| Basis of Presentation and Summary of significant accounting policies | Note
2 — Basis of Presentation and Summary of significant accounting policies Basis
of presentation The
accompanying financial statements have been prepared in accordance with the generally accepted accounting principles in the United States
of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”).
The Company’s fiscal year end date is September 30. Consolidated
Principles of consolidation The
Consolidated financial statements include the accounts of the Company and its subsidiaries, Inno Metal Studs Corp., Castor Building Tech
LLC, and Inno Research Institute LLC. All inter-company balances and transactions have been eliminated. Reclassification Reclassification could involve changes in accounting
policies, adjustments to prior period amounts, or shifts in the classification of specific items. Certain items in the financial statements
of comparative year have been reclassified to conform to the financial statements for the current year because of prior year adjustment
as disclosed in Note 16. Going
concern As
of September 30, 2023, the Company had total cash of $ 4,898 4,524,815 4,023,204 1,225,941 10 The
Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet
its obligations, in which it has not been successful, and/or obtaining additional financing from its shareholders or other sources, as
may be required. INNO
HOLDINGS INC. AND SUBSIDIARIES Note
2 — Basis of Presentation and Summary of significant accounting policies Management
is endeavoring to increase revenue-generating operations. While priority is on generating cash from operations through the sale of the
Company’s products, management is also seeking to raise additional working capital through various financing sources, including
the sale of the Company’s equity and/or debt securities, which may not be available on commercially reasonable terms to the Company,
or which may not be available at all. If such financing is not available on satisfactory terms, the Company may not be able to continue
operations or may be required to delay, scale back or eliminate some or all of its ongoing research and development efforts and other
operations. The Company’s ability to access capital when needed is not assured and, if not achieved on a timely basis, will materially
harm its business, financial condition and results of operations. In addition, any financing arrangement may have potentially adverse
effects on us and/or our stockholders. Debt financing (if available and undertaken) will increase expenses, must be repaid regardless
of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional
funds, the percentage ownership of our existing stockholders will be reduced, and the new equity securities may have rights, preferences
or privileges senior to those of the current holders of our common stock. Given the uncertainties associated with the Company’s
ability to access capital and its business growth strategy, management has concluded that substantial doubt exists regarding the Company’s
ability to continue as a going concern for the next twelve months from the date the condensed consolidated financial statements are issued. Our
Consolidated financial statements have been prepared assuming that we will continue as a going concern. Such assumption contemplates
the realization of assets and satisfaction of liabilities in the normal course of business. These Consolidated financial statements do
not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts
and classifications of liabilities that may result should the Company be unable to continue as a going concern. Use
of estimates and assumptions The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
amounts of assets and liabilities reported and disclosures of contingent assets and liabilities as of the date of the financial statements
and the reported amounts of revenues and expenses during the periods presented. Actual results could differ from these estimates. Reverse
acquisition under common control Effective
January 21, 2022, the Company acquired 100 15,170,000 100 100 Cash
and cash equivalents Cash
and cash equivalents consist of amounts held as cash on hand and bank deposits. From
time to time, the Company may maintain bank balances in interest bearing accounts in excess of the $ 250,000 INNO
HOLDINGS INC. AND SUBSIDIARIES Note
2 — Basis of Presentation and Summary of significant accounting policies Accounts
receivable During
the ordinary course of business, the Company extends unsecured credit to its customers. Accounts receivable are stated at the amount
the Company expects to collect from customers. Management reviews its accounts receivable balances each reporting period to determine
if an allowance for credit loss is required. In
October 2020, the Company adopted ASU 2016-13, Topics 326 — Credit Loss, Measurement of Credit Losses on Financial Instruments,
which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss
(CECL) methodology, for its accounting standard for its trade accounts receivable. The
Company continuously monitors the recoverability of accounts receivable. If there are any indicators that a customer may not make payment,
the Company may consider making provision for non-collectability for that particular customer. At the same time, the Company may cease
further sales or services to such customer. The following are some of the factors that the Company develops allowance for credit losses:
● the
customer fails to comply with its payment schedule;
● the
customer is in serious financial difficulty;
● a
significant dispute with the customer has occurred regarding job progress or other matters;
● the
customer breaches any of its contractual obligations;
● the
customer appears to be financially distressed due to economic or legal factors;
● the
business between the customer and the Company is not active; and
● other
objective evidence indicates non-collectability of the accounts receivable. The
adoption of the credit loss accounting standard has no material impact on the Company’s consolidated financial statements. Accounts
receivable are recognized and carried at carrying amount less an allowance for credit losses, if any. The Company maintains an allowance
for credit losses resulting from the inability of its customers to make required payments based on contractual terms. The Company reviews
the collectability of its receivables on a regular and ongoing basis. The Company has also included in the calculation of allowance for
credit losses the potential impact of the COVID-19 pandemic on our customers’ businesses and their ability to pay their accounts
receivable. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. The Company
also considers external factors to the specific customer, including current conditions and forecasts of economic conditions, including
the potential impact of the COVID-19 pandemic. In the event we recover amounts previously written off, we will reduce the specific allowance
for credit losses. Fair
values of financial instruments ASC
825, “Disclosures about Fair Value of Financial Instruments,” requires disclosure of fair value information about financial
instruments. ASC 820, “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value measurements. The
carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current assets and liabilities are
approximate fair values due to their short-term nature. INNO
HOLDINGS INC. AND SUBSIDIARIES Note
2 — Basis of Presentation and Summary of significant accounting policies For
other financial instruments to be reported at fair value, the Company utilizes valuation techniques that maximize the use of
observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines the fair value of its
financial instruments based on assumptions that market participants would use in pricing an asset or liability in the principal or
most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value
hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level
1 — Inputs
are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level
2 — Inputs
are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical
or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the related assets or liabilities; and
Level
3 — Unobservable
inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no
market data. As
of September 30, 2023 and 2022, the Company did not have any other financial instruments reported at fair value. Revenue
recognition The
Company has adopted Accounting Standards Codification (“ASC”) 606 since its inception and recognizes revenue from product
and service sales revenues, net of promotional discounts and return allowances, if any, when the following revenue recognition criteria
are met: a contract has been identified, separate performance obligations are identified, the transaction price is determined, the transaction
price is allocated to separate performance obligations and revenue is recognized upon satisfying each performance obligation. The Company
transfers the risk of loss or damage upon delivery, therefore, revenue from product sales is recognized when it is delivered to the customer.
For services, all sales are recognized upon completion based on terms stated in the sales agreements. The
Company evaluates the criteria of ASC 606 — Revenue Recognition Principal Agent Considerations in determining whether it is appropriate
to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is
primarily responsible for fulfilling the promise to provide a specified good or service, the Company is subject to inventory risk before
the good or service has been transferred to a customer and the Company has discretion in establishing the price, revenue is recorded
at gross. Payments
received prior to the delivery of goods to customers are recorded as customer deposits. Sales
discounts are recorded in the period in which the related sale is recognized. Sales return allowances are estimated based on historical
amounts and are recorded upon recognizing the related sales. Shipping and handling costs are recorded as selling expenses. Costs
and expenses Costs
and expenses are operating expenses, which consist of costs of material and labor, selling, general and administrative expenses, and
depreciation, are expensed as incurred. Inventory Inventory
consists of material and finished goods ready for sale and is stated at the lower of cost or net realizable value. The Company values
its inventory using the FIFO costing method. The Company’s policy is to include as a part of cost of goods sold any freight incurred
to ship the product from its vendors to warehouses. Outbound freight costs related to shipping costs to customers are considered periodic
costs and are reflected in selling expenses. The Company regularly reviews inventory and considers forecasts of future demand, market
conditions and product obsolescence. INNO
HOLDINGS INC. AND SUBSIDIARIES Note
2 — Basis of Presentation and Summary of significant accounting policies If
the estimated realizable value of the inventory is less than cost, the Company makes provisions in order to reduce its carrying value
to its estimated net realizable value. The Company also reviews inventory for slow moving inventory and obsolescence and records allowance
for obsolescence. Deferred
offering costs The
Company capitalizes certain legal, accounting and other third-party fees that are directly related to an equity financing that is probable
of successful completion until such financing is consummated. After consummation of an equity financing, these costs are recorded as
a reduction of the proceeds received as a result of the financing. Should a planned equity financing be abandoned, terminated or significantly
delayed, the deferred offering costs are immediately written off to operating expenses in the consolidated statements of operations in
the period of determination. Property
and equipment Property
and equipment is stated at the historical cost, less accumulated depreciation. Depreciation on property and equipment is provided using
the straight-line method over the estimated useful lives of the assets as follows: Schedule
of Depreciation on Property and Equipment
Machinery
and equipment 7
Office
equipment 5
Motor
vehicles 5
Leasehold
improvements the
shorter of the lease term or the estimated useful life of the improvements Expenditures
for renewals and betterments are capitalized while repairs and maintenance costs are normally charged to the statement of operations
in the year in which they are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase
in the future economic benefits expected to be obtained from the use of the asset, the expenditure is capitalized as an additional cost
of the asset. Upon
sale or disposal of an asset, the historical cost and related accumulated depreciation or amortization of such asset were removed from
their respective accounts and any gain or loss is recorded in the statements of income. The
Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying
value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.
In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an
amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment
include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand,
competition and other economic factors. Based on this assessment, no impairment expenses for property and equipment were recorded during
the years ended September 30, 2023 and 2022. Leases On
its inception date, the Company adopted ASC 842 — Leases (“ASC 842”), which requires lessees to record right-of-use
(“ROU”) assets and related lease obligations on the balance sheet, as well as disclose key information regarding leasing
arrangements. ROU
assets represent our right to use an underlying asset for the lease terms and lease liabilities represent our obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present
value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company generally uses
its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease
payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Lease
expense for lease payments is recognized on a straight-line basis over the lease term. INNO
HOLDINGS INC. AND SUBSIDIARIES Note
2 — Basis of Presentation and Summary of significant accounting policies Stock-based
Compensation The
Company applies ASC No. 718, “Compensation-Stock Compensation,” which requires that share-based payment transactions with
employees and nonemployees upon adoption of ASU 2018-07, be measured based on the grant date fair value of the equity instrument and
recognized as compensation expense over the requisite service period, with a corresponding addition to equity. Under this method, compensation
cost related to employee share options or similar equity instruments is measured at the grant date based on the fair value of the award
and is recognized over the period during which an employee is required to provide service in exchange for the award, which generally
is the vesting period. In addition to the requisite service period, the Company also evaluates the performance condition and market condition
under ASC 718-10-20. For an award which contains both a performance and a market condition, and where both conditions must be satisfied
for the award to vest, the market condition is incorporated into the fair value of the award, and that fair value is recognized over
the employee’s requisite service period or nonemployee’s vesting period if it is probable the performance condition will
be met. If the performance condition is ultimately not met, compensation cost related to the award should not be recognized (or should
be reversed) because the vesting condition in the award has not been satisfied. The
Company will recognize forfeitures of such equity-based compensation as they occur. Income
taxes The
Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their perspective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income
in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are recorded, when
necessary, to reduce deferred tax assets to the amount expected to be realized. As
a result of the implementation of certain provisions of ASC 740, Income Taxes (“ASC 740”), which clarifies the accounting
and disclosure for uncertainty in tax position, as defined, ASC 740 seeks to reduce the diversity in practice associated with certain
aspects of the recognition and measurement related to accounting for income taxes. The Company has adopted the provisions of ASC 740
since inception and has analyzed filing positions in each of the federal and state jurisdictions where the Company is required to file
income tax returns, as well as open tax years in such jurisdictions. The Company has identified the U.S. federal jurisdiction, and the
states of Texas and California, as its “major” tax jurisdictions. However, the Company has certain tax attribute carryforwards
which will remain subject to review and adjustment by the relevant tax authorities until the statute of limitations closes with respect
to the year in which such attributes are utilized. The
Company believes that its income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments
that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been
recorded pursuant to ASC 740. The Company’s policy for recording interest and penalties associated with income-based tax audits
is to record such items as a component of income taxes. Commitments
and contingencies In
the ordinary course of business, the Company is subject to certain contingencies, including legal proceedings and claims arising out
of the business that relate to a wide range of matters, such as government investigations and tax matters. The Company recognizes its
liability for such contingency if it determines it is probable that a loss has occurred and a reasonable estimate of the loss can be
made. The Company may consider many factors in making these assessments including historical and specific facts and circumstances of
each matter. INNO
HOLDINGS INC. AND SUBSIDIARIES Note
2 — Basis of Presentation and Summary of significant accounting policies Earnings
(loss) per share Basic
earnings (loss) per share are computed by dividing net income (loss) attributable to holders of common stock by the weighted average
number of shares of common stock outstanding during the year. Diluted earnings per share reflect the potential dilution that could
occur if securities to issue common stock were exercised. Recently
issued but not yet adopted accounting pronouncements In
June 2022, FASB issued ASU 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual
Sale Restrictions. The amendments in this ASU clarify the guidance in ASC 820 on the fair value measurement of an equity security that
is subject to a contractual sale restriction and require specific disclosures related to such an equity security. This standard is effective
for fiscal years beginning after December 15, 2024. The Company does not expect the adoption of this standard to have a material impact
on the consolidated financial statements. In
October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities
from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract
liabilities in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606) as if the entity
had originated the contracts. The guidance is effective for fiscal years beginning after December 15, 2023, with early application permitted.
The Company does not expect the adoption of this standard to have a material impact on the consolidated financial statements. Recently
issued and adopted accounting pronouncements In
January 2020, the FASB issued ASU 2020-01, “Investments — Equity Securities (Topic 321), Investments — Equity Method
and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and
Topic 815.” This ASU among other things clarifies that a company should consider observable transactions that require a company
to either apply or discontinue the equity method of accounting under Topic 323, Investments — Equity Method and Joint Ventures,
for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing
the equity method. The new ASU clarifies that, when determining the accounting for certain forward contracts and purchased options a
company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity
method or fair value option. The Company adopted ASU 2020-01 on October 1, 2022. The adoption did not have a material impact on the Company’s
consolidated financial statements. In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) — Simplifying the Accounting for Income Taxes. The update
is intended to simplify the current rules regarding the accounting for income taxes and addresses several technical topics including
accounting for franchise taxes, allocating income taxes between a loss in continuing operations and in other categories such as discontinued
operations, reporting income taxes for legal entities that are not subject to income taxes, and interim accounting for enacted changes
in tax laws. The Company adopted ASU 2019-12 on October 1, 2022. The adoption did not have a material impact on the Company’s consolidated
financial statements. The
Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material
effect on the consolidated financial position, statements of operations and cash flows. INNO
HOLDINGS INC. AND SUBSIDIARIES Note
2 — Basis of Presentation and Summary of significant accounting policies Subsequent
events The
Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the consolidated
financial statements are available to be issued. Material subsequent events that required recognition or additional disclosure in the
consolidated financial statements are presented. |
