E-Home Household Service(EJH) - 2024 Q4 - Annual Report

PART I Introductory Notes and Key Information E-Home, a Cayman Islands holding company, operates in China under a direct structure, facing PRC regulatory risks and cash transfer restrictions, with its auditor subject to PCAOB inspection - E-Home is a Cayman Islands holding company, not an operating company, with all business conducted in mainland China through its subsidiaries[15] - The company dissolved its Variable Interest Entity (VIE) structure in October 2021 and now operates through a direct holding structure[18][217] - The company is currently not in compliance with the CSRC's New Overseas Listing Rules, as it has not completed the required filings for its offerings after the rules' effective date (March 31, 2023), which may subject it to fines and penalties[18][19][119] - The company's auditor, Enrome LLP, is not headquartered in mainland China or Hong Kong and is subject to PCAOB inspection, reducing the immediate risk of delisting under the Holding Foreign Companies Accountable Act (HFCA Act)[20][179] - Cash transfers out of mainland China are restricted. PRC subsidiaries must set aside at least 10% of after-tax profits for statutory reserves until the fund reaches 50% of registered capital. These reserves are not distributable as dividends[30][156] - The company has undertaken several share consolidations (reverse stock splits) to comply with Nasdaq's minimum bid price requirement, with the most recent being a 1-for-10 split in September 2024[37][39] Risk Factors The company faces significant risks across business operations, Chinese regulatory environment, and its ordinary shares, including intense competition, government oversight, and potential NASDAQ delisting - The company is not in compliance with the CSRC's New Overseas Listing Rules for its recent offerings and may face sanctions and penalties[47][118][119] - The Chinese government exerts significant oversight and may intervene in the company's PRC operations at any time, creating material uncertainty[45][113] - The company has effected five reverse stock splits since September 2022 to maintain its NASDAQ listing. Failure to meet the minimum bid price could lead to delisting without a compliance period[187] - The company has identified material weaknesses in its internal control over financial reporting, specifically a lack of sufficient qualified accounting personnel with U.S. GAAP and SEC reporting knowledge[106][107][589] - As a foreign private issuer incorporated in the Cayman Islands, the company is exempt from certain U.S. corporate governance and reporting requirements, which may offer less protection to shareholders[54][195][196] Information on the Company E-Home provides integrated household services in China via its 'e家快服' platform, expanding through acquisitions and growing its user base under a direct holding structure - The company provides integrated household services, primarily home appliance services, housekeeping, and senior care, through its website and WeChat platform 'e家快服'[222] - The company partners with over 1,800 individuals and service stores for home appliance services and has more than 2,800 cleaners for housekeeping services[222] - The number of registered members on its platform increased from 4.45 million in FY2023 to over 5.26 million in FY2024[226] - The company dissolved its VIE structure in October 2021 and now operates through a direct holding structure, with E-Home WFOE directly owning the PRC operating entities[217] - The company has expanded into new segments by acquiring Zhongrun (pharmaceutical distribution) and Chuangying (educational consulting services)[218][227] Operating and Financial Review and Prospects Total revenue for FY2024 decreased by 25.81% to $50.69 million due to a weak economy, while net loss significantly narrowed to $19.39 million, supported by strong liquidity Fiscal Year 2024 vs. 2023 Performance | Financial Metric | FY 2024 | FY 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $50,685,314 | $68,321,743 | -25.81% | | Installation & Maintenance | $29,773,730 | $41,177,200 | -27.69% | | Housekeeping | $15,409,924 | $17,210,122 | -10.46% | | Senior Care Services | $4,025,456 | $6,515,953 | -38.22% | | Gross Profit | $12,700,596 | $18,557,645 | -31.56% | | Loss from Operations | ($16,085,700) | ($30,364,552) | -47.02% | | Net Loss Attributable to Shareholders | ($19,387,129) | ($35,006,839) | -44.62% | - The decrease in revenue for FY2024 was attributed to the weak economy and consumer spending in China, which negatively impacted all major service segments[320][360] - General and administrative expenses decreased by 71.62% in FY2024, primarily because FY2023 included significant impairment losses on goodwill ($8.85M) and intangible assets ($6.55M) from recent acquisitions[365] Cash Flow Summary (in USD) | Cash Flow Activity | FY 2024 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($11,453,154) | ($8,405,064) | $4,373,806 | | Net cash provided by (used in) investing activities | $4,295,120 | ($65,202,634) | ($7,400,320) | | Net cash provided by financing activities | $36,629,254 | $95,536,256 | $7,350,985 | | Cash at end of year | $100,810,078 | $71,252,380 | $54,842,052 | Directors, Senior Management and Employees The company's board meets NASDAQ independence rules, with executive and director compensation including cash and equity grants, and a workforce of 528 employees as of June 2024 - The board of directors consists of five members, three of whom are independent, satisfying the NASDAQ majority independence rule[438] FY2024 Compensation Summary | Group | Cash Compensation | | :--- | :--- | | Executive Officers | ~$165,349 | | Independent Directors | ~$54,400 | - The company has implemented multiple share incentive plans (2022, 2023, 2024) and has granted shares to executives, directors, and employees as part of their compensation[420][425][430] - As of June 30, 2024, the company employed 528 people, with the largest group (317) in sales and marketing[456][457] - As of October 28, 2024, Chairman and CEO Wenshan Xie beneficially owned 68,020 ordinary shares, representing less than 1% of the outstanding shares[461] Major Shareholders and Related Party Transactions The company has significant payable balances to related parties, including its CEO and a subsidiary shareholder, primarily for working capital advances, alongside share grants to directors and officers Payable Balances to Related Parties (as of June 30, 2024) | Related Party | Relationship | Amount Payable | | :--- | :--- | :--- | | Wenshan Xie | CEO & Major Shareholder | $1,817,302 | | Zhaodi Zeng | Wife of CEO | $90,000 | | Ling Chen | Shareholder of subsidiary Zhongrun | $1,247,396 | - During FY2024, CEO Wenshan Xie and his wife provided a total of $1.6 million in cash to the company for temporary working capital[466] - Directors and officers received share grants under the 2023 Share Incentive Plan as part of their compensation[469][470] Additional Information As a Cayman Islands company, E-Home's corporate governance and shareholder rights differ from U.S. standards, with its PRC operations subject to strict exchange controls and taxation - The company's authorized share capital was increased in September 2024 to US$1,000,020,000, comprising 1 billion ordinary shares and 10 million preferred shares[481][884] - As a Cayman Islands company, shareholder rights and corporate governance differ from U.S. standards. For example, shareholders have no general right to inspect corporate records and cannot requisition a shareholders' meeting[496][502][519] - PRC regulations impose strict controls on currency conversion and the remittance of funds out of China for capital account items, which could limit the company's ability to transfer funds to the parent company or pay dividends to foreign shareholders[533][166] - The company's PRC subsidiaries are subject to a 25% Enterprise Income Tax. Dividends paid to its Hong Kong subsidiary are subject to a 10% withholding tax, which may be reduced to 5% under a tax treaty if certain conditions are met[327][330][544] PART II Controls and Procedures Management concluded that disclosure controls were ineffective as of June 30, 2024, due to a material weakness in accounting personnel, with remediation plans underway - Management concluded that as of June 30, 2024, the company's disclosure controls and procedures were not effective[585] - A material weakness was identified in internal control over financial reporting due to insufficient qualified accounting personnel with knowledge of U.S. GAAP and SEC reporting[589] - Remediation plans include hiring more staff with relevant expertise, providing training, and engaging a third-party consultant to assist with financial statement preparation[590][591] Corporate Governance and Other Disclosures The company maintains an audit committee financial expert, follows Cayman Islands corporate governance practices as a foreign private issuer, and has implemented a cybersecurity risk management program - The company changed its independent registered public accounting firm from TPS Thayer LLC to Enrome LLP on May 17, 2023[603][606] - As a foreign private issuer, the company follows Cayman Islands home country practices, exempting it from certain NASDAQ rules, including shareholder approval for some equity issuances and the requirement to hold an annual meeting within one year of fiscal year-end[608][610] - The company has established a cybersecurity risk management process, led by its CTO, which includes an Information Safety Policy, use of firewalls, and data storage with Huawei Cloud for security[614] Principal Accountant Fees (Audit Fees) | Fiscal Year | Audit Fees | | :--- | :--- | | 2024 | $231,500 | | 2023 | $280,000 | PART III Financial Statements The consolidated financial statements, prepared under U.S. GAAP, detail the company's financial position, operations, and cash flows across five reportable segments, reflecting recent reorganizations and reverse stock splits Consolidated Balance Sheet Highlights (as of June 30) | Account | 2024 | 2023 | | :--- | :--- | :--- | | Total Assets | $178,718,823 | $158,255,607 | | Cash and cash equivalents | $100,665,223 | $71,252,380 | | Total Liabilities | $15,561,047 | $20,447,001 | | Total Shareholders' Equity | $163,157,776 | $137,808,606 | Consolidated Statement of Operations Highlights (Year Ended June 30) | Account | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total Revenues | $50,685,314 | $68,321,743 | $63,751,093 | | Gross Profit | $12,700,596 | $18,557,645 | $19,356,518 | | Net Loss | ($19,468,052) | ($36,242,249) | ($5,430,209) | | Net Loss per Share (Basic) | ($24.03) | ($311.44) | ($14,756.00) | - The company has effected multiple reverse stock splits, with the most recent being a one-for-ten split effective September 24, 2024. All share and per-share data in the financial statements have been retrospectively adjusted[654][655][656][657][885] - In FY2023, the company completed acquisitions of Zhongrun (75% ownership) and Chuangying (100% ownership), resulting in the recognition of $8.85 million in goodwill, which was subsequently fully impaired in the same fiscal year[744][747][748]