Business Context and Reporting Period
Company: SA Recovery Corp. (Note: Input metadata referenced "Nixxy, Inc.", but the filing text identifies the issuer as SA Recovery Corp., trading under symbol SARY).
Reporting Period: Quarterly report (Form 10-Q) for the period ended November 30, 2010.
Business Description: A development stage enterprise incorporated in Oklahoma in 2008. The company is engaged in designing a mobile unit to remove contaminants from sand. It has generated no revenue since inception (July 28, 2008). The company emerged from a reorganization of its former parent, AMS Health Sciences, Inc., following a Chapter 11 bankruptcy.
Key Financial Metrics
| Metric | Nine Months Ended Nov 30, 2010 | Nine Months Ended Nov 30, 2009 | As of Nov 30, 2010 |
|---|---|---|---|
| Revenue | $0 | $0 | N/A |
| Net Loss | $(29,112) | $(49,145) | N/A |
| Cash and Cash Equivalents | N/A | N/A | $585 |
| Total Liabilities | N/A | N/A | $110,271 |
| Shareholders' Deficit | N/A | N/A | $(109,686) |
| Working Capital | N/A | N/A | $(109,686) |
| Shares Outstanding | 31,073,593 | 31,073,593 | 31,073,593 |
Debt Composition (Nov 30, 2010):
- Convertible notes and interest payable: $72,567
- Note payable - related party: $28,763
- Accrued director salary: $8,750
- Accounts payable: $191
Material Changes vs. Prior Period
- Expense Reduction: Total expenses for the nine months ended November 30, 2010, were $29,112, a decrease from $49,145 in the same period in 2009. This reduction is primarily attributed to a decrease in interest expense, as the discount on a $65,000 convertible note was fully expensed in the prior fiscal year.
- Cash Position: Cash decreased from $2,170 at February 28, 2010, to $585 at November 30, 2010, due to operating cash outflows of $21,198.
- License Agreement: The company mutually agreed with CGJ Holding, LLC not to renew a license agreement that expired in July 2010. The prototype unit suffered operating problems (leaks, clogging), and the company is now focused on converting the prototype into a mobile unit without royalty obligations under the expired agreement.
Outlook, Risks, and Management Commentary
- Going Concern: The filing includes a "Going Concern" note. The company has a working capital deficit of $109,686 and negative cash flows from operations since inception ($87,178). Management states there is substantial doubt about the company's ability to continue as a going concern without additional financing.
- Capital Needs: The company requires additional capital to fund the development of the mobile unit. It currently has no identified sources of capital. If funding is not secured, the company may have to curtail or terminate operations.
- Financing Strategy: Management intends to finance deficits through additional shareholder notes or seeking outside financing via debt or equity sales.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of the end of the period.
- Regulatory Status: The company has unresolved comments/questions regarding its Form 10-12g registration statement with the SEC.
Investor Verification Checklist
- Verify the company's ability to secure immediate financing given the $585 cash balance and $110,271 in liabilities.
- Confirm the status of the unresolved SEC comments on the Form 10-12g registration statement.
- Assess the technical viability of the "Mobile Unit" given the reported failures of the original prototype (leaks, clogging).
- Review the terms of the $65,000 convertible note (maturity extended to Feb 28, 2011) and the $28,763 related-party note to understand repayment or conversion risks.
- Monitor the effectiveness of internal controls, as management has explicitly stated they are currently ineffective.