Business Context and Reporting Period
Company: SA Recovery Corp. (Note: Metadata lists "Nixxy, Inc." but the filing text identifies the issuer as SA Recovery Corp.)
Reporting Period: Quarterly period ended May 31, 2009.
Status: Development stage enterprise. The company emerged from a 2008 bankruptcy reorganization of its former parent, AMS Health Sciences, Inc.
Operations: Designing and testing a mobile unit to remove contaminants (e.g., asphalt) from sand. The company has generated no revenue since inception (July 28, 2008).
Key Financial Metrics
| Metric | Three Months Ended May 31, 2009 | Period from Inception to May 31, 2009 |
|---|---|---|
| Revenue | $0 | $0 |
| Net Loss | $(27,685) | $(120,348) |
| Cash Balance (End of Period) | $415 | $415 |
| Total Assets | $6,248 | $6,248 |
| Total Liabilities | $61,596 | $61,596 |
| Shareholders' Deficit | $(55,348) | $(55,348) |
| Convertible Notes Payable | $54,167 (net of discount) | $54,167 (net of discount) |
| Working Capital | $(61,181) | $(61,181) |
Expense Breakdown (3 Months): Interest expense ($18,941), General and administrative ($7,980), Director salary ($764).
Material Changes vs. Prior Period
- Cash Position: Cash decreased from $5,273 (Feb 28, 2009) to $415 (May 31, 2009), a reduction of $4,858.
- Liabilities: Total current liabilities increased from $39,991 to $61,596. This includes a new $1,900 advance from a related party and an increase in the carrying value of convertible notes due to amortization of the discount.
- Accumulated Deficit: The accumulated deficit grew from $(92,663) to $(120,348) due to the net loss for the quarter.
- Intangible Assets: The net book value of the license permit decreased from $7,055 to $5,833 due to amortization.
Outlook, Risks, and Management Commentary
- Going Concern: The filing explicitly states substantial doubt exists 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 operations through additional shareholder notes or outside financing.
- Product Development: The company is testing the "Sand Extraction Prototype I." Subsequent events (Note 8) indicate the original license agreement with CGJ Holding, LLC was not renewed in August 2010 due to operating problems with the prototype (leaks, clogging). The company is now focused on converting the prototype into a mobile unit.
- Debt Obligations: A $65,000 convertible note payable (maturity August 1, 2009) bears 5% interest and is convertible into 2 million shares at $0.035 per share. The note is fully discounted against equity.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of the end of the period.
- Risk Factors: No material changes in risk factors since February 28, 2009. Primary risks include lack of revenue, liquidity constraints, and reliance on future financing.
Investor Verification Checklist
- Liquidity Crisis: Verify the company's ability to secure immediate financing given cash on hand of only $415 and a working capital deficit exceeding $61,000.
- Debt Conversion: Confirm the status of the $65,000 convertible note maturing August 1, 2009, and the potential dilution of 2 million shares if converted.
- Product Viability: Assess the technical progress of the mobile unit given the reported failure of the original prototype and the non-renewal of the license agreement.
- Related Party Transactions: Review the $1,900 advance from a shareholder and the $2,630 accrued director salary to understand reliance on insider funding.
- Internal Controls: Evaluate the implications of the ineffective disclosure controls on the reliability of future financial reporting.