<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period ended June 30, 1995
/ / Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 For the transition period from
---------------
to .
-----------------------
Commission File Number: 0-16052
QUADRAX CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 05-0420158
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
300 HIGH POINT AVENUE 02871
PORTSMOUTH, RHODE ISLAND (Zip Code)
(Address of principal executive offices)
(401) 683-6600
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
------ -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT AUGUST 8, 1995
--------------- -----------------------------
<S> <C>
Common Stock, par value 16,350,243 shares
$.000009 per share
</TABLE>
<PAGE> 2
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FORM 10-Q
<TABLE>
PART I - FINANCIAL INFORMATION PAGE
<S> <C>
Item 1 -- Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at
June 30, 1995 and at December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Operations
for the three and six months ended June 30, 1995 and
July 3, 1994 and the period from March 6, 1986
(date of incorporation) to June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows
for the three and six months ended June 30, 1995 and
July 3, 1994 and the period from March 6, 1986
(date of incorporation) to June 30, 1995 . . . . . . . . . . . . . . . . . . . . . 6-7
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . 8-10
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . 11-13
PART II - OTHER INFORMATION
Item 1 -- Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6 -- Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
<PAGE> 3
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, 1995 DECEMBER 31, 1994
------------------- -----------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,367,857 $ 382,721
Accounts receivable 925,195 224,180
Inventories:
Raw materials 401,273 1,059,213
Work in process 663,153 212,573
------------------- -----------------------
1,064,426 1,271,786
Other current assets 216,405 81,756
------------------- -----------------------
TOTAL CURRENT ASSETS 4,573,883 1,960,443
------------------- -----------------------
Property and equipment, at cost:
Machinery and equipment 4,497,850 3,875,955
Office equipment 739,382 689,944
Leasehold improvements 1,037,157 1,035,513
------------------- -----------------------
6,274,389 5,601,412
Less accumulated depreciation and amortization 3,230,625 2,984,104
------------------- -----------------------
NET PROPERTY AND EQUIPMENT 3,043,764 2,617,308
------------------- -----------------------
Receivables from officers and employees 54,728 54,728
Non-competition agreement 573,750 641,250
Goodwill 685,504 709,142
Other assets 367,855 507,855
License agreement 600,000 600,000
Patents, net of amortization 165,507 169,437
------------------- -----------------------
TOTAL ASSETS $ 10,064,991 $ 7,260,163
=================== =======================
</TABLE>
See accompanying notes.
<PAGE> 4
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
JUNE 30, 1995 DECEMBER 31, 1994
----------------- ----------------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,117,836 $ 1,166,178
Accrued expenses 761,247 1,547,986
Notes payable to related party 660,000 135,000
Notes payable 250,000 310,000
----------------- ----------------------
TOTAL CURRENT LIABILITIES 2,789,083 3,159,164
Note payable to related party 540,000 540,000
----------------- ----------------------
TOTAL LIABILITIES 3,329,083 3,699,164
Stockholders' equity:
Original convertible preferred stock 7 7
Class A convertible preferred stock 1,339,200 0
Common stock 131 92
Additional paid-in capital 54,270,816 48,356,319
Deficit accumulated during development stage (47,008,195) (44,090,478)
----------------- ----------------------
8,601,959 4,265,940
Less:
Treasury stock, at cost: (993,009) (243,009)
Unearned compensation and deferred expenses (197,601) (123,932)
Note receivable for options (675,441) (338,000)
----------------- ----------------------
TOTAL STOCKHOLDERS' EQUITY 6,735,908 3,560,999
----------------- ----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,064,991 $ 7,260,163
================= ======================
</TABLE>
See accompanying notes.
<PAGE> 5
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
Three Three March 6,1986
months months Six months Six months (Date of
Ended Ended Ended Ended incorporation)
June 30, July 3, 1994 June 30, July 3, 1994 to June 30,
1995 1995 1995
------------- --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue:
Product sales $1,234,786 $ 132,289 $2,309,429 $ 206,336 $7,635,231
Interest income 0 208 8,995 2,215 1,400,357
Other income 0 0 0 0 68,408
------------- --------------- -------------- --------------- --------------
TOTAL REVENUE 1,234,786 132,497 2,318,424 208,551 9,103,996
------------- --------------- -------------- --------------- --------------
Expenses:
Cost of goods sold 1,043,208 14,246 1,757,628 41,258 3,657,268
Research and development (24,833) 289,132 211,240 688,441 13,637,058
Selling, general and administrative 1,422,334 771,001 2,833,940 1,443,647 22,017,256
Depreciation and amortization 220,245 140,748 423,917 336,575 7,312,066
Interest expense 5,025 28,611 9,415 32,850 459,554
Loss on investment 0 0 0 0 165,350
Non-recurring financing related 0 0 0 1,449,851 5,568,733
expenses
------------- --------------- -------------- --------------- --------------
TOTAL EXPENSES 2,665,979 1,243,738 5,236,140 3,992,622 52,817,285
------------- --------------- -------------- --------------- --------------
NET LOSS FROM CONTINUING OPERATIONS (1,431,193) (1,111,241) (2,917,716) (3,784,071) (43,713,289)
Discontinued operations:
Net loss from discontinued operations 0 0 0 0 (2,509,968)
Loss on disposal of laser segment 0 0 0 0 (579,848)
------------- --------------- -------------- --------------- --------------
NET LOSS $(1,431,193) $(1,111,241) $(2,917,716) $(3,784,071) $(46,803,105)
============= =============== ============== =============== ==============
NET LOSS PER COMMON SHARE * $ (0.11) $ (0.32) $ (0.25) $ (1.05)
============= =============== ============== ===============
WEIGHTED AVERAGE COMMON SHARES (13,008,872) 3,674,068 11,900,316 3,661,963
OUTSTANDING
============= =============== ============== ===============
</TABLE>
See accompanying notes.
* Gives effect for all periods to a 1-for-10 reverse split effective July
20, 1994.
<PAGE> 6
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
March 6, 1986
Six Months Six Months (date of
Ended Ended incorporation)
June 30, 1995 July 3, 1994 to June 30, 1995
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,917,716) $(3,784,071) $(46,803,105)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation & amortization of fixed assets 246,521 318,057 3,942,983
Amortization of intangibles 95,065 3,741 771,341
Amortization of unearned compensation 0 (7,473) 1,702,774
Amortization of deferred expense 82,331 22,250 634,156
Amortization of deferred debt expense 0 0 573,526
Common stock issued for expenses 258,274 1,287,225 2,572,163
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 66,495 286,245
Provision for loss contract 0 (145,000) 0
Effect on cash flows of changes in assets and
liabilities:
Accounts receivable and other (701,015) 65,060 (971,379)
Inventories 207,361 (48,131) (727,676)
Prepaid expenses and other assets (134,649) 18,947 (171,993)
Receivables/payables from related parties (225,000) 0 (185,343)
Accounts payable (48,342) 428,041 1,040,025
Accrued expenses (786,739) 30,038 716,247
Non-current liabilities 0 90,000 0
------------------ --------------- ---------------
Net cash used in operating activities (3,923,909) (1,654,821) (33,628,356)
------------------ --------------- ---------------
Cash flows from investing activities:
Notes receivable - officers and employees 0 0 (90,783)
Investments 0 11,550 148,100
Capital expenditures, net (672,977) (255,685) (7,083,913)
Other intangible assets 0 (15,182) (874,492)
Payments for businesses acquired net of cash 140,000 0 (260,029)
acquired
------------------ --------------- ---------------
Net cash provided by (used in) investing
activities (532,977) (259,317) (8,161,117)
------------------ --------------- ---------------
Cash flows from financing activities:
Proceeds from exercise of common stock warrants, 0 2,400 13,550,571
net
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 1,339,200 0 1,339,212
Net proceeds from initial public offering 0 0 4,740,022
Net proceeds from sale of stock and warrants 5,137,522 0 14,949,356
Issuance of debt 0 1,250,000 8,521,653
Repayment of debt (60,000) 0 (1,609,031)
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 6,442,022 1,252,400 44,157,330
------------------ --------------- ---------------
Net increase (decrease) in cash and cash equivalents 1,985,136 (661,738) $2,367,857
===============
Cash and cash equivalents at beginning of period 382,721 668,781
------------------ ---------------
Cash and cash equivalents at end of period $2,367,857 $ 7,043
================== ===============
</TABLE>
See accompanying notes.
<PAGE> 7
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
(UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE SIX MONTHS ENDED
JUNE 30, 1995 AND JULY 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.
<PAGE> 8
QUADRAX CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 June 30, 1995 and the results of operations for the six
and three months ended June 30, 1995 and July 3, 1994. The results of
operations for the six and three month periods ended June 30, 1995 may
not be indicative of the results that may be expected for the year
ending December 31, 1995. It is suggested that these Condensed
Consolidated Financial Statements be read in conjunction with the
Consolidated Financial Statements and the notes thereto included in
the Company's latest annual report to the Securities and Exchange
Commission on Form 10-KSB, as amended, for the year ended December 31,
1994.
The Company converted its fiscal year, effective December 31, 1994,
from a 52-53 week period ending on the Sunday closest to December 31
to a calendar year ending December 31. By accounting for its
activities on a 52-53 week period in prior years, its fiscal year end
and the fiscal quarters did not necessarily fall on the respective
month-ends for each fiscal quarter. All references to years in these
notes to consolidated financial statements represent fiscal years
unless otherwise noted.
2. Notes Payable
The Company's note payable is a non-interest bearing note for $250,000
due regarding the acquisition of certain assets and liabilities of
Time Sports, Inc., dba the Wimbledon division.
3. Shareholders Equity
The Company's capital shares are as follows:
Original Convertible Preferred Stock, $.01 par value, 1,172 shares
authorized at June 30, 1995 and December 31, 1994, 318 and 516 shares
issued and outstanding at June 30, 1995 and December 31, 1994,
respectively. During the six months ended June 30, 1995, 198 shares
of the Original Convertible Preferred Stock were converted to 75,268
shares of Common Stock.
Class A Convertible Preferred Stock, First Series, $10.00 par value,
300,000 shares and -0- shares authorized at June 30, 1995 and December
31, 1994, respectively, and 150,000 shares issued and outstanding at
June 30, 1995. Subsequent to June 30, 1995, these shares were
converted into 1,320,634 shares of common stock.
Common Stock, $.000009 par value, 90,000,000 shares authorized at June
30, 1995 and December 31, 1994, 14,610,790 and 10,249,066 shares
issued at June 30, 1995 and December 31, 1994, respectively and
14,289,985 and 9,928,261 shares outstanding at June 30, 1995 and
December 31, 1994, respectively.
<PAGE> 9
On July 20, 1994, the Company amended its Certificate of Incorporation
to provide for a 1 - for - 10 reverse stock split, effective July 20,
1994. All 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.
4. Changes in Control
On February 13, 1995, the Company entered into an agreement with
Pattinson Hayton, III, the Company's former Chairman, and two of his
affiliated companies, Conagher & Co., Inc., a California corporation,
Allied-Asian Consolidated Limited, a Hong Kong corporation, Richard A.
Fisher, who preceded Mr. Hayton as the Company's Chairman of the
Board, and who was also the Company's former Chief Executive 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 for
the fiscal year 1994 (See Changes in Control and Related Transactions
and Note 10 to the Consolidated Financial Statements -- Changes in
Control).
5. Related Party Transactions
During the six months ended June 30, 1995, the Company's former Chief
Executive Officer, Richard A. Fisher, exercised options covering
216,326 shares of the Company's common stock delivering notes
therefore aggregating $337,441. These notes are payable with interest
in five equal annual installments. 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. These shares were
transferred in trust for the benefit of the common stockholders. The
note is payable in monthly installments of $75,000 plus interest, over
a 10 month period commencing April 1995, provided that payments are
not due if the Company does not have working capital of at least
$500,000, and provided further that additional payments are due if the
Company receives certain levels of additional equity financing. For
the period ending June 30, 1995, the Company had paid $225,000 under
this agreement. Subsequent to June 30, 1995, after paying an
additional $75,000 to the former chief executive officer pursuant to
this agreement, the Company agreed to amend this agreement as follows:
1) The Company would issue 300,000 shares of new common stock to
the former chief executive officer upon the effective date of
a registration statement which was filed with the Securities
and Exchange Commission in July 1995.
2) The former chief executive officer suspended further payments
from the Company on its notes payable of $450,000 due to
related parties until such time as the registration statement
becomes effective and the shares described in (1), above, can
be sold. In addition, the lien placed on the original
preferred stock was released, and the former chief executive
surrendered his right to retake control of the board of
directors in the event of the Company's delinquency in
repaying the note.
3) All shares issued in conversion of the notes payable are to be
sold within a period of 150 days after the registration
statement becomes effective. If the net proceeds realized on
the sale of the common stock to be issued to the former
<PAGE> 10
chief executive officer are less in total than $450,000, the
Company agreed to pay any deficiency in cash. Conversely, if
the net proceeds realized exceed $450,000, the excess will be
rebated to the Company.
Also during the period ended June 30, 1995, the Company's former Chief
Executive Officer, Richard A. Fisher's consulting agreement dated
September 30, 1994 was amended to reflect an increase in consulting
fees of $12,500 per month and to issue him an additional 100,000 shares
of common stock, in recognition of the substantial additional efforts
expended and to be expended by Mr. Fisher on the Company's business.
6. Earnings Per Share
For the fiscal periods ending June 30, 1995 and July 3, 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.
<PAGE> 11
ITEM II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations for Quarter Ended June 30, 1995
As compared to Quarter Ended July 3, 1994
The Company is a development stage company. The Company's net loss from
operations for the quarter ended June 30, 1995 ("1995 second quarter") of
approximately $1,416,000 was $304,000 more than its net loss from operations of
$1,111,000 for the quarter ended July 3, 1994 ("1994 second quarter"). This
increase was primarily the result of additional selling, general and
administrative costs incurred with the acquisition of the Wimbledon and McManis
sporting goods divisions acquired in November, 1994.
Total revenue recognized during the 1995 second quarter was $1,235,000
compared to $132,000 in the 1994 second quarter. This increase of $1,103,000
or 836 percent from the 1994 second quarter results from the Company shipping
product to its defense related customers in the approximate amount of
$1,009,000. Additionally, $147,000 of Wimbledon related products were sold in
the 1995 second quarter .
Costs of goods sold for the second quarter of 1995 of $1,043,000 reflect
costs associated with the defense and consumer products which the Company
shipped in the 1995 second quarter. The cost of goods sold for the 1994 second
quarter was negligible.
Research and development expenses were a credit of $25,000 in the 1995
second quarter, a decrease of $314,000 as compared to $289,000 in the 1994
second quarter. The reason for this decrease is that the Company changed its
policy of accounting for new product development during this quarter. Rather
than expense all product development costs as incurred, the Company is
capitalizing these costs until the product begins shipments and then the
capitalized costs are amortized over a three year period.
Selling, general and administrative expenses increased by $651,000 to
$1,422,000 in the 1995 second quarter. The reasons for this increase are as
follows:
1) The Company's general sales and marketing costs increased
$281,000 in the 1995 second quarter and these expenditures
were monies the Company used for its McManis and Wimbledon
divisions, which it acquired in November, 1994.
2) The Company's general and administrative costs increased
$370,000. The reasons are four fold; first, payroll costs
increased $129,000 in the 1995 second quarter; two,
professional and consulting costs increased $99,000; three,
travel costs increased $120,000; and four, shareholder
communications and Board of Director costs increased $65,000.
Depreciation and amortization expense increased by $80,000 to $204,000 in
the second quarter of 1995 due to amortization of a non-competition agreement
with the Company's former chief executive officer, $34,000, and amortization of
deferred expenses of $46,000.
<PAGE> 12
Interest expense for the second quarter of 1995 was $5,000, while in 1994
it was $29,000, a decrease of $24,000. The reason for this decrease was the
Applied Laser Systems (ALS) financing debt which was entered into during the
1994 second quarter.
Results of Operations for the Six Months Ended June 30, 1995
As compared to the Six Months Ended July 3, 1994
The Company's net loss from operations for the six months ended June 30,
1995 ("1995 first half") of approximately $2,902,000 was approximately $882,000
less than its net loss from operations of approximately $3,784,000 for the six
months ended July 3, 1994 ("1994 first half"). This decrease is a combination
of costs, $1,450,000, associated with the proposed acquisition of the Company
incurred in 1994 by ALS along with higher selling, general and administrative
costs incurred with the acquisition of the Wimbledon and McManis sporting goods
divisions acquired in November, 1994.
Total revenue recognized during the 1995 first half was $2,309,000 compared
to $206,000 in the 1994 first half. This increase of $2,103,000 or 1,121
percent from the 1994 first half results from the Company shipping product to
its defense related customers in the approximate amount of $1,728,000.
Additionally, $328,000 of Wimbledon related products and $122,000 of McManis
products were sold in the 1995 first half .
Costs of goods sold for the first half of 1995 of $1,758,000 reflect costs
associated with the defense and consumer products which the Company shipped in
the 1995 first half. The cost of goods sold for the 1994 first half was
negligible.
Research and development expenses were $211,000 in the 1995 first half, a
decrease of $477,000 as compared to $688,000 in the 1994 first half. The
reason for this decrease is that the Company changed its policy of accounting
for new product development during this period. Rather than expense all
product development costs as incurred, the Company is capitalizing these costs
until the product begins shipments and then the capitalized costs are amortized
over a three year period.
Selling, general and administrative expenses increased by $1,390,000 to
$2,834,000 in the 1995 first half. The primary reasons for this increase are
as follows:
1) The Company's general sales and marketing costs increased
$882,000 in the 1995 first half and these expenditures were
monies the Company used for its McManis and Wimbledon
divisions, which it acquired in November, 1994.
2) The Company's general and administrative costs increased
$508,000. The reasons are four fold; first, payroll costs
increased $189,000 in the 1995 first half; two, professional
and consulting costs increased $138,000; three, travel costs
increased $172,000; and four, shareholder communications and
Board of Director costs increased $85,000.
Depreciation and amortization expense increased by $87,000 to $424,000 in
the first half of 1995, primarily due to amortization of a non-competition
agreement with the Company's former chief executive officer, in the amount of
$67,000.
Interest expense for the first half of 1995 was $9,000, while in 1994 it
was $33,000, a decrease of $24,000. The reason for this decrease was the ALS
financing debt which was paid in September, 1994.
<PAGE> 13
Financial Position, Liquidity and Capital Resources
The Company's working capital at June 30, 1995, increased approximately
$2,984,000 from December 31, 1994, due to the Company's successful efforts to
raise money from outside third party sources and the additional sales the
Company has generated during the 1995 first half. At June 30, 1995, the
Company had working capital of approximately $1,785,000 as compared to a
working capital deficit of $1,199,000 at December 31, 1994. The Company is
continuing to pursue the goal of changing its strategic objective to becoming a
vertically integrated supplier to OEMGs and end users of consumer products and
components manufactured from its proprietary materials systems.
Cash provided by financing activities during the first six months of 1995
totaled approximately $6,442,000 compared to $1,252,000 during the same period
of 1994. The primary source of these funds in 1995 was $6,477,000 from sales
of common stock and convertible preferred stock to outside third parties. The
1994 financing monies raised were attributable to monies advanced by Applied
Laser Systems which was subsequently discharged by Conagher & Co., Inc. for the
benefit of the Company.
The Company received a going concern qualification from its outside
independent auditors on its 1994 audited financial statements. While the
Company believes it has made and will continue to make substantial progress
towards achieving profitability, the results to date have not yet been
sufficient to negate the auditors' qualifications. The Company's management is
of the opinion that it will be able to continue to raise money from outside
third party sources in sufficient amounts to support its operations until the
time that the forecasted revenues for future periods materialize from programs
in which the Company is involved. There is no assurance that the Company's
efforts to raise money will be successful or that the forecasts will be
achieved. There will usually be differences between the forecast and actual
results because events and circumstances frequently do not occur as expected
and those differences may be material. 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.
It is difficult for the Company to predict with accuracy the point at which
the Company will no longer require a going concern qualification due to the
difficulty of predicting accurately the amount of revenues that the Company
will generate, the amount of expenses that will be required by its operations,
and the Company's ability to raise additional capital. The Company believes,
however, that under its current business plan, its revenues and earnings will
be sufficient to make the going concern qualification unnecessary by December
31, 1996.
<PAGE> 14
QUADRAX CORPORATION
PART II - OTHER INFORMATION
Item 1 -- Legal Proceedings
As of the date of this Amendment No. 1 to this Form 10-QSB, the Securities
and Exchange Commission is conducting two informal investigations of the
Company for activities occurring in 1994 and 1995. The following discussion is
based on information learned by the Company as a result of its involvement in
the Commission's activities. There may be other significant information
regarding these matters of which the Company is, at the time, not aware.
One inquiry, being conducted by the Commission's Denver officer, is
believed to have as its principal focus, insofar as it relates to the Company,
activities by the Company's former Chairman of the Board involving certain
transactions in the Company's stock and certain expenditures of the Company
funds, during his term as Chairman, from July 1994 through February 1995. A
second inquiry, being conducted under the supervision of the Commission's
Boston office, is believed to focus, insofar as it relates to the Company, on
certain activities involving the Company's public relations consultant
beginning January 1994. While the Company's contract with its public relations
consultant nominally extends until January 1996, the Company is no longer using
the services of the consultant to any significant degree and does not expect to
extend the contract for his services beyond the date of the current contract.
The Company has cooperated with the inquiries described above, providing
documents and other information in response to the Staff's requests. At this
time, the Company does not know what conclusions the Staff will reach or what
action, if any, the Staff will recommend to the Commission upon the termination
of the two inquiries.
Item 6 -- Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(Electronic Filing Only)
(b) Reports on Form 8-K
None since Form 10-KSB for fiscal year ended December 31, 1994.
<PAGE> 15
QUADRAX CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUADRAX CORPORATION
(Registrant)
By: /s/ James J. Palermo Date: January 17, 1996
-----------------------------
James J. Palermo, Chairman
and Chief Executive Officer
By: /s/ Edward A. Stoltenberg Date: January 17, 1996
-----------------------------
Edward A. Stoltenberg, Chief Financial
Officer and Principal Accounting Officer
<PAGE> 16
EXHIBIT INDEX
Sequentially Numbered
<TABLE>
<CAPTION>
Exhibit Number Description Page
- -------------- ----------- ----
<S> <C>
27.1 Financial Data Schedule
(Electronic Filing Only)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF QUADRAX CORPORATION FOR
THE SIX MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,367,857
<SECURITIES> 0
<RECEIVABLES> 925,195
<ALLOWANCES> 0
<INVENTORY> 1,064,426
<CURRENT-ASSETS> 4,573,883
<PP&E> 6,274,389
<DEPRECIATION> 3,230,625
<TOTAL-ASSETS> 10,064,991
<CURRENT-LIABILITIES> 2,789,083
<BONDS> 0
0
1,339,207
<COMMON> 131
<OTHER-SE> 54,270,816
<TOTAL-LIABILITY-AND-EQUITY> 10,064,991
<SALES> 2,309,429
<TOTAL-REVENUES> 2,318,424
<CGS> 1,757,628
<TOTAL-COSTS> 1,757,628
<OTHER-EXPENSES> 3,478,512
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,415
<INCOME-PRETAX> (2,917,716)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,917,716)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,917,716)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> 0
</TABLE>
