SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

|_|    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
       ACT OF 1934

|X|    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
       EXCHANGE ACT OF 1934
          FOR THE TRANSITION PERIOD FROM JULY 1, 2000 TO MARCH 31, 2001

                        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.[X]

              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 25, 2001: $0 (See Item 5)

   Number of shares outstanding of registrant's common stock, $0.01 par value,
                  as of June 25, 2001: 1,000,000 (See Item 11)

                    Documents incorporated by reference: NONE

       Transitional Small Business Disclosure Format (check one): Yes ___ No_X_


Exhibit index on consecutive page 21                          Page 1 of 42 Pages



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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
June 25, 2001, the Company had a total of 84 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, 2001, the Company
had total assets of $86,971. The majority of the Company's assets at March 31,
2001 consisted of funds being held in escrow and recoverable preference
payments. The Company intends to assert its entitlement to the balance of the
escrow account remaining after payment of liabilities not subject to compromise
and expenses yet to be incurred by the Company, if any, for legal and
administrative work stemming from the pre-consummation phase of the bankruptcy.
Lead counsel in the bankruptcy proceeding has advised the Company that to the
extent any such funds remain, such funds should be distributed pro-rata to the
Company's unsecured creditor class prior to the issuance of a final decree in
the bankruptcy case. While the Company believes it has meritorious arguments to
support its contention of entitlement to the escrow account balance, the Company
is unable to predict the ultimate disposition of these funds. If any such funds,
or a portion thereof, are distributed to the creditors, the Company's retained
deficit would increase by a corresponding amount.

As such, the Company can be defined as a "shell" company, whose sole purpose at
this time is to locate and consummate a merger or acquisition with a private
entity. The Board of Directors of the Company has elected to commence
implementation of the Company's principal business purpose, described below
under "Plan of Operation."

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 Securities Exchange Act of
1934, as amended (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.

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

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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.

PLAN OF OPERATION

The Company intends to seek to acquire assets or shares of an entity in exchange
for its securities. The Company has engaged in preliminary discussions with
several parties regarding the possibility of an acquisition or merger between
the Company and another entity. If the Company is able to successfully negotiate
an acquisition or merger agreement, any such agreement would likely be subject
to significant contingencies and uncertainties, any of which, if not
satisfactorily resolved, could cause any intended acquisition or merger to
ultimately be abandoned. To date, no agreement has been reached regarding any
such acquisition or merger and the Company is unable to predict if any such
agreement will be reached. Accordingly, the Company can provide no assurances
that the Company will be successful in negotiating and achieving a merger or
acquisition.

Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing the manner in which the transaction is
structured, the Company's Board of Directors expects that it will provide the
Company's shareholders with complete disclosure documentation concerning a
potential business opportunity and the structure of the proposed business
combination prior to consummation. Such disclosure is expected to be in the form
of a proxy, information statement, or report.

While such disclosure may include audited financial statements of such a target
entity, there is no assurance that such audited financial statements will be
available. The Board of Directors does intend to obtain certain assurances of
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 an
Exchange Act registered corporation. 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


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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.

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.


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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.

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

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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.

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.



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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.

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 AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION. The Company has
engaged in preliminary discussions with several parties regarding the
possibility of an acquisition or merger between the Company and another entity.
If the Company is able to successfully negotiate an acquisition or merger
agreement, any such agreement would likely be subject to significant
contingencies and uncertainties, any of which, if not satisfactorily resolved,
could cause any intended acquisition or merger to ultimately be abandoned. To
date, no agreement has been reached regarding any such acquisition or merger and
the Company is unable to predict if any such agreement will be reached.
Accordingly, the Company can provide no assurances that the Company will be
successful in negotiating and achieving a merger or acquisition. Management has
not identified any particular industry or specific business within an industry
for evaluation by the Company. There is no assurance management will be able to
negotiate a 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
90% 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

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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.

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

                                        9

<PAGE>


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 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. Space is provided to the Company on a rent free basis by Mr. Long, an
officer, director and principal shareholder of the Company, and it is


                                       10

<PAGE>

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.


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. The Company anticipates filing a motion to dismiss this appeal.
If the motion to dismiss is denied, the Company cannot predict the ultimate
impact, if any, on the Company, its financial statements and operations.

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
                                       11

<PAGE>


the Department of Energy, which elected not to receive shares. As of June 25,
2001, the Company had a total of 84 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 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 1,000,000 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.


                                     PART II

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

As of the date of this report no public market exists for the Company's shares.
Management intends to seek market makers to quote the Company's shares on the
Over-the-Counter Bulletin Board (the "OTC Bulletin Board") once the Company
qualifies for listing. Management does not know if, or when, a market will exist
for the Company's shares.

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


                                       12

<PAGE>
                                                    BID OR TRADE PRICES
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.

As of June 25, 2001, there were no market makers in the Company's shares. The
last reported trade by the OTC Bulletin Board was on May 25, 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 June 25, 2001, there were 84 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 nine months ended
March 31, 2001.


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.

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.


                                       13

<PAGE>


PLAN OF OPERATION

The Company currently has no substantial capital to fund operations or on-going
expenses. The Company must rely upon loans and investments from affiliates to
pay operating expenses. There are no assurances that such affiliates will
continue to advance funds to the Company or will continue to invest in the
Company's securities. In the event the Company is unable to obtain additional
capital or funding it may be unable to identify and/or acquire a suitable
business opportunity. During the twelve months following the filing of this
report, management intends to seek to acquire assets or shares of an entity
actively engaged in a business that generates revenues, in exchange for its
securities. The Company has engaged in preliminary discussions with several
parties regarding the possibility of an acquisition or merger between the
Company and another entity. If the Company is able to successfully negotiate an
acquisition or merger agreement, any such agreement would likely be subject to
significant contingencies and uncertainties, any of which, if not satisfactorily
resolved, could cause any intended acquisition or merger to ultimately be
abandoned. To date, no agreement has been reached regarding any such acquisition
or merger and the Company is unable to predict if any such agreement will be
reached. Accordingly, the Company can provide no assurances that the Company
will be successful in negotiating and achieving a merger or acquisition.

Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing the manner in which the transaction is
structured, the Company's Board of Directors expects that it will provide the
Company's shareholders with complete disclosure documentation concerning a
potential business opportunity and the structure of the proposed business
combination prior to consummation. Such disclosure is expected to be in the form
of a proxy, information statement, or report.

While such disclosure may include audited financial statements of such a target
entity, there is no assurance that such audited financial statements will be
available. The Board of Directors does intend to obtain certain assurances of
the value of the target entity's assets prior to consummating such a
transaction, with further assurances that audited financial statements would be
provided within sixty days after closing. Closing documents will include
representations that the value of the assets conveyed to or otherwise so
transferred will not materially differ from the representations included in such
closing documents, or the transaction will be voidable.

Due to the Company's intent to remain a shell company until a merger or
acquisition candidate is identified, it is anticipated that its cash
requirements will be minimal, and that all necessary capital, to the extent
required, will be provided by the Company's directors or officers. The Company
does not anticipate that it will have to raise capital or acquire any plant or
significant equipment in the next twelve months, unless possibly a merger or
acquisition target is identified.

LIQUIDITY

Effective April 16, 2001, the Company changed the date of its fiscal year end
from June 30 to March 31. This report covers the transition period from July 1,
2000 to March 31, 2001. As such, the only comparable financial information
presented is for the nine months ended March 31, 2000 (unaudited).

At March 31, 2001 and 2000 (unaudited), the Company had a working capital
deficit of $2,871 and $3,760,190, respectively. The decrease in the working
capital deficit is due to the reduction of the prepetition liabilities in
connection with the consummation of the Plan on May 25, 2000. During the nine
months ended March 31, 2001, the Company incurred legal and accounting expenses
relating to its filings with the Securities and Exchange Commission and the
bankruptcy proceedings. The Company will continue to incur expenses relating to
its filings with the SEC as long as it remains a reporting issuer.

As part of the Company's Second Amended Plan, the corporate entity was sold to
an investor group in May 2000. The corporate entity was sold without any
liabilities which were incurred prior to the sale. However, as of March 31,
2001, some of the Company's liabilities which existed prior to the sale of the
Corporate entity remained unpaid. At March 31, 2001, funds held by attorney in
escrow together with recoverable preference payments, net of liabilities not
subject to compromise, amounted to $17,146. A motion for a final decree in the
bankruptcy case is expected during the third quarter of the 2001 calendar year.
The Company intends to assert its entitlement to the balance of the escrow
account remaining after payment of liabilities not subject to compromise and
expenses yet to


                                       14

<PAGE>


be incurred by the Company, if any, for legal and administrative work stemming
from the pre-consummation phase of the bankruptcy. Lead counsel in the
bankruptcy proceeding has advised the Company that to the extent any such funds
remain, such funds should be distributed pro-rata to the Company's unsecured
creditor class prior to the issuance of a final decree in the bankruptcy case.
While the Company believes it has meritorious arguments to support its
contention of entitlement to the escrow account balance, the Company is unable
to predict the ultimate disposition of these funds. If any such funds, or a
portion thereof, are distributed to the creditors, the Company's retained
deficit would increase by a corresponding amount.

Mr. Long, in connection with the purchase and sale of the corporate entity,
engaged auditors and legal counsel prior to the change of control. After the
change of control, the auditors and legal counsel engaged by Mr. Long were
engaged by the Company. The Company will reimburse Mr. Long for professional
fees advanced by Mr. Long on the Company's behalf.

Since the Company has no significant source of revenue, working capital will
continue to be depleted by operating expenses. See " Results of Operations"
below. The Company presently has no external sources of cash and is dependent
upon its management and shareholders for funding.

ASSETS

At March 31, 2001 the Company had total assets of $86,971 compared to total
assets of $112,075 (unaudited) at March 31, 2000. At March 31, 2000, the
Company's assets consisted of cash and prepaid expenses. At March 31, 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 nine months ended March 31, 2001 the Company had a net loss of
$42,087. Due to the sale of the corporate entity and the elimination of the
Company's assets and debts as a result of the bankruptcy proceedings, as of the
date of this report, the Company essentially has no operations and no source of
revenue. The Company continues to incur professional fees and other expenses. If
the Company does not find a suitable acquisition target or other source of
revenue, the Company will continue to incur net losses and may have to cease
operations entirely.

As described in Note 3 of the Notes to Financial Statements, near the end of
fiscal year 2000, the Company liquidated its assets pursuant to an Order of the
Bankruptcy Court. The Company presently does not have sufficient liquid assets
to finance any significant level of operations and without further financial
support from shareholders or others, may not be able to meet its obligations as
they become due and, accordingly, may not be able to develop any business
operations.

The Company's ability to continue operations is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
identify and close an acquisition with a suitable target company, obtain
additional financing or refinancing as may be required, and ultimately to attain
profitability. There are no assurances that the Company will be able to identify
a suitable acquisition target, close such acquisition, obtain any such financing
or, if the Company is able to obtain additional financing, that such financing
will be on terms favorable to the Company. The inability to obtain additional
financing when needed will have a material adverse effect on the Company's
operating results.


ITEM 7.    FINANCIAL STATEMENTS.

Please refer to the pages beginning with F-1.



                                       15

<PAGE>



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

Not Applicable.


                                    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            42               President since May 2000
                                            Director since November 1988
                                            Secretary from March 1993 to May
                                            2000.

    James Platek           33               Treasurer since May 2000
                                            Director since May 2000

    Spencer Levy           44               Secretary since May 2000
                                            Director since May 2000


The directors of the Company are elected by the shareholders and the officers
are appointed annually by the Board of Directors. Vacancies in the Board of
Directors are filled by 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 is the Chairman of the Board of Directors of Regent Group, Inc., a
public company listed on the OTC-Bulletin Board.

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 is the Vice President of Institutional Marketing of Regent
Group, Inc., an SEC reporting issuer.


                                       16

<PAGE>



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
provided bookkeeping services. Glaser Capital Management, Inc. provides investor
relations to its clientele. Mr. Levy is the Vice President of Editorial Content
of Regent Group, Inc.

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 15, 2001, the Company did not have any standing audit, nominating, or
compensation committees of the Board of Directors.

During the nine months ended March 31, 2001, 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 nine- month period ended March 31, 2001.




                                       17

<PAGE>



ITEM 10.   EXECUTIVE COMPENSATION.

CURRENT COMPENSATION ARRANGEMENTS

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 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, such payment will be
tendered by the acquisition or merger candidate, 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.

FISCAL 2000 AND 2001 COMPENSATION ARRANGEMENTS

The following table sets forth information for Robert Long, the Company's Chief
Executive Officer ("CEO") during the nine-month period ended March 31, 2001. 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.


                                       18

<PAGE>




<TABLE>
<CAPTION>

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

Robert Long              2001       -0-          -0-         -0-            -0-             -0-           -0-              -0-
President, Chief         2000       -0-          -0-         -0-            -0-             -0-           -0-              -0-
Executive Officer        1999       -0-          -0-         -0-            -0-             -0-           -0-              -0-
and Director(1)<F1>

<FN>
(1)<F1>   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 fiscal years ended June 30, 1998 and June 30, 1999
          reflects compensation to Mr. Long in his capacity as Secretary and/or
          as a director of the Company.
</FN>
</TABLE>

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, 2001 and June 30, 2000, 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 15, 2001, 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 25, 2001, 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:


<TABLE>
<CAPTION>
    NAME AND ADDRESS OF                    NUMBER OF SHARES
     BENEFICIAL OWNER                     BENEFICIALLY OWNED              PERCENT OF CLASS(1)<F1>
<S>                                             <C>                                <C>

  Robert Long                                   360,000                            36%
  19 Maple Lane
  Rhinebeck, New York 12572

  Robert Platek(2)<F2>                          450,000                            45%
  5 Halls Lane
  Rye, New York 10580


                                       19

<PAGE>




  Spencer Levy                                   90,000                             9%
  11 Waverly Place #6H
  New York, New York 10003

  James Platek(2)<F2>                              -0-                              0%
  19 New England Avenue #8C
  Summit, New Jersey 07901

  All officers and directors, as a              450,000                            45%
  group (3 persons)

------------------
<FN>
(1)<F1>  Percentages are based on 1,000,000 shares of common stock outstanding
         as of June 25, 2001.

(2)<F2>  Robert Platek and James Platek are brothers.
</FN>
</TABLE>

CHANGES OF CONTROL

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
the current shareholders of the Company to sell or transfer all or a portion of
their common stock and/or resign from their positions as officers and/or
directors of the Company. The resulting change in control of the Company could
result in removal of the current management, and a corresponding reduction in or
elimination of their participation in the future affairs of the Company.

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 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 a target company, it is
        anticipated that the officers, directors and principal shareholders will
        sell all or a portion of their shares of the Company's common stock held
        by such persons and will receive compensation for such shares.






                                       20

<PAGE>



ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.

(a)        Exhibits:

<TABLE>
<CAPTION>
REGULATION                                                                                                    CONSECUTIVE
S-B NUMBER                                      EXHIBIT                                                       PAGE NUMBER
<S>                <C>                                                                                            <C>

   2               Debtor's Second Plan of Reorganization with Modifications Through                              N/A
                   December 2, 1999, Order of Judge R. Thomas Stinnett dated December 9,
                   1999 and Order Approving Disclosure Statement and Confirming Second
                   Amended Plan of Reorganization Under Chapter 11 of the Bankruptcy Code
                   (3)<F3>

  3(i)             Articles of Incorporation, as amended (1)<F1>                                                  N/A

  3(ii)            Amended and Restated Bylaws (1)<F1>                                                            N/A

  11               Statement re computation of per share earnings (2)<F2>                                         N/A

---------------------------
<FN>
(1)<F1>    Incorporated by reference to the Company's Registration Statement on
           Form S-1 filed with the Commission on January 13, 1989, file
           No. 33-26541.
(2)<F2>    See Part I - Financial Statements.
(3)<F3>    Incorporated by reference to the Exhibits previously filed with the
           Corporation's Current Report on Form 8-K dated May 23, 2000.
</FN>
</TABLE>


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

           None.

                                       21

<PAGE>




                                   SIGNATURES

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.

                                        NOXSO CORPORATION



Dated: June 28, 2001                    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.


<TABLE>
<CAPTION>
SIGNATURE                                            TITLE                                                DATE

<S>                                                  <C>                                                  <C>
                                                     President and Director
/s/ROBERT M. LONG                                    (Principal Executive Officer)                        June 28, 2001
-------------------------------------
Robert M. Long
                                                     Treasurer and Director
                                                     (Principal Financial and Accounting
/s/ JAMES PLATEK                                     Officer)                                             June 28, 2001
-------------------------------------
James Platek


/s/ SPENCER LEVY                                     Secretary and Director                               June 28, 2001
-------------------------------------
Spencer Levy

</TABLE>

                                       22

<PAGE>





                                NOXSO CORPORATION
                              FINANCIAL STATEMENTS
                               MARCH 31, 2001 AND
                                  JUNE 30, 2000


                                TABLE OF CONTENTS




                                                                        PAGE(S)

Report Of Independent Accountant                                          F-2

Balance Sheets - March 31, 2001 and June 30, 2000                         F-3

Statements Of Operations - Nine Months Ended March 31, 2001 and
Twelve Months Ended  June 30, 2000                                        F-4

Statements Of Changes In Stockholders' Equity - Nine Months
Ended March 31, 2001 and Twelve Months Ended  June 30, 2000               F-5

Statements Of Cash Flows- Nine Months Ended March 31, 2001 and
Twelve Months Ended  June 30, 2000                                        F-6

Notes To Financial Statements - March 31, 2001 and June 30, 2000   F-7 - F-11


                                      F-1

<PAGE>

                                                  2541 Monroe Avenue o Suite 304
                                                    Rochester, New York  14618
DANIEL J. BAIER, CPA, P.C.                               (716) 271-4550
================================================================================
Certified Public Accountant  o Business and Financial Advisory Services



    To the Board of Directors of NOXSO Corporation

    I have audited the accompanying balance sheets of NOXSO Corporation as of
    March 31, 2001 and June 30, 2000, and the related statements of operations,
    shareholders' equity, and cash flows for the nine months and twelve months,
    respectively, then ended. These financial statements are the responsibility
    of the Company's management. My responsibility is to express an opinion on
    these financial statements based on my audits.

    I conducted my audits in accordance with generally accepted auditing
    standards. Those standards require that I plan and perform the auditsto
    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. I believe that my audits provide a
    reasonable basis for my opinion.

    In my opinion, the financial statements referred to above present fairly, in
    all material respects, the financial position of NOXSO Corporation as of
    March 31, 2001 and June 30, 2000, and the results of its operations and its
    cash flows for the nine months and the year then ended, respectively, in
    conformity with generally accepted accounting principles.

    As described in Note 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. Also, continuation of any business
    of the reorganized entity is dependent on the Company's ability to achieve
    successful future operations. The accompanying financial statements have
    been prepared assuming that the Company will continue as a going concern.
    Management's plans in regard to these matters are also described in Note 4
    to the financial statements. The financial statements do not include any
    adjustments that might result from the outcome of this uncertainty.


     /s/ DANIEL J. BAIER, CPA, P.C.


    Daniel J. Baier, CPA, P.C.
    Rochester, New York
    June 15, 2001



                                     F-2

<PAGE>

                                NOXSO CORPORATION
                                 BALANCE SHEETS


<TABLE>
<CAPTION>
                                                             March 31,       June 30,
                                                                2001           2000
                                                         -------------------------------
<S>                                                            <C>             <C>

 Cash                                                           $ 1,800          $ 1,958
 Recoverable Preference Payments                                 68,228           20,258
 Funds Held By Attorney In Escrow                                16,943           98,152
                                                         -------------------------------
 Current Assets                                                  86,971          120,368
                                                         -------------------------------

 Total Assets                                                  $ 86,971        $ 120,368
                                                         ===============================


 LIABILITIES AND STOCKHOLDERS' EQUITY

 Liabilities Not Subject To Compromise                         $ 68,025         $ 81,152
 Amounts Due To Shareholders                                     21,817                -
                                                         -------------------------------
                                                                 89,842           81,152
                                                         -------------------------------



 Common Stock, $.01 Par Value, 20,000,000 Shares                 10,000           10,000
   Authorized, 1,000,000 Shares Outstanding
 Paid In Capital                                                 29,216           29,216
 Retained Deficit                                              (42,087)                -
                                                         -------------------------------
 Total Stockholders' Equity (Deficit)                           (2,871)           39,216
                                                         -------------------------------

 Total Liabilities and Shareholders' Equity                    $ 86,971        $ 120,368
                                                         ===============================

</TABLE>

                 See accompanying notes to financial statements.


                                       F-3

<PAGE>


                                NOXSO CORPORATION
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                             Twelve
                                                         Nine Months         Months
                                                         Ended March       Ended June
                                                          31, 2001          30, 2000
                                                       ---------------------------------
<S>                                                         <C>              <C>

Revenue                                                      $ -               $ -
                                                       ---------------------------------

 Legal and Accounting                                         115,760           503,909
 Corporate Expenses                                             4,014            23,466
                                                       ---------------------------------
                                                              119,774           527,375
                                                       ---------------------------------

 Reimbursement for Amounts Previously Disbursed                77,688           160,178
 Interest Income                                                    -               842
                                                       ---------------------------------
                                                               77,688           161,020
                                                       ---------------------------------

 Net (Loss)                                                 $ (42,087)       $ (366,356)
                                                       =================================

 Loss Per Common Share                                        $ (0.04)          $ (0.37)
                                                       =================================

 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 NINE MONTHS ENDED MARCH 31, 2001 AND THE TWELVE MONTHS
                              ENDED JUNE 30, 2000
<TABLE>
<CAPTION>

                                                      Prior
                                         Common       Common      Common                     Treasury      Retained
                                         Shares       Stock       Stock   Paid In Capital     Stock        Deficit        Total
                                         ------       -----       -----   ---------------     -----        -------        -----
<S>                                   <C>            <C>        <C>         <C>            <C>          <C>            <C>
Balance - June 30, 1999                15,383,468    $151,836   $     -     $16,907,293    $ (25,000)   $ (20,530,345) $ (3,496,216)
Fiscal Year 2000 - Net Loss                                                                                  (366,356)     (366,356)
Consummation of Bankruptcy Order      (14,383,468)   (151,836)    10,000    (16,878,077)      25,000       20,896,701     3,901,788
  and Recapitalization
  (May 25, 2000)
                                      ----------------------------------------------------------------------------------------------
Balance - June 30, 2000                 1,000,000           -     10,000         29,216            -               -         39,216

Nine Months Ended March 31, 2001 -
  Net Loss                                                                                                    (42,087)      (42,087)
                                      ----------------------------------------------------------------------------------------------
Balance - March 31, 2001                1,000,000    $      -   $ 10,000       $ 29,216            -      $   (42,087)     $ (2,871)
                                      ==============================================================================================

</TABLE>




                 See accompanying notes to financial statements.

                                       F-5
<PAGE>


                                NOXSO CORPORATION
                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                            NINE MONTHS          TWELVE
                                                               ENDED             MONTHS
                                                              MARCH 31,           ENDED
                                                                2001         JUNE 30, 2000
                                                                ----         -------------
<S>                                                          <C>               <C>

Cash Flows From Operating Activities:
Net Loss                                                     $ (42,087)        $ (366,356)
Adjustments to reconcile net loss to
  net cash used by operating activities:
Other Current Assets                                            33,239             (9,530)
Liabilities Not Subject To Compromise                          (13,127)            81,152
                                                            ------------------------------
                                                               (21,975)          (294,734)
                                                            ------------------------------

Cash Flows From Investing Activities:                                -                  -
                                                            ------------------------------

Cash Flows From Financing Activities:
Receipt of Funds In Contemplation of Sale of Net                     -            215,000
  Assets
Receipt of Funds In Contemplation of                                 -             50,000
  Recapitalizing the Company
Amounts Advanced By Shareholders                                21,817             29,531

                                                            ------------------------------
                                                                21,817            294,531
                                                            ------------------------------

Net Decrease in Cash                                              (158)              (203)
Cash at Beginning of Period                                      1,958              2,161
                                                            ------------------------------
Cash at End of Period                                          $ 1,800            $ 1,958
                                                            ==============================

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, 2001 AND JUNE 30, 2000


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 the flue gas generated by the
     burning of 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 will receive nothing on account of those
     interests.


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.

     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


                                       F-7
<PAGE>

                                NOXSO CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        MARCH 31, 2001 AND JUNE 30, 2000


     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, 2001 or June 30, 2000.

     At March 31, 2001, the Company had net operating loss carryforwards
     approximating $15,431,000 that expire in fiscal years through 2018. The
     rate of utilization of these losses is now restricted 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. Since reorganized NOXSO is actively
     seeking merger candidates irrespective of business segment, it is not
     probable that the continuity of business requirement could be met;
     consequently, the merged entity would 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, 2001 and June 30, 2000

     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


                                       F-8

<PAGE>


                                NOXSO CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        MARCH 31, 2001 AND JUNE 30, 2000


     consented to the jurisdiction of the Court and was adjudicated bankrupt.
     The Company converted the bankruptcy to a proceeding under Chapter 11 of
     the Bankruptcy Code. Subsequently, the Company operated as a debtor-in-
     possession in the proceeding.

     The Company's plan of reorganization was based on two principal elements.
     These two elements were the sale of its Tennessee Facility as well as the
     location of a site and the obtaining of funding (including reinstatement of
     DOE funding) to construct a commercial-size demonstration of the NOXSO
     Process. The Company sold the Tennessee Facility; however, the Company was
     unable to effect the commercial demonstration of the NOXSO process.
     Accordingly, the Company filed a second amended plan of reorganization that
     resulted in liquidation of the Company's assets.

     On December 2, 1999, the Bankruptcy Court issued an Order confirming the
     Company's second amended plan of reorganization under Chapter 11 of the
     Bankruptcy Code. Pursuant to the terms of the Order, the Company was
     authorized to separately transfer the corporate entity and it's assets. The
     proceeds from these transfers were to be used for the distributions to be
     made pursuant to the second amended plan, which will be in full and final
     satisfaction, settlement, release and discharge as against the Company, of
     any and all Claims and Interests of any nature whatsoever that arose before
     December 2, 1999.

     The Company's second amended plan of reorganization provided for conveyance
     of the corporate entity to a group including Mr. Robert Long, the Secretary
     and a Director of the Company, for $50,000. This group would own 90% of the
     outstanding shares of the new common stock, and the remaining 10% of the
     new common stock will be distributed to certain of the creditors.
     Simultaneously, the Company's sale of assets to FLS MILJO a/s free and
     clear of liens was approved.

     In connection with the distributions under the Company's second amended
     plan of reorganization, equity Interests based upon ownership of existing
     securities or rights to acquire existing securities, including without
     limitation vested and non-vested warrants, options, preemption rights or
     other rights, will be cancelled on the consummation date, and the equity
     interests will receive nothing on account of those interests.

     The consummation date of the Order was effective May 25, 2000, whereupon
     the Company, as a corporate entity, recorded the transactions on its books
     to give effect to the terms of the Order, as described above.

     These transactions comprised the elimination of fixed assets (which had
     been fully reserved), recording the expected recovery of preference
     payments, recording of liabilities not subject to compromise, the
     liquidation of prepetition liabilities and net shareholder's equity, and
     the recapitalization of the Company pursuant to the Order.

                                       F-9

<PAGE>


                                NOXSO CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        MARCH 31, 2001 AND JUNE 30, 2000


     In connection with the Company's recapitalization, Mr. Long had advanced
     the Company approximately $29,531 in addition to the $50,000 paid for the
     corporate entity.

     Following the liquidation entries, the amount remaining for
     recapitalization of the company consisted of $39,216 in the aggregate, of
     which $10,000 has been reflected as the par value for the Company's common
     stock and $29,216 has been reflected as paid in capital.

     Before the confirmation of the Company's second amended plan of
     reorganization, several shareholders objected to the confirmation and to
     the sale of the Company's assets to FLS MILJO a/s. The Bankruptcy Court
     considered the objections and overruled all of them by orders of December
     9, 2000.

     On December 6, 2000, an appeal was filed by an individual alleging the sale
     of assets to FLS MILJO a/s was fraudulent and that the officers, directors
     and counsel of the Company lacked the authority to conclude the sale. The
     Bankruptcy Court, after notice and hearing, denied the motion by order of
     February 20, 2001. On April 23, 2001, the individual filed a notice of
     appeal of the February 20, 2001 order. The Company anticipates filing a
     motion to dismiss this appeal, which it expects to be sustained, although
     no such assurance can be given. Were the Company's motion for dismissal
     denied, the Company cannot predict the ultimate impact, if any, on the
     accompanying financial statements.

     A motion for a final decree has been filed in the Bankruptcy case and a
     hearing is anticipated to be held in June 2001. Currently, funds held by
     attorney in escrow together with recoverable preference payments, amount to
     $70,028. In connection with the final decree, the Company intends to assert
     its entitlement to the balance in the escrow account, however lead counsel
     in the bankruptcy proceeding has advised the Company that to the extent any
     such funds remain, such funds should be distributed pro rata to the
     Company's unsecured creditor class prior to the issuance of a final decree
     in the bankruptcy case. While the Company believes it has meritorious
     arguments to support its contention of entitlement to the escrow account
     balance, the Company is unable to predict the ultimate disposition of these
     funds. Were such funds, or any portion thereof, to be distributed to the
     creditors, the Company's retained deficit would increase by a corresponding
     amount.


NOTE 4 - BUSINESS OPERATIONS:

     As described in Note 3, near the end of fiscal year 2000, the Company
     liquidated its assets pursuant to an Order of the Bankruptcy Court. The
     Company currently has no substantial capital to fund operations or on-going
     expenses. The Company must rely upon loans and investments from affiliates
     to pay operating expenses. There are no assurances that such affiliates
     will continue to advance funds to the Company or will continue to invest in
     the Company's securities. During the nine months ended March 31, 2001,
     shareholders of the Company loaned the Company $21,817.

                                      F-10

<PAGE>


                                NOXSO CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                        MARCH 31, 2001 AND JUNE 30, 2000




     The Company has engaged in preliminary discussions with several parties
     regarding the possibility of an acquisition or merger between the Company
     and another entity. If the Company is able to successfully negotiate an
     acquisition or merger agreement, any such agreement would likely be subject
     to significant contingencies and uncertainties, any of which, if not
     satisfactorily resolved, could cause any intended acquisition or merger to
     ultimately be abandoned. To date, no agreement has been reached regarding
     any such acquisition or merger and the Company is unable to predict if any
     such agreement will be reached. Accordingly, the Company can provide no
     assurances that the Company will be successful in negotiating and achieving
     a merger or acquisition.

     Due to the Company's intent to remain a shell company until a merger or
     acquisition candidate is identified, it is anticipated that its cash
     requirements will be minimal, and that all necessary capital, to the extent
     required, will be provided by the Company's directors or officers. The
     Company does not anticipate that it will have to raise capital or acquire
     any plant or significant equipment in the next twelve months, unless
     possibly a merger or acquisition target is identified.


NOTE 5 - 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.

     There are no warrants or options outstanding.

     Of the 1,000,000 shares of Common Stock issued and outstanding, 450,000
     shares are owned by an officer of the Company.
















                                      F-11

<PAGE>

                       NOXSO CORPORATION
                  CONSOLIDATED BALANCE SHEET

                           March 31,
                             2000
                          (Unaudited)

 Cash                                              $ 2,015
 Funds Held by Attorney in Escrow                  110,060
                                            ---------------
 Current Assets                                    112,075
                                            ---------------

 Equipment                                         339,931
 Furniture and Fixtures                            108,832
 Leasehold Improvements                             16,646
 Accumulated Depreciation                         (465,409)
                                            ---------------
 Net Fixed Assets                                        -
                                            ---------------

 Total Assets                                    $ 112,075
                                            ===============


 LIABILITIES AND STOCKHOLDERS' EQUITY

 Pre-Petition Liabilities                      $ 3,607,264
 Liabilities Not Subject To Compromise             265,000
 Amounts Due To Shareholders                        23,326
                                            ---------------
                                                 3,895,591
                                            ---------------

 Common Stock, $.01 Par Value, 20,000,000          151,836
  Shares Authorized, 15,383,468 Shares Issued
 Paid In Capital                                16,907,285
 Treasury Stock                                    (25,000)
 Retained Deficit                              (20,817,637)
                                            ---------------
 Total Stockholders' Equity (Deficit)           (3,783,516)
                                            ---------------

 Total Liabilities and Shareholders' Equity      $ 112,075
                                            ===============

            See Notes To Unaudited Consolidated Financial Statements


                                      F-12


<PAGE>


                                NOXSO CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)




                                               Nine Months
                                             Ended March 31,
                                            2000 (Unaudited)

 Revenues                                             $ -
                                         -----------------


 Legal and Accounting                             363,836
 Corporate Expenses                                 8,592
                                         -----------------
                                                  372,428
                                         -----------------
Reimbursement for Amounts Previously
   Disbursed                                       84,294
Interest Income                                       842
                                         -----------------
                                                   85,136
                                         -----------------

 NET LOSS                                      $ (287,292)
                                         =================

 LOSS PER COMMON SHARE                            $ (0.02)
                                         =================

 AVERAGE NUMBER OF SHARES OUTSTANDING          15,383,468
                                         =================

            See Notes To Unaudited Consolidated Financial Statements


                                      F-13


<PAGE>


                                NOXSO CORPORATION
             UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                    FOR THE NINE MONTHS ENDED MARCH 31, 2000

<TABLE>
<CAPTION>

                                     COMMON        COMMON          PAID IN       TREASURY            RETAINED
                                     SHARES         STOCK          CAPITAL         STOCK              DEFICIT              TOTAL
                                     ------         -----          -------         -----              -------              -----

<S>                                <C>             <C>           <C>              <C>             <C>                  <C>

Balance - June 30, 1999            15,383,468      $151,836      $16,907,285      $ (25,000)      $ (20,530,345)       $ (3,496,224)
Nine Months Ended
 March 31, 2000 - Net Loss                                                                             (287,292)           (287,292)
                                   -------------------------------------------------------------------------------------------------
Balance - March 31, 2000           15,383,468      $151,836      $16,907,285      $ (25,000)      $ (20,817,637)       $ (3,783,516)
                                   =================================================================================================
</TABLE>


            See Notes To Unaudited Consolidated Financial Statements










                                      F-14
<PAGE>


                                NOXSO CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


                                                   Nine Months
                                                   Ended March
                                                    31, 2000
                                                   (Unaudited)

 Cash Flows From Operating Activities:
  Net Loss                                        $ (287,292)
  Adjustments to reconcile net loss to
   net cash used by operating activities:
    Depreciation and Amortization
    Funds Held by Attorney in Escrow                  (5,368)
    Pre-petition Liabilities                           4,188
                                                -------------
                                                    (288,472)
                                                -------------

 Cash Flows From Investing Activities:
                                                           -
                                                -------------

 Cash Flows From Financing Activities:
  Receipt of Funds in Contemplation of
    Sale of Net Assets                               215,000
  Receipt of Funds in Contemplation of
    Recapitalizing the Company                        50,000
                                                      23,326
                                                -------------
                                                     288,326
                                                -------------

 Net Decrease in Cash                                 25,891
 Cash at Beginning of Period                          23,738
                                                -------------
 Cash at End of Period                              $ 49,629
                                                =============

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

Cash Payments For Taxes                                 $  -
                                                =============

            See Notes To Unaudited Consolidated Financial Statements




                                      F-15

<PAGE>


                                NOXSO CORPORATION
                         NOTES TO UNAUDITED CONSOLIDATED
                              FINANCIAL STATEMENTS
                    FOR THE NINE MONTHS ENDED MARCH 31, 2000


     Note 1 - Nature of Business and Principles of Consolidation: 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 the flue gas generated by the burning of
     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 will receive nothing on account of those
     interests.


Note 2 - Summary of Significant Accounting Policies:

     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.

                                      F-16


<PAGE>



     Property and Equipment -

     Property and equipment are stated at cost. The Company provided for
     depreciation using various methods over the estimated useful lives of 10
     years for plant, 3 to 5 years for machinery and equipment, 5 to 7 years for
     office furniture and fixtures, and the lease term or useful life, whichever
     is shorter, for leasehold improvements.

     Following the sale of its major assets, the Company deemed all remaining
     Property and Equipment in future operations to be impaired; accordingly,
     these remaining assets were fully reserved in fiscal year 1998. Subsequent
     to March 31, 2000, with the consummation of the Bankruptcy Order as of May
     25, 2000, all property accounts have eliminated.

     Liabilities Not Subject to Compromise -

     At March 31, 2000, such liabilities consisted 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, 2000.

     At March 31, 2000, the Company had tax loss carryforwards of approximately
     $15 million, which expire between 2000 and 2018. The deferred tax assets
     related to these net operating losses were entirely offset by a valuation
     allowances at March 31, 2000.

     Loss per Common Share -

     In February 1997, the Financial Accounting Standards Board (FASB) issued
     Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
     Share". This statement, adopted in fiscal year 1998, requires presentation
     of Basic and Fully Diluted Earnings Per 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 computed using the
     weighted average number of common shares and potentially dilutive common
     shares outstanding during the period.


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.


                                      F-17
<PAGE>


     On June 4, 1997, the Company consented to the jurisdiction of the Court and
     was adjudicated bankrupt. The Company converted the bankruptcy to a
     proceeding under Chapter 11 of the Bankruptcy Code.

     Subsequently, the Company operated as a debtor-in-possession in the
     proceeding.

     The Company's plan of reorganization was based on two principal elements.
     These two elements were the sale of its Tennessee Facility as well as the
     location of a site and the obtaining of funding (including reinstatement of
     DOE funding) to construct a commercial-size demonstration of the NOXSO
     Process. The Company sold the Tennessee Facility; however, the Company was
     unable to effect the commercial demonstration of the NOXSO process.
     Accordingly, the Company filed a second amended plan of reorganization that
     resulted in liquidation of the Company's assets.

     On December 2, 1999, the Bankruptcy Court issued an Order confirming the
     Company's second amended plan of reorganization under Chapter 11 of the
     Bankruptcy Code. Pursuant to the terms of the Order, the Company was
     authorized to separately transfer the corporate entity and it's assets. The
     proceeds from these transfers were to be used for the distributions to be
     made pursuant to the second amended plan, which will be in full and final
     satisfaction, settlement, release and discharge as against the Company, of
     any and all Claims and Interests of any nature whatsoever that arose before
     December 2, 1999.

     The Company's second amended plan of reorganization provided for conveyance
     of the corporate entity to a group including Mr. Robert Long, the Secretary
     and a Director of the Company, for $50,000. This group would own 90% of the
     outstanding shares of the new common stock, and the remaining 10% of the
     new common stock will be distributed to certain of the creditors.
     Simultaneously, the Company's sale of assets to FLS MILJO a/s free and
     clear of liens for $215,000 was approved.

     In connection with the distributions under the Company's second amended
     plan of reorganization, equity Interests based upon ownership of existing
     securities or rights to acquire existing securities, including without
     limitation vested and non-vested warrants, options, preemption rights or
     other rights, will be cancelled on the consummation date, and the equity
     interests will receive nothing on account of those interests.

     The consummation date of the Order was effective May 25, 2000, whereupon
     the Company, as a corporate entity, recorded the transactions on its books
     to give effect to the terms of the Order, as described above.

     These transactions comprised the elimination of fixed assets (which had
     been fully reserved), recording the expected recovery of preference
     payments, recording of liabilities not subject to compromise, the
     liquidation of prepetition liabilities and net shareholder's equity, and
     the recapitalization of the Company pursuant to the Order.

     Following the liquidation entries, the amount remaining for
     recapitalization of the company consisted of $39,216 in the aggregate, of


                                      F-18
<PAGE>



     which $10,000 has been reflected as the par value for the Company's common
     stock and $29,216 has been reflected as paid in capital.

     Before the confirmation of the Company's second amended plan of
     reorganization, several shareholders objected to the confirmation and to
     the sale of the Company's assets to FLS MILJO a/s. The Bankruptcy Court
     considered the objections and overruled all of them by orders of December
     9, 2000.

     On December 6, 2000, an appeal was filed by an individual alleging the sale
     of assets to FLS MILJO a/s was fraudulent and that the officers, directors
     and counsel of the Company lacked the authority to conclude the sale. The
     Bankruptcy Court, after notice and hearing, denied the motion by order of
     February 20, 2001. On April 23, 2001, the individual filed a notice of
     appeal of the February 20, 2001 order. The Company anticipates filing a
     motion to dismiss this appeal, which it expects to be sustained, although
     no such assurance can be given. Were the Company's motion for dismissal
     denied, the Company cannot predict the ultimate impact, if any, on the
     accompanying financial statements.

     A motion for a final decree has been filed in the Bankruptcy case and a
     hearing is anticipated to be held in June 2001. In connection with the
     final decree, the Company intends to assert its entitlement to the balance
     in the escrow account, however lead counsel in the bankruptcy proceeding
     has advised the Company that to the extent any such funds remain, such
     funds should be distributed pro rata to the Company's unsecured creditor
     class prior to the issuance of a final decree in the bankruptcy case. While
     the Company believes it has meritorious arguments to support its contention
     of entitlement to the escrow account balance, the Company is unable to
     predict the ultimate disposition of these funds. Were such funds, or any
     portion thereof, to be distributed to the creditors, the Company's retained
     deficit would increase by a corresponding amount.


Note 4 - Business Operations:

     As described in Note 3, near the end of fiscal year 2000, the Company
     liquidated its assets pursuant to an Order of the Bankruptcy Court. The
     Company currently has no substantial capital to fund operations or on-going
     expenses. The Company must rely upon loans and investments from affiliates
     to pay operating expenses. There are no assurances that such affiliates
     will continue to advance funds to the Company or will continue to invest in
     the Company's securities.

     The Company has engaged in preliminary discussions with several parties
     regarding the possibility of an acquisition or merger between the Company
     and another entity. If the Company is able to successfully negotiate an
     acquisition or merger agreement, any such agreement would likely be subject
     to significant contingencies and uncertainties, any of which, if not
     satisfactorily resolved, could cause any intended acquisition or merger to
     ultimately be abandoned. To date, no agreement has been reached regarding
     any such acquisition or merger and the Company is unable to predict if any

                                      F-19


<PAGE>

     such agreement will be reached. Accordingly, the Company can provide no
     assurances that the Company will be successful in negotiating and achieving
     a merger or acquisition.

     Due to the Company's intent to remain a shell company until a merger or
     acquisition candidate is identified, it is anticipated that its cash
     requirements will be minimal, and that all necessary capital, to the extent
     required, will be provided by the Company's directors or officers. The
     Company does not anticipate that it will have to raise capital or acquire
     any plant or significant equipment in the next twelve months, unless
     possibly a merger or acquisition target is identified.


Note 5 - Capital Structure, Common Stock, Options and Warrants:

     The 1990 Stock Option Plan -

     The 1990 Plan authorized the granting of either "incentive stock options,"
     as defined in Section 422 of the Internal Revenue Code or "non-qualified
     stock options," to acquire 1,000,000 shares of the Company's common stock.
     There were no transactions in fiscal year 2000 or 1999 for stock options
     under the 1990 Plan. Options outstanding and exercisable immediately prior
     to the consummation date of the Bankruptcy Order were 1,191,750 and
     1,151,750, respectively. Subsequent to the consummation of such Order,
     these options have been cancelled.

     On March 17, 1996 and 1997, the President, Vice President and outside
     Directors of the Board were granted options to purchase 25,000, 15,000 and
     10,000 shares of the Company's common stock, respectively, on an annual
     basis. These grants were to vest 50% immediately and 50% on the anniversary
     date of the issuance. Additionally, the President was granted 250,000
     options, which vest in stages on completion of certain specified targets.
     None of these options are currently exercisable. Subsequent to the
     consummation of such Order, all of these options have been cancelled.

     Warrants -

     Immediately prior to the consummation date of the Bankruptcy Order, the
     following warrants were outstanding and exercisable to purchase the
     Company's stock:


     Aggregate Number
     of Shares Subject           Price
     to Warrant                Per Share      Expiration Date
     -----------------        ----------       ----------------
        156,763                 $4.28          April 12, 1999
         10,000                 $6.00          October 27, 2000
        767,133                 $1.50          December 31, 2001

     Subsequent to the consummation of such Order, all of these warrants have
     been cancelled.




                                      F-20