Business Context and Reporting Period
Company: SA Recovery Corp. (Note: Input metadata referenced "Nixxy, Inc.", but the filing text identifies the registrant as SA Recovery Corp., trading under symbol "SARY").
Reporting Period: Quarterly period ended August 31, 2011 (Six months ended August 31, 2011).
Business Status: Development Stage Enterprise. The company is designing a mobile unit to remove contaminants from sand. It has generated no revenue since inception (July 28, 2008). The company is currently negotiating to extend a license agreement for its prototype technology.
Key Financial Metrics
| Metric | Six Months Ended 8/31/11 | Six Months Ended 8/31/10 | As of 8/31/11 |
|---|---|---|---|
| Revenue | $0 | $0 | N/A |
| Net Loss | $(14,180) | $(16,788) | N/A |
| Cash and Cash Equivalents | N/A | N/A | $2,579 |
| Total Assets | N/A | N/A | $2,579 |
| Total Liabilities | N/A | N/A | $137,070 |
| Shareholders' Deficit | N/A | N/A | $(134,491) |
| Working Capital | N/A | N/A | $(134,491) |
| Shares Outstanding | 31,073,593 | 31,073,593 | 31,073,593 |
Debt Composition (as of 8/31/11):
- Convertible notes and interest payable: $75,004 (Note is in default).
- Note payable - related party: $49,375.
- Accrued director salary: $12,500.
- Accounts payable: $191.
Material Changes vs. Prior Period
- Expenses: Total expenses for the six months ended August 31, 2011, were $14,180, a decrease of $2,608 compared to $16,788 in the same period in 2010. This reduction is attributed to fluctuations in the timing of Exchange Act compliance costs.
- Liquidity: Cash increased slightly from $2,238 at February 28, 2011, to $2,579 at August 31, 2011, primarily due to $16,000 in proceeds from a related-party note payable.
- Liabilities: Total liabilities increased by $12,866 to $137,070, driven by additional related-party advances and accrued interest.
Outlook, Risks, and Management Commentary
Going Concern: The filing includes a "Going Concern" note. The company has a working capital deficit of $134,491 and negative cash flows from operations of $101,796 since inception. Management states there is substantial doubt about the company's ability to continue as a going concern without additional financing.
Plan of Operation: Management plans to seek approximately $160,000 to address technical problems with the mobile unit, undertake other business activities, or merge with another operating company. If capital is not raised, the company may have to curtail or terminate operations.
Risks and Contingencies:
- Default: A $65,000 convertible note (plus accrued interest) is in default as of the filing date.
- Capital Needs: The company lacks funds and relies on advances from a majority shareholder (IACE Investments Two, Inc.) and related parties. There is no assurance that additional funding will be available.
- Controls: Management concluded that disclosure controls and procedures were not effective as of the end of the period.
- License Agreement: The license for the sand extraction technology is subject to extension negotiations; failure to meet sales targets or extend the agreement could result in termination.
Investor Verification Checklist
- Capital Sufficiency: Verify if the company has secured the ~$160,000 needed to fix the prototype or if it has found a merger partner, given the current cash balance of only $2,579.
- Debt Resolution: Confirm the status of the defaulted $65,000 convertible note and whether the holder has exercised conversion rights or demanded repayment.
- Related Party Dependence: Assess the sustainability of operations relying on advances from a single affiliate (IACE Investments Two, Inc.).
- License Status: Verify the outcome of negotiations to extend the license agreement with CGJ Holding, LLC, which is critical to the company's sole asset.
- Internal Controls: Review any subsequent filings for updates on the remediation of ineffective disclosure controls.