Inno Holdings Inc 10-K for FY2023

Inno Holdings Inc. (INHD)

10-K 2024-01-16 For: 2023-09-30

Added on April 10, 2026

About this 10-K

Inno Holdings Inc filed this 10-K on January 16, 2024, covering the fiscal year ended September 30, 2023 (FY2023).

Headline figures

Fiscal year ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $799.75K; down 82.2% from $4.5M a year earlier
Net loss: $3.9M; compared with a net loss of $1.01M a year earlier
Diluted EPS: -$0.21; compared with -$0.06 a year earlier

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Title of Each Class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, no par value		INHD		The Nasdaq Stock Market

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☒

		Page
PART I

ITEM 1:	BUSINESS	1
ITEM 2:	PROPERTIES	19
ITEM 3:	LEGAL PROCEEDINGS	19

PART II

ITEM 5:	MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES	20
ITEM 6:	[RESERVED]	22
ITEM 7:	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	22
ITEM 8:	FINANCIAL STATEMENTS	F-1
ITEM 9A.	CONTROLS AND PROCEDURES	35

PART III

ITEM 10:	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	36
ITEM 11:	EXECUTIVE COMPENSATION	42
ITEM 12:	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	45
ITEM 13:	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	46
ITEM 14:	PRINCIPAL ACCOUNTING FEES AND SERVICES	48

PART IV

ITEM 15:	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	49

SIGNATURES		50

	●	the “Company,” “INNO,” the “registrant,” “we,” “our,” or “us” mean INNO HOLDINGS INC. and its subsidiaries;
	●	“year” or “fiscal year” means the year ending September 30;
	●	all dollar or $ references, when used in this prospectus, refer to United States dollars;
	●	“framing” means the process of connecting building materials together to create a structure;
	●	“stud” means a vertical framing member which forms part of a wall or partition, also known as a wall stud, a fundamental component of frame construction;
	●	“truss” means a web-like roof design that uses tension and compression to create strong, light components that can span a long distance;
	●	“joist” means a horizontal structural member used in framing to span an open space, often between beams that subsequently transfer loads to vertical members;
	●	“cold-formed steel” or “CFS” or “light-gauge steel” or “LGS” means steel products shaped by cold-working processes carried out near room temperature, such as rolling, pressing, stamping, bending, etc.;
	●	“turnkey cost” is the total cost that must be covered before a product or service is ready to be sold and used by consumers;
	●	“prefab” means a building manufactured in sections to enable assembly on site.

	●	Light-gauged studs and tracks;

	●	Prefabricated wall panels and trusses;

	●	Structure framing work on site;

	●	Engineering services;

	●	Machine sales; and

	●	Replicable Apartment product.

	●	Materials — Rolled steel represents the single largest cost. We manage our relationship with suppliers (primarily US Steel) very adroitly by building in purchase orders and their associated costs to the customer to minimize our exposure to changes in steel prices for any specific project. We manage our purchases and deliveries as close to “just in time” as possible.

	●	Labor — Labor is potentially the most variable component of cost of sales. We have a team of hourly workers who largely work onsite at the factory producing parts from raw steel and assembling them into prefabricated pieces to be delivered to job sites. Contractors are non-employee hourly workers who largely work in our turnkey projects. As-needed hourly labor is largely available in our markets.

	●	Freight and Shipping — Our policy is to include any freight incurred to ship the product from our vendors to warehouses as a part of cost of goods sold. Outbound freight costs related to shipping costs to customers are considered periodic costs and are reflected in selling expenses.

	●	Steel has the highest strength-to-weight ratio of any framing material.

	●	Non-combustible. Steel will not contribute fuel to the spread of fire.

	●	Steel is termite and rodent resistant.

	●	Steel ensures dimensional stability. Will not rot, warp, crack or shrink.

	●	Lower builder’s risk insurance.

	●	Permanently straight walls. No call backs for nail pops.

	●	No toxicity contribution. Free of resins, adhesives, and chemicals normally present in other framing material.

	●	Consistent material quality. No regional variation.

	●	Grounded against electrical storms.

	●	Steel is inorganic. Unlike traditional framing products, steel is not vulnerable to mold.

	●	Steel is the most recycled product in the world. Optimum sustainability.

	●	A first floor non-combustible (concrete) podium with parking and retail space

	●	Residential dwellings on levels 2-5

	●	Roof-top/penthouse space atop level 5 housing building services.

	●	New optimized design for Roll Former CNC machine that efficiently produces C&U type studs and tracks to be used in building high quality, quick erection structures. (Application number: 63427583)

	●	Cube 200, which is a new optimized design for a Roll Former CNC machine that efficiently produces C&U type studs and tracks to be used in building high quality, quick erection structures. (Application number: 63437142)

	●	Z-shaped pendant for castor exterior wall to replace the Z-shaped pendant for sheetrock with honeycomb aluminum plate. (Application number: 63434155)

	●	Cube 300, which is a new optimized design for a Roll Former CNC machine that efficiently produces C&U type studs and tracks to be used in building high quality, quick erection structures. (Application number: 63437143)

	●	Aluminum honeycomb plate for interior wall construction. (Application number: 63367663)

	●	Entering fixed price forward contracts with steel mills/suppliers for delivery in the future so that our bids for customer contracts have known pricing for the steel. This is particularly useful in larger projects that involve delivery of product over many months.

	●	Maintaining an approximately three-month inventory of our most actively used rolled steel coils (defined by width and gauge). This inventory requires an active forward-looking assessment of steel needs to meet expected demand. Maintaining inventory is a real financial exposure especially during periods of pricing volatility.

	For the Years Ended September 30,
	2023			2022			Variance
Revenues	$	799,747		$	4,252,568			-81	%
Revenues– related party		-			250,000			-100	%
TOTAL REVENUES		799,747			4,502,568			-82	%
Costs of materials and labor		1,255,315			3,031,588			-59	%
Selling, general and administrative expenses (exclusive of depreciation and bad debt expenses shown separately below)		2,191,043			2,247,820			-3	%
Depreciation		69,437			33,138			110	%
Bad debt expense		1,267,960			-			100	%
Operating loss		(3,984,008	)		(809,978	)		392	%
Other income (expenses)		(39,196	)		(310,114	)		-87	%
Loss before income taxes		(4,023,204	)		(1,120,092	)		259	%
Income tax expense		-			9,915			-100	%
Net loss		(4,023,204	)		(1,130,007	)		256	%
Non-controlling interest		(127,426	)		(121,345	)		5	%
Net loss attributable to INNO HOLDINGS INC.	$	(3,895,778	)	$	(1,008,662	)		286	%

Operating loss % of revenues		(498	)%		(18	)%
Net loss % of revenues		(503	)%		(25	)%

Steel Price Sensitivity Analysis
Steel Price		Steel as % of COGS
Variance		Low Volume		High Volume
	(20)%		40%		51%
	(10)%		43%		54%
	0		45%		57%
	10%		48%		59%
	20%		50%		61%

	Aging Category
	1 – 30 days		> 270 days			Total
Accounts receivable	$	—	$	1,338,395		$	1,338,395
Less: allowance for credit losses		—		(1,267,960	)		(1,267,960	)
Accounts receivable, net	$	—	$	70,435		$	70,435

	A.	We were notified that the ownership of one of our projects had been transferred in the middle of construction. We had collection issues from the former owner and reserved approximately $0.5 million credit losses accordingly.

	B.	As a subcontractor to provide the designing service and prefab products, we recognize the revenue upon completion of our performance obligations. However, there are two projects that had been significantly changed during the later stage of construction, our delivered services and prefab products had been replaced. We are experiencing difficulties in collecting payment for the services rendered and prefab products delivered. The related balance of approximately $0.3 million has been reserved as credit losses.

	C.	We were notified that several customers have cash flow issues and are facing challenges in securing loans. We are experiencing difficulties in collecting payment for the services rendered and prefab products delivered. We assessed the customers’ financial situation and reserved approximately $0.4 million as credit losses.

	●	Acquisition of new (large size) builders, developers, and other types of customers and assisting them to complete the structural design and engineering more efficiently.

	●	Consistently providing value-added professional services for our customers, saving costs, and shortening construction periods to win more loyal customers.

	●	Maintaining technological leadership, competitive prices, and other advantages over competitors.

	●	Consistent investment in automation and other systems to improve efficiencies required to improve margins.

	●	Investment in employees in an effort to efficiently manage operations, finances, and other corporate efforts.

	●	Demand for residential and commercial buildings can be substantially impacted by the cost of borrowing money. Recent increases in interest rates and recessionary fears have slowed building activities. However, we believe demand for affordable housing remains stable. Builders in this segment are driven to seek breakthroughs and optimization in terms of cost and lead time, which we believe may benefit INNO.

	●	Our competitors include traditional wood framing, competing steel framing solutions, and other building techniques, as well as prefab homes and prefabricated building components. With respect to framing solutions, we expect cost savings, quality, and construction efficiency over our competitors to be the main driver of outperformance for INNO. For prefab homes and components, we differentiate through modern design, high quality, technology innovation, and affordability, and we believe our product is differentiated in this large and growing market space.

	●	From applying AI design technology, innovation of new products, and exploration of new materials, to developing a whole new structural system, we provide customers with the most optimized solutions and LGS framing, which can lead to lower costs and construction times.

	●	Our steel framing products are formed by automated CNC production lines. We currently own five automatic production lines that can cover 3 ⅝” to 12” studs/tracks of different thickness ranging from 25 gauge to 12 gauge. We believe our lead time is faster than other traditional suppliers.

	●	INNO is a technology-based manufacturing company, with all manufacturing operations currently based in the U.S. We currently source our steel from U.S.-based steel mills, which greatly reduces our exposure to global supply chain concerns; however, we may in the future source steel from other countries. We may also source other materials internationally from time-to-time to ensure we maintain an efficient cost profile.

	●	Timely transportation of our inbound raw materials and outbound finished goods are critical to our operations and meeting our obligations to our customers. We are exposed to the overall shortage in capacity in the transportation industry including the well-publicized driver shortage and volatile fuel price. We have mitigated some of the transportation shortages and maintained high service levels by having one company-owned truck and may add more if demand warrants it.

	●	An additional innovation aiding in our logistics strategy, is our patent-pending Mobile Factory. Our Mobile Factory can be transported to the jobsite for production. Once launched, our Mobile Factory can greatly reduce the logistic costs of all or a portion of finished products produced at the factory.

	●	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.

Machinery tools and equipment		7 years
Office furniture and equipment		5 years
Motor vehicles		5 years
Leasehold improvements		the shorter of the lease term or the estimated useful life of the improvements

		Page
Financial Statements as of and for the Fiscal Years Ended September 30, 2023 and 2022
Report of Independent Registered Public Accounting Firm PCAOB ID# (05854)		F-2
Consolidated Balance Sheets as of September 30, 2023 and 2022		F-3
Consolidated Statements of Operations for the years ended September 30, 2023 and 2022		F-5
Consolidated Statements of Changes in Stockholders’ Equity for the years ended September 30, 2023 and 2022		F-6
Consolidated Statements of Cash Flows for the years ended September 30, 2023 and 2022		F-7
Notes to Consolidated Financial Statements		F-8

	September 30, 2023		September 30, 2022
ASSETS
Current assets
Cash and cash equivalent	$	4,898	$	50,628
Accounts receivable, net		70,435		1,807,290
Accounts receivable – related party		-		100,000
Accounts receivable, net		-		100,000
Inventories		394,293		329,904
Deferred offering costs		538,765		—
Prepayments and other current assets		180,467		176,591
Total current assets		1,188,858		2,464,413

Non-current assets
ROU assets		437,770		453,883
Property and equipment, net		869,584		694,122
Other non-current assets		49,550		39,699
Total non-current assets		1,356,904		1,187,704
Total assets	$	2,545,762	$	3,652,117

LIABILITIES AND EQUITY
Current liabilities
Accounts payable		781,056		471,778
Accounts payable – related party		535,595		485,595
Accounts payable		535,595		485,595
Credit cards payable		5,454		—
Unearned revenue		1,137,828		201,730
Other payables and accrued liabilities		86,710		46,043
Other payables – related party		504,372		12,233
Other payables		504,372		12,233
Short-term loan payable		790,000		710,000
Lease liability – current		212,277		110,993
Long-term notes payable – current portion		49,393		47,259
Total current liabilities		4,102,685		2,085,631

Non-current liabilities
Notes payable		110,846		160,009
Lease liability – non-current		275,817		349,402
Other non-current liabilities		—		2,457
Total non-current liabilities		386,663		511,868
Total liabilities		4,489,348		2,597,499

Commitments and contingency		—		—

	September 30, 2023			September 30, 2022
Stockholders’ Equity (Deficit)
Common stock, no par value; 100,000,000 shares authorized;18,251,726 and 17,970,000 shares issued and outstanding at September 30, 2023 and 2022		—			—
Additional paid in capital		2,830,000			1,805,000
Accumulated deficit		(4,524,815	)		(629,037	)
Non-controlling interest		(248,771	)		(121,345	)
Total stockholders’ equity (deficit)		(1,943,586	)		1,054,618
Total liabilities and stockholders’ equity (deficit)	$	2,545,762		$	3,652,117


	For the Years Ended September 30,
	2023			2022
REVENUES	$	799,747		$	4,252,568
REVENUES – related party		-			250,000
TOTAL REVENUES		799,747			4,502,568

COSTS AND EXPENSES:
Costs of materials and labor		1,255,315			3,031,588
Selling, general and administrative expenses (exclusive of depreciation and bad debt expense shown separately below)		2,191,043			2,247,820
Depreciation		69,437			33,138
Bad debt expense		1,267,960			—
Total costs and expenses		4,783,755			5,312,546

LOSS FROM OPERATIONS		(3,984,008	)		(809,978	)

OTHER INCOME (EXPENSE)
Interest expenses		(72,118	)		(10,114	)
Stock compensation expense		—			(300,000	)
Other non-operating income (expense)		32,922			—
Total other income (expenses), net		(39,196	)		(310,114	)

LOSS BEFORE INCOME TAXES		(4,023,204	)		(1,120,092	)

PROVISION FOR INCOME TAXES		-			9,915
NET LOSS		(4,023,204	)		(1,130,007	)

Non-controlling interest		(127,426	)		(121,345	)

NET LOSS ATTRIBUTABLE TO INNO HOLDINGS INC.	$	(3,895,778	)	$	(1,008,662	)

WEIGHTED AVERAGE NUMBER OF COMMON STOCK
Basic		18,155,104			17,230,822
Diluted		18,155,104			17,230,822

LOSSES PER SHARE
Basic	$	(0.21	)	$	(0.06	)
Diluted	$	(0.21	)	$	(0.06	)


	Common Stock*				Additional Paid in		Retained Earnings (Accumulated			Non- controlling
	Shares		Amount		Capital		Deficit)			interest			Total
Balance, September 30, 2021		16,170,000		—		5,000		379,625			—			384,625
Net loss								(1,008,662	)		(121,345	)		(1,130,007	)
Shares issued for cash		1,500,000		—		1,500,000								1,500,000
Shares issued for service		300,000		—		300,000								300,000
Balance, September 30, 2022		17,970,000	$	—	$	1,805,000	$	(629,037	)	$	(121,345	)	$	1,054,618
Balance		17,970,000	$	—	$	1,805,000	$	(629,037	)	$	(121,345	)	$	1,054,618
Net loss								(3,895,778	)		(127,426	)		(4,023,204	)
Shares issued for cash		248,832		—		900,000		—			—			900,000
Shares issued for service		32,894		—		125,000		—			—			125,000
Balance, September 30, 2023		18,251,726	$	—	$	2,830,000	$	(4,524,815	)	$	(248,771	)	$	(1,943,586	)
Balance		18,251,726	$	—	$	2,830,000	$	(4,524,815	)	$	(248,771	)	$	(1,943,586	)

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.

Machinery and equipment		7 years
Office equipment		5 years
Motor vehicles		5 years
Leasehold improvements		the shorter of the lease term or the estimated useful life of the improvements

	September 30, 2023		September 30, 2022
Raw material	$	134,299	$	296,042
Production inventory		259,994		33,862
Total	$	394,293	$	329,904

	September 30, 2023		September 30, 2022
Advance to suppliers	$	87,217	$	102,027
Other prepayments and current assets		93,250		74,564
Total	$	180,467	$	176,591

	2023			2022
	September 30,
	2023			2022
Current:
Federal	$	—		$	—
State		—			9,915
Total current income tax provision		—			9,915

Deferred:
Federal		(633,247	)		(235,219	)
State		—			—
Increase/(decrease) in valuation allowance		633,247			235,219
Total deferred taxes		—			—

Total provision for income taxes	$	—		$	9,915

	September 30, 2023			September 30, 2022
Statutory tax rate
Federal		21.00	%		21.00	%
State (net of federal benefit)		—	%		(0.89	)%
Net effect of state income tax deduction and other permanent differences		(21.00	)%		(21.00	)%
Effective tax rate		—	%		(0.89	)%

Lease cost	2023			2022
Operating lease cost (included in G&A in the Company’s statement of operations)	$	153,241		$	95,230
Other information
Cash paid for amounts included in the measurement of lease liabilities	$	109,430		$	94,146
Remaining term in years		1.25 – 3.58			2.25 – 4.58
Average discount rate – operating leases		8.5	%		8	%

Operating leases	September 30, 2023		September 30, 2022
Right of use asset – non-current	$	437,770	$	453,883
Lease Liability – current		212,277		110,993
Lease Liability – non-current		275,817		349,402
Total operating lease liabilities	$	488,094	$	460,395

	Operating Lease
For periods subsequent to September 30, 2023:
2024	$	241,385
2025		154,531
2026		90,800
2027		54,183
Less: Imputed interest/present value discount		(52,805	)
Present value of lease liabilities	$	488,094

	●	Lack of sufficient personnel commensurate with our accounting and reporting requirements and insufficient segregation of duties within accounting functions.

	●	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.

Name	Age	Position
Dekui Liu	42	Chief Executive Officer, Director and Chairman
Tianwei (Solomon) Li	35	Chief Financial Officer
Dr. Li (Alice) Gong	38	Chief Operation Officer
Ying Liu	68	Director
Xiaogang (John) Zhang	40	Independent Director
Chen Sung	73	Independent Director
Richard B. Haws, PE	67	Independent Director