UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 20-F/A

(Amendment No.1)

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from __________ to ___________

Commission file number 333-204074

WINS Finance Holdings Inc.

(Exact name of the Registrant as specified in its charter)

Cayman Islands

(Jurisdiction of incorporation or organization)

1F, Building 1B

No. 58 Jianguo Road, Chaoyang District

Beijing 100024, People’s Republic of China

(Address of principal executive offices)

1177 Avenue of the Americas

5th Floor New York, NY 10036

646-694-8538

(New York Office)

Securities registered or to be registered pursuant to Section 12(b) of the Act: None

Securities registered or to be registered pursuant to Section 12(g) of the Act: Ordinary Shares, par value $0.0001 per share

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

As of August 31, 2023, the registrant had 19,837,642 ordinary shares outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes

☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

☐ Yes

☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes

☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐	Large Accelerated filer	☐ Accelerated filer	☒	Non-accelerated filer
		☐ Emerging Growth Company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☒

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentivebased compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

	☐ International Financial Reporting
	Standards as issued by the
☒ US GAAP	International	☐ Other
	Accounting Standards Board

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17

☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes

☒ No

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Explanatory Note

Amendment No. 1 to the Annual Report on Form 20-F for the fiscal year ended June 30, 2020 (the “Form 20-F”) of Wins Finance Holdings Inc. is being filed to amend and restate Items 3A, 5 and 18. We restated our financial statements for 2020, 2021 and 2022 to reflect the investment losses from the disposal of Jinchen Agriculture and Dongsheng Guarantee. These mainly resulted from adjustments for the fiscal years ended June 30, 2021 and June 30, 2020. The financial statements for the fiscal year ended June 30, 2022 were revised to reflect these restatements. Other than the changes described above, no changes have been made to the Form 20-F.

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FORWARD-LOOKING STATEMENTS

This Annual Report contains statements that may be deemed to be “forward-looking statements” within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations and/or future financial performance. In some cases, you can identify forward-looking statements by their use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “ought to,” “plan,” “possible,” “potentially,” “predicts,” “project,” “should,” “will,” “would,” negatives of such terms or other similar terms. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The forward-looking statements in this Annual Report include, without limitation, statements relating to:

●

our goals and strategies;

●

our future business development, results of operations and financial condition;

●

our estimates regarding expenses, future revenues, capital requirements and our need for additional financing;

●

our estimates regarding the market opportunity for our services;

●

the impact of government laws and regulations;

●

our ability to recruit and retain qualified personnel;

●

our failure to comply with regulatory guidelines;

●

uncertainty in industry demand;

●

general economic conditions and market conditions in the financial services industry;

●

the effects of COVID-19 or other pandemics;

●

future sales of large blocks or our securities, which may adversely impact our share price; and

●

depth of the trading market in our securities.

The preceding list is not intended to be an exhaustive list of all of our forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties, including those described in Item 3D “Key Information - Risk Factors.”

You should not unduly rely on any forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements will be achieved or will occur. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Annual Report, to conform these statements to actual results or to changes in our expectations.

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PART I

ITEM 3. KEY INFORMATION

A.	Selected financial data

The following selected financial data should be read in conjunction with Item 5 - “Operating and Financial Review and Prospects” and the Financial Statements and Notes thereto included elsewhere in this Annual Report.

The selected consolidated statements of operations data for the fiscal years ended June 30, 2022, 2021, 2020, 2019, 2018 and the selected balance sheet data as of June 30, 2022, 2021, 2020, 2019, 2018 are derived from the audited consolidated financial statements of Wins Finance for those fiscal years.

The audited consolidated financial statements for the fiscal years ended June 30, 2022, 2021, 2020, 2019, 2018 are prepared and presented in accordance with U.S. GAAP. The selected financial data information is only a summary and should be read in conjunction with the historical consolidated financial statements and related notes. The historical financial statements are not necessarily indicative of our future performance.

Statements of Income and Comprehensive Income


(US$ except share data)	2022		2021		2020		2019		2018

Direct financing lease income
Direct financing lease interest income		242,740		174,306		4,934,157		7,595,992		5,697,957
Interest expense for direct financing lease		—		(11,181)		(11,967)		(411,066)		(1,546,304)
Business collaboration fee and commission expenses for leasing projects		—		—		(37,572)		(68,342)		(99,320)
Provision for lease payment receivable		(2,258,060)		(9,495,002)		(19,379,086)		(81,585,960)		(3,514,961)
Net direct financing lease income after provision for receivables		(2,015,320)		(9,331,877)		(14,494,468)		(74,469,376)		537,372

Medical consulting revenue		30,682		—		—		—		—
Financial advisory and agency income		—		—		—		—		1,695,303
Net revenue		(1,984,638)		(9,331,877)		(14,494,468)		(74,469,376)		2,232,675

Non-interest (loss) income
Interest on investment securities		—		—		—		105,878		3,942,719
Investment loss		—		—		(164,098,554)		—		—
Total non-interest(loss) income		—		—		(164,098,554)		105,878		3,942,719

Non-interest expense
Business taxes and surcharge		(231)		(476)		(7,652)		(15,827)		(9,911)
Salaries and employee charges		(276,546)		(920,194)		(923,325)		(542,628)		(540,312)
Rental expenses		(76,442)		(97,693)		(95,545)		(102,859)		(175,549)
Other operating expenses		(524,518)		(6,136,647)		(481,311)		(2,062,802)		(4,554,030)
Total non-interest expense		(877,737)		(7,155,010)		(1,507,833)		(2,724,116)		(5,279,802)

loss before taxes		(2,862,375)		(16,486,887)		(180,100,855)		(77,087,614)		895,592

Income tax(expense) credit		(738)		(24,590,417)		3,999,361		18,900,720		322,038
Net (loss) income		(2,863,113)		(41,077,304)		(176,101,494)		(58,186,894)		1,217,630

Net loss attributable to noncontrolling interests		(52,019)		—		—		—		—
loss from discontinued operation		—		—		—		8,377,166		8,881,255
Net (loss) profit attributable to Wins Finance Holdings Inc.		(2,811,094)		(41,077,304)		(176,101,494)		(49,809,728)		10,098,885

Other comprehensive (loss) income
Foreign currency translation adjustment		187,029		2,381,422		(2,305,407)		(9,623,857)		5,977,187
TOTAL Comprehensive (Loss) income		(2,676,084)		(38,695,882)		(178,406,901)		(59,433,585)		16,076,072

Total comprehensive loss attributable to noncontrolling interests		(48,238)		—		—		—		—
Total comprehensive (loss) income attributable to ordinary shareholders		(2,627,846)		(38,695,882)		(178,406,901)		(59,433,585)		16,076,072

Weighted-average common shares outstanding
Basic (1)		19,837,642		19,837,642		19,837,642		19,837,642		19,837,642
Diluted (1)		19,837,642		19,837,642		19,837,642		19,837,642		19,837,642

Earnings (loss) per share
Basic (1)		(0.14)		(2.07)		(8.88)		(2.51)		0.51
Diluted (1)		(0.14)		(2.07)		(8.88)		(2.51)		0.51
From continuing operation		(0.14)		(2.07)		(8.88)		(2.93)		0.06
From discontinued operation (2)		—		—		—		0.42		0.45

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(1)	These data have been retrospectively adjusted giving effect to the reverse merger between WFG and Sino, completed on October 26, 2015. More information about the reverse merger is contained in our Consolidated Financial Statements.

(2)

On June 9, 2020, the Changzhi Public Security Bureau enforced a judgement against Jinchen Agriculture and its subsidiary, Dongsheng Guarantee. As a result, the Company lost control over these subsidiaries. Due to the loss of control, the Company reported the results of these subsidiaries as disposal group classified as held for sale.

(3)	On January 6, 2021, the company transferred the discountinued operation assets of Jinchen Agriculture and Dongsheng Guarantee’ equity to a third party.

(4)

On October 11, 2021, we established Dalian Ruikai Taifu Investment Management Co., LTD., which specializes in the medical equipment sales business. On April 7,2022，We acquired a 71.43% interest in Zhongrui Xukai (Beijing) Technology Co., LTD.. The main business includes the sales of domestic specialty medical equipment and consumables and the establishment of cancer diagnosis and treatment centers


	2022		2021		2020		2019		2018

Balance Sheet Data
Cash and cash equivalents	$	159,543	$	6,621	$	38,820	$	703,120	$	13,133,540
Total assets		1,463,591		3,631,904		46,445,521		228,101,794		309,903,262
Total liabilities		6,855,493		6,284,325		10,402,060		13,651,432		36,019,315
Total equity		(5,391,902)		(2,652,421)		36,043,461		214,450,362		273,883,947

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and related notes included in this Annual Report beginning on page F-1. The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Item 3D “Key Information - Risk factors.” and elsewhere in this Annual Report.

As at 30 June 2020, the Company determined that it had lost control of the subsidiaries Jinchen Agriculture and Dongsheng Guarantee. The management of the Company has concluded that the Company has no option but to de-consolidate Jinchen Agriculture and Dongsheng Guarantee from its financial reporting as at 30 June 2020. The effect of de-consolidation is that in future, the financial results of the subsidiaries are no longer reported in the Company’s Annual Report (i.e. the report will be at a company, not group level) and the investment in the subsidiaries is written down in the Company’s accounts as a disposal without consideration. In the event that the Company is able to re-establish control over the PRC subsidiaries and/or their assets, the Company will then re-consolidate and/or recognize this value.

On January 6 2021, the company entered into an agreement to transfer the equity of Jinchen Agriculture and Dongsheng Guarantee to a third party. The transfer price was zero. In addition, the creditor’s rights and debts among the group, Jinchen Agriculture and Dongsheng Guarantee shall be mutually exempted. The investment loss was $164.10 million due to the disposal of Jinchen Agriculture and Dongsheng Guarantee for the year ended June 30, 2020. The disposal of these assets have had a material and adverse effect on our financial results, but the Company’s other businesses have been unaffected by the disposal and continue to operate normally.

We are now even more focused upon achieving our core mission which is to help SMEs in China with their funding needs while offering this constituency creative solutions across a wider financial spectrum. We will seek leasing clients across China rather than on strictly a regional or local basis and plan to (1) focus on a few specific industries with experience and connections, such as clean energy, electric vehicles, education equipment and medical devices; and (2) to revitalize our advisory services business through innovative solutions and long-term capital funding planning. We plan upon working harder than ever to achieve sustainable results to both restore and reward our shareholders’ confidence in a niche sector where we believe we are well positioned and have the opportunity to achieve substantial market share.

Overview

Wins Finance, a Cayman Island holding company with business operations in China . We have two lines of business, (i) as an integrated lending solution provider mainly serving small-and-medium sized enterprises (SMEs) in Jinzhong City, Shanxi Province

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and Beijing, China providing two financial products and one supplementary service , and (ii) in medical equipment sales and medical service consulting.

As a lending solutions provider we provide the following services:

Financial Guarantees: We act as a guarantor both to access and share credit risks and to facilitate financing arrangements between SMEs and banks; we will repay principal, interest and fees and expenses related to the guaranteed loan in the event that a customer default;

Financial Leasing (or Capital Leasing): We provide direct equipment leasing or purchase-leaseback services to SMEs, to satisfy SMEs’ cash flow needs;

Financing advisory: We structure suitable financing solutions for SME clients based upon their needs and qualifications, designed to help SMEs save on taxes, lower financing costs, and provide other benefits.

As a medical equipment sales and medical service consulting business we provide:

The medical sector and improve its income sources and profit margin (compared with the net interest margin of debt financing projects (about 2%), the return rate of equipment sales and consumables sales in the general medical field will be increased to about 15%). Wins plants to continue to acquire private medical groups, medical equipment and consumables manufacturers (Tianjin Boshuobi Biotechnology Co., Ltd. and Xinbo Medical Technology Co., Ltd. are expected to be completed in the first quarter of 2023). Increase the sales of medical equipment and consumables (orthopedic consumables, optic-optical super, Pet-CT, etc.). It is estimated that the sales amount will be about 300 million yuan in 2023 (all of which will be merged into the financial statements of ZhongRuixukai). Continue to do financial business and provide financing services for listed companies and large state-owned enterprises.

Our financial guarantee business was mainly conducted by Dongsheng Guarantee, which was incorporated on February 22, 2006 in Jinzhong City, Shanxi Province . It typically provides a one-year term of guarantee for customers’ loans and the guarantee scope typically covers the principal amount and interest. Guarantee fee, which is calculated with reference to the principal amount, annual guarantee fee rate and the term of the guarantee, ranges from 2% to 4%.

However, on June 9, 2020, the Changzhi Public Security Bureau enforced a judgement against Jinchen Agriculture and its subsidiary Dongsheng Guarantee, and all the information and assets of those companies was frozen. Because of this, Jinchen Agriculture and Dongsheng Guarantee are no longer under our control and their operations have been seriously and adversely affected. We have not consolidated the financial results of Jinchen Agriculture and Dongsheng Guarantee with our results for 2020 and 2019 due to our lack of control of these entities. On January 6, 2021, Wins Finance and Shanghai Guyuan signed an asset disposal agreement, pursuant to which on January 6, 2021, Wins Finance, sold its entire interest in Shanxi Jinchen Agriculture Ltd. (“Jinchen Agriculture”) (including its subsidiary Shanxi Dongsheng Finance Guarantee Co., Ltd. (“Dongsheng Guarantee”)) to Shanghai Guyuan (the “Purchaser”) in exchange for the Purchaser assuming the obligations of Jinchen Agriculture.

Credit risks, including impairment losses on the investment in financial leases, are inherent in our business. Our risk control system, based upon our “Trusted Business Circle” of core enterprises, has proved practical and efficient given the limitations in the current credit system in China. During these periods there were several financial leasing contracts outstanding. The impaired losses of our lease receivables were $9.5 million and $ 19.4 million for the years ended June 30, 2021 and 2020, respectively.

Our net revenue (excluding financial guarantee business), which consists primarily of direct financing lease interest income, was $(9.3) million for the year ended June 30, 2021, representing an increase of $ 5.2 million or 35.6 %, from $(14.5) million for the year ended June 30, 2020. We note that the impairment allowance for the investment in financial leases that have affected our operating results are non-cash items and represent Management’s assessment of the default risk of its finance leasing customers. Interest on investment securities was nil for the year ended June 30, 2021, same as for the year ended June 30, 2020. Net income from continuing operation was $(41.1) million for the year ended June 30, 2021, representing an decreased of $135 million, or 76.67%, from net profit from continuing operation $(176.1) million for the year ended June 30, 2020.

On June 9, 2020, the Changzhi Public Security Bureau (the “Bureau”) froze the assets of Jinchen Agriculture and its subsidiary Dongsheng Guarantee. Our legal counsel was unable to determine the cause of the freeze as the authorities did not provide us with this information, and our legal counsel advised us that we no longer have control of the assets or operations of both Jinchen Argiculture and Dongsheng Guarantee. Consequently, the Company’s Board of Directors voted to dispose of Jinchen Agriculture and Dongsheng Guarantee. On January 6 2021, the company entered into an agreement to transfer the equity of Jinchen Agriculture and

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Dongsheng Guarantee to a third party. The transfer price was zero. In addition, the creditor’s rights and debts among the group, Jinchen Agriculture and Dongsheng Guarantee shall be mutually exempted. The investment loss was $175.43 million for the year ended June 30, 2021,due to the disposal of Jinchen Agriculture and Dongsheng Guarantee. As of fiscal year end June 30, 2020, the assets and the liabilities of the disposal group were classified as ‘held for sale’ and were $163.25 million and $3.0 million, respectively. The disposal of these assets have had a material and adverse effect on our financial results, but the Company’s other businesses have been unaffected by the disposal and continue to operate normally.

On October 11, 2021, we established Dalian Ruikai Taifu Investment Management Co., LTD., which specializes in the medical equipment sales business. On April 7,2022，We acquired a 71.43% interest in Zhongrui Xukai (Beijing) Technology Co., LTD.In the future, we believe that the medical business will become our main source of income.

In the future, Wins’s medical business will mainly focus on the following areas:

1)Sales of domestic medical characteristic equipment and consumables.. We have established a sales agent system covering the whole country, and now we are selling PET-CT products (Beijing Ruishi Kang, Beijing Sanuo United, Shanghai United Film), crema ultrasound (Xinbo Medical), B-ultrasound (Shanghai United Film, Samsung), orthopedic consumables (Tianjin Boshuobi) and other products.

2)Cancer diagnosis and treatment center .We will establish regional cancer diagnosis and treatment centers in major regions of China through mergers and acquisitions and new construction, providing the whole process services of examination, consultation, treatment, recovery and rehabilitation in the field of cancer. It is estimated that in the next five years, we will manage 20,000 beds, set up 15-30 regional cancer screening centers (Pet-CT), and establish a cancer disease cooperation network with 300 county-level grassroots public hospitals to jointly build pathology centers, cancer screening centers, and “medical green channel” services. Some tumor patients were transferred to our cancer diagnosis and treatment center for chemoradiotherapy.

The Ordinary Shares Were Suspended From Trading On The Nasdaq Stock Market

On October 19, 2020, the Company received a letter from the Nasdaq Hearing Panel (the “Panel”) of the Nasdaq Stock Exchange LLC (“Nasdaq). The letter notified the Company that since its new auditor submitted a qualified opinion on its financial statements filed on Form 20-F for the years ended December 31, 2019 and 2018 due to the freezing of a substantial portion of its assets by a public security bureau in China, this rendered the Form 20-F incomplete. Accordingly, the Panel determined to delist the Company’s shares from Nasdaq. As a result, the ordinary shares were suspended from trading on the Nasdaq Stock Market on October 21, 2020.

This event could result in a material adverse effect on our business. Inferior internal control could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. We can give no assurance that additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future these controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.

Key Factors that Affect Operating Results

Our operating subsidiaries are incorporated, and our operations and assets are primarily located, in the PRC. Accordingly, our results of operations, financial condition and prospects are affected by China’s economic and regulation conditions in the following factors: (a) an economic downturn in China or any regional market in China;(b) economic policies and initiatives undertaken by the PRC government; (c) changes in the PRC or regional business or regulatory environment affecting the SME and microenterprise sector; (d) changes to prevailing market interest rates; (e) a higher rate of bankruptcy; (f) the deterioration of the creditworthiness of SMEs and microenterprises in general; and (g) the change of currency exchange rate of RMB to USD. Unfavorable changes could affect demand for the services that we provide and could materially and adversely affect the results of operations. Although we have generally benefited from China’s economic growth and the policies to encourage lending to SMEs, we are also affected by the complexity, uncertainties and changes in the PRC economic conditions and regulations governing the non-banking financial industry.

Our results of operations are also affected by the impairment allowance for the investment in financial leases which are a non-cash item and represent an assessment of the risk of future impairment losses. The amount of provisions or allowances has been recorded based on management’s assessment. We may increase or decrease the allowance for impairment losses for investment in financial leases based on any such change of economic conditions and the change of management’s assessment. Any change in the loan losses would have an effect on our financial condition and results of operations.

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We hold a significant amount of investment securities in assets management products issued by banks and financial institutions, including government bonds, corporate bonds and central bank notes. The interest income on these assets highly depends on market interest rate in the market of investment products especially government bonds and corporate bonds, and the management ability of the asset management companies. Any changes on the market conditions will affect our interest income from those investments and then the financial results.

PRC Limitation on Overseas Listing and Share Issuances

As we have traded in the United States since 2015, (a) the CSRC currently has not issued any definitive rule or interpretation concerning whether we are subject to the M&A Regulations (as defined hereinafter); and (b) our businesses do not relate to any sensitive industry identified by Chinese Law, we believe that we are not required to obtain any licenses or approvals, under applicable PRC laws and regulations, for offering securities to foreign investors. We also believe we are not required to obtain approvals from any PRC government authorities, including the CSRC or the Cyberspace Administration of China (the “CAC”), or any other government entity, to operate and to issue our securities to foreign investors and to trade in the U.S. As of the date of this report, we have not received any inquiry, notice, warning, sanctions or regulatory objection to our offering from the CSRC or any other PRC governmental authorities. However, applicable laws, regulations, or interpretations of PRC may change, and the relevant PRC government agencies could reach a different conclusion and may subject us to a stringent approval process from the relevant government entities in connection with our continued trading in the U.S., and the issuance of shares or the maintenance of our status as a publicly traded company outside China. It is uncertain when and whether we will be required to obtain permission from the PRC government to continue to trade in the U.S. in the future and offer our securities to foreign investors. If we (i) do not receive or maintain such permissions or approvals, should the approval be required in the future by the PRC government, (ii) inadvertently conclude that such permissions or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future, and we are denied permissions or approvals from Chinese authorities to trade in the U.S. or offer our securities to foreign investors, we may not be able to trade in the U.S. or be subject to other severe consequences, which would materially affect the interest of the investors. In addition, any changes in PRC law, regulations, or interpretations may severely affect our operations.

COVID-19

Management is currently evaluating the impact of the COVID-19 global pandemic on the industry and has concluded that while it is reasonably possible that the virus has a negative effect on the Company’s consolidated financial position, the specific impact is shown on these consolidated financial statements.

Recent PCAOB Developments

Wins Finance Holdings Inc. is a company incorporated under the laws of the Cayman Islands. Our auditor is Audit Alliance LLP who is located on Singapore. Audit Alliance LLP is subject to the determinations announced by the PCAOB on December 16, 2021. Future Developments in China laws may restrict our auditor’s ability or willingness to continue auditing our business. If Wins cannot be inspected by the PCAOB for three consecutive years, the trading of our securities on any U.S. national securities exchanges, as well as any over-the-counter trading in the U.S., will be prohibited.

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Transfers of Cash

Wins Finance Holdings Inc. does not make use of variable interest entity (“VIE”) structures. Our principal operating entities in China are either wholly or partially owned subsidiaries under our offshore parent companies, and we do not have any other operating entity with which our subsidiaries have any contractual controlling relationship.

Current PRC regulations permit our PRC subsidiaries to pay dividends to an overseas entity, for example an entity located in Hong Kong, only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entities in China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of our board of directors.

The PRC government also imposes controls on the conversion of Renminbi (“RMB”), the legal currency of the PRC, into foreign currencies and the remittance of currencies out of the PRC. Therefore, we may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from our profits, if any.

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Results of Operations

Year Ended June 30, 2022 Compared to Year Ended June 30, 2021


	For the years ended June 30,				Changes
	2022		2021		$		%
Direct financing lease income
Direct financing lease interest income	$	242,740		174,306	$	68,434	$	39.3	%
Interest expense for direct financing lease		—		(11,181)		11,181		(100)	%
Provision for lease payment receivable		(2,258,060)		(9,495,002)		7,236,942		(76.2)	%
Net direct financing lease interest income after provision for receivables		(2,015,320)		(9,331,877)		7,316,557		(78.4)	%

Medical consulting revenue		30,682		—		30,682		100	%
Net revenue		(1,984,638)		(9,331,877)		7,347,239		(78.7)	%

Non-interest expense
Business taxes and surcharge		(231)		(476)		245		(51.5)	%
Salaries and employees charges		(276,546)		(920,194)		643,648		(69.9)	%
Rental expenses		(76,442)		(97,693)		21,251		(21.8)	%
Other operating expenses		(524,518)		(6,136,647)		5,612,129		(91.5)	%
Total non-interest expense		(877,737)		(7,155,010)		6,277,273		(87.7)	%

loss before taxes		(2,862,375)		(16,486,887)		13,624,512		(82.64)	%

Income tax expense		(738)		(24,590,417)		24,589,679		(99.99)	%
NET LOSSES		(2,863,113)		(41,077,304)		38,214,191		(99.03)	%
Net loss attributable to noncontrolling interests		(52,019)		—		(52,019)		100
TOTAL COMPREHENSIVE LOSS		(2,811,094)		(41,077,304)		38,266,210		(93.16)	%
Foreign currency translation adjustment		187,029		2,381,422	$	(2,194,393)		(92.15)	%
TOTAL COMPREHENSIVE LOSS		(2,676,084)		(38,695,882)	$	36,019,798		(93.08)	%
Total comprehensive loss attributable to non-controlling interests		(48,238)		—	$	(48,238)		100
Total comprehensive loss attributable to ordinary shareholders	$	(2,627,846)	$	(38,695,882)	$	36,068,036		(93.21)	%

Net Revenue

Our net revenue consists of commissions and fees on our direct financing lease interest income and Medical consulting revenue. Net revenue increased by $ 7.3million, or 78 % to $(2.0) million for the year ended June 30, 2022, compared to $(9.3) million for the year ended June 30, 2021. The increase is mainly due to a lower provision for lease payment receivables.

Direct financing lease income

Direct financing lease interest income

Direct financing lease interest income increase by $ 0.06 million, or 39.3 %, to $0.24 million for the year ended June 30, 2022, compared to $0.17 million for the Medical consulting revenue is primarily provided to customers for medical-related services provided in the course of transactions. This revenue is a new type of business revenue that will be generated in the year ending June 30, 2022. It is in its initial stage. We will expand this segment in the future.year ended June 30, 2021. The low income was primarily attributable to the adverse impact of the COVID-19 outbreak affecting the lessee’s ability to repay the rental expenses.

Interest expense for capital lease

Interest expense for capital leases represents the interest incurred on the long-term loans from banks and other financial institutions for financial support for capital leases. Interest expense for capital leases decreased by $11.18 thousand , or 100 %, tonil thousand for the year ended June 30, 2022, compared to $11.18 thousand for the year ended June 30, 2021. The decrease is mainly due to the full repayment of outstanding loans from banks and other financial institutions.

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Provision for lease payment receivable

We accrue allowances for the impairment on our investment in direct financing leases based on historical experience and an estimate of collectability of the lease receivables. Provision for lease payment receivable decreased by $7.2 million, to $2.3million, for the year ended June 30, 2022, from $9.5 million for the year ended June 30, 2021. The decrease was primarily attributable to the outbreak of COVID-19, affecting the lessee’s ability to repay the rental expense and the Company had made specific allowance for the lease payment as at June 30 2022 based on the specific risk of collectability of the lessee was identified. Jinshang Leasing made a specific allowance of $119.07 million and $121.44 million for the years ended June 30, 2022 and 2021, respectively, for customers individually evaluated for impairment. Jinshang Leasing also made a general allowance of $3.8 million and $6.4 million for the years ended June 30, 2022 and 2021, respectively, for customers collectively evaluated for impairment. On grounds of prudence, if the client default, we will make allowance for all uncollected principal and interests (including the amount due and not due) as provision.

Net direct financing lease interest income after provision for receivables

Net direct financing lease interest income after provision for receivables was $(2.0) million for the year ended June 30, 2022, compared to $(9.3) million for the year ended June 30, 2021.

Medical consulting revenuee

Medical consulting revenue was $0.30 million for the year ended June 30, 2022. consulting revenue is primarily provided to customers for medical-related services provided in the course of transactions. This revenue is a new type of business revenue that will be generated in the year ending June 30, 2022. It is in its initial stage. We will expand this segment in the future.

Non-interest expenses

Non-interest expenses mainly consisted of business tax and surcharges, salary and benefits for employees, office rental expenses, traveling costs, depreciation of equipment, lawyer’s fees, professional fees, consultation fees and office supplies. Non-interest expenses decrease by $5.6 million, or 91.5%, to $0.87million for the year ended June 30, 2022, compared to $7.2million for the year ended June 30, 2021. The decrease was primarily caused by a decrease in other operating expenses.

Non-interest expenses - Other operating expenses


	For the years ended June 30,
	2022		2021

Legal and professional fees	$	143,642	$	386,374
Audit fees		63,203		592,865
Depreciation		297		6,925
Others		317,376		5,150,483
Total	$	524,518	$	6,136,647

The decrease in other operating expenses was mainly caused by: (i) a decrease in legal and professional fees amounting $0.24 million in the years ended June 30, 2022; and (ii) the others contain the impairment loss.

Income taxes

The income tax rate of our PRC subsidiaries is 25% pursuant to the Enterprise Income Tax (“EIT”) Law. According to the Tax Regulation Caishui [2012] No. 25 issued by the Ministry of Finance of the People’s Republic of China, credit guarantee institutions for SMEs are subject to a pre-tax deduction for the provision of default losses equal to 1% of the outstanding guarantee balance, and 50% of guarantee income in current year should be deferred and taxable in the next year. According to Tax Regulation Caishui [2008] No.1, the income from investment in assets management products is subject to a tax-exemption.

Income tax credit decreased by $24.6 million to a tax credit of $738 for the year ended June 30, 2022, compared to a tax credit of $24,6million for the year ended June 30, 2021. The decrease was primarily attributable to the decrease of provision for lease payment receivable. For the years ended June 30, 2022 and 2021, losses before taxes excluding the interest on investment securities and offshore expenses was $(2.89) million and $(15.57) million, respectively.

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Net loss from continuing operation

As a result of the above, net loss from continuing operations was $ 2.86 million for the year ended June 30, 2022, compared to net loss from continuing operations of $41.08 million for the year ended June 30, 2021.

Critical Accounting Policies and Estimates

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. On an ongoing basis, management reviews these estimates using information then currently available. Changes in facts and circumstances may cause Wins Finance to revise its estimates. Material estimates that are particularly susceptible to significant change in the near-term include the determination of the allowances for doubtful accounts receivable and for guarantee losses.

Significant accounting estimates reflected in the financial statements include, but are not limited to: (i) the allowance for doubtful receivables; (ii) estimates of losses on unexpired contracts and financial guarantee service contracts; (iii) accrual of estimated liabilities; (iv) useful lives of long-lived assets; (v) impairment of long-lived assets; (vi) valuation allowance for deferred tax assets; (vii) contingencies; and (viii) share-based compensation.

Operating segments

ASC 280, Segment Reporting, requires companies to report financial and descriptive information about their reportable operating segments, including segment profit or loss, certain specific revenue and expense items, and segment assets. All of the Company’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Company supports the others.

The Company’s chief operating decision-maker (“CODM”) has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for both the financing lease business and the guarantee business. The Company’s net revenues are all generated from customers in the PRC. Hence, The Company operates and manages its business within one reportable segment, which is to provide financial services in the PRC domestic market

For the year ended June 30, 2022, there were two customers that accounted for 91% and 9% of the Jinshang Leasing’s revenue, respectively. For the year ended June 30, 2021, there were three customers that accounted for 63% ,19% and 14% of the Jinshang Leasing’s revenue, respectively.

As of June 30, 2022, two customers accounted 55% and 45%, respectively, of the minimum lease payments receivable of Jinshang Leasing. As of June 30, 2021, three customers accounted for 70%,17% and 13%, respectively, of the minimum lease payments receivable of Jinshang Leasing.

For the year ended June 30, 2022, there were one that accounted for 100% of the Ruikai Taifu Medical consultation services revenue.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash in banks and all highly liquid investments with original maturities of three months or less that are unrestricted as to withdrawal and use.

Net investment in direct financing lease

Lease contracts that Jinshang Leasing enters with financing lease customers transfer substantially all the rewards and risks of ownership of the leased assets, other than legal title, to the customers. These financing lease contracts are accounted for as direct financing leases in accordance with ASC 840-10-25 and ASC 840-40-25. At the inception of a transaction, the cost of the leased property is capitalized at the present value of the minimum lease payment receivables and the unguaranteed residual value of the property at the end of the lease. The difference between the sum of (i) the minimum lease payment receivables and the unguaranteed

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residual value and (ii) the cost of the leased property is recognized as unearned income. Unearned income is recognized over the period of the lease using the effective interest rate method.

Net investment in direct financing leases is recorded at net realizable value consisting of minimum lease payments to be received less allowance for uncollectible, as needed, and less the unearned income. The allowance for lease payment receivable losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on Jinshang Leasing’s loss history, known and inherent risks in the transactions, adverse situations that may affect the lessee’s ability to repay, the estimated value of any underlying asset, current economic conditions and other relevant factors. This evaluation is inherently subjective, as it requires material estimates that may be susceptible to significant revision as more information becomes available. While management uses the best information available upon which to base estimates, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used for the purposes of analysis.

Jinshang Leasing provides “Specific Allowance” for the lease payment receivable of lease transactions if any specific collectability risk is identified, and a “General Allowance”, based on total minimum lease payment receivable balance of those transactions with no specific risk identified, to be used to cover unidentified probable loss. Jinshang Leasing performs periodic and systematic detailed reviews to identify credit risks and to assess the overall collectability, and may adjust its estimates on allowance when new circumstances arise.

Revenue recognition

The Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2018, using the modified retrospective approach. ASC 606 establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The Company has assessed the impact of the guidance by reviewing its existing customer contracts and current accounting policies and practices to identify differences that will result from applying the new requirements, including the evaluation of its performance obligations, transaction price, customer payments, transfer of control and principal versus agent considerations. Based on the assessment, the Company concluded that there was no change to the timing and pattern of revenue recognition for its current revenue streams in scope of ASC 606 and therefore there were no material changes to the Company’s consolidated financial statements upon adoption of ASC 606.

Direct financing lease interest income

Direct financing lease interest income is recognized on an accrual basis using the effective interest method over the term of the lease by applying the rate that discounts the estimated future minimum lease payment receivables through the period of the lease to the amount of the net investment in the direct financing lease at inception.

The accrual of financing lease interest income is discontinued when a customer becomes 90 days or more past due on its lease or interest payments to Jinshang Leasing, unless Jinshang Leasing believes the interest is otherwise recoverable. Leases may be placed on non-accrual earlier if Jinshang Leasing has significant doubt about the ability of the customer to meet its lease obligations, as evidenced by consistent delinquency, deterioration in the customer’s financial condition or other relevant factors. Payments received while the lease is on non-accrual are applied to reduce the amount of the recorded value. Jinshang Leasing resumes accruing the interest income when Jinshang Leasing determines that the interest has again become recoverable, as, for example, if the customer resumes payment of the previous interest, and shows material improvement in its operating performance, financial position, and similar indicators.

Contract Balances

For the year ended June 30, 2022 and 2021, the Company did not have any significant incremental costs of obtaining contracts with customers incurred and/or costs incurred in fulfilling contracts with customers within the scope of ASC Topic 606, that shall be recognized as an asset and amortized to expenses in a pattern that matches the timing of the revenue recognition of the related contract.

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As of June 30, 2022 and 2021, the Company does not have any contract assets (unbilled receivables) since revenue is recognized when the performance obligation is fulfilled and the payment from customers is not contingent on a future event.

Advances received from customers related to unsatisfied performance obligations are recorded as contract liabilities (unearned income), which will be recognized as revenues upon the satisfaction of performance obligations through the transfer of related promised services to customers.

Allocation to Remaining Performance Obligations

The Company has elected to apply the practical expedient in paragraph ASC Topic 606-10-50-14 and did not disclose the information related to transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of June 30, 2022 and 2021, because either the performance obligation of the Company’s contracts with customers has an original expected duration of one year or less or the Company has a right to consideration from a borrower or a customer in an amount that corresponds directly with the value to the borrower or the customer of the Company’s performance completed to date, therefore the Company may recognize revenue in the amount to which the Company has a right to invoice or collect.

Property and equipment

Plant and equipment are recorded at cost less accumulated depreciation and impairment. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, with 3% salvage value. The average estimated useful lives of property and equipment are discussed in Note 6.

The Company eliminates the cost and related accumulated depreciation of assets sold or otherwise retired from the corresponding accounts and includes any gain or loss in the statements of income. The Company charges maintenance, repairs and minor renewals directly to expenses as incurred; major additions and improvements of equipment are capitalized

Impairment of long-lived assets

The Company applies the provisions of ASC No. 360 Subtopic 10, “Impairment or Disposal of Long-Lived Assets” (ASC 360-10) issued by the Financial Accounting Standards Board (“FASB”). ASC 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

The Company tests long-lived assets, including property and equipment and finite-lived intangible assets, for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount of the assets is greater than their fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows at the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There were no impairment losses on long-lived assets in the years ended June 30, 2022 and 2021.

Non-marketable equity investments

On August 28, 2018, a subsidiary of the Company entered into an agreement to acquire a 30% equity interest in HuiYue Finance Leasing (Ningbo) Co., Ltd. (“HuiYue”). HuiYue will be a joint venture between the Company, Mercury International Financial Leasing (Tianjin) Co., Ltd. (formerly translated as Chenxing International (Tianjin) Financial Leasing Co., Ltd) and Zhongtou Jinchuang (China) Financial Holding Group Co., Limited (formerly translated as Sino Investment Jinchuang Financial Holding Co., Ltd). The Company was originally required to pay RMB 300 million ($43.7 million) for its 30% interest in HuiYue.

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leasing of equipment relating to port logistics, construction machinery, energy conservation and medicine in Ningbo, China. The Company believes that participating in this investment has the opportunity to boost the Company’s growth in the leasing sector by leveraging the local financial, governmental and client resources of the Company.

The Company elected to record its equity investments in this privately held company using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer, since the Company does not have significant influence over HuiYue and its investment in HuiYue is without readily determinable fair value. There was no observable price change for the year ended June 30, 2021.

On February 22 2021, a subsidiary of the Company entered into an agreement to Convert Hui Yue’s equity into the creditor’s right of Shenzhen Jiruhai Technology Co., LTD.

On June 16,2021, Beijing Fu Sheng Xing Trading Co., LTD (“Fu Sheng Xing”) was established under the laws of the PRC. Full Shine owns 40% interest in Fu Sheng Xing.

In the future, Wins’s medical business will mainly focus on the following areas:

Equity investments in HuiYue accounted for using the measurement alternative are subject to periodic impairment reviews. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of these equity securities.

All gains and losses on non-marketable equity securities, realized and unrealized, are recognized in non-interest income (expenses).Dividend income is recognized when the right to receive the payment is established.

Fair value measurements

ASC Topic 825, Financial Instruments (“Topic 825”) requires disclosure of fair value information for financial instruments, whether or not recognized in the balance sheets, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments. Topic 825 excludes certain financial instruments and all non-financial assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts do not represent the underlying value of the Company.

Level 1 - inputs are based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - inputs are based upon quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3 - inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.

As of June 30, 2022 and 2021, financial instruments of the Company primarily consisted of cash, restricted cash, accounts receivables, other receivables, and bank and other loans which were carried at cost or amortized cost on the consolidated balance sheets, and carrying amounts approximated their fair values because of their generally short maturities or the rate of interest of these instruments approximate the market rate of interest.

Foreign currency translation

The Company’s functional and reporting currency is the United States Dollar (“US dollars” or “USD”). The functional currency of the Company’s subsidiaries in the PRC is the Chinese Yuan, or Renminbi (“RMB”).

Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange ruling at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into functional currency at the applicable rates of exchange prevailing when the transactions occurred. Transaction gains and losses are recognized in the statements of operations.

For financial reporting purposes, the financial statements of the Company’s subsidiaries are prepared using RMB and translated into the Company’s functional currency at the exchange rates quoted by www.oanda.com. Assets and liabilities are translated using the exchange rate in effect at each balance sheet date. Revenue and expenses are translated using average rates prevailing during each reporting period, and stockholders’ equity is translated at historical exchange rates. Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in stockholders’ equity.


	June 30,	June 30,
	2022	2021
Balance sheet items, except for equity accounts	6.7114	6.4601


	For the years ended
	June 30
	2022	2021
Items in the statements of income and comprehensive income, and statements of cash flows	6.4571	6.6273

Interest expense

Interest expense arising from the loans providing funds for financial leasing contracts is classified as cost of revenue in the consolidated statements of income.

Non-interest expenses

Non-interest expenses primarily consist of salary and benefits for employees, travel cost, entertainment expense, depreciation of equipment, office rental expense, professional service fees, office supplies, and similar items.

Income taxes

The Company accounts for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.” ASC 740 requires a Company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment of the changes.

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benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded

Operating leases

The Company leases its office premises under lease agreements that qualify as operating leases. The Company adopted ASU No. 2016-02 and related standards (collectively ASC 842, Leases), which replaced previous lease accounting guidance, on January 1, 2019 using the modified retrospective method of adoption. The Company elected the transition method expedient which allows entities to initially apply the requirements by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result of electing this transition method, prior periods have not been restated.

Commitments and contingencies

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among other things, government investigations and tax matters. In accordance with ASC No. 450 Sub topic 20, “Loss Contingencies”, the Company records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

Disposal groups (or non-current assets) held-for-sale and discontinued operations

Disposal groups (or non-current assets) are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. The disposal groups or the non- current assets (except for certain assets as explained below) are stated at the lower of carrying amount and fair value less costs to sell. Deferred tax assets, assets arising from employee benefits, financial assets (other than investments in subsidiaries and associates) and investment properties, which are classified as held for sale, would continue to be measured in accordance with the significant accounting policies.

A discontinued operation is a component of the Company’s business, the operations and cash flows of which can be clearly distinguished from the rest of the group and which represent a separate major line of business or geographic area of operations, or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations, or is a subsidiary acquired exclusively with a view to resale.

When an operation is classified as discontinued, a single amount is presented in the income statement, which comprises the post-tax profit or loss of the discontinued operation and the post-tax gain or loss recognized on the measurement to fair value less costs to sell, or on the disposal, of the assets or disposal groups constituting the discontinued operation.

Liquidity and Capital Resources

We have funded working capital and other capital requirements primarily by equity contribution from shareholders, cash flow from operations, and bank and other loans. Cash is required to maintain security deposits at banks, to issue capital leases to customers, to repay debts, to make default payments, salaries, office rental expenses, income taxes and other operating expenses.

Our management believes that current levels of cash and cash flows from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, we may need additional cash resources in the future if we experience changed business conditions or other developments, and may also need additional cash resources in the future if we wish to pursue opportunities for investment, acquisition, strategic cooperation or other similar actions. If it is determined that the cash requirements exceed the amount of cash and cash equivalents on hand, we may seek to issue debt or equity securities or obtain a credit facility.

The following summarizes the key components of our cash flows from continuing operations for the years ended June 30, 2022 and 2021:


	For the years ended
	June 30,
	2022		2021
Net cash used in operating activities	$	207,923	$	(13,007)
Net cash used in investing activities		(70,894)		—
Effect of exchange rate change on cash, cash equivalents and restricted cash		(6,116)		2,817
Net decrease in cash and cash equivalents and restricted cash	$	130,913	$	(10,190)

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Net cash used in operating activities was approximately $0.20million for the year ended June 30, 2022, while net cash used in operating activities was approximately $(0.01) million for the year ended June 30, 2021. The net cash provided by operating activities for the year ended June 30, 2022 mainly consisted of $0.2 million of cash used in Provision for lease payment receviable. The net cash used in operating activities for the year ended June 30, 2021 mainly consisted of $ 5.9 million of cash used in minimum lease payment receivable.

Net cash provided by investing activities was$(0.07) million for the year ended June 30, 2022, while net cash used in investing activities was nil for the year ended June 30, 2021. Net cash used in investing activities for the year ended June 30, 2022 mainly consisted of $(0.07) million of related to purchase of subsidiaries and other business units. Net cash used in financing activities was nil for the year ended June 30, 2022, while net cash used in financing activities was nil for the year ended June 30, 2021. shareholders.

Commitments and Contractual Obligations

The following table presents our material contractual obligations as of June 30, 2022 and 2021:


	Total as at
	June 30,		Less than	1 – 3	3 – 5		5+
Contractual Obligations	2022		1 year	years	years		years
Due to a related party		464,000	464,000	—		—		—
Operating lease obligations		50,436	50,436	—		—		—
	$	514,436	514,436	—	$	—	$	—


	Total as at
	June 30,		Less than	1 – 3	3 – 5		5+
Contractual Obligations	2021		1 year	years	years		years
Due to a related party		464,000	464,000	—		—		—
Operating lease obligations		55,022	55,022	—		—		—
	$	519,022	519,022	—	$	—	$	—

Off-balance Sheet Arrangements

During the year ended June 30, 2018, Jinshang Leasing and a third party jointly entered into certain finance lease contracts with a customer with total contract amount of $70.1 million (RMB464 million). Jinshang Leasing provides financing to the customer of $6.2 million (RMB44 million) (included in Note 4 - net investment in direct financing leases) and the third party provides the remaining financing of $59.4 million (RMB420 million), for a period up to August 2020. Jinshang Leasing also acts as a guarantor and is obligated to pay the third party if the customer fails to pay the obligations when they become due. As of June 30, 2021, the maximum guarantee issued by Jinshang Leasing was $71.5 million (RMB462 million). As of June 30, 2022, the maximum guarantee issued by Jinshang Leasing was $68.8 million (RMB462 million).

Impact of Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses” (“ASU 2016-13”), which introduces new guidance for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments, including, but not limited to, trade and other receivables, held-to-maturity debt securities, loans and net investments in leases. The new guidance also modifies the impairment model for available-for-sale debt securities and requires the entities to determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss. The standard also indicates that entities may not use the length of time a security has been in an unrealized loss position as a factor in concluding whether a credit loss exists. The ASU is effective for Emerging Growth Company (“EGC”) for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years and effective for public companies excluding EGC and smaller reporting companies for fiscal years beginning after December 15, 2019. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Group is in the process of evaluating the impact of ASU 2016-13 on its consolidated financial statements.

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those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted. The Group is not early adopting the standard and it is in the process of evaluation the impact of adoption of this new standard on its consolidated financial statements.

Impact of recently issued accounting pronouncements not yet adopted

In May 2021, the FASB issued ASU 2021-04—Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This amendment provides that for an entity that presents earnings per share (EPS) in accordance with Topic 260, the effects of a modification or an exchange of a freestanding equity-classified written call option that is recognized as a dividend should be an adjustment to net income (or net loss) in the basic EPS calculation. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring on or after the effective date of the amendments. Early adoption is permitted for all entities, including adoption in an interim period. If an entity elects to early adopt the amendments in this Update in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the impact of adopting this guidance.

Impact of recently issued accounting pronouncements not yet adopted(con’t)

In July 2021, the FASB issued 2021-05—Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. Topic 842 requires that a lessor determine whether a lease should be classified as a sales-type lease or a direct financing lease at lease commencement on the basis of specified classification criteria. Under Topic 842, a lessor is not permitted to estimate most variable payments and must exclude variable payments that are not estimated and do not depend on a reference index or a rate from the lease receivable. Subsequently, those excluded variable payments are recognized entirely as lease income when the changes in facts and circumstances on which those variable payments are based occur. Consequently, the net investment in the lease for a sales-type lease or a direct financing lease with variable payments of a certain magnitude that do not depend on a reference index or a rate may be less than the carrying amount of the underlying asset derecognized at lease commencement. As a result, the lessor recognizes a selling loss at lease commencement (hereinafter referred to as a day one loss) even if the lessor expects the arrangement to be profitable overall. Certain preparers and practitioners have continued to highlight that recognizing a day-one loss for a sales-type lease with variable payments that do not depend on a reference index or a rate results in reporting outcomes that do not faithfully represent the underlying economics either at lease commencement or over the lease term. Those stakeholders emphasized that users of financial statements are not provided with financial information that is relevant or decision useful in those cases. Rather, the reporting of a loss is counter to the economics of those arrangements, and, thus, the accounting previously required fails to represent the underlying economics neutrally and faithfully. Lease arrangements with variable payment structures based on the performance or use of underlying assets are becoming more prevalent, particularly in the energy industry, and stakeholders from that industry requested that the Board amend the leases guidance to address this issue. This issue also may exist for a direct financing lease with variable payments that do not depend on a reference index or a rate. Those stakeholders further highlighted that lessors did not recognize a day-one loss under Topic 840, Leases, because of the longstanding practice to account for certain leases with variable payments as operating leases based on an interpretation of a classification criterion in Topic 840. That classification criterion was not retained in Topic 842. Additionally, the resulting day-one loss issue was not identified or discussed by the Board in deliberations leading to the issuance of Update 2016-02. The amendments in this Update address stakeholders’ concerns by amending the lease classification requirements for lessors to align them with practice under Topic 840. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if both of the following criteria are met:

1.The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3.

2.The lessor would have otherwise recognized a day-one loss.

When a lease is classified as operating, the lessor does not recognize a net investment in the lease, does not derecognize the underlying asset, and, therefore, does not recognize a selling profit or loss. The leased asset continues to be subject to the measurement and impairment requirements under other applicable GAAP 3 before and after the lease transaction. The amendments in this Update amend Topic 842, which has different effective dates for public business entities and most entities other than public business entities. The amendments are effective for fiscal years beginning after December 15, 2021, for all entities, and interim

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periods within those fiscal years for public business entities and interim periods within fiscal years beginning after December 15, 2022, for all other entities. The Company is currently evaluating the impact of adopting this guidance.

In October 2021, the FASB issued ASU 2021-07—Compensation—Stock Compensation (Topic 718): Determining the Current Price of an Underlying Share for Equity-Classified Share-Based Awards. The measurement objective in Topic 718 for share-based awards is fair value based, and the current price input is measured at fair value. This input is used in determining an award’s fair value. The practical expedient in this Update allows a non-public entity to determine the current price of a share underlying an equityclassified share-based award using the reasonable application of a reasonable valuation method. The practical expedient in this Update is effective prospectively for all qualifying awards granted or modified during fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application, including application in an interim period, is permitted for financial statements that have not yet been issued or made available for issuance as of October 25, 2021. The Company is currently evaluating the impact of adopting this guidance.

Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, consolidated statements of income and comprehensive income and consolidated statements of cash flows.

ITEM 18. FINANCIAL STATEMENTS

Our Financial Statements beginning on pages F-1 through F-40, as set forth in the following index, are hereby incorporated herein by reference. These Financial Statements are filed as part of this Annual Report.

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ITEM 19. EXHIBITS


No.		Description
1.1		Amended and Restated Articles of Association of the Company (incorporated by reference from Annex C-4 to the proxy statement/prospectus forming a part of the registrant’s Registration Statement on Form S-4 (Registration No. 333-204074), originally filed with the SEC on May 11, 2015)
1.2		Certificate of Incorporation on Change of Name of the registrant (incorporated by reference from Annex C-1 to the proxy statement/prospectus forming a part of the registrant’s Registration Statement on Form S-4 (Registration No. 333-204074), originally filed with the SEC on May 11, 2015).
2.1		Form of the Company’s Ordinary Share Certificate (incorporated by reference to Exhibit 4.1 to the registrant’s Registration Statement on Form S-4 (Registration No. 333-204074), originally filed with the SEC on May 11, 2015)
2.2		Agreement and Plan of Reorganization, dated as of April 24, 2015 and amended on May 5, 2015, by and among Sino Mercury Acquisition Corp (“Sino”), Wins Finance Holdings Inc., Wins Finance Group Ltd. (“WFG”) and the shareholders of WFG (incorporated by reference from Annex A to the proxy statement/prospectus forming a part of the registrant’s Registration Statement on Form S-4 (Registration No. 333-204074), originally filed with the SEC on May 11, 2015).
4.1		Amended and Restated Registration Rights Agreement dated as of October 27, 2015 among the Company, the initial stockholders of Sino and the shareholders of WFG (incorporated by reference to Exhibit 10.8 to the definitive Proxy Statement/Prospectus included with the Registration Statement on Form S-4/A filed on September 11, 2015.
4.2		Securities Escrow Agreement dated as of August 26, 2014, as amended on June 21, 2016 by and among the Company and the initial stockholders of Sino (incorporated by reference to Exhibit 10.3 of Sino Mercury Acquisition Corp.’s Form S-1/A filed on July 18, 2014).
4.3		Escrow Agreement dated as of October 27, 2016 among Wins Finance Holdings Inc., the Representative (as described in the Agreement and Plan of Reorganization) and Continental Stock Transfer & Trust Company, as Escrow Agent (incorporated by reference to Annex F to the definitive Proxy Statement/Prospectus included with the Registration Statement on Form S-4/A filed on September 21, 2015)
4.4		Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.2 of Sino’s Form 8-K filed on April 27, 2015).
4.5		Loan Contract between Jinshang International Financial Leasing Co., Ltd. and Bank of China, Shouzhou Branch (incorporated by reference to Exhibit 10.9 to the Registrant Statement on Form S-4/A filed on May 11, 2015)
4.6		Loan Contract between Jinshang International Financial Leasing Co., Ltd. and China Citic Bank (incorporated by reference to Exhibit 10.10 to the Registrant Statement on Form S-4/A filed on May 11, 2015)
4.7		Tenancy Agreement between Jinshang International Financial Leasing Co., Ltd. and Beijing Dong Sheng International Culture Industry Development Co., Ltd. (incorporated by reference to Exhibit 10.11 to the Registrant Statement on Form S-4/A filed on May 11, 2015)
4.8		Tenancy Agreement between Shanxi Dongsheng Financial Guarantee Co., Ltd. and Shanxi Province YuciWangcheng Enterprises Limited (incorporated by reference to Exhibit 10.12 to the Registrant Statement on Form S-4/A filed on May 11, 2015)
4.9		2015 Long Term Incentive Equity Plan (incorporated by reference to Annex D to the definitive Proxy Statement/Prospectus included with the Registration Statement on Form S-4/A filed on September 21, 2015)
4.10		Summary Purchase-and-Lease-Back Agreement dated December 23, 2015 by and between Jinshang International Financial Lease Co., Ltd, and Liaoning Sg Automotive Group Co., Ltd. (incorporated by reference to Exhibit 4.10 to Amendment No. 1 to the Annual Report on Form 20-F filed on _October 24, 2016)
4.11		Summary Purchase-and-Lease-Back Agreement dated April 23, 2016 by and between Jinshang International Financial Lease Co., Ltd, and Liaoning Sg Automotive Group Co., Ltd. (incorporated by reference to Exhibit 4.11 to Amendment No. 1 to the Annual Report on Form 20-F filed on _October 24, 2016)
4.12		Equity Adjustment Agreement with Mercury International Financial Leasing (Tianjin) Co., Ltd. (formerly translated as Chenxing International (Tianjin) Financial Leasing Co., Ltd.) and Zhongtou Jinchuang (China) Financial Holding Group Co., Limited (formerly translated as Sino Investment Jinchuang Financial Holding Co., Ltd.) dated August 28, 2018 (incorporated by reference to Exhibit 4.12 to the Annual Report on Form 20-F filed on _October 31, 2018)

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4.13		Amendment to Equity Adjustment Agreement with Mercury International Financial Leasing (Tianjin) Co., Ltd. (formerly translated as Chenxing International (Tianjin) Financial Leasing Co., Ltd.) and Zhongtou Jinchuang (China) Financial Holding Group Co., Limited (formerly translated as Sino Investment Jinchuang Financial Holding Co., Ltd.) dated October 26, 2018 (incorporated by reference to Exhibit 4.12 to the Annual Report on Form 20-F filed on _October 31, 2018)
8.1		List of Subsidiaries of the Company (incorporated by reference to Exhibit 4.12 to the Annual Report on Form 20-F filed on _October 31, 2018)
12.1		Certification of Chief Executive Officers Pursuant to Rule 13a-14(a)/15d-14(a)
12.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)
13.1		Certification of Chief Executive Officers and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		Letter from Centurion ZD CPA & Co., dated July 6, 2020 (incorporated by reference to Exhibit 99.1 to the CurrentReport on Form 20-F filed on July 6, 2020)
101.1NS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definitions Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

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SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	WINS FINANCE HOLDINGS INC.

Date: October 10, 2023	By:	/s/ Renhui Mu
	Name:	Renhui Mu
	Title:	Chief Executive Officer and Chief Operating Officer
		(Principal Executive Officer)

	By:	/s/ Yuchan Cheng
	Name:	Yuchan Cheng
	Title:	Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

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FINANCIAL STATEMENTS

Contents		Page(s)
Reports of Independent Registered Public Accounting Firm (PCAOB ID:3487)		F-2
Consolidated Statement of Financial Position as of June 30, 2022 and 2021		F-5
Consolidated Statements of Income and Other Comprehensive Income for the years ended June 30, 2022, 2021 and 2020		F-6
Consolidated Statements of Changes in Stockholders’ Deficit for the years ended June 30, 2022 and 2021		F-7
Consolidated Statements of Cash Flows for the years ended June 30, 2022,2021 and 2020		F-8
Notes to Consolidated Financial Statements		F-9

F-1

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AG
	AUDIT ALLIANCE LLP^®
	A Top 18 Audit Firm 10 Anson Road, #20-16 International Plaza, Singapore 079903.

UEN: T12LL1223B GST Reg No: M90367663E		Tel: (65) 6227 5428
Website: www.allianceaudit.com

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of Wins Finance Holdings Inc and Its Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of financial position of Wins Finance Holdings Inc. and its subsidiaries (collectively, the “Company”) as of June 30, 2022 and 2021, and the related consolidated statements of income and other comprehensive income, changes in stockholders’ equity and cash flows for the year ended June 30, 2022 and 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated statement of financial position of the Company as of June 30, 2022 and 2021, and the related consolidated statements of income and other comprehensive income, changes in stockholders’ deficit and cash flows for the year ended June 30, 2022 and 2021 in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP)

Material Uncertainty Related to Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, during the financial year ended 30 June 2022, the Company incurred a net loss of USD2,863,113 and as of 30 June 2022, its net stockholders’ deficit was US$ 5,391,902 and its net current liabilities was US$3,536,000. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern.

In addition, we draw attention to Note 17 of the financial statements, which describes the uncertainty related to the outcome of the lawsuit filed against the Company, and we also draw attention to Note 1 of the financial statements, which describe the Company facing uncertainty as to the operational impact of the COVID-19 outbreak on the Company’s financial leasing business resulting had a material adverse effect on the Company’s results of operation, cash flows and liquidity. The financial statements have been prepared on a going concern basis in view of the Company will be able to:

(a)obtain continued financial support from its related party or its ability to obtain external financing; or

(b)further implement management’s business plan to extend its operations and generate sufficient revenues to meet its obligations.

The validity of the going concern basis on which the financial statements are prepared depends on the Company’s ability to operate as a going concern as set forth above. The assumptions are premised on future events, the outcome of which are inherently uncertain. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

F-2

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of Wins Finance Holdings Inc and Its Subsidiaries

Basis for Opinion (Cont’d)

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Audit Alliance LLP (PCAOB ID:3487)

Singapore

October 10, 2023

We have served as the Company’s auditor since 2020.

F-3

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Report of Independent Registered Public Accounting Firm

Opinion on the financial statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Wins Finance Holdings Inc. and subsidiaries (collectively, the “Company”) as of June 30, 2020, and the related consolidated statements of income and other comprehensive income, changes in stockholders’ equity and cash flows for each of the year ended June 30, 2020, and the related notes (collectively referred to as the “financial statements”). Except for the matter highlighted in the Basis for qualified opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020, and the results of its operations and its cash flows for each of the year ended June 30, 2020, in conformity with U.S. generally accepted accounting principles.

Basis for qualified opinion

Loss of control over subsidiaries

As disclosed in Note 1 to the financial statements, the board of directors are of the view that the Company has lost its ability to control its subsidiaries and has not had control of its subsidiaries since June 9, 2020. The subsidiaries are namely Shanxi Jincheng Agriculture Co., Ltd and Shanxi Dongsheng Finance Guarantee Co., Ltd (collectively “subsidiaries without control”). We were unable to carry out any audit procedures or to obtain information we considered necessary during our audit of the financial statements of the subsidiaries without control stated on the face of the balance sheet of the Company classified as disposal group. Therefore, we could not determine the effect of adjustments, if any, on the financial position of Company as at June 30 2020 or on its financial performance and cash flows for the year then ended.

We also did not receive disclosure from management of subsidiaries without control regarding the results of their assessment of the risk that the financial statements may be materially misstated as a result of fraud. Accordingly, we could not obtain assurance over the completeness of any allegations of fraud, or suspected fraud, affecting the Company’s financial statements as communicated by employees, former employees, analysts, regulators or others. Management of subsidiaries without control is unable to acknowledge their responsibilities for the design, implementation and maintenance of accounting and internal control systems that are designed to prevent and detect fraud and error, the objectives of which are to provide us with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition and that transactions are executed as authorized.

Material Uncertainty Related to Going Concern

We draw attention to Note 1 in the financial statements, which indicates that the Company incurred a net loss of USD176,101,494 during the year ended June 30, 2020 and as of that date, the Company reported a net cash used in operations of USD3,111,416. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that uncertainty exists that may cast doubt on the Company’s going concern assumption.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our qualified opinion.

/s/ Audit Alliance LLP

We have served as the Company’s auditor since 2018.

Singapore

October 10, 2023

F-4

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(In US dollars, except share data)


	June 30, 2022		June 30, 2021
ASSETS
Current assets
Cash and cash equivalents	$	159,543	$	6,621
Restricted cash		—		22,009
Other assets (Note 7)		611,645		770,985
Total current assets		771,188		799,615
Non-current assets
Net investment in direct financing leases (Note 4)		688,663		2,778,471
Operating lease, right-of-use asset (Note 5)		—		50,935
Property and equipment, net (Note 6)		3,740		2,883
Total non-current assets		692,403		2,832,289
TOTAL ASSETS	$	1,463,591	$	3,631,904

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities
Current liabilities
Other liabilities (Note 8)		4,307,188		3,715,268
Operating lease liability-current (Note 5)		—		55,022
Total current liabilities		4,307,188		3,770,290
Non-current liability
Deposits from direct financing leases(Note 16)		2,084,305		2,050,035
Due to related a party (Note 15)		464,000		464,000
Total non-current liabilities		2,548,305		2,514,035
Total Liabilities	$	6,855,493	$	6,284,325

Stockholders’ Deficit
Common stock (par value $0.0001 per share, 100,000,000 shares authorized; 19,837,642 issued and outstanding at June 30, 2022 and 2021)(Note 10)	$	1,984		1,984
Additional paid-in capital		211,934,432		211,934,432
Statutory reserve (Note 11)		4,687,085		4,687,085
Accumulated losses		(198,429,741)		(195,618,646)
Accumulated other comprehensive losses		(23,474,027)		(23,657,276)
Total Stockholders’ Deficit		(5,280,267)		(2,652,421)
Noncontrolling interests		(111,635)		—
Total Deficit		(5,391,902)		(2,652,421)
TOTAL LIABILITIES AND DEFICIT	$	1,463,591	$	3,631,904

See notes to the consolidated financial statements.

F-5

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME

(In US dollars, except share data)


	For the years ended June 30,
	2022		2021		2020

Direct financing lease income
Direct financing lease interest income		242,740		174,306		4,934,157
Interest expense for direct financing lease		—		(11,181)		(11,967)
Business collaboration fee and commission expenses for leasing projects		—		—		(37,572)
Provision for lease payment receivable		(2,258,060)		(9,495,002)		(19,379,086)
Net direct financing lease interest income after provision for receivables		(2,015,320)		(9,331,877)		(14,494,468)

Medical consulting revenue		30,682		—		—

Net revenue		(1,984,638)		(9,331,877)		(14,494,468)

Non-interest loss
Investment loss		—		—		(164,098,554)
Total non-interest loss		—		—		(164,098,554)

Non-interest expense
Business taxes and surcharge		(231)		(476)		(7,652)
Salaries and employee charges		(276,546)		(920,194)		(923,325)
Rental expenses		(76,442)		(97,693)		(95,545)
Other operating expenses		(524,518)		(6,136,647)		(481,311)
Total non-interest expense		(877,737)		(7,155,010)		(1,507,833)

Loss before taxes		(2,862,375)		(16,486,887)		(180,100,855)

Income tax (expense)credit		(738)		(24,590,417)		3,999,361

NET LOSS		(2,863,113)		(41,077,304)		(176,101,494)

Net loss attributable to noncontrolling interests		(52,019)		—		—

Net loss attributable to Wins Finance Holdings Inc..		(2,811,094)		(41,077,304)		(176,101,494)

Other comprehensive income(loss)
Foreign currency translation adjustment		187,029		2,381,422		(2,305,407)
TOTAL COMPREHENSIVE LOSS	$	(2,676,084)	$	(38,695,882)	$	(178,406,901)

Total comprehensive loss attributable to noncontrolling interests		(48,238)		—		—
Total comprehensive loss attributable to ordinary shareholders		(2,627,846)		(38,695,882)		(178,406,901)

Weighted-average ordinary shares outstanding
Basic		19,837,642		19,837,642		19,837,642
Diluted		19,837,642		19,837,642		19,837,642

Loss per share attributable to ordinary shareholders
Basic	$	(0.14)	$	(2.07)	$	(8.88)
Diluted	$	(0.14)	$	(2.07)	$	(8.88)
From continuing operation	$	(0.14)	$	(2.07)	$	(8.88)
From discontinued operation	$	—	$	—	$	—

See notes to the consolidated financial statements

F-6

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(In US dollars, except share data)


						Accumulated				Retained
						Other				Earnings/		Non
	Common Stock			Additional		Comprehensive		Statutory		(Accumulated		Controlling	Total
	Shares	Amount		Paid-in Capital		Losses		Reserve		Losses)		interests	Deficit
Balance as of June 30, 2020	19,837,642	$	1,984	$	211,934,432	$	(26,038,698)		4,687,085		154,541,342	—		36,043,461
Net loss	—		—		—		—		—		(41,077,304)	—		(41,077,304)
Foreign currency translation adjustment	—		—		—		2,381,422		—		—	—		2,381,422
Balance as of June 30, 2021	19,837,642	$	1,984		211,934,432		(23,657,276)		4,687,085		(195,618,646)	—		(2,652,421)
Investment in new subsidiaries	—		—		—		—		—		—	(63,397)		(63,397)
Net loss	—		—		—		—		—		(2,811,094)	(52,019)		(2,863,113)
Foreign currency translation adjustment	—		—		—		183,248		—		—	3,781		187,029
Balance as of June 30, 2022	19,837,642	$	1,984		211,934,432		(23,474,027)		4,687,085		(198,429,740)	(111,635)		(5,391,902)

See notes to the consolidated financial statements.

F-7

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US dollars)


	For the years ended June 30,
	2022		2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,863,113)	$	(41,077,304)	$	(176,101,494)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		297		838		21,118
Investment loss for disposal of subsidiaries		—		—		164,098,554
Property and equipment written off		—		24,718		—
Provision for lease payment receivables		2,258,060		9,495,002		19,379,086
Provision for other assets		—		3,017,816		—
Deferred tax expense (benefit)		—		26,108,436		(4,255,391)
Changes in assets and liabilities:
Net investment in direct financing leases		(194,077)		5,887,016		(7,116,662)
Other assets		186,571		(628,927)		180,508
Lease receivable in lease agency transaction		—		2,085,456		(92,689)
Interest payable		—		(8,874)		(12,629)
Income tax payable		—		(1,518,019)		256,030
Deposits from direct financing leases		115,404		(3,649,836)		42,663
Other liabilities		704,781		250,671		489,490
Net Cash Provided by (Used in) Operating Activities		207,923		(13,007)		(3,111,416)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(1,300)		—		(843)
Net cash paid for purchases of subsidiaries and other business units		(69,594)		—		—
Net Cash Used in Investing Activities		(70,894)		—		(843)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of loans		—		—		(699,469)
Net Cash Used in Financing Activities		—		—		(699,469)

EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH FROM CONTINUING OPERATION		(6,116)		2,817		3,780,236
EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH FROM (DISPOSAL GROUP)/DISCONTINUED OPERATION		—		(7,553,701)		(221,827)

NET INCREASE/(DECREASE) CASH FROM CONTINUING OPERATION		130,913		(10,190)		(31,492)
NET (DECREASE) AND INCREASE IN CASH FROM (DISPOSAL GROUP)/DISCONTINUED OPERATION		—		(7,553,701)		(221,827)

Cash and cash equivalents at beginning of year	$	28,630	$	38,820	$	70,312
Cash and cash equivalents at beginning of year-disposal groups	$	—	$	7,553,701	$	7,775,528
Cash and cash equivalents at end of year		159,543		28,630		38,820
Cash and cash equivalents at end of year-disposal groups		—		—		7,553,701

SUPPLEMENTAL CASH FLOW INFORMATION:
Continuing Operation
Cash paid for interest expense	$	—	$	11,181	$	11,966

See notes to the consolidated financial statements.

F-8

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 1 - ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT’S PLANS

The accompanying consolidated financial statements include the financial statements of Wins Finance Holdings Inc. (“Wins Finance”) and its subsidiaries, Wins Finance Group Limited (“WFG”), Full Shine Capital Resources Limited (“Full Shine”), Jinshang International Financial Leasing Co., Ltd. (“Jinshang Leasing”), Shanxi Jinchen Agriculture Co., Ltd. (“Jinchen Agriculture),Shanxi Dongsheng Finance Guarantee Co., Ltd. (“Dongsheng Guarantee”) , Dalian Ruikai Taifu Investment Management Co., Ltd. (“Ruikai Taifu) and Zhongrui Xuikai Beijing Technology Co., Ltd. (“Zhongrui Xuikai”). Wins Finance and its subsidiaries are collectively referred to as the “Company”.

Wins Finance was incorporated in the Cayman Islands as an exempt company on February 17, 2015 and is then a wholly owned subsidiary of Sino Mercury Acquisition Corp.

WFG was incorporated under the laws of British Virgin Islands on July 27, 2014 and was initially owned 100% by Mr. Wang Hong. On October 23, 2014, WFG acquired a wholly-owned subsidiary, Full Shine, which is a shell company incorporated in the laws of the Hong Kong Special Administrative Region (the “HKSAR” or “Hong Kong”), for HK$1.

On December 2, 2014, WFG, through Full Shine, acquired 100% of the equity capital of Jinshang Leasing, a PRC Company, by means of a share exchange (the “Jinshang Leasing Share Exchange”) pursuant to which WFG issued 30,000,000 ordinary shares to a personal holding Company owned by Mr. Wang Hong in exchange for Mr. Wang Hong’s transferring 100% of the equity capital of Jinshang Leasing to Full Shine.

The share exchange among WFG, Full Shine and Mr. Wang Hong is considered in substance to be a capital transaction, rather than a business combination transaction, because prior to the share exchange WFG and Full Shine did not have any operations, had an immaterial amount of assets, and were controlled by the same owner as Jinshang Leasing. WFG’s financial statements as of and for the year ended June 30, 2015 consolidate WFG, Full Shine, Jinshang Leasing, and Jinshang Leasing’s direct and indirect wholly-owned PRC subsidiaries Jinchen Agriculture, Dongsheng Guarantee and Tianjin Jiaming. Following the completion of the capital transaction, WFG conducted business operations primarily through Jinshang Leasing and Dongsheng Guarantee.

Jinshang Leasing was incorporated on May 18, 2009 in Beijing, the People’s Republic of China (the “PRC”) under the laws of PRC and engages primarily in providing financing lease services to small and medium-sized companies and related financing consulting services in the PRC.

Tianjin Jiaming was incorporated on April 23, 2014 as a wholly-owned subsidiary of Jinshang Leasing. Tianjin Jiaming did not conduct any business activities from its inception through September 30, 2015, and it was dissolved on March 30, 2018.

Dongsheng Guarantee was incorporated on February 22, 2006 in Jinzhong City, Shanxi Province, PRC under the laws of PRC and is mainly engaged in providing credit guarantees to small and medium-sized companies and related consulting finance services in the PRC and it was disposed on January 6, 2021.

Jinchen Agriculture was incorporated on February 29, 2012 in Jinzhong City, Shanxi Province, PRC under the laws of PRC. Jinchen Agriculture did not conduct any business activities from its inception through September 30, 2015 and it was disposed on January 6, 2021.

Ruikai Taifu was incorporated on October 11, 2021 in Dalian City Liaoling Province, PRC under the laws of PRC.Ruikai Taifu is mainly engaged in business services in China and is the subsidiary of the company.

On April 1, 2022, pursuant to the Capital Increase Agreement, the Company, through Ruikai Taifu, held a 71.43% equity interest in Zhongrui Xuikai, a company registered in Beijing, China. Zhongrui Xuikai is mainly engaged in technology promotion, application services and medical device sales.

On October 26, 2015, Wins Finance consummated the transactions contemplated by the Agreement and Plan of Reorganization (the “Merger Agreement”), dated as of April 24, 2015 and amended on May 5, 2015, by and among Wins Finance, Sino Mercury Acquisition Corp. (“Sino”), WFG and the shareholders of WFG (the “WFG Shareholders”).

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Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 1 - ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT’S PLANS (CON’T)

Upon the closing of the transactions contemplated by the Merger Agreement (the “Closing”), (i) Sino merged with and into Wins Finance with Wins Finance surviving the merger (the “Merger”) and (ii) the WFG Shareholders exchanged 100% of the ordinary shares of WFG for cash and ordinary shares of Wins Finance (the “Share Exchange” together with the Merger, the “Transactions”).

WFG is an integrated financing solution provider with operations located primarily in Jinzhong City, Shanxi Province and Beijing, China. WFG’s goal is to assist Chinese small & medium enterprises, including microenterprises, which have limited access to financing, in improving their overall fund-raising capability and enable them to obtain funding for business development.

As a result of the Transactions, the former members of WFG own approximately 78.0% of the stock of Wins Finance and the former stockholders of Sino own the remaining 22.0%.

The Transactions are accounted for as a “reverse merger” and recapitalization at the date of the consummation of the Transactions since the former members of WFG owned a majority of common stock of the Company and WFG’s operations will be the operations of Sino following the Transactions. Accordingly, WFG is deemed to be the accounting acquirer in the Transactions and, consequently, the Transactions are treated as a recapitalization of WFG. As a result, the assets and liabilities and the historical operations that will be reflected in the Sino’s financial statements after consummation of the Transactions will be those of WFG and will be recorded at the historical cost basis of WFG. Sino’s assets, liabilities and results of operations will be consolidated with the assets, liabilities and results of operations of WFG upon consummation of the Transactions. As such, WFG is the continuing entity for financial reporting purpose. SEC Manual requires that in a reverse acquisition of historical shareholder’s equity of the accounting acquirer prior to the merger is retroactively reclassified (a recapitalization) for the equivalent number of shares received in the merger after giving effect to any difference in par value of the registrant’s and the accounting acquirer’s stock by an offset in paid-in-capital. Therefore, the financial statements have been prepared as if WFG had always been the reporting company and then on the share exchange date, had changed its name and reorganized its capital stock.

WHL was incorporated on November 10, 2015 in New York and was disposed on June 30, 2016 to Ms. Wenyu Li, an individual beneficially owning 8.1% of the Company’s ordinary Shares as of June 30, 2016, for a cash consideration of $270,000, which was the net asset value of WHL on the date of disposal. WHL did not conduct any business activities from its inception.

On December 13, 2016, Appelo Ltd. and Wits Global Ltd., each an entity controlled by Mr. Wang Hong (collectively, the “Sellers”) entered into an agreement to transfer all of the ordinary shares of Wins Finance owned by them (an aggregate of 13,440,000 ordinary shares (approximately 67% of the Company’s outstanding ordinary shares)) to Freeman FinTech Corporation Limited (“Freeman”), a company listed on the Hong Kong Stock Exchange. In connection with the transaction, the Seller transferred certain rights in a registration rights agreement to Freeman.

On August 2, 2017, Spectacular Bid Limited, a wholly owned subsidiary of Freeman, completed the acquisition of approximately 67% of the Company’s outstanding shares, and thereafter, Spectacular Bid Limited and Freeman become the Company’s immediate and ultimate holding company.

On June 9, 2020, the Changzhi Public Security Bureau ( the “Bureau”) enforced a judgement against Jinchen Agriculture. Pursuant to the action, the Bureau froze the assets of Jincheng Agriculture and its subsidiaries. Up to the date of the report, the Company’s management was unable to determine the cause of the freeze as the authorities have not provided such information, but it has advised that the Company no longer has control of the assets or operations of Jinchen Agriculture and its subsidiary Dongsheng Guarantee. Therefore, until the freeze is lifted, the Company will not be able to consolidate Shanxi Jinchen and its subsidiary Dongsheng Guarantee into its financial statements. The Company’s other business are unaffected by the freeze and continue to operate normally.

Jinshang Leasing has entered into an agreement for disposal of Jinchen Agriculture and Dongsheng Guarantee to Shanghai Guyan Investment Management Co., Ltd on January 6, 2021.

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Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 1 - ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT’S PLANS (CON’T)

As at 30 June 2022 and the date of approval of the consolidated financial statements, the Company had the following wholly-owned subsidiaries:


	Place and date of
Name of entity	establishment	Registered capital	Principal activities

Wins Finance Group	British Virgin Islands	US$ 30,000,100.00	A holding company 100%
Limited(“WFG”)	July 27, 2014		owned by Wins Finance

Full Shine Capital	Hong Kong		A holding company 100%
Resources Limited	August 01, 2013	HK$ 1.00	owned by WFG
(“Full Shine”)

Jinshang International	PRC	US$ 180,000,000.00	A company providing
Financial Leasing	May 18, 2009		financial leasing services and
Co.,Ltd (“Jingshang Leasing”)			100% owned by Full shine

Dalian Ruikai Taifu	PRC		A company providing
Investment Management	October 11, 2021	RMB 100,000,000.00	business service industry and
Co.,Ltd (“Ruikai Taifu”)			60% owned by Full shine

Zhongrui Xuikai Beijing	PRC		A company providing
Technology Co., Ltd	June 22, 2018	RMB 28,000,000.00	medical equipment sales and
(“Zhongrui Xuikai”)			71.43% owned by Ruikai Taifu

Going concern and management plans

These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue its operations in the foreseeable future and that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations. In addition, Note 17 to the Company financial statements, which describes the uncertainty related to the outcome of the lawsuit filed against the Company. During the financial year ended 30 June 2022, the Company incurred a net loss of US $2,863,113 and as of 30 June 2022, its stockholders’ deficit was US$ 5,391,902 its net current liabilities was US $3,536,000. The Company’s revenue in the year ended June 30 2022 decreased significantly as compared with the year ended June 30 2021 due to the continued adverse impact of the COVID-19 outbreak on the Company’s financial leasing business and the Company had made specific allowance for the lease payment with amount to US$ 119,067,356 as of June 30 2022 based on the specific risk of collectability of the lessee was identified. The Company’s ability to continue as a going concern dependents upon:

(1)the continued financial support from its related party or its ability to obtain external financing; or

(2)further implement management’s business plan to extend its operations and generate sufficient revenues to meet its obligations.

While the Company believes in the viability of its strategy to increase sales volume and in its ability to raise additional funds, there can be neither any assurances to that effect, nor any assurance that the Company will be successful in securing sufficient funds to sustain the operations.

F-11

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 1 - ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT’S PLANS (CON’T)

Going concern and management plans (con’t)

As of June 30, 2022, the Company’s having a minimum cash balance on the consolidated statement of financial position. The Company has taken an intensive review of operations and expenditures, including selling, distribution, and administration expenses, to identify and eliminate inefficiencies and redundancies in order to preserve cash while maintaining the business. Given the Company’s existing cash balances and projected cash generated by, and used in, operating activities, the Company believes that it will have sufficient liquidity to fund its operating activities, and react as necessary to market changes, which may include working capital needs for at least twelve months from June 30, 2022. These consolidated financial statements do not reflect adjustments to the carrying value of assets and liabilities, reported expenses and statement of financial position classification that would be necessary if going concern assumption was not appropriate. These adjustments could be material.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)

Basis of presentation and principle of consolidation

The consolidated financial statements of Wins Finance and its subsidiaries are prepared and presented in accordance with U.S. generally accepted accounting principles.(“U.S. GAAP”).

The consolidated financial statements include the financial statements of Wins Finance, its subsidiaries, including the wholly-foreign owned enterprises (“WFOEs”) in the PRC.

A subsidiary is an entity in which Wins Finance (i) directly or indirectly controls more than 50% of the voting power; or (ii) has the power to appoint or remove the majority of the members of the board of directors or to cast a majority of votes at the meeting of the board of directors or to govern the financial and operating policies of the investee pursuant to a statute or under an agreement among the shareholders or equity holders.

All significant inter-Company transactions and balances have been eliminated upon consolidation.

(b)

Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. On an ongoing basis, management reviews these estimates using information that are currently available. Changes in facts and circumstances may cause Wins Finance to revise its estimates. Material estimates that are particularly susceptible to significant change in the near-term include the determination of the allowances for doubtful accounts receivable and for guarantee losses.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(c)

Operating segments

The Company’s chief operating decision-maker (“CODM”) has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the financing lease business. The Company’s net revenues are all generated from customers in the PRC. Hence, the Company operates and manages its business in two reportable segments, namely, the provision of financial services and medical consulting services in the PRC domestic market.

As of June 30, 2022, two customers accounted 55% and 45%, respectively, of the minimum lease payments receivable of Jinshang Leasing. As of June 30, 2021, three customers accounted for 70%, 17% and 13%, respectively, of the minimum lease payments receivable of Jinshang Leasing.

For the year ended June 30, 2022, there was one customer that accounted for 100% of the Ruikai Taifu Medical consultation services revenue.

(d)

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash in banks and all highly liquid investments with original maturities of three months or less that are unrestricted as to withdrawal and use.

(e)

Restricted Cash

Restricted cash represents cash pledged to banks.

(f)

Investments securities – held to maturity

Investments in non-marketable asset management products issued by banks and financial institutions (the issuers) with original maturities of one year or three or five years are classified as investment securities – held to maturity (“HTM”). The Company’s asset management products are managed by banks and financial institutions and invested in fixed-income financial products that are permitted by the China Securities Regulatory Commission (“CSRC”), such as government bonds, corporate bonds and central bank notes. The investment portfolios of these products are not disclosed to the Company by the banks or financial institutions.

HTM securities are those securities in which the Company has the ability and intent to hold the security until maturity. HTM securities are recorded at amortized cost. Premiums and discounts on HTM securities are amortized or accreted over the life of the related HTM security as an adjustment to yield using the effective-interest method. There were no such premiums or discounts on HTM securities for any of the reporting periods presented herein.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(f)

Investments securities – held to maturity (con’t)

A decline in the market value of any HTM securities below cost that is deemed to be other-than-temporary results in an impairment to reduce the carrying amount to fair value. To determine whether an impairment is other-than-temporary, the Company considers all available information relevant to the collectability of the security, including past events, current conditions, and reasonable and supportable forecasts when developing an estimate of cash flows expected to be collected. The Company regularly evaluates the potential for impairment of the HTM securities, in particular when conditions indicate a potential for impairment, but not less than annually. There was no impairment noted for any of the reporting periods presented herein.

Interest income from HTM securities is recognized when the Company’s right to receive payment is established. Accrued but unpaid interest income is recorded as interest receivable in the accompanying consolidated statement of financial position.

(g)

Net investment in direct financing leases

(h)

Revenue recognition

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(h)

Revenue recognition (con’t)

Direct financing lease interest income

Contract Balances

Allocation to Remaining Performance Obligations

(i)

Property and equipment, net

Property and equipment are recorded at cost less accumulated depreciation and impairment. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, with 3%salvage value. The average estimated useful lives of property and equipment are discussed in Note 6.

The Company eliminates the cost and related accumulated depreciation of assets sold or otherwise retired from the corresponding accounts and includes any gain or loss in the consolidated statements of income and comprehensive income. The Company charges maintenance, repairs and minor renewals directly to expenses as incurred; major additions and improvements of equipment are capitalized.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(j)

Impairment of long-lived assets

The Company applies the provisions of ASC No. 360 Sub topic 10, “Impairment or Disposal of Long-Lived Assets” (ASC 360-10) issued by the Financial Accounting Standards Board (“FASB”). ASC 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

(k)

Non-marketable equity investments

On August 28, 2018, a subsidiary of the Company entered into an agreement to acquire a 30% equity interest in Hui Yue Finance Leasing (Ningbo) Co., Ltd. (“Hui Yue”). Hui Yue will be a joint venture between the Company, Mercury International Financial Leasing (Tianjin) Co., Ltd. (formerly translated as Chenxing International (Tianjin) Financial Leasing Co., Ltd) and Zhongtou Jinchuang (China) Financial Holding Group Co., Limited (formerly translated as Sino Investment Jinchuang Financial Holding Co., Ltd). The Company was originally required to pay RMB 300 million ($43.7 million) for its 30% interest in Hui Yue.

On October 26, 2018, the parties to the agreement entered into an amendment providing that the Company would acquire only a 15% equity interest in Hui Yue (instead of the originally contemplated 30%) for RMB150 million($21.8 million). Pursuant to the agreement, the Company was required to pay the capital within thirty years, from the date of change of Hui Yue’s company registration. The first payment of RMB 20 million ($2.9 million) was made on October 30, 2018. Hui Yue will focus on the financial leasing of equipment relating to port logistics, construction machinery, energy conservation and medicine in Ningbo, China. The Company believes that participating in this investment has the opportunity to boost the Company’s growth in the leasing sector by leveraging the local financial, governmental and client resources of the Company.

The Company elected to record its equity investments in this privately held company using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer, since the Company does not have significant influence over Hui Yue and its investment in Hui Yue is without readily determinable fair value. There was no observable price change for the year ended June 30, 2022.

On February 17 2021, a subsidiary of the Company entered into an agreement to convert Hui Yue’s equity into the creditor’s right of Shenzhen Jiruhai Technology Co., Ltd.

Equity investments in Hui Yue accounted for using the measurement alternative are subject to periodic impairment reviews. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of these equity securities.

On June 16,2021, Beijing Fu Sheng Xing Trading Co., LTD (“Fu Sheng Xing”) was established under the laws of the PRC. Full Shine owns 40% interest in Fu Sheng Xing.

F-16

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(l)

Fair value measurements

Level 1 - inputs are based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

As of June 30, 2022 and 2021, financial instruments of the Company primarily consisted of cash, restricted cash, accounts receivables, other receivables, and bank and other loans which were carried at cost or amortized cost on the consolidated statement of financial position, and carrying amounts approximated their fair values because of their generally short maturities or the rate of interest of these instruments approximate the market rate of interest.

(m)

Foreign currency translation

The Company’s reporting currency is the United States Dollar (“US dollars” or “USD”). The functional currency of the Company’s subsidiaries in the PRC is the Chinese Yuan, or Renminbi (“RMB”).


	June 30, 2022	June 30, 2021
Statement of financial position items, except for equity accounts	6.7114	6.4601


	For the years ended June 30
	2022	2021
Items in the statements of income and comprehensive income, and statements of cash flows	6.4571	6.6273

F-17

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(n)

Interest expense

Interest expense derived from the loans providing funds for financial leasing contracts is classified as cost of revenue in the consolidated statements of income and comprehensive income.

(o)

Non-interest expenses

(p)

Income taxes

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

(q)

Comprehensive income

Comprehensive income includes net income and foreign currency translation adjustments. Comprehensive income is reported in the statements of income and other comprehensive income.

Accumulated other comprehensive income, as presented on the consolidated statement of financial position, represents cumulative foreign currency translation adjustments.

(r)

Operating leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current and non-current lease liabilities on the Company’s consolidated statement of financial position.

ROU lease assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company use its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay to borrow an amount equal to the lease payments under similar terms. The operating lease ROU assets also include initial direct costs incurred and any lease payments made to the lessor or before the commencement date, minus any lease incentives received. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

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Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(s)

Share-based compensation

The Company accounts for share-based compensation awards to employees in accordance with ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense net of estimated forfeitures over the requisite service period. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods.

If an award is cancelled for no consideration and it is not accompanied by a concurrent grant of (or offer to grant) a replacement award, it is accounted for as a repurchase for no consideration. Any unrecognized compensation cost is recognized on the cancellation date. Cancellation of an award, accompanied by a concurrent grant of (or offer to grant) a replacement award, is accounted for as a modification of the cancelled award (ASC 718-20-35-8 through 35-9).

(t)

Commitments and contingencies

(u)

Earnings per Share (EPS)

Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic net income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares pertaining to warrants, stock options, and similar instruments had been issued and if the additional common shares were dilutive. Diluted earnings per share are based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding unvested restricted stock, options and warrants, and the if-converted method for the outstanding convertible instruments. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, outstanding convertible instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).

(v)

Disposal groups (or non-current assets) held-for-sale and discontinued operations

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(w)

Impact of recently issued accounting pronouncements

In December 2019, the FASB issued ASU No. 2019-12 (“ASU 2019-12”), Simplifying the Accounting for Income Taxes. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted. The Group is not early adopting the standard and it is in the process of evaluation the impact of adoption of this new standard on its consolidated financial statements.

(x)

Impact of recently issued accounting pronouncements not yet adopted

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(x)

Impact of recently issued accounting pronouncements not yet adopted (con’t)

The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3.

The lessor would have otherwise recognized a day-one loss.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(x)

Impact of recently issued accounting pronouncements not yet adopted (con’t)

Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated statement of financial position, consolidated statements of income and comprehensive income and consolidated statements of cash flows.

(y)

Related parties

The Company identifies related parties, and accounts for, discloses related party transactions in accordance with ASC 850, “Related Party Disclosures” and other relevant ASC standards.

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

Transactions between related parties commonly occurring in the normal course of business are considered to be related party transactions. Transactions between related parties are also considered to be related party transactions even though they may not be given accounting recognition. While ASC does not provide accounting or measurement guidance for such transactions, it nonetheless requires their disclosure.

(z)

Employee retirement benefits

Pursuant to the relevant regulations of the PRC government, the Company’s PRC subsidiaries participate in a local municipal government social benefits plan, and is required to contribute a certain percentage of the basic salaries of its employees to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees. The Company’s only obligation is to pay the ongoing required contributions. Contributions are charged to expense as incurred. There are no provisions whereby forfeited contributions may be used to reduce future contributions. Amounts contributed during the years ended June 30, 2021 and 2022, are discussed in Note 12.

(aa) Deposits from direct financing leases

After the expiration of the lease term or early termination of the contract, and after the customer has paid off all the rent, liquidated damages and other payables, the company will return the deposit to the customer if no other expenses are incurred.

If both parties agree to terminate the contract early, the company shall not set off the security deposit against the rent of other periods, otherwise the customer may set off the security deposit against the outstanding rent of each period on the date of each rent payment; the order of setting off the security deposit is from the last rent to the next period.

During the lease period, if the customer fails to fulfill the payment obligation according to the contract, the company has the right to deduct the amount due to the company from the security deposit, and the customer must make up the security deposit and the relevant overdue interest within the time required by the company.

F-22

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(ab) Other assets

Other assets include accounts receivable and other receivables and advance to supplier.

Account receivables and other receivables are recorded net of allowance for uncollectible accounts.The Company usually determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Delinquent account balances are written off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of June 30, 2022 and 2021, the Company did not accrue allowance for uncollectible balances.

Advances to suppliers include prepayments to the Company’s suppliers,advance payment depends on specific circumstances, such as the nature of goods or services, negotiations with suppliers, and the delivery time of products or services received from suppliers after the advance payment. The Company continuously monitors suppliers’ delivery and payment, while maintaining an estimated credit loss reserve based on historical experience and any specific supplier problems (such as the identified inventory supply interruption). If the Company has difficulty in receiving payment from any supplier, the Company will take the following measures: stop buying products from the supplier, demand an immediate refund of the Company’s advance payment, and take legal actions if necessary. During the reporting periods, no legal proceedings were brought. If all these steps are unsuccessful, the management will decide whether the advance payment should be retained or cancelled. The balance of allowance for doubtful accounts relating to advances to suppliers was $0 as of As of June 30, 2022 and 2021.

(ac) Other current liabilities

Other current liabilities include accounts payable, employee compensation payable, taxes payable and other payables.

Accounts payable represent liabilities for goods and services provided to the Company prior to the end of the financial year which are unpaid. The amounts are unsecured and are paid on normal commercial terms. employee compensation payable refers to the salary, social security, provident fund and bonus payable to the Company’s employees before the end of the current fiscal year. taxes payable refers to the composition of VAT and surtax payable under PRC tax before the end of the fiscal year. Other payables mainly consist of loans payable, lawyer fees, service fees, etc.

F-23

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 3 - RISKS

(a)	Credit risk

Credit risk is one of the most significant risks for the Company’s business. Credit risk exposure arises principally in investments in direct financing leases.

The Company identifies credit risk collectively based on industry, geography and customer type. This information is monitored regularly by management.

Further quantitative disclosures in respect of the Company’s exposure to credit risk arising from its investments in direct financing leases are set out in Note 4.

The Company’s asset management products are managed by banks and financial institutions and invested in fixed-income financial products that are permitted by the China Securities Regulatory Commission (“SRC”), such as government bonds, corporate bonds and central bank notes. Management does not foresee any significant credit risks from these assets and does not expect that these banks or financial institutions may default and cause losses to the Company.

PRC state-owned banks, such as Bank of China, are subject to a series of risk control regulatory standards, and PRC bank regulatory authorities are empowered to take over the operation and management when any of those banks faces a material credit crisis. Meanwhile, China does not have an official deposit insurance program, nor does it have an agency similar to what was the Federal Deposit Insurance Corporation (FDIC) in the U.S. In the event of bankruptcy of one of the financial institutions in which the Company has deposits or investments, it may be unlikely to claim its deposits or investments back in full. As of June 30, 2022 and 2021, the Company held cash and restricted cash was Nil and US$22,009, respectively, that was not insured by any governmental authority. To limit exposure to credit risk relating to deposits, the Company primarily places cash deposits only with well-known financial institutions in the PRC. There has been no recent history of default in relation to these financial institutions.

(b)	Liquidity risk

The Company is also exposed to liquidity risk, which is the risk that it will be unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. The Company is also exposed to liquidity risk on its short-term investments, including the risks that the banks and financial institutions that manage the Company’s short-term investments will be unable to redeem such short-term investments at a price equal to principal and accrued and unpaid interest or, in extreme circumstances, such as significant redemptions or a deterioration of liquidity in the financial markets, may be unable to redeem them at all. As a result, the Company may not have access to the capital related to such short-term investments when needed. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, the Company may turn to other financial institutions, and historically has occasionally take loans from its shareholders to obtain short-term funding to meet liquidity shortages.

(c)	Foreign currency risk

A majority of the Company’s operating activities and a significant portion of the Company’s assets and liabilities are denominated in the RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the Peoples’ Bank of China (the “PBOC”) or other authorized financial institutions at exchange rates quoted by the PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. The value of the RMB is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.

F-24

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 3 - RISKS (CON’T)

(d)	Business and economic risks

The Company’s operations are carried out in the PRC through its direct and indirect WFOEs. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

The Company revenue for the fiscal year ending June 30, 2022 increased 57% compared to the fiscal year ending June 30, 2021 as the adverse impact of the COVID-19 on the Company’s finance lease business was significantly reduced by China’s control measures for the outbreak. In addition, due to the continued impact of the COVID-19, the lessee’s ability to repay the rental expense was still affected and the Company had made specific allowance for the lease payment with amount to USD 119,067,358 as of June 30 2022 based on the specific risk of collectability of the lessee was identified.

NOTE 4 - NET INVESTMENT IN DIRECT FINANCING LEASES

Jinshang Leasing’s leasing operations consist principally of leasing high value equipment under direct financing leases expiring in 1-5 years as of the balance sheets dates. The leases bear effective interest rate of 4.3% - 13.3% per annum.

The following is a summary of the components of the Jinshang Leasing’s net investment in direct financing leases at June 30, 2022 and 2021:


	June 30, 2022		June 30, 2021
Total minimum lease payments to be received	$	122,893,158	$	127,827,892
Less: Amounts representing estimated executory costs		—		—
Minimum lease payments receivable		122,893,158		127,827,892
Less: unearned income, representing interest		(3,137,139)		(3,607,312)
Present value of minimum lease receivable		119,756,019		124,220,580
Less: Allowance for uncollectible receivables		(119,067,356)		(121,442,109)
Net investment in direct financing leases	$	688,663	$	2,778,471

Future minimum lease receipts under non-cancellable direct financing lease arrangements are as follows:


	June 30, 2022		June 30, 2021
Within 1 year	$	332,802	$	377,696
2 years		41,764		117,869,926
3 years		101,782,289		7,847,263
4 years		14,659,311		1,733,007
5 years		6,076,992		—
Total minimum finance lease receivables	$	122,893,158	$	127,827,892

F-25

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 4 - NET INVESTMENT IN DIRECT FINANCING LEASES (CON’T)

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. The accrual of direct financing lease interest income had been suspended on delinquent finance lease receivables with remaining contractual amounts due of $119,067,356 and $121,442,109 as of June 30, 2022 and 2021. As of June 30, 2022 and 2021, there were no recorded investment in direct financing leases past due 90 days or more and still accruing.

The following is a credit quality analysis of finance lease receivables. In the event that an instalment repayment of a finance lease receivables is overdue for more than 30 days, the entire outstanding balance of the finance lease receivables is classified as overdue. If the instalment repayment is overdue within 30 days, only the balance of this instalment is classified as overdue.


	June 30, 2022		June 30, 2021
Overdue and credit-impaired	$		$
– Overdue above 90 days		11,746,159		12,373,365
Not yet overdue but credit impaired		107,317,870		109,039,328

Overdue but not credit-impaired
Neither overdue nor impaired		691,990		2,807,887

Less: Allowances for impairment losses		(119,067,356)		(121,442,109)
Net investment in direct financing leases, end of year	$	688,663	$	2,778,471

The allowance for uncollectible minimum lease payments receivables in direct financing leases for the years ended June 30, 2022 and 2021 were as following:


	June 30, 2022		June 30, 2021
Allowance for uncollectible receivables at the beginning of year	$	121,442,109	$	102,069,239
(Reversal of Provision)for lease payment receivables		(25,971)		(192,136)
Provision for lease payment receivables		2,284,032		9,687,138
Effect of foreign currency translation		(4,632,814)		9,877,868
Allowance for uncollectible receivables at the end of year	$	119,067,356	$	121,442,109


	June 30, 2022		June 30, 2021
Allowance for uncollectible receivables relating to:
Individually evaluated for impairment	$	119,064,028	$	121,412,692
Collectively evaluated for impairment		3,328		29,417
Ending balance	$	119,067,356	$	121,442,109

Minimum lease payments receivable
Individually evaluated for impairment	$	119,064,028	$	121,412,692
Collectively evaluated for impairment		3,829,130		6,415,200
Ending balance	$	122,893,158	$	127,827,892

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Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 4 - NET INVESTMENT IN DIRECT FINANCING LEASES (CON’T)

The allowance for credit losses provides coverage for probable and estimable losses in the Company’s investment in direct financing leases. The allowance recorded is based on a quarterly review. The determination of the appropriate amount of any provision is highly dependent on management’s judgment at that time and takes into consideration all known relevant internal and external factors, including levels of nonperforming leases, customers’ financial condition, leased property values and collateral values as well as general economic conditions. When a direct financing lease receivable is determined uncollectible, for example, the customer declares bankruptcy, or the Company reaches agreement of debt restructuring with the customer, the direct financing lease would be written off from the investment in direct financing leases.

Credit Quality of Investment in Direct Financing Lease:

The Company performs a quarterly review on the credit quality of its investments in direct financing leases, by evaluating a variety of factors, including dependence on the counterparties, latest financial position and performance of the customers, actual defaults, estimated future defaults, historical loss experience, leased property values or collateral values, and other economic conditions such as economic trends in the area or country. In cases where heightened risk is detected as a result of factors indicating that a customer is having difficulty repaying the underlying financing, such as a default in making interest payments, material changes to the customer’s business, and deterioration of financial condition and cash flow support, the Company classifies the contracts as “abnormal contracts,” contracts without such heightened risk indicators are classified as “normal contracts”. For those contracts, the Company’s WFOE generally initiates negotiations with the customer about possible improvement or remediation measures, such as an improvement plan for cash flow management, third-party support, extension plans and similar measure, and implement close supervision of the remediation measures adopted.

The risk classification of direct financing lease receivables is as follows:


	June 30, 2022		June 30, 2021
Normal	$	3,829,130	$	6,415,200
Abnormal		119,064,028		121,412,692
Total	$	122,893,158	$	127,827,892

NOTE 5 - LEASES


	June 30, 2022		June 30, 2021
Operating leases:
Operating lease right of use assets	$	—	$	50,935
Current operating lease liabilities		—		55,022
Total operating lease liabilities	$	—	$	55,022

Lease commitments:

The Company’s Jinshang Leasing, and Zhongrui Xuikai, entered into operating lease agreements with landlords to lease office space in Beijing.

The following table sets forth our contractual obligations as of June 30, 2022:


For the year ended June 30,	Operating lease
2022	$	44,103
2023		6,333
Total	$	50,436

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Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 6 - PROPERTY AND EQUIPMENT, NET

Property and equipment as of June 30, 2022 and 2021 consisted of the following:


	Useful life	Salvage
	(years)	value		June 30, 2022		June 30, 2021
Office equipment	5	3	%		200,947		208,765
Electric equipment	5	3	%		26,945		26,091
Less: accumulated depreciation					(224,152)		(231,973)
Property and equipment, net				$	3,740	$	2,883

Depreciation expense totaled $297 and $838 for the years ended June 30, 2022 and 2021, respectively.

NOTE 7 - OTHER ASSETS

Other assets as of June 30, 2022 and 2021 consisted of:


	June 30, 2022		June 30, 2021
Account receivable	$	261,852	$	—
Other receivables		349,793		770,985
	$	611,645	$	770,985

NOTE 8 - OTHER LIABILITIES

Other liabilities as of June 30, 2022 and 2021 consisted of:


	June 30, 2022		June 30, 2021
Other tax payable	$	1,630,159	$	1,623,217
Accounts payable		3,874		—
Accrued payroll		172,508		101,656
Compensation payable		1,260,000		1,260,000
Legal fee payable		381,224		276,782
Loans payable		263,205		—
Audit fee payable		60,000		51,294
Rental and property management fee payable		264,689		269,392
Other payables		271,529		132,927
	$	4,307,188	$	3,715,268

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Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 9 - SHARE-BASED COMPENSATION

2015 Long-Term Incentive Equity Plan

On October 20, 2015, the Company adopted the 2015 Long-Term Incentive Equity Plan, or the “Plan”, under which the Company may grant options to purchase ordinary shares of the Company to its employees, officers, directors and consultants. The total number of Ordinary Shares reserved and available for issuance under the Plan shall be a number of Ordinary Shares equal to ten percent (10%) of the total outstanding Ordinary Shares as of the closing date of that certain Agreement and Plan of Reorganization, dated as of April 10, 2015, by and among the Company, WFG and the shareholders of WFG (“Merger Agreement”), after taking into account the Ordinary Shares that may be issued pursuant to the Merger Agreement and the conversion of any shares held by the Company’s public shareholders as provided for in the Company’s Amended and Restated Certificate of Incorporation.

The Plan shall be administered by the Board or a Committee. If administered by a Committee, such Committee shall be composed of at least two directors, all of whom are “outside directors” within the meaning of the regulations issued under Section 162(m) of the Code and “non-employee” directors within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended. Committee members shall serve for such term as the Board may in each case determine and shall be subject to removal at any time by the Board.

The term of each Option shall be fixed by the Committee; provided, however, that an Incentive Option may be granted only within the ten-year period commencing from the Effective Date and may only be exercised within ten years of the date of grant (or five years in the case of an Incentive Option granted to an optionee who, at the time of grant, owns Ordinary Shares possessing more than 10% of the total combined voting power of all classes of voting shares of the Company (“10% Shareholder”).

The exercise price per Ordinary Share purchasable under an Option shall be determined by the Committee at the time of grant and may not be less than 100% of the Fair Market Value on the date of grant (or, if greater, the par value of the Ordinary Shares); provided, however, that the exercise price of an Incentive Option granted to a 10% Shareholder will not be less than 110% of the Fair Market Value on the date of grant.

The Plan was approved and unless terminated by the Board, it shall continue to remain effective until such time as no further awards may be granted and all awards granted under the Plan are no longer outstanding. Notwithstanding the foregoing, grants of Incentive Options may be made only during the ten-year period beginning on the Effective Date.

The following table summarizes stock award activity and related information for all of Wins Finance’s Equity Plans for the years ended June 30, 2022 and 2021:


			Weighted Average
		Weighted	Remaining
	Number of	Average	Contractual
	Shares	Exercise Price	Term In Years
		$
Outstanding, July 1, 2016	1,270,000	12	2.42
Granted	—	12	3.00
Exercised	—	—	—
Forfeited	(1,190,000)	12	—
Canceled	(80,000)	12	—
Outstanding, June 30, 2017, 2018, 2019, 2020 and 2021	—	—	—
Granted	—	—	—
Exercised	—	—	—
Forfeited	—	—	—
Canceled	—	—	—
Outstanding, June 30, 2022	—	—	—

Exercisable, June 30, 2021 and 2022	—	—	—
Vested and expected to vest, June 30, 2021 and 2022	—	—	—

F-29

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 9 - SHARE-BASED COMPENSATION (CON’T)

2015 Long-Term Incentive Equity Plan (con’t)

During the year ended June 30, 2017, 1,190,000 options were forfeited and 80,000 options were cancelled due to the termination of the holders’ employment prior to vesting. On February 14, 2017, Wins Finance terminated the remaining option agreements with the employees for no consideration. No options remained outstanding following the cancellation and as of June 30, 2021 and 2022.

The Company measures compensation cost related to share options based on the grant-date fair value of the award using the Binomial Model. The weighted-average assumptions used in the Binomial Model calculation for option grants during the year ended June 30, 2016 were as follows:


Expected volatility		51.5	%
Risk-free interest rates		1.77	%
Expected terms		5.0 years
Dividend yields		0	%
Sub-Optimal behavior multiple		2.80
Fair Value per share of options granted	$	5.27~$5.44

The expected volatility assumption is based on historical weekly volatility of peer companies’ share price. The Company utilized peer company data due to Wins Finance’s limited history of publicly traded shares. During the year ended 2016, the expected term assumption represents the remaining life of the option at the grant date. The risk-free interest rates used are based on the USD Treasury Activities (IYC25) Zero Coupon Yield.

The estimated fair value of share-based compensation to employees is recognized as a charge against income on a ratable basis over the requisite service period, which is generally the vesting period of the award.

In connection with the grant of stock options to employees, the Company recorded share-based compensation charges of nil and nil , respectively, for the years ended June 30, 2022 and 2021, respectively. The negative amount in 2017 resulted from the reversal of share-based compensation expense for the Company’s options that were cancelled due to the termination of the holder’s employment prior to vesting.

NOTE 10 - CAPITALIZATION

Common Stock

As of October 26, 2015, Wins Finance is authorized to issue up to 100,000,000 ordinary shares with a par value of $0.0001, 21,526,747 shares of Common Stock were issued and outstanding. 16,800,000 and 4,726,747 ordinary shares were held by WFG’s shareholders and former stockholders of Sino, respectively.

On June 28, 2016, the Company repurchased 5,100 of its ordinary shares from Bradley Reifler, a former director of the Company, for $60,180, and 1,480,000 shares from Bluesky LLC for $17,464,000. Of the amounts payable to Bluesky LLC, $17 million was paid. Bluesky LLC is a limited liability Company owned and controlled by Bluesky Family Trust, a family trust benefitting the family of Jianming Hao, the Company’s former Chairman, Co-Chief Executive Officer and President. Balance of $464,000 remained unpaid as of June 30, 2022 and June 30, 2021.

On December 2, 2016, the Company repurchased 204,005 of its ordinary shares from Richard Xu, a former officer of the Company, for a consideration of $204.

As of June 30, 2022 and 2021, there were 19,837,642 shares of common stock issued and outstanding.

F-30

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 11 - STATUTORY RESERVE

In accordance with the PRC regulations on enterprises and the company’s articles of association, enterprises established in the PRC are required to provide statutory reserve before any dividend distribution, which is appropriated from net profit as reported in the enterprise’s PRC statutory accounts for the calendar year. Before making any dividend distribution, an enterprise is required to allocate at least 10% of its annual after-tax profit to the general reserve until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. The statutory reserve can only be used for specific purposes and is not distributable as cash dividends.

NOTE 12 - EMPLOYEE RETIREMENT BENEFITS

The Company has made employee benefit contributions in accordance with Chinese relevant regulations, including retirement insurance, unemployment insurance, medical insurance, housing fund, work injury insurance and birth insurance. The Company recorded the contribution in the salaries and employee charges when incurred. The contributions made by the Companies were $89,501 and $101,318 for the year ended June 30, 2022 and 2021, respectively.

NOTE 13 - LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per share for the years ended June 30, 2022 and 2021, respectively:


	June 30, 2022		June 30, 2021
Net loss attributable to the common shareholders	$	(2,811,094)	$	(41,077,304)

Basic weighted-average common shares outstanding		19,837,642		19,837,642
Effect of dilutive securities
Diluted weighted-average common shares outstanding		19,837,642		19,837,642
Loss per share – Basic	$	(0.14)	$	(2.07)
Loss per share – Diluted	$	(0.14)	$	(2.07)

Basic earnings per share are computed by dividing the net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed by adding other common stock equivalents, including non-vested common share in the weighted average number of common shares outstanding for a period, if dilutive. As of June 30, 2022 and 2021, there were no dilutive securities.

NOTE 14 - INCOME TAXES

Pursuant to the relevant rules and regulations of the Cayman Islands and the BVI, the Company and its subsidiary incorporated therein are not subject to any income tax pursuant to the rules and regulations of their respective countries of incorporation.

No Hong Kong Profits Tax has been made for the years ended June 30, 2022 and 2021 as Full Shine had no assessable profits arising in Hong Kong.

The provision for PRC Enterprise Income Tax (“EIT) is calculated at 25% of the estimated assessable profits of the subsidiaries established in the PRC during the years ended June 30, 2022 and 2021.

Under the EIT Law, investment income from security funds is exempted from PRC EIT.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 14 - INCOME TAXES (CON’T)

The PRC income tax returns are generally not subject to examination by the tax authorities for tax years before calendar (tax) year 2013. With a few exceptions, the calendar (tax) years 2014-2018 remain open to examination by tax authorities in the PRC. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or its withholding agent. The statute of limitations extends to five years under special circumstances, which are not clearly defined. In the case of a related party transaction, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion.

The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits of the position, and measures the unrecognized benefits associated with the tax position. For the years ended June 30, 2022 and 2021, the Company had no unrecognized tax benefits.

The Company does not anticipate any significant increase to its liabilities for unrecognized tax benefits within the next 12 months. The Company will classify interest and penalties, if any, related to income tax matters in income tax expense.

The Company’s WFOEs are subject to income taxes in China and are subject to routine corporate income tax audits. Management believes that the WFOEs’ tax return positions are fully supported, but tax authorities may challenge certain positions, which may not be fully sustained. Determining the income tax expense for these potential assessments and recording the related effects requires management judgments and estimates. The amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in the Company’s income tax expense and, therefore, could have a material impact on the Company’s provision for income tax, net income and cash flows. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty and the timing of the resolution and/or closure of audits is not certain. If any issues addressed in tax audits of the Company’s WFOEs are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income tax in the period such resolution occurs.

Income tax payable represented enterprise income tax at a rate of 25% of taxable income the Company accrued but not paid. Income tax payable as of June 30, 2022 and 2021 comprises:


	June 30, 2022		June 30, 2021
Jinshang Leasing	$	738		—
Total	$	738	$	—


	For the year ended June 30,
	2022		2021
Current income tax benefit (expense)	$	(738)		1,256,560
Deferred tax expense		—		(25,846,977)
Total expense for income taxes	$	(738)		(24,590,417)

The reconciliation between the effective income tax rate and the PRC statutory income tax rate of 25% is as follows:


	June 30, 2022		June 30, 2021
PRC statutory tax	25	%	25	%
Effect of non-deductible expenses	—		(14.6)	%
Effect of non-taxable income	—		(6.9)	%
Effect of preferential tax rate	(22.5)	%	—
Others	—	%	147.9	%
Effective tax rate	2.5	%	151.4	%

F-32

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 15 - RELATED PARTY TRANSACTIONS AND BALANCES

Related party balances

Related party balances as of June 30, 2022 and 2021 (apart from those disclosed elsewhere in these financial statements) consisted of:

Bluesky LLC is a limited liability Company owned and controlled by Bluesky Family Trust, a family trust benefitting the family of Jianming Hao, the Company’s former Chairman, Co-Chief Executive Officer and President.

The amount due to Bluesky LLC was non-trade in nature, interest free, unsecured and due on demand.

NOTE 16 - DEPOSITS FROM DIRECT FINANCING LEASES

The deposit for direct finance leasing is delivered to the company by the customer when the company signs the finance lease contract as a guarantee for the performance of the contract, the deposit does not bear interest. The balance of the direct financing margin as of June 30, 2022 and 2021 was $ 2,084,305 and $ 2,050,035, respectively.

NOTE 17 - COMMITMENTS AND CONTINGENCIES

Guarantee Commitments

During the year ended June 30, 2018, Jinshang Leasing and a third party jointly entered into certain finance lease contracts with a customer with total contract amount of $70.1 million (RMB464 million). Jinshang Leasing provides financing to the customer of $6.2 million (RMB44 million)(included in Note 4 - net investment in direct financing leases) and the third party provides the remaining financing of $59.4 million (RMB420 million), for a period up to August 2020. Jinshang Leasing also acts as a guarantor and is obligated to pay the third party if the customer fails to pay the obligations when they become due. As of June 30, 2022, the maximum guarantee issued by Jinshang Leasing was $68.8 million(RMB462 million).

Litigation

The Company is involved in various legal actions arising in the ordinary course of its business. As of June 30, 2022, the Company was involved in 1 lawsuits in China, which the Company is a defendant in relation to its financing lease business (see below). The cases are in the process of being enforced.

On October 31, 2014, King & Wood Mallesons filed a complaint in Xicheng District People’s Court of Beijing on behalf of its client for breach of contract against Jinshang Leasing, our subsidiary. On February 3, 2015, the court agreed with Jinshang Leasing that it did not have jurisdiction over the proceeding, and the case was transferred to the court in Beijing, Haidian. There has been no activity in the case since it was transferred to the Beijing Haidian court. We believe that resolution of this matter will not result in any payment that, in the aggregate, would be material to our financial position or results of operations.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2022

NOTE 17 - COMMITMENTS AND CONTINGENCIES (CON’T)

Litigation (con’t)

As of June 30, 2018, the Company and certain of its executive officers have been named as defendants in one civil securities lawsuit filed in U.S. District Courts. On April 20, 2017, Michel Desta filed a securities class action complaint in the District Court for the Central District of California seeking monetary damages against us, JianmingHao, Renhui Mu, Peiling (Amy) He, and Junfeng Zhao (entitled Desta v. Wins Finance Holdings, Inc., et al.; C.D. Cal. Case No. 2:17-cv-02983) (hereafter, the “California Action”). On June 26, 2017, the Court issued an Order appointing lead plaintiffs and lead counsel, and on August 25, 2017 lead plaintiffs filed an Amended Class Action Complaint. The Amended Complaint (which did not name Peiling (Amy) He as a defendant), alleges a claim against us for securities fraud purportedly arising from alleged misrepresentations concerning Wins’ principal executive offices (which alleged misrepresentations resulted in Wins being added to, and then removed from, the Russell 2000 index). On October 24, 2017, we moved to dismiss the Amended Complaint for failure to state a claim as against us.

On March 1, 2018, the District Court for the Central District of California issued an Order denying the Company’s motion to dismiss. Thus, the civil action has proceeded to the fact gathering “discovery” stage in respect to the Company.

As a result of a private mediation conducted in November 2018, the Company agreed in principle to settle the class action, on behalf of all remaining defendants. The full terms of that settlement remain confidential (but include certain contingencies concerning shareholder participation in the settlement and required court approvals). The court granted preliminary approval of the settlement by order entered on March 4, 2019. Given that the Company has not yet received the necessary approvals from Chinese regulators as to the transfer of the settlement funds from China to the United States, the Court entered an Order dated August 11, 2020 setting a final settlement approval hearing for March 22, 2021.

As of this date and to the best of our knowledge, neither the Company nor the individual Defendants have been served or have agreed to accept service of the summons and complaint. As of this date, Plaintiff has not filed an affidavit of service with the Court concerning service upon any Defendant. In accordance with procedural rules applicable to such securities class actions, motions for appointment as lead plaintiff(s) and lead counsel were filled on or before September 24, 2020, following the Court’s resolution of which it is common for the newly-appointed lead plaintiff(s) to amend the complaint and allegations underlying the claims. There is not any update progress since from June 30, 2022.

NOTE 18 - SUBSEQUENT EVENTS

No subsequent event which had a material impact on the Company was identified through the date of issuance of the financial statements.

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FINANCIAL STATEMENTS
Contents		Page(s)
Reports of Independent Registered Public Accounting Firm		F-36
Consolidated Statement of Financial Position as of June 30, 2021 and 2020		F-39
Consolidated Statements of Income and Comprehensive Income (Loss) for the years ended June 30, 2021, 2020 and 2019		F-40
Consolidated Statements of Changes in Stockholders’ Equity for the years ended June 30, 2021 and 2020		F-41
Consolidated Statements of Cash Flows for the years ended June 30, 2021,2020 and 2019		F-42
Notes to Consolidated Financial Statements		F-43

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of Wins Finance Holdings Inc and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of financial position of Wins Finance Holdings Inc. and subsidiaries (collectively, the “Company”) as of June 30, 2021, and the related consolidated statements of income and other comprehensive income, changes in stockholders’ equity and cash flows for each of the year ended June 30, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated statement of financial position of the Company as of June 30, 2021, and the related consolidated statements of profit and other comprehensive income, changes in equity and cash flows for the year ended June 30, 2021, in conformity with U.S. generally accepted accounting principles.

Going Concern Uncertainty

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, During the financial year ended 30 June 2021, the Company incurred a net loss of approximately USD 41 million and as at 30 June 2021, its negative net stockholders’ equity of approximately US$2.6 million and its negative operating activities cash flows of US$13,007. These events or conditions indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern.

In addition, we draw attention to Note 16 of the financial statements, which describes the uncertainty related to the outcome of the lawsuit filed against the Company. and we also draw attention to Note 2 of the financial statements, which describe the Company facing uncertainty as to the operational impact of the COVID-19 outbreak on the Company’s financial leasing business resulting had a material adverse effect on the Company’s results of operation, cash flows and liquidity. The financial statements have been prepared on a going concern basis in view of the Company will be able to:

(a)obtain continued financial support from its related party or its ability to obtain external financing; or

(b)further implement management’s business plan to extend its operations and generate sufficient revenues to meet its obligations.

The validity of the going concern basis on which the financial statements are prepared depends on the Company’s ability to operate as a going concern as set forth above. The assumptions are premised on future events, the outcome of which are inherently uncertain. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of Wins Finance Holdings Inc and Subsidiaries

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Basis for Opinion (Cont’d)

/s/ Audit Alliance LLP

Singapore

October 10, 2023

We have served as the Company’s auditor since 2018.

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Report of Independent Registered Public Accounting Firm

Opinion on the financial statements and Internal Control over Financial Reporting

Basis for qualified opinion

Loss of control over subsidiaries

Material Uncertainty Related to Going Concern

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our qualified opinion.

/s/ Audit Alliance LLP

We have served as the Company’s auditor since 2018.

Singapore

October 10, 2023

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(In US dollars, except share data)


	June 30, 2021		June 30, 2020
ASSETS
Cash	$	6,621	$	38,820
Restricted cash		22,009		—
Net investment in direct financing leases (Note 4)		2,778,471		16,958,300
Operating lease, right-of-use asset (Note 5)		50,935		63,356
Property and equipment, net (Note 6)		2,883		26,592
Deferred tax assets, net (Note 14)		—		24,474,583
Other assets (Note 7)		770,985		2,054,907
Non-marketable investment (Note 2<k>)		—		2,828,963
TOTAL ASSETS	$	3,631,904	$	46,445,521

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Interest payable		—		8,320
Income tax payable (Note 14)		—		1,423,022
Deposits from direct financing leases		2,050,035		5,294,690
Operating lease liability-current(Note 5)		55,022		47,904
Other liabilities (Note 8)		3,715,268		3,157,021
Due to related party (Note 15)		464,000		464,000
Operating lease liability-non-current (Note 5)		—		7,103
Total Liabilities	$	6,284,325	$	10,402,060

Stockholders’ Equity
Common stock (par value $0.0001 per share, 100,000,000 shares authorized; 19,837,642 issued and outstanding at June 30, 2021 and 2020)(Note 10)	$	1,984		1,984
Additional paid-in capital		211,934,432		211,934,432
Statutory reserve (Note 11)		4,687,085		4,687,085
(Accumulated losses)/retained earnings		(195,618,646)		(154,541,342)
Accumulated other comprehensive losses		(23,657,276)		(26,038,698)
Total Stockholders’ Equity		(2,652,421)		36,043,461
TOTAL LIABILITIES AND EQUITY	$	3,631,904	$	46,445,521

See notes to the consolidated financial statements.

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(In US dollars, except share data)


	For the years ended June 30,
	2021		2020		2019

Direct financing lease income
Direct financing lease interest income		174,306		4,934,157		7,595,992
Interest expense for direct financing lease		(11,181)		(11,967)		(411,066)
Business collaboration fee and commission expenses for leasing projects		—		(37,572)		(68,342)
Provision for lease payment receivable		(9,495,002)		(19,379,086)		(81,585,960)
Net direct financing lease interest income after provision for receivables		(9,331,877)		(14,494,468)		(74,469,376)

Net revenue		(9,331,877)		(14,494,468)		(74,469,376)

Non-interest income
Interest on investment securities		—		—		105,878
Investment loss		—		(164,098,554)		—
Total non-interest(loss) income		—		(164,098,554)		105,878

Non-interest expense
Business taxes and surcharge		(476)		(7,652)		(15,827)
Salaries and employee charges		(920,194)		(923,325)		(542,628)
Rental expenses		(97,693)		(95,545)		(102,859)
Other operating expenses		(6,136,647)		(481,311)		(2,062,802)
Total non-interest expense		(7,155,010)		(1,507,833)		(2,724,116)

Loss before taxes		(16,486,887)		(180,100,855)		(77,087,614)

Income tax (expense)credit		(24,590,417)		3,999,361		18,900,720

NET LOSS		(41,077,304)		(176,101,494)		(58,186,894)

Loss from discontinued operation		—		—		8,377,166

Total Net Losses		(41,077,304)		(176,101,494)		(49,809,728)

Other comprehensive loss
Foreign currency translation adjustment		2,381,422		(2,305,407)		(9,623,857)
COMPREHENSIVE LOSS	$	(38,695,882)	$	(178,406,901)	$	(59,433,585)

Weighted-average ordinary shares outstanding
Basic		19,837,642		19,837,642		19,837,642
Diluted		19,837,642		19,837,642		19,837,642

Earnings (loss) per share
Basic	$	(2.07)	$	(8.88)	$	(2.51)
Diluted	$	(2.07)	$	(8.88)	$	(2.51)
From continuing operation	$	(2.07)	$	(8.88)	$	(2.93)
From discontinued operation	$	—	$	—	$	0.42

See notes to the consolidated financial statements

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In US dollars, except share data)


						Accumulated				Retained
						Other				Earnings/		Total
	Common Stock			Additional		Comprehensive		Statutory		(Accumulated		Stockholders’
	Shares	Amount		Paid-in Capital		Losses		Reserve		Losses)		Equity
Balance as of June 30, 2019	19,837,642	$	1,984	$	211,934,432	$	(23,733,291)	$	4,687,085	$	21,560,152	$	214,450,362
Net loss	—		—		—		—		—		(176,101,494)		(176,101,494)
Foreign currency translation adjustment	—		—		—		(2,305,407)		—		—		(2,305,407)
Balance as of June 30, 2020	19,837,642	$	1,984	$	211,934,432	$	(26,038,698)		4,687,085		(154,541,342)		36,043,461
Net loss	—		—		—		—		—		(41,077,304)		(41,077,304)
Foreign currency translation adjustment	—		—		—		2,381,422		—		—		2,381,422
Balance as of June 30, 2021	19,837,642	$	1,984		211,934,432		(23,657,276)		4,687,085		(195,618,646)		(2,652,421)

See notes to the consolidated financial statements.

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US dollars)


	For the years ended June 30,
	2021		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(41,077,304)	$	(176,101,494)	$	(58,186,894)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation		838		21,118		41,000
Investment loss for disposal of subsidiaries		—		164,098,554		—
Property and equipment written off		24,718		—		—
Provision for lease payment receivables		9,495,002		19,379,086		81,585,960
Provision for other assets		3,017,816		—		—
Deferred tax expense (benefit)		26,108,436		(4,255,391)		(20,055,500)
Changes in assets and liabilities:
Net investment in direct financing leases		5,887,016		(7,116,662)		(41,724,936)
Interest receivable		—		—		4,293,657
Other assets		(628,927)		180,508		473,025
Lease receivable in lease agency transaction		2,085,456		(92,689)		(1,930,374)
Interest payable		(8,874)		(12,629)		(130,205)
Income tax payable		(1,518,019)		256,030		1,127,838
Deposits from direct financing leases		(3,649,836)		42,663		(4,397,481)
Other liabilities		250,671		489,490		1,190,464
Net Cash Used in Operating Activities from Discontinued Operation		—		—		(229,263)
Net Cash Used in Operating Activities		(13,007)		(3,111,416)		(37,942,709)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of investment securities		—		—		46,906,465
Deposits paid to banks for financial leasing services		—		—		(2,916,996)
Purchase of property, plant and equipment		—		(843)		—
Withdrawal of pledged bank deposits		—		—		4,397,481
Net Cash Used in Investing Activities from Discontinued Operation		—		—		(3,266,588)
Net Cash (Used in) Provided by Investing Activities		—		(843)		45,120,362

CASH FLOWS FROM FINANCING ACTIVITY
Repayment of loans		—		(699,469)		(17,200,372)
Net Cash Used in Financing Activity		—		(699,469)		(17,200,372)

EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH FROM CONTINUING OPERATION		2,817		3,780,236		(6,536,360)
EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH FROM (DISPOSAL GROUP)/DISCONTINUED OPERATION		(7,553,701)		(221,827)		5,907,827

NET DECREASE CASH FROM CONTINUING OPERATION		(10,190)		(31,492)		(13,063,228)
NET (DECREASE) AND INCREASE IN CASH FROM (DISPOSAL GROUP)/DISCONTINUED OPERATION		(7,553,701)		(221,827)		2,411,976

Cash and cash equivalents at beginning of year	$	38,820	$	70,312	$	13,133,540
Cash and cash equivalents at beginning of year-disposal groups	$	7,553,701	$	7,775,528	$	5,363,552
Cash and cash equivalents at end of year		28,630		38,820		70,312
Cash and cash equivalents at end of year-disposal groups		—		7,553,701		7,775,528

SUPPLEMENTAL CASH FLOW INFORMATION:
Continuing Operation
Cash paid for income taxes	$	—	$	—	$	26,942
Cash paid for interest expense	$	11,181	$	11,966	$	443,186
Discontinued Operation
Cash paid for income taxes	$	—	$	—	$	256,613
Cash paid for interest expense	$	—	$	—	$	—

See notes to the consolidated financial statements.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 1 - ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT’S PLANS

The accompanying consolidated financial statements include the financial statements of Wins Finance Holdings Inc. (“Wins Finance”) and its subsidiaries, Wins Holdings LLC (“WHL”),Wins Finance Group Limited (“WFG”), Full Shine Capital Resources Limited (“Full Shine”), Jinshang International Financial Leasing Co., Ltd. (“Jinshang Leasing”), Shanxi Jinchen Agriculture Co., Ltd. (“Jinchen Agriculture) and Shanxi Dongsheng Finance Guarantee Co., Ltd. (“Dongsheng Guarantee”). Wins Finance and its subsidiaries are collectively referred to as the “Company”.

Wins Finance was incorporated in the Cayman Islands as an exempt company on February 17, 2015 and was then a wholly owned subsidiary of Sino Mercury Acquisition Corp.

Jinchen Agriculture was incorporated on February 29, 2012 in Jinzhong City. Shanxi Province, PRC under the laws of PRC. Jinchen Agriculture did not conduct any business activities from its inception through September 30, 2015. And it was disposed on January 6, 2021.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 1 - ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT’S PLANS (CON’T)

As a result of the Transactions, the former members of WFG own approximately 78.0% of the stock of Wins Finance and the former stockholders of Sino own the remaining 22.0%.

Jinshang Leasing has enter into an agreement for disposal of Jinchen Agriculture and Dongsheng Guarantee to Shanghai Guyan Investment Management Co., Ltd on January 6, 2021.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 1 - ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT’S PLANS (CON’T)

As at 30 June 2021 and the date of approval of the consolidated financial statements, the Company had the following wholly-owned subsidiaries:


	Place and date of
Name of entity	establishment	Registered capital	Principal activities

Wins Finance Group	British Virgin Islands	USD 30,000,100.00	A holding company 100%
Limited(“WFG”)	July 27, 2014		owned by Wins Finance

Full Shine Capital	Hong Kong		A holding company 100%
Resources Limited	August 01, 2013	HKD 1.00	owned by WFG
(“Full Shine”)

Jinshang International	PRC	USD 180,000,000.00	A company providing
Financial Leasing	May 18, 2009		financial leasing services and
Co.,Ltd (“Jingshang Leasing”)			100% owned by Full shine

Going concern and management plans

These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue its operations in the foreseeable future and that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations. During the financial year ended 30 June 2021, the Company incurred a net loss of approximately USD 216 million and as at 30 June 2021, its negative net stockholders’ equity of approximately US$2.6 million and its negative operating activities cash flows of US$13,007. The Company revenue in the year ended June 30 2021 was decreased significantly as compared with the year ended June 30 2020 due to the continued adverse impact of the COVID-19 outbreak on the Company’s financial leasing business. Besides, the COVID-19 was contained in China in the second half of 2020, the lessee’s ability to repay the rental expense was still affected and the Company had made specific allowance for the lease payment with amount to USD 121,412,692 as of June 30 2021 based on the specific risk of collectability of the lessee was identified. The Company funded these losses dependent upon:

(1)the continued financial support from its related party or its ability to obtain external financing; or

(2)further implement management’s business plan to extend its operations and generate sufficient revenues to meet its obligations.

As of June 30, 2021, the Company’s having a minimum cash balance on the consolidated statement of financial position. The Company has taken an intensive review of operations and expenditures, including selling, distribution, and administration expenses, to identify and eliminate inefficiencies and redundancies in order to preserve cash while maintaining the business. Given the Company’s existing cash balances and projected cash generated by, and used in, operating activities, the Company believes that it will have sufficient liquidity to fund its operating activities, and react as necessary to market changes, which may include working capital needs for at least twelve months from June 30, 2021. These consolidated financial statements do not reflect adjustments to the carrying value of assets and liabilities, reported expenses and statement of financial position classification that would be necessary if going concern assumption was not appropriate. These adjustments could be material.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation and principle of consolidation

The consolidated financial statements of Wins Finance and its subsidiaries are prepared and presented in accordance with U.S. generally accepted accounting principles.(“U.S. GAAP”).

The consolidated financial statements include the financial statements of Wins Finance, its subsidiaries, including the wholly-foreign owned enterprises (“WFOEs”) in the PRC.

All significant inter-Company transactions and balances have been eliminated upon consolidation.

(b) Use of estimates

(c) Operating segments

The Company’s chief operating decision-maker (“CODM”) has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the financing lease business. The Company’s net revenues are all generated from customers in the PRC. Hence, The Company operates and manages its business within one reportable segment, which is to provide financial services in the PRC domestic market.

For the year ended June 30, 2021, there were three customers that accounted for 63%, 19% and 14% of the Jinshang Leasing’s revenue, respectively. For the year ended June 30, 2020, there were two customers that accounted for 50% and 14% of the Jinshang Leasing’s revenue, respectively.

As of June 30, 2021, three customers accounted for 70%,17% and 13%, respectively, of the minimum lease payments receivable of Jinshang Leasing. As of June 30, 2020, two customers accounted for 40% and 13%, respectively, of the minimum lease payments receivable of Jinshang Leasing.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(d) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash in banks and all highly liquid investments with original maturities of three months or less that are unrestricted as to withdrawal and use.

(e) Restricted Cash

Restricted cash represents cash pledged to banks.

(f) Investments securities – held to maturity

(g) Net investment in direct financing leases

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(g) Net investment in direct financing leases (con’t)

(h) Revenue recognition

Direct financing lease interest income

Contract Balances

For the year ended June 30, 2021 and 2020, the Company did not have any significant incremental costs of obtaining contracts with customers incurred and/or costs incurred in fulfilling contracts with customers within the scope of ASC Topic 606, that shall be recognized as an asset and amortized to expenses in a pattern that matches the timing of the revenue recognition of the related contract.

As of June 30, 2021 and 2020, the Company does not have any contract assets (unbilled receivables) since revenue is recognized when the performance obligation is fulfilled and the payment from customers is not contingent on a future event.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(h) Revenue recognition (con’t)

Allocation to Remaining Performance Obligations

The Company has elected to apply the practical expedient in paragraph ASC Topic 606-10-50-14 and did not disclose the information related to transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of June 30, 2021 and 2020, because either the performance obligation of the Company’s contracts with customers has an original expected duration of one year or less or the Company has a right to consideration from a borrower or a customer in an amount that corresponds directly with the value to the borrower or the customer of the Company’s performance completed to date, therefore the Company may recognize revenue in the amount to which the Company has a right to invoice or collect.

(i) Property and equipment, net

Plant and equipment are recorded at cost less accumulated depreciation and impairment. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, with 3%salvage value. The average estimated useful lives of property and equipment are discussed in Note 6.

(j) Impairment of long-lived assets

The Company applies the provisions of ASC No. 360 Sub topic 10, “Impairment or Disposal of Long-Lived Assets” (ASC 360-10) issued by the Financial Accounting Standards Board (“FASB”). ASC 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

(k) Non-marketable equity investments

On August 28, 2018, a subsidiary of the Company entered into an agreement to acquire a 30% equity interest in Hui Yue Finance Leasing (Ningbo) Co., Ltd. (“Hui Yue”). Hui Yue will be a joint venture between the Company, Mercury International Financial Leasing (Tianjin) Co., Ltd. (formerly translated as Chenxing International (Tianjin) Financial Leasing Co., Ltd) and Zhongtou Jinchuang (China) Financial Holding Group Co., Limited (formerly translated as Sino Investment Jinchuang Financial Holding Co., Ltd). The Company was originally required to pay RMB 300 million ($43.7 million) for its 30% interest in Hui Yue.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(k) Non-marketable equity investments (con’t)

The Company elected to record its equity investments in this privately held company using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer, since the Company does not have significant influence over Hui Yue and its investment in Hui Yue is without readily determinable fair value. There was no observable price change for the year ended June 30, 2021.

On February 17 2021, a subsidiary of the Company entered into an agreement to Convert Hui Yue’s equity into the creditor’s right of Shenzhen Jiruhai Technology Co., Ltd.

Equity investments in Hui Yue accounted for using the measurement alternative are subject to periodic impairment reviews. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of these equity securities.

On June 16,2021, Beijing Fu Sheng Xing Trading Co., LTD (“Fu Sheng Xing”) was established under the laws of the PRC. Full Shine owns 40% interest in Fu Sheng Xing.

(l) Fair value measurements

Level 1 - inputs are based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(l) Fair value measurements (con’t)

As of June 30, 2021 and 2020, financial instruments of the Company primarily consisted of cash, restricted cash, accounts receivables, other receivables, and bank and other loans which were carried at cost or amortized cost on the consolidated statement of financial position, and carrying amounts approximated their fair values because of their generally short maturities or the rate of interest of these instruments approximate the market rate of interest.

(m) Foreign currency translation


	June 30, 2021	June 30, 2020
Statement of financial position items, except for equity accounts	6.4601	7.0697


	For the years ended June 30
	2021	2020
Items in the statements of income and comprehensive income, and statements of cash flows	6.6273	7.0319

(n) Interest expense

Interest expense derived from the loans providing funds for financial leasing contracts is classified as cost of revenue in the consolidated statements of income and comprehensive income.

(o) Non-interest expenses

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(p) Income taxes

(q) Comprehensive income

Comprehensive income includes net income and foreign currency translation adjustments. Comprehensive income is reported in the statements of operations and comprehensive income.

Accumulated other comprehensive income, as presented on the consolidated statement of financial position, represents cumulative foreign currency translation adjustments.

(r) Operating leases

(s) Share-based compensation

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(t) Commitments and contingencies

(u) Earnings per Share (EPS)

(v) Disposal groups (or non-current assets) held-for-sale and discontinued operations

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(w) Impact of recently issued accounting pronouncements

(x) Impact of recently issued accounting pronouncements not yet adopted

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(x) Impact of recently issued accounting pronouncements not yet adopted (con’t)

The lease would have been classified as a sales-type lease or a direct financing lease in accordance with the classification criteria in paragraphs 842-10-25-2 through 25-3.

The lessor would have otherwise recognized a day-one loss.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON’T)

(x) Impact of recently issued accounting pronouncements not yet adopted (con’t)

Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated statement of financial position, consolidated statements of income and comprehensive income and consolidated statements of cash flows.

NOTE 3 - RISKS

(a) Credit risk

Credit risk is one of the most significant risks for the Company’s business. Credit risk exposure arises principally in investments in direct financing leases.

The Company identifies credit risk collectively based on industry, geography and customer type. This information is monitored regularly by management.

Further quantitative disclosures in respect of the Company’s exposure to credit risk arising from its investments in direct financing leases are set out in Note 4.

PRC state-owned banks, such as Bank of China, are subject to a series of risk control regulatory standards, and PRC bank regulatory authorities are empowered to take over the operation and management when any of those banks faces a material credit crisis. Meanwhile, China does not have an official deposit insurance program, nor does it have an agency similar to what was the Federal Deposit Insurance Corporation (FDIC) in the U.S. In the event of bankruptcy of one of the financial institutions in which the Company has deposits or investments, it may be unlikely to claim its deposits or investments back in full. As of June 30, 2021 and 2020, the Company held cash and restricted cash was US$22,009 and Nil, respectively, that was not insured by any governmental authority. To limit exposure to credit risk relating to deposits, the Company primarily places cash deposits only with well-known financial institutions in the PRC. There has been no recent history of default in relation to these financial institutions.

(b) Liquidity risk

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 3 - RISKS (CON’T)

(d) Business and economic risks

The Company revenue in the year ended June 30 2021 to decrease 96% as compared with the year ended June 30 2020 due to the adverse impact of the COVID-19 outbreak on the Company’s financial leasing business. Besides, the COVID-19 was outbroke in China in the second half of 2020, the lessee’s ability to repay the rental expense was still affected and the Company had made specific allowance for the lease payment with amount to USD 121,412,692 as of June 30 2021 based on the specific risk of collectability of the lessee was identified.

NOTE 4 - NET INVESTMENT IN DIRECT FINANCING LEASES

The following is a summary of the components of the Jinshang Leasing’s net investment in direct financing leases at June 30, 2021 and 2020:


	June 30, 2021		June 30, 2020
Total minimum lease payments to be received	$	127,827,892	$	122,561,475
Less: Amounts representing estimated executory costs		—		—
Minimum lease payments receivable		127,827,892		122,561,475
Less: unearned income, representing interest		(3,607,312)		(3,533,936)
Present value of minimum lease receivable		124,220,580		119,027,539
Less: Allowance for uncollectible receivables		(121,442,109)		(102,069,239)
Net investment in direct financing leases	$	2,778,471	$	16,958,300

Future minimum lease receipts under non-cancellable direct financing lease arrangements are as follows:


	June 30, 2021		June 30, 2020
Within 1 year	$	377,696	$	113,637,581
2 years		117,869,926		7,340,325
3 years		7,847,263		1,583,569
4 years		1,733,007		—
Total minimum finance lease receivables	$	127,827,892	$	122,561,475

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 4 - NET INVESTMENT IN DIRECT FINANCING LEASES (CON’T)

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. The accrual of direct financing lease interest income had been suspended on delinquent finance lease receivables with remaining contractual amounts due of $121,442,109 and $102,069,239 as of June 30, 2021 and 2020. As of June 30, 2021 and 2020, there were no recorded investment in direct financing leases past due 90 days or more and still accruing.


	June 30, 2021		June 30, 2020
Overdue and credit-impaired	$		$
– Overdue within 90 days (inclusive)		—		—
– Overdue above 90 days		12,373,365		9,195,673
Not yet overdue but credit impaired		109,039,328		92,666,574

Overdue but not credit-impaired
– Overdue within 30 days (inclusive)		—		—
– Overdue 31 to 90 days (inclusive)		—		—
– Overdue above 90 days		—		—
Neither overdue nor impaired		2,807,887		17,165,292

Less: Allowances for impairment losses		(121,442,109)		(102,069,239)
Net investment in direct financing leases, end of year	$	2,778,471	$	16,958,300

The allowance for uncollectible minimum lease payments receivables in direct financing leases for the years ended June 30, 2021 and 2020 were as following:


	June 30, 2021		June 30, 2020
Allowance for uncollectible receivables at the beginning of year	$	102,069,239	$	85,225,257
(Reversal of Provision)for lease payment receivables		(192,136)		(10,626)
Provision for lease payment receivables		9,687,138		19,368,460
Effect of foreign currency translation		9,877,868		(2,513,852)
Allowance for uncollectible receivables at the end of year	$	121,442,109	$	102,069,239


	June 30, 2021		June 30, 2020
Allowance for uncollectible receivables relating to:
Individually evaluated for impairment	$	121,412,692	$	101,862,247
Collectively evaluated for impairment		29,417		206,992
Ending balance	$	121,442,109	$	102,069,239

Minimum lease payments receivable
Individually evaluated for impairment	$	121,412,692	$	101,862,247
Collectively evaluated for impairment		6,415,200		20,699,228
Ending balance	$	127,827,892	$	122,561,475

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 4 - NET INVESTMENT IN DIRECT FINANCING LEASES (CON’T)

Credit Quality of Investment in Direct Financing Lease:

The risk classification of direct financing lease receivables is as follows:


	June 30, 2021		June 30, 2020
Normal	$	6,415,200	$	20,699,228
Abnormal		121,412,692		101,862,247
Total	$	127,827,892	$	122,561,475

NOTE 5 - LEASES


	June 30, 2021		June 30, 2020
Operating leases:
Operating lease right of use assets		50,935		63,356
Current operating lease liabilities		55,022		47,904
Non-current operating lease liabilities		—		7,103
Total operating lease liabilities	$	55,022	$	55,007

Maturities of lease liabilities were as follows:


For the year ended June 30,	Operating lease
2022	$	55,551
Total	$	55,551
Less: amount representing interest	$	529
Present value of future minimum lease payments	$	55,022
Less: Current obligations	$	55,022
Long-term obligations	$	—

Operating lease expense for the years ended June 30, 2021 and 2020 was $96,184 and $95,545, respectively The remaining lease term is six months as to the year ended June 30, 2021.And the discount rate was 4.75%.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 6 - PROPERTY AND EQUIPMENT, NET

Property and equipment as of June 30, 2021 and 2020 consisted of the following:


	Useful life	Salvage
	(years)	value		June 30, 2021		June 30, 2020
Vehicles	5	3	%		—		463,425
Office equipment	5	3	%		208,765		190,763
Electric equipment	5	3	%		26,091		23,841
Less: accumulated depreciation					(231,973)		(651,437)
Property and equipment, net				$	2,883	$	26,592

Depreciation expense totaled $838 and $2,491 for the years ended June 30, 2021 and 2020, respectively.

NOTE 7 - OTHER ASSETS

Other assets as of June 30, 2021 and 2020 consisted of:


	June 30, 2021		June 30, 2020
Advance payment to third party companies	$	—	$	1,839
Other receivables		770,985		2,053,068
	$	770,985	$	2,054,907

NOTE 8 - OTHER LIABILITIES

Other liabilities as of June 30, 2021 and 2020 consisted of:


	June 30, 2021		June 30, 2020
Other tax payable	$	1,623,217	$	1,428,070
Accrued payroll		101,656		54,010
Other payables		1,990,395		1,674,941
	$	3,715,268	$	3,157,021

NOTE 9 - SHARE-BASED COMPENSATION

2015 Long-Term Incentive Equity Plan

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 9 - SHARE-BASED COMPENSATION (CON’T)

The following table summarizes stock award activity and related information for all of Wins Finance’s Equity Plans for the years ended June 30, 2021 and 2020:


			Weighted Average
		Weighted	Remaining
	Number of	Average	Contractual
	Shares	Exercise Price	Term In Years
		$
Outstanding, July 1, 2016	1,270,000	12	2.42
Granted	—	12	3.00
Exercised	—	—	—
Forfeited	(1,190,000)	12	—
Canceled	(80,000)	12	—
Outstanding, June 30, 2017, 2018,2019 and 2020	—	—	—
Granted	—	—	—
Exercised	—	—	—
Forfeited	—	—	—
Canceled	—	—	—
Outstanding, June 30, 2021	—	—	—

Exercisable, June 30, 2020 and 2021	—	—	—
Vested and expected to vest, June 30, 2020 and 2021	—	—	—


Expected volatility		51.5	%
Risk-free interest rates		1.77	%
Expected terms		5.0 years
Dividend yields		0	%
Sub-Optimal behavior multiple		2.80
Fair Value per share of options granted	$	5.27~$5.44

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 9 - SHARE-BASED COMPENSATION (CON’T)

In connection with the grant of stock options to employees, the Company recorded share-based compensation charges of nil and nil, respectively, for the years ended June 30, 2021 and 2020, respectively. The negative amount in 2017 resulted from the reversal of share-based compensation expense for the Company’s options that were cancelled due to the termination of the holder’s employment prior to vesting.

NOTE 10 - CAPITALIZATION

Common Stock

On June 28, 2016, the Company repurchased 5,100 of its ordinary shares from Bradley Reifler, a former director of the Company, for $60,180, and 1,480,000 shares from Bluesky LLC for $17,464,000. Of the amounts payable to Bluesky, $17 million was paid. Bluesky LLC is a limited liability Company owned and controlled by Bluesky Family Trust, a family trust benefitting the family of Jianming Hao, the Company’s former Chairman, Co-Chief Executive Officer and President. Balance of $464,000 remained unpaid as of June 30, 2021 and June 30, 2020.

On December 2, 2016, the Company repurchased 204,005 of its ordinary shares from Richard Xu, a former officer of the Company, for a consideration of $204.

As of June 30, 2021 and 2020, there were 19,837,642 shares of common stock issued and outstanding.

NOTE 11 - STATUTORY RESERVE

NOTE 12 - EMPLOYEE RETIREMENT BENEFITS

The Company has made employee benefit contributions in accordance with Chinese relevant regulations, including retirement insurance, unemployment insurance, medical insurance, housing fund, work injury insurance and birth insurance. The Company recorded the contribution in the salaries and employee charges when incurred. The contributions made by the Companies were $101,318 and $95,017 for the year ended June 30, 2021 and 2020, respectively.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 13 - EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the years ended June 30, 2021 and 2020, respectively:


	June 30, 2021		June 30, 2020
Net loss attributable to the common shareholders	$	(41,077,304)	$	(176,101,494)

Basic weighted-average common shares outstanding		19,837,642		19,837,642
Effect of dilutive securities
Diluted weighted-average common shares outstanding		19,837,642		19,837,642
Earnings (loss) per share – Basic	$	(2.07)	$	(8.88)
Earnings (loss) per share – Diluted	$	(2.07)	$	(8.88)
Earnings (loss) per share – From continuing operations	$	(2.07)	$	(8.88)
Earnings (loss) per share – From discontinued operations	$	—	$	—

NOTE 14 - INCOME TAXES

No Hong Kong Profits Tax has been made for the years ended June 30, 2021 and 2020 as Full Shine had no assessable profits arising in Hong Kong.

The provision for PRC Enterprise Income Tax (“EIT) is calculated at 25% of the estimated assessable profits of the subsidiaries established in the PRC during the years ended June 30, 2021 and 2020.

Under the EIT Law, investment income from security funds is exempted from PRC EIT.

The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits of the position, and measures the unrecognized benefits associated with the tax position. For the years ended June 30, 2021 and 2020, the Company had no unrecognized tax benefits.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 14 - INCOME TAXES (CON’T)

Income tax payable represented enterprise income tax at a rate of 25% of taxable income the Company accrued but not paid. Income tax payable as of June 30, 2021 and 2020 comprises:


	June 30, 2021		June 30, 2020
Jinshang Leasing		—		1,423,022
Total	$	—	$	1,423,022

The reconciliation between the effective income tax rate and the PRC statutory income tax rate of 25% is as follows:


	June 30, 2021		June 30, 2020
PRC statutory tax	25	%	25	%
Effect of non-deductible expenses	(14.6)	%	(30.3)	%
Effect of non-taxable income	(6.9)	%	3.7	%
Others	147.9	%	(23.4)	%
Effective tax rate	151.4	%	(25.0)	%

Deferred tax arose from the difference in tax and accounting base of the deductible lease payment receivable loss and difference in direct financing lease income recognition between PRC and U.S. GAAP.


	June 30, 2021		June 30, 2020
Deferred tax assets
Provision for direct financing lease	$	—	$	25,517,310
Direct financing lease income		—		(1,042,727)
Total deferred tax assets		—		24,474,583
Net total deferred tax assets	$	—	$	24,474,583

For the purpose of presentation in the consolidated statement of financial position, certain deferred tax assets and liabilities have been offset.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 14 - INCOME TAXES (CON’T)

As of June 30, 2021 and 2020, the Company had net deferred tax assets of Nil and $24,299,486, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The management considered all available evidence, both positive and negative, in determining the realizability of deferred tax assets at June 30, 2021 and 2020. Management considered carry back availability, the scheduled reversals of deferred tax liabilities, projected future taxable income during the reversal periods, and tax planning strategies in making this assessment. Management also considered recent history of taxable income, trends in the Company’s earnings and tax rate, positive financial ratios, and the impact of the downturn in the current economic environment (including the impact of credit on allowance and provision for guarantee and direct financing lease losses; and the impact on funding levels) on the Company. Based upon its assessment, management believes that a valuation allowance was not necessary as of June 30, 2021 and 2020.

As of June 30, 2021 and 2020, the Company intends to permanently reinvest the undistributed earnings of its operating subsidiaries to fund future operations. As such, no provision has been made for deferred tax assets related to the future repatriation of the cumulative undistributed earnings of the PRC subsidiaries of $92,081,580 and $51,295,890 as of June 30, 2021 and 2020, respectively.

For the years ended June 30, 2021 and 2020, the Company has not been selected for examination by the applicable tax authority and no resolution of tax audits were expected to be material to the financial statements.

NOTE 15 - RELATED PARTY TRANSACTIONS AND BALANCES

Related party balances

Related party balances as of June 30, 2021 and 2020 (apart from those disclosed elsewhere in these financial statements) consisted of:

The amount due to Bluesky LLC was interest free, unsecured and due on demand.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 16 - COMMITMENTS AND CONTINGENCIES

Guarantee Commitments

During the year ended June 30, 2018, Jinshang Leasing and a third party jointly entered into certain finance lease contracts with a customer with total contract amount of $70.1 million (RMB464 million). Jinshang Leasing provides financing to the customer of $6.2 million (RMB44 million)(included in Note 4 - net investment in direct financing leases) and the third party provides the remaining financing of $59.4 million (RMB420 million), for a period up to August 2020. Jinshang Leasing also acts as a guarantor and is obligated to pay the third party if the customer fails to pay the obligations when they become due. As of June 30, 2021, the maximum guarantee issued by Jinshang Leasing was $71.5 million(RMB462 million).

Litigation

The Company is involved in various legal actions arising in the ordinary course of its business. As of June 30, 2019, the Company was involved in 1 lawsuits in China, which the Company is a defendant in relation to its financing lease business (see below). The cases are in the process of being enforced.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 16 - COMMITMENTS AND CONTINGENCIES (CON’T)

NOTE 17 - SUBSEQUENT EVENTS

Establishment of new subsidiary

On October 11,2021, Dalian Ruikai Taifu Investment Management Co. LTD (“Ruikai Taifu”) was established under the laws of the PRC. Full Shine owns 60% interest in Ruikai Taifu.

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FINANCIAL STATEMENTS


Contents	Page(s)
Reports of Independent Registered Public Accounting Firm	F-69
Consolidated Balance Sheets as of June 30, 2020 and 2019	F-70
Consolidated Statements of Income and Comprehensive Income (Loss) for the years ended June 30, 2020and 2019	F-71
Consolidated Statements of Changes in Stockholders’ Equity for the years ended June 30, 2020 and 2019	F-72
Consolidated Statements of Cash Flows for the years ended June 30, 2020and 2019	F-73
Notes to Consolidated Financial Statements	F-74

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REPORT OF INDEPENDENT REGISTERED PUBIC ACCOUNTING FIRM

Opinion on the financial statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Wins Finance Holdings Inc. and subsidiaries (collectively, the “Company”) as of June 30, 2020, and the related consolidated statements of income and other comprehensive income, changes in stockholders’ equity and cash flows for each of the year ended June 30, 2020, and the related notes (collectively referred to as the “financial statements”). The financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020, and the results of its operations and its cash flows for each of the year ended June 30, 2020, in conformity with U.S. generally accepted accounting principles.

Basis for qualified opinion

Loss of control over subsidiaries

Material Uncertainty Related to Going Concern

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our qualified opinion.

/s/ Audit Alliance LLP

We have served as the Company’s auditor since 2018.

Singapore

October 10, 2023

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(In US dollars, except share data)


	June 30, 2020		June 30, 2019
ASSETS
Cash	$	38,820	$	70,312
Net investment in direct financing leases (Note 5)		16,958,300		30,011,279
Operating lease, right-of-use asset (Note 6)		63,356		163,041
Property and equipment, net (Note 7)		26,592		48,131
Deferred tax assets, net (Note 16)		24,474,583		20,836,408
Other assets (Note 8)		2,054,907		2,106,321
Non-marketable investment (Note 3<k>)		2,828,963		2,912,040
Assets of disposal group classified as held for sale		—		171,954,262
TOTAL ASSETS	$	46,445,521	$	228,101,794

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Bank loans for capital lease business (Note 9)		—		338,763
Other loans for capital lease business (Note 9)		—		377,393
Interest payable		8,320		21,494
Income tax payable (Note 16)		1,423,022		1,202,674
Deposits from direct financing leases		5,294,690		5,406,497
Operating lease liability-current		47,904		57,990
Other liabilities (Note 10)		3,157,021		2,552,085
Due to related party (Note 17)		464,000		464,000
Operating lease liability-non-current (Note 6)		7,103		194,089
Liabilities of disposal group classified as held for sale (Note 19)		—		3,036,447
Total Liabilities	$	10,402,060	$	13,651,432

Stockholders’ Equity
Common stock (par value $0.0001 per share, 100,000,000 shares authorized; 19,837,642 issued and outstanding at June 30, 2020 and 2019)(Note 12)	$	1,984		1,984
Additional paid-in capital		211,934,432		211,934,432
Statutory reserve (Note 13)		4,687,085		4,687,085
Retained earnings		(154,541,342)		21,560,152
Accumulated other comprehensive losses		(26,038,698)		(23,733,291)
Total Stockholders’ Equity		36,043,461		214,450,362
TOTAL LIABILITIES AND EQUITY	$	46,445,521	$	228,101,794

See notes to the consolidated financial statements.

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

(In US dollars, except share data)


	For the years ended June 30,
	2020		2019
Direct financing lease income
Direct financing lease interest income	$	4,934,157	$	7,595,992
Interest expense for direct financing lease		(11,967)		(411,066)
Business collaboration fee and commission expenses for leasing projects		(37,572)		(68,342)
Provision for lease payment receivable		(19,379,086)		(81,585,960)
Net direct financing lease interest income after provision for receivables	$	(14,494,468)	$	(74,469,376)

Net revenue	$	(14,494,468)	$	(74,469,376)

Non-interest (loss) income
Interest on investment securities-held to maturity		—		105,878
Investment loss		(164,098,554)		—
Total non-interest(loss) income	$	(164,098,554)	$	105,878

Non-interest expense
Business taxes and surcharges		(7,652)		(15,827)
Salaries and employee charges		(923,325)		(542,628)
Rental expenses (Note 6)		(95,545)		(102,859)
Other operating expenses		(481,311)		(2,062,802)
Total non-interest expense	$	(1,507,833)	$	(2,724,116)

Income before taxes		(180,100,855)		(77,087,614)

Income taxes credit (Note 16)		3,999,361		18,900,720

NET LOSSES	$	(176,101,494)	$	(58,186,894)

Income from discontinued operation	$	—		8,377,166

Total Net Losses		(176,101,494)		(49,809,728)

Other comprehensive loss
Foreign currency translation adjustment		(2,305,407)		(9,623,857)
COMPREHENSIVE LOSS	$	(178,406,901)	$	(59,433,585)

Weighted-average ordinary shares outstanding (Note 15)
Basic		19,837,642		19,837,642
Diluted		19,837,642		19,837,642

Earnings per share(Note 15)
Basic	$	(8.88)	$	(2.51)
Diluted	$	(8.88)	$	(2.51)
From continuing operation	$	(8.88)	$	(2.93)
From discontinued operation	$	—	$	0.42

See notes to the consolidated financial statements

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In US dollars, except share data)


						Accumulated
						Other						Total
	Common Stock			Additional		Comprehensive		Statutory		Retained		Stockholders’
	Shares	Amount		Paid-in Capital		(Loss) Income		Reserve		Earnings		Equity
Balance as of June 30, 2018	19,837,642	$	1,984	$	211,934,432	$	(14,109,434)	$	4,687,085	$	71,369,880	$	273,883,947
Net losses	—		—		—		—		—		(49,809,728)		(49,809,728)
Foreign currency translation adjustment	—		—		—		(9,623,857)		—		—		(9,623,857)
Balance as of June 30, 2019	19,837,642	$	1,984	$	211,934,432	$	(23,733,291)	$	4,687,085	$	21,560,152	$	214,450,362
Net losses	—		—		—		—		—		(176,101,494)		(176,101,494)
Foreign currency translation adjustment	—		—		—		(2,305,407)		—		—		(2,305,407)
Balance as of June 30, 2020	19,837,642	$	1,984	$	211,934,432	$	(26,038,698)		4,687,085		(154,541,342)		36,043,461

See notes to the consolidated financial statements.

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WINS FINANCE HOLDINGS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In US dollars)


	For the years ended June 30,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Continuing Operation
Net losses	$	(176,101,494)		(58,186,894)
Depreciation		21,118		41,000
Investment loss for disposal of subsidiaries		164,098,554		—
Provision for lease payment receivables		19,379,086		81,585,960
Deferred tax (benefit)		(4,255,391)		(20,055,500)
Changes in assets and liabilities:
Net investment in direct financing leases		(7,116,662)		(41,724,936)
Interest receivable		—		4,293,657
Other assets		180,508		473,025
Lease receivable in lease agency transaction		(92,689)		(1,930,374)
Interest payable		(12,629)		(130,205)
Income tax payable		256,030		1,127,838
Deposits from direct financing leases		42,663		(4,397,481)
Other liabilities		489,490		1,190,464
Net Cash Provided by (Used in) Operating Activities from Discontinued Operation		—		(229,263)
Net Cash Provided by (Used in) Operating Activities		(3,111,416)		(37,942,709)

CASH FLOWS FROM INVESTING ACTIVITIES
Continuing Operation
Proceeds from maturities of investments securities		—		46,906,465
Deposits paid to banks for financial leasing services		—		(2,916,996)
Withdrawal of pledged bank deposits		—		4,397,481
Purchase of property, plant and equipment		(843)		—
Net Cash Provided by (Used in) Investing Activities from Discontinued Operation		—		(3,266,588)
Net Cash Provided by (Used in) Investing Activities		(843)		45,120,362

CASH FLOWS FROM FINANCING ACTIVITIES
Continuing Operation
Repayment of loans		(699,469)		(17,200,372)
Net Cash (Used in) Provided by Financing Activities		(699,469)		(17,200,372)

EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH FROM CONTINUING OPERATION		3,780,236		(6,536,360)
EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH FROM DISCONTINUED OPERATION		(221,827)		5,907,827

NET (DECREASE) IN CASH FROM CONTINUING OPERATION		(31,492)		(13,063,228)
NET (DECREASE) AND INCREASE IN CASH FROM DISCONTINUED OPERATION		(221,827)		2,411,976

Cash and cash equivalents at beginning of year		70,312		13,133,540
Cash and cash equivalents at beginning of year-disposal groups		7,775,528		5,363,552
Cash and cash equivalents at end of year	$	38,820		70,312
Cash and cash equivalents at end of year-disposal groups		7,553,701		7,775,528

SUPPLEMENTAL CASH FLOW INFORMATION:
Continuing Operation
Cash paid for income taxes	$	—		26,942
Cash paid for interest expense	$	11,966		443,186
Discontinued Operation
Cash paid for income taxes		—		256,613
Cash paid for interest expense		—		—

See notes to the consolidated financial statements.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

NOTE 1 - ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT’S PLANS

Wins Finance was incorporated in the Cayman Islands as an exempt company on February 15, 2015 and was then a wholly owned subsidiary of Sino Mercury Acquisition Corp.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

As a result of the Transactions, the former members of WFG own approximately 78.0% of the stock of Wins Finance and the former stockholders of Sino own the remaining 22.0%.

WHL was incorporated on November 10, 2015 in New York and was disposed on June 30, 2016 to Ms. Wenyu Li, an individual beneficially owning 8.1% of the Company’s ordinary Shares as of June 30, 2016, for a cash consideration of $270,000 (Note 8), which was the net asset value of WHL on the date of disposal. WHL did not conduct any business activities from its inception.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

As at June 30 2020 and the date of approval of the consolidated financial statements, the Company had the following wholly-owned subsidiaries:


	Place and date of
Name of entity	establishment	Registered capital	Principal activities

Wins Finance Group	British Virgin Islands	USD 30,000,100.00	A holding company 100%
Limited(“WFG”)	July 27, 2014		owned by Wins Finance

Full Shine Capital	Hong Kong		A holding company 100%
Resources Limited	August 01, 2013	HKD 1.00	owned by WFG
(“Full Shine”)

Jinshang International	PRC	USD 180,000,000.00	A company providing
Financial Leasing	May 18, 2009		financial leasing services and
Co.,Ltd (“Jingshang Leasing”)			100% owned by Full shine

GOING CONCERN AND MANAGEMENT’S PLANS

These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue its operations in the foreseeable future and that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company has incurred losses for the year ended June 30, 2020 of approximately USD 12 million from continuing operation and net cash used in operating activities in 2020 of approximately USD 3.11 million from continuing operations. The Company has funded these losses primarily through cash generated from operations over the years. The Company expects revenue in the year ended June 30 2021 to decrease 25% as compared with the year ended June 30 2020 due to the adverse impact of the COVID-19 outbreak on the Company’s financial leasing business. Despite COVID-19 was contained in China in the second half of 2020, the lessee’s ability to repay the rental expense was still affected and the Company had made specific allowance for the lease payment with amount to USD 101,862,247 as of June 30, 2020 based on the specific risk of collectability of the lessee was identified.

As of June 30, 2020, the Company’s cash balances totaled USD 38,000. The Company has taken an intensive review of operations and expenditures, including selling, distribution and administration expenses, to identify and eliminate inefficiencies and redundancies in order to preserve cash while maintaining the business. Given the Company’s existing cash balances and projected cash generated by, and used in, operating activities, the Company believes that it will have sufficient liquidity to fund its operating activities, and react as necessary to market changes, which may include working capital needs for at least twelve months from June 30, 2020. These consolidated financial statements do not reflect adjustments to the carrying value of assets and liabilities, reported expenses and statement of financial position classification that would be necessary if going concern assumption was not appropriate. These adjustments could be material.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of presentation and principle of consolidation

The consolidated financial statements of Wins Finance and its subsidiaries are prepared and presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).

The consolidated financial statements include the financial statements of Wins Finance, its subsidiaries, including the wholly-foreign owned enterprises (“WFOEs”) in the PRC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

All significant inter-Company transactions and balances have been eliminated upon consolidation.

(b) Use of estimates

(c) Operating segments

For the year ended June 30, 2020, there were 2 customers that accounted for 50% and 14% of the Jinshang Leasing’s revenue, respectively. For the year ended June 30, 2019, there were 3 customers that accounted for 43%, 12% and 11% of the Jinshang Leasing’s revenue, respectively.

As of June 30, 2020, two customers accounted for 40% and 13%, respectively, of the minimum lease payments receivable of Jinshang Leasing. As of June 30, 2019, two customers accounted for 45% and 12%, respectively, of the minimum lease payments receivable of Jinshang Leasing.

(d) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash in banks and all highly liquid investments with original maturities of three months or less that are unrestricted as to withdrawal and use.

(e) Restricted Cash

Restricted cash represents cash pledged to banks.

(f) Investments securities – held to maturity

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

central bank notes. The investment portfolios of these products are not disclosed to the Company by the banks or financial institutions.

(g) Net investment in direct financing leases

(h) Revenue recognition

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

Direct financing lease interest income

Contract Balances

For the year ended June 30, 2020 and 2019, the Company did not have any significant incremental costs of obtaining contracts with customers incurred and/or costs incurred in fulfilling contracts with customers within the scope of ASC Topic 606, that shall be recognized as an asset and amortized to expenses in a pattern that matches the timing of the revenue recognition of the related contract.

As of June 30, 2020 and 2019, the Company does not have any contract assets (unbilled receivables) since revenue is recognized when the performance obligation is fulfilled and the payment from customers is not contingent on a future event.

Allocation to Remaining Performance Obligations

The Company has elected to apply the practical expedient in paragraph ASC Topic 606-10-50-14 and did not disclose the information related to transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of June 30, 2020 and 2019, because either the performance obligation of the Company’s contracts with customers has an original expected duration of one year or less or the Company has a right to consideration from a borrower or a customer in an amount that corresponds directly with the value to the borrower or the customer of the Company’s performance completed to date, therefore the Company may recognize revenue in the amount to which the Company has a right to invoice or collect.

(i) Property and equipment, net

Plant and equipment are recorded at cost less accumulated depreciation and impairment. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, with 3%salvage value. The average estimated useful lives of property and equipment are discussed in Note 8.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

(j) Impairment of long-lived assets

The Company applies the provisions of ASC No. 360 Sub topic 10, “Impairment or Disposal of Long-Lived Assets” (ASC 360-10) issued by the Financial Accounting Standards Board (“FASB”). ASC 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

(k) Non-marketable equity investments

On August 28, 2018, a subsidiary of the Company entered into an agreement to acquire a 30% equity interest in Hui Yue Finance Leasing (Ningbo) Co., Ltd. (“Hui Yue”). Hui Yue will be a joint venture between the Company, Mercury International Financial Leasing (Tianjin) Co., Ltd. (formerly translated as Chenxing International (Tianjin) Financial Leasing Co., Ltd) and Zhongtou Jinchuang (China) Financial Holding Group Co., Limited (formerly translated as Sino Investment Jinchuang Financial Holding Co., Ltd). The Company was originally required to pay RMB 300 million ($43.7 million) for its 30% interest in Hui Yue.

The Company elected to record its equity investments in this privately held company using the measurement alternative at cost, less impairment, with subsequent adjustments for observable price changes resulting from orderly transactions for identical or similar investments of the same issuer, since the Company does not have significant influence over Hui Yue and its investment in Hui Yue is without readily determinable fair value. There was no observable price change for the year ended June 30, 2020.

Equity investments in Hui Yue accounted for using the measurement alternative are subject to periodic impairment reviews. The Company’s impairment analysis considers both qualitative and quantitative factors that may have a significant effect on the fair value of these equity securities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

(l) Fair value measurements

Level 1 - inputs are based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

As of June 30, 2020 and 2019, financial instruments of the Company primarily consisted of cash, restricted cash, accounts receivables, other receivables, and bank and other loans which were carried at cost or amortized cost on the consolidated balance sheets, and carrying amounts approximated their fair values because of their generally short maturities or the rate of interest of these instruments approximate the market rate of interest.

(m) Foreign currency translation


	June 30, 2020	June 30, 2019
Balance sheet items, except for equity accounts	7.0697	6.8680


	For the years ended June 30
	2020	2019
Items in the statements of income and comprehensive income, and statements of cash flows	7.0319	6.8221

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

(n) Interest expense

Interest expense derived from the loans providing funds for financial leasing contracts is classified as cost of revenue in the consolidated statements of income.

(o) Non-interest expenses

(p) Income taxes

(q) Comprehensive income

Comprehensive income includes net income and foreign currency translation adjustments. Comprehensive income is reported in the statements of operations and comprehensive income.

Accumulated other comprehensive income, as presented on the balance sheets, represents cumulative foreign currency translation adjustments.

(r) Operating leases

(s) Share-based compensation

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

cancellation date. Cancellation of an award, accompanied by a concurrent grant of (or offer to grant) a replacement award, is accounted for as a modification of the cancelled award (ASC 718-20-35-8 through 35-9).

(t) Commitments and contingencies

(u) Earnings per Share (EPS)

(v) Disposal groups (or non-current assets) held-for-sale and discontinued operations

(w) Impact of recently issued accounting pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This guidance supersedes current guidance on revenue recognition in Topic 605, Revenue Recognition. In addition, there are disclosure requirements related to the nature, amount, timing, and uncertainty of revenue recognition. On July 1, 2018, the Company adopted ASC 606, applying the modified retrospective method to contracts that were not completed as of July 1, 2018. The adoption did not have a material impact on retained earnings as of July 1, 2018. Results for reporting periods beginning on or after July 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 605. Additional disclosures have been made. Please see the Notes to Consolidated Financial Statements for details.

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WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments- Recognition and Measurement of Financial Assets and Financial Liabilities. This new guidance amends certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The main provisions require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value through earnings, unless they qualify for a measurement alternative. The new guidance will require a modified retrospective application to all of the Company’s outstanding instruments beginning July 1, 2018, with a cumulative effect adjustment recorded to opening retained earnings as of the beginning of the first period in which the guidance becomes effective. However, changes to the accounting for equity securities without a readily determinable fair value will be applied prospectively. Please see the Notes to Consolidated Financial Statements for details.

In November 2016, the FASB issued ASU No. 2016-18, Statements of Cash Flows (Topic 230): Restricted Cash. This guidance requires that a statement of cash flows explain the changes during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The standard should be applied to each period presented using a retrospective transition method. The adoption of this standard resulted in the Company’s restricted cash being included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows.

Other accounting standards adopted beginning July 1, 2018 do not have a significant impact on the Company’s consolidated financial statements.

(x) Impact of recently issued accounting pronouncements not yet adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) for recognition of credit losses on financial instruments, which is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (i.e., January 1, 2020, for calendar year entities), with early adoption permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The guidance introduces a new credit reserving model known as the Current Expected Credit Loss (CECL) model, which is based on expected losses, and differs significantly from the incurred loss approach used today. The CECL model requires measurement of expected credit losses not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating forward-looking information and will likely result in earlier recognition of credit reserves. The Company does not intend to adopt the new standard early and is currently evaluating the impact the new guidance will have on its financial position, results of operations and cash flows.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which is part of the FASB disclosure framework project to improve the effectiveness of disclosures in the notes to the financial statements. The amendments in the new guidance remove, modify and add certain disclosure requirements related to fair value measurements covered in Topic 820, Fair Value Measurement. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for either the entire standard or only the requirements that modify or eliminate the disclosure requirements, with certain requirements applied prospectively, and all other requirements applied retrospectively to all periods presented. The Company is currently evaluating the impact of adopting this guidance.

In October 2018, the FASB issued ASU No. 2018-17, Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities, which modifies the guidance related to indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interest. ASU 2018-17 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in ASC 740, Income Taxes. This guidance removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. This guidance also clarifies and simplifies other areas of ASC 740. This ASU will be effective beginning on January 1, 2021. Early adoption is permitted. Certain amendments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. The Company does not believe the adoption of this ASU would have a material effect on the Company’s consolidated financial statements.

Except as mentioned above, the Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated balance sheets, statements of income and comprehensive income and statements of cash flows.

NOTE 3 - RISKS

(a) Credit risk

Credit risk is one of the most significant risks for the Company’s business. Credit risk exposure arises principally in investments in direct financing leases.

The Company identifies credit risk collectively based on industry, geography and customer type. This information is monitored regularly by management.

Further quantitative disclosures in respect of the Company’s exposure to credit risk arising from its investments in direct financing leases are set out in Note 6.

PRC state-owned banks, such as Bank of China, are subject to a series of risk control regulatory standards, and PRC bank regulatory authorities are empowered to take over the operation and management when any of those banks faces a material credit crisis. Meanwhile, China does not have an official deposit insurance program, nor does it have an agency similar to what was the Federal Deposit Insurance Corporation (FDIC) in the U.S. In the event of bankruptcy of one of the financial institutions in which the Company has deposits or investments, it may be unlikely to claim its deposits or investments back in full. As of June 30, 2020 and 2019, the Company held cash and restricted cash was $Nil, that was not insured by any governmental authority. To limit exposure to credit risk relating to deposits, the Company primarily places cash deposits only with well-known financial institutions in the PRC. There has been no recent history of default in relation to these financial institutions.

(b) Liquidity risk

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

(d) Business and economic risks

The Company expects revenue in the year ended June 30, 2021 to decrease 25% as compared with the year ended June 30,2020due to the adverse impact of the COVID-19outbreak on the Company’s financial leasing business. Besides, because of the COVID-19 outbreak, the lessee’s ability to repay the rental expense was affected and the Company had made specific allowance for the lease payment amounting to USD 101,862,247 as of June 30, 2020 based on the specific risk of collectability of the lessee.

NOTE 4- INVESTMENTS SECURITIES – HELD TO MATURITY

Investments securities – held to maturity as of June 30, 2020 and 2019mainly represented asset management products that Jinshang Leasing purchased from financial institutions. The term for the investments is one year or three or five years, and Jinshang Leasing has the ability and intents to hold the security until maturity. Interest from these investments varies from 5% to 5.5% annually, with deduction of a management fee, and was receivable quarterly, annually or upon maturity. Given that the amount of returns of the investments is determinable, the Company recorded these investments at amortized cost using the effective interest.

The balances of investments securities as of June 30, 2020 and June 30, 2019 was nil.

Interest income from these investments was $ Nil and $105,878 for the years ended June 30, 2020 and 2019, respectively. Earned but uncollected interest was nil both of as of June 30, 2020 and 2019.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

NOTE 5 - NET INVESTMENT IN DIRECT FINANCING LEASES

The following is a summary of the components of the Jinshang Leasing’s net investment in direct financing leases at June 30, 2020 and 2019:


	June 30, 2020		June 30, 2019
Total minimum lease payments to be received	$	122,561,475	$	121,043,154
Less: Amounts representing estimated executory costs		—		—
Minimum lease payments receivable		122,561,475		121,043,154
Less: unearned income, representing interest		(3,533,936)		(5,806,618)
Present value of minimum lease receivable		119,027,539		115,236,536
Less: Allowance for uncollectible receivables		(102,069,239)		(85,225,257)
Net investment in direct financing leases	$	16,958,300	$	30,011,279

Future minimum lease receipts under non-cancellable direct financing lease arrangements are as follows:


	June 30, 2020		June 30, 2019
Within 1 year	$	113,637,581	$	98,532,910
2 years		7,340,325		14,124,241
3 years		1,583,569		7,022,776
4 years		—		1,363,227
Total minimum finance lease receivables	$	122,561,475	$	121,043,154

An account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. The accrual of direct financing lease interest income had been suspended on delinquent finance lease receivables with remaining contractual amounts due of $102,069,239 and $85,225,257 as of June 30, 2020 and 2019. As of June 30, 2020 and 2019, there were no recorded investment in direct financing leases past due 90 days or more and still accruing.


	June 30, 2020		June 30, 2019
Overdue and credit-impaired	$		$
– Overdue within 90 days (inclusive)		—		632,212
– Overdue above 90 days		9,195,673		3,156,238
Not yet overdue but credit impaired		92,666,574		81,234,615

Overdue but not credit-impaired
– Overdue within 30 days (inclusive)		—		—
– Overdue 31 to 90 days (inclusive)		—		—
– Overdue above 90 days		—		—
Neither overdue nor impaired		17,165,292		30,213,471

Less: Allowances for impairment losses		(102,069,239)		(85,225,257)
Net investment in direct financing leases, end of year	$	16,958,300	$	30,011,279

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

The allowance for uncollectible minimum lease payments receivables in direct financing leases for the years ended June 30, 2020 and 2019 were as following:


	June 30, 2020		June 30, 2019
Allowance for uncollectible receivables at the beginning of year	$	85,225,257	$	4,342,576
(Reversal of Provision)for lease payment receivables		(10,626)		(574,002)
Provision for lease payment receivables		19,368,460		82,159,962
Effect of foreign currency translation		(2,513,852)		(703,279)
Allowance for uncollectible receivables at the end of year	$	102,069,239	$	85,225,257


	June 30, 2020		June 30, 2019
Allowance for uncollectible receivables relating to:
Individually evaluated for impairment	$	101,862,247	$	85,023,066
Collectively evaluated for impairment		206,992		202,191
Ending balance	$	102,069,239	$	85,225,257

Minimum lease payments receivable
Individually evaluated for impairment	$	101,862,247	$	85,572,930
Collectively evaluated for impairment		20,699,228		35,470,224
Ending balance	$	122,561,475	$	121,043,154

The finance leases receivable has no pledged as collateral for the Company’s other loans as of June 30, 2020.The finance leases receivable with a gross amount of approximately $1,433,609 (RMB9,846,081) were pledged as collateral for the Company’s other loans (Note 10) as of June 30, 2019.

Credit Quality of Investment in Direct Financing Lease:

The risk classification of direct financing lease receivables is as follows:


	June 30, 2020		June 30, 2019
Normal	$	20,699,228	$	36,020,088
Abnormal		101,862,247		85,023,066
Total	$	122,561,475	$	121,043,154

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2020

NOTE 6 - LEASES


	June 30, 2020		June 30, 2019
Operating leases:
Operating lease right of use assets		63,356		163,041
Current operating lease liabilities		47,904		57,990
Non-current operating lease liabilities		7,103		194,089
Total operating lease liabilities	$	55,007	$	252,079

Maturities of lease liabilities were as follows:


For the year ended June 30,	Operating lease
2021	$	61,304
Total	$	61,304
Less: amount representing interest	$	6,297
Present value of future minimum lease payments	$	55,007
Less: Current obligations	$	47,904
Long-term obligations	$	7,103

Operating lease expense for the years ended June 30, 2020 and 2019 was $95,545 and $102,859, respectively The remaining lease term is eight months as to the year ended June 30, 2020. Discount rate was 5.46%.

NOTE 7 - PROPERTY AND EQUIPMENT, NET

Property and equipment as of June 30, 2020 and 2019 consisted of the following:


	Useful life	Salvage
	(years)	value		June 30, 2020		June 30, 2019
Leasehold improvement	20	3	%
Vehicles	5	3	%		463,425		477,034
Office equipment	5	3	%		190,763		196,365
Electric equipment	5	3	%		23,841		23,678
Less: accumulated depreciation					(651,437)		(648,946)
Property and equipment, net				$	26,592	$	48,131

Depreciation expense totaled $2,491 and $17,846 for the years ended June 30, 2020 and 2019, respectively.

NOTE 8 - OTHER ASSETS

Other assets as of June 30, 2020 and 2019 consisted of:


	June 30, 2020		June 30, 2019
Deposit for direct financing lease	$	—	$	182,782
Advance payment to third party companies		1,839		872
Other receivables		2,053,068		1,922,667
	$	2,054,907	$	2,106,321

NOTE 9 - LOANS FOR CAPITAL LEASE BUSINESS

Bank loans

Bank loans of $Nil and $338,763 as of June 30, 2020 and 2019, respectively, represented RMB denominated loans Jinshang Leasing obtained for Yancheng projects from CITIC Bank.

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FOR THE YEARS ENDED JUNE 30, 2020

The CITIC Bank loan for Yancheng project with a principal amount of RMB3.1 million ($0.5 million) was obtained in April 2015, bears interest at the fixed rate of 5.75% per annum, has a term from April 3, 2015 to February 12, 2020, pledged with time deposit certificate from Potevio New Energy Yancheng Co., Ltd (lessee of Yancheng project) of $498,898 (RMB3,426,450) as of June 30, 2019.

Interest expense incurred on the bank loans for the years ended June 30, 2020 and 2019 were $10,369and $324,350, respectively.

Other loans

Other loans of $ Nil and $ 377,393 as of June 30, 2020 and 2019 represented RMB denominated loans Jinshang Leasing obtained in July 2016 and April 2017 for its various direct financing lease projects from Great Wall Guoxing Financial Leasing Co., Ltd. The loans bear interest at the fixed rate of 6% per annum and the term of the loans is thirty months and matures in 2019, and pledged against the Company’s receivables from its certain direct financing leases, with a gross carrying amount of$1,433,609 (RMB9,846,081)as of June 30, 2019,Jinshang Leasing paid deposits totaled $ 182,782(RMB1,255,355) (Note 9) to Great Wall Guoxing Financial Leasing Co., Ltd as of June 30, 2019, respectively, which are non-interest bearing and repayable upon maturity of the other loans.

Interest expense incurred on the other loans for the years ended June 30, 2020and 2019 were $1,597 and $118,821, respectively.

As of June 30, 2020, the borrowings was Nil.

As of June 30, 2019, the borrowings will be due according to the following schedule:


	Bank loans		Other loans
	(principal amounts)		(principal amounts)
Within 1 year	$	338,763	$	377,393
Between 1 to 2 years
Between 2 to 3 years		—		—
Between 3 to 4 years		—		—
Between 4 to 5 years		—		—
Beyond 5 years		—		—
	$	338,763	$	377,393

NOTE 10 - OTHER LIABILITIES

Other liabilities as of June 30, 2020 and 2019 consisted of:


	June 30, 2020		June 30, 2019
Other tax payable	$	1,428,070	$	1,223,716
Accrued payroll		54,010		41,215
Other payables		1,674,941		1,287,154
	$	3,157,021	$	2,552,085

NOTE 11 - SHARE-BASED COMPENSATION

2015 Long-Term Incentive Equity Plan

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FOR THE YEARS ENDED JUNE 30, 2020

Shares that may be issued pursuant to the Merger Agreement and the conversion of any shares held by the Company’s public shareholders as provided for in the Company’s Amended and Restated Certificate of Incorporation.

The following table summarizes stock award activity and related information for all of Wins Finance’s Equity Plans for the years ended June 30, 2020 and 2019:


			Weighted Average
		Weighted	Remaining
	Number of	Average	Contractual
	Shares	Exercise Price	Term In Years
		$
Outstanding, July 1, 2016	1,270,000	12	2.42
Granted	—	12	3.00
Exercised	—	—	—
Forfeited	(1,190,000)	12	—
Canceled	(80,000)	12	—
Outstanding, June 30, 2017, 2018 and 2019	—	—	—
Granted	—	—	—
Exercised	—	—	—
Forfeited	—	—	—
Canceled	—	—	—
Outstanding, June 30, 2020	—	—	—

Exercisable, June 30, 2019 and 2020	—	—	—
Vested and expected to vest, June 30, 2019 and 2020	—	—	—

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FOR THE YEARS ENDED JUNE 30, 2020


Expected volatility		51.5	%
Risk-free interest rates		1.77	%
Expected terms		5.0 years
Dividend yields		0	%
Sub-Optimal behavior multiple		2.80
Fair Value per share of options granted	$	5.27~$5.44

In connection with the grant of stock options to employees, the Company recorded share-based compensation charges of nil and nil, respectively, for the years ended June 30, 2020 and 2019, respectively. The negative amount in 2017 resulted from the reversal of share-based compensation expense for the Company’s options that were cancelled due to the termination of the holder’s employment prior to vesting.

NOTE 12 - CAPITALIZATION

Common Stock

On June 28, 2016, the Company repurchased 5,100 of its ordinary shares from Bradley Reifler, a former director of the Company, for $60,180, and 1,480,000 shares from Bluesky LLC for $17,464,000. Of the amounts payable to Bluesky, $17 million was paid. Bluesky LLC is a limited liability Company owned and controlled by Bluesky Family Trust, a family trust benefitting the family of Jianming Hao, the Company’s former Chairman, Co-Chief Executive Officer and President. Balance of $464,000 remained unpaid as of June 30, 2020 and June 30, 2019.

On December 2, 2016, the Company repurchased 204,005 of its ordinary shares from Richard Xu, a former officer of the Company, for a consideration of $204.

As of June 30, 2020 and 2019, there were 19,837,642 shares of common stock issued and outstanding.

NOTE 13 - STATUTORY RESERVE

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FOR THE YEARS ENDED JUNE 30, 2020

NOTE 14 - EMPLOYEE RETIREMENT BENEFITS

The Company has made employee benefit contributions in accordance with Chinese relevant regulations, including retirement insurance, unemployment insurance, medical insurance, housing fund, work injury insurance and birth insurance. The Company recorded the contribution in the salaries and employee charges when incurred. The contributions made by the Companies were $95,017 and $124,667 for the year ended June 30, 2020 and 2019, respectively.

NOTE 15 - EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the years ended June 30, 2020 and 2019, respectively:


	June 30, 2020		June 30, 2019
Net income/(loss) attributable to the common shareholders	$	(176,101,494)	$	(49,809,728)

Basic weighted-average common shares outstanding		19,837,642		19,837,642
Effect of dilutive securities		—		—
Diluted weighted-average common shares outstanding		19,837,642		19,837,642
Earnings (loss) per share – Basic	$	(8.88)	$	(2.51)
Earnings (loss) per share – Diluted	$	(8.88)	$	(2.51)
Earnings (loss) per share – From continuing operations	$	(8.88)	$	(2.93)
Earnings (loss) per share – From discontinued operations	$	—	$	0.42

NOTE 16 - INCOME TAXES

No Hong Kong Profits Tax has been made for the years ended June 30, 2020 and 2019 as Full Shine had no assessable profits arising in Hong Kong.

The provision for PRC Enterprise Income Tax (“EIT) is calculated at 25% of the estimated assessable profits of the subsidiaries established in the PRC during the years ended June 30, 2020 and 2019.

Under the EIT Law, investment income from security funds is exempted from PRC EIT.

The Company evaluates the level of authority for each uncertain tax position (including the potential application of interest and penalties) based on the technical merits of the position, and measures the unrecognized benefits associated with the tax position. For the years ended June 30, 2020 and 2019, the Company had no unrecognized tax benefits.

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FOR THE YEARS ENDED JUNE 30, 2020

Income tax payable represented enterprise income tax at a rate of 25% of taxable income the Company accrued but not paid. Income tax payable as of June 30, 2020 and 2019 comprises:


	June 30, 2020		June 30, 2019
Jinshang Leasing		1,423,022		1,202,674
Total	$	1,423,022	$	1,202,674

The reconciliation between the effective income tax rate and the PRC statutory income tax rate of 25% is as follows:


	June 30, 2020		June 30, 2019
PRC statutory tax	25	%	25.0	%
Effect of non-deductible expenses	(30.3)	%	(27.4)	%
Effect of non-taxable income	3.7	%	0.5	%
Others	(23.4)	%	(22.9)	%
Effective tax rate	(25.0)	%	(24.8)	%

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FOR THE YEARS ENDED JUNE 30, 2020


	June 30, 2020		June 30, 2019
Deferred tax assets
Provision for direct financing lease	$	25,517,310	$	21,306,314
Direct financing lease income		(1,042,727)		(469,906)
Specific allowance on guarantee				—
Total deferred tax assets		24,474,583		20,836,408
Less: Valuation allowance				—
Less: Net off with deferred tax liabilities for financial reporting purposes				—
Nettotal deferred tax assets	$	24,474,583	$	20,836,408

Deferred tax liabilities
Guarantee paid on behalf of guarantee service customers loss	$	—	$	—
Commissions and fees on financial guarantee services		—		—
Direct financing lease income		—		—
Total deferred tax liabilities
Less: Net off with deferred tax assets for financial reporting purposes		—		—
Net total deferred tax liabilities	$	—	$	—

For the purpose of presentation in the consolidated balance sheets, certain deferred tax assets and liabilities have been offset.

As of June 30, 2020 and 2019, the Company had net deferred tax assets of $24,299,486 and $20,836,408, respectively. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The management considered all available evidence, both positive and negative, in determining the realizability of deferred tax assets at June 30, 2020 and 2019. Management considered carry back availability, the scheduled reversals of deferred tax liabilities, projected future taxable income during the reversal periods, and tax planning strategies in making this assessment. Management also considered recent history of taxable income, trends in the Company’s earnings and tax rate, positive financial ratios, and the impact of the downturn in the current economic environment (including the impact of credit on allowance and provision for guarantee and direct financing lease losses; and the impact on funding levels) on the Company. Based upon its assessment, management believes that a valuation allowance was not necessary as of June 30, 2020 and 2019.

As of June 30, 2020 and 2019, the Company intends to permanently reinvest the undistributed earnings of its operating subsidiaries to fund future operations. As such, no provision has been made for deferred tax assets related to the future repatriation of the cumulative undistributed earnings of the PRC subsidiaries of $51,295,890 and $39,293,597 as of June 30, 2020 and 2019, respectively.

For the years ended June 30, 2020 and 2019, the Company has not been selected for examination by the applicable tax authority and no resolution of tax audits were expected to be material to the financial statements.

NOTE 17 - RELATED PARTY TRANSACTIONS AND BALANCES

Related party balances

Related party balances as of June 30, 2020 and 2019 (apart from those disclosed elsewhere in these financial statements) consisted of:


	June 30, 2020		June 30, 2019
Due to related party
Bluesky LLC	$	464,000	$	464,000
	$	464,000	$	464,000

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FOR THE YEARS ENDED JUNE 30, 2020

The amount due to Bluesky LLC was interest free, unsecured and due on demand.

NOTE 18 - COMMITMENTS AND CONTINGENCIES

Guarantee Commitments

During the year ended June 30, 2018, Jinshang Leasing and a third party jointly entered into certain finance lease contracts with a customer with total contract amount of $70.1 million (RMB464 million). Jinshang Leasing provides financing to the customer of $6.2 million (RMB44 million) (included in Note 6 - net investment in direct financing leases) and the third party provides the remaining financing of $59.4 million (RMB420 million), for a period up to August 2020. Jinshang Leasing also acts as a guarantor and is obligated to pay the third party if the customer fails to pay the obligations when they become due. As of June 30, 2020, the maximum guarantee issued by Jinshang Leasing was $65.3 million(RMB462 million).

Litigation

The Company is involved in various legal actions arising in the ordinary course of its business. As of June 30, 2019, the Company was involved in 1 lawsuit in China, which the Company is a defendant in relation to its financing lease business (see below). The cases are in the process of being enforced.

As of June 30, 2018, the Company and certain of its executive officers have been named as defendants in one civil securities lawsuit filed in U.S. District Courts. On April 20, 2017, Michel Desta filed a securities class action complaint in the District Court for the Central District of California seeking monetary damages against us, Jianming Hao, Renhui Mu, Peiling (Amy) He, and Junfeng Zhao (entitled Desta v. Wins Finance Holdings, Inc., et al.; C.D. Cal. Case No. 2:17-cv-02983) (hereafter, the “California Action”). On June 26, 2017, the Court issued an Order appointing lead plaintiffs and lead counsel, and on August 25, 2017 lead plaintiffs filed an Amended Class Action Complaint. The Amended Complaint (which did not name Peiling (Amy) He as a defendant), alleges a claim against us for securities fraud purportedly arising from alleged misrepresentations concerning Wins’ principal executive offices (which alleged misrepresentations resulted in Wins being added to, and then removed from, the Russell 2000 index). On October 24, 2017, we moved to dismiss the Amended Complaint for failure to state a claim as against us.

As a result of a private mediation conducted in November 2018, the Company agreed in principle to settle the class action, on behalf of all remaining defendants. The full terms of that settlement remain confidential (but include certain contingencies concerning shareholder participation in the settlement and required court approvals). The court granted preliminary approval of the settlement by order entered on March 4, 2019. Given that the Company has not yet received the necessary approvals from Chinese regulators as to the transfer of the settlement funds from China to the United States, the Court entered an Order dated October 13, 2020 setting a final settlement approval hearing for March 24, 2021.

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FOR THE YEARS ENDED JUNE 30, 2020

Asset Management Co., Ltd. was “highly uncertain,” and that the resignation of the Company’s former independent auditor was “foreseeably likely” given the non-payment of the foregoing loan as well as alleged material weaknesses in the Company’s control over financial reporting.

NOTE 19 - DISPOSAL GROUPS HELD FOR SALE

As at 30 June 2020 and 30 June 2019, the Company determined that it had lost control of the subsidiaries Jinchen Agriculture and Dongsheng Guarantee.

The management of the Company has concluded that the Company has no option but to de-consolidate Jinchen Agriculture and Dongsheng Guarantee from its financial reporting as at June 30. 2020 and 2019.

The effect of de-consolidation is that in future, the financial results of the subsidiaries are no longer reported in the Company’s Annual Report (i.e. the report will be at a company, not group level) and the investment in the subsidiaries is written down in the Company’s accounts as a disposal without consideration. In the event that the Company is able to re-establish control over the PRC subsidiaries and/or their assets, the Company will then re-consolidate and/or recognize this value.

De-consolidation will allow the Company to prepare and issue financial reports that, to the extent possible given the circumstances, most closely and accurately reflect the true financial position of the Company.

As shareholders will be aware, the Company has been unable to complete its financial reporting on a Group basis (including the PRC subsidiaries information). The Board did not, until now, believe that de-consolidation was warranted as they were waiting for further information and confirmations on the subsidiaries Jinchen Agriculture and Dongsheng Guarantee. This has led the Company to seek several extensions for submission of the reports and left the Company facing potential de-listing by Nasdaq. The Board now believes that the decision to de-consolidate as at June 30. 2020 and 2019 is justified.

The de-consolidation is based on a combination of factors:

1. The Board and the management has incomplete record for the Company itself and no access to the original books and records of the subsidiaries of Jinchen Agriculture and Dongsheng Guarantee due to the freeze by the Bureau.

2. The Company, although owing 100% of the subsidiaries of Jinchen Agriculture and Dongsheng Guarantee, is only able to affect control over them via the cooperation of the managements of the subsidiaries or the Bureau. As the management of the subsidiaries was out of connection and the assets and documents were freeze by the Bureau, there are significant legal and financial obstacles to regaining the control of the subsidiaries.

3. The confirmation by way of site visit that the subsidiaries have ceased operations at the operating offices.

4. The Company’s appointed legal counsel was unable to determine the cause of the freeze as the authorities have not provided such information, but it has advised the Company that the Company no longer has control of the assets or operations of Jinchen Agriculture and Dongsheng Guarantee. Therefore, until the freeze is lifted and the Company has not been provided any guidance about when the freeze would be lifted, the Company will not be able to consolidate Jinchen Agriculture and Dongsheng Guarantee into its financial statements.

5. The Company intend to dispose the right to major shareholders for which the price will be determined later and subject to shareholder approval.

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FOR THE YEARS ENDED JUNE 30, 2020

Given the circumstances and based on the available information, the Board believes that the Company and its shareholders have been the victim of financial misreporting and the loss control of the subsidiaries of Jinchen Agriculture and Dongsheng Guarantee.

The Board believes that de-consolidating the accounts as at June 30, 2020 and 2019 will be the fairest and most accurate way of reporting the Company’s financial position going forward and will allow the Company to pursue a restructuring and reorganization of its listing to safeguard its remaining value.

Details of the disposal are as follows:

Carrying amounts of assets of which control was lost:


	June 30, 2020		June 30, 2019
ASSETS
Cash	$	3,755,831	$	7,775,528
Restricted cash		15,568,983		16,026,192
Commission receivable		1,211,140		1,246,707
Compensation receivable		100,622		103,577
Advance payment		17,217		17,724
Interest receivable		15,940,393		16,408,380
Other receivable		198		—
Available-for-sale financial assets		126,596,083		130,313,790
Property and equipment, net		60,585		62,364
TOTAL ASSETS	$	163,251,052	$	171,954,262

LIABILITIES
Allowance on guarantee	$	348,854	$	359,098
Unearned Income-Guarantee commission		77,902		80,190
Income tax payable		2,243,618		2,309,505
Other liabilities		75,381		77,580
Deferred tax liabilities		204,081		210,074
TOTAL LIABILITIES	$	2,949,836	$	3,036,447
Net assets de-recognised	$	160,301,216	$	168,917,815

On January 6 2021, the company entered into an agreement to transferred Jinchen Agriculture and Dongsheng Guarantee’ equity to a third party. The transfer price was zero. In addition, the creditor’s rights and debts among the group, Jinchen Agriculture and Dongsheng Guarantee shall be mutually exempted. The investment loss was $164.10 million due to the disposal of Jinchen Agriculture and Dongsheng Guarantee.

NOTE 20 - SUBSEQUENT EVENTS

Loss of control over subsidiaries

On June 9, 2020, the Changzhi Public Security Bureau ( the “Bureau”) enforced a judgement against Jinchen Agriculture. Pursuant to the action, the Bureau froze the assets of Jincheng Agriculture and its subsidiaries. Up to the date of the report, the Company’s management was unable to determine the cause of the freeze as the authorities have not provided such information, but it has advised that the Company no longer has control of the assets or operations of Jinchen Agriculture and its subsidiary Dongsheng Guarantee. Therefore, until the freeze is lifted, the Company will not be able to consolidate Jinchen Agriculture and its subsidiary Dongsheng Guarantee into its financial statements.

On November 2, 2020, the Company applied to Changzhi Public Security Bureau for assistance, hoping to take all appropriate and necessary actions as soon as possible,including but not limited to:

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FOR THE YEARS ENDED JUNE 30, 2020

1.	Under the supervision of Changzhi Public Security Bureau, the external auditors and lawyers authorised by the Company on the site of Jincheng Agriculture and its subsidiary shall retrieve or check the financial data and business contracts of the subsidiaries sealed by the relevant authorities

Under the supervision of Changzhi Public Security Bureau, the external auditors and lawyers authorised by the Company on the site of Jincheng Agriculture and its subsidiary shall send confirmation request letters to the debtors of the subsidiaries and affix the official seal of Jincheng Agriculture and its subsidiary.

The Company’s other business are unaffected by the freeze and continue to operate normally

Legal issues

On July 24, 2020, Samuel Kamau filed a shareholder class action complaint in the District Court for the Central District of California seeking unspecified monetary damages for alleged violations of the United States Securities Exchange Act of 1934 during the period from October 31, 2018 to July 6, 2020 against Wins Finance Holdings Inc., Renhui Mu, and Junfeng Zhao (entitled Kamau v. Wins Finance Holdings, Inc., et al.; C.D. Cal. Case No. 2:20-cv-06656). Plaintiffs initial complaint alleges, among other things, that Defendants purportedly violated the securities laws by failing to disclose that the repayment of a RMB 580 million “loan” to Guohong Asset Management Co., Ltd. was “highly uncertain,” and that the resignation of the Company’s former independent auditor was foreseeably likely given the non-payment of the foregoing loan as well as alleged material weaknesses in the Company’s control over financial reporting. As of this date and to the best of our knowledge, neither the Company nor the individual Defendants have been served or have agreed to accept service of the summons and complaint. As of this date, Plaintiff has not filed an affidavit of service with the Court concerning service upon any Defendant. In accordance with procedural rules applicable to such securities class actions, the deadline for the submission of motions for appointment as lead plaintiff(s) and lead counsel are due on or before September 24, 2020, following the resolution of which it is common for the newly-appointed lead plaintiff(s) to amend the complaint and allegations underlying the claims. For this reason, we cannot provide a meaningful evaluation at this time of the likelihood of an unfavorable outcome. Similarly, because the action seeks unspecified damages, and because the shareholder class has not yet been certified by the Court, we cannot provide a meaningful evaluation of the amount or range of potential loss. Finally, given the preliminary status of this newly-filed action, we have not yet received instructions from the Company as to whether it will defend or seek to settle this matter.

Influence of COVID-19

The Company expects revenue in the year ended June 30,2021 to decrease 25% as compared with the year ended June 30,2020 due to the adverse impact of the COVID-19 outbreak on the Company’s financial leasing business. Despite COVID-19 was contained in China in the second half of 2020, the lessee’s ability to repay the rental expense was still affected and the Company had made specific allowance for lease payments amounting to USD 101,862,247 as at June 30 2020 based on the specific risk of collectability of the lessees identified.

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June 30, 2022

June 30, 2021

Due to related party

Bluesky LLC

464,000

464,000