SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2002

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                        Commission file number: 000-17454

                                NOXSO CORPORATION
                 (Name of small business issuer in its charter)

                  VIRGINIA                              54-1118334
      (State or other jurisdiction of                (I.R.S. Employer
       incorporation or organization)               Identification No.)

      19 MAPLE LANE, RHINEBECK, NEW YORK                     12572
   (Address of principal executive offices)                (Zip Code)

                    Issuer's telephone number: (845) 266-4858

       Securities registered under Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange Act:

                          COMMON STOCK, $0.01 PAR VALUE

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

Check whether the issuer has 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

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.[ ]

              Issuer's revenues for its most recent fiscal year. $0

Aggregate market value of the voting and non-voting stock held by non-affiliates
             of the registrant as of June 20, 2002: $0 (See Item 5)

   Number of shares outstanding of registrant's common stock, $0.01 par value,
                  as of June 20, 2002: 1,135,000 (See Item 11)

                    Documents incorporated by reference: NONE

       Transitional Small Business Disclosure Format (check one): Yes    No  X
                                                                     ---    ---


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                                     PART I

ITEM 1.    DESCRIPTION OF BUSINESS.

NOXSO Corporation (the "Company") was incorporated in Virginia on August 28,
1979. Until June 1997, the Company was principally engaged in developing,
testing, and marketing a dry post-combustion emission control technology process
which used a regenerable sorbent to remove a high percentage of the pollutants
which cause "acid rain" and ground level ozone from flue gas generated by
burning fossil fuel.

On February 6, 1997, Olin Corporation ("Olin"), FRU-CON Construction Company
("FRU-CON") and Industrial Rubber & Safety Products, Inc. ("Industrial Rubber")
filed an involuntary petition in bankruptcy against the Company in the United
States Bankruptcy Court in the Eastern District of Tennessee (the "Bankruptcy
Court"). On June 4, 1997, the Company (i) consented to the jurisdiction of the
Court and was adjudicated bankrupt and (ii) converted the bankruptcy to a
proceeding under Chapter 11 of the Bankruptcy Code (case no. 97-19709). The
Company operated as a debtor-in-possession in the bankruptcy proceeding, until
the corporate entity was sold to an investor group on May 25, 2000.

Pursuant to the provisions of the Bankruptcy Code, the Company had the right to
file a plan of reorganization. An order approving interim debtor-in-possession
financing was entered in August of 1997. The Company subsequently applied to the
Bankruptcy Court for approval of additional debtor-in-possession financing in an
amount of up to $600,000. On August 18, 1997, the Bankruptcy Court entered a
final order authorizing the Company to obtain such financing from a group of
lenders (the "DIP Lenders"). Pursuant to such arrangement, the Company was
authorized to grant and did grant to the DIP Lenders a first priority lien in
certain of the Company's patents and laboratory equipment and was authorized to
issue 300,000 shares of its common stock in the aggregate to the DIP Lenders.

The DIP Lenders loaned $600,000 to the Company pursuant to the financing
arrangement, and the Company issued 300,000 shares of common stock to the DIP
Lenders. The loans from the DIP Lenders bore interest at the rate of 20% per
annum. Interest for a one-year period (a portion of which was refunded to the
extent not earned) and a 5% origination were paid from proceeds.

The Company's initial plan of reorganization included two principal elements.
These two elements were the sale of the Tennessee Facility as well as the
location of a site and the obtaining of funding (including reinstatement of DOE
funding) to construct a commercial-size demonstration of the NOXSO Process.

In September of 1997, the Company executed an asset purchase agreement for the
Tennessee Facility between the Company and Republic Financial Corporation.
However, the Company was unable to effect the commercial demonstration of the
NOXSO Process. Accordingly, the Company filed a Second Amended Plan of
Reorganization (as modified, the "Plan") that resulted in liquidation of the
Company's assets.

On December 9, 1999, the Bankruptcy Court issued an Order confirming the Plan
under Chapter 11 of the Bankruptcy Code. Pursuant to the terms of the Order, the
Company was authorized to separately transfer the corporate entity and its
assets. The proceeds from these transfers are to be used for the distributions
to be made pursuant to the Plan, which will be in full and final satisfaction,
settlement, release and discharge as against the Company, of any and all claims
and interests of any nature whatsoever that arose before December 9, 1999.

The Plan provided for conveyance of the corporate entity to an investor group
including Mr. Robert Long, an officer, director and shareholder of the Company.
Simultaneously, the Company's sale of assets to FLS MILJO a/s free and clear of
liens was approved.

In connection with such distributions, equity interests based upon ownership of
existing securities or rights to acquire existing securities, including without
limitation vested and non-vested warrants, options, preemptive rights or other
rights, were cancelled on the consummation date (May 25, 2000).

The Company, as a corporate entity, continues to exist as a reorganized entity.

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Pursuant to the Second Amended Plan, on May 25, 2000, all outstanding shares and
options of the Company were cancelled and 900,000 shares of common stock were
issued to an investor group consisting of Robert M. Long (360,000 shares), an
officer, director and shareholder of the Company prior to the sale of the
corporate entity, Robert Platek (450,000 shares), and Spencer Levy (90,000
shares). Pursuant to the terms of the Plan an additional 100,000 shares have
been issued, pro-rata, to the Company's unsecured creditors with allowed claims,
except for the Department of Energy, which elected not to receive shares. As of
April 29, 2002, the Company had a total of 87 shareholders of record.

Messrs. Long, Platek and Levy paid an aggregate of $50,000 cash, on a pro-rata
basis, under the terms of the Plan for the right to acquire control of the
Company and 90% of the outstanding shares of common stock.

In connection with the change of control, all of the Company's officers and
directors, with the exception of Mr. Long, were replaced on May 25, 2000. On May
25, 2000, the investor group elected Mr. Long, a director of the Company and
Secretary of the Company prior to the change of control, as a director and
President of the Company. Additionally, James Platek was elected as a director
and Treasurer of the Company, and Spencer Levy was elected as a director and
Secretary of the Company.

Pursuant to the Company's Second Amended Plan of Reorganization, as of June 15,
2001, the Company has no material net assets. As of March 31, 2002, the Company
had total assets of $70,136. Of this amount, $62,076 were funds being held in
escrow. The amount of liabilities not subject to compromise, $108,689, exceeds
the amount held in escrow.

As such, the Company can be defined as a "shell" company, whose sole purpose is
to locate and consummate a merger or acquisition with a private entity. The
Company intends to acquire Cano Energy Corporation, as described below. If the
Company should fail to consummate that acquisition, the Company's principal
business purpose will be implemented, described below under "Plan of Operation."

CANO ENERGY CORPORATION

As of April 24, 2002, the Company entered into a Merger Agreement and Plan of
Reorganization (the "Merger Agreement") to acquire Cano Energy Corporation
("Cano"), a Texas corporation engaged in oil and gas exploration. Under the
terms of the Merger Agreement, Cano is to merge with Noxso Acquisition Corp., a
Delaware corporation wholly-owned and formed by the Company solely for the
purpose of this transaction ("Acquisition Corp"). Cano would be the surviving
corporation of the merger.

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. 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"). Cano and the Company
have extended the July 3, 2002 deadline to August 3, 2002.

If this minimum offering is completed and the acquisition closes, the following
shall occur:

(i)      Cano shall become a wholly-owned subsidiary of the Company as a result
         of it being the surviving corporation of the merger with Acquisition
         Corp;

(ii)     the existing Cano shareholders shall receive in the merger 9,940,000
         shares of the Company's common stock;

(iii)    a minimum of 666,640 shares of common stock and warrants to purchase
         333,320 shares of common stock shall be sold for $2,000,000 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;

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(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 August 3, 2002.

PLAN OF OPERATION

If the Company fails to acquire Cano, the Company intends to seek to acquire
assets or shares of an entity in exchange for its securities. If the Company is
able to successfully negotiate an acquisition or merger agreement with another
entity, 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. The Company can
provide no assurances that it will be successful in negotiating and achieving a
merger or acquisition of another entity.

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
value of the target entity's assets prior to consummating such a transaction,
with further assurances that audited financial statements would be provided
within sixty days after closing. Closing documents will include representations
that the value of the assets conveyed to or otherwise so transferred will not
materially differ from the representations included in such closing documents,
or the transaction will be voidable.

Due to the Company's intent to remain a shell company until a merger or
acquisition candidate is identified, it is anticipated that its cash
requirements will be minimal, and that all necessary capital, to the extent
required, will be provided by the 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 a merger or acquisition
target is identified.

GENERAL BUSINESS PLAN

The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of a

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corporation registered under the Securities Exchange Act of 1934 (the "Exchange
Act"). The Company will not restrict its search to any specific business,
industry, or geographical location and the Company may participate in a business
venture of virtually any kind or nature. This discussion of the proposed
business is purposefully general and is not meant to be restrictive of the
Company's virtually unlimited discretion to search for and enter into potential
business opportunities. Management anticipates that it may be able to
participate in only one potential business venture because the Company has
nominal assets and limited financial resources. This lack of diversification
should be considered a substantial risk to shareholders of the Company because
it will not permit the Company to offset potential losses from one venture
against gains from another.

The Company may seek a business opportunity with entities that have recently
commenced operations, or that wish to utilize the public marketplace in order to
raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. The Company
may acquire assets and establish wholly-owned subsidiaries in various businesses
or acquire existing businesses as subsidiaries.

Management anticipates that the selection of a business opportunity in which to
participate will be complex and extremely risky. Due to general economic
conditions, rapid technological advances being made in some industries and
shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include, among other things, facilitating or improving
the terms on which additional equity financing may be sought, providing
liquidity for incentive stock options or similar benefits to key employees, and
providing liquidity (subject to restrictions of applicable statutes) for all
shareholders. Potentially, available business opportunities may occur in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex.

The Company has, and will continue to have, no substantial capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a publicly registered company without incurring the cost and time
required to conduct an initial public offering. The owners of the business
opportunities will, however, incur significant legal and accounting costs in
connection with acquisition of a business opportunity, including the costs of
preparing annual (Form 10-K or 10-KSB), quarterly (Form 10-Q or 10-QSB) and
current reports (Form 8-K), agreements and related documents. The Exchange Act
specifically requires that any merger or acquisition candidate comply with all
applicable reporting requirements, which include providing audited financial
statements to be included within the numerous filings required under the
Exchange Act. Nevertheless, the officers and directors of the Company have not
conducted market research and are not aware of statistical data which would
support the perceived benefits of a merger or acquisition transaction for the
owners of a business opportunity.

The analysis of new business opportunities will be undertaken by, or under the
supervision of, the officers and directors of the Company. Management intends to
concentrate on identifying preliminary prospective business opportunities which
may be brought to its attention through present associations of the Company's
officers and directors, or by the Company's shareholders. In analyzing
prospective business opportunities, management will consider such matters as the
available technical, financial and managerial resources; working capital and
other financial requirements; history of operations, if any; prospects for the
future; nature of present and expected competition; the quality and experience
of management services which may be available and the depth of that management;
the potential for further research, development, or exploration; specific risk
factors not now foreseeable but which then may be anticipated to impact the
proposed activities of the Company; the potential for growth or expansion; the
potential for profit; the perceived public recognition of acceptance of
products, services, or trades; name identification; and other relevant factors.
Officers and directors of the Company expect to meet personally with management
and key personnel of the business opportunity as part of their "due diligence"
investigation. To the extent possible, the Company intends to utilize written
reports and personal investigations to evaluate the above factors. The Company
will not acquire or merge with any company that cannot provide audited financial
statements within a reasonable period of time after closing of the proposed
transaction.


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Management of the Company, while not especially experienced in matters relating
to the new business of the Company, shall rely upon their own efforts and, to a
much lesser extent, the efforts of the Company's shareholders, in accomplishing
the business purposes of the Company. Except for persons who may assist the
Company in identifying a suitable target company, it is not anticipated that any
outside consultants or advisors, except for the Company's legal counsel and
accountants, will be utilized by the Company to effectuate its business
purposes. To the extent the Company uses outside consultants or advisors, any
cash fee earned by such parties will be paid by the prospective
merger/acquisition candidate, as the Company has no cash assets with which to
pay such obligation.  Management will not restrict the Company's search to any
specific kind of firms, but may acquire a venture that is in its preliminary or
development stage or is already operating. It is impossible to predict at this
time the status of any business in which the Company may become engaged, in that
such business may need to seek additional capital, may desire to have its shares
publicly traded, or may seek other perceived advantages which the Company may
offer. Furthermore, management does not intend to seek capital to finance the
operation of any acquired business opportunity until possibly such time as the
Company has successfully consummated a merger or acquisition.

It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan. Because the Company has no substantial
capital with which to pay these anticipated expenses, it is anticipated that
present management of the Company will advance funds to the Company. However,
there are no assurances that management will continue to fund these expenses. If
additional funding is necessary, management and/or shareholders will continue to
provide capital or arrange for outside funding. However, the only opportunity
which management has to have these loans repaid will be from a prospective
merger or acquisition candidate. Management's agreements with the Company
contain no negative covenants that would impede or prevent consummation of a
proposed transaction. There is no assurance, however, that management will
continue to provide capital indefinitely if a merger candidate cannot be found.
If a merger candidate cannot be found in a reasonable period of time, management
may be required to reconsider its business strategy.

ACQUISITION OF OPPORTUNITIES

In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. The Company may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and shareholders of the
Company will no longer be in control of the Company. In addition, the Company's
directors may, as part of the terms of the acquisition transaction, resign and
be replaced by new directors without a vote of the Company's shareholders or may
sell their stock in the Company. Any and all such sales will only be made in
compliance with the securities laws of the United States and any applicable
state.

It is anticipated that any securities issued in any such reorganization would be
issued in reliance upon an exemption from registration under applicable federal
and state securities laws. In some circumstances, however, as a negotiated
element of its transaction, the Company may agree to register all or a part of
such securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
assurance, it will be undertaken by the surviving entity after the Company has
successfully consummated a merger or acquisition and the Company is no longer
considered a "shell" company. Until a merger or acquisition is consummated, the
Company will not attempt to register any additional securities. The issuance of
substantial additional securities and their potential sale into any trading
market which may develop in the Company's securities may have a depressive
effect on the value of the Company's securities in the future, if such a market
develops, of which there is no assurance.

While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company would retain 20% or less
of the issued and outstanding shares of the surviving entity, which would result
in significant dilution in the equity of such shareholders.

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As part of the Company's "due diligence" investigation, officers and directors
of the Company may meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis and verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures to the extent of the Company's
limited financial resources and management expertise. The manner in which the
Company participates in an opportunity will depend on the nature of the
opportunity, the respective needs and desires of the Company and other parties,
the management of the opportunity and the relative negotiation strength of the
Company and such other management.

With respect to any merger or acquisition negotiations with a target company
management is expected to focus on the percentage of the Company, which the
target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, the Company's shareholders will in all
likelihood hold a substantially lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage ownership may be
subject to significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's then shareholders.

The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require
some specific representations and warranties by all of the parties, will specify
certain events of default, will detail the terms of closing and the conditions
that must be satisfied by each of the parties prior to and after such closing,
will outline the manner of bearing costs, including costs associated with the
Company's attorneys and accountants, will set forth remedies on default and will
include miscellaneous other terms.

As stated previously, the Company will not acquire or merge with any entity that
cannot provide independent audited financial statements within a reasonable
period of time after closing of the proposed transaction. The Company is subject
to the reporting requirements of the Exchange Act. Included in these
requirements is the affirmative duty of the Company to file independent audited
financial statements as part of its Form 8-K to be filed with the Securities and
Exchange Commission upon consummation of a merger or acquisition, as well as the
Company's audited financial statements included in its annual report on Form
10-K (or 10-KSB, as applicable). If such audited financial statements are not
available at closing, or within time parameters necessary to insure the
Company's compliance with the requirements of the Exchange Act, or if the
audited financial statements provided do not conform to the representations made
by the candidate to be acquired in the closing documents, the closing documents
will provide that the proposed transaction will be voidable at the discretion of
the present management of the Company. If such transaction is voided, the
agreement will also contain a provision providing for the acquisition entity to
reimburse the Company for all costs associated with the proposed transaction.

INVESTMENT COMPANY ACT OF 1940

Although the Company will be subject to regulation under the Securities Act of
1933, as amended (the "Securities Act"), and the Exchange Act, management
believes the Company will not be subject to regulation under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), insofar as the
Company will not be engaged in the business of investing or trading in
securities. In the event the Company engages in business combinations which
result in the Company holding passive investment interests in a number of
entities, the Company could be subject to regulation under the Investment
Company Act. In such event, the Company would be required to register as an
investment company and could be expected to incur significant registration and
compliance costs. The Company has obtained no formal determination from the
Securities and Exchange Commission as to the status of the Company under the
Investment Company Act and, consequently, a violation of such Act could subject
the Company to material adverse consequences.


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INVESTMENT ADVISERS ACT OF 1940

Under Section 202(a)(11) of the Investment Advisers Act of 1940, as amended, an
"investment adviser" means any person who, for compensation, engages in the
business of advising others, either directly or through publications or
writings, as to the value of securities or as to the advisability of investing
in, purchasing, or selling securities, or who, for compensation and as part of a
regular business, issues or promulgates analyses or reports concerning
securities. The Company shall only seek to locate a suitable merger or
acquisition candidate, and does not intend to engage in the business of advising
others in investment matters for a fee or otherwise.

FORWARD LOOKING STATEMENTS

Pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 (the "PSLRA"), the Company cautions readers regarding forward
looking statements found in the following discussion and elsewhere in this
report and in any other statement made by, or on the behalf of the Company,
whether or not in future filings with the Securities and Exchange Commission.
Forward-looking statements are statements not based on historical information
and which relate to future operations, strategies, financial results or other
developments. Forward looking statements are necessarily based upon estimates
and assumptions that are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond the
Company's control and many of which, with respect to future business decisions,
are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward looking statements made by or on behalf of the Company. The
Company disclaims any obligation to update forward-looking statements.

COMPETITION

The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than does the Company.
In view of the Company's combined extremely limited financial resources and
limited management availability, the Company will continue to be at a
significant competitive disadvantage compared to the Company's competitors.

RISK FACTORS

The Company's business is subject to numerous risk factors, including the
following:

BANKRUPTCY, NO REVENUE AND MINIMAL ASSETS. The Company, as a result of the
bankruptcy proceedings, has no operations or revenues. The Company has no
significant assets or financial resources. The Company will, in all likelihood,
sustain operating expenses without corresponding revenues, at least until the
consummation of a business combination. This may result in the Company incurring
a net operating loss that will increase continuously until the Company can
consummate a business combination with a profitable business opportunity. There
is no assurance that the Company can identify such a business opportunity and
consummate such a business combination. In addition, since the Company has
previously filed bankruptcy other companies may be adverse to entering into a
business combination with the Company because of regulatory or disclosure
requirements which may limit the actions of such company and/or the negative
perception which may exist about a post-bankruptcy company.

SPECULATIVE NATURE OF COMPANY'S PROPOSED OPERATIONS. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified business
opportunity. While management intends to seek a business combination with an
entity having an established operating history, there can be no assurance the
Company will be successful in locating any candidates meeting such criteria. In
the event the Company completes a business combination, the success of its
operations may be dependent upon management of the successor firm or venture
partner firm and numerous other factors beyond the Company's control.

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SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS. The
Company is and will continue to be an insignificant participant in the business
of seeking mergers with, joint ventures with and acquisitions of private
entities. A large number of established and well-financed entities, including
venture capital firms, are active in mergers and acquisitions of companies that
may be desirable target candidates for the Company. Nearly all such entities
have significantly greater financial resources, technical expertise and
managerial capabilities than the Company and, consequently, the Company will be
at a competitive disadvantage in identifying possible business opportunities and
successfully completing a business acquisition. The Company will also compete in
seeking merger or acquisition candidates with numerous other small public
companies.

NO ASSURANCE OF BUSINESS COMBINATION OR OTHER TRANSACTION. The Company has
entered into the Merger Agreement to acquire Cano, which is subject to
significant contingencies and uncertainties, any of which, if not satisfactorily
resolved, could cause the acquisition to be abandoned. Accordingly, the Company
can provide no assurances that the Company will be successful in completing the
acquisition of Cano. If the Company fails to acquire Cano, there is no assurance
management will be able to negotiate another business combination on terms
favorable to the Company.

NO STANDARDS FOR BUSINESS COMBINATION. The Company has not established a
specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which the Company will require a target business
opportunity to have achieved. Accordingly, the Company may enter into a business
combination with a business opportunity having no significant operating history,
losses, limited or no potential for earnings, limited assets, negative net worth
or other characteristics that are very often indicative of development stage
companies.

CONTROL BY INVESTOR GROUP. The investor group which, consists of Mr. Long,
Robert Platek and Spencer Levy, in the aggregate, beneficially own approximately
79% of the shares of the Company's outstanding capital stock. As a result, these
stockholders possess the ability, among other things, to elect a majority of the
Company's Board of Directors and approve significant corporate transactions.
Such share ownership and control may also have the effect of delaying or
preventing a change in control of the Company, impeding a merger, consolidation,
takeover or other business combination involving the Company or discourage a
potential acquirer from making a tender offer or otherwise attempting to obtain
control of the Company, thereby having a material and adverse effect on the
value of the Company's stock. In addition, investors may have difficulty
obtaining the necessary stockholder vote required for corporate actions contrary
to the wishes of the management.

CONTINUED MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY. While seeking a
business combination, management anticipates devoting up to 15 hours per month
to the business of the Company. The Company has not entered into employment
agreements with any of its officers and is not expected to do so in the
foreseeable future. The Company has not obtained key man life insurance on any
of its officers or directors. Notwithstanding the combined limited experience
and time commitment of management, loss of the services of any of these
individuals would adversely affect development of the Company's business and its
likelihood of continuing operations. See "Item 9. Directors, Executive Officers,
Promoters and Control Persons; Compliance With Section 16(a) of the Exchange
Act."

CONFLICTS OF INTEREST - GENERAL. Officers and directors of the Company may
participate in business ventures which could be deemed to compete directly with
the Company. Additional conflicts of interest and non-arm's length transactions
may also arise in the event the Company's officers or directors are involved in
the management of any firm with which the Company transacts business.

REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Sections 13 and 15(d)
of the Securities Exchange Act require reporting companies to provide certain
information about significant acquisitions, including audited financial
statements for the company acquired, covering one, two, or three years,
depending on the relative size of the acquisition. The time and additional costs
that may be incurred by some target entities to prepare such statements may
significantly delay or essentially preclude consummation of an otherwise
desirable acquisition by the Company. Acquisition prospects that do not have or
are unable to obtain the required audited statements may be inappropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable.

                                       9

<PAGE>

LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. The Company has neither
conducted, nor have others made available to it, results of market research
indicating that market demand exists for the transactions contemplated by the
Company. Moreover, the Company does not have, and does not plan to establish, a
marketing organization. Even in the event demand is identified for a merger or
acquisition contemplated by the Company, there is no assurance the Company will
be successful in completing any such business combination.

LACK OF DIVERSIFICATION. The Company's proposed operations, even if successful,
will in all likelihood result in the Company engaging in a business combination
with a business opportunity. Consequently, the Company's activities may be
limited to those engaged in by business opportunities which the Company merges
with or acquires. The Company's inability to diversify its activities into a
number of areas may subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks associated with
the Company's operations.

GOVERNMENT REGULATION. Although the Company will be subject to the reporting
requirements under the Exchange Act, management believes the Company will not be
subject to regulation under the Investment Company Act, insofar as the Company
will not be engaged in the business of investing or trading in securities. In
the event the Company engages in business combinations which result in the
Company holding passive investment interests in a number of entities, the
Company could be subject to regulation under the Investment Company Act. In such
event, the Company would be required to register as an investment company and
could be expected to incur significant registration and compliance costs. The
Company has obtained no formal determination from the Securities and Exchange
Commission as to the status of the Company under the Investment Company Act and,
consequently, violation of such Act could subject the Company to material
adverse consequences.

PROBABLE CHANGE IN CONTROL AND MANAGEMENT. A business combination involving the
issuance of the Company's common stock will, in all likelihood, result in
shareholders of a private company obtaining a controlling interest in the
Company. Any such business combination may require management of the Company to
sell or transfer all or a portion of the Company's common stock held by them, or
resign as members of the Board of Directors of the Company. The resulting change
in control of the Company could result in removal of one or more present
officers and directors of the Company and a corresponding reduction in or
elimination of their participation in the future affairs of the Company.

REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING A BUSINESS COMBINATION. The
Company's primary plan of operation is based upon a business combination with a
private concern which, in all likelihood, would result in the Company issuing
securities to shareholders of any such private company. The issuance of
previously authorized and unissued common stock of the Company would result in a
reduction in the percentage of shares owned by present and prospective
shareholders of the Company and may result in a change in control or management
of the Company.

ABSENCE OF TRADING MARKET. There currently is no trading market for the
Company's stock and there is no assurance that a trading market will develop.

"PENNY" STOCK REGULATION OF BROKER-DEALER SALES OF COMPANY SECURITIES. The SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in "penny stocks". Generally, penny stocks are equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system). If the Company's
shares are traded for less than $5.00 per share, the shares will be subject to
the SEC's penny stock rules unless (1) the Company's net tangible assets exceed
$5,000,000 during the Company's first three years of continuous operations or
$2,000,000 after the Company's first three years of continuous operations; or
(2) the Company has had average revenue of at least $6,000,000 for the last
three years. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prescribed by the SEC that provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a


                                       10

<PAGE>

transaction in a penny stock not otherwise exempt from those rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. As long as the Company's common stock is
subject to the penny stock rules, the holders of the common stock may find it
difficult to sell the common stock of the Company.

TAXATION. Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination the Company may undertake. Currently,
such transactions may be structured so as to result in tax-free treatment to
both companies, pursuant to various federal and state tax provisions. The
Company intends to structure any business combination so as to minimize the
federal and state tax consequences to both the Company and the target entity;
however, there can be no assurance that such business combination will meet the
statutory requirements of a tax-free reorganization or that the parties will
obtain the intended tax-free treatment upon a transfer of stock or assets. A
non-qualifying reorganization could result in the imposition of both federal and
state taxes which may have an adverse effect on both parties to the transaction.

REQUIREMENT OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS
OPPORTUNITIES. Management believes that any potential business opportunity must
provide audited financial statements for review for the protection of all
parties to the business combination. One or more attractive business
opportunities may choose to forego the possibility of a business combination
with the Company, rather than incur the expenses associated with preparing
audited financial statements.

EMPLOYEES

The Company has no full time employees. The Company's officers and directors
have agreed to allocate a portion of their time to the activities of the
Company, without compensation. These officers and directors anticipate that the
business plan of the Company can be implemented by their devoting an aggregate
of 45 hours per month to the business affairs of the Company and, consequently,
conflicts of interest may arise with respect to the limited time commitment by
such officers and directors. The Company does not expect any significant changes
in the number of employees prior to the consummation of a business combination.

The Company's officers and directors are or may become involved with other
companies who have a business purpose similar to that of the Company. As a
result, potential conflicts of interest may arise in the future. If such a
conflict does arise and an officer or director of the Company is presented with
business opportunities under circumstances where there may be a doubt as to
whether the opportunity should belong to the Company or another "shell" company
they are affiliated with, they will disclose the opportunity to all such
companies.


ITEM 2.    DESCRIPTION OF PROPERTY.

The Company has no properties and at this time has no agreements to acquire any
properties. The Company intends to attempt to acquire assets or a business in
exchange for its securities.

The Company operates from its offices at 19 Maple Lane, Rhinebeck, New York
12572. Mr. Long, an officer, director and principal shareholder of the Company,
provides space to the Company on a rent-free basis and it is anticipated that
this arrangement will remain until such time as the Company successfully
consummates a merger or acquisition. Management believes that this space will
meet the Company's needs for the foreseeable future.


                                       11

<PAGE>


ITEM 3.    LEGAL PROCEEDINGS.

GENERAL

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 Bankruptcy 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
proceeding, until the corporate entity was sold to an investor group on May 25,
2000.

CONFIRMATION OF SECOND AMENDED PLAN OF REORGANIZATION

The Company's initial plan of reorganization included two principal elements.
These two elements were the sale of the Tennessee Facility as well as the
location of a site and the obtaining of funding (including reinstatement of DOE
funding) to construct a commercial-size demonstration of the NOXSO Process.

In September of 1997, the Company executed an asset purchase agreement between
the Company and Republic Financial Corporation pursuant to which the Company
agreed to sell the Tennessee Facility to Republic Financial Corporation.
However, the Company was unable to effect the commercial demonstration of the
NOXSO Process. Accordingly, the Company filed the Plan to liquidate the
Company's assets.

On December 9, 1999, the Bankruptcy Court issued an Order confirming the Plan
under Chapter 11 of the Bankruptcy Code. Pursuant to the terms of the Order, the
Company was authorized to separately transfer the corporate entity and it's
assets. The proceeds from these transfers are to be used for the distributions
to be made pursuant to the Plan, which will be in full and final satisfaction,
settlement, release and discharge as against the Company, of any and all claims
and interests of any nature whatsoever that arose before December 9, 1999.

The Plan provided for conveyance of the corporate entity to an investor group
which included Mr. Robert Long, an officer, director and shareholder of the
Company at the time. Simultaneously, the Company's sale of assets to FLS MILJO
a/s free and clear of liens was approved.

In connection with such distributions, equity interests based upon ownership of
existing securities or rights to acquire existing securities, including without
limitation vested and non-vested warrants, options, preemption rights or other
rights, were cancelled on the consummation date, and the equity interests will
receive nothing on account of those interests.

On December 6, 2000, an appeal was filed by an individual alleging the sale of
the 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. A motion for a final
decree has been filed in the bankruptcy case and a final decree is anticipated
in calendar year 2002.

The Company, as a corporate entity, continues to exist as a reorganized entity.

Pursuant to the Plan, on May 25, 2000, all outstanding shares and options to
purchase shares of the Company were cancelled and 900,000 shares of common stock
were issued to an investor group consisting of Robert M. Long (360,000 shares),
an officer, director and shareholder of the Company prior to the sale of the
corporate entity, Robert Platek (450,000 shares), and Spencer Levy (90,000
shares). Pursuant to the terms of the Plan an additional 100,000 shares have
been issued, pro-rata, to the Company's unsecured creditors with allowed claims,
except for the Department of Energy, which elected not to receive shares. As of
April 29, 2002, the Company had a total of 87 shareholders of record.

                                       12

<PAGE>


Messrs. Long, Platek and Levy paid an aggregate of $50,000 cash, on a pro-rata
basis, under the terms of the Plan for the right to acquire control of the
Company and 90% of the then outstanding shares of common stock.

In connection with the change of control, all of the Company's officers and
directors, with the exception of Mr. Long, were replaced on May 25, 2000. On May
25, 2000, the investor group elected Mr. Long, a director of the Company and
Secretary of the Company prior to the change of control, as a director and
President of the Company. Additionally, James Platek was elected as a director
and Treasurer of the Company, and Spencer Levy was elected as a director and
Secretary of the Company.

Pursuant to the Company's Second Amended Plan of Reorganization, as of June 15,
2001, the Company had no material net assets. As such, the Company can be
defined as a "shell" company, whose sole purpose at this time is to locate and
consummate a merger or acquisition with a private entity. The Board of Directors
of the Company has elected to commence implementation of the Company's principal
business purpose, described above in "Item 1. Description of Business - Plan of
Operation."

Prior to the change of control, there were 15,383,468 shares of common stock
issued and outstanding. Subsequent to the change of control and pursuant to the
Plan, there are 1,135,000 shares of common stock issued and outstanding.

Immediately prior to confirmation of the Plan, the Company had assets totaling
approximately $314,863 and liabilities totaling approximately $3,868,078.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Not Applicable.






                                       13

<PAGE>


                                     PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Since November 7, 2001, the Company's common stock has been quoted on the
Over-the-Counter Bulletin Board (the "OTC Bulletin Board") under the symbol
"NXSO".

The Company's common stock traded on the OTC Bulletin Board from June 4, 1997
until May 25, 2000, under the symbol "NOXOQ". Prior to June 4, 1997, it was
traded in the Nasdaq Small Cap Market System. The following table sets forth the
range of high and low closing bid quotations of the common stock for each fiscal
quarter within the fiscal years ended June 30, 2000 and 1999:

                                                      BID OR TRADE PRICES

2000 FISCAL YEAR                                  HIGH                  LOW

Quarter Ending 09/30/99......................    $0.060               $0.036
Quarter Ending 12/31/99......................    $0.060               $0.010
Quarter Ending 03/31/00......................    $0.030               $0.000
Quarter Ending 06/30/00(1)...................    $0.025               $0.004

1999 FISCAL YEAR                                  HIGH                  LOW

Quarter Ending 09/30/98......................    $0.270               $0.010
Quarter Ending 12/31/98......................    $0.035               $0.005
Quarter Ending 03/31/99......................    $0.037               $0.006
Quarter Ending 06/30/99......................    $0.460               $0.020

----------------------
(1) Through May 25, 2000, the date on which trading in the shares ceased.

The last reported trade of the common stock was on May 30, 2000 at $0.010 per
share.

The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions.

As of April 29, 2002, there were 87 record holders of the Company's common
stock.

During the last two fiscal years, no cash dividends have been declared on the
Company's common stock and management does not anticipate that dividends will be
paid in the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES

There were no securities issued by the Company during the year ended March 31,
2002.


ITEM 6.    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.

                                       14

<PAGE>


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.

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. See "Item 1. Description of Business - Cano Energy Corporation."
Accordingly, the Company can provide no assurances that the Company 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

Effective April 16, 2001, the Company changed the date of its fiscal year end
from June 30 to March 31. As such, the comparable financial information
presented is for the nine months ended March 31, 2001.

At March 31, 2002 and 2001, the Company had working capital deficits of $83,337
and $2,871, respectively. The increase in the working capital deficit is due to
the reduction of the recoverable preference payments and increase in the
liabilities not subject to compromise and amounts due to related parties. During
the year ended March 31, 2002, 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 March 31,
2002, some of the Company's liabilities which existed prior to the sale of the
Corporate entity remained unpaid. At March 31, 2002, liabilities not subject to
compromise exceeded funds held by attorney in escrow by $46,613. In 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 $63,636. 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

                                       15

<PAGE>

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 liabilities
not subject to compromise. If the Company successfully completes the minimum
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. See "Item 1. Description of Business - Cano Energy Corporation."

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 Company engaged the auditors and legal counsel engaged
by Mr. Long.  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. During the year ended March
31, 2002, management and shareholders advanced $23,007 to the Company.

ASSETS

At March 31, 2002 the Company had total assets of $70,136 compared to total
assets of $86,971 at March 31, 2001. At March 31, 2002 and 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 year ended March 31, 2002, the Company had a net loss of $80,506, as
compared to a net loss of $42,087 for the nine months ended March 31, 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
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.


ITEM 7.    FINANCIAL STATEMENTS.

Please refer to the pages beginning with F-1.


ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE.

Not Applicable.

                                       16

<PAGE>

                                    PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

The officers and directors of the Company are:

   NAME                     AGE           TITLE(S)
   ----                     ---           --------
   Robert Long              43            President since May 2000
                                          Director since November 1988
                                          Secretary from March 1993 to May 2000

   James Platek             34            Treasurer since May 2000
                                          Director since May 2000

   Spencer Levy             45            Secretary since May 2000
                                          Director since May 2000


The shareholders elect the directors of the Company and the Board of Directors
appoints the officers annually. The Board of Directors fills vacancies in the
Board of Directors. Directors of the Company receive no compensation for their
service as directors. Set forth below are brief descriptions of the recent
employment and business experience of the Company's officers and directors.

James Platek is the brother of Robert Platek, a controlling shareholder of the
Company. There are no other family relationships between any executive officer
and director of the Company.

ROBERT M. LONG, PRESIDENT AND DIRECTOR.  Mr. Long holds a bachelors degree in
Economics from the University of the South (Sewanee, Tennessee), and a Masters
of Business Administration from The College of William and Mary (Williamsburg,
Virginia).  Mr. Long has been self-employed as a financial consultant throughout
his career, which has included providing financial consulting services to early
stage companies. Since 1997, Mr. Long has been the president and sole
shareholder of LongView Partners, Inc.  Through LongView Partners, Inc. Mr. Long
provides clients with financial and investor relations services.  From 1983 to
1996, Mr. Long was a self-employed financial consultant, providing investment
banking services.  Mr. Long has been a director of the Company since November
1988 and served as Secretary from March 1993 until May 25, 2000.  Mr. Long was
an officer and director of the Company at the time the Company filed bankruptcy.
Mr. Long was a director of Regent Group, Inc., a public company listed on the
OTC-Bulletin Board, from July 1999 to October 15, 2001.

JAMES PLATEK, TREASURER AND DIRECTOR. Mr. Platek holds a bachelors degree in
History from Rutgers University.  Since 1998, Mr. Platek has been a
self-employed financial consultant and private investor.  From 1997 to 1998, Mr.
Platek was a retail broker for Morgan Stanley Dean Witter, New York, New York.
From 1995 to 1998, Mr. Platek was the Director of Marketing for Plymouth
Partners, New York, New York.  Mr. Platek was responsible for marketing,
analysis and fund raising. Plymouth Partners is a private company which assists
companies with funding and marketing.  Mr. Platek was the Vice President of
Institutional Marketing of Regent Group, Inc., a publicly-held company, from
July 1999 to July 2001.

SPENCER LEVY, SECRETARY, DIRECTOR.  Mr. Levy holds a bachelors degree in Liberal
Arts from New York University, and a Masters Degree in Anthropology from the
University of Chicago.  Since 1999, Mr. Levy has been a self-employed financial
consultant.  From 1996 to 1999, Mr. Levy was an employee/consultant for LongView
Partners, Inc. where he provided financial and investor relations consulting
services.  From 1993 to 1995, Mr. Levy was an Associate for Glaser Capital
Management, Inc., New York, New York, where he interacted with the partners and


                                       17

<PAGE>

provided bookkeeping services.  Glaser Capital Management, Inc. provided
investor relations to its clientele.  Mr. Levy was the Vice President of
Editorial Content of Regent Group, Inc. from July 1999 to July 2001.

PRIOR "SHELL" COMPANY EXPERIENCE

With the exception of Mr. Long and Mr. Levy, none of the Company's officers
and/or directors has had any direct experience in identifying emerging companies
for investment and/or business combinations.

CONFLICTS OF INTEREST

Members of the Company's management are associated with other firms involved in
a range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors of the Company.
Insofar as the officers and directors are engaged in other business activities,
management anticipates they will devote only a minor amount of time to the
Company's affairs.

The officers and directors of the Company are now and may in the future become
shareholders, officers or directors of other companies which may be formed for
the purpose of engaging in business activities similar to those conducted by the
Company. Accordingly, additional direct conflicts of interest may arise in the
future with respect to such individuals acting on behalf of the Company or other
entities. Moreover, additional conflicts of interest may arise with respect to
opportunities which come to the attention of such individuals in the performance
of their duties or otherwise. The Company does not currently have a right of
first refusal pertaining to opportunities that come to management's attention
insofar as such opportunities may relate to the Company's proposed business
operations.

The officers and directors are, so long as they are officers or directors of the
Company, subject to the restriction that all opportunities contemplated by the
Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. If the Company or
the companies in which the officers and directors are affiliated with both
desire to take advantage of an opportunity, then said officers and directors
would abstain from negotiating and voting upon the opportunity. However, all
directors may still individually take advantage of opportunities if the Company
should decline to do so. Except as set forth above, the Company has not adopted
any other conflict of interest policy with respect to such transactions.

As of June 20, 2002, the Company did not have any standing audit, nominating, or
compensation committees of the Board of Directors.

During the fiscal year ended March 31, 2002, no meetings of the Board of
Directors were held.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and Nasdaq. Officers,
directors and greater than 10% percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. To the best of the Company's knowledge no reports were required to be
filed during the fiscal year ended March 31, 2002.


ITEM 10.   EXECUTIVE COMPENSATION.

None of the Company's officers and/or directors receives any compensation for
services rendered to the Company, nor has any received such compensation in the
past, excluding Mr. Long. They all have agreed to act without compensation until
authorized by the Board of Directors, which is not expected to occur until after
consummation of a merger or acquisition; however, the officers and directors are
reimbursed for expenses incurred on behalf of the


                                       18

<PAGE>

Company, including travel expenses. As of the date of this report, the Company
has no funds available to pay directors. Further, none of the directors are
accruing any compensation pursuant to any agreement with the Company.

It is possible that after the Company successfully consummates a merger or
acquisition with another entity that entity may desire to employ or retain one
or a number of members of the Company's management for the purposes of providing
services to the surviving entity or otherwise provide other compensation to such
persons. Each member of management has agreed to disclose to the Company's Board
of Directors any discussions concerning possible compensation to be paid to them
by any entity which proposes to undertake a transaction with the Company and
further, to abstain from voting on such transaction. Therefore, as a practical
matter, if each member of the Company's Board of Directors is offered
compensation in any form from any prospective merger or acquisition candidate,
the proposed transaction cannot be approved by the Company's Board of Directors
due to the inability of the Board to affirmatively approve such a transaction.
Specifically, under section 13.1-691 of the Virginia Stock Corporation Act, a
transaction in which a director has a director or indirect personal interest is
not voidable by a corporation if:

     1.    The material facts are disclosed to the board of directors and
           a majority of the disinterested directors (which must be more
           than one director) approve the transaction;

     2.    The material facts are disclosed to the shareholders and a
           majority of the shareholders approve the transaction; however,
           the shares of interested directors are not counted in
           determining whether to approve the transaction; or

     3.    The transaction is fair to the corporation.

It is possible that persons associated with management may refer a prospective
merger or acquisition candidate to the Company. In the event the Company
consummates a transaction with any entity referred by associates of management,
it is possible that such an associate will be compensated for their referral in
the form of a finder's fee. It is anticipated that this fee will be either in
the form of restricted common stock issued by the Company as part of the terms
of the proposed transaction, or will be in the form of cash consideration.
However, if such compensation is in the form of cash, the acquisition or merger
candidate will tender such payment, because the Company has insufficient cash
available. The amount of such finder's fee cannot be determined as of the date
of this report, but is expected to be comparable to consideration normally paid
in like transactions. No member of management of the Company will receive any
finder's fee, either directly or indirectly, as a result of their respective
efforts to implement the Company's business plan.

No retirement, pension, profit sharing, stock option or insurance programs or
other similar programs have been adopted by the Company for the benefit of its
employees.

The following table sets forth information for Robert Long, the Company's Chief
Executive Officer ("CEO") during the last three completed fiscal periods. No
disclosure need be provided for any executive officer, other than the CEO, whose
total annual salary and bonus for the last completed fiscal year did not exceed
$100,000. Accordingly, no other executive officers of the Company are included
in the table.

<TABLE>
<CAPTION>
                                                                         LONG TERM COMPENSATION
                                                                  -------------------------------------
                                     ANNUAL COMPENSATION                  AWARDS             PAYOUTS
                              -------------------------------------------------------------------------

                                                        OTHER     RESTRICTED   SECURITIES
                                                       ANNUAL        STOCK     UNDERLYING                ALL OTHER
NAME AND PRINCIPAL                                   COMPENSATION  AWARD(S)    OPTIONS /      LTIP      COMPENSATION
POSITION              YEAR    SALARY($)   BONUS($)       ($)          ($)       SARS ($)   PAYOUTS ($)      ($)
--------------------------------------------------------------------------------------------------------------------
<S>                   <C>        <C>         <C>         <C>          <C>         <C>          <C>          <C>

Robert Long           2002       -0-         -0-         -0-          -0-         -0-          -0-          -0-
President, Chief      2001       -0-         -0-         -0-          -0-         -0-          -0-          -0-
Executive Officer     2000       -0-         -0-         -0-          -0-         -0-          -0-          -0-
and Director (1)

</TABLE>

                                       19

<PAGE>


--------------------

(1)      Mr. Long was elected President on May 25, 2000.  Mr. Long previously
         served as Secretary of the Company, and as such the compensation
         reported for the 2000 fiscal year reflects compensation to Mr. Long in
         his capacity as Secretary and/or as a director of the Company.

The Company does not have any employment contracts with any of its officers or
directors. Such persons are employed by the Company on an at will basis, and the
terms and conditions of employment are subject to change by the Company. At
March 31, 2002, Mr. Long did not hold any stock options in the Company.

STOCK OPTION PLANS

As of the date of this report, the Company does not have a stock option plan. As
a result of the Bankruptcy Proceedings, the Company's 1990 Stock Option Plan was
terminated, along with all outstanding options granted under the 1990 Stock
Option Plan. As of the date of this report there are no outstanding stock
options.

EMPLOYMENT AGREEMENTS

As of June 20, 2002, the Company did not have any employment agreements with its
officers or directors.

DIRECTORS' COMPENSATION

The Company does not compensate directors for services in their capacities as
directors. Directors are reimbursed for their expenses in connection with
attendance at each Board Meeting.


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth information, as of June 20, 2002, with respect to
the beneficial ownership of the Company's common stock by each person known by
the Company to be the beneficial owner of more than five percent of the
outstanding common stock and by directors and officers of the Company, both
individually and as a group:


        NAME AND ADDRESS OF             NUMBER OF SHARES
          BENEFICIAL OWNER             BENEFICIALLY OWNED    PERCENT OF CLASS(1)

     Robert Long                             360,000                31.7%
     19 Maple Lane
     Rhinebeck, New York 12572

     Robert Platek(2)                        450,000                39.6%
     5 Halls Lane
     Rye, New York 10580

     Spencer Levy                             90,000                 7.9%
     11 Waverly Place #6H
     New York, New York 10003

     James Platek(2)                            -0-                   0%
     19 New England Avenue, #8C
     Summit, New Jersey 07901

     All officers and directors,              450,000               39.6%
     as a group (3 persons)

------------------
(1)      Percentages are based on 1,135,000 shares of common stock outstanding
         as of June 20, 2002.
(2)      Robert Platek and James Platek are brothers.

                                       20

<PAGE>


CHANGES OF CONTROL

If the Company consummates the proposed acquisition of Cano, the Cano
shareholders and investors in the private placement will own collectively 92.5%
of the then outstanding shares of common stock and existing shareholders of the
Company will own collectively 7.5% 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.


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Other than as disclosed below, none of the present directors, officers or
principal shareholders of the Company, nor any family member of the foregoing,
nor, to the best of the information and belief of the present management of the
Company, any of the former directors, senior officers or principal shareholders
of the Company, nor any family member of such former directors, officers or
principal shareholders, has or has had any material interest, director or
indirect, in any transaction, within the two years prior to the date of this
report, or in any proposed transaction which has materially affected or will
materially affect the Company. Management believes the following transactions
are as fair to the Company and similar to terms which could be obtained from
unrelated third parties.

1.       Pursuant to the Plan, on May 25, 2000, all outstanding shares of the
         Company were cancelled and 900,000 shares of common stock were issued
         to an investor group consisting of Robert M. Long (360,000 shares), an
         officer, director and shareholder of the Company prior to the sale of
         the corporate entity, Robert Platek (450,000 shares), a beneficial
         shareholder of the Company prior to the sale, and Spencer Levy (90,000
         shares). Messrs. Long, Platek and Levy paid an aggregate of $50,000 for
         control of the Company, on a pro-rata basis.

2.       During the year ended March 31, 2002, shareholders advanced $23,007 to
         the Company. During the nine months ended March 31, 2001, shareholders
         of the Company loaned the Company $21,817. During the fiscal year ended
         June 30, 2000, Mr. Long, an officer, director and principal shareholder
         of the Company, advanced $29,531 to the Company for the payment of
         expenses.

3.       In connection with the Company's acquisition of Cano, the following
         persons, who are officers, directors and principal shareholders, will
         sell a portion of their shares of the Company's common stock back to
         the Company:

               Robert M. Long           -      119,570 shares for $119,570
               Robert Platek            -      119,570 shares for $119,570
               Robert J. Salluzzo       -      35,860 shares for $35,860

         If the Company fails to acquire Cano, the Company can terminate the
         agreements to redeem these shares.

4.       In the event that the Company has acquired Cano and 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.

5.       As a condition to closing the Company's acquisition of Cano, the net
         proceeds of $40,000 from the private placement must have been used,
         together with the $35,000 loan from Cano, to pay all outstanding
         liabilities of the Company, so that at the closing, the Company does
         not have any outstanding liabilities. At March


                                       21

<PAGE>

         31, 2002, the Company's current liabilities were $183,513. To satisfy
         this condition, it is anticipated that related parties will have to
         forgive amounts owed to them by the Company.


ITEM 13.   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 Modifica-        N/A
            tions 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)

   2.2      Merger Agreement and Plan of Reorganization dated
            April 24, 2002 by and among Noxso Corporation, Noxso
            Acquisition Corp., and Cano Energy Corporation, as
            amended

   3.1      Articles of Incorporation, as amended (1)                    N/A

   3.2      Amended and Restated Bylaws (1)                              N/A

  10.1      Stock Redemption Agreements with shareholders

   11       Statement re computation of per share earnings (2)           N/A
---------------------------
(1)   Incorporated by reference to the Company's Registration Statement on
      Form S-1 filed with the Commission on January 13, 1989, file No. 33-26541.
(2)   See Part I - Financial Statements.
(3)   Incorporated by reference to the Exhibits previously filed with the
      Corporation's Current Report on Form 8-K dated May 23, 2000.

(b)   The following reports on Form 8-K were filed during the last quarter of
      the period covered by this report:

      None.







                                       22
<PAGE>


                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      NOXSO CORPORATION



Dated: July 11, 2002                  By:  /s/ ROBERT M. LONG
                                         ---------------------------------------
                                            Robert M. Long, President

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

SIGNATURE                          TITLE                            DATE

                             President and Director
/s/ ROBERT M. LONG           (Principal Executive Officer)        7-11-02
---------------------------                                     ----------------
Robert M. Long

                             Treasurer and Director
                             (Principal Financial and
/s/ JAMES PLATEK             Accounting Officer)                  7-11-02
---------------------------                                     ----------------
James Platek


                             Secretary and Director
---------------------------                                     ----------------
Spencer Levy











                                       23

<PAGE>

                                NOXSO CORPORATION
                              FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001


                                TABLE OF CONTENTS



                                                                       PAGE(S)

      Report of Independent Certified Public Accountants                 F-2

      Balance Sheets - March 31, 2002 and 2001                           F-3

      Statements Of Operations - Twelve Months Ended March 31,           F-4
      2002 and Nine Months Ended  June 30, 2001

      Statements Of Changes In Stockholders' Equity - Twelve             F-5
      Months Ended March 31, 2002 and Nine Months Ended
      June 30, 2001

      Statements Of Cash Flows- Twelve Months Ended March 31,            F-6
      2002 and Nine Months Ended  June 30, 2001

      Notes To Financial Statements - March 31, 2002 and 2001         F-7 - F-13





                                      F-1

<PAGE>

                                         1169 Pittsford - Victor Road, Suite 125
                                                 Pittsford, New York 14534
BAIER & WILLIAMS,                                      (585) 385-0530
================================================================================
 Certified Public Accountants  o Business and Financial Advisory Services


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors of NOXSO Corporation

We have audited the accompanying balance sheets of NOXSO Corporation as of March
31, 2002 and 2001, and the related statements of operations, shareholders'
equity, and cash flows for the twelve months and nine months, respectively, then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NOXSO Corporation as of March
31, 2002 and 2001, and the results of its operations and its cash flows for the
year and the nine months then ended, respectively, in conformity with accounting
principles generally accepted in the United States of America.

As described in Note 5 to the financial statements, on April 24, 2002, the
Company entered into a merger agreement and plan of reorganization with Cano
Energy Corporation. The completion of the merger agreement and plan of
reorganization is conditional on the Company achieving a minimum sale of $2
million in connection with a private placement offering commenced in June 2002
that is described in Note 4 to the financial statements.

As described in Notes 1 and 3 to the financial statements, in 1997 a bankruptcy
proceeding was commenced against the Company, and a final decree terminating the
proceeding has not yet been issued. This final decree, when issued, could direct
the disposition of funds held in escrow by an attorney, if any, to other parties
including unsecured creditors. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has no source of revenues,
does not intend to commence operations and intends to merge with another entity.
Until a merger is ultimately completed, the Company intends to remain a shell
company and anticipates that its cash requirements will be dependent on the
Company's directors or officers. These matters raise a substantial doubt
regarding the Company's ability to continue as a going concern. As described
above and in Note 5 to the financial statements, the Company entered into a
merger agreement and plan of reorganization with Cano Energy Corporation. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


/s/ BAIER & WILLIAMS, LLP.

Baier & Williams, LLP.
Rochester, New York
June 19, 2002


                                      F-2

<PAGE>


                                NOXSO CORPORATION
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                          MARCH 31, 2002      MARCH 31, 2001
                                                          --------------      --------------
<S>                                                       <C>                 <C>
 Cash                                                     $       1,560       $       1,800
 Account Receivable                                               6,500
 Recoverable Preference Payments                                    -                68,228
 Funds Held By Attorney In Escrow                                62,076              16,943
                                                          ----------------------------------
 Current Assets                                                  70,136              86,971
                                                          ----------------------------------

 Total Assets                                             $      70,136       $      86,971
                                                          ==================================


 LIABILITIES AND STOCKHOLDERS' EQUITY

 Liabilities Not Subject To Compromise                    $     108,689       $      68,025
 Amounts due to related party                                    44,824              21,817
                                                          ----------------------------------
 Current Liabilities                                            153,513              89,842
                                                          ----------------------------------



 Common Stock, $.01 Par Value, 20,000,000 Shares
    Authorized, 1,000,000 Shares Outstanding                     10,000              10,000
 Paid In Capital                                                 29,216              29,216
 Retained Deficit                                              (122,593)            (42,087)
                                                          ----------------------------------
 Total Stockholders' Equity (Deficit)                           (83,377)             (2,871)
                                                          ----------------------------------

 Total Liabilities and Shareholders' Equity               $      70,136       $      86,971
                                                          ==================================
</TABLE>





                 See accompanying notes to financial statements.


                                      F-3

<PAGE>


                                NOXSO CORPORATION
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                               Twelve Months         Nine Months
                                                              Ended March 31,      Ended March 31,
                                                                    2002                 2001

<S>                                                           <C>                  <C>
Revenue                                                       $          -         $          -
                                                              ------------------------------------

 Legal and Accounting                                                 77,189              115,760
 Corporate Expenses                                                    3,317                4,014
                                                              ------------------------------------
                                                                      80,506              119,774
                                                              ------------------------------------

 Reimbursement for Amounts Previously Disbursed                          -                 77,688
                                                              ------------------------------------
                                                                         -                 77,688
                                                              ------------------------------------

 Net (Loss)                                                   $      (80,506)      $      (42,087)
                                                              ====================================

 Loss Per Common Share                                        $        (0.08)      $        (0.04)
                                                              ====================================

 Average Shares Outstanding                                        1,000,000            1,000,000
                                                              ====================================

</TABLE>


                 See accompanying notes to financial statements.


                                      F-4
<PAGE>


         NOXSO CORPORATION STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
         FOR THE TWELVE MONTHS ENDED MARCH 31, 2002 AND THE NINE MONTHS
                               ENDED JUNE 30, 2001

<TABLE>
<CAPTION>
                                                      Common          Common        Paid In       Retained
                                                      Shares           Stock        Capital        Deficit          Total

<S>                                                  <C>           <C>            <C>            <C>             <C>
Balance - June 30, 2000                              1,000,000     $    10,000    $  29,216      $     -         $   39,216

Net Loss Nine Months Ended March 31, 2001                                                          (42,087)         (42,087)
                                                   -------------------------------------------------------------------------

Balance - March 31, 2001                             1,000,000          10,000       29,216        (42,087)          (2,871)

Net Loss Year Ended March 31, 2002                                                                 (80,506)         (80,506)
                                                   -------------------------------------------------------------------------

Balance - March 31, 2002                             1,000,000     $    10,000    $  29,216      $(122,593)      $  (83,377)
                                                   =========================================================================

</TABLE>

                 See accompanying notes to financial statements.



                                      F-5

<PAGE>


                                NOXSO CORPORATION
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                               Twelve Months       Nine Months
                                                              Ended March 31,    Ended March 31,
                                                                    2002               2001
<S>                                                           <C>                <C>
Cash Flows From Operating Activities:
  Net Loss                                                    $      (80,506)    $      (42,087)
  Adjustments to reconcile net loss to net cash
  used by operating activities:
     Change in Other Current Assets                                   16,595             33,239
     Change in Liabilities not subject to compromise                  40,664            (13,127)
                                                              ----------------------------------
 Cash Flows From Investing Activities:                               (23,247)           (21,975)
                                                              ----------------------------------

 Cash Flows From Financing Activities:
     Change in Amounts Due Shareholders                               23,007             21,817
                                                              ----------------------------------
                                                                      23,007             21,817
                                                              ----------------------------------

 Net Change in Cash                                                    (240)               (158)
 Cash at Beginning of Period                                          1,800               1,958
                                                              ----------------------------------
 Cash at End of Period                                        $       1,560      $        1,800
                                                              ==================================

 Cash Payments For Interest                                   $         -        $          -
                                                              ==================================

 Cash Payments For Taxes                                      $         -        $          -
                                                              ==================================
</TABLE>



                       See notes to financial statements.





                                      F-6
<PAGE>


                                NOXSO CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

NOTE 1 - NATURE OF BUSINESS:

     NOXSO Corporation was incorporated in the Commonwealth of Virginia on
     August 28, 1979, to engage in developing, testing and marketing a process
     capable of removing certain emissions from flue gas generated by burning
     coal. Until September 1998, the Company had been in the development stage
     and had not commenced commercial operation.

     In September 30, 1998, the Company ceased operations, closed and vacated
     its offices, and was no longer able to effect transactions crucial to a
     successful implementation of its plan for reorganization under a pending
     bankruptcy proceeding. In light of the Company's amended plan of
     reorganization which ultimately resulted in liquidation of the Company (see
     Note 3), the Company discontinued the application of accounting and
     reporting applicable to development stage enterprises.

     Creditors of the Company filed an involuntary petition of bankruptcy
     against the Company, and as more fully described in Note 3, the Company had
     been operating as a debtor-in-possession in the bankruptcy proceeding.

     However, the Company was unable to effect its initial plan of
     reorganization and on December 2, 1999, the Bankruptcy Court issued an
     order (the "Order") confirming the Company's second amended plan of
     reorganization authorizing the Company to separately transfer its assets
     and corporate entity and to apply the proceeds toward the distributions
     pursuant to the liquidation stipulated in the second amended plan of
     reorganization.

     In connection with such distributions, equity interests based upon
     ownership of existing securities or rights to acquire existing securities,
     including without limitation vested and non-vested warrants, options,
     preemption rights or other rights, were cancelled on the consummation date,
     and the equity interests received nothing on account of those interests.

     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 year ended March 31,
     2002, shareholders of the Company loaned the Company $23,007.

     Also, see Note 5 for information with respect to a merger agreement and
     plan of reorganization.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     FISCAL YEAR END -

     As of April 16, 2001, the Company changed the date of its fiscal year from
     June 30 to March 31.


     CASH -

     Cash consists of funds held in a bank account maintained by an attorney on
     behalf of the Company.


     ACCOUNT RECEIVABLE -

     The account receivable is comprised of corporate expenses reimbursable by
     Cano Engery Corp. (See Note 5.)  No reserve is considered necessary.



                                      F-7

<PAGE>

                                NOXSO CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001


     USE OF ESTIMATES -

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of the contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenues and expenses
     during the reporting period. Actual results could differ from those
     estimates.


     LIABILITIES NOT SUBJECT TO COMPROMISE -

     Such liabilities consist of accrued legal, accounting, and other fees
     incurred in connection with the conclusion of the Bankruptcy proceeding.


     INCOME TAXES -

     Under the Financial Accounting Standards Board ("FASB") Statement No. 109,
     "Accounting for Income Taxes" (SFAS No. 109), deferred tax assets or
     liabilities are computed based on the difference between the financial
     statement and income tax basis of assets and liabilities using the enacted
     marginal tax rate. Deferred income taxes or credits are based on the
     changes in the asset or liability from period to period. There were no
     material temporary differences at March 31, 2002 or March 31, 2001.

     At March 31, 2002, the Company had net operating loss carryforwards
     approximating $15,115,000 that expire in fiscal years through 2017. The
     rate of utilization of these losses is now subject to restriction because
     more than a 50% ownership change resulted from the consummation of the plan
     of reorganization confirmed by the Bankruptcy court.

     The ultimate utilization, if any, of the net operating losses is dependent
     on the Company meeting requirements imposed by the Internal Revenue Code
     that mandate a continuity of business for the net operating losses to be
     used as an reduction of taxable income. In light of the merger agreement
     and plan of reorganization described in Note 5, the continuity of business
     requirement may not be met; consequently, the merged entity may be unable
     to utilize the accumulated net operating losses.

     The deferred tax assets related to these net operating losses were entirely
     offset by a valuation allowances at March 31, 2002 and March 31, 2001.


     LOSS PER COMMON SHARE -

     Basic net loss per share is computed using the weighted average number of
     common shares outstanding during the period. Diluted net loss per share is
     equivalent to the basic net loss per share.


NOTE 3 - BANKRUPTCY AND PLAN OF REORGANIZATION:

     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.


                                      F-8

<PAGE>


                                NOXSO CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

     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 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.


                                      F-9
<PAGE>


                                NOXSO CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

     A motion for a final decree has been filed in the bankruptcy case and a
     final decree is anticipated in calendar year 2002.

     At March 31, 2002, cash and other funds held by attorney in escrow amount
     to $63,636. 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.


NOTE 4 - CAPITAL STRUCTURE:

     The Company has a single class of Common Stock with 20,000,000 shares
     authorized and 1,000,000 shares issued and outstanding at March 31, 2002
     and 2001.

     In April 2002, the Company issued an additional 135,000 shares of Common
     Stock to an individual in exchange for $6,250 of accounting and consulting
     services he previously provided and that had been included as a liability
     not subject to compromise on the balance sheet at March 31, 2002.

     There are no warrants or options outstanding.

     Of the 1,000,000 shares of Common Stock issued and outstanding at March 31,
     2002, 450,000 shares are owned by officers and directors of the Company.

     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.
     The purchase price is $50,000 per Unit. The minimum investment is one Unit,
     subject to reduction by the Company.

     Simultaneously with and as a condition to the initial closing of the
     private placement offering, which shall be for no less than the $2,000,000
     minimum offering, 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 Note 5).

     Pending the initial closing and the simultaneous closing of the merger
     agreement and plan of reorganization (See Note 5), 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,

                                      F-10

<PAGE>

                                NOXSO CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001

     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.


NOTE 5 - 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"). (See
     the description of the June 2002 private placement memorandum in Note 4.)
     The completion of the merger is conditional on the Company achieving an
     initial closing of its private placement offering, which shall be for no
     less than the $2,000,000 minimum described in the offering,

     The parties to the agreement intend that the merger shall constitute a
     reorganization within the meaning of Section 368 of the Internal Revenue
     Code.

     The Company intends to close its acquisition of Cano in early August, 2002,
     although the closing date may be extended by agreement among the parties.
     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:
         (i)   Cano shall be the surviving entity of the merger and shall become
               a wholly-owned subsidiary of the Company, although Cano shall be
               deemed to be the acquiring entity and the Company shall be deemed
               to be the acquired entity,
         (ii)  the current shareholders of Cano shall become the controlling
               shareholders of the Company, and
         (iii) the current officers and directors of the Company shall resign
               and Cano shall appoint new officers and directors of the Company.
     Following the closing of the merger and the private placement , the Company
     believes the issued and outstanding shares of its Common Stock shall be
     owned as follows: 7.5% shall be owned by current Company shareholders and
     92.5% shall be owned by current shareholders of Cano and purchasers in the
     private placement. Accordingly, the transaction is expected to be accounted
     for as a reverse merger with Cano being the surviving entity. Inasmuch as
     the Company is an SEC registrant, upon the closing of the transaction, Cano
     will become a public company.

     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.

     Also, see Note 6.



                                      F-11

<PAGE>

                                NOXSO CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                             MARCH 31, 2002 AND 2001


NOTE 6 - PRO FORMA FINANCIAL INFORMATION - UNAUDITED:

     The net effect of pro forma adjustments to the financial statements of the
     Company, after giving effect to the private placement memorandum (see Note
     4), the merger agreement and plan of reorganization (see Note 5) 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 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 ($2 million -
             net proceeds of $1.68 million).
         C - Record NOXSO buy back agreement for 275,000 shares of comon stock.
         D - Eliminate NOXSO pre merger liabilities.
         E - Record investment in subsidiary.
         F - Elimination of investment in subsidiary.



PRO FORMA BALANCE SHEET - ASSETS (UNAUDITED)

<TABLE>
<CAPTION>
                                                   NOXSO        Cano Energy
                                                Corporation     Corporation
                                                 March 31,     December, 31                               Proforma
                                                   2002            2001              Adustments             Total
                                                   -----           -----             -----------            -----
<S>                                            <C>             <C>                  <C>               <C>
 Cash                                          $     1,560     $   789,333      B   $ 1,680,000       $   2,195,893
                                                                                C      (275,000)
 Account Receivable                                  6,500                      D        (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                      D       (62,076)                -
                                               ---------------------------------------------------------------------
                Current Assets                      70,136         862,883            1,336,424           2,269,443
                                               ---------------------------------------------------------------------
 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                                                       E       101,663                 -
                                                                                F      (101,663)
 Other assets                                                        6,580                                    6,580
                                               ---------------------------------------------------------------------
 Total Assets                                  $    70,136     $ 2,651,809         $  1,336,424       $   4,058,369
                                               =====================================================================
</TABLE>



                                      F-12

<PAGE>
                               NOXSO CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
                            MARCH 31, 2002 AND 2001



 PRO FORMA BALANCE SHEET - LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED)

<TABLE>
<CAPTION>
                                                   NOXSO        Cano Energy
                                                Corporation     Corporation
                                                 March 31,     December, 31                               Proforma
                                                   2002            2001              Adustments             Total
                                                   -----           -----             -----------            -----
<S>                                            <C>             <C>                  <C>               <C>

 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               15,255
                                                                                B         6,667
                                                                                C        (2,750)
                                                                                E         1,144
                                                                                F       (15,267)
 Paid In Capital                                    29,216       2,153,963      A         4,900            3,681,972
                                                                                B     1,673,333
                                                                                C      (272,250)
                                                                                D       (43,906)
                                                                                E       100,519
                                                                                F       (86,396)
 Retained Deficit                                 (122,593)        (10,568)     D       122,593              (10,568)
                                               ----------------------------------------------------------------------
     Total Stockholders' Equity (Deficit)          (83,377)      2,157,506            1,489,937            3,564,066
                                               ----------------------------------------------------------------------
 Total Liabilities and Shareholders' Equity    $    70,136    $  2,651,809          $ 1,336,424       $    4,058,369
                                               ======================================================================

</TABLE>

PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                   NOXSO        Cano Energy
                                                Corporation     Corporation
                                                 March 31,     December, 31                               Proforma
                                                   2002            2001              Adustments             Total
                                                   -----           -----             -----------            -----
<S>                                            <C>             <C>                  <C>               <C>
 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)
                                               ======================================================================

</TABLE>



                                      F-13