Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

- 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 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 a Texas holding company. Through our Hong Kong operating subsidiaries, we are an innovative technology company that engages primarily in the business of recycled consumer electronic devices, as 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 currently derive all of our revenue in our business of recycled consumer electronic devices from Lear Group Limited, our wholly owned operating subsidiary in Hong Kong. We also have another wholly owned subsidiary in Hong Kong, Baymax High Technology Co., Limited, and other wholly owned subsidiaries incorporated in the British Virgin Islands through which we conduct research and development and other non-revenue generating technology-related activities intended to support and strengthen our recycled consumer electronics business.

Recent Developments

May 2026 At the Market Offering

On May 15, 2026, the Company entered into a sales agreement (the "May 2026 Sales Agreement") with Aegis Capital Corp. (the "Sales Agent"), in connection with an "at the market" offering program. Pursuant to the May 2026 Sales Agreement, 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 $60.0 million (the "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 May 15, 2026 to June 30, 2026, the Company sold an aggregate of 39,123 shares of common stock, which was previously issued under the Sales Agreement dated November 12, 2025, for the gross proceeds of approximately $41,000 through the Sales Agent pursuant to the May 2026 Sales Agreement.

May 2026 Reverse Stock Split

On May 4, 2026, we effected a one-for-twenty (1:20) reverse stock split of our issued and outstanding shares of common stock (the "May 2026 Reverse Stock Split" or the "2026 Split"). As a result of the Split, every twenty (20) shares of common stock issued and outstanding immediately prior to the effective date was automatically converted into one share of common stock. The 2026 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.

January Securities Purchase Agreement

On January 16, 2026, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering by the Company directly to the investors (the "January 2026 Offering"), an aggregate of 1,332,000 shares of its common stock, no par value, at a purchase price per share of $0.55. The January 2026 Offering closed on January 21, 2026 and the Company received gross proceeds of $732,600.

December 2025 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 "May 2025 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 March 31, 2026, the Company issued an aggregate of 3,541,667 shares of common stock (or 85,000,000 shares of common stock before the December 2025 Reverse Stock Split) for the gross proceeds of approximately $28 million through the Sales Agent pursuant to the Sales Agreement.

From March 31, 2026 to May 12, 2026, the Company issued 1) 2,099,883 shares of common stock (or 41,997,660 shares of common stock before the May 2026 Reverse Stock Split) for the gross proceeds of approximately $10.7 million through the Sales Agent pursuant to the Sales Agreement; and 2) 2,000,117 shares of common stock (the "Issued and Unsold Shares"), none of which were sold till the termination of the Sales Agreement. In July 2026, all of the Issued and Unsold Shares were returned to the transfer agent of the Company and then cancelled.

In accordance with the Sales Agreement, the Sales Agreement automatically terminated on May 12, 2026, the six-month anniversary of the execution date of 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"), on a post-reverse stock split basis, 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 carried out through our Hong Kong operating subsidiaries. The KPIs used by the Company include:

The turnover rate of inventory

Our business is reliant on timely delivery of our products by our Hong Kong operating subsidiaries. At the same time, our products are expensive to warehouse. Our Hong Kong operating subsidiaries strive to achieve roughly 3-6 months of inventory to balance our cost of inventory against the risk of not having products when needed. Our Hong Kong operating subsidiaries 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, our Hong Kong operating subsidiaries 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 our Hong Kong operating subsidiaries' successful business. Based on our historical collectability experience, we will target strategic relationships with large-scale and professional suppliers 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 of our Hong Kong operating subsidiaries.

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 June 30, 2026, and 2025

		Three Months Ended June 30,
		2026				2025
Revenues		$	2,067,662			$	1,086,250				90	%
Costs of goods sold			1,974,238				1,102,300				79	%
Selling, general and administrative expenses (exclusive of items shown separately below)			1,602,051				1,544,590				4	%
Operating loss			(1,508,627	)			(1,560,640	)			-3	%
Other income (expenses)			(106,548	)			14,352				-842	%
Loss before income taxes			(1,615,175	)			(1,546,288	)			4	%
Income tax expense			-				-				-	%
Net loss from discontinued operations			(1,615,175	)			(1,546,288	)			63	%
Net loss			(1,615,175	)			(1,546,288	)			4	%
Non-controlling interest			-				-				-	%
Net loss attributable to Inno Holdings Inc.		$	(1,6 15,175	)		$	(1,546,288	)			4	%

For the Nine Months Ended June 30, 2026, and 2025

		Nine Months Ended June 30,
		2026				2025
Revenues		$	4,456,054			$	1,760,350				153	%
Costs of goods sold			4,266,648				1,718,900				148	%
Selling, general and administrative expenses (exclusive of items shown separately below)			2,975,757				3,425,985				-13	%
Impairment loss			-				3,514				-100	%
Operating loss			(2,786,351	)			(3,388,049	)			-18	%
Other income (expenses)			66,137				(2,117,120	)			-103	%
Loss before income taxes			(2,720,214	)			(5,505,169	)			-51	%
Income tax expense			-				-					%
Net loss from discontinued operations			-				(195,796	)			-100	%
Net loss			(2,720,214	)			(5,700,965	)			-52	%
Non-controlling interest			-				69,517				-100	%
Net loss attributable to Inno Holdings Inc.		$	(2,720,214	)		$	(5,770,482	)			-53	%

Revenues

Revenue for the three months ended June 30, 2026 increased 90% to $2,067,662 in comparison to $1,086,250 for the three months ended June 30, 2025. Revenue for the three months ended June 30, 2026 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 June 30, 2026 against the comparable period in 2025.

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 June 30, 2026, increased to $1,974,238 in comparison to $1,102,300 for the three months ended June 30, 2025. COGS for the three months ended June 30, 2026 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 June 30, 2026 against the comparable period in 2025.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended June 30, 2026, increased 4% to $1,602,051 in comparison to $1,544,590 for the comparable period in 2025. The main reason for the increase was an increase in professional expenses such as legal fees.

Operating Loss

Operating loss was $1,508,627 for the three months ended June 30, 2026, in comparison to an operating loss of $1,560,640 for the comparable period in 2025. The increase in operating loss was primarily attributed to the increase in selling, general and administrative expenses, as discussed above.

Other Income (Expense)

Other expense for the three months ended June 30, 2026, was $106,548, in comparison to other income of $14,352 for the comparable period in 2025. Other expense for the three months ended June 30, 2026, primarily consisted of a $293,868 interest income from bank deposits and a $200,000 loss in fair value of equity investment. In contrast, other income for the three months ended June 30, 2025, primarily consisted of a $14,549 interest income.

Net Loss

Net loss for the three months ended June 30, 2026 was $1,615,175, in comparison to net loss of $1,546,288 for the three months ended June 30, 2025. 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 June 30, 2026 and 2025, we primarily funded our operations with cash generated from operations, private shares offerings, and at the market offering. We had cash of $33,238,616 as of June 30, 2026 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 periods ended June 30, 2026, and offset by the cash usage in operating and investing activities during the periods ended June 30, 2026.

The Company has participated in at-the-market offering and private-placement offering during the nine months ended June 30, 2026. 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 May 12, 2026, the Company issued an aggregate of 2,277,083 shares of common stock (or 45,541,667 shares of common stock before the Reverse Stock Split effective on May 4, 2026) for the gross proceeds of approximately $38.7 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.

On January 16, 2026, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering by the Company directly to the investors (the "January 2026 Offering"), an aggregate of 1,332,000 shares of its common stock, no par value, at a purchase price per share of $0.55. The January 2026 Offering closed on January 21, 2026 and the Company received gross proceeds of $732,600.

On May 15, 2026, the Company entered into a sales agreement (the "May 2026 Sales Agreement") with Aegis Capital Corp. (the "Sales Agent"), in connection with an "at the market" offering program. Pursuant to the May 2026 Sales Agreement, 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 $60.0 million (the "2026 At-the-Market Offering"). From May 15, 2026 to June 30, 2026, the Company sold an aggregate of 39,123 shares of common stock, which was previously issued under the Sales Agreement dated November 12, 2025, for the gross proceeds of approximately $41,000 through the Sales Agent pursuant to the May 2026 Sales Agreement.

As disclosed in the notes to our consolidated financial statements of our 2025 Annual Report, our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern. This determination is based on our recurring losses from operations, negative cash flows and liquidity position at the time of issuance of our financial statements in our 2025 Annual Report, which raised substantial doubt about our ability to continue as a going concern within the twelve (12) months after the date that our financial statements were issued in our 2025 Annual Report. Since then, our management has undertaken plans to alleviate our liquidation conditions primarily through seeking additional capital through equity financings. Our management has also evaluated other plans including (i) seeking additional capital through equity or debt financings; (ii) pursuing strategic investments or partnerships; and (iii) improving operating cash flows through cost control measures and operational efficiencies.

Based on our current operating plans as evaluated by our management, we believe our cash and cash equivalents on hand as of June 30, 2026 of $33,238,616 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.

There can be no assurance that our future capital needs will not increase to a level that renders our then-current liquidity insufficient, that our operating plans will be successfully realized as anticipated or will be sufficient to mitigate any liquidity issues, or that additional financing will be available on acceptable terms, or at all. If our plans or circumstances change materially, or if our actual future cash requirements exceed current estimates, substantial doubt about our ability to continue as a going concern may arise. We may 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. 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 June 30, 2026 and September 30, 2025, our working capital was $53,943,012 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 nine months ended June 30, 2026, net cash used in operating activities was $11,632,320, primarily driven by the net loss from continuing operation of $2,720,214, change in fair value of SEPA of $370,546, change in fair value of investment of $700,000, a $1,887,120 increase in inventories, a $6,367,574 increase in prepayments and other current assets, and a $156,703 decrease in other payables and accrued liabilities.

For the nine months ended June 30, 2025, net cash used in operating activities was $3,704,646, primarily driven by the net loss from continuing operation of $5,505,169 and net loss from discontinuing operation of $265,313, partially offset by non-cash items of stock-based compensation expense of $2,185,205 and loss from investment disposal of $2,152,522, and working capital used cash of $1,872,943, which was primarily driven by a $1,026,834 increase in prepayments and other current assets, a $2,058,800 increase in inventories and a $805,579 increase in accounts payable, and operating cash flow used by discontinued operations of $398,948.

Investing Activities

For the nine months ended June 30, 2026, net cash used in investing activities was $3,012,756 which is purchase of investment in equity investee.

For the nine months ended June 30, 2025, net cash used in investing activities was $1,522,453 and was primarily the purchase of investment in equity investee.

Financing Activities

Net cash provided by financing activities was $37,752,750 and $8,535,250, respectively, for the nine months ended June 30, 2026 and 2025.

For the nine months ended June 30, 2026, net cash provided by financing activities was due to the $37,752,750 net cash from the at the market offering and the private-placement offerings.

For the nine months ended June 30, 2025, net cash provided by financing activities was due to the $8,535,250 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.