Exhibit 99.1
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
AS OF DECEMBER 31, 2023 AND JUNE 30, 2023
AND
FOR THE SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022
F-1
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-2
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2023 (UNAUDITED) AND JUNE 30, 2023
(IN U.S. DOLLARS, EXCEPT FOR NUMBER OF SHARES DATA)
| December 31, 2023 (Unaudited) | June 30, 2023 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Advances to suppliers | ||||||||
| Inventories | ||||||||
| Prepayment, receivables and other current assets | ||||||||
| Due from related parties | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Operating lease - right-of-use assets, net | ||||||||
| Finance lease - right-of-use assets, net | ||||||||
| Long-term deposits and other non-current assets | ||||||||
| Total Non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Advances from customers | ||||||||
| Current maturities of operating lease liabilities | ||||||||
| Current maturities of finance lease liabilities | ||||||||
| Due to related parites | ||||||||
| Short-term loan | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Long-term portion of operating lease liabilities | ||||||||
| Long-term portion of finance lease liabilities | ||||||||
| Convertible note | ||||||||
| Deferred tax liabilities, net | ||||||||
| Total non-current liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Ordinary shares, $ | ||||||||
| Additional paid-in capital | ||||||||
| Statutory reserve | ||||||||
| Accumulate deficits | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total equity attributable to shareholders | ||||||||
| Non-controlling interest | ||||||||
| TOTAL SHAREHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | ||||||
| * |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER
COMPREHENSIVE INCOME (LOSS)
FOR THE SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022
(IN U.S. DOLLARS, EXCEPT SHARES DATA)
(UNAUDITED)
| For the six months ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenues | ||||||||
| Installation and maintenance | $ | $ | ||||||
| Housekeeping | ||||||||
| Senior care services | ||||||||
| Sales of pharmaceutical products | ||||||||
| Educational consulting services | ||||||||
| Total revenues | ||||||||
| Cost of revenues | ||||||||
| Installation and maintenance | ||||||||
| Housekeeping | ||||||||
| Senior care services | ||||||||
| Sales of pharmaceutical products | ||||||||
| Educational consulting services | ||||||||
| Total cost of revenues | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Sales and marketing expenses | ||||||||
| General and administrative expenses | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses), net | ||||||||
| Interest income | ||||||||
| Interest expenses | ( | ) | ( | ) | ||||
| Amortization of financing cost | ( | ) | ( | ) | ||||
| Fair value loss – financial instruments | ( | ) | ||||||
| Other income, net | ||||||||
| Total other expenses, net | ( | ) | ( | ) | ||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Income tax expense | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Including: | ||||||||
| Net loss attributable to the Company’s shareholders | ( | ) | ( | ) | ||||
| Net loss attributable to non-controlling interests | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income (loss) | ||||||||
| Foreign currency translation adjustment, net of nil tax | ( | ) | ||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | ||
| ( | ) | ( | ) | |||||
| * |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022
(IN U.S. DOLLARS, EXCEPT SHARES DATA)
(UNAUDITED)
| Number of Shares* | Ordinary Shares | Additional paid-in capital | Statutory reserve | Retained earnings (Accumulated loss) | Accumulated other comprehensive income (loss) | Equity attributable to the Company’s shareholders | Non-controlling interest | Total equity | ||||||||||||||||||||||||||||
| Balance as of June 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Acquisition of | ||||||||||||||||||||||||||||||||||||
| Acquisition of | - | |||||||||||||||||||||||||||||||||||
| Acquisition of | ||||||||||||||||||||||||||||||||||||
| Shares issued to investors | ||||||||||||||||||||||||||||||||||||
| Shares issued under equity incentive plan | ||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of convertible notes | ||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | |||||||||||||||||||||||||||||||||
| Shares issued to investors | ||||||||||||||||||||||||||||||||||||
| Shares issued under equity incentive plan | ||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of convertible notes | ||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-5
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2023 AND 2022
(IN U.S. DOLLARS)
(UNAUDITED)
| For the six months ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Cash provided by operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Deferred tax benefit | ( | ) | ||||||
| Interest expense | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right-of-use assets | ||||||||
| Convertible note - Amortization of financing cost | ||||||||
| Equity incentive plan | ||||||||
Written-off of property, plant and equipment | ||||||||
| Fair value loss – financial instruments | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivables | ( | ) | ||||||
| Advance to suppliers | ||||||||
| Inventories | ( | ) | ||||||
| Prepayment, receivables and other current assets | ( | ) | ||||||
| Long-term deposits and other non-current assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Advance from customers | ( | ) | ||||||
| Taxes payable | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash provided by operating activities | ||||||||
| Investing Activities | ||||||||
| Purchases of property, plant and equipment | ( | ) | ||||||
| Purchases of intangible assets | ( | ) | ||||||
| Due from related parties | ( | ) | ( | ) | ||||
| Loan receivables | ( | ) | ||||||
| Refund for potential acquisitions | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities | ||||||||
| Proceeds from stock issuance | ||||||||
| Proceeds from short-term loan | ||||||||
| Payment of financial leases | ( | ) | ||||||
| Repayment convertible note | ( | ) | ||||||
| Due to related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Effects of currency translation | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| Non-cash transactions | ||||||||
| Issuance of shares for acquisition of | $ | |||||||
| Issuance of shares for acquisition of | $ | |||||||
| Issuance of shares for convertible note principal and interest settlement | $ | |||||||
| Issuance of shares to directors and consultants | $ | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-6
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS
E-Home Household Service Holdings Limited (the “Company”) was incorporated as a limited company under the law of Cayman Islands on September 24, 2018. The Company does not conduct any substantive operations on its own but instead conducts its business operations through its subsidiaries. The Company and its subsidiaries are hereinafter collectively referred to as “the Company”. The Company is principally engaged in the operation of household services, e.g. installation and maintenance of home appliances, housekeeping and senior care in the People’s Republic of China (the “PRC”) through on-line APP platform or call center. As described below, the Company, through a series of transactions which is accounted for as a reorganization of entities under common control (the “Reorganization”), became the ultimate parent entity of its subsidiaries. Accordingly, these condensed consolidated financial statements reflect the historical operations of the Company as if the current organization structure had been in existence throughout the periods presented.
Reorganization
In preparation of its initial public offering in the United States (“IPO”), the following transactions were undertaken to reorganize the legal structure of the Company. The reorganization involved (i) the incorporation of the Company in the Cayman Islands as a holding company; (ii) the establishment of E-Home Household Service Holdings Limited (“E-Home Hong Kong”) as a wholly-owned subsidiary in Hong Kong, PRC; (iii) the establishment of E-Home Household Service Technology Co., Ltd. (“WOFE”), as a wholly-owned subsidiary of E-Home Hong Kong in Fujian, PRC; (iv) the entry by WFOE into contractual arrangements with Pingtan Comprehensive Experimental Area E Home Service Co., Ltd. (“E-Home Pingtan”) and Fuzhou Bangchang Technology Co. Ltd. (“Fuzhou Bangchang”) and their shareholders. The Company, E-Home Hong Kong and WFOE are all holding companies and had not commenced operation until this reorganization was complete. A reorganization of the Company’s legal structure was completed in February 2019.
As all the entities involved in the process of the Reorganization are under common control before and after the Reorganization, the Reorganization is accounted for in a manner similar to a pooling-of-interest with the assets and liabilities of the parties to the Reorganization carried over at their historical amounts.
Dissolution of the Company’s variable interest entity structure
On October 18, 2021, E-Home WFOE entered into an equity transfer agreement with each of E-Home Pingtan and Fuzhou Bangchang and their respective shareholders, pursuant to which E-Home WFOE exercised the options to acquire all of the equity interests in each of E-Home Pingtan and Fuzhou Bangchang from their respective shareholders. Upon the registration of the equity transfers with the local governmental authorities as of October 27, 2021, the equity transfers were closed, the company’s VIE structure was dissolved and each of E-Home Pingtan and Fuzhou Bangchang became a wholly owned indirect subsidiary of the Company.
Equity transfer agreements
Acquisition of non-controlling interest in HAPPY
On August 10, 2021,
| In USD | ||||
| Purchase consideration | ||||
| Noncontrolling interests | ( | ) | ||
| Additional paid-in capital | ||||
F-7
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Reverse stock split
On September 8, 2022, the Company’s board
of directors approved to effect a one-for-twenty reverse stock split of its ordinary shares with the market effective on September 23,
2022, such that the par value of each ordinary share is increased from US$
On April 12, 2023, the Company announced the effect
of a one-for-ten reverse stock split of its ordinary shares approved by the Company’s Annual General Meeting of Shareholders with
the market effective on April 13, 2023, such that the par value of each ordinary share is increased from US$
On September 22, 2023, the Company announced the
effect of a one-for-ten reverse stock split of its ordinary shares approved by the Company’s Extraordinary General Meeting of Shareholders
with the market effective on September 25, 2023, such that the par value of each ordinary share is increased from US$
On February 9, 2024, the Company announced the
effect of a one-for-five reverse stock split of its ordinary shares approved by the Company’s Extraordinary General Meeting of Shareholders
with the market effective on February 14, 2024, such that the par value of each ordinary share is increased from US$
The number of ordinary shares outstanding as of December 31, 2023 and June 30, 2023, and for the six months ended December 31, 2023 and 2022 were retrospectively adjusted for effect of reverse stock splits on September 23, 2022, April 13, 2023, September 25, 2023 and February 14, 2024.
| Name | Date of Incorporation | Place of Organization |
% of Ownership |
|||||
| E-Home Household Service Holdings Limited | % | |||||||
| E-Home Household Service Technology Co., Ltd. | % | |||||||
| Pingtan Comprehensive Experimental Area E Home Service Co., Ltd. | % | |||||||
| Fuzhou Bangchang Technology Co. Ltd. | % | |||||||
| Fuzhou Yongheng Xin Electric Co., Ltd. (“YHX”) | % | |||||||
| Fujian Happiness Yijia Family Service Co., Ltd. | % | |||||||
| Yaxing Human Resource Management (Pingtan)Co., Ltd. | % | |||||||
| Fuzhou Gulou Jiajiale Family Service Co. Ltd. | % | |||||||
| Yaxin Human Resource Management (Fuzhou) Co., Ltd. | % | |||||||
| Zhongrun (Fujian) Pharmaceutical Co., Ltd. (“Zhongrun”) | % | |||||||
| Fujian Chuangying Business School Co., Ltd. (“Chuangying”) | % | |||||||
The accompanying condensed consolidated financial statements include the financial statements of the Company and its subsidiaries.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Interim financial statements
These unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”) for interim financial information and with the instructions to Form 6-K and Regulation S-X. Accordingly, the condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended June 30, 2023 and notes thereto and other pertinent information contained in our Form 20-F the Company has filed with the Securities and Exchange Commission (the “SEC”) on November 6, 2023. The results of operations for the six months ended December 31, 2023, are not necessarily indicative of the results to be expected for the full fiscal year ending June 30, 2024.
F-8
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and have been consistently applied. The accompanying consolidated financial statements include the financial statements of E-Home Household Service Holdings Limited and its subsidiaries. All inter-company balances and transactions have been eliminated upon consolidation.
Use of estimates
In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the valuation of accounts receivable, prepayments, and other receivables, useful lives of property, plant and equipment and intangible assets, the recoverability of long-lived assets and goodwill, and provision necessary for contingent liabilities. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, cash accounts, interest bearing savings accounts and time certificates of deposit with a maturity of three months or less when purchased. The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. The Company maintains most of the bank accounts in the PRC. Cash balances in bank accounts in PRC are not insured by the Federal Deposit Insurance Corporation or other programs.
Accounts receivable
Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. Based on management of customers’ credit and ongoing relationship, management makes conclusions whether any balances outstanding at the end of the period will be deemed uncollectible on an individual basis and on aging analysis basis. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of operations and other comprehensive income (loss). Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of December 31, 2023 and June 30, 2023, the Company determined that all accounts receivable were collectible and thus the allowance for doubtful accounts were $ and $, respectively.
Advances to suppliers
Advances to suppliers refer to advances for purchase of inventories or services, which are applied against accounts payable when the inventories or services are received.
The Company reviews a supplier’s credit history and background information before advancing a payment. If the financial condition of its suppliers were to deteriorate, resulting in an impairment of their ability to deliver goods or provide services, the Company would write off such amount in the period when it is considered as impaired. The allowance for advances to suppliers recognized as of December 31, 2023 and June 30, 2023 were $ and $, respectively.
Prepayments, receivables and other current assets
Prepayments, receivables and other current assets refer to prepaid for marketing fee, receivable from equity transfer, tax receivable and so on. Prepaid marketing fees are amortized during the contract periods which are within 1 year.
The Company reviews a supplier’s credit history and background information before advancing a payment. If the receivables expected not to be collected, the Company would write off such amount in the period when it is considered as impaired. The allowance for prepayments, deposits and other current assets recognized as of December 31, 2023 and June 30, 2023 were $ and $, respectively.
Inventories
Inventories primarily include purchased accessories, appliances and E-watches for senior care services. Cost of inventories is based on purchase costs and is determined by the weighted-average method. Inventories are stated at the lower of cost or net realizable value. Net realizable value represents the anticipated selling price, net of distribution cost and other costs related to selling the inventories. For the six months ended December 31, 2023 and 2022, the Company recorded no impairment provision of inventories for lower of cost or net realizable value, respectively.
F-9
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Property, plant and equipment, net
Property, plant and equipment are stated at cost
less accumulated depreciation. Maintenance and repairs are charged to expense as incurred.
| Useful Lives | ||
| Buildings and improvements | ||
| Office and electronic equipment | ||
| Motor vehicles | ||
| Machinery |
Expenditures for maintenance and repairs, which do not materially extend the useful lives of the assets, are charged to expense as incurred. Expenditures for major renewals and betterment which substantially extend the useful life of assets are capitalized. The cost and related accumulated depreciation of assets retired or sold are removed from the respective accounts, and any gain or loss is recognized in the consolidated statements of income and other comprehensive income (loss) in other income or expenses.
Intangible assets, net
Intangible assets consist of software acquired from third parties, customer relationships, copyrights and trademarks acquired from business combination and senior care service app developed by the Company. The Company has purchased software from third parties used for operation management and developed an app for its senior care service. Customer relationships include but are not limited to: (1) customer contracts and related customer relationships, (2) noncontractual customer relationships, (3) customer lists, and (4) order or production backlog acquired by the Company from business combination. In accordance with ASC 805-20-55, customer relationships should be recognized separately from goodwill if it meets either of the following criteria: (1) contractual-legal criterion: the intangible asset arises from contractual or other legal rights (regardless of whether those rights are transferable or separable from the acquired business or from other rights and obligations); or (2) separability criterion: the intangible asset is capable of being separated or divided from the acquired business and sold, transferred, licensed, rented, or exchanged.
Intangible assets with finite lives are carried at cost less accumulated amortization. All intangible assets with finite lives are amortized using the straight-line method over their estimated useful lives. Software, senior care service app, copyrights, trademarks and customer relationships are amortized on a straight-line basis over the estimated economic useful lives of five to ten years.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business combination. The Company assesses goodwill for impairment in accordance with ASC Subtopic 350-20, Intangibles—Goodwill and Other: Goodwill (“ASC 350-20”), which requires that goodwill to be tested for impairment at the reporting unit level at least annually and more frequently upon the occurrence of certain events, as defined by ASC 350-20.
The Company has the option to assess qualitative factors first to determine whether it is necessary to perform the quantitative test in accordance with ASC 350-20. In the qualitative assessment, the Company considers primary factors such as industry and market considerations, overall financial performance of the reporting unit, and other specific information related to the operations. If the Company believes, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, the quantitative impairment test described above is required. Otherwise, no further testing is required. The quantitative impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess.
The Company performed qualitative and quantitative assessments for the goodwill. Based on the requirements of ASC 350-20, the Company evaluated all relevant factors including, but not limited to, macroeconomic conditions, industry and market conditions, financial performance, and the share price of the Company.
On disposal of a portion of reporting unit that constitutes a business, the attributable amount of goodwill is included in the determination of the amount of gain or loss recognized upon disposal. When the Company disposes of a business within the reporting unit, the amount of goodwill disposed is measured on the basis of the relative fair value of the business disposed and the portion of the reporting unit retained. This relative fair value approach is not used when the business to be disposed was not integrated into the reporting unit after its acquisition, in which case the current carrying amount of the acquired goodwill should be included in the carrying amount of the business to be disposed.
F-10
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Impairment of long-lived assets other than goodwill
Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Long-lived assets with carrying values that are not expected to be recovered through future cash flows are written down to their estimated fair values. The carrying value of a long-lived asset is deemed not recoverable if it exceeds the sum of undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the asset’s carrying value exceeds the sum of its undiscounted cash flows, a non-cash asset impairment charges equal to the excess of the asset’s carrying value over its estimated fair value is recorded. Fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at a specified measurement date. The Company measures fair value using market price indicators or, in the absence of such data, appropriate valuation technique.
Borrowings
Borrowings comprise short-term borrowings. Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds net of transaction costs and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.
Leases
Leases are classified at lease commencement date as either a finance lease or an operating lease. A lease is a finance lease if it meets any of the following criteria: (a) the lease transfers ownership of the underlying asset to the lessee by the end of the lease term. (b) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise, (c) the lease term is for the major part of the remaining economic life of the underlying asset, (d) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset or (e) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. When none of the criteria meets, the lease shall be classified as an operating lease.
For lessee, a lease is recognized as a right-of-use asset with a corresponding liability at lease commencement date. The lease liability is calculated at the present value of the lease payments not yet paid by using the lease term and discount rate determined at lease commencement. The right-of-use asset is calculated as the lease liability, increased by any initial direct costs and prepaid lease payments, reduced by any lease incentives received before lease commencement. The right-of-use asset itself is amortized on a straight-line basis unless another systematic method better reflects how the underlying asset will be used by and benefits the lessee over the lease term.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The amendments in this ASU require an entity to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will depend on classification as a finance or operating lease. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. The Company adopted ASC 842 effective as of the beginning of the first period presented by using a modified retrospective transition approach in the accompanying financial statements of the Company. The adoption of this standard had a material impact on the Company’s financial position, with no material impact on the results of operations and cash flows (see Note 9 and Note 10).
Convertible note- cash conversion feature
ASC 470, Debt, requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. ASC 470-20 requires that the initial proceeds from the sale of these notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by the Company at such time. We measured the estimated fair value of the debt component of our convertible notes as of the issuance date based on our nonconvertible debt borrowing rate. The equity components of the convertible senior notes have been reflected within additional paid-in capital in our consolidated balance sheet, and the resulting debt discount is amortized over the period during which the convertible notes are expected to be outstanding (through the maturity date) as additional non-cash interest expense.
Freestanding instruments-warrants
Per ASC 470-20-30-2, when detachable warrants (detachable call options) are issued in conjunction with a debt instrument as consideration in purchase transactions, the amounts attributable to each class of instrument issued shall be determined separately, based on values at the time of issuance.
(1) The first step in determining the proper accounting for warrants is to determine whether the equity-linked component is free standing financial instrument of embedded in a host instrument. According to the warrant agreement, the debt and warrant agreements were both entered into by the parties on December 20, 2021 and May 13, 2022 warrants were issued as part of the subscription agreement with the note holders. The holder can transfer the warrant to any person or entity in accordance with the warrant agreement as long as there is a registration statement effective. The warrants can be exercised any time after issuance dates and prior to the expiration date. The debt can remain outstanding even after the warrants are exercised. Based on the above facts, the warrants should be considered as a freestanding instrument.
F-11
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(2) The next step is to determine whether the free-standing instrument is within the scope of ASC 480. The warrants are not within the scope of ASC 480 because the warrant is not considered a mandatorily redeemable financial instrument. The Company has no obligation to redeem the shares or settle the obligation by transferring assets.
(3) The last step is to determine if the freestanding instrument should be accounted for as an equity instrument or liability within the guidance of ASC 815-40. The Company determines the value of the warrants using the Black- Scholes Option Pricing Model (“Black-Scholes”) using the stock price on the date of issuance, the risk-free interest rate associated with the life of the debt, and the volatility of the stock.
Based on the above analysis, the Company concluded that the warrant shall be classified as equity and is recorded at fair value. Subsequent re-measurement is not required.
Convertible debt – derivative treatment
When the Company issues debt with a conversion feature, we must first assess whether the conversion feature meets the requirements to be treated as a derivative, as follows: a) one or more underlying, typically the price of our common stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. An embedded equity-linked component that meets the definition of a derivative does not have to be separated from the host instrument if the component qualifies for the scope exception for certain contracts involving an issuer’s own equity. The scope exception applies if the contract is both a) indexed to its own stock; and b) classified in shareholders’ equity in its statement of financial position.
If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative upon the date of issuance. If the fair value of the convertible debt derivative is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the convertible debt derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The convertible debt derivative is revalued at the end of each reporting period and any change in fair value is recorded as a gain or loss in the statement of operations. The debt discount is amortized through interest expense over the life of the debt. The Company did not identify any derivative in their convertible notes issued during the reporting period.
Fair value of financial instruments
The fair value of a financial instrument is defined as the exchange price that would be received from an asset or paid to transfer a liability (as exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, time deposits, accounts receivable, prepaid expenses and other current assets, accounts payable, and other current liabilities, approximate their fair values because of the short maturity of these instruments and market rates of interest.
ASC 820 requires certain disclosures regarding the fair value of financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
| Level 1 – | Quoted prices in active markets for identical assets and liabilities. |
F-12
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Level 2 – | Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| Level 3 – | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. |
The Company considers the carrying amount of its financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, advances to suppliers, prepayment, receivables and other current assets, due from related parties, loan receivables, accounts payable and advances from customers to approximate the fair value of the respective assets and liabilities as of December 31, 2023 and June 30, 2023 owing to their short-term or immediate nature.
Revenue recognition
The Company adopted Accounting Standards Codification No. 606, Revenue from Contracts with Customers (ASC 606) beginning January 1, 2018 and elected to adopt ASC 606 under the modified retrospective method. This guidance was applied retrospectively to the most current period presented in the Company’s consolidated financial statements. The adoption of ASC 606 did not have a material impact on the consolidated financial statements of the Company.
The Company generates revenues primarily from installation & maintenance services, housekeeping services, senior care services, sales of household appliance accessories and sales of E-watches. The Company sells its goods and services through a third-party service provider, WeChat platform. The Company’s revenues are subject to value added tax (“VAT”). To record VAT payable, the Company uses the gross presentation method, which presents the taxable services and the available input VAT amount (at the rate applicable to the supplier). Revenues are recorded net of VAT in accordance with ASC 606. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The recognition of revenues involves certain management judgments. The amount and timing of our revenues could be materially different for any period if management made different judgments or utilized different estimates.
The Company does not have amounts of contract
assets since revenue is recognized as control of goods or services is transferred. The contract liabilities consist of advance payments
from customers. The contract liabilities are reported in a net position on a customer-by-customer basis at the end of each reporting period.
All contract liabilities are included in advance from customers in the condensed consolidated balance sheets. As of December 31, 2023
and June 30, 2023, the Company record advance from customers of $
Installation & maintenance
Installation and maintenance services mainly consist of the following services: technical home installation and repair, maintenance and other after sale services. Revenues from installation and maintenance services are recognized at a point in time once the service is transferred to the customer. For service arrangements that include multiple performance obligations, revenues are allocated to each performance obligation based on its standalone selling price. The Company allocates arrangement consideration in multiple-deliverable revenue arrangements at the inception of an arrangement to all deliverables based on the relative selling price method, generally based on the best estimate of selling price. The Company considers whether the nature of its promise is a performance obligation to provide the specified goods or services itself (that is, the entity is a principal) or to arrange for the other party to provide those goods or services (that is, the entity is an agent). The Company acts as principal and has contracts with third-party service providers (i.e., service outlets) who acts as agents. The Company is responsible for market development and providing the customer information to the service provider, directing the outlet to provide services and coordination with the customer, while the service provider provides the door-to-door service. The price of services is set by the Company and the service provider is only responsible for collection of payments. When the Company’s end customers place orders online for services, they pay either a required visit fee or the estimated full amount of service fee through third-party payment platforms, such as WeChat Pay and Alipay. If the customer is not satisfied with the chosen provider, the service provider can be re-selected. Regardless of the service provider’s performance, the Company is still liable to complete the orders. If the end customer fails to pay after satisfactory service is provided and the service provider is unable to collect payment from the end customer, the Company will communicate directly with the end customer. The service provider is not obligated to pay the Company. To minimize our risk, the service provider will remit payment of any outstanding receivables each month.
F-13
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Housekeeping services
Housekeeping services refer to services including housecleaning, nanny service, maternity matron and personnel staffing. Revenues from housekeeping are recognized at a point in time upon completion of services to the customer based on the relative selling price method. The Company considers whether the nature of its promise is a performance obligation to provide the specified goods or services itself (that is, the entity is a principal) or to arrange for the other party to provide those goods or services (that is, the entity is an agent). The Company determines it is a principal and recognizes revenues at the gross amount received for the services.
Senior care services
Senior care services refer to services including heart rate test, daily steps count, location and track record, call for help by Wechat or phone, and other care services rendered to senior customers through an E-watch, which is given to the customers when they pay the annual fees. The customers sign a contract for the services with our company. The contract term is normally one year. The revenues from senior care services are allocated into the revenue from the E-watch sold and the revenue of the services provided. Revenues from the E-watch sold are recognized at a point in time once customers receive the E-watch and the revenues from the services provided are recognized over the service period. We consider whether the nature of its promise is a performance obligation to provide the specified goods or services itself (that is, the entity is a principal) or to arrange for the other party to provide those goods or services (that is, the entity is an agent). We determine it is a principal and recognizes revenues at the gross amount received for the services.
Disaggregation of revenue from contracts with customers
During the process of performing the installation and maintenance services, the Company also sells household appliance accessories such as air conditioner parts to its customers according to the customers’ needs. The Company did not sell these household appliance accessories separately. The senior care services consist of the sale of E-watch and the care services. The E-watch cannot be sold to the customers solely without the care services, and the care services should be rendered by the E-watch. Consequently, the Company regards these operating activities as operating in one material segment, being the revenue of senior care services.
Based on the above discussion, the Company disaggregated sales of household appliance accessories from installation and maintenance revenue and senior care services revenue into the sales of the E-watch and the care service. Sales of household appliance accessories and E-watches are recognized in revenue at a point in time while revenue from care service is recognized over a period.
Sales of pharmaceutical products
The Company also generates revenues from sales of pharmaceutical products to its customers, which are mainly pharmaceutical stores in PRC. Under the adoption of ASC 606, the Company recognized revenues in a manner to depict the transfer of goods to a customer at an amount that reflects the consideration expected to be received in exchange for those goods. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
The Company considers customer purchase orders to be the contracts with a customer. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligations. The Company considers whether the nature of its promise is a performance obligation to provide the specified goods itself (that is, the entity is a principal) or to arrange for the other party to provide those goods (that is, the entity is an agent). The Company determines it is a principal and recognizes revenues at the gross amount received for the goods. The Company controls the specified good before that good is transferred to its customers based on the following indicators: (1) the Company is primarily responsible for fulfilling the promise to provide the specified good, (2) the Company bears the inventory risk before or after (i.e., customer has a right of return) the specified good has been transferred to a customer, (3) the Company has discretion in setting the price for the specified good.
F-14
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. The Company provide its customers with rights to return the sold goods for several days after the customers’ acceptance of the goods and can reasonably estimates return provision for the goods. The product return provisions are estimated based on (1) historical rates, (2) specific identification of outstanding returns not yet received from customers and outstanding discounts and claims and (3) estimated returns, discounts and claims expected, but not yet finalized with customers. The Company analyzed historical refund claims for defective products and concluded that they have been immaterial since the Company can return the goods returned from the customers to its suppliers.
Revenues are reported net of all VAT. As the Company’s standard payment terms are less than one year, the Company has elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on their relative standalone selling price.
Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied at a point in time), which typically occurs at delivery. Prices are determined based on negotiations with the Company’s customers when signing the contracts and are not subject to adjustment.
Educational consulting services
Cost of revenues
Cost of revenues consists of service fees paid to staff, outlets, suppliers and the cost of products sold.
Government subsidies
Government subsidies as the compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related cost are recognized in profit or loss in the period in which they become receivable. Government subsidies are recognized when received and all the conditions for their receipt have been met.
For the six months ended December 31, 2023 and
2022, the Company received government subsidies of $ and $
Income taxes
Income taxes are provided on an asset and liability approach for financial accounting and reporting of income taxes. Any PRC tax paid by subsidiaries during the year is recorded. Deferred income taxes are recognized for all significant temporary differences at enacted rates and classified as current or non-current based upon the classification of the related asset or liability in the financial statements. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all, the deferred tax asset will not be realized.
Ordinary shares
The Company accounts for repurchased ordinary shares under the cost method and includes such treasury stock as a component of the common shareholders’ equity. Cancellation of treasury stock is recorded as a reduction of ordinary shares, additional paid-in capital and retained earnings, as applicable. An excess of purchase price over par value is allocated to additional paid-in capital first with any remaining excess charged entirely to retained earnings.
Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as a family member or relative, shareholder, or a related corporation.
F-15
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Earnings per share
The Company computes earnings per share (“EPS”)
in accordance with ASC 260, “Earnings per Share”. ASC 260 requires companies with complex capital structures to present basic
and diluted EPS. Basic EPS is measured as net income divided by the weighted average ordinary shares outstanding for the period. Diluted
EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential ordinary shares (e.g., convertible securities,
options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential ordinary
shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the
calculation of diluted EPS. The potentially dilutive ordinary shares for the six months ended December 31, 2023 was
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity of the Company during a period arising from transactions and other events and circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders. Comprehensive income (loss) is reported in the consolidated statements of operations and other comprehensive income. Accumulated other comprehensive income (loss), as presented on the accompanying consolidated balance sheets, consists of accumulated foreign currency translation adjustments.
Foreign currency translation
Foreign currency translation
The Company’s principal country of operations is the PRC. The financial position and results of its operations are determined using RMB, the local currency, as the functional currency. The functional currency of the Company’s Hong Kong-based and the Cayman-based parent is the U.S. dollar. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the consolidated balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included as a separate component of accumulated other comprehensive income (loss).
Foreign operations translation
In translating the financial statements of the Company’s PRC subsidiaries from their functional currency into the Company’s reporting currency of United States dollars, consolidated balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in shareholders’ equity. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
The value of RMB against U.S. Dollar may fluctuate
and is affected by, among other things, changes in the PRC’s political and economic conditions. Any significant revaluation of RMB
may materially affect the Company’s consolidated financial condition in terms of U.S. Dollar reporting.
| December 31, 2023 |
June 30, 2023 |
December 31, 2022 |
||||||||||
| Year-end spot rate | US$1= |
US$1= |
US$1= |
|||||||||
| Average rate | US$1= |
US$1= |
US$1= |
|||||||||
Segment reporting
Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are identified from the financial information provided regularly to the Company’s most senior executive management for the purposes of allocating resources to, and assessing the performance of, the Company’s various lines of business and geographical locations.
F-16
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Individually material operating segments are not aggregated for financial reporting purposes unless the segments have similar economic characteristics and are similar in respect of the nature of products and services, the nature of production processes, the type or class of customers, the methods used to distribute the products or provide the services, and the nature of the regulatory environment. Operating segments which are not individually material may be aggregated if they share a majority of these criteria. The Company’s five segments are installation & maintenance, housekeeping, senior care services, sales of pharmaceutical products, and educational consulting services. The Company launched senior care services and started generating revenue from this new segment in August 2019. Segments of sales of pharmaceutical products and educational consulting services were acquired from business combination in July 2023.
Business combinations
The Company accounts for its business combinations using the purchase method of accounting in accordance with ASC Topic 805, Business Combinations. The purchase method of accounting requires that the consideration transferred to be allocated to the assets, including separately identifiable assets and liabilities the Company acquired, based on their estimated fair values. The consideration transferred in an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total of cost of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interests in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in earnings.
In a business combination achieved in stages, the Company remeasures its previously held equity interest in the acquiree immediately before obtaining control at its acquisition-date fair value and the re-measurement gain or loss, if any, is recognized in “Others, net” in the consolidated statements of comprehensive income (loss).
The determination and allocation of fair values to the identifiable assets acquired, liabilities assumed and noncontrolling interests is based on various assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in these valuations are discount rates, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. The Company determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons.
Commitments and contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. There are no known commitments or contingencies as of December 31, 2023 and June 30, 2023.
Concentration of risks
Exchange rate risks
The Company’s Chinese subsidiaries may be
exposed to significant foreign currency risks from exchange rate fluctuations and the degree of volatility of foreign exchange rates between
the U.S. Dollar and the RMB. As of December 31, 2023 and June 30, 2023, the RMB denominated cash and cash equivalents amounted to $
Currency convertibility risks
Substantially all of the Company’s operating activities are transacted in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with other information such as suppliers’ invoices, shipping documents and signed contracts.
F-17
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Concentration of credit risks
Financial instruments that potentially subject the Company to concentration of credit risks consist primarily of cash and cash equivalents and accounts receivable, the balances of which stated on the consolidated balance sheets represented the Company’s maximum exposure. The Company places its cash and cash equivalents in good credit quality financial institutions in China.
Risks and uncertainties
The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations including its organization and structure disclosed in Note 1, this may not be indicative of future results.
Recent accounting pronouncements
The Company considers the applicability and impact of all ASUs. Management periodically reviews new accounting standards that are issued.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers”, which provides guidance on the acquirer’s accounting for acquired revenue contracts with customers in a business combination. The amendments require an acquirer recognizes and measures contract assets and contract liabilities acquired in a business combination at the acquisition date in accordance with ASC 606 as if it had originated the contracts. This guidance also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The new guidance is required to be applied prospectively to business combinations occurring on or after the date of adoption. This guidance is effective for the Company for the year ending March 31, 2024 and interim reporting periods during the year ending March 31, 2024. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”, which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. This guidance also requires certain disclosures for equity securities subject to contractual sale restrictions. The new guidance is required to be applied prospectively with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This guidance is effective for the Company for the year ending March 31, 2025 and interim reporting periods during the year ending March 31, 2025. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows.
In July 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in ASU 2023-07 improve financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows.
In September 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The Board is issuing the amendments in this Update to enhance the transparency and decision usefulness of income tax disclosures. Investors currently rely on the rate reconciliation table and other disclosures, including total income taxes paid, to evaluate income tax risks and opportunities. While investors find these disclosures helpful, they suggested possible enhancements to better (1) understand an entity’s exposure to potential changes in jurisdictional tax legislation and the ensuing risks and opportunities, (2) assess income tax information that affects cash flow forecasts and capital allocation decisions, and (3) identify potential opportunities to increase future cash flows. The Board decided that the amendments should be effective for public business entities for annual periods beginning after December 15, 2024. The Company does not expect that the adoption of this guidance will have a material impact on the financial position, results of operations and cash flows.
The Company does not believe other recently issued but not yet effective accounting statements, if recently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of operations and other comprehensive income (loss) and statements of cash flows.
F-18
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 – BUSINESS COMBINATIONS
For the year ended June 30, 2023, the Company
completed several business combinations with total purchase consideration in aggregate was $
Goodwill, which is non-deductible for tax purposes, is primarily attributable to the synergies expected to be achieved from the acquisitions.
The valuations used in the purchase price allocation were determined by the Company with the assistance of independent third-party valuation firms. The valuation reports considered generally accepted valuation methodologies such as the income, market and cost approaches. As the acquirees are all private companies, the fair value estimates of pre-existing equity interests and debt investment or noncontrolling interests are based on significant inputs considered by market participants which mainly include (a) discount rate, (b) projected terminal value based on future cash flows, (c) equity multiples or enterprise value multiples of companies in the same industries and (d) adjustment for lack of control or lack of marketability.
Acquisition of
| In USD | ||||
| Fair value of total consideration transferred: | ||||
| Equity instrument ( | ||||
| Cash consideration | ||||
| Total consideration | ||||
| Recognized amounts of identifiable assets acquired and liability assumed: | ||||
| Intangible assets - customer relationships | ||||
| Deferred tax liabilities | ( | ) | ||
| Total identifiable net assets | ||||
| Fair value of non-controlling interest | ||||
| Goodwill | ||||
| Impairment loss | ( | ) | ||
| Goodwill, net | ||||
Acquisition of
| In USD | ||||
| Fair value of total consideration transferred: | ||||
| Equity instrument ( | ||||
| Total consideration | ||||
| Recognized amounts of identifiable assets acquired and liability assumed: | ||||
| Intangible assets - customer relationships | ||||
| Intangible assets - copyrights and trademarks | ||||
| Deferred tax liabilities | ( | ) | ||
| Total identifiable net assets | ||||
| Fair value of non-controlling interest | ||||
| Goodwill | ||||
| Impairment loss | ( | ) | ||
| Goodwill, net | ||||
F-19
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – ACCOUNTS RECEIVABLE
| December 31, 2023 | June 30, 2023 | |||||||
| Accounts receivable | $ | $ | ||||||
The Company recorded no allowance for doubtful accounts
as of December 31, 2023 and June 30, 2023. The Company gives its customers credit period of 30 days to 1 year and continually assesses
the recoverability of uncollected accounts receivable. As of December 31, 2023 and June 30, 2023, the balances of the Company’s
accounts receivable were all due within credit periods. Until April 30, 2024, the Company collected accounts receivable of $
NOTE 5 – PREPAYMENT, RECEIVABLES AND OTHER CURRENT ASSETS
| December 31, 2023 | June 30, 2023 | |||||||
| Prepaid for marketing fee* | $ | $ | ||||||
| Receivable from equity transfer** | ||||||||
| Tax receivable | ||||||||
| Other prepaid expenses and current assets | ||||||||
| Total prepayments, receivables and other current assets | $ | $ | ||||||
| * |
| Six months ended December 31, 2023 | Year ended June 30, 2023 | |||||||
| Beginning balance | $ | $ | ||||||
| Marketing fees paid | ||||||||
| Amortization of marketing fees | ( | ) | ( | ) | ||||
| Foreign exchange difference | ( | ) | ||||||
| Ending balance | $ | $ | ||||||
| ** |
F-20
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT, NET
| December 31, 2023 | June 30, 2023 | |||||||
| Building and improvements | $ | $ | ||||||
| Motor vehicles | ||||||||
| Office and electronic equipment | ||||||||
| Machinery | ||||||||
| Total property, plant and equipment, at cost | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
As of December 31, 2023 and June 30, 2023, there
were not any pledged property, plant or equipment. The Company recorded depreciation expenses of $
For the six months ended December 31, 2023 and
2022, the Company purchased property, plant and equipment of $ and $
For the six months ended December 31, 2023, the Company
wrote off office and electronic equipment and machinery of $
NOTE 8 – INTANGIBLE ASSETS, NET
| December 31, 2023 | June 30, 2023 | |||||||
| Customer relationships | $ | $ | ||||||
| Copyrights and trademarks | ||||||||
| Software | ||||||||
| Senior care service app | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Less: impairment loss | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
On June 14, 2022 and December 20, 2022,
Based on the valuations report from independent
third-party valuation firms used in the purchase price allocation, the Company recorded customer relationships of $
F-21
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On July 30, 2022, the Company’s board of
directors approved to acquire
Based on the valuations report from independent
third-party valuation firms used in the purchase price allocation, the Company recorded customer relationships of $
As of December 31, 2023 and June 30, 2023, there
were no any pledged intangible assets to secure bank loans. The Company recorded amortization expense of $
| Years ending December 31, | Amortization expense | |||
| 2024 | $ | |||
| $ | ||||
NOTE 10 – OPERATING LEASE RIGHT-OF-USE ASSETS, NET
| June 30, 2023 | Increase/ (Decrease) | Exchange rate translation | December 31, 2023 | |||||||||||||
| Shou Hill Valley Area | $ | $ | $ | $ | ||||||||||||
| Villas | ||||||||||||||||
| Farmland* | ||||||||||||||||
| Warehouse** | ||||||||||||||||
| Base Station Tower | ||||||||||||||||
| Total right-of-use assets, at cost | ||||||||||||||||
| Less: accumulated lease expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Operating lease right-of-use assets, net | $ | $ | ( | ) | $ | $ | ||||||||||
| * |
| ** |
The Company recognized lease expense for the operating
lease right-of-use assets Shou Hill Valley Area and Villas over the lease periods which are
For the six months ended December 31, 2023, amortization
of the operating lease right-of-use assets amounted to $
F-22
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 – FINANCE LEASE RIGHT-OF-USE ASSETS, NET
| June 30, 2023 | Increase/ (Decrease) | Exchange rate translation | December 31, 2023 | |||||||||||||
| Company vehicles | $ | $ | ( | ) | $ | $ | ||||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||||||||||
| Finance lease right-of-use assets, net | $ | $ | ( | ) | $ | $ | ||||||||||
On July 1, 2023, the Company terminated the lease
agreement of vehicles with the lease. The finance lease right-of-use asset is amortized over a
NOTE 12 – LONG-TERM DEPOSITS AND OTHER NON-CURRENT ASSETS
| December 31, 2023 | June 30, 2023 | |||||||
| Deposits paid for land use right* | $ | $ | ||||||
| Performance deposits** | ||||||||
| Deposits paid for lease assets | ||||||||
| Total | $ | $ | ||||||
| * |
| ** |
NOTE 13 – GOODWILL
For the year ended June 30, 2023, the Company
completed several business combinations with total purchase consideration in aggregate was $
Goodwill, which is non-deductible for tax purposes, is primarily attributable to the synergies expected to be achieved from the acquisitions.
The valuations used in the purchase price allocation were determined by the Company with the assistance of independent third-party valuation firms. The valuation reports considered generally accepted valuation methodologies such as the income, market and cost approaches. As the acquirees are all private companies, the fair value estimates of pre-existing equity interests and debt investment or noncontrolling interests are based on significant inputs considered by market participants which mainly include (a) discount rate, (b) projected terminal value based on future cash flows, (c) equity multiples or enterprise value multiples of companies in the same industries and (d) adjustment for lack of control or lack of marketability.
The purchase prices allocation to the assets acquired and liabilities assumed based on their fair values were included in Note 3. Business Combinations.
NOTE 14 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| December 31, 2023 | June 30, 2023 | |||||||
| Payable to suppliers | $ | $ | ||||||
| Salary and welfare payables | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Total | ||||||||
F-23
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 – ADVANCES FROM CUSTOMERS
| December 31, 2023 | June 30, 2023 | |||||||
| Senior care services | $ | $ | ||||||
| Housekeeping services | ||||||||
| Total | $ | $ | ||||||
E-Home received annual fees from senior care services
customers and recognized revenues over the contract period. The amounts advanced from customers from senior care services were $
NOTE 16 – OPERATING LEASE LIABILITIES
| December 31, 2023 | June 30, 2023 | |||||||
| Villas* | $ | $ | ||||||
| Warehouse** | ||||||||
| Base Station Tower*** | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| December 31, 2023 | June 30, 2023 | |||||||
| Long-term portion of operating lease liabilities | $ | $ | ||||||
| Current maturities of operating lease liabilities | ||||||||
| Total | $ | $ | ||||||
The operating lease liabilities is the net present value of the remaining lease payments as of December 31, 2023 and June 30, 2023.
The discount rates used for the Villas, Base Station
Tower, and Warehouse were
The Company recorded no operating lease liability
for the operating lease of Shou Hill Valley Area as of December 31, 2023 and June 30, 2023, respectively, since the Company prepaid the
total lease expense of $
For the six months ended December 31, 2023 and
2022, the operating lease costs were $
| * |
| ** |
| *** |
F-24
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Operating lease payment | Villas | Base station tower | Warehouse | Total undiscounted cash flows | ||||||||||||
| Discount rate at commencement | % | % | % | |||||||||||||
| One year | $ | $ | $ | $ | ||||||||||||
| Two years | ||||||||||||||||
| Three years | ||||||||||||||||
| Four years | ||||||||||||||||
| Five years | ||||||||||||||||
| Beyond five years | ||||||||||||||||
| Total undiscounted cash flows | $ | $ | $ | $ | ||||||||||||
| Total financing lease liabilities | ||||||||||||||||
| Difference between undiscounted cash flows and discounted cash flows | ||||||||||||||||
| Operating lease payment | Villas | Base station tower | Warehouse | Total undiscounted cash flows | ||||||||||||
| Discount rate at commencement | % | % | % | |||||||||||||
| One year | $ | - | $ | $ | $ | |||||||||||
| Two years | ||||||||||||||||
| Three years | ||||||||||||||||
| Four years | ||||||||||||||||
| Five years | ||||||||||||||||
| Beyond five years | ||||||||||||||||
| Total undiscounted cash flows | $ | $ | $ | $ | ||||||||||||
| Total operating lease liabilities | ||||||||||||||||
| Difference between undiscounted cash flows and discounted cash flows | ||||||||||||||||
NOTE 17 – FINANCE LEASE LIABILITIES
| June 30, 2023 | Increase/ (Decrease) | Payment | Exchange rate translation | December 31, 2023 | ||||||||||||||||
| Company vehicles | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| Add: unrecognized finance expense | ( | ) | ||||||||||||||||||
| Total financing lease liabilities | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
| December 31, 2023 | June 30, 2023 | |||||||
| Long-term portion of finance lease liabilities | $ | - | $ | |||||
| Current maturities of finance lease liabilities | - | |||||||
| Total | $ | - | $ | |||||
The lease agreement was entered into on September
11, 2017, bears interest at about
For the six months ended December 31, 2023 and
2022, the amortization expense of financial lease right-of-use assets were $ and $
There were no future financial lease liabilities as of December 31, 2023.
F-25
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Financial lease payments | Company vehicles | |||
| Discount rate at commencement | % | |||
| One year | $ | |||
| Two years | ||||
| Three years | ||||
| Four years | ||||
| Five years | ||||
| Beyond five years | ||||
| Total undiscounted cash flows | $ | |||
| Total financing lease liabilities | ||||
| Difference between undiscounted cash flows and discounted cash flows | ||||
NOTE 18 – CONVERTIBLE NOTE
The Convertible Note 2021
On December 20, 2021, the Company entered into
a Securities Purchase Agreement with an institutional investor pursuant to which the Company issued an unsecured convertible promissory
note with a two-year maturity (the “Convertible Note 2021”) to Investor. The Convertible Note 2021 has the original principal
amount of $
Material Terms of the Convertible Note 2021:
| ● | Interest
accrues on the outstanding balance of the Convertible Note at |
| ● | Upon
the occurrence of a Trigger Event, Investor may increase the outstanding balance payable under the Convertible Note by |
| ● | Investor
may convert all or any part of the outstanding balance of the Convertible Note, at any time after six months from the issue date, into
ordinary shares of the Company at a price equal to |
| ● | Joseph
Stone Capital, LLC (“JSC”) acted as the exclusive placement agent in connection with the offering. The Company agreed to
pay JSC a cash fee equal to |
| ● | Lender
has the right at any time after the date that is six (6) months from the Purchase Price Date until the Outstanding Balance has been paid
in full, at its election, to convert (“Conversion”) all or any portion of the Outstanding Balance into fully paid and non-assessable
Ordinary Shares, par value $ |
F-26
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In accounting for the issuance of the Convertible
Note 2021, the Company separated the Convertible Note into liability and equity components. The carrying amount of the equity component
of the Convertible Note 2021 and the warrants was $
For the year ended June 30, 2022, the Company
issued
For the year ended June 30, 2023, the Company
issued
For the six months ended December 31, 2023, the
Company issued
The Convertible Note 2021 was fully repaid and converted on November 10, 2023.
The Convertible Note 2022
On May 13, 2022, the Company entered into a Securities
Purchase Agreement with an institutional investor pursuant to which the Company issued an unsecured convertible promissory note with a
two-year maturity (the “Convertible Note 2022”) to Investor. The Convertible Note 2022 has the original principal amount of
$
Material Terms of the Convertible Note 2022:
| ● | Interest
accrues on the outstanding balance of the Convertible Note at |
| ● | Upon
the occurrence of a Trigger Event, Investor may increase the outstanding balance payable under the Convertible Note by |
| ● | Investor
may convert all or any part of the outstanding balance of the Convertible Note, at any time after six months from the issue date, into
ordinary shares of the Company at a price equal to |
| ● | Joseph
Stone Capital, LLC (“JSC”) acted as the exclusive placement agent in connection with the offering. The Company agreed to
pay JSC a cash fee equal to |
| ● | Lender
has the right at any time after the date that is six (6) months from the Purchase Price Date until the Outstanding Balance has been paid
in full, at its election, to convert (“Conversion”) all or any portion of the Outstanding Balance into fully paid and non-assessable
Ordinary Shares, par value $ |
F-27
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In accounting for the issuance of the Convertible
Note 2022, the Company separated the Convertible Note into liability and equity components. The carrying amount of the equity component
of the Convertible Note and the warrants was $
Debt issuance costs related to the original Convertible
Note 2022 comprised of commissions paid to third party placement agent and lawyers of $426,095 which includes original issue discount
of $
For the six months ended December 31, 2023, the
Company issued
| Principal outstanding | Unamortized issuance cost | Net carrying value | ||||||||||
| Convertible Note 2021 | ||||||||||||
| Convertible Note 2022 | ( | ) | ||||||||||
| Convertible Notes - liability portion | $ | ( | ) | $ | ||||||||
| Amount allocated to conversion option | Issuance cost | Equity component, net | ||||||||||
| Convertible Note 2021 | $ | $ | ( | ) | $ | |||||||
| Convertible Note 2022 | ( | ) | ||||||||||
| Convertible Note – equity portion | $ | ( | ) | $ | ||||||||
| Issuance costs and debt discount | Convertible note interest | Total | ||||||||||
| Convertible Note 2021 | ||||||||||||
| Convertible Note 2022 | ||||||||||||
| Convertible Note | $ | $ | ||||||||||
F-28
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Principal outstanding | Unamortized issuance cost | Net carrying value | ||||||||||
| Convertible Note 2021 | $ | $ | ( | ) | $ | |||||||
| Convertible Note 2022 | ( | ) | ||||||||||
| Convertible Notes - liability portion | $ | $ | ( | ) | $ | |||||||
| Amount allocated to conversion option | Issuance cost | Equity component, net | ||||||||||
| Convertible Note 2021 | $ | $ | ( | ) | $ | |||||||
| Convertible Note 2022 | ( | ) | ||||||||||
| Convertible Notes – equity portion | $ | $ | ( | ) | $ | |||||||
| Issuance costs and debt discount | Convertible note interest | Total | ||||||||||
| Convertible Note 2021 | $ | $ | $ | |||||||||
| Convertible Note 2022 | ||||||||||||
| Convertible Notes | $ | $ | $ | |||||||||
The effective interest rates to derive the liability
component fair value were
F-29
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 19 - Warrants
On December 20, 2021 and May 13, 2022, the Company
issued warrants to settle the commission of the agent in connection with the issuance of the convertible notes during the year ended June
30, 2022. The warrants entitle the holder to purchase
As of December 31, 2023 and June 30, 2022, the
Company had approximately
The 2021 warrants were valued using the Black-Scholes
value option pricing model with the following inputs: volatility of
The 2022 warrants were valued using the Black-Scholes
value option pricing model with the following inputs: volatility of
NOTE 20 – TAXES
The Company is registered in the Cayman Islands. The Company generated substantially all of its income from its PRC operations for the six months ended December 31, 2023 and 2022.
Cayman Islands
Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, upon payments of dividends to the shareholders, no Cayman Islands withholding tax will be imposed.
Hong Kong
E-Home Hong Kong is not subject to tax on income or capital gain since there has no operations in Hong Kong for the six months ended December 31, 2023 and 2022.
F-30
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PRC
Income Tax
On March 16, 2007, the National People’s
Congress of PRC enacted an Enterprise Income Tax Law (“EIT Law”), under which Foreign Investment Enterprises (“FIEs”)
and domestic companies would be subject to enterprise income tax (“EIT”) at a uniform rate of
| For six months ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Current income tax provision | $ | $ | ||||||
| Deferred income tax provision | ( | ) | ||||||
| Total | $ | $ | ||||||
| For six months ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Provision for income taxes at statutory tax rate in the PRC | $ | $ | ||||||
| Effect of expense for which no income tax is deductible | ||||||||
| Effect of assets recognized at fair value in business combinations | ( | ) | ||||||
| Effective income tax expense | $ | $ | ||||||
| December 31, 2023 | June 30, 2023 | |||||||
| Deferred tax assets | ||||||||
| Advanced from customers | $ | |||||||
| Total deferred tax assets | ||||||||
| Allowance for deferred tax assets | ( | ) | ( | ) | ||||
| Deferred tax assets, net | ||||||||
| December 31, 2023 | June 30, 2023 | |||||||
| Deferred tax liabilities | ||||||||
| Business combinations | $ | |||||||
| Total deferred tax liabilities | ||||||||
Value Added Tax (“VAT”)
Business tax changed to VAT in China since May
1, 2016. The Company’s revenue from installation is subject to a VAT rate of
According to the regulations (Fiscal and Tax [2016] 36), no VAT will be levied if an enterprise provides employee-based household services. E-Home Pingtan applied for the tax exemption in July 2017 and was approved by the State Administration of Taxation (China), so the VAT rate of installation, maintenance, after-sales and cleaning service is since July 2017.
F-31
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Taxes payable
As of December 31, 2023 and June 30, 2023, the Company’s has taxes payable balances of $ and $, respectively.
NOTE 21 – EQUITY
Ordinary Shares
At the reorganization event described in Note
1, the Company issued
Prior to the reorganization, the Company had $
The reorganization has been accounted for at historical
cost and prepared on the basis as if the reorganization had become effective as of the beginning of the first period presented in the
accompanying financial statements of the Company. On May 23, 2019, the Company split its
On May 18, 2021, the Company completed the closing
of its initial public offering of
On October 18, 2021, E-Home WFOE entered into an equity transfer agreement with each of E-Home Pingtan and Fuzhou Bangchang and their respective shareholders, pursuant to which E-Home WFOE exercised the options to acquire all of the equity interests in each of E-Home Pingtan and Fuzhou Bangchang from their respective shareholders. Upon the registration of the equity transfers with the local governmental authorities as of October 27, 2021, the equity transfers were closed, the company’s VIE structure was dissolved and each of E-Home Pingtan and Fuzhou Bangchang became a wholly owned indirect subsidiary of the Company.
On June 21, 2021, the Company granted
On January 20, 2022, the Company and E-Home Pingtan
entered into an equity transfer agreement to acquire
On January 20, 2022, the Company and E-Home Pingtan
entered into an equity transfer agreement to acquire
On March 18, 2022, the Company granted
On June 14, 2022, the Company and its wholly owned
subsidiary, E-Home Hong Kong, entered into an equity transfer agreement with Zhongrun, a limited liability company established in China
and Ms. Ling Chen, the sole shareholder of Zhongrun, pursuant to which Ms. Chen agreed to transfer
F-32
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On July 30, 2022, the Company’s board of directors
approved to acquire
On August 15, 2022, the Company’s board of directors
approved the financing by the Company in the amount of $
On September 19, 2022, the Company’s board of
directors approved for issuance and sale of the Company’s ordinary shares up to an aggregate offering price of US$
On November 18, 2022, the Company entered into
a securities purchase agreement with certain investors, pursuant to which each of the investors agreed to purchase and the Company agreed
to issue and sell to the investors, an aggregation of
On December 20, 2022, the Company and its wholly
owned subsidiary, E-Home Hong Kong, entered into an equity transfer agreement with Zhongrun, a limited liability company established in
China and Ms. Ling Chen, pursuant to which Ms. Chen agreed to transfer
On January 6, 2023, the Company entered into a
securities purchase agreement with eleven investors, including two entities and nine individuals, pursuant to which the investors agreed
to purchase an aggregate of
On January 27, 2023, the Company entered into
a securities purchase agreement with certain investors, pursuant to which each of the investors agreed to purchase and the Company agreed
to issue and sell to the investors an aggregate of
F-33
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On May 15, 2023, the Board approved and adopted
the Company’s 2023 Share Incentive Plan which has
Reverse stock split
On September 8, 2022, the Company’s board
of directors approved to effect a one-for-twenty reverse stock split of its ordinary shares with the market effective on September 23,
2022, such that the par value of each ordinary share is increased from US$
On April 12, 2023, the Company announced the effect
of a one-for-ten reverse stock split of its ordinary shares approved by the Company’s Annual General Meeting of Shareholders with
the market effective on April 13, 2023, such that the par value of each ordinary share is increased from US$
On September 22, 2023, the Company announced the
effect of a one-for ten reverse stock split of its ordinary shares approved by the Company’s Extraordinary General Meeting of Shareholders
with the market effective on September 25, 2023, such that the par value of each ordinary share is increased from US$
On February 9, 2024, the Company announced the
effect of a one-for-five reverse stock split of its ordinary shares approved by the Company’s Extraordinary General Meeting of Shareholders
with the market effective on February 14, 2024, such that the par value of each ordinary share is increased from US$
Statutory Reserve
The Company is required to make appropriations
to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income
determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory
surplus reserve are required to be at least
Dividends
Dividends declared by the Company are based on the distributable profits as reported in its statutory financial statements reported in accordance with PRC GAAP, which may differ from the results of operations reflected in the consolidated financial statements prepared in accordance with US GAAP. The Company’s ability to pay dividends is primarily from cash received from its operating activities in PRC. For the six months ended December 31, 2023 and 2022, there was no Company dividend declared.
F-34
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 22 – REVENUES
| For six months ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Installation and maintenance | $ | $ | ||||||
| Housekeeping | ||||||||
| Senior care services | ||||||||
| Sales of E-watch | ||||||||
| Sales of pharmaceutical products | ||||||||
| Educational consulting services | ||||||||
| Total | $ | $ | ||||||
NOTE 23 – SEGMENT INFORMATION
Operating segments are reported in a manner consistent
with the internal reporting provided to the management for decision making. Management has identified
| For the six months ended December 31, | ||||||||
| Revenues | 2023 | 2022 | ||||||
| Installation and maintenance | $ | $ | ||||||
| Housekeeping | ||||||||
| Senior care services | ||||||||
| Sales of pharmaceutical products | ||||||||
| Educational consulting services | ||||||||
| Total | $ | $ | ||||||
| For the six months ended December 31, | ||||||||
| Gross Profit | 2023 | 2022 | ||||||
| Installation and maintenance | $ | $ | ||||||
| Housekeeping | ||||||||
| Senior care services | ||||||||
| Sales of pharmaceutical products | ||||||||
| Educational consulting services | ||||||||
| Total | $ | $ | ||||||
F-35
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Current Assets | December 31, 2023 | June 30, 2023 | ||||||
| Installation and maintenance | $ | $ | ||||||
| Housekeeping | ||||||||
| Senior care services | ||||||||
| Sales of pharmaceutical products | ||||||||
| Educational consulting services | ||||||||
| Unallocated current assets | ||||||||
| Total | $ | $ | ||||||
| Non-current Assets | December 31, 2023 | June 30, 2023 | ||||||
| Installation and maintenance | $ | $ | ||||||
| Housekeeping | ||||||||
| Senior care services | ||||||||
| Sales of pharmaceutical products | ||||||||
| Educational consulting services | ||||||||
| Unallocated non-current assets | ||||||||
| Total | $ | $ | ||||||
On account of the Company’s business model, assets, operating expense, profit or loss, liabilities and other material items could not be separated into each operating segment. As the Company’s long-lived assets and revenue are substantially located in and derived from the PRC, no geographical segments are presented.
NOTE 24 – COMMITMENTS AND CONTINGENCIES
| Future Lease Payments | Operating Lease | |||
| January 2024 to December 2024 | $ | |||
| January 2025 to December 2025 | ||||
| January 2026 to December 2026 | ||||
| January 2027 to December 2027 | ||||
| January 2027 to December 2027 | ||||
| Thereafter | ||||
| Total | $ | |||
F-36
E-HOME HOUSEHOLD SERVICE HOLDINGS LIMITED
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 25 – CUSTOMER AND SUPPLIER CONCENTRATION
Significant customers and suppliers are those that account for greater than 10% of the Company’s revenues and purchase.
The Company’s sales are made to customers that are located primarily in China. For the six months ended December 31, 2023 and 2022, no individual customer or supplier accounted for more than 10% of the Company’s total revenues or purchase. As of December 31, 2023 and June 30, 2023, no individual customer or supplier accounted for more than 10% of the total outstanding accounts receivable or accounts payable balance.
NOTE 26 – RELATED PARTY BALANCES AND TRANSACTIONS
As of December 31, 2023 and June 30, 2023, the
Company had $
For the six months ended December 31, 2023, Mr.
Xie made payment of $
As of December 31, 2023 and June 30, 2023, the
Company had $
For the six months ended December 31, 2023, the
Company transferred $
NOTE 27 – SUBSEQUENT EVENTS
On January 9, 2024, the
Compensation Committee of the Board of Directors of the Company granted a stock award of
On January 11, 2024, the Company entered into a Securities Purchase
Agreement with certain purchasers, pursuant to which the Company agreed to sell to the purchasers in a private placement
On March 21, 2024, the Company entered into a
Securities Purchase Agreement with certain purchasers. Pursuant to the purchase agreement, the Company will sell to the purchasers in
a registered direct offering, an aggregate of
Reverse stock split
On February 9, 2024, the Company announced the
effect of a one-for-five reverse stock split of its ordinary shares approved by the Company’s Extraordinary General Meeting of Shareholders
with the market effective on February 14, 2024, such that the par value of each ordinary share is increased from US$
In accordance with ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2023 to the date these financial statements were issued, and has determined that, it does not have any material subsequent events to disclose in these financial statements.
F-37