Business Context and Reporting Period
Company: SA Recovery Corp. (Note: Request metadata listed "Nixxy, Inc.", but the filing text identifies the issuer as SA Recovery Corp., trading under symbol "SARY").
Reporting Period: Quarterly period ended May 31, 2011.
Status: Development Stage Enterprise. The company is designing a mobile unit to remove contaminants from sand but has generated no revenue since inception (July 28, 2008). The company emerged from a 2008 bankruptcy reorganization of its former parent, AMS Health Sciences, Inc.
Key Financial Metrics
| Metric | Value (May 31, 2011) | Comparison (Feb 28, 2011) |
|---|---|---|
| Cash and Cash Equivalents | $1,761 | $2,238 |
| Total Assets | $1,761 | $2,238 |
| Total Liabilities | $129,168 | $124,204 |
| Shareholders' Deficit | ($127,407) | ($121,966) |
| Working Capital Deficit | ($127,407) | ($121,966) |
| Revenue (3 Months) | $0 | $0 |
| Net Loss (3 Months) | ($6,109) | ($5,965) |
| Cash Used in Operations (3 Months) | ($6,477) | ($3,712) |
| Convertible Notes Payable | $74,192 | $73,379 |
| Related Party Notes | $39,375 | $33,375 |
Material Changes
- Liquidity Decline: Cash decreased by $477 during the quarter, primarily due to operating losses of $6,109, partially offset by $6,000 in proceeds from related-party notes.
- Liability Increase: Total liabilities increased by $4,964. This includes a $6,000 increase in related-party notes and accrued interest on convertible notes.
- Expense Stability: Total expenses for the quarter were $6,109, virtually unchanged from the $5,965 reported in the same period of the prior year. Expenses consist mainly of director salaries, general administrative costs (Exchange Act compliance), and interest.
- Accumulated Deficit: The accumulated deficit since inception grew to $195,686.
Outlook, Risks, and Management Commentary
- Going Concern: The filing includes a "Going Concern" note. Management states that negative cash flows and a working capital deficit raise substantial doubt about the company's ability to continue operations without additional financing.
- Capital Needs: The company requires approximately $160,000 to address technical problems with its mobile unit prototype or to pursue a merger/acquisition. No definitive arrangements for funding exist.
- Default Status: A $65,000 convertible note payable (originally due August 2009, extended to February 2011) is currently in default.
- Operations: The company has no employees other than the sole officer. The prototype unit has failed to sustain the target production rate of 4 cubic yards per hour. Management plans to defer director compensation until revenue is generated.
- Controls: Management concluded that disclosure controls and procedures were not effective as of the end of the period.
Investor Verification Checklist
- Default Status: Verify the status of the $65,000 convertible note and potential conversion or legal actions by the holder.
- Related Party Dependence: Confirm the willingness of the affiliate (IACE Investments Two, Inc.) to continue advancing funds, as the company relies on these advances for survival.
- Prototype Viability: Assess the technical feasibility of the sand extraction unit given the failure to meet production targets and the lack of capital for engineering studies.
- Merger Activity: Monitor for any announcements regarding a reverse merger or acquisition, as this is a stated alternative to raising capital for product development.
- Stock Dilution: Review the terms of the convertible note (convertible to 2 million shares) and potential future equity issuances required to raise the needed $160,000.