Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO ___________
COMMISSION FILE NO. 001-41434
NOCERA, INC.
(Exact name of registrant as specified in charter)
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
3F (Building B), No. 185, Sec. 1, Datong Rd., Xizhi Dist., New Taipei City221, Taiwan (R.O.C.)
(Address of principal executive offices and zip code)
(886)-910-163-358
(Registrant’s telephone number, including area
code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT:
Common Stock NCRA The Nasdaq Capital Market LLC
SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
OF THE ACT:
None.
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether
the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether
the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). Yes ☒ No ☐
Indicate by check mark whether
the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer”, “small reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether
the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☐
If securities are registered pursuant
to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether
any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the
registrant’s issued and outstanding shares of common stock held by non-affiliates of the registrant as of June 30, 2022 based on
$4.00 per share, the price at which the registrant’s common stock was last sold on June 30, 2022, was approximately $18,658,256.
There were 9,243,587 shares outstanding
of the registrant’s common stock, par value $0.001 per share, as of March 31, 2023.
NOCERA, INC.
TABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2022
PART I 1
ITEM 1. BUSINESS 1
ITEM 1A. RISK FACTORS 8
ITEM 1B. UNRESOLVED STAFF COMMENTS 26
ITEM 2. PROPERTIES 27
ITEM 3. LEGAL PROCEEDINGS 27
ITEM 4. MINE SAFETY DISCLOSURES 27
ITEM 6. [RESERVED] 29
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 42
ITEM 9A. CONTROLS AND PROCEDURES 43
ITEM 9B. OTHER INFORMATION 46
ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 46
PART III 47
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE 47
ITEM 11. EXECUTIVE COMPENSATION 52
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 57
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 58
SIGNATURES 61
EXHIBIT INDEX 58
INDEX TO FINANCIAL STATEMENTS F-1
i
In this Annual Report on Form 10-K, unless otherwise
stated or as the context otherwise requires, references to “Nocera, Inc.,” “Nocera,” the “Company,”
“we,” “us,” “our” and similar references refer to Nocera, Inc., a Nevada corporation. Our logo and
other trademarks or service marks of the Company appearing in this Annual Report on Form 10-K are the property of Nocera, Inc.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements represent
our expectations, beliefs, intentions, or strategies concerning future events, including, but not limited to, any statements regarding
our assumptions about financial performance; the continuation of historical trends; growth strategies; the sufficiency of our cash balances
for future liquidity and capital resource needs; the expected impact of changes in accounting policies on our results of operations, financial
condition or cash flows; anticipated problems and our plans for future operations; our future financing plans and anticipated needs for
working capital; and the economy in general or the future of the food production industry, all of which were subject to various risks
and uncertainties. Such statements, when used in this Annual Report on Form 10-K and other reports, statements, and information we have
filed with the Securities and Exchange Commission (“SEC”), in our press releases, presentations to securities analysts or
investors, in oral statements made by or with the approval of an executive officer, are generally identifiable by use of the words “may,”
“will,” “should,” “expect,” “anticipate,” “continue,” “estimate,”
“believe,” “intend,” or “project” or the negative of these words or other variations on these words
or comparable terminology. However, any statements contained in this Annual Report on Form 10-K that are not statements of historical
fact may be deemed to be forward-looking statements. These statements are expressed in good faith and based upon a reasonable basis when
made, but there can be no assurance that these expectations will be achieved or accomplished.
This information may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future
results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under Part
I Item 1 “Business” and Part II Item 7 “Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” as well as in other parts of this Annual Report on Form 10-K. Actual events or results may differ
materially from those discussed in forward-looking statements as a result of various factors as described in this Annual Report on Form
10-K generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in
this Annual Report on Form 10-K will in fact occur. In addition to the information expressly required to be included in this filing, we
will provide such further material information, if any, as may be necessary to ensure that the required statements, in light of the circumstances
under which they are made, are not misleading.
Although forward-looking statements in this Annual
Report on Form 10-K reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and
unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those
discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which
speak only as of the date of this Annual Report on Form 10-K. We assume no obligation to update any forward-looking statements in order
to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-K, other than as may be required by
applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed
with the Securities and Exchange Commission (“SEC”) which attempt to advise interested parties of the risks and factors that
may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize,
or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.
This Annual Report on Form 10-K also contains estimates,
projections, and other information concerning our industry, our business, and particular markets, including data regarding the estimated
size of those markets. Information that is based on estimates, forecasts, projections, market research, or similar methodologies is inherently
subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information.
Unless otherwise expressly stated, we obtained this industry, business, market, and other data from reports, research surveys, studies,
and similar data prepared by market research firms and other third parties, industry, general publications, government data, and similar
sources.
ii
PART I
ITEM 1. BUSINESS
Overview
Nocera, Inc. was incorporated in the State of Nevada
on February 1, 2002, with operations based in New Taipei City, Taiwan. Our primary business operations currently consist of designing,
developing and producing large scale recirculating aquaculture systems (“RASs”) for fish farms along with providing consulting,
technology transfer and aquaculture project management services to new and existing aquaculture management business services.
RASs operate by filtering water from the fish (or
shellfish) tanks so it can be reused within the tank. This dramatically reduces the amount of water and space required to intensively
produce seafood products. The steps in RASs include solids removal, ammonia removal, Co2 removal and oxygenation. Prior to 2021, we initially
focused on the Chinese market due to opportunities presented by changes to regulations governing water use for fish production in China.
As of October 2020, we had delivered 551 fish tank systems to six separate Chinese-based fish farms, and two fish tank systems to our
Taiwan showroom.
In October 2020, the government of Taiwan began supporting
the Green Power and Solar Sharing Fish Farms initiative. In view of the opportunities resulting from this initiative, in October 2020,
we ceased all of our operations in China and moved all of our technology and back-office operations to Taiwan. We now only operate out
of Taiwan.
Our current mission is to provide consulting
services and solutions in aquaculture projects to reduce water pollution and decrease the disease problems of fisheries. Our goal is to
become a global leader in the land-based aquaculture business. 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 do not currently have any intentions
of conducting operations in China or Hong Kong.
Corporate History
Nocera, Inc. was incorporated in the State of Nevada
on February 1, 2002, and is based in New Taipei City, Taiwan.
Reverse Merger
Effective December 31, 2018, we completed a reverse
merger transaction pursuant to an Agreement and Plan of Merger (the “Agreement”) with (i) GSI, (ii) GSI’s stockholders,
Yin-Chieh (“Jeff”) Cheng and Zhang Bi, who together owned shares constituting 100% of the issued and outstanding ordinary
shares of GSI (the “GSI Shares”) and (iii) GSI Acquisition Corp. Under the terms of the Agreement, the GSI Stockholders transferred
to us all of the GSI Shares in exchange for the issuance of 6,666,667 (post-split) shares of our common stock. As a result of the reverse
merger, GSI became our wholly-owned subsidiary and Mr. Cheng and Zhang Bi, the former stockholders of GSI, became our controlling stockholders.
The share exchange transaction with GSI was treated as a reverse merger, with GSI as the accounting acquirer and Nocera as the acquired
party. GSI is a limited company established under the laws and regulations of Hong Kong on August 1, 2014 and is a holding company without
any assets or operations.
In anticipation of the reverse merger, GSI undertook
a reorganization and became the 100% holding company of Guizhou Grand Smooth Technology Ltd (“GZ GST”) and GSI Guizhou Wan
Feng Hu Intelligent Aquatic Technology Co. Limited (“GZ WFH”), which were all controlled by the same stockholders before and
after the reorganization, pursuant to a series of contractual agreements (the “GZ WFH VIE Agreements”). As a result, GSI,
through GZ GST, was determined to be the primary beneficiary of GZ WFH and GZ WFH became a variable interest entity (“VIE”)
of GSI. Accordingly, GSI consolidated GZ WFH’s operations, assets and liabilities.
GZ WFH was incorporated in Xingyi City, Guizhou Province,
People’s Republic of China (PRC) on October 25, 2017, and was engaged in providing fish farming containers service, which integrated
sales, installments, and maintenance of aquaculture equipment.
Divestiture of GZ WFH
On September 21, 2020, we terminated our relationship
with GZ WFH and its management, and the GZ WFH Agreements between the parties were terminated as well.
Subsequently
on October 8, 2020, Zhang Bi and GZ WFH entered into a Settlement Agreement and Release with us wherein all claims as to GZ WFH’s
debt (claim to our shares or GZ GST) were compromised, settled, and otherwise resolved as to any and all claims or causes of action whatsoever
against us for any matter, action, or representation as to Nocera, and any debt to ownership of Nocera or GZ GST up to the date of the
settlement agreement. The consideration for the settlement agreement was mutual waiver of any and all claims against each other and GZ
GST, and GZ WFH (including Zhang Bi) waived any claims to our stock, and the 3,166,667 (post-split) shares
of our common stock owned by Zhang Bi were cancelled.
XFC Sale
On December 31, 2020, we exchanged 466,667 (post-split)
shares of our restricted common stock to stockholders of Xin Feng Construction Co., Ltd., a Taiwan limited liability company (“XFC”),
in exchange for 100% controlling interest in XFC. We also entered into contractual arrangements with a stockholder of XFC, that enabled
us to have the power to direct the activities that most significantly affects the economic performance of XFC and receive the economic
benefits of XFC that could be significant to XFC. On November 30, 2022, we entered into a Purchase of Business Agreement with Han-Chieh
Shih (the “Purchaser”), in which we sold our controlling interest of XFC, to the Purchaser for a total purchase cash price
of $300,000 (the “XFC Sale”). The closing of the XFC Sale occurred on November 30, 2022 and the XFC variable interest entity
(“VIE”) agreements were terminated in connection with the XFC Sale.
Reverse Stock Split
On July 26, 2022, we filed a Certificate of Amendment
with the Secretary of State of the State of Nevada to implement a 2-for-3 reverse stock split of our outstanding common stock, with fractional
shares resulting from the reverse stock split being rounded up to the nearest whole number. The reverse stock split was effected on August
11, 2022.
The VIE Agreements with Meixin
On September 7, 2022, we entered into a series of
contractual agreements (collectively, the “Meixin VIE Agreements”) with the majority stockholder (the “Selling Stockholder”)
of Meixin Institutional Food Development Co., Ltd., a Taiwan corporation and a food processing and catering company (“Meixin”),
and Meixin, of which we purchased 80% controlling interest of Meixin for $4,300,000. The Meixin VIE Agreements essentially confer
control and management of Meixin as well as substantially all of the economic benefits of the Selling Stockholder in Meixin to us.
Business Developments
The following highlights recent material developments
in our business:
Recent Developments
Recent developments of the Company are summarized
below and have been previously disclosed in Current Reports on Form 8-K filed with the SEC:
Corporate Structure
We conduct our operations through (i) Meixin; and
(ii) Nocera Taiwan Branch, an unincorporated division of the Company (“NTB”). Our other subsidiaries, GSI, which wholly-owns
GZ GST, are dormant and currently do not have any operations. However, GZ GST may be involved with RASs manufacturing in the near future.
We acquired GSI in a reverse merger on December 31,
2018. Prior to the merger, we were a “shell company” as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act). GSI is the parent holding company of GZ GST, which was incorporated on November 13, 2018, as a wholly
foreign-owned enterprise established in the PRC. Both GSI and GZ GZT are currently dormant and do not conduct any operations. We currently
do not conduct any operations in China or Hong Kong.
In December 2020, we added XFC as a VIE in order to
obtain a Class A construction license to construct indoor RASs and solar sharing fish farms. On November 30, 2022, we entered into a Purchase
of Business Agreement with Han-Chieh Shih, in which we sold our controlling interest of XFC, to the Purchaser for a total purchase cash
price of $300,000. The closing of the XFC Sale occurred on November 30, 2022 and the XFC VIE agreements were terminated in connection
with the XFC Sale. As of November 30, 2022, we ceased providing services to construct indoor RASs and solar sharing fish farms in Taiwan.
On September 7, 2022, we entered into a series of
contractual agreements with the majority stockholder of Meixin and Meixin, of which we purchased 80% controlling interest of Meixin for
$4,300,000. The Meixin VIE Agreements essentially confer control and management of Meixin as well as substantially all of the economic
benefits of the Selling Stockholder in Meixin to us. Therefore, in accordance with ASC 810 “Consolidation,” we are considered
the primary beneficiary of Meixin and have consolidated Meixin’s assets, liabilities, results of operations, and cash flows in the
accompanying consolidated financial statements.
NTB was established on January 14, 2021 in Taiwan.
In October 2021, Nocera began its eel trading business in response to domestic demands created by the COVID-19 lockdown. NTB currently
procures and sells eel in Taiwan and plans to trade other types of seafood, such as tilapia and milkfish, in the near future.
Significant Products & Services
We manufacture, sell, and install RASs for land-based
fish farms. Originally, our systems were designed and constructed from used marine shipping containers. We then developed our next generation
of RASs, a cylindrical shaped tank that holds approximately 15,000 U.S. gallons of water, which we believe make them among the largest
systems in the market.
There are several significant benefits to our RASs:
· the system provides a controlled and “traceable” environment;
Nocera’s RASs include the fish tank, circulation
and filtration systems.
Nocera Land-based RASs Overview
Height / width 1.5m/10m
Main composition of our tank Environmental-friendly PE
Yield per growing season (Tilapia) 11,000 lbs.
Price per RASs Total Solution $35,000 USD
Our RASs can raise both freshwater and saltwater fish,
as well as a variety of crustaceans.
Nocera Recirculating Aquaculture System
Market Overview
Global fish consumption has long been on the rise
at a rate higher than any other source of animal protein, and the trend is expected to continue. With overfishing already threatening
the earth’s marine ecosystem, it is anticipated that a significantly larger proportion of fish consumption would be farm-raised
instead of wild-caught in the future.
Also, the trade conflict between the U.S. and China
has led to a greater demand for non-Chinese origin seafood products from the U.S. market.
On a broader perspective, as the world rapidly begins
a transition towards net zero carbon emissions in response to the ever-more pressing threat of climate change, it is foreseeable that
solar energy will be the go-to option for many countries as a new source of green energy.
We believe that the RASs, with its proven advantage
in producing more fish in a more cost-effective and environmentally friendly manner while offering greater location flexibility and the
potential for a “solar-fish sharing mode,” is a perfect solution to address the opportunities highlighted above.
Consulting Services
We also provide consulting services and solutions
for aquaculture projects, where we offer design innovation and RAS expertise to increase revenue, while decreasing operating expenses,
allowing clients to operate more efficiently while increasing production. Additionally, we show clients how to operate more strategically
by diversifying the species of fish raised to meet market demands. Our equipment enhances the management of fish farms by reducing the
incidence of disease among the fish populations, while reducing water pollution from inland fish farms. We currently provide such services
in Taiwan and intend to expand into other international markets and the United States to increase revenues and operate more efficiently.
We plan to provide the following service offerings:
Strategy
We plan to focus on countries with a growing population
and growing demand for food. By 2050, we will need to double the global food supply to feed the world’s growing population.1
There is a growing need for new ways to produce high-quality local fish without putting more pressure on our natural ecosystems. Like
Taiwan, there are also many countries with a growing population and growing demand for high-protein food. We plan to go global through
building demo sites promoting our RASs and selling our price-competitive systems in these countries to meet their demand for food and
to satisfy their desire for a greener environment.
In January 2021, we moved our operation and market
focus from China to Taiwan. In 2021, we established a Nocera Taiwan Branch to focus on customers in a variety of sectors, such as individual
investors, government supported or funded companies, and international customers. We have received interest from areas like Japan, Thailand,
Jordan, South Africa and the United States.
During the year ended December 31, 2022 and 2021,
the net sales were approximately $16.3 million and approximately $9.9 million, respectively.
Construction Services
Prior to terminating the VIE agreements with XFC in
connection with the XFC Sale, we were the only provider of RAS solar power energy sharing and construction services in Taiwan. As of the
filing date of this Annual Report on Form 10-K, we have no intention of providing services to construct indoor RASs and solar sharing
fish farms in Taiwan.
Customers
In 2023, we intend to target customers in a variety
of markets (e.g., Japan, Taiwan, Thailand, Jordan, South Africa and the United States), such as individual investors, government supported
or funded companies and other types of international customers. During the year ended December 31, 2022 and 2021, the net sales were approximately
$16.3 million and approximately $9.9 million, respectively.
______________________
] Ranganathan et al, How to Sustainably
Feed 10 Billion People by 2050, in 21 Charts, WORLD RESOURCES INSTITUTE (Dec. 5, 2018); https://www.wri.org/insights/how-sustainably-feed-10-billion-people-2050-21-charts#:~:text=
How%20to%20Sustainably%20Feed%2010%20Billion%20People%20by%202050%2C%20in%2021%20Charts,-December%205%2C%202018&text=There%20is%20a%20big%20shortfall,than%20there%20were%20in%202010.
Suppliers
We intend to purchase raw materials and parts and
equipment from third parties locally in Taiwan and build and sell them to customers. We are not directly involved in the production or
manufacturing of readily available equipment, and we do not take a risk in the repair and maintenance of the equipment because of the
manufacturer’s maintenance policy. We have identified and sourced multiple suppliers in Taiwan, and our relationships with suppliers
are generally good. We expect that our suppliers will be able to meet the anticipated demand for our products in the foreseeable future.
There can be no assurance that our suppliers will continue to meet our needs, particularly as we ramp up our expansion into the U.S. and
other markets around the world.
Competition
The market for aquaculture projects and services is
highly competitive. Many of the producers and sellers are large entities that have significantly greater resources than we have. We also
compete with small suppliers which provide smaller alternative aquaculture solutions regionally but due to the size of our projects, we
believe that we should have a better price point.
Trademarks and Patents
We do not own any trademarks or patents.
Sales and Marketing
We intend to create a brand and by our creation of
the brand, offer unique and better incentives to the consumers. Our target market is not only limited to the direct processing plants;
instead, consumers will be informed about the uniqueness of the fish product, and the important health benefits of fish protein.
Further, we plan to increase the species selection
and product form through the investment of the additional 500 tanks; among all we plan to build a hatchery system by collaborating with
professionals to promote and maintain healthy, self-sustaining populations of fish and other aquatic species. We are aiming for the direct
wholesale option, including live hauling, restaurants, supermarkets and specialty stores. As of December 2022, we sell our food items,
including our signature seafood porridge bowl, through our flagship bento box store located at the Ning Xia Night Market in the Datong
District of Taipei City, Taiwan. In addition to utilizing Meixin’s distribution channel, we will move towards online marketing as
well to achieve a greater market share.
Manufacturing Operations
Currently, we manufacture RASs through our branch
office in Taiwan and may manufacture RASs through our Chinese subsidiaries. Additionally, we provide consulting services regarding RAS
technology transfer and aquaculture project management services to customers in Taiwan.
Government Regulation
We are subject to many varying laws and regulations
in Taiwan and throughout the world, including, without limitation, those related to privacy, data protection, intellectual property, consumer
protection, e-commerce, marketing, advertising, messaging, rights of publicity, health and safety, employment and labor, product liability,
accessibility, competition, and taxation. These laws and regulations are constantly evolving and may be interpreted, applied, created,
or amended in a manner that could harm our current or future business and operations. In addition, it is possible that certain governments
may seek to block or limit our products and services or otherwise impose other restrictions that may affect the accessibility or usability
of any or all of our products and services for an extended period of time or indefinitely.
Our properties and operations are subject to a number
of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate. Under certain of these laws
and regulations, we may be subject to joint and several liability for environmental investigations and cleanups, including at properties
that we currently or previously owned or operated, or at sites at which waste we generated was disposed, even if the contamination was
not caused by us or was legal at the time it occurred.
We are also subject to laws regulating consumer products
in the jurisdictions in which we sell our products. In the United States for instance, certain of our products are subject to the U.S.
Consumer Product Safety Act, under which the U.S. Consumer Product Safety Commission may exclude products from the market that are found
to be unsafe or hazardous, require repair, replacement or refund of products, impose fines for noncompliance with requirements and impose
fines for failure to timely notify them of potential safety hazards.
Also, with respect to the potential sale of eel and
any other seafood into the United States, we are subject to extensive regulation, including, among other things, the Food, Drug and Cosmetic
Act, as amended by the Food Safety Modernization Act (“FSMA”), the Public Health Security and Bioterrorism Preparedness and
Response Act of 2002, and the rules and regulations promulgated thereunder by the U.S. Food and Drug Administration (the “FDA”).
The FSMA was enacted in order to aid the effective prevention of food safety issues in the food supply. This comprehensive and evolving
regulatory program impacts how food is grown, packed, processed, shipped and imported into the United States and it governs compliance
with Good Manufacturing Practices regulations. The FDA has finalized seven major rules to implement FSMA, recognizing that ensuring the
safety of the food supply is a shared responsibility among many different points in the global supply chain. The FSMA rules are designed
to make clear specific actions that must be taken at each of these points to prevent contamination. Some aspects of these laws use a strict
liability standard for imposing sanctions on corporate behavior. If we fail to comply with applicable laws and regulations, we may be
subject to civil remedies, including fines, injunctions, recalls, or seizures, and criminal sanctions, any of which could impact our results
of operations.
In addition, the Nutrition Labeling and Education
Act of 1990 prescribes the format and content of certain information required to appear on the labels of food products.
Our operations and products are also subject to state
and local regulation, including the registration and licensing of plants, enforcement by state health agencies of various state standards,
and the registration and inspection of facilities. Compliance with federal, state and local regulation is costly and time-consuming. Enforcement
actions for violations of federal, state, and local regulations may include seizure and condemnation of products, cease and desist orders,
injunctions or monetary penalties. We believe that our practices are sufficient to maintain compliance with applicable government regulations.
We are subject to certain regulations by the U.S.
Federal Trade Commission. Advertising of our products is subject to such regulation pursuant to the Federal Trade Commission Act and the
regulations promulgated thereunder.
We are also subject to certain health and safety regulations,
including regulations issued pursuant to the Occupational Safety and Health Act. These regulations require us to comply with certain manufacturing,
health, and safety standards to protect our employees from accidents.
Our business depends in part on environmental regulations
and programs of Taiwan that promote cleaner water sources to restore clean water back to people. Our customers may be encouraged with
incentives by the local governments relating to aquaculture investment. The approvals of land, licenses or permits, are required from
relevant central and local government authorities. In addition, from time to time, relevant government authorities may impose new regulations
at a local level regulating fish farming. We believe that we have skills to help our customers obtain all necessary licenses, registrations
and permits to comply with all requirements necessary to allow our customers and investors to conduct aquaculture business in Taiwan.
Listing on The Nasdaq Capital Market
Our common stock is listed on The Nasdaq Capital Market
under the symbol “NCRA” since August 11, 2022.
Legal Proceedings
We are currently not a party to any legal or administrative
proceedings and are not aware of any pending or threatened legal or administrative proceedings against us in all material aspects. We
may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.
Property
We own 229 contiguous acres of land located in
Montgomery County, Alabama up to the date of this report.
Seasonality
Since the global growing demand from aquaculture production
along with the decreasing production from wild fisheries and our fish farming systems provide a controlled and traceable environment for
species, our business rarely suffers a seasonal impact.
Human Capital Resources
As of December 31, 2022, we had a total of 19
employees, including 16 full-time employees and 3 part-time employees. In addition, we have 9 consultants. We are compliant with local
prevailing wage, contractor licensing, and have good relations with our employees.
Our human capital resources objectives
include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and
consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting
of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of our Company by motivating
such individuals to perform to the best of their abilities and achieve our objectives.
Corporate Information
Our principal executive offices are located at 3F
(Building B), No. 185, Sec. 1, Datong Rd., Xizhi Dist., New Taipei City 221, Taiwan (R.O.C.). Our telephone number is 886-910-163-358.
Available Information
Our website address is www.nocera.company.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, any amendments to those reports, proxy and
registration statements filed or furnished with the SEC, are available free of charge through our website. We make these materials available
through our website as soon as reasonably practicable after we electronically file such materials with, or furnish such materials to,
the SEC. The reports filed with the SEC by our executive officers and directors pursuant to Section 16 under the Exchange Act are also
made available, free of charge on our website, as soon as reasonably practicable after copies of those filings are provided to us by those
persons. These materials can be accessed through the “Investor Relations” section of our website. The information contained
in, or that can be accessed through, our website is not part of this Annual Report on Form 10-K.
ITEM 1A. RISK FACTORS
Our business is subject to many risks and uncertainties,
which may affect our future financial performance. If any of the events or circumstances described below occur, our business and financial
performance could be adversely affected, our actual results could differ materially from our expectations, and the price of our securities
could decline. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties
not currently known to us or that we currently do not believe are material that may adversely affect our business and financial performance.
The statements contained in this Annual Report on Form 10-K that are not historic facts are forward-looking statements that are subject
to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking
statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed.
In that case, the trading price of our securities could decline, and investors in our securities may lose all or part of their investment.
Risks Related to Our Business
Our business may be materially adversely affected
by the coronavirus (COVID-19) outbreak.
The current outbreak of COVID-19 has globally resulted
in loss of life, business closures, restrictions on travel, and widespread cancellation of social gatherings. The extent to which the
COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted at this
time, including:
· new information which may emerge concerning the severity of the disease;
· the duration and spread of the outbreak;
· other business disruptions that affect our workforce;
· the impact on capital and financial markets; and
In addition, the current outbreak of COVID-19 has
resulted in a widespread global health crisis and adversely affected global economies and financial markets, and similar public health
threats could do so in the future.
Substantially all our revenues are concentrated in
Taiwan pending expansion into other international markets. Consequently, our results of operations will likely be adversely, and may be
materially affected, to the extent that the COVID-19 pandemic or any epidemic harms Taiwan’s economy and society and the global
economy in general. Any potential impact to our results will depend on, to a large extent, future developments and new information that
may emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by government authorities and other entities
to contain the COVID-19 pandemic or treat its impact, almost all of which are beyond our control. If the disruptions posed by the COVID-19
pandemic or other matters of global concern continue for an extensive period of time, the operations of our business may be materially
adversely affected.
To the extent the COVID-19 pandemic or a similar public
health threat has an impact on our business, it is likely to also have the effect of heightening many of the other risks described in
this Part I Item 1A “Risk Factors” section.
We have a limited operating history in an evolving
industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
We have a limited operating history on which to base
an evaluation of its business and prospects. We are subject to all the risks inherent in a small company seeking to develop, market and
distribute new services, particularly companies in evolving markets. The likelihood of our success must be considered, in light of the
problems, expenses, difficulties, complications and delays frequently encountered in connection with the development, introduction, marketing
and distribution of new products and services in a competitive environment.
Such risks for us include, but are not limited to,
dependence on the success and acceptance of our services and the management of growth. In view of our limited operating history, we believe
that period-to-period comparisons of its operating results are not necessarily meaningful and should not be relied upon as an indication
of future performance.
We are therefore subject to many of the risks common
to early-stage enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial, and other
resources and lack of revenues.
If we fail to raise capital when needed it will
have a material adverse effect on our business, financial condition and results of operations.
We have limited revenue-producing operations and will
require proceeds from future offerings to execute its full business plan. A failure to raise capital when needed would have a material
adverse effect on our business, financial condition and results of operations. In addition, debt and other debt financing may involve
a pledge of assets and may be senior to interests of equity holders. Any debt financing secured in the future could involve restrictive
covenants relating to capital raising activities and other financial and operational matters, which may make it more difficult for us
to obtain additional capital or to pursue business opportunities, including potential acquisitions. If adequate funds are not obtained,
we may be required to reduce, curtail or discontinue operations.
Our ability to obtain additional capital on acceptable
terms is subject to a variety of uncertainties, including:
· investors’ perception of, and demand for, our securities;
· our future results of operations, financial condition and cash flow.
Our failure to successfully market our brands
could result in adverse financial consequences.
We believe that continuing to strengthen our brands
is critical to achieving our widespread acceptance, particularly in light of the competitive nature of the market in which we operate.
Promoting and positioning its brands will depend largely on the success of our marketing efforts and our ability to provide high quality
services. There can be no assurance that brand promotion activities will yield increased revenues or that any such revenues would offset
the expenses incurred us in building our brand. If we fail to promote and maintain our brand or incur substantial expenses in an attempt
to promote and maintain our brand or if our existing or future strategic relationships fail to promote our brand or increase brand awareness,
our business, results of operations and financial condition would be materially adversely affected.
We may not generate the same level of revenues
from general construction projects.
Our revenues for the year ended December 31, 2022
and for the year ended December 31, 2021 were approximately $16.3 million and $9.9 million, respectively. There were four customers
(The Fifth District Management Office of Taiwan Water Corporation, Farmers Vending Machine Co., Ltd., Ming-Chi Chen, Kai-Ling Chen, and
Yu-Zhen Zhang) who represented approximately 50% of our total revenue for the year ended December 31, 2022, and one customer, The Fifth
District Management Office of Taiwan Water Corporation, who represented approximately 58% of our total revenue for the prior year period.
These customers are not located in mainland China or Hong Kong. Our future plan of operations is to shift away from general construction
services to the construction of fish farms and fish trading business. There can be no guarantee that such shift in operations will generate
the same levels of revenues previously generated through our VIE.
There is no assurance that we will be profitable.
There is no assurance that we will earn profits
in the future, or that profitability will be sustained. There is no assurance that future revenues will be sufficient to generate the
funds required to continue our business development and marketing activities. If we do not have sufficient capital to fund our operations,
we may be required to reduce our sales and marketing efforts or forego certain business opportunities.
There is substantial doubt of our ability
to continue as a going concern.
We have incurred net losses since our inception.
In the twelve months ended December 31, 2022 and 2021, we incurred operating losses of $5,180,208 and $9,475,092, respectively. As at December
31, 2022, we have working capital of $1,715,103 and had an accumulated deficit of $14,747,461. In their audit report for the fiscal year
ended December 31, 2022 included in this report, our auditors have expressed their concern as to our ability to continue as a going concern.
Our ability to continue as a going concern is dependent upon our ability to generate cashflows from operations and obtain financing. We
intend to continue funding our operations through equity and debt financing arrangements, which may be insufficient to fund our capital
expenditures, working capital and other cash requirements in the long term. There can be no assurance that the steps management is taking
will be successful.
We may not have the ability to manage our growth.
We anticipate that significant expansion will be required
to address potential growth in our customer base and market opportunities. Our anticipated expansion is expected to place a significant
strain on our management, operational and financial resources. To manage any material growth of its operations and personnel, we may be
required to improve existing operational and financial systems, procedures and controls and to expand, train and manage our employee base.
There can be no assurance that our planned personnel, systems, procedures and controls will be adequate to support our future operations,
that management will be able to hire, train, retain, motivate and manage required personnel or that our management will be able to successfully
identify, manage and exploit existing and potential market opportunities. If we are unable to manage growth effectively, our business,
prospects, financial condition and results of operations may be materially adversely affected.
We will need additional financing in order to
grow our business.
From time to time, in order to expand operations to
meet customer demand, we will need to incur additional capital expenditures. These capital expenditures are intended to be funded from
third party sources, including the incurring of debt and/or the sale of additional equity securities. In addition to requiring additional
financing to fund capital expenditures, we may require additional financing to fund working capital, research and development, sales and
marketing, general and administrative expenditures, and operating losses. The incurrence of debt creates additional financial leverage
and therefore an increase in the financial risk of our operations. The sale of additional equity securities will be dilutive to the interests
of current equity holders. In addition, there can be no assurance that such additional financing, whether debt or equity, will be available
to us or that it will be available on acceptable commercial terms. Any inability to secure such additional financing on appropriate terms
could have a materially adverse impact on our business, financial condition and operating results.
We rely on our executive officers.
Our success is dependent on our current executive
officers. Our success also depends in large part on the continued service of our key operational and management personnel. We face intense
competition from our competitors, customers and other companies throughout the industry. The loss of any our executive officers, specifically
Mr. Yin-Chieh (“Jeff”) Cheng, our Chief Executive Officer, or any failure on our part to hire, train and retain a sufficient
number of qualified professionals could impair our business.
We rely on the performance of highly skilled
personnel, and if we are unable to attract, retain and motivate well-qualified employees, our business could be harmed.
We are, and will be, heavily dependent on the skill,
acumen and services of our management and other employees. Our future success depends on our continuing ability to attract, develop, motivate
and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract
them. In addition, the loss of any of our senior management or key employees could materially adversely affect our ability to execute
our business plan, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services
of any members of our senior management or other key employees. If we do not succeed in attracting well-qualified employees or retaining
and motivating existing employees, our business could be harmed.
We may have inadvertently violated Section 13(k)
of the Exchange Act (implementing Section 402 of the Sarbanes-Oxley Act of 2002) and may be subject to sanctions as a result.
Section 13(k) of the Exchange Act provides that it
is unlawful for a company that has a class of securities registered under Section 12 of the Exchange Act to, directly or indirectly, including
through any subsidiary, extend or maintain credit in the form of a personal loan to or for any of its directors or executive officers.
In 2019, we did not have a corporate bank account established in Hong Kong or the U.S., and certain funds that were supposed to be deposited
into such corporate bank account were instead deposited into the personal bank account of our principal stockholder as well as Chairman
of the Board of Directors of the Company (“Board”), President, Chief Executive Officer and Director, Yin-Chieh Cheng, which
was considered to be a personal loan made by us to Yin-Chieh Cheng and may have violated Section 13(k) of the Exchange Act. The receivable
was repaid to us in January 2020. Issuers that are found to have violated Section 13(k) of the Exchange Act may be subject to civil sanctions,
including injunctive remedies and monetary penalties, as well as criminal sanctions. The imposition of any of such sanctions on us could
have a material adverse effect on our business, financial position, results of operations or cash flows.
Future acquisitions may have an adverse effect
on our ability to manage our business.
Selective acquisitions currently form part of our
strategy to further expand our business. If we are presented with appropriate opportunities, we may acquire additional businesses, services
or products that are complementary to our core business. Future acquisitions and the subsequent integration of new companies into ours
would require significant attention from our management. Future acquisitions would also expose us to potential risks, including risks
associated with the assimilation of new operations, services and personnel, unforeseen or hidden liabilities, the diversion of resources
from our existing businesses and technologies, the inability to generate sufficient revenue to offset the costs and expenses of acquisitions
and potential loss of, or harm to, relationships with employees as a result of integration of new businesses. The diversion of our management’s
attention and any difficulties encountered in any integration process could have a material adverse effect on our ability to manage our
business.
The value of seafood which we sell (e.g., eel)
is subject to fluctuation which may result in volatility of our results of operations and the value of an investment in us.
Our business is partly dependent upon the sale of
eel which value is subject to fluctuation and which value greatly fluctuates. Our net sales and operating results vary significantly due
to the volatility of the value of eel and any other seafood that we sell which may result in the volatility of the market price of our
common stock.
We are highly susceptible to changes in market
demand for the types of seafood for which our recirculating aquaculture systems are used.
A significant portion of our revenues are derived
from constructing recirculating aquaculture systems for fish farming. We therefore are highly susceptible to changes in market demand
for the seafood for which our systems are used, which may be impacted by factors over which we have limited or no control. Factors that
could lead to a decline in market demand for seafood in general and specifically the type of fish farmed using our systems include economic
conditions and evolving consumer preferences. A substantial downturn in market demand for such seafood may have a material adverse effect
on our business and on our results of operations.
A portion of our revenues are derived from a
single product, eel, and therefore we are highly susceptible to changes in market demand, which may be affected by factors over which
we have limited or no control.
Approximately 84% of our revenues are derived from
a single product, eel. We therefore are highly susceptible to changes in market demand, which may be impacted by factors over which we
have limited or no control. Factors that could lead to a decline in market demand for eel include economic conditions and evolving consumer
preferences. A substantial downturn in market demand for eel may have a material adverse effect on our business and on our results of
operations.
There are risks associated with outsourced production
that may result in a decrease in our profit.