UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20212022
OR
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER: 000-54884
CHINA UNITED INSURANCE SERVICE, INC.
(Exact name of registrant as specified in its charter)
Delaware | 30-0826400 |
(State or other jurisdiction of | (IRS Employer |
7F, No. 311 Section 3
Nan-King East Road
Taipei City, Taiwan, 105405
(Address of principal executive offices)
+8862-87126958
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer 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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”�� “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark 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 is a shell company as defined in Rule 12b-2 of the Exchange Act.
Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which |
N/A |
| N/A |
| N/A |
As of May 10, 2021,March 31, 2022, there were 29,421,73630,286,199 shares of common stock issued and outstanding, and 1,000,000 preferred shares issued and outstanding.
TABLE OF CONTENTS
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| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | |
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2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described under Part 1 Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify 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. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report, or that we filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
3
OTHER PERTINENT INFORMATION
References in this quarterly report to “we,” “us,” “our” and the “Company” refer to China United Insurance Service, Inc., its subsidiaries and variable interest entities.
References to China or the PRC refer to the People’s Republic of China (excluding Hong Kong, Macao and Taiwan). References to Taiwan refer to Republic of China.
Unless context indicates otherwise, reference to the “Company” in this quarterly report refers to China United Insurance Service, Inc. and its subsidiaries. Reference to “AHFL” refers to the combined operations of Action Holdings Financial Limited and its Taiwan Subsidiaries (as defined below). Reference to “Anhou” refers to the combined operations of Law Anhou Insurance Agency Co., Ltd. and its subsidiaries.
Our business is conducted in Taiwan and China using New Taiwanese Dollars (“NT$” or “NTD”), the currency of Taiwan, Hong Kong Dollars (“HK$” or “HKD”), the currency of Hong Kong, and RMB, the currency of China, respectively, and our financial statements are presented in United States dollars (“USD”, “US$” or “$”). In this quarterly report, we refer to assets, obligations, commitments and liabilities in our financial statements in U.S. dollars. These dollar references are based on the exchange rate of NT$, HK$ and RMB to USD, determined as of a specific date. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of U.S. dollars which may result in an increase or decrease in the amount of our obligations (expressed in USD) and the value of our assets, including accounts receivable (expressed in USD).
4
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | |
|
| March 31, 2021 |
| December 31, 2020 | ||
(Amount in USD) | | (Unaudited) | | | | |
ASSETS | | | | | | |
Current assets | | | | | | |
Cash and cash equivalents | | $ | 17,436,654 | | $ | 9,063,338 |
Time deposits | |
| 53,749,018 | |
| 53,339,508 |
Accounts receivable | |
| 18,744,199 | |
| 25,346,250 |
Contract assets | | | 97,480 | | | — |
Marketable securities | | | 0 | | | 1,272,573 |
Other current assets | |
| 1,332,842 | |
| 1,491,168 |
Total current assets | |
| 91,360,193 | |
| 90,512,837 |
| | | | | | |
Right-of-use assets under operating leases | | | 6,282,892 | | | 6,524,555 |
Property and equipment, net | |
| 2,157,445 | |
| 2,373,245 |
Intangible assets, net | |
| 330,273 | |
| 381,747 |
Long-term investments | |
| 2,636,257 | |
| 2,835,095 |
Restricted cash – noncurrent | |
| 65,499 | |
| 66,490 |
Deferred tax assets | | | 866,702 | | | 1,021,890 |
Other assets | |
| 4,135,077 | |
| 4,012,370 |
TOTAL ASSETS | | $ | 107,834,338 | | $ | 107,728,229 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
|
| |
|
|
Current liabilities | |
|
| |
|
|
Commission payable to sales professionals | | $ | 9,801,187 | | $ | 12,088,291 |
Short-term loans | | | 16,235,471 | | | 14,159,108 |
Contract liabilities | | | 1,103,987 | | | 1,119,361 |
Income tax payable - current | |
| 4,266,279 | |
| 3,146,018 |
Operating lease liabilities - current | | | 3,018,303 | | | 3,043,056 |
Due to related parties | |
| 76,831 | |
| 94,047 |
Other current liabilities | |
| 10,476,912 | |
| 13,591,034 |
Total current liabilities | |
| 44,978,970 | |
| 47,240,915 |
| | | | | | |
Income tax payable - noncurrent | |
| 719,515 | |
| 719,515 |
Operating lease liabilities - noncurrent | | | 3,191,735 | | | 3,440,343 |
Other liabilities | |
| 861,037 | |
| 1,090,222 |
TOTAL LIABILITIES | |
| 49,751,257 | |
| 52,490,995 |
| | | | | | |
COMMITMENTS AND CONTINGENCIES | |
| | |
| |
| | | | | | |
STOCKHOLDERS’ EQUITY | |
| | |
| |
Preferred stock, par value $0.00001, 10,000,000 authorized, 1,000,000 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | |
| 10 | |
| 10 |
Common stock, par value $0.00001, 100,000,000 authorized, 29,421,736 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively | |
| 294 | |
| 294 |
Additional paid-in capital | |
| 8,190,449 | |
| 8,190,449 |
Statutory reserves | |
| 9,463,903 | |
| 9,463,903 |
Retained earnings | |
| 11,507,794 | |
| 9,097,408 |
Accumulated other comprehensive income | |
| 3,061,569 | |
| 3,889,429 |
Total stockholders' equity attributable to China United's shareholders | |
| 32,224,019 | |
| 30,641,493 |
Noncontrolling interests | |
| 25,859,062 | |
| 24,595,741 |
TOTAL STOCKHOLDERS' EQUITY | |
| 58,083,081 | |
| 55,237,234 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | | $ | 107,834,338 | | $ | 107,728,229 |
| | | | | | |
| | March 31, | | | December 31, | |
(Amount in USD) |
| 2022 |
| 2021 | ||
ASSETS | | | | | | |
Current assets | | | | | | |
Cash and cash equivalents | | $ | 20,595,428 | | $ | 18,234,350 |
Time deposits | |
| 68,935,263 | |
| 64,299,176 |
Accounts receivable | |
| 18,315,305 | |
| 26,761,678 |
Contract assets | | | 457,917 | | | — |
Marketable securities | | | 832,990 | | | — |
Other current assets | |
| 1,173,425 | |
| 1,207,496 |
Total current assets | |
| 110,310,328 | |
| 110,502,700 |
| | | | | | |
Right-of-use assets under operating leases | | | 6,594,686 | | | 6,449,182 |
Property and equipment, net | |
| 1,823,211 | |
| 2,061,755 |
Intangible assets, net | |
| 359,759 | |
| 333,118 |
Long-term investments | |
| 2,594,564 | |
| 2,696,812 |
Restricted cash – noncurrent | |
| 13,650 | |
| 88,282 |
Deferred tax assets | | | 698,750 | | | 909,032 |
Other assets | |
| 4,733,347 | |
| 4,740,640 |
TOTAL ASSETS | | $ | 127,128,295 | | $ | 127,781,521 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
|
| |
|
|
Current liabilities | |
|
| |
|
|
Commission payable to sales professionals | | $ | 9,840,217 | | $ | 14,003,541 |
Short-term loans | | | 19,589,013 | | | 18,835,932 |
Income tax payable - current | |
| 5,087,907 | |
| 3,893,047 |
Operating lease liabilities - current | | | 3,312,917 | | | 3,059,329 |
Due to related parties | |
| 36,844 | |
| 50,531 |
Other current liabilities | |
| 13,826,954 | |
| 13,997,603 |
Total current liabilities | |
| 51,693,852 | |
| 53,839,983 |
| | | | | | |
Income tax payable - noncurrent | |
| 539,636 | |
| 539,636 |
Operating lease liabilities - noncurrent | | | 3,250,652 | | | 3,298,089 |
Net defined benefit liabilities - noncurrent | | | 376,522 | | | 389,198 |
Other liabilities | |
| 524,109 | |
| 541,754 |
TOTAL LIABILITIES | |
| 56,384,771 | |
| 58,608,660 |
| | | | | | |
COMMITMENTS AND CONTINGENCIES | |
| | |
| |
| | | | | | |
STOCKHOLDERS’ EQUITY | |
| | |
| |
Preferred stock, par value $0.00001, 10,000,000 authorized, 1,000,000 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | |
| 10 | |
| 10 |
Common stock, par value $0.00001, 100,000,000 authorized, 30,286,199 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | |
| 303 | |
| 303 |
Additional paid-in capital | |
| 9,296,953 | |
| 9,296,953 |
Statutory reserves | | | 11,101,064 | |
| 11,101,064 |
Retained earnings | |
| 16,635,245 | |
| 13,690,368 |
Accumulated other comprehensive income | |
| 2,593,189 | |
| 4,664,848 |
Total stockholders’ equity attributable to China United’s shareholders | |
| 39,626,764 | |
| 38,753,546 |
Noncontrolling interests | |
| 31,116,760 | |
| 30,419,315 |
TOTAL STOCKHOLDERS’ EQUITY | |
| 70,743,524 | |
| 69,172,861 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 127,128,295 | | $ | 127,781,521 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| | | | | | | |||||||
| | | | | | | | | Three Months Ended | ||||
| | Three Months Ended March 31, | | | March 31, | ||||||||
(Amount in USD) |
| 2021 |
| 2020 | |
| 2022 |
| 2021 | ||||
Revenue | | $ | 30,530,117 | | $ | 28,523,210 | | | $ | 30,980,523 | | $ | 30,530,117 |
Cost of revenue | |
| 18,973,432 | |
| 19,499,924 | | |
| 19,009,519 | |
| 18,973,432 |
| | | | | | | | | | | | | |
Gross profit | |
| 11,556,685 | |
| 9,023,286 | | |
| 11,971,004 | |
| 11,556,685 |
| | | | | | | | | | | | | |
Operating expenses: | |
| | |
| | | |
| | |
| |
Selling | |
| 579,777 | |
| 490,030 | | |
| 684,150 | |
| 579,777 |
General and administrative | |
| 6,090,254 | |
| 6,984,554 | | |
| 5,973,039 | |
| 6,090,254 |
Total operating expense | |
| 6,670,031 | |
| 7,474,584 | | |
| 6,657,189 | |
| 6,670,031 |
| | | | | | | | | | | | | |
Income from operations | |
| 4,886,654 | |
| 1,548,702 | | |
| 5,313,815 | |
| 4,886,654 |
| | | | | | | | | | | | | |
Other income (expenses): | |
| | |
| | | |
| | |
| |
Interest income | |
| 83,998 | |
| 110,891 | | |
| 104,977 | |
| 83,998 |
Interest expenses | |
| (42,470) | |
| (59,282) | | |
| (52,335) | |
| (42,470) |
Foreign currency exchange gain (loss), net | |
| 328,466 | |
| (55,937) | | ||||||
Foreign currency exchange gains | |
| 737,550 | |
| 328,466 | |||||||
Other - net | |
| 178,940 | |
| (96,802) | | |
| 162,048 | |
| 178,940 |
Total other income (expenses), net | |
| 548,934 | |
| (101,130) | | ||||||
Total other income, net | |
| 952,240 | |
| 548,934 | |||||||
| | | | | | | | | | | | | |
Income before income taxes | |
| 5,435,588 | |
| 1,447,572 | | |
| 6,266,055 | |
| 5,435,588 |
Income tax expense | |
| (1,398,806) | |
| (1,111,287) | | |
| (1,581,897) | |
| (1,398,806) |
| | | | | | | | | | | | | |
Net income | |
| 4,036,782 | |
| 336,285 | | |
| 4,684,158 | |
| 4,036,782 |
Less: net income attributable to noncontrolling interests | |
| (1,626,396) | |
| (625,522) | | |
| (1,739,281) | |
| (1,626,396) |
Net income (loss) attributable to China United’s shareholders | |
| 2,410,386 | |
| (289,237) | | ||||||
Net income attributable to China United’s shareholders | |
| 2,944,877 | |
| 2,410,386 | |||||||
| | | | | | | | | | | | | |
Other comprehensive items, net of tax: | |
| | |
| | | |
| | |
| |
Foreign currency translation loss | |
| (1,191,299) | |
| (567,633) | | |
| (3,113,495) | |
| (1,191,299) |
Other | |
| 364 | |
| (57) | | |
| 0 | |
| 364 |
Total other comprehensive loss | | | (1,190,935) | | | (567,690) | | | | (3,113,495) | | | (1,190,935) |
| | | | | | | | | | | | | |
Comprehensive income (loss) | | | 2,845,847 | | | (231,405) | | ||||||
Comprehensive income | | | 1,570,663 | | | 2,845,847 | |||||||
Less: comprehensive income attributable to noncontrolling interests | | | (1,263,321) | | | (390,854) | | | | (697,445) | | | (1,263,321) |
| | | | | | | | | | | | | |
Comprehensive income (loss) attributable to China United’s shareholders | | $ | 1,582,526 | | $ | (622,259) | | ||||||
Comprehensive income attributable to China United’s shareholders | | $ | 873,218 | | $ | 1,582,526 | |||||||
| | | | | | | | | | | | | |
Weighted average shares outstanding: | |
| | |
| | | |
| | |
| |
Basic and diluted | | | 29,421,736 | | | 29,421,736 | | |
| 30,286,199 | |
| 29,421,736 |
| | | | | | | | | | | | | |
Earnings (Loss) per share attributable to common stockholders of China United: | |
| | |
|
| | ||||||
Earnings per share attributable to common stockholders of China United: | |
| | |
| | |||||||
Basic and diluted | | $ | 0.079 | | $ | (0.010) | | | $ | 0.094 | | $ | 0.079 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'STOCKHOLDERS’ EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | Additional | | | | | Other | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||
�� | | Common | | | | | Preferred | | | | | Paid-in | | Statutory | | Comprehensive | | Retained | | | | | Noncontrolling | | Total | |||||||||||||||||||||||||||||||||||||||
(Amount in USD) |
| Stock |
| Amount |
| Stock |
| Amount |
| Capital |
| Reserves |
| Income |
| Earnings |
| Total |
| Interests |
| Equity | ||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2021 |
| 30,286,199 | | $ | 303 | | | 1,000,000 | | $ | 10 | | $ | 9,296,953 | | $ | 11,101,064 | | $ | 4,664,848 | | $ | 13,690,368 | | $ | 38,753,546 | | $ | 30,419,315 | | $ | 69,172,861 | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
Foreign currency translation loss |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (2,071,659) | |
| — | |
| (2,071,659) | |
| (1,041,836) | |
| (3,113,495) | ||||||||||||||||||||||||||||||||
Other comprehensive income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | ||||||||||||||||||||||||||||||||
Net income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 2,944,877 | |
| 2,944,877 | |
| 1,739,281 | |
| 4,684,158 | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
Balance March 31, 2022 |
| 30,286,199 | | $ | 303 | | | 1,000,000 | | $ | 10 | | $ | 9,296,953 | | $ | 11,101,064 | | $ | 2,593,189 | | $ | 16,635,245 | | $ | 39,626,764 | | $ | 31,116,760 | | $ | 70,743,524 | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Additional | | | | | Other | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | |||
| | Common | | | | | Preferred | | | | | Paid-in | | Statutory | | Comprehensive | | Retained | | | | | Noncontrolling | | Total | | | | | | | | | | | | | Additional | | | | | Other | | | | | | | | | | | | | |||||||||
|
| Stock |
| Amount |
| Stock |
| Amount |
| Capital |
| Reserves |
| Income |
| Earnings |
| Total |
| Interests |
| Equity | | Common | | | | | Preferred | | | | | Paid-in | | Statutory | | Comprehensive | | Retained | | | | | Noncontrolling | | Total | |||||||||||||||||
(Amount in USD) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Stock |
| Amount |
| Stock |
| Amount |
| Capital |
| Reserves |
| Income |
| Earnings |
| Total |
| Interests |
| Equity | ||||||||||
Balance December 31, 2020 |
| 29,421,736 | | $ | 294 | | | 1,000,000 | | $ | 10 | | $ | 8,190,449 | | $ | 9,463,903 | | $ | 3,889,429 | | $ | 9,097,408 | | $ | 30,641,493 | | $ | 24,595,741 | | $ | 55,237,234 |
| 29,421,736 | | $ | 294 | | | 1,000,000 | | $ | 10 | | $ | 8,190,449 | | $ | 9,463,903 | | $ | 3,889,429 | | $ | 9,097,408 | | $ | 30,641,493 | | $ | 24,595,741 | | $ | 55,237,234 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
Foreign currency translation loss |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (828,100) | |
| — | |
| (828,100) | |
| (363,199) | |
| (1,191,299) |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (828,100) | |
| — | |
| (828,100) | |
| (363,199) | |
| (1,191,299) |
Other comprehensive income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 240 | |
| — | |
| 240 | |
| 124 | |
| 364 |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 240 | |
| — | |
| 240 | |
| 124 | |
| 364 |
Net income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 2,410,386 | |
| 2,410,386 | |
| 1,626,396 | |
| 4,036,782 |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| 2,410,386 | |
| 2,410,386 | |
| 1,626,396 | |
| 4,036,782 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance March 31, 2021 |
| 29,421,736 | | $ | 294 | | | 1,000,000 | | $ | 10 | | $ | 8,190,449 | | $ | 9,463,903 | | $ | 3,061,569 | | $ | 11,507,794 | | $ | 32,224,019 | | $ | 25,859,062 | | $ | 58,083,081 |
| 29,421,736 | | $ | 294 | | | 1,000,000 | | $ | 10 | | $ | 8,190,449 | | $ | 9,463,903 | | $ | 3,061,569 | | $ | 11,507,794 | | $ | 32,224,019 | | $ | 25,859,062 | | $ | 58,083,081 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | Additional | | | | | Other | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||||
| | Common | | | | | Preferred | | | | | Paid-in | | Statutory | | Comprehensive | | Retained | | | | | Noncontrolling | | Total | |||||||||||||||||||||||||||||||||||||||
|
| Stock |
| Amount |
| Stock |
| Amount |
| Capital |
| Reserves |
| Income |
| Earnings |
| Total |
| Interests |
| Equity | ||||||||||||||||||||||||||||||||||||||||||
(Amount in USD) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
Balance December 31, 2019 |
| 29,421,736 | | $ | 294 | | | 1,000,000 | | $ | 10 | | $ | 8,190,449 | | $ | 8,228,904 | | $ | 417,015 | | $ | 9,402,294 | | $ | 26,238,966 | | $ | 19,512,526 | | $ | 45,751,492 | ||||||||||||||||||||||||||||||||
Issuance of preferred stock1based compensation | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 980,466 | | | 980,466 | ||||||||||||||||||||||||||||||||
Foreign currency translation loss |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (332,984) | |
| — | |
| (332,984) | |
| (234,649) | |
| (567,633) | ||||||||||||||||||||||||||||||||
Other comprehensive loss |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (38) | |
| — | |
| (38) | |
| (19) | |
| (57) | ||||||||||||||||||||||||||||||||
Net (loss) income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| (289,237) | |
| (289,237) | |
| 625,522 | |
| 336,285 | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
Balance March 31, 2020 |
| 29,421,736 | | $ | 294 | | | 1,000,000 | | $ | 10 | | $ | 8,190,449 | | $ | 8,228,904 | | $ | 83,993 | | $ | 9,113,057 | | $ | 25,616,707 | | $ | 20,883,846 | | $ | 46,500,533 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | |
| | Three Months Ended March 31, | ||||
(Amount in USD) |
| 2021 |
| 2020 | ||
Cash flows from operating activities: | | | | | | |
Net income | | $ | 4,036,782 | | $ | 336,285 |
Adjustments to reconcile net income to net cash provided by operating activities | |
| | |
| |
Noncash stock-based compensation | | | 0 | | | 980,466 |
Depreciation and amortization | |
| 301,618 | |
| 201,522 |
Amortization of bond premium | |
| 58 | |
| 66 |
Gain on sales of financial assets | |
| (140,913) | | | 0 |
Loss on valuation of financial assets | | | 150,992 | | | 170,530 |
Loss on disposals of equipment | | | 77 | | | 7,346 |
Deferred income tax | |
| 80,710 | |
| (251,548) |
Changes in operating assets and liabilities: | |
| | |
| |
Accounts receivable | |
| 6,353,128 | |
| 7,596,492 |
Contract assets | | | (98,867) | | | (221,848) |
Other current assets | |
| 33,244 | |
| (235,848) |
Other assets | |
| (58,712) | |
| (156,709) |
Commission payable to sales professionals | |
| (2,154,109) | |
| (4,171,583) |
Income tax payable | |
| 1,171,156 | |
| 1,306,071 |
Other current liabilities | |
| (3,012,677) | |
| (2,005,065) |
Other liabilities | |
| (217,259) | |
| (215,366) |
Net cash provided by operating activities | |
| 6,445,228 | |
| 3,340,811 |
| | | | | | |
Cash flows from investing activities: | |
| | |
| |
Cash received from issuance of preferred stock | | | 0 | | | 319 |
Purchases of time deposits | |
| (23,561,920) | |
| (22,634,176) |
Proceeds from maturities of time deposits | |
| 22,403,564 | |
| 18,441,127 |
Purchases of marketable securities | |
| 0 | | | (940,268) |
Proceeds from sales of marketable securities | |
| 1,424,798 | | | 0 |
Proceeds from disposal of equipment | |
| 0 | | | 2,879 |
Purchase of equipment | |
| (57,520) | |
| (195,976) |
Purchase of intangible assets | | | (9,780) | | | (9,487) |
Net cash provided by (used in) investing activities | |
| 199,142 | |
| (5,335,582) |
| | | | | | |
Cash flows from financing activities: | |
|
| |
|
|
Proceeds from short-term loans | |
| 6,324,770 | |
| 22,800,000 |
Repayment of short-term loans | |
| (4,140,000) | |
| (21,300,000) |
Proceeds from related party borrowings | |
| (13,627) | |
| 79,759 |
Net cash provided by financing activities | | | 2,171,143 | |
| 1,579,759 |
| |
| | | | |
Foreign currency translation | |
| (443,188) | |
| (142,027) |
Net increase (decrease) in cash, cash equivalents and restricted cash | |
| 8,372,325 | |
| (557,039) |
| | | | | | |
Cash, cash equivalents and restricted cash, beginning balance | |
| 9,129,828 | |
| 12,658,500 |
Cash, cash equivalents and restricted cash, ending balance | | $ | 17,502,153 | | $ | 12,101,461 |
| | | | | | |
SUPPLEMENTARY DISCLOSURE: | | | | | | |
Interest paid | | $ | 40,886 | | $ | 58,926 |
Income tax paid | | $ | 0 | | $ | 0 |
| | | | | | |
(Amount in USD) | | Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities: | | | | | | |
Net income | | $ | 4,684,158 | | $ | 4,036,782 |
Adjustments to reconcile net income to net cash provided by operating activities | |
| | |
| |
Depreciation and amortization | |
| 286,049 | |
| 301,618 |
Amortization of right-of-use assets | | | 951,111 | | | 877,022 |
Amortization of bond premium | |
| — | |
| 58 |
Gain on sales of financial assets | |
| — | | | (140,913) |
Loss on valuation of financial assets | |
| 11,177 | | | 150,992 |
Loss on disposals of equipment | | | 4,368 | | | 77 |
Deferred income tax | |
| 41,730 | |
| 80,710 |
Unrealized foreign currency exchange (gains) | | | (228,109) | | | — |
Net changes in operating assets and liabilities: | |
| | |
| |
Accounts receivable | |
| 7,774,338 | |
| 6,353,128 |
Contract assets | | | (468,333) | | | (98,867) |
Other current assets | |
| (107,500) | |
| 33,244 |
Other assets | |
| 112,257 | |
| (58,712) |
Commission payable to sales professionals | |
| (3,799,212) | |
| (2,154,109) |
Income tax payable | |
| 1,327,928 | |
| 1,171,156 |
Other current liabilities | |
| (1,758,352) | |
| (2,746,985) |
Other liabilities | |
| — | |
| (217,259) |
Lease liabilities | | | (1,232,314) | | | (1,142,714) |
Net cash provided by operating activities | |
| 7,599,296 | |
| 6,445,228 |
| | | | | | |
Cash flows from investing activities: | |
| | |
| |
Purchases of marketable securities | | | (846,673) | | | — |
Purchases of time deposits | |
| (23,217,843) | |
| (23,561,920) |
Proceeds from maturities of time deposits | |
| 16,562,521 | |
| 22,403,564 |
Proceeds from receipts in advance of disposal of a subsidiary | |
| 2,316,652 | |
| — |
Proceeds from sales of marketable securities | | | — | | | 1,424,798 |
Purchase of equipment | |
| (69,500) | |
| (57,520) |
Purchase of intangible assets | | | (76,637) | | | (9,780) |
Net cash (used in) provided by investing activities | |
| (5,331,480) | |
| 199,142 |
| | | | | | |
Cash flows from financing activities: | |
|
| |
|
|
Proceeds from short-term loans | |
| 6,488,087 | |
| 6,324,770 |
Repayment of short-term loans | |
| (5,423,529) | |
| (4,140,000) |
Repayment of related party borrowings | |
| (9,789) | |
| (13,627) |
Net cash provided by financing activities | | | 1,054,769 | |
| 2,171,143 |
| |
| | | | |
Foreign currency translation | |
| (1,036,139) | |
| (443,188) |
Net increase in cash, cash equivalents and restricted cash | |
| 2,286,446 | |
| 8,372,325 |
| | | | | | |
Cash, cash equivalents and restricted cash, beginning balance | |
| 18,322,632 | |
| 9,129,828 |
Cash, cash equivalents and restricted cash, ending balance | | $ | 20,609,078 | | $ | 17,502,153 |
| | | | | | |
SUPPLEMENTARY DISCLOSURE: | | | | | | |
Interest paid | | $ | 52,490 | | $ | 40,886 |
Income tax paid | | $ | — | | $ | — |
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | | | |
Lease liabilities arising from new right-of-use assets | | $ | 1,096,615 | | $ | 635,360 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amount in USD)
NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
China United Insurance Service, Inc. (“China United” or “CUII”), its subsidiaries and variable-interest entitiesentity and its subsidiaries (collectively referred to herein as the “Company”) primarily engage in insurance brokerage and insurance agency services. The Company markets and sells to customers two broad categories of insurance products: life insurance products and property and casualty insurance products, both focused on meeting the particular insurance needs of individuals. The insurance products the Company sells are underwritten by some of the leading insurance companies in Taiwan and China. The Company manages its business through aggregating them into three geographic operating segments, Taiwan, the PRC, and Hong Kong. The Company’s common stock currently trades over the counter on the OTCQB under the ticker symbol “CUII.”“CUII” on the OTCQB.
The corporate structure as of March 31, 20212022 is as follows:
On January 31, 2022, Genius Investment Consultant Co., Ltd (“GIC”), a subsidiary entity of CUII entered into a stock transfer agreement with AIlife International Investment Co., Ltd. (“AIlife”), pursuant to which GIC sold and transferred to AIlife 100% of its equity ownership in Joint Insurance Broker Co., Ltd. (“JIB”), a former wholly-owned subsidiary of GIC, resulting in AIlife owning 100% equity interest in JIB. Such exchange of equity interests between CUII’s subsidiaries are under common control of the Company and
9
therefore, they were accounted for at the carrying amount of the equity interests transferred and there was no impact on consolidated financial statements as of and for the three months ended March 31, 2022.
On February 25, 2022, Law Anhou Insurance Agency Co., Ltd. (“Law Anhou”), a contractually controlled entity of CUII entered into a Share Purchase Agreement with Jiangsu Law Insurance Brokerage Co., Ltd. (“Jiangsu Law”) and third-party buyers, pursuant to which Law Anhou shall sell and transfer 100% of its equity ownership in Jiangsu Law, a wholly owned subsidiary of Law Anhou to the following buyers: Xuzhou Guosheng Furui Asset Management Co., Ltd., Jiangsu Zhongbozhixin Financial Service Outsourcing Co., Ltd., and Xuzhou Xinrui Service Outsourcing Co., Ltd. Due to delays in the registration of shareholder change caused by the COVID-19, the control of Jiangsu Law has not been transferred as of March 31, 2022. Law Anhou has received the first installment of the contract $2,317,971 (RMB 14.7 million) which was recorded under other current liabilities as of March 31, 2022. The total assets as of March 31, 2022 and revenue from Jiangsu Law for the three months ended March 31, 2022 were 0.67% and 0.72%, respectively, which were immaterial to the Company’s consolidated financial statements.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of China United, its subsidiaries and variable interest entitiesentity and its subsidiaries as shown in the corporate structure in Note 1. All significant intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to the consolidated financial statements for prior year to the current year’s presentation. Such reclassifications have no effect on net income and the cash flow statements operating activities as previously reported.
Basis of Presentation
The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included. Operating results for the three months ended March 31, 20212022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.2022.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2020,2021, which were included in the Company’s 20202021 Annual Report on Form 10-K (“20202021 Form 10-K”). The accompanying consolidated balance sheet as of December 31, 2020,2021, has been derived from the Company’s audited consolidated financial statements as of that date.
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and footnotes thereto. Actual results may differ from those estimates and assumptions.
Variable Interest Entities
Due to the legal restrictions on foreign ownership and investment in insurance agency and brokerage businesses in China, especially those on qualifications as well as capital requirement of the investors, China United, through its subsidiary, Zhengzhou Zhonglian Hengfu Business Consulting Co., Limited (“WFOE”), entered into Exclusive Business Cooperation Agreement (the “EBCA”), Power of Attorney, Option Agreement, and Share Pledge Agreement (collectively, the First VIE Agreements) on January 17, 2011 with Anhou and Anhou original shareholders so as to operate and conduct the insurance agency and brokerage business in the PRC.
Pursuant to the EBCA, (a) WFOE has the right to provide Anhou with complete technical support, business support and related consulting services during the term of the EBCA; (b) Anhou agrees to accept all the consultations and services provided by WFOE. Anhou further agrees that unless with WFOE’s prior written consent, during the term of the EBCA, Anhou shall not directly or indirectly accept the same or any similar consultations and/or services provided by any third party and shall not establish similar cooperation relationship with any third party regarding the matters contemplated by the EBCA; (c) within 90 days after the end of each fiscal year Anhou shall pay an amount to WFOE equal to the shortfall, if any, of the aggregate net income of Anhou for such fiscal; (d) WFOE retains all exclusive and proprietary rights and interests in all rights, ownership, interests and intellectual properties arising out of or
10
created during the performance of the EBCA; and (e) the shareholders of Anhou have pledged all of their equity interests in Anhou to WFOE to guarantee Anhou’s performance of its obligations under the EBCA. The term of the EBCA is 10 years and may be extended and determined by WFOE prior to the expiration thereof, and Anhou shall accept such extended term unconditionally.
On March 23, 2022, Anhou and WFOE entered into an amendment to the EBCA, pursuant to which the EBCA shall be automatic renewed for successive terms unless WFOE gives a 30-day notice to terminate such agreement, with each term being 10 years.
To extend the business within the PRC, Anhou intended to increase its registered capital to RMB50 million (approximately $8 million) to meet the requirement of the China Insurance Regulatory Commission (the “CIRC”) so that it can set up new branches in any province beyond its current operations in China. China United increased the investment in Anhou through various loan agreements with the shareholders of Anhou. The aggregate funding provided by WFOE was RMB 40 million. Due to the capital increase, a series of variable interest agreements (the “Second VIE Agreements”), which include Power of Attorneys, Exclusive Option Agreements, Share Pledge Agreements, were signed on October 24, 2013 and entered in the same form as the First VIE Agreements, other than the change of shareholder names and their respective shareholdings. The First VIE Agreements were terminated by and among WFOE, Anhou and Anhou original shareholders on the same date. The EBCA executed by and between WFOE and Anhou on January 17, 2011 remains in full effect.
As a result of the Second VIE Agreements, WFOE is considered the primary beneficiary of Anhou and has effective control over Anhou. Accordingly, the results of operations, assets and liabilities of Anhou and its subsidiaries (collectively, the “Consolidated Affiliated Entities” or the “CAE”) are consolidated from the earliest period presented. The Company reviews the VIE’s status on an annual basis and determine if any events have occurred that could cause its primary beneficiary status to change, which include (a) the legal entity’s governing documents or contractual arrangements are changed in a manner that changes the characteristics or adequacy of the legal entity’s equity investment at risk; (b) the equity investment or some part thereof is returned to the equity investors, and other interests become exposed to expected losses of the legal entity; (c) the legal entity undertakes additional activities or acquires additional assets, beyond those anticipated at the later of the inception of the entity or the latest reconsideration event, that increase the entity’s expected losses; and (d) the legal entity receives an additional equity investment that is at risk, or the legal entity curtails or modifies its activities in a way that decreases its expected losses. For the three months ended March 31, 2022 and 2021, no event taken place that would change the Company’s primary beneficiary status.
Marketable Securities
The Company invests part of its excessive cash in equity securities and money market funds. Marketable securities represent trading securities bought and held primarily for sale in the near-term to generate income on short-term price differences and are stated at fair value. Realized and unrealized gains and losses are recorded in other income (expense).
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable includes commission receivables stated at net realizable values. The Company reviews its accounts receivable regularly to determine if a bad debt allowance is necessary at each quarter-end. Management reviews the composition of accounts receivable and analyzes the age of receivables outstanding, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the necessity of making such allowance. No allowance was deemed necessary as of March 31, 20212022 and December 31, 2020.2021.
Revenue Recognition
The Company’s revenue is derived from insurance agency and brokerage services with respect to life insurance and property and casualty insurance products. The Company, through its subsidiaries and variable interest entities, sells insurance products provided by insurance companies to individuals, and is compensated in the form of commissions from the respective insurance companies, according to the terms of each service agreement made by and between the Company and the insurance companies. The core revenue recognition principle under ASC 606, the Company considers the contracts with insurance companies contain one performance obligation and consideration should be recorded when performance obligation is satisfied at point in time. The sale of an insurance product by the Company is considered complete when initial insurance premium is paid by an individual and the insurance policy is approved by the respective insurance company. When a policy is effective, the insurance company is obligated to pay the agreed-upon commission to the Company under the terms of its service agreement with the Company and such commission is recognized as revenue.
For the first year commission (FYC), the Company recognizes the revenue when the individuals’ policies are effective. The Company makes the estimation amount to be entitled for annual performance and operating bonus which is based on the FYC. The Company
11
makes an estimation on performance and operation bonus which are based on the accumulated FYC on quarterly basis, and make reconciliation between actual and estimation amount on annual basis. For the three months ended March 31, 2022 and 2021, the estimated revenue was approximately $2.8 million and $2.0 million, respectively.
Others includes the contingent commissions for subsequent years, the bonus based on persistency ratio bonus, and service allowances, are considered highly susceptible to factors outside the company's influence and depend on the actions of third parties (i.e., the subsequent premiums paid by individual policyholders), and the uncertainty can be extended for many years. Considering the high uncertainties, the contingent commissions for subsequent years, the bonus based on persistency ratio, and service allowances will be recognized as revenue based on the actual amount received from the insurance companies after the uncertain event is resolved.
For property and casualty insurance products, the Company recognizes the revenue when the individuals’ policies are effective. The revenue from property and casualty insurance products were 7.0% and 5.6% of total revenue for the three months ended March 31, 2022 and 2021, respectively.
The Company is obligated to pay commissions to its sales professionals when an insurance policy becomes effective. The Company recognizes commission revenue granted from insurance companies on a gross basis, and the commissions paid to its sales professionals are recognized as cost of revenue.
The Company enters into service agreements with insurance companies, which may give rise to contract assets and contract liabilities. When the timing of revenue recognition differs from the timing of payments made by insurance companies, the Company recognizes either contract assets (its performance precedes the billing date) or contract liabilities (customer payment is received in advance of performance).
Foreign Currency Transactions
China United’s financial statements are presented in U.S. dollars ($), which is the China United’s reporting and functional currency. The functional currencies of the China United’s subsidiaries are New Taiwan dollar (“NTD”), China yuan (“RMB”) and Hong Kong dollar (“HKD”). The resulting translation adjustmentsEach subsidiary maintains its financial records in its own functional currency. Transactions denominated in foreign currencies are reported under other comprehensive income. Gainsmeasured at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured at the exchange rates prevailing at the balance sheet date. Non-monetary items that are measured in terms of historical cost in foreign currency are remeasured using the exchange rates at the dates of the initial transactions. Exchange gains and losses resulting from the translation of foreign currency transactions are reflectedincluded in the consolidated statements of operations and other comprehensive income (loss). Monetary assets and liabilities denominated in foreign currency are translated at the functional currency using the rate of exchange prevailing at the balance sheet date. Any differences are taken to profit or loss as a gain or loss on foreign currency translation in the consolidated statements of operations and other comprehensive income (loss).
10
The Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from NTD, RMB and HKD into U.S. dollars are recorded in stockholders’ equity as part of accumulated other comprehensive income. The exchange rates used for unaudited condensed consolidated financial statements are as follows:
| | | | | | | |||||||
| | | | | | | | | Average Rate for the three months ended | ||||
| | Average Rate for the three months ended | | | March 31, | ||||||||
| | March 31, | |
| 2022 |
| 2021 | ||||||
|
| 2021 |
| 2020 |
| | (unaudited) | | (unaudited) | ||||
Taiwan dollar (NTD) | | NTD | 28.06892 |
| NTD | 30.10404 | | | NTD | 27.98355 |
| NTD | 28.06892 |
China yuan (RMB) | | RMB | 6.48199 |
| RMB | 6.97985 | | | RMB | 6.34536 |
| RMB | 6.48199 |
Hong Kong dollar (HKD) | | HKD | 7.75690 |
| HKD | 7.77046 | | | HKD | 7.80460 |
| HKD | 7.75690 |
United States dollar ($) | | $ | 1.00000 |
| $ | 1.00000 | | | $ | 1.00000 |
| $ | 1.00000 |
| | | | | | | |||||||
| | | | | | | | | Exchange Rate at | ||||
| | Exchange Rate at | |
| March 31, 2022 |
| | ||||||
|
| March 31, 2021 |
| December 31, 2020 |
| | (unaudited) | | December 31, 2021 | ||||
Taiwan dollar (NTD) | | NTD | 28.46825 |
| NTD | 28.07725 | | | NTD | 28.62003 |
| NTD | 27.68785 |
China yuan (RMB) | | RMB | 6.55363 |
| RMB | 6.52765 | | | RMB | 6.34175 |
| RMB | 6.35877 |
Hong Kong dollar (HKD) | | HKD | 7.77422 |
| HKD | 7.75249 | | | HKD | 7.83033 |
| HKD | 7.79713 |
United States dollar ($) | | $ | 1.00000 | | $ | 1.00000 | | | $ | 1.00000 | | $ | 1.00000 |
12
Earnings (Loss) Per Share
Basic earnings (loss) per common share (“EPS”) is computed by dividing net income attributable to the common shareholders of the Company by the weighted-average number of common shares outstanding. Diluted EPS is computed in the same manner as basic EPS, except the number of shares includes additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued.
As the holders of preferred stock of the Company are entitled to share equally with the holders of common stock, on a per share basis, in such dividends and other distributions of cash, property or shares of stock of the Company as may be declared by the board of directors, the preferred stock is treated as a participating security. When calculating the basic earnings per common share, the two-class method is used to allocate earnings to common stock and participating security as required by FASB ASC Topic 260, “Earnings Per Share.” As of March 31, 20212022 and 2020,2021, the Company does not have any potentially dilutive instrument.
The following is a reconciliation of the income and share data used in the basic and diluted EPS computations for the three months ended March 31, 2022 and 2021 under the two-class method.
| | | | | | | | | | | | |
|
| Three Months Ended March 31, | ||||||||||
| | 2022 | | 2021 | ||||||||
Numerator: |
| Common stock |
| Preferred stock |
| Common stock |
| Preferred stock | ||||
Allocation of net income attributable to the Company | | $ | 2,850,750 | | $ | 94,127 | | $ | 2,331,154 | | $ | 79,232 |
| | | | | | | | | | | | |
Denominator: | |
|
| |
|
| |
|
| |
|
|
Weighted average shares of the Company’s common/preferred stock outstanding - basic | |
| 30,286,199 | |
| 1,000,000 | |
| 29,421,736 | |
| 1,000,000 |
Basic and diluted earnings per share | | $ | 0.094 | | $ | 0.094 | | $ | 0.079 | | $ | 0.079 |
The participating rights (liquidation and dividend rights) of the holders of the Company’s common stock and preferred stock are identical, except with respect to voting right. As a result, and in accordance with ASC 260, the undistributed earnings for each year are allocated based on the contractual participation rights of the common stock and preferred stock as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis.
Fair Value of Financial Instruments
Fair value accounting establishes a framework for measuring fair value and expands disclosure about fair value measurements. Fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
- | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
-Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments.
-Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.
In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are measured and reported on a fair value basis. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.
1113
The following table summarizessummarize financial assets and liabilities measured at fair value on a recurring basis as of March 31, 20212022 and December 31, 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2021 | | March 31, 2022 | ||||||||||||||||||||
| | Fair Value | | Carrying | | Fair Value | | Carrying | ||||||||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Value | ||||||||
Assets | | | | | | | | | | | | | | | | | ||||||||
Total time deposits |
| $ | 53,749,018 | | $ | — | | $ | — | | $ | 53,749,018 | ||||||||||||
Marketable securities : | | | | | | | | | | | | | ||||||||||||
Stock and mutual funds | | $ | 832,990 | | $ | — | | $ | — | | $ | 832,990 | ||||||||||||
Long-term investments: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
REITs | | | 1,286,159 | | | — | | | — | | | 1,286,159 | |
| 1,204,320 | |
| — | |
| — | |
| 1,204,320 |
Total assets measured at fair value | | $ | 55,035,177 | | $ | — | | $ | — | | $ | 55,035,177 | | $ | 2,037,310 | | $ | — | | $ | — | | $ | 2,037,310 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 | | December 31, 2021 | ||||||||||||||||||||
| | Fair Value | | Carrying | | Fair Value | | Carrying | ||||||||||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Value | ||||||||
Assets | | | | | | | | | | | | | | | | | ||||||||
Total cash equivalents and time deposits |
| $ | 53,339,508 | | $ | — | | $ | — | | $ | 53,339,508 | ||||||||||||
Marketable securities : | | | | | | | | | | | | | ||||||||||||
Stock Mutual funds | |
| 1,272,573 | |
| — | |
| — | |
| 1,272,573 | ||||||||||||
Long-term investments: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Government bonds held for available -for -sale | |
| — | |
| 107,096 | |
| — | |
| 107,096 | ||||||||||||
REITs | | | 1,359,100 | | | — | | | — | | | 1,359,100 | | $ | 1,261,482 | | $ | — | | $ | — | | $ | 1,261,482 |
Total assets measured at fair value | | $ | 55,971,181 | | $ | 107,096 | | $ | — | | $ | 56,078,277 | | $ | 1,261,482 | | $ | — | | $ | — | | $ | 1,261,482 |
The carrying amounts of current financial assets and liabilities in the consolidated balance sheets for cash equivalents, and time deposits, and restricted cash equivalents approximate fair value due to the short-term duration of those instruments.instruments, which are considered level 2 fair value measurement.
Marketable securities and long-term investments in REITs – The fair values of mutual funds and REITs were valued based on quoted market prices in active markets.
Government bonds – The fair value of government bonds is valued based on theoretical bond price in the Taipei Exchange.
According to Taiwan Regulations Governing Deposit of Bond and Acquirement of Insurance by Insurance Agents, Insurance Brokers and Insurance Surveyors (“RGDBAI”) Article 3 and 4, Law Broker is required to maintain a minimum of NTD 3,000,000 ($105,381 and $106,848 as of March 31, 2021 and December 31, 2020, respectively) restricted balance in a separate account or government bonds issued by the central government in order to maintain its insurance license. The government bonds matured on March 17, 2021 and the amortized cost of the bonds was NaN and $106,906 (NTD 3,001,620) as of March 31, 2021 and December 31, 2020, respectively. The Company will purchase a similar investment after the maturity of the bonds to maintain the insurance license.
Concentration of Risk
The Company maintains cash with banks in the USA, People’s Republic of China (“PRC”), Hong Kong, and Taiwan. Should any bank holding the Company’s cash become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose all or part of its cash deposit with that bank; however, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. In Taiwan, a depositor has up to NTD3,000,000 insured by Central Deposit Insurance Corporation (“CDIC”). In China, a depositor has up to RMB500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”). In Hong Kong, a depositor has up to HKD500,000 insured by Hong Kong Deposit Protection Board (“DPB”). In the United States, the standard insurance amount is $250,000 per depositor in a bank insured by the Federal Deposit Insurance Corporation (“FDIC”).
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, time deposits, restricted cash, register capital deposit and accounts receivable. As of March 31, 2022 and December 31, 2021, approximately $2,643,000 and $2,712,000 of the Company’s cash and cash equivalents, time deposits, and registered capital deposits held by financial institutions, was insured, and the remaining balance of approximately $90,445,000 and $83,446,000, was not insured. With respect to accounts receivable, the Company generally does not require collateral and does not have an allowance for doubtful accounts.
For the three months ended March 31, 2022 and 2021, the Company’s revenues from sale of insurance policies underwritten by these companies were:
| | | | | | | | | | | |
| | Three Months Ended March 31, | | ||||||||
| | 2022 | | 2021 |
| ||||||
| | (unaudited) | | (unaudited) | | ||||||
| | | | | % of Total | | | | | % of Total |
|
|
| Amount |
| Revenue |
| Amount |
| Revenue |
| ||
TransGlobe Life Insurance Inc. | | $ | 7,680,425 |
| 25 | % | $ | 6,600,629 | | 22 | % |
Taiwan Life Insurance Co., Ltd. | | | 4,406,584 |
| 14 | % | | 7,231,458 | | 24 | % |
Farglory Life Insurance Co., Ltd. | |
| 3,431,308 |
| 11 | % |
| 4,519,841 | | 15 | % |
1214
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, time deposits, restricted cash, register capital deposit and accounts receivable. As of March 31, 2021 and December 31, 2020, approximately $2,215,000 and $2,229,000 of the Company’s cash and cash equivalents, time deposits, and registered capital deposits held by financial institutions, was insured, and the remaining balance of approximately $71,987,000 and $63,222,000, was not insured. With respect to accounts receivable, the Company generally does not require collateral and does not have an allowance for doubtful accounts.
For the three months ended March 31, 2021 and 2020, the Company’s revenues from sale of insurance policies underwritten by these companies were:
| | | | | | | | | | | |
| | Three months ended March 31, | | ||||||||
| | 2021 | | 2020 |
| ||||||
| | | | | % of Total | | | | | % of Total |
|
|
| Amount |
| Revenue |
| Amount |
| Revenue |
| ||
Taiwan Life Insurance Co., Ltd. | | $ | 7,231,458 |
| 24 | % | $ | 5,592,675 | | 20 | % |
TransGlobe Life Insurance Inc. | | | 6,600,629 |
| 22 | % | | 4,995,954 | | 18 | % |
Farglory Life Insurance Co., Ltd. | |
| 4,519,841 |
| 15 | % |
| 3,379,091 | | 12 | % |
Shin Kong Life Insurance Co., Ltd. | |
| (*) |
| (*) | |
| 3,062,062 |
| 11 | % |
(*) The related revenues for the three months ended had not exceeded 10% or more of the consolidated revenues.
As of March 31, 20212022 and December 31, 2020,2021, the Company’s accounts receivable from these companies were:
| | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 |
| | March 31, 2022 | | | | | |
| |||||||||
| | | | | % of Total | | | | | % of Total |
| | (unaudited) | | December 31, 2021 |
| ||||||
| | | | | Accounts | | | | | Accounts |
| | | | | % of Total | | | | | % of Total |
|
|
| Amount |
| Receivable |
| Amount |
| Receivable | | | | | | Accounts | | | | | Accounts |
| ||
|
| Amount |
| Receivable |
| Amount |
| Receivable | | |||||||||||||
TransGlobe Life Insurance Inc. | | $ | 5,217,313 | | 28 | % | $ | 8,569,590 | | 32 | % | |||||||||||
Taiwan Life Insurance Co., Ltd | | $ | 5,103,386 |
| 27 | % | $ | 4,557,862 |
| 18 | % | | | 3,520,479 | | 19 | % | | 4,483,343 | | 17 | % |
TransGlobe Life Insurance Inc. | |
| 4,118,134 |
| 22 | % |
| 7,761,664 |
| 31 | % | |||||||||||
Farglory Life Insurance Co., Ltd. | |
| 2,046,970 |
| 11 | % |
| 2,787,586 |
| 11 | % | | | 2,049,294 | | 11 | % | | 2,729,673 | | 10 | % |
| | | | | | | | | | | |
The Company’s operations are in the PRC, Hong Kong and Taiwan. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic, foreign currency exchange and legal environments in the PRC, Hong Kong and Taiwan, and by the state of each economy. The Company’s results of operations may be adversely affected by changes in the political and social conditions in the PRC, Hong Kong and Taiwan, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
Stock-Based Compensation
The Company accounts for equity-based compensation cost in accordance with ASC 718, Compensation-Stock Compensation after adoption of ASC 2018-07, which requires the measurement and recognition of compensation expense related to the fair value of equity-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all share-based compensation payments granted to employees and nonemployees, net of estimated forfeitures, over the employees requisite service period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Compensation costs for awards granted to nonemployees under Uniwill for the three months ended March 31, 2021 and 2020 were NaN and $980,466, respectively.
Income Taxes
The Company records income tax expense using the asset-and-liability method of accounting for deferred income taxes. Under this method, deferred taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that the deferred tax assets will not be realized.
13
When tax returns are filed, it is likely some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of operations and other comprehensive income (loss).
New Accounting Pronouncements and Other Guidance
New Accounting Pronouncements Effective January 1, 2021:
Income Tax
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which is intended to simplify various aspects related to accounting for income taxes. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Companypronouncements not yet adopted this standard in the beginning of January 1, 2021, and the adoption did not have any significant impact on the Company’s condensed consolidated financial statements.
Equity Securities, Equity-method Investments and Certain Derivatives
In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The guidance provides clarification of the interaction of rules for equity securities, the equity method of accounting and forward contracts and purchase options on certain types of securities. ASU 2020-01 is effective for the Company in the first quarter of 2021. The adoption did not have any significant impact on the Company’s condensed consolidated financial statements.
Accounting Standards Issued but Not Yet Adopted:
Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, (FASB ASC Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, rather than the “incurred loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments.
In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company believes the adoption of ASU No. 2016-13 will not have a material impact on itsthe Company’s consolidated financial position and resultsstatements.
15
Reference Rate Reform
In March 2020, the FASB issued ASU 2020-04,No. 2020–04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standardpronouncement provides temporary optional expedients and exceptions for applying GAAP to contracts, hedging relationships,the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other transactions in which theinterbank offered rates to alternative reference LIBOR or another reference rate are expected to be discontinued as a result of the Reference Rate Reform.rates. The standard isguidance was effective for all entities. The standard mayentities upon issuance and generally can be adopted as of any date from the beginning of an interim period that includes or is subsequentapplied to March 12, 2020applicable contract modifications through December 31, 2022. We are currently evaluating the effects of the standard on our consolidated financial statements and related disclosures.
14
Convertible Debt, and Derivatives and Hedging
In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, to improve financial reporting associated with accounting for convertible instruments and contracts in an entity's own equity. ASU 2020-06 will be effective for the Company in the first quarter of 2022. The Company is currently evaluating the amendedeffects of the guidance andon the impact on itsCompany’s consolidated financial statements and related disclosures.
The management does not believe that other than disclosed above, accounting pronouncements the recently issued but not yet adopted will have a material impact on its financial position, results of operations or cash flows.
NOTE 3 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash, cash equivalents and restricted cash consisted of the following as of March 31, 20212022 and December 31, 2020:2021:
| | | | | | | | |||||||
| | | | | | | | | March 31, 2022 | |
| | | |
|
| March 31, 2021 |
| December 31, 2020 | |
| (unaudited) |
| December 31, 2021 | | ||||
Cash and cash equivalents: | | | | | | | | | | | | | | |
Cash on hand and in banks | | $ | 17,436,654 | | $ | 9,063,338 | | | $ | 20,595,428 | | $ | 18,234,350 | |
Time deposits - with original maturities less than three months (see Note 4) | |
| 0 | |
| — | | |||||||
| |
| 17,436,654 | |
| 9,063,338 | | |||||||
Restricted cash – noncurrent | |
| 65,499 | |
| 66,490 | | |
| 13,650 | |
| 88,282 | |
Total cash, cash equivalents and restricted cash shown in the statements of cash flows | | $ | 17,502,153 | | $ | 9,129,828 | | | $ | 20,609,078 | | $ | 18,322,632 | |
Noncurrent restricted cash includes a mandatory deposit in the bank in conformity with Provisions of the Supervision and Administration of Specialized Insurance Agencies in PRC, which is not allowed to be withdrawn without the permission of the regulatory commission, and a trust account held for the bonus accrued for officers of Law Insurance Broker Co., Limited ("Law Broker').commission.
NOTE 4 – TIME DEPOSITS
| | | | | | | | |||||||
| | | | | | | | | March 31, 2022 | | | | | |
|
| March 31, 2021 |
| December 31, 2020 | |
| (unaudited) |
| December 31, 2021 | | ||||
| | | | | | | | | | | | | | |
Total time deposits | | $ | 53,749,018 | | $ | 53,339,508 | | | $ | 72,718,699 | | $ | 71,161,391 | |
Less: Time deposits – with original maturities less than three months (see Note 3) | |
| 0 | |
| — | | |||||||
Less: Time deposits – with original maturities less than three months | |
| (3,783,436) | |
| (6,862,215) | | |||||||
Time deposits – original maturities over three months but less than one year | | $ | 53,749,018 | | $ | 53,339,508 | | | $ | 68,935,263 | | $ | 64,299,176 | |
Time Deposits Pledged as Collateral
The Company had a total of $17,369,198$24,767,563 (NTD 494.4708.8 million) and $15,930,161$23,811,616 (NTD 447.3659.3 million) restricted time deposits, respectively, as of March 31, 20212022 and December 31, 2020.2021. As of March 31, 20212022 and December 31, 2020,2021, time deposits of $35,128$34,941 (NTD 1 million) and 35,616$36,117 (NTD 1 million) were pledged as collateral for the Company’s credit card, respectively. In addition, the Company had time deposits of $17,334,070$24,732,622 and $15,894,545$23,775,499 pledged as collateral for short-term loans, respectively, as of March 31, 20212022 and December 31, 2020.2021. See Note 5.6.
NOTE 5 – LONG-TERM INVESTMENTS
As of March 31, 2022 and December 31, 2021, the Company’s long-term investments consisted of the following:
| | | | | | |
| | March 31, 2022 | | | | |
| | (unaudited) | | December 31, 2021 | ||
Equity investments under cost method | | $ | 1,390,244 | | $ | 1,435,330 |
REITs |
| | 1,204,320 |
| | 1,261,482 |
Total long-term investments | | $ | 2,594,564 | | $ | 2,696,812 |
1516
Equity Investments under cost method using the measurement alternative
| | | | | | | | | | |
|
| March 31, 2022 |
| | | | | |||
| | (unaudited) | | December 31, 2021 | ||||||
| | Investment | | | | | Investment | | | |
Investee | | Ownership | | | Amount | | Ownership | | | Amount |
Genius Insurance Broker Co., Ltd (“GIB”) | | 11.73 | % | $ | 1,342,938 | | 11.73 | % | $ | 1,388,151 |
Hainan Haoguan Yucheng Technology Service LLP (“HAINAN”) |
| 9.99 | % | | 47,306 |
| 9.99 | % | | 47,179 |
On February 13, 2015, the Company and AHFL, a wholly owned subsidiary of the Company, entered into an acquisition agreement with Mr. Chwan Hau Li, the selling shareholder of GHFL. Subsequent to the acquisition, GHFL became a wholly-owned subsidiary of the Company which in turn holds approximately 15.64% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius Broker”). Accordingly, the acquisition was accounted for as an asset acquisition of Genius Broker, which is an equity investment under cost method using the measurement alternative acquired by the Company.
The total paid-in capital with GIB changed from NTD 45 million to NTD 60 million due to capital increase taken place on August 14, 2020. GIC didn’t subscribe the new shares during the capital increase. As a result, the equity interest of GIB owned by GIC reduced from 15.64% to 11.73%.
A new investee in the investment ownership was due to the Company’s investment in HAINAN in 2021. HAINAN operates projects for insurance platforms, which contain insurance product centralized procurement, share service platform of sub-hierarchy distribution channel, and IoT business requirement. The Company invested HAINAN for RMB 300,000, or 9.99%, to engage in the qualification of supplier membership and distributor membership.
The change in carrying value of equity investment resulted from the fluctuation of exchange rates.
REITs
REITs are valued based on quoted market prices in the active market of Taiwan. The fair value of REITs as of March 31, 2022 and December 31, 2021 were $1,204,320 and $1,261,482, respectively.
Unrealized losses included in earnings for assets held at the end of the reporting periods were $16,441 and $20,489 for the three months ended March 31, 2022 and 2021, respectively.
For the three months ended March 31, 2022 and 2021, no other-than temporary impairment were recorded related to the long-term investments.
17
NOTE 56 – SHORT-TERM LOANS
The Company’s short-term loans consisted of the following as of March 31, 20212022 and December 31, 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | March 31, 2021 | | December 31, 2020 | | | | March 31, 2022 | | | | | | | ||||||||||||
| | | | | | | | | | | | | | | | | | (unaudited) | | December 31, 2021 | ||||||||
|
| |
| Debt |
| Collateral |
| Debt |
| Collateral |
| |
| Debt |
| Collateral |
| Debt |
| Collateral | ||||||||
Line of Credit | | Collateral | | balance | | value | | balance | | value | | Collateral | | balance | | value | | balance | | value | ||||||||
$8.9 million (NTD 250 million) revolving line of credit with Cathay United Bank Company Limited (“CUB”); the loan bears interest at the higher of CUB's adjustable rates for loans plus a margin of 0.41% or the 1-month TAIBOR rate plus a margin of 0.8% and matures on May 4, 2021. The maturity date was extended to May 4, 2022. |
| Time deposits | | $ | 7,745,471 | | $ | 7,745,471 | | $ | 6,019,108 | | $ | 6,019,108 | ||||||||||||||
$4.0 million revolving line of credit with O-Bank; the loan bears interest at the TAIFX3 rate plus a margin of 0.5% and matures on December 29, 2021 |
| Time deposits | |
| 4,000,000 | |
| 4,847,506 | |
| 4,000,000 | |
| 4,915,011 | ||||||||||||||
$1.6 million revolving line of credit with KGI; the loan bears interest at the LIBOR rate plus a margin of 0.9% and matures on February 18, 2022 |
| Time deposits | |
| — | |
| — | | | 2,100,000 | |
| 2,443,003 | ||||||||||||||
$1.5 million revolving line of credit with CTBC Bank Co., Ltd. (“CTBC”); the loan bears interest at the CTBC’s cost of funds plus a negotiated margin on individual case basis and matures on August 28, 2021 |
| Time deposits | |
| 1,500,000 | |
| 1,500,000 | |
| 1,200,000 | |
| 1,384,833 | ||||||||||||||
$2.5 million revolving line of credit with Far Eastern International Bank (“FEIB”); the loan bears interest at the higher of LIBOR or TAIFX3 rate plus a margin of 0.7% and matures on December 17, 2021 |
| Time deposits | |
| 1,990,000 | |
| 2,241,093 | |
| 840,000 | |
| 1,132,590 | ||||||||||||||
$1.0 million revolving line of credit with E. Sun Bank (“E. Sun”); the loan bears interest at the higher of LIBOR or TAIFX3 rate plus a margin of 0.7% and matures on June 3, 2021 |
| Time deposits | |
| 1,000,000 | |
| 1,000,000 | |
| — | |
| — | ||||||||||||||
$8.7 million (NTD 250 million) revolving line of credit with Cathay United Bank Company Limited (“CUB”); the loan bears interest at the higher of CUB's adjustable rates for loans plus a margin of 0.41% or the 1-month TAIBOR rate plus a margin of 0.8% and matures on May 4, 2022. |
| Time deposits | | $ | 5,223,615 | | $ | 5,258,556 | | $ | 9,011,172 | | $ | 9,047,289 | ||||||||||||||
$4.0 million revolving line of credit with O-Bank; the loan bears interest at the TAIFX3 rate plus a margin of 0.5% and matures on December 2, 2022. |
| Time deposits | |
| 4,000,000 | |
| 4,821,799 | |
| 4,000,000 | |
| 4,984,135 | ||||||||||||||
$6.0 million revolving line of credit with Taishin International Bank (“TSIB”); the loan bears interest at the TSIB’s cost of funds plus a margin of 0.7% and matures on May 31, 2022. |
| Time deposits | |
| 2,200,000 | |
| 3,065,801 | | | 2,200,000 | |
| 3,065,801 | ||||||||||||||
$2.5 million revolving line of credit with Far Eastern International Bank |
| Time deposits | |
| 1,850,000 | |
| 2,865,127 | |
| 1,850,000 | |
| 2,961,588 | ||||||||||||||
$3.1 million revolving line of credit with KGI; the loan bears interest at the TAIFX Fixing rate plus a margin of 0.9% and matures on May 18, 2022. |
| Time deposits | |
| 1,540,000 | |
| 2,357,961 | |
| 1,540,000 | |
| 2,481,926 | ||||||||||||||
$7.0 million (NTD 200 million) revolving line of credit with Taishin International Bank (“TSIB”); the loan bears interest at the TSIB’s cost of funds plus a margin of 0.625% and matures on May 31, 2022. |
| Time deposits | | | 3,721,171 | |
| 3,721,171 | |
| 234,760 | |
| 234,760 | ||||||||||||||
$3.0 million revolving line of credit with E. Sun Bank (“E. Sun”); the loan bears interest at the TAIFX3 rate plus a margin of 0.4% and matures on November 30, 2022. | | Time deposits | | | 600,000 | | | 1,000,000 | | | — | | | 1,000,000 | ||||||||||||||
$7.0 million (NTD 200 million) revolving line of credit with E. Sun Bank (“E. Sun”); the loan bears interest at the E. Sun’s adjustable rates for loans plus a margin of 0.1% and matures on October 15, 2022. | | Time deposits | | | 454,227 | | | 1,642,207 | | | — | | | — | ||||||||||||||
| | | | $ | 16,235,471 | | $ | 17,334,070 | | $ | 14,159,108 | | $ | 15,894,545 | | | | $ | 19,589,013 | | $ | 24,732,622 | | $ | 18,835,932 | | $ | 23,775,499 |
Borrowings under the revolving credit agreements are generally due 90 days or less. Total interest expenses for short-term loans incurred from the credit facilities were $52,335 and $42,470, and $59,282respectively, for the three months ended March 31, 20212022 and 2020,2021, respectively.
NOTE 67 – COMMISSIONS PAYABLE TO SALES PROFESSIONALS
Commissions payable to sales professionals consisted of the following as of March 31, 20212022 and December 31, 2020:2021:
| | | | | | | | |||||||
| | | | | | | | | March 31, 2022 | | | | ||
|
| March 31, 2021 |
| December 31, 2020 | |
| (unaudited) |
| December 31, 2021 | | ||||
Taiwan | | $ | 9,483,511 | | $ | 11,814,222 | | | $ | 9,625,456 | | $ | 13,793,343 | |
PRC | |
| 317,676 | |
| 274,069 | | |
| 214,761 | |
| 210,198 | |
Hong Kong | |
| 0 | |
| 0 | | |||||||
Total commissions payable to sales professionals | | $ | 9,801,187 | | $ | 12,088,291 | | | $ | 9,840,217 | | $ | 14,003,541 | |
Commissions payable to sales professionals are usually settled within twelve months.
18
NOTE 78 – OTHER CURRENT LIABILITIES
Other current liabilities were as follows, as of March 31, 20212022 and December 31, 2020:2021:
| | | | | | | ||||||
| | | | | | | | March 31, 2022 | | | | |
| | March 31, 2021 |
| December 31, 2020 |
| (unaudited) |
| December 31, 2021 | ||||
Accrued bonus | | $ | 5,432,444 | | $ | 7,854,488 | | $ | 5,463,307 | | $ | 6,645,496 |
Payroll payable and other benefits | | | 1,746,549 | | | 1,767,417 | | | 1,742,262 | | | 2,188,074 |
Accrued business tax and tax withholdings | | | 913,419 | | | 1,643,082 | | | 1,323,088 | | | 1,903,039 |
Accrued tax penalties | |
| 0 | |
| 170,016 | ||||||
Proceeds from receipts in advance of disposal of a subsidiary | | | 2,317,971 | | | — | ||||||
Execution fees payable – AIA(Note 10) | | | 1,153,039 | | | 1,191,858 | ||||||
Other accrued liabilities | | | 2,384,500 | | | 2,156,031 | | | 1,827,287 | | | 2,069,136 |
Total other current liabilities | | $ | 10,476,912 | | $ | 13,591,034 | | $ | 13,826,954 | | $ | 13,997,603 |
16
Accrued Bonus
The Company’s foreign subsidiaries have various bonus plans, which provide cash awards to employees based upon their performance, and had accrued bonus of $3,269,661$2,932,572 and $5,948,157,$4,059,901, respectively, related to cash awards to employees as of March 31, 20212022 and December 31, 2020. 2021.
The Company has other compensation plans solely provided by Law Broker to its officers. The compensation plans eligible to Law Broker’s officers include a surplus bonus based on a percentage of income after tax and other performance bonuses such as retention and non-competition. For the three months ended March 31, 20212022 and 2020,2021, the bonus expenses to Law Broker’s officers under the compensation plans were $91,896$72,905 and $249,939,$91,896, respectively.
As of March 31, 20212022 and December 31, 2020,2021, the Company had accrued bonus of $2,162,783$2,530,735 and $1,906,331$2,585,595 payable within next 12 months, and noncurrent accrued bonus of NaN and $237,440, respectively, related to the compensation plans for Law Broker’s officers. See Note 1415 for additional information of agreements with Law Broker’s officers.
NOTE 89 – OTHER LIABILITIES
The Company’s other liabilities consisted of the following as of March 31, 20212022 and December 31, 2020:2021:
| | | | | | | | |||||||
| | | | | | | | | March 31, 2022 | | | | | |
|
| March 31, 2021 |
| December 31, 2020 | |
| (unaudited) |
| December 31, 2021 |
| ||||
Due to previous shareholders of AHFL | | $ | 526,903 | | $ | 534,240 | | | $ | 524,109 | | $ | 541,754 | |
Net defined benefit liability | | | 334,134 | | | 318,542 | | |||||||
Accrued bonus - noncurrent (Note 7) | |
| 0 | |
| 237,440 | | |||||||
Total other liabilities | | $ | 861,037 | | $ | 1,090,222 | | | $ | 524,109 | | $ | 541,754 | |
Due to Previous Shareholders of AHFL
Due to previous shareholders of AHFL is the entire remaining balance payable of the 2012 acquisition cost. On March 27, 2019, the Company and the selling shareholders of Action Holdings Financial Limited (“AHFL”)AHFL entered into a sixth amendment to the acquisition agreement, pursuant to which, the Company wouldwill make the cash payment in the amount of NTD15 million on or prior to March 31, 2021. In March 2021, the Company entered into a seventh amendment with the selling shareholders in negotiation with the previous shareholders of AHFL to extend the repayment date to March 31, 2024. The amount consisted of 68% and 32% of payables due to related parties and third parties, respectively. As of March 31, 20212022 and December 31, 2020,2021, the amount due to previous shareholders of AHFL were $526,903$524,109 and $534,240,$541,754, respectively. The change in amounts was due to foreign currency translation.
NOTE 910 – CONTRACTS WITH CUSTOMERS
Information about accounts receivable contract assets, and contract liabilitiesassets from contracts with customers is as follows:
| | | | | | |
| | March 31, 2022 | | | | |
|
| (unaudited) |
| December 31, 2021 | ||
Accounts receivable | | $ | 18,315,305 | | $ | 26,761,678 |
Contract assets | | | 457,917 | | | — |
| | | | | | |
|
| March 31, 2021 |
| December 31, 2020 | ||
Accounts receivable | | $ | 18,744,199 | | $ | 25,346,250 |
Contract assets | | | 97,480 | | | 0 |
Contract liabilities | | | 1,103,987 | | | 1,119,361 |
19
Contract assets are the Company’s conditional rights to consideration for completed performance obligation and are in relation to the performance bonus to be rewarded based on the annual performance. The Company recognizes the contingent commission as a contract asset when the performance obligation is fulfilled, and the Company has not had the unconditional rights to the payment. As of March 31, 20212022 and December 31, 2020,2021, the Company had $97,480$457,917 and nilNaN of contract assets, respectively.
Contract with AIATW
On June 10, 2013, AHFL entered into a Strategic Alliance Agreement (the “Alliance Agreement”) with AIA International Limited Taiwan Branch (“AIATW”), the purpose of which is to promote life insurance products provided by AIATW within Taiwan by insurance agencies or brokerage companies affiliated with AHFL or China United. Pursuant to the terms of the Alliance Agreement, AIATW paid AHFL an execution fee, which was recorded as revenue upon fulfilling certain criteria over the original term of the Alliance Agreement from June 1, 2013 to May 31, 2018. From 2014 to 2017, AHFL has entered into three amendments to the Alliance Agreement with AIATW to further revise certain terms and conditions in the Alliance Agreement, including the extension of the expiration date from May 31, 2018 to December 31, 2021. Pursuant to the Third Amendment to the Alliance Agreement (the “Amendment 3”), both AHFL and AIATW agreed to adjust certain terms and conditions set forth in this amendment, some of which included (i) except the first contract year (April 15th, 2013 to September 30th, 2014), the sales target of the alliance between the parties shall be changed to (a) value of new business (“VONB”) and (b) the 13-month persistency ratio; and (ii) AIATW will calculate and recognize the VONB and 13-month persistency ratio each contract year and inform the Company the result; and (iii) the Company agrees to return the basic business promotion fees to AIATW within thirty (30) days of receipt of the notice sent by AIATW if the Company fails to meet the targets set forth in the Amendment 3, AIATW reserves the right to offset such amount against the amount payable by it to the Company; and (iv) upon the termination of the Alliance Agreement and its amendments pursuant to the Section 8.2 of the Alliance Agreement, both parties agreed to calculate the amount to be returned or repaid, as applicable, based on the past and current contract years. The Company shall return the basic business execution fees at NTD 50 million for the first contract year, NTD 35 million for the second contract year, and NTD 33 million for each contract year thereafter within one month after the termination. Accordingly, for the last contract year of 2021, no revenue was recognized because the Company failed to meet the targets set forth in the Amendment 3 and therefore, the Company shall refund the basic business execution fees of NTD 33 million based on the calculation of VONB and 13-month persistency for the same contract period. As of March 31, 2022 and December 31, 2021, the basic business execution fees of $1,153,039 and $1,191,858 were payable and recorded under other current liabilities, respectively.
On March 15, 2022, AHFL entered into the Fourth Amendment to the Alliance Agreement (the “Amendment 4”), which, among other things, extended the expiration date of the Alliance Agreement to December 31, 2031. Pursuant to Amendment 4, the sales targets for the remaining contract term under the Alliance Agreement shall be changed by reference to (i) the amount of VONB and (ii) the 13-month persistency ratio as set forth therein, provided that to the extent any underlying insurance contract is revoked, invalidated or terminated and premiums are refunded to such policyholder, the amount of the related VONB shall be correspondingly reduced. Amendment 4 provides that AIATW shall pay the strategic alliance business promotion fee of NTD 50 million to AHFL; however, AHFL shall be required to return certain portions of or all of the business promotion fees within thirty (30) days of receipt of notice provided by AIATW if AFHL fails to meet certain goals set in Table 2 and Table 3 of Amendment 4. The primary factor under formula one focuses on the annual and/or accumulated achievement rate(s), while the primary factor under formula two focuses on the 13-month persistency ratio(s), among others.
The Company recognized the revenue related to AIATW of $22,135 (NTD 619,428) and NaN, net of VAT, for the three months ended March 31, 2022 and 2021, respectively.
1720
NOTE 11 –LEASE
The Company has operating leases for its offices with lease terms ranging from one to five years. The Company recorded its operating lease cost of $1,370,536 and $1,020,873 for the three months ended March 31, 2022 and 2021.
Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As of March 31, 2022 and December 31, 2021, operating lease right-of-use assets and lease liabilities were as follows:
| | | | | | |
|
| March 31, 2022 |
| | | |
|
| (unaudited) |
| December 31, 2021 | ||
Right-of-use assets under operating leases | | $ | 6,594,686 | | $ | 6,449,182 |
Operating lease liabilities – current | |
| 3,312,917 | |
| 3,059,329 |
Operating lease liabilities – noncurrent | |
| 3,250,652 | |
| 3,298,089 |
Lease term and discount rate
| | | | | | | |
| | March 31, 2022 |
| | | | |
|
| (unaudited) |
| December 31, 2021 | | ||
Weighted average remaining lease term | | | |
| | |
|
Operating lease | |
| 2.23 | years | | 2.31 | years |
Weighted average discount rate | |
| |
| | |
|
Operating lease | |
| 3.19 | % | | 2.80 | % |
Supplemental cash flow information related to leases
| | | | | | |
|
| Three Months Ended March 31, | ||||
| | 2022(unaudited) | | 2021(unaudited) | ||
Cash paid for amounts included in the measurement of lease liabilities |
| | | | | |
Operating cash flows related to operating leases | | $ | 1,232,314 | | $ | 1,142,714 |
Amortization of right-of-use assets under operating leases | | | 951,111 | | | 877,022 |
The minimum future lease payments as of March 31, 2022 are as follows:
| | | |
|
| Amount | |
2022 (remainder of year) | | | 2,705,341 |
2023 | |
| 2,577,470 |
2024 | |
| 1,292,693 |
2025 | |
| 178,775 |
2026 | | | 12,074 |
Thereafter | |
| 0 |
Total minimum lease payments | | | 6,766,353 |
Less: Interest | |
| (202,784) |
Present value of future minimum lease payments | | $ | 6,563,569 |
21
Contract Liabilities – AIATW
On June 10, 2013, AHFL entered into a Strategic Alliance Agreement (the “Alliance Agreement”) with AIA International Limited Taiwan Branch (“AIATW”), the purpose of which is to promote life insurance products provided by AIATW within Taiwan by insurance agencies or brokerage companies affiliated with AHFL or China United. The original term of the Alliance Agreement was from June 1, 2013 to May 31, 2018. Pursuant to the terms of the Alliance Agreement, AIATW paid AHFL an execution fee of approximately $8,326,700 (NTD250,000,000, including the tax of NTD11,904,762, the “Execution Fee”), which is to be recorded as revenue upon fulfilling sales targets and the 13-month persistency ratio, as defined, over the next five years. The Execution Fee may be required to be recalculated if certain performance targets are not met by AHFL.
On September 30, 2014, AHFL entered into a Strategic Alliance Supplemental Agreement (the “First Amendment to the Alliance Agreement”) with AIATW. In the First Amendment to the Alliance Agreement, the performance targets and the provision about refunding the Execution Fee on a pro rata basis when the performance targets are not met were revised.
On January 6, 2016, AHFL entered into an Amendment No. 2 to the Alliance Agreement (the “Second Amendment to the Alliance Agreement”) with AIATW to further revise certain provisions in the Strategic Alliance Agreement and the previous amendment entered into by and between AHFL and AIATW. To the extent permitted by applicable laws and regulations, AHFL shall assist and encourage any insurance agency company or insurance brokerage company duly approved by the competent government authorities of Taiwan (the “Appointed Broker/Agent”), to cooperate with AIATW for the promotion of life insurance products of AIATW. Pursuant to the Second Amendment to the Alliance Agreement, the expiration date of the Strategic Alliance Agreement was extended from May 31, 2018 to December 31, 2021, and the effect of the Alliance Agreement during the period from October 1, 2014 to December 31, 2015 was suspended. In addition, both AHFL and AIATW agreed to adjust certain terms and conditions set forth in the Alliance Agreement, some of which are as follows: (i) expanding the scope of services to be provided by AHFL to AIATW to include, without limitation, assessment and advice on suitability of cooperative partners, advice on product strategies suitable for promotion channel development, advice on promotion/sales channel improvement, advice on promotion channel marketing and strategic planning, and promotion channel talent training; and (ii) removing certain provisions related to performance milestones and refund of Execution Fees. On March 15, 2016, AHFL issued a promise letter (the “2016 Letter”) to AIATW that AHFL is required to (i) fulfill sales targets and (ii) the 13-month persistency ratio.
On June 14, 2017, with AIATW’s consent, the 2016 Letter was revoked in order to conform with the latest terms and conditions regarding the cooperation between AHFL and AIATW as set forth in an Amendment No. 3 to the Alliance Agreement (the “Third Amendment to the Alliance Agreement”). Pursuant to the Third Amendment to the Alliance Agreement, both AHFL and AIATW agreed to adjust certain terms and conditions set forth this amendment, some of which included (i) except the first contract year (April 15th, 2013 to September 30th, 2014), the sales target of the alliance between the parties shall be changed to (a) value of new business (“VONB”) and (b) the 13-month persistency ratio; and (ii) AIATW will calculate and recognize the VONB and 13-month persistency ratio each contract year and inform the Company the result; and (iii) the Company agrees to return the basic business promotion fees to AIATW within thirty (30) days of receipt of the notice sent by AIATW if the Company fails to meet the targets set forth in the Third Amendment to the Alliance Agreement, AIATW reserves the right to offset such amount against the amount payable by it to the Company; and (iv) upon the termination of the Alliance Agreement and its amendments pursuant to the Section 8.2 of the Alliance Agreement, both parties agreed to calculate the amount to be returned or repaid, as applicable, based on the past and current contract years. The Company shall return the basic business execution fees at NTD50 million for the first contract year, NTD35 million for the second contract year, and NTD33 million for each contract year thereafter within one month after the termination.
The following table presents the amounts recognized as revenue and refund for each contract year:
| | | | | | | | | | | | | | | | | |
Contract | | | | | | | Revenue | | Revenue VAT | | Refund | | Refund VAT | ||||
Year |
| Period |
| Execution Fees |
| Amount |
| Amount |
| Amount |
| Amount | |||||
First | | 04/15/2013 - 09/30/2014 | | NTD | 50,000,000 | | NTD | 27,137,958 | (1) | NTD | 1,356,898 | | NTD | 20,481,090 | (1) | NTD | 1,024,054 |
Second | | 01/01/2016 - 12/31/2016 | | NTD | 35,000,000 | | NTD | 12,855,000 | (2) | NTD | 642,750 | | NTD | 20,478,333 | (2) | NTD | 1,023,917 |
Third | | 01/01/2017 - 12/31/2017 | | NTD | 33,000,000 | | NTD | 12,628,201 | (3) | NTD | 631,410 | | NTD | 18,800,370 | (3) | NTD | 940,019 |
Fourth | | 01/01/2018 - 12/31/2018 | | NTD | 33,000,000 | | NTD | 11,228,600 | (4) | NTD | 561,429 | | NTD | 20,199,971 | (4) | NTD | 1,010,000 |
Fifth | | 01/01/2019 - 12/31/2019 | | NTD | 33,000,000 | | NTD | 9,481,371 | (5) | NTD | 474,069 | | NTD | 21,947,200 | (5) | NTD | 1,097,360 |
Sixth | | 01/01/2020 - 12/31/2020 | | NTD | 33,000,000 | | NTD | 12,223,829 | (6) | NTD | 611,191 | | NTD | 19,204,743 | (6) | NTD | 960,237 |
Seventh | | 01/01/2021 - 12/31/2021 | | NTD | 33,000,000 | | NTD | 0 | (7) | NTD | 0 | | NTD | 31,428,571 | (7) | NTD | 1,571,429 |
TOTAL | |
| | NTD | 250,000,000 | | NTD | 85,554,959 | | NTD | 4,277,747 | | NTD | 152,540,278 | | NTD | 7,627,016 |
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recognized revenue of NaN and $102,166 (NTD3,075,599), net of VAT for the three months ended March 31, 2021 and 2020 related to this agreement. As of March 31, 2021 and December 31, 2020, the Company had contract liabilities of $1,103,987 and $1,119,361, respectively, related to the Alliance Agreement.
NOTE 10 –LEASE
For the three months ended March 31, 2021 and 2020, the Company recorded its operating lease cost of $1,020,873 and $678,348, respectively.
Operating lease right-of-use assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. As of March 31, 2021 and December 31, 2020, the operating lease right-of-use assets and lease liabilities were as follows:
| | | | | | | |
|
| March 31, 2021 |
| December 31, 2020 | | ||
Right-of-use assets under operating leases | | $ | 6,282,892 | | $ | 6,524,555 | |
Operating lease liabilities – current | |
| 3,018,303 | |
| 3,043,056 | |
Operating lease liabilities – noncurrent | |
| 3,191,735 | |
| 3,440,343 | |
Lease term and discount rate
| | | | | |
|
| March 31, 2021 |
| December 31, 2020 | |
Weighted average remaining lease term |
|
|
|
|
|
Operating lease |
| 2.48 | years | 2.64 | years |
Weighted average discount rate |
|
|
|
|
|
Operating lease |
| 3.64 | % | 3.15 | % |
19
Supplemental cash flow information related to leases
| | | | | | | |
|
| March 31, 2021 |
| December 31, 2020 | | ||
Cash paid for amounts included in the measurement of lease liabilities |
| | | | | | |
Operating cash flows related to operating leases | | $ | 1,142,714 | | $ | 3,310,015 | |
Amortization of right-of-use assets under operating leases | | | 877,022 | | | 3,009,101 | |
The minimum future lease payments as of March 31, 2021 are as follows:
| | | |
|
| Amount | |
2021 (remainder of year) | | $ | 2,469,856 |
2022 | |
| 2,160,357 |
2023 | |
| 1,155,709 |
2024 | |
| 572,054 |
2025 | |
| 101,832 |
Thereafter | |
| — |
Total minimum lease payments | | | 6,459,808 |
Less: Interest | |
| (249,770) |
Present value of future minimum lease payments | | $ | 6,210,038 |
NOTE 1112 – NONCONTROLLING INTERESTS
Noncontrolling interests consisted of the following as of March 31, 20212022 and December 31, 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | % of Non- | | | | | | | | Other | | | | | % of Non- | | | | | | | | Other | | March 31, | |||
| | Controlling | | December 31, | | Net Income | | Comprehensive | | March 31, | | controlling | | December 31, | | Net Income | | Comprehensive | | 2022 | ||||||||
Name of Entity |
| Interests |
| 2020 |
| (Loss) |
| Loss |
| 2021 |
| Interest |
| 2021 |
| (Loss) |
| (Loss) |
| (unaudited) | ||||||||
Law Enterprise |
| 34.05 | % | $ | (414,957) | | $ | (72,946) | | $ | (6,187) | | $ | (494,090) |
| 34.05 | % | $ | (676,166) | | $ | (82,974) | | $ | (5,870) | | | (765,010) |
Law Broker |
| 34.05 | % |
| 25,177,272 | |
| 1,404,896 | | | (353,398) | |
| 26,228,770 |
| 34.05 | % |
| 31,016,203 | | | 1,650,826 | |
| (1,018,942) | |
| 31,648,087 |
Uniwill |
| 50.00 | % |
| (421,035) | |
| 267,364 | | | (2,646) | |
| (156,317) |
| 50.00 | % |
| 48,802 | | | 149,554 | |
| (16,158) | |
| 182,198 |
Rays | | 1.00 | % | | (5,772) | | | (297) | | | 0 | | | (6,069) | | 1.00 | % | | (6,461) | | | (55) | | | — | | | (6,516) |
PFAL |
| 49.00 | % |
| 423,978 | |
| 27,593 | | | (767) | |
| 450,804 |
| 49.00 | % |
| 364,056 | | | 21,930 | |
| (866) | |
| 385,120 |
MKI |
| 49.00 | % |
| (732) | |
| — | | | 0 | |
| (732) |
| 49.00 | % |
| (327,119) | | | — | |
| — | |
| (327,119) |
PA Taiwan |
| 49.00 | % |
| (163,013) | |
| (214) | | | (77) | |
| (163,304) | ||||||||||||||
Total | | | | $ | 24,595,741 | | $ | 1,626,396 | | $ | (363,075) | | $ | 25,859,062 | | | | $ | 30,419,315 | | $ | 1,739,281 | | $ | (1,041,836) | | $ | 31,116,760 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | % of Non- | | | | | | | | | | | Other | | | | | % of Non- | | | | | | | | Other | | Impact from | | | | |||
| | controlling | | December 31, | | Contribution | | Net Income | | Comprehensive | | December 31, | | controlling | | December 31, | | Net Income | | Comprehensive | | Liquidation of | | December 31, | ||||||||||
Name of Entity |
| Interest |
| 2019 |
| /Acquisition |
| (Loss) |
| Income |
| 2020 |
| Interest |
| 2020 |
| (Loss) |
| Income (Loss) |
| PA Taiwan |
| 2021 | ||||||||||
Law Enterprise |
| 34.05 | % | $ | (204,964) | | $ | 0 | | $ | (241,231) | | $ | 31,238 | | $ | (414,957) |
| 34.05 | % | $ | (414,957) | | $ | (264,642) | | $ | 3,433 | | $ | — | | $ | (676,166) |
Law Broker |
| 34.05 | % |
| 19,536,104 | |
| 0 | |
| 4,193,314 | |
| 1,447,854 | |
| 25,177,272 |
| 34.05 | % |
| 25,177,272 | |
| 5,444,673 | |
| 394,258 | | | — | |
| 31,016,203 |
Uniwill | | 50.00 | % | | 0 | | | 1,427,603 | | | (1,918,023) | | | 69,385 | | | (421,035) | | 50.00 | % | | (421,035) | | | 466,934 | | | 2,903 | | | — | | | 48,802 |
Rays | | 1.00 | % | | 0 | | | 1,019 | | | (6,791) | | | 0 | | | (5,772) | | 1.00 | % | | (5,772) | | | (689) | | | — | | | — | | | (6,461) |
PFAL |
| 49.00 | % |
| 351,278 | |
| 0 | |
| 71,713 | |
| 987 | |
| 423,978 |
| 49.00 | % |
| 423,978 | |
| (63,441) | |
| 3,519 | | | — | |
| 364,056 |
MKI |
| 49.00 | % |
| 283 | |
| 0 | |
| (1,015) | |
| 0 | |
| (732) |
| 49.00 | % |
| (732) | |
| (161,090) | |
| — | | | (165,297) | |
| (327,119) |
PA Taiwan |
| 49.00 | % |
| (167,531) | |
| 0 | |
| 4,227 | |
| 291 | |
| (163,013) |
| 49.00 | % |
| (163,013) | |
| 1,102 | |
| (3,386) | | | 165,297 | |
| — |
PTC Nanjing |
| 49.00 | % |
| (2,644) | |
| 0 | |
| 1,465 | |
| 1,179 | |
| 0 | |||||||||||||||||
Total | | | | $ | 19,512,526 | | $ | 1,428,622 | | $ | 2,103,659 | | $ | 1,550,934 | | $ | 24,595,741 | | | | $ | 24,595,741 | | $ | 5,422,847 | | $ | 400,727 | | $ | — | | $ | 30,419,315 |
20
NOTE 1213 – INCOME TAX
The following table reconciles the Company’s statutory tax rates to effective tax rates for the three months ended March 31, 20212022 and 2020:2021:
| | | | | | |||||
| | | | | | | Three Months Ended March 31, | | ||
| | Three Months Ended March 31, | | | 2022 | | 2021 | | ||
| | 2021 | | 2020 | |
| (unaudited) |
| (unaudited) |
|
US statutory rate |
| 21 | % | 21 | % |
| 21 | % | 21 | % |
Tax rate difference |
| (2) | % | (2) | % |
| (2) | % | (2) | % |
Tax base difference | | 0 | % | 1 | % | |||||
Change in valuation allowance |
| 8 | % | 4 | % | |||||
Income tax on undistributed earnings |
| 4 | % | 11 | % | | 4 | % | 4 | % |
Change in valuation allowance |
| 4 | % | 25 | % | |||||
Utilization of deferred tax assets not previously recognized | | (1) | % | 0 | % | | (2) | % | (1) | % |
Provision for uncertain tax position |
| 0 | % | 19 | % | |||||
Non-deductible and non-taxable items |
| 1 | % | 2 | % |
| — | % | 1 | % |
True up of prior year income tax |
| (1) | % | 0 | % |
| — | % | (1) | % |
Other | | (4) | % | — | % | |||||
Effective tax rate |
| 26 | % | 77 | % |
| 25 | % | 26 | % |
The Company’s income tax expense is mainly generated by its subsidiaries in Taiwan. The Company’s subsidiaries in Taiwan are governed by the Income Tax Law of Taiwan and subject to thea statutory tax rate on income reported in the statutory financial statements after appropriate adjustments at 20% and a tax on undistributed earnings at 5% of. The Company had no plan to distribute earnings earned for the years ended December 2021 and 2020, and the tax on any undistributed earnings according to the Income Tax Lawon entities in Taiwan of Taiwan.5% was estimated. As of March 31, 20212022 and December 31, 2020,2021, the Company had current tax payable of $4,151,716$4,904,891 and $2,978,618$3,703,412 for Taiwan income tax, respectively.
WFOE and the Consolidated Affiliated Entities (“CAE”) in the PRC are governed by the Income Tax Law of PRC concerning private-run enterprises, which are generally subject to tax at 25% on income reported in the statutory financial statements after appropriate adjustments. WFOE and CAE had no income tax expenses for the three months ended March 31, 20212022 and the year ended December 31, 20202021 due to the loss positions.net operating losses generated in the previous years.
22
The Company’s subsidiaries in Hong Kong are governed by the Inland Revenue Ordinance Tax Law of Hong Kong and are generally subject to a profittwo-tiered profits tax regime. The first HK$2 million assessable profits is taxed at the rate of 8.25% on the estimatedand any assessable profits.profits over HK$2 million is taxed at 16.25%. As of March 31, 20212022 and December 31, 2020,2021, the Company had current tax payable of $18,627$3,137 and $13,613$9,756 for Hong Kong income tax.
The Company is2017 Tax Act was enacted into law on December 22, 2017 and imposed a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to the statutory rate of 21% in the U.S. federal jurisdiction. The Company had no income tax expense for the three months ended March 31, 2021 and 2020 due to the loss positions and no GILTI tax obligation existed. The Company recognized a one-time transition tax of $1,199,195 in the year of 2018 basedtax. Based on the Company’s total post-1986 earnings and profits (“E&P”) that it previously deferred from U.S. income tax.taxes, we recorded the one-time transition tax $1,199,195 in eight annual installments for the transition tax on undistributed earnings of non-U.S. subsidiaries during the year ended December 31, 2018. As of March 31, 20212022 and December 31, 2020,2021, the Company both had current tax payable of $95,936 and $153,787$179,879 and noncurrent tax payable of $719,515 and $719,515$539,636 for U.S. income tax.
As of March 31, 2020, the Company recorded an uncertain tax positions approximately of $277,000 related to withholding tax matters in the Taiwan Segment. During the three months ended March 31, 2020, the Company recognized interest and penalties of approximately $178,000, in selling, general and administrative expenses.
NOTE 1314 – RELATED PARTY TRANSACTIONS
The following summarized the Company’s loans payable to related parties as of March 31, 20212022 and December 31, 2020:2021:
| | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 | | | March 31, 2022 | | | | | |||
| | | | | | | |
| (unaudited) |
| December 31, 2021 | | ||
Due to Ms. Lu (A shareholder of Anhou) | | $ | 70,600 | | $ | 78,541 | | | $ | 25,654 | | $ | 41,311 | |
Others | |
| 6,231 | |
| 15,506 | | |
| 11,190 | |
| 9,220 | |
Total | | $ | 76,831 | | $ | 94,047 | | | $ | 36,844 | | $ | 50,531 | |
Amounts due to Ms. Lu were borrowings from Ms. Lu to support Anhou’s business operation. The amounts were non-interesting bearing and payable on demand.
21Due to bonus to officer, please refer to Note 8; and due to AHFL previous shareholders, please refer to Note 9.
There was no other material related party transactions other than those disclosed above.
Table of Contents
NOTE 14–15– COMMITMENTS AND CONTINGENCIES
Operating Leases
See future minimum annual lease payments in Note 10.11.
Time Deposits Pledged as Collateral
See time deposits pledged as collateral in NoteNotes 4 and 5.6.
Appointment agreement
On December 21, 2018, Law Broker entered into an appointment agreement with Shu-Fen, Lee (“Ms. Lee”), pursuant to which, she will have served as the president of Law Broker from December 21, 2018 to December 20, 2021. Law Broker expects to extend Ms. Lee’s appointment agreement at the next meeting of the board of directors. Ms. Lee’s primary responsibilities includeincluded 1) overall business planning, 2) implementation of resolution of the shareholders’shareholders' meeting or the board of directors, 3) the appointment and dismissal of the Law Broker’s employees and sales professionals, except for internal auditors, 4) financial management and application, 5) being the representative of Law Broker, 6) other matters assigned by the board of directors. According to the appointment agreement, Ms. Lee’s compensation plan included: 1) base salary, 2) managerial allowance, 3) surplus bonus based on 1.25% of Law Broker’s income after tax, and 4) annual year-end bonus. The renewed appointment agreement is expected to be signed in May 2022. For the three months ended March 31, 20212022 and 2020,2021, the Company has recorded the compensation expense of $62,208$72,905 and $50,436$62,208 under the appointment agreement, respectively.
Engagement agreement
On May 10, 2016,December 23, 2021, Law Broker entered into ana new engagement agreement with Hui-Hsien Chao ("(“Ms. Chao"Chao”), pursuant to which she shall have served as the general manager of Law Broker from December 29, 201523, 2021 to December 28, 2018. The engagement agreement with22, 2024. Ms. Chao was renewed in 2019 and her service period has extended to December 20, 2021. Ms. Chao'sChao’s primary responsibilities are to assist Law Broker in operating and managing insurance agency business. According to the engagement agreement, Ms. Chao's bonus plan included:Chao’s Bonus plans shall include: 1) execution, 2) long-term service fees 3) pension and 4)3) non-competition. The payment of such bonuses
23
will only occur upon satisfaction of certain condition,conditions and subject to the terms and conditions in the engagement agreement. Ms. Chao has actedagreed to act as the general manager or in the equivalent position of Law Broker for a term of at least three years. For the three months ended March 31, 20212022 and 2020,2021, the Company has recorded the compensationperformance bonus expense of $29,689NaN and $75,772$29,689 under the appointmentengagement agreement, respectively.
NOTE 16 –VARIABLE INTEREST ENTITIES
The carrying amounts of the assets, liabilities and the results of operations of the VIE and its subsidiaries (i.e., Zhengzhou Zhonglia Hengfu Business Consulting Co., Limited and its subsidiaries) included in the Company’s consolidated balance sheets and statements of comprehensive loss after the elimination of intercompany balances and transactions among VIEs and their subsidiaries within the Company are as follows:
| | | | | | |
|
| March 31, 2022 |
| | | |
(Amount in USD) | | (unaudited) | | December 31, 2021 | ||
ASSETS |
| |
|
| |
|
Current assets | | | | | | |
Cash and cash equivalents | | $ | 2,808,564 | | $ | 1,001,974 |
Accounts receivable and notes receivable | |
| 731,192 | |
| 455,884 |
Other current assets | |
| 173,360 | |
| 120,113 |
Total current assets | |
| 3,713,116 | |
| 1,577,971 |
| | | | | | |
Right-of-use assets under operating leases | |
| 1,400,738 | |
| 1,528,856 |
Property and equipment, net | |
| 209,016 | |
| 199,056 |
Prepaid expenses - intangible assets | |
| 20,389 | |
| 9,377 |
Long-term investments | |
| 47,306 | |
| 47,179 |
Restricted cash – noncurrent | |
| 856 | |
| 72,870 |
Registered capital deposits | |
| 1,103,796 | |
| 1,100,842 |
Deferred tax assets | |
| — | |
| 74,709 |
Other assets | |
| 84,176 | |
| 83,951 |
TOTAL ASSETS | | $ | 6,579,393 | | $ | 4,694,811 |
| | | | | | |
LIABILITIES | |
|
| |
|
|
Current liabilities | |
|
| |
|
|
Commissions payable to sales professionals | | $ | 214,761 | | $ | 210,198 |
Other current liabilities | |
| 3,312,953 | |
| 1,117,738 |
Due to related parties - Ms. Lu (the shareholder of Law Anhou) | |
| 25,654 | |
| 41,311 |
Total current liabilities | |
| 3,553,368 | |
| 1,369,247 |
| | | | | | |
Operating lease liabilities - noncurrent | |
| 807,009 | |
| 908,971 |
TOTAL LIABILITIES | | $ | 4,360,377 | | $ | 2,278,218 |
| | | | | | |
|
| Three Months Ended March 31, | ||||
(Amount in USD) | | 2022 | | 2021 | ||
Revenue | | $ | 1,347,816 | | $ | 1,951,469 |
Net loss | |
| (201,946) | |
| (50,781) |
Net cash used in operating activities | |
| (472,033) | |
| (449,692) |
Net cash provided by (used in) investing activities | |
| 2,290,667 | |
| (7,292) |
Net cash used in financing activities | |
| (15,760) | |
| (7,714) |
The VIEs contributed $ 1,347,816 and $1,951,469 of the Company’s consolidated revenue for the three months ended March 31, 2022 and 2021, respectively, after elimination of inter-company transactions.
24
As of March 31, 2022, there was no pledge or collateralization of the VIEs’ assets that can only be used to settle obligations of the VIEs, other than the share pledge agreements, restricted cash and registered capital deposits. Other than the amounts due to the Company and its non-VIE subsidiaries (which are eliminated upon consolidation), the creditors of the VIEs’ third-party liabilities did not have recourse to the general credit of the Company in normal course of business. The Company did not provide or intend to provide financial or other supports not previously contractually required to the VIEs during the years presented.
NOTE 1517 – SEGMENT REPORTING
The Company organizes and manages its business as three3 operating segments by operating geographic areas. The business of WFOE, CU Hong Kong and the CAE in PRC was managed and reviewed as PRC segment. The business of AHFL and its subsidiaries in Taiwan was managed and reviewed as Taiwan segment. The business of PFAL was managed and reviewed as Hong Kong segment. PRC and Taiwan segments retain majority of reported consolidated amounts.
The geographical distributions of the Company’s financial information for the three months ended March 31, 2022 and 2021 were as follows:
| | | | | | |
| | Three Months Ended March 31, | ||||
|
| (unaudited) |
| (unaudited) | ||
|
| 2022 |
| 2021 | ||
Geographical Areas | | | | | | |
Revenue | | | | | | |
Taiwan | | $ | 30,505,357 | | $ | 28,851,500 |
PRC | |
| 1,347,816 | |
| 1,951,469 |
Hong Kong | |
| 82,822 | |
| 110,985 |
Elimination adjustment | |
| (955,472) | |
| (383,837) |
Total revenue | | $ | 30,980,523 | | $ | 30,530,117 |
| | | | | | |
Income (loss) from operations | |
| | |
| |
Taiwan | | $ | 5,213,523 | | $ | 4,690,729 |
PRC | |
| (155,919) | |
| (3,918) |
Hong Kong | |
| 38,401 | |
| 61,493 |
Elimination adjustment | |
| 217,810 | |
| 138,350 |
Total income from operations | | $ | 5,313,815 | | $ | 4,886,654 |
| | | | | | |
Non operating income (expense) | | | | | | |
Taiwan | | $ | 860,527 | | $ | 587,469 |
PRC | |
| 256,585 | |
| 96,152 |
Hong Kong | |
| 9,502 | |
| (118) |
Elimination adjustment | |
| (174,374) | |
| (134,569) |
Total non-operating income (expense) | | $ | 952,240 | | $ | 548,934 |
| | | | | | |
Net income | |
| | |
| |
Taiwan | | $ | 4,570,169 | | $ | 3,933,490 |
PRC | |
| 25,798 | |
| 46,918 |
Hong Kong | |
| 44,756 | |
| 56,312 |
Elimination adjustment | |
| 43,435 | |
| 62 |
Total net income | | $ | 4,684,158 | | $ | 4,036,782 |
2225
The geographical distributions of the Company’s financial information for the three months ended March 31, 2021 and 2020 were as follows:
| | | | | | |
| | For three months ended March 31, | ||||
|
| 2021 |
| 2020 | ||
Geographical Areas | | | | | | |
Revenue | | | | | | |
Taiwan | | $ | 28,851,500 | | $ | 27,342,936 |
PRC | |
| 1,951,469 | |
| 1,429,297 |
Hong Kong | |
| 110,985 | |
| 68,619 |
Elimination adjustment | |
| (383,837) | |
| (317,642) |
Total revenue | | $ | 30,530,117 | | $ | 28,523,210 |
| | | | | | |
Income (loss) from operations | |
| | |
| |
Taiwan | | $ | 4,690,729 | | $ | 1,503,282 |
PRC | |
| (3,918) | |
| (31,113) |
Hong Kong | |
| 61,493 | |
| 23,653 |
Elimination adjustment | |
| 138,350 | |
| 52,880 |
Total income from operations | | $ | 4,886,654 | | $ | 1,548,702 |
| | | | | | |
Net income (loss) | |
| | |
| |
Taiwan | | $ | 3,933,490 | | $ | 345,266 |
PRC | |
| 46,918 | |
| (39,957) |
Hong Kong | |
| 56,312 | |
| 21,772 |
Elimination adjustment | |
| 62 | |
| 9,204 |
Total net income(loss) | | $ | 4,036,782 | | $ | 336,285 |
The geographical distribution of the Company’s financial information as of March 31, 20212022 and December 31, 20202021 were as follows:
| | | | | | | ||||||
| | | | | ||||||||
| | | | | | | | March 31, 2022 | | | | |
|
| March 31, 2021 |
| December 31, 2020 |
| (unaudited) |
| December 31, 2021 | ||||
Geographical Areas | | | | | | | | | | | | |
Reportable assets | | | | | | | | | | | | |
Taiwan | | $ | 174,507,496 | | $ | 171,037,252 | | $ | 190,952,606 | | $ | 195,981,770 |
PRC | |
| 12,930,173 | |
| 13,149,306 | |
| 14,209,455 | |
| 12,326,308 |
Hong Kong | |
| 974,442 | |
| 915,628 | |
| 798,648 | |
| 756,692 |
Elimination adjustment | |
| (80,577,773) | |
| (77,373,957) | |
| (78,832,414) | |
| (81,283,249) |
Total reportable assets | | $ | 107,834,338 | | $ | 107,728,229 | | $ | 127,128,295 | | $ | 127,781,521 |
| | | | | | | | | | | | |
Long-lived assets | |
| | |
| | |
| | |
| |
Taiwan | | $ | 1,990,118 | | $ | 2,198,739 | | $ | 6,809,903 | | $ | 6,784,644 |
PRC | |
| 168,704 | |
| 175,748 | |
| 1,609,754 | |
| 1,727,911 |
Hong Kong | |
| 1,531 | |
| 1,664 | |
| 1,146 | |
| 1,287 |
Elimination adjustment | |
| (2,908) | |
| (2,906) | |
| (2,906) | |
| (2,905) |
Total long-lived assets | | $ | 2,157,445 | | $ | 2,373,245 | | $ | 8,417,897 | | $ | 8,510,937 |
| | | | | | | | | | | | |
Capital investment | |
| | |
| | ||||||
Capital investments (CAPEX cash flows) | |
| | |
| | ||||||
Taiwan | | $ | 50,228 | | $ | 1,522,189 | | $ | 43,515 | | $ | 595,591 |
PRC | |
| 7,292 | |
| 87,903 | |
| 25,985 | |
| 79,203 |
Hong Kong | |
| 0 | |
| 1,576 | |
| — | |
| 154 |
Total capital investments | | $ | 57,520 | | $ | 1,611,668 | | $ | 69,500 | | $ | 674,948 |
23NOTE 18 –RISKS AND UNCERTAINTIES
NOTE 1619 – SUBSEQUENT EVENTS
The Company has evaluated all other subsequent events through the date these consolidated financial statements were issued and determine that there were no subsequent events or transactions that require recognition or disclosures in the consolidated financial statements, except for the follows:following:
On April 29, 2021, Rays Technology Co., Ltd. (“Rays”), a majority-owned subsidiary ofAs disclosed in Note 10, the Company received a Decision Letter dated April 27, 2021 fromfailed to meet the Financial Supervisory Commission (Taiwan) (the “FSC”) stating that Rays was fined NTD900,000 (equivalent to approximately $32,233 USD) bytargets set forth in the FSC for violating Article 167-1 SectionAmendment 3 of the Insurance ActAlliance Agreement with AIATW and shall refund the basic business execution fees of Taiwan (the “Act”)$1,159,039 (NTD 33 million). On May 11, 2021,6, 2022, AIATW issued a formal letter to the FSC verbally informed Law Broker that it could expect a Decision Letter fromCompany and agreed to reduce the FSC stating that Law Broker was fined NTD1.7 million (equivalentrefund amount of $1,159,039 (NTD 33.0 million) to approximately $60,565 USD) and one-month correction period for violating the relevant laws and regulations of the Act. The two subsidiaries are in the process of remediating the noncompliance issues.$807,127 (NTD 23.1 million).
2426
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
The following discussion of the results of operations and financial condition should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Item 1 of this part. This report, including the information incorporated by reference, contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The use of any of the words “believe,” “expect,” “anticipate,” “plan,” “estimate,” and similar expressions are intended to identify such statements. Forward-looking statements include statements concerning our possible or assumed future results. The actual results that we achieve may differ materially from those discussed in such forward-looking statements due to the risks and uncertainties described in the Risk Factors section of this report, in Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in other sections of this report, as well as in our annual report on Form 10-K. We undertake no obligation to update any forward-looking statements.
Overview
The Company primarily provides two broad categories of insurance products, life insurance products and property and casualty insurance products, in Taiwan and People’s Republic of China (“PRC”). The Company also provides reinsurance brokerage services and insurance consulting services in Hong Kong and Taiwan. The percentage of reinsurance brokerage services and insurance consulting services is less than 1% of our total revenue. The insurance products that the Company’s subsidiaries sell are underwritten by some of the leading insurance companies in Taiwan and PRC, respectively.
(1) | Life Insurance Products |
Total revenue from Taiwan segment’s sales of life insurance products were 88.1%89.2% and 89.7%88.1% of total revenue for the three months ended March 31, 20212022 and 2020,2021, respectively. Total revenue from PRC segment’s sales of life insurance products were 6.0%3.6% and 4.8%6.0% of total revenue for the three months ended March 31, 20212022 and 2020,2021, respectively.
In addition to the periodic premium payment schedules, most of the individual life insurance products we distribute also allow the insured to choose to make a single, lump-sum premium payment at the beginning of the policy term. If a periodic payment schedule is adopted by the insured, a life insurance policy can generate periodic payment of fixed premiums to the insurance company for a specified period of time. This means that once the Company sells a life insurance policy with a periodic premium payment schedule, they will be able to derive commission and fee income from that policy for an extended period of time, sometimes up to 25 years. Because of this feature and the expected sustainedsustainable growth of life insurance sales in Chinathe PRC and Taiwan, we have focused significant resources ever since the incorporation of Anhou and Law Broker on developing our capability to distribute individual life insurance products with periodic payment schedules. We expect that sales of life insurance products will continuously be our primary source of revenue in the next several years.
(2) | Property and Casualty Insurance Products |
Total revenue from Taiwan segment’s sales of property and casualty insurance products were 5.2%6.3% and 4.7%5.2% of total revenue for the three months ended March 31, 20212022 and 2020,2021, respectively. Total revenue from PRC segment’s sales of property and casualty insurance products were 0.4%0.7% and 0.2%0.4% of total revenue for the three months ended March 31, 20212022 and 2020,2021, respectively.
As COVID-19 and its duration remain uncertain, we have been monitoring and will continue to measure and modify our business to protect our customers, sales professionals and employees. The extent of the COVID-19 impact to the Company will depend on numerous factors and developments. Consequently, any potential impacts of COVID-19 remain highly uncertain and cannot be predicted with confidence.
Critical Accounting Policies and Estimates
A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires our management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We have had no changes to our Critical Accounting Policies as described in our most recent Form 10-K for the year ended December 31, 20202021 and believe that of our significant accounting and reporting policies, the more critical policies include our accounting for revenue recognition stock-based compensations, and estimate of income taxes. Our significant accounting policies are described in Note 2 of “Summary of Significant Accounting Policies” included within this Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission.
2527
in Note 1 of “Summary of Significant Accounting Policies” included within our 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Results of Operations- Three Months ended March 31, 20212022 Compared to Three Months ended March 31, 20202021
The following table shows the results of operations for the three months ended March 31, 20212022 and 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | | | | | | | | Three Months Ended March 31, |
| |||||||||||||
| | 2021 | | 2020 | | | | | | | | | 2022 | | 2021 | | | | | |
| ||||
|
| | (Unaudited) |
| | (Unaudited) |
| Change |
| Percent |
|
|
| (Unaudited) |
| (Unaudited) |
| Change |
| Percent |
| ||||
Revenue | | $ | 30,530,117 | | $ | 28,523,210 | | $ | 2,006,907 |
| 7.0 | % | | | $ | 30,980,523 | | $ | 30,530,117 | | $ | 450,406 |
| 2 | % |
Cost of revenue | |
| 18,973,432 | |
| 19,499,924 | |
| (526,492) |
| (2.7) | % | | |
| 19,009,519 | |
| 18,973,432 | |
| 36,087 |
| — | % |
Gross profit | |
| 11,556,685 | |
| 9,023,286 | |
| 2,533,399 |
| 28.1 | % | | |
| 11,971,004 | |
| 11,556,685 | |
| 414,319 |
| 4 | % |
Gross profit margin | |
| 37.9 | % |
| 31.6 | % |
| 6.3 | % | 19.9 | % | | |
| 38.6 | % |
| 37.9 | % |
| 0.7 | % | 2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Operating expenses: | |
| | |
| | |
| |
| | | | |
|
| |
|
| |
|
|
|
| |
Selling | |
| 579,777 | |
| 490,030 | |
| 89,747 |
| 18.3 | % | | |
| 684,150 | |
| 579,777 | |
| 104,373 |
| 18 | % |
General and administrative | |
| 6,090,254 | |
| 6,984,554 | |
| (894,300) |
| (12.8) | % | | |
| 5,973,039 | |
| 6,090,254 | |
| (117,215) |
| (2) | % |
Total operating expenses | |
| 6,670,031 | |
| 7,474,584 | |
| (804,553) |
| (10.8) | % | | |
| 6,657,189 | |
| 6,670,031 | |
| (12,842) |
| — | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Income from operations | |
| 4,886,654 | |
| 1,548,702 | |
| 3,337,952 |
| 215.5 | % | | |
| 5,313,815 | |
| 4,886,654 | |
| 427,161 |
| 9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Other income (expenses): | |
| | |
| | |
| |
| | | | |
|
| |
|
| |
|
|
|
| |
Interest income | |
| 83,998 | |
| 110,891 | |
| (26,893) |
| (24.3) | % | | |
| 104,977 | |
| 83,998 | |
| 20,979 |
| 25 | % |
Interest expenses | |
| (42,470) | |
| (59,282) | |
| 16,812 |
| (28.4) | % | | |
| (52,335) | |
| (42,470) | |
| (9,865) |
| 23 | % |
Foreign currency exchange gain (loss), net | |
| 328,466 | |
| (55,937) | |
| 384,403 |
| (687.2) | % | | ||||||||||||
Other – net | |
| 178,940 | |
| (96,802) | |
| 275,742 |
| (284.9) | % | | ||||||||||||
Total other income (expenses), net | |
| 548,934 | |
| (101,130) | |
| 650,064 |
| (642.8) | % | | ||||||||||||
Foreign currency exchange gains, net | |
| 737,550 | |
| 328,466 | |
| 409,084 |
| 125 | % | |||||||||||||
Other - net | |
| 162,048 | |
| 178,940 | |
| (16,892) |
| (9) | % | |||||||||||||
Total other income, net | |
| 952,240 | |
| 548,934 | |
| 403,306 |
| 74 | % | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | |
Income before income taxes | |
| 5,435,588 | |
| 1,447,572 | |
| 3,988,016 |
| 275.5 | % | | |
| 6,266,055 | |
| 5,435,588 | |
| 830,467 |
| 15 | % |
Income tax expense | |
| (1,398,806) | |
| (1,111,287) | |
| (287,519) |
| 25.9 | % | | |
| (1,581,897) | |
| (1,398,806) | |
| (183,091) |
| 13 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | |
| 4,036,782 | |
| 336,285 | |
| 3,700,497 |
| 1,100.4 | % | | |
| 4,684,158 | |
| 4,036,782 | |
| 647,376 |
| 16 | % |
Net income attributable to the noncontrolling interests | |
| (1,626,396) | |
| (625,522) | |
| (1,000,874) |
| 160.0 | % | | |
| (1,739,281) | |
| (1,626,396) | |
| (112,885) |
| 7 | % |
Net income (loss) attributable to China United’s shareholders | | $ | 2,410,386 | | $ | (289,237) | | $ | 2,699,623 |
| (933.4) | % | | ||||||||||||
Net income attributable to China United’s shareholders | | $ | 2,944,877 | | $ | 2,410,386 | | $ | 534,491 |
| 22 | % |
Revenue
As a distributor of insurance products, we derive our revenue primarily from commissions and fees paid by insurance companies, typically calculated as a percentage of premiums paid by our customers to the insurance companies in among Taiwan, People’s Republic of China (“PRC”)PRC and Hong Kong. We generate revenue primarily through our sales force, which consists of individual sales agents in our distribution and service network. For the three months ended March 31, 20212022 and 2020,2021, the revenues generated from our operations in Taiwan, PRC and Hong Kong arewere as follows:
| | | | | | | | | | | | |
Geographic Areas | | Three Months Ended March 31, | | |||||||||
|
| 2021 |
| 2020 |
| Change |
| Percent |
| |||
Revenue |
| |
|
| |
|
| |
|
|
| |
Taiwan segment | | $ | 28,467,663 | | $ | 27,025,294 | | $ | 1,442,369 |
| 5.3 | % |
Percentage of revenue | |
| 93.2 | % |
| 94.7 | % |
| |
| | |
PRC segment | |
| 1,951,469 | |
| 1,429,297 | |
| 522,172 |
| 36.5 | % |
Percentage of revenue | |
| 6.4 | % |
| 5.0 | % |
| |
| | |
Hong Kong segment | |
| 110,985 | |
| 68,619 | |
| 42,366 |
| 61.7 | % |
Percentage of revenue | |
| 0.4 | % |
| 0.3 | % |
| |
| | |
Total revenue | | $ | 30,530,117 | | $ | 28,523,210 | | $ | 2,006,907 |
| 7.0 | % |
| | | | | | | | | | | | |
Geographic Areas | | Three Months Ended March 31, |
| |||||||||
|
| 2022 |
| 2021 |
| Change |
| Percent |
| |||
Revenue |
| |
|
| |
|
| |
|
|
| |
Taiwan segment | | $ | 29,549,885 | | $ | 28,467,663 | | $ | 1,082,222 |
| 3.8 | % |
Percentage of revenue | |
| 95.4 | % |
| 93.2 | % |
|
|
|
| |
PRC segment | |
| 1,347,816 | |
| 1,951,469 | |
| (603,653) |
| (30.9) | % |
Percentage of revenue | |
| 4.3 | % |
| 6.4 | % |
|
|
|
| |
Hong Kong segment | |
| 82,822 | |
| 110,985 | |
| (28,163) |
| (25.4) | % |
Percentage of revenue | |
| 0.3 | % |
| 0.4 | % |
|
|
|
| |
Total revenue | | $ | 30,980,523 | | $ | 30,530,117 | | $ | 450,406 |
| 1.5 | % |
Revenue from our Taiwan segment increased by $1.0 million from $28.5 million for the three months ended March 31, 2021 to $29.5 million for the three months ended March 31, 2022. Increase in revenue was mainly due to the high performance of sales of investment-
2628
Overall revenue from our Taiwan segment increased by $1.4 million from $27.0 million for the three months ended March 31, 2020 to $28.5 million for the three months ended March 31, 2021. Due totype insurance policies, our continued growth in the sales of insurance products in the past years, we continue to receiveand our continuance of receiving more contingent commissions, which include trailing commissions, persistency rate linkedpersistency-rate-linked bonuses and some other service allowance, for the three months ended March 31, 2021. However,2022 as compared to the revenue growth was partially offset by decreases in the sales of long-term care and disability insurance products because of the discontinuations of these products in the year 2020.three months ended March 31, 2021.
Overall revenueRevenue from our PRC segment increaseddecreased by $0.5$0.6 million to $2.0from $1.9 million for the three months ended March 31, 2021 from $1.4to $1.3 million for the three months ended March 31, 2020. Such increase in revenue2022. The insurance premium of the PRC segment was mainly due to the adverse impact on the outbreak of COVID-19 that restricted to a significant extent our sales agents’ in-person selling activitiescertain products were priced higher in the first quarter of 2020. The operations2022 than those in the first quarter of 2021 and therefore, customers in PRC were unwilling to buy the insurance products, which resulted in the decrease of revenue. In addition, the persistency-rate-linked bonuses in the PRC segment had been fully resumed inalso decreased for the second quarterthree months ended March 31, 2022 due to the termination of 2020.certain sales agreement with some of the PRC insurance companies.
The revenue inRevenue from the Hong Kong Segment was primarily derived from reinsurance commission on sales of insurance products from other insurers to Taiwan Life Insurance Co., Ltd. (“Taiwan Life”) for risk management. Overall revenueRevenue from our Hong Kong segment for the three months ended March 31, 20212022 remained consistent with that of the same period in 2020.2021.
Cost of revenue and gross profit
The cost of revenue mainly consists of commissions paid to our sales professionals. The cost of revenue for the three months ended March 31, 2021 decreased by $0.5 million, to $19.0 million compared to $19.5 million for the three months ended March 31, 2020. Decreases in the cost2022 remained consistent with that of revenue were due to fewer insurance policies sold during the first quarter of 2021 compared to the same period of 2020, which result in a decrease in the direct commission costs paid to sales professionals for the first-year commissions.2021.
Consequently, the gross profit margin increased from 31.6% for the three months ended March 31, 2020 to 37.9% for the three months ended March 31, 2021.2021 to 38.6% for the three months ended March 31, 2022. Such increase in the gross profit margin mainly resulted from receiving more contingent commissions for subsequent years.
Selling expenses
Selling expenses were mainly incurred by Law Broker and Uniwill in connection with online marketing and advertising. OverallFor the three months ended March 31, 2022, selling expenses were $0.7 million, reflecting an increase of $ 0.1 million, compared with $0.6 million of selling expenses for the three months ended March 31, 2021 remained consistent with2021. Increase in the same periodselling expenses was caused by the donation for charity foundations in 2020.Taiwan during the three months ended March 31, 2022.
General and administrative expenses
General and administrative (“G&A”) expenses are principally comprised of salaries and benefits for our administrative staff, office rental expenses, travel expenses, depreciation and amortization, entertainment expenses, and professional service fees.
For the three months ended March 31, 2021, our G&A General and administrative expenses were $6.1 million, reflecting a decrease of $0.9 million, compared with $7.0$6.0 million for the three months ended March 31, 2020. Our G&A expenses decreased for2022, which was not significantly different from those of the three months ended March 31, 2021 because the Company recognized costssame period of $1.0 million related to stock-based compensation arrangements during the first quarter of 2020.2021.
Other income (expenses)(expense)
Other income (expense) mainly consisted of interest income, interest expenses, gain or loss on valuation of financial assets, and foreign currency exchange gain or loss. Net otherOther income for the three months ended March 31, 2021 was $0.5were $1.0 million, reflecting an increase of $0.7$0.5 million, compared with netthe other expenseincome of $0.1$0.5 million for the three months ended March 31, 2020.2021. The increasesincrease in other income for the three months ended March 31, 2021 was mainly due to foreign currency exchange gain recognized from foreign currency time deposits because of the depreciation of the New Taiwan Dollar against the USU.S. dollar and Chinese Yuan during the first quarter of 2021.2022.
Income tax expense
For the three months ended March 31, 2021,2022, income tax expense was $1.4$1.6 million, reflecting an increase of 25.9%$0.2 million or 13%, compared with the income tax expense of $1.1$1.4 million for the three months ended March 31, 2020.2021. The increase in tax expenses was mainly due to more taxes on undistributed earning accrued because of morethe increase in revenues generated in the Taiwan segment during the first quarter of 2021.2022.
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Liquidity and Capital Resources
The following table representspresents a comparison of the net cash provided by operating activities, net cash provided by (used in) investing activities and net cash provided by financing activities for the three-month periods ended March 31, 20212022 and 2020:2021:
| | | | | | | | | | | | |
|
| Three Months Ended March 31, | | | | | |
| ||||
|
| 2021 |
| 2020 |
| Change |
| Percent |
| |||
Net cash provided by operating activities | | $ | 6,445,228 | | $ | 3,340,811 | | $ | 3,104,417 |
| 92.9 | % |
Net cash provided by (used in) investing activities | |
| 199,142 | |
| (5,335,582) | |
| 5,534,724 |
| (103.7) | % |
Net cash provided by financing activities | |
| 2,171,143 | |
| 1,579,759 | |
| 591,384 |
| 37.4 | % |
| | | | | | | | | | | | |
| | Three Months Ended March 31, |
| |||||||||
|
| 2022 |
| 2021 |
| Change |
| Percent |
| |||
Net cash provided by operating activities | | $ | 7,599,296 | | $ | 6,445,228 | | $ | 1,154,068 |
| 17.9 | % |
Net cash (used in) provided by investing activities | |
| (5,331,480) | |
| 199,142 | |
| (5,530,622) |
| (2,777.2) | % |
Net cash provided by financing activities | |
| 1,054,769 | |
| 2,171,143 | |
| (1,116,374) |
| (51.4) | % |
Operating activities
Net cash provided by operating activities during the three months ended March 31, 20212022 was $6.4$7.6 million, reflecting an increase of 92.9%$1.2 million or 17.9% in comparison with $3.3that of $6.4 million net cash provided by operating activities during the three months ended March 31, 2020.2021. The increase in cash inflows was mainly due to a strong business performancethe higher net income and collection from accounts receivable for the three months ended March 31, 20212022 compared with that of the same period in 2020.2021.
Investing activities
Net cash provided byused in investing activities was $0.2$5.3 million during the three months ended March 31, 20212022 as compared with the net cash used inprovided by investing activities of $5.3$0.2 million for the three months ended March 31, 2020.2021. Increases in the cash inflows forused in the investing activities resulted from salesthe increase of stock mutual fundsthe purchases of marketable securities and time deposits, and the decrease of proceeds from maturities of time deposits during the first quarter of 2021.2022.
Financing activities
Net cash provided by financing activities was $2.2$1.1 million during the three months ended March 31, 2021,2022, which increaseddecreased by $0.6$1.1 million from $1.6that of $2.2 million during the same period of 2020.2021. The increasedecrease was mainly due to increasesthe decrease in the net proceeds from additional borrowings under the revolving credit agreements and partially offset by the decrease of repayment of related party borrowings during the first quarter of 2021.2022.
Contractual Obligations
There have been no significant changes to the Company’s contractual obligations as disclosed in the Company’s 2021 Annual Report filed on Form 10-K for the year ended December 31, 2020.10-K.
Off Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as of March 31, 2021.2022.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information under this item.
30
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit of possible controls and procedures.
28
Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2021.2022. This conclusion was based on the material weaknesses in our internal control over financial reporting described in Part II, Item 9A, “Controls and Procedures” of our auunalannual report on Form 10-K for the year ended December 31, 2020.2021. The material weaknesses have not been remediated as of March 31, 2021.2022. We continue workingto work on the remediation of the material weakness, we may determine to take additional measures to address our control deficiencies. The material weakness will continue to exist until the remediation steps identified in our 20202021 Form 10-K are fully implemented and concluded to be operating effectively.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. If not remediated, the material weaknesses in our internal control over financial reporting described in the Form 10-K for the year of 20202021 could result in a material misstatement of our annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended March 31, 2021,2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
31
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
DuringOn November 29, 2021, Law Broker received a decision letter (the “Law Broker Decision Letter”) dated November 25, 2021 from the Financial Supervisory Commission (Taiwan) (the “FSC”) stating that Law Broker was fined NTD 200,000 (equivalent to approximately $7,227 USD) (the “Fine”) and a one-month correction period (the “Correction Period,” collectively with the Fine, the “Penalty”) by the FSC for violating Article 163 Sections 4 and 8 of the Insurance Act (the “Act”) and Section 23 of Article 49 of the Regulations Governing Insurance Brokers (the “Regulation”). The FSC found that one of Law Broker’s insurance agents, within a short period of time, solicited the same customer for insurance policies from different insurance companies but the financial information of the customer in such agent’s report was different. The insurance agent and Law Broker were not able to verify the reason behind such discrepancy.
Further, the FSC found that Law Broker’s current “Customer Risk Assessment Standards for Preventing Money Laundering and Combating Terrorism,” underestimated customers’ risk levels and therefore such standards may have deficiency in screening the risks.
Law Broker has paid the Fine in full and is in the process of adjusting its business models to regain compliance with the Act and the Regulation.
Except as disclosed above, during the three months ended March 31, 2021,2022, we were not aware of any suchother legal proceedings or claims that we believed would have a material adverse effect on our business, financial condition or operating results. From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.business, such as labor and employment disputes. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On April 29, 2021, Rays Technology Co., Ltd. (“Rays”), a majority-owned subsidiary of the Company, received a Decision Letter dated April 27, 2021 from the Financial Supervisory Commission (Taiwan) (the “FSC”) stating that Rays was fined NTD900,000 (equivalent to approximately $32,233 USD) by the FSC for violating Article 167-1 Section 3 of the Insurance Act of Taiwan (the “Act”). The FSC found that from 2019 to 2021 Rays used its website “Triple-I” and its point system thereon to facilitate certain insurance sales and charged the points from certain participating insurance salespersons on the Triple-I point system once clients purchased insurance products from those insurance salespersons. The FSC found that Rays’ operations through the Triple-I website constituted insurance brokerage services but Rays did not have the proper insurance brokerage license while operating the Triple-I website.
On May 11, 2021, the FSC verbally informed Law Broker that it could expect a Decision Letter from the FSC stating that Law Broker was fined NTD1.7 million (equivalent to approximately $60,565 USD) and one-month correction period for violating the relevant laws and regulations of the Act. The FSC found that from 2011 to 2020 Law Broker charged advertising fees and business promotion fees pursuant to certain contracts and agreements with some of its strategic insurance companies and such charges exceeded the scope of remuneration for insurance-related services allowed for Law Broker. The FSC found that such business practices of Law Broker’s did not comply with Article 9 of the Act and Section 11 of Article 49 of the Regulations Governing Insurance Brokers.
29
The Company’s two subsidiaries, Rays and Law Broker, are in the process of adjusting their business models to regain compliance with the relevant laws and regulations and will pay the respective fines within the prescribed periods.
ITEM 1A. RISK FACTORS.
As a smaller reporting company, we are not required to make disclosure under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Not applicable during this reporting period.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable during this reporting period.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable during this reporting period.
32
ITEM 6. EXHIBITS
Exhibit |
|
| ||
Number |
| Description of Exhibit | ||
10.1 | | |||
10.2 | | |||
31.1 |
| |||
31.2 |
| |||
32.1* |
| |||
32.2* |
|
101.INS |
| XBRL Instance Document | ||
101.SCH |
| XBRL Taxonomy Extension Schema Document | ||
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document | ||
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
*The certifications attached as Exhibits 32.1 and 32.2 accompany this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
3033
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
| China United Insurance Service, Inc. | |
| | | |
Date: May | | By: | /s/ Yi-Hsiao Mao |
| | Name: | Yi-Hsiao Mao |
| | Its: | Chief Executive Officer |
| | | (Principal Executive Officer) |
| | | |
Date: May | | By: | /s/ Mei-Kuan Yeh |
| | Name: | Mei-Kuan Yeh |
| | Its: | Chief Financial Officer |
| | | (Principal Financial and Accounting Officer) |
3134