U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: DECEMBER 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(D) OF THE
EXCHANGE ACT
For the transition period from ______________ to _______________
Commission file number 000-17454
NOXSO CORPORATION
(Exact name of small business issuer as specified in its charter)
VIRGINIA 54-1118334
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
19 MAPLE LANE, RHINEBECK, NEW YORK 12572
(Address of principal executive offices)
(845) 266-4858
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the last practicable date:
1,000,000 SHARES OF COMMON STOCK, $0.01 PAR VALUE, AS OF DECEMBER 31, 2000
Transitional Small Business Disclosure Format (check one); Yes No X
----- -----
Exhibit index on page 10 Page 1 of 11 pages
NOXSO CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, June 30, 2000
2000
(Unaudited)
Cash $ 1,958 $ 1,958
Recoverable Preference Payments - 20,258
Funds Held By Attorney In Escrow 1,000 98,152
-------------------------------
Current Assets 2,958 120,368
-------------------------------
Total Assets $ 2,958 $ 120,368
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities $ 47,417 $ 81,152
-------------------------------
47,417 81,152
-------------------------------
Amounts Due To Shareholders 13,608 -
Common Stock, $.01 Par Value, 20,000,000 Shares Authorized, 1,000,000
Shares Outstanding 10,000 10,000
Paid In Capital 29,216 29,216
Treasury Stock - -
Retained Deficit (97,283) -
-------------------------------
Total Stockholders' Equity (Deficit) (44,459) 39,216
-------------------------------
Total Liabilities and Shareholders' Equity $ 2,958 $ 120,368
===============================
See Notes To Unaudited Consolidated Financial Statements
2
NOXSO CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
Revenue $ - $ - $ - $ -
-----------------------------------------------------------
Legal and Accounting 82,052 57,198 89,541 57,198
Corporate Expenses 1,816 28 8,607 56
-----------------------------------------------------------
83,868 57,226 98,148 57,254
-----------------------------------------------------------
Reimbursement for Amounts
Previously Disbursed - - 865 -
Interest Income - 95 - 238
-----------------------------------------------------------
- 95 865 238
-----------------------------------------------------------
Net (Loss) $ (83,868) $ (57,131) $ (97,283) $ (57,016)
===========================================================
(Loss) Per Common Share $ (0.08) $ (0.00) $ (0.10) $ (0.00)
===========================================================
Average Shares Outstanding 1,000,000 15,383,468 1,000,000 15,383,468
===========================================================
See Notes To Unaudited Consolidated Financial Statements
3
NOXSO CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
Cash Flows From Operating Activities:
Net Loss $ (83,868) $ (57,131) $ (97,283) $ ($57,016)
Adjustments to reconcile net loss to net cash used by
operating activities:
Change in Current Assets 110,787 - 117,410
Change in Current Liabilities (33,735) - (33,735)
Change in Amounts Due Shareholders 6,816 - 13,608
-----------------------------------------------------------
- (57,131) - (57,016)
-----------------------------------------------------------
Cash Flows From Investing Activities: - - - -
-----------------------------------------------------------
Cash Flows From Financing Activities: - 265,000 - 265,000
-----------------------------------------------------------
- -
Net Change in Cash - 207,869 - 207,984
Cash at Beginning of Period 1,958 21,558 1,958 23,720
-----------------------------------------------------------
Cash at End of Period $ 1,958 $ 229,427 $ 1,958 $ 231,704
===========================================================
Cash Payments For Interest - - - -
===========================================================
Cash Payments For Taxes - - - -
===========================================================
See Notes To Unaudited Consolidated Financial Statements
4
NOXSO CORPORATION
FORM 10-QSB - DECEMBER 31, 2000
NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited, condensed, consolidated financial statements for the
three and six month periods ended December 31, 2000 and 1999 have been prepared
in accordance with the instructions for SEC Form 10-QSB and, accordingly, do not
include all disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of the management of NOXSO
Corporation ("Company"), all adjustments, consisting of normal recurring
accruals considered necessary for a fair presentation, have been included.
Interim unaudited financial results should be read in conjunction with the
audited financial statements included in the Company's Annual Report on Form
10-KSB for the fiscal year ended June 30, 2000.
The results of operations for the three and six months ended December 31, 2000
are not necessarily indicative of the operating results to be expected for the
full fiscal year ending on June 30, 2001.
2. OTHER MATTERS
As described in Note 3 to the consolidated financial statements accompanying the
Company's Annual Report on Form 10-KSB, in 1997 a bankruptcy proceeding was
commenced against the Company. In December 1999, the Bankruptcy Court issued an
order (the "Order") confirming the Company's Second Amended Plan of
Reorganization under Chapter 11 of the Bankruptcy Code. The Company was
authorized to transfer the corporate entity and to separately transfer its
assets.
The proceeds from these transfers were used for the distributions made pursuant
to the Second Amended Plan of Reorganization, which were in full and final
satisfaction, settlement, release and discharge as against the Company, of any
and all Claims and Interests of any nature whatsoever that arose before December
2, 1999. In connection with such distributions, Equity Interests based upon
ownership of Existing Securities or rights to acquire Existing Securities,
including without limitation vested and non-vested warrants, options, preemption
rights or other rights, were cancelled on the Consummation Date (May 25, 2000),
and the Equity Interests received nothing on account of those interests. A
motion for a final decree in the bankruptcy case is anticipated in the first or
second quarter of 2001. The accrual of additional legal expenses and expenses
incurred in connection with completing the bankruptcy case in the quarter ending
on December 31, 2000 has substantially exhausted the Company's net assets;
accordingly, following a final decree in the bankruptcy case, virtually no funds
will remain to be distributed to creditors.
The consummation date of the Order was effective May 25, 2000, whereupon the
Company, as a corporate entity, recorded the transactions on its books to give
effect to the terms of the Order. These transactions comprised the elimination
of fixed assets (which had been fully reserved), recording the expected recovery
of preference payments, recording of liabilities not subject to compromise, the
liquidation of prepetition liabilities and net shareholder's equity, and the
recapitalization of the Company pursuant to the Order.
Following the consummation date of May 25, 2000, the Company, through the
corporate entity, continues to exist as a reorganized entity.
As discussed in Note 4 to the consolidated financial statements accompanying the
Company's Annual Report on Form 10-KSB, continuation of any business of the
reorganized entity is dependent on the Company's ability to achieve successful
future operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
NOXSO Corporation was incorporated in Virginia on August 28, 1979. Until June
1997, the Company was principally engaged in developing, testing, and marketing
a process of dry post-combustion emission control technology which used a
regenerable sorbent to remove a high percentage of the pollutants which cause
"acid rain" and ground level ozone from flue gas generated by burning fossil
fuel.
On February 6, 1997, Olin Corporation ("Olin"), FRU-CON Construction Company
("FRU- CON") and Industrial Rubber & Safety Products, Inc. ("Industrial Rubber")
filed an involuntary petition in bankruptcy against the Company in the United
States Bankruptcy Court in the Eastern District of Tennessee (the "Bankruptcy
Court"). On June 4, 1997, the Company (i) consented to the jurisdiction of the
Court and was adjudicated bankrupt and (ii) converted the bankruptcy to a
proceeding under Chapter 11 of the Bankruptcy Code (case no. 97- 19709). The
Company operated as a debtor-in-possession in the bankruptcy proceeding, until
the corporate entity was sold to an investor group on May 25, 2000.
Pursuant to the provisions of the Bankruptcy Code, the Company had the right to
file a plan of reorganization. An order approving the interim
debtor-in-possession financing was entered in August of 1997. The Company
subsequently applied to the Bankruptcy Court for approval of additional
debtor-in-possession financing in an amount of up to $600,000. On August 18,
1997, the Bankruptcy Court entered a final order authorizing the Company to
obtain such financing from a group of lenders (the "DIP Lenders"). Pursuant to
such arrangement, the Company was authorized to grant and had granted to the DIP
Lenders a first priority lien in certain of the Company's patents and laboratory
equipment and was authorized to issue 300,000 shares of its common stock in the
aggregate to the DIP Lenders.
The DIP Lenders loaned $600,000 to the Company pursuant to the financing
arrangement, and the Company issued 300,000 shares of common stock to the DIP
Lenders. The loans from the DIP Lenders bore interest at the rate of 20% per
annum. Interest for a one-year period (a portion of which was refunded to the
extent not earned) and a 5% origination fee were paid from the proceeds.
The Company's initial plan of reorganization included two principal elements.
These two elements were the sale of the Tennessee Facility as well as the
location of a site and the obtaining of funding (including reinstatement of DOE
funding) to construct a commercial-size demonstration of the NOXSO Process.
In September of 1997, the Company executed an asset purchase agreement for the
Tennessee Facility between the Company and Republic Financial Corporation.
However, the Company was unable to effect the commercial demonstration of the
NOXSO process. Accordingly, the Company filed a Second Amended Plan of
Reorganization (as modified, the "Plan") that resulted in liquidation of the
Company's assets.
On December 9, 1999, the Bankruptcy Court issued an Order confirming the Plan
under Chapter 11 of the Bankruptcy Code. Pursuant to the terms of the Order, the
Company was authorized to separately transfer the corporate entity and its
assets. The proceeds from these transfers are to be used for the distributions
to be made pursuant to the Plan, which will be in full and final satisfaction,
settlement, release and discharge as against the Company, of any and all claims
and interests of any nature whatsoever that arose before December 9, 1999.
The Plan provided for conveyance of the corporate entity to an investor group
including Mr. Robert Long, an officer, director and shareholder of the Company.
Simultaneously, the Company's sale of assets to FLS MILJO a/s. free and clear of
liens was approved.
In connection with such distributions, equity interests based upon ownership of
existing securities or rights to acquire existing securities, including without
limitation vested and non-vested warrants, options, preemptive rights or other
rights, were cancelled on the consummation date (May 25, 2000).
The Company, as a corporate entity, continues to exist as a reorganized entity.
6
Pursuant to the Plan, on May 25, 2000, all outstanding shares of the Company
were cancelled and 900,000 shares of common stock were issued to an investor
group consisting of Robert M. Long (360,000 shares), an officer, director and
shareholder of the Company prior to the sale of the corporate entity, Robert
Platek (450,000 shares), and Spencer Levy (90,000 shares). Pursuant to the terms
of the Plan an additional 100,000 shares have been issued, pro-rata, to the
Company's unsecured creditors with allowed claims, except for the Department of
Energy, which elected not to receive shares. As of December 31, 2000, the
Company had a total of 91 shareholders of record.
Messrs. Long, Platek and Levy paid an aggregate of $50,000 cash, on a pro-rata
basis, under the terms of the Plan for the right to acquire control of the
Company and 90% of the outstanding shares of common stock.
In connection with the change of control, all of the Company's officers and
directors, with the exception of Mr. Long, were replaced on May 25, 2000. On May
25, 2000, the investor group elected Mr. Long, a director of the Company and
Secretary of the Company prior to the change of control, as a director and
President of the Company. Additionally, James Platek was elected as a director
and Treasurer of the Company, and Spencer Levy was elected as a director and
Secretary of the Company.
Pursuant to the Company's Second Amended Plan of Reorganization, as of February
13, 2001, the Company has no material assets. As such, the Company can be
defined as a "shell" company, whose sole purpose at this time is to locate and
consummate a merger or acquisition with a private entity. The Board of Directors
of the Company has elected to commence implementation of the Company's principal
business purpose, described below under "Plan of Operation."
The corporate entity was conveyed to the investor group without any significant
assets or liabilities, excluding the value, if any, of any tax loss
carryforwards attributed to the Company. As such, the financial statements of
the Company prior to the sale, including the financial statements included
herein, are not representative of the Company's future operations.
As of the date of this report, the Company had no source of income and must rely
entirely upon loans and equity investments from affiliates to pay operating
expenses.
PLAN OF OPERATION
The Company currently has no substantial capital to fund operations or on-going
expenses. The Company must rely upon loans and investments from affiliates to
pay operating expenses. There are no assurances that such affiliates will
continue to advance funds to the Company or will continue to invest in the
Company's securities. During the six months ended December 31, 2000,
shareholders of the Company loaned the Company $13,608. In the event the Company
is unable to obtain additional capital or funding it may be unable to identify
and/or acquire a suitable business opportunity. During the twelve months
following the filing of this report, management intends to seek to acquire
assets or shares of an entity actively engaged in a business that generates
revenues, in exchange for its securities. The Company has not identified a
particular acquisition target and has not entered into any negotiations
regarding such an acquisition. Management intends to contact investment bankers,
corporate financial analysts, attorneys and other investment industry
professionals through various media. As of the date of this report, none of the
Company's officers, directors, promoters or affiliates has engaged in any
material contact or discussions with any representative of any other company
regarding the possibility of an acquisition or merger between the Company and
such other company.
Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing the manner in which the transaction is
structured, the Company's Board of Directors expects that it will provide the
Company's shareholders with complete disclosure documentation concerning a
potential business opportunity and the structure of the proposed business
combination prior to consummation. Such disclosure is expected to be in the form
of a proxy, information statement, or report.
While such disclosure may include audited financial statements of such a target
entity, there is no assurance that such audited financial statements will be
available. The Board of Directors does intend to obtain
7
certain assurances of value of the target entity's assets prior to consummating
such a transaction, with further assurances that audited financial statements
would be provided within sixty days after closing. Closing documents will
include representations that the value of the assets conveyed to or otherwise so
transferred will not materially differ from the representations included in such
closing documents, or the transaction will be voidable.
Due to the Company's intent to remain a shell company until a merger or
acquisition candidate is identified, it is anticipated that its cash
requirements will be minimal, and that all necessary capital, to the extent
required, will be provided by the Company's directors or officers. The Company
does not anticipate that it will have to raise capital or acquire any plant or
significant equipment in the next twelve months, unless possibly a merger or
acquisition target is identified.
LIQUIDITY
At December 31, 2000 the Company had a working capital deficit of $44,459,
compared to a working capital surplus of $39,216 at June 30, 2000. During the
three and six month periods ended December 31, 2000, shareholders of the Company
advanced $6,817 and $13,608, respectively, to the Company.
The changes in the Company's available working capital relate to the payment of
expenses during the period. The law firm representing the Company in the
bankruptcy proceedings was able to recover certain preference payments, which
reduced the amount of recoverable preference payments to zero and increased the
funds held by attorney in escrow; however, during the period payments were made
from the escrow for legal services provided by the law firm representing the
Company in the bankruptcy proceeding.
The Company continues to incur liabilities and operating expenses. As part of
the Company's Second Amended Plan, the corporate entity was sold to an investor
group in May 2000. The corporate entity was sold without any liabilities which
were incurred prior to the sale. However, as of December 31, 2000, some of the
Company's liabilities which existed prior to the sale of the Corporate entity
remained unpaid. At December 31, 2000, funds held by attorney in escrow, net of
liabilities not subject to compromise, amounted to $1,000. Expenses relating to
the bankruptcy for legal and administrative work are expected to be paid in part
from this balance. A motion for a final decree in the bankruptcy case is
anticipated in the first or second quarter of 2001. Following a final decree,
the escrow balance, if any, may be distributed to the creditors. As such, the
Company does not expect to receive any of these funds, and has effectively been
transferred to the investor group with no material net assets.
Mr. Long, in connection with the purchase and sale of the corporate entity,
engaged auditors and legal counsel prior to the change of control. After the
change of control, the auditors and legal counsel engaged by Mr. Long were
engaged by the Company. The Company will reimburse Mr. Long for professional
fees advanced by Mr. Long on the Company's behalf.
Since the Company has no significant source of revenue, working capital will
continue to be depleted by operating expenses. See " Results of Operations"
below. The Company presently has no external sources of cash and is dependent
upon its management and shareholders for funding.
ASSETS
At December 31, 2000 the Company had total assets of $2,958 compared to total
assets of $120,368 at June 30, 2000. During the period, funds held by attorney
in escrow decreased by $97,152. The decrease is attributable to the payment of
legal fees from the escrow.
As of the date of this report, the Company has essentially no assets.
RESULTS OF OPERATIONS
The Company has no current operations and has not generated any revenue from its
operations since the change of control. The Company must rely entirely upon
loans from affiliates to pay operating expenses.
8
During the three-months ended December 31, 2000 the Company had a net loss of
$83,868 compared to a net loss of $57,131, during the three-months ended
December 31, 1999. During the three-months ended December 31, 1999, the Company
was operating as a debtor-in-possession in the bankruptcy proceeding and was
essentially dormant. During the three-months ended December 31, 2000, the
Company incurred legal and accounting fees in connection with the bankruptcy
proceedings and preparing and filing reports with the Securities and Exchange
Commission in the amount of $82,052 and incurred miscellaneous corporate
expenses in the amount of $1,816. These expenses were paid by shareholders of
the Company and have been accounted for as amounts due to shareholders.
During the six-months ended December 31, 2000 the Company had a net loss of
$97,283 compared to a net loss of $57,019, during the six-months ended December
31, 1999. During the six-months ended December 31, 1999, the Company was
operating as a debtor-in-possession in the bankruptcy proceeding and was
essentially dormant. During the six-months ended December 31, 2000, the Company
incurred legal and accounting fees in connection with the bankruptcy and
preparing and filing reports with the Securities and Exchange Commission in the
amount of $89,541 and incurred corporate expenses for document conversion and a
press release in the amount of $8,607. These expenses were paid by shareholders
of the Company and have been accounted for as amounts due to shareholders.
Due to the sale of the corporate entity and the elimination of the Company's
assets and debts as a result of the bankruptcy proceedings, as of the date of
this report, the Company essentially has no operations and no source of revenue.
The Company continues to incur professional fees and other expenses. If the
Company does not find a suitable acquisition target or other source of revenue,
the Company will continue to incur net losses and may have to cease operations
entirely.
As described in Note 2 of the Notes to the Unaudited Condensed Consolidated
Financial Statements, near the end of fiscal year 2000, the Company liquidated
its assets pursuant to an Order of the Bankruptcy Court. The Company presently
does not have sufficient liquid assets to finance any significant level of
operations and without further financial support from shareholders or others,
may not be able to meet its obligations as they become due and, accordingly, may
not be able to develop any business operations.
The Company's ability to continue operations is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
identify and close an acquisition with a suitable target company, obtain
additional financing or refinancing as may be required, and ultimately to attain
profitability. There are no assurances that the Company will be able to identify
a suitable acquisition target, close such acquisition, obtain any such financing
or, if the Company is able to obtain additional financing, that such financing
will be on terms favorable to the Company. The inability to obtain additional
financing when needed will have a material adverse effect on the Company's
operating results.
9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
REGULATION S-B CONSECUTIVE
NUMBER EXHIBIT PAGE NUMBER
2 Debtor's Second Plan of Reorganization with
Modifications Through December 2, 1999, Order
of Judge R. Thomas Stinnett dated December 9,
1999 and Order Approving Disclosure Statement
and Confirming Second Amended Plan of
Reorganization Under Chapter 11 of the Bankruptcy
Code (3)<F3> N/A
3(i) Articles of Incorporation, as amended (1)<F1> N/A
3(ii) Amended and Restated Bylaws (1)<F1> N/A
11 Statement re computation of per share earnings (2)<F2> N/A
- --------------------------------
<FN>
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 filed with the Commission on January 13, 1989, file No. 33-26541.
(2) See Part I - Financial Statements.
(3) Incorporated by reference to the Exhibits previously filed with the
Company's Current Report on Form 8-K dated May 23, 2000.
</FN>
B) REPORTS ON FORM 8-K:
Form 8-K dated October 26, 2000 reporting under "Item 5. Other
Events" the status of the Company's audited financial
statements.
10
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NOXSO CORPORATION
(Registrant)
Date: February 21, 2001 By: /S/ JAMES PLATEK
-------------------- --------------------------------
James Platek, Director, Treasurer,
Principal Financial Officer and
Principal Accounting Officer
11