<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1997
File No. 333-34905
=====================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
------------------
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:
JOSEPH A. SMITH, ESQ.
EPSTEIN BECKER & GREEN, P.C.
250 PARK AVENUE, 12TH FLOOR
NEW YORK, NY 10177
(212) 351-4924 (VOICE)
(212) 351-4928 (FAX)
---------------------
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]
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. [ ]
=======================================
(Cover continued on next page)
=======================================
<PAGE>
(Cover continued from previous page)
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Proposed Proposed
Title of each class of maximum maximum
securities to be Amount to be offering price aggregate Amount of
registered registered(2) per share (1) offering price(1) registration fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 8,734,346 $0.50 $4,367,173 $1,323.39
$.000009 par value
- ---------------------------------------------------------------------------------------------------------
Common Stock, 10,000 $0.75 $ 7,500 $ 2.27
$.000009 par value
- ---------------------------------------------------------------------------------------------------------
Common Stock, 1,000,000 $0.50 $ 500,000 $ 151.52
$.000009 par value
- ---------------------------------------------------------------------------------------------------------
TOTAL 9,744,346 $4,874,673 $1,477.18*
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Previously paid.
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon a price of $.50 per share, which was
the average of the high and low prices of the Common Stock, as reported on
The NASDAQ Small Cap Market on September 2, 1997.
(2) Pursuant to Rule 416, there also are being registered an indeterminate
number of shares of the registrant's common stock, par value $.000009 per
share, which may become issuable pursuant to the antidilution provisions of
the underlying convertible securities.
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 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
2
<PAGE>
PRELIMINARY PROSPECTUS FOR SEC STAFF REVIEW ONLY
9,744,346 SHARES
QUADRAX CORPORATION
COMMON STOCK
This Prospectus relates to 9,744,346 shares of common stock, par value
$.000009 per share (the "Common Stock" or "Shares") of Quadrax Corporation, a
Delaware corporation ("Quadrax" or the "Company"), to be offered and sold from
time to time for the accounts of the Selling Securityholders set forth herein
(the "Selling Securityholders"). All of the 9,744,346 shares of Common Stock
being offered hereby are being registered at the Company's expense pursuant to
contractual obligations of the Company incurred in connection with private
placements of its convertible debentures, common stock purchase warrants, and
Common Stock under the Securities Act of 1933, as amended.
Up to 8,634,346 shares are being offered by two of the Selling
Securityholders who have agreed, pursuant to a contractual obligation, to
purchase up to $3,500,000 aggregate principal amount of the Company's
Convertible Debentures due 1999 (the "Debentures"). Such Selling Securityholders
have purchased and the Company has issued $2,250,000 principal amount of such
Debentures (the "Initial Debentures") through October 14, 1997. The number of
shares issuable upon conversion of the Initial Debentures is determined by
dividing the principal amount of the Initial Debenture being converted by 75% of
the average closing bid price for the Company's Common Stock for the ten (10)
trading days immediately preceding the date of conversion of the Debenture (the
"Market Price"), subject to the overall limitation noted below. The Selling
Securityholders may, at their option, convert the Initial Debentures into shares
of Common Stock beginning on the earlier of October 3, 1997 and the date of this
Prospectus. The Initial Debentures are due on August 4, 1999.
One of the Selling Securityholders is obligated to purchase the remaining
Debentures (the "Additional Debentures") in a series of tranches (as directed by
the Company by ten (10) days prior written notice) commencing thirty (30) days
after the date of this prospectus. The Additional Debentures will bear interest
at a rate of 4% rather than 8%, and shall each be due two years from their
respective dates of issuance. The Additional Debentures issued in each tranche
will be not less than $50,000 nor in excess of $200,000 principal amount, and
must be purchased by the Selling Securityholder subject only to certain external
market conditions. Management of the Company believes all of the Additional
Debentures will be purchased by the Selling Securityholder within six (6)
months from the date of the initial closing. The Company is obligated to
require the Selling Securityholder to purchase at least an additional $1,250,000
principal amount of Additional Debentures by August 4, 1998, or else the Company
must issue the Selling Securityholder a warrant to purchase 300,000 shares of
the Company's Common Stock on terms identical to the 700,000 share warrant
described below which was issued at the initial closing. The number of shares
issuable upon conversion of the Additional Debentures will be determined by
dividing the principal amount of the Additional Debentures being converted by
the lesser of (i) 75% of the Market Price on the date(s) of issuance of such
Additional Debentures, or (ii) 100% of the Market Price on the date of issuance
of the first Initial Debenture, or $0.472 per share. The Additional Debentures
will be convertible immediately upon issuance.
In no event may the Initial Debentures and the Additional Debentures, taken
together, convert into a number of shares of Common Stock which exceeds 20% of
the number of shares of Common Stock outstanding on the date of the first
closing (43,171,731 shares). In the event that the market price of the Company's
Common Stock is insufficient to permit conversion of the Debentures within this
overall limit, the Company will be required to repay any unconverted balance in
cash, in accordance with the terms of the Debenture, and, if such overall limit
were reached prior to the Company borrowing the entire $3,500,000 principal
amount of the commitment, the Company would be unable to take down the entire
funding and be required to attempt to seek other sources of financing. The
Selling Securityholders were granted demand registration rights for the shares
of Common Stock issuable upon conversion of the
<PAGE>
Debentures and the exercise of warrants described below.
This Prospectus also covers the offering by the Selling Securityholder who
purchased the first two Initial Debentures of up to 1,000,000 shares of Common
Stock that are issuable upon the exercise of warrants, 700,000 of which the
holder of the Debentures received together with the first Initial Debenture, and
300,000 of which may be issuable to the Selling Securityholder under
circumstances described above. The exercise price of both of the warrants is
$0.50 per share. The warrants expire on the third anniversary date of their
issuance.
The Company is also registering for resale 100,000 shares of Common Stock
issued to a financial consultant of the Company and 10,000 shares issuable upon
the exercise of Warrants issued in a private transaction, exercisable at a price
of $0.75 per share.
The Company will receive no part of the proceeds of sales from the offering
of Shares by the Selling Securityholders. The Company could receive up to
$507,500 from the exercise of warrants held by the Selling Securityholders. The
Company has no knowledge of any Selling Securityholder actually intending to
sell any Shares.
The shares of Common Stock may be sold by the Selling Securityholders in
underwritten transactions, in ordinary brokerage transactions, in transactions
in which brokers solicit purchases, in negotiated transactions, or in a
combination of such methods of sale, at market prices prevailing at the time of
sale, at prices relating to such prevailing market prices or at negotiated
prices. See "Plan of Distribution." All expenses of registration incurred in
connection with this offering are being borne by the Company, but all selling
and other expenses incurred by the Selling Securityholders will be borne by such
Selling Securityholders. None of the Common Stock offered pursuant to this
Prospectus has been registered prior to the filing of the Registration Statement
of which this Prospectus is a part.
On September 2, 1997, the closing price for the Common Stock as quoted on
the NASDAQ SmallCap Market, under the symbol "QDRX," was $0.50 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 7
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 OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES 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 October ___, 1997.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVAILABLE INFORMATION.................................................... 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 4
THE COMPANY.............................................................. 5
RISK FACTORS............................................................. 7
USE OF PROCEEDS.......................................................... 14
SELLING SECURITYHOLDERS.................................................. 14
PLAN OF DISTRIBUTION..................................................... 15
DESCRIPTION OF SECURITIES................................................ 17
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES........................... 18
LEGAL MATTERS............................................................ 18
EXPERTS.................................................................. 18
</TABLE>
3
<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 with the Commission 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. 333-34905) 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 (file no. 0-16052) 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, 1996, as amended.
(2) The Company's Quarterly Reports on Form 10-QSB for the quarters ended
March 31, 1997, as amended and June 30, 1997 as amended.
(3) The Company's Current Reports on Form 8-K dated May 7, 1997 and filed
July 18, 1997, as amended, and May 31, 1997.
(4) 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 amended, including any amendment or report
filed for the purpose of updating such description.
(5) The Company's Proxy Statement in connection with the Annual Meeting of
Stockholders held May 19, 1997.
(6) 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
4
<PAGE>
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, telephone (401) 683-6600.
THE COMPANY
The Company, which prior to fiscal year 1995 was a development stage
company, produces two distinct lines of products. The Company designs,
develops, fabricates and sells fiber-reinforced thermoplastic polymer composite
materials ("Quadrax Composites") and products manufactured from Quadrax
Composites. The Company also, through its Victor Electric Wire & Cable Corp.
("Victor") subsidiary, manufacturers and sells electric power cordsets and
interconnect cables, primarily for original equipment manufacturers of small
appliances.
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. Structural substrates
are composite materials made from continuous fibers (such as carbon, Kevlar, or
fiberglass), as opposed to composite materials made from chopped fibers which
tend to produce a weaker material. The Company believes that Quadrax
Composites' functional advantages over other structural substrates include high
strength-to-weight ratios, chemical stability in a variety of ambient conditions
(imperviousness to rust, rot or reaction with most commonly molding techniques),
virtually unlimited shelf life without special storage or handling requirement,
ease and safety of manufacture using modified conventional heat and compression
molding techniques and recyclability. In addition, the Company believes that
Quadrax Composites are tougher and less brittle than traditional thermoset
plastics such as epoxies and polyesters.
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. The Company believes that opportunities for
thermoplastics do not currently exist in the defense and aerospace markets, but
if attractive opportunities arise in the future, the Company will pursue them.
The Company acquired the Victor subsidiary in May 1997. Victor is a
vertically-integrated manufacturer of electric power cordsets and interconnect
cables, primarily for original equipment manufacturers of small appliances.
Victor manufactures its cordsets by drawing raw copper rods into fine wire, and
then stranding such fine wire into heavier cables of varying thicknesses
depending on customer specifications. The stranded cables are insulated with a
PVC plastic and rubber compound, and then molded to plugs to create the finished
product. Every component except blades (prongs) and insulating compound,
consisting of PVC plastic and rubber, is manufactured by Victor at its plant.
5
<PAGE>
Victor produces a wide variety of cordsets which are all produced in
response to a specific customer order. Victor sells its cordsets to
approximately 150 customers. Approximately 60% of Victor's sales are to
nationally recognized manufacturers of small consumer appliances.
The Company is organized in a holding company structure, operating through
two wholly owned subsidiaries: Quadrax Advanced Materials Systems, Inc. and
Victor. It also wholly owns and operates Quadrax Sports, Inc. as a marketing
company.
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 1996, as they did for fiscal 1995, reflecting the
Company's history of losses and its continued dependence on outside financing to
provide the funds 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.
6
<PAGE>
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, 1996, the
Company incurred a cumulative net loss from continuing operations of
approximately $63,758,000. During the fiscal years 1996, 1995, 1994 and 1993,
the Company incurred net loss from continuing operations of approximately
$9,560,000, $10,108,000, $11,517,000, and $5,713,000 respectively.
Other than through its Victor subsidiary, which was acquired in May, 1997,
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, but has yet to achieve significant penetration of any
consumer market. During fiscal years 1996, 1995, 1994, and 1993, the Company's
total revenues were approximately $3,600,000, $4,635,000, $860,000, and
$1,555,000, respectively. Of these revenues for 1996, 1995, 1994, and 1993,
approximately 92%, 33%, 46%, and 28%, respectively, were generated from consumer
markets. The Company estimates that approximately 95% of its total revenue for
fiscal year 1997, other than revenues of its Victor subsidiary, will be
generated from consumer markets. 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
1996 and 1995, 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. The Company expects that its audited financial
statements for fiscal 1997 will similarly contain a "going concern"
qualification.
DEPENDENCE ON NEW PRODUCTS
The Company historically has marketed its products, prior to the
acquisition of the Victor subsidiary, 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.
7
<PAGE>
Although the Company has entered into several joint development and
exclusive manufacturing contracts with companies such as Taylor Made Golf
Company and Spinergy, Inc., to sell goods in the consumer sporting goods market,
the contracts are contingent on the Company being able to meet contractual
specifications such as performance, weight and appearance standards, 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 consumer 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.
CAPITAL REQUIREMENTS
The Company has not achieved profitability in any fiscal quarter and has
been required to raise substantial amounts of equity 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 production of finished goods, it will
continue to be dependent on outside financing sources. The Company is precluded
from receiving any dividends or distributions of cash from its Victor subsidiary
under the terms of Victor's senior secured credit facility. Accordingly, any
future profits from Victor will not be a source of operating capital for
Quadrax's Quadrax Composites business.
From its incorporation in March 1986 to date, the Company has raised a
total of approximately $54.8 million in equity capital. So far, in fiscal 1997,
the Company has raised $5.45 million from the private placement of convertible
debentures and will raise up to an additional $1.25 million from the sale of the
Additional Debentures during the next four (4) months if needed for operations.
In fiscal years 1996, 1995, and 1994, the Company raised approximately $6.2
million, $9.2 million, and $5.9 million, respectively, through the private
placement of the Company's stock and convertible debt. Management believes that
the $5.45 million raised in February 1997 and August and October 1997 from the
sale of its convertible debentures, together with the $1.25 million which may be
raised by the sale of the Additional Debentures if the conditions precedent to
receiving such funds continue to be met, and cash provided by revenues, will be
sufficient to meet the Company's cash requirements for the next three (3)
months. The Company may, however, continue to seek sources of outside financing.
Management expects the Company's capital needs to be less in 1998 than in 1997
due to significant capital expenditures in 1997, and than in 1996 and 1995
because the Company has resolved and paid for the financial settlements with its
former chairman, Mr. Hayton, and its founder and former chief executive officer,
Mr. Fisher.
8
<PAGE>
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 agreement with the Selling Securityholders
provides that the Company may not offer or sell any Common Stock or securities
convertible into Common Stock for a period of 120 days following the issuance of
the last Additional Debenture, without the prior written consent of the
purchaser. Accordingly, the Company may be subject to significant liquidity
problems in the first quarter of 1998.
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 major production contracts to date, all of which
were defense related. Those contracts were with the Lockheed Aeronautical
Systems Company for thermoplastic biaxial tape, EAR Special Composite Company
for submarine sound dampening tiles, and United Defense, L.P., for thermoplastic
materials. 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 small sales and marketing force.
While initial efforts to break into the consumer markets have been successful,
insofar as the Company has already produced and delivered to the marketplace
limited quantities of tennis rackets, shoe lasts, golf shafts, lacrosse sticks,
hockey sticks and bicycle seat posts, wheels and handlebars, 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.
RAW MATERIALS AVAILABILITY AND COMMODITY PRICING
The copper, plastic and rubber used to create the insulating compound used
by the Victor subsidiary as raw materials and the fibers and plastic resins used
in the production of Quadrax Composites are subject to substantial price
fluctuations. These industries are cyclical in nature and prices for such raw
materials are influenced by a number of factors beyond the control of the
Company, including general economic conditions and competition. While
management expects that there will continue to be an abundance of copper and
insulating compound for use in the production of Victor's electric power
cordsets, there can be no assurance that adequate quantities will always be
available or that prices Victor may be required to pay for raw materials will
allow the Victor subsidiary to operate at a profit. Carbon fiber, a key raw
material for Quadrax Composites, is in short supply, although the Company
expects additional production capacity to come on line in 1998, based upon
public announcements of plans to increase carbon fiber production by several
manufacturers, including Aldila, Mitsubishi Rayon/Grafil, Toho Rayon, Hexcel
Corporation and Zoltek.
9
<PAGE>
NO LONG-TERM AGREEMENTS WITH SUPPLIERS OR CUSTOMERS AND DEPENDENCE ON
SIGNIFICANT SUPPLIERS AND CUSTOMERS
The Company is dependent on third party relationships with several
suppliers of the raw materials necessary to its business. While the Victor
subsidiary has long-term supply arrangements for approximately 50% of its
projected copper requirements for the following 12-18 months in the form of
purchase orders issued to copper suppliers, Victor does not presently have any
long-term supply agreements with its suppliers of plastic and does not
anticipate the execution of any long-term agreements with these suppliers in the
future. Management believes that it has alternative sources of supply available
to it in the event that its requirements change or its current suppliers are
unable or unwilling to fulfill its needs. Nevertheless, there can be no
assurance that alternative suppliers will be available upon terms compa rable to
its existing arrangements.
Victor also does not presently have any long-term agreements with its
customers and does not anticipate the execution of any long-term agreements in
the future. During the year ended December 31, 1996, Victor's two largest
customers each accounted for more than 10% of total sales, with sales to both
customers totalling 35% of total sales. The Victor subsidiary's existing
operations and plans for the future growth anticipate the continued existence of
relationships with its current customers.
SEASONALITY; FLUCTUATIONS IN QUARTERLY RESULTS
The Victor subsidiary's business is seasonal as its customers place the
majority of their orders with Victor in May through September so that the
customers receive the electric power cordsets in time to utilize them in the
manufacture of goods to be sold by such customers during the year-end holiday
buying season. Accordingly, net revenues for Victor are typically strongest in
the second and third quarters. As Victor's profitability significantly depends
on sales made in the second and third quarters, Victor's operations could be
materially adversely affected by an economic downturn in any second or third
quarter. Net revenues in other quarters are generally lower and vary
significantly as a result of customers' requirements for new types of electric
power cordsets and other factors. There can be no assurance that the Victor
subsidiary will achieve consistent profitability on a quarterly or an annual
basis.
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 management believes that 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.
10
<PAGE>
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.
The industry in which the Victor subsidiary competes is also highly
competitive. Victor is ISO 9002 certified, and competes with other companies
that are also ISO 9002 certified, many of which are larger and better financed
than Victor, and have significantly greater manufacturing and marketing
resources than does Victor. Victor's domestic competitors include Belden,
Leviton and Komar. There are also numerous overseas competitors. While
management believes that Victor's long-established reputation for quality and
reliable delivery are attractive features to potential customers, there can be
no assurance that Victor can capture an adequate customer base to sustain
profitability, or that other companies will not provide superior products in
both price and quality.
NO ASSURANCE OF PROTECTION OF 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 to the Company 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
11
<PAGE>
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. In addition, the Company
has entered into an employment contract with John A. McQuade, the Company's Vice
President of Administration which expires on December 31, 1998. The loss of the
services of a key employee could have a material adverse effect on the Company's
business and financial condition. The Company has not obtained, and does not
currently plan to obtain, "key-man" insurance on any of its executives. 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.
NEW CHIEF FINANCIAL OFFICER
The Company appointed a new Chief Financial Officer, Brooks R. Herrick, in
August 1997. Mr. Herrick is a Certified Public Accountant with a Master of
Business Administration from Boston College and a Master of Science in Taxation
from Bentley College. From 1993 - 1996, Mr. Herrick was the Vice President of
Finance/Corporate Controller of Amtrol, Inc., West Warwick, Rhode Island, a
manufacturer of water systems that was listed on The Nasdaq National Market
before its acquisition by another company. From 1989 - 1993, Mr. Herrick was a
Key Financial Executive at Damon Corp., a clinical laboratory company listed on
the New York Stock Exchange. Prior to 1989, Mr. Herrick worked as Vice
President, Administration and Treasurer of Carlson Metalcraft Company, Inc.,
which he co-owned, and practiced public accounting in a firm bearing his name,
after early experience with Touche Ross & Company (now Deloitte & Touche,
L.L.P.)
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
$2,250,000 principal amount of Debentures which were issued in August and
October 1997 were converted into shares of the Company's Common Stock based on
the closing price of the Company's Common Stock on The Nasdaq SmallCap Market on
August 22, 1997, approximately 6,000,000 shares of Common Stock would be
issuable, 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 approximately 43,200,000 shares are outstanding
as of the date of this Prospectus. 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.
12
<PAGE>
ENVIRONMENTAL REGULATION
Federal, state and local environmental laws apply to the activities of the
Company and to the products it produces. Violations of statutes, regulations or
environmental permit requirements, even if unintentional, can result in
significant fines, costs, revocation of required licenses or permits or
requirements for remedial work. The Company's present and planned activities
are, or may become, subject to regulation under various federal, state and local
environmental laws and regulations, including laws and regulations that may be
adopted in the future. Such regulations may materially adversely affect the
Company's existing or planned operations. Any failure of the Company to comply
with the requirements of these environmental laws and regulations, even if
unintentional, could give rise to liabilities, penalties or fines which could
have a material adverse effect on the business or financial condition of the
Company.
PRODUCT LIABILITY AND OTHER CLAIMS
Sales of Quadrax Composites and parts manufactured therefrom, and sales of
electric power cordsets manufactured by the Victor subsidiary may expose the
Company to liability for substantial damages in the event of accident or injury
shown to have been caused by defective materials. The Victor subsidiary is
subject to product liability litigation on a recurring basis from persons
suffering shocks from electrical appliances. Management believes that its
limited product liability insurance is currently adequate for sales of Quadrax
Composites and parts manufactured therefrom, and the broader product liability
insurance maintained by the Victor subsidiary is currently adequate for sales of
Victor's electric power cordsets, 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
for sales of Quadrax Composites and parts manufactured therefrom as shipments to
commercial markets increase. There can be no assurance that any of the
aforementioned coverage can be maintained over time or increased if necessary,
or if maintained or increased, will be effective to insulate the Company's
assets from such claims or, if such coverage is available, that it will be
available on terms that are economically acceptable to the Company.
UNIONIZED EMPLOYEES
At June 30, 1997, the Victor subsidiary employed 225 full time employees
who are represented by the International Brotherhood of Electrical Workers.
Victor and the union executed a new three-year collective bargaining agreement
in late April 1997. There can be no assurance that Victor will be able to renew
such collective bargaining agreement after its expiration, or that such renewal
will be on terms as favorable as those currently in existence. In addition,
Victor's operations could be materially adversely affected in the event a strike
is called by the union for an extended period of time.
VOLATILITY OF STOCK PRICE; DEPRESSIVE EFFECT OF FUTURE SALES OF COMMON STOCK
The trading price of the Common Stock has been subject to wide fluctuations
for a number of reasons, including the financial difficulties and subsequent
cessation in 1991 of market-making activities by its former principal market
maker and changes in control of the Company in 1994 and 1995. In addition, the
stock market has from time to time experienced extreme price and volume
fluctuations that particularly affected the market price for many technology
companies and that often have been unrelated to operating performance of these
companies. These broad market fluctuations. may adversely affect the market
price of the Common Stock. In addition, future sales by the Company
13
<PAGE>
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
All proceeds from any sale of Shares offered by the Selling Securityholders
will be received by the Selling Securityholders and not by the Company. The
proceeds to the Company from the exercise of all of the warrants would be
$507,500. Such proceeds, if any, will be used for general corporate purposes.
SELLING SECURITYHOLDERS
9,744,346 shares are being offered for resale by certain shareholders of
the Company. Up to 8,634,346 of those shares are issuable upon conversion by
the holder of up to $3,500,000 aggregate principal amount of Debentures. Up to
1,000,000 shares are issuable upon exercise of warrants that are held by or are
issuable to the holder of the Debentures. 100,000 shares are being offered for
the account of a Selling Securityholder which is a financial consultant of the
Company, and 10,000 shares of Common Stock issuable upon the exercise of
warrants issued to a finder exercisable at $0.75 per share. All 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
Securityholders").
The following table sets forth certain information with respect to the
Selling Securityholders for whom the Company is registering the Common Stock for
resale to the public, including: (i) the principal amount of Debentures owned by
each Selling Securityholder, (ii) the maximum number of shares issuable upon
conversion of the Debentures, (iii) the number of shares issuable upon exercise
of warrants, (iv) the percentage of class owned (assuming the maximum number of
shares were issued upon conversion of Debentures or exercise of Warrants); and
(v) the maximum number of shares offered by each Selling Securityholder
(assuming the maximum number of shares were issued upon conversion). The
Company has no knowledge of the intentions of any Selling Securityholder to
actually sell any of the shares listed under the columns "Maximum Shares
Issuable Upon Conversion" or "Shares Owned." There are no material relationships
between any of the Selling Securityholders and the Company other than as
disclosed below.
14
<PAGE>
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OF MAXIMUM SHARES OTHER MAXIMUM
DEBENTURE ISSUABLES UPON SHARES PERCENTAGE SHARES
SELLING SECURITYHOLDER Owned Conversion Owned of Class Offered(3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sovereign Partners, $1,500,000 4,000,000(2) 1,000,000(4) 4.90%(5) 4,000,000
L.P.
Dominion Capital Fund 2,000,000 4,634,346(3) 4.90%(5) 4,634,346
Jesup & Lamont -- -- 100,000 * 100,000
Securities
Corporation
Jeffrey Taylor -- -- 10,000(4) * 10,000
-----------------------------------------------------------------------------------
TOTAL $3,500,000 8,634,346 1,110,000 9,744,346
</TABLE>
Ownership is less than one percent of class.
(1) No information is given with respect to beneficial ownership after the
offering because the principal amount of Debentures that will be
converted into Common Stock, as well as the number of shares issuable
upon conversion, is indeterminate.
(2) Assumes conversion of 100 percent of the principal amount of the
Debentures and issuance of the maximum number of shares issuable upon
conversion thereof, based on the presumed conversion price at August
22, 1997. The actual number of shares is determined by dividing the
principal amount of the Debentures into 75% of the average closing bid
price of the Common Stock during the ten (10) trading days immediately
preceding the date of conversion as to the Initial Debenture and the
lesser of 75% of such ten-day average closing bid price or $0.472 as
to the Additional Debentures, subject to a maximum issuance of
8,634,346 shares of Common Stock. Any unconverted principal amount of
such Debenture would be required to be repaid in cash.
(3) Assumes conversion of 100 percent of the principal amount of the
Debentures and issuance of the maximum number of shares issuable upon
conversion thereof, based on the presumed conversion price at August
22, 1997.
(4) Issuable upon exercise of warrants to purchase Common Stock.
(5) Sovereign Partners, L.P. and Dominion Capital Fund have each
undertaken not to acquire beneficial ownership of more than 4.9% of
the Company's Common Stock.
The information concerning the Selling Securityholders may change from time
to time and will be set forth in Supplements to this Prospectus.
PLAN OF DISTRIBUTION
The purpose of this Prospectus is to permit the Selling Securityholders, if
they desire, to offer and sell up to 9,744,346 Shares (the "Selling
Securityholder Shares") at such times and at such places as the Selling
Securityholders choose.
15
<PAGE>
The decision to convert the Debentures into shares, to exercise the
warrants, or to sell any shares, is within the sole discretion of the holders
thereof. There can be no assurance that any of the Debentures will be converted
or any of the warrants will be exercised, or any shares will be sold by the
Selling Securityholders.
The distribution of the Selling Securityholder Shares may be effected from
time to time in one or more transactions. Any of the Selling Securityholder
Shares may be offered for sale, from time to time, by the Selling
Securityholders, or by permitted transferees or successors of the Selling
Securityholders, 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 Securityholder 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 acts 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 Securityholder Shares will be set forth in a Prospectus Supplement.
In connection with the distribution of the Selling Securityholder Shares or
otherwise, the Selling Securityholders 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 Securityholders. The Selling Securityholders may also sell Common
Stock short and redeliver the shares to close out such short positions. The
Selling Securityholders 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
Securityholder 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 Securityholders may also pledge the
Selling Securityholder 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 Securityholder 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 Securityholders or their underwriters, dealers or agents may
sell the Selling Securityholder 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 Securityholders 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
Securityholder 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 Securityholder 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 Regulation M under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or unless
otherwise permitted under Regulation M, the Selling Securityholders will not
engage in any stabilization activity in connection
16
<PAGE>
with the Company's securities, will furnish each broker or dealer engaged by the
Selling Securityholders 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.
The Company will not receive any proceeds from any sales of the Selling
Securityholder Shares, but will receive the proceeds from the exercise, if any,
of the warrants held by the Selling Securityholders, which proceeds, if any,
will be used for general corporate purposes.
In connection with the registration by the Company of the Selling
Securityholder Shares, 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 $20,000.
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,
$.000009 par value per share. As of August 1, 1997, there were 43,171,731
shares of Common Stock issued and outstanding and held of record by
approximately 1,100 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 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. There are currently no shares of Class A
Preferred Stock issued and outstanding.
17
<PAGE>
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.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Epstein Becker & Green, P. C., 250 Park Avenue, New York, New York
10177.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-KSB for the years ended December 31, 1995 and
December 31, 1996, 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.
The financial statements of Victor appearing in the Company's Current
Report on Form 8-K dated May 7, 1997 as amended, for the years ended June 30,
1995 and June 30, 1996, have been audited by Joseph Decosimo and Company,
independent auditors, as set forth in its report thereon included therein and
incorporated herein by reference. Such 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.
18
<PAGE>
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.
9,744,346 SHARES OF
COMMON STOCK
QUADRAX CORPORATION
October ___, 1997
19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
Item 14. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
Registration Fee $ 1,477
Printing Expenses $ 1,000
Blue Sky Fees and Expenses $ 1,500
Legal Fees and Expenses $12,000
Accounting Fees and Expenses $ 2,000
Transfer Agent Fees $ --
Miscellaneous 1,000
-------
TOTAL $18,977
</TABLE>
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.
ITEM 16. EXHIBITS
The following documents are filed as exhibits to this Registration
Statement:
2.1 Securities Purchase Agreement dated August 4, 1997 between the Company and
Sovereign Partners, L.P., as amended August 22, 1997*
2.2 Amendment No. 2 to Securities Purchase Agreement dated October 8, 1997.
20
<PAGE>
4.1 Specimen Common Share Certificate/1/
4.2 Form of Convertible Debenture Due August 4, 1999 *
4.3 Form of Additional Debenture *
4.4 Form of Warrant issued August 4, 1997 *
5.1 Opinion of Epstein Becker & Green, P.C. [to be filed by amendment]
23.1 Consent of Livingston & Haynes, P.C.
23.2 Consent of Joseph Decosimo and Company
23.3 Consent of Epstein Becker & Green, P.C. (see Exhibit 5. 1)
24 Power of Attorney *
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.
- ---------------
/1/ Filed as an Exhibit to the Company's Registration Statement on Form
S-1, File No. 33-14275 and incorporated herein by reference.
* Previously filed. 21
<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: October 22, 1997
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.
<TABLE>
<S> <C> <C>
/s/ James J. Palermo Chairman of the Board of October 22, 1997
- ---------------------------------- Directors, and Chief
James J. Palermo Executive Officer (Principal
Executive Officer)
/s/ Brooks R. Herrick Executive Vice President October 22, 1997
- ---------------------------------- and Chief Financial Officer
Brooks R. Herrick (Principal Accounting and
Financial Officer)
William G. Conway* Director October 22, 1997
- ----------------------------------
William G. Conway
John W. Jepson* Director October 22, 1997
- ----------------------------------
John W. Jepson
Sven Kraumanis* Director October 22, 1997
- ----------------------------------
Sven Kraumanis
Alan Milton* Director October 22, 1997
- ----------------------------------
Alan Milton
Eugene L. Scott* Director October 22, 1997
- ----------------------------------
Eugene L. Scott
</TABLE>
/s/ James J. Palermo
* By: ----------------------------------
James J. Palermo,
Attorney-in-fact
22
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- ------- ----------- ----
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2.1 Securities Purchase Agreement dated August 4, 1997 between the Company
and Sovereign Partners, L.P., as amended August 22, 1997*
2.2 Amendment No. 2 to Securities Purchase Agreement dated October 8, 1997.
4.1 Specimen Common Share Certificate/1/*
4.2 Form of Convertible Debenture Due August 4, 1999*
4.3 Form of Additional Debenture*
4.4 Form of Warrant issued August 4, 1997*
5.1 Opinion of Epstein Becker & Green, P.C. [to be filed by amendment]
23.1 Consent of Livingston & Haynes, P.C.
23.2 Consent of Joseph Decosimo and Company
23.3 Consent of Epstein Becker & Green, P.C. (see Exhibit 5. 1)
24 Power of Attorney*
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/1/ Filed as an Exhibit to the Company's Registration Statement on Form
S-1, File No. 33-14275 and incorporated herein by reference.
* Previously filed.
<PAGE>
AMENDMENT NO. 2 TO
SECURITIES PURCHASE AGREEMENT
BETWEEN
QUADRAX CORPORATION AND SOVEREIGN PARTNERS, L.P.
This Amendment No. 2 dated October 8th, 1997 to Securities Purchase
Agreement dated as of August 4, 1997, as amended on August 22, 1997, is entered
into between Quadrax Corporation (the "Company") and Dominion Capital Fund, as
assignee of Sovereign Partners, L.P. ("Buyer") with respect to the following
facts. All terms used herein which are not defined herein shall have the
meanings set forth in the Securities Purchase Agreement.
1. The Company and the Buyer are the parties to the Securities Purchase
Agreement.
2. The Buyer has agreed to purchase and the Company has agreed to sell a
further $750,000 principal amount Initial Debenture as of the date hereof,
notwithstanding that the Company's registration statement on Form S-3 (File No.
333-34905) has not yet been declared effective.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Company will issue and sell to Buyer, and Buyer will purchase from
the Company, a $750,000 principal amount Initial Debenture, in the form attached
to the Securities Purchase Agreement as Annex I, for a price of $750,000.
2. The Buyer's commitment to purchase Additional Debentures pursuant to
Section 4(j) of the Securities Purchase Agreement shall be reduced from
$2,000,000 to $1,250,000.
3. The Conversion Rate for all of the Initial Debentures, including those
sold to Sovereign Partners, L.P. (which shall have an aggregate principal amount
of $2,250,000 upon closing of the sale referred to in Section 1 hereof) shall be
Seventy-Five Percent (75%) of the Market Price on the Conversion Date, and the
Conversion Rate for all of the Additional Debentures shall be the lesser of (a)
75% of the Market Price on the Additional Closing Date or (b) 100% of the Market
Price on the date of the issuance of the first Initial Debenture.
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4. All other terms and conditions of the Securities Purchase Agreement
are hereby ratified and confirmed, except as expressly modified herein.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 as of
the date set forth above, being duly authorized to do so.
QUADRAX CORPORATION DOMINION CAPITAL FUND
By:________________________
James J. Palermo, C.E.O. By:_____________________________
Mark Valentine, Agent
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion by reference in this Registration Statement of
Quadrax Corporation on Form S-3 for the registration of 9,744,346 shares of its
common stock of our report dated March 14, 1997, (which contained an explanatory
paragraph with respect to the ability to continue as a going concern) appearing
in the Prospectus, which is part of such Registration Statement, and to the
reference to us under the caption "Experts" in such Prospectus.
/s/ Livingston & Haynes, P.C.
Livingston & Haynes, P.C.
Wellesley, Massachusetts
October 22, 1997
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the caption "Experts" in this
Registration Statement on Form S-3 and to the incorporation by reference therein
of our report, dated August 23, 1996, except for the notes payable and
subsequent events footnotes , as to which the date is May 7, 1997, with respect
to the financial statements of Victor Electric Wire & Cable Corp. included in
Quadrax Corporation's current report on Form 8-K dated May 7, 1997, filed with
the Securities and Exchange Commission.
/s/ Joseph Decosimo and Company, LLP
JOSEPH DECOSIMO AND COMPANY, LLP
Cincinnati, Ohio
October 22, 1997
