<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A - Number 2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act Of 1934
Date of Report (Date of Earliest Event Reported) May 7, 1997
-------------------------------
QUADRAX CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-16052 05-0420158
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
300 High Point Avenue, Portsmouth, RI 02871
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (401) 683-6600
- --------------------------------------------------------------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Former Address, If Changed Since Last Report.)
<PAGE>
ITEM 7. Financial Statements Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
Attached as Appendix A are the audited financial statements for
Victor Electric Wire and Cable Corporation for the fiscal years
ending June 30, 1996 and June 30, 1995.
Attached as Appendix A (1) are Victor Electric Wire and Cable
Corporation's Unaudited Interim Balance Sheets as of March 31, 1997
and June 30, 1996, along with the related Unaudited Interim Statement
of Operations and Accumulated Deficits for the three and nine months
ended March 31, 1997 and 1996. Also, included are the related
Unaudited Interim Statements of Cash Flows for the nine months ended
March 31, 1997 and 1996.
(b) Pro Forma Financial Information.
As previously reported on May 15, 1997, the Company on May 7,
1997, acquired all of the outstanding stock of Victel, Inc., a
Delaware corporation ("Victel"), whose sole asset was all of the
outstanding stock of Victor Electric Wire & Cable Corporation
("Victor") , a manufacturer of electric power cords and interconnect
cables, for $720,000 cash and the assumption of approximately
$2,840,000 of existing bank debt. The existing bank debt was
refinanced at the closing by means of Victor entering into a new
working capital and term credit agreement with Congress Financial
Corporation, "Congress". The loan arrangement with Congress provides
for a three-year revolving credit facility of up to $3,550,000
drawable against a percentage of accounts receivable and inventory, a
$950,000 fully amortizing five year term loan and an equipment
financing facility of up to $500,000, also based upon a five year
fully-amortizing repayment schedule. All of such loans bear interest
at a rate of prime plus 1.5%. The Company has guaranteed all of the
obligations of Victor to Congress.
The Company is accounting for this acquisition using the
purchase method. Accordingly, the purchase price was allocated to the
assets acquired based on their estimated fair values. This treatment
resulted in no excess of cost over assets acquired as of April 30,
1997.
Attached as Appendix B is the Company's Unaudited Pro-Forma
Combining Condensed Consolidated Balance sheet as of March 31, 1997,
along with the related Unaudited Pro-Forma Combining Condensed
Consolidated Statement of Operations for the year ended December
31,1996.
Attached as Appendix C is the Company's Unaudited Pro-Forma
Combining Condensed Consolidated Balance sheet as of March 31, 1997,
along with the related Unaudited Pro-Forma Combining Condensed
Consolidated Statement of Operations for the three months ended March
31, 1997.
(c) Exhibits.
2.1 Stock Purchase Agreement between Quadrax Corporation
and Exeter Capital L.P dated May 7, 1997.*
10.1 Loan and Security Agreement between Victor Corporation
and Congress Financial Corporation dated May 7, 1997.*
<PAGE>
10.2 Lease between CRW Real Estate Partnership, as amended,
and Victor Corporation dated as of October 31, 1995. To
be filed by Amendment to this Form 8-K at a later date.*
10.3 Employment Agreement dated as of May 7, 1997 between
Victor Corporation and John V. Palermo. To be filed by*
Amendment to this Form 8-K at a later date.
10.4 Press Release dated May 8, 1997.*
*Previously filed
<PAGE>
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
October 22, 1997 /s/ James J. Palermo
- ---------------------------- --------------------------------------
(Date) James J. Palermo, Chairman and
Chief Executive Officer
October 22, 1997 /s/ Brooks R. Herrick
- ---------------------------- --------------------------------------
(Date) Brooks R. Herrick, Chief
Financial Officer and Principal
Accounting Officer
<PAGE>
Appendix A
Audited Financial Statements for
Victor Electric Wire and Cable Corp. for the fiscal years
ending June 30, 1996 and June 30, 1995.
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
FINANCIAL STATEMENTS AND AUDIT REPORT
JUNE 30, 1996
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS 1
BALANCE SHEETS 2
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT 3
STATEMENTS OF CASH FLOWS 4/5
NOTES TO FINANCIAL STATEMENTS 6/13
</TABLE>
<PAGE>
AN OHIO REGISTERED PARTNERSHIP HAVING LIMITED LIABILITY
- --------------------------------------------------------------------------------
PRIVATE COMPANIES MEMBER AICPA DIVISION SEC PRACTICE SECTION
PRACTICE SECTION FOR CPA FIRMS
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Victor Electric Wire & Cable Corp.
West Warwick, Rhode Island
We have audited the accompanying balance sheets of Victor Electric Wire & Cable
Corp. (a wholly-owned subsidiary of Victel, Inc.) as of June 30, 1996 and July
2, 1995, and the related statements of operations and accumulated deficit and
cash flows for each of the three years in the period ended June 30, 1996. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Victor Electric Wire & Cable
Corp. as of June 30, 1996 and July 2, 1995, and the results of its operations
and its cash flows for each of the three years in the period ended June 30,
1996, in conformity with generally accepted accounting principles.
Cincinnati, Ohio
August 23, 1996, except for
the notes payable and subsequent event
footnotes, as to which the date is
May 7, 1997
1
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
BALANCE SHEETS
JUNE 30, 1996 AND JULY 2, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 109,102 $ 172,895
Receivables - less allowance for
doubtful accounts of $60,000 3,008,842 2,844,066
Refundable Income Taxes 4,000 17,000
Inventories 1,038,969 1,113,876
Prepayments 23,268 73,395
Deferred Income Taxes 152,000 398,000
---------- ----------
Total Current Assets 4,336,181 4,619,232
EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, net 972,045 1,171,951
OTHER ASSETS 112,798 153,006
DEFERRED INCOME TAXES 875,000 936,000
--------- ---------
TOTAL ASSETS $6,296,024 $6,880,189
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES
Bank Overdraft $ 18,174 $ 140,468
Current Portion of Long-Term Debt -
Senior Term Note 345,264 1,110,840
Other 11,476 16,806
Accounts Payable 1,677,263 1,179,582
Accrued Expenses 792,822 884,764
----------- -----------
Total Current Liabilities 2,844,999 3,332,460
----------- -----------
LONG-TERM LIABILITIES
Revolving Line of Credit 2,785,203 2,800,000
Senior Term Note 405,644 92,488
Subordinated Debt to Related Parties 2,439,063 2,439,063
Capital Lease Obligation - 11,476
Accrued Expenses 127,375 -
----------- -----------
Total Long-Term Liabilities 5,757,285 5,343,027
----------- -----------
CONTINGENCIES
STOCKHOLDER'S DEFICIT
Preferred Stock - $100 par value - 15,000
shares authorized; 2615.9 shares issued 261,590 261,590
Common Stock - $10 par value - 10,000 shares
authorized; 60 shares issued 600 600
Accumulated Deficit (2,568,450) (2,057,488)
----------- -----------
Total Stockholder's Deficit (2,306,260) (1,795,298)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 6,296,024 $ 6,880,189
=========== ===========
</TABLE>
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
YEARS ENDED JUNE 30, 1996, JULY 2, 1995 AND JULY 3, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
SALES $ 18,117,060 $ 20,552,955 $ 22,458,158
Less Returns and Allowances 98,763 137,595 166,463
------------ ------------ ------------
18,018,297 20,415,360 22,291,695
COST OF SALES 15,822,098 17,196,716 18,150,713
------------ ------------ ------------
Gross Profit 2,196,199 3,218,644 4,140,982
------------ ------------ ------------
OPERATING EXPENSES
Selling 421,882 652,676 644,075
General and Administrative 1,434,258 1,359,939 1,384,867
------------ ------------ ------------
1,856,140 2,012,615 2,028,942
------------ ------------ ------------
INCOME FROM OPERATIONS 340,059 1,206,029 2,112,040
------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest Income 5,818 6,000 6,000
Interest Expense - senior debt ( 375,894) ( 485,356) ( 315,286)
Interest Expense - subordinated debt ( 249,328) ( 245,261) ( 479,476)
Amortization Expense ( 68,592) ( 68,592) ( 56,577)
Gain on Disposition of Assets - 7,500 76,544
Other, net 143,975 ( 54,514) 2,098
------------ ------------ ------------
( 544,021) ( 840,223) ( 766,697)
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES ( 203,962) 365,806 1,345,343
Provision for Income Taxes 307,000 88,000 581,000
------------ ------------ ------------
NET INCOME (LOSS) ( 510,962) 277,806 764,343
ACCUMULATED DEFICIT - beginning of year ( 2,057,488) ( 2,335,294) ( 3,099,637)
------------ ------------ ------------
ACCUMULATED DEFICIT - end of year $( 2,568,450) $( 2,057,488) $( 2,335,294)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, JULY 2, 1995 AND JULY 3, 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash Received from Customers $ 17,821,098 $ 20,838,468 $ 21,953,017
Cash Paid to Suppliers and
Employees (16,668,962) (19,252,144) (20,180,133)
Interest Received 5,818 6,000 6,000
Interest Paid ( 497,057) ( 704,190) ( 1,089,877)
Income Taxes Refunded (Paid) 13,000 ( 17,000) ( 41,000)
------------ ------------ ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 673,897 871,134 648,007
------------ ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of Equipment and
Leasehold Improvements ( 131,373) ( 266,539) ( 418,649)
Proceeds from Sale of Equipment - 7,500 78,775
------------ ------------ ------------
NET CASH USED BY
INVESTING ACTIVITIES ( 131,373) ( 259,039) ( 339,874)
------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase (Decrease) in
Bank Overdraft ( 122,294) 140,468 ( 42,923)
Net Borrowings (Payments) on
Line of Credit ( 14,797) 313,610 ( 180,349)
Issuance of Senior Term Note 225,000 - 2,880,000
Payments of Senior Term Note ( 677,420) ( 1,110,840) ( 565,832)
Payments of Subordinated Debt - - ( 2,000,000)
Payments Under Capital Lease
Obligations ( 16,806) ( 13,756) ( 12,099)
Payment of Deferred Financing Costs - - ( 156,112)
------------ ------------ ------------
NET CASH USED BY
FINANCING ACTIVITIES ( 606,317) ( 670,518) ( 77,315)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH ( 63,793) ( 58,423) 230,818
CASH - beginning of year 172,895 231,318 500
------------ ------------ ------------
CASH - end of year $ 109,102 $ 172,895 $ 231,318
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, JULY 2, 1995 AND JULY 3, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
RECONCILIATION OF NET INCOME
(LOSS) TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
Net Income (Loss) $(510,962) $ 277,806 $ 764,343
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Provided by Operating Activities -
Depreciation 331,279 347,050 372,493
Amortization Expense 68,592 68,592 56,577
Bad Debt Expense 32,423 61,418 -
Deferred Income Taxes 307,000 88,000 563,000
Gain on Disposition of Assets - ( 7,500) ( 76,544)
Changes in Operating Assets
and Liabilities -
Decrease (Increase) in -
Receivables (197,199) 423,108 ( 338,678)
Refundable Income Taxes 13,000 ( 17,000) -
Inventories 74,907 258,238 ( 9,285)
Prepayments and Deposits 21,743 16,029 ( 72,433)
Increase (Decrease) in -
Accounts Payable and
Accrued Expenses 405,739 ( 611,445) ( 88,422)
Income Taxes Payable - - ( 23,000)
Long-Term Accrued Expenses 127,375 ( 33,162) ( 500,044)
---------- ---------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 673,897 $ 871,134 $ 648,007
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and practices followed by the company are as
follows:
YEAR END - The company's year end is the 52 or 53-week period ending on the
Sunday closest to June 30. The years ended June 30, 1996 and July 2, 1995, each
included 52 weeks and the year ended July 3, 1994, included 53 weeks.
DESCRIPTION OF BUSINESS - The company is a New York corporation and a wholly-
owned subsidiary of Victel, Inc. The company's operations consist primarily of
the manufacture and sale of power cords and specialty cable products to original
equipment manufacturers throughout the United States, Mexico, Canada and Western
Europe.
CASH AND CASH EQUIVALENTS - The company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. Substantially all of the company's cash is held at one bank.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method except for copper
inventory, which is determined by the last-in, first-out (LIFO) method.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - Owned equipment and improvements are
stated at cost. Equipment under capital leases is stated at the lower of the
present value of minimum lease payments at the beginning of the lease term or
fair value at the inception of the lease.
Owned equipment and improvements are depreciated over their estimated useful
lives on the straight-line method. Equipment under capital leases and leasehold
improvements are amortized over the shorter of the lease term or the estimated
useful life of the related assets.
INTANGIBLE ASSETS - Deferred financing costs relating to the term note and
revolving line of credit are amortized over their thirty-six month term.
INCOME TAXES - Deferred income taxes are recognized for estimated future tax
effects attributed to temporary differences between book and tax bases of assets
and liabilities and for carryforward items.
ESTIMATES AND UNCERTAINTIES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
6
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVENTORIES
Inventories consist of the following:
1996 1995
Raw Materials $ 507,079 $ 410,733
Work in Process 81,400 122,565
Finished Goods 450,490 580,578
---------- ----------
$1,038,969 $1,113,876
========== ==========
</TABLE>
Current estimated replacement price of copper inventories is higher than the
LIFO inventory value by approximately $72,000 and $105,000 as of June 30, 1996
and July 2, 1995, respectively.
EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements consist of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Machinery and Equipment $ 4,040,931 $ 3,922,079
Leasehold Improvements 1,544,166 1,533,412
Furniture, Fixtures and
Data Processing Equipment 721,893 720,124
Data Processing Equipment Held
Under Capitalized Lease 69,589 69,589
----------- -----------
6,376,579 6,245,204
Accumulated Depreciation (5,404,534) (5,073,253)
$ 972,045 $ 1,171,951
=========== ===========
</TABLE>
7
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES PAYABLE
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Prime Plus 2% Term Note - payable $30,500
monthly plus interest through July, 1997 $ 750,908 $1,203,328
Prime Plus 1.75% Revolving Line of Credit -
interest payable monthly - due July, 1997 2,785,203 2,800,000
10% Subordinated Notes to a Shareholder
of the Parent Company - due December 31, 1997 2,439,063 2,439,063
Obligations Under Capital Lease for Data
Processing Equipment - payable $1,756
monthly through January, 1997 11,476 28,282
---------- ----------
5,986,650 6,470,673
Less Current Portion 356,740 1,127,646
---------- ----------
$5,629,910 $5,343,027
========== ==========
</TABLE>
In March, 1994, the company increased its term note to $2,684,448, utilizing the
additional borrowing to prepay a portion of its subordinated debt. In March,
1996, the company executed the second amendment to its revolving line of credit
and term note agreement. This amendment provided for additional term note
borrowings of $225,000, modified the repayment terms and extended the due date
of the revolving line of credit and term note to July 31, 1997. This revolving
credit is secured by the company's receivables and inventory, with maximum
available borrowings limited based on receivables and inventory levels. A
portion of the term note and revolving credit facility is guaranteed by a
shareholder of the parent company.
The provisions of the company's loan and credit agreement contain various
restrictive covenants which include minimum net worth, minimum current ratio,
minimum debt coverage ratios, restrictions on property and equipment additions
and restrictions on additional indebtedness.
As of June 30, 1996, the company was in violation of its interest coverage and
minimum net worth covenants, and these violations were not waived by the bank.
As described in the subsequent event footnote, the term note and revolving line
of credit were refinanced on May 7, 1997, and the subordinated debt was
converted to additional paid-in capital.
Aggregate maturities of long-term debt, excluding capital lease obligations and
subordinated debt and giving effect to the refinancing, for the five years
subsequent to June 30, 1996, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
<S> <C>
June 29, 1997 $ 345,264
June 28, 1998 $ 100,497
June 27, 1999 $ 111,019
July 2, 2000 $2,907,847
July 1, 2001 $ 135,485
</TABLE>
8
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
LEASES
The company leases data processing equipment under a capital lease and certain
equipment and real estate under noncancelable operating leases expiring through
December, 2002.
Future minimum lease payments under the capital lease and noncancelable
operating leases as of June 30, 1996, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
<S> <C> <C>
YEAR ENDING
June 29, 1997 $12,261 $ 275,686
June 28, 1998 - 249,049
June 27, 1999 - 248,310
July 2, 2000 - 250,000
July 1, 2001 - 250,000
Later Years - 125,000
------- ----------
Total Minimum Lease Payments 12,261 $1,398,045
==========
Less Amounts Representing Interest 785
-------
Present Value of Net Minimum Lease Payments $11,476
=======
</TABLE>
Rent expense totaled $311,253 for 1996, $337,705 for 1995 and $363,262 for 1994.
PENSION PLAN
The company maintained a defined contribution plan through December 31, 1994,
for substantially all union employees. Any employee who was a member of Local
2014 of the International Brotherhood of Electrical Workers Union, AFL-CIO was
eligible to participate in the plan on the first day of the plan year in which
such employee completed one year of service with the company and attainment of
age twenty-one. The plan provided benefits upon retirement, disability or
death, or upon termination of employment. On January 1, 1995, the company
merged this plan with its defined contribution thrift plan.
The company maintains a defined contribution thrift plan for substantially all
employees. Under this plan, eligible employees are permitted to contribute a
portion of their compensation with the company making a matching contribution up
to certain maximum levels.
Pension expense is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Money Purchase Plan and Trust for
Members of IBEW Local 2014 $ - $ 45,137 $56,125
Thrift Plan 103,049 92,730 43,059
-------- -------- -------
$103,049 $137,867 $99,184
======== ======== =======
</TABLE>
9
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INCOME TAXES
Statement of Financial Accounting Standards Number 109, "Accounting for Income
Taxes," (SFAS 109), requires that deferred income taxes reflect the tax
consequences on future years of differences between the tax basis of assets and
liabilities and their financial reporting amounts. SFAS 109 generally allows
the recognition of deferred tax assets related to the anticipated benefit of net
operating loss carryforwards and future temporary differences, subject to
certain valuation allowance adjustments.
A valuation allowance is required by SFAS 109 if, based on the weight of
available evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Management concluded that valuation
allowances of $342,000 and $31,000 were appropriate at June 30, 1996 and July 2,
1995, based on forecasted operating results during the loss carryforward period.
The need for the valuation allowance is evaluated periodically by management and
it is reasonably possible that the allowance could change materially in the near
term.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CURRENT PROVISION
Federal Income Tax $ - $ - $ 18,000
-------- ------- --------
DEFERRED PROVISION
Federal Income Tax ( 3,000) 22,000 468,000
State Income Tax ( 1,000) 35,000 95,000
-------- ------- --------
( 4,000) 57,000 563,000
-------- ------- --------
Change in Valuation Allowance 311,000 31,000 -
-------- ------- --------
$307,000 $88,000 $581,000
======== ======= ========
</TABLE>
The provision for income taxes is different from the amount computed by applying
statutory rates to income before taxes. The reasons for the difference are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Federal Income Tax at Statutory Rate $( 69,000) $ 124,000 $457,000
State Income Taxes, net of federal benefit ( 13,000) 24,000 106,000
Change in Valuation Allowance 311,000 31,000 -
Other 78,000 ( 91,000) -
Increases in Taxes Resulting From -
Effect of Alternative Minimum Tax - - 18,000
--------- --------- --------
$ 307,000 $ 88,000 $581,000
========= ========= ========
</TABLE>
10
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INCOME TAXES - continued
As of June 30, 1996 and July 2, 1995, the tax effect of components of net
deferred tax assets and liabilities is as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
DEFERRED TAX ASSETS
Net Operating Loss Carryforward $ 577,000 $ 667,000
Alternative Minimum Tax Credit 60,000 60,000
State Investment Tax Credit 29,000 -
Accrued Interest on Subordinated Notes 611,000 569,000
Accrued Expenses 26,000 25,000
Expenses Payable to Related Parties 50,000 51,000
Allowances for Slow Moving Inventory 44,000 39,000
Allowances for Uncollectible Receivables 24,000 24,000
Other 4,000 15,000
DEFERRED TAX LIABILITIES
Depreciation ( 47,000) ( 78,000)
Other ( 9,000) ( 7,000)
---------- ----------
1,369,000 1,365,000
VALUATION ALLOWANCE 342,000 31,000
---------- ----------
NET DEFERRED TAX ASSETS AND LIABILITIES $1,027,000 $1,334,000
========== ==========
</TABLE>
In 1989 the company underwent a change in ownership pursuant to Internal Revenue
Code Section 382. Under this provision, the company's ability to utilize its
net operating loss carryovers and credit carryovers up to and prior to the date
of change in ownership is restricted. It is estimated that the company will be
able to use only approximately $21,000 of such losses per year over the fifteen
year carryover period.
In addition, the company has net operating losses generated subsequent to the
change in ownership which are available to reduce future taxable income and
income taxes which will expire in the following years:
YEAR ENDING
June 27, 2004 $ 126,000
July 2, 2006 1,378,000
---------
$ 1,504,000
=========
The company has an alternative minimum tax net operating loss carryforward of
approximately $1,150,000.
11
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
RELATED PARTY TRANSACTIONS
The company has a 10% subordinated note in the amount of $2,439,063 due to a
stockholder of its parent company. Interest expense totaled $249,328 for 1996,
$245,261 for 1995, and $479,476 for 1994 of which $127,375 was accrued at June
30, 1996. The company has unpaid management fees of $125,000 as of June 30,
1996 and July 2, 1995.
During 1995, the company transacted product sales of $2,300 with a company which
has common ownership with the company's parent.
MAJOR CUSTOMERS AND LABOR CONCENTRATION
Sales to two major customers accounted for 39%, 39% and 41% of the company's net
sales for 1996, 1995 and 1994, respectively. Receivables from these customers
accounted for 46% and 41% of total receivables as of June 30, 1996 and July 2,
1995.
The company's production and certain indirect employees are covered under a
collective bargaining agreement with Local 2014, International Brotherhood of
Electrical Workers, AFL-CIO. At June 30, 1996, approximately 77% of the
company's employees are covered by a collective bargaining agreement that
expires on April 7, 1997.
CONTINGENCIES
The company has been notified by the Rhode Island Department of Employment and
Training that it has been considered a "successor employer" for its employees
whose services were provided through an employee leasing arrangement from
January through June, 1993. The company is in the process of appealing the
state court decision in this matter and intends to vigorously pursue its legal
alternatives to successfully resolve this matter. The Department of Employment
and Training has assessed the company an additional $169,695 and $150,068 in
unemployment taxes as of June 30, 1996 and July 2, 1995, respectively, which has
been accrued by the company and is included in Accrued Expenses.
In 1989, the company was notified by the United States Environmental Protection
Agency (EPA) that they had been identified by the EPA as a potentially
responsible party (PRP) for clean-up costs of a hazardous waste site.
Approximately 59 other companies were also identified as PRP's of the site. On
January 30, 1992, the company entered into a de minimis settlement with the
Environmental Protection Agency in the amount of $157,648, of which $33,162 was
paid in each of the three years ended July 2, 1995. The remaining balance of
$33,162 is payable during fiscal year 1997.
The company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a materially adverse effect on the
company.
12
<PAGE>
VICTOR ELECTRIC WIRE & CABLE CORP.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SUBSEQUENT EVENT
On May 7, 1997, a buyer purchased all of the outstanding stock of the company's
parent, Victel, Inc. As a result of this transaction, the existing bank debt
was refinanced at the closing by means of the company entering into a new
working capital and term credit agreement with a financial institution. The
loan arrangement provides for a three-year revolving credit facility of up to
$3,550,000 drawable against a percentage of accounts receivable and inventory, a
$950,000 fully amortizing five year term loan and an equipment financing
facility of up to $500,000, also based upon a five year fully-amortizing
repayment schedule. All of such loans bear interest at a rate of prime plus
1.5%. The company's parent has guaranteed all of the refinanced debt.
Additionally, in conjunction with the sale of stock, the subordinated debt of
$3,439,063 was converted to additional paid-in capital.
13
<PAGE>
APPENDIX A (1)
Victor Electric Wire and Cable Corporation's
Unaudited Interim Balance Sheets as of March 31, 1997 and June 30, 1996,
along with the related Unaudited Interim Statements of Operations and
Accumulated Deficit for the three and nine months ended March 31, 1997
and 1996. Also included are the related Unaudited Interim Statements of
Cash Flow for the Nine Months ended March 31, 1997 and 1996.
<PAGE>
VICTOR ELECTRIC WIRE AND CABLE CORPORATION
INTERIM BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
--------- --------
<S> <C> <C>
Assets
Current Assets
Cash $ 8 $ 109
Accounts receivable 2,163 3,009
Inventories 1,394 1,039
Other current assets 167 179
------- -------
Total Current Assets 3,732 4,336
Equipment and Leasehold improvements 6,466 6,377
Accumulated Depreciation (5,646) (5,405)
------- -------
Net Equipment and Leasehold Improvements 820 972
Other Assets 86 113
Deferred Income Taxes 875 875
------- -------
Total Assets $ 5,513 $ 6,296
======= =======
Liabilities and Stockholder's Deficit
Current Liabilities
Accounts payable $ 1,467 $ 1,677
Accrued expenses 866 793
Other current liabilities 275 375
------- -------
Total Current Liabilities 2,608 2,845
------- -------
Long Term Liabilities
Revolving line of credit 2,281 2,785
Subordinated debt to related parties 2,439 2,439
Other long term liabilities 699 533
------- -------
Total Long-Term Liabilities 5,419 5,757
------- -------
Contingencies
Stockholder's Deficit
Preferred stock - $100 par value - 15,000 shares
authorizes; 60 shares issued 262 262
Accumulated Deficit (2,776) (2,568)
------- -------
Total Stockholder's Deficit (2,514) (2,306)
------- -------
Total Liabilities and Stockholder's Deficit $ 5,513 $ 6,296
======= =======
</TABLE>
See accompanying note
<PAGE>
VICTOR ELECTRIC WIRE AND CABLE CORPORATION
INTERIM STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales $ 3,327 $ 3,438 $11,483 $13,149
Cost of Sales 3,060 3,266 10,073 11,569
------- ------- ------- -------
Gross Profit 267 172 1,410 1,580
Selling, General and Administrative 394 444 1,223 1,420
------- ------- ------- -------
Income (Loss) From Operations (127) (272) 187 160
Other Income (Expense), net (116) 10 (393) (320)
------- ------- ------- -------
Income (Loss) Before Provision For Income Taxes (243) (262) (206) (160)
Provision for Income Taxes -- -- 1 1
------- ------- ------- -------
Net Income (Loss) (243) (262) (207) (161)
Accumulated Deficit - beginning of period (2,533) (1,957) (2,569) (2,058)
------- ------- ------- -------
Accumulated Deficit - end of period $(2,776) $(2,219) $(2,776) $(2,219)
======= ======= ======= =======
</TABLE>
See accompanying note
<PAGE>
VICTOR ELECTRIC WIRE AND CABLE CORPORATION
INTERIM STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
March 31
----------------------
1997 1996
---------- ---------
<S> <C> <C>
Reconciliation of Net Income (Loss) to Net Cash
Provided by Operating Activities
Net Income (Loss) $(208) $(161)
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Provided by Operating Activities -
Depreciation and Amortization 271 301
Changes in Operating Assets and Liabilities 549 712
----- -----
Net Cash Provided by Operating Activities 612 852
----- -----
Cash Flows from Investing Activities
Purchase of Equipment and Leasehold Improvements (89) (90)
----- -----
Cash Flows from Financing Activities
Increase in Bank Overdraft 166 410
Net Borrowings (Payments) on Line of Credit (504) (752)
Insurance of Senior Term Note -- 225
Payments of Senior Term Note (275) (586)
Payments Under Capital Lease Obligations (11) (12)
----- -----
Net Cash Used by Financing Activities (624) (715)
----- -----
Net Increase (Decrease) in Cash (101) 47
Cash - beginning of year (109) 32
----- -----
Cash - end of year $ 8 $ 79
===== =====
</TABLE>
See accompanying note
<PAGE>
VICTOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited condensed consolidated financial statements presented herein
have been prepared in accordance with the instructions to Form 10-QSB 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, 1997 and the results of operations for the
nine months ended March 31, 1997 and March 31, 1996. 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 audited financial statements included in this Form 8K/A for the
year ended December 31, 1996.
<PAGE>
Appendix B
The Company's Unaudited Pro-Forma Combining Condensed
Consolidated Balance Sheet as off March 31, 1997,
along with the related Unaudited Pro-Forma
Combining Condensed Consolidated
Statement of Operations for the
year ended December 31, 1996.
<PAGE>
Quadrax Corporation
-------------------
Pro-Forma Combining Condensed Consolidated Balance Sheet As of March 31, 1997
- --------------------------------------------------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
As Pro-Forma March 31, 1997
Victor Quadrax Combined Adjustments As Adjusted
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Cash $ 7,831 $ 2,523,697 $ 2,531,528 $ (720,000) (A) $ 1,811,528
Accounts receivable 2,163,396 913,797 3,077,193 3,077,193
Inventories 1,393,521 1,372,491 2,766,012 2,766,012
Other current assets 15,540 127,091 142,631 - 142,631
------------- ------------- ------------- ------------- -------------
Total current assets 3,580,288 4,937,076 8,517,364 (720,000) 7,797,364
------------- ------------- ------------- ------------- -------------
Property and equipment, net 819,603 2,978,638 3,798,241 2,750,000 6,548,241
- -
- - -
------------- ------------- ------------- ------------- -------------
Deferred income taxes 1,027,000 - 1,027,000 308,000 -
(1,335,000) -
Investment in Victor Corp. 720,000 (A) -
(720,000) (7) -
Other non-current assets 85,876 622,647 708,523 - 708,523
------------- ------------- ------------- ------------- -------------
Total assets $ 5,512,767 $ 8,538,361 $ 14,051,128 $ 1,003,000 $ 15,054,128
============= ============= ============= ============= =============
Notes payable, bank
working capital lines $ 2,280,794 $ 499,296 $ 2,780,090 $ - $ 2,780,090
Other current liabilities 2,922,131 2,143,684 5,065,815 (306,236) (8)
- - - (125,000) (1) 4,634,579
------------- ------------- ------------- ------------- -------------
Total current liabilities 5,202,925 2,642,980 7,845,905 (431,236) 7,414,669
Long-term debt, less current portion 384,908 318,330 703,238 - 703,238
Convertible debentures payable 3,960,000 3,960,000 3,960,000
Subordinated debt 2,439,063 - 2,439,063 (2,439,063) (1) -
------------- ------------- ------------- ------------- -------------
Total liabilities 8,026,896 6,921,310 14,948,206 (2,870,299) 12,077,907
------------- ------------- ------------- ------------- -------------
Stockholders' Equity
Common & preferred stock 262,190 313 262,503 (262,190) (7) 313
Additional paid-in capital - 69,181,603 69,181,603 2,750,000 (3)
(457,810) (7)
2,439,063 (1)
(1,335,000) (2) 72,577,856
-------------
Retained earnings (deficit) (2,776,319) (65,288,745) (68,065,064)
308,000 (6)
125,000 (1)
306,236 (8) (67,325,828)
-------------
Treasury stock and deferred charges - (2,276,120) (2,276,120) - (2,276,120)
------------- ------------- ------------- ------------- -------------
Total stockholders' equity (2,514,129) 1,617,051 (897,078) 3,873,299 2,976,221
------------- ------------- ------------- ------------- -------------
Total liabilities & equity $ 5,512,767 $ 8,538,361 $ 14,051,128 $ 1,003,000 $ 15,054,128
============= ============= ============= ============= =============
</TABLE>
The accompanying note is an integral part of this pro-forma combining
consolidated balance sheet.
1
<PAGE>
Quadrax Corporation
Pro-Forma Combining Condensed Consolidated Statement of Operations
------------------------------------------------------------------
For the Year Ended December 31, 1996
------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
As Pro-Forma December 31, 1996
Victor Quadrax Combined Adjustments As Adjusted
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 16,608,946 $ 3,567,567 $ 20,176,513 $ - $ 20,176,513
Cost of Sales 14,225,153 3,674,034 17,899,187 - 17,899,187
------------- ------------- ------------- ------------- -------------
Gross profit 2,383,793 (106,467) 2,277,326 - 2,277,326
------------- ------------- ------------- ------------- -------------
Selling, general, administrative
and research & development (1,674,634) (5,473,966) (7,148,600) 125,000 /(1)/ (7,023,600)
Restructuring costs - (1,325,000) (1,325,000) - (1,325,000)
Depreciation (394,286) (773,361) (1,167,647) (253,750) /(5)/ (1,421,397)
------------- ------------- ------------- ------------- -------------
Income (loss) from operations 314,873 (7,678,794) (7,363,921) (128,750) (7,492,671)
Interest expense (583,333) (1,880,774) (2,464,107) 243,906 /(4)/ (2,220,201)
------------- ------------- ------------- ------------- -------------
Income (loss) before
income taxes (268,460) (9,559,568) (9,828,028) 115,156 (9,712,872)
Income taxes (308,000) - (308,000) 308,000 /(6)/ -
------------- ------------- ------------- ------------- -------------
Net (loss) $ (576,460) $ (9,559,568) $(10,136,028) $ 423,156 $ (9,712,872)
============= ============= ============= ============= =============
</TABLE>
The accompanying note is an integral part of this pro-forma combining condensed
consolidated statement of operations.
3
<PAGE>
Quadrax Corporation
-------------------
Note to the Combined Condensed Consolidated Pro-Forma Balance Sheet as of
-------------------------------------------------------------------------
March 31, 1997 and Combined Condensed Consolidated Pro-Forma Statement of
----------------------------------------------------------------------------
Operations for the Year Ended December 31, 1996
-----------------------------------------------
The pro-forma combining condensed consolidated balance sheet at March 31,
1997 and the pro-forma statement of operations for the year ending December
31, 1996 present the pro-forma effects on the historical combined operating
results as if the combination of the combined entity were consummated as of
March 31, 1997 for the pro-forma Balance Sheet and January 1, 1996 for the
pro-forma Statement of Operations.
The pro-forma adjustments include:
(A) The initial cash investment to acquire Victel, Inc. (Victor Electric
Wire and Cable Corporation's Parent Company) in the amount of
$720,000.
(1) The contribution to capital by Victor's new parent company,
Quadrax Corporation, of the subordinated debt and other
liabilities payable by Victor to its former parent company,
Exeter L.P.
(2) The write-off of Victor's deferred income taxes in that no
benefit will accrue to the combined entity.
(3) The write-up of Victor's property and equipment by the amount of
$2,750,000 to reflect appraised value.
(4) The elimination of interest expense related to Victor's former
parent company debt which was contributed to capital.
(5) Additional depreciation expense incurred in 1996 by Victor
reflecting the write-up of fixed assets by Victor to appraised
value. The write up of fixed assets is being amortized over 8
years.
(6) The elimination of income tax expense in that no income taxes
would be due and payable after giving effect to the combined
entity.
(7) The elimination of Quadrax's investment in Victor of $720,000.
(8) The elimination of interest expense payable to Victor's former
parent company due to the contribution of capital of subordinated
debt by Victor's new parent as of March 31, 1997.
4
<PAGE>
Appendix C
The Company's Unaudited Pro-Forma Combining Condensed
Consolidated Balance sheet as of March 31, 1997,
along with the related Unaudited Pro-Forma Combining Condensed
Consolidated Statement of Operations for the three months
ended March 31, 1997.
<PAGE>
Quadrax Corporation
-------------------
Pro-Forma Combining Condensed Consolidated Balance Sheet As of March 31, 1997
-----------------------------------------------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
As Pro-Forma March 31, 1997
Victor Quadrax Combined Adjustments As Adjusted
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Cash $ 7,831 $ 2,523,697 $ 2,531,528 $ (720,000)/(A)/ $ 1,811,528
Accounts receivable 2,163,396 913,797 3,077,193 3,077,193
Inventories 1,393,521 1,372,491 2,766,012 2,766,012
Other current assets 11,540 127,091 138,631 - 138,631
------------ ------------ ------------ ------------ --------------
Total current assets 3,576,288 4,937,076 8,513,364 (720,000) 7,793,364
------------ ------------ ------------ ------------ --------------
Property and equipment, net 819,603 2,978,638 3,798,241
- - (317,188)/(5)/
- - - 2,750,000 /(3)/ 6,231,053
------------ ------------ ------------ ------------ --------------
Deferred income taxes 1,027,000 - 1,027,000 (1,027,000) (2) -
Investment in Victor Corp. - 720,000 /(A)/ -
- (720,000)/(6)/ -
Other non-current assets 85,876 622,647 708,523 - 708,523
------------ ------------ ------------ ------------ --------------
Total assets $ 5,508,767 $ 8,538,361 $ 14,047,128 $ 685,812 $ 14,732,940
============ ============ ============ ============ ==============
Notes payable, bank
working capital lines $ 2,280,794 $ 499,296 $ 2,780,090 $ - $ 2,780,090
Other current liabilities 2,918,131 2,143,684 5,061,815 (306,236)/(4)/
- - - (125,000)/(1)/ 4,630,579
------------ ------------ ------------ ------------ --------------
Total current liabilities 5,198,925 2,642,980 7,841,905 (431,236) 7,410,669
Long-term debt 384,908 318,330 703,238 - 703,238
Convertible debentures payable - 3,960,000 3,960,000 - 3,960,000
Subordinated debt 2,439,063 - 2,439,063 (2,439,063)/(1)/ -
------------ ------------ ------------ ------------ --------------
Total liabilities 8,022,896 6,921,310 14,944,206 (2,870,299) 12,073,907
------------ ------------ ------------ ------------ --------------
Stockholders' Equity
Common & preferred stock 262,190 313 262,503 (262,190)/(6)/ 313
Additional paid-in capital - 69,181,603 69,181,603 2,750,000 /(3)/
(457,810)/(6)/
2,439,063 /(1)/
(1,027,000)/(2)/ 72,885,856
------------
Retained earnings (deficit) (2,776,319) (65,288,745) (68,065,064) (317,188)/(5)/
125,000 /(1)/
306,236 /(4)/ (67,951,016)
------------
Treasury stock and deferred charges - (2,276,120) (2,276,120) - (2,276,120)
------------ ------------ ------------ ------------ --------------
Total stockholders' equity (2,514,129) 1,617,051 (897,078) 3,556,111 2,659,033
------------ ------------ ------------ ------------ --------------
Total liabilities & equity $ 5,508,767 $ 8,538,361 $ 14,047,128 $ 685,812 $ 14,732,940
============ ============ ============ ============ ==============
</TABLE>
The accompanying note is an integral part of this pro-forma combining
condensed consolidated balance sheet.
2
<PAGE>
Quadrax Corporation
Pro-Forma Combining Condensed Consolidated Statement of Operations
------------------------------------------------------------------
For the Three Months Ended March 31, 1997
-----------------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
As Pro-Forma March 31, 1997
Victor Quadrax Combined Adjustments As Adjusted
----------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 3,333,688 $ 649,501 $ 3,983,189 $ - $ 3,983,189
Cost of Sales 2,985,492 663,185 3,648,677 - 3,648,677
----------- ----------- ----------- ----------- --------------
Gross profit 348,196 (13,684) 334,512 - 334,512
----------- ----------- ----------- ----------- --------------
Selling, general, administrative
and research & development (385,164) (1,297,118) (1,682,282) - (1,682,282)
Depreciation (82,958) (198,254) (281,212) (63,438) /(5)/ (344,650)
----------- ----------- ----------- ----------- --------------
Income (loss) from operations (119,926) (1,509,056) (1,628,982) (63,438) (1,692,420)
Interest expense (122,933) (21,930) (144,863) 62,330 /(4)/ (82,533)
----------- ----------- ----------- ----------- --------------
Income (loss) before
income taxes (242,859) (1,530,986) (1,773,845) (1,108) (1,774,953)
Income taxes - - - - -
----------- ----------- ----------- ----------- --------------
Net (loss) $ (242,859) $(1,530,986) $(1,773,845) $ (1,108) $(1,774,953)
=========== =========== =========== =========== ==============
</TABLE>
The accompanying note is an integral part of this pro-forma combining
condensed consolidated statement of operations.
<PAGE>
Quadrax Corporation
-------------------
Note to the Combined Condensed Consolidated Pro-Forma Balance Sheet as of
-------------------------------------------------------------------------
March 31, 1997 and Combined Condensed Consolidated Pro-Forma Statement of
-------------------------------------------------------------------------
Operations for the Three Months Ended March 31, 1997
----------------------------------------------------
The pro-forma combining condensed consolidated balance sheet at March 31,
1997 and the pro-forma statement of operations for the three months ended March
31, 1997 present the pro-forma effects on the historical combined operating
results as if the combination of the combined entity were consummated as of
January 1, 1996.
The pro-forma adjustments include:
(A) The initial cash investment to acquire Victel, Inc. (Victor Electric
Wire and Cable Corporation's Parent Company) in the amount of $720,000.
(1) The contribution to capital by Victor's new parent company,
Quadrax Corporation, of the subordinated debt and other
liabilities payable by Victor to its former parent company, Exeter
L.P.
(2) The write-off of Victor's deferred income taxes in that no benefit
will accrue to the combined entity.
(3) The write-up of Victor's property and equipment by the amount of
$2,750,000 to reflect appraised value.
(4) The elimination of interest expense related to Victor's former
parent company debt which was contributed to capital.
(5) Additional depreciation expense incurred by Victor
resulting from the write-up of fixed assets by Victor to appraised
value. The write up of fixed assets is being amortized over 8
years.
(6) The elimination of Quadrax's investment in Victor of $720,000.
4
