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, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 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:
1,135,000 SHARES OF COMMON STOCK, $0.01 PAR VALUE, AS OF JUNE 30, 2002
Transitional Small Business Disclosure Format (check one); Yes No X
----- -----
Exhibit index on page______ Page 1 of 19 pages
NOXSO CORPORATION
BALANCE SHEETS
June 30, 2002
(Unaudited) March 31, 2002
----------------------- -------------------
Cash $ 2,660 $ 1,560
Account Receivable 17,100 6,500
Reserve for uncollectible accounts (17,100) -
Funds Held By Attorney In Escrow 61,205 62,076
-----------------------------------------------
Current Assets 63,865 70,136
-----------------------------------------------
Total Assets $ 63,865 $ 70,136
===============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities Not Subject To Compromise $ 90,271 $ 108,689
Amount due to pending merger participant 35,000 -
Amounts due to related party 35,196 44,824
-----------------------------------------------
Current Liabilities 160,467 153,513
-----------------------------------------------
Common Stock, $.01 Par Value, 20,000,000 Shares
Authorized, 1,135,000 Shares Outstanding 11,350 10,000
Paid In Capital 34,116 29,216
Retained Deficit (142,068) (122,593)
-----------------------------------------------
Total Stockholders' Equity (Deficit) (96,602) (83,377)
-----------------------------------------------
Total Liabilities and Shareholders' Equity $ 63,865 $ 70,136
===============================================
See Notes To Unaudited Financial Statements
2
NOXSO CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Three Months
Ended June 30, Ended June 30,
2002 (Unaudited) 2001 (Unaudited)
Revenue $ - $ -
------------------------------------
Legal and Accounting 1,820 20,228
Corporate Expenses 17,655 54
------------------------------------
19,475 20,282
------------------------------------
Net (Loss) $ (19,475) $ (20,282)
====================================
Loss Per Common Share $ (0.02) $ (0.02)
====================================
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,
2002 (Unaudited) 2001 (Unaudited)
Cash Flows From Operating Activities:
Net Loss $ (19,475) $ (20,282)
Adjustments to reconcile net loss to net cash
used by operating activities:
Change in other current assets 7,371 9,012
Change in liabilities not subject to compromise (18,418) (11,230)
Issuance of common stock for services 6,250
------------------------------------
Cash Flows From Operating Activities: (24,272) (22,500)
------------------------------------
Cash Flows From Financing Activities:
Change in amount due to pending merger participant 35,000
Change in amounts due shareholders (9,628) 22,500
------------------------------------
Cash Flows From Financing Activities: 25,372 22,500
------------------------------------
Net Change in Cash 1,100 -
Cash at Beginning of Period 1,560 1,800
------------------------------------
Cash at End of Period $ 2,660 $ 1,800
====================================
Cash Payments For Interest $ - $ -
====================================
Cash Payments For Taxes $ - $ -
====================================
See Notes To Unaudited Financial Statements
4
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2002
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited, condensed, balance sheets as of June 30, 2002
and March 31, 2002 and statements of operations and cash flows for the
three month periods ended June 30, 2002 and 2001 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, 2002.
Accounts receivable at June 30, 2002 include $8,400 of legal fees and
$8,700 of accounting fees reimbursable by Cano Energy Corp. in connection
with the Company's merger agreement and plan of reorganization (described
in Note 2, below). During the quarter ended June 30, 2002, the Company
fully reserved these amounts.
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
BANKRUPTCY
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 it's 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.
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
5
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2002
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
and non-vested warrants, options, preemption rights or other rights, were
cancelled on the consummation date, and the equity interests received
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 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. In response, the ruling of the
Bankruptcy Court was affirmed by the District Court for the Eastern
District of Tennessee. It is reasonably possible that this individual will
continue to attack the validity of the confirmation of the Company's plan
of reorganization.
A motion for a final decree has been filed in the bankruptcy case and a
final decree is anticipated in calendar year 2002.
At June 30, 2002, an attorney on behalf of the Company maintained $1,560 of
the Company's cash and funds held by the same attorney in escrow was
$61,205. The remaining administrative expenses incurred by the Company
during its bankruptcy case are expected to be paid from these funds and the
Company is unable to determine if any such funds will remain after the
payment of remaining administrative expenses. The Company has been advised
that to the extent any such funds remain in the Bankruptcy Court plan fund
after the payment of the remaining administrative expenses, such funds are
to be distributed pro rata to the Company's unsecured creditor class in the
same percentage as the new stock of the Company has been issued. However,
in connection with the motion for final decree, the Company has asserted
its entitlement to such funds and instructions with regard to the
disposition of these funds are ultimately to be issued by the Bankruptcy
Court. While the Company believes it has meritorious arguments to support
its contention of entitlement to these funds, the Company is unable to
predict the ultimate disposition of these funds. Were such funds, or any
portion thereof, to be distributed to any other parties, the Company's
retained deficit would increase by a corresponding amount.
PRIVATE PLACEMENT
In June 2002, the Company commenced a private placement offering of a
minimum of forty units ($2,000,000) and a maximum of one hundred units
($5,000,000), each Unit consisting of:
(i) 16,666 shares (the "Shares") of common stock, par value $.001 per
share, and
(ii) redeemable warrants to purchase 8,333 shares of Common Stock at an
exercise price of $5.00 per share.
6
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2002
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
The purchase price is $50,000 per Unit. The minimum investment is one Unit,
subject to reduction by the Company. As of August 16, 2002, none of the
units offered have been sold.
Simultaneously with and as a condition to the initial closing of the
private placement offering, which shall be for no less than $1,000,000, the
Company's wholly owned subsidiary Noxso Acquisition Corp., a newly formed
Delaware corporation, shall merge, with Cano Energy Corporation, a Texas
corporation ("Cano"), in the oil and gas exploration business (see below).
Pending the initial closing and the simultaneous closing of the merger
agreement and plan of reorganization all proceeds from the subscription of
Units shall be held in escrow with an escrow agent and only will be
released to the Company upon the Initial Closing and the simultaneous
closing of the merger.
In the event
(i) the merger is not consummated notwithstanding that the minimum
offering is subscribed for, or
(ii) the minimum offering is not sold,
all funds received from subscribers are to be returned to such subscribers
without deduction therefrom or interest thereon.
The Units (ie., the common stock and the common stock warrants) are not
being registered under the Securities Act of 1933 and are being offered for
sale only to persons that are "accredited investors" in reliance on
exemptions under Regulation D of the Securities Act of 1933, as amended.
Subsequent to March 31, 2002, three shareholders sold 275,000 shares of
Common Stock to the Company for $275,000 evidenced by Buy Back Notes which
are due and will be paid to such persons at and from the proceeds of the
initial closing. If the merger agreement and plan of reorganization (see
below) fails to occur, the Company may terminate the agreements to redeem
these shares.
MERGER AGREEMENT AND PLAN OF REORGANIZATION
On April 24, 2002, the Company entered into a merger agreement and plan of
reorganization Cano Energy Corporation, a Texas corporation, ("Cano").
(Also, see the description of the June 2002 private placement memorandum
above.)
Consummation of the acquisition of Cano is subject to the satisfaction of
several conditions. Among the conditions is that the Company must sell at
least $2,000,000 of units of common stock and warrants by July 3, 2002.
Cano and the Company have reduced the $2,000,000 of units to $1,000,000 of
units and have extended the July 3, 2002 deadline to September 15, 2002.
The private placement commenced June 12, 2002. The Company is offering a
maximum of 100 Units at $50,000 per Unit, each Unit consisting of 16,666
shares of common stock and redeemable warrants to purchase 8,333 shares of
common stock at $5.00 per share. The proceeds of the offering are to be
used primarily for the acquisition and development of the oil, gas, and
mineral interests of the Davenport Field, located in Lincoln County,
Oklahoma (the "Davenport Unit").
The consummation of the acquisition is also contingent upon shareholder
approval of a 1-for-2.09081 reverse stock split of the Company's
outstanding shares of common stock (after redemption of certain shares by
the Company, as described below).
If this minimum offering is completed and the acquisition closes, at the
time of closing, Cano will merge with NOXSO Acquisition Corp., an entity
that will be, at the closing date, a wholly owned subsidiary of the
Company. Accordingly, after the closing, Cano will become a wholly owned
subsidiary of the Company. The transaction is anticipated to be accounted
for as a reverse merger, pursuant to which, among other things:
7
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2002
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
(i) Cano shall become a wholly-owned subsidiary of the Company as a
result of it being the surviving corporation of the merger and
Cano shall be deemed to be the acquiring entity and the Company
shall be deemed to be the acquired entity,
(ii) the existing Cano shareholders shall receive in the merger
9,940,000 shares of the Company's common stock;
(iii) a minimum of 333,320 shares of common stock and warrants to
purchase 166,660 shares of common stock shall be sold for
$1,000,000 of gross proceeds and a maximum of 1,666,600 shares
of common stock and warrants to purchase 833,300 shares of common
stock shall be sold for $5,000,000 of gross proceeds;
(iv) all then officers and directors of the Company shall resign and
Cano shall designate new officers and directors of the Company;
(v) the net proceeds received by the Company from the sale of units in
the private offering shall be applied as disclosed to investors
including (i) $650,000 to acquire the Davenport Unit and (ii)
$315,000 to repay outstanding indebtedness and obligations of the
Company consisting of (a) the repayment of $275,000 aggregate
principal amount of notes issued by the Company to repurchase
275,000 shares of common stock owned by certain current control
persons of the Company, which shares shall become treasury shares,
and (b) $40,000 to repay certain outstanding obligations of the
Company; and
(vi) in the event that the Company's consolidated balance sheet does
not reflect at least $5,000,000 of total consolidated net assets
for either (i) the quarter ending June 30, 2003, or (ii) at any
date prior to June 30, 2003, Mr. Long, the current Chief Executive
Officer and President and a controlling shareholder of the
Company, shall have the right to purchase the 9,940,000 shares of
common stock issued to the Cano shareholders in the merger for an
aggregate purchase price of $175,000. In the event this option is
exercised, the Company shall simultaneously with the closing
thereof return all shares of Cano common stock (which at that time
will be a wholly-owned subsidiary of the Company), to the
shareholders of Cano prior to the merger.
Pursuant to the Merger Agreement, in the event the merger does not occur by
July 3, 2002, the Company may terminate the Merger Agreement. Cano and the
Company have extended this July 3, 2002 deadline to September 15, 2002.
In connection with the Company's acquisition of Cano, persons, who are
officers, directors and principal shareholders, will sell 275,000 of their
shares of the Company's common stock back to the Company for $1.00 per
share. If the Company fails to acquire Cano, the Company can terminate the
agreements to redeem these shares.
If the Company consummates the proposed acquisition of Cano, the Cano
shareholders and investors in the private placement will own collectively
91.5% of the then outstanding shares of common stock and existing
shareholders of the Company will own collectively 8.5% of the then
outstanding shares. In addition, upon the closing of the acquisition, it is
proposed that the current officers and directors of the Company will resign
and new officers and directors who are currently members of Cano management
will be appointed to fill those vacancies.
As a condition precedent to closing on the Merger Agreement, the Company is
required to implement a 1-for-2.09081 reverse stock split of the
outstanding shares of the Company's common stock. The reverse stock split
is intended to increase the value of each remaining share of common stock.
The Company's controlling shareholders intend to cast their votes in favor
of the reverse stock split.
If approved, the reverse stock split will be effective after the redemption
of shares by the Company and immediately prior to closing on the Merger
Agreement. If the Company determines not to proceed with the acquisition of
Cano, the reverse split, even if approved, may not be implemented.
8
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2002
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
To repay approximately $75,000 of liabilities not subject to compromise,
Cano loaned the Company $35,000 in May 2002. The additional $40,000 will be
paid by Cano to the Company upon and from the Initial Closing from the
Offering net proceeds.
The net effect of pro forma adjustments to the financial statements of the
Company, after giving effect to the selling of $1,000,000 million of units
pursuant to the private placement memorandum, the merger agreement and plan
of reorganization and utilizing the December 31, 2001 financial statements
for Cano (the latest available financial statements, the Cano financial
statements having been audited by another independent certified public
accounting firm whose opinion on the Cano financial statements was
unqualified), are shown in Note 3 (below).
PENDING SHAREHOLDER MATTERS - REVERSE STOCK SPLIT
On July 31, 2002, the Board of Directors approved an amendment to the
Company's Articles of Incorporation (the "Amendment") effecting a
1-for-2.09081 reverse stock split of the outstanding common shares (the
"Reverse Stock Split") as a condition precedent to the merger agreement and
plan of reorganization described above.
If the Amendment is approved by the shareholders, each holder of 2.09081
shares of common stock, par value $0.01 per share (the "Old Common Stock"),
immediately prior to the effectiveness of the Amendment would become the
holder of one share of common stock, par value $0.01 per share (the "New
Common Stock"). The per share par value of the common stock will not change
as a result of the Reverse Stock Split. The shares of common stock issuable
upon approval of the Amendment will be fully paid and nonassessable. The
voting rights and other privileges of the continuing holders of common
stock will not be affected substantively by the adoption of the Amendment
or implementation of the Reverse Stock Split. As a result, the Company's
stated capital will be reduced and capital in excess of par value (paid-in
capital) increased accordingly. Shareholder's equity will remain largely
unchanged, but will be reduced by the de minimus costs associated with
effecting the Reverse Stock Split and the repurchase of fractional shares
It is not anticipated that the financial condition of the Company, the
percentage ownership of each shareholder or any aspect of the Company's
business would change materially as a result of the Reverse Stock Split.
If approved, the reverse stock split will be effective immediately prior to
closing on the merger agreement and plan of reorganization described above.
NOTE 3 - PRO FORMA INFORMATION
See "Merger Agreement and Plan of Reorganization" in Note 2, above. The net
effect of pro forma adjustments to the financial statements of the Company
at March 31, 2002 (its most recent fiscal year end), after giving effect to
the private placement memorandum, the merger agreement and plan of
reorganization and utilizing the December 31, 2001 financial statements for
Cano (the latest available financial statements), are shown below.
The pro forma adjustments are comprised of:
A - Issuance of 135,000 NOXSO shares of common stock subsequent to
March 31, 2002.
B - Initial closing of NOXSO private placement memorandum
($1 million).
C - Record NOXSO buy back agreement for 275,000 shares of common
stock.
D - Record NOXSO 1:209081 reverse stock split.
E - Eliminate NOXSO pre merger liabilities.
F - Record investment in subsidiary.
G - Elimination of investment in subsidiary.
9
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2002
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
PRO FORMA BALANCE SHEET - ASSETS (UNAUDITED)
NOXSO Cano Energy
Corporation Corporation
March 31, December, 31 Proforma
2002 2001 Adustments Total
---- ---- ---------- -----
Cash $ 1,560 $ 789,333 B $ 840,000 $ 1,355,893
C (275,000)
Account Receivable 6,500 E (6,500) -
Accrued production 59,076 59,076
Prepaid expenses and other current assets 14,474 14,474
Funds Held By Attorney In Escrow 62,076 E (62,076) -
---------------------------------------------------------------------
Current Assets 70,136 862,883 496,424 1,429,443
---------------------------------------------------------------------
Oil and gas properties 1,797,985 1,797,985
Other 58,543 58,543
Less accumulated depreciation and depletion (74,182) (74,182)
---------------------------------------------------------------------
Property and equipment, net - 1,782,346 - 1,782,346
---------------------------------------------------------------------
Investment in subsidiary F 146,906 -
G (146,906)
Other assets 6,580 6,580
---------------------------------------------------------------------
Total Assets $ 70,136 $ 2,651,809 $ 496,424 $ 3,218,369
======================================================================
10
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2002
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
PRO FORMA BALANCE SHEET - LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED)
NOXSO Cano Energy
Corporation Corporation
March 31, December, 31 Proforma
2002 2001 Adustments Total
---- ---- ---------- -----
Accounts payable and accrued liabilities $ 355,817 $ 355,817
Deferred income 125,000 125,000
Liabilities Not Subject To Compromise $ 108,689 A $ (6,250) -
D (102,439)
Amounts due to related party 44,824 9,958 D (44,824) 9,958
----------------------------------------------------------------------
Current Liabilities 153,513 490,775 (153,513) 490,775
----------------------------------------------------------------------
Deferred income taxes 3,528 3,528
----------------------------------------------------------------------
Preferred stock - -
Common stock 10,000 14,111 A 1,350 6,704
B 3,333
C (2,750)
D (5,217)
F 1,144
G (15,267)
Paid In Capital 29,216 2,153,963 A 4,900 2,727,930
B 836,667
C (272,250)
D 5,217
E (43,906)
F 145,762
G (131,639)
Retained Deficit (122,593) (10,568) E 122,593 (10,568)
----------------------------------------------------------------------
Total Stockholders' Equity (Deficit) (83,377) 2,157,506 649,937 2,724,066
----------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 70,136 $ 2,651,809 $ 496,424 $ 3,218,369
======================================================================
11
NOXSO CORPORATION
FORM 10-QSB - JUNE 30, 2002
NOTES TO UNAUDITED CONDENSED
FINANCIAL STATEMENTS
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
NOXSO Cano Energy
Corporation Corporation
March 31, December, 31 Proforma
2002 2001 Adustments Total
---- ---- ---------- -----
Revenue $ - $ 1,956,765 $ 1,956,765
----------------------------------------------------------------------
Lease operating expenses 406,644 406,644
Depreciation and depletion 74,182 74,182
General and administrative 80,506 1,484,116 1,564,622
----------------------------------------------------------------------
Total Expenses 80,506 1,964,942 - 2,045,448
----------------------------------------------------------------------
Operating loss (80,506) (8,177) - (88,683)
Interest income - 1,137 1,137
----------------------------------------------------------------------
Loss before income taxes (80,506) (7,040) (87,546)
Income tax expense - 3,528
Net loss $ (80,506) $ (10,568) $ - $ (87,546)
======================================================================
12
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. 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.
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 are not representative of the Company's future operations.
As of the date of this report the Company has 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.
The Company has entered into an agreement to acquire Cano Energy Corporation.
The agreement is subject to significant contingencies and uncertainties, any of
which, if not satisfactorily resolved, could cause the acquisition of Cano to be
abandoned. Accordingly, the Company can provide no assurances that it will be
successful in achieving this acquisition. If the Company fails to acquire Cano,
it will continue its search for a merger or acquisition target.
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.
LIQUIDITY
At June 30, 2002, the Company had a working capital deficit of $96,602, compared
to a deficit of $83,377 at March 31, 2002. The increase in the working capital
deficit is due primarily to the loss for the period. The June 30, 2002 balance
sheet reflects a current liability in the amount of $35,000, which was loaned to
the Company by Cano Energy Corporation. These funds were used to pay other
current liabilities, which had been incurred to keep the Company in compliance
with its reporting obligations to the Securities and Exchange Commission. 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, 2002,
some of the Company's liabilities which existed prior to the sale of the
corporate entity remained unpaid. At June 30, 2002, liabilities not subject to
compromise exceeded funds held by attorney in escrow by $29,066. In
13
connection with a motion for a final decree filed by the Company in the
bankruptcy case, the Company has asserted its entitlement to cash and other
funds held by attorney in escrow in the amount of $62,765. Instructions with
regard to the disposition of these funds are to be issued by the Bankruptcy
Court. 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 any other parties, the Company's retained
deficit would increase by a corresponding amount.
In May 2002, Cano loaned $35,000 to the Company to pay a portion of the
liabilities not subject to compromise. If the Company successfully completes the
minimum private placement offering and closes the acquisition of Cano, $40,000
of the proceeds from the private offering will be used for the payment of
liabilities not subject to compromise.
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 June 30, 2002, the Company had total assets of $63,865 compared to total
assets of $70,136 at March 31, 2002. At March 31, 2002 and June 30, 2002, 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, 2002, the Company had a net loss of
$19,475, as compared to a loss of $20,282 for the three months ended June 30,
2001. 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.
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 close
its proposed 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.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
In April 2002, the Company issued 135,000 shares of its common stock to
Robert Salluzzo in payment of his invoice for $6,250, pursuant to the
exemption from registration contained in Section 4(2) of the Securities
Act of 1933. No underwriters were involved in the transaction.
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 CONSECUTIVE
S-B NUMBER EXHIBIT PAGE NUMBER
2.1 Debtor's Second Plan of Reorganization with Modifi- N/A
cations 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 (1)
2.2 Merger Agreement and Plan of Reorganization dated April N/A
24, 2002 by and among Noxso Corporation, Noxso Acquisition
Corp., and Cano Energy Corporation, as amended (2)
3.1 Articles of Incorporation, as amended (3) N/A
3.2 Amended and Restated Bylaws (3) N/A
10.1 Stock Redemption Agreements with shareholders (1) N/A
99.1 Certification by Chief Executive Officer Pursuant to 18 18
U.S.C. Section 1350, as adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
99.2 Certification by Chief Financial Officer Pursuant to 18 19
U.S.C. Section 1350, as adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
- ---------------------------
(1) Incorporated by reference to the Exhibits previously filed with the
Corporation's Current Report on Form 8-K dated May 23, 2000.
(2) Incorporated by reference to the Exhibits filed with the Corporation's
Annual Report on Form 10-KSB for the fiscal year ended March 31, 2002.
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(3) 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.
(b) The following reports on Form 8-K were filed during the last quarter of
the period covered by this report:
None.
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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 19, 2002 By: /s/ JAMES PLATEK
----------------------------------------
James Platek, Director, Treasurer,
Principal Financial Officer and
Principal Accounting Officer
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