Nocera, Inc. (NCRA) - Q3 2024 10-Q Summary
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended September 30, 2024. Nocera, Inc. is a Nevada corporation operating primarily in Taiwan, focusing on land-based recirculation aquaculture systems (RAS), fish trading, and food processing/catering through its Variable Interest Entity (VIE), Meixin. The company is classified as a smaller reporting company and an emerging growth company.
Key Financial Metrics
| Metric | Q3 2024 (3 Months) | Q3 2023 (3 Months) | YTD 2024 (9 Months) | YTD 2023 (9 Months) |
|---|---|---|---|---|
| Net Sales | $1,363,101 | $7,283,281 | $13,016,093 | $16,448,325 |
| Gross Profit | $34,131 | $51,369 | $163,879 | $157,260 |
| Gross Margin | 2.5% | 0.7% | 1.3% | 1.0% |
| Net Loss (Company) | $(285,418) | $(264,059) | $(1,126,116) | $(1,563,081) |
| EPS (Basic & Diluted) | $(0.0210) | $(0.0264) | $(0.0865) | $(0.1611) |
| Cash & Equivalents | $372,270 (as of Sept 30, 2024) | |||
| Total Assets | $7,059,829 (as of Sept 30, 2024) | |||
| Total Liabilities | $2,423,373 (as of Sept 30, 2024) | |||
| Stockholders' Equity | $4,636,456 (as of Sept 30, 2024) |
Debt & Liquidity: The company repaid its short-term secured loan in full during the period. Current liabilities include a significant Warrant Liability of $1,179,768. Net cash used in operating activities for the nine months ended September 30, 2024, was $909,563.
Material Changes vs. Prior Period
- Revenue Decline: Net sales decreased significantly by 81% in Q3 2024 compared to Q3 2023, and by 21% on a year-to-date basis. Management attributes this to a slow fish market in Taiwan and reduced activity in the Meixin catering business.
- Expense Reduction: General and administrative expenses decreased by 30% year-to-date ($1.22M vs $1.75M), driven by lower consulting, audit, and legal fees.
- Net Loss Improvement: Despite lower revenue, the net loss attributable to the company decreased by 28% year-to-date ($1.13M vs $1.56M) due to the reduction in operating expenses.
- Acquisitions: The company acquired 100% controlling interests in two new VIEs in 2024: Zhejiang Xinca Mutual Entertainment Culture Media Co., Ltd. (Jan 2024) and Hangzhou SY Culture Media Co. Ltd. (Apr 2024), exchanging restricted common stock for equity.
- Customer Concentration: As of September 30, 2024, a single customer (Customer A) represented 98.32% of total accounts receivable, up from 60.11% in the prior year.
Guidance, Outlook, Risks, and Unusual Items
- Outlook: Management plans to expand RAS demo sites in Taiwan, the U.S. (Alabama), and Brazil. They aim to sell over 5,000 tanks in the next five years. However, the company notes it may need to raise additional capital to fund these long-term requirements.
- Nasdaq Compliance Risk: On September 17, 2024, the company received a deficiency letter from Nasdaq for failing to maintain the minimum $1.00 closing bid price. The company has 180 days (until March 17, 2025) to regain compliance or face potential delisting.
- HFCAA Risk: The company is identified as a "Commission-Identified Issuer" under the Holding Foreign Companies Accountable Act (HFCAA) because its auditor is in Hong Kong. Continued identification for three consecutive years could lead to a trading prohibition.
- Internal Controls: Management concluded that disclosure controls and procedures were ineffective as of September 30, 2024, citing material weaknesses including lack of written documentation, insufficient monitoring, and inadequate segregation of duties.
- Accountant Change: On October 16, 2024, Centurion ZD CPA & Co. resigned as the independent auditor. Enrome LLP was appointed as the new auditor effective October 16, 2024.
- Subsequent Event: On October 21, 2024, the company filed a Form S-3 registration statement to offer up to $50 million in various securities.
Investor Verification Checklist
- Liquidity Runway: Verify if current cash ($372k) is sufficient given the negative operating cash flow and planned capital expenditures for U.S. and Brazil expansion.
- Nasdaq Status: Monitor the stock price to ensure it meets the $1.00 bid price requirement to avoid delisting by March 2025.
- Customer Concentration: Assess the risk associated with 98% of accounts receivable being owed by a single customer.
- Internal Control Remediation: Review progress on fixing material weaknesses in financial reporting and segregation of duties.
- HFCAA Timeline: Track the company's status regarding the PCAOB inspection of its Hong Kong-based auditor to understand delisting risks under HFCAA.
- Revenue Sustainability: Evaluate the viability of the new media/entertainment VIE acquisitions (Xinca, SY Media) as revenue drivers given the decline in core fish trading and catering businesses.