(Name, Telephone, E-mail
and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(g)
of the Act.
Securities for which there is a reporting obligation pursuant to Section
15(d) of the Act.
Indicate the number of outstanding shares of each of the issuer’s
classes of capital or common stock as of the close of the period covered by the annual report (June 30, 2022): There were 44,247,198 shares
of the registrant’s Ordinary Shares outstanding, par value $0.002 per share.
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer.
If an emerging growth company that prepares its
financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:
If “Other” has been checked in response
to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As required by Rule 12b-15
under the Securities Exchange Act of 1934, as amended, new certificates of our principal executive officer, principal financial officer,
and auditor are being filed as exhibits to this Amendment No. 1 on Form 20-F/A as Exhibits 12.1, 12.2, 13.1, 13.2 and 15.2.
PART I
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management
The following table sets forth certain information
regarding our directors and executive officers.
| NAME |
|
AGE |
|
POSITION |
| Wenshan Xie |
|
49 |
|
Chairman and Chief Executive
Officer |
| Chunsheng Zhu |
|
57 |
|
Chief Financial Officer
and Director |
| Mingxiang He |
|
46 |
|
Chief Marketing Officer
and Director |
| Yang Chen |
|
31 |
|
Chief Technology Officer |
| Yijing Ye |
|
57 |
|
Independent Director |
| Ratansha B. Vakil |
|
61 |
|
Independent Director |
| Jianhua Wang |
|
50 |
|
Independent Director |
| Mark Willis |
|
66 |
|
Independent Director |
Wenshan Xie. Mr. Xie is our founder
and has served as our Chief Executive Officer and Chairman since May 23, 2019. He has served as Chief Executive Officer of E-Home Pingtan
since 2014. Since 2007, Mr. Xie has also been the executive director and general manager of Fuzhou Bangchang. Mr. Xie is a pioneer in
China’s home appliance service industry and has devoted himself to this industry for 15 years. He received his Executive Master
of Business Administration degree from the School of Continuing Education at Tsinghua University in 2010.
Chunshen Zhu. Mr. Zhu has served
as our Chief Financial Officer since November 23, 2020 and our director since November 30, 2020. Mr. Zhu has served as financial manager
of E-Home Pingtan since July 2020. Before joining us, he was the finance director of Fujian Haixing Entertainment Company from January
1992 to June 1999 and financial manager at Fuzhou Mawei Shipping Co., Ltd. from February 2002 to September 2009. From July 2010 to March
2020, Mr. Zhu was the chief financial officer of Fujian Entrepreneurship Cooperation Electric Co., Ltd., a Chinese company with shares
quoted on the National Equities Exchange and Quotations. Mr. Zhu graduated from Fujian Jimei Institute of Finance and Economics, where
he majored in Industrial Accounting.
Mingxiang He. Mr. He has served
as our Chief Marketing Officer and Director since August 19, 2021. Prior to that, he served as an operations manager at E-Home Pingtan
since May 2021. Before joining the Company, Mr. He was the general manager of Fujian Magic New Technology Co., Ltd from May 2017 to April
2021, and a manager of Xiamen Chaohong Electronics Co., Ltd. from January 2015 to April 2017. He studied and researched in the UK from
2005 to 2012. Prior to that, he was a teacher from 1994 to 2005 and was selected as a member at a teaching research association. He had
substantial work and research experience in the fields of e-commerce, foreign trade, Internet of Things and blockchain. Mr. He graduated
from Fujian Yuanhong Normal School in 1994 where he majored in Professional Teachers.
Yang Chen. Mr. Chen has served
as our Chief Technology Officer since May 23, 2019 and he has served as IT manager of E-Home Pingtan since 2015. He has four years’
experience in website development. Mr. Chen worked in the new media product operation department in Fuzhou Yeats Optoelectronic Technology
Co, Ltd., an LED product sales company in Fujian, from 2014 to 2015. Mr. Chen received his bachelor’s degree in mechanical design
from Fuzhou University Zhicheng College in 2014.
Yijing Ye. Ms. Ye has served as
our independent director since May 14, 2021. She has more than 20 years of extensive experience relating to financial analysis, accounting
and financial management. Since 2009, Ms. Ye has been the Chief Financial Officer of Easen International, Inc., an international firm
headquartered in San Diego that provides environmental and financial services for industrial clients, international development organizations
and government agencies. From 2005 to 2009, she was a financial specialist at Easen International, Inc.’s Shanghai office. From
1999 to present, Ms. Ye has also acted as a freelance international consultant and participated in more than 30 international projects
financed by various international organizations, such as the Asian Development Bank, the World Bank and the International Finance Corporation,
in which she served as the international financial specialist, performing institutional, accounting, financial and economic assessment,
forecasting, and comprehensive analysis using self-designed models or models approved by the banks. Ms. Ye holds a Master’s degree
in financial engineering from Shanghai Jiao Tong University, a Master of law in economics from Wuhan University, and a BS degree in finance
and banking from Shanghai University of Finance and Economics.
Ratansha B Vakil. Mr. Vakil has
served as our independent director since May 14, 2021. Since April 2017, Mr. Vakil has been President of SkyFi Capital Partners Inc.,
a firm based in New York City that provides financial and management consulting services. From April 2012 to April 2017, he was an advisor
of IT and funding at Prestige Investment Associates Inc. Prior to that, he provided consulting services on accounting, financial, management
and analytical software systems to companies. Mr. Vakil received an MBA in international business and finance from the University of
San Diego and a bachelor’s degree in computer science and economics with a minor in mathematics from the National University of
Singapore.
Jianhua Wang. Mr. Wang has served
as our independent director since May 14, 2021. Since 2009, Mr. Wang has acted as a senior manager at China Taiping Insurance Group Ltd,
one of the largest insurance companies in China. From October 2016 to December 2018, he was a director of Yanguangwo (Beijing) Culture
Development Co., Ltd. Mr. Wang holds a bachelor’s degree in financial management from Zhongnan University of Economics and Law.
Mark Willis. Mr. Willis has served
as our independent director since May 14, 2021. Mr. Willis is the President and CEO of ParQuest Consulting since October 2014. Prior
to his current position, Mr. Willis was a Managing Director with Morgan Stanley and Citi Smith Barney. He held several executive positions
including Director of Investment Products Distribution, Head of Funds Sales, Head of Diversity, and Director of Training. Mr. Willis
currently serves on the Board of Directors of the South Bronx Overall Economic Development Corporation. He served on the board of the
National Association of Securities Professionals (NASP) from 1995-2012 and was the Chairman of the Board during the financial crisis
of 2008 and 2009. Mr. Willis earned a Bachelor of Business Administration in Finance and Investments and a Master of Business Administration
in Computer Methodology from Bernard Baruch College in New York, New York.
No family relationship exists between any of
our directors and executive officers. There are no arrangements or understandings with major shareholders, customers, suppliers or others
pursuant to which any person referred to above was selected as a director or member of senior management.
B. Compensation
Executive Compensation
For the fiscal year ended June 30, 2022, the aggregate
cash compensation and benefits that we paid to our executive officers was approximately $372,762.
Director Compensation
For the fiscal year ended June 30, 2022, we
granted 5,000 ordinary shares to each of our independent directors, Yijing Ye, Ratansha Vakil, Yijing Ye and Mark W. Willis, under the
2022 Equity Incentive Plan as compensation for their services. For the fiscal year ended June 30, 2022, we granted an aggregate of 500,000
shares to Wenshan Xie, chairman of the board and chief executive officer of the Company, under the 2022 Equity Incentive Plan as compensation
for his services. We did not pay other compensation to our directors. Other than as described above, none of our directors or executive
officers received any equity awards, including, options, restricted shares or other equity incentives in the year ended June 30, 2022.
We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our non-employee directors. Our
PRC subsidiaries are required by law to make contributions equal to certain percentages of each employee’s salary for his or her
pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund.
C. Board Practices
Board Composition and Committees
The Nasdaq Marketplace Rules generally require
that a majority of an issuer’s board of directors must consist of independent directors. Our board of directors currently consists
of seven directors, including four independent directors, namely, Ms. Yijing Ye, Mr. Ratansha Vakil, Mr. Jianhua Wang and Mr. Mark Willis,
so that a majority of our board of directors is independent.
A director is not required to hold any shares
in our company to qualify to serve as a director. Our board of directors may exercise all the powers of our company to borrow money,
mortgage or charge its undertaking, property and uncalled capital, and to issue debentures, bonds and other securities whenever money
is borrowed or as security for any debt, liability or obligation of the company or of any third-party.
A director who is in any way, whether directly
or indirectly, interested in a contract or proposed contract with our company is required to declare the nature of his interest at a
meeting of our directors. A director may vote in respect of any contract, proposed contract, or arrangement notwithstanding that he may
be interested therein, and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of our directors
at which any such contract or proposed contract or arrangement is considered.
Board Committees
The Board has established three standing committees: Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee. Each of the Audit Committee, Compensation Committee and Nominating
and Corporate Governance Committee is comprised entirely of independent directors. From time to time, the Board may establish other committees.
The Board has adopted a written charter for each of the Committees which are available on the corporate governance page of our website
at www.ej111.com. Printed copies of these charters may be obtained, without charge, by contacting the Corporate Secretary, E-Home Household
Service Holdings Limited, E-Home, 18/F, East Tower, Building B, Dongbai Center, Yangqiao Road, Gulou District, Fuzhou City 350001, People’s
Republic of China
Each committee’s members and functions
are described below.
Audit Committee
Our audit committee consists of three directors,
namely, Ms. Yijing Ye, Mr. Ratansha Vakil and Mr. Jianhua Wang, each of whom satisfies the “independence” requirements of
Rule 10A-3 under the Exchange Act and Section 5605 of the Nasdaq Marketplace Rules. Ms. Ye is the chairperson of our audit
committee. The board of directors has also determined that Ms. Ye qualifies as an “audit committee financial expert.” The
audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
The audit committee is responsible for, among other things:
| ● | appointing
the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; |
| ● | reviewing
with the independent auditors any audit problems or difficulties and management’s response; |
| ● | discussing
the annual audited financial statements with management and the independent auditors; |
| ● | reviewing
the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control
major financial risk exposures; |
| ● | reviewing
and approving all proposed related party transactions; |
| ● | meeting
separately and periodically with management and the independent auditors; and |
| ● | monitoring
compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure
proper compliance. |
Compensation Committee
Our compensation committee consists of three
directors, namely, Ms. Yijing Ye, Mr. Ratansha Vakil and Mr. Jianhua Wang, each of whom satisfies the “independence” requirements
of Rule 10A-3 under the Exchange Act and Section 5605 of the Nasdaq Marketplace Rules. Mr. Vakil is the chairperson of our
compensation committee. The compensation committee assists the board in reviewing and approving the compensation structure, including
all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee
meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things:
| ● | reviewing
and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers; |
| ● | reviewing
and recommending to the board for determination with respect to the compensation of our non-employee directors; |
| ● | reviewing
periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and |
| ● | selecting
compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s
independence from management. |
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee
consists of four directors, namely, Ms. Yijing Ye, Mr. Ratansha Vakil, Mr. Jianhua Wang and Mr. Mark Willis, each of whom satisfies the
“independence” requirements of Rule 10A-3 under the Exchange Act and Section 5605 of the Nasdaq Marketplace Rules. Mr. Willis
is the chairperson of our nominating and corporate governance committee. The nominating and corporate governance committee assists the
board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its
committees. The nominating and corporate governance committee is responsible for, among other things:
| ● | selecting
and recommending to the board nominees for election by the shareholders or appointment by the board; |
| ● | reviewing
annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills,
experience and diversity; |
| ● | making
recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and |
| ● | advising
the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance
with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial
action to be taken. |
Duties of Directors
Under Cayman Islands law, our directors have
a fiduciary duty to our company to act honestly, in good faith and with a view to our best interests. Our directors also owe to our company
a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greater
degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts
have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in
the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance with our amended and restated memorandum
and articles of association, as amended and restated from time to time. Our company has the right to seek damages if a duty owed by our
directors is breached. In limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty
owed by our directors is breached. You should refer to “Item. Additional Information – B. Memorandum and Articles of Association
- Differences in Corporate Law” for additional information on our standard of corporate governance under Cayman Islands law.
A director who is in any way, whether directly
or indirectly, interested in a contract or proposed contract with our company is required to declare the nature of his interest at a
meeting of our directors. A director may vote in respect of any contract, proposed contract, or arrangement notwithstanding that he may
be interested therein, and if he does so his vote shall be counted and he may be counted in the quorum at any meeting of our directors
at which any such contract or proposed contract or arrangement is considered. Our board of directors may exercise all the powers of our
company to borrow money, mortgage or charge its undertaking, property and uncalled capital, and to issue debentures, bonds and other
securities whenever money is borrowed or as security for any debt, liability or obligation of the company or of any third party.
The functions and powers of our board of directors
include, among others:
| ● | convening
shareholders’ annual general meetings and reporting its work to shareholders at such meetings; |
| ● | declaring
dividends and distributions; |
| ● | appointing
officers and determining the term of office of officers; |
| ● | exercising
the borrowing powers of our company and mortgaging the property of our company; and |
| ● | approving
the transfer of shares of our company, including the registering of such shares in our share register. |
Terms of Directors
and Officers
Our officers are elected by and serve at the
discretion of our board of directors. Our directors are not subject to a term of office and hold office until such time as they are removed
from office by ordinary resolution of the shareholders or until the expiration of his term or his successor has been elected and qualified.
A director will be removed from office automatically if, among other thing, the director (i) dies; (ii) becomes bankrupt or
makes any arrangement or composition with his creditors generally; (iii) is found to be or becomes of unsound mind; (iv) resigns
his office by notice in writing to our company; (v) is prohibited by law from being a director; and (vi) is removed from the
office pursuant to any other provisions of our amended and restated memorandum and articles of association.
D. Employees
As of June 30, 2022, we had a total of 526 employees.
The following table shows the number of our employees by function.
| Function |
|
Number of
Employees |
|
| Management |
|
7 |
|
| Finance |
|
25 |
|
| Product Development |
|
20 |
|
| Human Resource Administration |
|
26 |
|
| Sales Center-Director |
|
2 |
|
| Sales Center-Warehouse Logistics |
|
10 |
|
| Sales Center-Purchasing |
|
8 |
|
| Sales Center-Planning |
|
15 |
|
| Sales Center-Customer Service |
|
69 |
|
| Sales Center-Marketing |
|
313 |
|
| Sales Center-Senior Care Service |
|
22 |
|
| Sales Center-Housekeeping |
|
9 |
|
| Total |
|
526 |
|
As required by laws and regulations in China,
we contribute to various statutory employee benefit plans that are organized by municipal and provincial governments, including pension,
medical insurance, unemployment insurance, work-related injury insurance and maternity insurance plans as well as the housing provident
fund. We are required under Chinese law to make contributions to employee benefit plans at specified percentages of the salaries, bonuses
and certain allowances of our employees, up to a maximum amount specified by the local government from time to time.
We enter into standard labor contracts with our
key employees. The labor contract with our key personnel typically includes a standard non-compete covenant that prohibits the employee
from competing with us, directly or indirectly, during his or her employment. It also has a standard confidentiality and intellectual
property provision prohibiting employees from disclosing our confidential information obtained during the employment to any third party.
E. Share Ownership
The following table sets forth information with respect to beneficial
ownership of our share capital as of October 30, 2022 by:
| |
● |
Each of our directors (including
our director nominees) and named executive officers; |
| |
|
|
| |
● |
All directors (including
our director nominees) and named executive officers as a group; and |
| |
|
|
| |
● |
Each person who is known
by us to beneficially own 5% or more of each class of our voting securities. |
| | |
Ordinary
Shares
Beneficially Owned | |
| | |
Number(1) | | |
Percent of
Class(2) | |
| Directors
and Executive Officers: | |
| | |
| |
| Wenshan
Xie, Chairman and Chief Executive Officer(3) | |
| 646,275 | | |
| 10.66 | % |
| Chunsheng
Zhu, Chief Financial Officer and Director | |
| 0 | | |
| 0 | |
| Mingxiang
He, Chief Marketing Officer and Director | |
| 0 | | |
| 0 | |
| Yang
Chen, Chief Technology Officer | |
| 0 | | |
| 0 | |
| Yijing
Ye, Independent Director | |
| * | | |
| * | |
| Ratansha
Vakil, Independent Director | |
| * | | |
| * | |
| Jianhua
Wang, Independent Director | |
| * | | |
| * | |
| Mark
Willis, Independent Director | |
| * | | |
| * | |
| All
directors and executive officers as a group | |
| 647,575 | | |
| 10.68 | % |
| | |
| | | |
| | |
| Other
Principal Shareholders: | |
| | | |
| | |
| Streeterville
Capital LLC(4) | |
| 539,758 | | |
| 8.90 | % |
| (1) |
Beneficial Ownership is
determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.
Except as noted below, each of the beneficial owners listed above has direct ownership of and sole voting power and investment power
with respect to ordinary shares. For each beneficial owner above, any options exercisable within 60 days have been included in the
denominator. |
| (2) |
A total of 6,063,517 ordinary shares are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of October 30, 2022. |
| (3) |
Includes (i) 414,401
ordinary shares held by Mr. Wenshan Xie and (ii) 231,874 ordinary shares held by E-home Group Limited. Mr. Xie is the director and
sole shareholder of E-home Group Limited and has voting and investment power over the shares held by it. |
| (4) |
Includes 539,758 ordinary shares held by Streeterville Capital LLC, a limited liability company incorporated in Utah, USA. Streeterville Capital LLC is wholly owned by Streeterville Management LLC, a limited liability company incorporated in Utah, USA. The beneficial owner of Streeterville Management LLC is John M. Fife, a U.S. citizen. The principle office of Streeterville Capital LLC and Streeterville Management LLC is 303 E Wacker Drive, Suite 1040, Chicago, IL 60601. |
None of our major shareholders have different
voting rights from other shareholders. We are not aware of any arrangement that may, at a subsequent date, result in a change of control
of our company.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
A. Major Shareholders
Please refer to Item 6 “Directors, Senior Management and Employees—E.
Share Ownership.”
B.
Related Party Transactions
As of June 30, 2022 and 2021, the Company had
$327,985 and $30,925 payable balances from Mr. Wenshan Xie, one of its major shareholders, for purchase of goods and services.
During the year ended June 30, 2022, Mr. Xie made
payment of $339,045 for purchase of goods and services for the Company and the Company repaid $29,514 to Mr. Xie. During the year ended
June 30, 2021, Mr. Xie made payment of $63,975 for purchase of goods and services for the Company and the Company repaid $24,575 to Mr.
Xie. During the year ended June 30, 2020, the Company paid $8,475 in advance to Mr. Xie for purchase of goods and services.
On June 22, 2022, the Company granted an aggregate
of 520,000 ordinary shares to its directors and officers under its 2022 Equity Incentive Plan as compensations for their services at
a fair value of $167,700 (par value of $52 and additional paid-in capital of $167,648).
On June 21, 2021, the Company granted 6,000 ordinary
shares to three of its independent directors (2,000 shares for each director) as their compensations at a fair value of $213,840 (par
value of $1 and additional paid-in capital of $213,839).
C. Interests of Experts and Counsel
Not applicable.
The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
The accompanying notes are an integral part of
these consolidated financial statements.
Notes to the Consolidated Financial Statements
June 30, 2022 and 2021
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 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, the Company’s PRC subsidiary, E-Home Pingtan
entered into an equity transfer agreement to acquire the remaining 33% equity interests of Fujian Happiness Yijia Family Service Co.,
Ltd. (“HAPPY”) in consideration of $466,888 (RMB 3,000,000), with $54,462 (RMB 350,000) paid in August 2021 and $412,427 (RMB
2,650,000) paid in March 2022. The transaction to acquire the remaining 33% equity interests of HAPPY was closed in August 2021 and after
the acquisition, E-Home Pingtan owns 100% of the equity interest of HAPPY.
| | |
In USD | |
| | |
| |
| Purchase consideration | |
| 466,888 | |
| | |
| | |
| Noncontrolling interests | |
| (14,558 | ) |
| Additional paid-in capital | |
| 481,446 | |
| | |
| 466,888 | |
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
Reverse stock split
On October 3, 2022, the Company's board of directors
approved to effect a one-for-twenty reverse stock split of its ordinary shares (the “Reverse Stock Split”) with the market
effective on October 4, 2022, such that the number of the Company's authorized preferred and ordinary shares remain unchanged, and the
par value of each ordinary share is increased from US$0.0001 to US$0.002. As a result of the Reverse Stock Split, each twenty pre-split
ordinary shares outstanding were automatically combined and converted to one issued and outstanding ordinary share without any action
on the part of the shareholder. No fractional ordinary shares were issued to any shareholders in connection with the reverse stock split.
Each shareholder was entitled to receive one ordinary share in lieu of the fractional share that would have resulted from the reverse
stock split. As of October 3, 2022 (immediately prior to the effective date), there were 109,042,123 ordinary shares outstanding, and
the number of ordinary shares outstanding after the Reverse Stock Split was 5,453,106 shares, taking into account of the effect of rounding
fractional shares into whole shares. In addition, all options and any other securities of the Company outstanding immediately prior to
the Reverse Stock Split (to the extent they don’t provide otherwise) will be appropriately adjusted
by dividing the number of ordinary shares into which the options and other securities are exercisable by 20 and multiplying the exercise
price thereof by 20, as a result of the Reverse Stock Split.
The number of ordinary
shares outstanding as of June 30, 2022 and 2021 and for the years ended June 30, 2022, 2021 and 2020 were retrospectively adjusted for
effect of reverse stock split on October 4, 2022.
The Company’s
major consolidated subsidiaries as of June 30, 2022 are as follows:
| Name | |
Date of Incorporation | | |
Place of Organization | |
%
of Ownership | |
| E-Home Household Service
Holdings Limited | |
October 16, 2018 | | |
Hong Kong | |
| 100 | % |
| E-Home Household Service Technology
Co., Ltd. | |
December 5, 2018 | | |
PRC | |
| 100 | % |
| Pingtan Comprehensive Experimental
Area E Home Service Co., Ltd. | |
April 1, 2014 | | |
PRC | |
| 100 | % |
| Fuzhou Bangchang Technology Co. Ltd. | |
March 15, 2007 | | |
PRC | |
| 100 | % |
| Fuzhou Yongheng Xin Electric Co.,
Ltd. (“YHX”) | |
October 12, 2004 | | |
PRC | |
| 100 | % |
| Fujian Happiness Yijia Family Service
Co., Ltd. | |
January 19, 2015 | | |
PRC | |
| 100 | % |
| Yaxing Human Resource Management
(Pingtan)Co., Ltd. | |
July 6, 2018 | | |
PRC | |
| 51 | % |
| Fuzhou Gulou Jiajiale Family Service
Co. Ltd. | |
February 28, 2019 | | |
PRC | |
| 100 | % |
| Yaxin Human Resource Management (Fuzhou)
Co., Ltd. | |
September 10, 2021 | | |
PRC | |
| 100 | % |
The accompanying consolidated financial statements
include the financial statements of the Company and its subsidiaries.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying 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 recoverability of accounts receivable, useful lives of
property and equipment and intangible assets, the recoverability of long-lived assets and warrant valuation. 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 income and comprehensive income.
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 June 30, 2022 and 2021, the Company determined that all accounts receivable were collectible and
thus the allowance for doubtful accounts were $0 and $0.
Inventories
Inventories primarily include purchased accessories, appliances and
E-watches for senior care services. Cost of inventories is based on purchase costs. 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 years ended June 30, 2022, 2021, and 2020, the Company recorded no impairment provision of inventories for lower
of cost or net realizable value, respectively.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
Property and equipment, net
Property and equipment are stated at cost less accumulated depreciation.
Maintenance and repairs are charged to expense as incurred. Depreciation is provided on the straight-line method based on the estimated
useful lives of the assets as follows:
| | |
Useful Lives |
| Buildings | |
20 Years |
| Office Equipment | |
5 Years |
| Electronic Equipment | |
5 Years |
| Motor Vehicles | |
10 Years |
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 in other income or expenses.
Intangible assets, net
Intangible assets consist of acquired software and senior care service
application developed by the Company. The Company has purchased software from third parties used for operation management and developed
an application for its senior care service. Software is initially recorded at cost and amortized on a straight-line basis over the estimated
economic useful lives of five to ten years.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
Impairment of long-lived assets
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. We measure fair value using market price indicators or, in the absence of
such data, appropriate valuation technique.
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 audited 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.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
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.
(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.
Convertible debt – beneficial conversion feature
If the conversion feature is not treated as a derivative, the Company assesses
whether it is a beneficial conversion feature (“BCF”). A BCF exists if the conversion price of the convertible debt instrument
is less than the stock price on the commitment date. This typically occurs when the conversion price is less than the fair value of the
stock on the date the instrument was issued. The value of a BCF is equal to the intrinsic value of the feature, the difference between
the conversion price and the common stock into which it is convertible and is recorded as additional paid in capital and as a debt discount
in the consolidated balance sheets. The Company amortizes the balance over the life of the underlying debt as amortization of debt discount
expense in the consolidated statements of operations. If the debt is retired early, the associated debt discount is then recognized immediately
as amortization of debt discount expense in the consolidated statements of operations. The Company did not identify any BCF in their convertible
notes issued during the reporting period.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
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. |
| |
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, and accounts
payable to approximate the fair value of the respective assets and liabilities as of June 30, 2021 and 2020 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 the 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.
Installation& maintenance
Installation and maintenance services mainly
consisting 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.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
Housekeeping services
Housekeeping services refer to services including housecleaning 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.
Senior care services
Senior care services refer to services including
BP, 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 the 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.
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. Consequently, the Company regards
sales of household appliance accessories as a component of its installation and maintenance segment, but separates revenue generated
from sale of household appliance accessories as a disaggregated revenue stream. 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 of time.
Sublease
The Company subleases its operating leased right-of-use
asset. For the years ended June 30, 2022, 2021 and 2020, the sublease income of operating lease right-of-use asset were $0, $147,663 and
$214,319, respectively.
Cost of revenues
Cost of revenues consists of service fees paid
to staff, outlets, suppliers and the cost of accessories 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 years ended June 30, 2022, 2021 and 2020,
the Company received government subsidies of $7,733, $908,051 and $0, respectively. The grants were recorded as other income in the consolidated
financial statements.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
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.
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.
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. There were no potentially dilutive ordinary shares during the fiscal years ended June 30, 2022,
2021 and 2020.
Comprehensive income/(loss)
ASC Topic 220 establishes standards for reporting
comprehensive income and its components. Comprehensive income or loss is defined as the change in equity during a period from transactions
and other events from non-owner sources. During the fiscal years ended June 30, 2022, 2021 and 2020, foreign currency translation gain
(loss) adjustments of $(2,265,859), $3,261,889 and $(837,040), respectively, were recognized as a component of accumulated other comprehensive
income (loss), respectively.
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 consolidated financial statements are reported using U.S. Dollars. The results of operations and the statement of cash flows denominated
in foreign currency are translated at the average rate of exchange during the reporting period. Assets and liabilities denominated in
foreign currencies at the balance sheet date are translated at the applicable rates of exchange in effect at that date. The equity denominated
in the functional currency is translated at the historical rate of exchange at the time of capital contribution. Because cash flows are
translated based on the average translation rate, amounts related to assets and liabilities reported on the consolidated statements of
cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Translation adjustments
are included as a separate component of accumulated other comprehensive income (loss).
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. The following table
outlines the currency exchange rates that were used in the consolidated financial statements:
| |
|
|
June
30,
2022 |
|
|
|
June
30,
2021 |
|
|
|
June
30,
2020 |
|
| Year-end spot rate |
|
|
US$1= 6.7114 RMB |
|
|
|
US$1= 6.4601 RMB |
|
|
|
US$1= 7.0795 RMB |
|
| Average rate |
|
|
US$1= 6.4661 RMB |
|
|
|
US$1= 6.6076 RMB |
|
|
|
US$1= 7.0293 RMB |
|
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
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.
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 three segments are installation & maintenance,
housekeeping and senior care services. Operation of senior care services began in August 2019. The Company started generating revenue
from this new segment in August 2019.
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 June 30, 2022 and 2021.
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 June 30, 2022 and 2021, the RMB denominated cash and cash equivalents amounted to $53,946,205
and $52,410,472, respectively.
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.
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.
Revisions
The Company determined that previously issued
unaudited condensed consolidated financial statements for the year ended June 30, 2022 contained in the Company’s registration
statement on Form F-1/A filed on November 4, 2022 should be amended to clarify and correct certain statements and typographical errors
about the Company’s grant of shares under its 2022 Equity Incentive Plan to certain directors, officers, and employees as compensations
for their services.
The Company evaluated these revisions in compliance
with ASC 250-10 as well as SAB 99 and concluded that the error in previously issued financial statements was immaterial both quantitatively
and qualitatively. Correcting the immaterial error was referred as to as “revisions” of prior period financial statements.
As the effect of the error corrections on the prior periods was immaterial, column headings of “restatements” were not required.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
Recent accounting pronouncements
The Company considers the applicability and impact
of all ASUs. Management periodically reviews new accounting standards that are issued.
In June 2016, the FASB issued ASU No. 2016-13,
“Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. This amends guidelines
on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. For assets held at amortized
cost basis, Topic 326 eliminates the probable initial recognition threshold in current U.S. GAAP and, instead, requires an entity to reflect
its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized
cost basis of the financial assets to present the net amount expected to be collected. For available-for-sale debt securities, credit
losses should be measured in a manner similar to current U.S. GAAP, however Topic 326 will require that credit losses be presented as
an allowance rather than as a write-down. ASU 2016-13 affects entities holding financial assets and net investment in leases that are
not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in
leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have
the contractual right to receive cash. The amendments in this ASU will be effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit
Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which amended the effective date of
ASU 2016-13. The amendments in these ASUs are effective for the Company’s fiscal years, and interim periods within those fiscal
years beginning July 1, 2022. Early adoption is permitted. The Company does not expect to early adopt this guidance and is in the process
of evaluating the impact of adoption of this guidance on the Company’s consolidated financial statements.
In August 2020, the Financial Accounting Standards
Board (FASB) issued Accounting Standards Update (ASU) No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s
Own Equity, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining
or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes
from GAAP separation models for convertible debt that require the convertible debt to be separated into a debt and equity component,
unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium.
As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity, and
will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method
when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current
accounting treatment under the current guidance. The guidance is effective for financial statements issued for fiscal years beginning
after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the
fiscal year. Early adoption is permitted. The Company does not expect to early adopt this guidance and is in the process of evaluating
the impact of adoption of this guidance on the Company’s consolidated financial statements.
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 comprehensive income (loss) and statements of cash flows.
NOTE 3 – ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following
as of June 30, 2022 and 2021:
| | |
2022 | | |
2021 | |
| Accounts receivable, gross | |
$ | 877,931 | | |
$ | 826,683 | |
| Less: allowance for doubtful accounts | |
| - | | |
| - | |
| Accounts receivable, net | |
$ | 877,931 | | |
$ | 826,683 | |
The Company recorded no allowance for doubtful accounts as of June
30, 2022 and 2021. The Company gives its customers credit periods from 30 days to 90 days and continually assesses the recoverability
of uncollected accounts receivable. As of June 30, 2022 and 2021, the balances of the Company’s accounts receivable were all due
within the credit periods. Management believes the balances of accounts receivable will be collected in full.
NOTE 4 – INVENTORIES
Inventories as of June 30, 2022 and 2021 consisted
of the following:
| | |
2022 | | |
2021 | |
| | |
| | |
| |
| E-watches | |
$ | 11,058 | | |
$ | 246,778 | |
| Total inventories, net | |
$ | 11,058 | | |
$ | 246,778 | |
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
NOTE 5 – PREPAYMENTS, DEPOSITS AND OTHER CURRENT ASSETS
Prepayments, deposits and other current assets as of June 30, 2022
and 2021 consisted of the following:
| | |
2022 | | |
2021 | |
Deposits for potential acquisitions* | |
$ | 6,011,058 | | |
$ | 3,400,000 | |
| Prepaid for marketing fee** | |
| 1,865,219 | | |
| 2,333,358 | |
| Performance deposits*** | |
| 2,086,003 | | |
| 2,167,149 | |
| Prepaid consulting services fee | |
| 545,732 | | |
| 2,110,000 | |
| Prepaid office deposit**** | |
| 14,006 | | |
| 1,931,107 | |
| Other current assets | |
| 743,392 | | |
| - | |
| Prepaid income tax expenses | |
| - | | |
| 315,015 | |
| Prepaid office rental fee | |
| - | | |
| 26,006 | |
| Total prepayments, deposits and other current assets | |
$ | 11,265,410 | | |
$ | 12,282,665 | |
| | * | On April 30, 2021, the Company entered into two agreements with Premium Bright Corporate Advisory Limited (“Premium”) in which Premium will find target companies for the Company to acquire in order to expand its business into financial lending services. The Company prepaid a retainer of $1,800,000 to Premium, who is still actively searching for target companies as of June 30, 2022. On January 20, 2022, the Company and E-Home Pingtan entered into an equity transfer agreement to acquire 60% equity interests in YouYou Cleaning Co., Ltd. (“Youyou”) in consideration of (i) RMB4 million (approximately $0.60 million) in cash and (ii) 2,702,826 ordinary shares of the Company at a fair value of $2,000,091 (par value of $270 and additional paid-in capital of $1,999,821). The Company paid the consideration on February 3, 2022 however, the legal formalities to transfer the control to the Company were not completed as of June 30, 2022 and recorded paid consideration of $2,464,049 as deposits paid for potential acquisition. On January 20, 2022, the Company and E-Home Pingtan entered into an
equity transfer agreement to acquire 40% equity interests in Shenzhen Chinese Enterprises Industrial LianBao Appliance Service Co., Ltd.
(“Lianbao”) in consideration for 5,823,363 ordinary shares issued on March 2, 2022 of the Company at a fair value of $3,743,258
(par value of $582 and additional paid-in capital of $3,742,676). In June 2022, the Company reached an agreement with Lianbao and its
controlling shareholders to terminate the acquisition since the financial position of Lianbao had changed after the equity transfer agreement
being signed. In accordance with the termination agreement all related issued shares will be returned by December 31, 2022. Accordingly,
the Company has recorded the $1,747,009 as other receivables based on the fair value of the shares as of June 30, 2022 to be received.
For the year ended June 30, 2022, the Company recorded fair value adjustment of $1,996,249. On May 28, 2021, the Company entered into an agreement with Yuwin Group Limited (“Yuwin”) in which Yuwin will provide advisory service to acquire 55% ownership of Fujian Ruiquan Care Services Co., Ltd. The Company prepaid deposit for the acquisitions of $1,000,000 to Yuwin in June 2021. The acquisition was terminated and Yuwin returned the deposit to the Company in July 2021. On June 1, 2021, the Company entered into an equity transfer agreement with the shareholder of South Pacific Holding Group Limited (“South Pacific”) in which the Company will acquire 30% ownership of South Pacific. The Company prepaid deposit for the acquisitions of $600,000 to South Pacific in June 2021. In July 2021, the acquisition was terminated and South Pacific returned the deposit to the Company in April 2022. |
| ** | The Company entered into several agreements with its suppliers for designing, marketing, and branding services. Prepaid marketing fees are amortized during the contract periods which range from 1 year to 3 years. |
| | *** | In January 2020, E-Home Pingtan entered into three agreements with three new outlets for business cooperation purposes. These refundable performance deposits were mainly paid for the business introduction services in which the outlets promised to refer business and customers to E-Home Pingtan within three years. The outlets agreed to return the deposits to E-Home Pingtan in case of termination of the agreements. The Company terminated the agreement with one outlet and received refund of performance deposit from the outlet of $756,704 in April 2021. |
| **** | On June 20, 2021, E-Home Pingtan entered into an agreement with an unaffiliated individual to purchase an office for $4,416,120 (RMB 30,000,000). The Company prepaid $1,931,107 (RMB 12,000,000) to the individual in June 2021. The office was transferred to the Company in February 2022 and currently under renovation for daily operation use of the Company. |
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
NOTE 6 – PROPERTY AND EQUIPMENT, NET
Property and equipment consisted of the following
as of June 30, 2022 and 2021:
| | |
2022 | | |
2021 | |
| Buildings | |
$ | 4,416,120 | | |
$ | - | |
| Office equipment | |
| 10,266 | | |
| 10,665 | |
| Electronic equipment | |
| 75,466 | | |
| 74,845 | |
| Motor vehicles | |
| 323,490 | | |
| 315,964 | |
| Total property and equipment, at cost | |
| 4,825,342 | | |
| 401,474 | |
| Less: accumulated depreciation | |
| (230,238 | ) | |
| (97,986 | ) |
| Property and equipment, net | |
$ | 4,595,104 | | |
$ | 303,488 | |
As of June 30, 2022 and 2021, there were not
any pledged property or equipment. The Company recorded depreciation expense of $141,077, $16,196 and $16,856 during the years ended
June 30, 2022, 2021 and 2020, respectively. For the years ended June 30, 2022, 2021 and 2020, the Company recorded no impairment losses
for property and equipment.
For the years ended June 30, 2022 and 2021, the Company purchased new property
and equipment of $4,607,297 and $261,843, respectively. For the years ended June 30, 2022 and 2021, the Company recorded no disposal of
property and equipment.
NOTE 7 – INTANGIBLE ASSETS, NET
Intangible assets consisted of the following
as of June 30, 2022 and 2021:
| | |
2022 | | |
2021 | |
| Software | |
$ | 17,793 | | |
$ | 18,485 | |
| Senior care service App | |
| 44,700 | | |
| 46,439 | |
| Less: accumulated amortization | |
| (38,530 | ) | |
| (28,893 | ) |
| Intangible assets, net | |
$ | 23,963 | | |
$ | 36,031 | |
As of June 30, 2022 and 2021, there were no any
pledged intangible assets to secure bank loans. The Company recorded amortization expense of $11,126, $10,888 and $9,523 during the years
ended June 30, 2022, 2021 and 2020, respectively. For the years ended June 30, 2022, 2021 and 2020, the Company recorded no impairment
losses for intangible assets. For the years ended June 30, 2022, 2021 and 2020, the Company recorded no disposal of intangible assets.
Estimated future amortization expense is as follows
as of June 30, 2022:
| Years ending June 30, | |
Amortization
expense | |
| | |
| |
| 2023 | |
$ | 11,126 | |
| 2024 | |
| 11,126 | |
| 2025 | |
| 1,711 | |
| 2026 | |
| - | |
| 2027 | |
| - | |
| Thereafter | |
| - | |
| | |
$ | 23,963 | |
NOTE 8 – LONG-TERM INVESTMENT
The Company initiated the divestment process during
July 2021 and on September 15, 2021 formally reduced its ownership in Fuzhou Fumao from 67% to 20% by completing the registration process
with local governmental authorities. As part of the divesture process, the Company made an investment in Fuzhou Fumao of RMB 6,000,000
to retain an equity percentage of 20%. As of September 15, 2021, Fuzhou Fumao had nominal operations and the Company had no significant
influence, as the Company does not participate in Fuzhou Fumao’s management or daily operations. As of June 30, 2022, the Company
carried the investment at its cost in the amount of $894,001. Fuzhou Fumao’s new management is principally engaged in the operation
of senior care services and is cooperating with several local senior care centers and local government authorities to manage senior care
centers and provide senior care related services to enhance operations.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
NOTE 9 – OPERATING LEASE RIGHT-OF-USE ASSETS, NET
Operating lease right -of-use assets, net were as follows as of June
30, 2022 and 2021:
| | |
2021 | | |
Increase/
(Decrease) | | |
Exchange Rate
Translation | | |
2022 | |
| Shou Hill Valley Area | |
$ | 2,321,945 | | |
$ | - | | |
$ | (86,942 | ) | |
$ | 2,235,003 | |
| Villas | |
| 2,291,798 | | |
| - | | |
| (85,814 | ) | |
| 2,205,984 | |
| Base Station Tower | |
| 270,484 | | |
| - | | |
| (10,128 | ) | |
| 260,356 | |
| Farmland* | |
| - | | |
| 2,319,791 | | |
| (84,788 | ) | |
| 2,235,003 | |
| Office | |
| - | | |
| 167,397 | | |
| (6,118 | ) | |
| 161,279 | |
| Total right-of-use assets, at cost | |
| 4,884,227 | | |
| 2,487,188 | | |
| (273,790 | ) | |
| 7,097,625 | |
| Less: accumulated amortization | |
| (621,491 | ) | |
| (522,575 | ) | |
| 96,906 | | |
| (1,047,160 | ) |
| Right-of-use assets, net | |
$ | 4,262,736 | | |
$ | 1,964,613 | | |
| (176,884 | ) | |
$ | 6,050,465 | |
| * | On July 7, 2021, E-Home Pingtan entered into an agreement with an unaffiliated
company and individual to obtain the right of use for farmland of 74 acers for $2,319,791 (RMB 15,000,000). The Company paid the installment
of $2,319,791 (RMB 15,000,000) to the individual as of June 30, 2022. |
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 20 years. The Company recognized
lease expense for the operating lease right-of-use asset Base Station Tower over the lease period which is 10 years. The Company recognized
lease expense for the operating lease right-of-use asset Farmland over the lease period which is 12.5 years. The Company recognized lease
expense for the operating lease right-of-use asset Office over the lease period which is 3 years.
NOTE 10 – FINANCE LEASE RIGHT-OF-USE ASSETS, NET
Finance lease right -of-use assets, net were as follows as of June
30, 2022 and 2021:
| | |
2021 | | |
Increase/
(Decrease) | | |
Exchange Rate
Translation | | |
2022 | |
| Company vehicles | |
$ | 1,857,556 | | |
$ | - | | |
$ | (69,553 | ) | |
$ | 1,788,003 | |
| Total right-of-use assets, at cost | |
| 1,857,556 | | |
| - | | |
| (69,553 | ) | |
| 1,788,003 | |
| Less: accumulated amortization | |
| (510,828 | ) | |
| (185,583 | ) | |
| 25,910 | | |
| (670,501 | ) |
| Right-of-use assets, net | |
$ | 1,346,728 | | |
$ | (185,583 | ) | |
$ | (43,643 | ) | |
$ | 1,117,502 | |
The finance lease right-of-use asset is amortized
over a 10-year period. The amortization period is 10 years and the discount rate used is 4.9%.
NOTE 11 – LONG-TERM PREPAYMENTS AND OTHER NON-CURRENT ASSETS
Long-term prepayments and other non-current assets as of June 30,
2022 and 2021 consisted of the following:
| | |
2022 | | |
2021 | |
| Deposits paid for lease assets | |
$ | 372,501 | | |
$ | 386,991 | |
| Deposits paid for land* | |
| - | | |
| 1,547,964 | |
| Total | |
$ | 372,501 | | |
$ | 1,934,955 | |
| * | In 2019, E-Home Pingtan entered into an agreement with an unaffiliated company to purchase the right of use for land of 126 acers for RMB 80,000,000. The Company prepaid $1,547,964 (RMB 10,000,000) to the individual as of June 30, 2021. The agreement was terminated in 2022 and E-Home Pingtan received the deposit from the unaffiliated company. |
NOTE 12 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The following is a summary of accounts payable and accrued expenses
as of June 30, 2022 and 2021:
| | |
2022 | | |
2021 | |
| Payable to suppliers | |
$ | 3,486,600 | | |
$ | 3,657,700 | |
| Salary and welfare payables | |
| 412,444 | | |
| 614,355 | |
| Accrued expenses and other current liabilities | |
| 699,032 | | |
| 85,498 | |
| Total | |
| 4,598,076 | | |
| 4,357,553 | |
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
NOTE 13 – ADVANCE FROM CUSTOMERS
Advance from customers as of June 30, 2022 and 2021 consisted of the
following:
| | |
2022 | | |
2021 | |
| Senior care services | |
$ | 481,783 | | |
$ | 2,817,048 | |
| Housekeeping services | |
| 1,769,289 | | |
| 176,608 | |
| Total | |
$ | 2,251,072 | | |
$ | 2,993,656 | |
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
$1,769,289 and $2,817,048 as of June 30, 2022 and 2021, respectively, which will be recognized as senior care services revenue within
12 months. E-Home received advance from housekeeping services customers and recognized revenues when services are provided. The amounts
advanced from customers from housekeeping services were $481,783 and $176,608 as of June 30, 2022 and 2021, respectively, which will
be recognized as housekeeping services revenue within 12 months.
NOTE 14 – OPERATING LEASE LIABILITIES
Operating lease liabilities as of June 30, 2022 and 2021 consisted
of the following:
| | |
2022 | | |
2021 | |
| Villas* | |
$ | 1,956,260 | | |
$ | 1,951,867 | |
| Base Station Tower** | |
| 188,069 | | |
| 282,488 | |
| Office*** | |
| 107,506 | | |
| - | |
| Total operating lease liabilities | |
$ | 2,251,835 | | |
$ | 2,234,355 | |
Analyzed for reporting purposes as:
| | |
2022 | | |
2021 | |
| Long-term portion of operating lease liabilities | |
$ | 1,473,093 | | |
$ | 2,147,252 | |
| Current maturities of operating lease liabilities | |
| 778,742 | | |
| 87,103 | |
| Total | |
$ | 2,251,835 | | |
$ | 2,234,355 | |
The operating lease liabilities is the net present
value of the remaining lease payments as of June 30, 2022 and 2021.
The discount rates used for the Villas, Base
Station Tower and Office were 4.1239%, 3.1365% and 2.4584%, respectively. The weighted average discount rate used for operating leases
was 4.06%. The weighted average remaining lease terms for operating leases was 16.00 years. The incremental borrowing rate for the Company
ranged from 3.7% to 4.8%.
The Company recorded no operating lease liability
for the operating lease of Shou Hill Valley Area as of June 30, 2022 and 2021, respectively, since the Company prepaid the total lease
expense of $2,319,791 (RMB 15,000,000) in December 2017. The Company recorded no operating lease liability for the operating lease of
Farmland as of June 30, 2022, since the Company paid the total lease expense of $2,321,945 (RMB 15,000,000) in October 2021.
For the years ended June 30, 2022 and 2021, the operating lease expense
were $596,988 and $2,599,697, respectively, which included the short-term operating lease expense were $259,996 and $1,589,089, respectively.
| * | The lease agreement of Villas was entered into on December 22, 2017,
bears interest at about 4.1239% and will be matured on December 31, 2037. Lease payments for this agreement are to be made every five
years. As of June 30, 2022, the Company has paid $696,584 for the first installment to the lessee. |
| ** | The lease agreement of Base Station Tower was entered into on November
25, 2019, bears interest at about 3.1365% and will be matured on November 24, 2029. Lease payments for this agreement are to be made every
year. As of June 30, 2022, the Company has paid $ 61,919 to the lessee. |
| *** | The lease agreement of Office was entered into on January 1, 2022,
bears interest at about 2.4584% and will be matured on December 31, 2024. Lease payments for this agreement are to be made every year.
As of June 30, 2022, the Company has paid $55,070 for the first installment to the lessee. |
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
Maturity analysis of operating lease liabilities
as of June 30, 2022 is as follows:
| Operating lease payment | |
Villas | | |
Base station tower | | |
Office | | |
Total undiscounted cash flows | |
| Discount rate at commencement | |
| 4.1239 | % | |
| 3.1365 | % | |
| 2.4584 | % | |
| | |
| One year | |
$ | 737,551 | | |
$ | 29,800 | | |
$ | 55,070 | | |
$ | 822,421 | |
| Two years | |
| - | | |
| 29,800 | | |
| 55,070 | | |
| 84,870 | |
| Three years | |
| - | | |
| 29,800 | | |
| - | | |
| 29,800 | |
| Four years | |
| - | | |
| 29,800 | | |
| - | | |
| 29,800 | |
| Five years | |
| - | | |
| 29,800 | | |
| - | | |
| 29,800 | |
| Beyond five years | |
| 1,703,743 | | |
| 59,600 | | |
| - | | |
| 1,763,343 | |
| Total undiscounted cash flows | |
$ | 2,441,294 | | |
$ | 208,600 | | |
| 110,140 | | |
$ | 2,760,034 | |
| Total financing lease liabilities | |
| 1,956,260 | | |
| 188,069 | | |
| 107,506 | | |
| 2,251,835 | |
| Difference between undiscounted cash flows and discounted cash flows | |
| 485,034 | | |
| 20,531 | | |
| 2,634 | | |
| 508,199 | |
Maturity analysis of operating lease liabilities
as of June 30, 2021 is as follows:
| Operating
lease payment |
|
Villas |
|
|
Base
station tower |
|
|
Total
undiscounted cash flows |
|
| Discount rate at commencement |
|
|
4.1239 |
% |
|
|
3.1365 |
% |
|
|
|
|
| One year |
|
$ |
- |
|
|
$ |
61,918 |
|
|
$ |
30,959 |
|
| Two years |
|
|
766,242 |
|
|
|
30,959 |
|
|
|
797,201 |
|
| Three years |
|
|
- |
|
|
|
30,959 |
|
|
|
30,959 |
|
| Four years |
|
|
- |
|
|
|
30,959 |
|
|
|
30,959 |
|
| Five years |
|
|
- |
|
|
|
30,959 |
|
|
|
30,959 |
|
| Beyond five years |
|
|
1,770,020 |
|
|
|
123,836 |
|
|
|
1,862,897 |
|
| Total undiscounted cash flows |
|
$ |
2,536,262 |
|
|
$ |
309,590 |
|
|
$ |
2,783,934 |
|
| Total financing lease liabilities |
|
|
1,951,867 |
|
|
|
282,488 |
|
|
|
2,234,355 |
|
| Difference between undiscounted cash flows and discounted
cash flows |
|
|
584,395 |
|
|
|
27,102 |
|
|
|
549,579 |
|
NOTE 15 – FINANCE LEASE LIABILITIES
Financing lease liabilities as of June 30, 2022 and 2021 consisted
of the following:
| | |
2021 | | |
Increase/ (Decrease) | | |
Payment | | |
Exchange Rate Translation | | |
2022 | |
| Company vehicles | |
$ | 425,375 | | |
$ | - | | |
$ | (82,292 | ) | |
$ | (14,599 | ) | |
$ | 328,484 | |
| Add: Unrecognized finance expense | |
| 76,393 | | |
| 23,250 | | |
| - | | |
| (2,032 | ) | |
| 97,611 | |
| Total financing lease liabilities | |
$ | 501,768 | | |
$ | 23,250 | | |
$ | (82,292 | ) | |
$ | (16,631 | ) | |
$ | 426,095 | |
Analyzed for reporting purposes as:
| | |
2022 | | |
2021 | |
| Long-term portion of finance lease liabilities | |
$ | 366,359 | | |
$ | 442,670 | |
| Current maturities of finance lease liabilities | |
| 59,736 | | |
| 59,098 | |
| Total | |
$ | 426,095 | | |
$ | 501,768 | |
The lease agreement was entered into on September
11, 2017, bears interest at about 4.9% and will be matured on December 31, 2027. For the years ended June 30, 2022, 2021 and 2020, the
amortization expense of financial lease right-of-use assets were $185,583, $181,610 and $170,714, respectively. For the years ended June
30, 2022, 2021 and 2020, the interest expense for financial lease were $26,068, $25,509 and $26,447, respectively.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
Maturity analysis of financial lease liabilities
as of June 30, 2022 is as follows:
| Financial lease payments | |
Company vehicles | |
| Discount rate at commencement | |
| 4.9 | % |
| One year | |
$ | 79,285 | |
| Two years | |
| 79,285 | |
| Three years | |
| 79,285 | |
| Four years | |
| 79,285 | |
| Five years | |
| 79,285 | |
| Beyond five years | |
| 99,106 | |
| Total undiscounted cash flows | |
$ | 495,531 | |
| Total financing lease liabilities | |
| 426,095 | |
| Difference between undiscounted cash flows and discounted cash flows | |
| 69,436 | |
Maturity analysis of financial lease liabilities
as of June 30, 2021 is as follows:
| Financial
lease payments |
|
Company
vehicles |
|
| Discount rate at commencement |
|
|
4.9 |
% |
| One year |
|
$ |
82,369 |
|
| Two years |
|
|
82,369 |
|
| Three years |
|
|
82,369 |
|
| Four years |
|
|
82,369 |
|
| Five years |
|
|
82,369 |
|
| Beyond five years |
|
|
185,330 |
|
| Total undiscounted cash flows |
|
$ |
597,175 |
|
| Total financing lease liabilities |
|
|
501,768 |
|
| Difference between undiscounted cash flows and discounted
cash flows |
|
|
95,407 |
|
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
NOTE 16 – CONVERTIBLE NOTES
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 $5,275,000 including the original issue discount of $250,000 and Investor’s legal and other transaction costs of $25,000.
The Company anticipates using the proceeds for general working capital purposes.
Material Terms of the Convertible Note 2021:
| ● | Interest accrues on the outstanding balance of the Convertible Note at 8% per annum from the Purchase Price Date until the same is paid in full. All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Convertible Note. |
| ● | Upon the occurrence of a Trigger Event, Investor may increase the outstanding balance payable under the Convertible Note by 12% or 5%, depending on the nature of such event. If the Company files to cure the Trigger Event within the required five trading days, the Triger Event will automatically become an event of default and interest will accrue at the lesser of 22% per annum or the maximum rate permitted by applicable law. The Company evaluated these trigger events and concluded to record no provision as of June 30, 2022. |
| ● | 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 85% multiplied by the lowest daily VWAP (Volume-Weighted Average Price) during the ten trading days immediately preceding the applicable conversion, subject to certain adjustments, an issuance cap pursuant to NASDAQ Listing Rule 5635(d) and ownership limitations specified in the Convertible Note. |
| ● | 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 6.5% of the aggregate gross proceeds received by the Company in the offering as well as certain placement agent allowance and legal fees. In addition, the Company agreed to issue to JSC or its designee(s) warrants to purchase up to 157,934 ordinary shares of the Company (the “Warrants”). The Warrants have a term of five years and are exercisable at a price of $2.00 per share. |
| ● | 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 $0.0001 (the “Ordinary Shares”), of Borrower (“Conversion Shares”) as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price; provided, however, that in the event the Floor Price is higher than the Conversion Price, Borrower may, subject to applicable Nasdaq listing rules, either agree to lower the Floor Price (as defined below) to be equal to the applicable Conversion Price or satisfy the Conversion in cash. |
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 $1,304,565 (equity component $1,092,460, warrants value $212,105). Equity component
was determined by deducting the fair value of the liability component from the par value of the original Convertible Note 2021. Warrants
value was determined with the Black Scholes model. Equity component is not remeasured as long as it continues to meet the conditions
for equity classification. The excess of the principal amount of the liability component over its carrying amount (“debt discount”)
is amortized to interest expense over the term of the Convertible Note 2021.
Debt issuance costs related to the original Convertible
Note 2021 comprised of commissions paid to third party placement agent and lawyers of $667,920 which included original issue discount
of $250,000, Investor’s legal and other transaction costs of $25,000 and commission of $392,920. The Company allocated the total
amount incurred to the liability and equity components of the original Convertible Note 2021 based on their relative values. Issuance
costs attributable to the liability component were $697,771 and will be amortized to interest expense using the effective interest method
over the contractual term. Issuance costs attributable to the equity component were $182,255 and netted with the equity component in stockholders’
equity of $1,092,460 and warrant value of $212,105.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
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
$3,170,000 including the original issue discount of $150,000 and Investor’s legal and other transaction costs of $20,000. The Company
anticipates using the proceeds for general working capital purposes.
Material Terms of the Convertible Note 2022:
| ● | Interest accrues on the outstanding balance of the Convertible Note at 8% per annum from the Purchase Price Date until the same is paid in full. All interest calculations hereunder shall be computed on the basis of a 360-day year comprised of twelve (12) thirty (30) day months, shall compound daily and shall be payable in accordance with the terms of this Convertible Note. |
| ● | Upon the occurrence of a Trigger Event, Investor may increase the outstanding balance payable under the Convertible Note by 12% or 5%, depending on the nature of such event. If the Company files to cure the Trigger Event within the required five trading days, the Triger Event will automatically become an event of default and interest will accrue at the lesser of 22% per annum or the maximum rate permitted by applicable law. The Company evaluated these trigger events and concluded to record no provision as of June 30, 2022. |
| ● | 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 85% multiplied
by the lowest daily VWAP (Volume-Weighted Average Price) during the ten trading days immediately preceding the applicable conversion,
subject to certain adjustments, an issuance cap pursuant to NASDAQ Listing Rule 5635(d) and ownership limitations specified in the Convertible
Note. |
| ● | 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 6.5% of the aggregate gross proceeds received by the Company in the offering as well as certain placement agent allowance and legal fees. In addition, the Company agreed to issue to JSC or its designee(s) warrants to purchase up to 386,585 ordinary shares of the Company (the “Warrants”). The Warrants have a term of five years and are exercisable at a price of $0.49 per share. |
| ● | 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 $0.0001 (the “Ordinary Shares”), of Borrower (“Conversion Shares”) as per the following conversion formula: the number of Conversion Shares equals the amount being converted (the “Conversion Amount”) divided by the Conversion Price; provided, however, that in the event the Floor Price is higher than the Conversion Price, Borrower may, subject to applicable Nasdaq listing rules, either agree to lower the Floor Price (as defined below) to be equal to the applicable Conversion Price or satisfy the Conversion in cash. |
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 $816,765 (equity component $683,393, warrants value $133,372). Equity component was determined
by deducting the fair value of the liability component from the par value of the original Convertible Note 2022. Warrants value was determined
with the Black Scholes model. Equity component is not remeasured as long as it continues to meet the conditions for equity classification.
The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to
interest expense over the term of the Convertible Note 2022.
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 $150,000, Investor’s legal and other transaction costs of $20,000 and commission of $256,095. The Company allocated the total
amount incurred to the liability and equity components of the original Convertible Note 2022 based on their relative values. Issuance
costs attributable to the liability component were $438,856 and will be amortized to interest expense using the effective interest method
over the contractual term. Issuance costs attributable to the equity component were $120,611 and netted with the equity component in stockholders’
equity of $683,393 and warrant value of $133,372.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
Net carrying amount of the liability component
Convertible Notes dated as of June 30, 2022 were as following:
| | |
Principal outstanding | | |
Unamortized
issuance
cost | | |
Net carrying
value | |
| | |
| | |
| | |
| |
| Convertible Note 2021 | |
$ | 5,275,000 | | |
$ | (1,405,654 | ) | |
$ | 3,869,346 | |
| Convertible Note 2022 | |
| 3,170,000 | | |
| (1,109,673 | ) | |
| 2,060,327 | |
| Convertible Notes - liability portion | |
$ | 8,445,000 | | |
$ | (2,515,327 | ) | |
$ | 5,929,673 | |
Net carrying amount of the equity component of
the Convertible Notes as of June 30, 2022 were as following:
| | |
Amount
allocated
to conversion
option | | |
Issuance cost | | |
Equity
component,
net | |
| | |
| | | |
| | | |
| | |
| Convertible Note 2021 | |
$ | 1,092,460 | | |
$ | (182,255 | ) | |
$ | 910,205 | |
| Convertible Note 2022 | |
| 683,393 | | |
| (120,611 | ) | |
| 562,782 | |
| Convertible Notes – equity portion | |
$ | 1,775,853 | | |
$ | (302,866 | ) | |
$ | 1,472,987 | |
Amortization of issuance cost, debt discount
and interest cost for the year ended June 30, 2022 were as follows:
| | |
Issuance costs
and
debt discount | | |
Convertible
note interest | | |
Total | |
| | |
| | |
| | |
| |
| Convertible Note 2021 | |
$ | 384,577 | | |
$ | 227,465 | | |
$ | 612,042 | |
| Convertible Note 2022 | |
| 12,576 | | |
| 7,051 | | |
| 19,627 | |
| Convertible Notes | |
$ | 397,543 | | |
$ | 234,516 | | |
$ | 631,669 | |
The effective interest rate to derive
the liability component fair value were 33.10% and 34.51% for Convertible Note 2021 and Convertible Note 2022, respectively.
Note
17- 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 157,934 ordinary shares of our common stock at an exercise price equal to $2 per
share and 386,585 ordinary shares of our common stock at an exercise price equal to $0.49 per share, respectively, at any time within
a term of five year after issuance. The Company determined that these warrants are free standing financial instruments that are legally
detachable and separately exercisable from the common stock of the Company. In accordance with the accounting guidance, the outstanding
warrants are recognized as additional paid in capital (APIC) on the balance sheet and are measured at their inception date fair value.
For the years ended June 30, 2022 and 2021, the
Company had approximately 544,529 and 0 warrants outstanding, respectively at an average exercise price between $0.49 and $2 and there
were zero warrants exercised or repurchased. For the years ended June 30, 2022, 2021 and 2020 the Company recognized an accretion
of debt discount related to warrants expense of approximately $345,477, 0 and 0, respectively.
The 2021 warrants were valued using the Black-Scholes
value option pricing model with the following inputs: volatility of 117%; risk-free interest rate of 2.04%; expected term of 5 years;
exercise price $0.49 and 0% dividend yield.
The 2022 warrants were valued using the Black-Scholes value option pricing model with the following inputs: volatility
of 129%; risk-free interest rate of 0.27%; expected term of 5 years; exercise price $2 and 0% dividend yield.
NOTE
18 – TAXES
The
Company is registered in the Cayman Islands. The Company generated substantially all of its income/ (loss) from its PRC operations for
the years ended June 30, 2022, 2021 and 2020.
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 years ended June 30, 2022, 2021 and 2020.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
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 25%. The EIT Law became effective
on January 1, 2008. 25% tax rates apply to all the PRC operation subsidiaries in the Company. The PRC State Taxation Administration has examined the Company’s income tax returns through the year ended on June 30, 2022. However,
the Company’s enterprise income tax is subject to examination by the PRC State Taxation Administration as needed after it is filed.
The provision for income tax for the years ended
June 30, 2022, 2021 and 2020, consisted of the following:
| | |
2022 | | |
2021 | | |
2020 | |
| Current income tax provision | |
$ | 1,849,570 | | |
$ | 2,968,362 | | |
$ | 2,251,672 | |
| Deferred income tax provision | |
| 244,506 | | |
| 704,262 | | |
| 353,097 | |
| Total | |
$ | 2,094,076 | | |
$ | 3,672,624 | | |
$ | 1,898,575 | |
The following table sets forth reconciliation
between the statutory EIT rate and the effective tax for the years ended June 30, 2022, 2021 and 2020, respectively:
| | |
2022 | | |
2021 | | |
2020 | |
| Income before income taxes | |
$ | 8,335,041 | | |
$ | 10,072,523 | | |
$ | 7,546,583 | |
| Provision for income taxes at statutory tax rate in the PRC | |
| 2,083,760 | | |
| 3,660,090 | | |
| 1,886,646 | |
| Effect of expense for which no income tax is deductible | |
| 10,316 | | |
| 12,534 | | |
| 11,929 | |
| Income tax expense | |
$ | 2,094,076 | | |
$ | 3,672,624 | | |
$ | 1,898,575 | |
The significant components of deferred tax assets
as of June 30, 2022 and 2021 were as follows:
| | |
2022 | | |
2021 | |
| Deferred tax assets | |
| | |
| |
| Advanced from customers | |
$ | 442,322 | | |
| 704,262 | |
| Total | |
$ | 442,322 | | |
| 704,262 | |
Value Added Tax (“VAT”)
Business tax changed to VAT in China since May
1, 2016. The Company’s revenue of installation is subject to a VAT rate of 11%.
The maintenance and accessories sales were subject
to a VAT rate of 17% before May 1, 2018 and were reduced to 16% since then. The VAT rate was reduced to 13% since April 1, 2019.
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 nil since July 2017.
Taxes payable
The Company’s taxes payable as of June
30, 2022 and 2021, consisted of the following:
| | |
2022 | | |
2021 | |
| Income tax payable | |
$ | 495,009 | | |
$ | - | |
| VAT payable | |
| 9,725 | | |
| 332 | |
| Other tax payables | |
| 940 | | |
| 1,888 | |
| Total | |
$ | 505,674 | | |
$ | 2,220 | |
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
NOTE 19 - EQUITY
Ordinary Shares
At the reorganization event described in Note
1, the Company issued 50,000 ordinary shares with par value of $1 to exchange for the ownership in E-Home Pingtan from the former shareholders
to WFOE.
Prior to the reorganization, the Company had
$3,620,757 and $3,885,586 in contributed ownership as of June 30, 2019 and 2018, respectively.
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 50,000 ordinary shares into 500,000,000
ordinary shares. The authorized ordinary shares became 500,000,000 shares and the par value changed from US$1 to US$0.0001. As part of
its reorganization and on May 23, 2019, the Company surrendered 472,000,000 ordinary shares. As a result, the Company has 28,000,000
ordinary shares issued and outstanding.
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 May 18, 2021, the Company completed the closing
of its initial public offering of 5,575,556 ordinary shares at a public offering price of $4.50 per ordinary share, including 20,000 ordinary
shares issued upon the partial exercise of the over-allotment option by Joseph Stone Capital, LLC, who acted as the representative of
underwriters for the initial public offering. The total gross proceed from the initial public offering was approximately $25.1 million
before underwriting commissions and offering expenses. The total net proceed from the initial public offering was $21,661,293 (par value
of $558 and additional paid-in capital of $21,660,735) after deducting the financing expenses directly related to the initial public offering.
On June 21, 2021, the Company granted 6,000 ordinary
shares to three of its independent directors (2,000 shares for each director) as their compensations at a fair value of $213,840 (par
value of $1 and additional paid-in capital of $213,839).
On January 20, 2022, the Company and E-Home Pingtan
entered into an equity transfer agreement to acquire 60% equity interests in Youyou in consideration of in consideration for the sum of
(i) RMB4 million (approximately $0.60 million) in cash and (ii) 2,702,826 ordinary shares of the Company. On February 3, 2022, the Company
issued 2,702,826 ordinary shares to the former controlling shareholders of Youyou at a fair value of $2,000,091 (par value of $270 and
additional paid-in capital of $1,999,821).
On January 20, 2022, the Company and E-Home Pingtan
entered into an equity transfer agreement to acquire 40% equity interests in Lianbao in consideration of in consideration for 5,823,363
ordinary shares of the Company. On March 2, 2022, the Company issued 5,823,363 ordinary shares to the former controlling shareholders
of Lianbao.
On March 18, 2022, the Company granted 400,000
ordinary shares to its consultants as their compensations at a fair value of $308,000 (par value of $40 and additional paid-in capital
of $307,960). On June 22, 2022, the Company granted 520,000 ordinary shares to its directors and officers as their compensations at a
fair value of $167,700 (par value of $52 and additional paid-in capital of $167,648). The Company also granted an aggregate of 480,000
shares to its employees, on June 22, 2022, under its 2022 Equity Incentive Plan at a fair value of $154,800 (par value of $48 and additional
paid-in capital of $154,752).
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 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve
is equal to 50% of the entity’s registered capital. Appropriations to the discretionary surplus reserve are made at the discretion
of the Board of Directors. The reserved amounts as determined pursuant to PRC statutory laws totaled $664,100 and $664,100 as of June
30, 2022 and 2021.
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 years ended June 30, 2022 and
2021, there were no Company dividend declared.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
NOTE 20 –REVENUE
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 of time. Deferred portion of senior care service is recorded as a liability (advances from customers)
in the company’s balance sheet.
| | |
2022 | | |
2021 | |
| Installation and maintenance | |
$ | 37,531,466 | | |
$ | 48,164,931 | |
| Sales of household appliance accessories | |
| 2,486,496 | | |
| 3,381,304 | |
| Housekeeping | |
| 16,340,910 | | |
| 16,792,722 | |
| Senior care services | |
| 5,259,977 | | |
| 4,710,645 | |
| Sales of E-watch | |
| 2,132,244 | | |
| 1,328,169 | |
| Sublease | |
| - | | |
| 147,663 | |
| Total | |
$ | 63,751,093 | | |
$ | 74,525,434 | |
NOTE 21 – SEGMENT INFORMATION
Operating segments are reported in a manner consistent
with the internal reporting provided to the management for decision making. Management has identified three operating segments which
are installation and maintenance, housekeeping and senior care services. Operations for senior care services began in August 2019. The
Company started generating revenue from this new segment in August 2019. These operating segments are monitored and strategic decisions
are made on the basis of segmental profit margins. Segment profit is defined as net sales reduced by cost of revenue and other related
operating expenses. The results are shown as follows for the years ended June 30, 2022, 2021 and 2020:
| Revenue | |
2022 | | |
2021 | | |
2020 | |
| Installation and Maintenance | |
$ | 40,017,962 | | |
$ | 51,546,235 | | |
$ | 32,220,898 | |
| Housekeeping | |
| 16,340,910 | | |
| 16,792,722 | | |
| 11,704,899 | |
| Senior care services | |
| 7,392,221 | | |
| 6,038,814 | | |
| 2,060,833 | |
| Sublease | |
| - | | |
| 147,663 | | |
| 214,319 | |
| Total | |
$ | 63,751,093 | | |
$ | 74,525,434 | | |
$ | 46,200,949 | |
| Cost of revenue | |
2022 | | |
2021 | | |
2020 | |
| Installation and Maintenance | |
$ | 26,791,434 | | |
$ | 32,209,179 | | |
$ | 19,484,927 | |
| Housekeeping | |
| 13,411,221 | | |
| 13,435,869 | | |
| 8,901,973 | |
| Senior care services | |
| 4,191,920 | | |
| 2,666,350 | | |
| 1,714,172 | |
| Sublease | |
| - | | |
| - | | |
| - | |
| Total | |
$ | 44,394,575 | | |
$ | 48,311,398 | | |
$ | 30,101,072 | |
| Gross profit |
|
2022 |
|
|
2021 |
|
|
2020 |
|
| Installation
and Maintenance |
|
$ |
13,226,528 |
|
|
$ |
19,337,056 |
|
|
$ |
12,735,971 |
|
| Housekeeping |
|
|
2,929,689 |
|
|
|
3,356,853 |
|
|
|
2,802,926 |
|
| Senior care services |
|
|
3,200,301 |
|
|
|
3,372,464 |
|
|
|
346,661 |
|
| Sublease |
|
|
- |
|
|
|
147,663 |
|
|
|
214,319 |
|
| Total |
|
$ |
19,356,518 |
|
|
$ |
26,214,036 |
|
|
$ |
16,099,877 |
|
| Sales and marketing expenses | |
2022 | | |
2021 | | |
2020 | |
| Installation and Maintenance | |
$ | - | | |
$ | - | | |
$ | - | |
| Housekeeping | |
| - | | |
| - | | |
| - | |
| Senior care services | |
| - | | |
| - | | |
| - | |
| Sublease | |
| - | | |
| - | | |
| - | |
| Unallocated | |
| 9,221,124 | | |
| 10,279,274 | | |
| 7,514,211 | |
| Total | |
$ | 9,221,124 | | |
$ | 10,279,274 | | |
$ | 7,514,211 | |
| General and administrative expenses | |
2022 | | |
2021 | | |
2020 | |
| Installation and Maintenance | |
$ | - | | |
$ | - | | |
$ | - | |
| Housekeeping | |
| - | | |
| - | | |
| - | |
| Senior care services | |
| - | | |
| - | | |
| - | |
| Sublease | |
| - | | |
| - | | |
| - | |
| Unallocated | |
| 10,073,654 | | |
| 6,869,419 | | |
| 1,114,984 | |
| Total | |
$ | 10,073,654 | | |
$ | 6,869,419 | | |
$ | 1,114,984 | |
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
| Current assets | |
2022 | | |
2021 | |
| Installation and Maintenance | |
$ | - | | |
$ | - | |
| Housekeeping | |
| - | | |
| - | |
| Senior care services | |
| - | | |
| - | |
| Sublease | |
| - | | |
| - | |
| Unallocated current assets | |
| 67,864,923 | | |
| 65,766,598 | |
| Total | |
$ | 67,864,923 | | |
$ | 65,766,598 | |
| Non-current assets | |
2022 | | |
2021 | |
| Installation and Maintenance | |
$ | - | | |
$ | - | |
| Housekeeping | |
| - | | |
| - | |
| Senior care services | |
| 4,301,543 | | |
| 4,966,998 | |
| Sublease | |
| - | | |
| - | |
| Unallocated non-current assets | |
| 7,138,112 | | |
| 3,621,202 | |
| Total | |
$ | 11,439,655 | | |
$ | 8,588,200 | |
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 22 – COMMITMENTS AND CONTINGENCIES
As of June 30, 2022, the Company had following lease commitments
under non-cancelable agreements:
| Future Lease Payments | |
Operating Lease | | |
Finance Lease | | |
Total | |
| July 2022 to June 2023 | |
$ | 822,421 | | |
$ | 79,285 | | |
$ | 901,706 | |
| July 2023 to June 2024 | |
| 84,870 | | |
| 79,285 | | |
| 164,155 | |
| July 2024 to June 2025 | |
| 29,800 | | |
| 79,285 | | |
| 109,085 | |
| July 2025 to June 2026 | |
| 29,800 | | |
| 79,285 | | |
| 109,085 | |
| July 2026 to June 2027 | |
| 29,800 | | |
| 79,285 | | |
| 109,085 | |
| Thereafter | |
| 1,763,343 | | |
| 99,106 | | |
| 1,862,449 | |
| Total | |
$ | 2,760,034 | | |
$ | 495,531 | | |
$ | 3,255,565 | |
NOTE 23 – 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 years ended June 30, 2022, 2021 and 2020, no individual customer or supplier accounted for
more than 10% of the Company’s total revenues or purchase. As of June 30, 2022, 2021 and 2020, no individual customer or supplier
accounted for more than 10% of the total outstanding accounts receivable or accounts payable balance.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
NOTE 24 – RELATED PARTY BALANCES AND
TRANSACTIONS
As of June 30, 2022 and 2021, the Company had $108,761 and $30,925 payable
balances to Mr. Wenshan Xie, one of its major shareholders, for purchase of goods and services.
During the year ended June 30, 2022, Mr. Xie made payment of $419,619
for purchase of goods and services for the Company and the Company repaid $337,629 to Mr. Xie. During the year ended June 30, 2021, Mr.
Xie made payment of $63,975 for purchase of goods and services for the Company and the Company repaid $24,575 to Mr. Xie. During the year
ended June 30, 2020, the Company paid $8,475 in advance to Mr. Xie for purchase of goods and services.
On June 22, 2022, the Company granted 520,000
ordinary shares to its directors and officers as their compensations at a fair value of $167,700 (par value of $52 and additional paid-in
capital of $167,648).
On June 21, 2021, the Company granted 6,000 ordinary
shares to three of its independent directors (2,000 shares for each director) as their compensations at a fair value of $213,840 (par
value of $1 and additional paid-in capital of $213,839).
NOTE 25 – SUBSEQUENT EVENTS
Equity transfer agreements
On June 14, 2022, the Company and its wholly owned
Hong Kong subsidiary, E-Home Household Service Holdings Limited (“E-Home Hong Kong”) entered into an equity transfer agreement
with Zhongrun (Fujian) Pharmaceutical Co., Ltd., a limited liability company established in China (“Zhongrun”) and Ms. Ling
Chen, the sole shareholder of Zhongrun, pursuant to which Ms. Chen agreed to transfer 55% of the equity interests in Zhongrun to E-Home
Hong Kong, in consideration for the sum of (i) RMB3 million (approximately $0.45 million) in cash and (ii) 28,041,992 ordinary shares
of the Company. On July 8, 2022, the Company issued 28,041,992 ordinary shares according to the equity transfer agreement at a fair value
of $8,496,724 (par value of $2,804 and additional paid-in capital of $8,493,919).
As of the date of these consolidated financial statements, the Company
is still evaluating the purchase price allocation for this business combination.
Reverse stock split
On September 23, 2022, the Company's board of
directors approved to effect a one-for-twenty reverse stock split of its ordinary shares (the “Reverse Stock Split”) with
the market effective on October 4, 2022, such that the number of the Company's authorized preferred and ordinary shares remain unchanged,
and the par value of each ordinary share is increased from US$0.0001 to US$0.002. As a result of the Reverse Stock Split, each twenty
pre-split ordinary shares outstanding were automatically combined and converted to one issued and outstanding ordinary share without any
action on the part of the shareholder. No fractional ordinary shares were issued to any shareholders in connection with the reverse stock
split. Each shareholder was entitled to receive one ordinary share in lieu of the fractional share that would have resulted from the reverse
stock split. As of October 3, 2022 (immediately prior to the effective date), there were 109,042,123 ordinary shares outstanding, and
the number of ordinary shares outstanding after the Reverse Stock Split was 5,453,106 shares, taking into account of the effect of rounding
fractional shares into whole shares. In addition, all options and any other securities of the Company outstanding immediately prior to
the Reverse Stock Split (to the extent they don’t provide otherwise) will be appropriately adjusted by dividing the number of ordinary
shares into which the options and other securities are exercisable by 20 and multiplying the exercise price thereof by 20, as a result
of the Reverse Stock Split.
E-Home Household Service Holdings Limited
Notes to the Consolidated Financial Statements
June 30, 2022 and
2021
Other subsequent events
On July 30, 2022, the Company’s board of directors approved proposal
per Mr. Xie to acquire 100% of the equity interests of Fujian Chuangying Business Science and Technology Co., Ltd. (“Chuangying”)
and Fuzhou Funeng Enterprise Management Consulting Co., Ltd. and Fujian Weizhixing Technology Co., Ltd (“the Chuangying’s
Subsidiaries”) from Lin Jianying (“Mr.Lin”). The acquisition has not happened as of the report date, while the details
of the acquisitions were still under discussion between the Company and the acquiree.
On August 15, 2022, the Company’s board of directors approved
proposal per Mr.Xie regarding financing by the Company in the amount of $3,600,000.00 through the issuance and sale to Multi Rise Holdings
Limited, a British Virgin Islands company, of 16,363,636 ordinary shares of the Company, par value $0.0001 per share, at a per share purchase
price of $0.22, pursuant to a securities purchase agreement. The financing has not happened as of the report date.
On September 19, 2022, the Company’s board of directors approved
proposal per Mr.Xie for issuance and sale of the Company's ordinary shares up to an aggregate offering price of US$12,300,000' that the
Company may sell to White Lion Capital LLC from time to time at the Company's sole discretion over the commitment period, plus an aggregate
of 1,329,729 of Ordinary Shares issuable to the Investor as commitment fee pursuant to the Purchase Agreement. The Company entered into
an ordinary share purchase agreement with the Investor dated September 14, 2022, a copy of which had been distributed to the Directors
before the meeting. The purchase and issuance have not happened as of the report date.
In accordance with ASC 855-10, the Company evaluated
all events and transactions that occurred after June 30, 2022 up through the date the Company issued these financial statements on November
4, 2022 and concluded that no other material subsequent events except for the disclosed above.
F-32
+86-591
87590668
E-Home
Household Service Holdings Limited (the “Company”) is filing this Amendment No.1 to its Annual Report on form 20-F for the
fiscal year ended June 30, 2022, originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on November
4, 2022 (the “Original Filing”) to clarify and correct certain statements and typographical errors about the Company’s
grant of shares under its 2022 Equity Incentive Plan to certain directors, officers, and employees as compensations for their services.
Only those Items that contain a revision are being included in this 20-F/A (other than with respect to the Exhibit Index).As required by Rule 12b-15
under the Securities Exchange Act of 1934, as amended, new certificates of our principal executive officer, principal financial officer,
and auditor are being filed as exhibits to this Amendment No. 1 on Form 20-F/A as Exhibits 12.1, 12.2, 13.1, 13.2 and 15.2.Except
as described in this Explanatory Note, no other changes have been made to the Original Filing. The Original Filing continues to speak
as of the date of the Original Filing and we have not updated the disclosures contained therein to reflect any events which may have
taken place at a date subsequent to the filing of the Original Filing. Accordingly, this Amendment No. 1 on Form 20-F/A should be read
in conjunction with our filings with the SEC subsequent to the date of the Original Filing.The following sections of this Form 20-F/A
contain information that has been amended where necessary to reflect the above-referenced changes to the Original Filing:●Part
I Item 6. Directors, Senior Management and Employees●Part
I Item 7. Major Shareholders And Related Party Transactions●Part
III Item 17. Consolidated Financial Statements●Part
III Item 18. Consolidated Financial Statements
2.99
3.44
4.47
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1432532
1831632
On April 30, 2021, the Company entered into two agreements with Premium Bright Corporate Advisory Limited (“Premium”) in which Premium will find target companies for the Company to acquire in order to expand its business into financial lending services. The Company prepaid a retainer of $1,800,000 to Premium, who is still actively searching for target companies as of June 30, 2022. On January 20, 2022, the Company and E-Home Pingtan entered into an equity transfer agreement to acquire 60% equity interests in YouYou Cleaning Co., Ltd. (“Youyou”) in consideration of (i) RMB4 million (approximately $0.60 million) in cash and (ii) 2,702,826 ordinary shares of the Company at a fair value of $2,000,091 (par value of $270 and additional paid-in capital of $1,999,821). The Company paid the consideration on February 3, 2022 however, the legal formalities to transfer the control to the Company were not completed as of June 30, 2022 and recorded paid consideration of $2,464,049 as deposits paid for potential acquisition. On January 20, 2022, the Company and E-Home Pingtan entered into an equity transfer agreement to acquire 40% equity interests in Shenzhen Chinese Enterprises Industrial LianBao Appliance Service Co., Ltd. (“Lianbao”) in consideration for 5,823,363 ordinary shares issued on March 2, 2022 of the Company at a fair value of $3,743,258 (par value of $582 and additional paid-in capital of $3,742,676). In June 2022, the Company reached an agreement with Lianbao and its controlling shareholders to terminate the acquisition since the financial position of Lianbao had changed after the equity transfer agreement being signed. In accordance with the termination agreement all related issued shares will be returned by December 31, 2022. Accordingly, the Company has recorded the $1,747,009 as other receivables based on the fair value of the shares as of June 30, 2022 to be received. For the year ended June 30, 2022, the Company recorded fair value adjustment of $1,996,249. On May 28, 2021, the Company entered into an agreement with Yuwin Group Limited (“Yuwin”) in which Yuwin will provide advisory service to acquire 55% ownership of Fujian Ruiquan Care Services Co., Ltd. The Company prepaid deposit for the acquisitions of $1,000,000 to Yuwin in June 2021. The acquisition was terminated and Yuwin returned the deposit to the Company in July 2021. On June 1, 2021, the Company entered into an equity transfer agreement with the shareholder of South Pacific Holding Group Limited (“South Pacific”) in which the Company will acquire 30% ownership of South Pacific. The Company prepaid deposit for the acquisitions of $600,000 to South Pacific in June 2021. In July 2021, the acquisition was terminated and South Pacific returned the deposit to the Company in April 2022. On January 20, 2022, the Company and E-Home Pingtan entered into an equity transfer agreement to acquire 60% equity interests in YouYou Cleaning Co., Ltd. (“Youyou”) in consideration of (i) RMB4 million (approximately $0.60 million) in cash and (ii) 2,702,826 ordinary shares of the Company at a fair value of $2,000,091 (par value of $270 and additional paid-in capital of $1,999,821). The Company paid the consideration on February 3, 2022 however, the legal formalities to transfer the control to the Company were not completed as of June 30, 2022 and recorded paid consideration of $2,464,049 as deposits paid for potential acquisition. On January 20, 2022, the Company and E-Home Pingtan entered into an equity transfer agreement to acquire 40% equity interests in Shenzhen Chinese Enterprises Industrial LianBao Appliance Service Co., Ltd. (“Lianbao”) in consideration for 5,823,363 ordinary shares issued on March 2, 2022 of the Company at a fair value of $3,743,258 (par value of $582 and additional paid-in capital of $3,742,676). In June 2022, the Company reached an agreement with Lianbao and its controlling shareholders to terminate the acquisition since the financial position of Lianbao had changed after the equity transfer agreement being signed. In accordance with the termination agreement all related issued shares will be returned by December 31, 2022. Accordingly, the Company has recorded the $1,747,009 as other receivables based on the fair value of the shares as of June 30, 2022 to be received. For the year ended June 30, 2022, the Company recorded fair value adjustment of $1,996,249. On May 28, 2021, the Company entered into an agreement with Yuwin Group Limited (“Yuwin”) in which Yuwin will provide advisory service to acquire 55% ownership of Fujian Ruiquan Care Services Co., Ltd. The Company prepaid deposit for the acquisitions of $1,000,000 to Yuwin in June 2021. The acquisition was terminated and Yuwin returned the deposit to the Company in July 2021. On June 1, 2021, the Company entered into an equity transfer agreement with the shareholder of South Pacific Holding Group Limited (“South Pacific”) in which the Company will acquire 30% ownership of South Pacific. The Company prepaid deposit for the acquisitions of $600,000 to South Pacific in June 2021. In July 2021, the acquisition was terminated and South Pacific returned the deposit to the Company in April 2022. On January 20, 2022, the Company and E-Home Pingtan entered into an equity transfer agreement to acquire 60% equity interests in YouYou Cleaning Co., Ltd. (“Youyou”) in consideration of (i) RMB4 million (approximately $0.60 million) in cash and (ii) 2,702,826 ordinary shares of the Company at a fair value of $2,000,091 (par value of $270 and additional paid-in capital of $1,999,821). The Company paid the consideration on February 3, 2022 however, the legal formalities to transfer the control to the Company were not completed as of June 30, 2022 and recorded paid consideration of $2,464,049 as deposits paid for potential acquisition. On January 20, 2022, the Company and E-Home Pingtan entered into an equity transfer agreement to acquire 40% equity interests in Shenzhen Chinese Enterprises Industrial LianBao Appliance Service Co., Ltd. (“Lianbao”) in consideration for 5,823,363 ordinary shares issued on March 2, 2022 of the Company at a fair value of $3,743,258 (par value of $582 and additional paid-in capital of $3,742,676). In June 2022, the Company reached an agreement with Lianbao and its controlling shareholders to terminate the acquisition. In accordance with the termination agreement all related issued shares will be returned by December 31, 2022. Accordingly, the Company has recorded the $1,747,009 as other receivables based on the fair value of the shares as of June 30, 2022 to be received. For the year ended June 30, 2022, the Company recorded fair value adjustment of $1,996,249. On May 28, 2021, the Company entered into an agreement with Yuwin Group Limited (“Yuwin”) in which Yuwin will provide advisory service to acquire 55% ownership of Fujian Ruiquan Care Services Co., Ltd. The Company prepaid deposit for the acquisitions of $1,000,000 to Yuwin in June 2021. The acquisition was terminated and Yuwin returned the deposit to the Company in July 2021. On June 1, 2021, the Company entered into an equity transfer agreement with the shareholder of South Pacific Holding Group Limited (“South Pacific”) in which the Company will acquire 30% ownership of South Pacific. The Company prepaid deposit for the acquisitions of $600,000 to South Pacific in June 2021. In July 2021, the acquisition was terminated and South Pacific returned the deposit to the Company in April 2022.
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