Inno Holdings Inc.: Form 10-Q for the period ended Dec 31, 2025

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes that appear elsewhere in this Quarterly Report on Form 10-Q. All share and per-share information presented in this report has been retroactively adjusted to reflect the 1-for-24 reverse stock split of our common stock, which was effective on December 22, 2025. 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 Quarterly Report on Form 10-Q.

Cautionary Note Regarding Forward-Looking Statements

Some of the information in this document contains, or has incorporated by reference, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements typically are identified by the use of terms such as “may,” “believe,” “anticipate,” “expect,” “plan,” “predict,” “estimate,” “will be,” or other similar words and phrases, although some forward-looking statements are expressed differently. You should be aware that our actual results could differ materially from results anticipated in the forward-looking statements due to a number of factors, including, but not limited to, 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 complete, 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, operations, and results of operations. You should also consider carefully the statements under “Risk Factors,” as disclosed in our annual report on Form 10-K for the fiscal year ended September 30, 2025, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward-looking statements. We undertake no obligation to update any such factors or forward-looking statements to reflect future events or developments.

Overview

We are an innovative technology company that engages in the business of recycled consumer electronic devices. We source and purchase pre-owned consumer electronic devices such as smartphones and tablets from suppliers and sell the electronic devices to wholesalers that re-sell these products to their wholesale and/or retail customers in Southeast Asia, Middle East Asia, Europe and other regions. We conduct our business of recycled consumer electronic devices through two Hong Kong-based wholly-owned subsidiaries Lear Group Limited and Baymax High Technology Co., Limited.

Recent Developments

Reverse Stock Split

On December 22, 2025, we effected a one-for-twenty-four (1:24) reverse stock split of our issued and outstanding shares of common stock (the “Reverse Stock Split” or the “Split”). As a result of the Split, every twenty-four (24) shares of common stock issued and outstanding immediately prior to the effective date was automatically converted into one share of common stock. The Split was implemented to comply with Nasdaq’s minimum bid price requirement. The Split did not reduce the number of authorized shares of common stock and did not affect the par value of the common stock.

At the Market Offering

On November 12, 2025, the Company entered into a sales agreement (the “Sales Agreement”) with Aegis Capital Corp. (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time, to or through the Sales Agent, shares of the Company’s common stock, with no par value, having an aggregate offering price of up to $50.0 million (the “Placement Shares”).

The Company is not obligated to sell any Placement Shares under the Sales Agreement. Subject to the terms and conditions of the Sales Agreement, the Sales Agent will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of The Nasdaq Stock Market LLC (“Nasdaq”), to sell Placement Shares from time to time based upon the Company’s notice and instructions, up to the amount specified therein. Under the Sales Agreement, the Sales Agent may sell Placement Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, including sales made directly on Nasdaq or on any other existing trading market or directly to the Sales Agent as principal in negotiated transactions. The Sales Agent may also sell Placement Shares by any other method permitted by law, including in privately negotiated transactions, with the Company’s consent.

In accordance with the Sales Agreement, the Company will pay the Sales Agent in cash, upon each sale of Placement Shares pursuant to the Sales Agreement, an amount equal to three percent (3.0%) of the gross proceeds from each sale of Placement Shares. The Sales Agreement may be terminated by the Company and the Sales Agent at any time upon notice to the other party. If not terminated earlier, the Sales Agreement will automatically terminate upon the earlier to occur of (i) May 12, 2026 (the sixth month anniversary of the date of the Sales Agreement), or (ii) the issuance and sale of all of the Placement Shares under the Sales Agreement.

From November 12, 2025 to December 31, 2025, the Company issued an aggregate of 3,541,667 shares of common stock (or 85,000,000 shares of common stock before the Reverse Stock Split) for the gross proceeds of approximately $28 million through the Sales Agent pursuant to the Sales Agreement.

December Securities Purchase Agreement

On December 26, 2025, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to issue and sell, by the Company directly to the investors (the “December 2025 Offering”), an aggregate of 3,000,000 shares (the “December 2025 Shares”) of its common stock, no par value, at a purchase price per share of $1.31. The December 2025 Offering closed on January 6, 2026 and the Company received gross proceeds of $3.93 million.

Key Performance Indicators (“KPIs”)

In addition to the measures presented in our consolidated financial statements, our management regularly monitors certain KPIs for our business. The KPIs used by the Company include:

The turnover rate of inventory

Our business is reliant on timely delivery of our products. At the same time, our products are expensive to warehouse. We strive to achieve roughly 3-6 months of inventory to balance our cost of inventory against the risk of not having products when needed. We do this by setting up long-term cooperative relationship with multiple local and national suppliers to obtain a better payment cycle to secure the products and to maximize the use of funds. At the same time, we maintain a dynamic level of inventories of recycled consumer electronic devices, based on our knowledge of the prevailing market trend and estimation of electronic devices price fluctuation. We continuously adjust our inventory levels by lowering inventory of products in downward trend and increasing inventory of those in upward trend.

The collection period of accounts receivable

Timely payments from customers are essential to a successful business. Based on our historical collectability experience, we will target strategic relationships with large-scale homebuilders and professional companies to reduce the risk associated with accounts receivable and reduce the days outstanding for accounts receivable. Eventually, we expect to achieve the goal of receiving 100% of the payment before products leave the shop.

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.

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 Three Months Ended December 31, 2025, and 2024

Revenues

Revenue for the three months ended December 31, 2025 increased 643% to $1,456,481 in comparison to $196,000 for the three months ended December 31, 2024. Revenue for the three months ended December 31, 2025 consists solely of the Company’s business of electronic products trading. The business of electronic products trading contributes to the increase in revenue for the three months ended December 31, 2025 against the comparable period in 2024.

Our revenues are significantly impacted by demand for economic conditions including 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 the negative overall economic conditions currently being experienced.

Costs of Goods Sold

Cost of Goods Sold (COGS) includes electronic products purchased from our suppliers. COGS for the three months ended December 31, 2025, increased to $1,382,346 in comparison to $180,000 for the three months ended December 31, 2024. COGS for the three months ended December 31, 2025 consists solely of electronic products purchased from our suppliers in the Company’s business of electronic products trading. The business of electronic products trading contributes to the increase in COGS for the three months ended December 31, 2025 against the comparable period in 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended December 31, 2025, increased 19% to $560,003 in comparison to $470,592 for the comparable period in 2024. The main reason for the increase was due to an increase in legal and consulting expenses.

Operating Loss

Operating loss was $485,868 for the three months ended December 31, 2025, in comparison to an operating loss of $458,106 for the comparable period in 2024. The increase in operating loss was primarily attributed to the increase in selling, general and administrative expenses, as discussed above.

Other Income (Expense)

Other income for the three months ended December 31, 2025, was $457,250, in comparison to other income of $366 for the comparable period in 2024. Other income for the three months ended December 31, 2025, primarily consisted of a $370,546 change in fair value of SEPA and $86,729 interest income from bank deposits. In contrast, other income for the three months ended December 31, 2024, were primarily consisted of interest income from bank deposits.

Net Loss

Net loss for the three months ended December 31, 2025 was $28,618, in comparison to net loss of $605,409 for the three months ended December 31, 2024. The increase in net loss was primarily due to changes in revenue, costs and expenses as outlined above.

Liquidity and Capital Resources

Sources of Liquidity

During the three months ended December 31, 2025 and 2024, we primarily funded our operations with cash generated from operations, private shares offerings, and at the market offering. We had cash of $37,149,913 as of December 31, 2025 compared to $10,130,942 of cash as of September 30, 2025. The cash increase was primarily due to the proceeds from the at-the market offering and private-placement offering during the quarter ended December 31, 2025, and offset by the cash usage in operating and investing activities during the periods ended December 31, 2025.

The Company has participated in at-the-market offering and private-placement offering during the quarter ended December 31, 2025. On November 12, 2025, the Company entered into a sales agreement (the “Sales Agreement”) with Aegis Capital Corp. (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time, to or through the Sales Agent, shares of the Company’s common stock, with no par value, having an aggregate offering price of up to $50.0 million (the “At-the-Market Offering”). From November 12, 2025 to December 31, 2025, the Company issued an aggregate of 3,541,667 shares of common stock (or 85,000,000 shares of common stock before the Reverse Stock Split) for the gross proceeds of approximately $28 million through the Sales Agent pursuant to the Sales Agreement.

On December 26, 2025, the Company entered into a securities purchase agreement with certain investors, providing for the sale and issuance of 3,000,000 shares of the Company’s common stock, no par value, for an aggregate purchase price of $3.93 million at $1.31 per share (the “December 2025 Offering”). The offering closed on January 6, 2026.

We do not believe the cash and cash equivalents on hand as of December 31, 2025 of $37,149,913 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. The uncertainties surrounding our ability to access capital when needed creates substantial doubt about our ability to continue as a going concern. 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. We may be required in the near future to issue debt or sell our Company’s equity securities in order to raise additional cash, although there are no firm arrangements in place for any such financing at this time. We cannot provide any assurances as to whether we will be able to secure the necessary financing, or the terms of any such financing transaction if one were to occur. The failure to secure such financing could severely curtail our plans for future growth or in more severe scenarios, the continued operations of our Company.

Working Capital

As of December 31, 2025 and September 30, 2025, our working capital (deficit) was $44,958,259 and $13,337,273, respectively. The historical seasonality in our business and our capital raising activities during the year can cause cash and cash equivalents, inventory, and accounts payable to fluctuate, resulting in changes in our working capital.

Cash Flows

Operating Activities

For the three months ended December 31, 2025, net cash used in operating activities was $5,001,179, primarily driven by the net loss from continuing operation of $28,618, change in fair value of SEPA of $370,546, a $4,397,904 increase in prepayments and other current assets, an $85,591 decrease in inventories, and a $189,702 decrease in other payables and accrued liabilities.

For the three months ended December 31, 2024, net cash used in operating activities was $2,096,345, primarily driven by the net loss from continuing operation of $457,740 and net loss from discontinuing operation of $147,669, a $1,893,000 increase in inventories, a $757,032 decrease of prepayments and other current assets, and operating cash flow used by discontinued operations of $421,170.

Investing Activities

For the three months ended December 31, 2025, net cash used in investing activities was $Nil.

For the three months ended December 31, 2024, net cash used in investing activities was $1,428,154 and was mainly related to the investment in Core Modu LLC.

Financing Activities

Net cash provided by financing activities was $32,020,150 and $7,250,000, respectively, for the three months ended December 31, 2025 and 2024.

For the three months ended December 31, 2025, net cash provided by financing activities was due to the net cash from the at the market offering and the private-placement offering.

For the three months ended December 31, 2024, net cash provided by financing activities was primarily due to the net cash from the several private-placement offerings.

Critical Accounting Policies and Estimate

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Note 2 — Basis of Presentation and Summary of significant accounting policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 of our most recently filed Form 10-K, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Our critical accounting estimates, identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most recently filed Form 10-K, include the discussion of estimates used for revenue recognition, inventory valuation, going concern assessment, and our provision for income taxes. Such accounting estimates require significant judgments and assumptions to be used in the preparation of the Condensed Consolidated Financial Statements included in this Form 10-Q, and actual results could differ materially from the amounts reported.

New Accounting Standards

From time to time, the FASB or other standards-setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update. To understand the impact of recently issued guidance, whether adopted or to be adopted, please review the information provided in Note 2 — Basis of Presentation and Summary of significant accounting policies, “Recently issued but not yet adopted accounting pronouncements”, in the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q. 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 Condensed Consolidated Financial Statements upon adoption.

As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.

Disclosure Controls and Procedures

An evaluation was performed under the supervision of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that, as of December 31, 2025, our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms due to material weaknesses in our internal controls described below.

• Lack of adequate policies and procedures in internal control function to ensure that proper control and procedures have been designed and implemented over key business cycles.
• Lack of sufficient in-house accounting personnel with the requisite knowledge and experience in the application of U.S. GAAP.

We plan to hire additional personnel or consultant with relevant experience and qualifications to design and implement internal control over key business cycles to strengthen the internal control system, and plan to hire additional in-house accounting personnel with the requisite knowledge and experience in the application of U.S. GAAP. However, we cannot assure you that we will remediate our material weaknesses in a timely manner.

Inherent Limitations Over Internal Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our control systems are designed to provide such reasonable assurance of achieving their objectives. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal controls over financial reporting during the quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information in this Item. In any event, there have been no material changes in our risk factors as previously disclosed in our 2025 Annual Report on Form 10-K filed with the SEC on December 15, 2025.