Nocera, Inc. Form 8-K Summary
Business Context and Reporting Period
Nocera, Inc. filed a Current Report on Form 8-K dated May 13, 2020, regarding the reliability of previously issued unaudited financial statements for the periods ended September 30, 2019. The Company is an emerging growth company and has no securities registered under Section 12(b).
Financial Reporting Issue and Key Metrics
- On September 20, 2019, Nocera entered into an exclusive distribution agreement with JC Development Co. Ltd. in Taiwan.
- Under the agreement, JCD agreed to pay Nocera $5 million over five years for perpetual exclusive sales-agent rights in the Asia-Pacific region.
- Nocera agreed to pay JCD an 8% commission on total sales, excluding sales to CIMC Smart Science & Technology Co., Ltd. in China.
- Nocera initially recognized $1 million received from JCD as revenue at a point in time in September 2019.
- The Company subsequently concluded that the $1 million should have been recognized over the estimated economic life of the arrangement.
- The filing states that the accounting correction affects revenue, tax expense or benefit, net income or net loss, deferred tax assets, income tax payable, and deferred revenue.
- The correction had no impact on previously reported cash.
- The filing does not provide the revised revenue, profit, cash flow, margin, debt, liquidity, or balance-sheet amounts.
Material Changes, Outlook, and Risks
The Board of Directors and management concluded that the affected financial statements should no longer be relied upon. The Company intends to amend its Form 10-Q for the periods ended September 30, 2019, to reflect the required adjustments or restatement. The independent registered public accounting firm, Marcum Bernstein & Pinchuk LLP, concurred with management regarding the restatement.
Until restated results are filed, investors are cautioned not to rely on the affected financial statements, related press releases, earnings releases, or investor communications. The Company warned that the restatement could reduce investor confidence, negatively affect market sentiment, and cause a decline in its stock price.
Important Facts to Verify
- Confirm the filing and scope of the amended or restated Form 10-Q for the periods ended September 30, 2019.
- Verify the revised timing and amount of revenue recognition for the JCD distribution agreement.
- Review the effects on net income or net loss, deferred revenue, taxes, deferred tax assets, and income tax payable.
- Confirm that the restatement does not change previously reported cash balances or cash flows.
- Assess whether any additional accounting, internal-control, audit, or regulatory issues were identified.