SA Recovery Corp. — Form 10-Q Summary
Entity and period: The supplied filing is for SA Recovery Corp., not Nixxy, Inc.; investors should verify that this is the intended filing. It covers the quarter and nine months ended November 30, 2011, for a development-stage company incorporated in Oklahoma. The filing describes a project to develop a mobile unit for removing contaminants from sand.
Financial results and position
- Revenue: None for the quarter or nine-month period; the company reports no revenue since inception.
- Expenses and net loss: Nine-month expenses and net loss were both $19,393, versus $29,112 in the prior-year period. For the quarter, expenses and net loss were $5,213, versus $12,324. Management attributed the reductions mainly to lower or differently timed Exchange Act compliance costs and reduced activity.
- Interest: Nine-month interest expense was $5,401, up from $4,164, attributed to higher debt levels.
- Margins and EPS: Not meaningful without revenue. The filing presents loss per share as a dash rather than a clear numerical value.
- Cash flow and liquidity: Nine-month operating cash use was $17,201; $16,000 of related-party borrowing partly funded operations, and cash declined by $1,201 to $1,037. At November 30, current liabilities were $139,433, producing a $138,396 working-capital deficit.
- Debt and liabilities: Total liabilities were $139,433, including $75,817 of convertible notes and accrued interest, $49,375 owed on a related-party note, $13,750 of accrued director salary, and $491 of accounts payable. The $65,000 convertible note matured in August 2009, remains unpaid, and is reported in default; it accrues interest at 5% and may convert into 2 million shares at $0.035 per share.
- Equity: Shareholders’ deficit was $138,396 at November 30, 2011. Common shares issued and outstanding were 31,073,593; the filing reports the same amount as of January 13, 2012.
Changes, outlook, and risks
- Compared with the prior-year nine-month period, expenses and net loss decreased by $9,719, while interest expense increased by $1,237. No revenue was reported in either period.
- Management says the prototype still needs development and has not obtained additional capital to modify it for commercial use. The filing states that it has not achieved its targeted production rate; commercial readiness and technical performance remain uncertain.
- The company’s stated 12-month plan was to seek approximately $160,000 to address technical problems, pursue other business activities, or merge with an operating company. It reported no identified funding source or definitive financing arrangement and warned that it may need to change or curtail operations if it cannot raise capital.
- The company says it intends to rely on additional shareholder advances and outside debt or equity financing. Management warns that it may substantially curtail or terminate operations without additional capital or sufficient revenue.
- The financial statements include a going-concern warning: the filing reports cumulative operating cash use of $103,338 from inception through November 30, 2011 and states that conditions raise substantial doubt about the company’s ability to continue as a going concern.
- The technology license was described as expired after extensions through August 2010, with the company negotiating a further extension. The license may be terminated in default; commercial use also entails a 10% royalty on gross receipts.
- Management concluded that disclosure controls and procedures were not effective at period-end. It reported no material change in internal control during the nine-month period. The company reported no current legal proceedings and no material changes to its previously disclosed risk factors.
Important facts for investors to verify
- Confirm the issuer identity: the request names Nixxy, Inc., but the filing names SA Recovery Corp. and lists the OTC symbol SARY.
- Confirm current liquidity, access to financing, related-party support, and the status of the defaulted convertible note.
- Verify whether the sand-cleaning prototype can meet commercial performance requirements and whether the technology license has been extended or remains in force.
- Review the company’s disclosed ineffective controls and the cited going-concern uncertainty when assessing the reliability and continuity of operations.