10-Q/A: Nocera Inc. Files Amended 10-Q After SEC Comments, Reports Mixed Results

Nocera Inc. has filed an amended 10-Q to address SEC comments, revealing a decrease in revenue and a net loss for the quarter ended September 30, 2024.

Summary

• Nocera Inc. filed an amended 10-Q for the period ended September 30, 2024, to address comments from the SEC and provide additional clarity in its financial statements.
• The company reported a net loss of $298,382 for the three months ended September 30, 2024, compared to a net loss of $272,778 for the same period in 2023.
• Net sales decreased to $1,363,101 for the three months ended September 30, 2024, from $7,283,281 in the same period of 2023.
• For the nine months ended September 30, 2024, the company's net loss was $1,161,554, compared to a net loss of $1,607,279 for the same period in 2023.
• Net sales for the nine months ended September 30, 2024, were $13,016,093, down from $16,448,325 in the same period of 2023.
• The company's cash and cash equivalents stood at $372,270 as of September 30, 2024, a decrease from $1,229,580 at the end of 2023.
• The company has identified material weaknesses in its internal controls and is working to remediate them.

Sentiment

Score: 3

Explanation: The document reveals significant financial challenges, including decreased revenue, net losses, and a substantial decrease in cash. The identification of material weaknesses in internal controls and the potential for delisting further contribute to a negative outlook. While there are some positive aspects, such as cost reductions and a foreign currency gain, the overall sentiment is negative due to the company's financial instability and operational risks.

Positives

• The company's general and administrative expenses decreased to $1,219,608 for the nine months ended September 30, 2024, compared to $1,747,766 for the same period in 2023.
• The company reported a foreign currency translation gain of $190,263 for the nine months ended September 30, 2024.
• The company is actively working to remediate material weaknesses in its internal controls.
• The company has a financial support letter from a former officer and principal stockholder.

Negatives

• Net sales decreased significantly for both the three and nine months ended September 30, 2024.
• The company reported a net loss for both the three and nine months ended September 30, 2024.
• Cash and cash equivalents decreased substantially.
• The company identified material weaknesses in its internal controls.
• The fish trading and catering businesses experienced decreased volume and average prices.
• The company's current liabilities exceed its current assets.

Risks

• The company's ability to continue as a going concern is dependent on securing funding, reducing costs, and improving liquidity.
• The company may need to raise additional capital in the future, but there is no assurance that it will be able to do so on acceptable terms.
• The company's operations could be disrupted by geopolitical conditions, trade disputes, and other similar events.
• The company is subject to the effects of exchange rate fluctuations.
• The company's auditor has resigned, and the company has engaged a new auditor.
• The company received a deficiency letter from Nasdaq for not maintaining the minimum required closing bid price.
• The company is subject to the Holding Foreign Companies Accountable Act, which could lead to delisting if the company remains a Commission-Identified Issuer for three consecutive years.

Future Outlook

The company plans to expand its sales and marketing model through online marketing, data intelligence, and the establishment of a distributor network, and intends to sell and develop fish farms in Taiwan, the U.S., and Brazil. They expect to sell over five thousand tanks in the next five years and are planning to establish a production facility in Taiwan.

Management Comments

• Management believes its current cash balances coupled with anticipated cash flow from operating activities will be sufficient to meet its working capital requirements for at least one year.
• Management is also focused on growing the Company's existing product offering, as well as its customer base, to increase its revenues.
• The shareholders are committed to provide additional financing required when we try to raise additional capital from third party investors or banks.
• Management has implemented plans to secure funding, reduce costs, and improve liquidity.

Industry Context

The company operates in the aquaculture industry, which is experiencing growing demand due to decreasing production from wild fisheries. The company's focus on land-based recirculation aquaculture systems aligns with the industry's need for controlled and traceable environments for fish species. The company is also targeting the Taiwan government-supported solar fish farms initiative.

Comparison to Industry Standards

• The company's revenue decline contrasts with the general growth trend in the aquaculture industry, where demand is increasing.
• The company's net loss and cash burn are concerning compared to industry peers that are typically focused on profitability and sustainable growth.
• The identified material weaknesses in internal controls are a significant concern, as most public companies in the sector have robust financial reporting systems.
• The company's reliance on a small number of customers for a large portion of its revenue is a risk, as is the case with many smaller companies in the sector.
• The company's plans to expand into the U.S. and Brazil are ambitious, and it will need to demonstrate its ability to execute these plans effectively to compete with established players in those markets.

Related Party Transactions

• The company had sales of $12,498 to Grand Smooth Corporation Limited, a related party with the same director.
• The company had balances due to related parties, including $21,440 to Mr. Yin-Chieh Cheng and $7,681 to Mountain Share Transfer, LLC.

Stakeholder Impact

• Shareholders face the risk of potential delisting and dilution from future capital raises.
• Employees may be affected by cost-cutting measures and potential restructuring.
• Customers may be concerned about the company's financial stability and its ability to fulfill contracts.
• Suppliers may face increased credit risk due to the company's financial challenges.
• Creditors may be concerned about the company's ability to repay its debts.

Next Steps

• The company intends to actively monitor the closing bid price of its Common Stock and, as appropriate, will consider available options to regain compliance with the Bid Price Rule.
• The company is working to remediate the material weaknesses in its internal controls.
• The company plans to expand its sales and marketing model through online marketing, data intelligence, and the establishment of a distributor network.
• The company plans to sell and develop fish farms in Taiwan, the U.S., and Brazil.
• The company expects to obtain financing from shareholders or raise additional capital through, among other things, the sale of equity or debt securities.

Key Dates

Keywords

Nocera Inc, 10-Q, SEC, Financial Statements, Aquaculture, Fish Farming, Internal Controls, Net Loss, Revenue, Material Weaknesses, Going Concern, Nasdaq, HFCAA