Business Overview and History

Nocera, Inc. (NASDAQ: NCRA) is a fully integrated sustainable seafood company that has established itself as a pioneer in the land-based recirculation aquaculture systems (RAS) industry. With a focus on manufacturing and operating RAS facilities, Nocera is poised to capitalize on the growing global demand for environmentally responsible seafood production.

Nocera, Inc. was incorporated in the State of Nevada on February 1, 2002, but remained dormant until its reverse merger with Grand Smooth Inc. Limited (GSI) on December 31, 2018. Through this reverse merger, GSI became Nocera's wholly-owned subsidiary, and the former shareholders of GSI became Nocera's controlling shareholders.

GSI, established under the laws and regulations of Hong Kong on August 1, 2014, was initially a holding company without any operations. In October 2017, GSI incorporated Guizhou Grand Smooth Technology Ltd. (GZ GST) in China with registered capital of $150,000. GZ GST focused on providing fish farming containers service, integrating sales, installations, and maintenance of aquaculture equipment.

In September 2020, Nocera filed a Current Report on Form 8-K outlining the termination of its relationship with its former variable interest entity, Guizhou Wan Feng Hu Intelligent Aquatic Technology Co. Limited (GZ WFH) and its management. The following month, Nocera entered into a Settlement Agreement and Release with GZ WFH and its management, resolving all claims between the parties.

On December 31, 2020, Nocera entered into a series of contractual agreements with Xin Feng Construction Co., Ltd. (XFC), a Taiwanese company, to provide technical consulting and related services. However, on November 30, 2022, Nocera sold its controlling interest in XFC to a third-party purchaser, marking a shift in the company's strategic focus.

Nocera's current mission is to become a global leader in the land-based aquaculture business, providing consulting services and solutions to aquaculture projects worldwide. The company is now poised to grow its existing operations in Taiwan and expand into the development and management of land-based fish farms in Taiwan, North America, and South America.

The company's primary focus is on the design, development, and production of RAS, large-scale fish tank systems, along with expert consulting, technology transfer, and aquaculture project management services to new and existing aquaculture management businesses. Nocera aims to provide solutions that reduce water pollution and decrease disease problems in fisheries, aligning with the growing demand for sustainable and environmentally-friendly fish farming solutions.

Financial Performance and Liquidity

Nocera's financial performance has been a mixed bag in recent years. In the fiscal year ended December 31, 2023, the company reported total revenue of $23.92 million, a significant increase from the $14.10 million reported in 2022. However, the company's net income for 2023 was a loss of $4.34 million, compared to a loss of $2.07 million in the previous year. The annual operating cash flow for 2023 was negative $1.06 million, and the annual free cash flow was negative $1.92 million.

The company's liquidity position has been a concern, with a current ratio of 0.51 as of September 30, 2024, indicating potential challenges in meeting short-term obligations. Nocera's cash and cash equivalents stood at $372,270 as of the same date, down from $2.91 million at the end of 2022. The company's quick ratio of 0.46 further underscores the liquidity challenges it faces.

As of September 30, 2024, Nocera had a debt-to-equity ratio of 0.15, with total debt of $487,800 against total equity of $3.26 million. The company's current assets were $1.21 million, while current liabilities stood at $2.39 million, resulting in net current liabilities of $1.18 million. Stockholders' equity was reported at $4.64 million.

Quarterly Performance

In the third quarter of 2024, Nocera reported revenue of $1.36 million, a significant decrease from the $7.28 million recorded in the same period of 2023, representing an 81.3% decline. The company's net loss for the quarter was $285,420, compared to a net loss of $272,780 in the third quarter of 2023. The decrease in revenue was primarily attributed to slower sales in the company's fish trading business in Taiwan and the Meixin catering business.

For the nine-month period ended September 30, 2024, Nocera's revenue was $13.02 million, down from $16.45 million in the same period of the prior year. The company's net loss for the nine-month period was $1.13 million, compared to a net loss of $1.56 million in the corresponding period of 2023. Gross profit for the nine-month period was $163,880, compared to $157,260 in the prior-year period. The slight increase in gross profit was due to higher demand for the company's e-commerce sales.

Notably, Nocera's general and administrative expenses decreased from $1.75 million in the nine months ended September 30, 2023, to $1.22 million in the current period, primarily due to lower consulting, audit, and legal fees.

Geographical Expansion and Acquisitions

To drive its growth strategy, Nocera has made several strategic moves, including geographic expansion and acquisitions. In September 2022, the company entered into a series of contractual agreements to acquire an 80% controlling interest in Meixin Institutional Food Development Co., Ltd., a Taiwanese food processing and catering company, for $4.3 million.

More recently, in January 2024, Nocera acquired a 100% controlling interest in Zhejiang Xinca Mutual Entertainment Culture Media Co., Ltd. (Xinca), a Chinese media company, in exchange for 1.8 million shares of its restricted common stock. This acquisition was followed by the company's purchase of a 100% controlling interest in Hangzhou SY Culture Media Co. Ltd. (SY Culture), a Chinese livestreaming e-commerce company, in April 2024 for 600,000 shares of its common stock.

These acquisitions are part of Nocera's strategy to diversify its revenue streams and expand its capabilities in the sustainable seafood value chain, leveraging its expertise in RAS technology and aquaculture project management.

It's worth noting that in October 2020, Nocera ceased its operations in China and moved all of its technology and back-office operations to Taiwan. The company no longer has any intentions of conducting operations in China or Hong Kong, which makes its recent acquisitions of Chinese companies an interesting strategic move.

Competitive Landscape and Risks

Nocera operates in a competitive environment, facing challenges from both traditional and emerging players in the seafood industry. The company's primary competitors include other land-based aquaculture providers, as well as global seafood producers and distributors.

One of the key risks facing Nocera is the potential impact of geopolitical conditions, trade disputes, and international sanctions on its operations and supply chain. The company's recent expansion into China, coupled with the ongoing tensions between the United States and China, could pose a significant challenge to its growth plans.

Additionally, Nocera is subject to the Holding Foreign Companies Accountable Act (HFCAA), which may result in the delisting of its shares from the Nasdaq Stock Market if the company remains identified as a "Commission-Identified Issuer" for three consecutive years. This regulatory risk could have a substantial impact on the company's access to capital markets and investor sentiment.

Outlook and Future Plans

Nocera's long-term success will depend on its ability to navigate the evolving competitive landscape, effectively manage geopolitical risks, and execute its strategic initiatives to expand its geographic reach and diversify its revenue streams. The company's focus on sustainable seafood production and its expertise in RAS technology position it well to capitalize on the growing global demand for environmentally responsible aquaculture solutions.

The company believes its current cash balances and anticipated cash flow from operating activities will be sufficient to meet its working capital requirements for at least one year from the date of the financial statements. However, Nocera may need to raise additional capital in the future to fund its planned expansion and the construction of its land-based fish farming demo sites in Taiwan, the United States, and Brazil.

While Nocera's recent financial performance has been challenging, the company's efforts to diversify its business through acquisitions and the potential of its RAS technology suggest that it may be well-positioned to overcome its current headwinds and emerge as a leader in the blue economy. The company's primary focus remains on the design, development, and promotion of its RAS systems for the global aquaculture market, with a particular emphasis on the Taiwanese and North American markets.

Investors should closely monitor the company's progress in executing its growth strategy, managing the various risks it faces, and improving its financial performance. The coming quarters will be crucial in determining whether Nocera can successfully leverage its technological expertise and strategic acquisitions to drive sustainable growth and profitability in the competitive aquaculture industry.