UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

☐ 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)

Nevada		16-1626611
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

3F (Building B), No. 185, Sec. 1, Datong Rd., Xizhi Dist., New Taipei City 221, 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:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	NCRA	The Nasdaq Stock Market LLC

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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

There were 9,018,587 shares outstanding of the registrant’s common stock, par value $0.001 per share, as of September 30, 2022.

TABLE OF CONTENTS

Cautionary Statement Regarding Forward-Looking Statements

PART I	FINANCIAL INFORMATION	4

ITEM 1.	INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	4
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35
ITEM 4.	CONTROLS AND PROCEDURES	36

PART II	OTHER INFORMATION	38

ITEM 1.	LEGAL PROCEEDINGS	38
ITEM 1A.	RISK FACTORS	38
ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	38
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	38
ITEM 4	MINE SAFETY DISCLOSURES	38
ITEM 5	OTHER INFORMATION	39
ITEM 6	EXHIBITS	39

SIGNATURES		40

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, 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”). Forward-looking statements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words such as “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “anticipate,” “predict,” “project,” “forecast,” “potential,” and “continue” or the negatives thereof or similar expressions. Forward-looking statements speak only as of the date they are made, are based on various underlying assumptions and current expectations about the future and are not guarantees of future performance. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, level of activity, performance or achievement to be materially different from the results of operations or plans expressed or implied by such forward-looking statements. You are cautioned to not place undue reliance on these forward-looking statements, which speak only as of their dates.

We cannot predict all the risks and uncertainties that may impact our business, financial condition or results of operations. Accordingly, the forward-looking statements in this Quarterly Report on Form 10-Q should not be regarded as representations that the results or conditions described in such statements will occur or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements. These forward-looking statements are found at various places throughout this Quarterly Report on Form 10-Q and include information concerning possible or projected future results of our operations, including statements about potential acquisition or merger targets, strategies or plans; business strategies; prospects; future cash flows; financing plans; plans and objectives of management; any other statements regarding future acquisitions, future cash needs, future operations, business plans and future financial results; and any other statements that are not historical facts.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to a variety of factors and risks, including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 23, 2022.

Many of those risks and factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. Considering these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. All subsequent written and oral forward-looking statements concerning other matters addressed in this Quarterly Report on Form 10-Q and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this Quarterly Report on Form 10-Q.

Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise.

PART I FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

NOCERA, INC.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars except for Number of Shares)


	September 30, 2022			December 31, 2021
	(Unaudited)			(Audited)
	$			$
ASSETS
Current assets
Cash and cash equivalents		2,203,592			2,444,009
Accounts receivable, net		609,400			699,555
Inventories		215,171			1,488,681
Advances to suppliers		56,941			42,969
Prepaid expenses and other assets, net		16,851			107,444
Due from a related party		1,826,772			1,615,217
Total current assets		4,928,727			6,397,875

Non-current assets
Retention receivables		–			69,489
Property and equipment, net		912,286			71,245
Goodwill		4,373,100			332,040
Total non-current assets		5,285,386			472,774

TOTAL ASSETS		10,214,113			6,870,649

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Current liabilities
Notes payable		–			92,112
Accounts payable		567,127			17,442
Other payables and accrued liabilities		36,376			142,426
Advance receipts		–			1,051,121
Due to related parties		18,252			39,341
Warrant liability		4,009,340			312,320
Dividend payable		6,312			6,312
Income tax payable		33,108			387,319
Bank borrowing		–			52,292
Total current liabilities		4,670,515			2,100,685

TOTAL LIABILITIES		4,670,515			2,100,685

Commitments and contingencies		–			–

EQUITY
Common stock ($0.001 par value; authorized 200,000,000 shares; 9,018,587 shares issued and outstanding as of September 30, 2022 and 7,071,920 shares issued and outstanding as of December 31, 2021, respectively) (1)		9,018			7,071
Preferred stock ($0.001 par value; authorized 10,000,000 shares; Series A Preferred Stock, 2,000,000 authorized, 80,000 shares issued and outstanding as of September 30, 2022 and December 31, 2021)		80			80
Additional paid-in capital (1)		17,259,182			14,476,241
Statutory and other reserves		191,219			191,219
(Accumulated losses) Retained earnings		(11,973,740	)		(9,918,553	)
Accumulated other comprehensive loss		(11,663	)		13,906
TOTAL NOCERA, INC.’S STOCKHOLDERS’ EQUITY		5,474,096			4,769,964
Non-controlling interests		69,502			–
TOTAL STOCKHOLDER EQUITY		5,543,598			4,769,964
TOTAL LIABILITIES AND STOCKHOLDER EQUITY		10,214,113			6,870,649

(1)

On August 11, 2022, the Company effected a 2:3 reverse stock split for each share of common stock issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the stock split.

See notes to the condensed consolidated financial statements which are an integral part of these unaudited condensed financial statements.

NOCERA, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Stated in US Dollars except for Number of Shares)

(UNAUDITED)


	Three months ended September 30,						Nine months ended September 30,
	2022			2021			2022			2021
	$			$			$			$
Net sales		1,374,417			18,366			6,478,075			2,865,399
Cost of sales		(1,365,624	)		(70,502	)		(6,360,491	)		(2,495,401	)
Gross profit (loss)		8,793			(52,136	)		117,584			369,998

Operating expenses
General and administrative expenses		(880,006	)		(239,462	)		(2,178,323	)		(809,688	)
Total operating expenses		(880,006	)		(239,462	)		(2,178,323	)		(809,688	)

Loss from operations		(871,213	)		(291,598	)		(2,060,739	)		(439,690	)

Other income (expense)		7,898			(85	)		9,897			(3,797	)
Loss before income taxes		(863,315	)		(291,683	)		(2,050,842	)		(443,487	)

Income tax benefit (expense)		2,592			16,560			422			(54,279	)
Net loss		(860,723	)		(275,123	)		(2,050,420	)		(497,766	)

Less: Net income attributable to non-controlling interests		4,767			–			4,767			–
Net loss attributable to the company		(865,490	)		(275,123	)		(2,055,187	)		(497,766	)

Comprehensive (loss) income
Net loss		(860,723	)		(275,123	)		(2,050,420	)		(497,766	)
Foreign currency translation gain (loss)		(6,343	)		384			(25,569	)		47,059
Total comprehensive loss		(867,066	)		(274,739	)		(2,075,989	)		(450,707	)

Less: comprehensive loss attributable to non-controlling interest		4,767			–			4,767			–
Comprehensive loss attributable to the Company		(871,833	)		(274,739	)		(2,080,756	)		(450,707	)

Loss per share
Basic (1)		(0.1069	)		(0.0449	)		(0.2757	)		(0.0811	)
Diluted (1)		(0.1069	)		(0.0449	)		(0.2757	)		(0.0811	)

Weighted average number of common shares outstanding (1)
Basic (1)		8,099,021			6,121,651			7,455,656			6,140,694
Diluted (1)		8,099,021			6,121,651			7,455,656			6,140,694

(1)

See notes to the condensed consolidated financial statements which are an integral part of these unaudited condensed financial statements.

NOCERA, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Stated in US Dollars except for Number of Shares)

(UNAUDITED)


	2022			2021
	$			$
Cash flows from operating activities:
Net loss		(2,050,420	)		(497,766	)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation expenses		975			4,846
Deferred income tax		–			2,294
Share-based compensation		812,898			317,430
Changes in operating assets and liabilities:
Accounts receivable, net		168,095			(159,417	)
Inventories		1,313,297			(1,280,808	)
Advance to suppliers		(6,114	)		(135,829	)
Prepaid expenses and other assets, net		354,172			(16,835	)
Retention receivables		70,305			243,273
Notes payable		(93,194	)		51,571
Accounts payable		532,240			2,696
Advance receipts		(1,063,468	)		1,646,513
Warrant Liability		–			312,320
Other payables and accrued liabilities		(133,280	)		2,160
Income tax payable		(363,031	)		7,260
Amount due from a related party		(211,555	)		(536,109	)
Net cash used in operating activities		(669,080	)		(36,401	)

Cash flows from investing activities:
Purchase of property and equipment		(836,404	)		(25,062	)
Net cash outflow upon acquisition of a subsidiary		(4,292,176	)		–
Net cash used in investing activities		(5,128,580	)		(25,062	)

Cash flows from financing activities:
Repayment of bank borrowing		(52,906	)		(301,703	)
Proceeds from issuance of common stock		5,664,244			215
Net cash provided (used) in financing activities		5,611,338			(301,488	)

Effect of exchange rate changes on cash and cash equivalents		(54,095	)		15,160
Net decrease in cash and cash equivalents		(240,417	)		(347,791	)
Cash and cash equivalents at beginning of period		2,444,009			1,023,531
Cash and cash equivalents at end of period		2,203,592			675,740

Supplemental disclosures of cash flow information
Cash paid for interest expenses		–			–
Cash paid for Income taxes		–			–

See notes to the condensed consolidated financial statements which are an integral part of these unaudited condensed financial statements.

NOCERA, INC.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Stated in US Dollars except Number of Shares)

(UNAUDITED)


	Common Stock				Preferred stock				Additional Paid-in			Statutory and other		Retained			Accumulated Other Compre- hensive			Total Nocera Inc.’s Stockholders’ Equity			Non- controlling		Total Stockholders’ Equity
	Stock⁽¹⁾		Amount⁽¹⁾		Stock		Amount		Capital (1)			Reserves		Earnings			Loss			(Deficit)			Interests		(Deficit)
Balance, January 1, 2021		6,088,343		6,088		–		–		2,696,017			191,219		(293,162	)		(49,770	)		2,550,392			–		2,550,392
Foreign currency translation adjustments		–		–		–		–		–			–		–			(1,669	)		(1,669	)		–		(1,669	)
Share-based compensation		–		–		–		–		103,155			–		–			–			103,155			–		103,155
Net loss		–		–		–		–		–			–		49,490			–			49,490			–		49,490
Balance, March 31, 2021		6,088,343		6,088		–		–		2,799,172			191,219		(243,672	)		(51,439	)		2,701,368			–		2,701,368
Foreign currency translation adjustments		–		–		–		–		–			–		–			48,344			48,344			–		48,344
Share-based compensation		–		–		–		–		103,321			–		–			–			103,321			–		103,321
Net loss		–		–		–		–		–			–		(272,133	)		–			(272,133	)		–		(272,133	)
Balance, June 30, 2021		6,088,343		6,088		–		–		2,902,493			191,219		(515,805	)		(3,095	)		2,580,900			–		2,580,900
Foreign currency translation adjustments		–		–		–		–		–			–		–			384			384			–		384
Share-based compensation		57,576		58		–		–		103,430			–		–			–			103,488			–		103,488
Common stock and warrant issuance		32,000		32		–		–		2,848			–		–			–			2,880			–		2,880
Preferred stock and warrant issuance		–		–		80,000		80		29,520			–		–			–			29,600			–		29,600
Changes in fair value of warranty liabilities		–		–		–		–		(24,800	)		–		–			–			(24,800	)		–		(24,800	)
Net loss		–		–		–		–		–			–		(275,123	)		–			(275,123	)		–		(275,123	)
Balance, September 30, 2021		6,177,919	$	6,178		80,000	$	80	$	3,013,491		$	191,219	$	(790,928	)	$	(2,711	)	$	2,417,329		$	–	$	2,417,329



Balance, January 1, 2022		7,071,920		7,072		80,000		80		14,476,240			191,219		(9,918,553	)		13,906			4,769,964			–		4,769,964
Consultancy services settled by equities		66,667		66		–		–		502,934			–		–			–			503,000			–		503,000
Foreign currency translation Adjustments		–		–		–		–		–			–		–			129,231			129,231			–		129,231
Share-based compensation		–		–		–		–		103,155			–		–			–			103,155			–		103,155
Net loss		–		–		–		–		–			–		(805,720	)		–			(805,720	)		–		(805,720	)
Balance, March 31, 2022		7,138,587		7,138		80,000		80		15,082,329			191,219		(10,724,273	)		143,137			4,699,630			–		4,699,630
Foreign currency translation adjustments		–		–		–		–		–			–		–			(148,457	)		(148,457	)		–		(148,457	)
Share-based compensation		–		–		–		–		103,321			–		–			–			103,321			–		103,321
Net loss		–		–		–		–		–			–		(383,977	)		–			(383,977	)		–		(383,977	)
Balance, June 30, 2022		7,138,587		7,138		80,000		80		15,185,650			191,219		(11,108,250	)		(5,320	)		4,270,517			–		4,270,517
Foreign currency translation adjustments		–		–		–		–		–			–		–			(6,343	)		(6,343	)		–		(6,343	)
Share-based compensation		–		–		–		–		103,488			–		–			–			103,488			–		103,488
Purchase of non-controlling interest		–		–		–		–		–			–		–			–			–			64,735		64,735
Common stock issuance		1,880,000		1,880		–		–		1,970,044			–		–			–			1,971,924			–		1,971,924
Net loss		–		–		–		–		–			–		(865,490	)		–			(865,490	)		4,767		(860,723	)
Balance, September 30, 2022		9,018,587		9,018		80,000		80		17,259,182			191,219		(11,973,740	)		(11,663	)		5,474,096			69,502		5,543,598

(1)

See notes to the condensed consolidated financial statements which are an integral part of these unaudited condensed financial statements.

NOCERA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 PRINCIPAL ACTIVITIES AND ORGANIZATION

The consolidated financial statements include the financial statements of Nocera, Inc., a Nevada corporation (“Nocera”), and its subsidiaries, Grand Smooth Inc. Limited (“GSI”) and Guizhou Grand Smooth Technology Ltd. (“GZ GST” or “WFOE”) and Meixin Institutional Food Development Co. Ltd. (“MIFD”), and Xin Feng Construction Co., Ltd. (“XFC”) that is controlled through contractual arrangements. Nocera, GSI, GZ GST, MIFD and XFC are collectively referred to as the “Company.”

Nocera was incorporated in the State of Nevada on February 1, 2002 and is based in New Taipei City, Taiwan (R.O.C.). It did not engage in any operations and was dormant from its inception until its reverse merger with GSI on December 31, 2018.

The Company conducts its operations through (i) Xin Feng Construction Co., Ltd., a Taiwan limited liability company (“XFC”); (ii) Nocera Taiwan Branch, an unincorporated division of the Company (“NTB”); and (iii) Meixin Institutional Food Development Co. Ltd. The Company’s other subsidiaries, Grand Smooth Inc. Limited, a Hong Kong limited company (“GSI”), which wholly-owns Guizhou Grand Smooth Technology Ltd., a People’s Republic of China (PRC) corporation (“GZ GST”), are dormant and do not have any operations. The Company intends to keep such entities dormant and not conduct any operations in the PRC or Hong Kong.

Reverse Merger

Effective December 31, 2018, Nocera completed a reverse merger transaction (the “Transaction”) pursuant to an Agreement and Plan of Merger (the “Agreement”), with (i) GSI, (ii) GSI’s shareholders, Yin-Chieh Cheng and Bi Zhang, 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 Shareholders transferred to Nocera all of the GSI Shares in exchange for the issuance of 10,000,000 shares (the “Shares”) of Nocera’s common stock (the “Share Exchange”). As a result of the reverse merger, GSI became Nocera’s wholly-owned subsidiary and Yin-Chieh Cheng and Bi Zhang, the former shareholders of GSI, became Nocera’s controlling shareholders. 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 operations.

GZ WFH was incorporated in Xingyi City, Guizhou Province, People’s Republic of China (“PRC”) on October 25, 2017, and is engaged in providing fish farming containers service, which integrates sales, installments, and maintenance of aquaculture equipment. The registered capital of GZ WFH is RMB$5,000,000 (equal to US$733,138).

On November 13, 2018, GSI incorporated GZ GST in PRC with registered capital of US$15,000.

Divestiture

On September 21, 2020, the Company filed a Current Report on Form 8-K outlining the lack of communication that led to the termination by Nocera of its relationship with its former variable interest entity, Guizhou Wan Feng Hu Intelligent Aquatic Technology Co. Limited (“GZ WFH”) and its management, and termination of the variable interest entity agreements between the parties.

Subsequently, on October 8, 2020, Zhang Bi and GZ WFH entered into a Settlement Agreement and Release with Nocera wherein all claims as to GZ WFH’s debt (claim to shares in Nocera or GZ GST) were compromised, settled, and otherwise resolved as to any and all claims or causes of action whatsoever against Nocera 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 agreement. The consideration for the agreement was a mutual waiver of any and all claims against each other and GZ GST, and GZ WFH (including Zhang Bi) waived any claims to Nocera stock, meaning the 4,750,000 shares of common stock of Nocera owned by Zhang Bi were cancelled as part of the agreement.

The VIE Agreements

On December 31, 2020, Nocera and XFC, a domestic funded limited liability company registered in Taiwan (R.O.C.), entered into a series of contractual agreements (“VIE Agreements”) whereby Nocera agreed to provide technical consulting and related services to XFC. As a result, Nocera has been determined to be the primary beneficiary of XFC and XFC became a variable interest entity (“VIE”) of Nocera.

On December 31, 2020, Nocera exchanged 700,000 shares of the Company’s restricted common stock to shareholders of XFC in exchange for 100% controlling interest in XFC.

The VIE structure was adopted mainly because we engage in business in an industry that prohibits foreign investment (e.g., construction) and which requires special licenses in Taiwan. We are not currently planning to engage in business in mainland China or Hong Kong, and as a result, we are not currently required to obtain any special licenses in mainland China or Hong Kong. Nocera has entered into the following contractual arrangements with a stockholder of XFC, that enable the Company to (i) have the power to direct the activities that most significantly affect the economic performance of XFC, and (ii) receive the economic benefits of XFC that could be significant to XFC. The Company is fully and exclusively responsible for the management of XFC, assumes all of the risks of losses of XFC and has the exclusive right to exercise all voting rights of XFC’s stockholders. Therefore, in accordance with ASC 810 “Consolidation,” the Company is considered the primary beneficiary of XFC and has consolidated XFC’s assets, liabilities, results of operations, and cash flows in the accompanying consolidated financial statements.

(1) Voting Rights Proxy Agreement & Power of Attorney. Mr. Tsai, Wen-Chih, Ms. Tu, Hui-Min, Mr. Tsai, Chin-Yao, and Mr. Tsai, Chin-Chao (“Existing Stockholders”) have irrevocably authorized Nocera or the individual then designated by Nocera (“Attorney”) to exercise, on his or her behalf, the following rights available to them in their capacity as a stockholder of XFC under the then effective articles of association of XFC (collectively, “Powers”): (a) to propose the convening of, and attend, stockholders’ meetings in accordance with the articles of association of XFC on behalf of the Existing Stockholders; (b) to exercise voting rights on behalf of the Existing Stockholders on all matters required to be deliberated and resolved by the stockholders’ meeting, including without limitation the appointment and election of the directors and other executives to be appointed and removed by the stockholders of XFC and the sale or transfer of all or part of the equity held by stockholders of XFC; (c) to exercise other stockholders’ voting rights under the articles of association of XFC (including any other stockholders’ voting rights stipulated upon an amendment to such articles of association); (d) other voting rights that stockholders shall enjoy under Taiwan (R.O.C.) laws, as amended, revised, supplemented and re-enacted, no matter whether they take effect before or after the conclusion of the Voting Rights Proxy Agreement. The Existing Stockholders will not revoke the authorization and entrustment accorded to the Attorney other than in the case where Nocera gives the Existing Stockholders a written notice requesting the replacement of the Attorney, in which event the Existing Stockholders will immediately appoint such other person as then designated by Nocera to exercise the foregoing Powers and such new authorization and entrustment shall supersede, immediately upon its grant, the original authorization, and entrustment.

(2) Exclusive Business Cooperation Agreement. Nocera agrees to provide technical consulting and services including management consulting services, general and financial advisory services and various general and administrative services, for the specific content thereof (hereinafter referred to as the “Target Business”) to XFC as the technical consulting and service provider of XFC in accordance with the conditions set forth in, and during the term of, the Exclusive Business Cooperation Agreement. XFC agreed to accept the technical consulting and services provided by Nocera. XFC further agreed that, without the prior written consent of Nocera, during the term of the Exclusive Business Cooperation Agreement, it will not accept any technical consulting and services identical or similar to the Target Business that are provided by any third party.

(3) Equity Pledge Agreement. Under the Equity Interest Pledge Agreement between Nocera and the Existing Stockholders, the Existing Stockholders pledged all of their equity interests in XFC to Nocera to guarantee the performance of XFC’s obligations under the Exclusive Business Cooperation Agreement. Under the terms of the Equity Pledge Agreement, in the event that XFC or the Existing Stockholders breach their respective contractual obligations under the Exclusive Business Cooperation Agreement, Nocera, as pledgor, will be entitled to certain rights, including, but not limited to, the right to collect dividends generated by the pledged equity interests. Zhang Bi also agreed that upon the occurrence of any event of default, as set forth in the Equity Pledge Agreement, Nocera is entitled to claim indemnity.

(4) Exclusive Call Option Agreement. XFC and the Existing Stockholders have entered into an Exclusive Call Option Agreement with Nocera. Under the Exclusive Call Option Agreement, the Existing Stockholders irrevocably granted Nocera (or its designee) an exclusive option to purchase, to the extent permitted under Taiwan (R.O.C.) law, part or all of their equity interests in XFC. According to the Exclusive Call Option Agreement, the purchase price shall be the minimum price permitted by applicable Taiwan (R.O.C.) law at the time when such share transfer occurs.

XFC will shift focus to support the construction activities of land-based recirculation aquaculture systems (“RASs”) fish farms of our clients and the development of the Company-owned and operated fish farms.

On September 7, 2022, we entered into a series of contractual agreements (collectively, the “VIE Agreements”) with the majority stockholder (the “Selling Stockholder”) of Meixin Institutional Food Development Co., Ltd., a Taiwan corporation (“Meixin”), and Meixin. The VIE Agreements essentially conferred control and management of Meixin as well as substantially all of the economic benefits of the Selling Stockholder in Meixin to us. Meixin, a food processing and catering company established in 2003, is engaged in the production of hot and frozen meals, bento boxes, group meals and processing of vegetables and fruits for other companies in the food industry. Pursuant to the VIE Purchase Agreement that we entered into with the Selling Stockholder and Meixin, we purchased the Selling Stockholder’s 80% controlling interest of Meixin for a purchase price of US$4,300,000 paid in cash. We also entered into the Voting Rights Proxy Agreement, Equity Pledge Agreement and Exclusive Call Option Agreement with Meixin and the Selling Stockholder and the Exclusive Business Cooperation Agreement with Meixin.

Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICY

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, these financial statements do not include all of the information and footnotes required for complete financial statements and should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 23, 2022.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair presentation of the Company’s unaudited condensed consolidated financial position as of September 30, 2022, its consolidated results of operations for the nine months ended September 30, 2022, cash flows for the nine months ended September 30, 2022 and change in equity for the nine months ended September 30, 2022, as applicable, have been made. Operating results for the nine months ended September 30, 2022 are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2021 or any future periods.

Concentrations of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of accounts receivable. The Company conducts credit evaluations of its customers and suppliers and generally does not require collateral or other security from them. The Company evaluates its collection experience and long outstanding balances to determine the need for an allowance for doubtful accounts. The Company conducts periodic reviews of the financial condition and payment practices of its customers to minimize collection risk on accounts receivable.

There were four customers who represent 99% of the Company’s total revenue for the nine months ended September 30, 2021. There were four customers who represent 83% of the Company’s total revenue for the nine months ended September 30, 2022.

The following table sets forth a summary of single customers who represent 10% or more of the Company’s total accounts receivable, net:

Concentrations of credit risk
	September 30, 2022		December 31, 2021
	(Unaudited)		(Audited)
Percentage of the Company’s accounts receivable
Customer A		17.17%		16.37%
Customer B		44.05%		59.53%
Customer C		16.31%		16.30%
Customer D		14.57%		7.8%
		92.10%		100.00%

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.”

The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, the Company applies the following steps:

	Ÿ	Step 1: Identify the contract(s) with a customer.
	Ÿ	Step 2: Identify the performance obligations in the contract.
	Ÿ	Step 3: Determine the transaction price.
	Ÿ	Step 4: Allocate the transaction price to the performance obligation in the contract.
	Ÿ	Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company recognizes revenue when (or as) the Company satisfies performance obligations by transferring promised goods or services to its customers. Revenue is measured at the transaction price which is based on the amount of consideration that the Company expects to receive in exchange for transferring the promised goods or services to its customers. Contracts with customers are comprised of invoices and written contracts.

The Company does not have arrangements for returns from customers. The Company has no sales incentive programs.

The Company provides goods, maintenance service warranties for goods sold with a period varying from 18 months to 72 months, a majority of which are 18 months, and an exclusive sales agency license to its customers. For performance obligations related to providing products, the Company expects to recognize the revenue according to the delivery of products. For performance obligation related to maintenance service warranties, the Company expects to recognize the revenue on a ratable basis using a time-based output method. The performance obligations are typically satisfied as services are rendered on a straight-line basis over the contract term, which is generally for 18 months as a majority of the maintenance service warranties periods provided are 18 months. For performance obligation related to exclusive agency licenses, the Company recognizes the revenue ratably upon the satisfaction over the estimated economic life of the license.

The Company does not have amounts of contract assets since revenue is recognized as control of goods is transferred. The contract liabilities consist of advance payments from customers and deferred revenue. Advance payments from customers are expected to be recognized as revenue within 12 months. Deferred revenue is expected to be recognized as revenue within 12 months.

Recent Accounting Pronouncements

The FASB issued several updates during the period, none of these standards are either applicable to the Company or require adoption at a future date and none are expected to have a material impact on the consolidated financial statements upon adoption.

Note 3 ACCOUNTS RECEIVABLE, NET

As of September 30, 2022 and December 31, 2021, accounts receivable consisted of the following:

Schedule of accounts receivable
	September 30, 2022		December 31, 2021
	(Unaudited)		(Audited)
	$		$
Accounts receivable		609,400		699,555
Less: Allowance for doubtful accounts		–		–
Total		609,400		699,555

For the nine months ended September 30, 2022 and for the year ended December 31, 2021, the Company has recorded provision for doubtful accounts of nil.

Note 4 INVENTORIES

As of September 30, 2022 and December 31, 2021, inventories consisted of the following:

Schedule of inventory
	September 30, 2022		December 31, 2021
	(Unaudited)		(Audited)
	$		$
Raw materials		102,613		97,163
Work in process		112,558		1,391,518
Total		215,171		1,488,681

Note 5 PREPAID EXPENSES AND OTHER ASSETS, NET


	September 30, 2022		December 31, 2021
	(Unaudited)		(Audited)
	$		$
Other receivables from third party		16,851		107,444
Prepaid expenses and other assets, net		16,851		107,444

Note 6 PROPERTY AND EQUIPMENT, NET

As of September 30, 2022 and December 31, 2021, property and equipment consisted of the following:

Schedule of property and equipment
	September 30, 2022			December 31, 2021
	(Unaudited)			(Audited)
	$			$
Equipment		922,201			78,802
Less: Accumulated depreciation		(9,915	)		(7,557	)
Property and equipment, net		912,286			71,245

Depreciation expenses for the nine months ended September 30, 2022 and 2021 were $975 and $4,846, respectively, and $(266) and $1,255 for the three months ended September 30, 2022 and 2021, respectively.

Note 7 GOODWILL

As of September 30, 2022 and December 31, 2021, goodwill consisted of the following:

Schedule of goodwill
	September 30, 2022		December 31, 2021
	(Unaudited)		(Audited)
	$		$
Goodwill - XFC		332,040		332,040
Goodwill - Meixin		4,041,060		–
Less: Accumulated amortization		–		–
Goodwill, net		4,373,100		332,040

Note 8 WARRANTS

On April 1, 2021, the Company entered into a securities purchase agreement with certain investors for an aggregate of 80,000 shares of its preferred stock at a per share purchase price of $2.50. As part of the transaction, the investors received one Class C warrant and one Class D warrant for the subscription of each preferred share. The Class C warrants consist of the right to purchase up to 80,000 shares of the Company’s common stock at an exercise price of $2.50 per share exercisable for 36 months from the date of inception. The Class D warrants consist of the right to purchase up to 80,000 shares of the Company’s common stock at an exercise price of $5.00 per share exercisable for 36 months from the date of inception. The subscription was completed on August 10, 2021.

On September 27, 2021, the Company entered into another securities purchase agreement with the same investors, pursuant to which the Company issued in a registered direct offering, an aggregate of 48,000 shares of common stock of the Company at a per share purchase price of $2.50. In addition, the investors also received one Class C warrant and one Class D warrant for the subscription of each preferred share. The Class C warrants consist of the right to purchase up to 80,000 shares of the Company’s common stock at an exercise price of $2.50 per share exercisable for 36 months from the date of inception. The Class D warrants consist of the right to purchase up to 80,000 shares of the Company’s common stock at an exercise price of $5.00 per share exercisable for 36 months from the date of inception.

In connection with the Public Offering and pursuant to a registration statement on Form S-1, amended (File No. 333-264059), originally filed with the Securities and Exchange Commission (the “SEC”) on April 1, 2022, and declared effective by the SEC on August 10, 2022 (the “Registration Statement”), the public offering price of each Unit was $3.50, and each unit consisting of one share of common stock and a warrant to purchase two shares of common stock from the date of issuance until the fifth anniversary of the date of issuance. The Shares and the Warrants comprising the Units were immediately separable and issued separately in the Offering, which closed on August 15, 2022.

In connection with the Public Offering and pursuant to the underwriting agreement between us and the underwriters named therein, we granted the underwriters a 45-day option to purchase up to 282,000 additional shares of common stock and warrants, equivalent to 15% of the Units sold in the Public Offering, at the public offering price per Unit, less underwriting discounts and commissions, to cover over-allotments, if any. On September 23, 2022, the underwriters exercised their option to purchase an additional 282,000 warrants from us for gross proceeds of $2,820. The warrants were issued to the underwriters on September 26, 2022.

The exercise price of the Warrants shall be decreased to the reset price, which means the greater of (i) 50% of the exercise price and (ii) 100% of the last volume weighted average price immediately preceding the 90th calendar day following the initial issuance date (the greater of (i) and (ii), the “Reset Price”) if, on the date that is 90 calendar days immediately following the initial issuance date, the Reset Price is less than the exercise price on that date.

The following is a reconciliation of the beginning and ending balances of warrants liability measured at fair value on a recurring basis using Level 3 inputs:

Schedule of Warranty Liability
	September 30, 2022		December 31, 2021
	(Unaudited)		(Audited)
	$		$
Balance at the beginning of period		312,320		–
Warrants issued to investors		3,214,800		287,520
Warrants issued to underwriter		482,220		–
Warrants redeemed		–		–
Fair value change of warrants included in earnings		–		24,800
Total		4,009,340		312,320

The following is a summary of the warrant activity:

Schedule of warrant activity
	Number of Warrants		Average Exercise Price		Weighted Average Remaining Contractual Term in Years

Outstanding at January 1, 2022		256,000		3.75		2.66
Exercisable at January 1, 2022		256,000		3.75		2.66
Granted		2,162,000		1.93		4.98
Exercised / surrendered		–		–		–
Expired		–		–		–
Outstanding at September 30, 2022		2,418,000		2.12		4.73
Exercisable at September 30, 2022		2,418,000		2.12		4.73

Note 9 LEASES

The Company has two non-cancelable lease agreements for certain of the office and accommodation as well as fish farming containers for research and development of advanced technology for water circulation in fish farming containers with original lease periods expiring between 2022 and 2023. After one year from the effective date of the lease, the Company has the option to terminate the lease or extend the term of the lease. The Company recognizes rental expense on a straight-line basis over the lease term.

The components of lease expense for the nine months ended September 30, 2022 and September 30, 2021 were as follows:

Components of lease expenses
	Statement of Income Location	Nine months ended September 30, 2022		Nine months ended September 30, 2021
		(Unaudited)		(Unaudited)
		$		$
Lease Costs
Operating lease expense	General and administrative expenses		35,329		3,318
Total net lease costs			35,329		3,318

Maturity of lease liabilities under our non-cancelable operating leases as of December 31, 2021 and September 30, 2022 are US$ nil.

Note 10 OTHER PAYABLES AND ACCRUED LIABILITIES

Schedule of payables
	September 30, 2022		December 31, 2021
	(Unaudited)		(Audited)
	$		$
VAT payable		–		40,023
Salary payable		7,870		89,775
Others		28,506		12,628
Total		36,376		142,426

Note 11 INCOME TAXES

The Company and its subsidiary, and the consolidated VIE file tax returns separately.

1) Value-added tax (“VAT”)

PRC

Pursuant to the Provisional Regulation of the PRC on VAT and the related implementing rules, all entities and individuals (“taxpayers”) that are engaged in the sale of products in the PRC are generally required to pay VAT, at a rate of which was changed from 16% to 13% on April 1, 2019 of the gross sales proceeds received, less any deductible VAT already paid or borne by the taxpayers.

Taiwan

Pursuant to the Value-added and Non-value-added Business Tax Act and the related implementing rules, all entities and individuals (“taxpayers”) that are engaged in the sale of products in the Taiwan are generally required to pay VAT, at a rate of 5%.

2) Income tax

United States

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into legislation. The Tax Act significantly revises the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 34% to 21%, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to provide guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. The Company has completed the assessment of the income tax effect of the Tax Act and there were no adjustments recorded to the provisional amounts.

The Coronavirus Aid, Relief and Economy Security Act (the “CARES Act”) was signed into law on 27 March 2020. The CARES Act temporarily eliminates the 80% taxable income limitation (as enacted under the Tax Cuts and Jobs Act of 2017) for net operating loss (“NOL”) deductions for 2018-2020 tax years and reinstated NOL carrybacks for the 2018-2020 tax years. Moreover, the CARES Act also temporarily increases the business interest deduction limitations from 30% to 50% of adjusted taxable income for the 2019 and 2020 taxable year. Lastly, the Tax Act technical correction classifies qualified improvement property as 15-year recovery period, allowing the bonus depreciation deduction to be claimed for such property retroactively as if it was included in the Tax Act at the time of enactment. The Company does not anticipate a significant tax impact on its financial statements and will continue to examine the impact the CARES Act may have on its business.

The Company evaluated the Global Intangible Low Taxed Income (“GILTI”) inclusion on current earnings and profits of greater than 10% owned foreign controlled corporations. The Company has evaluated whether it has additional provision amount resulted by the GILTI inclusion on current earnings and profits of its foreign controlled corporations. The law also provides that corporate taxpayers may benefit from a 50% reduction in the GILTI inclusion, which effectively reduces the 21% U.S. corporate tax rate on the foreign income to an effective rate of 10.5%. The GILTI inclusion further provides for a foreign tax credit in connection with the foreign taxes paid. In 2021, the Company recorded a GILTI inclusion of $152,829. The Company has elected to treat the financial statement impact of GILTI as current period expenses.

The reverse merger was completed on December 31, 2018 and the tax losses of the U.S. subsidiary was not in the scope as of December 31, 2018. As of December 31, 2019, net operating loss carried forward which was available to offset future taxable income for the Company in the United States was $99,817. There was a full valuation allowance applied against these loss carry forward as management determined it was not more likely than not that these net operating losses would be utilized in the foreseeable future.

Hong Kong

The HK tax reform has introduced two-tiered profits tax rates for corporations. Under the two-tiered profits tax rates regime, the profits tax rate for the first HK$2 million (approximately $257,931) of assessable profits will be lowered to 8.25% (half of the rate specified in Schedule 8 to the Inland Revenue Ordinance) for corporations. Assessable profits above HK$2 million (approximately $257,931) will continue to be subject to the rate of 16.5% for corporations. Because the Company assessed that the HK entity will not earn a profit greater than HK$2 million (approxima

SEC Form 10-Q filed by Nocera Inc.