| 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. All inter-company balances and transactions
have been eliminated. Reclassifications Certain
amounts on the prior year’s consolidated balance sheets, consolidated statements of operations and cash flows were reclassified
to conform to the current year presentation, with no effect on ending stockholders’ equity. Reverse
Stock Split On
November 30, 2022, the Company effected a forward stock split (the “Stock Split”) of the Company’s issued and outstanding
shares of the common stock at a split ratio of 2-for-1. 200,000,000 100,000,000 On
October 9, 2024, the Company completed a 1-for-10 reverse stock split of its issued and outstanding common stock, no par value, (the
“Reverse Stock Split”). 199,787 All
common share and per-share amounts in this Form 10-K have been retroactively restated to reflect the effect of the Reverse Stock Split. INNO
HOLDINGS INC. AND SUBSIDIARIES Notes
to Consolidated Financial Statements Note
2 — Basis of Presentation and Summary of significant accounting policies 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. Cash
and cash equivalents Cash
and cash equivalents consist of amounts held as cash on hand, bank and money market deposits, and marketable securities with maturities
of less than 90 days. From
time to time, the Company may maintain bank balances in interest bearing accounts in excess of the $ 250,000 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 using expected credit loss (CECL)
methodology each reporting period to determine if an allowance for credit loss is required. 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. 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 based on its 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. 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. 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 INNO
HOLDINGS INC. AND SUBSIDIARIES Notes
to Consolidated Financial Statements Note
2 — Basis of Presentation and Summary of significant accounting policies 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. Revenue
recognition The
Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, accounting for product, service
and licensing revenue, 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 or services to customers are recorded as unearned revenue. 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. License
income originates from licensing our logo, technology and intellectual property where we receive fixed license fees over licensing periods.
Our 2024 license revenue was derived from one-time licensing agreement with an individual and his startup company for the purpose of
startup operations and marketing development. Revenue from the licensing has minimal associated direct costs, and thus is highly profitable. 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 Notes
to Consolidated Financial Statements 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 regularly assesses its inventory for obsolescence and records an allowance only when
the inventory is no longer suitable for reproduction. The Company’s inventory generally has a long-life cycle and does not become
obsolete quickly. 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 their 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, the Company recorded $ 23,911 No 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 Notes
to Consolidated Financial Statements 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. Segment
Reporting The
Company uses the management approach in determining reportable operating segments. The management approach considers the internal organization
and reporting used by the Company’s chief operating decision maker for making operating decisions, allocating resources and assessing
performance as the source for determining the Company’s reportable segments. During the years ended September 30, 2024 and 2023,
the Chief Executive Officer has been identified as the chief operating decision maker. The Company’s chief operating decision maker
regularly reviews consolidated assets and consolidated operating results prepared under U.S. GAAP for the enterprise as a whole when
making decisions about allocating resources and assessing performance of the Company. Consequently, management has determined that the
Company only has one operating segment as defined under ASC 280-10-50. 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 Notes
to Consolidated Financial Statements Note
2 — Basis of Presentation and Summary of significant accounting policies Loss
per share Basic
loss per share are computed by dividing net income 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
December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The new guidance requires
enhanced disclosures about income tax expenses. The Company is required to adopt this guidance in the first quarter of the fiscal year
2026. Early adoption is permitted on a prospective basis. We are currently evaluating the impact of this ASU on our annual income tax
disclosures. In
November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The new guidance
requires enhanced disclosures about significant segment expenses. The Company is required to adopt this guidance for its annual reporting
in fiscal year 2025 and for interim period reporting beginning the first quarter of fiscal year 2026 on a retrospective basis. Early
adoption is permitted. We are currently evaluating the impact of this ASU on our segment disclosures. 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. 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 Notes
to Consolidated Financial Statements 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. |
