INNO HOLDINGS INC. — FY2023 Form 10-K
Reporting period: Fiscal year ended September 30, 2023; comparisons are with FY2022. The company manufactures cold-formed steel framing and offers prefabrication, engineering, construction, and related services. Its shares trade on Nasdaq under INHD. Financial statements are audited under U.S. GAAP; the auditor’s opinion is unqualified and includes a going-concern emphasis.
Financial performance and position
| Metric | FY2023 / Sept. 30, 2023 | FY2022 / Sept. 30, 2022 |
|---|---|---|
| Total revenue | $799,747 | $4,502,568 |
| Costs of materials and labor | $1,255,315 | $3,031,588 |
| Gross result (revenue less materials and labor) | $(455,568); approximately -57% of revenue | $1,470,980; approximately 33% of revenue |
| Operating loss | $(3,984,008); approximately -498% of revenue | $(809,978); approximately -18% of revenue |
| Net loss | $(4,023,204); $(0.21) per share | $(1,130,007); $(0.06) per share |
| Cash from operating activities | $(1,225,941) | $(1,717,819) |
| Cash from investing activities | $(244,899) | $(684,815) |
| Cash from financing activities | $1,425,110 | $2,356,401 |
| Cash and cash equivalents | $4,898 | $50,628 |
| Working capital | $(2,913,827) | $378,782 |
| Total assets / total liabilities | $2,545,762 / $4,489,348 | $3,652,117 / $2,597,499 |
At September 30, 2023, short-term loans were $790,000, current and non-current notes payable totaled approximately $160,239, and operating lease liabilities totaled $488,094. Current liabilities were $4,102,685. The company reported a stockholders’ deficit of $1,943,586.
Material changes and operating developments
- Revenue fell 82%, reflecting lower construction activity, fewer customers (24 versus 48 reported for 2022 in MD&A), and lower average project size. The filing also says 46 customers for FY2022 elsewhere; this inconsistency merits verification.
- Three customers represented 53% of FY2023 revenue. One customer accounted for all year-end accounts receivable; the gross receivable was $1,338,395, with a $1,267,960 credit-loss allowance and $70,435 net receivable.
- Bad-debt expense of $1,267,960 was recorded in FY2023. Management cited project ownership changes, replacement of delivered services and products on two projects, and customers’ financing or cash-flow difficulties.
- Materials and labor costs declined 59%, but less than revenue; fixed and long-term-project costs contributed to the deterioration in operating results. SG&A declined 3%, while depreciation increased to $69,437.
- Management reported a signed-contract backlog of approximately $14 million–$19 million, expected to be realized within 24 months. The range includes a $15,875,800 agreement with Vision 101, an entity partially owned by a minority shareholder; no revenue under that agreement was recognized in FY2023.
Liquidity, outlook, risks, and unusual items
- Going concern and funding: Management states that cash at year-end was insufficient for the next 12 months and that substantial doubt about continuing as a going concern was not alleviated, even considering the subsequent IPO. The company may need further financing; no firm arrangement was disclosed.
- IPO after year-end: On December 18, 2023, the company sold 2.5 million shares at $4.00 each for $10 million gross proceeds and approximately $7.86 million net proceeds. The filing says about $0.9 million had been used by the stated date for working capital and general corporate purposes. Planned uses include marketing, capacity, R&D, strategic opportunities, and working capital.
- Debt: A $1 million revolving credit facility was in default as of May 14, 2023 for nonpayment of interest. The balance was $560,000 at year-end; $300,000 was paid on December 29, 2023, with the remainder scheduled for repayment by the end of February 2024. The filing also discloses $230,000 of demand loans from individuals and interest-free related-party borrowings.
- Subsequent property transaction: In January 2024, the company agreed to acquire a California office and commercial property for $14.6 million, with an approximately $9.7 million existing loan contemplated for assumption. The agreement included a $440,000 escrow deposit and financing and due-diligence contingencies. The transaction’s final financing and completion are not established in the filing.
- Legal contingency: A December 27, 2023 garnishment order followed a creditor action seeking $67,978; the company’s bank account was debited $17,330. This is noted as an exception to the statement that there were no material legal proceedings.
- Controls: Management concluded disclosure controls were not effective at September 30, 2023, citing insufficient accounting/reporting personnel and inadequate control policies and procedures. The auditor did not audit or opine on internal control effectiveness.
- Business risks: Demand is exposed to construction activity, interest rates, labor and material costs, and project timing. Customer and supplier concentration, unsecured receivables, steel-price volatility, and limited capital are significant risks. Three suppliers represented 57% of purchases in FY2023. Management provided no quantified earnings or revenue guidance.
- Strategic plans: The company is developing Castor Cube modular homes, Mobile Factory production units, and other products, and anticipates higher production capacity. These are plans and expectations, not reported results; the filing’s proposed capacity and delivery targets depend on execution, demand, and funding.
Investor verification priorities
- Confirm conversion of the reported $14 million–$19 million backlog into delivered work, collected cash, and recognized revenue—especially the related-party Vision 101 contract.
- Review subsequent cash balances, IPO proceeds and spending, going-concern disclosures, and the company’s ability to meet near-term obligations.
- Verify repayment of the defaulted credit facility, status of demand loans, and financing and closing status of the $14.6 million property acquisition.
- Assess collectability of aged receivables, the adequacy of the credit-loss allowance, and concentration in customers and suppliers.
- Track remediation of material weaknesses in disclosure controls and confirm the accuracy of customer-count and revenue-recognition disclosures, which are not fully consistent in the filing text.