Company: EJH
Filing Date: 2025-10-30
Form Type: 20-F
Source: 0001213900-25-104179
Chunk: 192

Company: E-Home Household Service Holdings Ltd
Filing Date: 2025-10-30
Form: 20-F
Item: Item 19
Chunk 192
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, the Company concluded
that the warrant shall be classified as equity and is recorded at fair value. Subsequent re-measurement is not required.

F-13

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.

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, accounts receivable, prepayments, deposits and other current assets,
accounts payable, and other current liabilities, approximate their fair values because of the short maturity of these