INHD 10-Q
Inno Holdings Inc. (INHD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended | |
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: |
For the transition period from __________ to __________.
Commission
file number:
(Exact name of registrant as specified in its charter)
| (State
or Other Jurisdiction of Incorporation or Organization) |
(I.R.S.
Employer Identification No.) |
(Address of principal executive offices, including ZIP Code)
(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 | ||
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 issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | 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 Exchange Act). Yes ☐ No
As of January 30, 2026, there were shares of common stock, no par value, issued and outstanding.
Table of Contents
| i |
INNO HOLDINGS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
| December 31, 2025 | September 30, 2025 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalent | $ | $ | ||||||
| Inventories | ||||||||
| Prepayments and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Equity investment | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities | ||||||||
| Advance from customer | ||||||||
| Other payables and accrued liabilities | ||||||||
| Short-term loan payable | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| SEPA liabilities | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
INNO
HOLDINGS INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
| December 31, 2025 | September 30, 2025 | |||||||
| (unaudited) | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
| 1 |
INNO HOLDINGS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended December 31, 2025 and 2024 (unaudited)
For the Three month Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| REVENUES: | ||||||||
| Revenue - products | $ | $ | ||||||
| Total revenue | ||||||||
| COSTS OF REVENUE: | ||||||||
| Costs of goods sold | ||||||||
| Total cost of sales | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES: | ||||||||
| Selling, general and administrative expenses (exclusive of expenses shown separately below) | ||||||||
| Impairment loss on goodwill | ||||||||
| Total operating expenses | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest income (expenses), net | ||||||||
| Change in fair value of SEPA | ||||||||
| Other non-operating expense | ( | ) | ( | ) | ||||
| Total other (expenses) income, net | ||||||||
| LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| INCOME TAX EXPENSE | ||||||||
| NET LOSS FROM CONTINUING OPERATIONS | ( | ) | ( | ) | ||||
| Net loss from discontinued operations | ( | ) | ||||||
| NET LOSS | $ | ( | ) | $ | ( | ) | ||
| Non-controlling interest | ||||||||
| NET LOSS ATTRIBUTABLE TO INNO HOLDINGS INC. | $ | ( | ) | $ | ( | ) | ||
| WEIGHTED AVERAGE NUMBER OF COMMON STOCK* | ||||||||
| Basic and Diluted | ||||||||
| LOSSES PER SHARE | ||||||||
| Basic and Diluted from Continuing Operation | ) | ) | ||||||
| Basic and Diluted from Discontinuing Operation | ) | |||||||
| Basic and Diluted, Total | $ | ) | $ | ) | ||||
| * |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
| 2 |
INNO HOLDINGS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the Three Months Ended December 31, 2025 and 2024
| Common Stock* | Additional Paid in | Accumulated | Non- controlling | |||||||||||||||||||||
| Shares | Amount | Capital | Deficit | interest | Total | |||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||
| Shares issued for cash | ||||||||||||||||||||||||
| Balance, December 31, 2024 (unaudited) | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Common Stock* | Additional Paid in | Accumulated | Non- controlling | |||||||||||||||||||||
| Shares | Amount | Capital | Deficit | interest | Total | |||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Fractional shares round up due to reverse stock split | ||||||||||||||||||||||||
| Shares issued for cash | ||||||||||||||||||||||||
| Balance, December 31, 2025 (unaudited) | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| * |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
| 3 |
INNO HOLDINGS INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
| For the Three Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss from continuing operation | $ | ( | ) | $ | ( | ) | ||
| Net loss from discontinuing operation | ( | ) | ||||||
| Adjustments to reconcile net income to cash used in operating activities: | ||||||||
| Stock-based compensation expense | ||||||||
| Impairment loss | ||||||||
| Change in fair value of SEPA | ( | ) | ||||||
| Inventories | ( | ) | ||||||
| Prepayments and other current assets | ( | ) | ||||||
| Advance from customer | ( | ) | ||||||
| Other payables and accrued liabilities | ( | ) | ||||||
| Operating cash flow used by discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of investment in equity investee | ( | ) | ||||||
| Net cash used in investing activities by discontinued operations | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITY: | ||||||||
| Shares issued for cash | ||||||||
| Net cash provided by financing activity | ||||||||
| CHANGES IN CASH AND CASH EQUIVALENT | ||||||||
| CASH AND CASH EQUIVALENT, beginning of period | ||||||||
| CASH AND CASH EQUIVALENT, ending of period | $ | $ | ||||||
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
| 4 |
INNO HOLDINGS INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 1 — Nature of business and organization
INNO HOLDINGS, INC., a Texas corporation (the “Company”), was incorporated on September 8, 2021. The Company is currently an innovative technology company that engages in the business of recycled consumer electronic devices. The Company sources and purchases pre-owned consumer electronic devices such as smartphones and tablets from suppliers and sell the electronic devices to wholesalers that re-sell these products to their wholesale and/or retail customers in Southeast Asia, Middle East Asia, Europe and other regions. The recycled consumer electronic devices offered by the Company include smartphones (various models of iPhone) and tablets (various models of iPad). The Company conducts its business of recycled consumer electronic devices through two Hong Kong-based wholly-owned subsidiaries Lear Group Limited and Baymax High Technology Co., Limited, acquired by the Company in October and December 2024, respectively.
On
January 18, 2022, the Company formed a limited liability company, Castor Building Tech LLC (“CBT”), in California. The Company
owned
Effective
as of January 21, 2022, the Company acquired
Inno
Research Institute LLC (“IRI”), a Texas limited liability company was formed on September 8, 2021, is a
On January 21, 2024, the Company incorporated Inno Disrupts Inc., a wholly owned subsidiary in Texas. The purpose of Inno Disrupts Inc. is to remodel buildings using the Company’s framing steel products, enhance producing and marketing capabilities, manage the designated buildings in US, and other activities.
On February 11, 2024, the Company incorporated Inno AI Tech Corp., a wholly owned entity to conduct AI tech research and consulting activities.
On
October 18, 2024, the Company completed the acquisition of shares of Lear Group Limited (“Lear”), a Hong Kong company,
from its shareholder for a total consideration of $
| 5 |
On
December 13, 2024, the Company completed the acquisition of shares of Baymax High Technology Co., Limited (“Baymax”),
a Hong Kong company, from its shareholder for a total consideration of $
On
March 4, 2025, the Company entered into a Share Purchase Agreement with Architectix Limited, pursuant to which the Company sold all issued
and outstanding shares it owns in Inno Metal Studs Corp and Inno AI Tech Corp for an aggregate purchase price of $
On
March 28, 2025, the Company entered into a Membership Interest Purchase Agreement with Strucraft Group Limited, pursuant to which the
Company sold all the membership interest it owns in Castor Building Tech LLC, which represents
On
April 8, 2025, the Company entered into a Share Purchase Agreement with Strucraft Group Limited, pursuant to which the Company sold all
issued and outstanding shares it owns in Inno Disrupts Inc. for an aggregate purchase price of $
Note 2 — Basis of Presentation and Summary of significant accounting policies
Basis of presentation
The accompanying financial statements have been prepared in accordance with the generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The Company’s fiscal year end date is September 30.
Certain information and footnote disclosures normally included in the Company’s annual audited financial statements and accompanying notes have been condensed or omitted in this accompanying interim consolidated financial statements and footnotes. Accordingly, the accompanying interim condensed consolidated financial statements included herein 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 September 30, 2025, filed with the Securities and Exchange Commission (“SEC”) on December 15, 2025.
In the opinion of management, these unaudited consolidated financial statements include all adjustments and accruals, consisting only of normal, recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein. The results of the interim periods are not necessarily indicative of the results expected for the full fiscal year or any other interim period or any future year or period.
Consolidated Principles of consolidation
The Consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company balances and transactions have been eliminated.
Going concern
As
of December 31, 2025, the Company had total cash and cash equivalent of $
| 6 |
The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, and/or obtaining additional financing from its shareholders or other sources, as may be required.
Standby Equity Purchase Agreement
On
July 4, 2025, the Company entered into the SEPA with the Investors. Pursuant to SEPA, the Company has the right, but not the obligation,
to issue and sell, from time to time at the Company’s discretion, up to $ million of shares of our common stock to the
Use of estimates and assumptions
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates.
Cash and cash equivalents
Cash and cash equivalents consist of amounts held as cash on hand, bank and money market deposits, and marketable securities with maturities of less than 90 days.
From
time to time, the Company may maintain bank balances in interest bearing accounts in excess of the $
Accounts receivable
During the ordinary course of business, the Company extends unsecured credit to its customers. Accounts receivable are stated at the amount the Company expects to collect from customers. Management reviews its accounts receivable balances each reporting period to determine if an allowance for credit loss is required.
In October 2020, the Company adopted ASU 2016-13, Topics 326 — Credit Loss, Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology, for its accounting standard for its trade accounts receivable.
The Company continuously monitors the recoverability of accounts receivable. If there are any indicators that a customer may not make payment, the Company may consider making provision for non-collectability for that particular customer. At the same time, the Company may cease further sales or services to such customer. The following are some of the factors that the Company develops allowance for credit losses:
| ● | the customer fails to comply with its payment schedule; | |
| ● | the customer is in serious financial difficulty; | |
| ● | a significant dispute with the customer has occurred regarding job progress or other matters; | |
| ● | the customer breaches any of its contractual obligations; | |
| ● | the customer appears to be financially distressed due to economic or legal factors; | |
| ● | the business between the customer and the Company is not active; and | |
| ● | other objective evidence indicates non-collectability of the accounts receivable. |
| 7 |
The adoption of the credit loss accounting standard has no material impact on the Company’s consolidated financial statements. Accounts receivable are recognized and carried at carrying amount less an allowance for credit losses, if any. The Company maintains an allowance for credit losses resulting from the inability of its customers to make required payments based on contractual terms. The Company reviews the collectability of its receivables on a regular and ongoing basis. The Company has also included in the calculation of allowance for credit losses based on its customers’ businesses and their ability to pay their accounts receivable. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. The Company also considers external factors to the specific customer, including current conditions and forecasts of economic conditions. In the event we recover amounts previously written off, we will reduce the specific allowance for credit losses.
Fair values of financial instruments
ASC 825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current assets and liabilities are approximate fair values due to their short-term nature.
For other financial instruments to be reported at fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
| Level 1 — | Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; |
| Level 2 — | Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and |
| Level 3 — | Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data. |
On
July 4, 2025, the Company entered into the SEPA with the Investors. Upon execution of the SEPA, the Company determined the fair value
of the SEPA derivative liability to be $
The following tables summarize the changes in fair value of SEPA derivative liability for the three months ended December 31, 2025. The SEPA derivative liabilities were not present for the three months ended December 31, 2024.
| Level 3 Liabilities | Fair Value at September 30, 2025 | Issuances (Settlements) | Change in Unrealized (Gains) Losses | Fair Value at December 31, 2025 | ||||||||||||
| SEPA derivative liability | $ | $ | $ | $ | ||||||||||||
| 8 |
Revenue recognition
The Company has adopted Accounting Standards Codification (“ASC”) 606 since its inception and recognizes revenue from product and service sales revenues, net of promotional discounts and return allowances, if any, when the following revenue recognition criteria are met: a contract has been identified, separate performance obligations are identified, the transaction price is determined, the transaction price is allocated to separate performance obligations and revenue is recognized upon satisfying each performance obligation. The Company transfers the risk of loss or damage upon delivery, therefore, revenue from product sales is recognized when it is delivered to the customer. For services, all sales are recognized upon completion based on terms stated in the sales agreements.
The Company evaluates the criteria of ASC 606 — Revenue Recognition Principal Agent Considerations in determining whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is primarily responsible for fulfilling the promise to provide a specified good or service, the Company is subject to inventory risk before the good or service has been transferred to a customer and the Company has discretion in establishing the price, revenue is recorded at gross.
Payments received prior to the delivery of goods to customers are recorded as unearned revenue.
Sales discounts are recorded in the period in which the related sale is recognized. Sales return allowances are estimated based on historical amounts and are recorded upon recognizing the related sales. Shipping and handling costs are recorded as selling expenses.
Revenue from electronic products trading is recognized at the point of delivery when the customer obtains control of the products.
Costs and expenses
Costs and expenses are operating expenses, which consist of costs of material and labor, selling, general and administrative expenses, and depreciation, are expensed as incurred.
Inventory
Inventory consists of material and finished goods ready for sale and is stated at the lower of cost or net realizable value. The Company values its inventory using the FIFO costing method. The Company’s policy is to include as a part of cost of goods sold any freight incurred to ship the product from its vendors to warehouses. Outbound freight costs related to shipping costs to customers are considered periodic costs and are reflected in selling expenses. The Company regularly reviews inventory and considers forecasts of future demand, market conditions and product obsolescence.
If the estimated realizable value of the inventory is less than cost, the Company makes provisions in order to reduce its carrying value to its estimated net realizable value. The Company regularly assesses its inventory for obsolescence and records an allowance only when the inventory is no longer suitable for reproduction. The Company’s inventory generally has a long life cycle and does not become obsolete quickly.
Deferred offering costs
The Company capitalizes certain legal, accounting and other third-party fees that are directly related to an equity financing that is probable of successful completion until such financing is consummated. After consummation of an equity financing, these costs are recorded as a reduction of the proceeds received as a result of the financing. Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are immediately written off to operating expenses in the consolidated statements of operations in the period of determination.
| 9 |
Property and equipment
Property and equipment is stated at their historical cost, less accumulated depreciation. Depreciation on property and equipment is provided using the straight-line method over the estimated useful lives of the assets as follows:
| Machinery and equipment | ||
| Office equipment | ||
| Motor vehicles | ||
| Leasehold improvements |
Expenditures for renewals and betterments are capitalized while repairs and maintenance costs are normally charged to the statement of operations in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost of the asset.
Upon sale or disposal of an asset, the historical cost and related accumulated depreciation or amortization of such asset was removed from their respective accounts and any gain or loss is recorded in the statements of income.
The
Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying
value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.
In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an
amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment
include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand,
competition and other economic factors. Based on this assessment,
Goodwill
Goodwill represents the excess of the purchase price of an acquired business over the amount assigned to the assets acquired and liabilities assumed. Goodwill is not amortized but are subject to impairment testing on an annually basis or more frequently if events or circumstances indicate a potential impairment. These events or circumstances could include a significant change in the business climate, regulatory environment, established business plans, operating performance indicators or competition. Potential impairment indicators may also include, but are not limited to, (i) significant changes to estimates and assumptions used in the most recent annual or interim impairment testing, (ii) downward revisions to internal forecasts, and the magnitude thereof, (iii) declines in our market capitalization below our book value, and the magnitude and duration of those declines, (iv) a reorganization resulting in a change to our operating segments, and (v) other macroeconomic factors, such as increases in interest rates that may affect the weighted average cost of capital, volatility in the equity and debt markets, or fluctuations in foreign currency exchange rates that may negatively impact our reported results of operations.
Leases
On its inception date, the Company adopted ASC 842 — Leases (“ASC 842”), which requires lessees to record right-of-use (“ROU”) assets and related lease obligations on the balance sheet, as well as disclose key information regarding leasing arrangements.
ROU assets represent our right to use an underlying asset for the lease terms and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
| 10 |
The Company applies ASC No. 718, “Compensation-Stock Compensation,” which requires that share-based payment transactions with employees and nonemployees upon adoption of ASU 2018-07, be measured based on the grant date fair value of the equity instrument and recognized as compensation expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation cost related to employee share options or similar equity instruments is measured at the grant date based on the fair value of the award and is recognized over the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period. In addition to the requisite service period, the Company also evaluates the performance condition and market condition under ASC 718-10-20. For an award which contains both a performance and a market condition, and where both conditions must be satisfied for the award to vest, the market condition is incorporated into the fair value of the award, and that fair value is recognized over the employee’s requisite service period or nonemployee’s vesting period if it is probable the performance condition will be met. If the performance condition is ultimately not met, compensation cost related to the award should not be recognized (or should be reversed) because the vesting condition in the award has not been satisfied.
The Company will recognize forfeitures of such equity-based compensation as they occur.
Segment Reporting
The Company uses the management approach in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions, allocating resources and assessing performance as the source for determining the Company’s reportable segments. During the three months ended December 31, 2025 and 2024, the Chief Executive Officer has been identified as the chief operating decision maker. The Company’s chief operating decision maker regularly reviews consolidated assets and consolidated operating results prepared under U.S. GAAP for the enterprise as a whole when making decisions about allocating resources and assessing performance of the Company. Consequently, management has determined that the Company only has one operating segment as defined under ASC 280-10-50.
Income taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when necessary, to reduce deferred tax assets to the amount expected to be realized.
As a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company has adopted the provisions of ASC 740 since inception and has analyzed filing positions in each of the federal and state jurisdictions where the Company is required to file income tax returns, as well as open tax years in such jurisdictions. The Company has identified the U.S. federal jurisdiction, and the states of Texas and California, as its “major” tax jurisdictions. However, the Company has certain tax attribute carryforwards which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect to the year in which such attributes are utilized.
The Company believes that its income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740. The Company’s policy for recording interest and penalties associated with income-based tax audits is to record such items as a component of income taxes.
| 11 |
Commitments and contingencies
In the ordinary course of business, the Company is subject to certain contingencies, including legal proceedings and claims arising out of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes its liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be made. The Company may consider many factors in making these assessments including historical and specific facts and circumstances of each matter.
Basic earnings per share are computed by dividing net income attributable to holders of common stock by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share reflect the potential dilution that could occur if securities to issue common stock were exercised.
Recently issued but not yet adopted accounting pronouncements
In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The legislation includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Act and Jobs Act, modifications to the international tax framework, and the restoration of favorable business tax provisions, such as 100% bonus depreciation and the business interest expense limitation, among others. The legislation contains multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. While we are continuing to evaluate the full impact of the legislation, we do not expect the OBBBA to have a material effect on our fiscal 2025 effective tax rate.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The new guidance requires enhanced disclosures about income tax expenses. The Company is required to adopt this guidance in the first quarter of the fiscal year 2026. Early adoption is permitted on a prospective basis. We are currently evaluating the impact of this ASU on our annual income tax disclosures.
In June 2022, FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this ASU clarify the guidance in ASC 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and require specific disclosures related to such an equity security. This standard is effective for fiscal years beginning after December 15, 2024. The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.
Subsequent events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the consolidated financial statements are available to be issued . Material subsequent events that required recognition or additional disclosure in the consolidated financial statements are presented.
Note 3 — Inventories
As of December 31, 2025 and September 30, 2025, inventories consisted of the following:
| December 31, 2025 | September 30, 2025 | |||||||
| (unaudited) | ||||||||
| Merchandise inventory | $ | $ | ||||||
| Total | $ | $ | ||||||
| 12 |
As
of December 31, 2025 and September 30, 2025, there was
Note 4 — Prepayments and other current assets
As of December 31, 2025 and September 30, 2025, prepayments and other current assets consisted of the following:
| December 31, 2025 | September 30, 2025 | |||||||
| (unaudited) | ||||||||
| Loan and Interest receivable | $ | $ | ||||||
| Receivable from sales of equity investment | ||||||||
| Advance to suppliers | ||||||||
| Prepaid rent | ||||||||
| Prepaid insurance | ||||||||
| Prepaid for legal fee | ||||||||
| Deposits | ||||||||
| Advance to other service providers | ||||||||
| Other prepayments and current assets | ||||||||
| Total | $ | $ | ||||||
On
February 28, 2025, the Company entered into a loan agreement with HST Trading Limited, providing a principal amount of $
On
October 2, 2025, the Company entered into a loan agreement with TORCHLIGHT GROUP LIMITED, providing a principal amount of $
On
December 1, 2025, the Company entered into a loan agreement with Shengshi Chuangtou Co., Limited, providing a principal amount of $
Note 5 — Equity Investments
On
October 14, 2024, the Company entered into an equity investment agreement with an individual, securing a
On
March 28,2025, the Company entered into a Membership Interest Purchase Agreement with Strucraft Group Limited, pursuant to which the
Company sold all of the membership interest it owns in Core Modu LLC, which represents
| 13 |
On
May 28, 2025, the Company entered into an equity investment agreement with Aurora Technology Holding Limited (“Aurora”),
securing a
On
August 6, 2025, Lear Group Limited, the subsidiary of the Company, entered into an equity investment agreement with Flower Mouse Network
Technology Limited (“Flower”), securing a
Note 6 — Goodwill, net
As of December 31, 2025 and September 30, 2025, goodwill consisted of the following:
| December 31, 2025 | September 30, 2025 | |||||||
| (unaudited) | ||||||||
| Goodwill, gross | $ | $ | ||||||
| Less: Accumulated impairment loss | ( | ) | ||||||
| Goodwill, net | $ | $ | ||||||
Goodwill
of $
For
the three months ended December 31, 2025 and 2024, impairment loss amounted to $ and $
Note 7 — Other payables and accrued liabilities
As of December 31, 2025 and September 30, 2025, prepayments and other current assets consisted of the following:
| December 31, 2025 | September 30, 2025 | |||||||
| (unaudited) | ||||||||
| Payable to service providers | $ | $ | ||||||
| State tax payable | ||||||||
| Accrued expenses | ||||||||
| Other payables | ||||||||
| Total | $ | $ | ||||||
Note 8 — Loans payable
Short-term loans
Short term loan without interest
From June 2023 to August 2023, the Company borrowed short-term loans due on demand without interest, amounting to
$
Note 9— Standby Equity Purchase Agreement
On July 4, 2025, the Company entered into the SEPA with the Investors. Pursuant to SEPA, the Company has the right, but not the obligation, to issue and sell, from time to time at the Company’s discretion, up to $ million of shares of our common stock to the The SEPA has a three-year term and may be terminated earlier by the Company, and the Company expect to use any proceeds for working capital and general corporate purposes. The SEPA, in its entirety, is classified as a derivative liability because it did not meet the equity classification criteria under ASC 815-10, Derivatives and Hedging (“ASC 815-10”). The SEPA derivative is valued based on a scenario-based valuation model utilizing the expected draws, probability of the draws and risk-free rate inputs. The change in the fair value of the derivative is recorded in the Condensed Consolidated Statements of Operations. The SEPA is accounted for as a derivative and is recognized as a liability measured at fair value in accordance with ASC 820. The Company intends to utilize the SEPA to access capital to fund its operations.
| 14 |
A
third-party independent appraiser was engaged to calculate the estimated fair value of the SEPA. The estimated fair value of the SEPA
liability on September 30, 2025, was $
| Valuation assumptions: | December 31, 2025 | September 30, 2025 | ||||||
| Expected draws | $ | $ | ||||||
| Expected probability of draws | % | |||||||
| Risk-free interest rate | % | |||||||
The estimated fair value of the liability was determined using a scenario-based valuation model which assigned a probability to a number of different outcomes. The inputs and assumptions utilized in the calculation require management to apply judgment and make estimates including:
| (a) | total
expected draws of $ |
| (b) | the expected probability of the draws on the SEPA, which the Company estimate based on our expectation of the draws being completed; and |
| (c) | risk-free interest rate, which was determined by reference to the U.S. Treasury yield curve for time periods commensurate with the expected term of the agreement in relation to the date of the expected draw. |
These estimates may be subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined with exact precision.
Note 10 — Discontinued operations
On
March 4, 2025, the Company entered into a Share Purchase Agreement with Architectix Limited, pursuant to which the Company sold all issued
and outstanding shares it owns in Inno Metal Studs Corp (“IMSC”) and Inno AI Tech Corp (“AT”) for an aggregate
purchase price of $
On
March 28, 2025, the Company entered into a Membership Interest Purchase Agreement with Strucraft Group Limited, pursuant to which the
Company sold all the membership interest it owns in Castor Building Tech LLC (“CBT”), which represents
On April 8, 2025, the Company entered into a Share Purchase Agreement with Strucraft Group Limited, pursuant to which
the Company sold all issued and outstanding shares it owns in Inno Disrupts Inc. (“Disrupts”) for an aggregate purchase price
of $
| 15 |
In accordance with the provisions of ASC 205-20, we have not included the results of operations from discontinued operations in the results of continuing operations in the consolidated statements of operations. The results of operations from discontinued operations for the three months ended December 31, 2025 and 2024, have been reflected as discontinued operations in the condensed consolidated statements of operations for the three months ended December 31, 2025 and 2024, and consist of the following:
For the Three months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Cost of sales | ||||||||
| GROSS PROFIT / (LOSS) | ||||||||
| Selling, general and administrative expenses (exclusive of expenses shown separately below) | ||||||||
| Depreciation | ||||||||
| Total operating expenses | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ||||||
| Interest income (expenses), net | ( | ) | ||||||
| Other non-operating income (expense) | ( | ) | ||||||
| Total other (expenses) income, net | ( | ) | ||||||
| Net loss from discontinued operations | ( | ) | ||||||
| Non-controlling interest | ( | ) | ||||||
| Net loss from discontinued operations to the Company | $ | $ | ( | ) | ||||
In accordance with the provisions of ASC 205-20, we have included the net cash provided by discontinued operations in the consolidated statements of cash flows. The net cash provided by discontinued operations in the consolidated statements of cash flows for the three months ended December 31, 2025 and 2024, consists of the following:
| For the Three Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss from discontinuing operation | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income to cash used in operating activities: | ||||||||
| Non-controlling interest | ( | ) | ||||||
| Depreciation expense | ||||||||
| Non-cash operating lease expense | ||||||||
| Fixed assets disposal loss | ||||||||
| Prepayments and other current assets | ||||||||
| Accounts payable | ||||||||
| Operating lease liabilities | ( | ) | ||||||
| Other payables and accrued liabilities | ( | ) | ||||||
| Note payable | ( | ) | ||||||
| Net cash used in operating activities by discontinued operations | ( | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | - | |||||||
| Fixed assets additions | ( | ) | ||||||
| Net cash used in investing activities by discontinued operations | ( | ) | ||||||
| CHANGES IN CASH AND CASH EQUIVALENT | $ | $ | ( | ) | ||||
Note 11 — Related party transactions
On
October 14, 2024, the Company entered into an equity investment agreement with an individual, securing a
| 16 |
Note 12 — Equity
The Company was incorporated in Texas on September 8, 2021. The total authorized shares of capital stock were shares without par value.
On
November 30, 2022,
On
October 9, 2024,
On
December 22, 2025,
As of December 31, 2025 and September 30, 2025, after giving effect to the stock splits of the outstanding shares of Common Stock, there were and shares of Common Stock issued and outstanding, respectively. The total authorized number of shares of capital stock was shares without par value.
In
December 2022, The Company issued shares ( shares pre–Reverse Stock Split) of its common stock at a price of $ per
share to an accredited investor for $
In
February 2023, The Company issued shares ( shares pre–Reverse Stock Split) of its common stock at a price of $ per
share to an accredited investor for $
In
March 2023, The Company issued shares ( shares pre–Reverse Stock Split) of its common stock at a price of $ per share
to an accredited investor for $
On
June 20, 2023, the Company issued shares ( shares pre-Reverse Stock Split) of its common stock for a total value of $
| 17 |
The
registration statement for the Company’s Initial Public Offering (the “Offering”) was declared effective on November
9, 2023. The Common Stock commenced trading on the Nasdaq Capital Market (the “Nasdaq”) on December 14, 2023, under the symbol
“INHD.” The closing of the Offering took place on December 18, 2023. On December 18, 2023, in connection with the closing
of the initial public offering of shares (“the Shares”) ( shares pre-Reverse Stock Split) of its common stock,
no par value, the Company adopted its Amended and Restated Bylaws, effective the same day. In connection with the Offering of the Shares
at an offering price of $ per share, the Company also granted the underwriters an option exercisable for 45-days to purchase up to
shares ( shares pre-Reverse Stock Split) of Common Stock as the Public Offering Price, less the underwriting discount to
cover-over allotment. Additionally, the Company also issued warrants to the underwriters to purchase up to
The
total gross proceeds from the Offering were $
On
October 31, 2024, the Company entered into a securities purchase agreement with certain investors, providing for the sale and issuance
of shares ( shares pre-Reverse Stock Split) of the Company’s common stock,
On
November 13, 2024, the Company entered into a securities purchase agreement with nine non-U.S. investors, pursuant to which the Company
agreed to issue and sell in a private placement offering (the “November 2024 Private Placement”) an aggregate of shares
( shares pre-Reverse Stock Split) of common stock,
On
December 11, 2024, the Company entered into a securities purchase agreement with nine non-U.S. investors, pursuant to which the Company
agreed to issue and sell in a private placement offering (the “December 2024 Private Placement”) an aggregate of shares
( shares pre-Reverse Stock Split) of common stock,
On January 16, 2025, pursuant to the Omnibus Incentive Plan, the Company granted shares ( shares pre-Reverse Stock Split) of our common stock to our Chief Executive Officer Ding Wei, and shares ( shares pre-Reverse Stock Split) of our common stock to our Chief Financial Officer Mengshu Shao.
On May 28, 2025, pursuant to 2025 Omnibus Incentive Plan, the Company granted shares ( shares pre-Reverse Stock Split) of its common stock to the Company’s employees.
On
June 2, 2025, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to
issue and sell, in a registered direct offering by the Company directly to the investors (the “June 2025 Offering”), an aggregate
of shares ( shares pre-Reverse Stock Split) (the “June 2025 Shares”) of its common stock, par value, at
a purchase price per share of $. The June 2025 Offering closed on June 6, 2025 and the Company received gross proceeds of $
| 18 |
On
January 27, 2025, the Company entered into a Standby Equity Purchase Agreement (the “January SEPA”) with certain investors
effective as of January 28, 2025. Pursuant to January SEPA, the Company has the right to issue and sell to the investors, from time to
time, up to $
On
July 4, 2025, the Company entered into the Standby Equity Purchase Agreement (the “July SEPA”) with the Investors. Pursuant
to July SEPA, the Company has the right to issue and sell to the investors, from time to time, up to $
On
September 10, 2025, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which
the Company offered, in a registered direct offering, shares ( shares pre-Reverse Stock Split) of its common stock, at
a purchase price of $ per share and pre-funded warrants to purchase up to shares ( shares pre-Reverse Stock Split)
of common stock, at a purchase price of $ per pre-funded warrant (equal to $ minus the exercise price of $
On
November 12, 2025, the Company entered into a sales agreement (the “Sales Agreement”) with Aegis Capital Corp. (the “Sales
Agent”), pursuant to which the Company may offer and sell, from time to time, to or through the Sales Agent, shares of the Company’s
common stock, with no par value, having an aggregate offering price of up to $ million (the “Placement Shares”). From
November 12, 2025 to December 15, 2025, the Company issued an aggregate of shares ( shares pre-Reverse Stock Split)
of Common Stock for the gross proceeds of approximately $
On
December 26, 2025 the Company entered into a securities purchase agreement with each of ten (10) non-U.S. investors relating to the issuance
and sale of an aggregate of shares of the Company’s common stock with
Note 13 — Concentration of risk
Credit risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.
As
of December 31, 2025 and September 30, 2025, $
Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposing the Company to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.
| 19 |
Customer and vendor concentration risk
For
the three months ended December 31, 2025, three customers accounted for
For the three months ended December 31, 2025, two suppliers accounted for % of the Company’s total purchases. For the three months ended December 31, 2024, two suppliers accounted for % of the Company’s total purchases. As of December 31, 2025 and September 30, 2025, $ outstanding of accounts payable.
Note 14 — Commitments and contingencies
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business.
In
December 2024, a former shareholder of the Company (the “Shareholder”) filed a complaint against the Company and other entities
and individuals affiliated with the Company in the Orange County Superior Court of California, alleging financial losses related to his
investment in entities affiliated with the Company.
Except as set forth above, we are not currently a party to any legal proceeding that we believe would adversely affect our financial position, results of operations, or cash flows and are not aware of any material legal proceedings contemplated by governmental authorities.
Note 15 — Segment Information
Reportable Segments
The Company operates as a single reportable segment, which is consistent with how the Chief Operating Decision Maker (“CODM”), the Chief Executive Officer, allocates resources and assesses performance. The Company’s operations are centralized and integrated, with financial results reviewed and managed on a consolidated basis. Accordingly, management has determined that the Company has one reportable segment under ASC Topic 280, Segment Reporting.
Measure of Segment Profit or Loss
The CODM reviews financial information on a consolidated basis, using Net Income as the primary measure of segment performance to monitor budget versus actual results and decide where to allocate and invest additional resources to achieve continued growth. Net Income is defined as revenue less cost of goods sold and operating expenses, and other segment items (including interest income, interest expense, other income and other expenses), and income taxes.
| 20 |
Significant Segment Expense Categories Provided to the CODM
The CODM regularly receives and reviews the following expense categories, which are included in the segment’s measure of profit or loss.
For the Three Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Sales and marketing expenses | ||||||||
| – Marketing service expenses | ||||||||
| General and administrative expenses | ||||||||
| – Payroll and stock-based compensation expenses | ||||||||
| – Professional service expenses | ||||||||
| – Office related expenses | ||||||||
| – Lease expenses | ||||||||
| – Other expenses | ||||||||
| Other segment expenses (income), net | ( | ) | ||||||
| Income tax expense | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Net loss from discontinued operations | ( | ) | ||||||
The following table presents revenues by geographic area based on the sales location of our products:
For the Three Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Hong Kong | $ | $ | ||||||
| Total revenue | $ | $ | ||||||
For the Three Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Restricted stock: | ||||||||
| – Stock awards | $ | $ | ||||||
| Total | $ | $ | ||||||
Basic loss per share and diluted loss per share have been calculated in accordance with ASC 260 on computation of earnings per share for the three months ended December 31, 2025 and 2024 as follows:
For the Three Months Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Statement of Operations Summary Information: | ||||||||
| Net loss from continued operation | $ | ( | ) | $ | ( | ) | ||
| Weighted- average common shares outstanding – basic and diluted | ||||||||
| Net loss per share, basic and diluted from continued operation | $ | ) | $ | ) | ||||
| Net loss from discontinued operation | $ | $ | ( | ) | ||||
| Weighted- average common shares outstanding – basic and diluted | ||||||||
| Net loss per share, basic and diluted from continued operation | $ | $ | ) | |||||
As of December 31, 2025 and September 30, 2025, there were no potentially dilutive shares.
Note 18 — Subsequent events
On January 5, 2026, the Company incorporated a new wholly-owned subsidiary, Equicap Holdings Limited, in the British Virgin Islands.
The Company entered into a securities purchase agreement on December 26,
2025 with each of ten non-U.S. investors relating to the issuance and sale of an aggregate of shares of the Company’s
common stock with
On
January 16, 2026, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed
to issue and sell, in a registered direct offering by the Company directly to the investors (the “January 2026 Offering”),
an aggregate of shares of its common stock,
On January 20, 2026, the Company incorporated a new wholly-owned subsidiary, ApexVest Holdings Limited, in the British Virgin Islands.
On February 2, 2026, the Company entered into an
equity investment agreement with Megabyte Solutions Limited (“Megabyte”), securing a
| 21 |
ITEM 2. - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes that appear elsewhere in this Quarterly Report on Form 10-Q. All share and per-share information presented in this report has been retroactively adjusted to reflect the 1-for-24 reverse stock split of our common stock, which was effective on December 22, 2025. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth under the heading “Cautionary Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.
Cautionary Note Regarding Forward-Looking Statements
Some of the information in this document contains, or has incorporated by reference, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements typically are identified by the use of terms such as “may,” “believe,” “anticipate,” “expect,” “plan,” “predict,” “estimate,” “will be,” or other similar words and phrases, although some forward-looking statements are expressed differently. You should be aware that our actual results could differ materially from results anticipated in the forward-looking statements due to a number of factors, including, but not limited to, our ability to effectively operate our business segments, our ability to manage our research, development, expansion, growth, and operating expenses, our ability to evaluate and measure our business, prospects, and performance metrics, our ability to complete, directly and indirectly, and succeed in a highly competitive and evolving industry, our ability to respond and adapt to changes in technology and customer behavior, our ability to protect our intellectual property and to develop, maintain, and enhance a strong brand, and other factors relating to our industry, operations, and results of operations. You should also consider carefully the statements under “Risk Factors,” as disclosed in our annual report on Form 10-K for the fiscal year ended September 30, 2025, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward-looking statements. We undertake no obligation to update any such factors or forward-looking statements to reflect future events or developments.
Overview
We are an innovative technology company that engages in the business of recycled consumer electronic devices. We source and purchase pre-owned consumer electronic devices such as smartphones and tablets from suppliers and sell the electronic devices to wholesalers that re-sell these products to their wholesale and/or retail customers in Southeast Asia, Middle East Asia, Europe and other regions. We conduct our business of recycled consumer electronic devices through two Hong Kong-based wholly-owned subsidiaries Lear Group Limited and Baymax High Technology Co., Limited.
| 22 |
Recent Developments
Reverse Stock Split
On December 22, 2025, we effected a one-for-twenty-four (1:24) reverse stock split of our issued and outstanding shares of common stock (the “Reverse Stock Split” or the “Split”). As a result of the Split, every twenty-four (24) shares of common stock issued and outstanding immediately prior to the effective date was automatically converted into one share of common stock. The Split was implemented to comply with Nasdaq’s minimum bid price requirement. The Split did not reduce the number of authorized shares of common stock and did not affect the par value of the common stock.
At the Market Offering
On November 12, 2025, the Company entered into a sales agreement (the “Sales Agreement”) with Aegis Capital Corp. (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time, to or through the Sales Agent, shares of the Company’s common stock, with no par value, having an aggregate offering price of up to $50.0 million (the “Placement Shares”).
The Company is not obligated to sell any Placement Shares under the Sales Agreement. Subject to the terms and conditions of the Sales Agreement, the Sales Agent will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of The Nasdaq Stock Market LLC (“Nasdaq”), to sell Placement Shares from time to time based upon the Company’s notice and instructions, up to the amount specified therein. Under the Sales Agreement, the Sales Agent may sell Placement Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, including sales made directly on Nasdaq or on any other existing trading market or directly to the Sales Agent as principal in negotiated transactions. The Sales Agent may also sell Placement Shares by any other method permitted by law, including in privately negotiated transactions, with the Company’s consent.
In accordance with the Sales Agreement, the Company will pay the Sales Agent in cash, upon each sale of Placement Shares pursuant to the Sales Agreement, an amount equal to three percent (3.0%) of the gross proceeds from each sale of Placement Shares. The Sales Agreement may be terminated by the Company and the Sales Agent at any time upon notice to the other party. If not terminated earlier, the Sales Agreement will automatically terminate upon the earlier to occur of (i) May 12, 2026 (the sixth month anniversary of the date of the Sales Agreement), or (ii) the issuance and sale of all of the Placement Shares under the Sales Agreement.
From November 12, 2025 to December 31, 2025, the Company issued an aggregate of 3,541,667 shares of common stock (or 85,000,000 shares of common stock before the Reverse Stock Split) for the gross proceeds of approximately $28 million through the Sales Agent pursuant to the Sales Agreement.
December Securities Purchase Agreement
On December 26, 2025, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to issue and sell, by the Company directly to the investors (the “December 2025 Offering”), an aggregate of 3,000,000 shares (the “December 2025 Shares”) of its common stock, no par value, at a purchase price per share of $1.31. The December 2025 Offering closed on January 6, 2026 and the Company received gross proceeds of $3.93 million.
Key Performance Indicators (“KPIs”)
In addition to the measures presented in our consolidated financial statements, our management regularly monitors certain KPIs for our business. The KPIs used by the Company include:
| 23 |
The turnover rate of inventory
Our business is reliant on timely delivery of our products. At the same time, our products are expensive to warehouse. We strive to achieve roughly 3-6 months of inventory to balance our cost of inventory against the risk of not having products when needed. We do this by setting up long-term cooperative relationship with multiple local and national suppliers to obtain a better payment cycle to secure the products and to maximize the use of funds. At the same time, we maintain a dynamic level of inventories of recycled consumer electronic devices, based on our knowledge of the prevailing market trend and estimation of electronic devices price fluctuation. We continuously adjust our inventory levels by lowering inventory of products in downward trend and increasing inventory of those in upward trend.
The collection period of accounts receivable
Timely payments from customers are essential to a successful business. Based on our historical collectability experience, we will target strategic relationships with large-scale homebuilders and professional companies to reduce the risk associated with accounts receivable and reduce the days outstanding for accounts receivable. Eventually, we expect to achieve the goal of receiving 100% of the payment before products leave the shop.
The growth of total operating income
We maintain internal long-term targets for both gross profit and operating income, based partly on long-term revenue growth targets and partly on execution and internal controls. Ultimately, we strive to deliver profitable long-term growth.
Results of Operation
The following table presents certain Consolidated statement-of-operations information and presentation of that data as a percentage of change from year to year.
For the Three Months Ended December 31, 2025, and 2024
| Three Months Ended December 31, | ||||||||||||
| 2025 | 2024 | |||||||||||
| Revenues | $ | 1,456,481 | 196,000 | 643 | % | |||||||
| Costs of goods sold | 1,382,346 | 180,000 | 668 | % | ||||||||
| Selling, general and administrative expenses (exclusive of items shown separately below) | 560,003 | 470,592 | 19 | % | ||||||||
| Impairment loss | - | 3,514 | -100 | % | ||||||||
| Operating loss | (485,868 | ) | (458,106 | ) | 6 | % | ||||||
| Other income (expenses) | 457,250 | 366 | 124,832 | % | ||||||||
| Loss before income taxes | (28,618 | ) | (457,740 | ) | -94 | % | ||||||
| Income tax expense | - | - | - | % | ||||||||
| Net loss from discontinued operations | - | (147,669 | ) | -100 | % | |||||||
| Net loss | (28,618 | ) | (605,409 | ) | -95 | % | ||||||
| Non-controlling interest | - | (1,712 | ) | -100 | % | |||||||
| Net loss attributable to Inno Holdings Inc. | $ | (28,618 | ) | (603,697 | ) | -95 | % | |||||
Revenues
Revenue for the three months ended December 31, 2025 increased 643% to $1,456,481 in comparison to $196,000 for the three months ended December 31, 2024. Revenue for the three months ended December 31, 2025 consists solely of the Company’s business of electronic products trading. The business of electronic products trading contributes to the increase in revenue for the three months ended December 31, 2025 against the comparable period in 2024.
Our revenues are significantly impacted by demand for economic conditions including costs of labor, materials and other variables that impact the cost of our finished goods. We cannot ensure that growth will continue, and our business may be adversely affected by the negative overall economic conditions currently being experienced.
| 24 |
Costs of Goods Sold
Cost of Goods Sold (COGS) includes electronic products purchased from our suppliers. COGS for the three months ended December 31, 2025, increased to $1,382,346 in comparison to $180,000 for the three months ended December 31, 2024. COGS for the three months ended December 31, 2025 consists solely of electronic products purchased from our suppliers in the Company’s business of electronic products trading. The business of electronic products trading contributes to the increase in COGS for the three months ended December 31, 2025 against the comparable period in 2024.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended December 31, 2025, increased 19% to $560,003 in comparison to $470,592 for the comparable period in 2024. The main reason for the increase was due to an increase in legal and consulting expenses.
Operating Loss
Operating loss was $485,868 for the three months ended December 31, 2025, in comparison to an operating loss of $458,106 for the comparable period in 2024. The increase in operating loss was primarily attributed to the increase in selling, general and administrative expenses, as discussed above.
Other Income (Expense)
Other income for the three months ended December 31, 2025, was $457,250, in comparison to other income of $366 for the comparable period in 2024. Other income for the three months ended December 31, 2025, primarily consisted of a $370,546 change in fair value of SEPA and $86,729 interest income from bank deposits. In contrast, other income for the three months ended December 31, 2024, were primarily consisted of interest income from bank deposits.
Net Loss
Net loss for the three months ended December 31, 2025 was $28,618, in comparison to net loss of $605,409 for the three months ended December 31, 2024. The increase in net loss was primarily due to changes in revenue, costs and expenses as outlined above.
Liquidity and Capital Resources
Sources of Liquidity
During the three months ended December 31, 2025 and 2024, we primarily funded our operations with cash generated from operations, private shares offerings, and at the market offering. We had cash of $37,149,913 as of December 31, 2025 compared to $10,130,942 of cash as of September 30, 2025. The cash increase was primarily due to the proceeds from the at-the market offering and private-placement offering during the quarter ended December 31, 2025, and offset by the cash usage in operating and investing activities during the periods ended December 31, 2025.
The Company has participated in at-the-market offering and private-placement offering during the quarter ended December 31, 2025. On November 12, 2025, the Company entered into a sales agreement (the “Sales Agreement”) with Aegis Capital Corp. (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time, to or through the Sales Agent, shares of the Company’s common stock, with no par value, having an aggregate offering price of up to $50.0 million (the “At-the-Market Offering”). From November 12, 2025 to December 31, 2025, the Company issued an aggregate of 3,541,667 shares of common stock (or 85,000,000 shares of common stock before the Reverse Stock Split) for the gross proceeds of approximately $28 million through the Sales Agent pursuant to the Sales Agreement.
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On December 26, 2025, the Company entered into a securities purchase agreement with certain investors, providing for the sale and issuance of 3,000,000 shares of the Company’s common stock, no par value, for an aggregate purchase price of $3.93 million at $1.31 per share (the “December 2025 Offering”). The offering closed on January 6, 2026.
We do not believe the cash and cash equivalents on hand as of December 31, 2025 of $37,149,913 will be sufficient to fund our operations and capital expenditure requirements for the next twelve months from the date the consolidated financial statements are issued. We will be required to raise additional capital to continue to fund operations and capital expenditure. The uncertainties surrounding our ability to access capital when needed creates substantial doubt about our ability to continue as a going concern. Based on our need to raise additional funds to implement our business plans for the next twelve months, we have included a discussion concerning the presentation of our financial statements on a going concern basis in the notes to our consolidated financial statements. We may be required in the near future to issue debt or sell our Company’s equity securities in order to raise additional cash, although there are no firm arrangements in place for any such financing at this time. We cannot provide any assurances as to whether we will be able to secure the necessary financing, or the terms of any such financing transaction if one were to occur. The failure to secure such financing could severely curtail our plans for future growth or in more severe scenarios, the continued operations of our Company.
Working Capital
As of December 31, 2025 and September 30, 2025, our working capital (deficit) was $44,958,259 and $13,337,273, respectively. The historical seasonality in our business and our capital raising activities during the year can cause cash and cash equivalents, inventory, and accounts payable to fluctuate, resulting in changes in our working capital.
Cash Flows
Operating Activities
For the three months ended December 31, 2025, net cash used in operating activities was $5,001,179, primarily driven by the net loss from continuing operation of $28,618, change in fair value of SEPA of $370,546, a $4,397,904 increase in prepayments and other current assets, an $85,591 decrease in inventories, and a $189,702 decrease in other payables and accrued liabilities.
For the three months ended December 31, 2024, net cash used in operating activities was $2,096,345, primarily driven by the net loss from continuing operation of $457,740 and net loss from discontinuing operation of $147,669, a $1,893,000 increase in inventories, a $757,032 decrease of prepayments and other current assets, and operating cash flow used by discontinued operations of $421,170.
Investing Activities
For the three months ended December 31, 2025, net cash used in investing activities was $Nil.
For the three months ended December 31, 2024, net cash used in investing activities was $1,428,154 and was mainly related to the investment in Core Modu LLC.
Financing Activities
Net cash provided by financing activities was $32,020,150 and $7,250,000, respectively, for the three months ended December 31, 2025 and 2024.
For the three months ended December 31, 2025, net cash provided by financing activities was due to the net cash from the at the market offering and the private-placement offering.
For the three months ended December 31, 2024, net cash provided by financing activities was primarily due to the net cash from the several private-placement offerings.
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Critical Accounting Policies and Estimate
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Note 2 — Basis of Presentation and Summary of significant accounting policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of our most recently filed Form 10-K, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Our critical accounting estimates, identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most recently filed Form 10-K, include the discussion of estimates used for revenue recognition, inventory valuation, going concern assessment, and our provision for income taxes. Such accounting estimates require significant judgments and assumptions to be used in the preparation of the Condensed Consolidated Financial Statements included in this Form 10-Q, and actual results could differ materially from the amounts reported.
New Accounting Standards
From time to time, the FASB or other standards-setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update. To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 2 — Basis of Presentation and Summary of significant accounting policies, “Recently issued but not yet adopted accounting pronouncements”, in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. Unless otherwise discussed, we believe that the impact of recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a material impact on our Condensed Consolidated Financial Statements upon adoption.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
An evaluation was performed under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2025, our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms due to material weaknesses in our internal controls described below.
| ● | Lack of adequate policies and procedures in internal control function to ensure that proper control and procedures have been designed and implemented over key business cycles. | |
| ● | Lack of sufficient in-house accounting personnel with the requisite knowledge and experience in the application of U.S. GAAP. |
We plan to hire additional personnel or consultant with relevant experience and qualifications to design and implement internal control over key business cycles to strengthen the internal control system, and plan to hire additional in-house accounting personnel with the requisite knowledge and experience in the application of U.S. GAAP. However, we cannot assure you that we will remediate our material weaknesses in a timely manner.
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Inherent Limitations Over Internal Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our control systems are designed to provide such reasonable assurance of achieving their objectives. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal controls over financial reporting during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not currently a party to any material legal proceedings, investigations or claims. From time to time, we involve in legal matters arising in the ordinary course of our business. There can be no assurance that such matters will not arise in the future or that any such matters in which we are involved, or which may arise in the ordinary course of our business, will not at some point proceed to litigation or that such litigation will not have a material adverse effect on our business, financial condition or results of operations.
ITEM 1A. RISK FACTORS.
As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information in this Item. In any event, there have been no material changes in our risk factors as previously disclosed in our 2025 Annual Report on Form 10-K filed with the SEC on December 15, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(A) Unregistered Sales of Equity Securities
On December 26, 2025, the Company entered into a securities purchase agreement with each of ten non-U.S. investors (the “December 2025 Investors”) pursuant to which the Company agreed to issue and sell in a private placement offering an aggregate of 3,000,000 shares of common stock at a purchase price per share of $1.31, for gross proceeds of approximately $3.9 million (the “December 2025 Offering”), of which proceeds will be used for working capital and other general corporate purposes. The December 2025 Offering closed on January 6, 2026. The issuance and sale of the shares were exempt from registration under the Securities Act, pursuant to Rule 903 of Regulation S under the Securities Act because all of the investors were non-U.S. Persons (as defined under Rule 902 Section (k)(2)(i) of Regulation S).
The foregoing information is a summary of our agreements with the December 2025 Investors involved in the December 2025 Offering described above, is not complete, and is qualified in its entirety by reference to the full text of our agreement with each investor, the form of which is attached an exhibit to this Quarterly Report on Form 10-Q. Readers should review the agreement for a complete understanding of the terms and conditions associated with this transaction.
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(B) Use of Proceeds
Not applicable.
(C) Issuer Purchases of Equity Securities
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
None.
ITEM 5. OTHER INFORMATION.
During
the quarter ended December 31, 2025, no director or officer of the Company
ITEM 6. EXHIBITS
EXHIBIT INDEX
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101). |
| * | Filed or furnished herewith. |
| ^ | Portions of this exhibit with certain identified and confidential information have been omitted and redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K, because such information is both not material and would likely cause competitive harm to the registrant if publicly disclosed. The registrant hereby agrees to furnish an unredacted copy of the exhibit and its materiality and competitive harm analyses to the SEC upon request. |
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| INNO HOLDINGS, INC. | ||
| Date: February 3, 2026 | By: | /s/ Ding Wei |
| Ding Wei | ||
Chief Executive Officer (Principal Executive Officer) | ||
| Date: February 3, 2026 | By: | /s/ Mengshu Shao |
| Mengshu Shao | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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