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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

OR

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

For the fiscal year ended June 30, 2021

OR

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

OR

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)

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Ordinary Shares, par value $.0001 per share

WINS

NASDAQ Capital Market

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

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

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 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, 2021 were revised to reflect these restatements. Other than the changes described above, no changes have been made to the Form 20-F.

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.

i

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, 2021, 2020, 2019, 2018, 2017 and the selected balance sheet data as of June 30, 2021, 2020, 2019, 2018, 2017 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, 2021, 2020, 2019, 2018, 2017 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)

    

2021

    

2020

    

2019

    

2018

    

2017

Guarantee service income

 

  

 

  

 

  

 

  

 

  

Commissions and fees on financial guarantee services

 

 

2,839,194

(Provision) reversal of provision for financial guarantee services

 

 

3,208,827

Commission and fees on guarantee services, net

 

 

6,048,021

Direct financing lease income

 

  

 

  

 

  

 

  

 

  

Direct financing lease interest income

 

174,306

 

4,934,157

 

7,595,992

 

5,697,957

 

6,047,172

Interest expense for direct financing lease

 

(11,181)

 

(11,967)

 

(411,066)

 

(1,546,304)

 

(2,094,587)

Business collaboration fee and commission expenses for leasing projects

 

 

(37,572)

 

(68,342)

 

(99,320)

 

(603,873)

Provision for lease payment receivable

 

(9,495,002)

 

(19,379,086)

 

(81,585,960)

 

(3,514,961)

 

(27,332)

Net direct financing lease income after provision for receivables

 

(9,331,877)

 

(14,494,468)

 

(74,469,376)

 

537,372

 

3,321,380

Financial advisory and agency income

 

 

 

1,695,303

 

357,284

Net revenue

 

(14,494,468)

 

(74,469,376)

 

2,232,675

 

9,726,685

Non-interest income

 

  

 

  

 

  

 

  

 

  

Interest on investment securities

 

 

 

105,878

 

3,942,719

 

13,752,538

Investment loss

(164,098,554)

Total non-interest(loss) income

 

 

(164,098,554)

 

105,878

 

3,942,719

 

13,752,538

Non-interest expense

 

 

  

 

  

 

  

 

Business taxes and surcharge

 

(476)

 

(7,652)

 

(15,827)

(9,911)

 

(4,406)

Salaries and employee charges

 

(920,194)

 

(923,325)

 

(542,628)

(540,312)

 

(879,595)

Rental expenses

 

(97,693)

 

(95,545)

 

(102,859)

(175,549)

 

(247,684)

Other operating expenses

 

(6,136,647)

 

(481,311)

 

(2,062,802)

(4,554,030)

 

(46,258)

Total non-interest expense

 

(7,155,010)

 

(1,507,833)

 

(2,724,116)

 

(5,279,802)

 

(1,177,943)

loss before taxes

 

(16,486,887)

 

(180,100,855)

 

(77,087,614)

 

895,592

 

22,301,280

Income tax(expense) credit

 

(24,590,417)

 

3,999,361

 

18,900,720

 

322,038

 

(1,951,489)

Net loss

 

(41,077,304)

 

(176,101,494)

 

(58,186,894)

 

1,217,630

 

20,349,791

loss from discontinued operation

8,377,166

8,881,255

Total Net Losses

(41,077,304)

(176,101,494)

(49,809,728)

10,098,885

Other comprehensive loss

 

  

 

  

 

  

 

  

 

  

Foreign currency translation adjustment

 

2,381,422

 

(2,305,407)

 

(9,623,857)

 

5,977,187

 

(5,130,963)

ComprehensiveLoss

 

(38,695,882)

 

(178,406,901)

 

(59,433,585)

 

16,076,072

 

15,218,828

Weighted-average common shares outstanding

 

  

 

  

 

  

 

  

Basic (1)

19,837,642

 

19,837,642

 

19,837,642

 

19,837,642

 

19,926,510

Diluted (1)

19,837,642

 

19,837,642

 

19,837,642

 

19,837,642

 

20,082,089

Earnings (loss) per share

 

  

 

  

  

 

  

 

  

Basic (1)

 

(2.07)

 

(8.88)

(2.51)

 

0.51

1.02

Diluted (1)

 

(2.07)

 

(8.88)

(2.51)

 

0.51

1.01

From continuing operation

(2.07)

(8.88)

(2.93)

0.06

1.01

From discontinued operation (2)

0.42

0.45

1

(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.

    

2021

    

2020

    

2019

    

2018

    

2017

Balance Sheet Data

 

 

  

 

  

Cash and cash equivalents

 

$

6,621

 

$

38,820

 

$

703,120

 

$

13,133,540

 

$

17,002,282

Total assets

 

3,631,904

 

46,445,521

 

228,101,794

 

309,903,262

 

312,764,090

Total liabilities

 

6,284,325

 

10,402,060

 

13,651,432

 

36,019,315

 

54,956,215

Total equity

 

(2,652,421)

 

36,043,461

 

214,450,362

 

273,883,947

 

257,807,875

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, is a leading and integrated lending solution provider mainly serving small-and-medium sized enterprises (SMEs) in Jinzhong City, Shanxi Province and Beijing, China. We are currently providing two financial products and one supplementary service:

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;

2

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.

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 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 $164.01 million for the year ended June 30, 2020,due to the disposal of Jinchen Agriculture and Dongsheng Guarantee. As of fiscal year end 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.

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.

3

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.

Qualified Opinion

As disclosed elsewhere in this document, because we lost the ability to control our subsidiaries Shanxi Jincheng Agriculture Co., Ltd and Shanxi Dongsheng Finance Guarantee Co., Ltd (collectively “subsidiaries without control”) our auditor was unable to carry out any audit procedures or to obtain information it considered necessary during its audit of the financial statements of the subsidiaries without control stated on the face of the 2020 balance sheet classified as disposal group. Therefore, the auditor could not determine the effect of adjustments, if any, on our financial position as at June 30 2020 or on our financial performance and cash flows for the year then ended.

We were unable to provide disclosure to our auditor relating to the subsidiaries without control regarding the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. The management of the subsidiaries without control were 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 the auditor with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition and that transactions are executed as authorized.

The SEC takes the position that audit reports that express a qualified opinion due to a departure from GAAP, like the one our auditor provided on our financial statements, do not meet the requirements of Regulation S-X, and that financial statements not in conformity with GAAP, like ours, are presumed to be inaccurate or misleading, notwithstanding explanatory disclosures in footnotes or in the accountant’s report. Notwithstanding the position of the SEC, we believe that it is preferable for us to release the information contained in this Annual Report on Form 20-F to our stockholders than to withhold such information.

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.

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.

4

Results of Operations

Year Ended June 30, 2021 Compared to Year Ended June 30, 2020

For the years ended June 30,

Changes

 

    

2021

    

2020

    

$

    

%

 

Direct financing lease income

 

  

 

  

 

  

  

Direct financing lease interest income

$

174,306

4,934,157

$

(4,759,851)

$

(96.47)

%

Interest expense for direct financing lease

 

(11,181)

 

(11,967)

 

786

6.57

%

Business collaboration fee and commission expenses for leasing projects

 

 

(37,572)

 

37,572

100

%

Provision for lease payment receivable

 

(9,495,002)

 

(19,379,086)

 

9,884,084

51.00

%

Net direct financing lease interest income after provision for receivables

 

(9,331,877)

 

(14,494,468)

 

5,162,591

35.62

%

Financial advisory and lease agency income

 

 

 

Net revenue

 

(9,331,877)

 

(14,494,468)

 

5,162,591

35.62

%

Non-interest income

 

  

 

  

 

Investment loss

 

 

(164,098,554)

 

(164,098,554)

100

%

Total non-interest (loss)income

 

(164,098,554)

 

(164,098,554)

100

%

Non-interest expense

 

  

 

  

 

  

Business taxes and surcharge

 

(476)

 

(7,652)

 

7,176

(93.78)

%

Salaries and employees charges

 

(920,194)

 

(923,325)

 

(3,131)

(0.34)

%

Rental expenses

 

(97,693)

 

(95,545)

 

2,148

2.25

%

Other operating expenses

 

(6,136,647)

 

(481,311)

 

5,655,336

1,174.99

%

Total non-interest expense

 

(7,155,010)

 

(1,507,833)

 

5,647,177

374.52

%

loss before taxes

 

(16,486,887)

 

(180,100,855)

 

163,613,968

(90.85)

%

Income tax(expense) credit

 

(24,590,417)

 

3,999,361

 

(28,589,778)

(714.86)

%

NET LOSSES

(41,077,304)

(176,101,494)

135,024,190

(76.67)

%

Income from discontinued operation

Total Net Losses

$

(41,077,304)

$

(176,101,494)

$

135,024,190

(76.67)

%

Net Revenue

Our net revenue consists of commissions and fees on our direct financing lease interest income and financial advisory and lease agency income. Net revenue increased by $5.2 million, or 35.6 % to $(9.3) million for the year ended June 30, 2021, compared to $(14.5) million for the year ended June 30, 2020. 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 decreased by $4.7 million, or 96.5 %, to $0.2 million for the year ended June 30, 2021, compared to $4.9 million for the year ended June 30, 2020. The decrease 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 $786, or 6.6 %, to $11.18 thousand for the year ended June 30, 2021, compared to $12 thousand million for the year ended June 30, 2020. The decrease was primarily attributable to the decrease in the average balance of outstanding loans from banks and other financial institutions.

5

Business collaboration fee and commission expenses for leasing projects

We pay fees and commissions on collaboration for leasing projects for services rendered during the transaction process. Such fees and commissions decreased by 100.00% for the year ended June 30, 2021, compared to the year ended June 30, 2020.

Provision

Net direct financing lease interest income after provision for receivables

Net direct financing lease interest income after provision for receivables was $(9.3) million for the year ended June 30, 2021, compared to $(14.5) million for the year ended June 30, 2020.

Financial advisory and agency income

Financial advisory and lease agency income was nil for the year ended June 30, 2021.

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 increased by $5.6 million, or 374.5%, to $7.2 million for the year ended June 30, 2021, compared to $1.5 million for the year ended June 30, 2020. The increase was primarily caused by a increase in other operating expenses.

Non-interest expenses - Other operating expenses

For the years ended June 30,

    

2021

    

2020

Legal and professional fees

$

386,374

$

158,594

Audit fees

 

592,865

 

204,266

Depreciation

 

6,925

 

12,328

Others

 

5,150,483

 

106,123

Total

$

6,136,647

$

481,311

The increase in other operating expenses was mainly caused by: (i) a increase in audit fees amounting $0.3 million in the years ended June 30, 2021; 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 $28.6 million to a tax credit of $(24.6) million for the year ended June 30, 2021, compared to a tax credit of $4.0 million for the year ended June 30, 2020. The decrease was primarily attributable to the decrease of provision for lease payment receivable. For the years ended June 30, 2021 and 2020, losses before taxes excluding the interest on investment securities and offshore expenses was $(15.57) million and $17.3 million, respectively.

Net loss from continuing operation

As a result of the above, net loss from continuing operations was $41.08 million for the year ended June 30, 2021, compared to net loss from continuing operations of $176.1 million for the year ended June 30, 2020.

6

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, 2021, there were 3 customers that accounted for 63%, 19% and 14% of the Jinshang Leasing’s revenue, respectively. For the year ended June 30, 2020, there were 2 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.

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 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.

7

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, 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.

8

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, 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.

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, 2021 and 2020.

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.

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 HuiYue (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 HuiYue’s company registration. The first payment of RMB 20 million ($2.9 million) was made on October 30, 2018. HuiYue 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.

9

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.

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.

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, 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 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.

10

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,

    

2021

    

2020

Balance sheet 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

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.

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

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.

11

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, 2021 and 2020:

For the years ended

June 30,

    

2021

    

2020

Net cash used in operating activities

$

(13,007)

$

(3,111,416)

Net cash used in investing activities

 

 

(843)

Net cash used in financing activities

 

 

(699,469)

Effect of exchange rate change on cash, cash equivalents and restricted cash

 

2,817

 

3,780,236

Net decrease in cash and cash equivalents and restricted cash

$

(10,190)

$

(31,492)

Net cash used in operating activities was approximately $0.01 million for the year ended June 30, 2021, while net cash used in operating activities was approximately $3.1 million for the year ended June 30, 2020. The net cash provided by operating activities for the year ended June 30, 2021 mainly consisted of $5.9 million of cash used in minimum lease payment receivable. The net cash used in operating activities for the year ended June 30, 2020 mainly consisted of $7.1 million of cash used in minimum lease payment receivable.

Net cash provided by investing activities was nil for the year ended June 30, 2021, while net cash used in investing activities was approximately $843 for the year ended June 30, 2020. Net cash used in investing activities for the year ended June 30, 2020 mainly consisted of $843 of related to purchase of property, plant and equipment. Net cash used in financing activities was nil for the year ended June 30, 2021, while net cash used in financing activities was approximately $0.7 million for the year ended June 30, 2020. Net cash used in financing activities for the year ended June 30, 2020 consisted of $0.7 million to repay long term loans.

12

Commitments and Contractual Obligations

The following table presents our material contractual obligations as of June 30, 2021 and 2020:

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

$

$

Total as at

June 30,

Less than

1 – 3

3 – 5

5+

Contractual Obligations

    

2020

    

1 year

    

years

    

years

    

years

Due to a related party

 

464,000

 

464,000

 

 

 

Operating lease obligations

 

55,007

 

47,904

 

7,103

 

 

$

519,007

 

511,904

7,103

$

$

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).

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.

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.

13

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 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.

14

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.

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)

15

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)

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 8.1 to the Annual Report on Form 20-F filed on _October 29, 2021)

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

16

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)

17

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

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.

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.

F-2

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of Wins Finance Holdings Inc and Subsidiaries

Basis for Opinion (Cont’d)

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 2018.

F-3

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 (PCAOB ID:3487)

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

Singapore

October 10, 2023

F-4

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.

F-5

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

F-6

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.

F-7

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.

F-8

Table of Contents

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.

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.

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”).

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.

F-9

Table of Contents

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%.

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

F-10

Table of Contents

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.

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.

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.

F-11

Table of Contents

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.

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 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.

(c)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 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.

F-12

Table of Contents

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

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.

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

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 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.

F-13

Table of Contents

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)

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.

(h)

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, 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.

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.

F-14

Table of Contents

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.

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.

(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.

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, 2021 and 2020.

(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.

F-15

Table of Contents

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)

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, 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.

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.

(l)

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.

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.

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Table of Contents

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

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”).

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, 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

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.

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Table of Contents

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

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.

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 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

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.

(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).

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Table of Contents

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

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.

(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

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.

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.

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Table of Contents

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

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.

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

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.

F-20

Table of Contents

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)

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 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.

F-21

Table of Contents

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.

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, 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

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.

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Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 3 -             RISKS (CON’T)

(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.

(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 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

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, 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

F-23

Table of Contents

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.

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, 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

F-24

Table of Contents

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)

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, 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%.

F-25

Table of Contents

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

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”).

F-26

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

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

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, 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

 

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, 2020 and 2021.

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.

F-27

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

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

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, 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

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, $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

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 $101,318 and $95,017 for the year ended June 30, 2021 and 2020, respectively.

F-28

Table of Contents

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

$

$

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, 2021 and 2020, 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, 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 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, 2021 and 2020, 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.

F-29

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 14 -           INCOME TAXES (CON’T)

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, 2021 and 2020 comprises:

    

June 30, 2021

    

June 30, 2020

Jinshang Leasing

 

 

1,423,022

Total

$

$

1,423,022

For the year ended June 30, 

    

2021

    

2020

Current income tax benefit (expense)

1,256,560

(256,030)

Deferred tax (expense)benefit

 

(25,846,977)

 

4,255,391

Total (expense)credit for income taxes

(24,590,417)

3,999,361

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.

F-30

Table of Contents

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:

    

June 30, 2021

    

June 30, 2020

Due to related party

 

  

 

  

Bluesky LLC

$

464,000

$

464,000

$

464,000

$

464,000

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 interest free, unsecured and due on demand.

F-31

Table of Contents

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.

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.

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.

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). Plaintiff’s 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.

F-32

Table of Contents

WINS FINANCE HOLDINGS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2021

NOTE 16 -           COMMITMENTS AND CONTINGENCIES (CON’T)

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, 2020.

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.

F-33

v3.23.3
Document And Entity Information - shares
12 Months Ended
Jun. 30, 2021
Oct. 31, 2021
Document Information [Line Items]    
Document Type 20-F/A  
Document Registration Statement false  
Document Annual Report true  
Document Transition Report false  
Document Shell Company Report false  
Entity Registrant Name WINS Finance Holdings Inc.  
Document Period End Date Jun. 30, 2021  
Entity Current Reporting Status Yes  
Entity Well-known Seasoned Issuer No  
Entity Filer Category Non-accelerated Filer  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   19,837,642
Amendment Flag true  
Amendment Description Amendment No.1  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus FY  
Entity Central Index Key 0001640251  
Current Fiscal Year End Date --06-30  
Entity Voluntary Filers No  
Trading Symbol WINS  
Title of 12(b) Security Ordinary Shares, par value $.0001 per share  
Entity File Number 333-204074  
Entity Incorporation, State or Country Code E9  
Entity Address, Address Line One 1F, Building 1B  
Entity Address, Address Line Two No. 58 Jianguo Road, Chaoyang District  
Entity Address, City or Town Beijing  
Entity Address, Postal Zip Code 100024  
Entity Address, Country CN  
Security Exchange Name NASDAQ  
Document Accounting Standard U.S. GAAP  
Auditor Name Audit Alliance LLP  
Auditor Firm ID 3487  
Auditor Location Singapore  
Business Contact [Member]    
Document Information [Line Items]    
City Area Code 646  
Entity Address, Address Line One 1177 Avenue of the Americas  
Entity Address, Address Line Two 5th Floor  
Entity Address, City or Town NY  
Entity Address, State or Province NY  
Entity Address, Postal Zip Code 10036  
Local Phone Number 694-8538  
v3.23.3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION - USD ($)
Jun. 30, 2021
Jun. 30, 2020
ASSETS    
Cash $ 6,621 $ 38,820
Restricted cash 22,009 0
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) 0 24,474,583
Other assets (Note 7) 770,985 2,054,907
Non-marketable investment (Note 2 k) 0 2,828,963
TOTAL ASSETS 3,631,904 46,445,521
Liabilities    
Interest payable 0 8,320
Income tax payable (Note 14) 0 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) 0 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
v3.23.3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Parenthetical) - $ / shares
Jun. 30, 2021
Jun. 30, 2020
Oct. 26, 2015
CONSOLIDATED STATEMENT OF FINANCIAL POSITION      
Common stock, par value per share $ 0.0001 $ 0.0001 $ 0.0001
Common stock, shares authorized 100,000,000 100,000,000 100,000,000
Common stock shares issued 19,837,642 19,837,642 21,526,747
Common stock, shares outstanding 19,837,642 19,837,642 21,526,747
v3.23.3
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 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 0 (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 0 0 105,878
Investment loss 0 (164,098,554) 0
Total non-interest(loss) income 0 (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 0 0 8,377,166
Total Net Losses (41,077,304) (176,101,494) (49,809,728)
Other comprehensive income (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 - Basic (2.07) (8.88) (2.93)
From continuing operation - Diluted (2.07) (8.88) (2.93)
From discontinued operation - Basic 0 0 0.42
From discontinued operation - Diluted $ 0.00 $ 0.00 $ 0.42
v3.23.3
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated other Comprehensive Losses [Member]
Statutory Reserve [Member]
Retained Earnings/(Accumulated Losses) [Member]
Total
Beginning Balance at Jun. 30, 2019 $ 1,984 $ 211,934,432 $ (23,733,291) $ 4,687,085 $ 21,560,152 $ 214,450,362
Beginning Balance, shares at Jun. 30, 2019 19,837,642          
Net loss $ 0 0 0 0 (176,101,494) (176,101,494)
Foreign currency translation adjustment 0 0 (2,305,407) 0 0 (2,305,407)
Ending Balance at Jun. 30, 2020 $ 1,984 211,934,432 (26,038,698) 4,687,085 (154,541,342) 36,043,461
Ending Balance, Shares at Jun. 30, 2020 19,837,642          
Net loss $ 0 0 0 0 (41,077,304) (41,077,304)
Foreign currency translation adjustment 0 0 2,381,422 0 0 2,381,422
Ending Balance at Jun. 30, 2021 $ 1,984 $ 211,934,432 $ (23,657,276) $ 4,687,085 $ (195,618,646) $ (2,652,421)
Ending Balance, Shares at Jun. 30, 2021 19,837,642          
v3.23.3
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 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 0 164,098,554 0
Property and equipment written off 24,718 0 0
Provision for lease payment receivables 9,495,002 19,379,086 81,585,960
Provision for other assets 3,017,816 0 0
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 0 0 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 0 0 (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 0 0 46,906,465
Deposits paid to banks for financial leasing services 0 0 (2,916,996)
Purchase of property, plant and equipment 0 (843) 0
Withdrawal of pledged bank deposits 0 0 4,397,481
Net Cash Used in Investing Activities from Discontinued Operation 0 0 (3,266,588)
Net Cash (Used in) Provided by Investing Activities 0 (843) 45,120,362
CASH FLOWS FROM FINANCING ACTIVITY      
Repayment of loans 0 (699,469) (17,200,372)
Net Cash Used in Financing Activity 0 (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 0 7,553,701 7,775,528
Continuing Operation      
Cash paid for income taxes 0 0 26,942
Cash paid for interest expense 11,181 11,966 443,186
Discontinued Operation      
Cash paid for income taxes 0 0 256,613
Cash paid for interest expense $ 0 $ 0 $ 0
v3.23.3
ORGANIZATION, PRINCIPAL ACTIVITIES,GOING CONCERN AND MANAGEMENT'S PLANS
12 Months Ended
Jun. 30, 2021
ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT'S PLANS  
ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT'S PLANS

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.

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.

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”).

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.

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%.

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

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.

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.

v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Jun. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 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.

(c)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 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.

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

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.

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

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 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.

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

(g)

Net investment in direct financing leases (con’t)

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.

(h)

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, 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.

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.

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.

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.

(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.

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, 2021 and 2020.

(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.

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

(k)

Non-marketable equity investments (con’t)

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, 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.

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.

(l)

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.

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.

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

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”).

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, 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

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.

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

(p)

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.

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 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

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.

(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).

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

(t)

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.

(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

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.

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.

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

(w)

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.

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

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.

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

(x)

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 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.

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.

v3.23.3
RISKS
12 Months Ended
Jun. 30, 2021
RISKS  
RISKS

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, 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

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.

NOTE 3 -             RISKS (CON’T)

(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.

(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 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.

v3.23.3
NET INVESTMENT IN DIRECT FINANCING LEASES
12 Months Ended
Jun. 30, 2021
NET INVESTMENT IN DIRECT FINANCING LEASES  
NET INVESTMENT IN DIRECT FINANCING LEASES

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, 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

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.

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, 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

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, 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

v3.23.3
LEASES
12 Months Ended
Jun. 30, 2021
LEASES  
LEASES

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%.

v3.23.3
PROPERTY AND EQUIPMENT, NET
12 Months Ended
Jun. 30, 2021
PROPERTY AND EQUIPMENT, NET  
PROPERTY AND EQUIPMENT, NET

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.

v3.23.3
OTHER ASSETS
12 Months Ended
Jun. 30, 2021
OTHER ASSETS  
OTHER ASSETS

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

v3.23.3
OTHER LIABILITIES
12 Months Ended
Jun. 30, 2021
OTHER LIABILITIES  
OTHER LIABILITIES

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

v3.23.3
SHARE-BASED COMPENSATION
12 Months Ended
Jun. 30, 2021
SHARE-BASED COMPENSATION  
SHARE-BASED COMPENSATION

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”).

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

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, 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

 

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, 2020 and 2021.

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.

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

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, 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.

v3.23.3
CAPITALIZATION
12 Months Ended
Jun. 30, 2021
CAPITALIZATION  
CAPITALIZATION

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, $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.

v3.23.3
STATUTORY RESERVE
12 Months Ended
Jun. 30, 2021
STATUTORY RESERVE  
STATUTORY RESERVE

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.

v3.23.3
EMPLOYEE RETIREMENT BENEFITS
12 Months Ended
Jun. 30, 2021
EMPLOYEE RETIREMENT BENEFITS  
EMPLOYEE RETIREMENT BENEFITS

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.

v3.23.3
EARNINGS PER SHARE
12 Months Ended
Jun. 30, 2021
EARNINGS PER SHARE  
EARNINGS PER SHARE

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

$

$

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, 2021 and 2020, there were no dilutive securities.

v3.23.3
INCOME TAXES
12 Months Ended
Jun. 30, 2021
INCOME TAXES  
INCOME TAXES

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, 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 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, 2021 and 2020, 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.

NOTE 14 -           INCOME TAXES (CON’T)

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, 2021 and 2020 comprises:

    

June 30, 2021

    

June 30, 2020

Jinshang Leasing

 

 

1,423,022

Total

$

$

1,423,022

For the year ended June 30, 

    

2021

    

2020

Current income tax benefit (expense)

1,256,560

(256,030)

Deferred tax (expense)benefit

 

(25,846,977)

 

4,255,391

Total (expense)credit for income taxes

(24,590,417)

3,999,361

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.

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.

v3.23.3
RELATED PARTY TRANSACTIONS AND BALANCES
12 Months Ended
Jun. 30, 2021
RELATED PARTY TRANSACTIONS AND BALANCES  
RELATED PARTY TRANSACTIONS AND BALANCES

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:

    

June 30, 2021

    

June 30, 2020

Due to related party

 

  

 

  

Bluesky LLC

$

464,000

$

464,000

$

464,000

$

464,000

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 interest free, unsecured and due on demand.

v3.23.3
COMMITMENTS AND CONTINGENCIES
12 Months Ended
Jun. 30, 2021
COMMITMENTS AND CONTINGENCIES  
COMMITMENTS AND CONTINGENCIES

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.

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.

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.

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). Plaintiff’s 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.

NOTE 16 -           COMMITMENTS AND CONTINGENCIES (CON’T)

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, 2020.

v3.23.3
SUBSEQUENT EVENTS
12 Months Ended
Jun. 30, 2021
SUBSEQUENT EVENTS  
SUBSEQUENT EVENTS

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.

v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
12 Months Ended
Jun. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Basis of presentation and principle of consolidation

(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.

Use of estimates

(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 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

(c)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 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.

Cash and cash equivalents

(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.

Restricted Cash

(e)

Restricted Cash

Restricted cash represents cash pledged to banks.

Investments securities - held to maturity

(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.

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.

Net investment in direct financing leases

(g)

Net investment in direct financing leases

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 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.

(g)

Net investment in direct financing leases (con’t)

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

(h)

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, 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.

(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.

Property and equipment, net

(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.

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.

Impairment of long-lived assets

(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.

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, 2021 and 2020.

Non-marketable equity investments

(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.

(k)

Non-marketable equity investments (con’t)

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, 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.

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

(l)

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.

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.

(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.

Foreign currency translation

(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”).

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, 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

Interest expense

(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.

Non-interest expenses

(o)

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

(p)

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.

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.

Comprehensive income

(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.

Operating leases

(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.

Share-based compensation

(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).

Commitments and contingencies

(t)

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.

Earnings per Share (EPS)

(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).

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

(v)

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.

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.

Impact of recently issued accounting pronouncements and Impact of recently issued accounting pronouncements not yet adopted

(w)

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.

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

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.

(x)

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 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.

(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.

v3.23.3
ORGANIZATION, PRINCIPAL ACTIVITIES,GOING CONCERN AND MANAGEMENT'S PLANS (Tables)
12 Months Ended
Jun. 30, 2021
ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT'S PLANS  
Schedule of wholly-owned subsidiaries of the company

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

v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
12 Months Ended
Jun. 30, 2021
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Schedule of Adjustments Resulting from the Foreign Currency Translations Adjustments resulting from the translation are recorded as a separate component of accumulated other comprehensive income in stockholders’ equity.

    

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

v3.23.3
NET INVESTMENT IN DIRECT FINANCING LEASES (Tables)
12 Months Ended
Jun. 30, 2021
NET INVESTMENT IN DIRECT FINANCING LEASES  
Summary of the Components of the Jinshang Leasing's 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

Schedule of Future Minimum Lease Receipts

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

Summary of credit quality analysis of finance lease receivables

    

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

Schedule of allowance on financial guarantee

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

Summary of Risk Classification of Direct Financing Lease Receivables

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

v3.23.3
LEASES (Tables)
12 Months Ended
Jun. 30, 2021
LEASES  
Schedule of operating lease

    

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

Schedule of maturity lease liability

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

$

v3.23.3
PROPERTY AND EQUIPMENT, NET (Tables)
12 Months Ended
Jun. 30, 2021
PROPERTY AND EQUIPMENT, NET  
Schedule of 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

v3.23.3
OTHER ASSETS (Tables)
12 Months Ended
Jun. 30, 2021
OTHER ASSETS  
Schedule of 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

v3.23.3
OTHER LIABILITIES (Tables)
12 Months Ended
Jun. 30, 2021
OTHER LIABILITIES  
Schedule of 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

v3.23.3
SHARE-BASED COMPENSATION (Tables)
12 Months Ended
Jun. 30, 2021
SHARE-BASED COMPENSATION  
Schedule of Stock Award Activity

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

 

Schedule of Weighted Average Assumptions Used to Value Options 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

v3.23.3
EARNINGS PER SHARE (Tables)
12 Months Ended
Jun. 30, 2021
EARNINGS PER SHARE  
Schedule of Computation of Basic and Diluted Earnings Per Common 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

$

$

v3.23.3
INCOME TAXES (Tables)
12 Months Ended
Jun. 30, 2021
INCOME TAXES  
Schedule of Income Tax Payable

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

Schedule of Components of Income Tax Expense (Benefit)

For the year ended June 30, 

    

2021

    

2020

Current income tax benefit (expense)

1,256,560

(256,030)

Deferred tax (expense)benefit

 

(25,846,977)

 

4,255,391

Total (expense)credit for income taxes

(24,590,417)

3,999,361

Schedule of Reconciliation Between the Effective Income Tax Rate and the PRC Statutory Income Tax Rate

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)

%

Schedule of Deferred Tax Assets and Liabilities

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

v3.23.3
RELATED PARTY TRANSACTIONS AND BALANCES (Tables)
12 Months Ended
Jun. 30, 2021
RELATED PARTY TRANSACTIONS AND BALANCES  
Schedule of Related Party Balances

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

    

June 30, 2021

    

June 30, 2020

Due to related party

 

  

 

  

Bluesky LLC

$

464,000

$

464,000

$

464,000

$

464,000

v3.23.3
ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT'S PLANS (Details)
12 Months Ended
Dec. 13, 2016
shares
Jun. 30, 2021
USD ($)
shares
Jun. 30, 2020
USD ($)
shares
Jun. 30, 2019
USD ($)
Aug. 02, 2017
Jun. 30, 2016
USD ($)
Oct. 26, 2015
shares
Dec. 02, 2014
shares
Jul. 27, 2014
Common stock shares issued | shares   19,837,642 19,837,642       21,526,747    
Cash consideration           $ 270,000      
Net loss   $ 216,000,000              
Net stockholders' equity   (2,652,421) $ 36,043,461 $ 214,450,362          
Net cash in operating activities   (13,007) (3,111,416) (37,942,709)          
Cash and Cash Equivalents, at Carrying Value   $ 6,621 38,820            
Decrease in revenue (as a percent)   96.00%              
Net loss   $ 41,077,304 176,101,494 58,186,894          
Specific allowance for lease payment receivables for COVID-19   121,412,692              
Accumulated other comprehensive losses   23,657,276 26,038,698            
Income (Loss) from Continuing Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest   $ (41,077,304) $ (176,101,494) $ (58,186,894)          
Jinshang Leasings [Member]                  
Percentage of acquired the equity capital               100.00%  
Common stock shares issued | shares               30,000,000  
Ms. Wenyu Li [Member]                  
Percentage of individual beneficially owning           8.10%      
Wang Hong                  
Percentage of acquired the equity capital                 100.00%
Freeman FinTech Corporation [Member]                  
Agreement to transfer ordinary shares | shares 13,440,000                
Percentage of owned subsidiary 67.00%                
Spectacular Bid Limited [Member]                  
Percentage of owned subsidiary         67.00%        
Former [Member] | Holdco [Member]                  
Percentage of acquired the equity capital             78.00%    
Former [Member] | Sino [Member]                  
Percentage of acquired the equity capital             22.00%    
Wins Finance Group Limited("WFG")                  
Percentage Of Shares Exchanged             100    
v3.23.3
ORGANIZATION, PRINCIPAL ACTIVITIES, GOING CONCERN AND MANAGEMENT'S PLANS - Schedule of wholly-owned subsidiaries of the company (Details)
12 Months Ended
Jun. 30, 2021
USD ($)
Jun. 30, 2021
HKD ($)
Wins Finance Group Limited("WFG")    
Schedule Of Wholly Owned Subsidiaries [Line Items]    
Registered capital $ 30,000,100.00  
Ownership interest (as a percent) 100.00% 100.00%
Full Shine Capital Resources Limited ("Full Shine")    
Schedule Of Wholly Owned Subsidiaries [Line Items]    
Registered capital   $ 1.00
Ownership interest (as a percent) 100.00% 100.00%
Jinshang International Financial Leasing Co.,Ltd("Jingshang Leasing")    
Schedule Of Wholly Owned Subsidiaries [Line Items]    
Registered capital $ 180,000,000.00  
Ownership interest (as a percent) 100.00% 100.00%
v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details)
12 Months Ended
Jun. 30, 2021
USD ($)
segment
Jun. 30, 2020
USD ($)
Number of Reportable Segments | segment 1  
Property, Plant and Equipment, Salvage Value, Percentage 3.00%  
Impairment of long lived assets | $ $ 0 $ 0
Customer Concentration Risk [Member] | Revenue from Rights Concentration Risk [Member]    
Concentration Risk, Customer three two
Customer Concentration Risk [Member] | Revenue from Rights Concentration Risk [Member] | Capital Lease Obligations [Member]    
Concentration Risk, Customer three two
Customer One Concentration Risk [Member] | Revenue from Rights Concentration Risk [Member] | Capital Lease Obligations [Member]    
Concentration Risk, Percentage 70.00% 40.00%
Customer One Concentration Risk [Member] | Three customer [Member] | Revenue from Rights Concentration Risk [Member]    
Concentration Risk, Percentage 63.00% 50.00%
Customer Two Concentration Risk [Member] | Revenue from Rights Concentration Risk [Member] | Capital Lease Obligations [Member]    
Concentration Risk, Percentage 17.00% 13.00%
Customer Two Concentration Risk [Member] | Three customer [Member] | Revenue from Rights Concentration Risk [Member]    
Concentration Risk, Percentage 19.00% 14.00%
Customer Three Concentration Risk [Member] | Revenue from Rights Concentration Risk [Member] | Capital Lease Obligations [Member]    
Concentration Risk, Percentage 13.00%  
Customer Three Concentration Risk [Member] | Three customer [Member] | Revenue from Rights Concentration Risk [Member]    
Concentration Risk, Percentage 14.00%  
v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)
Jun. 30, 2021
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-07-01  
Change in Contract with Customer, Liability [Abstract]  
Expected duration for satisfaction of performance obligation 1 year
v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Non-marketable equity investments (Details)
¥ in Millions, $ in Millions
Oct. 30, 2018
CNY (¥)
Oct. 30, 2018
USD ($)
Oct. 26, 2018
CNY (¥)
Oct. 26, 2018
USD ($)
Aug. 28, 2018
CNY (¥)
Aug. 28, 2018
USD ($)
Jun. 16, 2021
Hui Yue              
Schedule of Equity Method Investments [Line Items]              
Equity interest agreed to acquire     15.00% 15.00% 30.00% 30.00%  
Agreed payment to acquire equity method investment     ¥ 150 $ 21.8 ¥ 300 $ 43.7  
Period within which entity was required to pay the capital     30 years 30 years      
Payment made to acquire equity method investment ¥ 20 $ 2.9          
Beijing Fu Sheng Xing Trading Co., LTD              
Schedule of Equity Method Investments [Line Items]              
Equity interest agreed to acquire             40.00%
v3.23.3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Foreign currency translation (Details)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES    
Statement of financial position items, except for equity accounts 6.4601 7.0697
Items in the statements of income and comprehensive income, and statements of cash flows 6.6273 7.0319
v3.23.3
RISKS (Details) - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
RISKS    
Restricted cash and cash equivalents $ 22,009 $ 0
Decrease in revenue (as a percent) 96.00%  
Specific Allowance For Lease Payment Receivables For COVID-19 $ 121,412,692  
v3.23.3
NET INVESTMENT IN DIRECT FINANCING LEASES (Details) - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Remaining direct financing leases contractual amounts $ 121,442,109 $ 102,069,239
Maximum    
Lessee, Finance Lease, Term of Contract 5 years 5 years
Finance Lease Interest Expense Percentage 13.30%  
Minimum    
Lessee, Finance Lease, Term of Contract 1 year 1 year
Finance Lease Interest Expense Percentage 4.30%  
v3.23.3
NET INVESTMENT IN DIRECT FINANCING LEASES - Summary of the Components of Net Investment in Direct Financing Leases (Details) - USD ($)
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2019
NET INVESTMENT IN DIRECT FINANCING LEASES      
Total minimum lease payments to be received $ 127,827,892 $ 122,561,475  
Less: Amounts representing estimated executory costs 0 0  
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) $ (85,225,257)
Net investment in direct financing leases. $ 2,778,471 $ 16,958,300  
v3.23.3
NET INVESTMENT IN DIRECT FINANCING LEASES - Schedule of Future Minimum Lease Receipts (Details) - USD ($)
Jun. 30, 2021
Jun. 30, 2020
NET INVESTMENT IN DIRECT FINANCING LEASES    
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 0
Total minimum finance lease receivables $ 127,827,892 $ 122,561,475
v3.23.3
NET INVESTMENT IN DIRECT FINANCING LEASES - Schedule of credit quality analysis of finance leases (Details) - USD ($)
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2019
Direct Financing Lease, Net Investment in Lease, Credit Quality Indicator [Line Items]      
Net investment in direct financing leases, end of year $ 2,778,471 $ 16,958,300  
Less: Allowance for uncollectible receivables (121,442,109) (102,069,239) $ (85,225,257)
Overdue and credit-impaired | Overdue above 90 days      
Direct Financing Lease, Net Investment in Lease, Credit Quality Indicator [Line Items]      
Net investment in direct financing leases, end of year 12,373,365 9,195,673  
Overdue and credit-impaired | Not yet overdue but credit impaired      
Direct Financing Lease, Net Investment in Lease, Credit Quality Indicator [Line Items]      
Net investment in direct financing leases, end of year 109,039,328 92,666,574  
Overdue but not credit-impaired      
Direct Financing Lease, Net Investment in Lease, Credit Quality Indicator [Line Items]      
Neither overdue nor impaired $ 2,807,887 $ 17,165,292  
v3.23.3
NET INVESTMENT IN DIRECT FINANCING LEASES - Schedule of Allowance for Uncollectible Lease Payments Receivables (Details) - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
NET INVESTMENT IN DIRECT FINANCING LEASES    
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
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
v3.23.3
NET INVESTMENT IN DIRECT FINANCING LEASES - Summary of Risk Classification of Direct Financing Lease Receivables (Details) - USD ($)
Jun. 30, 2021
Jun. 30, 2020
Total minimum lease payments to be received $ 127,827,892 $ 122,561,475
Normal [Member]    
Total minimum lease payments to be received 6,415,200 20,699,228
Abnormal [Member]    
Total minimum lease payments to be received $ 121,412,692 $ 101,862,247
v3.23.3
LEASES (Details) - USD ($)
Jun. 30, 2021
Jun. 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 0 7,103
Total operating lease liabilities $ 55,022 $ 55,007
v3.23.3
LEASES - Maturities of lease liabilities (Details) - USD ($)
Jun. 30, 2021
Jun. 30, 2020
Maturities of lease liabilities    
2022 $ 55,551  
Total 55,551  
Less: amount representing interest 529  
Total operating lease liabilities 55,022 $ 55,007
Current operating lease liabilities 55,022 47,904
Long-term obligations $ 0 $ 7,103
v3.23.3
LEASES - Additional Information (Details) - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
LEASES    
Operating lease expense $ 96,184 $ 95,545
Remaining lease term 6 months  
Discount rate 4.75%  
v3.23.3
PROPERTY AND EQUIPMENT, NET (Details) - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Less: accumulated depreciation $ (231,973) $ (651,437)
Property and equipment, net $ 2,883 26,592
Salvage value 3.00%  
Depreciation expenses $ 838 2,491
Vehicles [Member]    
Property, Plant and Equipment, Gross   463,425
Salvage value 3.00%  
Useful life (years) 5 years  
Office equipment [Member]    
Property, Plant and Equipment, Gross $ 208,765 190,763
Salvage value 3.00%  
Useful life (years) 5 years  
Electric equipment [Member]    
Property, Plant and Equipment, Gross $ 26,091 $ 23,841
Salvage value 3.00%  
Useful life (years) 5 years  
v3.23.3
OTHER ASSETS (Details) - USD ($)
Jun. 30, 2021
Jun. 30, 2020
OTHER ASSETS    
Advance payment to third party companies $ 0 $ 1,839
Other receivables 770,985 2,053,068
Other Assets $ 770,985 $ 2,054,907
v3.23.3
OTHER LIABILITIES (Details) - USD ($)
Jun. 30, 2021
Jun. 30, 2020
OTHER LIABILITIES    
Other tax payable $ 1,623,217 $ 1,428,070
Accrued payroll 101,656 54,010
Other payables 1,990,395 1,674,941
Other Liabilities $ 3,715,268 $ 3,157,021
v3.23.3
SHARE-BASED COMPENSATION - Schedule of Stock Award Activity (Details) - $ / shares
12 Months Ended 48 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2020
Number of Shares              
Outstanding, Beginning | shares 0 0 0 0 1,270,000   1,270,000
Granted | shares 0 0 0 0 0    
Exercised | shares 0 0 0 0 0    
Forfeited | shares 0 (1,190,000) (1,190,000) (1,190,000) (1,190,000)    
Canceled | shares 0 (80,000) (80,000) (80,000) (80,000)    
Outstanding, Ending | shares 0 0 0 0 0 1,270,000 0
Exercisable 0 0         0
Vested and expected to vest 0 0         0
Weighted Average Exercise Price              
Outstanding, Beginning | $ / shares $ 0 $ 0 $ 0 $ 0 $ 12   $ 12
Granted | $ / shares 0           12
Exercised | $ / shares 0 0 0 0 0    
Forfeited | $ / shares 0 12 12 12 12    
Canceled | $ / shares 0 12 12 12 12    
Outstanding, Ending | $ / shares 0 0 $ 0 $ 0 $ 0 $ 12 0
Exercisable 0 0         0
Vested and expected to vest $ 0 $ 0         $ 0
Weighted Average Remaining Contractual Term In Years              
Outstanding           2 years 5 months 1 day  
Granted             3 years
Vested and expected to vest 0 years 0 years          
v3.23.3
SHARE-BASED COMPENSATION - Schedule of Weighted Average Assumptions Used to Value Options (Details)
12 Months Ended
Jun. 30, 2016
$ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Expected volatility 51.50%
Risk-free interest rates 1.77%
Expected terms 5 years
Dividend yields 0.00%
Sub-Optimal behavior multiple $ 2.80
Minimum  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Fair Value per share of options granted 5.27
Maximum  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Fair Value per share of options granted $ 5.44
v3.23.3
SHARE-BASED COMPENSATION - Additional Information (Details) - USD ($)
12 Months Ended 48 Months Ended
Oct. 20, 2015
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2020
Feb. 14, 2017
Jun. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                  
Percentage of shares reserved for further issuance 10.00%                
Grant period 10 years                
Exercise period 10 years                
Options granted   0 0 0 0 0      
Options granted, weighted average exercise price per share   $ 0         $ 12    
Options forfeited   0 1,190,000 1,190,000 1,190,000 1,190,000      
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period   0 80,000 80,000 80,000 80,000      
Consideration for option agreements terminated               $ 0  
Options outstanding   0 0 0 0 0 0   1,270,000
Share-based Compensation              
Minimum                  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                  
Fair market value on date of grant 100.00%                
Shareholders Voting Power Exceeds Ten Percent [Member]                  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                  
Exercise period 5 years                
Shareholders Voting Power Exceeds Ten Percent [Member] | Minimum                  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]                  
Fair market value on date of grant 110.00%                
v3.23.3
CAPITALIZATION (Details) - USD ($)
Dec. 02, 2016
Jun. 28, 2016
Jun. 30, 2021
Jun. 30, 2020
Oct. 26, 2015
Class of Stock [Line Items]          
Due to related party     $ 464,000 $ 464,000  
Common Stock, Par or Stated Value Per Share     $ 0.0001 $ 0.0001 $ 0.0001
Common Stock, Shares Authorized     100,000,000 100,000,000 100,000,000
Common Stock, Shares, Issued     19,837,642 19,837,642 21,526,747
Common Stock, Shares, Outstanding     19,837,642 19,837,642 21,526,747
Richard Xu [Member]          
Class of Stock [Line Items]          
Ordinary shares repurchased, shares 204,005        
Ordinary shares repurchased, amount $ 204        
Brad Reifler [Member]          
Class of Stock [Line Items]          
Ordinary shares repurchased, shares   5,100      
Ordinary shares repurchased, amount   $ 60,180      
Bluesky LLC [Member]          
Class of Stock [Line Items]          
Ordinary shares repurchased, shares   1,480,000      
Ordinary shares repurchased, amount   $ 17,464,000      
Amount paid to related party for repurchase of ordinary shares   $ 17,000,000      
Due to related party     $ 464,000 $ 464,000  
WFG's shareholders [Member]          
Class of Stock [Line Items]          
Common Stock, Shares, Issued         16,800,000
Sino [Member] | Former Stockholders [Member]          
Class of Stock [Line Items]          
Common Stock, Shares, Issued         4,726,747
v3.23.3
STATUTORY RESERVE (Details)
12 Months Ended
Jun. 30, 2021
STATUTORY RESERVE  
Percentage allocation of annual after-tax profit to general reserve 10
Limit of general reserve to distribute dividends 50.00%
v3.23.3
EMPLOYEE RETIREMENT BENEFITS (Details) - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
EMPLOYEE RETIREMENT BENEFITS    
Employee benefit contributions $ 101,318 $ 95,017
v3.23.3
EARNINGS PER SHARE (Details) - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2019
EARNINGS PER SHARE      
Net income/(loss) attributable to the common shareholders $ (41,077,304) $ (176,101,494) $ (49,809,728)
Basic weighted-average common shares outstanding 19,837,642 19,837,642 19,837,642
Effect of dilutive securities 0 0  
Diluted weighted-average common shares outstanding 19,837,642 19,837,642 19,837,642
Earnings (loss) per share - Basic $ (2.07) $ (8.88) $ (2.51)
Earnings (loss) per share - Diluted (2.07) (8.88) (2.51)
Earnings (loss) per share - From continuing operations - Basic (2.07) (8.88) (2.93)
Earnings (loss) per share - From continuing operations - Diluted (2.07) (8.88) (2.93)
Earnings (loss) per share - From discontinued operations - Basic 0 0 0.42
Earnings (loss) per share - From discontinued operations - Diluted $ 0.00 $ 0.00 $ 0.42
v3.23.3
INCOME TAXES (Details) - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
INCOME TAXES    
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent 25.00% 25.00%
Unrecognized Tax Benefits $ 0 $ 0
Deferred Tax Assets, Net 24,299,486
Provision for deferred tax assets related to the repatriation of the undistributed earnings 0 0
Deferred Tax Liability Not Recognized, Amount of Unrecognized Deferred Tax Liability, Undistributed Earnings of Foreign Subsidiaries $ 92,081,580 $ 51,295,890
v3.23.3
INCOME TAXES - Schedule of Income Tax Payable (Details) - USD ($)
Jun. 30, 2021
Jun. 30, 2020
Income tax payable $ 0 $ 1,423,022
Jinshang Leasing [Member]    
Income tax payable   $ 1,423,022
v3.23.3
INCOME TAXES - Schedule Of Components Of Income Tax Expense Benefit (Details) - USD ($)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2019
INCOME TAXES      
Current income tax benefit (expense) $ 1,256,560 $ (256,030)  
Deferred tax (expense)benefit (26,108,436) 4,255,391 $ 20,055,500
Total (expense)credit for income taxes $ (24,590,417) $ 3,999,361 $ 18,900,720
v3.23.3
INCOME TAXES - Schedule of Reconciliation Between the Effective Income Tax Rate and the PRC Statutory Income Tax Rate (Details)
12 Months Ended
Jun. 30, 2021
Jun. 30, 2020
INCOME TAXES    
PRC statutory tax 25.00% 25.00%
Effect of non-deductible expenses (14.60%) (30.30%)
Effect of non-taxable income (6.90%) 3.70%
Others 147.90% (23.40%)
Effective tax rate 151.40% (25.00%)
v3.23.3
INCOME TAXES - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($)
Jun. 30, 2021
Jun. 30, 2020
Deferred tax assets    
Provision for direct financing lease   $ 25,517,310
Direct financing lease income   (1,042,727)
Total deferred tax assets $ 0 24,474,583
Net total deferred tax assets   $ 24,474,583
v3.23.3
RELATED PARTY TRANSACTIONS AND BALANCES - Schedule of Related Party Balances (Details) - USD ($)
Jun. 30, 2021
Jun. 30, 2020
Related Party Transaction [Line Items]    
Due to related party $ 464,000 $ 464,000
Bluesky LLC [Member]    
Related Party Transaction [Line Items]    
Due to related party $ 464,000 $ 464,000
v3.23.3
COMMITMENTS AND CONTINGENCIES (Details)
¥ in Millions, $ in Millions
12 Months Ended
Jun. 30, 2018
USD ($)
Jun. 30, 2018
CNY (¥)
Jun. 30, 2021
USD ($)
Jun. 30, 2021
CNY (¥)
Jul. 06, 2020
CNY (¥)
Jun. 30, 2019
lawsuit
Guarantor Obligations [Line Items]            
Finance Lease, Principal Payments $ 70.1 ¥ 464        
Number of lawsuits | lawsuit           1
Repayment of loan being highly uncertain, loan amount | ¥         ¥ 580  
Third Party [Member]            
Guarantor Obligations [Line Items]            
Finance Lease, Principal Payments 59.4 420        
Jinshang Leasing [Member]            
Guarantor Obligations [Line Items]            
Finance Lease, Principal Payments $ 6.2 ¥ 44        
Guarantor Obligations, Current Carrying Value     $ 71.5 ¥ 462    
v3.23.3
SUBSEQUENT EVENTS (Details)
Oct. 11, 2021
Subsequent event | Dalian Ruikai Taifu Investment Management Co. LTD  
Equity interest investment own percentage 60.00%

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