<PAGE>   1
                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                           Washington, D. C.   20549

   
                                FORM 10-QSB/A-2
    

   
                                Amendment No. 2
    


[X]     Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934 For the period ended September 30, 1996

[ ]     Transition Report Pursuant to Section 13 or 15(d) of The Securities
        Exchange Act of 1934

For the transition period from                     to
                               -------------------    --------------------------

                      Commission File Number:     0-16052 
                                             ------------

                             Quadrax Corporation
--------------------------------------------------------------------------------
           (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                   <C>
             Delaware                                          05-0420158    
-------------------------------------                 --------------------------
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification Number)
</TABLE>

              300 High Point Avenue   Portsmouth, Rhode Island         02871
--------------------------------------------------------------------------------
                 (Address of principal executive offices)           (Zip Code)

                               (401) 683-6600
--------------------------------------------------------------------------------
            (Registrant's telephone number, including area code)

--------------------------------------------------------------------------------
  (Former name, former address and former fiscal year, if changed since last
                                    report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes x  No
                                              --    --

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.


<TABLE>
          <S>                                  <C>
          Class                                Outstanding at October 25, 1996
          -----------------------              -------------------------------
          Common Stock, par value              28,112,875 shares
          $.000009 per share
</TABLE>


                                      1
<PAGE>   2
                              QUADRAX CORPORATION


   
                            INDEX TO FORM 10-QSB/A-2
    



<TABLE>
<CAPTION>
      PART I - FINANCIAL INFORMATION                                                             PAGE
      <S>                                                                                       <C>
            Item 1      Condensed Consolidated Financial Statements


                        Condensed Consolidated Balance Sheets at September 30, 1996 and at
                        December 31, 1995                                                       3-4
                                                                                                
                        Condensed Consolidated Statements of Operations for the
                        three and nine months ended September 30, 1996 and
                        September 30, 1995                                                      5

                        Condensed Consolidated Statements of Cash Flows for the nine months
                        ended September 30, 1996 and September 30, 1995                         6-7

                        Notes to Condensed Consolidated Financial Statements                    8-9

            Item 2      Management's Discussion and Analysis of Financial Condition and
                        Results of Operations                                                   10-15


      PART II - OTHER INFORMATION


            Item 6      Exhibits and Reports on Form 8-K                                        16

            Signatures                                                                          17
</TABLE>





                                       2
<PAGE>   3
                              QUADRAX CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                   SEPTEMBER 30,                 DECEMBER 31,
                                                                       1996                          1995
                                                                --------------------        -------------------
 <S>                                                                  <C>                          <C>
 Current assets:
     Cash and cash equivalents, including $100,000 and
       $481,146 of restricted cash, respectively                      $     653,672                $ 2,613,555

     Accounts receivable, net of allowances for doubtful
       accounts of $24,000                                                1,161,336                  1,265,301
     Inventories                                                          1,755,050                  1,466,813

     Other current assets                                                   208,470                    134,197
                                                                --------------------        -------------------
                                          TOTAL CURRENT ASSETS            3,778,528                  5,479,866
                                                                --------------------        -------------------

 Property and equipment, at cost:

     Machinery and equipment                                              3,431,302                  3,319,881
     Office equipment                                                       900,224                    851,160
     Leasehold improvements                                               1,087,482                  1,071,532
     Construction-in-progress                                             1,284,389                          0
                                                                --------------------        -------------------
                                                                          6,703,397                  5,242,573
 Less accumulated depreciation and amortization                           3,455,004                  3,000,093
                                                                --------------------        -------------------
                                    NET PROPERTY AND EQUIPMENT            3,248,393                  2,242,480
                                                                --------------------        -------------------


 Goodwill, net of amortization of $5,927 at
     September 30, 1996                                                     112,626                    118,553

 Other assets                                                               289,626                    267,855

 License agreement, net of amortization of $210,000
     and $120,000, respectively                                             390,000                    480,000

 Deferred assets, net of amortization of $68,428 and
     $61,912, respectively                                                  233,452                    211,498
                                                                --------------------        -------------------
                                                  TOTAL ASSETS           $8,052,625                 $8,800,252 
                                                                ====================        ===================
                                                                                                               
</TABLE>


                            See accompanying notes.





                                       3
<PAGE>   4
                              QUADRAX CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

                      LIABILITIES AND STOCKHOLDERS' EQUITY


   
<TABLE>
<CAPTION>
                                                                     SEPTEMBER 30,              DECEMBER 31,
                                                                         1996                       1995
                                                                  --------------------        -------------------
 <S>                                                                 <C>                         <C>
 Current liabilities:
     Accounts payable                                                $        986,602            $       870,988
     Accrued expenses                                                       1,011,552                  1,200,779
     Notes payable to related party                                                 0                    300,000
     Notes payable                                                          1,017,362                  1,114,301
                                                                  --------------------        -------------------
                                       TOTAL CURRENT LIABILITIES            3,015,516                  3,486,068

 Long-term debt, less current portion                                         397,443                    356,034

 Convertible debentures payable                                                     0                  2,250,000
                                                                  --------------------        -------------------
                                               TOTAL LIABILITIES            3,412,959                  6,092,102
                                                                  --------------------        -------------------

 Stockholders' equity:
     Original convertible preferred stock                                                                      6
     Class A Series B convertible preferred stock                           2,334,000                          0
     Common stock                                                                 254                        160
     Additional paid-in capital                                            65,647,655                 58,288,953
     Retained earnings (deficit)                                          (61,183,327)               (54,198,191)
                                                                  --------------------        -------------------
                                                                            6,798,582                  4,090,928

 Less:

     Treasury stock, at cost                                               (1,091,969)                (1,043,009)
     Unearned compensation and deferred expenses                             (545,587)                  (339,769)
     Notes receivable for the exercise of stock options                      (521,360)                         0
                                                                  --------------------        -------------------
                                      TOTAL STOCKHOLDERS' EQUITY            4,639,666                  2,708,150

                                                                  --------------------        -------------------
                      TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $8,052,625                 $8,800,252
                                                                  ====================        ===================

</TABLE>
    


                            See accompanying notes.





                                       4
<PAGE>   5
   
                              QUADRAX CORPORATION
    

   
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
    



   
<TABLE>
<CAPTION>
                                       THREE MONTHS              THREE MONTHS             NINE MONTHS                NINE MONTHS
                                           ENDED                    ENDED                    ENDED                      ENDED
                                    SEPTEMBER 30, 1996        SEPTEMBER 30, 1995       SEPTEMBER 30, 1996        SEPTEMBER 30, 1995
                                   --------------------      --------------------     --------------------      --------------------
 <S>                                         <C>                    <C>                        <C>                      <C>  
 Revenue:
     Sales                                    $723,082                $1,160,994               $2,650,426                $3,470,059
     Interest income                            17,145                     9,941                   48,106                    19,301
     Other income                                6,393                         0                   50,338                         0
                                   --------------------      --------------------     --------------------      --------------------
                  TOTAL REVENUE                746,620                 1,170,935                2,748,870                 3,489,360
                                   --------------------      --------------------     --------------------      --------------------
 Expenses:
    Cost of goods sold                         918,666                   768,596                2,691,328                 2,526,224
    Research and development                   114,657                   215,640                  373,268                   426,881
    Selling, general and                     1,389,135                 1,517,521                4,046,958                 4,351,460
    administrative 
    Depreciation and amortization              191,017                   183,956                  561,056                   607,873
    Interest expense                            54,906                     3,482                  894,730                    12,895
    Reserve for restructuring costs                  0                 2,600,000                        0                 2,600,000
                                   --------------------      --------------------     --------------------      --------------------
                 TOTAL EXPENSES              2,688,381                 5,289,195             ($8,567,340)               $10,525,333
                                   --------------------      --------------------     --------------------      --------------------
                       NET LOSS           ($1,921,761)              ($4,118,260)             ($5,818,470)              ($7,035,973)
                                   ====================      ====================     ====================      ====================
      NET LOSS PER COMMON SHARE                ($0.08)                   ($0.29)                  ($0.26)                   ($0.53)
                                   ====================      ====================     ====================      ====================
        WEIGHTED AVERAGE COMMON
             SHARES OUTSTANDING             24,741,950                 4,189,979               22,576,236                13,392,893
                                   ====================      ====================     ====================      ====================
</TABLE>
    

   
                            See accompanying notes.
    





                                       5
<PAGE>   6
   
                              Quadrax Corporation
                     Consolidated Statements of Cash Flows
                Increase (Decrease) in Cash and Cash Equivalents
                                  (Unaudited)
    


   
<TABLE>
<CAPTION>
                                                                             Nine Months           Nine Months
                                                                                Ended                 Ended
                                                                         September 30, 1996     September 30, 1995
                                                                         ------------------     ------------------
 <S>                                                                            <C>                   <C>
 Cash flows from operating activities:
 Net loss                                                                       ($5,818,470)          ($7,035,973)
     Adjustments to reconcile net income to net cash used in operating
        activities:
        Depreciation & amortization of fixed assets                                 458,613               537,660
        Amortization of intangibles                                                 102,443                62,865
        Amortization of unearned compensation                                        79,182                61,070
        Amortization of deferred expense                                             15,000               191,430
        Common stock issued for expenses                                            875,131               529,864
        Write-off of goodwill                                                             0               685,504
        Effect on cash flows of changes in assets and liabilities:
           (Increase) decrease in receivables, inventories, prepaid
               expenses and other assets                                           (258,545)             (731,559)
           Increase (decrease) in officer payables, accounts payable
               and accrued expenses                                                (373,613)             (267,361)
                                                                                 -----------           -----------
                  Net cash used in operating activities                          (4,920,259)           (5,966,500)
                                                                                 -----------           -----------


 Cash flows from investing activities:
     Cash expenditures, net                                                      (1,460,824)             (374,969)
     Other tangible assets purchased                                                (50,241)                    0
     Payments for business acquired net of cash acquired                                  0               140,000
                                                                                 -----------           -----------
                  Net cash provided by (used in) investing activities            (1,511,065)             (234,969)
                                                                                 -----------             ---------

 Cash flows from financing activities:
     Proceeds from exercise of common stock options                                  27,042                25,300
     Net proceeds from sale of stock and warrants                                         0             5,569,162
     Issuance of debt                                                                39,850                     0
     Issuance of convertible debt, net of costs                                   1,471,372                91,334
     Issuance of convertible preferred stock, net of costs                        3,028,557             1,339,200
     Repayment of debt                                                              (95,380)              (60,000)
                                                                                 -----------           -----------
                  Net cash provided by financing activities                       4,471,441             6,964,996
                                                                                 -----------           -----------

 Net increase (decrease) in cash and cash equivalents                            (1,959,883)              763,527

 Cash and cash equivalents at beginning of period                                 2,613,555               382,721
                                                                                 -----------           -----------

 Cash and cash equivalents at end of period                                        $653,672            $1,146,248 
                                                                                 ===========           ===========
</TABLE>
    

   
                             See accompanying notes
    





                                       6
<PAGE>   7
                              QUADRAX CORPORATION


               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                           FOR THE NINE MONTHS ENDED
                   SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995



  Supplemental schedule of significant noncash transactions:

  1996:

          The Company issued 6,355,976 shares of its common stock in exchange
          for the cancellation of $3,916,666 of its convertible debentures.

          The Company issued 217,026 shares of its common stock for payment in
          full for $160,854 of accrued liabilities and expenses.

          The Company acquired 90,308 shares of common stock for the Treasury
          via the exercise of stock options.

          The Company issued 300,000 shares of its common stock for consulting
          services.

          The Company issued 1,355,132 shares of its common stock in exchange
          for the cancellation of $1,166,000 of its Series B Convertible
          Preferred Stock.

          The Company issued 522,738 shares of its common stock to the former
          shareholders of McManis Sports Associates, Inc. in settlement of a
          claim relating to the sale to the Company of all of the issued and
          outstanding shares of Common Stock of McManis Sports Associates, Inc.
          in 1994.


  1995:

          The Company assumed $750,000 of debt due its former chairman from
          Conagher & Co., Inc. for Conagher's purchase of the original
          preferred stock.

          The Company issued 1,489,946 shares of its common stock in exchange
          for the cancellation of $1,500,000 of its Series A Convertible
          Preferred Stock.





                                       7
<PAGE>   8
                              QUADRAX CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  (UNAUDITED)




1.  The unaudited condensed consolidated financial statements presented herein
    have been prepared in accordance with the instructions to Form 10-Q and do
    not include all of the information and note disclosures required by
    generally accepted accounting principles.  In the opinion of management,
    such condensed consolidated financial statements include all adjustments,
    consisting only of normal recurring adjustments, necessary to present
    fairly the Company's financial position as of September 30, 1996 and the
    results of operations for the nine months ended September 30, 1996 and
    September 30, 1995.  The results of operations for the nine month period
    ended September 30, 1996 may not be indicative of the results that may be
    expected for the year ending December 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 annual report to the Securities and Exchange Commission on
    Form 10-KSB for the year ended December 31, 1995.


2.  Debt

    Long-term debt consists of the following:

<TABLE>
<CAPTION>  
                                                          September 30,               December 31,
                                                               1996                       1995
                                                    --------------------           ---------------- 
 <S>                                                        <C>                        <C>
 Note payable - bank                                         $  732,000                 $  801,000
 Notes payable - former Lion shareholders                       331,493                    331,634
 Equipment financing notes payable                              101,312                     87,701
 Other non-interest bearing note                                250,000                    250,000
                                                    --------------------           ---------------- 
                                                              1,414,805                  1,470,335

 Less current maturities                                    (1,017,362)                (1,114,301)
                                                    --------------------           ---------------- 
                                                             $  397,443                 $  356,034
                                                    ====================           ================ 
</TABLE>                                            

Note Payable - Bank

The Company's wholly-owned subsidiary, Lion Golf of Oregon, Inc., an Oregon
corporation ("Lion Golf"), has a $1,000,000 revolving line of credit with its
bank.  The line of credit is secured by substantially all of Lion Golf's assets
and is guaranteed by the Company and the former majority shareholder of Lion
Golf.  The note was renewed January 2, 1996 and bears interest at 10.75% per
annum.  Loan advances are limited to 75% of "eligible accounts receivable" plus
45% of "eligible inventories" up to a maximum of $500,000, as such terms are
defined under the line of credit.  The Company's current outstanding balance
due on the line of credit is approximately $732,000.  The bank has indicated
that this line of credit when it expires on December 15, 1996 will not be
renewed.  The Company is currently exploring alternative financing arrangements
for its Lion Golf subsidiary to replace the current banking arrangement.





                                       8
<PAGE>   9

                              QUADRAX CORPORATION

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


    Notes Payable - Lion Shareholders

    Lion Golf has three unsecured notes bearing interest at the rate of 8% per
    annum, payable to its former shareholders.  These notes are subordinated to
    the bank credit line.  The first of the notes, for the principal amount of
    $270,000, has annual principal payments of $54,000 commencing March 31,
    1997.  These annual payments can be limited to the extent of Lion Golf's
    pretax profits as defined in the Purchase Agreement among the Company, Lion
    Golf, and Lion Golf's former shareholders dated December 29, 1995 (the
    "Purchase Agreement").  The second note for the principal amount of
    $50,200, has monthly principal payments of $2,400 until paid-in-full.  The
    third note is a demand note in the principal amount of $10,500.


3.  Shareholders Equity

    The Company's capital shares are as follows:


   
    Original Convertible Preferred Stock, $0.01 par value, -0- shares
    authorized at September 30, 1996 and 1,172 shares authorized at December
    31, 1995.  There were 318 shares of the Original Convertible Preferred
    Stock issued and outstanding at December 31, 1995.  Subsequent to December
    31, 1995, all shares of Original Convertible Preferred Stock were converted
    into common stock which were then redeemed by the Company for a nominal
    consideration.
    

   
    Class A, Series B Convertible Preferred Stock, $0.01 par value, 7,000
    shares and -0- shares were authorized at September 30, 1996 and December
    31, 1995, respectively.  There were 2,334 shares and -0- shares of Series B
    Convertible Preferred Stock issued and outstanding at September 30, 1996,
    and December 31, 1995, respectively.  During the fiscal quarter ended
    June 30, 1996, the Company paid a dividend in kind of Common Stock of
    $1,166,666 to the Series B Preferred Stock shareholders.
    

    Common Stock, $.000009 par value, 90,000,000 shares were authorized at
    September 30, 1996 and December 31, 1995.  27,663,451 and 17,772,812 shares
    were outstanding at September 30, 1996 and December 31, 1995, respectively.


4.  Earnings Per Share


    For the fiscal quarters ending September 30, 1996 and September 30, 1995,
    the net loss per share was computed using the weighted number of average
    shares outstanding during the respective periods.  Common Stock equivalents
    did not enter into the computation because the impact would have been
    anti-dilutive.

   
5.  Accounting Changes
    

   
    Previously the Company accounted for the conversion of convertible
    debentures, which are issued with conversion rights at a discount to 
    market, as sale of securities and treated the discount as a cost of capital.
    The Company has restated its financial statements for the year ended 
    December 31, 1995 to reclassify the discount as interest and record it as 
    a cost of borrowing.  The effect on income for the year ended 
    December 31, 1995 was $1,109,589 in additional interest expense.
    



                                       9
<PAGE>   10
      ITEM II

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


    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 Form 10-Q 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.

    Competition.  As the Company enters the sporting goods and recreational
equipment market, it faces competition from other materials used in the
manufacture of such goods and equipment, and from other suppliers of
thermoplastic composites.  The Company's success in entering this market will
depend largely upon its ability to displace other materials currently in use.
If the Company is unsuccessful in creating a niche within the sporting goods
and recreational equipment market by convincing the market of the strategic
benefits of thermoplastic composites, the Company would be adversely affected.
Many of the companies whose product offerings compete with the Company's
product offerings have significantly greater financial, manufacturing and
marketing resources than the Company.

    Development of Distribution Channels.  Success in the sporting goods and
recreational equipment market will also hinge on the Company's ability to
develop distribution channels, including both retailers and distributors, and
there can be no assurance that the Company will be able to effectively develop
such channels.

    Continued Investment.  Maintaining the Company's technological and
strategic advantages over its competitors 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.

    Technological Advances.  The Company's ability to maintain a competitive
edge by making technological advances ahead of its competition will have a
significant impact on the success of the Company.

    Outside Financing.  The Company believes that it will need significant
outside financing over the next five years.  There can be no assurance that it
will be able to obtain such financing.


Results of Operations for Quarter Ended September 30, 1996 as Compared to
Quarter Ended September 30, 1995

    The Company's net loss from operations for the quarter ended September 30,
1996 ("1996 third quarter") of $1,922,000 was approximately $2,196,000 less
than its net loss from operations of approximately $4,118,000 for the quarter
ended September 30, 1995 ("1995 third quarter").

    Total revenue recognized during the 1996 third quarter was $746,620
compared to $1,170,935 in the 1995 third quarter, a decrease of $424,315.  An
increase in sales of approximately $236,000 for the 1996 third quarter for the
Company's Consumer Products Group, which includes Lion Golf, was more than
offset by a decline in sales for the





                                       10
<PAGE>   11
Company's Advanced Materials Systems division ("AMS") of approximately
$684,000. The decrease in the AMS division reflects the completion of the
defense programs late in 1995 with no corresponding increase in consumer
product shipments in 1996.  The AMS 1996 third quarter sales are thermoplastic
tape of approximately $78,000 and development contract revenues of $45,000.

    Interest income increased by approximately $7,000 in the three months ended
September 30, 1996, as compared to the same period one year ago because of the
greater amount of money the Company had on deposit in interest bearing paper in
1996.

    Other income increased approximately $6,000 in the 1996 third quarter.  The
primary reason for this increase is that the Company was the beneficiary of
debt forgiven in a financing transaction for the purchase of equipment.

    Cost of goods sold for the third quarter of 1996 of $918,666 increased
approximately $150,000 in the three months ended September 30, 1996 vis-a-vis
the three months ended September 30, 1995.  The reasons for this increase are
the reduction in gross margins in 1996 due to the Company's change in revenue
source from defense related products to consumer oriented products, along with
inventory product write-downs at the Company's Lion Golf subsidiary.

    Research and development expenses were $114,657 in the 1996 third quarter,
which is approximately $101,000 lower than in the 1995 third quarter.  The
reason for this decrease is the Company's significant downsizing of its
research and development program.  The majority of the Company's remaining
research and development expenditures have been dedicated to the development of
a production facility for golf shafts in Vista, California by the Company's AMS
Division.  These development costs were capitalized in the 1996 third quarter.
Production will not commence at this facility until the fourth quarter of 1996.

    Selling, general and administrative expenses decreased by approximately
$128,000 to $1,389,135 in the three months ended September 30, 1996 over the
comparable period a year ago.  The primary reason for this decrease is that
advertising and trade show expenditures are down, particularly, in the golf
area.

    Depreciation and amortization expense increased by approximately $7,000 to
$191,017 in the third quarter of 1996, an insignificant fluctuation.

    Interest expense for the third quarter of 1996 increased from approximately
$3,500 to $54,906.  This reflects the Company's 1996 subordinated debt along
with the financing costs associated with the financing leases which the Company
entered into during the past year.  Lastly, interest on the Lion Golf line of
credit is reflected in the 1996 third quarter, which was not present in the
1995 third quarter.

    Expenses related to restructuring costs decreased $2,600,000 to $-0- in the
1996 third quarter.  The Company established this reserve in 1995 after
evaluating the carrying value of its assets and determining that certain of its
intangibles, in particular goodwill associated with the acquisition of McManis
Sports Associates, were overvalued.  In addition, the Company decided that it
would not use the services of various executives.  The restructuring costs in
the 1995 third quarter relate to the reserve for these costs.


Results of Operations for Nine Months Ended September 30, 1996 as compared to
Nine Months Ended September 30, 1995





                                       11
<PAGE>   12
   
    The Company's net loss from operations for the nine months ended September
30, 1996 ("1996 period") of $5,818,470 was approximately $1,218,000 less than
its net loss from operations of approximately $7,036,000 for the nine months
ended September 30, 1995 ("1995 period").  The decrease in net loss was caused
primarily by the absence in the 1996 period of a reserve for restructuring
costs which existed in the 1995 period.  The decrease in net loss was partially
offset, however, by the reduction in gross margins (resulting from the 
Company's transition from defense related products to consumer oriented 
products) and an increase in interest expense.
    

    Total revenue recognized during the 1996 period was $2,748,870 compared to
$3,489,360 in the 1995 period.  This decrease of approximately $740,000 from
the 1995 period resulted from the Company shipping approximately $1,947,000 in
product to its defense related customers in 1995, while in the 1996 period,
there were inconsequential defense related sales. This decline in defense
related sales was somewhat offset by an increase in consumer product sales of
$1,426,000 in the 1996 period.

    Interest income in the 1996 period was approximately $48,000, an increase
of $29,000 from the 1995 period, due to the Company having a greater amount of
money invested in interest bearing paper in 1996.

    Other income increased by approximately $50,000 in the 1996 period.  This
increase resulted primarily from Lion Golf's settlement of a product trademark
dispute with another golf equipment manufacturer pursuant to which Lion Golf
received a lump-sum settlement of $40,000.

    Costs of goods sold increased approximately $165,000 in the 1996 period to
$2,691,328.  The reason for this increase is the reduction in gross margins in
1996 due to the Company's change in revenue source from defense related
products to consumer oriented products.

    Research and development expenses were $373,268 in the 1996 period, a
decrease of approximately $54,000 as compared to the 1995 period.  The reason
for this decrease is that a significant portion of the Company's product
development costs in 1996, particularly in the second and third quarters of
1996, have been capitalized into the Vista, California golf shaft manufacturing
facility.

    Selling, general and administrative expenses decreased by approximately
$304,000 from $4,351,460 to $4,046,958 in the 1996 period.   This decrease is
the result of a decline in advertising and trade show expenditures for the
Wimbledon and McManis product lines.

    Depreciation and amortization expense decreased by approximately $46,000 to
$561,056 in the 1996 period, primarily due to the one-time write-off in the
1995 period of machinery and equipment no longer utilized by the Company.

   
    Interest expense for the 1996 period was $894,730, while in the 1995 period
it was $12,895, an increase of approximately $882,000.  This increase was
caused by the Company's payment of interest on Lion Golf's working capital line
of credit in 1996 in addition to interest paid on the Company's convertible 
debentures including imputed interest of approximately $714,000 for the 
discount that convertible debenture investors received from the Company in
private placement transactions.
    

    Expenses related to restructuring costs decreased $2,600,000 to $-0- in the
1996 period.  The Company established this reserve in 1995 after evaluating the
carrying value of its assets and determining that certain of its intangibles,
in particular goodwill associated with the acquisition of McManis Sports
Associates, were overvalued.  In addition, the Company decided that it would
not use the services of various executives.  The restructuring costs in the
1995 period relate to the reserve for these costs.





                                       12
<PAGE>   13

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

    At September 30, 1996, the Company had total assets of $8,052,625 and
stockholders' equity of $4,639,666.  Current assets were $3,778,528 and current
liabilities were $3,015,516 resulting in working capital of approximately
$750,000 which is a decrease of approximately $1,200,000 from December 31,
1995, when working capital was approximately $2 million.  This decrease in
working capital resulted from the Company's continued losses from operations in
the first nine months of calendar 1996.

    Cash and cash equivalents decreased by approximately $1,960,000 from
$2,613.555 at December 31, 1995 to $653,672 at September 30, 1996.  This
decrease is due to the Company's use of approximately $4,920,000 to fund its
operations and approximately $1,461,000 to prepare and equip its golf shaft
manufacturing facility in Vista, California and to purchase hockey stick
manufacturing equipment from Vega, U.S.A.  These $6,381,000 in expenditures
were partially offset by the Company's raising of additional capital of
approximately $4,500,000 in the 1996 period.

    The Company's total accounts receivable, net of allowance for doubtful
accounts at September 30, 1996, were $1,161,336.  Accounts receivable decreased
by approximately $104,000.  The primary reasons for this decrease are that the
Company collected its trade receivables from its defense customers which were
outstanding at December 31, 1995, and the decline in revenues in 1996.  $4,000
of the $1,161,336 of accounts receivable is related to defense business.  The
balance is related to commercial and consumer business.  None of the defense
contracting receivables were considered past due, while $140,000 of the
commercial and consumer receivables could be considered doubtful.  Of this past
due amount, approximately $110,000 relates to the Wimbledon tennis receivables,
with respect to which the Company was in litigation on November 15, 1996.
Subsequent to November 15, 1996, the Company settled this dispute which
resulted in an over accrual of $75,000 for Wimbledon related liabilities. The
over accrual will be classified as an allowance for doubtful accounts in
periods subsequent to September 30, 1996.

    Inventories increased by approximately $288,000.  This increase is due to
the build-up of product for the Company's consumer sales.  The Company's
inventory products write-down at September 30, 1996, for its Consumer
Products/Lion Golf Division was approximately $230,000. This write-down was
based on a physical inventory taken by the Company at September 30, 1996, along
with a review for obsolete products included in the inventory at that date.

    Other current assets increased by approximately $74,000 between September
30, 1996 and December 31, 1995.  This increase was primarily caused by the
Company's renewal of various insurance policies as of September 30, 1996, and
the prepayment of the premium.

    Notes payable decreased by approximately $77,000.  This reflects the
Company's decreased usage of its  line of credit with the Bank of the Cascades.

    Accounts payable and accrued expenses decreased approximately $74,000 from
$2,072,000 at December 31, 1995. This decrease was caused by payments made to
trade vendors and to former employees in 1996.  The employee payments were
charged against the reserve for restructuring costs accrued as of December 31,
1995.

    Notes payable to related parties decreased $300,000 to zero at September
30, 1996.  The reason for this decrease is that the Company paid Richard
Fisher, its former chairman and chief executive officer, in full in February
1996 pursuant to the December 1995 settlement agreement.





                                       13
<PAGE>   14
    Long term debt increased approximately $41,000 to $397,443 at September 30,
1996.  The reason for this increase is the new equipment financing leases the
Company entered into in 1996.


    Convertible debentures decreased to $-0- at September 30, 1996 from
$2,250,000 at December 31, 1995.  This reflects the debenture holder's
conversion of its debentures to common stock during the nine months ended
September 30, 1996.

    In the first nine months of fiscal 1996, capital expenditures were
approximately $1,511,000.  These capital expenditures are an integral part of
the Company's program to construct a golf shaft manufacturing line, a
thermoplastic tape manufacturing line, and a hockey stick manufacturing line.
These equipment acquisitions are expected to be paid for through equipment
leasing programs and from funds raised through the placement of the Company's
securities.

    The Company generated revenues of approximately $2,750,000 in the first
nine months of fiscal 1996, and as a result, operations were not a source of
funds or liquidity for the Company.  The Company continues to depend on outside
financing for the cash required to fund its operations.  Net funds provided by
financing activities in the first nine months of fiscal 1996, after giving
effect to the repayment of debt, totaled approximately $4,500,000 during the
period ended  September 30, 1996.

    The Company believes that funds provided by operations and cash on hand
(approximately $650,000 at September 30, 1996), will be sufficient to meet the
Company's near-term cash requirements.  In addition, the Company believes that
it will be able to raise additional monies from the sale of convertible
securities prior to the end of fiscal 1996 and during fiscal 1997 of at least
$5,000,000.  There can be no assurance, however, that the Company will be able
to raise additional funds, and that even if raised, that such funds will be
sufficient to satisfy the Company's cash requirements for the remainder of 1996
and 1997.

    The Company received a going concern qualification from its outside
independent auditors on its fiscal 1995 audited financial statements.  While
the Company believes it has made and will continue to make substantial progress
towards achieving profitability, the results to date have not yet been
sufficient to negate the auditors' qualifications. During this transition,
management continues to redirect the Company's focus from the defense related
products to consumer oriented products.  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 such time as 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.

    The Company believes that it can achieve viability and profitability by
continuing to expand sales of consumer sporting goods products, as well as
other products that employ its thermoplastic materials.  Management believes
that the Company's acquisition of Lion Golf in late 1995 will further this
strategy because of Lion Golf's manufacturing expertise and access to new
distribution channels, such as golf and tennis pro shops.  Management also
expects sales of composite based lacrosse sticks and continuing efforts to
develop and market other consumer products should contribute to the Company's
viability and profitability.  There can be no assurances that the Company's
transition to consumer oriented products will succeed to the extent necessary
to make the Company profitable.  Nor can there be any assurances that Lion
Golf's manufacturing expertise and access to distribution





                                       14
<PAGE>   15
channels will be sufficient for the Company to overcome institutional
resistance to the use of thermoplastic composite materials in sporting
equipment products, or to the intense competition in this field.

    There is no assurance that the Company's efforts to achieve viability and
profitability or to raise money will be successful or that the forecasts will
be achieved.  It is difficult for the Company to predict with accuracy the
point at which the Company will be viable and profitable or whether it can
achieve viability or profitability at all, due to the difficulty of predicting
accurately the amount of revenues that the Company will generate, the amount of
expenses that will be required by its operations, and the Company's ability to
raise additional capital.





                                       15
<PAGE>   16

                              QUADRAX CORPORATION



PART II - OTHER INFORMATION



      Item 6 - Exhibits and Reports on Form 8-K

            (a)  Exhibits
         
                 None since Form 10-KSB for fiscal year ended December 31,
                 1995 was filed on April 12, 1996.
         
         
                 27.1       Financial Data Schedule 
                            (Electronic Filing Only)
         
         
         
            (b)  Reports on Form 8-K
 
                 The following Current Reports on Form 8-K were filed with the
                 Securities and Exchange Commission since August 14, 1996, the
                 date the Company's Form 10-QSB for the quarter ending June 30,
                 1996 was filed.

                 -   On September 10, 1996, the Company filed a Form 8-K with
                     respect to its press release announcing that it had signed
                     a contract with Taylor Made Golf Company to develop new
                     golf products made with Quadrax's thermoplastic composite
                     materials.


                 -   On October 4, 1996, the Company filed a Form 8-K with
                     respect to its press release announcing a reduction in the
                     exercise price of its Class C Warrants from $4.53 to $3.33
                     and an increase in the number of shares of the Company's
                     common stock purchasable upon the exercise of each Class C
                     Warrant, from 3.18 to 4.3262 shares.





                                       16
<PAGE>   17
                              QUADRAX CORPORATION

                                   SIGNATURES


  Pursuant to the requirements of the Securities Exchange Act of 1934, the
  registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized.





                                                     QUADRAX CORPORATION
                                                     -------------------
                                                         (Registrant)
                                                     
                                                     
                                                     
                                                     
                                                     
   
     February 13, 1997                          /s/ James J. Palermo           
--------------------------------------          -------------------------------
           (Date)                               James J. Palermo, Chairman and
                                                Chief Executive Officer
    
                                              
                                              
                                              
   
     February 13, 1997                          /s/ Edward A. Stoltenberg      
--------------------------------------          --------------------------------
          (Date)                                Edward A. Stoltenberg, Senior 
                                                Vice President, and Chief
                                                Financial Officer (Principal
                                                Accounting Officer)
    





                                       17