Business Context and Reporting Period
Company: SA Recovery Corp. (trading symbol: SARY; formerly Nixxy, Inc. in metadata request, but filing identifies SA Recovery Corp.)
Reporting Period: Quarterly period ended November 30, 2009 (Form 10-Q).
Status: Development Stage Enterprise. The company is designing a mobile unit to remove contaminants from sand. It has generated no revenue since inception on July 28, 2008.
Background: Formed via reorganization of AMS Health Sciences, Inc. following a Chapter 11 bankruptcy. The company's former parent's operations were sold, and SA Recovery Corp. holds the equity structure and a license for sand extraction technology.
Key Financial Metrics
| Metric | Nine Months Ended 11/30/09 | As of 11/30/09 |
|---|---|---|
| Revenue | $0 | N/A |
| Net Loss | $(49,145) | N/A |
| Cash and Cash Equivalents | N/A | $268 |
| Total Assets | N/A | $3,573 |
| Total Liabilities | N/A | $80,381 |
| Shareholders' Deficit | N/A | $(76,808) |
| Working Capital | N/A | $(80,113) |
| Convertible Notes Payable | N/A | $65,000 |
| Related Party Note Payable | N/A | $6,650 |
Cash Flow: Cash used in operating activities for the nine months ended November 30, 2009, was $11,655. Cash provided by financing activities was $6,650 (related party note). Net decrease in cash for the period was $5,005.
Material Changes vs. Prior Period
- Revenue: Remained at $0, consistent with the prior period and inception.
- Expenses: Total expenses for the three months ended November 30, 2009, were $7,402, a significant decrease from $41,507 in the same period in 2008. The prior year included one-time consulting charges related to the company's startup.
- Liquidity: Cash on hand dropped from $5,273 (as of Feb 28, 2009) to $268 (as of Nov 30, 2009).
- Liabilities: Total liabilities increased from $39,991 (Feb 28, 2009) to $80,381 (Nov 30, 2009), driven by the accrual of interest on convertible notes and new related-party borrowings.
- Intangible Assets: The value of the license permit decreased from $7,055 to $3,305 due to amortization.
Outlook, Risks, and Management Commentary
- Going Concern: The filing includes a substantial doubt regarding the company's ability to continue as a going concern due to negative cash flows and a working capital deficit. Management intends to finance deficits through additional shareholder notes or outside financing (debt or equity).
- Product Development: The company is attempting to convert a "Sand Extraction Prototype I" into a mobile unit. The prototype has suffered operating problems (leaks, clogging) and failed to meet production targets. The license agreement with CGJ Holding, LLC expired in August 2010 and was not renewed; the company is no longer obligated to pay royalties but would need a new license to sell the original prototype design.
- Capital Needs: The company has no identified sources of capital. Without additional funding, it may have to curtail or terminate operations.
- Controls: Management concluded that disclosure controls and procedures were not effective as of the end of the period.
- Debt: A $65,000 convertible note (maturity extended to Feb 28, 2011) is outstanding. The entire discount on this note has been amortized to interest expense.
Investor Verification Checklist
- Cash Runway: Verify the current cash balance (reported as $268) and immediate ability to pay accrued liabilities ($80,381).
- Financing Status: Confirm if the company has secured the additional capital required to continue operations, as no sources were identified in the filing.
- Technology Viability: Assess the progress of converting the prototype into a functional mobile unit given the reported mechanical failures and the expiration of the original license.
- Debt Conversion: Review the terms of the $65,000 convertible note and the potential dilution of 2 million shares if converted.
- Related Party Dependence: Evaluate the reliance on shareholder advances (e.g., $6,650 received in the period) to fund operations.