As filed with the Securities and Exchange Commission on November 27, 1996
File No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
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QUADRAX CORPORATION
(Exact name of registrant as specified in charter)
Delaware 05-0420158
(State of incorporation) (IRS Employer Identification Number)
300 High Point Avenue
Portsmouth, Rhode Island 02871
(401) 683-6600
(Address and telephone number of registrant's
principal executive offices)
James J. Palermo
Chairman of the Board and Chief Executive Officer
Quadrax Corporation
300 High Point Avenue
Portsmouth, Rhode Island 02871
(401) 683-6600
(Address and telephone number of
agent for service)
Please send copies of all communications to:
Stephen I. Glover, Esq.
Fried, Frank, Harris, Shriver & Jacobson
1001 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
---------------------------------
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the Registration Statement
becomes effective.
If the only securities being registered on this form are
being offered pursuant to dividend or interest reinvestment
plans, check the following box: [ ].
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, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box [ x ].
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(Cover continued on next page)
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<PAGE>
(Cover continued from previous page)
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 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>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of each maximum maximum Amount of
class of Amount to be offering aggregate registration
securities to registered price per offering fee
be registered share price
__________________________________________________________________
<S> <C> <C> <C> <C>
Common Stock, 1,346,376 $ 0.77 $1,036,709.50 $314.15
$.000009 par
value(1)
- ------------------------------------------------------------------
Common Stock, 135,000 $ 0.78 $ 105,300.00 $ 31.90
$.000009 par
value(2)
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Common Stock, 500,000 $ 0.68 $ 340,000.00 $103.03
$.000009 par
value(3)
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Common Stock, 250,000 $ 0.01 $ 2,500.00 $ 0.76
$.000009 par
value(4)
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Common Stock, 75,000 $ 0.75 $ 56,250.00 $ 17.05
$.000009 par
value(5)
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Total 2,306,376 $1,540,759.50 $466.89
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</TABLE>
(1) For shares issuable upon exercise of 311,199 outstanding Class
C Warrants calculated pursuant to Rule 457(g) based on the
amended exercise price of such Class C Warrants. Includes
all additional shares of Common Stock which may be issued
pursuant to the application of anti-dilution protections,
pursuant to Rule 416(a).
(2) For shares held by certain selling shareholders. Estimated
pursuant to Rule 457(c) solely for the purpose of computing
the registration fee based upon the average of the high and
low prices of the Common Stock, as reported on the NASDAQ
Small Cap Market on November 22, 1996.
(3) For shares that will be held by a certain selling shareholder
upon exercise of outstanding warrants to purchase 500,000
shares of Common Stock at $0.68 per share, calculated
pursuant to Rule 457(g). Includes all additional shares of
Common Stock which may be issued pursuant to the application
of anti-dilution protections, pursuant to Rule 416(a).
(4) For shares that will be held by a certain selling shareholder
upon exercise of outstanding warrants to purchase 250,000
shares of Common Stock at $0.01 per share, calculated
pursuant to Rule 457(g). Includes all additional shares of
Common Stock which may be issued pursuant to the application
of anti-dilution protections, pursuant to Rule 416(a).
(5) For shares that will be held by a certain selling shareholder
upon exercise of outstanding options to purchase 75,000
shares of Common Stock at $0.75 per share, calculated
pursuant to Rule 457(g). Includes all additional shares of
Common Stock which may be issued pursuant to the application
of anti-dilution protections, pursuant to Rule 416(a).
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 THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
<PAGE>
PROSPECTUS
2,306,376 SHARES
QUADRAX CORPORATION
Common Stock
This Prospectus relates to the public offering, which is not
being underwritten, of up to 2,306,376 shares (the "Shares") of
common stock, par value $.000009 per share (the "Common Stock")
of Quadrax Corporation ("Quadrax" or the "Company"). Of these
Shares, 1,346,376 Shares are issuable by the Company upon the
exercise of 311,199 outstanding Non-Callable 10-Year Class C
Warrants (the "Class C Warrants"). Each Class C Warrant entitles
the holder to purchase 4.3264 shares of Common Stock at an
exercise price of $3.33 per Class C Warrant (or $0.77 per Share
of Common Stock), subject to adjustment pursuant to certain
dilution protections.
135,000 Shares of Common Stock may be offered for resale
from time to time by certain shareholders of the Company. An
additional 825,000 Shares may be offered for resale from time to
time by certain shareholders of the Company assuming such
shareholders exercise all of the outstanding options or warrants
(the "Other Warrants") held by them. (See "Selling
Shareholders.")
The Company will receive approximately $1,036,296 if all
Class C Warrants are exercised and $398,750 if all the Other
Warrants held by the Selling Shareholders are exercised.
Aggregate net proceeds from the exercise of all of the Class C
Warrants and Other Warrants would be $1,425,046. The Company
will receive no proceeds from the sale of Shares by the Selling
Shareholders.
The Company has no knowledge of any plans of any Class C
Warrant holder or Selling Shareholder to actually sell any
Shares.
The Selling Shareholders and any broker-dealers, agents or
underwriters that participate with the Selling Shareholders may
be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act of 1933 (the "Securities Act"), and
any commissions received by them and any profit on the resale of
the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of
Distribution."
On November 25, 1996, the closing price for the Common Stock
as quoted on the NASDAQ Small-Cap Market, under the symbol
"QDRX," was $0.75 per share.
AN INVESTMENT IN THE COMMON STOCK OFFERED PURSUANT TO THIS
PROSPECTUS IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF
CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY INVESTORS BEFORE
PURCHASING THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_________________________
The date of this Prospectus is November 27, 1996
<PAGE>
TABLE OF CONTENTS
Page
Available Information 3
Incorporation of Certain Documents by Reference 3
The Company 4
Risk Factors 5
Use of Proceeds 11
Selling Shareholders 11
Plan of Distribution 12
Description of Securities 14
Indemnification for Securities Act Liabilities 16
Legal Matters 16
Experts 16
UNTIL JANUARY 5, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN
THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
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"). Such reports, proxy statements
and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549; 75 Park Place, New York, New York 10007; and Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60604.
Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street N.W., Washington,
D.C. 20549 at prescribed rates. In addition, the Commission
maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding
companies that file electronically with the Commission through
the Electronic Data Gathering, Analysis and Retrieval System.
The Company has filed with the Commission in Washington,
D.C. a Registration Statement on Form S-3 (Registration No. 333-
) under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Shares of which this Prospectus is a
part. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all the information
set forth in the Registration Statement, including the exhibits
filed as part thereof and otherwise incorporated therein to which
reference is hereby made. Copies of the Registration Statement
and the exhibits may be inspected at the offices of the
Commission, and may be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W. Washington, D.C.
20549 upon payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1995.
(2) The Company's Quarterly Report on Form 10-QSB for
the quarter ended March 31, 1996.
(3) The Company's Quarterly Report on Form 10-QSB for
the quarter ended June 30, 1996.
(4) The Company's Quarterly Report on Form 10-QSB for
the quarter ended September 30, 1996.
(5) The description of the Company's Common Stock
which is contained in the registration statement
on Form 8-A filed by the Company to register such
securities under Section 12(g) of the Securities
Exchange Act of 1934, as
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<PAGE>
amended, including any amendment or report filed
for the purpose of updating such description.
(6) The Company's Current Reports on Form 8-K dated
January 15, 1996, March 15, 1996, June 19, 1996,
July 2, 1996, July 3, 1996, July 31, 1996,
September 10, 1996, and October 4, 1996.
(7) The Company's Proxy Statement in connection with
the Annual Meeting of Stockholders held May 10,
1996.
(8) All documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act after the date of this Prospectus and prior to
the termination of the Offering made hereby shall
be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date
of filing such documents.
The Company will provide without charge to each person,
including any beneficial owners, to whom this Prospectus is
delivered, upon the written or oral request of any such person, a
copy of any and all of the information that has been incorporated
herein by reference, other than exhibits to such information
(unless such exhibits are specifically incorporated by reference
into the information that the Prospectus incorporates). Requests
for such information should be directed to the Secretary of the
Company at 300 High Point Avenue, Portsmouth, Rhode Island 02871
(401) 683-6600.
THE COMPANY
The Company, which prior to fiscal year 1995 was a
development stage company, 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. Management
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 1994 and 1995 to
focus on commercial and consumer markets for value-added, high-
performance products.
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<PAGE>
The Company is organized in a holding company structure,
operating through two wholly owned subsidiaries: Quadrax Advanced
Materials Systems, Inc. and Lion Golf of Oregon, Inc. ("Lion
Golf"). It also wholly owns and operates Quadrax Sports, Inc. as
a marketing company.
The Company's acquisition of Lion Golf at the end of 1995
represents a departure from the Company's prior focus on selling
Quadrax Composites and "high-end" products, particularly sporting
goods, designed by the Company made from Quadrax Composites.
Lion Golf is a "low-end" importer and manufacturer of sporting
goods utilizing non-proprietary materials. Management believes
that by serving both the "high" and "low" ends of the sporting
goods market, it will benefit from the increased industry
knowledge that management will obtain, and the Company's enhanced
recognition in the industry.
The Company's independent accountants, Livingston & Haynes,
P.C., included a "going concern" qualification in their report on
the Company's financial statements for fiscal 1995, as they did
for fiscal 1994 (the period from January 3, 1994 to December 31,
1994), reflecting the Company's history of losses and its
continued dependence on outside financing to provide the fund
needed to meet its expenses.
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.
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. The Private
Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain matters discussed in
this section and elsewhere in this Prospectus are forward-looking
statements. These forward-looking statements involve risks and
uncertainties including, but not limited to, economic conditions,
product demand and industry capacity, competition, and other
risks.
Operating Losses; Limited Revenues; Going Concern Qualification
The Company has not achieved profitability in any fiscal
quarter since its incorporation in March 1986. From
incorporation through December 31, 1995, the Company incurred a
cumulative net loss from continuing operations of approximately
$53,089,000. During the fiscal years 1995, 1994, 1993 and 1992,
the Company incurred net losses from continuing operations of
approximately $8,998,000, $11,517,000, $5,713,000 and $7,266,000,
respectively. For the nine months ended September 30, 1996, the
Company had a net loss of $5,104,193.
The Company has generated only limited revenue to date. In
particular, Quadrax has recently redirected its development and
marketing efforts from aerospace and defense markets to consumer
markets and commenced limited production for these markets in mid-
1993. During fiscal years 1995, 1994, 1993 and 1992, the
Company's total revenue was approximately $4,635,000, $860,000,
$1,555,000 and $850,000, respectively. For the nine months ended
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<PAGE>
September 30, 1996, the Company's total revenue was $2,748,870.
There can be no assurance that sales of the Company's products
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 reports on the Company's financial
statements for fiscal 1995 and 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.
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 markets in 1993, and since that time has taken a number
of actions aimed at entering the sporting goods and athletic
equipment market. The Company has only commenced limited
commercial production of consumer products and therefore has not
yet had an opportunity to fully determine the extent to which
Quadrax Composites can be successfully applied to the development
and production of consumer products. While management believes
that Quadrax Composites are functionally superior to other
structural substrates for many commercial applications, any
failure of Quadrax Composites to perform to standards anticipated
by the Company would have a material adverse affect 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 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
entering into additional contracts. This would have a material
adverse effect on the Company's operations and financial
condition.
In addition, 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.
The Company's Lion Golf products compete in a large market
with numerous competitors, some of which are large, well-
capitalized companies with wide brand recognition, and some of
which are small. The golf equipment industry is characterized by
products which are differentiated primarily by marketing
strategies.
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<PAGE>
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 consumer 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 December 31,
1995, the Company has raised a total of $40.2 million in equity
capital. The Company raised approximately $4.5 million in equity
and debt capital during the first nine months of fiscal 1996, and
$9.2 million through sales of stock and convertible debt during
fiscal 1995. In fiscal 1994, the Company raised $5.9 million of
equity capital. Management believes that the funds raised to
date, together with cash provided by revenues, will be sufficient
to meet the Company's near-term cash requirements. The Company
does, however, continue to seek sources of outside financing.
Management estimates that its capital needs for the fiscal year
1997 will be $2-3 million, subject to satisfying its sale
projections for 1997.
Management believes that the Company will be able to
continue to raise money from outside third parties in sufficient
amounts to support its operations until the time in which the
Company's consumer product programs generate sufficient revenues.
There can be no assurance, however, that the Company will be able
to raise additional funds from third parties, or even that if
raised, such funds will be sufficient to fund the Company's
product programs until such programs are able to generate enough
revenue to support themselves. 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. There can be no assurance that the Company will be
successful in raising such additional capital.
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 and
has completed three production contracts to date. 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.
Prior to 1994, Quadrax concentrated almost all its product
marketing and customer calling efforts on the sale of materials
within the defense contracting community. Efforts to move into
consumer applications were limited to attendance of trade shows
sponsored by members of the plastics and advanced materials
industries. The Company currently has only a
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<PAGE>
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.
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 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.
The Company faces competition from three of the world's
largest multi-national chemical companies_E.I. du Pont de Nemours
& Co., Imperial Chemical Industries PLC and Saint Gobain,
S.A._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 Gobain, S.A., 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 will not devote
significantly greater financial, technical, marketing and other
resources to develop and market sporting goods and athletic
equipment more aggressively than the Company.
In general, management believes it can compete effectively
by offering products with superior performance characteristics to
products offered by other suppliers, at prices substantially
equivalent to those charged by other suppliers. The Company
believes that the success of its efforts will depend on a variety
of 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 management 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
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.
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<PAGE>
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, some 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. Mr. Palermo
has signed an employment agreement with the Company that is
effective through December 1999. 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.
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<PAGE>
Potential Dilution
Quadrax has a complex capital structure that includes a
number of classes of outstanding warrants and options to purchase
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 November 25, 1996 were to be
exercised, an aggregate of 3,316,959 shares of Common Stock would
be issuable for a total of $2,046,275, resulting in a reduction
in the percentage of voting rights and interest in equity profits
represented by a share of Common Stock. If all of the issued and
outstanding shares of Series B Convertible Preferred Stock were
converted based on the closing price of the Company's Common
Stock on the Nasdaq SmallCap Market on November 25, 1996,
2,333,333 shares of Common Stock would be issuable for a total of
$1,537,500, resulting in a reduction in the percentage of voting
rights and interest in equity 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
28,500,000 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 voting rights and interests in profits currently represented
by a share of Common 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.
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. Management 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 no 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 Effective 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
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<PAGE>
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.
USE OF PROCEEDS
The net proceeds to the Company from the exercise of all
311,199 Class C Warrants would be $1,026,296. The net proceeds
to the Company from the exercise of all of the Other Warrants
would be $398,750. Aggregate net proceeds from the exercise of
all of the Class C Warrants and Other Warrants could be
$1,425,046. Such proceeds, if any, will be used for general
corporate purposes. All proceeds from any sale of Shares offered
by the Selling Shareholders will be received by the Selling
Shareholders and not by the Company.
SELLING SHAREHOLDERS
135,000 Shares are being offered for resale by certain
shareholders of the Company. An additional 825,000 Shares are
being offered for resale by certain shareholders of the Company
assuming such shareholders exercise all of the Other Warrants.
All 960,000 Shares, to the extent they are being offered, are
being offered for the account of the following shareholders and
their donees or pledgees (the "Selling Shareholders"). The
following table sets forth certain information with respect to
the Selling Shareholders. The Company has no knowledge of the
intentions of any Selling Shareholder to actually sell any of the
Shares listed under the column "Shares to be Sold."
- 11 -
<PAGE>
<TABLE>
<CAPTION> Ownership
Prior Shares Ownership Percentage of
Selling to to be After Class Owned
Shareholder Offering(1) Sold Offering After Offering
_______________ ___________ _________ _________ ______________
<S> <C> <C> <C> <C>
John Clarke 125,000 125,000 -- *
H. David Cowherd 125,000 125,000 -- *
Joss Company 250,000 250,000 -- *
Harold M. Levine 75,000 75,000 -- *
Paul Mannion 125,000 125,000 -- *
Thomas McLaughlin 35,000 35,000 -- *
Max Morgulis 25,000 25,000 -- *
Nancy Nelson 30,000 30,000 -- *
Roger Nelson 20,000 20,000 -- *
Edward A. Stoltenberg(2) 157,200(3) 50,000 -- *
Sutherland, Asbill &
Brennan as escrow
agent for
Paul Mannion and
John Clarke 100,000 100,000 -- *
_______ _______
TOTAL 960,000 960,000
======= =======
</TABLE>
(1) The column headed "Shares to be Sold" includes only
otherwise unregistered shares registered by this Prospectus.
The column headed "Ownership After Offering" is shown as
zero for each Selling Shareholder only to indicate that all
shares beneficially owned by such person have been
registered for resale, and do not necessarily indicate any
actual intent to sell any shares.
(2) Mr. Stoltenberg is Senior Vice President and Chief
Financial Officer of the Company.
(3) Includes 30,000 shares issued to Mr. Stoltenberg
pursuant to the Company's 1993 Stock Option Plan and 200
shares held for the benefit of his minor children.
* Ownership is less than one percent of class.
PLAN OF DISTRIBUTION
The purpose of this Prospectus is to permit (a) the Company
to offer and sell Shares of Common Stock reserved for issuance
upon exercise from time to time of the Class C Warrants and
(b) the Selling Shareholders, if they desire, to offer and sell
their 960,000 Shares (the "Selling Shareholder Shares") at such
times and at such places as the Selling Shareholders choose.
The decision to exercise Class C Warrants is within the sole
discretion of the holders thereof. There can be no assurance
that any of such Class C Warrants will be exercised.
- 12 -
<PAGE>
The distribution of the Selling Shareholder Shares may be
effected from time to time in one or more transactions. Any of
the Selling Shareholder Shares may be offered for sale, from time
to time, by the Selling Shareholders, or by permitted transferees
or successors of the Selling Shareholders, on the NASDAQ SmallCap
Market, or otherwise, at prices and on terms then obtainable, at
fixed prices, at prices then prevailing at the time of sale, at
prices related to such prevailing prices, or in negotiated
transactions at negotiated prices or otherwise. The Selling
Shareholder Shares offered hereby may be sold by one or more of
the following: (i) through underwriters, or through underwriting
syndicates; (ii) through one or more dealers or agents (which may
include one or more underwriters), including, but not limited to:
(a) block trades in which the broker or dealer block as principal
to facilitate the transactions; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage
transactions; and (d) transactions in which the broker solicits
purchasers; (iii) directly to one or more purchasers; or (iv) a
combination of these methods. The names of any underwriters or
agents involved in the sale of the Selling Shareholder Shares
will be set forth in a Prospectus Supplement. In connection with
the distribution of the Selling Shareholder Shares or otherwise,
the Selling Shareholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection
with such transactions, broker-dealers or other financial
institutions may engage in short sales of Common Stock in the
course of hedging the positions they assume with the Selling
Shareholders. The Selling Shareholders may also sell Common
Stock short and redeliver the shares to close out such short
positions. The Selling Shareholders may also enter into options
or other transactions with broker-dealers or other financial
institutions which require the delivery to such broker-dealers or
other financial institutions of the Selling Shareholder Shares,
which shares such broker-dealers or financial institutions may
resell pursuant to this Prospectus (as supplemented or amended to
reflect this transaction). The Selling Shareholders may also
pledge the Selling Shareholder Shares registered hereunder to a
broker-dealer or other financial institution and, upon a default,
such broker-dealer or other financial institution may effect
sales of the pledged shares pursuant to this Prospectus (as
supplemented or amended to reflect such transaction). In
addition, any Selling Shareholder Shares covered by this
Prospectus that qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to
this Prospectus.
The Selling Shareholders or its underwriters, dealers or
agents may sell the Selling Shareholder Shares to or through
underwriters, dealers or agents, and such underwriters, dealers
or agents may receive compensation in the form of discounts or
concessions allowed or reallowed. Underwriters, dealers, brokers
or other agents engaged by the Selling Shareholders may arrange
for other such persons to participate. Any fixed public offering
price and any discounts and concessions may be changed from time
to time. Underwriters, dealers and agents who participate in the
distribution of the Selling Shareholder Shares may be deemed to
be underwriters within the meaning of the Securities Act, and any
discounts or commissions received by them or any profit on the
resale of shares by them may be deemed to be underwriting
discounts and commissions thereunder. The proposed amounts of
Selling Shareholder Shares, if any, to be purchased by
underwriters and the compensation, if any, of underwriters,
dealers or agents will be set forth in a Prospectus Supplement.
Unless granted an exemption by the Commission from Rule 10b-
6 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or unless otherwise permitted under
- 13 -
<PAGE>
Rule 10b-6A, the Selling Shareholders will not engage in any
stabilization activity in connection with the Company's
securities, will furnish each broker or dealer engaged by the
Selling Shareholders and each other participating broker or
dealer the number of copies of this Prospectus required by such
broker or dealer, and will not bid for or purchase any securities
of the Company or attempt to induce any person to purchase any of
the Company's securities other than as permitted under the
Exchange Act. Selling Shareholders who may be "affiliated
purchasers" of the Company as defined in Rule 10b-6 have been
advised that pursuant to Exchange Act Release 34-23611 (September
11, 1986), they must coordinate their sales under this Prospectus
with each other and the Company for purposes of Rule 10b-6.
The Company will not receive any proceeds from any sales of
the Selling Shareholder Shares, but will receive the proceeds
from the exercise of the Class C Warrants and from the exercise
of the other warrants held by the Selling Shareholders, which
proceeds, if any, will be used for general corporate purposes.
In connection with the registration by the Company, the
Company shall use its best efforts to prepare and file with the
Commission such amendments and supplements to the registration
statement and the prospectus used in connection therewith as may
be necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect to
the disposition of the Shares covered by the registration
statement for the period required to effect the distribution of
such Shares.
The Company is paying certain expenses (other than
commissions and discounts of underwriters, dealers or agents)
incident to the offering and sale of the Shares to the public,
which are estimated to be approximately $50,950. If the Company
is required to update this Prospectus during such period, it may
incur additional expenses in excess of the amount estimated
above.
In order to comply with certain states' securities laws, if
applicable, the Shares will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In certain
states the Shares may not be sold unless they have been
registered or qualify for sale in such state or an exemption from
registration or qualification is available and is complied with.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 90,000,000 shares of
Common Stock, $0.000009 par value per share. As of October 25,
1996, there were 28,112,875 shares of Common Stock issued and
outstanding and held of record by approximately 1,500 holders.
The holders of the 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
- 14 -
<PAGE>
creditors and 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 non-assessable.
The Company is authorized to issue 10,000,000 shares of
Class A Preferred Stock, par value $.01 per share. 7,000 of
these shares are designated "Series B Convertible Preferred
Stock" ("Series B"). Each share of Series B ("Series B Share")
is convertible into an amount of shares of Common Stock equal to
the "Stated Value" of such share of Series B, which is $1,000,
divided by (i) the average bid prices of the Common Stock (the
"Average Closing Price"), as reported by the Nasdaq SmallCap
Market or NASDAQ Electronic Bulletin Board during the period of
five trading days immediately preceding the date of conversion
(the "Conversion Date"), discounted by 25 percent (the
"Conversion Price"). As an example, if the Average Closing Bid
Price on the Conversion Date is $2.00 and 3,500 Series B Shares
are being converted, the Stated Value for which is $3,500,000,
then the Conversion Price would be $1.50 per share of Common
Stock ($2.00 x .75), and the 3,500 Series B Shares would be
convertible into 2,333,333 shares of Common Stock ($3,500,000
divided by $1.50 equals 2,333,333).
Each holder of one Series B Share is entitled to vote on all
matters presented to the stockholders of the Corporation for
their action, together as a single class with the holders of all
other classes and series of securities of the Company, except as
provided by law or that number of votes equal to the number of
whole shares of Common Stock into which one Series B Share is
convertible on the record date for the vote, with respect
In the event of a voluntary or involuntary dissolution,
liquidation, or winding up of the Company, Series B Holders are
entitled to received out of the assets of the Company before any
payment or distribution to holders of Common Stock or any other
class of stock ranking junior to the Series B, an amount per
share equal to $1,000 per share of Series B plus all accrued and
unpaid dividends.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company's certificate of incorporation and bylaws
provide broadly for the indemnification of the directors and
officers of the Company for certain liabilities and costs
incurred by them in connection with the performance of their
duties. This indemnification may include indemnification for
liabilities arising under the Securities Act.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities
and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable.
- 15 -
<PAGE>
LEGAL MATTERS
The validity of the Shares offered hereby will be passed
upon for the Company by Fried, Frank, Harris, Shriver & Jacobson,
1001 Pennsylvania Avenue, N.W., Washington, D.C. 20004.
EXPERTS
The consolidated financial statements of the Company
appearing in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1995, have been audited by Livingston &
Haynes, P.C., independent auditors, as set forth in its report
thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by
reference in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
No dealer, salesman or other person has been authorized to
give any information or to make any representation in connection
with this offering other than those contained in this Prospectus,
and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company.
This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of these securities in any
state to any person to whom it is unlawful to make such offer or
solicitation in such state. The delivery of this Prospectus at
any time does not imply that information herein is correct as of
any time subsequent its date.
- 16 -
<PAGE>
2,306,376
Common Shares
QUADRAX CORPORATION
November 27, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Registration Fee $ 450
Printing Expenses $ --
Blue Sky Fees and Expenses $25,000
Legal Fees and Expenses $20,000
Accounting Fees and Expenses $ 500
Transfer Agent Fees $ 5,000
Miscellaneous $ --
_______
Total $50,950
=======
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware (the
"GCL") authorizes and empowers the Company to indemnify the
directors, officers, employees and agents of the Company against
liabilities incurred in connection with, and related expenses
resulting from, any claim or suit brought against any such person
as a result of his relationship with the Company, provided that
such persons acted in accordance with a stated standard of
conduct in connection with the acts or events on which such
claim, action or suit is based. The finding of either civil or
criminal liability on the part of such persons in connection with
such acts or events is not necessarily determinative of the
questions of whether such persons have met the required standard
of conduct and are accordingly, entitled to be indemnified.
In addition, Section 10 of the Company's by-laws requires
the Company to indemnify its officers and directors to the
fullest extent permitted by the GCL, and permits the Company to
indemnify other persons as it chooses, to the same extent. Such
indemnity shall not extend to such persons, however, (i) for any
breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) for actions contravening Section 174 of the GCL
(relating to unlawful dividend stock purchases or stock
redemptions), or (iv) for any transaction from which the director
derived an improper personal benefit.
<PAGE>
Item 16. Exhibits
The following documents are filed as exhibits to this Registration
Statement:
4.1 Specimen Common Share Certificate*
5.1 Opinion of Fried, Frank, Harris, Shriver & Jacobson**
24.1 Consent of Livingston & Haynes, P.C.
24.2 Consent of Fried, Frank, Harris, Shriver & Jacobson (see Exhibit 5.1)**
Item 17. Undertakings.
The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which it offers to
sells securities, a post-effective amendment to this registration
statement to 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.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end
of the offering.
_______________
* Filed as an Exhibit to the Company's Registration Statement
on Form S-1, File No. 33-14275 and incorporated herein by reference.
** To be filed by amendment.
<PAGE>
SIGNATURES
Pursuant to 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 this to
Form S-3 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Portsmouth, Rhode Island.
QUADRAX CORPORATION
By: /s/ James J. Palermo
_____________________________
James J. Palermo
Chairman of the Board of Directors,
and Chief Executive Officer
Date: November 27, 1996
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
/s/ James J. Palermo Chairman of the November 27, 1996
____________________ Board of Directors,
James J. Palermo and Chief
Executive Officer
(Principal Executive
Officer)
/s/Edward A. Stoltenberg Senior Vice President November 27, 1996
________________________ and Chief Financial
Edward A. Stoltenberg Officer (Principal
Accounting and
Financial Officer)
/s/William G. Conway Director November 27, 1996
____________________
William G. Conway
/s/Sven Kraumanis Director November 27, 1996
__________________
Sven Kraumanis
/s/Alan Milton Director November 27, 1996
______________
Alan Milton
/s/Eugene L. Scott Director November 27, 1996
__________________
Eugene L. Scott
/s/Gordon Werner Director November 27, 1996
________________
Gordon Werner
EXHIBIT 24.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement on Form S-3 (relating to 2,306,376 shares of Quadrax
Corporation common stock, par value $.000009) of our report, dated
March 26, 1996, which expresses an unqualified opinion and includes
an explanatory paragraph relating to the ability of Quadrax
Corporation to continue as a going concern, accompanying the Annual
Report on Form 10-KSB of Quadrax Corporation for the year ended
December 31, 1995 and to the reference to us in the Prospectus,
which is part of this Registration Statement, under the caption
entitled "Experts".
/s/Livingston & Haynes, P.C.
Wellesley Hills, Massachusetts
November 27, 1996
