In a recent move, Inno Holdings Inc. (NASDAQ:INHD), a Texas-based steel pipe and tubes manufacturer with a market capitalization of $16 million, has replaced its independent registered public accounting firm. The change was announced following the identification of a material weakness in the company's internal control over financial reporting. According to InvestingPro data, the company currently maintains a "WEAK" overall financial health score of 1.65, suggesting significant challenges ahead.
On Monday, the company's Audit Committee approved the dismissal of Simon & Edward, LLP (S&E) and the engagement of JWF Assurance PAC to take over the auditing responsibilities for the fiscal year ending September 30, 2025. The decision to change auditors was not due to any disagreements on accounting principles or practices, financial statement disclosure, or auditing scope or procedure between Inno Holdings and S&E during the fiscal year ended September 30, 2024, or the subsequent interim period through January 13, 2025.
The company's previous financial statements for the year ended September 30, 2024, audited by S&E, did not contain any adverse opinion or disclaimer of opinion. However, a material weakness was disclosed in the company's Annual Report on Form 10-K filed on December 9, 2024. Specifically, Inno Holdings acknowledged the lack of adequate policies and procedures in its internal control function to ensure proper control and procedures over its key business cycles.
Prior to the engagement of JWF Assurance PAC, Inno Holdings confirms that there were no consultations with JWF regarding the application of accounting principles to a specified transaction, any disagreements, or any reportable events as defined by SEC regulations during the fiscal years ended September 30, 2024, and 2023, and the subsequent interim periods through January 13, 2025.
In other recent news, Inno Holdings Inc. has seen significant changes in its executive leadership and board of directors. The company's board accepted the resignation of Tianwei Li as Chief Financial Officer, simultaneously appointing Mengshu Shao to the position. The company has also issued 700,000 shares of common stock at a price of $2.50 per share in a private placement, raising approximately $1.75 million for working capital and other general corporate purposes.
In addition, Inno Holdings has raised about $3.5 million from equity sales, issuing 729,167 shares at $4.80 per share. This financial activity is critical given the company's rapid cash burn, as reported by InvestingPro data.
In a bid to maintain compliance with Nasdaq's listing rules, the company also enacted a one-for-ten reverse stock split. While these are recent developments, the company's overall financial health score remains weak at 1.6 out of 5, as per InvestingPro's analysis.
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