INNO HOLDINGS(INHD) - 2024 Q4 - Annual Report

FORM 10-K Filing Information Registrant Information This section provides INNO HOLDINGS INC.'s Form 10-K identification details, including fiscal year, commission file number, and filer status - Registrant: INNO HOLDINGS INC.[3] - Fiscal Year End: September 30, 2024[2] - Common stock (INHD) is listed on The Nasdaq Stock Market[4] - Filer Status: Non-accelerated filer, Smaller reporting company, Emerging growth company[5] Market Value and Shares Outstanding As of March 31, 2024, non-affiliate common stock market value was approximately $2.8 million, with 3,057,043 shares outstanding as of December 3, 2024 Market Value and Shares Outstanding | Metric | Value | | :----------------------------------------- | :------------ | | Market Value (non-affiliates, Mar 31, 2024) | $2,798,633 | | Shares Outstanding (Dec 3, 2024) | 3,057,043 | Table of Contents Special Note Regarding Forward-Looking Statements Forward-Looking Statements Disclaimer This section warns that forward-looking statements are subject to risks and uncertainties, including operational effectiveness, competition, and intellectual property protection, which may cause actual results to differ materially - Forward-looking statements are based on current expectations and assumptions, subject to inherent uncertainties, risks, and changes in circumstances[12] - Key risk factors include the ability to operate business segments, manage expenses, compete in an evolving industry, adapt to technology changes, and protect intellectual property[12] - The Company does not intend to update forward-looking statements unless required by law[14] Use of Certain Defined Terms Defined Terms This section defines key terms used in the report, including 'Company,' 'INNO,' 'fiscal year,' and specific construction terminology like 'cold-formed steel' and 'prefab' - Defines 'Company,' 'INNO,' 'registrant,' 'we,' 'our,' or 'us' as INNO HOLDINGS INC. and its subsidiaries[16] - Specifies 'year' or 'fiscal year' refers to the period ending September 30[16] - Provides definitions for construction terms: framing, stud, truss, joist, cold-formed steel (CFS/LGS), turnkey cost, and prefab[16] PART I Business Overview INNO HOLDINGS INC. is a building-technology company transforming construction with proprietary cold-formed steel-framing, manufacturing steel members and prefab homes, and launched new AI tech consulting services in 2024 - INNO HOLDINGS INC. aims to transform the construction industry using proprietary cold-formed steel-framing technology[19] - The company manufactures cold-formed steel members and offers full services, including structural designs, metal stud production, and preassembly of steel wall panels and prefabricated homes[19][21] - In 2024, INNO launched Inno AI Tech Corp. for research and consulting services, establishing a new revenue stream[23][38] Our Products INNO offers cold-formed steel framing, modular prefab homes (Castor Cube), and a Mobile Factory for on-site production, leveraging proprietary software for efficient, durable, and sustainable construction solutions - Cold-formed steel framing products (roof trusses, wall panels, joist systems) are a cost-effective, noncombustible alternative to traditional materials, used in various building types[24] - Castor Cube is a 743-square-foot modular home designed for high structural stability, earthquake/wind resistance, and pest prevention, capitalizing on the growing prefab home market[29][30] - The Mobile Factory is a portable, IoT-managed production facility capable of producing steel-framing members on-site, reducing transportation costs and enabling urgent deployment in remote or disaster areas[34][35][36] Related Services INNO provides land development and contractor services for projects using its metal framing, and its Inno AI Tech Corp. generated $205,000 in 2024 from research and consulting services - INNO participates in land development and contractor services, leveraging its metal framing products for projects like apartment complexes and retirement communities[37] - Inno AI Tech Corp., formed in February 2024, provides research and consulting services, generating $205,000 in revenue in 2024 by supporting a client in establishing a steel technology company[38] Our Customers INNO serves B2B customers for steel framing and B2B/B2C for prefab homes and consulting, with three major customers accounting for 90% of total revenues in 2024, indicating high customer concentration - Sales model for cold-formed steel framing is business-to-business, targeting developers, builders, and contractors[39] - Sales model for Castor Cube prefab homes and Inno AI Tech Corp. consulting services is expected to be either business-to-business or business-to-customer[39] Customer Revenue Concentration | Year Ended September 30, | % of Total Revenues from 3 Major Customers | | :----------------------- | :----------------------------------------- | | 2024 | 90% | | 2023 | 53% | Our Suppliers INNO relies on a limited number of suppliers, with two suppliers accounting for 58% of total purchases in 2024 and 51% of accounts payable, generally operating without written agreements Supplier Purchase Concentration | Year Ended September 30, | % of Total Purchases from Top Suppliers | | :----------------------- | :-------------------------------------- | | 2024 | 58% (two suppliers) | | 2023 | 57% (three suppliers) | Accounts Payable Concentration | As of September 30, | % of Total Accounts Payable to Top Two Suppliers | | :------------------ | :----------------------------------------------- | | 2024 | 51% | | 2023 | 55% | - The Company generally does not have written agreements with its suppliers, making purchases through individual orders[43] Our Competitive Strengths INNO's strengths include continuous innovation, integrated manufacturing from design to prefabrication, and 8-16% cost savings with cold-formed steel over wood, focusing on patentable products and off-site technology - INNO is committed to continuous technology innovation, focusing on patentable products and commercializing research in cold-formed steel for resilient buildings[44] - The company offers a fully integrated manufacturing process, from design to metal stud production and prefabrication, utilizing off-site building technology to reduce on-site labor and improve quality control[45] - INNO's products offer 8-16% cost savings compared to traditional wood framing, driven by the rising cost of wood and the inherent advantages of steel[47][48] Market Opportunity INNO targets a $33.5 billion U.S. market in 2024, including light-gauge steel framing (projected to reach $52.73 billion by 2030), prefabricated homes, and wood framing replacement, driven by sustainability and efficiency Market Size and Growth Projections | Market Segment | 2023/2024 Value (USD) | Projected 2030 Value (USD) | CAGR (2023-2030) | | :----------------------------------- | :-------------------- | :------------------------- | :--------------- | | Global Light-Gauge Steel Framing | $37.27 billion (2023) | $52.73 billion | 5.1% | | U.S. Prefabricated Home Manufacturing | $13.3 billion (2024) | $53 billion | 7% (U.S. modular home market) | | U.S. Wood Framing (Target Market) | $27.5 billion (2024) | N/A | N/A | | INNO's Total Target Market (U.S.) | ~$33.5 billion (2024) | N/A | N/A | - Market growth is fueled by increased construction spending, a shift towards sustainable materials, and regulatory changes (e.g., Los Angeles banning wood-frame building in certain areas) promoting alternatives like steel[50][53][55][57] - Cold-formed steel framing is positioned as an optimal alternative due to its sustainability, fire/termite resistance, consistent quality, and reduced carbon footprint[58] Marketing INNO's marketing strategy focuses on leadership in intelligent steel-framing, leveraging customer referrals, strategic partnerships, industry education, and digital marketing to expand its customer base - Marketing strategy focuses on establishing INNO as a leader in intelligent steel-framing building systems and expanding its customer base[59] - Leverages strategic partners (real estate companies, general contractors, builders, developers) and customer referrals for new business[59][61] - Actively educates the construction industry on the benefits of cold-formed steel framing through associations and is increasing online marketing efforts with a professional sales team[62][63] Research and Product Development/Innovations INNO's R&D focuses on cost-effective steel components and optimized production using proprietary CAD/BIM and roller machines, with innovations including a CFS portal frame system, lighter steel trusses, and honeycomb aluminum panels, targeting 100 potential patentable products - INNO utilizes proprietary modified cold-formed roller machines and CAD/BIM solutions (Vertex) for accurate, information-rich design models and automated production of steel framing members[65] - Key innovations include a CFS portal frame system to replace shear walls, offering superior lateral resistance and flexible room layouts for modular homes (Castor Cube) and commercial buildings[67][68] - Developing a cold-formed steel truss system for longer spans and lighter weight, and high-strength, light-weight honeycomb aluminum panels for versatile wall systems, with 100 potential patentable products in the pipeline[69][71] Revenue Model INNO's revenue model includes wholesale light-gauge studs, prefabricated panels/trusses, on-site framing, engineering/consulting (including $205,000 from Inno AI Tech Corp. in 2024), machine sales/leasing, and replicable apartment products like 'Village 101' - Revenue streams include wholesale of customized light-gauge studs and tracks, prefabricated wall panels and trusses (with assembly services), and on-site structure framing work[73][74][75][77] - Services revenue includes stamped and sealed structural design, shop drawings, and AI tech research and consulting, which generated $205,000 in 2024[78][79] - Developing 'Replicable Apartment products' like Village 101 (155-unit senior living) and other apartment options, aiming for scalable, high-quality housing solutions[82][83][84] Cost of Sales INNO's cost of sales primarily comprises materials (rolled steel, managed with fixed-price contracts and three-month inventory) and labor, with inbound freight included in cost of goods sold and outbound freight as a selling expense - Materials, primarily rolled steel, represent the largest cost component, managed through fixed-price forward contracts and a three-month inventory to mitigate price fluctuations[85][187][188] - Labor costs include hourly factory workers for producing and assembling prefabricated pieces, and non-employee contractors for turnkey projects[86] - Inbound freight is part of cost of goods sold, while outbound freight to customers is classified as a selling expense[87] Other Expenses Other expenses primarily include payroll, rent, utilities, insurance, and professional fees, with the company focusing on lean operations in a business-friendly state - Other expenses mainly comprise payroll for salaried and hourly workers, rent, utilities, insurance, and consulting/professional fees[88] - The company focuses on lean and efficient operations, benefiting from a business-friendly state and available workforce[88] Our Growth Strategy INNO's growth strategy integrates revenue (capacity expansion, R&D for Castor Cube/Village 101, marketing, acquisitions), profit (automation, Mobile Factory, AI design optimization), and technology (thinner/lighter products, stainless steel, module wall applications) - Revenue growth strategy includes expanding factory operations, investing in R&D for products like Castor Cube and Village 101, increasing marketing, and pursuing vertical integration through acquisitions to offer comprehensive building solutions[92][93][94][95] - Profit growth strategy focuses on improving assembly automation with production robots, reducing transportation costs by utilizing the Mobile Factory, and optimizing AI design capabilities to reduce raw material usage[96][97][99] - Technology growth strategy involves developing thinner/lighter EQ products, stainless steel as a high-end building material, and leveraging module wall technology to expand applications[100][101] Strategic Partnerships INNO has strategic partnerships with at least 10 regional and national developers in Texas and California, who intend to use INNO's steel framing or modular solutions, providing INNO with customized offers and higher bid success rates - INNO maintains strategic partnerships with at least 10 regional and national developers and builders in Texas and California[102] - These partners have a strong project pipeline and intend to utilize INNO's steel framing or modular building solutions (Castor Cube, Village 101)[102] - Strategic partnerships provide INNO with customized offers and increased probability of winning project bids[102] Competitive Outlook INNO competes against lumber and traditional CFS, highlighting steel's superior strength, non-combustibility, and sustainability, while differentiating with proprietary software for customized punchouts and faster structure formation than 3D printing - Steel framing offers superior strength-to-weight ratio, non-combustibility, resistance to pests and mold, dimensional stability, lower builder's risk insurance, and high recyclability compared to lumber[104][105][106][107][108][114][115] - INNO differentiates from traditional CFS manufacturers (e.g., Clark Dietrich, CEMCO) by using proprietary software for customized punchouts and automated screw hole punching, optimizing load-bearing capacity and reducing on-site labor[119][120] - INNO's cold-formed steel technology avoids the cooling time and unique raw material requirements of 3D printing for prefab homes, offering faster structure formation and superior disaster resistance for products like Castor Cube[124][125] Government Regulations INNO's operations comply with building codes (IBC, CBC, FBC), environmental laws (USGBC awards for sustainability), and occupational health and safety regulations, with no material compliance expenditures in 2023 or 2024 - INNO's cold-formed steel-framing members comply with 2018/2015 IBC, 2019 CBC, and 2020 FBC, and are inherently non-combustible, offering an advantage in fire safety regulations[128][129] - The company adheres to U.S. federal, state, and local environmental laws, with manufacturing processes that minimize waste and prevent pollution, earning awards from the USGBC in 2020[130][132] - Operations are subject to federal, state, and local occupational health and safety laws, with procedures designed to promote compliance and no material expenditures for compliance in 2024 and 2023[133][135] Human Capital Resources INNO's success depends on attracting and retaining skilled employees, with 4 full-time employees and 11 contractors as of September 30, 2024, a decrease from 2023, and three marketing consultants engaged in 2024 - The company's success depends on attracting, retaining, and developing a skilled workforce, offering competitive wages and collaborating with workforce development agencies[136] Human Capital Resources | Metric | September 30, 2024 | September 30, 2023 | | :---------------------- | :----------------- | :----------------- | | Full-time Employees | 4 | 11 | | At-will Contractors | 11 | 18 | | Marketing Consultants | 3 (in 2024) | N/A | Intellectual Property Matters INNO currently has no registered IP or trademarks but has five pending patent applications for optimized CNC machine designs, a Z-shaped pendant, and honeycomb aluminum plates, with non-disclosure policies in place - INNO currently has no registered intellectual property rights or trademarks, but applications are pending[137] - Five patent applications are pending, covering optimized CNC machine designs (Cube 200, Cube 300), a Z-shaped pendant for exterior walls, and honeycomb aluminum plates for interior walls[137] - Despite non-disclosure policies, the company cannot assure complete protection of its intellectual property and manufacturing expertise[138] Corporate Structure INNO HOLDINGS INC., incorporated in Texas on September 8, 2021, includes subsidiaries like Inno Metal Studs Corp and Castor Building Tech LLC, and in 2024, established Inno Disrupts Inc. and transferred R&D to Inno AI Tech Corp. - INNO HOLDINGS INC. was incorporated in Texas on September 8, 2021[139] - Key subsidiaries include Inno Metal Studs Corp (100% owned) and Castor Building Tech LLC (55% owned as of Oct 2023)[139][265][266] - In 2024, Inno Disrupts Inc. was established, and Inno Research Institute LLC was dissolved, with its R&D functions transferred to the newly formed Inno AI Tech Corp.[140][141][267][268] Risk Factors As a 'smaller reporting company,' INNO HOLDINGS INC. is not required to provide specific risk factor information in this item - The Company is a 'smaller reporting company' and is not required to provide risk factor information in this item[143] Unresolved Staff Comments There are no unresolved staff comments for INNO HOLDINGS INC. as of the filing date - No unresolved staff comments[144] Cybersecurity As a smaller reporting company, INNO lacks formalized cybersecurity measures and a dedicated team, but is evaluating needs, considering external experts, and developing a framework with Board oversight, despite no significant incidents - As a smaller reporting company, INNO currently lacks formalized cybersecurity measures, a dedicated team, or specific protocols[147] - The company has not experienced significant cybersecurity incidents but recognizes its vulnerability due to the absence of a formalized framework[148] - INNO is evaluating its cybersecurity needs, considering external experts, conducting vulnerability assessments, and developing an incident response strategy, with Board oversight for risk management[149][150] Properties INNO leases its principal executive and production facility in Brookshire, Texas, under a new agreement (Jan 2024-Jan 2027) with prepaid rent for 2027, having ended its California office lease in October 2024 - The principal executive office and production facility in Brookshire, Texas, is leased under a new agreement (Jan 2024 - Jan 2027) with prepaid rent for 2027[152] - The California office relocated from Corona to Diamond Bar in August 2023, and the Diamond Bar lease was ended in October 2024[153] - The current leased property is considered in good condition and suitable for business operations[155] Legal Proceedings INNO is not a party to any material legal proceedings, though an ongoing litigation involves a subcontractor's alleged misappropriation of over $1.3 million, which INNO is contesting - The Company is not currently a party to any material legal proceedings, investigations, or claims[156] - An ongoing litigation involves a plaintiff claiming a subcontractor misappropriated over $1.3 million, with funds allegedly transferred to the company; INNO is contesting these claims[369] - There is no assurance that future legal matters will not arise or materially affect the business[156] Mine Safety Disclosures Mine Safety Disclosures are not applicable to INNO HOLDINGS INC.'s operations - Mine Safety Disclosures are not applicable[157] PART II Market for Common Equity, Related Stockholder Matters and Purchases of Equity Securities INNO HOLDINGS INC.'s common stock (INHD) is listed on Nasdaq, underwent a 1-for-10 reverse stock split in October 2024, has declared no cash dividends, and completed its IPO in December 2023, raising approximately $7.86 million - Common stock is listed on The Nasdaq Capital Market under the symbol 'INHD'[160] - The Company completed a 1-for-10 reverse stock split on October 9, 2024, and previously a 1-for-2 reverse stock split in July 2023[162][163] - No cash dividends have been declared since inception; earnings are reinvested for working capital and business growth[166] - The IPO closed on December 18, 2023, generating approximately $7,859,533 in aggregate net proceeds[179] RESERVED This item is reserved and contains no information - This item is reserved[184] Management's Discussion and Analysis of Financial Condition and Results of Operation INNO, a building technology company, saw total revenue increase by 11% to $885,495 in FY2024 (driven by new consulting/licensing) and net loss decrease by 19% to $3,251,127, but faces going concern doubt due to insufficient cash for future operations - INNO's business involves manufacturing cold-formed steel products and prefabricated homes, with a new consulting service stream[185][189] - Performance is affected by steel price fluctuations, inflation, interest rates, and geopolitical conditions[191][192][193] - The company's cash and cash equivalents of $1,526,661 as of September 30, 2024, are not believed to be sufficient to fund operations for the next twelve months, creating substantial doubt about its ability to continue as a going concern[215] Results of Operation In FY2024, total revenue increased by 11% to $885,495 (driven by consulting/licensing), product revenue decreased by 51%, SG&A rose by 68% to $3,678,866, and net loss decreased by 19% to $(3,251,127) Consolidated Statements of Operations Summary (YoY Change) | Metric | FY2024 ($) | FY2023 ($) | YoY Change (%) | | :----------------------------------------- | :------------ | :------------ | :------------- | | Revenue - products | 395,495 | 799,747 | -51% | | Revenue - consulting services | 205,000 | - | 100% | | Revenue – License income | 285,000 | - | 100% | | Total Revenue | 885,495 | 799,747 | 11% | | Costs of materials and labor | 409,169 | 1,255,315 | -67% | | Selling, general and administrative expenses | 3,678,866 | 2,191,043 | 68% | | Impairment loss | 23,911 | - | 100% | | Depreciation | 87,116 | 69,437 | 25% | | Bad debt expense | 59,935 | 1,267,960 | -95% | | Operating loss | (3,373,502) | (3,984,008) | -15% | | Other income (expenses) | 123,175 | (39,196) | -414% | | Loss before income taxes | (3,250,327) | (4,023,204) | -19% | | Income tax expense | 800 | - | 100% | | Net loss | (3,251,127) | (4,023,204) | -19% | | Net loss attributable to INNO HOLDINGS INC. | (3,213,829) | (3,895,778) | -18% | - Product revenue decreased by 51% due to varying project statuses, while new consulting and licensing streams significantly contributed to total revenue[200][201] - Backlog as of September 30, 2024, was approximately $14,000,000 to $19,000,000, including a $15,875,800 agreement with Vision Opportunity Fund LP (Vision 101)[202] Liquidity and Capital Resources INNO's cash and cash equivalents increased to $1,526,661 in FY2024 (from $4,898 in FY2023) due to $8 million IPO proceeds, but insufficient cash for the next twelve months raises going concern doubt, necessitating additional $5.5 million capital raises post-year-end Cash and Cash Equivalents | As of September 30, | Cash and Cash Equivalents ($) | | :------------------ | :---------------------------- | | 2024 | 1,526,661 | | 2023 | 4,898 | - The cash increase was primarily driven by $8 million in net proceeds from the initial public offering closed in December 2023[212][214] - Management believes current cash is insufficient for the next twelve months, creating substantial doubt about the company's ability to continue as a going concern, necessitating additional capital raises[215] - Subsequent to year-end, the company secured $2,000,000 and approximately $3.5 million through private placements in October and November 2024, respectively[216][217][387][389] Cash Flows Net cash used in operating activities increased to $5,075,412 in FY2024 (from $1,225,941 in FY2023), investing activities used $547,060, and financing activities provided $7,144,235 (largely from IPO proceeds) Summary of Cash Flows | Cash Flow Activity | FY2024 ($) | FY2023 ($) | | :----------------- | :------------ | :------------ | | Operating | (5,075,412) | (1,225,941) | | Investing | (547,060) | (244,899) | | Financing | 7,144,235 | 1,425,110 | - The increase in net cash usage in operating activities was mainly due to a $3,720,738 increase of working capital outflow[219] - Net cash provided by financing activities in FY2024 was primarily due to $8,450,000 net cash from the initial public offering[224] Quantitative and Qualitative Disclosure About Market Risk As a 'smaller reporting company,' INNO HOLDINGS INC. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a 'smaller reporting company' and is not required to provide quantitative and qualitative disclosures about market risk[229] PART III Financial Statements and Supplementary Data This section presents INNO HOLDINGS INC.'s audited consolidated financial statements for FY2024 and FY2023, including balance sheets, statements of operations, equity, and cash flows, with unqualified auditor opinions (one highlighting going concern) and detailed notes on accounting policies and subsequent events - Consolidated financial statements for FY2024 and FY2023 include Balance Sheets, Statements of Operations, Changes in Stockholders' Equity, and Cash Flows[231] - Independent auditors (Simon & Edward, LLP for 2024; TAAD LLP for 2023) issued unqualified opinions, with TAAD LLP's report highlighting a going concern matter due to recurring losses[232][240][241] - Notes to financial statements provide details on accounting policies, financial instrument fair values, revenue recognition, inventory, property and equipment, loans, related party transactions, equity, concentration of risk, commitments, contingencies, income taxes, and subsequent events[263][269][323] Consolidated Balance Sheets Total assets increased from $2,545,762 in 2023 to $4,169,337 in 2024, total liabilities decreased to $1,371,801, and total equity improved from a $(1,943,586) deficit to $2,797,536 in 2024 Consolidated Balance Sheet Highlights | Metric | September 30, 2024 ($) | September 30, 2023 ($) | | :---------------------- | :--------------------- | :--------------------- | | Total Assets | 4,169,337 | 2,545,762 | | Total Liabilities | 1,371,801 | 4,489,348 | | Total Equity (Deficit) | 2,797,536 | (1,943,586) | - Cash and cash equivalents increased from $4,898 in 2023 to $1,526,661 in 2024[247] - Working capital improved from a deficit of $(2,913,827) in 2023 to a positive $975,755 in 2024[218] Consolidated Statements of Operations Total revenue increased by 11% to $885,495 in 2024, while net loss decreased by 19% to $(3,251,127), and losses per share improved from $(2.15) to $(1.59) Consolidated Statements of Operations Summary | Metric | FY2024 ($) | FY2023 ($) | | :----------------------------------------- | :------------ | :------------ | | Total Revenue | 885,495 | 799,747 | | Loss from Operations | (3,373,502) | (3,984,008) | | Net Loss | (3,251,127) | (4,023,204) | | Net Loss Attributable to INNO HOLDINGS INC. | (3,213,829) | (3,895,778) | | Losses Per Share (Basic and Diluted) | (1.59) | (2.15) | - Total revenue increased by 11% year-over-year, primarily due to the introduction of consulting services and licensing income[198][200] - Net loss decreased by 19% year-over-year, reflecting changes in revenue, costs, expenses, and other income/expenses[211] Consolidated Statements of Changes in Stockholders' Equity Total equity shifted from a $(1,943,586) deficit in 2023 to a positive $2,797,536 in 2024, driven by $7,859,534 in additional paid-in capital from the IPO and $72,000 from shares issued for services Changes in Stockholders' Equity | Metric | September 30, 2024 ($) | September 30, 2023 ($) | | :----------------------------------- | :--------------------- | :--------------------- | | Additional Paid in Capital | 10,748,534 | 2,830,000 | | Accumulated Deficit | (7,738,644) | (4,524,815) | | Total Equity (Deficit) | 2,797,536 | (1,943,586) | - The IPO completion resulted in $7,859,534 in additional paid-in capital[256] - Shares issued for services contributed $72,000 to additional paid-in capital in 2024[256] Consolidated Statements of Cash Flows Net cash increased by $1,521,763 in 2024, resulting in $1,526,661 cash at year-end, driven by $7,144,235 from financing (IPO proceeds) offsetting $5,075,412 used in operations and $547,060 in investing Consolidated Statements of Cash Flows Summary | Cash Flow Activity | FY2024 ($) | FY2023 ($) | | :----------------- | :------------ | :------------ | | Operating | (5,075,412) | (1,225,941) | | Investing | (547,060) | (244,899) | | Financing | 7,144,235 | 1,425,110 | | Net Change in Cash | 1,521,763 | (45,730) | | Cash, End of Period| 1,526,661 | 4,898 | - Net cash provided by financing activities was primarily due to $8,450,000 net cash from the initial public offering in 2024[224][261] - Net cash used in operating activities increased significantly due to a $3,720,738 increase in working capital outflow[219][261] Notes to Consolidated Financial Statements Notes detail accounting policies (U.S. GAAP, reverse stock splits), key estimates, changes in accounts receivable (allowance for credit losses decreased to $0 in 2024), inventory, property, loans, related party transactions, equity changes, risk concentrations, commitments, contingencies, income taxes, and subsequent events including $5.5 million in private placements and a $1.4 million equity investment - The Company's financial statements are prepared in accordance with U.S. GAAP, with all inter-company balances and transactions eliminated[269][270] - Allowance for credit losses decreased significantly to $0 in 2024 from $1,267,960 in 2023, reflecting improved collection rates and discontinuing business with high-risk customers[207][324] - Subsequent events include two private placements in October and November 2024, raising $2 million and approximately $3.5 million respectively, and a $1.4 million equity investment in CoreModu LLC[386][387][389] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure INNO HOLDINGS INC. reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - No changes in or disagreements with accountants on accounting and financial disclosure[392] Controls and Procedures As of September 30, 2024, INNO's disclosure controls and procedures were ineffective due to inadequate internal control policies, with plans to remediate by hiring personnel or consultants, acknowledging inherent control limitations - Disclosure controls and procedures were not effective as of September 30, 2024, due to a lack of adequate policies and procedures in internal control functions over key business cycles[394][395] - The company plans to hire additional personnel or consultants to design and implement internal controls to strengthen the system[395] - Management recognizes that internal control systems have inherent limitations and cannot prevent all errors or fraud[396] Other Information This item contains no other information - No other information is reported in this item[398] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This disclosure is not applicable to INNO HOLDINGS INC. - This disclosure is not applicable[400] PART III (Continued) Directors, Executive Officers and Corporate Governance INNO's Board has 5 directors (3 independent), with Ding Wei as CEO and Tianwei Li as CFO, overseeing risk management; post-IPO, Audit and Compensation Committees were established, chaired by Yufang Qu (audit committee financial expert) - The Board of Directors comprises 5 directors, with 3 independent directors (Yufang Qu, Tao Tu, Yongbo Mo) as per Nasdaq standards[417][419] - Key executive officers are Ding Wei (CEO, Director, Chairman) and Tianwei (Solomon) Li (CFO)[403][405][406] - The Board oversees risk management, including operational, financial, legal, regulatory, cybersecurity, strategic, and reputational risks, and monitors geopolitical developments[416] - Audit and Compensation Committees were established post-IPO, composed of independent directors. Yufang Qu chairs both and is an audit committee financial expert[420][421][425] Executive Compensation INNO, as an emerging growth company, discloses executive compensation for NEOs, aiming to attract and retain talent through base salaries and short-term incentives (e.g., $50,000 IPO award to Tianwei Li), with no equity incentives granted in FY2023/2024 - The compensation program aims to attract, motivate, and retain executives, aligning their interests with shareholders through base salaries, short-term cash incentives, and long-term equity incentives[432] Summary Compensation Table for NEOs | Name and Principal Position | Year | Salary ($) | Bonus ($) | Total ($) | | :-------------------------- | :--- | :--------- | :-------- | :-------- | | Ding Wei (CEO) | 2024 | - | - | - | | | 2023 | - | - | - | | Dekui Liu (Former CEO) | 2024 | 70,833 | - | 70,833 | | | 2023 | 11,000 | - | 11,000 | | Tianwei (Solomon) Li (CFO) | 2024 | 180,000 | 50,000 | 230,000 | | | 2023 | 45,000 | - | 45,000 | | Dr. Li (Alice) Gong (Former COO) | 2024 | 152,587 | - | 152,587 | | | 2023 | 100,347 | - | 100,347 | | Weston Twigg (Former CFO) | 2024 | - | - | - | | | 2023 | 104,527 | - | 104,527 | - Mr. Li received a one-time IPO award of $50,000 in 2024. No incentive equity awards were granted in FY2023 or FY2024[433][434][445][448] - The company adopted the 2023 Omnibus Incentive Plan and an Incentive Based Compensation Recoupment Policy[446][452] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of December 6, 2024, INNO had 3,057,043 shares outstanding, with no beneficial ownership by directors/executive officers, and significant stockholders including West Lake Club Inc. (20.94%) and Changzheng Ye (5.14%) - As of December 6, 2024, there were 3,057,043 shares of common stock issued and outstanding[457] Beneficial Ownership (as of Dec 6, 2024) | Name and Address of Beneficial Owner | Beneficially Owned Shares | Percent | | :----------------------------------- | :------------------------ | :------ | | Officers and Directors as a Group | — | — | | Changzheng Ye | 157,079 | 5.14% | | West Lake Club Inc. | 640,000 | 20.94% | - No awards were issued under the Company's equity compensation plan as of September 30, 2024[461] Certain Relationships and Related Transactions, and Director Independence INNO engaged in related party transactions, including $2,000 in loans from former CEO Mr. Dekui Liu, consulting from Yunited Assets LLC, purchases from Baicheng Trading LLC, and a $15.88 million project agreement with Vision Opportunity Fund LP, with a related person transaction policy and a majority independent Board - Short-term, interest-free loans from former CEO Mr. Dekui Liu, with $2,000 outstanding as of September 30, 2024[463] - Consultation services from Yunited Assets LLC (minority owner of a subsidiary) and renovation design services/materials from Baicheng Trading LLC (related to Chairwoman)[464][466] - A $15,875,800 project development agreement with Vision Opportunity Fund LP (assigned to Vision 101), partially owned by a former shareholder, with $244,185 received as deferred revenue as of September 30, 2024[468] - The company has a written related person transaction policy for review and approval, and a majority of its Board members are independent[469][471] Principal Accounting Fees and Services INNO paid $92,500 in audit fees to Simon & Edward, LLP for FY2024 and $178,383 to TAAD LLP for FY2023, with no other fees incurred, and the audit committee pre-approves all services Fees Paid to Principal Independent Registered Public Accounting Firm | Fee Type | FY2024 ($) | FY2023 ($) | | :--------------- | :--------- | :--------- | | Audit Fees | 92,500 | 178,383 | | Audit Related Fees | - | - | | Tax Fees | - | - | | All Other Fees | - | - | | Total Fees | 92,500 | 178,383| - Simon & Edward, LLP served as the independent auditor for FY2024, and TAAD LLP for FY2023[472] - The audit committee's charter requires pre-approval of all audit and permitted non-audit services[475] PART IV Exhibits and Financial Statement Schedules This section lists financial statements and exhibits for the Form 10-K, with all financial statements included under Item 8 and schedules omitted, detailing corporate governance documents, agreements, and certifications - All financial statements are included under Item 8 of this Annual Report[477] - Financial statement schedules are omitted as the required information is included in the financial statements or notes, or not required[478] - The exhibit index includes corporate formation documents, bylaws, underwriter warrants, indemnification agreements, development and supply agreements, incentive plans, offer letters, and various certifications[482][485] Form 10-K Summary This item indicates that no Form 10-K summary is provided - No Form 10-K summary is provided[483] Signatures The Form 10-K report is signed by CEO Ding Wei and CFO Tianwei Li, along with other directors, on December 9, 2024 - The report is signed by Ding Wei (Chief Executive Officer, Director and Chairman) and Tianwei Li (Chief Financial Officer) as principal executive and financial/accounting officers, respectively[488] - Additional signatures include directors Yufang Qu, Mengshu Shao, Tao Tu, and Yongbo Mo[488] - All signatures are dated December 9, 2024[488][490]