELEVENTH of the Registrant's Certificate of Incorporation
provides that, to the fullest extent permitted by the Delaware General
Corporation Law, the Company shall indemnify its officers and directors and
such other persons as it chooses to indemnify. Article ELEVENTH also provides
that directors shall not be personally liable to the Company or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director, except (to the extent provided by applicable law) for
liability (i) for breach of the director's duty of loyalty, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the General
Corporation Law of Delaware, or any amendment or successor provision thereto or
(iv) for any transaction from which the director derived an improper personal
benefit.

Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, in any criminal proceeding, if such
person had no reasonable cause to believe his conduct was unlawful; provided
that, in the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such
person shall have been adjudged to be liable to the corporation unless and only
to the extent that the adjudicating court determines that such indemnification
is proper under the circumstances.

The effect of these provisions would be to permit such indemnification by
the Company for liabilities arising out of the Securities Act.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the various expenses in connection with
the offering of the Common Shares, all of which will be paid by the Company.
All amounts shown are estimates except the registration fee payable to the
Commission.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee . . . . . . . . . . . . . . . . $ 900
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . *
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
Blue Sky fees and expenses (including related legal fees) . . . . . . . . . . . . . *
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
--------

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $125,000
========
</TABLE>

- -----------------------------
* To be provided by amendment.

II-1
<PAGE> 95
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

The following information is furnished with regard to all securities
issued by the Company within the past three years which were not registered
under the Securities Act. Except as noted, no underwriters were engaged in
connection with the issuances of securities and no commissions or discounts
were paid. The term "person" as used below includes both individuals and
entities.

1. In July 1992, the Company issued an aggregate of 5,600,057 shares of
Voting Preferred Stock to a total of 30 persons in exchange for the
cancellation of $3,080,000 principal amount of indebtedness. In connection
with this exchange Emanuel & Co., Inc. and First Flushing Securities, Inc.
received commissions totalling $308,000 in shares of Voting Preferred Stock in
consideration for their services as placement agents. These shares of Voting
Preferred Stock were offered and sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.

2. In September 1992:

a. The Company issued an aggregate of 1,818,181 shares of Voting
Preferred Stock to a total of 17 persons in exchange for an aggregate
purchase price of $1,000,000. In connection with this purchase, First
Flushing Securities, Inc. received commissions in Voting Preferred Stock
totaling $108,000. These shares of Voting Preferred Stock were sold in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act.

b. The Company issued an aggregate of 79,546 shares of Common
Stock to 2 persons upon conversions of Voting Preferred Stock. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 3(a)(9) of the Securities Act.

3. In October 1992:

a. The Company issued an aggregate of 9,328 shares of Common
Stock to 6 persons upon exercise of warrants. The total warrant exercise
price was $6.00. These shares of Common Stock were sold in reliance upon
the exemption from registration under Section 4(2) of the Securities Act.

b. The Company issued an aggregate of 379,549 shares of Common
Stock to approximately 25 persons upon conversions of Voting Preferred
Stock. These shares of Common Stock were sold in reliance upon the
exemption from registration under Section 3(a)(9) of the Securities Act.

4. In November 1992, the Company issued an aggregate of 9,091 shares of
Common Stock to 2 persons upon conversions of Voting Preferred Stock. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 3(a)(9) of the Securities Act.

5. In December 1992:

a. The Company issued an aggregate of 116,890 shares of Common
Stock to approximately 8 persons upon conversions of Voting Preferred
Stock. These shares of Common Stock were sold in reliance upon the
exemption from registration under Section 3(a)(9) of the Securities Act.

b. The Company issued 17,273 shares of Common Stock to 1 person
upon exercise of warrants. The total warrant exercise price was $95,000.
These shares of Common Stock were sold in reliance upon the exemption
from registration under Section 4(2) of the Securities Act.

II-2
<PAGE> 96
c. The Company issued 1,000 shares of Common Stock to 1 person
upon exercise of an option. The total option exercise price of $1,000
was paid in cash to the Company. These shares of Common Stock were sold
in reliance upon the exemption from registration under Section 4(2) of
the Securities Act.

d. The Company issued 10,000 shares of Common Stock to 1 person
in consideration for the provision of certain financial public relations
services to the Company. These shares of Common Stock were issued in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act.

e. The Company issued 27,000 shares of Common Stock to First
Flushing Securities, Inc. upon conversion of Voting Preferred Stock.
These shares of Common Stock were issued in reliance upon the exemption
from registration under Section 3(a)(9) of the Securities Act.

f. The Company issued an aggregate of 9,061 shares of Common
Stock to 3 persons upon conversions of Original Preferred Stock. These
shares of Common Stock were issued in reliance upon the exemption from
registration under Section 3(a)(9) of the Securities Act.

6. In January 1993:

a. The Company issued 4,545 shares of Common Stock to 1 person
upon conversion of Voting Preferred Stock. These shares of Common Stock
were issued in reliance upon the exemption from registration under
Section 3(a)(9) of the Securities Act.

b. The Company issued 20,000 shares of Common Stock to 1 person
upon exercise of warrants. The total warrant exercise price was
$110,000. These shares of Common Stock were sold in reliance upon the
exemption from registration under Section 4(2) of the Securities Act.

c. The Company issued 3,500 shares of Common Stock to Stephen
Tsai in connection with services provided as a director of the Company.
These shares of Common Stock were issued in reliance upon the exemption
from registration under Section 4(2) of the Securities Act.

7. In February 1993, the Company issued an aggregate of 29,293 shares
of Common Stock to 3 persons upon conversions of Voting Preferred Stock. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 3(a)(9) of the Securities Act.

8. In March 1993:

a. The Company issued an aggregate of 4,123 shares of Common
Stock to 2 persons upon conversions of Original Preferred Stock. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 3(a)(9) of the Securities Act.

b. The Company issued an aggregate of 6,465 shares of Common
Stock to 2 persons upon conversions of Voting Preferred Stock. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 3(a)(9) of the Securities Act.

9. In April 1993, the Company issued 5,939 shares of Common Stock to 1
person upon conversion of Original Preferred Stock. These shares of Common
Stock were sold in reliance upon the exemption from registration under Section
3(a)(9) of the Securities Act.

II-3
<PAGE> 97
10. In May 1993:

a. The Company issued an aggregate of 752,297 shares of Common
Stock, together with Series E Warrants and Series F Warrants to acquire
an aggregate of 1,504,594 additional shares of Common Stock, to a total
of 71 persons in exchange for an aggregate purchase price of $4,890,000.
These shares of Common Stock were sold in reliance upon the exemption
from registration under Section 4(2) of the Securities Act.

b. The Company issued 10,000 shares of Common Stock to 1 person
in consideration for the provision of financial advisory services. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.

11. In June 1993:

a. The Company issued 3,846 shares of Common Stock to 1 person
for a purchase price of $25,000 These shares of Common Stock were sold in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act.

b. The Company issued 105,690 shares of Common Stock to First
Flushing Securities, Inc. in consideration for its services as placement
agent in connection with the Company's issuance of 752,297 shares of
Common Stock in May 1993 and its issuance of an aggregate principal
amount of $2,500,000 of debt in October 1992. These shares of Common
Stock were issued in reliance upon the exemption from registration under
Section 4(2) of the Securities Act.

c. The Company issued 2,500 shares of Common Stock to 1 person in
consideration for the provision of financial advisory services. These
shares of Common Stock were issued in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.

12. In July 1993:

a. The Company issued an aggregate of 9,116 shares of Common
Stock to 2 persons upon conversions of Voting Preferred Stock. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 3(a)(9) of the Securities Act.

b. The Company issued 162 shares of Common Stock to each of
Stephen Tsai and Robert Eng in consideration for their services as
directors of the Company. These shares of Common Stock were issued in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act.

c. The Company issued 2,500 shares of Common Stock to 1 person in
connection with a separation agreement. These shares of Common Stock
were sold in reliance upon the exemption from registration under Section
4(2) of the Securities Act.

d. The Company issued 10,000 shares of Common Stock to 1 person
in consideration for the provision of financial advisory services. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.

e. The Company issued an aggregate of 205,846 shares of Common
Stock to a total of 3 persons in exchange for an aggregate purchase price
of $113,215. These shares of Common Stock were sold in reliance upon the
exemption from registration under Regulation S of the Securities Act.

II-4
<PAGE> 98
f. The Company issued 20,000 shares of Common Stock to 1 person
upon conversion of Voting Preferred Stock. These shares of Common Stock
were sold in reliance upon the exemption from registration under Section
3(a)(9) of the Securities Act.

13. In August 1993, the Company issued 32,727 shares of Common Stock to
1 person upon exercise of warrants. The total warrant exercise price was
$180,000. These shares of Common Stock were sold in reliance upon the
exemption from registration under Section 4(2) of the Securities Act.

14. In September 1993, the Company issued 3,622 shares of Common Stock
to 1 person upon conversion of Original Preferred Stock. These shares of
Common Stock were sold in reliance upon the exemption from registration under
Section 3(a)(9) of the Securities Act.

15. In December 1993:

a. The Company issued 343 shares of Common Stock to each of
Stephen Tsai and Robert Eng in consideration for their services as
directors of the Company. These shares of Common Stock were issued in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act.

b. The Company issued an aggregate of 389,149 shares of Common
Stock to 55 persons in exchange for Class E Warrants. These shares of
Common Stock were issued in reliance upon the exemption from registration
under Section 4(2) of the Securities Act.

16. In January 1994:

a. The Company issued an aggregate of 8,572 shares of Common
Stock to 2 persons upon conversions of Voting Preferred Stock. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.

b. The Company issued 120,000 shares of Common Stock to 1 person
in consideration for the provision of financial advisory services. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.

17. In July 1994, the Company issued 1,500,000 shares of Common Stock to
Conagher & Co., Inc. The purchase price of $3,000,000 was paid by issuance of
a promissory note to the Company. These shares of Common Stock were sold in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act.

18. In August 1994, the Company issued 9,772 shares of Common Stock to 1
person upon conversion of Original Preferred Stock. These shares of Common
Stock were sold in reliance upon the exemption from registration under Section
3(a)(9) of the Securities Act.

19. In September 1994:

a. The Company issued 160,000 shares of Common Stock to 1 person
in consideration for the provision of certain financial public relations
services to the Company. These shares of Common Stock were issued in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act.

b. The Company issued 53,953 shares of Common Stock to Andrew J.
MacGowan upon conversion of Original Preferred Stock. These shares of
Common Stock were sold in reliance upon the exemption from registration
under Section 3(a)(9) of the Securities Act.

II-5
<PAGE> 99

c. The Company issued 2,250,000 shares of Common Stock to
Conagher & Co., Inc. The purchase price of $4,500,000 was paid by
issuance of a promissory note to the Company. These shares of Common
Stock were sold in reliance upon the exemption from registration under
Section 4(2) of the Securities Act.

20. In October 1994, the Company issued an aggregate of 48,200 shares of
Common Stock to 13 persons in payment of $132,236 of interest accrued on
outstanding indebtedness of the Company. These shares of Common Stock were
sold in reliance upon the exemption from registration under Section 4(2) of the
Securities Act.

21. In November 1994:

a. The Company issued 200,000 shares of Common Stock to James J.
Palermo pursuant to his employment agreement. These shares of Common
Stock were sold in reliance upon the exemption from registration under
Section 4(2) of the Securities Act.

b. The Company issued 7,483 shares of Common Stock to a total of
9 persons in exchange for the discharge of $41,999 principal amount of
indebtedness. These shares of Common Stock were sold in reliance upon
the exemption from registration under Section 4(2) of the Securities Act.

c. The Company issued an aggregate of 100,555 shares of Common
Stock to a total of 4 persons in consideration for the provision of
financial advisory services. These shares of Common Stock were sold in
reliance upon the exemption from registration under Section 4(2) of the
Securities Act.

d. The Company issued 12,700 shares of Common Stock to 1 person
in exchange for certain promotional services. These shares of Common
Stock were sold in reliance upon the exemption from registration under
Section 4(2) of the Securities Act.

e. The Company issued 1,500 shares of Common Stock to 1 person in
consideration for the provision of certain consulting services. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.

f. The Company issued 10,000 shares of Common Stock to 1 person
in consideration for the provision of legal services. These shares of
Common Stock were sold in reliance upon the exemption from registration
under Section 4(2) of the Securities Act.

g. The Company issued 1,540 shares of Common Stock to 1 person in
payment of debt in the amount of $5,000. These shares of Common Stock
were sold in reliance upon the exemption from registration under Section
4(2) of the Securities Act.

h. The Company issued 10,000 shares of Common Stock to Robert
Oliphant in consideration for the provision of services as a director of
the Company. These shares of Common Stock were sold in reliance upon the
exemption from registration under Section 4(2) of the Securities Act.

i. The Company issued 250,000 shares of Common Stock to a
designee of Allied-Asian Consolidated Limited as a finder's fee in
connection with the Company's acquisition of certain assets from Time
Sports, Inc. and its acquisition of the stock of McManis Sports
Associates, Inc. These shares of Common Stock were sold in reliance upon
the exemption from registration under Section 4(2) of the Securities Act.

II-6
<PAGE> 100
22. In January 1995:

a. The Company issued an aggregate of 449,602 shares of Common
Stock to 3 persons upon conversions of Voting Preferred Stock. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 3(a)(9) of the Securities Act.

b. The Company issued an aggregate of 75,090 shares of Common
Stock to 5 persons upon conversion of Voting Preferred Stock. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 3(a)(9) of the Securities Act.

c. The Company issued 178 shares of Common Stock to Richard A.
Fisher upon conversion of Original Preferred Stock. These shares of
Common Stock were sold in reliance upon the exemption from registration
under Section 3(a)(9) of the Securities Act.

23. In February 1995:

a. The Company issued 1,150,000 shares of Common Stock to
Allied-Asian Consolidated Limited in connection with a settlement
agreement dated February 13, 1995 with Conagher & Co., Inc., Pattinson
Hayton III, Richard A. Fisher, James J. Palermo and Allied-Asian
Consolidated Limited. These shares of Common Stock were sold in reliance
upon the exemption from registration under Section 4(2) of the Securities
Act.

b. The Company issued an aggregate of 330,000 shares of Common
Stock to a total of 3 persons in exchange for an aggregate purchase price
of $647,950. These shares of Common Stock were sold in reliance upon the
exemption from registration under Regulation S of the Securities Act.

24. In March 1995:

a. The Company issued an aggregate of 926,973 shares of Common
Stock to a total of 9 persons in exchange for an aggregate purchase
price of $1,645,200. These shares of Common Stock were sold in reliance
upon the exemption from registration under Regulation S of the
Securities Act.

b. The Company issued 24,444 shares of Common Stock to 1 person
in consideration for the provision of financial advisory services. These
shares of Common Stock were sold in reliance upon the exemption from
registration under Section 4(2) of the Securities Act.

25. In April 1995, the Company issued 528,800 shares of Common Stock to
4 persons in exchange for an aggregate purchase price of $796,940. These
shares of Common Stock were sold in reliance upon exemption from registration
under Regulation S of the Securities Act.

26. In May 1995, the Company issued 417,112 shares of Common Stock to 3
persons in exchange for an aggregate purchase price of $542,246. In connection
with this issuance, the Company paid a broker's commission of $37,957. These
shares of Common Stock were sold in reliance upon exemption from registration
under Regulation S of the Securities Act.

27. In June 1995:

a. The Company issued 150,000 shares of Class A Preferred
Stock - First Series to 1 person in exchange for an aggregate purchase
price of $1,500,000. In connection with this issuance, the Company paid
a broker's commission of $105,000 and a finder's fee of $55,800. These
shares of Class A Preferred Stock were sold in reliance upon exemption
from registration under Regulation S of the Securities Act.

b. The Company issued an aggregate of 500,000 shares of Common
Stock to 2 persons upon exercise of warrants. The total warrant exercise
price was $805,000. These shares of Common Stock were sold in reliance
upon exemption from registration under Regulation S of the Securities Act.

28. In July 1995, the Company issued 250,000 shares of Common Stock to 1
person upon exercise of warrants. The total warrant exercise price was
$402,500. These shares of Common Stock were sold in reliance upon exemption
from registration under Regulation S of the Securities Act.

II-7
<PAGE> 101
ITEM 27. EXHIBITS.

<TABLE>
<S> <C>
3.1 Certificate of Incorporation of the Company, as amended.(15)
3.2 By-laws of the Company, as amended.(4)
4.1 Excerpt from Certificate of Incorporation of the Company, as amended,
as to rights of holders of Common Stock.(15)
4.2 Specimen Certificate for Common Stock.(15)
4.3 Specimen Certificate for Class C Warrants.(6)
4.4 Form of Warrant Agreement with American Stock Transfer & Trust
Company, as Warrant Agent for Class C Warrants.(5)
5.1* Opinion of Timothy P. MacDonald with respect to the validity of the
shares of Common Stock being offered.
10.1 Form of Proprietary Information and Invention Agreement executed by
certain employees of the Company.(1)
10.2 1989 Non-Qualified Stock Option Plan.(7)
10.3 1993 Stock Plan.(10)
10.4 1994 Non-Qualified Stock Option Plan.(15)
10.5 Patent and Technology License Agreement between the Company and the
Joss Company.(2)
10.6(a) Agreement and Certificate of Limited Partnership of A.S.C.
Development, Inc./Quadrax Corporation Limited Partnership as General
Partner with Quadrax Corporation as Limited Partner dated
June 28, 1988.(3)
10.6(b) Building Sub-Lease dated October 5, 1993 between the Company and
A.S.C. Development Inc./Quadrax Corporation, L.P. (a Rhode Island
limited partnership).(11)
10.6(c) Second Amendment to Limited Partnership Agreement and Certificate of
A.S.C. Development, Inc./Quadrax Corporation Limited Partnership as
General Partner with Quadrax Corporation as Limited Partner dated
October 7, 1993.(11)
10.7 Amendment to partnership agreement dated September 21, 1988 between
the Company and A.S.C. Development, Inc.(3)
10.8 Equipment Sales Agreement between the Company and Phillips Petroleum
Company dated September 9, 1992.(8)
10.9 License Agreement between the Company and Phillips Petroleum Company
dated September 8, 1992.(8)
10.10 Stock Purchase Warrant issued by the Company to Emanuel and Company
dated November 27, 1991 (similar warrant for 250,000 shares, dated
March 3, 1992, also issued to Emanuel and Company).(6)
10.11 Form of Class D Warrant issued in connection with the 1992 Private
Placement of 10% Unsecured Promissory Notes.(8)
10.12 Form of Class F Warrant issued in connection with the 1993 Private
Placement of stock and warrants.(8)
10.13 Stock Purchase Warrant issued by the Company to George Beyts and
Stock Purchase Warrant issued by the Company to Mohammed Manzur, each
dated December 1, 1994.(15)
10.14 Unit Price Option dated September 1, 1992, between the Company and
D.H. Blair Investment Banking Corporation.(9)
10.15 Consulting Agreement dated January 20, 1994, between the Company and
Liviakis Financial Communications, as amended as of May 13, 1994.(11)
10.16 Letter Agreement dated March 3, 1993 between the Company and First
Flushing Securities, Inc. to pay warrant solicitation fee upon
exercise of the Company's Class D, E and F Warrants.(11)
</TABLE>

[footnotes appear at end of table)]

II-8
<PAGE> 102
<TABLE>
<S> <C>
10.17 Release, Settlement and Severance Agreement dated July 5, 1994 among
the Company and its subsidiaries, Richard A Fisher and Andrew J.
MacGowan.(12)
10.18 Stock Purchase Agreement between the Company and Conagher & Co.,
Inc., dated July 8, 1994, and as amended November 15, 1994.(13)
10.19 Stock Purchase Agreement between the Company and Conagher & Co. Inc.,
dated August 26, 1994.(13)
10.20 Amendment Stock Purchase Agreement between the Company and Conagher
& Co. Inc., dated September 16, 1994.(13)
10.21 Severance Agreement between the Company and Richard A. Fisher dated
September 30, 1994.(13)
10.22 Key Employee Agreement dated October 13, 1994 between the Company and
Terry Lanning.(15)
10.23 Key Employee Agreement dated August 9, 1994 between the Company and
James J. Palermo.(15)
10.24 Key Employee Agreement dated September 26, 1994 between the Company
and David Park.(15)
10.25 Agreement for the Purchase and Sale of Common Stock dated
November 14, 1994 between the Selling Stockholders of McManis Sports
Associates, Inc. named therein and the Company.(14)
10.26 Asset Purchase Agreement dated November 17, 1994 between the Company
and Time Sports, Inc.(14)
10.27(a) Conversion Agreement, Settlement and Release dated September 15, 1994
by and among the Company, Kuo Yu Chiang and Hinckley, Allen & Snyder,
as escrow agent.(15)
10.27(b) Conversion Agreement, Settlement and Release dated September 15, 1994
by and among the Company, Li-Chiun Chiang and Hinckley, Allen &
Snyder, as escrow agent.(15)
10.27(c) Conversion Agreement dated September 15, 1994 by and among the
Company, Franklyn B. Neville and Hinckley, Allen & Snyder, as escrow
agent.(15)
10.27(d) Conversion Agreement and Release dated December 30, 1994 by and among
the Company, the holders of Original Preferred Stock named therein
and Hinckley, Allen & Snyder, as escrow agent (collated).(15)
10.28(a) Agreement for the Creation of a Voting Trust in Settlement of Claims
and Liabilities dated February 13, 1995 by and among Allied-Asian
Consolidated Limited, the Company, Conagher & Co., Inc., Pattinson
Hayton, III, Richard A. Fisher and James J. Palermo.(15)
10.28(b) Declaration of Trust "The Quadrax Preferred Stock Voting Trust" dated
February 13, 1995 by and among Allied-Asian Consolidated Limited and
James J. Palermo, for the benefit of the Holders of the Common Stock
of the Company.(15)
10.28(c) Letter Agreement dated March 17, 1995 among the Company, Allied-Asian
Consolidated Limited, Conagher & Co., Inc., Pattinson Hayton, III,
Richard A. Fisher and James J. Palermo.(15)
10.28(d) Promissory Note dated February 13, 1995, issued by the Company to
Richard A. Fisher.
10.28(e) Agreement dated as of July 13, 1995 among the Company, Richard A.
Fisher and James J. Palermo, as trustee.
21.1 List of Subsidiary Corporations.(15)
23.1 Consent of Timothy P. MacDonald (included in Exhibit 5.1).
23.2 Consent of Livingston & Haynes, P.C.
23.3 Consent of Ernst & Young LLP.
28.1 Licensing Opportunity Summary - Quadrax Biaxial Thermoplastic Prepreg
for Structural Applications, prepared, by Arthur D. Little, Inc.(5)
</TABLE>
_______________________
* To be filed by amendment.
(1) Incorporated by reference from the Company's Registration Statement on Form
S-1, File No. 33-14275, filed May 19, 1987.
(2) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-1, File No. 33-14275, filed July 1, 1987.
(3) Incorporated by reference from the Company's Form 10-K for the fiscal year
ended January 1, 1989.
(4) Incorporated by reference from the Company's Form 10-K for the fiscal year
ended December 31, 1989.
(5) Incorporated by reference from the Company's Registration Statement on Form
S-2, File No. 33-40089, filed April 19, 1991.

[Footnotes continued on following page]

II-9
<PAGE> 103
(6) Incorporated by reference from Amendment No. 2 to the Company's
Registration Statement on Form S-3, File No. 33-48998, filed June 24, 1991.
(7) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-3, File No. 33-48998, filed
August 31, 1992.
(8) Incorporated by reference from Amendment No. 3 to the Company's
Registration Statement on Form S-3, File No. 33-48998, filed
September 23, 1992.
(9) Incorporated by reference from the Company's Form 10-K for the fiscal year
ended January 3, 1993.
(10) Incorporated by reference from the Company's Registration Statement on Form
S-3, File No. 33-66348 filed October 8, 1993.
(11) Incorporated by reference from the Company's Form 10-K for the fiscal year
ended January 2, 1994.
(12) Incorporated by reference from the Company's Form 10-Q for the fiscal
quarter ended July 3, 1994.
(13) Incorporated by reference from the Company's Form 10-Q for the fiscal
quarter ended September 30, 1994.
(14) Incorporated by reference from the Company's Form 8-K dated as of November
14, 1994.
(15) Incorporated by reference from the Company's Form 10-KSB/A for the fiscal
year ended December 31, 1994.

ITEM 28. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the provisions contained in the Company's
Certificate of Incorporation and By-Laws and the laws of the State of Delaware,
or otherwise, the small business issuer 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. In the event that a claim
for indemnification against such liabilities (other than the payment by the
small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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
small business issuer 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.

The undersigned small business issuer hereby undertakes:

(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of
the Securities Act;

(ii) Reflect in the prospectus any facts or events arising
which, individually or together, represent a fundamental change in
the information in the registration statement; and

(iii) Include any additional or changed material information
on the plan of distribution;

(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering; and

(3) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.

II-10
<PAGE> 104
SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Portsmouth, Rhode Island, as of the twentieth
day of July, 1995.

QUADRAX CORPORATION

By: /s/ JAMES J. PALERMO
-------------------------------------------
James J. Palermo, Chairman of the Board and
Chief Executive Officer

POWER OF ATTORNEY

Know all men by these presents that each individual whose signature
appears below constitutes and appoints James J. Palermo and Carolyn Cote, and
each of them, his true and lawful attorneys-in-fact and agents with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing which they, or any of them, may deem necessary or advisable
to be done in connection with this Registration Statement, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or any
substitute or substitutes for any or all of them, may lawfully do or cause to
be done by virtue hereof.

In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated as of the twentieth day of July, 1995.

<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
/s/ JAMES J. PALERMO Chairman of the Board of Directors and Chief Executive Officer
- ----------------------------------- (Principal Executive Officer)
James J. Palermo

/s/ EDWARD A. STOLTENBERG Acting Chief Financial Officer
- ----------------------------------- (Principal Financial and Accounting Officer)
Edward A. Stoltenberg

/s/ WILLIAM G. CONWAY Director
- -----------------------------------
William G. Conway

/s/ SVEN KRAUMANIS Director
- -----------------------------------
Sven Kraumanis

/s/ GORDON WERNER Director
- -----------------------------------
Gordon Werner
</TABLE>

II-11
<PAGE> 105
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
<S> <C>
3.1 Certificate of Incorporation of the Company, as amended.(15)
3.2 By-laws of the Company, as amended.(4)
4.1 Excerpt from Certificate of Incorporation of the Company, as
amended, as to rights of holders of Common Stock.(15)
4.2 Specimen Certificate for Common Stock.(15)
4.3 Specimen Certificate for Class C Warrants.(6)
4.4 Form of Warrant Agreement with American Stock Transfer & Trust
Company, as Warrant Agent for Class C Warrants.(5)
5.1* Opinion of Timothy P. MacDonald with respect to the validity
of the securities being offered.
10.1 Form of Proprietary Information and Invention Agreement
executed by certain employees of the Company.(1)
10.2 1989 Non-Qualified Stock Option Plan.(7)
10.3 1993 Stock Plan.(10)
10.4 1994 Non-Qualified Stock Option Plan.(15)
10.5 Patent and Technology License Agreement between the Company
and the Joss Company.(2)
10.6(a) Agreement and Certificate of Limited Partnership of A.S.C.
Development, Inc./Quadrax Corporation Limited Partnership as
General Partner with Quadrax Corporation as Limited Partner
dated June 28, 1988.(3)
10.6(b) Building Sub-Lease dated October 5, 1993 between the Company
and A.S.C. Development Inc./Quadrax Corporation, L.P. (a Rhode
Island limited partnership).(11)
10.6(c) Second Amendment to Limited Partnership Agreement and
Certificate of A.S.C. Development, Inc./Quadrax Corporation
Limited Partnership as General Partner with Quadrax
Corporation as Limited Partner dated October 7, 1993.(11)
10.7 Amendment to partnership agreement dated September 21, 1988
between the Company and A.S.C. Development, Inc.(3)
10.8 Equipment Sales Agreement between the Company and Phillips
Petroleum Company dated September 9, 1992.(8)
10.9 License Agreement between the Company and Phillips Petroleum
Company dated September 8, 1992.(8)
10.10 Stock Purchase Warrant issued by the Company to Emanuel and
Company dated November 27, 1991 (similar warrant for 250,000
shares, dated March 3, 1992, also issued to Emanuel and
Company).(6)
10.11 Form of Class D Warrant issued in connection with the 1992
Private Placement of 10% Unsecured Promissory Notes.(8)
10.12 Form of Class F Warrant issued in connection with the 1993
Private Placement of stock and warrants.(8)
10.13 Stock Purchase Warrant issued by the Company to George Beyts
and Stock Purchase Warrant issued by the Company to Mohammed
Manzur, each dated December 1, 1994.(15)
10.14 Unit Price Option dated September 1, 1992, between the Company
and D.H. Blair Investment Banking Corporation.(9)
10.15 Consulting Agreement dated January 20, 1994, between the
Company and Liviakis Financial Communications, as amended as
of May 13, 1994.(11)
10.16 Letter Agreement dated March 3, 1993 between the Company and
First Flushing Securities, Inc. to pay warrant solicitation
fee upon exercise of the Company's Class D, E and F
Warrants.(11)
10.17 Release, Settlement and Severance Agreement dated July 5, 1994
among the Company and its subsidiaries, Richard A Fisher and
Andrew J. MacGowan.(12)
10.18 Stock Purchase Agreement between the Company and Conagher &
Co., Inc., dated July 8, 1994, and as amended November 15,
1994.(13)
</TABLE>

[Footnotes appear at end of Index]
<PAGE> 106
<TABLE>
<S> <C>
10.19 Stock Purchase Agreement between the Company and Conagher &
Co. Inc., dated August 26, 1994.(13)
10.20 Amendment Stock Purchase Agreement between the Company and
Conagher & Co. Inc., dated September 16, 1994.(13)
10.21 Severance Agreement between the Company and Richard A. Fisher
dated September 30, 1994.(13)
10.22 Key Employee Agreement dated October 13, 1994 between the
Company and Terry Lanning.(15)
10.23 Key Employee Agreement dated August 9, 1994 between the
Company and James J. Palermo.(15)
10.24 Key Employee Agreement dated September 26, 1994 between the
Company and David Park.(15)
10.25 Agreement for the Purchase and Sale of Common Stock dated
November 14, 1994 between the Selling Stockholders of McManis
Sports Associates, Inc. named therein and the Company.(14)
10.26 Asset Purchase Agreement dated November 17, 1994 between the
Company and Time Sports, Inc.(14)
10.27(a) Conversion Agreement, Settlement and Release dated September
15, 1994 by and among the Company, Kuo Yu Chiang and Hinckley,
Allen & Snyder, as escrow agent.(15)
10.27(b) Conversion Agreement, Settlement and Release dated September
15, 1994 by and among the Company, Li-Chiun Chiang and
Hinckley, Allen & Snyder, as escrow agent.(15)
10.27(c) Conversion Agreement dated September 15, 1994 by and among the
Company, Franklyn B. Neville and Hinckley, Allen & Snyder, as
escrow agent.(15)
10.27(d) Conversion Agreement and Release dated December 30, 1994 by
and among the Company, the holders of Original Preferred Stock
named therein and Hinckley, Allen & Snyder, as escrow agent
(collated).(15)
10.28(a) Agreement for the Creation of a Voting Trust in Settlement of
Claims and Liabilities dated February 13, 1995 by and among
Allied-Asian Consolidated Limited, the Company, Conagher &
Co., Inc., Pattinson Hayton, III, Richard A. Fisher and James
J. Palermo.(15)
10.28(b) Declaration of Trust "The Quadrax Preferred Stock Voting
Trust" dated February 13, 1995 by and among Allied-Asian
Consolidated Limited and James J. Palermo, for the benefit of
the Holders of the Common Stock of the Company.(15)
10.28(c) Letter Agreement dated March 17, 1995 among the Company,
Allied-Asian Consolidated Limited, Conagher & Co., Inc.,
Pattinson Hayton, III, Richard A. Fisher and James J.
Palermo.(15)
10.28(d) Promissory Note dated February 13, 1995, issued by the Company
to Richard A. Fisher.
10.28(e) Agreement dated as of July 13, 1995 among the Company, Richard
A. Fisher and James J. Palermo, as trustee.
21.1 List of Subsidiary Corporations.(15)
23.1 Consent of Timothy P. MacDonald (included in Exhibit 5.1).
23.2 Consent of Livingston & Haynes, P.C.
23.3 Consent of Ernst & Young LLP.
28.1 Licensing Opportunity Summary - Quadrax Biaxial Thermoplastic
Prepreg for Structural Applications, prepared, by Arthur D.
Little, Inc.(5)
</TABLE>
_______________________
* To be filed by amendment.
(1) Incorporated by reference from the Company's Registration Statement on Form
S-1, File No. 33-14275, filed May 19, 1987.
(2) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-1, File No. 33-14275, filed July 1, 1987.
(3) Incorporated by reference from the Company's Form 10-K for the fiscal year
ended January 1, 1989.
(4) Incorporated by reference from the Company's Form 10-K for the fiscal year
ended December 31, 1989.
(5) Incorporated by reference from the Company's Registration Statement on Form
S-2, File No. 33-40089, filed April 19, 1991.
(6) Incorporated by reference from Amendment No. 2 to the Company's
Registration Statement on Form S-3, File No. 33-48998, filed June 24, 1991.

[Footnotes continued on following page]
<PAGE> 107
(7) Incorporated by reference from Amendment No. 1 to the Company's
Registration Statement on Form S-3, File No. 33-48998, filed August 31,
1992.
(8) Incorporated by reference from Amendment No. 3 to the Company's
Registration Statement on Form S-3, File No. 33-48998, filed September 23,
1992.
(9) Incorporated by reference from the Company's Form 10-K for the fiscal year
ended January 3, 1993.
(10) Incorporated by reference from the Company's Registration Statement on Form
S-3, File No. 33-66348 filed October 8, 1993.
(11) Incorporated by reference from the Company's Form 10-K for the fiscal year
ended January 2, 1994.
(12) Incorporated by reference from the Company's Form 10-Q for the fiscal
quarter ended July 3, 1994.
(13) Incorporated by reference from the Company's Form 10-Q for the fiscal
quarter ended September 30, 1994.
(14) Incorporated by reference from the Company's Form 8-K dated as of November
14, 1994.
(15) Incorporated by reference from the Company's Form 10-KSB/A for the fiscal
year ended December 31, 1994.

<PAGE> 1
EXHIBIT 10.28(d)
PROMISSORY NOTE

$750,000 February 13, 1995

FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to the
order of Richard A. Fisher ("Payee"), in installments hereinafter specified, at
Payee's address, 102-B Washington Street, Newport, Rhode Island 02840 or such
other address as Payee may specify by written notice to Maker, the principal sum
of Seven Hundred Fifty Thousand Dollars ($750,000).

Subject to the limitations set forth herein regarding Maker's available
working capital, the principal amount outstanding shall be payable in 10 equal
monthly installments of $75,000 each on April 7, 1995, May 7, 1995, June 7,
1995, July 7, 1995, August 7, 1995, September 7, 1995, October 7, 1995, November
7, 1995, December 7, 1995 and January 7, 1996.

Interest on unpaid principal and interest shall be payable monthly in
arrears at the rate of 8 percent per annum.

Notwithstanding the foregoing but subject to the limitations set forth
herein regarding Maker's available working capital, upon the sale by Maker of
any of its equity securities or securities convertible into equity securities
(other than an equity placement with respect to which Maker had issued its
securities before February 3, 1995), which sale yields $500,000 or more of net
proceeds, 10 percent of such proceeds of such sale shall be applied to payment
of the principal amount outstanding hereunder such payment to be credited
against the installment or installments of principal due on the latest
installment date or dates in 1995. By way of illustration, if the Company
received $750,000 of net proceeds from the sale of any of its equity securities
on May 6, 1995, $75,000 of the principal balance hereunder would be payable,
such payment to be credited $50,000 against the installment due on January 7,
1996 and $25,000 against the installment due on December 7, 1995, and the May 7
payment would remain due on May 7. Equity placements by Maker of less than
$500,000 shall be aggregated such that, when the total equity placed at any time
equals or exceeds $500,000, the payment s provided in this paragraph shall be
due.

If on any installment date other than April 7, 1995, Maker has
available working capital of less than $500,000, the installment of principal
then due under this Note shall be deferred, with interest, until such time as
Maker has available working capital in excess of $500,000, and then shall be
paid to the extent of such excess. By way of illustration, if on both May 7,
1995 and June 7, 1995 Maker's available working capital was less than $500,000
but on June 15, 1995 Maker's available working capital was $635,000, on June 15,
1995 Maker would remit $75,000 to Payee with respect to the May 7, 1995
installment and $60,000 to Payee with respect to the June 7, 1995 installment.
Maker would then owe Payee a payment of up to $15,000 with respect to the
installment which, but for the application of this paragraph, would have been
due on June 7, 1995 if at any time before the next installment date Maker's
working capital exceed $500,000. For purposes of this Note, working capital
means (i) cash on hand plus accounts receivable minus (ii) accounts payable
within 30 days and accrued expenses payable within 30 days. Payee shall at all
times have the right to review Maker's books, ledgers and work papers to verify
the amount of Maker's available working capital.

<PAGE> 2

If Maker fails to make two successive payments under this Note, whether
or not Maker is thereby in default, Payee may, at his option, notify Maker in
writing that it wishes to be issued shares of Maker's common stock, par value
$.000009 per share ("Common Stock") in partial or complete discharge of Maker's
obligations under this Note. Notwithstanding the foregoing, Maker shall not be
required to issue to Payee less than 75,000 shares of Common Stock unless the
entire unpaid principal balance of the Note is less than the product of 75,000
and the closing bid price of the Common Stock on the date Payee so notifies
Maker. In the event of such election, the principal balance of the Note shall
be reduced by the sum of (i) the net proceeds received by Payee from the sale of
the shares of Common Stock issued to Payee under this paragraph, provided such
sales occur within 60 days of the receipt of such shares of Common Stock by
Payee, and (ii) the product of (a) the number of shares of Common Stock
remaining unsold after 60 days and (b) the closing bid price of the Common Stock
on the date the shares of Common Stock were issued to Payee (the "Deemed
Proceeds"). Payee shall provide Maker with copies of all broker confirmations.
Payee shall remit to Maker the amount, if any, by which the sum of the Proceeds
actually received by Payee and the Deemed Proceeds exceeds the total outstanding
principal balance, plus accrued interest, under this Note.

By way of illustration, if Payee notified Maker that it wished to be
issued 100,000 shares of Common Stock under the preceding paragraph, and on the
date of such notice the closing bid price of the Common Stock was $3.00 per
share, and Payee sold 75,000 shares of Common Stock at net $2.75 per share
within 60 days of the receipt of such shares, then the principal balance of this
Note would be reduced by $281,250. If the closing bid price had been $3.50 per
share, the principal balance of this Note would be reduced by $293,750. If the
total remaining balance plus accrued interest under this Note was $280,000 on
the sixtieth day of issue, Payee would remit $13,750 to Maker.

Maker may, at its sole option, make additional payments at any time
without premium or penalty.

This Note is related to a Voting Trust dated February 13, 1995 between
Allied Asian Consolidated Limited and James J. Palermo, trustee, a copy of which
is attached hereto, which provides that if this Note shall be in default, the
Trustee shall vote the shares of Original Preferred Stock which are held therein
in accordance with the instructions of Payee.

If payment hereunder shall not be made by Maker on or before its due
date, Maker may, at any time thereafter prior to a declaration by Payee that the
entire principal balance has become due by reason of such default, remove such
default by paying to Payee all sums then due and payable.

Upon occurrence of any of the following events of default:

1. Default in any payment hereunder for a period of ten (10) days
after the same becomes due and payable; or

2. The liquidation or dissolution of Maker, the appointment of a
receiver for substantially all the property of Maker, the making of a general
assignment for the benefit of creditors by Maker,

<PAGE> 3

or the filing of a petition seeking relief as an insolvent debtor under any
bankruptcy, receivership, insolvency or other debtor relief law (including
relief by way of reorganization, composition or extension of the indebtedness)
by Maker; or

3. There shall be filed against Maker a petition under any bankruptcy,
receivership, insolvency or other debtor relief law, which petition shall remain
undismissed for a period of sixty (60) days; or

4. A judgment or attachment against Maker in excess of $100,000 that
is not paid or discharged with 60 days; or

5. An admission by Maker that it is unable to pay its debts as they
mature

this Note shall, at the option of Payee, become immediately due and payable
without further presentment, demand or protest exercised by written notice from
Payee to Maker, all of which are hereby expressly waived by Maker. Failure to
exercise said option shall not constitute a waiver of the right to exercise the
same at any other time for the same or any other cause.

Maker waives presentment, demand, notice and protest and all defenses
based on giving time and expressly agrees that no renewal or extension granted,
nor any other indulgence shown nor any release or discharge of or any dealings
between Payee and Maker, shall discharge, extend or in any way affect the
obligations of Maker.

If this Note shall not be paid when due and shall be placed by Payee in
the hands of an attorney for collection through legal proceedings or otherwise,
or Payee shall exercise any of his rights hereunder, Maker will pay on demand
reasonably attorneys fees of Payee together with the reasonable costs and
expenses of collection.

This Note shall be governed by and construed in accordance with the
laws of the State of Rhode Island, without regard to its conflict of laws rules.

Secretary QUADRAX CORPORATION

/s/ Carolyn Cote By: /s/ James J. Palermo
-------------------- -------------------------------
James J. Palermo
Title: Chief Executive Officer

[SEAL]

Attachment
Voting Trust

<PAGE> 1

AGREEMENT

THIS AGREEMENT is entered into as of July 13, 1995 among Quadrax
Corporation, a Delaware corporation ("Quadrax"), Richard A. Fisher, an
individual domiciled in Rhode Island ("Fisher"), and, with respect to Section 4
hereof, James J. Palermo, as trustee under the Declaration of Trust "The Quadrax
Preferred Stock Voting Trust" (the "Trustee").

WHEREAS, Quadrax, Fisher, Allied-Asian Consolidated Limited, Conagher &
Co., Inc., Pattinson Hayton, III, and the Trustee have entered into an Agreement
for the Creation of a Voting Trust in Settlement of Claims and Liabilities dated
as of February 13, 1995 (the "Settlement Agreement"), pursuant to which, among
other things, Allied transferred to the Trustee record ownership of 317.99
shares (the "Control Block") of original preferred stock, par value $.01 per
share, of Quadrax;

WHEREAS, Quadrax and Fisher wish to terminate as of the date hereof
certain continuing interests of Fisher in the Control Block, as set forth
herein;

WHEREAS, in accordance with Section 3.2(a) of the Settlement Agreement,
Quadrax has issued to Fisher a promissory note dated February 13, 1995 (the
"Promissory Note"), which initially had a principal amount of $750,000.00 and
which, as of the date hereof, has an outstanding principal amount of
$450,000.00; and

WHEREAS, Quadrax and Fisher wish to provide for the payment of the
Promissory Note through the issuance by Quadrax to Fisher of shares of Quadrax's
common stock, par value $.000009 per share ("Common Stock"), and, in connection
therewith, to provide for the registration of such shares under the registration
statement of Quadrax on Form SB-2 to be filed with the Securities and Exchange
Commission in July 1995 (the "Registration Statement"), all as set forth herein;

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1. Amendment of Promissory Note.

(a) Payment of the principal of and accrued interest on the
Promissory Note shall hereafter be effected solely as provided in this
Agreement. Without limiting the foregoing, the provisions of the second,
third, fourth, fifth, sixth and seventh paragraphs of the Promissory
Note shall be of no further force or effect after the date hereof.

(b) Interest on the outstanding principal of, and on unpaid
interest on, the Promissory Note shall accrue at the rate of eight percent
per annum up to, but not including, the date on which the Registration
Statement shall initially be declared effective by the Securities and
Exchange Commission (the "Effective Date"). No interest on the Promissory
Note shall accrue with respect to the Effective Date or any date
thereafter.

(c) In the event that the Effective Date has not occurred by any
date listed below, Quadrax shall pay to Fisher in cash on such date the
indicated amount of outstanding principal

<PAGE> 2

of the Promissory Note, together with accrued and unpaid interest on the
Promissory Note as of such date:
<TABLE>
<CAPTION>

<S> <C>
September 7, 1995 $75,000
October 7, 1995 $75,000
November 7, 1995 $75,000
December 7, 1995 $75,000
January 7, 1996 $150,000
</TABLE>

(d) In the event that the Effective Date occurs prior to January 7,
1996, then, subject to the provisions of Section 3 hereof, all principal
of and accrued interest on the Promissory Note shall be deemed to have
been paid upon the issuance by Quadrax to Fisher of a stock certificate
representing shares of Common Stock (the "Shares") in a number equal to
(i) the outstanding principal amount of the Promissory Note as of the
Effective Date, plus the amount of interest accrued and unpaid on the
Promissory Note as of the Effective Date (computed as provided in clause
1(b) above) (the "Converted Amount"), divided by (ii) the average of the
last closing bid prices of the Common Stock on the second through eleventh
business days, inclusive, preceding the Effective Date, as such prices are
reported in The Wall Street Journal. Delivery of such stock certificate
shall be made upon presentation and surrender of the Promissory Note by
Fisher to Quadrax on or after the Effective Date.

2. Sale of Shares by Fisher. All of the Shares shall be included in
the Common Stock registered under the Registration Statement. Quadrax agrees
that it will use its reasonable efforts to keep the Registration Statement
effective for an aggregate of 150 calendar days after the Effective Date, it
being understood that Fisher may be required to discontinue disposition of
Shares at any time or from time to time to the extent (a) necessary or
desirable, in the judgment of Quadrax and its outside securities counsel, for
Quadrax to comply with the Securities Act of 1933, as amended, and the rules
and regulations of the Securities and Exchange Commission thereunder or (b) in
the good faith judgment of Quadrax, it would be significantly disadvantageous
for Quadrax to keep the Registration Statement in effect at such time. Fisher
shall sell the Shares pursuant to the Registration Statement at any time or
from time to time as determined in his discretion, provided that if the
Registration Statement is in effect for at least an aggregate of 150 days, then
all of the Shares shall be sold pursuant to the Registration Statement during
such 150-calendar day period.

3. Adjustments. If the total amount of proceeds received by Fisher
from the sale of all of the Shares (net of any commissions and fees of brokers
and dealers incurred by Fisher in connection with the sale of the Shares) is
less than the Converted Amount, then Quadrax shall remit the difference to
Fisher in cash. Alternatively, if the total amount of proceeds received by
Fisher from the sale of all of the Shares (net of any commissions and fees of
brokers and dealers incurred by Fisher in connection with the sale of the
Shares) is greater than the Converted Amount, then Fisher shall remit the
difference to Quadrax in cash. Fisher shall provide Quadrax with copies of the
broker or dealer confirmation with respect to each sale of Shares (or other
documents sufficient, in the reasonable judgment of Quadrax, to confirm the
sales price and broker's or dealer's commission, fee or discount with respect
thereto) within five business days after the settlement date of such sale. Any
adjustment payment to be remitted pursuant to this Section 3 shall be paid
within fifteen business days after the settlement date for the final sale of
Shares.

4. Relinquishment of Rights in Control Block. Effective as of the date
hereof, the provisions of the second paragraph of Section 5 of the Declaration
of Trust "The Quadrax Preferred Stock

2
<PAGE> 3

Voting Trust" and the provisions of the ninth paragraph of the Promissory Note
shall no longer be of any force or effect.

5. General. Each party shall, at any time and from time to time,
execute, acknowledge, sell and deliver all such instruments and documents, and
do all such further things, as the other party may reasonably request in order
to effect the purposes and intent of this Agreement. This Agreement constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreement and understandings, whether
written or oral, in connection with the subject matter hereof. This Agreement
may be executed in counterparts, which, taken together, shall constitute one and
the same agreement. This Agreement shall be governed by the laws of Rhode
Island

IN WITNESS WHEREOF, Quadrax, Fisher and the Trustee have executed, or
caused to be executed, this instrument under seal as of the date first set forth
above.

QUADRAX CORPORATION

By: /s/ James J. Palermo,
-------------------------------
James J. Palermo,
Chairman of the Board and Chief
Executive Officer

/s/ Richard A. Fisher
----------------------------------
RICHARD A. FISHER

Consented and Agreed to:

/s/ James J. Palermo,
- ------------------------------------------
JAMES J. PALERMO, as trustee
under the Declaration of Trust
"The Quadrax Preferred Stock Voting Trust"

<PAGE> 1
Exhibit 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Regisration Statement of Quadrax Corporation on
Form SB-2 for the registration of 1,290,858 shares of its common stock of
our report dated April 6, 1995, (which contained an explanatory paragraph with
respect to the ability to continue as a going concern) appearing in the
Prospectus, which is part of such Registration Statement, and to the reference
to us under the captions "Experts" and "Selected Consolidated Financial Data"
in such prospectus.

/s/ Livingston & Haynes, P.C.

Wellesley Hills, Massachusetts
July 20, 1995

<PAGE> 1

EXHIBIT 23.3

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference of our firm under the caption "Experts" and
"Selected Financial Data" and to the use of our report dated February 25, 1994,
in the Registration Statement (Form SB-2) and related Prospectus of Quadrax
Corporation for the registration of 1,290,858 shares of its common stock.

/s/ ERNST & YOUNG LLP

Providence, Rhode Island
July 20, 1995