Exhibit 99.2
OPERATING AND FINANCIAL REVIEW AND PROSPECTS IN CONNECTION WITH THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED DECEMBER 31, 2021
The following discussion and analysis of our results of operations and financial condition should be read together with our unaudited condensed consolidated financial statements and the notes thereto and other financial information, which are included elsewhere in this Form 6-K. Our unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). In addition, our unaudited financial statements and the financial information included in this Form 6-K reflect our organizational transactions and have been prepared as if our current corporate structure had been in place throughout the relevant periods.
This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those identified elsewhere in this report on Form 6-K, and those listed in our Annual Report on Form 20-F for the fiscal year ended June 30, 2021 filed with the Securities and Exchange Commission (the “2021 Form 20- F”) under “Item 3. Key Information-D. Risk Factors” or in other parts of the 2021 Form 20-F.
Unless otherwise indicated or the context requires otherwise, “we”, “us” or the “Company” in this prospectus are to E-Home Household Service Holdings Limited and its subsidiaries in the context of describing our business, operations and consolidated financial information.
Overview
We are a household service company based in Fuzhou, China. We provide integrated household services through our website and WeChat platform, “e家快服”, across 21 provinces in China. Currently, these services primarily include home appliance services and housekeeping services. For our home appliance services, we partner with individuals and service stores which provide the technicians to deliver the on-site services. We have partnerships with approximately 2,387 individuals and service stores providing these services in China. For our housekeeping services, we primarily partner with individual service providers who serve as independent contractors. We currently have more than 2,900 cleaners and nannies providing our housekeeping services. Our online platform integrates these offline service providers, which helps them to gain a larger customer base, and provides professional and reliable one-stop household services to our customers.
In July 2015, we successfully transitioned from an outsourcing after-market service provider of home appliances and building materials to an operator of home appliance services. In January 2018, we officially became an integrated household service provider after expanding our service portfolio from distribution, installation, repair and maintenance of home appliances to delivery, installation, repair and maintenance of home appliances, home-moving, house cleaning, nanny and maternity matron. We have also launched and are actively promoting our senior care services, but so far we have only generated a limited amount of revenue from these services. We plan to further expand our business to include smart community services, as well as sales of smart home supplementary merchandise. We currently have approximately 523 employees to support our operations.
Due to the impact of Chinese government’s strict quarantine measures and lockdown in many cities in China in 2021, our overall revenue decreased by 31.4% to approximately $34.08 million for the six months ended December 31, 2021, as compared to approximately $44.09 million for the six months ended December 31, 2020. Our revenue from installation and maintenance services decreased by 31.4% to approximately $21.98 million for the six months ended December 31, 2021, as compared to $32.06 million for the six months ended December 31, 2020. Our revenue from housekeeping services decreased by 16.8% to approximately $8.01 million for the six months ended December 31, 2021, as compared to $9.63 million for the six months ended December 31, 2020. We also generated approximately $4.09 million of revenue from our senior care services for the six months ended December 31, 2021, representing an increase of 70.1% as compared to $2.40 million for the six months ended December 31, 2020. For the six months ended December 31, 2020, we generated a net loss of $ approximately $0.61 million, representing a decrease in net income of approximately 106.8%.
The ongoing corona-virus pandemic has had a materially adverse effect on our industry and the markets in which we operate. All of our operating subsidiaries, employees and customers are located in China. While the outbreak of COVID-19 has come under control in China since the second quarter of 2020, there was a significant rise in COVID-19 cases, including the COVID-19 Delta and Omicron variant cases, in various cities in China since late 2021. As a result, many cities in China, especially Fujian Province, where we have business operations, had experienced lockdown or partial lockdown and our normal business activities were significantly curtailed. As compared with the second half of 2020, our business operations in the six months ended December 31, 2021, especially our home appliance installation and maintenance services and housekeeping services were more severely affected by the government’s strict quarantine and prevention measures.. The results of operations for the fiscal year 2022 and beyond are still uncertain. As the coronavirus continues to spread across countries, the extent to which the coronavirus impacts our operations and results in the long-term will depend on future developments and new information that may emerge regarding COVID-19 and the actions taken by governmental authorities and other entities to contain COVID-19 and/or mitigate its impact, almost all of which are beyond our control. This is a rapidly evolving situation, and we will continue to monitor and mitigate developments affecting our workforce, our customers, and the public at large to the extent we are able to do so.
Principal Factors Affecting Our Financial Performance
Our operating results are primarily affected by the following factors:
● | growth in the Chinese economy; |
● | industry demand; |
● | contract pricing and terms; |
● | competition in the home appliance services and in-home care and other household services industries; |
● | strategic acquisitions and investments; |
● | changes to government policies; |
● | market conditions and our market position; and |
● | our ability to broaden service offerings and diversify our customer base. |
Taxation
Cayman Islands
We are incorporated in the Cayman Islands. The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is currently no estate duty, inheritance tax or gift tax. There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.
Payments of dividends and capital in respect of the shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of a dividend or capital to any holder of our ordinary shares, nor will gains derived from the disposal of our ordinary shares be subject to Cayman Islands income or corporation tax.
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Hong Kong
Our subsidiary incorporated in Hong Kong is subject to Hong Kong profit tax at a rate of 16.5%. No Hong Kong profit tax has been levied as we did not have assessable profit that was earned in or derived from our Hong Kong subsidiary during the periods presented. Hong Kong does not impose a withholding tax on dividends.
PRC
Enterprise Income Tax
Generally, our PRC subsidiaries, which are considered PRC resident enterprises under PRC tax law, are subject to enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of 25%. If our holding company in the Cayman Islands or any of our subsidiaries outside the PRC is considered as a PRC resident enterprise for tax purposes, then our global income will be subject to PRC enterprise income tax at the rate of 25%. See “Risk Factors—Risks Related to Doing Business in China— We may be treated as a resident enterprise for PRC tax purposes under the PRC Enterprise Income Tax Law, and we may therefore be subject to PRC income tax on our global income.”
Value Added Tax
Our revenue from installation services is subject to a value added tax, or VAT, rate of 11% and our revenue from maintenance services and sales of goods was subject to a VAT rate of 17% prior to May 1, 2018, which was subsequently reduced to 16%.
According to PRC regulations, 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 PRC State Administration of Taxation, so the VAT rate for installation, maintenance, after-sales and cleaning service is 0% since July 2017.
Withholding Tax on Dividends
Dividends paid by E-Home Household Service Technology Co., Ltd. (“E-Home WFOE”) to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and receives approval from the relevant tax authority. If our Hong Kong subsidiary satisfies the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at a reduced tax rate of 5%. See “Risk Factors—Risks Related to Doing Business in China—There are significant uncertainties under the PRC Enterprise Income Tax Law relating to the withholding tax liabilities of our PRC subsidiaries, and dividends payable by our PRC subsidiaries to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.”
Our Reportable Segments
As of December 31, 2021, our operations are organized into three reportable segments: installation and maintenance, housekeeping, and senior care services. Operating segments are reported in a manner consistent with the internal reporting provided to management for decision making. These operating segments are monitored and strategic decisions are made on the basis of segmental profit margins.
Critical Accounting Policies
The preparation of consolidated financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results. Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.
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Basis 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 valuation of accounts receivable, prepayments, and other receivables, useful lives of property and equipment and intangible assets, the recoverability of long-lived assets and provision necessary for contingent liabilities. Actual results could differ from those estimates.
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.
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Convertible note, net
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.
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, housekeeping services and senior care services. The Company sells its 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 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, acting as principal, contracts with third-party service providers (i.e., service outlets), acting 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. The Company chooses the service provider by the proximity principle. 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.
Housekeeping services
Housekeeping services refer to services including housecleaning, nanny service, maternity matron and personnel staffing. Revenues from housekeeping are recognized at a point in time upon completion of services to the customer based on the relative selling price method.
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 of the services provided are recognized over the service period.
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Disaggregation of revenue from contracts with customers
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.
Business combinations
The Company accounts for its business combinations using the purchase method of accounting in accordance with ASC Topic 805, Business Combinations. The purchase method of accounting requires that the consideration transferred to be allocated to the assets, including separately identifiable assets and liabilities the Company acquired, based on their estimated fair values. The consideration transferred in an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent considerations as of the acquisition date. The costs directly attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and contingent liabilities acquired or assumed are measured separately at their fair value as of the acquisition date, irrespective of the extent of any noncontrolling interests. The excess of (i) the total of cost of acquisition, fair value of the noncontrolling interests and acquisition date fair value of any previously held equity interests in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree, is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in earnings.
In a business combination achieved in stages, the Company remeasures its previously held equity interest in the acquiree immediately before obtaining control at its acquisition-date fair value and the re-measurement gain or loss, if any, is recognized in “Others, net” in the consolidated statements of comprehensive (loss) income.
The determination and allocation of fair values to the identifiable assets acquired, liabilities assumed and noncontrolling interests is based on various assumptions and valuation methodologies requiring considerable judgment from management. The most significant variables in these valuations are discount rates, the number of years on which to base the cash flow projections, as well as the assumptions and estimates used to determine the cash inflows and outflows. The Company determines discount rates to be used based on the risk inherent in the related activity’s current business model and industry comparisons.
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 April 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.
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In August 2017, the FASB amended the existing accounting guidance for hedge accounting. The amendments require expanded hedge accounting for both non-financial and financial risk components and refine the measurement of hedge results to better reflect an entity’s hedging strategies. The new guidance also amends the presentation and disclosure requirements and changes how entities assess hedge effectiveness. The new guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018 with early adoption permitted. The new guidance must be adopted using a modified retrospective transition with a cumulative effect adjustment recorded to opening retained earnings as of the initial adoption date. The Company adopted the amendment on July 1, 2020 by using the modified retrospective method. The adoption had no impact on the Company’s statement of cash flows for six months ended December 31, 2021 and 2020.
In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118,” which amends the FASB ASC and XBRL Taxonomy based on the Tax Cuts and Jobs Act, or the Act, that was signed into law on December 22, 2017 and Staff Accounting Bulletin No. 118 that was released by the SEC. The Act changes numerous provisions that impact U.S. corporate tax rates, business-related exclusions, and deductions and credits and may additionally have international tax consequences for many companies that operate internationally. The Company adopted the amendment on July 1, 2020 by using the modified retrospective method. The adoption had no impact on the Company’s statement of cash flows for six months ended December 31, 2021 and 2020.
In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. These amendments take effect for public businesses for fiscal years beginning after December 15, 2017 and interim periods within those periods, and all other entities should apply these amendments for fiscal years beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The Company adopted the amendment on July 1, 2020 by using the modified retrospective method. The adoption had no impact on the Company’s statement of cash flows for six months ended December 31, 2021 and 2020.
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.
Results of Operations
Comparison of Six Months Ended December 31, 2021 and 2020
The following table shows key components of our results of operations during the six months ended December 31, 2021 and 2020, in dollars and as a percentage of our total revenue.
Year Ended June 30, 2020 | Year Ended June 30, 2021 | |||||||||||||||
Amount | % of Revenue | Amount | % of Revenue | |||||||||||||
Revenue | ||||||||||||||||
Installation and Maintenance | $ | 21,979,399 | 64.5 | $ | 32,055,964 | 72.7 | ||||||||||
Housekeeping | 8,009,015 | 23.5 | 9,630,598 | 21.8 | ||||||||||||
Senior care services | 4,091,068 | 12.0 | 2,404,491 | 5.5 | ||||||||||||
Total revenue | 34,079,482 | 100.0 | 44,091,053 | 100.0 | ||||||||||||
Total cost of revenue | 23,408,079 | 68.7 | 28,306,213 | 64.2 | ||||||||||||
Operating expenses | ||||||||||||||||
Sales and marketing expenses | 4,357,836 | 12.8 | 3,027,223 | 6.9 | ||||||||||||
General and administrative expenses | 5,602,754 | 16.4 | 919,089 | 2.1 | ||||||||||||
Total operating expenses | 9,960,590 | 29.2 | 3,946,312 | 9.0 | ||||||||||||
Income from operations | 710,813 | 2.1 | 11,838,528 | 26.9 | ||||||||||||
Other income (expenses) | ||||||||||||||||
Interest income | 90,907 | 0.3 | 49,333 | 0.1 | ||||||||||||
Interest expenses | (23,793 | ) | (0.1 | ) | (12,820 | ) | (0.0 | ) | ||||||||
Amortization of financing cost | (20,322 | ) | (0.1 | ) | - | - | ||||||||||
Foreign currency exchange loss | (6,920 | ) | (0.0 | ) | - | - | ||||||||||
Total other income (expenses) | 39,872 | 0.1 | 36,513 | 0.1 | ||||||||||||
Income before income taxes | 750,685 | 2.2 | 11,875,041 | 26.9 | ||||||||||||
Income tax expense | (1,356,819 | ) | (4.0 | ) | (2,970,179 | ) | (6.7 | ) | ||||||||
Net income | (606,134 | ) | (1.8 | ) | 8,904,862 | 20.2 | ||||||||||
Net income attributable to minority interests | - | - | (1,262 | ) | - | |||||||||||
Net income attributable to company shareholders | $ | (606,134 | ) | (1.8 | ) | $ | 8,906,124 | 20.2 |
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Revenue. We generate revenue from the provision of installation and maintenance services, the provision of housekeeping services and the provision of senior care services. Our total revenue was $34,079,482 for the six months ended December 31, 2021, compared to $44,091,053 for the six months ended December 31, 20201, representing a decrease of $10,011,571, or 22.7%. Such decrease was due to the decrease of $10,076,565 in revenue from installation and maintenance and the decrease of $1,621,583 in revenue from our housekeeping services, which we both began providing in the fiscal year ended June 30, 2018, offsetting by an increase of $1,686,577 in revenue from our senior care services, which we began providing in the fiscal year ended June 30, 2020.
Revenue from installation and maintenance services decreased by $10,076,565, or 31.4%, to $21,979,399 for the six months ended December 31, 2021 from $32,055,964 for the six months ended December 31, 2020. Installation and maintenance services accounted for 64.5% of our total revenue for the six months ended December 31, 2021, as compared to 72.7% for the six months ended December 31, 2020. Revenue from housekeeping services amounted to $8,009,015, or 23.5% of our total revenue for the six months ended December 31, 2021, representing a decrease of $1,621,583, or 16.8%, from $9,630,598 for the six months ended December 31, 2020. Such decreases were primarily due to the lockdown in many cities in China where we had operation as well as the termination of business cooperation with one of our outlets. During the six months ended December 31, 2021, we have partnerships with approximately 2,387 individuals and service stores providing these services in China, which decreased significantly comparing to the six months ended December 31, 2020. We believe our business is and will be continuously adversely affected by COVID-19 and the government’s strict quarantine and prevention measures.
For the six months ended December 31, 2021, we generated revenue from senior care services in an amount of $4,091,068, or 12.0% of our total revenue, which represents an increase of $1,686,577, or 70.1%, from revenue from senior care services of $2,404,491 for the six months ended December 31, 2020.
Cost of revenue. Our cost of revenue includes service fees paid to staff, outlets and suppliers for the services rendered and the cost of accessories sold. Our cost of revenue decreased by $4,898,134, or 17.3%, to $23,408,079 for the six months ended December 31, 2021 from $28,306,213 for the six months ended December 31, 2020. Such decrease was in line with our decreased revenue.
Sales and marketing expenses. Our sales and marketing expenses consist primarily of remuneration for staff involved in selling and marketing efforts, advertising cost, depreciation, travel and leasing expenses. Our sales and marketing expenses increased by $1,330,613, or 44.0%, to $4,357,836 for the six months ended December 31, 2021 from $3,027,223 for the six months ended December 31, 2020. Such increase was primarily due to the increased marketing costs, which were mainly caused by our efforts to increase our brand awareness for the six months ended December 31, 2021 after our initial public offering. As a percentage of revenue, sales and marketing expenses increased to 12.8% for the six months ended December 31, 2021 from 6.9% for the six months ended December 31, 2020.
General and administrative expenses. Our general and administrative expenses consist primarily of employee remuneration, professional fees, insurance, benefits, office leases, general office expenses and depreciation. Our general and administrative expenses increased by $4,683,665, or 509.6%, to $5,602,754 for the six months ended December 31, 2021 from $919,089 for the six months ended December 31, 2020. Such increase was due to the increasing costs for supporting our expanding business and the increased compliance costs as a result of becoming a public company after our initial public offering closed in May 2021. As a percentage of revenue, general and administrative expenses increased to 16.4% for the six months ended December 31, 2021 from 2.1% for the six months ended December 31, 2020.
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Income from operations. As a result of the foregoing, we recorded income from operations of $710,813 for the six months ended December 31, 2021, representing a decrease of $11,127,715, or 94.0%, compared to $11,838,528 for the six months ended December 31, 2020.
Total other income (expenses). We had $39,872 in total other income for the six months ended December 31, 2021, as compared to $36,513 in total other income for the six months ended December 31, 2020. Total other income (expenses), net, for the six months ended December 31, 2021 consisted of interest income in the amount of $90,907, offset by interest expenses in the amount of $23,793, amortization of financing cost of the convertible note of $20,322 and foreign currency exchange loss of $6,920. Total other income (expenses), net, for the six months ended December 31, 2020 consisted of interest income in the amount of $49,333, offset by interest expenses in the amount of $12,820.
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 to the investor. The convertible note 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.
Income tax expense. We recorded income tax expenses of $1,356,819 for the six months ended December 31, 2021, representing a decrease of $1,613,360, or 54.3%, as compared to $2,970,179 for the six months ended December 31, 2020. The decrease in the income tax expense mainly resulted from the decrease in the income before income taxes from our PRC subsidiaries. See also “—Taxation” above.
Net income. As a result of the cumulative effect of the factors described above, we generated a net loss of $606,134 for the six months ended December 31, 2021, representing a decrease in net income of $9,510,996, or 106.8%, from net income of $8,904,862 for the six months ended December 31, 2020.
Liquidity and Capital Resources
As of December 31, 2021 and June 30, 2021, we had cash and cash equivalents of $59,321,982 and $52,410,472, respectively. We finance our operations, working capital needs and strategic investments from cash generated through operations and through debt and equity financings.
We believe that our current levels of cash and cash flows from operations and equity financing will be sufficient to meet our anticipated cash needs for our operations and expansion plans for at least the next 12 months. We may, however, in the future require additional cash resources due to changing business conditions, implementation of our strategy to expand our business, or other investments or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.
The following table sets forth a summary of our cash flows for the periods presented:
For the Six Months Ended December 31, | ||||||||
2021 | 2020 | |||||||
Net cash provided by operating activities | $ | 1,784,209 | $ | 15,965,812 | ||||
Net cash used in investing activities | (121,856 | ) | (244,859 | ) | ||||
Net cash provided by financing activities | 4,607,080 | - | ||||||
Net increase in cash and cash equivalents | 6,269,433 | 15,720,953 | ||||||
Effect of currency translation | $ | 642,077 | $ | 2,777,922 | ||||
Cash and cash equivalents at beginning of the period | 52,410,472 | 25,022,199 | ||||||
Cash and cash equivalents at end of the period | 59,321,982 | 43,521,074 |
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Operating Activities
Net cash provided by operating activities was $1,784,209 for the year ended June 30, 2021, as compared to $15,965,812 for the six months ended December 31, 2020. For the year ended June 30, 2021, net cash provided by operating activities consisted of the net loss of $606,134, deferred income tax expense in the amount of $187,553, interest expense in the amount of $23,793, depreciation and amortization in the amount of $40,411, amortization of right-of-use assets in the amount of $248,518, amortization of financing cost of the convertible note of $20,322, change in inventory in the amount of $213,049, change in prepayments, deposits and other current assets in the amount of $2,279,543, change in long-term prepayments and other non-current assets in the amount of $1,556,045, and change in tax payable in the amount of $235,060, offset by change in account receivables in the amount of $43,555 and accounts payable and accrued expenses in the amount of $2,370,396.
Net cash provided by operating activities was $15,965,812 for the six months ended December 31, 2020. For the six months ended December 31, 2020, net cash provided by operating activities consisted of the net income of $8,904,862, income tax expense in the amount of $2,970,179, prepayment and other current assets in the amount of $619,103, accounts payable and accrued expenses in the amount of $4,713,298, accounts receivables, net, in the amount of $271,831, and depreciation and amortization in the amount of $350,982, offset by taxes payable in the amount of $1,499,070 and long-term prepayments and other non-current assets in the amount of $378,193, were the primary drivers of the cash provided by operating activities.
Investing Activities
Net cash used in investing activities was $121,856 for the six months ended December 31, 2021. Net cash used in investing activities for the six months ended December 31, 2021 consisted of right-of-use-assets costs in the amount of $103,641, cash paid for equipment and vehicles in the amount of $22,680, long-term investment of $941,073, and cash paid to former non-controlling shareholders of our subsidiary, Fujian Happiness Yijia Family Service Co., Ltd. in acquisition of the non-controlling interest of $54,462, offset by refund of prepaid deposit for potential acquisition in the amount of $1,000,000.
Net cash used in investing activities was $244,859 for the six months ended December 31, 2020, as compared to $260,220 in net cash used in investing activities for the six months ended December 31, 2019. Net cash used in investing activities for the six months ended December 31, 2020 consisted entirely of capitalized leasehold costs in the amount of $244,859.
Financing Activities
Net cash provided by financing activities was $4,607,080 for the six months ended December 31, 2021, which consisted of proceed from the convertible note in the amount of $5,275,000, offset by issuance cost of the convertible note paid in cash in the amount of $667,920.
We did not have any financing activities for the six months ended December 31, 2020.
Capital Expenditures
We made capital expenditures of $121,856 and $244,859 for the six months ended December 31, 2021 and 2020, respectively. In these periods, our capital expenditures were mainly used for purchases of property and equipment, including office equipment, electronic equipment and motor vehicles, and the. We plan to continue to make capital expenditures to meet the needs that result from the expected growth of our business.
Holding Company Structure
E-Home Household Service Holdings Limited is a Cayman Islands holding company with no material operations of its own. We conduct our operations primarily through E-Home WFOE and its subsidiaries in China. As a result, our ability to pay dividends depends upon dividends paid by E-Home WFOE. If E-Home WFOE or our other PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, E-Home WFOE is permitted to pay dividends to E-Home Household Service Holdings Limited only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, E-Home WFOE and its PRC subsidiaries are required to set aside at least 10% of their after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capital. In addition, each may allocate a portion of their after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at their discretion, and these entities may allocate a portion of their after-tax profits based on PRC accounting standards to a discretionary surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by the State Administration of Foreign Exchange. E-Home WFOE has not paid dividends and will not be able to pay dividends until it meets the requirements for statutory reserve funds.
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