Nocera, Inc. — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual report; it does not provide standalone fourth-quarter results.
Business context and reporting period
Nocera designs and supplies recirculating aquaculture systems (RAS), and provides aquaculture consulting and project services. Its Taiwan operations also trade eel and, following its September 2022 acquisition of Meixin, include food processing and catering. The company says approximately 84% of revenue came from eel, while its year-over-year discussion says 2022 sales were mostly from XFC construction services and eel trading; the filing text does not clearly reconcile these descriptions.
In 2022, Nocera acquired control of Meixin through contractual VIE arrangements for $4.3 million and sold XFC for $300,000, ending its Taiwan construction-services operations. It completed the purchase of 229 acres in Alabama in February 2023, with plans to develop RAS fish farming there. Nocera operates primarily in Taiwan and says it has no current plans to operate in mainland China or Hong Kong.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $16.34 million | $9.95 million |
| Gross profit / margin | $267,095 / 1.6% | $944,592 / 9.5% |
| Operating loss | $5.18 million | $9.48 million |
| Net loss | $4.74 million | $9.62 million |
| Net loss attributable to Nocera | $4.81 million | $9.62 million |
| Basic and diluted loss per share | $0.6111 | $1.0757 |
| Operating cash flow | $(1.91) million | $251,729 |
| Investing cash flow | $(4.03) million | $(25,067) |
| Financing cash flow | $6.29 million | $1.20 million |
Revenue increased about 64%, but gross profit fell about 72% and gross margin narrowed substantially. The operating loss improved as general and administrative expense declined to $5.45 million from $10.42 million, mainly because 2021 included much higher share-based compensation. 2022 other income of $419,811 was primarily attributed to waived payables.
At December 31, 2022, cash was $2.91 million, current assets were $3.24 million, current liabilities were $1.52 million, and reported working capital was $1.72 million. Total assets were $8.14 million and total liabilities $1.96 million. Secured borrowing totaled $651,254 at 6% interest, with $214,913 current and $436,341 long-term. The balance sheet also included a $1.18 million warrant liability. Accumulated deficit was $14.75 million.
Material changes versus the prior year
- Revenue rose from $9.95 million to $16.34 million, reflecting a different business mix that included XFC construction services and eel trading.
- Gross profit declined to $267,095 from $944,592; management attributed lower margin partly to the XFC sale and reduced revenue recognition in November.
- Operating and net losses narrowed, largely due to lower share-based compensation and other G&A costs.
- Operating cash flow turned negative, from $251,729 provided in 2021 to $1.91 million used in 2022. Investing cash use increased primarily because of the Meixin acquisition.
- Nocera raised approximately $5.3 million net from its August 2022 public offering. Common shares outstanding increased to 9,243,587 at year-end, after a 2-for-3 reverse stock split in August.
Outlook, risks, contingencies and unusual items
- Liquidity and going concern: The auditor and company disclosed substantial doubt about Nocera’s ability to continue as a going concern. Management said available cash and anticipated operating cash flows should meet working-capital needs for at least one year from issuance, but the company may need additional financing and offers no assurance it can obtain it on acceptable terms. Management also obtained a financial-support letter from CEO and Chairman Yin-Chieh Cheng.
- Plans: Nocera plans to expand RAS and fish-farming operations, pursue demonstration sites, and says it expects to sell more than 5,000 tanks over five years. It did not provide a formal financial forecast or quantitative earnings guidance.
- Alabama land and borrowing: The company completed the $875,000 land purchase on February 16, 2023, funded with $225,000 of cash and a $650,000, two-year loan at 6%. A $500,000 certificate of deposit was pledged as security.
- Customer and product concentration: Four customers represented approximately 49.6% of 2022 revenue. The filing also identifies substantial dependence on eel and Taiwan, creating exposure to demand, pricing, customer concentration, currency and regional risks.
- Meixin acquisition and goodwill: Meixin generated $3.91 million of goodwill, about 48% of year-end assets. The auditor identified the goodwill impairment assessment, including management’s revenue and gross-margin projections, as a critical audit matter. Meixin is consolidated through contractual VIE arrangements rather than direct equity ownership, creating control and enforceability risks.
- Internal controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end. Reported material weaknesses include inadequate written procedures, insufficient financial-reporting review and monitoring, and inadequate segregation of duties. Remediation was planned for 2023.
- Audit and listing risk: The filing states the Hong Kong-based auditor was not subject to full PCAOB inspection and that Nocera was identified under the Holding Foreign Companies Accountable Act in May 2022. Continued identification may ultimately threaten U.S. trading eligibility.
- Other unusual items: The XFC sale resulted in a reported $2.57 million disposal loss. The company reported $413,453 of 2022 share-based compensation and $11.11 million of unrecognized compensation cost expected to be recognized over a remaining vesting period of 1.99 years. No material pending litigation was disclosed.
Important facts for investors to verify
- Reconcile the filing’s statement that eel represented approximately 84% of revenue with its account that 2022 revenue was mostly from XFC construction and eel trading.
- Review the going-concern disclosure: the financial statements report a 2022 net loss of $4.74 million, while the going-concern note refers to a $7.9 million net loss. The filing text does not provide a clear reconciliation.
- Assess Meixin’s operating performance, the basis for its $3.91 million goodwill valuation, and the reliability of the assumptions used in the impairment test.
- Confirm the terms, repayment schedule and collateral implications of secured borrowings, including the Alabama land loan and pledged certificate of deposit.
- Track whether management remediates the internal-control weaknesses and whether future filings provide consistent, reliable financial and business-mix disclosures.