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

Nocera, Inc. has filed an amended 10-K report, addressing SEC comments and reporting a significant increase in revenue for 2023, while still facing substantial operating losses and concerns about its ability to continue as a going concern.

Summary

• Nocera, Inc. filed an amendment to its annual report on Form 10-K for the fiscal year ended December 31, 2023, in response to SEC comments.
• The company experienced a revenue increase from approximately $14.1 million in 2022 to $23.9 million in 2023, primarily driven by higher trading volumes in its fish trading business and increased revenue from its catering business.
• Despite the revenue growth, 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 Nocera's ability to continue as a going concern, which is dependent on generating cash flow from operations and obtaining financing.
• Nocera plans to focus on countries with growing populations and food demand, aiming to expand its land-based fish farms in Taiwan, North and South America.
• The company has shifted its focus from general construction services to fish farming and fish trading.
• Nocera is subject to various laws and regulations in Taiwan and internationally, including those related to privacy, data protection, and environmental health and safety.
• The company's common stock is listed on The Nasdaq Capital Market under the symbol NCRA.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While revenue growth is positive, the significant operating losses, going concern concerns, and material weaknesses in internal controls raise substantial concerns. The company's future plans are ambitious but face significant financial and operational challenges.

Positives

• Nocera experienced a significant increase in revenue, indicating growth in its core business segments.
• The company's fish trading business saw a substantial increase in volume and average selling price.
• The Meixin catering business expanded its services, contributing to revenue growth.
• Nocera has a strategic plan to expand its operations into new markets, including the U.S. and Brazil.
• The company has secured land in Alabama for future fish farming operations.

Negatives

• The company continues to incur significant operating losses, raising concerns about its financial sustainability.
• Nocera has a limited working capital and a substantial accumulated deficit.
• The company's auditors have expressed doubt about its ability to continue as a going concern.
• Gross profit decreased by 23.8% due to a higher proportion of revenue from the lower-margin fish trading business.
• The company has identified material weaknesses in its internal control over financial reporting.

Risks

• The company's ability to continue as a going concern is dependent on generating cash flow and obtaining financing.
• Nocera's business may be materially affected by future COVID-19 outbreaks or similar global epidemics.
• The company has a limited operating history, making it difficult to evaluate future prospects.
• Nocera may not be able to manage its growth effectively, which could strain resources.
• The company relies on key executive officers, and their loss could impair the business.
• Nocera faces intense competition in the aquaculture market.
• The company is subject to risks associated with international operations, including currency fluctuations and political instability.
• Natural disasters or other catastrophic events could harm Nocera's operations.
• The company is subject to the Holding Foreign Companies Accountable Act, which could lead to delisting if its auditor is not subject to PCAOB inspection.
• Nocera's contractual arrangements with its VIE may not be as effective as direct ownership.
• The company is increasingly dependent on information technology, and its systems face cybersecurity risks.

Future Outlook

Nocera plans to focus on countries with growing populations and food demand, aiming to expand its land-based fish farms in Taiwan, North and South America. The company expects to sell over five thousand tanks in the next five years and establish production facilities in Taiwan, with plans to sell systems in the Americas and Europe. Nocera also intends to expand fish farming demo sites in Taiwan and build a catfish farm in the U.S. by the end of 2024.

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 fish consumption and the increasing need for farm-raised seafood due to overfishing. Nocera positions its RAS technology as a solution to produce fish in a cost-effective and environmentally friendly manner, aligning with the trend towards net-zero carbon emissions and the demand for non-Chinese origin seafood products.

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 greater resources, and that Nocera competes with smaller suppliers offering alternative solutions.
• The company believes its larger RAS projects provide a better price point compared to smaller regional suppliers.
• The document does not provide specific details on the financial performance of comparable companies or projects, making a detailed assessment difficult.

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 shared director, in 2023.
• The company had sales of $993,918 to Grand Smooth Corporation Limited, a company with a shared 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 and 2022.

Stakeholder Impact

• Shareholders face the risk of potential delisting due to the Holding Foreign Companies Accountable Act.
• Employees may be affected by potential cost-cutting measures if the company faces financial difficulties.
• Customers may be impacted by potential disruptions in service or product availability due to financial instability.
• Suppliers may face increased credit risk due to the company's financial challenges.
• Creditors face increased risk of non-payment due to the company's financial difficulties.

Next Steps

• Nocera plans to expand its land-based fish farms in Taiwan, North and South America.
• The company intends to establish production facilities in Taiwan and sell systems in the Americas and Europe.
• Nocera plans to expand fish farming demo sites in Taiwan and build a catfish farm in the U.S. by the end of 2024.
• The company will continue to enhance its internal control over financial reporting to remediate material weaknesses.

Key Dates

Keywords

aquaculture, recirculating aquaculture systems, RAS, fish farming, seafood, eel trading, catering, financial results, revenue, operating loss, internal control, SEC, Taiwan, going concern