10-K: Nocera, Inc. Files 10-K with Restatement, Expresses Doubt About Going Concern

Nocera, Inc.'s 10-K filing reveals a restatement of interim financials due to warrant liability errors and expresses substantial doubt about the company's ability to continue as a going concern.

Summary

• Nocera, Inc. filed its 10-K report for the fiscal year ended December 31, 2024, including a restatement of unaudited interim financial statements for the quarters ended March 31, June 30, and September 30, 2024.
• The restatement corrects errors related to the fair value calculation of warrant liabilities and misclassifications of non-current assets and liabilities.
• The company's independent auditor expressed substantial doubt about its ability to continue as a going concern due to operating losses and an accumulated deficit.
• Nocera plans to fund operations through equity and debt financing, but there is no assurance that this will be sufficient.
• The company's primary business operations currently consist of designing, developing, and producing large scale recirculating aquaculture systems (RASs) for fish farms.
• Nocera ceased all operations in China in October 2020 and moved its technology and back-office operations to Taiwan.
• Net sales for the year ended December 31, 2024, were approximately $17.01 million, compared to approximately $23.9 million for the year ended December 31, 2023.
• The company is working to regain compliance with Nasdaq's minimum bid price rule, with a compliance date of July 14, 2025.
• The company is focusing on countries with a growing population and growing demand for food, planning to expand globally by building demo sites and selling RASs.
• The company is subject to various laws and regulations in Taiwan and throughout the world, including those related to privacy, data protection, and environmental health and safety.

Sentiment

Score: 3

Explanation: The document presents a mixed picture, with positive strategic initiatives but overshadowed by financial concerns, including a restatement, going concern uncertainty, and material weaknesses in internal controls.

Positives

• Nocera is actively working to correct material weaknesses in its internal control over financial reporting.
• The company is expanding its sales channels and diversifying its product offerings to improve revenue.
• Nocera is exploring opportunities to cooperate with the local solar energy industry.
• The company owns 229 acres of land in Montgomery County, Alabama, for building RASs for fish farming.
• The company is actively developing the cultivation of alternative aquaculture species to diversify its product offerings.

Negatives

• The company has incurred net losses since its inception and has a significant accumulated deficit.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company's disclosure controls and procedures were not effective as of December 31, 2024, due to material weaknesses.
• The company is susceptible to changes in market demand for seafood, particularly eel, which makes up a significant portion of its revenues.
• The company faces intense competition from larger entities with greater resources.
• The company may be subject to product liability claims if its services cause harm.
• The company may be subject to civil sanctions for violating Section 13(k) of the Exchange Act.

Risks

• The company's ability to continue as a going concern is dependent on generating cash flows from operations and obtaining financing.
• Failure to raise capital when needed would have a material adverse effect on the company's business, financial condition, and results of operations.
• The company may not generate the same level of revenues from general construction projects.
• The company may not have the ability to manage its growth effectively.
• The company relies on its executive officers, and the loss of any of them could impair its business.
• The value of seafood which the company sells is subject to fluctuation which may result in volatility of the company's results of operations and the value of an investment in the company.
• The company is subject to certain risks by virtue of its international operations.
• Natural disasters or other catastrophic events could harm the company's operations.
• Relations between the PRC and Taiwan could negatively affect the company's business and financial status.
• If the company remains identified as a Commission-Identified Issuer for three consecutive years, its securities will be delisted or prohibited from trading on Nasdaq.
• The company's contractual arrangements may not be as effective in providing operational control as direct ownership and the company's VIE shareholders may fail to perform their obligations under the company's contractual arrangements.
• Geopolitical conditions, including trade disputes and direct or indirect acts of war or terrorism, could have an adverse effect on the company's operations and financial results.
• The company is increasingly dependent on information technology, and its systems and infrastructure face certain risks, including cybersecurity and data leakage risks.
• Evolving U.S. trade regulations and policies with China may in the future have a material and adverse effect on the company's business, financial condition and results of operations.
• The company has identified material weaknesses in its internal control over financial reporting.
• Sales of the company's currently issued and outstanding shares of common stock and shares of common stock underlying warrants may become freely tradable pursuant to Rule 144 and may dilute the market for the company's shares and have a depressive effect on the price of the shares of the company's common stock.
• An active, liquid, and orderly market for the company's common stock may not develop.
• The company may issue preferred stock in different series with terms that could dilute the voting power or reduce the value of the company's common stock.
• The market valuation of the company's business may fluctuate due to factors beyond the company's control and the value of your investment may fluctuate correspondingly.
• The trading prices of the company's common stock could be volatile and could decline following this offering at a time when you want to sell your holdings.
• Securities class action litigation is often instituted against companies following periods of volatility in their stock price.
• Future sales or perceived sales of the company's common stock could depress the trading prices of the company's common stock.
• The company's common stock may be affected by limited trading volume and price fluctuations, which could adversely impact the value of the company's common stock.
• The company currently does not intend to declare dividends on its common stock in the foreseeable future and, as a result, your returns on your investment may depend solely on the appreciation of the company's common stock.
• Because the company initially became a reporting company under the Exchange Act by means other than a traditional underwritten initial public offering, the company may not be able to attract the attention of research analysts at major brokerage firms.
• The company may not be able to satisfy the continued listing requirements of Nasdaq to maintain a listing of its common stock.
• The company is an emerging growth company and a smaller reporting company under the JOBS Act, and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make the company's common stock less attractive to investors.
• The elimination of personal liability against the company's directors and officers under Nevada law and the existence of indemnification rights held by the company's directors, officers and employees may result in substantial expenses.
• If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about the company's business, the company's stock price and trading volume could decline.
• The inability to use Form S-3 for securities offerings could adversely affect the company's ability to access capital in the markets and may hinder the company's growth strategies by limiting the company's funding options.

Future Outlook

Nocera plans to focus on countries with growing populations and food demand, expanding globally by building demo sites and selling RASs. The company expects to sell over five thousand tanks in the next five years and is planning to enhance market penetration through the establishment of its own fish farms and diversify revenue streams through various sales channels.

Management Comments

• Management is focused on growing the existing product offering and customer base to increase revenues.
• Management believes that current cash balances, coupled with anticipated cash flow from operating activities, will be sufficient to meet working capital requirements for at least one year from the date of issuance of the consolidated financial statements.

Industry Context

The global fish consumption has been on the rise, and it is anticipated that a significantly larger proportion of fish consumption would be farm-raised instead of wild-caught in the future. The trade conflict between the U.S. and China has led to a greater demand for non-Chinese origin seafood products from the U.S. market. The RASs, with its proven advantage in producing more fish in a more cost-effective and environmentally friendly manner while offering greater location flexibility and the potential for a solar-fish sharing mode, is a perfect solution to address the opportunities highlighted above.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• Without specific financial benchmarks or performance metrics of comparable companies in the aquaculture or RAS industry, a comprehensive assessment is not possible.
• To accurately compare Nocera's results, one would need to analyze companies like AquaBounty Technologies, which focuses on genetically engineered salmon, or land-based aquaculture projects by companies such as Atlantic Sapphire, comparing their revenue growth, profitability, and operational efficiency.
• Additionally, comparing Nocera's technology adoption and market penetration with other RAS providers would require detailed data on system sales, customer acquisition costs, and market share, which are not available in this document.

Management Changes

Corporate Governance

Legal Proceedings

• The company is currently not a party to any legal or administrative proceedings and is not aware of any pending or threatened legal or administrative proceedings against it in all material aspects.

Stakeholder Impact

• Shareholders: The restatement and going concern uncertainty may negatively impact investor confidence and stock value.
• Employees: The company's financial difficulties could lead to job insecurity or changes in compensation.
• Customers: The company's ability to provide consistent service and product quality may be affected by its financial situation.
• Suppliers: The company may face challenges in meeting its payment obligations to suppliers.
• Creditors: The company's ability to repay its debts is uncertain.

Next Steps

• The company plans to take a number of actions to correct these material weaknesses, including, but not limited to, adding experienced accounting and financial personnel and retaining third-party consultants to review its internal controls and recommend improvements.
• The company is actively developing the cultivation of alternative aquaculture species to diversify its product offerings.
• The company is expanding and strengthening various sales channels to enhance market reach and drive revenue growth.

Key Dates

Keywords

Nocera, RAS, aquaculture, financial results, going concern, restatement, seafood, Taiwan, China, VIE, warrant liabilities, internal control, Nasdaq, delisting, e-commerce