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: DECEMBER 31, 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 DECEMBER 31, 2002
Transitional Small Business Disclosure Format (check one); Yes No X
---- ----
Exhibit index on page 9 Page 1 of 14 pages
NOXSO CORPORATION
BALANCE SHEETS
December
31, 2002 March 31,
(Unaudited) 2002
------------ ------------
Cash $ 1,028 $ 1,560
Account Receivable - 6,500
Funds Held By Attorney In Escrow - 62,076
------------ ------------
Current Assets 1,028 70,136
------------ ------------
Total Assets $ 1,028 $ 70,136
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities Not Subject To Compromise $ 41,827 $ 108,689
Amounts due to related party 35,196 44,824
Current Liabilities 77,023 153,513
------------ ------------
Common Stock, $.01 Par Value, 20,000,000 Shares
Authorized, 1,135,000 and 1,000,000 Shares 11,350 10,000
Outstanding at December 31, 2002 and
March 31, 2002, Respectively
Paid In Capital 34,116 29,216
Retained Deficit (121,461) (122,593)
------------ ------------
Total Stockholders' Equity (Deficit) (75,995) (83,377)
------------ ------------
Total Liabilities and Shareholders' Equity $ 1,028 $ 70,136
============ ============
See Notes To Unaudited Financial Statements
2
NOXSO CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Three
Nine Months Nine Months Months Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2002 2001 2002 2001
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ------------- -------------
Revenue $ - $ - $ - $ -
------------- ------------- ------------- -------------
Legal and Accounting 18,535 39,632 8,137 6,783
Corporate Expenses 21,333 1,186 1,552 110
Other Income (41,000) - - -
------------- ------------- ------------- -------------
(1,132) 40,818 9,689 6,894
------------- ------------- ------------- -------------
Net Income / (Loss) $ 1,132 $ (40,818) $ (9,689) $ (6,894)
============= ============= ============= =============
Income / (Loss) Per Common Share $ 0.00 $ (0.04) $ (0.01) $ (0.01)
============= ============= ============= =============
Average Shares Outstanding 1,121,500 1,000,000 1,135,000 1,000,000
============= ============= ============= =============
See Notes To Unaudited Financial Statements
3
NOXSO CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Three
Nine Months Nine Months Months Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2002 2001 2002 2001
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ------------- -------------
Cash Flows From Operating Activities:
Net Income / (Loss) $ 1,132 $ (40,818) $ (9,689) $ (6,894)
Adjustments to reconcile net loss to net cash
used by operating activities:
Change in other current assets 68,576 14,480 61,205 -
Change in liabilities not subject to compromise (66,862) (7,325) (53,124) (1,169)
Other Income - Termination of Merger Agreement (41,000) - - -
Issuance of common stock for services 6,250 - - -
------------- ------------- ------------- -------------
Cash Flows From Operating Activities: (31,904) (33,663) (1,608) (8,063)
------------- ------------- ------------- -------------
Cash Flows From Financing Activities:
Advances from prospective merger participant 41,000 - - -
Change in amounts due shareholders (9,628) 33,713 - 8,113
------------- ------------- ------------- -------------
Cash Flows From Financing Activities: 31,372 33,713 - 8,113
------------- ------------- ------------- -------------
Net Change in Cash (532) 50 (1,608) 50
Cash at Beginning of Period 1,560 1,800 2,636 1,800
------------- ------------- ------------- -------------
Cash at End of Period $ 1,028 $ 1,850 $ 1,028 $ 1,850
============= ============= ============= =============
Cash Payments For Interest $ - $ - $ - $ -
============= ============= ============= =============
Cash Payments For Taxes $ - $ - $ - $ -
============= ============= ============= =============
See Notes To Unaudited Financial Statements
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NOXSO CORPORATION
FORM 10-QSB - DECEMBER 31, 2002
NOTES TO UNAUDITED CONSDENSED
FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited, condensed, balance sheets as of December 31,
2002 and March 31, 2002 and statements of operations and cash flows for the
three and nine month periods ended December 31, 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.
The results of operations for the three and nine months ended December 31,
2002 are not necessarily indicative of the operating results to be expected
for the full fiscal year ending on March 31, 2003.
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 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, 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.
5
NOXSO CORPORATION
FORM 10-QSB - DECEMBER 31, 2002
NOTES TO UNAUDITED CONSDENSED
FINANCIAL STATEMENTS
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 was reflected as the par value for the Company's common stock
and $29,216 was reflected as paid in capital.
In December 2002, the United States Bankruptcy Court held a final hearing
and issued a final order closing the Chapter 11 case. The Bankruptcy Court
ordered that $10,000 of the approximately $62,700 funds held by attorneys
in escrow be paid to the Department of Energy with the remainder to be paid
to law firm serving as counsel for the creditors. This resolution resulted
in a deficiency of funds held by attorneys in escrow relative to the
related liability to those attorneys of approximately $6,200. Such amount
was reflected as a reduction of legal expense in the quarter ended December
31, 2002.
TERMINATION OF PRIVATE PLACEMENT AND PLANNED MERGER WITH CANO ENERGY
CORPORATION
In June 2002, the Company commenced a private placement offering in
connection with a plan of merger with Cano Energy Corporation ("Cano"). The
required minimum funds were not raised; accordingly, Cano elected to
terminate the planned merger.
In connection with the planned merger, the Company incurred approximately
$17,100 of legal and accounting expenses that were to have been recoverable
from Cano. These amounts were reflected as accounts receivable and at the
end of the first quarter were fully reserved.
Pursuant to a termination of merger agreement ("Agreement") dated September
17, 2002, the Company and Cano have agreed that the plan of merger is
terminated and that neither the Company nor Cano has any liability to each
other. Accordingly, the $35,000 advanced to the Company by Cano in the
first fiscal quarter and an additional $6,000 advanced in the second fiscal
quarter that had been reflected as payable to Cano has been discharged by
the Agreement and reflected as other income in the second fiscal quarter.
Also, the accounts receivable and the corresponding reserve (described
above) have been eliminated.
OTHER MATTERS
The Company has resumed preliminary discussions with other 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, 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.
6
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.
In April 2002, the Company entered into an agreement to acquire Cano Energy
Corporation. The agreement was subject to significant contingencies and
uncertainties, any of which, if not satisfactorily resolved, would cause the
acquisition of Cano to be abandoned. One of the conditions was not satisfied and
the agreement with Cano Energy was terminated in September 2002. The Company is
continuing 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 December 31, 2002, the Company had a working capital deficit of $75,995,
compared to a deficit of $83,377 at March 31, 2002. The decrease in the working
capital deficit is due primarily to the reduction of current liabilities, using
the funds advanced by Cano Energy. A total of $41,000 was advanced during the
nine months ended December 31, 2002. Since Cano Energy agreed that the Company
did not have any liability to Cano in the termination of merger agreement,
$41,000 has been reflected as other income.
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. At December 31, 2002, some of
the Company's liabilities which existed prior to the sale of the corporate
entity remained unpaid. At December 31, 2002, liabilities not subject to
compromise was $41,827.
In December 2002, the bankruptcy court issued a final order closing the Chapter
11 case. The court ordered that $10,000 of the funds held by attorneys in
escrow, in the approximate amount of $62,700, be paid to the Department
7
of Energy, with the remainder to be paid to the law firm serving as counsel for
the creditors. As a result, there was a deficiency of funds held by attorneys in
escrow relative to the related liability to those attorneys of approximately
$6,200. Such amount was reflected as a reduction of legal expense in the quarter
ended December 31, 2002.
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, 2002, the Company had total assets of $1,028 compared to total
assets of $70,136 at March 31, 2002. At March 31, 2002, the majority of the
Company's assets consisted of funds held by attorney in escrow. Since it was
determined in December 2002 that the Company was not entitled to the escrow
account balance, the Company's only asset is cash of $1,028.
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 nine months ended December 31, 2002, the Company had net income of
$1,132, as compared to a loss of $40,818 for the nine months ended December 31,
2001. The Company's expenses were only slightly lower for 2002; however, it
recognized $41,000 of other income for the current period. 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.
ITEM 3. CONTROLS AND PROCEDURES
The Company has recently evaluated its internal controls. As of February 12,
2003, there were no significant corrective actions taken by the Company or other
changes made to these internal controls. The Company's management does not
believe there were changes in other factors that could significantly affect
these controls subsequent to the date of the evaluation.
8
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 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 13
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 14
18 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.
(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.
9
(b) The following reports on Form 8-K were filed during the last quarter of
the period covered by this report:
None.
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 13, 2003 By: /s/ James Platek
--------------------------------------
James Platek, Director, Treasurer,
Principal Financial Officer and
Principal Accounting Officer
10
CERTIFICATIONS
I, Robert M. Long, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Noxso Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: February 12, 2003
/s/ ROBERT M. LONG
------------------------------------------
Robert M. Long
President (Principal Executive Officer)
11
I, James Platek, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Noxso Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: February 13, 2003
/s/ James Platek
---------------------------------------------
James Platek
Chief Financial Officer
12