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What changed in INNO HOLDINGS INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of INNO HOLDINGS INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+164 added−311 removedSource: 10-K (2024-12-09) vs 10-K (2024-01-16)

Top changes in INNO HOLDINGS INC.'s 2024 10-K

164 paragraphs added · 311 removed · 115 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

82 edited+13 added−40 removed92 unchanged
Biggest changeAccording to the report released by Grand View Research in 2020, titled “Light Gauge Steel Framing Market Size, Share & Trends Analysis Report By Type, By End-use, By Region, and Segment Forecasts, 2021-2028”, the global light-gauge steel-framing market was valued at $33.89 billion in 2020 and is expected to reach $48.21 billion by 2028, growing at a CAGR of 4.6% from 2021 to 2028.
Biggest changeFor the “low” scenario, we recently requested updated wood bids and used the lowest one; in this case, we estimate that INNO products would have provided the contractor with 8% savings. 4 Market Opportunity Light-Gauge Steel-Framing Market According to the report released by Grand View Research in 2022, titled “Light Gauge Steel Framing Market Size, Share & Trends Analysis Report By Type (Skeleton Steel Framing, Wall Bearing Steel Framing), By End-use (Commercial, Residential), By Region, And Segment Forecasts, 2023 - 2030”, the global light-gauge steel-framing market was valued at $37.27 billion in 2023 and is expected to reach $52.73 billion by 2030, growing at a CAGR of 5.1% from 2023 to 2030.
Our modular steel building framing systems avoid construction delays caused by partial or unsynchronized delivery of different building components. By breaking away from the methods of traditional stick-built building, our customers report that their construction timelines have been reduced at least by 20%. Castor Cube Due to high housing prices, some are having difficulties purchasing a home.
Our modular steel building framing systems avoid construction delays caused by partial or unsynchronized delivery of different building components. By breaking away from the methods of traditional stick-built building, our customers report that their construction timelines have been reduced by at least 20%. Castor Cube Due to high housing prices, some are having difficulties purchasing a home.
Cold-Formed Steel Our primary competitors (or segment with which we are most often compared) are traditional lumber-based building products solutions in certain categories, particularly buildings below six floors and residential. The accessibility and proficiency in assembling lumber-based structures can make practitioners in construction industry unwilling to move out of the wood framing comfort zone.
Cold-Formed Steel Our primary competitors (or segment with which we are most often compared) are traditional lumber-based building products solutions in certain categories, particularly buildings below six floors and residential. The accessibility and proficiency in assembling lumber-based structures can make practitioners in the construction industry unwilling to move out of the wood framing comfort zone.
CUBE 200 is able to form C& U type studs and tracks in the thickness of 16 gauge and 6 inches width studs. CUBE 300 is able to form C&U type studs in the thickness of 12 gauge and 12 inches width studs. In addition, mobile factories are an important countermeasure to traditional equipment.
CUBE 200 is able to form C& U type studs and tracks in the thickness of 16 gauge and 6 inches width studs. CUBE 300 is able to form C&U type studs in the thickness of 12 gauge and 12 inches width studs. 12 In addition, mobile factories are an important countermeasure to traditional equipment.
This could lead to supply chain disruptions and affect delivery time. Furthermore, the steel is still commonly used to support the structure of prefab homes, regardless of the manufacturing technology used. Safety is an important factor to consider when choosing a prefab home.
This could lead to supply chain disruptions and affect delivery time. Furthermore, steel is still commonly used to support the structure of prefab homes, regardless of the manufacturing technology used. Safety is an important factor to consider when choosing a prefab home.
In this context, we distinguish ourselves through the technologies and innovations we bring to our process and methods for producing structural components from rolled steel into useful pieces that assemble without error. 16 3D “Printing” Technology Currently, 3D printing technology is widely used for prefab homes; however, cooling time is required for formation because the technical principle is to melt the material and then wait for it to cool before settling.
In this context, we distinguish ourselves through the technologies and innovations we bring to our process and methods for producing structural components from rolled steel into useful pieces that assemble without error. 3D “Printing” Technology Currently, 3D printing technology is widely used for prefab homes; however, cooling time is required for formation because the technical principle is to melt the material and then wait for it to cool before settling.
By expanding our product offerings, strengthening our supply chain, and cultivating key partnerships, we are well-positioned to provide comprehensive building solutions that effectively meet the evolving needs of our clients while concurrently driving revenue growth and delivering enhanced shareholder value. 13 Profit Growth Strategy Our profit growth strategy is composed of the following. Improving assembly automation.
By expanding our product offerings, strengthening our supply chain, and cultivating key partnerships, we are well-positioned to provide comprehensive building solutions that effectively meet the evolving needs of our clients while concurrently driving revenue growth and delivering enhanced shareholder value. Profit Growth Strategy Our profit growth strategy is composed of the following. Improving assembly automation.
By expanding our product line and continually advancing our research and development efforts, we aim to capture a significant market share in the housing industry while delivering superior value to our clients. 12 Cost of Sales Cost of Sales primarily consist below components. ● Materials — Rolled steel represents the single largest cost.
By expanding our product line and continually advancing our research and development efforts, we aim to capture a significant market share in the housing industry while delivering superior value to our clients. Cost of Sales Cost of Sales primarily consist below components. ● Materials — Rolled steel represents the single largest cost.
Mobile Factory saves significant transportation costs and as such, our goal is to increase the use of Mobile Factory. Optimizing artificial intelligence design capabilities. We intend to optimize the artificial intelligence design capabilities by utilizing machine learning to get the wisest structure supporting data and running several models for all types of walls.
Mobile Factory saves significant transportation costs and as such, our goal is to increase the use of Mobile Factory. 10 Optimizing artificial intelligence design capabilities. We intend to optimize the artificial intelligence design capabilities by utilizing machine learning to get the wisest structure supporting data and running several models for all types of walls.
Rent, utilities, insurance, consulting service and other normal expenses are all competitive in the commercial area where we are based. Our Growth Strategy We seek to leverage the trend toward off-site and modular building techniques to increase productivity, reduce errors on-site, and decrease costs.
Rent, utilities, insurance, consulting service and other normal expenses are all competitive in the commercial area where we are based. 9 Our Growth Strategy We seek to leverage the trend toward off-site and modular building techniques to increase productivity, reduce errors on-site, and decrease costs.
(Application number: 63367663) In the course of our business, we develop expertise in the manufacturing process. Although we have non-disclosure policies in place with respect to our personnel and in our contractual relationships, we cannot assure you that we will be able to protect our intellectual property rights with respect to this expertise.
(Application number: 63367663) 14 In the course of our business, we develop expertise in the manufacturing process. Although we have non-disclosure policies in place with respect to our personnel and in our contractual relationships, we cannot assure you that we will be able to protect our intellectual property rights with respect to this expertise.
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.
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. 11 ● No toxicity contribution.
We are also investing in R&D to ensure a pipeline of competitive and innovative building-technology products. Multiple products. We are in the process of developing the Castor Cube, a 743-square-foot modular house product with the goal of mass producing.
We are also investing in R&D to ensure a pipeline of competitive and innovative building-technology products. Multiple products and services. We are in the process of developing the Castor Cube, a 743-square-foot modular house product with the goal of mass producing.
Steel is tough and does not rot, spawl, split, or absorb moisture, and it is resistant to pests, unlike wood building materials. 14 Inherent Benefits of Steel Framing ● Steel has the highest strength-to-weight ratio of any framing material. ● Non-combustible.
Steel is tough and does not rot, spawl, split, or absorb moisture, and it is resistant to pests, unlike wood building materials. Inherent Benefits of Steel Framing ● Steel has the highest strength-to-weight ratio of any framing material. ● Non-combustible.
Unlike traditional metal stud suppliers, whose products are “made to stock” with no consideration for engineer design, our metal studs are typically made-to-order and customized for each project. 11 Prefabricated wall panels and trusses Prefabricated wall panels and trusses are another option for customers.
Unlike traditional metal stud suppliers, whose products are “made to stock” with no consideration for engineer design, our metal studs are typically made-to-order and customized for each project. Prefabricated wall panels and trusses Prefabricated wall panels and trusses are another option for customers.
We are actively working on a list of 100 potential patentable products. Our goal is to commercialize patents and technologies that we own. For example, the CFS portal frame system invented by our CEO could replace current shear wall systems to provide adequate lateral resistance against strong winds and severe earthquakes.
We are actively working on a list of 100 potential patentable products. Our goal is to commercialize patents and technologies that we own. For example, the CFS portal frame system invented by us could replace current shear wall systems to provide adequate lateral resistance against strong winds and severe earthquakes.
This will bring the significant increase in production capacity and it can help INNO to meet the growing demand for prefab homes more efficiently.
This will bring a significant increase in production capacity and it can help INNO to meet the growing demand for prefab homes more efficiently.
Mobile Factory Illustration Source: INNO The Mobile Factory is operated and managed by Internet of Things (“IoT”) technology, a network of physical objects that are embedded with sensors, software and other technologies for the purpose of connecting and exchanging data with other devices and systems over the internet. INNO developed its proprietary IoT production management system independently.
The Mobile Factory is operated and managed by Internet of Things (“IoT”) technology, a network of physical objects that are embedded with sensors, software and other technologies for the purpose of connecting and exchanging data with other devices and systems over the internet. INNO developed its proprietary IoT production management system independently.
In cases where the customer simply wants the framing, we bring our expertise in working with steel to that portion of the project. We are in the process of reducing our on-site work offerings. Engineering services Our engineering services provide stamped and sealed structure design services by our in-house engineer team.
In cases where the customer simply wants the framing, we bring our expertise in working with steel to that portion of the project. We are in the process of reducing our on-site work offerings. S ervices Our engineering services provide stamped and sealed structure design services by our in-house engineer team.
Castor Cube plans to apply a patent for its utility hook-up system, which enable consumers to connect utility within one day. This is a unique feature that can make the process of setting up a prefab home more convenient for consumers.
Castor Cube plans to apply a patent for its utility hook-up system, which enables consumers to connect utility within one day. This is a unique feature that can make the process of setting up a prefab home more convenient for consumers.
We are keeping our prices at a competitive level with traditional wood framing solutions. In a recent internal case study, we found that INNO’s products delivered real-world cost-savings of 8-16% compared to wood framing. This study compared our solution against wood for a 2,2663 sqft. home built in 2022, for which we supplied materials.
We are keeping our prices at a competitive level with traditional wood framing solutions. In a recent internal case study, we found that INNO’s products delivered real-world cost-savings of 8-16% compared to wood framing. This study compared our solution against wood for a 2,2663 square feet. home built in 2022, for which we supplied materials.
Expenditures for environmental compliance purposes during 2023 and 2022 were not material. We were given awards by the U.S. Green Building Council (“USGBC”) in 2020. Our manufacturing processes minimizes waste, prevents pollution, and recycles wherever possible.
Expenditures for environmental compliance purposes during 2024 and 2023 were not material. 13 We were given awards by the U.S. Green Building Council (“USGBC”) in 2020. Our manufacturing processes minimizes waste, prevents pollution, and recycles wherever possible.
Further, lumber prices were generally lower than the price of metal studs before the COVID-19 pandemic. The switch to cold-formed Steel is being driven by materials price and several market-based advantages of steel. Steel is strong, safe, durable, versatile, and cost-effective. Steel has the exceptional environmental advantage of being highly recycled and infinitely recyclable.
Further, lumber prices were generally lower than the price of metal studs. The switch to cold-formed Steel is being driven by materials price and several market-based advantages of steel. Steel is strong, safe, durable, versatile, and cost-effective. Steel has the exceptional environmental advantage of being highly recycled and infinitely recyclable.
In this case, cold-formed steel cost 0.9% more than traditional wood construction. Cost Comparison Case Study 2 Source: SFIA The two case studies mentioned above are taken from the official SFIA website. We believe INNO’s product cost is less than that of the preceding case studies, with the overall cost less than that of traditional wood.
In this case, cold-formed steel cost 0.9% more than traditional wood construction. The two case studies mentioned above are taken from the official SFIA website. We believe INNO’s product cost is less than that of the preceding case studies, with the overall cost less than that of traditional wood.
INNO’s business growth strategy combines the following three parts: revenue growth strategy, profit growth strategy and technology growth strategy. Revenue Growth Strategy Our revenue growth strategy is composed of the following. Capacity expansion and in-house research and development. We plan to expand factory operations and manufacturing capabilities in line with demand.
INNO’s business growth strategy combines the following three parts: revenue growth strategy, profit growth strategy and technology growth strategy. Revenue Growth Strategy Our revenue growth strategy is composed of the following. Capacity expansion and in-house research and development. We are expanding factory operations and manufacturing capabilities in line with demand.
The first location for the study was a building constructed in Chicago in late 2017. Results include hard construction costs only. In this case, cold-formed steel cost 2.6% more than traditional wood construction. SFIA Cost Analysis: Wood vs. Cold-Formed Steel, Location 1 Source: SFIA 15 The second location was in Morristown, New Jersey.
The first location for the study was a building constructed in Chicago in late 2017. Results include hard construction costs only. In this case, cold-formed steel cost 2.6% more than traditional wood construction. The second location was in Morristown, New Jersey.
If we combined the US light gauge steel (which we estimate to be currently at approximately $6 billion based on the projected market value of $7.2 billion by 2027) and wood framing market ($24.9 billion) opportunities in 2023, we estimate it would amount to a $29.9B market opportunity in which INNO competes.
If we combined the US light gauge steel (which we estimate to be currently at approximately $6 billion based on the projected market value of $7.2 billion by 2027) and wood framing market ($27.5 billion) opportunities in 2024, we estimate it would amount to a $33.5 billion market opportunity in which INNO competes.
There are currently five pending patent applications and descriptions of each pending patent are as follows: ● 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.
The trademarks application status of our name and other marketing materials is pending. There are currently five pending patent applications and descriptions of each pending patent are as follows: ● 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.
Prefabricated Building Market According to the summary of an IBISWorld report titled, “Prefabricated Home Manufacturing in the US — Market Size 2002-2029,” the prefabricated home manufacturing market size in the U.S. is expected to be $9.1 billion in 2023.
Prefabricated Building Market According to the summary of an IBISWorld report titled, “Prefabricated Home Manufacturing in the US market size (2024-2029),” the prefabricated home manufacturing market size in the U.S. is expected to be $13.3 billion in 2024.
This approach allows INNO to streamline the production process, increase efficiency, and reduce dependency on labor. By implementing off-site building technologies, INNO is able to prefabricate and assemble many components of the building in a factory setting, which can lead to improved quality control, faster construction times and reduced on-site labor costs.
By implementing off-site building technologies, INNO is able to prefabricate and assemble many components of the building in a factory setting, which can lead to improved quality control, faster construction times and reduced on-site labor costs.
For example, local governments are beginning to regulate in favor of using alternatives to wood in building projects. To reduce the city’s vulnerability to wildfires, the Los Angeles City Council voted in early 2021 to explore a proposal that could prohibit the use of wood-frame building for larger developments in some of its most densely populated neighborhoods.
To reduce the city’s vulnerability to wildfires, the Los Angeles City Council voted in early 2021 to explore a proposal that could prohibit the use of wood-frame building for larger developments in some of its most densely populated neighborhoods.
Our manufacturing process manufactures special length products for all types of projects, has self-contained building system solutions that do not rely on third-party suppliers, and designs products to fulfill the BCA Energy Efficiency program.
Our manufacturing process manufactures special length products for all types of projects, has self-contained building system solutions that do not rely on third-party suppliers, and designs products to fulfill the BCA Energy Efficiency program. This compliance proves that we are a green company that meets basic environmental milestones and legal requirements.
We anticipate that this modular home product will be completely constructed within our facilities starting in the fourth quarter of 2023. Once built, it will be transported to permanent locations for installation. The timeline for product delivery is not affected by weather since it will be manufactured in our 100% climate-controlled factory.
We are expanding and improving our facility in Texas and anticipate that this modular home product will be completely constructed within the next couple years. Once built, it will be transported to permanent locations for installation. The timeline for product delivery is not affected by weather since it will be manufactured in our 100% climate-controlled factory.
We believe this innovation is the good solution for urgent deployment in disaster areas or remote areas. It is designed to reduce the cost and time of transportation of metal studs, which we believe can drive a lower carbon footprint for larger projects.
It is designed to reduce the cost and time of transportation of metal studs, which we believe can drive a lower carbon footprint for larger projects.
The new technologies in the portal frame system include optimized stiffened holes on cold-formed steel frame members to increase structural stability and span capacity and special moment joint technology using adhesive and rivet connections which enable superior energy dissipation capacity and fast fabrication. 10 This new CFS moment frame does not require any interior shear walls for the Castor Cube, our modular home product.
The new technologies in the portal frame system include optimized stiffened holes on cold-formed steel frame members to increase structural stability and span capacity and special moment joint technology using adhesive and rivet connections which enable superior energy dissipation capacity and fast fabrication.
According to the report released by Global Industry Analysts, Inc, titled “Prefabricated Building Global Market Trajectory & Analytics”, the global prefabricated building market, estimated at $106.1 billion in the year 2020, is projected to reach a revised size of $164.1 billion by 2027, growing at a CAGR of 6.4% over the analysis period of 2020 through 2027.
According to the report released by Global Industry Analysts, Inc, titled “Prefabricated Buildings - Global Strategic Business Report”, the global prefabricated building market, estimated at $117.4 billion in the year 2022, is projected to reach a revised size of $202.7 billion by 2030, growing at a CAGR of 7.1% over the analysis period of 2022 through 2030.
The targeted companies would include the ones that enjoy the popularities in the industry, including but not limited to the companies that can supply the interior finish, exterior wall panels, insulation materials and roof system etc.
To fortify our supply chain and augment our capabilities, we will consider the strategic acquisition or investment of construction vendors/suppliers. The targeted companies would include the ones that enjoy the popularities in the industry, including but not limited to the companies that can supply the interior finish, exterior wall panels, insulation materials and roof system etc.
We also work with local, regional, and state-wide agencies to facilitate workforce hiring and development initiatives. We had 11 full-time employees at both of September 30, 2023 and 2022. We also utilize at-will contractors in our business. As of September 30, 2022, we had 10 at-will contractors employed.
We provide employees with base wages and salaries that we believe are competitive and consistent with each employee’s position. We also work with local, regional, and state-wide agencies to facilitate workforce hiring and development initiatives. We had four and 11 full-time employees as of September 30, 2024 and 2023, respectively. We also utilize at-will contractors in our business.
S. market has dominated the North American cold-formed steel-framing market, and it is expected to continue to be a dominant market player until 2027; thereby, achieving a market value of $7.2 billion by 2027. 7 According to the summary of an IBISWorld report titled, “Wood Framing in the US — Market Size 2005-2029,” the wood framing market size in the U.S. is expected to be $24.9 billion in 2023.
S. market has dominated the North American cold-formed steel-framing market, and it is expected to continue to be a dominant market player until 2027; thereby, achieving a market value of $7.2 billion by 2027.
For the years ended September 30, 2023 and 2022, three customers accounted for 53% and one customer accounted for 15% of the Company’s total revenues, respectively. As of September 30, 2023 and 2022, accounts receivable from one customer accounted for 100% and five customers accounted for 80% of the Company’s total accounts receivable, respectively.
For the year ended September 30, 2023, three customers accounted for 53%. As of September 30, 2024, $Nil outstanding of accounts receivable. Accounts receivable from one customer accounted for 100% of the Company’s total accounts receivable as of September 30, 2023.
These products are under active research and development, with the aim of creating replicable housing complexes across the United States. By leveraging our expertise in building technology and innovative design, we target to provide scalable and high-quality housing solutions that meet the evolving needs of residents including but not limited to senior citizen, college students and Gen Z etc.
By leveraging our expertise in building technology and innovative design, we target to provide scalable and high-quality housing solutions that meet the evolving needs of residents including but not limited to senior citizen, college students and Gen Z etc. Through our revenue model, we anticipate generating sustainable income by catering to the demand for replicable apartment products.
The system controls equipment and manages the Mobile Factory via a dashboard, allowing the user to gain a comparative understanding of production parameters, such as operation data, machinery breakdown data, uptime data and production efficiency.
The system controls equipment and manages the Mobile Factory via a dashboard, allowing the user to gain a comparative understanding of production parameters, such as operation data, machinery breakdown data, uptime data and production efficiency. Related Services We may from time to time participate in land development and contractor services if an opportunity exists to leverage our products.
Due to the nature of manufacturing, we are subject to substantial regulations related to safety in the workplace. In addition to the requirements of local and state governments in Texas, we must comply with federal health and safety regulations, the most significant of which are enforced by the Occupational Safety and Health Administration.
In addition to the requirements of local and state governments in Texas, we must comply with federal health and safety regulations, the most significant of which are enforced by the Occupational Safety and Health Administration. Further, our operations and facilities are subject to additional federal, state, or local laws or regulations, such as the COVID-19 safety and prevention regulations.
They are now commonly used to build apartments, hotels, temporary housing, nursing homes, commercial buildings, industrial buildings, and single-family detached homes. These types of structures are expected to be the targets of our Company’s sales and marketing team.
They are now commonly used to build apartments, hotels, temporary housing, nursing homes, commercial buildings, industrial buildings, and single-family detached homes.
Due to its inherent advantages such as fire-resistance, termite resistance, consistent material quality and sustainability, we believe cold-formed steel will be the optimal alternative building material.
Due to its inherent advantages such as fire-resistance, termite resistance, consistent material quality and sustainability, we believe cold-formed steel will be the optimal alternative building material. Marketing We are an innovative building-technology company with a mission to transform the construction industry with our proprietary cold-formed steel-framing technology and other innovations.
In this way, INNO aims to have the most advanced and comprehensive technology in the industry and be the true technological barrier for competitors to overcome. A significant competitive strength in our research and development capability is the Inno Research Institute, LLC, a subsidiary of INNO (“IRI”).
In this way, INNO aims to have the most advanced and comprehensive technology in the industry and be the true technological barrier for competitors to overcome.
With nearly all of Los Angeles comfortably above 5,000 residents per square mile, this expansion would effectively ban timber and wood-frame building in much of the city, including many rapidly growing neighborhoods near transit.
With nearly all of Los Angeles comfortably above 5,000 residents per square mile, this expansion would effectively ban timber and wood-frame building in much of the city, including many rapidly growing neighborhoods near transit. 5 Sustainability and Green Building Manufacturing of materials for buildings and construction accounted for approximately 11% of global energy-related CO2 emissions in 2017 according to the Global Status Report 2018, Global Alliance for Buildings and Construction & International Energy Agency.
Our cold-formed roller machine is acquired from an original equipment manufacturer with certain modifications to the standard version of the machine that are unique and proprietary to INNO. When we refer to our “proprietary” cold-formed roller machines, we are referring to the modified machine with the intellectual property and process techniques we have developed.
When we refer to our “proprietary” cold-formed roller machines, we are referring to the modified machine with the intellectual property and process techniques we have developed.
Another innovation, the cold-formed steel truss system, utilizes a strong axis of cold-formed steel stud members for both chords and webs which allow longer spans and lighter weight than the conventional type trusses. The steel truss system has wide applications in storage and education buildings.
The new technology should improve the structural integrity of building structures, increase the lateral resistance, and lower the overall costs. Another innovation, the cold-formed steel truss system, utilizes a strong axis of cold-formed steel stud members for both chords and webs which allow longer spans and lighter weight than the conventional type trusses.
For example, we have agreed to provide project development services for our contract with Vision Opportunity Fund LP, partially owned by a minority shareholder of the Company, related to the development of an approximately 110,000 sqft retirement community. Our Customers We can serve commercial, residential, and industrial projects.
For example, we have agreed to provide project development services for our contract with Vision Opportunity Fund LP (assigned to Vision 101), partially owned by a minority shareholder of the Company, related to the development of an approximately 110,000 square feet retirement community. In February 2024, we formed Inno AI Tech Corp., which specializes in research and consulting services.
We are also working on developing Village 101, a smart senior living apartment comprising 155 units with a floor area of 110,000 square feet. The architectural plan package for Village 101 is complete and ready for implementation. Village 101 serves as a prototype building tech community, showcasing our innovative approach to senior living.
We are also working on developing Village 101, a smart senior living apartment comprising 155 units with a floor area of 110,000 square feet. The architectural plan package for Village 101 is complete and awaits permits approval for implementation. We’ve expanded our business to include consulting services offered by our new entity-AI Tech Corp. Marketing investment.
For the cold-formed steel-framing business, the sales model is business-to-business because the main customers are developers, builders, and contractors. For the Castor Cube prefab home products, the sales model is expected to be either business-to-business or business-to-customer. On a year-to-year basis we are generally dependent on a small number of major customers that change year to year.
For the cold-formed steel-framing business, the sales model is business-to-business because the main customers are developers, builders, and contractors. For the Castor Cube prefab home products and the consulting services performed by Inno AI Tech Corp., the sales model is expected to be either business-to-business or business-to-customer.
The architectural plan package for Village 101 is complete and ready for implementation. Village 101 serves as a prototype building tech community, showcasing our innovative approach to senior living. Our pipeline includes various apartment product options with different unit sizes, ranging from 15 to 150 units.
Village 101 serves as a prototype building tech community, showcasing our innovative approach to senior living. Our pipeline includes various apartment product options with different unit sizes, ranging from 15 to 150 units. These products are under active research and development, with the aim of creating replicable housing complexes across the United States.
These agreements contain standard construction and supplier agreement terms including payment schedules, performance schedules, the ability to subcontract, insurance obligations and indemnification provisions, and confidentiality provisions. Our written agreements with these customers generally terminate upon completion of the project or early terminate upon mutual agreement of the parties and contain provisions restricting our right to assign the agreement.
These agreements contain standard construction and supplier agreement terms including payment schedules, performance schedules, the ability to subcontract, insurance obligations and indemnification provisions, and confidentiality provisions.
As of September 30, 2023 and 2022, accounts payable to two suppliers accounted for 55% and three suppliers accounted for 94% of the Company’s total accounts payable, respectively. We currently do not have written agreements with these suppliers or, generally, with any of our suppliers. All of our purchases from these suppliers are made by way of individual orders.
We currently do not have written agreements with these suppliers or, generally, with any of our suppliers. All of our purchases from these suppliers are made by way of individual orders.
IRI focuses on patentable innovative products and commercializing research discoveries in the cold-formed steel industry in the U.S. and committed to bringing innovation in the field of thin-walled structures, cold-formed steel building technology, and design methodology for resilient buildings. 6 Fully Integrated Manufacturing Process Compared to other traditional metal stud manufacturers, INNO differentiates itself by integrating services from design to metal stud production to prefabrication, utilizing off-site building technology to reduce the need for on-site framing labor.
INNO focuses on patentable innovative products and commercializing research discoveries in the cold-formed steel industry in the U.S. and committed to bringing innovation in the field of thin-walled structures, cold-formed steel building technology, and design methodology for resilient buildings.
Our proprietary cold-formed roller machines are equipped with proprietary software, which optimizes production efficiency and supports individual part customization to ensure each cold-formed-steel member is produced to the exact specifications of the plans. Our intelligent machines can precisely cut and punch out steel studs, leaving channels for the mechanical, electrical, and plumbing designs.
These types of structures are expected to be the targets of our Company’s sales and marketing team. 1 Our proprietary cold-formed roller machines are equipped with proprietary software, which optimizes production efficiency and supports individual part customization to ensure each cold-formed-steel member is produced to the exact specifications of the plans.
It will allow the Cube to have various room layouts. The homeowners will also be able to change the room layout in the future. The new CFS moment frame can also be used for long-span residential and mid-rise commercial buildings. The new technology should improve the structural integrity of building structures, increase the lateral resistance, and lower the overall costs.
This new CFS moment frame does not require any interior shear walls for the Castor Cube, our modular home product. It will allow the Cube to have various room layouts. The homeowners will also be able to change the room layout in the future. The new CFS moment frame can also be used for long-span residential and mid-rise commercial buildings.
Based on fully quoted materials and estimated labor and insurance costs, we estimate the contractor saved 16% by using INNO products compared to wood framing. For the “low” scenario, we recently requested updated wood bids and used the lowest one; in this case, we estimate that INNO products would have provided the contractor with 8% savings.
Based on fully quoted materials and estimated labor and insurance costs, we estimate the contractor saved 16% by using INNO products compared to wood framing.
Corporate Information Our principal executive offices are located at 2465 Farm Market 359 South, Brookshire, TX 77423, and our California office is located at 21660 Copley Drive, Diamond Bar, CA 91765. Our corporate website address is www.innometalstuds.com . Our telephone number is (800) 909-8800.
Below is the corporate structure of the Company as of December 6, 2024: Corporate Information Our principal executive office is located at 2465 Farm Market 359 South, Brookshire, TX 77423. Our corporate website address is https://www.innoholdings.com . Our telephone number is (800) 909-8800.
Revenue Model Our revenue model currently consists of sales of the following: ● Light-gauged studs and tracks; ● Prefabricated wall panels and trusses; ● Structure framing work on site; ● Engineering services; ● Machine sales; and ● Replicable Apartment product.
This flexibility creates a complete and multi-functional highly competitive wall panel system that can be installed on almost any joist and are extremely simple to install. 7 Revenue Model Our revenue model currently consists of sales of the following: ● Light-gauged studs and tracks; ● Prefabricated wall panels and trusses; ● Structure framing work on site; ● Services; ● Machine sales; and ● Replicable Apartment product.
Also, we are actively conducting market research to determine the viability of our new products and new patents. We have increased our marketing budget and formed a professional sales team to increase our online marketing, which we believe can help us grow our revenue.
We have increased our marketing budget and formed a professional sales team to increase our online marketing, which we believe can help us grow our revenue. 6 Research and Product Development/Innovations We are a building technology company that is dedicated to research and product development innovation.
The training for such operations and installations are also provided. We will recommend, select, and advise pricings for material suppliers and other vendors. Replicable Apartment Product Our flagship product within this series is Village 101, a smart senior living apartment comprising 155 units with a floor area of 110,000 square feet.
Replicable Apartment Product Our flagship product within this series is Village 101, a smart senior living apartment comprising 155 units with a floor area of 110,000 square feet. The architectural plan package for Village 101 is complete and ready for implementation. The project is currently pending for permits.
Human Capital Resources The success of our business depends in large part on our ability to attract, retain, and develop a workforce of skilled employees at all levels of our organization. We provide employees with base wages and salaries that we believe are competitive and consistent with each employee’s position.
Expenditures for compliance with occupational health and safety laws and regulations during 2024 and 2023 were not material. Human Capital Resources The success of our business depends in large part on our ability to attract, retain, and develop a workforce of skilled employees at all levels of our organization.
Such system would include applications such as fully automated prefabrication processes that turn a 2D drawings or 3D model into a prefabricated building component, or fabrication directly off a 3D model or shop drawings, enabling the production of high-performing components and, ultimately, more efficient parts. 8 Regulatory and Governmental Pressures for Change President Biden’s Executive Order 14057 on the adoption of the federal Sustainable Development Catalyst for America’s Clean Energy Industry and Jobs and the accompanying federal Sustainable Development Plan establish the ambitious goal of achieving zero emissions from building by 2045.
Regulatory and Governmental Pressures for Change President Biden’s Executive Order 14057 on the adoption of the federal Sustainable Development Catalyst for America’s Clean Energy Industry and Jobs and the accompanying federal Sustainable Development Plan establish the ambitious goal of achieving zero emissions from building by 2045.
Further, our operations and facilities are subject to additional federal, state, or local laws or regulations, such as the COVID-19 safety and prevention regulations. Our operations are also subject to federal, state, and local labor laws relating to employee privacy, wage and hour matters, overtime pay, discrimination and harassment, equal opportunity and employee leave and benefits.
Our operations are also subject to federal, state, and local labor laws relating to employee privacy, wage and hour matters, overtime pay, discrimination and harassment, equal opportunity and employee leave and benefits. It is our policy and practice to comply with all legal and regulatory requirements and our procedures and internal controls are designed to promote such compliance.
Corporate Structure Our Company, INNO HOLDINGS, INC., a Texas corporation (the “Company”), was incorporated on September 8, 2021. The Company is principally engaged in the marketing and sale of construction products along with full-scope construction services in the US. It has three subsidiaries: Inno Metal Studs Corp, Castor Building Tech LLC, and Inno Research Institute LLC.
Corporate Structure Our Company, INNO HOLDINGS INC., was incorporated in Texas on September 8, 2021. It originally had three subsidiaries, Inno Metal Studs Corp (“IMSC”), Castor Building Tech LLC (“CBT”), and Inno Research Institute LLC (“IRI”). On January 21, 2024, the Company established Inno Disrupts Inc., a wholly owned subsidiary in Texas.
It is designed to enable immediate stud production on any site. Our Mobile Factory is complete with metal stud production equipment and a diesel generator. This generator can supply continuous power to our cold-formed roller machine. The production capacity of our Mobile Factory is at least 1,000 linear feet per day.
This generator can supply continuous power to our cold-formed roller machine. The production capacity of our Mobile Factory is at least 1,000 linear feet per day. We believe this innovation is the good solution for urgent deployment in disaster areas or remote areas.
IoT Production Management System Source: INNO 5 Related Services We may from time to time participate in land development and contractor services if an opportunity exists to leverage our products. Specifically, we have evaluated the development of apartment complexes, retirement communities, and remodels for projects that would incorporate our metal framing studs.
Specifically, we have evaluated the development of apartment complexes, retirement communities, and remodels for projects that would incorporate our metal framing studs.
Machine sales We may sell or lease our machines. We provide technical and design support at relatively low costs, including industry compliance license and permits, as well as shop drawings and structural design. We also offer administration, operation, and management consulting support, including directing and assisting factory set-up, operation procedures, equipment installation, machine maintenance, repairs, and efficiency improvement.
The revenue from the consulting service is recognized upon the described services be provided to customers. 8 Machine sales We may sell or lease our machines. We provide technical and design support at relatively low costs, including industry compliance license and permits, as well as shop drawings and structural design.
We will position ourselves to offer a comprehensive range of solutions encompassing the entire building. The expanded scope of our offerings includes prefab structure systems, centralized MEP (mechanical, electrical, plumbing) systems, integrated wall systems, integrated floor systems, roofing systems, and prefab cabinets, sinks, and countertops.
The expanded scope of our offerings includes prefab structure systems, centralized MEP (mechanical, electrical, plumbing) systems, integrated wall systems, integrated floor systems, roofing systems, and prefab cabinets, sinks, and countertops. This integration allows us to deliver a single-cycle turnkey solution, streamlining the traditional linear process employed by traditional developers.
Research and Product Development/Innovations We are a building technology company that is dedicated to research and product development innovation. Our scientists and engineers are committed to developing sturdier steel studs, tracks, headers, and other components, resulting in superior strength while maintaining the lowest costs possible.
Our scientists and engineers are committed to developing sturdier steel studs, tracks, headers, and other components, resulting in superior strength while maintaining the lowest costs possible. Our cold-formed roller machine is acquired from an original equipment manufacturer with certain modifications to the standard version of the machine that are unique and proprietary to INNO.
Our Mobile Factory is an all-in-one, secured production facility that will produce steel-framing members onsite. It can print wall panel, floor truss, and roof truss components. The size is customized for a trailer, which enables it to be transported anywhere, ranging from metropolitan suburbs to remote areas with little to no infrastructure.
The size is customized for a trailer, which enables it to be transported anywhere, ranging from metropolitan suburbs to remote areas with little to no infrastructure. It is designed to enable immediate stud production on any site. Our Mobile Factory is complete with metal stud production equipment and a diesel generator.
This compliance proves that we are a green company that meets basic environmental milestones and legal requirements. 17 Occupational Health and Safety Laws Our business and operations are subject to numerous federal, state, and local laws and regulations intended to protect our employees.
Occupational Health and Safety Laws Our business and operations are subject to numerous federal, state, and local laws and regulations intended to protect our employees. Due to the nature of manufacturing, we are subject to substantial regulations related to safety in the workplace.
In accordance with our growth strategy, our company intends to pursue vertical integration by acquiring several companies operating within the construction industry in the United States. The objective of this vertical integration is to strengthen our position as a prominent building-technology developer and expand our capabilities within the market.
The objective of this vertical integration is to strengthen our position as a prominent building-technology developer and expand our capabilities within the market. We will position ourselves to offer a comprehensive range of solutions encompassing the entire building.
Our production method allows the panels to be highly flexible in size and shape, such as curved panels and folded panels. This flexibility creates a complete and multi-functional highly competitive wall panel system that can be installed on almost any joist and are extremely simple to install.
Our production method allows the panels to be highly flexible in size and shape, such as curved panels and folded panels.
Our Suppliers Historically we rely on a limited number of suppliers. For the years ended September 30, 2023 and 2022, three suppliers accounted for 57% and three suppliers accounted for 75% of the Company’s total purchases, respectively.
For the year ended September 30, 2024, two suppliers accounted for 58% of the Company’s total purchases. For the year ended September 30, 2023, three suppliers accounted for 57% of the Company’s total purchases. As of September 30, 2024 and 2023, accounts payable to two suppliers accounted for 51% and 55% of the Company’s total accounts payable, respectively.
Castor Cube Rendering Source: INNO 4 Mobile Factory: Off-site Equipment Rental, Sales, Service, and Support We believe innovative technology can increase productivity in the building sector. Research and development of more efficient methods in the manufacturing and building space is at the forefront of our business model.
Furthermore, we expect that streamlined building process will shorten the completion time. Mobile Factory: Off-site Equipment Rental, Sales, Service, and Support We believe innovative technology can increase productivity in the building sector.
Since the wood structures could be replaced by cold-formed-steel structures, INNO’s target market size includes the wood-framing market.
According to the summary of an IBISWorld report titled, “Wood Framing in the US - Market Size, Industry Analysis, Trends and Forecasts (2024-2029),” the wood framing market size in the U.S. is expected to be $27.5 billion in 2024. Since the wood structures could be replaced by cold-formed-steel structures, INNO’s target market size includes the wood-framing market.
Our written agreements with major customers normally terminate upon completion, and our major customers change from year to year. For fiscal year 2023, we had 24 customers, and for fiscal year 2022 we had 46 customers, of which only 10 were customers the prior fiscal year.
On a year-to-year basis we are generally dependent on a small number of major customers that change year to year. Our written agreements with major customers normally terminate upon completion, and our major customers change from year to year. For the year ended September 30, 2024, three customers accounted for 90% of the Company’s total revenues, respectively.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe will continue to be obligated to pay the monthly rent for the office in Corona, California until the landlord finds a new lessee to occupy the facility. The new lease in Diamond Bar, CA 91765 has a 24-month term beginning on August 1, 2023 and ending on July 31, 2025.
Biggest changeIn August 2023, we relocated our California office from Corona to Diamond Bar. We were obligated to pay the monthly rent for the office in Corona until February 1, 2024 when the landlord found a new lessee to occupy the facility.
ITEM 2. PROPERTIES We lease our principal executive offices which are located at 2465 Farm Market 359 South, Brookshire, TX 77423. The lease for the Company’s principal Executive Officer at 2465 Farm Market 359 South, Brookshire, TX 77423 has a 60-month term beginning on December 1, 2019 and ending on December 31, 2024.
ITEM 2. PROPERTIES We lease our principal executive offices which are located at 2465 Farm Market 359 South, Brookshire, TX 77423. The lease for this principal Executive Office had a 60-month term beginning on December 1, 2019 and ending on December 31, 2024.
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We also leased a building at 4225 Prado Road, Suite 101, Corona, California 92880, as our California office. This lease has a five-year term beginning on May 1, 2022 and ending on April 30, 2027. In August 2023, our California office was relocated to 21660 Copley Drive, Diamond Bar, CA 91765.
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On January 1, 2024, this facility lease was terminated without penalty and a new lease agreement was entered with the landlord. The new lease term is from January 1, 2024 to January 1, 2027, with a monthly rent of $18,000. The facility consists of 15,000 square feet of indoor space and 2.5 acres of concrete slab in the yard.
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On January 4, 2024, the Company entered into an agreement to acquire certain real property located at 300 South Park Avenue, Pomona, Los Angeles, California. The property will serve as an office and commercial building.
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On February 1, 2024, a mutual amendment to the lease agreement was executed. Under the terms of the amendment, we opted to prepay the lease payments covering the period up to December 31, 2026, with the due date set for April 1, 2024.
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This prepayment arrangement secures a rent-free period for the final year of the lease, spanning the entirety of 2027. We had also entered into a lease agreement for office and production space in Corona, California with a term from May 1, 2022 until April 30, 2027 at a rate of $6,617 to $7,740 per month.
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The lease in Diamond Bar, California has a term of 24 months from August 18, 2023 to August 17, 2025 at a rate of $4,730 to $4,926 per month. Subsequently on October 28, 2024, the lease in Diamond Bar was ended and assigned to a nonprofit organization.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time, we may become involved in legal proceedings arising in the ordinary course of our business.
Biggest changeITEM 3. 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.
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We believe that we do not have any pending or threatened litigation which, individually or in the aggregate, would have a material adverse effect on our business, results of operations, financial condition and/or cash flows. 19 PART II ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information We have our common stock listed on the Nasdaq Capital Market under the symbol “INHD”.
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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.
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Holders As of January 11, 2024, there were approximately 4 stockholders of record of our common stock. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
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ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 16 PART II
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This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividend Policy We have not declared any cash dividends since inception, and we do not anticipate paying any dividends in the foreseeable future.
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Instead, we anticipate that all of our earnings will be used to provide working capital, to support our operations, and to finance the growth and development of our business.
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The payment of dividends is within the discretion of the Board and will depend on our earnings; capital requirements; financial condition; prospects; applicable Texas law, which provides that dividends are only payable out of surplus or current net profits; and other factors our Board might deem relevant.
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There are no restrictions that currently limit our ability to pay dividends on our common stock other than those generally imposed by applicable state law. Transfer Agent VStock Transfer, LLC., 18 Lafayette Place, Woodmere, New York 11598.
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Recent Sales of Unregistered Securities During the period from October 1, 2022 to September 30, 2023, we have granted or issued the following securities that were not registered under the Securities Act: (a) Issuance of common stock. ● On December 3, 2022, the Company issued 142,857 shares of its common stock, on a pre-reverse stock split basis, to an accredited investor at $3.5 per share for $500,000 in cash. ● On March 13, 2023, the Company issued 27,028 shares of its common stock, on a pre-reverse stock split basis, to an accredited investor at $3.7 per share for $100,000 in cash. ● On April 25, 2023, The Company issued 78,947 shares of its common stock, on a pre-reverse stock split basis, to an accredited investor at $3.80 per share for $300,000 in cash. ● On June 20, 2023, the Company issued 13,158 shares of its common stock, on a pre-reverse stock split basis, for a total value of $50,000 for services to be rendered during next twelve months by the immediate relative of the Company’s Chief Financial Officer. ● On June 20, 2023, the Company issued 19,737 shares of its common stock, on a pre-reverse stock split basis, for a total value of $75,000 for services to be rendered during next twelve months by one nonemployee contractor.
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These shares were valued at $3.8 per share. 20 ● On July 24, 2023, the Company issued 13,514 shares of its common stock to an accredited investor for no additional consideration following the Company’s previously disclosed reverse stock split. ● On July 24, 2023, the Company issued 39,473.50 shares of its common stock to an accredited investor for no additional consideration following the Company’s previously disclosed reverse stock split. ● On July 24, 2023, the Company issued 6,579 shares of its common stock to an accredited investor for no additional consideration following the Company’s previously disclosed reverse stock split. ● On July 24, 2023, the Company issued 9,868.50 shares of its common stock to an accredited investor for no additional consideration following the Company’s previously disclosed reverse stock split. ● On July 24, 2023, the Company issued 71,428.50 shares of its common stock to an accredited investor for no additional consideration following the Company’s previously disclosed reverse stock split.
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The issuance of the common stock in private placements was deemed exempt from registration under Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder in that the issuance of securities were made to an accredited investor and did not involve a public offering.
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The recipient of such securities represented its intention to acquire the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof.
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(b) Warrants. ● On December 18, 2023, the Company issued warrants to AC Sunshine Securities LLC, the underwriter of its IPO (as defined below), to purchase up to 201,250 shares of common stock at an exercise price of $4.80 per share.
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Use of Proceeds from our Initial Public Offering of Common Stock On December 18, 2023, we closed our initial public offering (the “IPO”), in which we sold and issued 2,500,000 shares of our common stock at a price to the public of $4.00 per share.
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We received approximately $7,859,533 in aggregate net proceeds from our IPO after deducting underwriting discounts and commissions and other offering expenses. AC Sunshine Securities LLC was the underwriter of our IPO.
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The offer and sale of all of the shares of our common stock in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-273429), which was declared effective by the SEC on November 9, 2023.
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As of January 11, 2023, we have used approximately $0.9 million of the net proceeds from our IPO for working capital and general corporate purposes.
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There has been no material change in our planned use of the net proceeds from our IPO as described in our final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on December 4, 2023.
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Purchases of Equity Securities Neither we nor any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, purchased any of our equity securities during the period covered by this annual report. Securities Authorized for Issuance Under Equity Compensation Plans.
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The information required by this Item regarding equity compensation plans is incorporated by reference to the information set forth in Item 12 of this Annual Report on Form 10-K. 21 ITEM 6. [RESERVED]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeITEM 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.
Biggest changeITEM 6: [RESERVED] 19 ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 19 ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 25 ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1 ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 26 ITEM 9A. CONTROLS AND PROCEDURES 26
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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 i SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This annual report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934.
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Forward-looking statements may appear throughout this annual report, including in the following sections: “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially.
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When used in this annual report, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements.
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Such statements include, but are not limited to, statements contained in this annual report relating to our business strategy, our future operating results, and our liquidity and capital-resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and other future conditions.
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Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance.
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We caution you, therefore, against relying on any of these forward-looking statements.
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Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation: ● 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 compete, 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, our operations, and results of operations.
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Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.
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We cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
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USE OF CERTAIN DEFINED TERMS Unless the context otherwise requires, in this annual report on Form 10-K references to: ● 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. ii PART I

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFor 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 )% 23 Revenues Revenue for the fiscal year ended September 30, 2023 declined 82% to $799,747 in comparison to $4,502,568 for the fiscal year ended September 30, 2022.
Biggest changeFor the Years Ended September 30, 2024, and 2023 Years Ended September 30, 2024 2023 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 (exclusive of items shown separately below) 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 % Non-controlling interest (37,298 ) (127,426 ) -71 % Net loss attributable to INNO HOLDINGS INC. $ (3,213,829 ) $ (3,895,778 ) -18 % Revenues Total revenue for the year ended September 30, 2024 increased 11% to $885,495 in comparison to the year ended September 30, 2023. 21 In February 2024, we started our second revenue stream by offering consulting service through our newly formed subsidiary, Inno AI Tech Corp.
At each stage of the process, we are adding value to the original rolled steel (and other materials) to its final assembled use by businesses or directly to customers. Our largest commodity expense is our primary raw material — rolled steel in various gauges and widths.
At each stage of the process, we are adding value to the original rolled steel (and other materials) to its final assembled use by businesses or directly to customers. 19 Our largest commodity expense is our primary raw material — rolled steel in various gauges and widths.
On March 29, 2023, we closed on a private-placement offering pursuant to which we sold to an accredited investor an aggregate of $300,000 in common stock, at a purchase price of $3.80 per share. The offerings were completed pursuant to an exemption from registration under Rule 506(b) of the Securities Act of 1933, as amended.
On March 29, 2023, we closed on a private-placement offering pursuant to which we sold to an accredited investor an aggregate of $300,000 in common stock, at a purchase price of $38 per share. The offerings were completed pursuant to an exemption from registration under Rule 506(b) of the Securities Act of 1933, as amended.
On March 13, 2023, we closed on a private-placement offering pursuant to which we sold to an accredited investor an aggregate of $100,000 in common stock, at a purchase price of $3.70 per share.
On March 13, 2023, we closed on a private-placement offering pursuant to which we sold to an accredited investor an aggregate of $100,000 in common stock, at a purchase price of $37 per share.
ITEM 7. - 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 consolidated financial statements and related notes that appear elsewhere in this Annual Report on Form 10-K.
ITEM 7. 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 consolidated financial statements and related notes that appear elsewhere in this Annual Report.
We do not believe the cash and cash equivalents on hand as of September 30, 2023 of $4,898 will be sufficient to fund its 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 expenditures.
We do not believe the cash and cash equivalents on hand as of September 30, 2024 of $1,526,661 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.
On December 3, 2022, we closed on a private-placement offering pursuant to which we sold to an accredited investor an aggregate of $500,000 in common stock, at a purchase price of $3.50 per share.
The Company has participated in several private-placement offerings. On December 3, 2022, we closed on a private-placement offering pursuant to which we sold to an accredited investor an aggregate of $500,000 in common stock, at a purchase price of $35 per share.
Liquidity and Capital Resources Sources of Liquidity During the years ended September 30, 2023, and 2022, we primarily funded our operations with cash generated from operations, sale of equity, as well as through borrowing under our revolving line of credit, a long term promissory note, and related parties.
Liquidity and Capital Resources Sources of Liquidity During the year ended September 30, 2024 and 2023, we primarily funded our operations with cash generated from operations, private and public shares offering, as well as through borrowing under our revolving line of credit, a long term promissory note, and related parties.
Investing Activities For the years ended September 30, 2023, and 2022, net cash used in investing activities was the result of additions to property and equipment of $244,899 and $684,815, respectively, which are mainly related to the purchase of machinery, tools, motor vehicles, and leasehold improvements.
Investing Activities For the year ended September 30, 2024 and 2023, net cash used in investing activities was primarily the result of additions to property and equipment of $559,629 and $244,899, respectively, which are mainly related to the additions of machinery, tools, motor vehicles, and leasehold improvements.
Results of Operation For the years ended September 30, 2023, and 2022 The following table presents certain Consolidated statement-of-operations information and presentation of that data as a percentage of change from year to year.
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 year ended September 30, 2023, net cash used in operating activities was $1.2 million, primarily driven by the net loss of $4.0 million, partially offset by non-cash items, which mainly included bad debt expense of $1.3 million.
For the year ended September 30, 2023, net cash used in operating activities was $1,225,941, primarily driven by the net loss of $4,023,204, partially offset by non-cash items of $1,499,867, which mainly included bad debt expense of $1,267,960.
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 Annual Report on Form 10-K.
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.
Financing Activities Net cash provided by financing activities was $1,425,110 and $2,356,401, respectively, for the years ended September 30, 2023, and 2022.
Financing Activities Net cash provided by financing activities was $7,144,235 and $1,425,110, respectively, for the year ended September 30, 2024 and 2023.
Working capital provided cash of $1.4 million, which was primarily driven by a $1.3 million increase in accounts payable, unearned revenue and other current liabilities, a $0.6 million decrease in account receivable and account receivable -related party, a $0.1 million decrease of prepayments and other current assets, and partially offset by a $0.5 million increase in deferred offering costs and a $0.1 million increase in inventories.
Working capital provided cash of $1,297,396, which was primarily driven by a $936,098 increase in unearned revenue, a $325,951 increase in accounts payable, accounts payable - related party, operating lease liabilities and other current liabilities, a $468,895 decrease in account receivable, a $79,457 decrease of prepayments and other current assets, and partially offset by a $64,389 increase in inventories and a $538,765 increase in deferred offering costs.
Working Capital As of September 30, 2023 and 2022, our working (deficit) capital was $(2,913,827) and $378,782, respectively. The historical seasonality in our business during the year can cause cash and cash equivalents, inventory, and accounts payable to fluctuate, resulting in changes in our working capital.
The historical seasonality in our business during the year can cause cash and cash equivalents, inventory, and accounts payable to fluctuate, resulting in changes in our working capital.
The increased loss was primarily attributed to lower revenue and increased expenses, as discussed above. 25 Other Income (Expense) Other expenses for the fiscal year ended September 30, 2023, were $39,196, in comparison to other expenses of $310,114 for the fiscal year ended September 30, 2022.
The increase in operating loss was primarily attributed to the lower revenue and increased expenses offset by the decrease in bad debt expense, as discussed above. 22 Other Income (Expense) Other income for the year ended September 30, 2024, was $123,175, in comparison to other expenses of $39,196 for the comparable period in 2023.
The uncertainties surrounding our ability to access capital when needed creates substantial doubt about our ability to continue as a going concern. 28 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 and our independent public accountants have included a similar discussion in their opinion on our financial statements through September 30, 2023.
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.
Cash Flows Operating Activities Net cash used in operating activities for the years ended September 30, 2023, and 2022 was $1,225,941 and $1,717,819, respectively.
Cash Flows Operating Activities Net cash used in operating activities for the year ended September 30, 2024 was $5,075,412 compared to $1,225,941 of net cash used in operating activities for the year ended September 30, 2023.
We had nine repeat customers in the year ended September 30, 2023 compared to the year ended September 30, 2022. Our backlog as of September 30, 2023 was approximately $14,000,000 to $19,000,000. The range of backlog amount is comprised of all remaining payments related to our signed customer contracts and estimation of order adjustments.
Our backlog as of September 30, 2024 was approximately $14,000,000 to $19,000,000. The range of backlog amount is comprised of all remaining payments related to our signed customer contracts and estimation of order adjustments. The timing of revenue recognition from these contracts is subject to variation based on each project’s permit status and construction progress.
We expect revenue from these contracts to be realized within next 24 months. These signed contracts included an agreement in the amount of $15,875,800 with Vision Opportunity Fund LP, assigned to Vision 101 LLC (“Vision 101”), which is partially owned by one of our minority shareholders.
These signed contracts included an agreement, amount of $15,875,800, with Vision Opportunity Fund LP (assigned to Vision 101) partially owned by one of our shareholders. None of the contract amount has been delivered to Vision 101 or recognized as revenue as of September 30, 2024.
We cannot ensure that growth will continue, and our business may be adversely affected by negative overall economic conditions currently being experienced. Costs of Materials and Labor Costs of materials and labor include raw materials (primarily rolled steel) and direct labor in the processing of raw materials through the manufacturing process.
Our revenues are significantly impacted by demand for residential and commercial buildings, economic conditions including interest rates and 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 negative overall economic conditions currently being experienced.
We estimated the credit losses based on each customer’s financial situation, project status and the outstanding days of the accounts receivable balance. Following table illustrates the allowance for credit losses related to each age group of receivables.
We estimated the credit losses based on each customer’s financial situation, project status and the outstanding days of the accounts receivable balance. Starting prior year, we strengthened our risk control of accounts receivable and reduced the days outstanding for accounts receivable by discontinuing business with smaller customers with high credit risk.
The decrease was mainly due to the combination of an increase in loss of $2.9 million offset by an increase of non-cash reconciling items of $1.1 million and a decrease in working capital consumption of $2.3 million.
The increase of net cash usage in operating activities was mainly due to a $128,733 increase of loss with non-cash reconciling items adjustment and a $3,720,738 increase of working capital outflow.
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period.
GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.
The decrease in expense was primarily related to stock compensation expense recorded for the fiscal year ended September 30, 2022. Net Loss Net loss for the fiscal year ended September 30, 2023 was $4,023,204, in comparison to net loss of $1,130,007 for the fiscal year ended September 30, 2022.
Net Loss Net loss for the year ended September 30, 2024 was $3,251,127, in comparison to a net loss of $4,023,204 for the year ended September 30, 2023. The decrease in net loss was primarily due to changes in revenue, costs, expenses and other income (expense) as outlined above.
Most of our current customers adhere to a 30-day payment term. For the current year’s transactions, we have maintained a high collection rate. For aged outstanding balances, we assessed the provision for credit loss based on the aging groups, each customer’s business and project status, contractual term, and financial situation.
Most of our current customers adhere to a 30-day payment term. For the current year’s transactions, we have maintained a high collection rate. Operating Loss Operating loss was $3,373,502 for the year ended September 30,2024, in comparison to an operating loss of $3,984,008 for the comparable period in 2023.
Costs of materials and labor for the fiscal year ended September 30, 2023, declined 59% to $1,255,315 in comparison to $3,031,588 for the fiscal year ended September 30, 2022. The decrease was primarily due to the sharp year-over-year decline in revenue, as discussed above.
Costs of Materials and Labor Costs of materials and labor include raw materials (primarily rolled steel) and direct labor in the processing of raw materials through the manufacturing process. Costs of materials and labor for the year ended September 30, 2024 was $409,169 compared to $1,255,315 for the year ended September 30, 2023.
The main reason for the decrease in net cash provided was primarily due to decrease in proceeds from shares sold for cash, short term loans and long-term note and offset by the increase in proceeds from related parties during the year ended September 30, 2023. 29 Critical Accounting Policies and Estimate We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or GAAP and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
For the year ended September 30, 2023, net cash provided by financing activities was primarily due to the $900,000 proceeds from stock issuance, $627,000 proceeds from related parties, $230,000 proceeds from short-term loans and offset by $150,000 payment of short-term loans, $134,861 repayment to related parties, and $47,029 payments of notes payable. 24 Critical Accounting Policies and Estimate The preparation of financial statements and related disclosures in conformity with U.S.
The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements.
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 Consolidated Financial Statements upon adoption.
Removed
Maintaining inventory is a real financial exposure especially during periods of pricing volatility. Key Performance Indicators (“KPIs”) In addition to the measures presented in our consolidated financial statements, our management regularly monitors certain KPIs for our business.
Added
Maintaining inventory is a real financial exposure especially during periods of pricing volatility. Beyond our manufacturing operations, we offer consulting services to support clients in developing their own building technology companies. Our subsidiary- Inno AI Tech Corp., formed in February 2024, specializes in providing research, consulting, incorporation assistance, training, market research, and business development guidance.
Removed
The KPIs used by the Company include: The capital turnover rate of raw-material procurement Our business is reliant on timely delivery of raw materials. At the same time, our primary raw material (steel) is expensive to warehouse.
Added
In 2024, we successfully assisted a client in establishing a new steel technology company. Key Factors Affecting our Performance As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period.
Removed
We strive to achieve roughly 1-3 months of raw materials inventory to balance our cost of inventory against the risk of not having raw materials when needed.
Added
Set forth below is a brief discussion of the key factors impacting our results of operations. Inflation Prices of certain commodity products, including raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, trade restrictions and tariffs.
Removed
We do this by setting up long-term cooperative relationship with multiple local and national suppliers, including the mills, so that we will gain a better payment cycle to secure the raw material, to maximize the usage of the funds.
Added
Increasing prices of the component materials for parts of our goods may impact the availability, quality and price of our products as suppliers search for alternatives to existing materials and increase the prices they charge. Our suppliers may also fail to provide consistent quality of product as they may substitute lower cost materials to maintain pricing levels.
Removed
At the same time, to match the raw-material usage of the sales order each quarter, we will make the quarterly purchase plans ahead, so that the efficiency of capital turnover is higher. 22 The collection period of accounts receivable Timely payments from customers are essential to a successful business.
Added
Rapid and significant changes in commodity prices may negatively affect our profit margins, and it may be difficult to mitigate worsened margins through customer pricing actions and cost reduction initiatives. Interest Rates Rising interest rates have also resulted in a shift in institutional holdings away from micro-cap equities, which has negatively influenced our stock’s trading volume.
Removed
Based on our historical collectability experience, we will seek to gradually eliminate the types of small-size homebuilders and cooperate with large-size and professional companies to strengthen risk control of accounts receivable and shorten the days outstanding for accounts receivable. Eventually, we expect to achieve the goal of receiving 100% of the payment before products leave the shop.
Added
We continue to forge relationships with institutional investors and analysts in order to maintain a healthy trading volume. Geopolitical Conditions In February 2022, Russia initiated significant military action against Ukraine.
Removed
Lead time Construction requires the coordination of many contractors, subcontractors, permitting, etc. that must be done on very exacting schedules where any delays will have a ripple effect down the chain.
Added
In response, the U.S. and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations, and the U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen.
Removed
While there are many things we cannot control, we strive to communicate with the customers at a high frequency and make the best production arrangement to minimize storage period and shorten the lead time, which is one of the most important operating indicators of INNO.
Added
It is not possible to predict the broader consequences of these conflicts, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as whether any counter measures or retaliatory actions in response, including, for example, potential cyberattacks or the disruption of energy exports, are likely to cause regional instability and geopolitical shifts, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy.
Removed
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.
Added
These situations remain uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflicts and actions taken in response to these conflicts could increase our costs, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations. 20 In addition, while we do not have any direct operations or significant sales in the Middle East nor Africa, geopolitical tensions and ongoing conflicts in these regions, particularly in Gaza, northern Israel and southern Lebanon, the Red Sea, Sudan, and Ethiopia, may lead to further global economic instability and fluctuating energy prices that could materially affect our business.
Removed
Production capacity improvement We are committed to investing in the improvement of production capacity and production efficiency in an effort to support larger orders and to meet the goal of increasing total operating income.
Added
It is not possible to predict the broader consequences of these conflicts, including related geopolitical tensions, and the measures and actions taken by other countries in respect thereof, which could materially and adversely affect global trade, currency exchange rates, regional economies and the global economy.
Removed
The decline in revenue primarily resulted from a decrease in customer construction activity, a decline in the number of customers, to 24 in the fiscal year ended September 30, 2023 from 48 in fiscal year 2022, and a decline in the average size of projects, which resulted in a decline in average revenue per customer to $33,323 in the fiscal year ended September 30, 2023 from $93,804 in the fiscal year ended September 30, 2022.
Added
While it is difficult to predict the impact of any of the foregoing, these conflicts may increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition and results of operations.
Removed
None of the contract amount has been delivered to Vision 101 or recognized as revenue during the fiscal year ended September 30, 2023. Our revenues are significantly impacted by demand for residential and commercial buildings, economic conditions including interest rates and costs of labor, materials and other variables that impact the cost of our finished goods.
Added
Throughout the year, we successfully supported a client in establishing a steel technology company. Our services included incorporation assistance, comprehensive training programs, in-depth market research, and strategic business development guidance. This engagement generated consulting revenue of $205,000. During the fourth quarter of 2024, we entered into a one-time licensing agreement with an individual and his startup company.
Removed
Fluctuations in raw materials pricing and production volume can have an impact on our costs as indicated in the table below, with raw steel contributing between approximately 40% of the cost of goods sold and 61% of the cost of goods sold, depending on price and volume.
Added
This agreement provided them with a license to utilize our logo, technology, trademarks and other intellectual property for the purpose of startup operations and marketing development. The agreement generated $285,000 in licensing income. Our product revenue decreased 51% to $395,495 in comparison to $799,747 for the year ended September 30, 2023.
Removed
The revenue decline exceeded the cost reduction, partly because some fixed costs are not declined along with the revenue and some expenses were incurred for long-term projects that are not eligible for revenue recognition in the current year.
Added
The decrease was primarily due to the various statuses and stages of projects. To mitigate collection issues, the Company has focused on developing relationships with larger customers. During the year ended September 30, 2024, the Company has been working on obtaining permits for large projects and exploring new business opportunities with larger customers.
Removed
While the Company seeks to minimize the impact of fluctuations of steel prices by advance purchases of steel tied to the price to be paid by customers in their contracts, available capital resources has limited our ability to make advance purchases to about three months of supply, which has left us with some exposure to supply price changes.
Added
The decrease in the Cost of Goods Sold (COGS), pertaining to materials and labor, is predominantly due to the decrease in product sales volume. The primary cost of consulting service revenue in fiscal year 2024 was the payroll expense for office employees, which is included in selling, general, and administrative expenses.
Removed
Among the uses of proceeds from our IPO, the Company intends to extend the number of months of supply to match the expected need for raw materials of purchases under contract.
Added
Selling, General and Administrative Expenses Selling, general and administrative expenses for the year ended September 30, 2024, increased 68% to $3,678,866 in comparison to $2,191,043 for the comparable period in 2023. This increase was primarily driven by higher overhead costs, including rent, payroll, insurance, consulting and professional fees, marketing, and promotional expenses.
Removed
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% Table Notes: “Low Volume” assumes three tons of steel material used per one eight-hour shift; “High Volume” assumes seven tons of steel material used per shift.
Added
These additional expenses were incurred to support our growth in the consulting business and comply with the regulatory requirements of a public company. Bad debt expense Bad debt expense decreased by $1,208,025 for the year ended September 30, 2024 compared to the same period in 2023.
Removed
Steel price variance assumes a baseline price of $1,200 per U.S. ton. 24 Selling, General and Administrative Expenses Selling, general and administrative expenses for the fiscal year ended September 30, 2023, decreased 3% to $2,191,043 in comparison to $2,247,820 for the fiscal year ended September 30, 2022.
Added
The increase in other income was primarily due to interest earned on bank deposits of $76,047, supporting services provided to a customer of $104,674, and offset by settlements with former lessor, customers and subcontractor. Other expenses for the year ended September 30, 2023, were primarily attributable to loan interest.
Removed
The decrease was primarily due to the decrease of nonemployee commission offset by the increase of overhead to support long-term growth. Bad debt expense Bad debt expense increased by $1,267,960 for the fiscal year ended September 30, 2023 compared to the same period in 2022 due to the reserves for doubtful accounts.
Added
We had cash of $1,526,661 as of September 30, 2024 compared to $4,898 of cash as of September 30, 2023. The cash increase was primarily due to the proceeds from the initial public offering closed in December 2023 and offset by the cash usage in operating and investing activities during the periods ended September 30, 2024.
Removed
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 At the beginning of our 2023 fiscal year, we started to strengthen our risk control of accounts receivable and reduce the days outstanding for accounts receivable by discontinuing business with smaller customers with high credit risk.
Added
On December 18, 2023, the Company successfully closed the initial public offering with net proceeds of $8 million.
Removed
We reserved 95% of the balance that is aged over nine months. Below, we have summarized the nature of our current collection issues: 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.
Added
The uncertainties surrounding our ability to access capital when needed creates substantial doubt about our ability to continue as a going concern.
Removed
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.
Added
On October 31, 2024, the Company entered into a Securities Purchase Agreement with certain investors to issue and sell 500,000 shares of its common stock at a price of $4.00 per share, for an aggregate purchase price of $2,000,000.
Removed
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.
Added
On November 13, 2024, the Company entered into a Securities Purchase Agreement with nine non-U.S. investors to issue and sell an aggregate of 729,167 shares of common stock in a private placement offering at a price per share of $4.80, for total proceeds of approximately $3.5 million. 23 Working Capital As of September 30, 2024 and September 30, 2023, our working capital (deficit) was $975,755 and $(2,913,827), respectively.
Removed
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.
Added
For the year ended September 30, 2024, net cash used in operating activities was $5,075,412, primarily driven by the net loss of $3,251,127, partially offset by non-cash items of $599,057 and working capital used cash of $2,423,342, which was primarily driven by a $322,739 increase of prepayments and other current assets, including prepaid insurance and prepayments to service suppliers, a $547,568 decrease in unearned revenue, a $729,359 decrease in operating lease liabilities and a $843,694 decrease in accounts payable, accounts payable - related party, and other current liabilities.
Removed
We continue to monitor our accounts receivable balances and limit small-size homebuilders and cooperate with large-size and professional companies to strengthen risk control of accounts receivable and shorten the days outstanding for accounts receivable.
Added
For the year ended September 30, 2024, net cash provided by financing activities was primarily due to the $8,450,000 net cash from the initial public offering, offset by $740,000 payment of short-term loans, $503,372 repayment to related parties, $49,393 payments of notes payable, and an aggregate amount payment of $13,000 for the assumption of the Warrants.
Removed
Operating Loss Operating loss was $3,984,008 for the fiscal year ended September 30, 2023, in comparison to operating loss of $809,978 for the fiscal year ended September 30, 2022.

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