E-Home Household Service(EJH) - 2024 Q2 - Quarterly Report

Financial Performance - Total revenues for the six months ended December 31, 2023, were $26,947,183, a decrease from$38,876,968 in the same period in 2022[8] - Net loss for the six months ended December 31, 2023, was $5,193,493, compared to a net loss of$3,316,128 in the same period in 2022[8] - Gross profit for the six months ended December 31, 2023, was $6,575,189, down from$11,138,086 in the same period in 2022[8] - Loss from operations for the six months ended December 31, 2023, was $4,311,584, compared to a loss of$562,094 in the same period in 2022[8] - Total comprehensive loss for the six months ended December 31, 2023, was $4,505,504, compared to$5,447,621 in the same period in 2022[8] - Net loss for the six months ended December 31, 2023 was $5,193,493, compared to$3,316,128 in the same period of 2022[20] - Net cash provided by operating activities for the six months ended December 31, 2023 was $1,381,424, compared to$3,805,834 in the same period of 2022[20] - Net cash used in investing activities for the six months ended December 31, 2023 was $10,688,160, compared to$3,468,043 in the same period of 2022[20] - Net cash provided by financing activities for the six months ended December 31, 2023 was $11,822,082, compared to$9,167,098 in the same period of 2022[20] - Government subsidies received for the six months ended December 31, 2022 were $43,616, compared to$Nil for the same period in 2023[91] Cash and Cash Equivalents - Cash and cash equivalents increased to $74,325,312 as of December 31, 2023, from$71,252,380 as of June 30, 2023[6] - Cash and cash equivalents at the end of the period December 31, 2023 was $74,325,312, compared to$62,470,005 at the end of the same period in 2022[20] - RMB denominated cash and cash equivalents amounted to $74,304,547 as of December 31, 2023, up from$71,240,361 as of June 30, 2023[108] Assets and Liabilities - Total current assets increased to $93,409,506 as of December 31, 2023, from$84,031,236 as of June 30, 2023[6] - Total liabilities decreased to $15,151,939 as of December 31, 2023, from$20,447,001 as of June 30, 2023[6] - Accounts receivable decreased from $1,018,691 as of June 30, 2023 to$697,359 as of December 31, 2023, with $84,600 collected by April 30, 2024, representing 12$2,164,434 as of December 31, 2023, down from $6,217,196 as of June 30, 2023[129] - Property, plant, and equipment net value was$4,626,725 as of December 31, 2023, with depreciation expenses of $219,759 for the six months ended December 31, 2023[134] - Intangible assets net value was$13,942 as of December 31, 2023, with amortization expense of $17,872 for the six months ended December 31, 2023[137] - Total right-of-use assets increased from$7,161,109 as of June 30, 2023 to $7,305,792 as of December 31, 2023, reflecting an increase of$144,683[144] - Operating lease right-of-use assets decreased by $338,846 from$5,634,302 as of June 30, 2023 to $5,446,285 as of December 31, 2023[144] - Finance lease right-of-use assets decreased by$882,069 from $871,876 as of June 30, 2023 to$0 as of December 31, 2023 due to the termination of vehicle lease agreements[149] - Long-term deposits and other non-current assets decreased from $62,874,337 as of June 30, 2023 to$60,768,022 as of December 31, 2023, primarily due to the return of performance deposits[150] - Accounts payable and accrued expenses decreased from $7,290,320 as of June 30, 2023 to$5,324,345 as of December 31, 2023, driven by reductions in supplier payables and accrued expenses[151] - Advances from customers decreased from $2,123,540 as of June 30, 2023 to$1,532,624 as of December 31, 2023, with senior care services accounting for the majority of the decrease[154] - Operating lease liabilities decreased from $1,952,746 as of June 30, 2023 to$1,896,477 as of December 31, 2023, with the weighted average discount rate at 3.79%[156][157] - Financing lease liabilities decreased by $344,585 from June 30, 2023, to December 31, 2023, resulting in a total of$0 as of December 31, 2023[165][166] Revenue Recognition - Revenue from installation and maintenance services is recognized at a point in time, with multiple performance obligations allocated based on standalone selling prices[77] - Housekeeping services revenue is recognized at a point in time upon completion of services, with the company acting as a principal[80] - Senior care services revenue is split between the sale of E-watches (recognized at a point in time) and care services (recognized over the service period)[81] - Revenue from pharmaceutical products is recognized when control of the product is transferred to the customer, typically at delivery[88] - Educational consulting services revenue is recognized at a point in time upon completion of services, with the company acting as a principal[89] Business Combinations and Acquisitions - The company acquired 100% equity interest in HAPPY for $466,888 in August 2021[27] - The company completed several business combinations in the year ended June 30, 2023 with total purchase consideration of$17,374,118, of which $8,846,867 was allocated to goodwill[121] - The fair value of total consideration transferred for acquisitions was$11,781,069, including $11,350,319 in equity instruments and$430,750 in cash[123] - Intangible assets acquired include customer relationships valued at $6,321,792 and goodwill of$5,312,774, with an impairment loss of $5,312,774[123] - Goodwill from business combinations amounted to$8,846,867 as of June 30, 2023, with total purchase consideration of $17,374,118[150] Convertible Notes and Warrants - The company's convertible notes balance as of December 31, 2023 was$148,261,367[16] - The company's convertible notes are accounted for by separating the liability and equity components, with the equity component reflected in additional paid-in capital and the debt discount amortized as non-cash interest expense[62] - Warrants issued with debt are classified as freestanding instruments and valued using the Black-Scholes Option Pricing Model, with no subsequent remeasurement required[64][65][66] - The company did not identify any derivative treatment in its convertible notes issued during the reporting period[68] - The Convertible Note 2021 had an original principal amount of $5,275,000, with an 8$1,680,679 worth of ordinary shares issued for principal and interest settlement[175] - The Convertible Note 2022 has an original principal amount of $3,170,000, with an 8$683,393, with warrants valued at $133,372[177] - The Company issued 5,263,835 ordinary shares for principal and interest partial settlement of the Convertible Note 2021 during the six months ended December 31, 2023[175] - The company issued 555,629 ordinary shares with a fair value of$1,800,000 for partial settlement of the Convertible Note 2022[179] - The net carrying amount of the liability component of Convertible Note 2022 as of December 31, 2023 was $1,456,480[180] - The net carrying amount of the equity component of Convertible Notes as of December 31, 2023 was$1,472,987[181] - Amortization of issuance cost, debt discount, and interest cost for the six months ended December 31, 2023 totaled $993,704[182] - The effective interest rates for Convertible Note 2021 and 2022 were 33.10$0.49 and $2[191] - The 2021 warrants were valued using a volatility of 117$687,989[8] - The company's Chinese subsidiaries are exposed to foreign currency risks, with all operating activities transacted in RMB which is not freely convertible[108][109] - The company is not subject to income or capital gains tax in the Cayman Islands[194] - The provision for income tax for the six months ended December 31, 2023 was $0[198] Stock Splits and Share Issuance - The company completed a one-for-twenty reverse stock split on September 23, 2022, a one-for-ten reverse stock split on April 13, 2023, a one-for-ten reverse stock split on September 25, 2023, and a one-for-five reverse stock split on February 14, 2024[31][32][33][34] - Shares issued to investors during the six months ended December 31, 2023, amounted to$12,001,420[14] - The potentially dilutive ordinary shares for the six months ended December 31, 2023 was 55 shares, with no potentially dilutive shares in the same period of 2022[96] Operating Segments - The company launched senior care services in August 2019 and acquired sales of pharmaceutical products and educational consulting services segments in July 2023[104] - The company's five operating segments are installation & maintenance, housekeeping, senior care services, sales of pharmaceutical products, and educational consulting services[104] - The company expects to achieve significant synergies from its recent acquisitions which it plans to complement its existing businesses[121] Accounting Standards and Policies - The company adopted ASC 842, which requires recognition of a right-of-use asset and lease liability for all leases with terms of more than 12 months, effective from the beginning of the first period presented[61] - The company does not expect recently issued accounting standards to have a material impact on its financial position, results of operations and cash flows[115][116][117][118] - The fair value of financial instruments is determined using a three-level hierarchy, with Level 1 being quoted prices in active markets for identical assets and liabilities[70][72] - Property, plant, and equipment are depreciated using the straight-line method, with useful lives ranging from 3 to 20 years depending on the asset type[49] - Intangible assets with finite lives, such as software and customer relationships, are amortized on a straight-line basis over estimated useful lives of five to ten years[51] - The company assesses goodwill for impairment annually and more frequently upon certain events, using both qualitative and quantitative assessments[52][53] - Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable[57] - The company recorded customer relationships of $1,426,798 with a useful life of ten years and copyrights and trademarks of$242,556 with a useful life of five years as intangible assets[140] - Estimated future amortization expense for intangible assets is $13,942 for the year ending December 31, 2024[142] - Amortization of operating lease right-of-use assets for the six months ended December 31, 2023 amounted to$304,163, with interest on lease liabilities at $34,683[146] - Total undiscounted cash flows for operating lease liabilities as of December 31, 2023 amounted to$2,303,529, with a difference of $407,052 between undiscounted and discounted cash flows[162] - Total undiscounted cash flows for operating leases amount to$2,390,797, with Villas contributing $1,582,455, station tower$166,074, and Warehouse $642,268[163] - Total operating lease liabilities are$1,952,746, with Villas at $1,192,898, station tower at$151,978, and Warehouse at $607,870[163] - The difference between undiscounted and discounted cash flows for operating leases is$438,051[163] Allowances and Impairments - As of December 31, 2023, and June 30, 2023, the company determined that all accounts receivable were collectible, with an allowance for doubtful accounts of $Nil for both periods[43] - The allowance for advances to suppliers recognized as of December 31, 2023, and June 30, 2023, were$Nil and $Nil, respectively[44] - The allowance for prepayments, deposits, and other current assets recognized as of December 31, 2023, and June 30, 2023, were$Nil and $Nil, respectively[45] - For the six months ended December 31, 2023, and 2022, the company recorded no impairment provision of inventories for lower of cost or net realizable value[46] Miscellaneous - The company maintains most of its bank accounts in the PRC, and cash balances in these accounts are not insured by the Federal Deposit Insurance Corporation or other programs[42] - The Company terminated the vehicle lease agreement on July 1, 2023, resulting in no future financial lease liabilities as of December 31, 2023[166][167]