Company: EJH
Filing Date: 2025-10-30
Form Type: 20-F
Source: 0001213900-25-104179
Chunk: 191

Company: E-Home Household Service Holdings Ltd
Filing Date: 2025-10-30
Form: 20-F
Item: Item 19
Chunk 191
---
 interest expense at the interest rate of
similar nonconvertible debt that could have been issued by the Company at such time. We measured the estimated fair value of the debt
component of our convertible notes as of the issuance date based on our nonconvertible debt borrowing rate. The equity components of the
convertible senior notes have been reflected within additional paid-in capital in our consolidated balance sheet, and the resulting debt
discount is amortized over the period during which the convertible notes are expected to be outstanding (through the maturity date) as
additional non-cash interest expense.

Freestanding instruments-warrants

Per ASC 470-20-30-2, when detachable warrants
(detachable call options) are issued in conjunction with a debt instrument as consideration in purchase transactions, the amounts attributable
to each class of instrument issued shall be determined separately, based on values at the time of issuance.

(1) The first step in determining the proper accounting
for warrants is to determine whether the equity-linked component is free standing financial instrument of embedded in a host instrument.
According to the warrant agreement, the debt and warrant agreements were both entered into by the parties on December 20, 2021 and May
13, 2022 warrants were issued as part of the subscription agreement with the note holders. The holder can transfer the warrant to any
person or entity in accordance with the warrant agreement as long as there is a registration statement effective. The warrants can be
exercised any time after issuance dates and prior to the expiration date. The debt can remain outstanding even after the warrants are
exercised. Based on the above facts, the warrants should be considered as a freestanding instrument.

(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