10-K/A: Nocera Inc. Files Amended 10-K After SEC Review, Reports Increased Revenue

Nocera, Inc. has filed an amendment to its 2023 annual report following SEC comments, highlighting a revenue increase but also ongoing concerns about its ability to continue as a going concern.

Summary

• Nocera, Inc. filed an amendment to its 2023 annual report on Form 10-K due to comments from the SEC.
• The company's primary business is designing and producing recirculating aquaculture systems (RAS) for fish farms, along with consulting services.
• Nocera ceased operations in China in 2020 and now operates solely out of Taiwan.
• The company's net sales increased to approximately $23.9 million in 2023 from approximately $14.1 million in 2022.
• Nocera incurred operating losses of $2,030,672 in 2023 and $5,180,208 in 2022.
• As of December 31, 2023, the company had a working capital of $87,409 and an accumulated deficit of $16,780,124.
• The company's auditors have expressed concern about its ability to continue as a going concern.
• Nocera plans to expand into land-based fish farms in Taiwan, North and South America.
• The company sold its controlling interest in Xin Feng Construction Co., Ltd. (XFC) in November 2022 for $300,000.
• Nocera acquired 80% controlling interest of Meixin Institutional Food Development Co., Ltd. for $4.3 million in September 2022.
• The company is targeting customers in various markets including Japan, Taiwan, Thailand, Jordan, South Africa and the United States.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While revenue has increased, the company faces significant financial challenges, including concerns about its ability to continue as a going concern and material weaknesses in internal controls. The positive aspects are overshadowed by the financial risks and uncertainties.

Positives

• The company experienced a significant increase in net sales, rising to $23.9 million in 2023.
• Operating losses decreased substantially from $5.18 million in 2022 to $2.03 million in 2023.
• General and administrative expenses were reduced by 18.5% in 2023.
• The company has a strategic focus on expanding into new markets in Taiwan, North and South America.
• Nocera has identified and sourced multiple suppliers in Taiwan, with good relationships.
• The company is actively marketing its brand and exploring online sales channels.

Negatives

• The company's auditors have expressed concern about its ability to continue as a going concern.
• The company has a low working capital of $87,409 and an accumulated deficit of $16,780,124.
• Gross profit decreased by 23.8% in 2023.
• The company relies heavily on a single product, eel, for a significant portion of its revenue.
• Nocera has identified material weaknesses in its internal control over financial reporting.
• The company has limited insurance coverage for its operations in Taiwan.
• The company is subject to risks associated with its international operations and currency fluctuations.

Risks

• There is substantial doubt about the company's ability to continue as a going concern.
• The company's business may be materially affected by future COVID-19 outbreaks or similar global epidemics.
• Nocera has a limited operating history in an evolving industry, making it difficult to evaluate future prospects.
• The company may not generate the same level of revenues from general construction projects.
• Nocera may not have the ability to manage its growth effectively.
• The company relies on its executive officers and may be harmed if they are unable to attract, retain and motivate well-qualified employees.
• The value of seafood which the company sells is subject to fluctuation which may result in volatility of results of operations.
• The company is highly susceptible to changes in market demand for the types of seafood for which its recirculating aquaculture systems are used.
• 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.
• The company is subject to certain risks by virtue of its international operations.
• The company is increasingly dependent on information technology, and its systems and infrastructure face certain risks, including cybersecurity and data leakage risks.
• The company's common stock has been listed on Nasdaq under the alternative initial listing standard which could suppress the trading price of its securities.
• The company has identified material weaknesses in its internal control over financial reporting.
• The company has a large number of authorized but unissued shares of its common stock which will dilute your ownership position when issued.
• 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 it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies will make its common stock less attractive to investors.
• 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 its growth strategies by limiting its funding options.

Future Outlook

Nocera plans to expand its operations in Taiwan and into North and South America, focusing on land-based fish farms. The company also intends to build demo sites promoting its RASs and sell its systems in countries with growing populations and demand for food. The company expects to sell over five thousand tanks in the next five years.

Management Comments

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

Industry Context

The document highlights the growing global demand for aquaculture production and the decreasing production from wild fisheries. Nocera's RAS technology is positioned as a solution to produce fish in a cost-effective and environmentally friendly manner. The company also notes 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.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or competitors in terms of financial performance.
• However, it mentions that many producers and sellers in the aquaculture market are large entities with significantly greater resources than Nocera.
• The company also competes with small suppliers which provide smaller alternative aquaculture solutions regionally but due to the size of our projects, we believe that we should have a better price point.
• The document notes that Nocera's cylindrical shaped tanks are among the largest systems in the market, holding approximately 15,000 U.S. gallons of water.

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.

Related Party Transactions

• The company had sales of $12,498 to Grand Smooth Corporation Limited, a company with a common director, in 2023.
• The company had sales of $993,918 to Grand Smooth Corporation Limited, a company with a common director, in 2022.
• The company has a balance due to Mountain Share Transfer, LLC, a company controlled by a former director, of $39,341 as of December 31, 2023.

Stakeholder Impact

• Shareholders face the risk of potential dilution from the issuance of new shares.
• Employees may be affected by the company's financial instability and potential restructuring.
• Customers may be impacted by the company's ability to deliver products and services.
• Suppliers may be affected by the company's financial instability and potential changes in purchasing patterns.
• Creditors face the risk of non-payment due to the company's financial difficulties.

Next Steps

• The company plans to expand into land-based fish farms in Taiwan, North and South America.
• Nocera intends to build demo sites promoting its RASs and sell its systems in countries with growing populations and demand for food.
• The company plans to establish a production facility in Taiwan and sell systems into the Americas and European countries.
• Nocera intends to expand fish farming demo sites in Taiwan and build a catfish farm in the U.S. by the end of 2024.

Key Dates

Keywords

aquaculture, recirculating aquaculture systems, RAS, fish farming, seafood, Taiwan, Meixin, eel, solar sharing fish farms, financial results