10-Q: Nocera Reports Q3 2025 Loss Amid Revenue Decline, Capital Raise

Nocera, Inc. reported a significant increase in net loss for the nine months ended September 30, 2025, despite a successful Series B Preferred Stock issuance and a new $300M convertible note agreement.

Summary

• Net sales for the nine months ended September 30, 2025, decreased by 22.3% to $10.11 million from $13.02 million in the prior year.
• The company experienced a substantial increase in net loss attributable to the company, reaching $2.24 million for the nine months ended September 30, 2025, compared to $0.52 million in the same period of 2024.
• Gross profit declined by 19.1% to $0.13 million for the nine months ended September 30, 2025, from $0.16 million in 2024.
• General and administrative expenses rose by 26.2% to $1.44 million for the nine months ended September 30, 2025.
• Cash and cash equivalents increased significantly to $2.03 million as of September 30, 2025, from $0.48 million at December 31, 2024, primarily due to financing activities.
• Nocera completed the sale of its controlling interest in SY Culture for $0.55 million cash on June 5, 2025, recognizing a loss of $87,332.
• The company acquired a 35% equity interest in Tachyonext Inc. for $0.5 million cash on June 5, 2025, and recognized a $315,224 share of loss from this investment.
• Nocera issued 3,500 shares of Series B Convertible Non-Voting Preferred Stock for $2.64 million net proceeds in August 2025.
• A subsequent event on October 31, 2025, involved an agreement to issue up to $300 million in senior secured convertible notes, with an initial closing of $8 million principal amount for $7.28 million purchase price on November 4, 2025.
• Management identified material weaknesses in disclosure controls and procedures, including lack of written documentation, insufficient monitoring, and inadequate segregation of duties, which are expected to be remediated in the second half of 2025.

Sentiment

Score: 3

Explanation: The company reported significantly worse financial results with a widening net loss and declining revenue and gross profit. While there was a substantial capital raise and plans for future financing, the underlying operational performance and identified material weaknesses in internal controls indicate significant challenges and high risk. The 'going concern' warning from auditors further dampens sentiment.

Positives

• Cash and cash equivalents increased significantly to $2,034,205 as of September 30, 2025, from $484,161 at December 31, 2024.
• Successful issuance of 3,500 shares of Series B Convertible Non-Voting Preferred Stock, raising $2,635,000 net proceeds.
• Secured a Securities Purchase Agreement for up to $300,000,000 in senior secured convertible notes, with an initial closing of $8,000,000 principal amount completed on November 4, 2025, providing significant future capital potential.
• Management is actively working to remediate identified material weaknesses in internal controls, including establishing an audit committee, adding experienced personnel, and retaining third-party consultants.
• The average selling price of eels in the fish trading business increased from $15.44 to $15.99 per kilogram for the nine months ended September 30, 2025, compared to 2024.

Negatives

• Net sales for the nine months ended September 30, 2025, decreased by 22.3% to $10,109,236 from $13,016,093 in the comparable period of 2024.
• Net loss attributable to the company significantly widened to $2,240,514 for the nine months ended September 30, 2025, from $519,420 in the prior year.
• Gross profit decreased by 19.1% to $132,506 for the nine months ended September 30, 2025.
• General and administrative expenses increased by 26.2% to $1,440,379 for the nine months ended September 30, 2025.
• Operating loss worsened to $1,307,873 for the nine months ended September 30, 2025, from $977,229 in 2024.
• Other expense was $820,982 for the nine months ended September 30, 2025, a significant increase from other income of $544,242 in 2024, primarily due to a loss on disposal of SY Culture and a share of loss from the Tachyonext investment.
• Net cash used in operating activities increased to $1,123,115 for the nine months ended September 30, 2025, from $909,564 in 2024.
• The company recognized a $315,224 share of loss from its 35% equity investment in Tachyonext Inc. for the nine months ended September 30, 2025.
• Auditors expressed concern about the company's ability to continue as a going concern in their report for the fiscal year ended December 31, 2024.
• Disclosure controls and procedures were deemed ineffective as of September 30, 2025, due to material weaknesses.

Risks

• The company's auditor is located in Hong Kong, leading to identification as a 'Commission-Identified Issuer' by the SEC in May 2022 under the Holding Foreign Companies Accountable Act (HFCAA). This could lead to delisting if the company remains identified for three consecutive years (or two years if the AHFCAA is enacted).
• Exposure to inflation, particularly in commodity prices (raw materials) and freight costs (including fuel), which can negatively affect profit margins if not mitigated.
• Disruptions from geopolitical conditions, trade disputes, international boycotts and sanctions, political and social instability, acts of war, or terrorist activity, as exemplified by the Russia-Ukraine conflict.
• Foreign currency exchange rate fluctuations, as the company's reporting currency is USD, while operations in Taiwan use NT dollar and PRC companies use Renminbi, impacting translated revenue, expenses, and net income.
• Inherent limitations in the effectiveness of disclosure controls and procedures, including human error and circumvention, meaning even effective controls can only provide reasonable assurance.
• The company's ability to raise additional capital on acceptable terms, or at all, to meet long-term operating requirements and fund strategic initiatives, despite recent financing activities.

Future Outlook

Management is focused on growing existing product offerings and customer base to increase revenues. The company plans to expand its land-based fish farming demo sites in Taiwan, the U.S., and Brazil, including building a catfish farm in the U.S. by the end of 2024. It expects to raise approximately $40 million through equity issuance, a leveraged buyout, and debt financing to support capital-intensive strategic initiatives, including business combinations and acquisitions. Approximately $5.9 million is expected to be utilized for operating activities and $30 million for capital expenditures over the next twelve months. The company believes its current cash balances and anticipated cash flow will be sufficient for at least one year.

Management Comments

• "Management is focused on growing our existing product offering, as well as our customer base, to increase our revenues."
• "We are now poised to grow our existing operations in Taiwan and expand into the development and management of land-based fish farms in Taiwan and North and South America."
• "We believe the U.S. is a potentially lucrative market to penetrate."
• "We expect to sell over five thousand tanks in the next five years."
• "We also intend to expend the fish farming demo sites in Taiwan by adding 20 units of RASs eel farming equipment with outsourcing construction services and build the catfish farm in the U.S. by the end of 2024 to promote our fish farming systems to the global market."
• "We are expecting more customers from various countries actively inquiring about our equipment."
• "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."
• "The Company anticipates that its primary source of liquidity over the next twelve months will be capital raised through financing activities."
• "We currently expect to raise approximately $40 million through a combination of equity issuance, a leveraged buyout transaction, and debt financing."
• "These funds are intended to support our capital-intensive strategic initiatives, including business combinations and acquisitions aligned with our long-term growth strategy."
• "We plan to allocate approximately $30 million toward capital expenditures, primarily for business combination and acquisition transactions."

Industry Context

Nocera operates in the aquaculture, catering, and e-commerce sectors. Its focus on land-based recirculation aquaculture systems (RASs) aligns with a global trend towards sustainable and controlled fish farming, driven by decreasing wild fisheries and environmental concerns. The expansion into e-commerce, particularly live-streaming platforms like Douyin, reflects the broader shift towards digital retail and social commerce in China. The company's strategic moves, such as the Alabama land acquisition and plans for U.S. and Brazil expansion, indicate an ambition to capitalize on growing international demand for aquaculture technology and products. However, the company's financial performance suggests challenges in translating these strategic initiatives into profitable growth, contrasting with the overall growth potential in these industries.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to assess Nocera's performance against global benchmarks. Therefore, a direct comparison to industry standards based solely on the filing content is not possible.

Management Changes

Corporate Governance

Legal Proceedings

• No legal proceedings were subject to the company during the nine months ended September 30, 2025, and there are currently no legal proceedings that could have a material adverse effect on the business, financial condition, or operating results.

Related Party Transactions

• No current related party transactions are required to be disclosed under current SEC rules and regulations.

Stakeholder Impact

• **Shareholders**: Significant net losses and a 'going concern' warning could negatively impact investor confidence and share price. However, recent capital raises and plans for future financing may offer some reassurance regarding liquidity and future growth potential.
• **Employees**: The company's focus on growth and remediation of internal controls could lead to improved operational stability and potentially new opportunities, but financial struggles could also create uncertainty.
• **Customers**: Continued operations in fish trading, catering, and e-commerce, along with plans for expansion, suggest ongoing service and product availability. The focus on RAS technology aims to improve product quality and sustainability.
• **Creditors**: The issuance of senior secured convertible notes indicates a new class of creditors with senior ranking, potentially impacting the recovery prospects of existing unsecured creditors in a distressed scenario. The 'going concern' warning highlights increased credit risk.
• **Suppliers**: Potential for continued business relationships, but financial instability could pose risks to timely payments or contract continuity.

Next Steps

• Remediate material weaknesses in disclosure controls and procedures in the second half of 2025.
• Invest in information technology systems to enhance operational and financial reporting and internal controls.
• Enhance organizational structure to support financial reporting processes and internal controls.
• Provide guidance, education, and training to employees relating to accounting policies and procedures.
• Further develop and document detailed policies and procedures regarding business processes for significant accounts, critical accounting policies, and critical accounting estimates.
• Establish effective general controls over information technology systems.
• Continue ensuring all requirements and evaluations are thoroughly addressed prior to constructing RASs on the Alabama land.
• Progress with the design of RAS equipment in alignment with project timelines for the Alabama land.
• Expand fish farming demo sites in Taiwan by adding 20 units of RASs eel farming equipment with outsourcing construction services.
• Build a catfish farm in the U.S. by the end of 2024 to promote fish farming systems to the global market.
• Execute on plans to raise approximately $40 million through a combination of equity issuance, a leveraged buyout transaction, and debt financing.
• Utilize approximately $5.9 million for operating activities over the next twelve months, including $5.0 million for the fish business, $0.7 million for G&A, and $0.2 million for e-commerce marketing.
• Allocate approximately $30 million toward capital expenditures, primarily for business combination and acquisition transactions.

Key Dates

Recommendation

Nocera, Inc. faces significant financial challenges, evidenced by a substantial increase in net loss, declining revenue, and a 'going concern' warning from its auditors. While recent capital raises and plans for future financing provide some liquidity, the underlying operational performance is weak, and the company has acknowledged material weaknesses in its internal controls. The risk of delisting due to HFCAA non-compliance further adds to the uncertainty. Given the deteriorating financial metrics, governance issues, and high operational risks, a seasoned investor would likely recommend selling the stock to mitigate potential further losses.

Keywords

Aquaculture, Fish Farming, RAS, Recirculation Aquaculture Systems, E-commerce, Catering, SEC Filing, 10-Q, Financial Results, Net Loss, Revenue Decline, Capital Raise, Convertible Notes, Preferred Stock, Internal Controls, Going Concern, HFCAA, Taiwan, China, United States