UNITED STATES
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: JUNE 30, 2001
[ ] 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 JUNE 30, 2001
Transitional Small Business Disclosure Format (check one); Yes No X
---- ----
Exhibit index on page 12 Page 1 of 13 pages
NOXSO CORPORATION
BALANCE SHEETS
June 30, 2001 March 31,
(Unaudited) 2001
Cash $ 1,800 $ 1,800
Recoverable Preference Payments - 68,228
Funds Held By Attorney In Escrow 76,159 16,943
------------- -------------
Current Assets 77,959 86,971
------------- -------------
Total Assets $ 77,959 $ 86,971
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities Not Subject to Compromise $ 56,795 $ 68,025
Amounts Due To Shareholders 44,317 21,817
------------- -------------
101,112 89,842
------------- -------------
Common Stock, $0.01 Par Value, 20,000,000 Shares Authorized,
1,000,000 Shares Outstanding 10,000 10,000
Paid In Capital 29,216 29,216
Retained Deficit (62,369) (42,087)
------------- -------------
Total Stockholders' Equity (Deficit) (23,153) (2,871)
------------- -------------
Total Liabilities and Shareholders' Equity $ 77,959 $ 86,971
------------- -------------
See Notes To Unaudited Financial Statements
2
NOXSO CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Three Months
Ended June 30, Ended June 30,
2001 2000
(Unaudited) (Unaudited)
Revenue $ - $ -
-------------- --------------
Legal and Accounting 20,228 140,073
Corporate Expenses 54 14,874
-------------- --------------
20,282 154,947
-------------- --------------
Reimbursement for Amounts Previously Disbursed - 75,883
-------------- --------------
- 75,883
-------------- --------------
Net Income / (Loss) $ (20,282) (79,064)
============== ==============
Loss Per Common Share $ (0.02) $ (0.08)
============== ==============
Average Shares Outstanding 1,000,000 1,000,000
============== ==============
See Notes To Unaudited Financial Statements
3
NOXSO CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Three Months
Ended June 30, Ended June 30,
2001 2000
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net Loss $ (20,282) $ (79,064)
Adjustments to reconcile net loss to net cash used
by operating activities:
Change in Current Assets 9,012 (8,283)
Change in Current Liabilities (11,230) 16,349
Change in Amounts Due Shareholders 22,500 23,327
-------------- --------------
- (47,671)
-------------- --------------
Cash Flows From Investing Activities: - -
-------------- --------------
Cash Flows From Financing Activities: - -
-------------- --------------
Net Change in Cash - (47,671)
Cash at Beginning of Period 1,800 49,629
-------------- --------------
Cash at End of Period $ 1,800 $ 1,958
============== ==============
Cash Payments for Interest $ - $ -
============== ==============
Cash Payments for Taxes $ - $ -
============== ==============
See Notes To Unaudited Financial Statements
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NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2001
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited, condensed, balance sheets as of June 30, 2001
and March 31, 2001 and statements of operations and cash flows for the
three month periods ended June 30, 2001 and 2000 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 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 March 31, 2001.
The results of operations for the three months ended June 30, 2001 are not
necessarily indicative of the operating results to be expected for the full
fiscal year ending on March 31, 2002.
2. OTHER MATTERS
As described in Note 3 to the financial statements accompanying the
Company's annual report on Form 10-KSB, In 1997, an involuntary bankruptcy
petition was filed against the Company in the United States Bankruptcy
Court in the Eastern District of Tennessee. On June 4, 1997, the Company
consented to the jurisdiction of the Court and was adjudicated bankrupt.
The Company converted the bankruptcy to a proceeding under Chapter 11 of
the Bankruptcy Code. Subsequently, the Company operated as a
debtor-in-possession in the proceeding.
The Company's plan of reorganization was based on two principal elements.
These two elements were the sale of its 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. The Company sold the Tennessee Facility; however, the Company was
unable to effect the commercial demonstration of the NOXSO process.
Accordingly, the Company filed a second amended plan of reorganization that
resulted in liquidation of the Company's assets.
On December 2, 1999, the Bankruptcy Court issued an Order confirming the
Company's second amended plan of reorganization 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 were to be used for the distributions to be
made pursuant to the second amended 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 2, 1999.
5
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2001
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
The Company's second amended plan of reorganization provided for conveyance
of the corporate entity to a group including Mr. Robert Long, the Secretary
and a Director of the Company, for $50,000. This group would own 90% of the
outstanding shares of the new common stock, and the remaining 10% of the
new common stock will be distributed to certain of the creditors.
Simultaneously, the Company's sale of assets to FLS MILJO a/s free and
clear of liens was approved.
In connection with the distributions under the Company's second amended
plan of reorganization, 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, will be cancelled on the consummation date, and the equity
interests will receive nothing on account of those interests.
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, as described above.
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.
In connection with the Company's recapitalization, Mr. Long had advanced
the Company approximately $29,531 in addition to the $50,000 paid for the
corporate entity.
Following the liquidation entries, the amount remaining for
recapitalization of the Company consisted of $39,216 in the aggregate, of
which $10,000 has been reflected as the par value for the Company's common
stock and $29,216 has been reflected as paid in capital.
Before the confirmation of the Company's second amended plan of
reorganization, several shareholders objected to the confirmation and to
the sale of the Company's assets to FLS MILJO a/s. The Bankruptcy Court
considered the objections and overruled all of them by orders of December
9, 2000.
On December 6, 2000, an appeal was filed by an individual alleging the sale
of assets to FLS MILJO a/s was fraudulent and that the officers, directors
and counsel of the Company lacked the authority to conclude the sale. The
Bankruptcy Court, after notice and hearing, denied the motion by order of
February 20, 2001. On April 23, 2001, the individual filed a notice of
appeal of the February 20, 2001 order. The Company filed a motion to
dismiss this appeal, which was sustained. However, the individual filed a
motion with the Bankruptcy Court for a rehearing. The Company believes the
Bankruptcy Court will deny this motion, although no such assurance can be
given. As a consequence, the Company cannot predict the ultimate impact of
this claim, if any, on the accompanying financial statements.
6
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2001
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
Separately, the same individual described in the above paragraph has
commenced a class action lawsuit against the Company, its Officers and
Directors, and lead counsel in the Bankruptcy proceeding with allegations
substantially the same as previously asserted in the actions described
above. This class action lawsuit is at a preliminary stage, and the Company
is unable to predict the ultimate impact of this lawsuit, if any, on the
accompanying financial statements. Inasmuch as parties ranging from former
shareholders to defendants in this lawsuit may assert claims against the
assets of the Company (principally, funds held by attorneys in escrow), it
is reasonably possible that the Bankruptcy proceeding may be extended
before a final decree is ordered. The Company is unable to predict the
nature, timing, extent or ultimate adjudication of such claims, if any.
A motion for a final decree was filed in the Bankruptcy case and a hearing
is scheduled for September 2001. Currently, funds held by attorney in
escrow together with recoverable preference payments, amount to $76,159. In
connection with its motion for final decree, the Company intends to assert
its entitlement to the balance in the escrow account, however lead counsel
in the bankruptcy proceeding has advised the Company that to the extent any
such funds remain, such funds should be distributed pro rata to the
Company's unsecured creditor class prior to the issuance of a final decree
in the bankruptcy case. Also, these funds may be the subject of claims
stemming from the class action lawsuit described in the above paragraph.
While the Company believes it has meritorious arguments to support its
contention of entitlement to the escrow account balance, the Company is
unable to predict the ultimate disposition of these funds. Were such funds,
or any portion thereof, to be distributed to the creditors or other
parties, the Company's retained deficit would increase by a corresponding
amount.
As discussed in Note 4 to the financial statements accompanying the
Company's annual report on Form 10-KSB, the Company liquidated its assets
pursuant to an Order of the Bankruptcy Court. 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 three months ended June 30, 2001, shareholders of
the Company loaned the Company $22,500.
The Company has engaged in preliminary discussions with several parties
regarding the possibility of an acquisition or merger between the Company
and another entity. If the Company is able to successfully negotiate an
acquisition or merger agreement, any such agreement would likely be subject
to significant contingencies and uncertainties, any of which, if not
satisfactorily resolved, could cause any intended acquisition or merger to
ultimately be abandoned. To date, no agreement has been reached regarding
any such acquisition or merger and the Company is unable to predict if any
such agreement will be reached. Accordingly, the Company can provide no
assurances that the Company will be successful in negotiating and achieving
a merger or acquisition.
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,
7
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2001
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
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.
8
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, FRU-CON and Industrial Rubber filed an involuntary
petition in bankruptcy against the Company in the United States Bankruptcy Court
in the Eastern District of Tennessee. 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. See "Item 1. Description of Business" and "Item 3. Legal Proceedings."
The corporate entity was conveyed to the investor group without any 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. 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 engaged in preliminary discussions with several
parties regarding the possibility of an acquisition or merger between the
Company and another entity. If the Company is able to successfully negotiate an
acquisition or merger agreement, any such agreement would likely be subject to
significant contingencies and uncertainties, any of which, if not satisfactorily
resolved, could cause any intended acquisition or merger to ultimately be
abandoned. To date, no agreement has been reached regarding any such acquisition
or merger and the Company is unable to predict if any such agreement will be
reached. Accordingly, the Company can provide no assurances that the Company
will be successful in negotiating and achieving a merger or acquisition.
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 certain assurances of
the 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.
9
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 June 30, 2001, the Company had a working capital deficit of $23,153, compared
to a deficit of $2,871 at March 31, 2001. The increase in the working capital
deficit is due primarily to an increase in amounts due to shareholders, which
represents fees paid on behalf of the Company by shareholders. During the three
months ended June 30, 2001, the Company incurred legal and accounting expenses
relating to its filings with the Securities and Exchange Commission and the
bankruptcy proceedings. The Company will continue to incur expenses relating to
its filings with the SEC as long as it remains a reporting issuer.
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 June 30, 2001,
some of the Company's liabilities which existed prior to the sale of the
Corporate entity remained unpaid. At June 30, 2001, funds held by attorney in
escrow together with recoverable preference payments, net of liabilities not
subject to compromise, amounted to $19,364.
Before the confirmation of the Company's second amended plan of reorganization,
several shareholders objected to the confirmation and to the sale of the
Company's assets to FLS MILJO a/s. The Bankruptcy Court considered the
objections and overruled all of them by orders of December 9, 2000.
On December 6, 2000, an appeal was filed by an individual alleging the sale of
assets to FLS MILJO a/s was fraudulent and that the officers, directors and
counsel of the Company lacked the authority to conclude the sale. The Bankruptcy
Court, after notice and hearing, denied the motion by order of February 20,
2001. On April 23, 2001, the individual filed a notice of appeal of the February
20, 2001 order. The Company filed a motion to dismiss this appeal, which was
sustained. However, the individual filed a motion with the Bankruptcy Court for
a rehearing. The Company believes the Bankruptcy Court will deny this motion,
although no such assurance can be given. As a consequence, the Company cannot
predict the ultimate impact of this claim, if any, on the accompanying financial
statements.
Separately, the same individual referred to in the preceding paragraph has
commenced a class action lawsuit against the Company, its Officers and
Directors, and lead bankruptcy counsel with allegations substantially the same
as previously asserted in the actions described above. This class action lawsuit
is at a preliminary stage, and the Company is unable to predict the ultimate
impact of this lawsuit, if any, on the accompanying financial statements.
Inasmuch as parties ranging from former shareholders to defendants in this
lawsuit may assert claims against the assets of the Company (principally, funds
held by attorneys in escrow), it is reasonably possible that the Bankruptcy
proceeding may be extended before a final decree is ordered. The Company is
unable to predict the nature, timing, extent or ultimate adjudication of such
claims, if any.
A motion for a final decree in the bankruptcy case was filed and a hearing is
scheduled for September 2001. The Company intends to assert its entitlement to
the balance of the escrow account remaining after payment of liabilities not
subject to compromise and expenses yet to be incurred by the Company, if any,
for legal and administrative work stemming from the pre-consummation phase of
the bankruptcy. Lead counsel in the bankruptcy proceeding has advised the
Company that to the extent any such funds remain, such funds should be
distributed pro-rata to the Company's unsecured creditor class prior to the
issuance of a final decree in the bankruptcy case. While the Company believes it
has meritorious arguments to support its contention of entitlement to the escrow
account balance, the Company is unable to predict the ultimate disposition of
these funds. If any such funds, or a portion thereof, are distributed to the
creditors, the Company's retained deficit would increase by a corresponding
amount.
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
10
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 June 30, 2001 the Company had total assets of $77,959 compared to total
assets of $86,971 at March 31, 2001. At March 31, 2001, the Company's assets
consisted of cash, recoverable preference payments and funds held by attorney in
escrow. At June 30, 2001, the majority of the Company's assets consisted of
funds held by attorney in escrow. If the Company is not entitled to the escrow
account balance, if any, the Company's retained deficit will increase by the
amount distributed to creditors. 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.
During the three months ended June 30, 2001 the Company had a net loss of
$20,828. 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 3 of the Notes to 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.
11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
An individual has commenced a class action lawsuit against the Company,
its Officers and Directors, and lead counsel in the Bankruptcy
proceeding with allegations substantially the same as those asserted in
the bankruptcy case. This class action lawsuit is at a preliminary
stage, and the Company is unable to predict the ultimate impact of this
lawsuit, if any, on the accompanying financial statements. Inasmuch as
parties ranging from former shareholders to defendants in this lawsuit
may assert claims against the assets of the Company (principally, funds
held by attorneys in escrow), it is reasonably possible that the
Bankruptcy proceeding may be extended before a final decree is ordered.
The Company is unable to predict the nature, timing, extent or ultimate
adjudication of such claims, if any.
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)<F1> 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)<F2> See Part I - Financial Statements.
(3)<F3> 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 April 16, 2001 reporting the change of the
Company's fiscal year end under Item 8.
12
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: AUGUST 20, 2001 By: /s/ James Platek
-------------------- --------------------------------------
James Platek, Director, Treasurer,
Principal Financial Officer and
Principal Accounting Officer
13