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.

Table of Contents

OTHER PERTINENT INFORMATION

References in this quarterly report to “we,” “us,” ~~“our,” the “Registrant”~~“our” and the “Company” ~~and words of like import~~ refer to China United Insurance Service, Inc., its subsidiaries and ~~consolidated affiliated entities (“CAE”) unless otherwise indicated by the context.~~

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 ~~Taiwan,~~ 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” or the “VIE” refers to the combined operations of Law Anhou Insurance Agency Co., Ltd. and its subsidiaries.

Our business is conducted in Taiwan ~~Hong Kong~~ and China using New Taiwanese Dollars (“NT$” or “NTD”), the currency of Taiwan, Hong Kong Dollars (“~~NTD”~~HK$” or “HKD”), the currency of Hong Kong, ~~(“HKD”),~~ and RMB, the currency of China, ~~(“RMB”),~~ 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 ~~USD.~~U.S. dollars. These dollar references are based on the exchange rate of ~~NTD, HKD~~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 ~~USD~~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).

Table of Contents~~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

September 30,

December 31,
(Amount in USD)

2022

2021
ASSETS

Current assets

Cash and cash equivalents

$
14,461,123

$
18,234,350
Time deposits

71,563,061

64,299,176
Accounts receivable

14,499,574

26,761,678
Contract assets

5,518,599

—
Marketable securities

753,345

—
Other current assets

873,505

1,207,496
Total current assets

107,669,207

110,502,700

Right-of-use assets under operating leases

7,455,797

6,449,182
Property and equipment, net

1,563,003

2,061,755
Intangible assets, net

294,088

333,118
Long-term investments

2,301,718

2,696,812
Restricted cash – noncurrent

14,939

88,282
Deferred tax assets

1,006,604

909,032
Other assets

4,164,320

4,740,640
TOTAL ASSETS

$
124,469,676

$
127,781,521

LIABILITIES AND STOCKHOLDERS’ EQUITY




Current liabilities




Commission payable to sales professionals

$
10,616,215

$
14,003,541
Short-term loans

20,033,483

18,835,932
Contract liabilities - current

87,097

—
Income tax payable - current

2,365,627

3,893,047
Operating lease liabilities - current

3,420,600

3,059,329
Due to related parties

6,593

50,531
Other current liabilities

8,881,520

13,997,603
Total current liabilities

45,411,135

53,839,983

Contract liabilities - noncurrent

1,348,875

—
Income tax payable - noncurrent

299,797

539,636
Operating lease liabilities - noncurrent

3,961,006

3,298,089
Net defined benefit liabilities - noncurrent

339,163

389,198
Other liabilities

472,106

541,754
TOTAL LIABILITIES

51,832,082

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 September 30, 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 September 30, 2022 and December 31, 2021, respectively

303

303
Additional paid-in capital

9,296,953

9,296,953
Statutory reserves

11,091,633

11,101,064
Retained earnings

25,162,731

13,690,368
Accumulated other comprehensive (loss) income

(4,327,301)

4,664,848
Total stockholders’ equity attributable to China United’s shareholders

41,224,329

38,753,546
Noncontrolling interests

31,413,265

30,419,315
TOTAL STOCKHOLDERS’ EQUITY

72,637,594

69,172,861
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$
124,469,676

$
127,781,521
September 30,
2017 December 31,
2016
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 11,663,265 $ 20,169,455
Time deposits 21,475,432 5,352,347
Marketable securities 32,867 2,426,870
Structured deposit 1,205,162 -
Accounts receivable, net 7,217,051 15,774,159
Other current assets 2,274,353 1,890,551
Total current assets 43,868,130 45,613,382

Property, plant and equipment, net 927,062 926,905
Intangible assets 747,610 784,219
Goodwill 2,071,491 2,071,491
Long-term investments 1,368,950 1,285,064
Other assets 2,149,619 726,482
TOTAL ASSETS $ 51,132,862 $ 51,407,543

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Tax payable $ 2,356,626 $ 2,249,869
Convertible bonds 200,000 -
Due to related parties 646,862 400,001
Other current liabilities 10,420,828 18,639,909
Total current liabilities 13,624,316 21,289,779

Convertible bonds - noncurrent - 200,000
Long-term loans 265,985 254,907
Long-term liabilities 4,898,335 5,315,327
TOTAL LIABILITIES 18,788,636 27,060,013

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.00001, 10,000,000 authorized, 1,000,000 issued and outstanding 10 10
Common stock, par value $0.00001, 100,000,000 authorized, 29,452,669 issued and outstanding 295 295
Additional paid-in capital 8,190,449 8,157,512
Statutory reserves 5,054,720 3,799,585
Retained earnings 6,663,807 3,286,562
Accumulated other comprehensive gain/(loss) 168,008 (667,976 )
Stockholders’ equity attribute to parent’s shareholders 20,077,289 14,575,988
Noncontrolling interests 12,266,937 9,771,542
TOTAL STOCKHOLDERS’ EQUITY 32,344,226 24,347,530
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 51,132,862 $ 51,407,543

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5
5

Table of Contents

CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND ~~OTHER~~
COMPREHENSIVE INCOME / (LOSS)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016

Revenue $ 16,210,334 $ 14,951,345 $ 50,084,684 $ 43,289,113
Cost of revenue 9,071,624 9,335,735 29,746,059 27,986,021

Gross profit 7,138,710 5,615,610 20,338,625 15,303,092

Operating expenses:
Selling 783,120 630,255 1,481,423 2,094,965
General and administrative 3,708,037 3,359,674 10,714,341 9,336,015
Total operating expenses 4,491,157 3,989,929 12,195,764 11,430,980

Income from operations 2,647,553 1,625,681 8,142,861 3,872,112

Other income (expenses):
Interest income 79,299 31,113 246,559 137,222
Interest expenses (8,293 ) (1,601 ) (24,562 ) (11,165 )
Dividend income 1,391 3,633 331,140 272,522
Other - net 89,065 21,248 136,113 (46,104 )
Total other income (expenses) 161,462 54,393 689,250 352,475

Income before income tax 2,809,015 1,680,074 8,832,111 4,224,587
Income tax expense 831,878 456,828 2,345,147 1,335,331

Net income 1,977,137 1,223,246 6,486,964 2,889,256
Net income attributable to the noncontrolling interests 669,490 465,501 1,854,584 1,301,226
Net income attributable to parent’s shareholders 1,307,647 757,745 4,632,380 1,588,030

Other comprehensive items
Foreign currency translation gain 48,149 260,981 793,090 378,217
Other 175 - 42,894 (1,593 )

Other comprehensive income attributable to parent’s shareholders 48,324 260,981 835,984 376,624
Other comprehensive items attributable to noncontrolling interests 23,405 249,160 640,811 408,827

Comprehensive income attributable to parent’s shareholders $ 1,355,971 $ 1,018,726 $ 5,468,364 $ 1,964,654

Comprehensive income attributable to noncontrolling interests $ 692,895 $ 714,661 $ 2,495,395 $ 1,710,053

Weighted average shares outstanding:
Basic 29,452,669 29,452,669 29,452,669 29,452,669
Diluted 30,521,407 30,478,667 30,521,407 30,462,097

Net income per share attributable to parent’s shareholder:
Basic $ 0.044 $ 0.026 $ 0.157 $ 0.054
Diluted $ 0.043 $ 0.025 $ 0.152 $ 0.052

Three Months Ended September 30,

Nine Months Ended September 30,
(Amount in USD)

2022

2021

2022

2021
Revenue

$
32,648,269

$
31,629,500

$
95,284,500

$
95,133,297
Cost of revenue

20,014,864

17,066,959

60,354,318

59,576,604

Gross profit

12,633,405

14,562,541

34,930,182

35,556,693

Operating expenses (income):

Selling

872,974

397,628

1,990,805

1,073,702
General and administrative

6,351,001

7,189,914

19,094,349

19,470,001
Gain on disposal of nonfinancial assets in Jiangsu Law

(3,262,890)

—

(3,262,890)

—
Total operating expense (income), net

3,961,085

7,587,542

17,822,264

20,543,703

Income from operations

8,672,320

6,974,999

17,107,918

15,012,990

Other income (expenses):

Interest income

232,343

116,277

498,395

330,054
Interest expenses

(107,046)

(47,701)

(229,185)

(136,807)
Foreign currency exchange gain (loss), net

1,240,704

(31,341)

2,682,717

(130,527)
Dividend income

7,521

499

219,890

251,827
Other - net

4,574

253,960

127,855

513,569
Total other income, net

1,378,096

291,694

3,299,672

828,116

Income before income taxes

10,050,416

7,266,693

20,407,590

15,841,106
Income tax expense

(866,461)

(1,908,078)

(3,565,730)

(4,308,482)

Net income

9,183,955

5,358,615

16,841,860

11,532,624
Less: net income attributable to noncontrolling interests

(2,284,110)

(2,338,903)

(5,378,928)

(4,911,643)
Net income attributable to China United’s shareholders

6,899,845

3,019,712

11,462,932

6,620,981

Other comprehensive items, net of tax:

Foreign currency translation gain (loss)

(6,711,878)

208,852

(13,377,127)

716,540
Other

—

(1)

—

363
Total other comprehensive gain (loss)

(6,711,878)

208,851

(13,377,127)

716,903

Comprehensive income

2,472,077

5,567,466

3,464,733

12,249,527
Less: comprehensive income attributable to noncontrolling interests

(118,808)

(2,404,539)

(993,950)

(5,163,181)

Comprehensive income attributable to China United’s shareholders

$
2,353,269

$
3,162,927

$
2,470,783

$
7,086,346

Weighted average shares outstanding:

Basic and diluted

30,286,199

29,421,736

30,286,199

29,421,736

Earnings per share attributable to common stockholders of China United:



Basic and diluted

$
0.220

$
0.099

$
0.366

$
0.218

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6
6

Table of Contents

CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Accumulated

Additional

Other

Common

Preferred

Paid-in

Statutory

Comprehensive

Retained

Noncontrolling

Total
(Amount in USD)

Stock

Amount

Stock

Amount

Capital

Reserves

Income (loss)

Earnings

Total

Interests

Equity
Balance June 30, 2022

30,286,199

$
303

1,000,000

$
10

$
9,296,953

$
11,091,448

$
219,275

$
18,263,071

$
38,871,060

$
31,294,457

$
70,165,517

Appropriation of reserves

—

—

—

—

—

185

—

(185)

—

—

—
Foreign currency translation loss

—

—

—

—

—

—

(4,546,576)

—

(4,546,576)

(2,165,302)

(6,711,878)
Other comprehensive income

—

—

—

—

—

—

—

—

—

—

—
Net income

—

—

—

—

—

—

—

6,899,845

6,899,845

2,284,110

9,183,955

Balance September 30, 2022

30,286,199

$
303

1,000,000

$
10

$
9,296,953

$
11,091,633

$
(4,327,301)

$
25,162,731

$
41,224,329

$
31,413,265

$
72,637,594

Accumulated

Additional

Other

Common

Preferred

Paid-in

Statutory

Comprehensive

Retained

Noncontrolling

Total
(Amount in USD)

Stock

Amount

Stock

Amount

Capital

Reserves

Income (loss)

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

Reversal of reserves

—

—

—

—

—

(9,431)

—

9,431

—

—

—
Foreign currency translation loss

—

—

—

—

—

—

(8,992,149)

—

(8,992,149)

(4,384,978)

(13,377,127)
Other comprehensive income

—

—

—

—

—

—

—

—

—

—

—
Net income

—

—

—

—

—

—

—

11,462,932

11,462,932

5,378,928

16,841,860

Balance September 30, 2022

30,286,199

$
303

1,000,000

$
10

$
9,296,953

$
11,091,633

$
(4,327,301)

$
25,162,731

$
41,224,329

$
31,413,265

$
72,637,594

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Accumulated

Additional

Other

Common

Preferred

Paid-in

Statutory

Comprehensive

Retained

Noncontrolling

Total
(Amount in USD)

Stock

Amount

Stock

Amount

Capital

Reserves

Income (loss)

Earnings

Total

Interests

Equity
Balance June 30, 2021

29,421,736

$
294

1,000,000

$
10

$
8,190,449

$
10,731,421

$
4,211,579

$
11,431,159

$
34,564,912

$
27,354,383

$
61,919,295

Common stock-based compensation granted

—

—

—

—

1,106,513

—

—

—

1,106,513

—

1,106,513
Foreign currency translation gain

—

—

—

—

—

—

143,215

—

143,215

65,637

208,852
Other comprehensive loss

—

—

—

—

—

—

—

—

—

(1)

(1)
Net income

—

—

—

—

—

—

—

3,019,712

3,019,712

2,338,903

5,358,615

Balance September 30, 2021

29,421,736

$
294

1,000,000

$
10

$
9,296,962

$
10,731,421

$
4,354,794

$
14,450,871

$
38,834,352

$
29,758,922

$
68,593,274

Accumulated

Additional

Other

Common

Preferred

Paid-in

Statutory

Comprehensive

Retained

Noncontrolling

Total
(Amount in USD)

Stock

Amount

Stock

Amount

Capital

Reserves

Income (loss)

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

Appropriation of reserves

—

—

—

—

—

1,267,518

—

(1,267,518)

—

—

—
Common stock-based compensation granted

—

—

—

—

1,106,513

—

—

—

1,106,513

—

1,106,513
Foreign currency translation gain

—

—

—

—

—

—

465,125

—

465,125

251,415

716,540
Other comprehensive income

—

—

—

—

—

—

240

—

240

123

363
Net income

—

—

—

—

—

—

—

6,620,981

6,620,981

4,911,643

11,532,624

Balance September 30, 2021

29,421,736

$
294

1,000,000

$
10

$
9,296,962

$
10,731,421

$
4,354,794

$
14,450,871

$
38,834,352

$
29,758,922

$
68,593,274

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amount in USD)

Nine Months Ended September 30,


2022

2021
Cash flows from operating activities:

Net income

$
16,841,860

$
11,532,624
Adjustments to reconcile net income to net cash provided by operating activities

Noncash stock-based compensation

—

1,106,513
Depreciation and amortization

847,915

880,555
Amortization of right-of-use assets

2,772,819

2,724,822
Amortization of bond premium

—

58
Gain on sales of financial assets

—

(198,637)
Loss on valuation of financial assets

310,244

224,609
Gain on disposal of nonfinancial assets in Jiangsu Law

(3,262,890)

—
(Gain) loss on disposals of equipment

(3,637)

72
Deferred income tax

(369,595)

103,153
Unrealized foreign currency exchange gains

(762,517)

—
Net changes in operating assets and liabilities:

Accounts receivable

9,595,151

8,334,483
Contract assets

(5,991,389)

(2,844,090)
Other current assets

95,716

214,284
Other assets

202,577

(666,789)
Commission payable to sales professionals

(1,727,941)

(3,259,115)
Contract liabilities

1,558,995

—
Income tax payable

(1,455,124)

(118,475)
Other current liabilities

(3,323,080)

(5,368,199)
Other liabilities

—

(558,400)
Lease liabilities

(3,095,389)

(3,138,759)
Net cash provided by operating activities

12,233,715

8,968,709

Cash flows from investing activities:

Purchases of time deposits

(79,397,492)

(61,420,198)
Proceeds from maturities of time deposits

63,299,359

56,760,207
Acquisition of equity investments under cost method using the measurement alternative

—

(46,372)
Purchases of marketable securities

(1,074,416)

(1,158,903)
Proceeds from sales of marketable securities

—

2,246,589
Proceeds from sales of long-term investments - REITs

—

142,007
Proceeds from disposal of nonfinancial assets in Jiangsu Law

3,262,890

—
Purchase of equipment

(503,313)

(561,099)
Purchase of intangible assets

(112,616)

(24,200)
Proceeds from disposal of equipment

25,806

143
Net cash used in investing activities

(14,499,782)

(4,061,826)

Cash flows from financing activities:




Proceeds from short-term loans

40,311,099

10,029,560
Repayment of short-term loans

(37,827,556)

(6,100,000)
Repayment of related party borrowings

(37,667)

(43,482)
Net cash provided by financing activities

2,445,876

3,886,078

Foreign currency translation

(4,026,379)

337,555
Net (decrease) increase in cash, cash equivalents and restricted cash

(3,846,570)

9,130,516

Cash, cash equivalents and restricted cash, beginning balance

18,322,632

9,129,828
Cash, cash equivalents and restricted cash, ending balance

$
14,476,062

$
18,260,344

SUPPLEMENTARY DISCLOSURE:

Interest paid

$
218,339

$
129,927
Income tax paid

$
4,839,357

$
3,588,250
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Lease liabilities arising from new right-of-use assets

$
3,779,434

$
2,483,439
Nine Months Ended September 30,
2017 2016

Cash flows from operating activities:
Net income $ 6,486,964 $ 2,889,256
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 410,593 455,383
Amortization of bond premium 193 -
Gain on settlement of debt - (83,425 )
Gain on valuation of financial assets 1,372,468 (10,868 )
Loss on disposals of property, plant and equipment 75,121 25,568
Deferred income tax (20,030 ) (65,235 )
Changes in operating assets and liabilities:
Accounts receivable 9,541,161 4,085,141
Other current assets (268,864 ) 450,406
Other assets (1,331,414 ) 66,823
Tax payable (35,858 ) (112,098 )
Other current liabilities (9,339,583 ) (3,943,730 )
Long-term liabilities (753,022 ) 623,579
Net cash provided by operating activities 6,137,729 4,380,800

Cash flows from investing activities:
Repayments to pervious shareholders - (150,959 )
Purchases of structured deposit (1,292,441 ) -
Purchases of time deposits (24,572,262 ) (7,095,147 )
Proceeds from maturities of time deposits 8,888,669 8,025,394
Purchase of marketable securities (6,231,364 ) -
Proceeds from disposals of marketable securities 7,488,976 -
Purchase of property, plant and equipment (257,944 ) (371,913 )
Purchase of intangible assets (88,745 ) (437,294 )
Net cash used in investing activities (16,065,111 ) (29,919 )

Cash flows from financing activities:
Proceeds from related party borrowings 261,589 68,431
Repayment to related parties (281 ) (623,507 )
Payment to noncontrolling interest as reduction of cash capital - (77,043 )
Proceeds from third party borrowings - 469,028
Repayment to loans - (224,447 )
Net cash provided by (used in) financing activities 261,308 (387,538 )

Foreign currency translation 1,159,884 596,891
Net increase (decrease) in cash and cash equivalents (8,506,190 ) 4,560,234

Cash and cash equivalents, beginning balance 20,169,455 13,083,357
Cash and cash equivalents, ending balance $ 11,663,265 $ 17,643,591

SUPPLEMENTARY DISCLOSURE:

Interest paid $ 29,806 $ 2,324
Income tax paid $ 2,298,197 $ 1,549,580

SUPPLEMENTAL DISCLOSURES OF CASH FLOW FOR NON-CASH TRANSACTION:

Debt forgiveness - related parties $ 32,937 $ -

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7
9

Table of Contents

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,” “CUIS”~~United” or “CUII”), the subsidiaries and variable-interest entity and its subsidiaries (collectively referred to herein, as the “Company”) ~~is a Delaware corporation organized~~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 ~~June 4, 2010~~meeting the particular insurance needs of individuals. The insurance products are underwritten by ~~Yi Hsiao Mao, a Taiwanese citizen, as a listing vehicle for both ZLI Holdings Limited (“ZLI Holdings”)~~some of the leading insurance companies in Taiwan and ~~Action Holdings Financial Limited (“AHFL”), which is~~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 ~~quoted~~trades over the counter under the ticker symbol “CUII” on the ~~United States Over the Counter Bulletin Board.~~
OTCQB.
The corporate structure as of September 30, ~~2017 was~~2022 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 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 and nine months ended September 30, 2022, respectively.

Table of Contents

On February 25, 2022, Law Anhou Insurance Agency Co., Ltd. (“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 Anhou sold and transferred 100% of its equity ownership in Jiangsu Law, a wholly owned subsidiary of Anhou, for a total consideration of $3,262,890 (or RMB 21 million). On July 28, 2022, the Hsuchow Regulatory Bureau of the China Banking and Insurance Regulatory Commission (the “CBIRC Jiangsu Regulatory Bureau”) approved the change of shareholders of Jiangsu Law from Anhou to the aforementioned third-party buyers and accordingly, Anhou has transferred out the control over Jiangsu Law. Please refer to Note 3 for more information.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The unaudited ~~accompanying~~ condensed consolidated financial statements include the accounts of China United, the subsidiaries and variable interest entity and its subsidiaries as shown in the ~~organization~~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 ~~presentation~~statement of the financial statements have been included. Operating results for the three and nine months ended September 30, ~~2017~~2022 are not necessarily indicative of the results that may be expected for the year ~~ended~~ending December 31, ~~2017.~~
8
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, ~~2016,~~2021, which were included in the Company’s ~~2016~~2021 Annual Report on Form ~~10-K.~~10-K (“2021 Form 10-K”). The accompanying ~~condensed~~ consolidated balance sheet as of December 31, ~~2016,~~2021, has been derived from the Company’s audited consolidated financial statements as of that date.
Use of Estimates
~~Reclassifications~~
~~Certain reclassifications have been made~~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 ~~prior periods’~~amounts reported in the consolidated financial statements and ~~notes to conform~~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 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.

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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 ~~period’s presentation. Such reclassifications~~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 determines 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 nine months ended September 30, 2022 and 2021, no event taken place that would change the Company’s primary beneficiary status.

Disposal of Subsidiary

A disposal of a subsidiary is categorized as a discontinued operation as provided by ASC Topic 205-20, Presentation of Financial Statements - Discontinued Operations, if the disposal group is a component of an entity or group of components that meets the held for sale criteria, is disposed of by sale, or is disposed of other than by sale, and represents a strategic shift that has or will have a major effect on an entity’s operations and financial results.

The Company deconsolidates the accounts of a subsidiary as provided by ASC Topic 810, Consolidation, once the Company ceases to have a controlling interest in a subsidiary. The aggregate of the fair value of consideration received, the fair value of any retained noncontrolling investment and the carrying amount of the former subsidiary’s assets and liabilities are recognized as a gain or loss on disposition.

If the transaction involves the sale of an ownership interest in a subsidiary and if substantially all of the fair value of the assets in that subsidiary promised to the counterparty is concentrated in nonfinancial assets, the financial assets in that subsidiary are in substance nonfinancial assets (ISNFA) and are accounted for under ASC 610-20, where the gain or loss recognized upon the derecognition of a nonfinancial asset or an ISNFA is the difference between the amount of consideration measured and allocated to that distinct asset and the carrying amount of the distinct asset.

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 ~~income~~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 ~~previously reported. Please see Note 23, Reclassifications.~~of September 30, 2022 and December 31, 2021.

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~~Foreign Currency Translations~~

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 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. The estimated revenue for the three and nine months ended September 30, 2022 were approximately $2.6 million and $8.4 million, and for the three and nine months ended September 30, 2021, were approximately $1.2 million and $6.8 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 was 5.7% and 6.7% of the Company’s total revenue for the three and nine months ended September 30, 2022, and was 9.0% and 7.4% of the Company’s total revenue for the three and nine months ended September 30, 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 ~~Company’s~~China United’s reporting and functional currency. The functional currencies of the ~~Company’s~~China United’s subsidiaries are ~~NTD, RMB~~New Taiwan dollar (“NTD”), China yuan (“RMB”) and ~~HKD. Gains~~Hong Kong dollar (“HKD”). Each subsidiary maintains its financial records in its own functional currency. Transactions denominated in foreign currencies are measured 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 ~~reflected~~included 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 rate~~

Table of ~~exchange prevailing at the balance sheet date. Any differences are taken as a gain or loss on foreign currency translation in the statements of operations.~~ Contents

~~In accordance with ASC 830, Foreign Currency Matters, the~~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. Cash flows were also translated at average translation rates for the period and, therefore, amounts reported on the statement of cash flows would not necessarily agree with changes in the corresponding balances on the unaudited condensed consolidated balance sheet. The exchange rates used for ~~interim~~unaudited condensed consolidated financial statements are as follows:

Average Exchange Rate for the Nine Months Ended September 30,
2017 2016
New Taiwan dollar (NTD) NTD 30.505166 NTD 32.736000

Average Rate for the nine months ended

September 30,


2022

2021

(unaudited)

(unaudited)
Taiwan dollar (NTD)

NTD
29.26528

NTD
27.95566
China yuan (RMB) RMB 6.805734 RMB 6.579240

RMB
6.60012

RMB
6.46939
Hong Kong dollar (HKD) HKD 7.787013 HKD 7.763280

HKD
7.83293

HKD
7.76655
United States dollar ($) $ 1.000000 $ 1.000000

$
1.00000

$
1.00000

Exchange Rate at
September 30, 2017 December 31, 2016
New Taiwan dollar (NTD) NTD 30.324000 NTD 32.283100

Exchange Rate at


September 30, 2022


(unaudited)

December 31, 2021
Taiwan dollar (NTD)

NTD
31.77251

NTD
27.68785
China yuan (RMB) RMB 6.654500 RMB 6.943700

RMB
7.10988

RMB
6.35877
Hong Kong dollar (HKD) HKD 7.811000 HKD 7.754340

HKD
7.84968

HKD
7.79713
United States dollar ($) $ 1.000000 $ 1.000000

$
1.00000

$
1.00000

Earnings Per Share
Basic earnings 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 September 30, 2022 and 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 and nine months ended September 30, 2022 and 2021, respectively, under the two-class method.


Three Months Ended September 30,

2022

2021
Numerator:

Common stock

Preferred stock

Common stock

Preferred stock
Allocation of net income attributable to the Company

$
6,679,305

$
220,540

$
2,920,450

$
99,262

Denominator:








Weighted average shares of the Company’s common/preferred stock outstanding - basic & diluted

30,286,199

1,000,000

29,421,736

1,000,000
Basic and diluted earnings per share

$
0.220

$
0.220

$
0.099

$
0.099

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Nine Months Ended September 30,

2022

2021
Numerator:

Common stock

Preferred stock

Common stock

Preferred stock
Allocation of net income attributable to the Company

$
11,096,543

$
366,389

$
6,403,341

$
217,640

Denominator:








Weighted average shares of the Company’s common/preferred stock outstanding - basic & diluted

30,286,199

1,000,000

29,421,736

1,000,000
Basic and diluted earnings per share

$
0.366

$
0.366

$
0.218

$
0.218

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 Topic 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 ~~Values~~Value of Financial Instruments
~~Accounting Standards Codification (ASC) 820,~~ Fair ~~Value Measurement, defines~~value accounting establishes a framework for measuring fair value and expands disclosure about fair value measurements. Fair value, which is defined as the price ~~at which~~that would be received to sell an asset ~~could be exchanged~~ or paid to transfer a liability ~~transferred~~ in an orderly transaction between ~~knowledgeable, willing parties~~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 ~~the principal or most advantageous market~~active markets, and inputs that are observable for the ~~asset~~assets or ~~liability. Where available,~~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 ~~observable~~significant unobservable inputs are classified as Level 3.
The following table summarize financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021:

September 30, 2022

Fair Value

Carrying


Level 1

Level 2

Level 3

Value
Assets

Marketable securities :

Stock and mutual funds

$
753,345

$
—

$
—

$
753,345
Long-term investments:

REITs

1,049,832

—

—

1,049,832
Total assets measured at fair value

$
1,803,177

$
—

$
—

$
1,803,177

December 31, 2021

Fair Value

Carrying


Level 1

Level 2

Level 3

Value
Assets

Long-term investments:

REITs

$
1,261,482

$
—

$
—

$
1,261,482
Total assets measured at fair value

$
1,261,482

$
—

$
—

$
1,261,482

Table of Contents

The carrying amounts of current financial assets and liabilities in the consolidated balance sheets for cash equivalents, time deposits, and restricted cash equivalents approximate fair value due to the short-term duration of those 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 or derived from such prices. Where observable prices or inputs are not available, valuation models are applied which may involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity. See Note 24, Fair Value Measurement.in active markets.
9
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 NTD 3,000,000 insured by Central Deposit Insurance Corporation (“CDIC”). In China, a depositor has up to RMB 500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”). In Hong Kong, a depositor has up to HKD 500,000 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, contract assets and accounts receivable. As of September 30, ~~2017,~~2022 and December 31, 2021, approximately ~~$1,467,000~~$2,257,000 and $2,712,000 of the Company’s cash and cash equivalents, time deposits, and registered capital ~~deposit and restricted cash~~deposits held by financial institutions, was insured, and the remaining balance of approximately ~~$32,808,000~~$86,840,000 and $83,446,000, was not insured.
Three major insurance companies accounted for more than 10% of the Company’s total revenue for the three months ended of September 30, 2017 and 2016. Revenue from these insurance companies were set out as below:
Three months ended September 30,
2017 2016
Amount % of Total
Revenue Amount % of Total
Revenue
Farglory Life Insurance Co., Ltd. $ 4,275,654 26 % $ 5,291,779 35 %
Taiwan Life Insurance Co., Ltd. (*) 1,911,978 12 % 1,493,069 10 %
TransGlobe Life Insurance Inc. 1,882,461 12 % (** ) (** )
~~(*)~~ ~~Taiwan Life Insurance Co., Ltd. was formerly known as CTBC Life Insurance Co., Ltd.~~
~~(**)~~ ~~Revenue for the three months ended September 30, 2016 had not exceeded 10% or more of the Company’s consolidated revenue of the Company.~~
~~For the nine months ended of September 30, 2017 and 2016, the Company’s revenue received from the following companies were set out as below:~~
Nine months ended September 30,
2017 2016
Amount % of Total
Revenue Amount % of Total
Revenue
Farglory Life Insurance Co., Ltd. $ 13,019,656 26 % $ 13,969,672 32 %
Taiwan Life Insurance Co., Ltd. (*) 5,881,228 12 % 4,813,813 11 %
TransGlobe Life Insurance Inc. 5,127,561 10 % (** ) (** )
Fubon Life Insurance Co., Ltd. (*** ) (*** ) 4,342,377 10 %
~~(*)~~ ~~Taiwan Life Insurance Co., Ltd. was formerly known as CTBC Life Insurance Co., Ltd.~~
~~(**)~~ ~~Revenue for the nine months ended September 30, 2016 had not exceeded 10% or more of the Company’s consolidated revenue of the Company.~~
~~(***)~~ ~~Revenue for the nine months ended September 30, 2017 had not exceeded 10% or more of the Company’s consolidated revenue of the Company.~~
~~As of September 30, 2017 and December 31, 2016, the Company’s accounts receivable from the following companies were set out as below:~~
September 30, 2017 December 31, 2016
Amount % of Total
Accounts
Receivable Amount % of Total
Accounts
Receivable
Farglory Life Insurance Co., Ltd. $ 2,450,793 34 % $ 6,503,843 41 %
Taiwan Life Insurance Co., Ltd (*) (** ) (** ) 1,973,410 13 %
TransGlobe Life Insurance Inc. 801,832 11 % (** ) (** )
Fubon Life Insurance Co., Ltd (** ) (** ) 1,660,685 11 %
~~(*)~~ ~~Taiwan Life Insurance Co., Ltd. was formerly known as CTBC Life Insurance Co., Ltd.~~
~~(**)~~ ~~Accounts receivable as of September 30, 2017 or December 31, 2016 had not exceeded 10% or more of the consolidated accounts receivable.~~
10
With respect to accounts receivable, the Company generally does not ~~have any~~require collateral and does not have ~~any~~an allowance for doubtful accounts.
For the three months ended September 30, 2022 and 2021, the Company’s revenues from sale of insurance policies underwritten by these companies were:

Three Months Ended September 30,

2022

2021

(unaudited)

(unaudited)

% of Total

% of Total


Amount

Revenue

Amount

Revenue

TransGlobe Life Insurance Inc.

$
10,553,991

32
%
$
8,043,483

25
%
Taiwan Life Insurance Co., Ltd.

5,164,375

16
%

6,733,094

21
%
Farglory Life Insurance Co., Ltd.

3,043,157

9
%

3,797,277

12
%

For the nine months ended September 30, 2022 and 2021, the Company’s revenues from sale of insurance policies underwritten by these companies were:

Nine Months Ended September 30,

2022

2021

(unaudited)

(unaudited)

% of Total

% of Total


Amount

Revenue

Amount

Revenue

TransGlobe Life Insurance Inc.

$
27,702,126

29
%
$
23,829,160

25
%
Taiwan Life Insurance Co., Ltd.

13,244,436

14
%

19,888,398

21
%
Farglory Life Insurance Co., Ltd.

10,884,853

11
%

12,279,101

13
%

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As of September 30, 2022 and December 31, 2021, the Company’s accounts receivable and contract assets from these companies were:

September 30, 2022

(unaudited)

December 31, 2021

% of Total

% of Total

Accounts

Accounts

Receivable

Receivable


Amount

and contract assets

Amount

and contract assets

TransGlobe Life Insurance Inc.

$
7,524,628

38
%
$
8,569,590

32
%
Taiwan Life Insurance Co., Ltd.

2,706,867

14
%

4,483,343

17
%
Farglory Life Insurance Co., Ltd.

1,593,213

8
%

2,729,673

10
%

The Company’s operations are in Taiwan, the PRC, ~~Taiwan~~ and Hong Kong. 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 ~~Hong Kong, the foreign currency exchange and~~by the state of each ~~regions.~~economy. The Company’s results of operations may be adversely affected by changes in the political and social conditions in the PRC, ~~Taiwan~~Hong Kong and ~~Hong Kong,~~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.
Income Taxes
~~Recent Accounting Pronouncements~~
~~In January 2016,~~The Company records income tax expense using the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-01, “Financial Instruments-Overall (Subtopic 825-10): Recognition~~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 ~~Measurement of Financial Assets~~liabilities and ~~Financial Liabilities,” which amends the guidance in U.S. GAAP~~their financial reporting amounts at each year-end based on ~~the classification~~enacted tax laws and ~~measurement of financial instruments. Changes~~statutory tax rates applicable to the ~~current guidance primarily~~periods in which the differences are expected to affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to thetaxable income. Deferred tax assets are reduced by a valuation allowance ~~assessment when recognizing~~if, based on available evidence, it is more likely than not that the deferred tax assets ~~resulting from unrealized losses on available-for-sale debt securities.~~will not be realized.
When tax returns are filed, it is likely that 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 ~~new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means~~benefit of a ~~cumulative-effect adjustment~~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 ~~balance sheet at~~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 ~~beginning~~statements of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk inoperations and other comprehensive ~~income. The Company is currently evaluating the impact of adopting this guidance.~~income (loss).
New Accounting Pronouncements and Other Guidance
New accounting pronouncements not yet adopted
Credit Losses
In ~~February~~June 2016, the FASB issued ASU ~~2016-02, Leases (Topic 842). The~~No. 2016-13, (FASB ASC Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance inand 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. ~~2016-02 supersedes~~2019-10 to postpone the ~~lease recognition requirements in ASC Topic 840, Leases (Statement~~effective date of Financial Accounting Standards No. 13). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. ASU No. ~~2016-02 is effective~~2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, ~~2018, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements.~~
In March 2016, the FASB issued ASU 2016-07, “Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting.” ASU 2016-07 eliminates the requirement for an investment that qualifies for the use of the equity method of accounting as a result of an increase in the level of ownership or degree of influence to adjust the investment, results of operations and retained earnings retrospectively. ASU 2016-07 will be effective prospectively for the Company for increases in the level of ownership interest or degree of influence that result in the adoption of the equity method that occur during or after the quarter ending December 31, 2017, with early adoption permitted. The impact of this guidance for the Company is dependent on any future increases in the level of ownership interest or degree of influence that result in the adoption of the equity method.
In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net).” ‘The amendments in this ASU are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing illustrative examples and adding additional illustrative examples to assist in the application of the guidance. The effective date and transition of these amendments is the same as the effective date and transition of ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” Public entities should apply the amendments in ASU No. 2014-09 for annual reporting periods beginning after December 15, 2017,2022, including ~~interim reporting periods therein. The Company is currently in the process of evaluating the impact of the adoption of this accounting standards update on its consolidated financial statements.~~
In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230) to Statement of Cash Flows.” ASU No. 2016-15 clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows to reduce diversity in practice with respect to (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) separately identifiable cash flows and application of the predominance principle. ASU No. 2016-15 is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2017, with early adoption permitted. The adoption of this update is not expected to have a significant impact on the Company’s consolidated financial statements.
11
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU No. 2016-18”), which amends the current accounting guidance.” The amendments in this update require the amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU No. 2016-18 is effective for annual periods beginning after December 15, 2017, and interim periods within those ~~annual periods.~~fiscal years. The Company believes the adoption of ASU No. ~~2016-18 is~~2016-13 will not ~~expected to~~ have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04 “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which eliminates Step 2 from the goodwill impairment test. Instead, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. ASU No. 2017-04 is effective for annual or any interim goodwill tests in fiscal years beginning after December 15, 2019. The adoption is not expected to have a material impact on the Company’s consolidated financial statements of the Company.
In July 2017, the FASB issued ASU No. 2017-11, “Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815),” which addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815) Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 refines and expands hedge accounting for both financial and commodity risks. This ASU creates more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes. In addition, this ASU makes certain targeted improvements to simplify the application of hedge accounting guidance. The Company is currently evaluating the impact of adopting this guidance on its consolidated financial statements.
In September 2017, the FASB issued ASU 2017-13, “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842),” which provides additional implementation guidance on the previously issued ASU 2016-02 Leases (Topic 842). The revenue standard is effective for annual periods beginning after December 15, 2017. ASU 2016-02 requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. Based on a preliminary assessment, the Company expects the adoption of this guidance to have a material impact on its assets and liabilities due to the recognition of right-of-use assets and lease liabilities on its consolidated balance sheet at the beginning of the earliest period presented. The Company is continuing its assessment, which may identify additional impacts this guidance will have on its consolidated financial statements and disclosures.
12
~~There were other updates recently issued. The management~~Management does not believe that other than as disclosed above, ~~the~~accounting pronouncements recently issued but not yet adopted ~~accounting pronouncements~~ will have a material impact on its financial position, results of operations or cash flows.

~~Going Concern Assessment~~17

~~The Company has assessed its ability to continue as a going concern for a period~~Table of one year from the date of the issuance of these financial statements. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The Company determined that there are no conditions or events that raise substantial doubt about its ability to continue as a going concern as of the date of the issuance of these financial statements.Contents

NOTE 3 – DISPOSAL OF NONFINANCIAL ASSETS IN SUBSIDIARY, JIANGSU LAW
On February 25, 2022, Law Anhou Insurance Agency Co., Ltd. (“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 Anhou shall sell and transfer 100% of its equity ownership in Jiangsu Law, a wholly owned subsidiary of Anhou, for a total consideration of $3,262,890 (or RMB 21 million) 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. Jiangsu Law holds an insurance agency license. The Company evaluated that such disposal does not meet the criteria for discontinued operations because it does not represent a strategic shift that has a major effect on the Company’s operations and financial results.
The Share Purchase Agreement provided that the accounts receivables and unfulfilled contracts of Jiangsu Law are transferred to Anhou and all debts and liabilities of Jiangsu Law are assumed by Anhou. In addition, the Share Purchase Agreement also provides that Anhou and Jiangsu Law are responsible for the arrangement of employees of Jiangsu Law. As a result, Jiangsu Law shall retain its insurance agency license as the only asset transferred to the third-party buyers. Further, for the maintenance of insurance agency license, there is a new requirement effective February 2022 by the local authorities to make additional capital contribution to Jiangsu Law, which will be provided by the third-party buyers according to the Share Purchase Agreement. The cost to sell this insurance agency license was immaterial.
On July 28, 2022, the Hsuchow Regulatory Bureau of the China Banking and Insurance Regulatory Commission (the “CBIRC Hsuchow Regulatory Bureau”) approved the change of shareholders of Jiangsu Law from Anhou to the aforementioned third-party buyers and accordingly, Anhou lost control over Jiangsu Law that holds the insurance agency license under ASC 810. In the meantime, the Company recognized a gain of $3,262,890 from the disposal of the insurance agency license under ASC 610-20, which was included in income from operations during the third fiscal quarter of 2022.

NOTE 4 – CASH, ~~AND~~ CASH EQUIVALENTS AND ~~TIME DEPOSITS~~
RESTRICTED CASH
Cash, ~~and~~ cash equivalents and ~~time deposits~~restricted cash consisted of the following as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:

September 30,
2017 December 31,
2016
Cash and cash equivalents:
Cash in bank and on hand $ 11,663,265 $ 17,713,744
Bank time deposits (*) - 2,455,711
11,663,265 20,169,455
Bank time deposits (**) 21,475,432 5,352,347
Total cash and cash equivalents and time deposits $ 33,138,697 $ 25,521,802

September 30, 2022




(unaudited)

December 31, 2021
Cash and cash equivalents:

Cash on hand and in banks

$
14,461,123

$
18,234,350
Restricted cash – noncurrent

14,939

88,282
Total cash, cash equivalents and restricted cash shown in the statements of cash flows

$
14,476,062

$
18,322,632

~~(*)~~ ~~With original maturities less than three months~~
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 such Agencies.
~~(**)~~ ~~With original maturities over three months~~

NOTE 5 – TIME DEPOSITS

September 30, 2022


(unaudited)

December 31, 2021

Total time deposits

$
71,563,061

$
71,161,391
Less: Time deposits – with original maturities less than three months

—

(6,862,215)
Time deposits – original maturities over three months but less than one year

$
71,563,061

$
64,299,176

Time Deposits Pledged as Collateral
The Company ~~considers cash on hand, cash in bank,~~had a total of $23,308,984 (NTD 740.6 million) and ~~bank~~$23,811,616 (NTD 659.3 million) restricted time deposits, ~~with maturities of three months or less to be cash and cash equivalents.~~
~~NOTE 4 – MARKETABLE SECURITIES~~
~~Marketable securities represent investment in equity securities of listed stocks and funds, which are classified as follows:~~
September 30, 2017
Cost Gross
Unrealized
Losses Total
Fair Value
Trading:
Funds $ 33,117 $ (250 ) $ 32,867
$ 33,117 $ (250 ) $ 32,867
December 31, 2016
Fair Value at Gross
December 31, Unrealized Total
2015 Gains Fair Value
Trading:
Stocks $ 28,863 $ 9,900 $ 38,763
Funds 2,340,219 47,888 2,388,107
$ 2,369,082 $ 57,788 $ 2,426,870
~~NOTE 5 – STRUCTURED DEPOSIT~~
On July 7, 2017, the Company entered into an agreement with Cathy United Bank to purchase a 185-days structured deposit in effective on July 7, 2017 and mature on January 8, 2018. Principal of the structured deposit is RMB 8,000,000 and the structured deposit with an embedded foreign exchange option linked to US Dollar to China Yuan offshore exchange rate (“USDCNH”). Strike price of the structured deposit is set as 7.3 USDCNH and the fixing date is on January 4, 2018. Yield rate will be at 4.1% per annum when the USDCNH is above or equal strike price on the fixing date, or at 3.9% per annum when blow.
September 30, 2017
Cost Gross
Unrealized
Losses Total
Fair Value
Structured deposit $ 1,278,551 $ (73,389 ) $ 1,205,162
$ 1,278,551 $ (73,389 ) $ 1,205,162
13
~~NOTE 6 – OTHER CURRENT ASSETS~~
~~Other current assets consisted of the following~~respectively, as of September 30, ~~2017~~2022 and December 31, ~~2016:~~
September 30,
2017 December 31,
2016
Loan receivable $ 1,477,060 $ 1,486,846
Prepaid expenses 228,193 64,678
Prepaid rent and rent deposits 186,745 199,022
Other receivable 176,386 50,683
Refundable business tax 117,848 17,441
Deferred tax assets-current 58,041 59,233
Interest receivable 30,080 12,648
Total other current assets $ 2,274,353 $ 1,890,551
On October 24, 2016, the Company entered into a loan agreement with third party, Rich Fountain Limited (“RFL”), which was incorporated under the laws of Samoa. The Company provided a short-term loan amount of NTD 48,000,000 ($1,486,846) to RFL. The short-term loan bears an interest rate of 4.5% per annum and the principal and interest are due on April 23, 2017. On April 21, 2017, the Company and RFL entered a supplemental agreement to extend the loan to October 23, 2017.2021. As of September 30, ~~2017,~~2022 and December 31, 2021, time deposits of $31,474 (NTD 1 million) and $36,117 (NTD 1 million) were pledged as collateral for the ~~outstanding balance of the loan receivable is NTD44,790,360 ($1,477,060). On November 1 and November 2, 2017,~~Company’s credit card, respectively. In addition, the Company ~~received the interest payment~~had time deposits of ~~this loan amount of NTD 300,000 (approximately $9,800)~~$23,277,510 and $23,832, respectively. The management has evaluated RFL's business operation and ability to repay the loan in the future and determine that RFL will be able to repay the loan per newly negotiated terms and assessed that there is no impairment loss on the loan. Therefore, the Company is willing to extend the payment period of RFL loan.
~~NOTE 7 – PROPERTY, PLANT AND EQUIPMENT, NET~~
~~Property, plant and equipment consisted of the following~~$23,775,499 pledged as collateral for short-term loans, respectively, as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021. See Note 7.

September 30,
2017 December 31,
2016
Office equipment $ 1,234,505 $ 1,070,061
Office furniture 101,123 168,658
Leasehold improvements 733,225 581,964
Transportation equipment 139,226 132,344
Other equipment 89,868 87,302
Total 2,297,947 2,040,329
Less: accumulated depreciation (1,370,885 ) (1,113,424 )
Total property, plant and equipment, net $ 927,062 $ 926,905
Depreciation expense was $78,972 and $81,267 for the three months ended September 30, 2017 and 2016, respectively. Depreciation expense was $235,093 and $231,414 for the nine months ended September 30, 2017 and 2016, respectively.
~~NOTE 8 – INTANGIBLE ASSETS~~
~~As of September 30, 2017 and December 31, 2016, the Company’s intangible assets consisted of the following:~~
September 30,
2017 December 31,
2016
Software $ 1,686,544 $ 1,500,339
Less: accumulated amortization (938,934 ) (716,120 )
Total intangible assets $ 747,610 $ 784,219
~~Estimated future intangible amortization as of September 30, 2017 is as follows:~~
Periods ending September 30, Amount
2018 $ 238,905
2019 214,913
2020 184,439
2021 90,116
2022 18,140
Thereafter 1,097
Total $ 747,610
14
18

Table of Contents

Amortization expense was $59,533 and $71,328 for the three months ended September 30, 2017 and 2016, respectively. Amortization expense was $175,500 and $223,969 for the nine months ended September 30, 2017 and 2016, respectively.

NOTE 96 – LONG-TERM INVESTMENTS
As of September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, the Company’s long-term investments consisted of the following:

September 30, 2022


(unaudited)

December 31, 2021
Equity investments under cost method using the measurement alternative

$
1,251,886

$
1,435,330
REITs

1,049,832

1,261,482
Total long-term investments

$
2,301,718

$
2,696,812

September 30,
2017 December 31,
2016
Equity investment $ 1,267,475 $ 1,190,558
Government bonds 101,475 94,506
Total $ 1,368,950 $ 1,285,064
Equity Investments under cost method using the measurement alternative
~~As of September 30, 2017 and December 31, 2016,~~


September 30, 2022


(unaudited)

December 31, 2021

Investment

Investment

Investee

Ownership

Amount

Ownership

Amount
Genius Insurance Broker Co., Ltd (“GIB”)

11.73
%
$
1,209,691

11.73
%
$
1,388,151
Hainan Haoguan Yucheng Technology Service LLP (“HAINAN”)

9.99
%

42,195

9.99
%

47,179

On February 13, 2015, the Company ~~had~~and AHFL, a wholly owned subsidiary of the ~~following equity investment:~~
Type Investee Ownership
September 30,
2017
Amount

December 31,
2016
Amount

Cost Method Genius Insurance Broker Co., Ltd. 15.64 % $ 1,267,475 $ 1,190,558
~~According~~Company, entered into an acquisition agreement with Mr. Chwan Hau Li, the selling shareholder of GHFL. Subsequent to ~~Taiwan Regulations Governing Deposit~~the acquisition, GHFL became a wholly-owned subsidiary of ~~Bond~~the Company which in turn holds approximately 15.64% issued and ~~Acquirement~~outstanding shares of ~~Insurance by Insurance Agents, Insurance Brokers and Insurance Surveyors (“RGDBAI”) Article 3 requirement, Law~~Genius Insurance Broker Co., Ltd. (“~~Law~~Genius Broker”). Accordingly, the acquisition was accounted for as an asset acquisition of Genius Broker, which is ~~required~~an equity investment under cost method using the measurement alternative acquired by the Company. Further, the equity interest of GIB owned by GIC reduced from 15.64% to ~~maintain a minimum~~11.73% due to capital increase in 2020 where GIC didn’t subscribe the new shares during the capital increase.
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 ~~NTD3,000,000 ($98,932~~sub-hierarchy distribution channel, and ~~$92,928~~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 September 30, ~~2017~~2022 and December 31, ~~2016, respectively) restricted balance~~2021 were $1,049,832 and $1,261,482, respectively.
Unrealized losses included in ~~a separate account. RGDBAI Article 4 is required~~earnings for assets held at the end of the reporting periods were $25,662 and $11,135 for the three months ended September 30, 2022 and 2021, and were $53,713 and $93,259 for the nine months ended September 30, 2022 and 2021, respectively.
For the three and nine months ended September 30, 2022 and 2021, no other-than temporary impairment were recorded related to ~~deposited a minimum amount in~~ the form of cash or book entry to government bond issued by the central government. Therefore, Law Broker used such amounts to purchase government bonds and has the right to trade such bonds with other debt or equity instruments.long-term investments.

September 30, 2017
Fair Value at Gross Fair Value at
December 31, Unrealized September 30,
2016 Gains 2017
Available-for-sale:
  Government bonds 94,506 6,969 101,475
$ 94,506 $ 6,969 $ 101,475
December 31, 2016
Fair Value at Gross Fair Value at
December 31, Unrealized December 31,
2015 Gains 2016
Available-for-sale:
  Government bonds 94,381 125 94,506
$ 94,381 $ 125 $ 94,506
15
19

Table of Contents

NOTE 107 – ~~OTHER ASSETS~~
SHORT-TERM LOANS
The Company’s ~~other assets~~short-term loans consisted of the following as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:

September 30,
2017 December 31,
2016
Registered capital deposit $ 1,065,176 $ -
Rental deposits 480,589 445,283
Restricted cash 488,822 248,803
Prepayments 61,206 5,576
Deferred tax assets 52,171 25,364
Others 1,655 1,456
Total other assets $ 2,149,619 $ 726,482

September 30, 2022

(unaudited)

December 31, 2021




Debt

Collateral

Debt

Collateral
Line of Credit

Collateral

balance

value

balance

value
$7.9 million (NTD 250 million) revolving line of credit with Cathay United Bank Company Limited (“CUB”); the loan bears interest the 1-month TAIBOR rate plus a margin of 0.46% and matures on April 11, 2023.

Time deposits

$
6,046,108

$
6,046,108

$
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

4,721,063

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, 2023.

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 (“FEIB”); the loan bears interest at the TAIFX3 rate plus a margin of 0.5% and matures on January 13, 2023.

Time deposits

1,650,000

2,045,794

1,850,000

2,961,588
$3.1 million (NTD 100 million) revolving line of credit with Far Eastern International Bank (“FEIB”); the loan bears interest at the FEIB’s adjustable rates for loans plus a margin of 0.6% and matures on January 13, 2023.

Time deposits

3,147,375

3,147,375

—

—
$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 matured on February 28, 2023.

Time deposits

500,000

1,573,687

—

—
$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

2,481,926
$6.3 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, 2023.

Time deposits

—

—

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

2,490,000

2,677,682

—

1,000,000

$
20,033,483

$
23,277,510

$
18,835,932

$
23,775,499

~~According to China Insurance Regulatory Commission No. 82, issued on~~Borrowings under the revolving credit agreements are generally due 90 days or less. Total interest expenses for short-term loans incurred were $107,046 and $47,701 for the three months ended September ~~29, 2016,~~30, 2022 and 2021, respectively, and were $229,185 and $136,807 for the ~~Company should deposit all of its registered capital in a custodian account~~nine months ended September 30, 2022 and subject to limited usage, among which, no less than 10% of the registered capital should be invested in significant deposit by agreement or term deposit. The Company should deposit this amount after six months of the issuance date.2021, respectively.

Restricted cash is a deposit in the bank by the Company in conformity with Provisions of the Supervision and Administration of Specialized Insurance Agencies, which is not allowed to be withdrawn without the permission of the regulatory commission and the trust account for Law Broker’s general manager’s bonus plans.
NOTE 118 – ~~TAX~~COMMISSIONS PAYABLE TO SALES PROFESSIONALS
~~The Company’s tax~~Commissions payable to sales professionals consisted of the following as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:

September 30,
2017 December 31,
2016
PRC Tax $ 287,138 $ 163,461
Hong Kong Tax 9,091 14,233
Taiwan Tax 2,060,397 2,072,175
Total tax payable $ 2,356,626 $ 2,249,869

September 30, 2022


(unaudited)

December 31, 2021
Taiwan

$
10,462,955

$
13,793,343
PRC

153,260

210,198
Total commissions payable to sales professionals

$
10,616,215

$
14,003,541

~~PRC tax represents income tax and other taxes accrued according~~Commissions payable to PRC tax law by the Company’s subsidiaries and Consolidated Affiliated Entities (“CAE”) in the PRC. Taiwan tax represents income tax accrued according to Taiwan tax law by the Company’s subsidiaries and branches in Taiwan. Hong Kong tax represents income tax accrued according to Hong Kong tax law by the Company’s subsidiaries in Hong Kong.sales professionals are usually settled within twelve months.

~~NOTE 12 – CONVERTIBLE BONDS~~
The Company intended to issue the convertible bonds during the period commencing on June 23, 2016 and ended on September 30, 2016 with an aggregate principal amount of up to $10,000,000. The convertible bonds were to be sold in units, with each unit being $100,000 in principal amount. The Company had not made any offers or sales of the convertible bonds to U.S. persons and there were no direct selling efforts in the United States. The bonds would not be convertible until two years from the issuance date and with an annual interest rate of 6% payable on a quarterly basis. The bond holder might cause the Company to redeem the convertible bonds before the end of the term, subject to certain penalties depending on the holding period of the convertible bonds when redeemed. Upon the expiration of the term of the convertible bonds, the bond holder may, in its sole discretion, choose to collect the payment of full principal amount of the convertible bonds together with any interest accrued or convert the convertible bonds into common shares of the Company at the conversion price. The conversion price shall be 80% of the average closing trading price for the ten (10) business days immediately prior to the conversion date.
On June 23, 2016, the Company issued two units of its convertible bonds with an aggregate principal amount of $200,000 to a non-US person and the value of the embedded derivatives liabilities is trivial. As of September 30, 2017 and December 31, 2016, the Company has an outstanding principal balance of $200,000 of convertible bonds. Total interest expense was $3,000 and $9,000 for the three and nine months ended September 30, 2017.
16
20

Table of Contents

NOTE 139 – OTHER CURRENT LIABILITIES
Other current liabilities ~~are~~were as follows, as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:

September 30, 2022


(unaudited)

December 31, 2021
Accrued bonus

$
4,947,981

$
6,645,496
Payroll payable and other benefits

1,198,804

2,188,074
Accrued business tax and tax withholdings

1,363,430

1,903,039
Execution fees payable – AIA(Note 11)

—

1,191,858
Other accrued liabilities

1,371,305

2,069,136
Total other current liabilities

$
8,881,520

$
13,997,603

September 30,
2017 December 31,
2016
Commissions payable to sales professionals $ 5,821,393 $ 11,869,181
Unearned revenue (AIATW and Farglory) 1,340,884 2,090,718
Due to previous shareholders of AHFL - 480,559
Accrued business tax 188,516 469,259
Deferred tax liabilities 125,059 -
Withholding employee personal tax 240,717 362,954
Accrued tax penalties 370,000 370,000
Accrued bonus 1,040,291 1,935,091
Salary payable to administrative staff 464,106 183,066
Accrued labor, health insurance and employee retirement plan 105,015 92,085
Accrued advertisement fee - 32,525
Other accrued liabilities 724,847 754,471
Total other current liabilities $ 10,420,828 $ 18,639,909
Accrued Bonus
~~Commissions payable~~The Company’s foreign subsidiaries have various bonus plans, which provide cash awards to ~~sales professionals,~~employees based upon their performance, and had accrued bonus ~~salaries~~of $2,820,152 and $4,059,901, respectively, related to cash awards to employees as of September 30, 2022 and December 31, 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 September 30, 2022 and 2021, the bonus expenses to Law Broker’s officers under the compensation plans were $70,733 and $135,563, respectively, and for the nine months ended September 30, 2022 and 2021, the bonus expenses to Law Broker’s officers under the compensation plans were $171,328 and $380,579, respectively.
As of September 30, 2022 and December 31, 2021, the Company had accrued bonus of $2,127,829 and $2,585,595 payable within next 12 months, respectively, related to ~~administrative staff,~~the compensation plans for Law Broker’s officers. See Note 16 for additional information of agreements with Law Broker’s officers.

NOTE 10 – OTHER LIABILITIES

The Company’s other liabilities consisted of the following as of September 30, 2022 and ~~accrued advertisement expense are usually settled within 12 months. Unearned revenue is described in Note 15.~~ December 31, 2021:

September 30, 2022


(unaudited)

December 31, 2021
Due to previous shareholders of AHFL

$
472,106

$
541,754
Total other liabilities

$
472,106

$
541,754

Due to Previous Shareholders of AHFL
Due to previous shareholders of ~~Action Holdings Financial Limited (“AHFL”)~~AHFL is the entire remaining balance payable of the acquisition cost. ~~Accrued business tax, withholding employee personal tax, accrued labor, health insurance and employee retirement plan will be paid~~In March 2021, the Company entered a seventh amendment with the selling shareholders in negotiation with the previous shareholders of AHFL to extend the related government departments within one month. Accrued tax penalties are estimated potential penalty in the event of a tax audit. Other accrued liabilities mainly consist of accrued interest, accrued logo promotion product expense and operating expenses payable for training and travelling.
~~NOTE 14 – LONG-TERM LOANS~~
September 30,
2017 December 31,
2016
Loan B, interest at 8%, maturity date May 15, 2019 $ 150,274 $ 144,015
Loan C, interest at 8%, maturity date July 20, 2019 115,711 110,892
Total long-term loans $ 265,985 $ 254,907
On May 15, 2016, the Company’s contractually controlled affiliate in PRC, Law Anhou Insurance Agency Co., Ltd (“Anhou” or “Law Anhou”), entered into a loan agreement (“Loan B”) with a third party. The long-term Loan Agreement provided for a $150,274 loanrepayment date to ~~the Company. Loan B bears an interest rate of 8% per annum and interest is payable annually. The principal and the interest will be due on May 15, 2019.~~
On July 20, 2016, Anhou entered into a loan agreement (“Loan C”) with a third party. The long-term Loan Agreement provided for a $115,711 loan to the Company. Loan C bears an interest rate of 8% per annum and interest is payable annually. The principal and the interest will be due on July 20, 2019.
~~The total interest expense for both Loan B and Loan C was $5,293 and $15,562 for the three and nine months ended September 30, 2017.~~
~~NOTE 15 – LONG-TERM LIABILITIES~~
March 31, 2024. As of September 30, ~~2017~~2022 and December 31, ~~2016, long-term~~2021, the amount due to previous shareholders of AHFL were $472,106 and $541,754, respectively.

NOTE 11 – CONTRACTS WITH CUSTOMERS
Information about accounts receivable, contract assets and contract liabilities ~~are~~from contracts with customers is as follows:

September 30,
2017 December 31,
2016
Unearned revenue – AIATW $ 4,242,585 $ 4,742,272
Unearned revenue – Farglory - 495,615
Due to pervious shareholders of AHFL 480,559 -
Other long-term liabilities 175,191 77,440
Long-term liabilities $ 4,898,335 $ 5,315,327

September 30, 2022


(unaudited)

December 31, 2021
Accounts receivable

$
14,499,574

$
26,761,678
Contract assets

5,518,599

—
Contract liabilities – current

87,097

—
Contract liabilities – noncurrent

1,348,875

—

17
21

Table of Contents

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 September 30, 2022 and December 31, 2021, the Company had $5,518,599 and nil of contract assets, respectively.

~~Unearned revenue –~~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~~, the purpose of ~~the Alliance Agreement~~which is to promote life insurance products provided by AIATW within Taiwan by insurance agencies or brokerage companies affiliated with AHFL or ~~CUIS. The term of the Alliance Agreement is from April 15, 2013 to August 31, 2018.~~China United. Pursuant to the terms of the Alliance Agreement, AIATW paid AHFL an execution fee, ~~of $8,326,700 (NTD250,000,000, including the tax of NTD11,904,762, the “Execution Fee”),~~ which ~~is to be~~was recorded as revenue upon fulfilling ~~sales targets and the 13-month persistency ratio, as defined,~~certain criteria over the ~~next five years. The Execution Fee may be required~~original term of the Alliance Agreement from June 1, 2013 to ~~be recalculated if certain performance targets are not met by AHFL. On September 30,~~May 31, 2018. From 2014 to 2017, AHFL has entered into ~~a Strategic~~three amendments to the Alliance ~~Supplemental~~ Agreement (the “Supplemental Agreement”) with AIATW. In the Supplemental Agreement, the performance targets and the provision about refunding the Execution Fee on pro rata basis when the performance targets are not met were revised.

~~On January 6, 2016, AHFL entered into an Amendment 2 to Strategic Alliance Agreement (the “Amendment No. 2”)~~ with AIATW to further revise certain ~~provisions~~terms and conditions in the ~~Strategic~~ Alliance Agreement, ~~and~~including the ~~previous amendment entered into by and between AHFL and AIATW. The purpose~~extension of the Strategic Alliance Agreement is to promote life insurance products provided by AIATW within the territory of Taiwan through insurance agency companies or insurance brokerage companies. 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 Amendment No. 2, the expiration date ~~of the Strategic Alliance Agreement has been extended~~ from May 31, 2018 to December 31, ~~2021, and~~2021. Pursuant to the ~~effect of~~Third Amendment to the ~~Strategic~~ Alliance Agreement ~~during the period from October 1, 2014 to December 31, 2015 has been suspended. In addition,~~(the “Amendment 3”), both AHFL and AIATW agreed to adjust certain terms and conditions set forth in the Strategic Alliance Agreement, among which: (i) expand 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) remove 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 has been revoked in order to conform with the latest terms and conditions regarding the cooperation between AHFL and AIATW as set forth in a third amendment (Amendment No. 3). Pursuant to the Amendment No. 3, both AHFL and AIATW agreed to adjust certain terms and conditions set forth this amendment, ~~among~~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 ~~No.~~ 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 ~~agree~~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 ~~promotion~~execution fees at NTD ~~330,000,000~~50 million for the first contract year, NTD 35 million for the second contract year, and NTD 33 million for each contract ~~years~~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. On May 6, 2022, AIATW issued a formal letter to the Company and agreed to reduce the refund amount of $1,159,039 (NTD 33.0 million) to $807,127 (NTD 23.1 million), for which the Company has paid to AIATW on May 13, 2022. As of September 30, 2022 and December 31, 2021, the basic business execution fees of nil and $1,191,858 were payable and recorded under other current liabilities, respectively.

~~The Company recognizes AIATW’s revenue when~~On March 15, 2022, AHFL entered into the ~~life~~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 ~~products~~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 ~~are met: (i) persuasive evidence~~if AFHL fails to meet certain goals set in Table 2 and Table 3 of ~~an agreement between~~Amendment 4. The primary factor under formula one focuses on the ~~insurance company and insured exists, (ii) insurance brokerage services have been provided, (iii)~~annual and/or accumulated achievement rate(s), while the ~~fee to be paid by~~primary factor under formula two focuses on the ~~related insurer to the Company for such services is fixed or determinable, and (iv) the collectability~~13-month persistency ratio(s), among others.

Table of ~~the fee is reasonably assured. The purpose of refund is primarily due to the portion of performance sales targets are not met in that contract year.~~ Contents

The following table presents the amounts recognized as revenue and ~~the refunded~~refund for each contract year:

Contract

Revenue

Revenue VAT

Refund

Refund VAT
Year

Period

Execution Fees

Amount

Amount

Amount

Amount
First

01/01/2022 - 12/31/2022

NTD
5,000,000

NTD
2,659,505
(1)
NTD
132,975

NTD
2,102,400
(1)
NTD
105,120
Second

01/01/2023 - 12/31/2023

NTD
5,000,000

NTD
—

NTD
—

NTD
—

NTD
—
Third

01/01/2024 - 12/31/2024

NTD
5,000,000

NTD
—

NTD
—

NTD
—

NTD
—
Fourth

01/01/2025 - 12/31/2025

NTD
5,000,000

NTD
—

NTD
—

NTD
—

NTD
—
Fifth

01/01/2026 - 12/31/2026

NTD
5,000,000

NTD
—

NTD
—

NTD
—

NTD
—
Sixth

01/01/2027 - 12/31/2027

NTD
5,000,000

NTD
—

NTD
—

NTD
—

NTD
—
Seventh

01/01/2028 - 12/31/2028

NTD
5,000,000

NTD
—

NTD
—

NTD
—

NTD
—
Eighth

01/01/2029 - 12/31/2029

NTD
5,000,000

NTD
—

NTD
—

NTD
—

NTD
—
Ninth

01/01/2030 - 12/31/2030

NTD
5,000,000

NTD
—

NTD
—

NTD
—

NTD
—
Tenth

01/01/2031 - 12/31/2031

NTD
5,000,000

NTD
—

NTD
—

NTD
—

NTD
—
TOTAL



NTD
50,000,000

NTD
2,659,505

NTD
132,975

NTD
2,102,400

NTD
105,120
18
Contract Year Period Execution Fees Revenue Amount Refund Amount
First 4/15/2013 ~ 9/30/2014 NTD 50,000,000 NTD 28,494,856 (1) NTD 21,505,144 (1)
Second 1/1/2016 ~ 12/31/2016 NTD 35,000,000 NTD 13,497,750 (2) NTD 21,502,250 (2)
Third 1/1/2017 ~ 12/31/2017 NTD 33,000,000 NTD 9,254,296 (3) NTD -
Fourth 1/1/2018 ~ 12/31/2018 NTD 33,000,000 NTD - NTD -
Fifth 1/1/2019 ~ 12/31/2019 NTD 33,000,000 NTD - NTD -
Sixth 1/1/2020 ~ 12/31/2020 NTD 33,000,000 NTD - NTD -
Seventh 1/1/2021 ~ 12/31/2021 NTD 33,000,000 NTD - NTD -
TOTAL NTD 250,000,000 NTD 51,246,902 NTD 43,007,394

1) ~~(1)~~
The ~~revenue recognition~~Company estimated VONB and 13-month persistency ratio for the ~~first contract~~ year ~~is based on the annual first year premium (“AFYP”) set in Alliance Agreement, which is difference from other contract years. From the second contract year to the seventh contract year,~~ending December 31, 2022 and calculated the revenue ~~calculation is based on VONB. The Company recognized the first contract year’s revenue~~ amount ~~of $934,099 (NTD28,494,856) and refunded the amount of nil~~to be $90,876 (NTD 2,659,505) for the first contract year for the nine months ended September 30, 2017. On December 3, 2015 and February 23, 2016, the Company refunded the amounts of $152,235 (NTD 5,000,000) and $502,532 (NTD 16,505,144) to AIATW, respectively, due to the portion of performance sales
~~targets not met during the first contract~~ year.
~~(2)~~ ~~For the nine months ended September 30, 2017, the Company recognized the second contract year’s revenue~~ The amount ~~of $442,474 (NTD13,497,750) and refunded the amount of $709,084 (NTD21,502,250) for the same contract period.~~
~~(3)~~ ~~For the nine months ended September 30, 2017, the Company recognized the third contract year’s revenue amount of $303,369 (NTD9,254,296) and refunded the amount nil for the same contract period.~~will be reassessed every quarter until receiving AIATW’s notice.
The Company recognized the revenue related to AIATW of ~~$1,679,942 (NTD51,246,902)~~$24,166 (NTD 731,957) and nil, net of VAT, for the three months ended September 30, 2022 and 2021, respectively, and $68,157 (NTD 1,994,629) and nil, net of VAT, for the nine months ended September 30, ~~2017~~2022 and ~~2016 related to this agreement.~~ 2021, respectively.
As of September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, the Company had $1,348,875 and nil of non-current portion of ~~unearned revenue of $4,242,585 and $4,742,272,~~contract liabilities, respectively, and current ~~portion~~contract liabilities of ~~$681,340~~$87,097 and ~~$1,966,814,~~nil, respectively, related to the Alliance Agreement.

~~Unearned revenue – Farglory~~
NOTE 12 –LEASE
~~On April 20, 2016, the Company entered into a service agreement (“Service Agreement”) with Farglory Life Insurance Co., Ltd. (“Farglory”).~~ The Company ishas operating leases for its offices with lease terms ranging from one to ~~provide consulting services~~five years. The Company recorded its operating lease cost of $1,047,058 and $3,169,875 for the three and nine months ended September 30, 2022, and $1,071,575 and $3,148,542 for the three and nine months ended September 30, 2021, respectively.
Operating lease right-of-use assets represent the Company’s right to ~~Farglory~~use an underlying asset for ~~NTD4,000,000 per year~~the lease term and lease liabilities represent the ~~aggregate consulting services fee is NTD20,000,000~~Company’s obligation to make lease payments arising from ~~May 1, 2016 to April 30, 2021. However, both parties are renegotiating~~ the ~~Service Agreement and plan to amend the cooperation method.~~lease. As of September 30, ~~2017~~2022 and December 31, ~~2016, the Company had long-term~~2021, operating lease right-of-use assets and lease liabilities ~~amount of nil~~were as follows:


September 30, 2022



(unaudited)

December 31, 2021
Right-of-use assets under operating leases

$
7,455,797

$
6,449,182
Operating lease liabilities – current

3,420,600

3,059,329
Operating lease liabilities – noncurrent

3,961,006

3,298,089

Lease term and ~~$495,615, respectively, and current liabilities amounts of $659,544 and $123,904, respectively,~~discount rate

September 30, 2022



(unaudited)

December 31, 2021

Weighted average remaining lease term

Operating lease

2.62
years

2.31
years
Weighted average discount rate

Operating lease

2.61
%

2.80
%

Supplemental cash flow information related to ~~this Service Agreement.~~leases


Nine Months Ended September 30,

2022 (unaudited)

2021 (unaudited)
Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows related to operating leases

$
3,095,389

$
3,138,759
Amortization of right-of-use assets under operating leases

2,772,819

2,724,822
~~Due to previous shareholders~~

Table of ~~AHFL~~Contents

Due to previous shareholders of AHFL is the remaining balance payable of the acquisition cost. On March 12, 2017, the Company and the selling shareholders of AHFL entered into a fifth amendment to the acquisition agreement (the “Fifth Amendment”), pursuant to which, the Company agreed to distribute the cash payment in the amount of $480,559 (NTD15 million) on or prior to March 31, 2019.

~~Other long-term liabilities~~

On May 10, 2016, Law Broker entered into an engagement agreement (the “Engagement Agreement”) with Hui-Hsien Chao (“Ms. Chao”), pursuant to which she acts as the general manager of Law Broker for a term from December 29, 2015 to December 28, 2018. Ms. Chao’s primary responsibilities are to assist Law Broker in operating and managing insurance agency business. According to the Engagement Agreement, Ms. Chao’s bonus plans include: 1) execution, 2) long-term service fees, 3) pension and 4) non-competition, and the payment of such bonuses will only occur upon satisfaction of certain condition and subject to the terms therein, among which, Ms. Chao acts as the general manager or equivalent position of Law Broker for at least 3 years.

On May 14, 2016, Law Broker and Ms. Chao entered into a supplementary agreement (“Supplementary Agreement”) to postpone her pension vesting date to December 29, 2016. Law Broker expects that none of the above-mentioned bonuses are to be paid prior to May 2019, and therefore it has recorded as long-term liabilities representing the corresponding portion of such bonuses accrued. On March 13, 2017, Law Broker and Ms. Chao entered into an engagement agreement, which is the amendment to Engagement Agreement dated May 10, 2016 to specify 1) Ms. Chao’s pension calculation assumption and start date, and 2) the non-competition provision start date. As of September 30, 2017 and December 31, 2016, the balance of such accrued long-term liabilities was $175,191 and $77,440, respectively.

~~NOTE 16 – PREFERRED STOCK~~

The ~~Company is authorized to issue 10,000,000 shares of preferred stock, $.00001 par value and currently has 1,000,000 shares of Series A Preferred Stock (“Series A Stock”) outstanding~~minimum future lease payments as of September 30, ~~2017. The Series A Stock has the following rights and preferences:~~2022 are as follows:


Amount
2022 (remainder of year)

921,334
2023

3,301,449
2024

2,141,767
2025

770,530
2026

312,332
Thereafter

217,622
Total minimum lease payments

7,665,034
Less: Interest

(283,428)
Present value of future minimum lease payments

$
7,381,606

Voting Rights. Except as otherwise provided by law, the Series A Stock and the common stock vote together on all matters submitted to a vote of the Company’s shareholders. Each holder of Series A Stock is entitled to ten votes for each share of Series A Stock held of record by such holder as of the applicable record date on any matter that is submitted to a vote of the stockholders of the Company.

19
Series A Board Designee and Board Restriction. In addition to the voting rights disclosed above, the holders of the Series A Stock shall be entitled to appoint one director (the “Series A Director”). No Board resolution regarding certain material Company actions can be made without the affirmative vote of the Series A Director.
Dividends. The holders of Series A Stock 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.
Liquidation. In the event of a voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Company, the holders of common stock and the holders of Series A Stock shall be entitled to share equally on a per share basis, in all assets of the Company of whatever kind available for distribution.
Conversion Rights. The holders of the Series A Stock have the right to convert their shares thereof at any time into shares of the Company’s common stock. Each share of Series A Stock is convertible into one share of common stock.
~~If the Company in any manner subdivides or combines the outstanding shares of common stock, the outstanding shares of the Series A Stock will be subdivided or combined in the same manner.~~
Business Combinations. In any merger, consolidation, reorganization or other business combination, the consideration received per share by the holders the common stock and the holders of the Series A Stock in such merger, consolidation, reorganization or other business combination shall be identical; provided however, that if such consideration consists, in whole or in part, of certain equity interests, the rights and limitations of such equity interests may differ to the extent that the rights and limitations of the common stock and the Series A Stock differ.
~~Fully Paid and Nonassessable. All of the Company’s outstanding shares of preferred stock are fully paid and nonassessable.~~
The fair value of the 1,000,000 preferred shares was $225,000 at the time of the preferred share issuance. The fair value of the common shares was $200,000 at the time of the preferred share issuance based on its market price at the date of the transaction. Therefore, the incremental value of the preferred shares was $25,000. This amount may be deemed compensation.
~~From the qualitative aspect, the Company notes the following regarding this deemed compensation:~~
~~Does not violate any debt or other contract covenants;~~
~~Does not change any earnings or EPS trends;~~
~~Does not affect any previous earnings or EPS guidance;~~
~~Does not affect any segment or class of revenue;~~
~~Does not affect any regulatory compliance matters;~~
~~Does not affect cash compensation of management;~~
~~Does not involve concealment of an unlawful act.~~
Additional preferred stock may be authorized and issued in the future in connection with acquisitions, financings, or other matters, as the Board of Directors (the “BOD”) deems appropriate. In the event that the Company issues any shares of preferred stock, a certificate of designation containing the rights, privileges and limitations of this series of preferred stock will be filed with the Secretary of State of the State of Delaware. The effect of this preferred stock designation power is that its BOD alone, subject to Federal securities laws, applicable blue-sky laws, and Delaware law, may be able to authorize the issuance of preferred stock which could have the effect of delaying, deferring, or preventing a change in control without further action by its stockholders, and may adversely affect the voting and other rights of the holders of its common stock.
20
~~NOTE 17 – STATUTORY RESERVES~~
According to Taiwan accounting rules and corporation regulations, the Company’s subsidiaries in Taiwan must appropriate 10% of net income to statutory reserves until the accumulated reserve hits registered capital. The reserve can be converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, with a limitation that the reserve left is not less than 25% of the registered capital after converting to share capital.
Pursuant to the PRC regulations, CAE are required to transfer 10% of their net profit, as determined under the PRC accounting regulations, to a Statutory Common Reserve Fund (“Reserve Fund”). Appropriation to the Reserve Fund may cease when the fund equals 50% of a company’s registered capital or when a company has accumulated losses. The transfer to this reserve must be made before distribution of dividends to shareholders. The Company’s CAE did not appropriate such reserve as they have accumulated losses.
NOTE 1813 – ~~NON-CONTROLLING~~NONCONTROLLING INTERESTS
~~Non-controlling~~Noncontrolling interests consisted of the ~~following:~~following as of September 30, 2022 and December 31, 2021:

% of Non-

Other

September 30,

controlling

December 31,

Net Income

Comprehensive

2022
Name of Entity

Interest

2021

(Loss)

Loss

(unaudited)
Law Enterprise

34.05
%
$
(676,166)

$
(207,439)

$
(6,043)

(889,648)
Law Broker

34.05
%

31,016,203

4,305,759

(4,224,770)

31,097,192
Uniwill

50.00
%

48,802

1,296,273

(152,940)

1,192,135
Rays

1.00
%

(6,461)

(214)

—

(6,675)
PFAL

49.00
%

364,056

(14,739)

(1,225)

348,092
MKI

49.00
%

(327,119)

(712)

—

(327,831)
Total

$
30,419,315

$
5,378,928

$
(4,384,978)

$
31,413,265

% of Non-

Other

Impact from

controlling

December 31,

Net Income

Comprehensive

Liquidation of

December 31,
Name of Entity

Interest

2020

(Loss)

Income (Loss)

PA Taiwan

2021
Law Enterprise

34.05
%
$
(414,957)

$
(264,642)

$
3,433

$
—

$
(676,166)
Law Broker

34.05
%

25,177,272

5,444,673

394,258

—

31,016,203
Uniwill

50.00
%

(421,035)

466,934

2,903

—

48,802
Rays

1.00
%

(5,772)

(689)

—

—

(6,461)
PFAL

49.00
%

423,978

(63,441)

3,519

—

364,056
MKI

49.00
%

(732)

(161,090)

—

(165,297)

(327,119)
PA Taiwan

49.00
%

(163,013)

1,102

(3,386)

165,297

—
Total

$
24,595,741

$
5,422,847

$
400,727

$
—

$
30,419,315

Name of Affiliate % of Non-controlling Interests As of December 31, 2016 Net Income and Other Comprehensive Gain/(Loss) of Non-controlling Interests As of September 30, 2017
Law Enterprise Co., Ltd. (“Law Enterprise”) 34.05 % $ 17,386 $ 446,585 $ 463,971
Law Broker 34.05 % 9,621,159 2,148,249 11,769,408
Prime Financial Asia Ltd. (“PFAL”) 49.00 % 232,414 (34,973 ) 197,441
Max Key Investments Ltd. (“MKI”) 49.00 % (1,569 ) (548 ) (2,117 )
Prime Asia Corporation Limited. (“PA Taiwan”) 49.00 % (95,448 ) (64,179 ) (159,627 )
Prime Management Consulting (Nanjing) Co., Ltd. (“PTC Nanjing”) 49.00 % (2,400 ) 261 (2,139 )
Total $ 9,771,542 $ 2,495,395 $ 12,266,937

Name of Affiliate % of Non-controlling Interests As of December 31, 2015 Net Income and Other Comprehensive Gain/(Loss) of Non-controlling Interests As of December 31, 2016
Law Enterprise 34.05 % $ 199,699 $ (182,313 ) $ 17,386
Law Broker 34.05 % 7,197,128 2,424,031 9,621,159
PFAL 49.00 % 206,098 26,316 232,414
MKI 49.00 % (1,065 ) (504 ) (1,569 )
PA Taiwan 49.00 % (26,292 ) (69,156 ) (95,448 )
PTC Nanjing 49.00 % (837 ) (1,563 ) (2,400 )
Total $ 7,574,731 $ 2,196,811 $ 9,771,542

Table of Contents

NOTE 1914 – INCOME TAX
~~Provision (benefit) for income~~The following table reconciles the Company’s statutory tax rates to effective tax rates for the three ~~months ended September 30, 2017 consisted of:~~
Three months ended
September 30, 2017
Federal State Foreign Total
Current $ - $ - $ 828,532 $ 828,532
Deferred - - 3,346 3,346
Total $ - $ - $ 831,878 $ 831,878
~~Provision (benefit) for income tax for the three months ended September 30, 2016 consisted of:~~
Three months ended
September 30, 2016
Federal State Foreign Total
Current $ - $ - $ 500,787 $ 500,787
Deferred - - (43,959 ) (43,959 )
Total $ - $ - $ 456,828 $ 456,828
21
~~Provision (benefit) for income tax for the~~and nine months ended September 30, ~~2017 consisted of:~~2022 and 2021:

Nine months ended
September 30, 2017
Federal State Foreign Total
Current $ - $ - $ 2,365,177 $ 2,365,177
Deferred - - (20,030 ) (20,030 )
Total $ - $ - $ 2,345,147 $ 2,345,147

Three Months Ended September 30,

2022

2021


(unaudited)

(unaudited)

U.S. statutory rate

21
%
21
%
Tax rate difference

(2)
%
(1)
%
Change in valuation allowance for unrecognized tax losses

(3)
%
2
%
Income tax on undistributed earnings

2
%
4
%
Release of valuation allowance

(4)
%
—
%
Utilization of previously unrecognized tax losses

(1)
%
—
%
Non-deductible and non-taxable items

(6)
%
—
%
Other

2
%
—
%
Effective tax rate

9
%
26
%

Nine Months Ended September 30,

2022

2021


(unaudited)

(unaudited)

U.S. statutory rate

21
%
21
%
Tax rate difference

(2)
%
(1)
%
Change in valuation allowance for unrecognized tax losses

2
%
4
%
Income tax on undistributed earnings

3
%
4
%
Release of valuation allowance

(2)
%
—
%
Utilization of previously unrecognized tax losses

(4)
%
—
%
Non-deductible and non-taxable items

—
%
(1)
%
Other

(1)
%
—
%
Effective tax rate

17
%
27
%

~~Provision (benefit) for~~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 a statutory tax rate on income reported in the statutory financial statements at 20% and a tax on undistributed earnings at 5%. The Company had no plan to distribute earnings earned for the ~~nine months~~years ended December 2021 and 2020, and the tax on undistributed earnings on entities in Taiwan of 5% was estimated. As of September 30, ~~2016 consisted of:~~2022 and December 31, 2021, the Company had current tax payable of $2,125,788 and $3,703,412 for Taiwan income tax, respectively.
Nine months ended
September 30, 2016
Federal State Foreign Total
Current $ - $ - $ 1,400,566 $ 1,400,566
Deferred - - (65,235 ) (65,235 )
Total $ - $ - $ 1,335,331 $ 1,335,331
~~Significant components~~The Company regularly assesses the likelihood that the deferred tax assets will be recovered from future taxable income. We consider projected future taxable income and then record a valuation allowance to reduce the carrying value of the deferred tax assets to an amount that is more likely than not to be realized. The Company considered cumulative losses arising from Uniwill’s startup costs at the initial stage along with compensation costs in connection with the issuance of preferred stock and ~~liabilities for income tax as of September 30, 2017 and December 31, 2016 consisted of the following:~~
As of
September 30,
2017 December 31,
2016
Deferred tax assets
Net operating loss carry-forward $ 1,101,734 $ 993,050
Others 110,212 84,597
Total $ 1,211,946 $ 1,077,647
Valuation allowance (1,101,734 ) (993,050 )
Net deferred tax assets $ 110,212 $ 84,597
Deferred tax assets - current $ 58,041 $ 59,233
Deferred tax assets - noncurrent $ 52,171 $ 25,364

Deferred tax liabilities - current $ 125,059 $ -
~~A 100%~~maintained a full valuation allowance ~~was provided for the~~against Unwill’s deferred tax assets ~~related~~because insufficient evidence existed to support the ~~PRC segment~~realization of any future income tax benefits. Uniwill became profitable because of receiving more trailing commissions since the fiscal year 2021 and also obtained the insurance license to sell property and casualty insurance products in 2022. As a result, the Company asexpected future profitability and improved overall prospects of ~~September 30, 2017 and December 31, 2016. Net~~future business. Therefore, the Company released the valuation allowance of $354,828 (NTD 11,273,783) against Uniwill’s deferred tax assets of $110,212 and $84,597, respectively, related to the Taiwan segment were included in other current assets and other assets on the consolidated balance sheets as of September 30, 2017 and December 31, 2016. Deferred tax liabilities were the timing differences of revenue and cost of sales recognized in the ~~period ended September 30, 2017. Deferred tax liabilities~~third quarter of ~~$125,059 and nil, respectively, related to the PRC segment were in other current liabilities on the consolidated balance sheets as of September 30, 2017 and December 31, 2016.~~fiscal 2022.
~~Zhengzhou Zhonglian Hengfu Business Consulting Co., Ltd. (“CU WFOE”)~~WFOE and the ~~CAE~~Consolidated Affiliated Entities (“CAE”) in the PRC are governed by the Income Tax Law of ~~the~~ PRC concerning ~~the private~~private-run enterprises, which are generally subject to tax at 25% on income reported in the statutory financial statements after ~~appropriated adjustments, except for Jiangsu. For Jiangsu, according to the requirement of local tax authorities, the tax basis is deemed as 10% of total revenue, instead of net income.~~
~~The Company’s subsidiaries in Taiwan are governed by the Income Tax Law of Taiwan, and are generally subject to tax at 17% on income reported in the statutory financial statements after~~ appropriate adjustments. InAs of September 30, 2022 and December 31, 2021, the ~~meanwhile, Income Tax Law of Taiwan provides that a company is taxed at additional 10% on any undistributed earnings to its shareholders.~~
22
Company had no current tax payable for PRC income tax.
The Company’s subsidiaries in Hong Kong are governed by the Inland Revenue Ordinance Tax Law and subject to two-tiered profits tax regime. The first HK$2 million assessable profits is taxed at 8.25% and any assessable profits over HK$2 million is taxed at 16.25%. As of September 30, 2022 and December 31, 2021, the Company had current tax payable of nil and $9,756 for Hong Kong income tax.

Table of Contents

The 2017 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 ~~generally~~ subject to ~~a profits tax at the rate of 16.5%~~U.S. tax. Based on the ~~estimated assessable profits.~~

~~The following table reconciles~~Company’s total post-1986 earnings and profits (“E&P”) that it previously deferred from U.S. income taxes, we recorded the ~~US statutory rates to the Company’s effective~~one-time transition tax ~~rate~~$1,199,195 in eight annual installments for the ~~three months~~transition tax on undistributed earnings of non-U.S. subsidiaries during the year ended December 31, 2018. As of September 30, ~~2017~~2022 and ~~2016:~~December 31, 2021, the Company had current tax payable of $239,839 and $179,879, and noncurrent tax payable of $299,797 and $539,636 for U.S. income tax.

Three Months Ended September 30,
2017 2016
US statutory rate 34 % 34 %
Tax rate difference (18 )% (18 )%
Tax base difference - % - %
Loss in subsidiaries 7 % 2 %
Un-deductible and non-taxable items 7 % 9 %
Tax per financial statements 30 % 27 %
~~The following table reconciles the US statutory rates to the Company’s effective tax rate for the nine months ended September 30, 2017 and 2016:~~
Nine Months Ended September 30,
2017 2016
US statutory rate 34 % 34 %
Tax rate difference (18 )% (20 )%
Tax base difference - % 1 %
Loss in subsidiaries 5 % 7 %
Un-deductible and non-taxable items 6 % 10 %
Tax per financial statements 27 % 32 %
~~Un-deductible and non-taxable items mainly represent un-deductible expenses according to local tax laws and the non-taxable tax income or expenses.~~
NOTE 2015 – RELATED PARTY TRANSACTIONS
~~Due to~~The following summarized the Company’s loans payable related parties
~~The related parties listed below loaned money to the Company for working capital. Due to related parties consisted of the following~~ as of September 30, ~~2017~~2022 and December 31, ~~2016:~~2021:

September 30,
2017 December 31,
2016
Due to Mr. Mao (CEO of the Company) $ 401,775 $ 361,379
Due to Ms. Lu (Shareholder of Law Anhou) 225,411 -
Due to Xude Investment (Owned by Mr. ChwanHau Li) - 32,374
Due to Mr. Zhu (Legal Representative of Jiangsu) 2,081 1,994
Due to Yuli Broker (Owned by Ms. Lee) 141 265
Due to Yuli Investment (Owned by Ms. Lee) 141 265
Due to I Health Management Corp* 17,313 3,724
Total $ 646,862 $ 400,001

September 30, 2022

(unaudited)

December 31, 2021
Due to Ms. Lu (A shareholder of Anhou)

$
—

$
41,311
Others

6,593

9,220
Total

$
6,593

$
50,531

*25% of I Health Management Corp’s shares are owned by Multiple Capital Enterprise. 24% of Multiple Capital Enterprise’s shares are owned by the Company’s management level
~~The loan~~Amounts due to ~~related parties~~Ms. Lu were ~~non-interest~~borrowings from Ms. Lu to support Anhou’s business operation. The amounts were non-interesting bearing and ~~were~~ payable on demand.
With respect to due to bonus to officers, please refer to Note 9; and due to AHFL previous shareholders, please refer to Note 10.
23
There was no other material related party transactions other than those disclosed above.
~~Debt Forgiveness – Related Parties~~
NOTE 16– COMMITMENTS AND CONTINGENCIES
~~In 2015, Xude Investment assisted the Company to set up Genius Holdings Financial Limited (BVI Company)~~Operating Leases
See future minimum annual lease payments in Note 12.
Time Deposits Pledged as Collateral
See time deposits pledged as collateral in Notes 5 and Genius Investment Consultant Co., Ltd. (Taiwan Company) and paid set up fee on behalf of the Company with the amount of $23,544 and NTD285,083 ($9,393). Xude Investment was owned by Mr. ChwanHau Li, who is one of the Directors of the Company. In March 2017, Xude Investment agreed to forgive the Company’s debt above in whole. As of September 30, 2017, the Company has debt forgiveness from related parties amount of $32,937.7.
Appointment agreement
~~Lease Agreements~~
On July 1, 2016, the Company entered into a lease agreement with Yuli Broker to lease its Nan-King East Road office space in Taipei City. The lease term was for one year commencing on July 1, 2016 and ending on June 30, 2017, with an annual base rent approximately of $590 (NTD18,000). On June 30, ~~2017, this lease~~2022, Law Broker entered into an appointment agreement ~~was extended automatically~~with Shu-Fen, Lee (“Ms. Lee”), pursuant to which, she served and will continue serving as the president of Law Broker from December 21, 2021 to June ~~30, 2018.~~29, 2025. Ms. Lee’s primary responsibilities included 1) overall business planning, 2) implementation of resolution of the 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, and 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. For the three and nine months ended September 30, ~~2017, rent income were $141 and $421, respectively.~~
~~On July 1, 2016,~~2022 the Company ~~entered into a lease~~has recorded the compensation expense of $70,618 and $177,209 under the appointment agreement, with Yuli Investment to lease its Nan-King East Road office space in Taipei City. The lease term was for one year commencing on July 1, 2016 and ending on June 30, 2017, with an annual base rent approximately of $590 (NTD18,000). On June 30, 2017, this lease agreement was extended automatically to June 30, 2018.respectively. For the three and nine months ended September 30, ~~2017, rent income were $141~~2021, the Company has recorded the compensation expense of $96,651 and ~~$421,~~$210,858 under the appointment agreement, respectively.
~~Advisory Agreements~~
Engagement agreement
On ~~May 2, 2016, the Company~~December 23, 2021, Law Broker entered into ~~an advisory~~a new engagement agreement with ~~I Health. Pursuant~~Hui-Hsien Chao (“Ms. Chao”), pursuant to which she served and will continue serving as the general manager of Law Broker from December 23, 2021 to December 22, 2024. Ms. Chao’s primary responsibilities are to assist Law Broker in operating and managing insurance agency business. According to the ~~Advisory Agreement, I Health provided 10,000 Taiwan citizen’s health information~~engagement agreement, Ms. Chao’s Bonus plans shall include: 1) execution, 2) long-term service fees and 3) non-competition. The payment of such bonuses will only occur upon satisfaction of certain conditions and subject to the ~~Company~~terms in the engagement agreement. Ms. Chao has agreed to act as the general manager or equivalent position of Law Broker for ~~its new insurance product during May 2, 2016 to May 1, 2017. The total advisory fee was approximately $42,000 (NTD1,275,000).~~a term of at least three years. For the three and nine months ended September 30, ~~2017, The Company had cost of revenue related to I Health amount of $13,269.~~
~~On December 7, 2016,~~2021, the Company ~~entered into an advisory~~has recorded the compensation expense of $38,912 and $169,721 under the engagement agreement, ~~with Fuchang Li (“Mr. Li,” the Director~~respectively.

Table of Contents

NOTE 17 –VARIABLE INTEREST ENTITIES
The carrying amounts of the ~~Company). Pursuant to this Advisory Agreement, Mr. Li provided investment consulting to~~assets, liabilities and the results of operations of the VIE and its subsidiaries (i.e., Zhengzhou Zhonglian 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 VIE and its subsidiaries within the Company ~~from December 7, 2016 to December 6, 2017.~~ are as follows:


September 30, 2022


(Amount in USD)

  (unaudited)

December 31, 2021
ASSETS




Current assets

Cash and cash equivalents

$
2,479,178

$
1,001,974
Accounts receivable and notes receivable

311,096

455,884
Other current assets

157,577

120,113
Total current assets

2,947,851

1,577,971

Right-of-use assets under operating leases

1,081,330

1,528,856
Property and equipment, net

148,118

199,056
Prepaid expenses - intangible assets

17,050

9,377
Long-term investments

42,195

47,179
Restricted cash – noncurrent

317

72,870
Registered capital deposits

703,246

1,100,842
Deferred tax assets

—

74,709
Other assets

75,082

83,951
TOTAL ASSETS

$
5,015,189

$
4,694,811

LIABILITIES

Current liabilities

Commissions payable to sales professionals

$
153,260

$
210,198
Operating lease liabilities-current

432,707

500,720
Other current liabilities

386,958

617,018
Due to related parties - Ms. Lu (the shareholder of Anhou)

—

41,311
Total current liabilities

972,925

1,369,247

Operating lease liabilities - noncurrent

539,229

908,971
TOTAL LIABILITIES

$
1,512,154

$
2,278,218

Three Months Ended September 30,
(Amount in USD)

2022

2021
Revenue

$
682,836

$
1,337,946
Net income (loss)

2,886,328

(70,710)


Nine Months Ended September 30,
(Amount in USD)

2022

2021
Revenue

$
3,115,764

$
4,554,515
Net income (loss)

1,441,719

(373,756)

Nine Months Ended September 30,
(Amount in USD)

2022

2021
Net cash used in operating activities

(1,510,463)

(550,258)
Net cash provided by (used in) investing activities

3,255,586

(115,645)
Net cash used in financing activities

(39,801)

(38,643)

Table of Contents

The ~~total advisory fee was approximately $58,000 (NTD1,800,000). The Company had general~~VIE contributed $682,836 and ~~administrative expense related to this advisory agreement amount~~$3,115,764 of ~~$13,619and $42,998, respectively,~~the Company’s consolidated revenue for the three and nine months ended September 30, ~~2017.~~

~~Consulting Agreement~~

~~On November 1, 2016, the Company entered into a consulting agreement with Apex Biz Solution Limited. (“Apex,” was formerly known as Prime Technology Corp.), which has one~~2022, and contributed $1,337,946 and $4,554,515 of the ~~same directors as Prime Financial Asia Ltd. Pursuant to this consulting agreement,~~Company’s consolidated revenue for the ~~Company provided administrative operation consulting service to Apex from November 1, 2016 to December 31, 2021. As of~~three and ~~for the~~ nine months ended September 30, ~~2017, the Company had account receivable and revenue amount~~2021, respectively, after elimination of ~~$17,274 and $33,874, respectively.~~inter-company transactions.

~~NOTE 21 – COMMITMENTS~~

~~Operating Leases~~

The Company has operating leases for its offices. Rental expenses for the three months ended September 30, 2017 and 2016 were $595,277 and $526,390, respectively. Rental expenses for the nine months ended September 30, 2017 and 2016 were $1,832,335 and $1,557,725, respectively. As of September 30, ~~2017, total future minimum annual lease payments under operating leases were as follows, by years:~~2022, there was no pledge or collateralization of the VIE’s assets that can only be used to settle obligations of the VIE, 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.

Twelve months ending September 30, 2018 $ 2,049,071
Twelve months ending September 30, 2019 1,166,015
Twelve months ending September 30, 2020 245,873
Twelve months ending September 30, 2021 55,088
Twelve months ending September 30, 2022 17,687
Thereafter -
Total $ 3,533,734
24
~~Engagement Agreement with Ms. Chao~~
~~On May 10, 2016, Law Broker entered into the Engagement Agreement with Ms. Chao. Please refer to Note 15 Other Long-term Liabilities.~~
NOTE 2218 – ~~FINANCIAL RISK MANAGEMENT AND FAIR VALUE~~
SEGMENT REPORTING
The Company ~~has exposure to credit, liquidity~~organizes and ~~market risks which arise in the normal course~~manages its business as three operating segments by operating geographic areas. The business of ~~its business. This note presents information about the Company’s exposure to each of these risks, the Company’s objectives, policies and processes for measuring and managing risk,~~WFOE, CU Hong Kong and the ~~Company’s management~~CAE in PRC was managed and reviewed as PRC segment. The business of ~~capital. Further quantitative disclosures are included throughout these consolidated financial statements.~~
~~The BOD has overall responsibility for the establishment~~AHFL and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its ~~training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.~~
The Company’s BOD oversees how management monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
~~(a)~~ ~~Credit risk~~
The Company’s credit risk arises principally from accounts receivables, loan and other receivables, pledged deposits and cash and equivalents. Management has a credit policy in place and monitors exposures to these credit risk on an ongoing basis. The carrying amounts of account receivables, loan and other receivables, pledged deposits and cash and cash equivalents represent the Company’s maximum exposure to credit risk. Accounts receivable are due within thirty (30) days from the date of billing.
~~(b)~~ ~~Liquidity risk~~
The BOD of the Company is responsible for the overall cash management and raising borrowings to cover expected cash demands. The Company regularly monitors its liquidity requirements, to ensure it maintains sufficient reserves of cash and readily realizable marketable securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the short and longer term.
~~(c)~~ ~~Currency risk~~
~~The functional currency for the Company’s~~ subsidiaries in Taiwan ~~is NTD~~was managed and ~~the functional currency for the Company’s subsidiaries~~reviewed as Taiwan segment. The business of PFAL was managed and ~~CAE in~~reviewed as Hong Kong segment. PRC ~~is RMB. The financial statements~~and Taiwan segments retain majority of the Company are in USD. The fluctuation of NTD and RMB exchange rates will affect the Company’s operating results expressed in USD. The Company reviews its foreign currency exposures, and the management does not consider its present foreign exchange risk to be significant.
25
~~NOTE 23 – RECLASSIFICATIONS~~
~~The effects of the reclassifications for the prior year is reflected below.~~
Consolidated Balance Sheet December 31, 2016
Original:
Cash and cash equivalents $ 25,521,802

Revised:
Cash and cash equivalents $ 20,169,455
Time deposits 5,352,347

Unaudited Condensed Consolidated Statements of Cash Flow
Nine Months Ended
September 30, 2016
Original:
Net cash used in investing activities $ (960,166 )

Foreign currency translation 942,171
Net increase (decrease) in cash and cash equivalents 3,975,267

Cash and cash equivalents, beginning balance 20,831,824
Cash and cash equivalents, ending balance 24,807,091

Revised:
Cash flows from investing activities:
Purchases of time deposits $ (7,095,147 )
Proceeds from maturities of time deposits 8,025,394
Net cash used in investing activities (29,919 )

Foreign currency translation 596,891
Net increase (decrease) in cash and cash equivalents 4,560,234

Cash and cash equivalents, beginning balance 13,083,357
Cash and cash equivalents, ending balance 17,643,591
~~NOTE 24 – FAIR VALUE MEASUREMENT~~
~~FASB ASC 820,~~ ~~“Fair Value Measurements and Disclosures,”~~ ~~defines Fair Value (“FV”), establishes a three-level valuation hierarchy for disclosures of FV measurement and enhances disclosure requirements for FV measures. The carrying amounts~~ reported in the balance sheets for receivables and current liabilities each qualify as financial instruments and are reasonable estimates of FV because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels are defined 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 FV.~~
26
~~The following table presents the fair value and carrying value of the Company’s financial assets and liabilities as of September 30, 2017:~~
Fair Value Carrying
Level 1 Level 2 Level 3 Value
Assets
Bank time deposits $ - $ 21,475,432 $ - $ 21,475,432
Marketable securities:
Funds 32,867 - - 32,867
Structured deposit - 1,205,162 - 1,205,162
Loan receivable (Other current assets in Notes 6) - - 1,477,060 1,477,060
Long-term investment:
Equity investment - - 1,288,279 1,267,475
Government bonds - 101,475 - 101,475

Liabilities
Due to related parties $ - $ - $ 646,862 $ 646,862
Convertible bonds - - 200,000 200,000
Long-term loans - - 265,985 265,985
~~The following table presents the fair value and carrying value of the Company’s financial assets and liabilities as of December 31, 2016:~~
Fair Value Carrying
Level 1 Level 2 Level 3 Value
Assets
Bank time deposits $ - $ 7,808,058 $ - $ 7,808,058
Marketable securities:
Stocks 38,763 - - 38,763
Funds 2,388,107 - - 2,388,107
Loan receivable (Other current assets in Notes 6) - - 1,486,846 1,486,846
Long-term investment:
Equity investment - - 1,288,279 1,190,558
Government bonds - 94,506 - 94,506

Liabilities
Due to related parties $ - $ - $ 400,001 $ 400,001
Convertible bonds - - 200,000 200,000
Long-term loans - - 254,907 254,907
~~Bank time deposits – The carrying amount approximates its fair value due to short-term in nature of the bank time deposits.~~
~~Marketable securities – The fair value of stocks and funds is generally valued based on quoted market prices in active markets.~~
Structured deposit – The fair value of the structured deposit is determined based on present value of the structured deposit, using annum yield of 3.9% or 4.1%, depending on the strike price. The strike price is at 7.3 USDCNH.
~~Loan receivable – The Company’s loan receivable is determined based on 4.5% per annum interest rate on the recent lending to Rich Fountain Limited.~~
Equity investment – The fair value of the Company’s equity investment was arrived at using the “Income Approach.” The calculation assumptions were: (i) 2% for long-term stable growth rate, (ii) 14.79%~15% for cash discount rate (rate for weighted average cost of capital), and (iii) 25% for liquidity discount rate. The Company evaluated overall economic condition and unnoted any significant change. The related equity investment does not have any negative news. Therefore, the fair value of the Company’s equity investment as of September 30, 2017 is same as December 31, 2016.
~~Government bonds – The fair value of government bonds is valued based on theoretical bond price in Taipei Exchange (formerly the Gre Tai Securities Market).~~
~~Due to related parties – The Company’s due to related parties bears no interest and payable on demand.~~
27
Convertible bonds – The Company determined the fair value of the convertible bonds is 80% of the average closing trading price for the ten (10) business days immediately prior to the conversion date.
~~Long-term loans - The fair value of the Company’s long-term loans were determined by discounted cash flows.~~
~~NOTE 25 – GEOGRAPHICAL DATA~~
consolidated amounts.
The geographical ~~distribution~~distributions of the Company’s financial information for the three ~~months ended September 30, 2017~~ and ~~2016 were as follows:~~
For three months ended September 30,
Geographical Areas 2017 2016
Revenue
Taiwan $ 13,290,282 $ 12,714,857
PRC 2,885,940 2,182,967
Hong Kong 33,633 71,079
Elimination adjustment 479 (17,558 )
Total revenue $ 16,210,334 $ 14,951,345

Income (loss) from operations
Taiwan $ 2,348,757 $ 1,661,872
PRC 284,662 (75,861 )
Hong Kong (21,353 ) 1,822
Elimination adjustment 35,487 37,848
Total income (loss) from operations $ 2,647,553 $ 1,625,681

Depreciation and amortization expenses
Taiwan $ 117,019 $ 130,343
PRC 21,415 22,180
Hong Kong 71 72
Elimination adjustment - -
Total depreciation and amortization expenses $ 138,505 $ 152,595

Interest income
Taiwan $ 101,919 $ 38,959
PRC 45 (2,254 )
Hong Kong - (1 )
Elimination adjustment (22,665 ) (5,591 )
Total interest income $ 79,299 $ 31,113

Interest expenses
Taiwan $ 25,665 $ 8,965
PRC 5,293 (1,773 )
Hong Kong - -
Elimination adjustment (22,665 ) (5,591 )
Total interest expenses $ 8,293 $ 1,601

Income tax expense
Taiwan $ 707,676 $ 456,849
PRC 129,257 (21 )
Hong Kong (5,055 ) -
Elimination adjustment - -
Total income tax expense $ 831,878 $ 456,828

Net income (loss)
Taiwan $ 1,877,187 $ 1,298,707
PRC 115,800 (88,813 )
Hong Kong (17,621 ) 10,781
Elimination adjustment 1,771 2,571
Total net income (loss) $ 1,977,137 $ 1,223,246
28
~~The geographical distribution of the Company’s financial information for the~~ nine months ended September 30, ~~2017~~2022 and ~~2016~~2021 were as follows:

Three Months Ended September 30,

(unaudited)

(unaudited)

2022

2021
Geographical Areas

Revenue

Taiwan

$
33,034,547

$
30,880,030
PRC

682,836

1,337,946
Hong Kong

257

342
Elimination adjustment

(1,069,371)

(588,818)
Total revenue

$
32,648,269

$
31,629,500

Income (loss) from operations

Taiwan

$
5,933,232

$
6,940,476
PRC

2,790,137

(87,442)
Hong Kong

(36,574)

(42,142)
Elimination adjustment

(14,475)

164,107
Total income from operations

$
8,672,320

$
6,974,999

Non-operating income (expense)

Taiwan

$
1,096,676

$
145,556
PRC

434,540

(7,097)
Hong Kong

1,732

2
Elimination adjustment

(154,852)

153,233
Total non-operating income

$
1,378,096

$
291,694

Net income (loss)

Taiwan

$
6,077,020

$
5,168,197
PRC

3,311,106

(87,708)
Hong Kong

(34,843)

(38,663)
Elimination adjustment

(169,328)

316,789
Total net income

$
9,183,955

$
5,358,615

For nine months ended September 30,
Geographical Areas 2017 2016
Revenue
Taiwan $ 41,667,540 $ 37,093,407
PRC 8,321,471 6,086,426
Hong Kong 106,147 148,664
Elimination adjustment (10,474 ) (39,384 )
Total revenue $ 50,084,684 $ 43,289,113

Income (loss) from operations
Taiwan $ 7,652,886 $ 4,549,826
PRC 447,690 (765,421 )
Hong Kong (59,649 ) (12,491 )
Elimination adjustment 101,934 100,198
Total income (loss) from operations $ 8,142,861 $ 3,872,112

Depreciation and amortization expenses
Taiwan $ 343,413 $ 392,943
PRC 66,965 62,224
Hong Kong 215 216
Elimination adjustment - -
Total depreciation and amortization expenses $ 410,593 $ 455,383

Interest income
Taiwan $ 302,630 $ 150,772
PRC 2,314 1,408
Hong Kong - -
Elimination adjustment (58,385 ) (14,958 )
Total interest income $ 246,559 $ 137,222

Interest expenses
Taiwan $ 67,385 $ 19,920
PRC 15,562 6,203
Hong Kong - -
Elimination adjustment (58,385 ) (14,958 )
Total interest expenses $ 24,562 $ 11,165

Income tax expense
Taiwan $ 2,133,024 $ 1,332,238
PRC 217,178 3,093
Hong Kong (5,055 ) -
Elimination adjustment - -
Total income tax expense $ 2,345,147 $ 1,335,331

Net income (loss)
Taiwan $ 6,382,356 $ 3,678,408
PRC 170,408 (781,726 )
Hong Kong (70,562 ) (13,882 )
Elimination adjustment 4,762 6,456
Total net income (loss) $ 6,486,964 $ 2,889,256
29
28

Table of Contents

Nine Months Ended September 30,


(unaudited)

(unaudited)


2022

2021
Geographical Areas

Revenue

Taiwan

$
95,103,196

$
92,002,783
PRC

3,115,764

4,554,515
Hong Kong

83,208

139,763
Elimination adjustment

(3,017,668)

(1,563,764)
Total revenue

$
95,284,500

$
95,133,297

Income (loss) from operations

Taiwan

$
15,012,498

$
14,800,973
PRC

1,684,570

(385,850)
Hong Kong

(36,520)

8,031
Elimination adjustment

447,370

589,836
Total income from operations

$
17,107,918

$
15,012,990

Non-operating income (expense)

Taiwan

$
2,912,665

$
1,098,589
PRC

901,271

(58,363)
Hong Kong

6,442

(114)
Elimination adjustment

(520,706)

(211,996)
Total non-operating income

$
3,299,672

$
828,116

Net income (loss)

Taiwan

$
14,598,295

$
11,590,188
PRC

2,346,980

(442,118)
Hong Kong

(30,079)

7,264
Elimination adjustment

(73,336)

377,290
Total net income

$
16,841,860

$
11,532,624

Table of Contents

The geographical distribution of the Company’s financial information as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021 were as follows:

As of

September 30, 2022

(unaudited)

December 31, 2021
Geographical Areas September 30, 2017 December 31, 2016

Capital expenditures
Reportable assets

Taiwan $ (317,455 ) $ (835,564 )

$
186,567,745

$
195,981,770
PRC (29,234 ) (148,936 )

12,643,322

12,326,308
Hong Kong - -
��

699,080

756,692
Total capital expenditures $ (346,689 ) $ (984,500 )

Elimination adjustment

(75,440,471)

(81,283,249)
Total reportable assets

$
124,469,676

$
127,781,521

Long-lived assets

Taiwan $ 1,508,431 $ 1,453,772

$
7,789,836

$
6,784,644
PRC 165,811 256,704

1,229,448

1,727,911
Hong Kong 430 648

2,422

1,287
Elimination adjustment 3,746,163 2,071,491

(2,906)

(2,905)
Total long-lived assets $ 3,746,163 $ 3,782,615

$
9,018,800

$
8,510,937

Reportable assets

Capital investments (CAPEX cash flows)

Taiwan $ 89,208,044 $ 90,388,991

$
468,569

$
595,591
PRC 11,748,446 13,325,433

33,110

79,203
Hong Kong 434,808 561,708

1,634

154
Elimination adjustment (50,258,436 ) (52,868,589 )
Total reportable assets $ 51,132,862 $ 51,407,543
Total capital investments

$
503,313

$
674,948

NOTE ~~26 – LOAN TO SHAREHOLDERS~~19 –RISKS AND UNCERTAINTIES
~~Anhou Registered Capital Increase~~
There has continued to be widespread impact from the coronavirus disease (“COVID-19”) pandemic including potentially more contagious strains of COVID-19 such as the Delta and Omicron variants. It has created significant volatility and uncertainty and economic disruption. The extent to which the pandemic impacts the Company’s business and operations will depend on numerous evolving factors, many of which are not within the Company’s control and which the Company may not be able to accurately predict, including its duration and scope; the ultimate availability, administration and effectiveness of vaccines around the world; governmental actions that have been and continue to be taken in response to the pandemic, including vaccine coverage; the impact of the pandemic on economic activity and actions taken in response; the ability of the Company’s customers to pay their insurance premiums which could impact the Company’s commission and fee revenues for the services provided; and the long-term impact of employees working from home, including increased technology costs.
On ~~April 27, 2013, China Insurance Regulatory Commission mandated any insurance agency have~~August 2, 2022, U.S. House Speaker Nancy Pelosi (“Pelosi”) visited Taiwan, which marked the first time that a ~~minimum registered capital requirement of RMB50 million (approximately $ 8 million). At the time, Anhou, a professional insurance agency with a PRC nationwide license, had a registered capital of RMB10 million (approximately $ 1.6 million). To better implement its expansion strategies, Anhou intends~~U.S. House speaker has visited Taiwan in 25 years. China’s military announced it was conducting military exercises in response to ~~increase its registered capital to RMB50 million so that it can set up new branches in any province beyond its current operations in the PRC.~~
Due to certain restriction on direct foreign investment in insurance agency business under current PRC legal requirements, Anhou sought investments from certain Investor Borrowers, as defined below in Item 2 of this part, who in turn needed funds through individual loans.
~~On June 9, 2013, AHFL entered into a loan agreement with ZLI Holdings, whereby AHFL agreed to provide a loan to ZLI Holdings of RMB40 million ($6,389,925).~~Pelosi’s visit, including joint air and sea drills and live-fire exercises near Taiwan. The ~~term for such loan is 10 years which may be extended upon the agreement~~government of the ~~parties. The loan was remitted to ZLI Holdings on August 30, 2013. In August 2013, ZLI Holdings entered into three loan agreements (“Investor Loan Agreements”) with~~P.R.C. asserts sovereignty over Taiwan, and does not recognize the ~~following independent third parties, collectively, the Investor Borrowers:~~
1. ~~Able Capital Holding Co., Ltd., a limited liability company established and registered in Hong Kong (RMB29,500,000 ($4,712,570))~~
2. ~~Ms. Chunyan Lu, PRC citizen (RMB3,000,000 ($479,244))~~
30
3. ~~Ms. Jing Yue, PRC citizen (RMB7,500,000 ($1,198,111))~~
~~The term for the above loans is 10 years which may be extended upon the agreement~~legitimacy of the ~~parties. Pursuant~~R.O.C. government. Therefore, relations between the R.O.C. and the P.R.C. and other factors affecting the political or economic conditions in Taiwan could have an adverse effect on the Company’s financial condition and results of operations, all of which are not within the Company’s control and the Company may not be able to the Investor Loan Agreements, each of the Investor Borrowers entered into a binding variable interest entity (“VIE”) agreement with Anhou, CU WFOE and certain existing shareholders of Anhou. The proceeds received from the said loans by the Investor Borrowers were solely used to increase the registered capital of Anhou. On October 20, 2013, the Investor Borrowers increased Anhou’s registered capital by RMB 40 million ($6,389,925).accurately predict at this time.

NOTE 2720 – SUBSEQUENT EVENTS
The Company does not receive the full remaining principle repayment of loan receivable from RFL. On November 1 and November 2, 2017, the Company received the interest payment of this loan amount of NTD 300,000 (approximately $9,800) and $23,832, respectively. The management has evaluated RFL's business operation and ability to repay the loan in the future and determine that RFL will be able to repay the loan per newly negotiated terms and assessed that there is no impairment loss on the loan. Therefore, the Company is willing to extend the payment period of RFL loan.
The Company has evaluated all ~~other~~ subsequent events through the date these consolidated financial statements were issued and ~~determined~~determine that there were no subsequent events or transactions that require recognition or disclosures in the consolidated financial statements.

31
30

Table of Contents

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 PRC. The Company also provides reinsurance brokerage services and insurance consulting services in Hong Kong and Taiwan. The ~~revenue from our~~percentage of reinsurance brokerage services and insurance consulting services ~~accounts for~~is less than 1% of our total revenue. The insurance products that the Company’s subsidiaries sell isare 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 92.2% and 87.7% of the Company’s total revenue for the three months ended September 30, 2022 and 2021, respectively. Total revenue from PRC segment’s sales of life insurance products were 2.1% and 3.3% of the Company’s total revenue for the three months ended September 30, 2022 and 2021, respectively.
Total revenue from Taiwan segment’s sales of life insurance products ~~accounted for 74.01%~~were 90.3% and ~~80.25%~~88.1% of the Company’s total revenue for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively. Total revenue from PRC segment’s sales of life insurance products were ~~15.67%~~2.9% and ~~12.43%~~4.3% of the Company’s total revenue for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~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~~it will be able to derive commission and fee income from that policy for an extended period of time, sometimes up to ~~twenty-five (25)~~25 years. Because of this feature and the expected ~~sustained~~sustainable growth of life insurance sales in ~~China~~the PRC and Taiwan, we have ~~focused~~invested 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~~continue being our primary source of revenue in the next several years.
(2)
Property and Casualty Insurance Products
~~Taiwan subsidiaries commenced sale of automobile insurance, casualty insurance and liability insurance business in August 2003.~~ Total revenue from Taiwan segment’s sales of property and casualty insurance products were ~~5.66%~~5.7% and ~~5.34%~~8.1% of the Company’s total revenue for the three months ended September 30, 2022 and 2021, respectively. Total revenue from PRC segment’s sales of property and casualty insurance products were nil and 0.9% of the Company’s total revenue for the three months ended September 30, 2022 and 2021, respectively.
Total revenue from Taiwan segment’s sales of property and casualty insurance products were 6.3% and 7.0% of the Company’s total revenue for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively. ~~Our CAE in PRC commenced its sales of commercial property insurance in 2009 and developed its automobile insurance business in 2010.~~ Total revenue from PRC segment’s sales of property and casualty insurance products were ~~0.93%~~0.4% and ~~1.63%~~0.5% of the Company’s total revenue for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively.

Table of Contents

As the impacts of COVID-19 and its duration remain uncertain, we have been monitoring and will continue to measure and modify our business attempting to keep our customers, sales professionals and employees healthy and safe. 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. Except for the accounting policy for disposal of subsidiary as described in Note 2 to this Form 10-Q for the quarter ended September 30, 2022, 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, 2021 and believe that of our significant accounting and reporting policies, the more critical policies include our accounting for revenue recognition and estimate of income taxes. Our significant accounting policies are described in Note 21 of “Summary of Significant Accounting Policies” included within our ~~2016~~2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission. ~~Following is a discussion~~

Results of ~~the accounting policies that we believe involve the most difficult, subjective or complex judgments and estimates.~~

~~Accrued Expenses~~

As part of the process of preparing our financial statements, we are required to estimate accrued expenses. The estimation basis of the majority of the accrued expenses is dependent on our sales force’s achievement of the sales targets identified by our clients. Examples of estimated accrued expenses include brokerage commission bonus, such as bonus payable to our sales professionals, and incentive program rewards, such as the estimated expenditures to fund the reward programs. We develop estimates of liabilities using our judgment based upon the facts and circumstances known at the time.

~~Long-term investments~~

The Company classifies its investments as available-for-sale in accordance with ASC 320 “Debt and Equity Securities,” and Investments – Debt and Equity Securities are reported at fair value. Unrealized gains and losses as a result of changes in the fair value of the available-for-sale investments are recorded as a separate component within accumulated other comprehensive income in the accompanying consolidated balance sheets.

The Company uses the cost method of accounting for investments in companies that do not have a readily determinable fair value in which it holds an interest of less than 20% and over which it does not have the ability to exercise significant influence. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established.

~~Recent Accounting Pronouncements~~

~~Refer to Note 2, Summary of Significant Accounting Policies, of our condensed consolidated financial statements for a discussion of recent accounting pronouncements and their effect, if any.~~

~~Overview of the three months~~Operations- Three Months ended September 30, ~~2017 and 2016~~

2022 Compared to Three Months ended September 30, 2021

The following table shows the results of operations for the three months ended September 30, ~~2017~~2022 and ~~2016:~~2021:

Three Months Ended
September 30,
2017 2016
(Unaudited) (Unaudited) Change Percent

Revenue $ 16,210,334 $ 14,951,345 $ 1,258,989 8 %
Cost of revenue 9,071,624 9,335,735 (264,111 ) -3 %
Gross profit 7,138,710 5,615,610 1,523,100 30 %
Gross profit margin 44 % 38 % 6 % 16 %

Operating expenses:
Selling 783,120 630,225 152,865 24 %
General and administrative 3,708,037 3,359,674 348,363 10 %
Total operating expenses 4,491,157 3,989,929 501,228 13 %

Income from operations 2,647,553 1,625,681 1,021,872 63 %

Other income (expenses):
Interest income 79,299 31,113 48,186 155 %
Interest expenses (8,293 ) (1,601 ) (6,692 ) 418 %
Dividend income 1,391 3,633 (2,242 ) -62 %
Other - net 89,065 21,248 67,817 319 %
Total other income (expenses) 161,462 54,393 107,069 197 %

Income before income tax 2,809,015 1,680,074 1,128,941 67 %
Income tax expense 831,878 456,828 375,050 82 %

Net income 1,977,137 1,223,246 753,891 62 %
Net income attributable to the noncontrolling interests 669,490 465,501 203,989 44 %
Net income attributable to parent’s shareholders 1,307,647 757,745 549,902 73 %
33
32

Table of Contents

Three Months Ended September 30,

2022

2021


(Unaudited)

(Unaudited)

Change

Percent

Revenue

$
32,648,269

$
31,629,500

$
1,018,769

3.2
%
Cost of revenue

20,014,864

17,066,959

2,947,905

17.3
%
Gross profit

12,633,405

14,562,541

(1,929,136)

(13.2)
%
Gross profit margin

38.7
%

46.0
%

(7.3)
%
(15.9)
%

Operating expenses (income):

Selling

872,974

397,628

475,346

119.5
%
General and administrative

6,351,001

7,189,914

(838,913)

(11.7)
%
Gain on disposal of nonfinancial assets in Jiangsu Law

(3,262,890)

—

(3,262,890)

—
%
Total operating expenses (income), net

3,961,085

7,587,542

(3,626,457)

(47.8)
%

Income from operations

8,672,320

6,974,999

1,697,321

24.3
%

Other income (expenses):

Interest income

232,343

116,277

116,066

99.8
%
Interest expenses

(107,046)

(47,701)

(59,345)

124.4
%
Foreign currency exchange gain (loss), net

1,240,704

(31,341)

1,272,045

(4,058.7)
%
Dividend income

7,521

499

7,022

1,407.2
%
Other - net

4,574

253,960

(249,386)

(98.2)
%
Total other income, net

1,378,096

291,694

1,086,402

372.4
%

Income before income taxes

10,050,416

7,266,693

2,783,723

38.3
%
Income tax expense

(866,461)

(1,908,078)

1,041,617

(54.6)
%

Net income

9,183,955

5,358,615

3,825,340

71.4
%
Net income attributable to noncontrolling interests

(2,284,110)

(2,338,903)

54,793

(2.3)
%
Net income attributable to China United’s shareholders

6,899,845

3,019,712

3,880,133

128.5
%

Other comprehensive items, net of tax:

(6,711,878)

208,851

(6,920,729)

(3,313.7)
%

Comprehensive income

2,472,077

5,567,466

(3,095,389)

(55.6)
%
Comprehensive income attributable to noncontrolling interests

(118,808)

(2,404,539)

2,285,731

(95.1)
%
Comprehensive income attributable to China United’s shareholders

$
2,353,269

$
3,162,927

$
(809,658)

(25.6)
%

Revenue
As a distributor of insurance products, we derive our revenue primarily from commissions and fees paid by insurance ~~and reinsurance~~ companies, typically calculated as a percentage of premiums paid by our customers to the insurance ~~and reinsurance~~ companies in Taiwan, PRC and Hong Kong. We generate revenue primarily through our sales force, which consists of individual sales ~~professionals~~agents in our distribution and service network. For the three months ended September 30, ~~2017~~2022 and ~~2016,~~2021, the ~~revenue~~revenues generated ~~respectively~~ from Taiwan, PRC and Hong Kong iswere as follows:

Geographic Areas

Three Months Ended September 30,


2022

2021

Change

Percent

Revenue









Taiwan segment

$
31,965,176

$
30,291,212

$
1,673,964

5.5
%
Percentage of revenue

97.9
%

95.8
%

PRC segment

682,836

1,337,946

(655,110)

(49.0)
%
Percentage of revenue

2.1
%

4.2
%

Hong Kong segment

257

342

(85)

(24.9)
%
Percentage of revenue

—
%

—
%

Total revenue

$
32,648,269

$
31,629,500

$
1,018,769

3.2
%

Three months ended September 30,
Geographical Areas 2017 2016
Revenue
Taiwan $ 13,290,282 $ 12,714,857
PRC 2,885,940 2,182,967
Hong Kong 33,633 71,079
Elimination adjustment 479 (17,558 )
Total Revenue $ 16,210,334 $ 14,951,345

~~During the three months ended September 30, 2017, 82.0%, 17.8% and 0.2%~~Table of Contents

Revenue from our ~~revenue in our unaudited consolidated financial statements were derived~~Taiwan segment increased by $1.7 million from Taiwan, PRC and Hong Kong, respectively. During the three months ended September 30, 2016, 85.0%, 14.6% and 0.4% of our revenue in our unaudited consolidated financial statements were derived from Taiwan, PRC and Hong Kong, respectively. The percentage of geographical revenue$30.3 million for the three months ended September 30, ~~2017 and 2016 were relatively consistent.~~

~~Total revenue increased by $1,258,989, or 8%, from $14,951,345~~2021 to $32.0 million for the three months ended September 30, ~~2016~~2022. The revenue in local currency was increased due to ~~$16,210,334~~the performance and operation bonus resulting from the sales of insurance products increase from Uniwill and Law Broker but partially offset by the foreign exchange fluctuation from the substantial depreciation of the New Taiwan Dollar against the U.S. dollar.

Revenue from our PRC segment decreased by $0.6 million from $1.3 million for the three months ended September 30, ~~2017, was mainly due~~2021 to the increase of the revenue from Strategic Alliance Agreement with AIATW in Taiwan and annuity insurance in PRC. Increase of revenue in PRC is mainly due to public awareness of financial planning and investment$0.7 million for retirement as average life span and individual economy has significantly increased over the recent years. Moreover, in anticipation of the possible adjustment on the max premium payment and the proposed change to the annuity insurance regulation in the PRC, the consumers are willing to invest their money in insurance products during the three months ended September 30, 2022. The overall insurance industry environment was declining during 2022 in PRC and customers in PRC were less willing to buy those insurance products in 2022, which resulted in the decrease of ~~this year~~revenue in the PRC segment.

Revenue 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. Revenue decrease from our Hong Kong segment for the three months ended September 30, 2022 continued compared to that of the ~~same period~~three months ended September 30, 2021 due to the termination of ~~last year.~~

certain of our reinsurance agreements and the discontinuation of travel insurance.

Cost of revenue and gross profit

The cost of revenue ~~decreased~~mainly consists of commissions paid to our sales professionals. The cost of revenue increased by ~~$264,111, or 3%,~~$2.9 million from ~~$9,335,735~~$17.1 million for the three months ended September 30, ~~2016~~2021 to ~~$9,071,624~~$20.0 million for the three months ended September 30, ~~2017.~~2022. The increase in the cost of revenue was mainly resulted from the revenue increase of both Uniwill and Law Broker. In addition, the bonuses paid to agents also increased due to the outstanding sales performance from senior agents with higher commission rates.

Consequently, the gross profit ~~was primarily due a decrease in direct cost, such as the bonuses and awards to sales professionals.~~

~~The gross profit~~margin decreased from 46.0% for the three months ended September 30, ~~2017 increased by $1,523,100 or 30%,~~2021 to ~~$7,138,710 compared to $5,615,610~~38.7% for the three months ended September 30, ~~2016. The gross profit ratio increased~~2022.

Selling expenses

Selling expenses were mainly incurred by Law Broker and Uniwill in connection with costs related to ~~44%~~marketing and advertising. For the three months ended September 30, 2022, selling expenses were $0.9 million, reflecting an increase of $0.5 million, compared with $0.4 million of selling expenses for the three months ended September 30, ~~2017 from 38% for~~2021. The increase in the selling expenses was caused by the marketing activities during the three months ended September 30, ~~2016. The increase~~2022. For the same period in ~~gross profit was primary due~~2021, the adverse impact from the outbreak of COVID-19 in Taiwan had substantially restricted our marketing activities in Taiwan, leading to ~~the increase~~less selling expenses in ~~business promotion revenue from AIATW and decrease in indirect cost.~~

~~Selling expenses~~

Selling expenses were mainly occurred in Law Broker, representing the expense for marketing promotion and selling related expenses. The selling expense for the three months ended September 30, 2017 increased by $152,865 or 24%, to $783,120 compared to $630,255 for the three months ended September 30, 2016. The increase was mainly due to increased sales conference fee.

such period.

General and administrative expenses

~~The general~~General and administrative (“G&A”) expenses are principally ~~comprise~~comprised of salaries and benefits for our administrative staff, office rental expenses, travel expenses, depreciation and amortization, entertainment expenses, and professional service ~~fees~~fees. For the three months ended September 30, 2022, G&A expenses were $6.4 million, reflecting a decrease of $0.8 million, compared with $7.2 million of G&A expenses for the three months ended September 30, 2021. The decrease in the general and administrative expenses was attributed to the ~~auditor and attorney.~~recognition of compensation costs for the issuance of shares of common stock during the three months ended September 30, 2021.

Gain on disposal of nonfinancial assets in Jiangsu Law

For the three months ended September 30, ~~2017, G&A~~2022, other operating income were $3.3 million generated from the disposal of nonfinancial assets in one of the subsidiaries, Jiangsu Law.

Other income (expenses), net

Other income mainly consisted of interest income, interest expenses, gain or loss on valuation of financial assets and foreign currency exchange gain or loss. Other income were ~~$3,708,037, increased by $348,363, or 10%,~~$1.4 million, reflecting an increase of $1.1 million, compared with ~~$3,359,674~~the other income of $0.3 million for the three months ended September 30, ~~2016, which~~2021. The increase in other income was mainly due to the ~~increased number~~foreign currency exchange gain recognized from foreign currency time deposits assets and intercompany receivable and payable because of ~~branches, personnel costs in China~~the substantial depreciation of the New Taiwan Dollar against the U.S. dollar and Chinese Yuan during the ~~increased personnel costs in Taiwan.~~

~~Other income (expenses)~~

~~Net other income for the three months ended September 30, 2017 and 2016 were $161,462 and $54,393, respectively. Other income (expense) mainly consists~~third quarter of ~~interest income, interest expenses, other income, dividend income and loss on disposal~~2022.

Table of ~~property, plant and equipment. Compared with the three months ended September 30, 2016, net other income increased due to the fluctuation of exchange rate and interest income.~~Contents

Income tax expense

For the three months ended September 30, ~~2017,~~2022, income tax expense was $0.9 million, reflecting a decrease of $1.0 million or 54.6%, compared with the income tax expense ~~was $831,878, increased by $375,050, or 82%, compared with $456,828~~of $1.9 million for the three months ended September 30, ~~2016.~~2021. The ~~increase~~decrease in income tax expense was mainly due to the ~~increased income before income tax~~reversal of valuation allowance, with respect to reason of reversal of valuation allowance, please refer to Note14.

Other comprehensive items

Other comprehensive items mainly consisted of foreign currency translation gain or loss. The foreign currency translation loss was $6.7 million, reflecting a decrease of $6.9 million, compared with foreign currency translation gain of $0.2 million for the three months ended September 30, ~~2017 compared~~2021. The decrease was mainly due to ~~that~~a larger foreign currency translation loss resulted from the substantial depreciation of the New Taiwan Dollar against the U .S. dollar for the three months ended September 30, ~~2016.~~2022.

~~The Company’s subsidiaries in Taiwan are governed by the Income Tax Law~~Results of Taiwan, and are generally subject to tax at 17% on income reported in the statutory financial statements after appropriate adjustments. In addition, the Income Tax Law of Taiwan provides that a company is taxed an additional 10% on any undistributed earnings to its shareholders.

CU WFOE and the CAE in the PRC are governed by the Income Tax Law of the PRC concerning the private enterprises, which are generally subject to tax at 25% on income reported in the statutory financial statements after appropriated adjustments, except for Jiangsu. For Jiangsu, according to the requirement of local tax authorities, the tax basis is deemed as 10% of total revenue, instead of net income.

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 profits tax at the rate of 16.5% on the estimated assessable profits.

~~Overview of the nine months~~Operations- Nine Months ended September 30 ~~2017 and 2016~~

, 2022 Compared to Nine Months ended September 30, 2021

The following table shows the results of operations for the nine months ended September 30, ~~2017~~2022 and ~~2016:~~2021:

Nine Months Ended September 30,

2022

2021


(Unaudited)

(Unaudited)

Change

Percent

Revenue

$
95,284,500

$
95,133,297

$
151,203

0.2
%
Cost of revenue

60,354,318

59,576,604

777,714

1.3
%
Gross profit

34,930,182

35,556,693

(626,511)

(1.8)
%
Gross profit margin

36.7
%

37.4
%

(0.7)
%
(1.9)
%

Operating expenses (income):

Selling

1,990,805

1,073,702

917,103

85.4
%
General and administrative

19,094,349

19,470,001

(375,652)

(1.9)
%
Gain on disposal of nonfinancial assets in Jiangsu Law

(3,262,890)

—

(3,262,890)

—
%
Total operating expenses (income), net

17,822,264

20,543,703

(2,721,439)

(13.2)
%

Income from operations

17,107,918

15,012,990

2,094,928

14.0
%

Other income (expenses):

Interest income

498,395

330,054

168,341

51.0
%
Interest expenses

(229,185)

(136,807)

(92,378)

67.5
%
Foreign currency exchange gain (loss), net

2,682,717

(130,527)

2,813,244

(2,155.3)
%
Dividend income

219,890

251,827

(31,937)

(12.7)
%
Other - net

127,855

513,569

(385,714)

(75.1)
%
Total other income, net

3,299,672

828,116

2,471,556

298.5
%

Income before income taxes

20,407,590

15,841,106

4,566,484

28.8
%
Income tax expense

(3,565,730)

(4,308,482)

742,752

(17.2)
%

Net income

16,841,860

11,532,624

5,309,236

46.0
%
Net income attributable to noncontrolling interests

(5,378,928)

(4,911,643)

(467,285)

9.5
%
Net income attributable to China United’s shareholders

11,462,932

6,620,981

4,841,951

73.1
%

Other comprehensive items, net of tax:

(13,377,127)

716,903

(14,094,030)

(1,966.0)
%

Comprehensive income

3,464,733

12,249,527

(8,784,794)

(71.7)
%
Comprehensive income attributable to noncontrolling interests

(993,950)

(5,163,181)

4,169,231

(80.7)
%
Comprehensive income attributable to China United’s shareholders

$
2,470,783

$
7,086,346

$
(4,615,563)

(65.1)
%

Nine Months Ended
September 30,
2017 2016
(Unaudited) (Unaudited) Change Percent

Revenue $ 50,084,684 $ 43,289,113 $ 6,795,571 16 %
Cost of revenue 29,746,059 27,986,021 1,760,038 6 %
Gross profit 20,338,625 15,303,092 5,035,533 33 %
Gross profit margin 41 % 35 % 6 % 17 %

Operating expenses:
Selling 1,481,423 2,094,965 (613,542 ) -29 %
General and administrative 10,714,341 9,336,015 1,378,326 15 %
Total operating expenses 12,195,764 11,430,980 764,784 7 %

Income from operations 8,142,861 3,872,112 4,270,749 110 %

Other income (expenses):
Interest income 246,559 137,222 109,337 80 %
Interest expenses (24,562 ) (11,165 ) (13,397 ) 120 %
Dividend income 331,140 272,522 58,618 22 %
Other - net 136,113 (46,104 ) 182,217 -395 %
Total other income (expenses) 689,250 352,475 336,775 96 %

Income before income tax 8,832,111 4,224,587 4,607,524 109 %
Income tax expense 2,345,147 1,335,331 1,009,816 76 %

Net income 6,486,964 2,889,256 3,597,708 125 %
Net income attributable to the noncontrolling interests 1,854,584 1,301,226 553,358 43 %
Net income attributable to parent’s shareholders 4,632,380 1,588,030 3,044,350 192 %

Table of Contents

Revenue

As a distributor of insurance products, we derive our revenue primarily from commissions and fees paid by insurance ~~and reinsurance~~ companies, typically calculated as a percentage of premiums paid by our customers to the insurance ~~and reinsurance~~ companies in Taiwan, PRC and Hong Kong. We generate revenue primarily through our sales force, which consists of individual sales ~~professionals~~agents in our distribution and service network. For the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, the ~~revenue~~revenues generated ~~respectively~~ from Taiwan, PRC and Hong Kong iswere as follows:

Geographic Areas

Nine Months Ended September 30,



2022


2021


Change

Percent

Revenue









Taiwan segment

$
92,085,528

$
90,439,019

$
1,646,509

1.8
%
Percentage of revenue

96.6
%

95.1
%

PRC segment

3,115,764

4,554,515

(1,438,751)

(31.6)
%
Percentage of revenue

3.3
%

4.8
%

Hong Kong segment

83,208

139,763

(56,555)

(40.5)
%
Percentage of revenue

0.1
%

0.1
%

Total revenue

$
95,284,500

$
95,133,297

$
151,203

0.2
%
Nine months ended September 30,
Geographical Areas 2017 2016
Revenue
Taiwan $ 41,667,540 $ 37,093,407
PRC 8,321,471 6,086,426
Hong Kong 106,147 148,664
Elimination adjustment (10,474 ) (39,384 )
Total Revenue $ 50,084,684 $ 43,289,113

~~During the nine months ended September 30, 2017, 83.2%, 16.6% and 0.2% of~~Revenue from our ~~revenue in our unaudited consolidated financial statements were derived~~Taiwan segment increased by $1.7 million from Taiwan, PRC and Hong Kong, respectively. During the nine months ended September 30, 2016, 85.7%, 14.1% and 0.3% of our revenue in our unaudited consolidated financial statements were derived from Taiwan, PRC and Hong Kong, respectively. The percentage of geographical revenue$90.4 million for the nine months ended September 30, ~~2017 and 2016 were relatively consistent.~~
36
~~Total revenue increased by $6,795,571, or 16%, from $43,289,113~~2021 to $92.1 million for the nine months ended September 30, ~~2016~~2022. The revenue in local currency was increased due to ~~$50,084,684~~the performance and operation bonus resulting from the sales of insurance products increase from Uniwill but partially offset by the foreign exchange fluctuation from the substantial depreciation of the New Taiwan Dollar against the U.S. dollar.
Revenue from our PRC segment decreased by $1.4 million from $4.5 million for the nine months ended September 30, ~~2017,~~2021 to $3.1 million for the nine months ended September 30, 2022. The overall insurance industry environment in PRC was declining during 2022 and customers in PRC were less willing to buy those insurance products in 2022, which resulted in the decrease of revenue in the PRC segment.
Revenue from the Hong Kong Segment was ~~mainly~~primarily derived from reinsurance commission on sales of insurance products from other insurers to Taiwan Life for risk management. Decrease in revenue from our Hong Kong segment for the nine months ended September 30, 2022 continued compared to that of the nine months ended September 30, 2021 due to the ~~increase~~termination of certain reinsurance agreements and the ~~revenue in Taiwan and PRC for the following reasons:~~discontinuation of travel insurance.
a) The revenue of TransGlobe Life Insurance Co., Ltd (“TransGlobe”) increased in 2017. The main reason was the launch of TransGlobe’s top seller product that offers better medical insurance coverages with an affordable insurance premium. This selling package drew more attention from the Company’s customers and boosted the sales performance for the nine months ended September 30, 2017.
b) The revenue of Taiwan Life Insurance Co., Ltd (“Taiwan Life”) increased in 2017, which was primarily due to the increase in sales of the injury and residual life insurance. This insurance guaranteed to pay 200 months no matter the insured survives or not. This selling package drew more attention from the company’s customers and raised the sales performance for the nine months ended September 30, 2017.
c)
The revenue of AIATW increased in 2017, which was primarily due to the expected appreciation of the US dollar in the future. One of AIATW’s top selling products is a life insurance offers repayment in USD, which becomes more attractive to the Company’s customers. As a result, the sales performance increased in current period compared with prior corresponding period.
d) The revenue increase in the PRC was primarily due to the increases in sales of the retirement and critical illness insurance in Sichuan for the nine months ended September 30, 2017. In light of the need to make personal provisions or old age and illness, as strongly encouraged by the Chinese government, demand for such policies increased accordingly. In addition, the China Insurance Regulatory Commission (“CIRC”) required insurance companies to make adjustments to policy designs, driving insurance companies to innovate on their products to better meet market needs. These innovations also led to increase in revenue.

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 nine months ended September 30, ~~2017 increased by $1,760,038 or 6%, to $29,746,059 compared to $27,986,021~~2022 remained consistent with the same period in 2021.
Consequently, the gross profit margin slightly decreased from 37.4% for the nine months ended September 30, ~~2016. The cost of revenue increased was mainly due~~2021 to ~~the increase of direct commission cost.~~
~~The gross profit~~36.7% for the nine months ended September 30, ~~2017 increased~~2022.
Selling expenses
Selling expenses were mainly incurred by ~~$5,035,533 or 33%, to $20,338,625~~Law Broker and Uniwill in connection with marketing and advertising. For the nine months ended September 30, 2022, selling expenses were $2.0 million, reflecting an increase of $ 0.9 million, compared ~~to $15,303,092~~with that of $1.1 million of selling expenses for the nine months ended September 30, ~~2016.~~2021. The ~~gross profit ratio increased to 41% for~~increase in the selling expenses was caused by the increase of marketing activities during the nine months ended September 30, ~~2017~~2022. For the same period in 2021, the adverse impact from ~~35% for~~the outbreak of COVID-19 in Taiwan had substantially restricted our marketing activities in Taiwan, resulting in less selling expenses during the nine months ended September 30, ~~2016. The increase in gross profit was primarily due to an increase in business promotion revenue from AIATW, and the cost~~2021.

Table of ~~revenue increased accordingly.~~Contents

~~Selling expenses~~

Selling expenses were mainly occurred in Law Broker, representing the expense for marketing promotion and selling related expense. The selling expense for the nine months ended September 30, 2017 decreased by $613,542 or 29%, to $1,481,423 compared to $2,094,965 for the nine months ended September 30, 2016. The decrease was mainly due to decreased advertising expense. The Company is already well known by the public in both Taiwan and China. In that case, we decided to reduce our advertising expenses for market promotion.

General and administrative expenses

~~The~~ General and administrative (“G&A&A”) expenses are principally ~~comprise~~comprised of salaries and benefits for our administrative staff, office rental expenses, travel expenses, depreciation and amortization, entertainment expenses, and professional service ~~fees~~fees. The decrease in the general and administrative expenses was mainly attributed to the ~~auditor and attorney.~~recognition of compensation costs for the issuance of shares of common stock for the nine months ended September 30, 2021 but partially offset by the recognition of severance pay arising from the disposal of the subsidiary Jiangsu Law in June, 2022.

Gain on disposal of nonfinancial assets in Jiangsu Law

For the nine months ended September 30, ~~2017, G&A~~2022, other operating income were $3.3 million generated from the disposal of nonfinancial assets in the subsidiary, Jiangsu Law.

Other income (expenses), net

Other income mainly consisted of interest income, interest expenses, ~~were $10,714,341, increased by $1,378,326,~~gain or ~~15%,~~loss on valuation of financial assets and foreign currency exchange gain or loss. Other income during the nine months ended September 30, 2022 was $3.3 million, reflecting an increase of $2.5 million, compared with ~~$9,336,015~~that of $0.8 million for the nine months ended September 30, ~~2016, which~~2021. The increase in other income was mainly due to the ~~increased number~~foreign currency exchange gain recognized from foreign currency time deposits assets because of ~~branches, personnel costs China~~the substantial depreciation of the New Taiwan Dollar against the U.S. dollar and ~~the increased personnel costs, rent and pension in Taiwan.~~

~~Other income (expenses)~~

~~Net other income for~~during the nine months ended September 30, 2017 was $689,250 and the net other income for the nine months ended September 30, 2016 was $352,475. Other income (expense) mainly consists of interest income, interest expenses, other income, dividend income and loss on disposal of property, plant and equipment. Compared with the nine months ended September 30, 2016, net other income increased due to the fluctuation of the exchange rate and interest income.

2022.

Income tax expense

For the nine months ended September 30, ~~2017, the~~2022, income tax expense was ~~$2,345,147, increased by $1,009,816,~~$3.6 million, reflecting a decrease of $0.7 million or ~~76%~~17.2%, compared with ~~$1,335,331~~that of $4.3 million for the nine months ended September 30, ~~2016.~~2021. The ~~increase~~decrease in tax expenses was mainly due to the ~~increased income before income tax~~reversal of valuation allowance, with respect to reason of reversal of valuation allowance, please refer to Note14.

Other comprehensive items

Other comprehensive items mainly consisted of foreign currency translation gain or loss. Foreign currency translation loss were $13.4 million, reflecting a decrease of $14.1 million, compared with foreign currency translation gain of $0.7 million for the nine months ended September 30, ~~2017 compared~~2021. The decrease was mainly due to ~~that~~a larger foreign currency translation loss resulted from the substantial depreciation of the New Taiwan Dollar against the U.S. dollar for the nine months ended September 30, ~~2016.~~2022.

The Company’s subsidiaries in Taiwan are governed by the Income Tax Law of Taiwan, and are generally subject to tax at 17% on income reported in the statutory financial statements after appropriate adjustments. In addition, the Income Tax Law of Taiwan provides that a company is taxed an additional 10% on any undistributed earnings to its shareholders.

Liquidity and Capital Resources

The following table ~~represents~~presents a comparison of the net cash provided by operating activities, net cash used in investing activities and net cash provided by ~~(used in)~~ financing activities for the ~~nine months~~nine-month periods ended September 30, ~~2017~~2022 and ~~2016:~~2021:

Nine Months Ended September 30,


2022

2021

Change

Percent

Net cash provided by operating activities

$
12,233,715

$
8,968,709

$
3,265,006

36.4
%
Net cash used in investing activities

(14,499,782)

(4,061,826)

(10,437,956)

257.0
%
Net cash provided by financing activities

2,445,876

3,886,078

(1,440,202)

(37.1)
%
Nine Months Ended September 30,
2017 2016 Change Percent
Net cash provided by operating activities $ 6,137,729 $ 4,380,800 1,756,929 40 %
Net cash used in investing activities (16,065,111 ) (29,919 ) (16,035,192 ) 53595 %
Net cash provided by (used in) financing activities 261,308 (387,538 ) 648,846 -167 %

Operating activities
Net cash provided by operating activities during the nine months ended September 30, ~~2017~~2022 was ~~$6,137,729, significantly increased~~$12.2 million, reflecting an increase of $3.3 million or 36.4% in comparison with ~~$4,380,800 net cash provided by operating activities~~that of $8.9 million during the nine months ended September 30, ~~2016.~~2021. The increase in cash inflows was mainly due to higher net income and the ~~increase~~collection form accounts receivable for the nine months ended September 30, 2022 compared with that of the same period in ~~net income.~~2021.

Table of Contents

Investing activities

Net cash used in investing activities ~~was $16,065,111~~ during the nine months ended September 30, ~~2017, which is mainly due to net cash outflows from purchase~~2022 was $14.5 million, reflecting an increase of ~~structured deposit, time deposits and marketable securities during the period. The net cash used~~$10.4 million or 257.0% in ~~investing activities was $29,919~~comparison with that of $4.1 million for the nine months ended September 30, ~~2016, which is~~2021. Increases in the cash used in the investing activities mainly ~~due to~~resulted from the ~~net cash outflows from purchase~~increase of the purchases of time deposits ~~property, plant~~during nine months ended September 30, 2022. However, the cash outflow was offset by proceeds from disposal of nonfinancial assets in subsidiary and ~~equipment and intangible assets during the period, which outweighed the~~proceeds from maturities of time deposits.

Financing activities

Net cash provided by financing activities was ~~$261,308~~$2.4 million during the nine months ended September 30, ~~2017,~~2022, which isdecreased by $1.4 million from that of $3.8 million during the ~~result~~same period of 2021. The decrease was mainly due to the decrease in net proceeds from additional borrowings under the ~~Company’s~~revolving credit agreements and partially offset by the decrease of repayment of related party ~~borrowings. The net cash used in financing activities was $387,538 for~~borrowings during the nine months ended September 30, ~~2016, which is the result of repayment for the borrowings from~~2022.

Contractual Obligations

There have been no significant changes to the Company’s ~~related parties and third parties.~~

~~Related Party Loan and Loans to Unrelated Third Parties~~

~~Anhou Registered Capital Increase~~

On April 27, 2013, the China Insurance Regulatory Commission (“CIRC”) issued the Decision on Revising the Provisions of the Supervision and Administration of Specialized Insurance Agencies (the “Decision on Revising the Agency Provisions”), pursuant to which, CIRC mandated any insurance agency established subsequent to the Decision on Revising the Agency Provisions to meet a minimum registered capital requirement of RMB50 million (~~approximately $8 million~~). On May 16, 2013, CIRC issued Notice for Further Clarification on Related Issues of Access to Professional Insurance Intermediary Market (the “Notice”), pursuant to which, professional insurance agencies established prior to the issuance of the Decision on Revising the Agency Provisions, with registered capital less than RMB50 million (~~approximately $8 million~~) can continue to operate its existing business within the provinces where they have a registered office or branch office, but shall not set up any new branches in any provinces where it has no registered office or a branch office.

Prior to the capital increase, Anhou, a professional insurance agency with a PRC nationwide license, used to have a registered capital of RMB10 million (approximately $1.6 million). The branch offices of Anhou currently were all in Henan province. To better implement its expansion strategies, Anhou intended to increase its registered capital to RMB50 million (~~approximately $8 million)~~ ~~to meet the requirement of CIRC so that it can set up new branches in any province beyond its current operations~~contractual obligations as disclosed in the ~~PRC.~~Company’s 2021 Annual Report on Form 10-K.

Off Balance Sheet Arrangements

~~On June 9, 2013, AHFL entered into a Loan Agreement (the “Company Loan Agreement”) with ZLI Holdings, its wholly-owned Hong Kong subsidiary.~~

Under the Company Loan Agreement, AHFL agreed to provide a loan to ZLI Holdings with the principal amount equal to the US Dollar equivalent of RMB40,000,000 ($6,389,925). The term for such was ten years which could be extended upon the agreement of the parties. The amount of such loan was remitted to the account of ZLI Holdings on August 30, 2013.

In August 2013, ZLI Holdings entered into the Investor Loan Agreements with the following unrelated parties: Able Capital Holding Co., Ltd., a limited liability company established and registered in Hong Kong, Mr. Chen Li and Ms. Yue Jing, both PRC citizens (collectively, the “Investor Borrowers”).

Due to certain restrictions on direct foreign investment in insurance agency business under current PRC legal regime, Anhou had sought certain investments made by the Investor Borrowers and they may need funds through individual loans. Upon the completion of the contemplated increase of registered capital of Anhou, each Investor Borrower shall, or cause their designated persons to, enter into the Variable Interest Entities Agreement with CU WFOE, Anhou and other parties so as to consolidate any additional VIE interest generated from the said registered capital increase into the Company.

~~On November 17, 2016, Li Chen transferred his interests in Anhou to Chunyan Lu for an aggregate consideration of RMB3 million.~~

Under the Investor Loan Agreements, the Investor Borrowers loaned cash from ZLI Holdings for their investment in Anhou and ZLI Holdings agreed to provide certain loans to each of the Investor Borrowers with an aggregate principal amount equal to the US Dollar equivalent of RMB40,000,000 ($6,389,925). The term for such loans was ten years which could be extended upon the agreement of the parties. Pursuant to the Investor Loan Agreements, each of the Investor Borrowers covenants to enter into certain Variable Interest Entities Agreements with Anhou, CU WFOE and certain existing shareholders of Anhou. The proceeds received from the said loans by the Investor Borrowers shall be solely used to increase the registered capital of Anhou, and ZLI Holdings may determine the repayment methods including transferring of the Investor Borrowers’ corresponding registered capital in Anhou or through other manner as full payment of the loans subject to terms and conditions therein in the event that the Investor Borrowers fail to repay the loan in currency to ZLI Holdings.

The ~~specific amounts loaned to the Investor Borrowers were as follows:~~

~~Able Capital Holding Co., Ltd.: RMB29,500,000 ($4,712,570)~~

~~Ms. Lu: RMB3,000,000 ($479,244)~~

~~Ms. Yue: RMB7,500,000 ($1,198,111)~~

~~On October 20, 2013, the Investor Borrowers, through certain nominees, increased Anhou’s registered capital by RMB 40 million ($6,389,925).~~

~~Loan Receivable~~

~~On October 24, 2016, our~~ Company entered into a loan agreement with a third party, RFL, which was incorporated under the laws of Samoa. We provided a short-term loan amount of NTD 48,000,000 ($1,486,846) to RFL. The short-term loan bears an interest rate of 4.5% per annum and the principal and interest are due on April 23, 2017. On April 21, 2017, the Company and RFL entered a supplemental agreement to extend the loan to October 23, 2017. As of September 30, 2017, the outstanding balance of the loan receivable is NTD44,790,360($1,477,060).~~On November 1 and November 2, 2017, the Company received the interest payment of this loan amount of NTD 300,000 (approximately $9,800) and $23,832, respectively~~. The management has evaluated RFL's business operation and ability to repay the loan in the future and determine that RFL will be able to repay the loan per newly negotiated terms and assessed that there ishad no ~~impairment loss on the loan. Therefore, the Company is willing to extend the payment period of RFL loan.~~

~~Due to related parties~~

~~The related parties listed below loaned money to the Company for working capital. Due to related parties consisted of the following~~off-balance sheet arrangements as of September 30, ~~2017 and December 31, 2016:~~2022.

September 30,
2017 December 31,
2016
Due to Mr. Mao (CEO of the Company) $ 401,775 $ 361,379
Due to Ms. Lu (Shareholder of Law Anhou) 225,411 -
Due to Xude Investment (Owned by Mr. ChwanHau Li) - 32,374
Due to Mr. Zhu (Legal Representative of Jiangsu) 2,081 1,994
Due to Yuli Broker (Owned by Ms. Lee) 141 265
Due to Yuli Investment (Owned by Ms. Lee) 141 265
Due to I Health Management Corp* 17,313 3,724
Total $ 646,862 $ 400,001
*25% of I Health Management Corp’s shares are owned by Multiple Capital Enterprise. 24% of Multiple Capital Enterprise’s shares are owned by the Company’s management level
~~The loan due to related parties bore no interest and were payable on demand.~~
~~Convertible bonds~~
On June 23, 2016, the Company has issued two units of its convertible bonds with an aggregate principal amount of $200,000 to a non-US person and the value of the embedded derivatives liabilities is trivial. As of September 30, 2017 and December 31, 2016, the Company has an outstanding principal balance of $200,000 of convertible bonds. Total interest expense was $3,000 and $9,000 for the three and nine months ended September 30, 2017.
~~Long-term loan~~
September 30,
2017 December 31,
2016
Loan B, interest at 8%, maturity date May 15, 2019 $ 150,274 $ 144,015
Loan C, interest at 8%, maturity date July 20, 2019 115,711 110,892
Total long-term loans $ 265,985 $ 254,907
40
On May 15, 2016, the Company’s contractually controlled affiliate in PRC, Law Anhou Insurance Agency Co., Ltd (“Anhou” or “Law Anhou”), entered into a loan agreement (“Loan B”) with a third party. The long-term Loan Agreement provided for a $150,274 loan to the Company. Loan B bears an interest rate of 8% per annum and interest is payable annually. The principal and the interest will be due on May 15, 2019.
On July 20, 2016, Anhou entered into a loan agreement (“Loan C”) with a third party. The long-term Loan Agreement provided for a $115,711 loan to the Company. Loan C bears an interest rate of 8% per annum and interest is payable annually. The principal and the interest will be due on July 20, 2019.
~~The total interest expense for both Loan B and Loan C was $5,293 and $15,562 for the three and nine months ended September 30, 2017.~~
~~Contractual Obligations~~
~~Operating Leases~~
The Company has operating leases for its offices. Rental expenses for the three months ended September 30, 2017 and 2016 were $595,277 and $526,390, respectively. Rental expenses for the nine months ended September 30, 2017 and 2016 were $1,832,335 and $1,557,725, respectively. As of September 30, 2017, total future minimum annual lease payments under operating leases were as follows, by years:
Twelve months ending September 30, 2018 $ 2,049,071
Twelve months ending September 30, 2019 1,166,015
Twelve months ending September 30, 2020 245,873
Twelve months ending September 30, 2021 55,088
Twelve months ending September 30, 2022 17,687
Thereafter -
Total $ 3,553,734
~~AHFL Acquisition Agreement~~
The Company conducts all of its Taiwanese operations indirectly through its subsidiary AHFL and the revenue from such Taiwanese operations represented approximately 90% of our total revenue in our consolidated financial statements for the year ended December 31, 2015 and the quarter ended June 30, 2016, and such operations were also the source of all of our profits in 2015. On February 17, 2016, the Company and the selling shareholders of AHFL entered into a third Amendment to the AHFL Acquisition Agreement (the “Third Amendment”), pursuant to which, on or prior to June 30, 2016, (i) the Company is committed to complete the listing of the Company’s shares in a major capital market, where the net proceeds raised through such public offering financing shall be at least US$10,000,000; (ii) the Company is committed to distribute the cash payment in the amount of NTD22.5 million (US$312,617), on a pro rata basis, to the selling shareholders of AHFL and issue 5 million common shares to its selected employees pursuant to its employee stock/option plan, or any alternative plan mutually accepted by the Company and such selling shareholders; and (iii) failure to timely complete either of the above-mentioned criteria shall be deemed as a material breach of the Company under Article 8 of the Acquisition Agreement, whereby the non-breaching party shall be entitled to terminate the Acquisition Agreement and unwind the Acquisition of AHFL by CUIS and restore the status quo of the Company and the selling shareholders (the “Selling Shareholders”) as if the said acquisition had never happened.
On August 8, 2016, the Company and the selling shareholders of AHFL entered into a fourth Amendment to the Acquisition Agreement (the “Fourth Amendment”), pursuant to which: (A) the Third Amendment is terminated with immediate effect on August 8, 2016, and (B) Sections 2.2(iii) and (iv) of the Acquisition Agreement are amended and restated so that the Company is now obligated to: (iii) pay NTD15 million (USD475,406) to the Selling Shareholders in the amounts set forth opposite each Selling Shareholder’s name on Schedule I on or prior to March 31, 2017 or at any other time or in any other manner otherwise agreed upon by and among the parties; and (iv) pay NTD4,830,514 (USD153,097) to the Selling Shareholders in the amounts set forth opposite each Selling Shareholder’s name on Schedule I on July 21, 2016. Unless amended by the Fourth Amendment, any other provision of the Acquisition Agreement shall remain unchanged. On July 21, 2016, the Company arranged for the payment of NTD4,830,514 (USD153,097) to the Selling Shareholders. As a result, the former shareholders of AHFL no longer have the right to unwind the acquisition of AHFL by the Company. On March 12, 2017, the Company and the selling shareholders of AHFL entered into a fifth Amendment to the Acquisition Agreement (the “Fifth Amendment”), pursuant to which, on or prior to March 31, 2019, the Company agreed to distribute the cash payment in the amount of NTD15 million.
41
~~Engagement Agreement with Ms. Chao~~
On May 10, 2016, Law Broker entered into the Engagement Agreement with Ms. Chao, pursuant to which she acts as the general manager of Law Broker for a term from December 29, 2015 to December 28, 2018. Ms. Chao’s primary responsibilities are to assist Law Broker in operating and managing insurance agency business. According to the Engagement Agreement, Ms. Chao’s bonus plans include: 1) execution, 2) long-term service fees, 3) pension and 4) non-competition, and the payment of such bonuses will only occur upon satisfaction of certain condition and subject to the terms therein, among which, Ms. Chao acts as the general manager or equivalent position of Law Broker for at least 3 years.
On May 14, 2016, Law Broker and Ms. Chao entered into a supplementary agreement (“Supplementary Agreement”) to postpone her pension vesting date to December 29, 2016. Though Law Broker expects that none of the above-mentioned bonuses need to be paid prior to May 2019, it has recorded long-term liabilities representing the corresponding portion of such bonuses accrued. On March 13, 2017, Law Broker and Ms. Chao entered into an engagement agreement, which is the amendment to Engagement Agreement dated May 10, 2016 to specify 1) Ms. Chao’s pension calculation assumption and start date, and 2) the non-competition provision start date. As of September 30, 2017 and December 31, 2016, the balance of such accrued long-term liabilities was $175,191 and $77,440, respectively.
~~Lease Agreements~~
On July 1, 2016, the Company entered into a lease agreement with Yuli Broker to lease its Nan-King East Road office space in Taipei City. The lease term was for one year commencing on July 1, 2016 and ending on June 30, 2017, with an annual base rent approximately of $590 (NTD18,000). On June 30, 2017, this lease agreement was extended automatically to June 30, 2018. For the three and nine months ended September 30, 2017, rent income were $141 and $421, respectively.
On July 1, 2016, the Company entered into a lease agreement with Yuli Investment to lease its Nan-King East Road office space in Taipei City. The lease term was for one year commencing on July 1, 2016 and ending on June 30, 2017, with an annual base rent approximately of $590 (NTD18,000). On June 30, 2017, this lease agreement was extended automatically to June 30, 2018. For the three and nine months ended September 30, 2017, rent income were $141 and $421, respectively.
~~Advisory Agreements~~
On May 2, 2016, the Company entered into an advisory agreement with I Health. Pursuant to the Advisory Agreement, I Health provided 10,000 Taiwan citizen’s health information to the Company for its new insurance product during May 2, 2016 to May 1, 2017. The total advisory fee was approximately $42,000 (NTD1,275,000). For the nine months ended September 30, 2017, The Company had cost of revenue related to I Health amount of $13,269.
On December 7, 2016, the Company entered into an advisory agreement with Fuchang Li (“Mr. Li,” the Director of the Company). Pursuant to this Advisory Agreement, Mr. Li provided investment consulting to the Company from December 7, 2016 to December 6, 2017. The total advisory fee was approximately $58,000 (NTD1,800,000). The Company had general and administrative expense related to this advisory agreement amount of $13,619 and $42,998, respectively, for the three and nine months ended September 30, 2017.
~~Consulting Agreement~~
On November 1, 2016, the Company entered into a consulting agreement with Apex Biz Solution Limited. (“Apex,” was formerly known as Prime Technology Corp.), which has one of the same directors as Prime Financial Asia Ltd. Pursuant to this consulting agreement, the Company provided administrative operation consulting service to Apex from November 1, 2016 to December 31, 2021. As of and for the nine months ended September 30, 2017, the Company had account receivable and revenue amount of $17,274 and $33,874, respectively.
~~Off Balance Sheet Arrangements~~
We have not participated in any transactions with unconsolidated entities, such as special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.
42
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarilyAs a ~~result of fluctuations in interest rates and foreign currency exchange rates.~~
~~Interest Rate Sensitivity~~
As of September 30, 2017, we had cash of USD approximately $10,000, cash of RMB8,227,876 (equivalent to approximately $1,236,000), cash of HKD417,620(equivalent to approximately $53,000), and cash of NTD314,260,180 (equivalent to approximately $10,363,000). We hold our cash for working capital purposes. Declines in interest rates would reduce future interest income. For the nine months ended September 30, 2017, the effect of a hypothetical 10% increase or decrease in overall interest rates would not have had a material impact on our interest income.
~~Foreign Currency Risk~~
The functional currency for the subsidiaries in Taiwan is NTD, the functional currency for the subsidiaries in Hong Kong is HKD and the functional currency for the subsidiaries and CAE in PRC is RMB. The financial statementssmaller reporting company as defined by Rule 12b-2 of the ~~Company~~Exchange Act, we are ~~in USD. The fluctuation of NTD and RMB will affect our operating results expressed in USD. The Company reviews its foreign currency exposures. To date, we have~~ not ~~entered into any hedging arrangements with respect~~required to ~~foreign currency risk or other derivative financial instruments. The management does not consider its present foreign exchange risk to be significant.~~provide the information under this item.

43
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
~~As required by SEC~~We maintain disclosure controls and procedures, as such term is defined under Rule ~~13a-15(b)~~13a-15(e) promulgated under the ~~Securities~~ Exchange ~~Act~~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 ~~1934, as amended (the “Exchange Act”),~~achieving the ~~Company carried out an evaluation, under~~desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit of possible controls and procedures.
Under the supervision and with the participation of ~~the Company’s~~ management, including ~~the Company’s Chief Executive Officer~~our principal executive officer and ~~Chief Financial Officer,~~principal financial officer, we conducted an evaluation of the effectiveness of ~~the design and operation of the Company’s~~our disclosure controls and procedures ~~(as defined in Rule 13a-15(e) under the Exchange Act)~~ as of ~~September 30, 2017.~~the end of the period covered by this report. Based on ~~that~~this evaluation, our ~~management, including the Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer,~~principal financial officer have concluded that ~~as of September 30, 2017,~~ our disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 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 annual report on Form 10-K for the year ended December 31, 2021. The material weaknesses have not been remediated as of September 30, 2022. We continue to ~~ensure~~work on the ~~information required~~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 2021 Form 10-K are fully implemented and concluded to be ~~disclosed by an issuer in the reports it files~~operating effectively.
A material weakness is a deficiency, or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms relating to us, and was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectivenesscombination of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
~~Changes~~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 2021 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.

Table of Contents

Changes in Internal Control over Financial Reporting

During the ~~nine months~~fiscal quarter ended September 30, ~~2017,~~2022, there were no changes in our internal control over financial reporting ~~identified in connection with the evaluation performed during the fiscal quarter covered by this report~~ that ~~has~~have materially affected, or isare 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.

Table of Contents

PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
During the three months ended September 30, 2022, we were not aware of any 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. However, litigation~~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. ~~We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.~~

ITEM 1A. RISK FACTORS.
As a smaller reporting company, we are not required to make disclosure under this item.
~~There have been no material changes from the risk factors disclosed in our annual report on Form 10-K for the fiscal year period ended December 31, 2016.~~
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Not applicable during this reporting period.
~~None.~~
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable during this reporting period.
~~None.~~
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

ITEM 5. OTHER ~~INFORMATION.~~INFORMATION
Not applicable during this reporting period.

~~Resignation of Officers~~
On August 30, October 2 and November 3, 2017, Mr. Te Yun Chiang, Mr. Wen Yuan Hsu and Mr. Tung-Chi Hsieh resigned as Chief Technology Officer, Chief Marketing Officer and Chief Operating Officer of the Company, respectively.
Though Mr. Chiang, Mr. Hsu and Mr. Hsieh held the titles of Chief Operating Officer, Chief Marketing Officer and Chief Technology Officer of the Company, respectively, before their resignations, they had not performed executive functions in the Company’s overall operations that may have been indicated by their respective titles. Their resignations will avoid ambiguity with respect to their duties and roles in the Company’s overall operations. There is no disagreement between the Company on the one hand, and Mr. Chiang, Mr. Hsieh and Mr. Hsu on the other hand, relating to the Company’s operations, policies and practices.
Subsequent to the resignations, Mr. Chiang will continue serving as the Manager of Jiangsu Law Insurance Brokers Co., Ltd. (“Jiangsu Law”), Mr. Hsieh will continue serving as the Division Chief of Management of Jiangsu Law, and Mr. Hsu will continue serving as the General Manager of Sichuan Kangzhuang Insurance Agency Co., Ltd., all of which are the Company’s CAEs in the PRC. In view of the continuous expansion of these CAEs, Mr. Chiang, Mr. Hsieh and Mr. Hsu and the Company have agreed they should dedicate substantially all of their time and efforts to serve their managerial functions in such CAEs.
45
40

Table of Contents

ITEM 6. EXHIBITS

~~Exhibit~~
~~Number~~
Exhibit
Number
Description of Exhibit
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1*
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS

~~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.

46
41

Table of Contents

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: November ~~9, 2017~~14, 2022
~~By:~~

By:
/s/ ~~Yi Hsiao~~Yi-Hsiao Mao

~~Name:~~

~~Yi Hsiao~~
Name:
Yi-Hsiao Mao

~~Its:~~

Its:
Chief Executive Officer

(Principal Executive Officer)

Date: November ~~9, 2017~~14, 2022
~~By:~~

By:
/s/ ~~Yung Chi Chuang~~Mei-Kuan Yeh

~~Name:~~

~~Yung Chi Chuang~~
Name:
Mei-Kuan Yeh

~~Its:~~

Its:
Chief Financial Officer

(Principal Financial and Accounting Officer)

Delaware	30-0826400
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

Large accelerated filer¨☐	Accelerated filerx☐
Non-accelerated filer¨ ~~(Do not check if a smaller reporting company)~~☒	Smaller reporting company¨☒
	Emerging growth company¨☐

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

~~PART I.~~	~~FINANCIAL INFORMATION~~	5
PART I.		FINANCIAL INFORMATION		5

ITEM 1.		UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ~~(UNAUDITED)~~		5

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32	31

ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	43	38

ITEM 4.		CONTROLS AND PROCEDURES	44	38

PART II.		OTHER INFORMATION	45	40

ITEM 1.		LEGAL PROCEEDINGS	45	40

ITEM 1A.		RISK FACTORS	45	40

ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	45	40

ITEM 3.		DEFAULTS UPON SENIOR SECURITIES	45	40

ITEM 4.		MINE SAFETY DISCLOSURES	45	40

ITEM 5.		OTHER INFORMATION	45	40

ITEM 6.	~~EXHIBITS~~	46 EXHIBITS		41

SIGNATURES		47		42


	September 30,		December 31,
(Amount in USD)	2022		2021
ASSETS
Current assets
Cash and cash equivalents	$	14,461,123	$	18,234,350
Time deposits		71,563,061		64,299,176
Accounts receivable		14,499,574		26,761,678
Contract assets		5,518,599		—
Marketable securities		753,345		—
Other current assets		873,505		1,207,496
Total current assets		107,669,207		110,502,700

Right-of-use assets under operating leases		7,455,797		6,449,182
Property and equipment, net		1,563,003		2,061,755
Intangible assets, net		294,088		333,118
Long-term investments		2,301,718		2,696,812
Restricted cash – noncurrent		14,939		88,282
Deferred tax assets		1,006,604		909,032
Other assets		4,164,320		4,740,640
TOTAL ASSETS	$	124,469,676	$	127,781,521

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Commission payable to sales professionals	$	10,616,215	$	14,003,541
Short-term loans		20,033,483		18,835,932
Contract liabilities - current		87,097		—
Income tax payable - current		2,365,627		3,893,047
Operating lease liabilities - current		3,420,600		3,059,329
Due to related parties		6,593		50,531
Other current liabilities		8,881,520		13,997,603
Total current liabilities		45,411,135		53,839,983

Contract liabilities - noncurrent		1,348,875		—
Income tax payable - noncurrent		299,797		539,636
Operating lease liabilities - noncurrent		3,961,006		3,298,089
Net defined benefit liabilities - noncurrent		339,163		389,198
Other liabilities		472,106		541,754
TOTAL LIABILITIES		51,832,082		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 September 30, 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 September 30, 2022 and December 31, 2021, respectively		303		303
Additional paid-in capital		9,296,953		9,296,953
Statutory reserves		11,091,633		11,101,064
Retained earnings		25,162,731		13,690,368
Accumulated other comprehensive (loss) income		(4,327,301)		4,664,848
Total stockholders’ equity attributable to China United’s shareholders		41,224,329		38,753,546
Noncontrolling interests		31,413,265		30,419,315
TOTAL STOCKHOLDERS’ EQUITY		72,637,594		69,172,861
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	124,469,676	$	127,781,521

	September 30, 2017		December 31, 2016
	(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents	$	11,663,265	$	20,169,455
Time deposits		21,475,432		5,352,347
Marketable securities		32,867		2,426,870
Structured deposit		1,205,162		-
Accounts receivable, net		7,217,051		15,774,159
Other current assets		2,274,353		1,890,551
Total current assets		43,868,130		45,613,382

Property, plant and equipment, net		927,062		926,905
Intangible assets		747,610		784,219
Goodwill		2,071,491		2,071,491
Long-term investments		1,368,950		1,285,064
Other assets		2,149,619		726,482
TOTAL ASSETS	$	51,132,862	$	51,407,543

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Tax payable	$	2,356,626	$	2,249,869
Convertible bonds		200,000		-
Due to related parties		646,862		400,001
Other current liabilities		10,420,828		18,639,909
Total current liabilities		13,624,316		21,289,779

Convertible bonds - noncurrent		-		200,000
Long-term loans		265,985		254,907
Long-term liabilities		4,898,335		5,315,327
TOTAL LIABILITIES		18,788,636		27,060,013

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.00001, 10,000,000 authorized, 1,000,000 issued and outstanding		10		10
Common stock, par value $0.00001, 100,000,000 authorized, 29,452,669 issued and outstanding		295		295
Additional paid-in capital		8,190,449		8,157,512
Statutory reserves		5,054,720		3,799,585
Retained earnings		6,663,807		3,286,562
Accumulated other comprehensive gain/(loss)		168,008		(667,976	)
Stockholders’ equity attribute to parent’s shareholders		20,077,289		14,575,988
Noncontrolling interests		12,266,937		9,771,542
TOTAL STOCKHOLDERS’ EQUITY		32,344,226		24,347,530
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	51,132,862	$	51,407,543

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016

Revenue	$	16,210,334		$	14,951,345		$	50,084,684		$	43,289,113
Cost of revenue		9,071,624			9,335,735			29,746,059			27,986,021

Gross profit		7,138,710			5,615,610			20,338,625			15,303,092

Operating expenses:
Selling		783,120			630,255			1,481,423			2,094,965
General and administrative		3,708,037			3,359,674			10,714,341			9,336,015
Total operating expenses		4,491,157			3,989,929			12,195,764			11,430,980

Income from operations		2,647,553			1,625,681			8,142,861			3,872,112

Other income (expenses):
Interest income		79,299			31,113			246,559			137,222
Interest expenses		(8,293	)		(1,601	)		(24,562	)		(11,165	)
Dividend income		1,391			3,633			331,140			272,522
Other - net		89,065			21,248			136,113			(46,104	)
Total other income (expenses)		161,462			54,393			689,250			352,475

Income before income tax		2,809,015			1,680,074			8,832,111			4,224,587
Income tax expense		831,878			456,828			2,345,147			1,335,331

Net income		1,977,137			1,223,246			6,486,964			2,889,256
Net income attributable to the noncontrolling interests		669,490			465,501			1,854,584			1,301,226
Net income attributable to parent’s shareholders		1,307,647			757,745			4,632,380			1,588,030

Other comprehensive items
Foreign currency translation gain		48,149			260,981			793,090			378,217
Other		175			-			42,894			(1,593	)

Other comprehensive income attributable to parent’s shareholders		48,324			260,981			835,984			376,624
Other comprehensive items attributable to noncontrolling interests		23,405			249,160			640,811			408,827

Comprehensive income attributable to parent’s shareholders	$	1,355,971		$	1,018,726		$	5,468,364		$	1,964,654

Comprehensive income attributable to noncontrolling interests	$	692,895		$	714,661		$	2,495,395		$	1,710,053

Weighted average shares outstanding:
Basic		29,452,669			29,452,669			29,452,669			29,452,669
Diluted		30,521,407			30,478,667			30,521,407			30,462,097

Net income per share attributable to parent’s shareholder:
Basic	$	0.044		$	0.026		$	0.157		$	0.054
Diluted	$	0.043		$	0.025		$	0.152		$	0.052



	Three Months Ended September 30,				Nine Months Ended September 30,
(Amount in USD)	2022		2021		2022		2021
Revenue	$	32,648,269	$	31,629,500	$	95,284,500	$	95,133,297
Cost of revenue		20,014,864		17,066,959		60,354,318		59,576,604

Gross profit		12,633,405		14,562,541		34,930,182		35,556,693

Operating expenses (income):
Selling		872,974		397,628		1,990,805		1,073,702
General and administrative		6,351,001		7,189,914		19,094,349		19,470,001
Gain on disposal of nonfinancial assets in Jiangsu Law		(3,262,890)		—		(3,262,890)		—
Total operating expense (income), net		3,961,085		7,587,542		17,822,264		20,543,703

Income from operations		8,672,320		6,974,999		17,107,918		15,012,990

Other income (expenses):
Interest income		232,343		116,277		498,395		330,054
Interest expenses		(107,046)		(47,701)		(229,185)		(136,807)
Foreign currency exchange gain (loss), net		1,240,704		(31,341)		2,682,717		(130,527)
Dividend income		7,521		499		219,890		251,827
Other - net		4,574		253,960		127,855		513,569
Total other income, net		1,378,096		291,694		3,299,672		828,116

Income before income taxes		10,050,416		7,266,693		20,407,590		15,841,106
Income tax expense		(866,461)		(1,908,078)		(3,565,730)		(4,308,482)

Net income		9,183,955		5,358,615		16,841,860		11,532,624
Less: net income attributable to noncontrolling interests		(2,284,110)		(2,338,903)		(5,378,928)		(4,911,643)
Net income attributable to China United’s shareholders		6,899,845		3,019,712		11,462,932		6,620,981

Other comprehensive items, net of tax:
Foreign currency translation gain (loss)		(6,711,878)		208,852		(13,377,127)		716,540
Other		—		(1)		—		363
Total other comprehensive gain (loss)		(6,711,878)		208,851		(13,377,127)		716,903

Comprehensive income		2,472,077		5,567,466		3,464,733		12,249,527
Less: comprehensive income attributable to noncontrolling interests		(118,808)		(2,404,539)		(993,950)		(5,163,181)

Comprehensive income attributable to China United’s shareholders	$	2,353,269	$	3,162,927	$	2,470,783	$	7,086,346

Weighted average shares outstanding:
Basic and diluted		30,286,199		29,421,736		30,286,199		29,421,736

Earnings per share attributable to common stockholders of China United:
Basic and diluted	$	0.220	$	0.099	$	0.366	$	0.218


												Accumulated
								Additional				Other
	Common			Preferred				Paid-in		Statutory		Comprehensive		Retained				Noncontrolling		Total
(Amount in USD)	Stock	Amount		Stock		Amount		Capital		Reserves		Income (loss)		Earnings		Total		Interests		Equity
Balance June 30, 2022	30,286,199	$	303		1,000,000	$	10	$	9,296,953	$	11,091,448	$	219,275	$	18,263,071	$	38,871,060	$	31,294,457	$	70,165,517

Appropriation of reserves	—		—		—		—		—		185		—		(185)		—		—		—
Foreign currency translation loss	—		—		—		—		—		—		(4,546,576)		—		(4,546,576)		(2,165,302)		(6,711,878)
Other comprehensive income	—		—		—		—		—		—		—		—		—		—		—
Net income	—		—		—		—		—		—		—		6,899,845		6,899,845		2,284,110		9,183,955

Balance September 30, 2022	30,286,199	$	303		1,000,000	$	10	$	9,296,953	$	11,091,633	$	(4,327,301)	$	25,162,731	$	41,224,329	$	31,413,265	$	72,637,594

												Accumulated
								Additional				Other
	Common			Preferred				Paid-in		Statutory		Comprehensive		Retained				Noncontrolling		Total
(Amount in USD)	Stock	Amount		Stock		Amount		Capital		Reserves		Income (loss)		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

Reversal of reserves	—		—		—		—		—		(9,431)		—		9,431		—		—		—
Foreign currency translation loss	—		—		—		—		—		—		(8,992,149)		—		(8,992,149)		(4,384,978)		(13,377,127)
Other comprehensive income	—		—		—		—		—		—		—		—		—		—		—
Net income	—		—		—		—		—		—		—		11,462,932		11,462,932		5,378,928		16,841,860

Balance September 30, 2022	30,286,199	$	303		1,000,000	$	10	$	9,296,953	$	11,091,633	$	(4,327,301)	$	25,162,731	$	41,224,329	$	31,413,265	$	72,637,594

	Average Exchange Rate for the Nine Months Ended September 30,
	2017		2016
New Taiwan dollar (NTD)	NTD	30.505166	NTD	32.736000

					Average Rate for the nine months ended
					September 30,
					2022		2021
					(unaudited)		(unaudited)
Taiwan dollar (NTD)					NTD	29.26528	NTD	27.95566
China yuan (RMB)	RMB	6.805734	RMB	6.579240	RMB	6.60012	RMB	6.46939
Hong Kong dollar (HKD)	HKD	7.787013	HKD	7.763280	HKD	7.83293	HKD	7.76655
United States dollar ($)	$	1.000000	$	1.000000	$	1.00000	$	1.00000

	Exchange Rate at
	September 30, 2017		December 31, 2016
New Taiwan dollar (NTD)	NTD	30.324000	NTD	32.283100

					Exchange Rate at
					September 30, 2022
					(unaudited)		December 31, 2021
Taiwan dollar (NTD)					NTD	31.77251	NTD	27.68785
China yuan (RMB)	RMB	6.654500	RMB	6.943700	RMB	7.10988	RMB	6.35877
Hong Kong dollar (HKD)	HKD	7.811000	HKD	7.754340	HKD	7.84968	HKD	7.79713
United States dollar ($)	$	1.000000	$	1.000000	$	1.00000	$	1.00000


	September 30, 2022
	Fair Value						Carrying
	Level 1		Level 2		Level 3		Value
Assets
Marketable securities :
Stock and mutual funds	$	753,345	$	—	$	—	$	753,345
Long-term investments:
REITs		1,049,832		—		—		1,049,832
Total assets measured at fair value	$	1,803,177	$	—	$	—	$	1,803,177

	~~(*)~~	~~Taiwan Life Insurance Co., Ltd. was formerly known as CTBC Life Insurance Co., Ltd.~~
	~~(**)~~	~~Revenue for the three months ended September 30, 2016 had not exceeded 10% or more of the Company’s consolidated revenue of the Company.~~

	September 30, 2017						December 31, 2016
	Amount			% of Total Accounts Receivable			Amount			% of Total Accounts Receivable
Farglory Life Insurance Co., Ltd.	$	2,450,793			34	%	$	6,503,843			41	%
Taiwan Life Insurance Co., Ltd (*)		(**	)		(**	)		1,973,410			13	%
TransGlobe Life Insurance Inc.		801,832			11	%		(**	)		(**	)
Fubon Life Insurance Co., Ltd		(**	)		(**	)		1,660,685			11	%

	September 30, 2017		December 31, 2016
Cash and cash equivalents:
Cash in bank and on hand	$	11,663,265	$	17,713,744
Bank time deposits (*)		-		2,455,711
		11,663,265		20,169,455
Bank time deposits (**)		21,475,432		5,352,347
Total cash and cash equivalents and time deposits	$	33,138,697	$	25,521,802

	September 30, 2017
	Cost		Gross Unrealized Losses			Total Fair Value
Trading:
Funds	$	33,117	$	(250	)	$	32,867
	$	33,117	$	(250	)	$	32,867

	December 31, 2016
	Fair Value at		Gross
	December 31,		Unrealized		Total
	2015		Gains		Fair Value
Trading:
Stocks	$	28,863	$	9,900	$	38,763
Funds		2,340,219		47,888		2,388,107
	$	2,369,082	$	57,788	$	2,426,870

	September 30, 2017		December 31, 2016
Loan receivable	$	1,477,060	$	1,486,846
Prepaid expenses		228,193		64,678
Prepaid rent and rent deposits		186,745		199,022
Other receivable		176,386		50,683
Refundable business tax		117,848		17,441
Deferred tax assets-current		58,041		59,233
Interest receivable		30,080		12,648
Total other current assets	$	2,274,353	$	1,890,551

	September 30, 2017			December 31, 2016
Office equipment	$	1,234,505		$	1,070,061
Office furniture		101,123			168,658
Leasehold improvements		733,225			581,964
Transportation equipment		139,226			132,344
Other equipment		89,868			87,302
Total		2,297,947			2,040,329
Less: accumulated depreciation		(1,370,885	)		(1,113,424	)
Total property, plant and equipment, net	$	927,062		$	926,905

	September 30, 2017			December 31, 2016
Software	$	1,686,544		$	1,500,339
Less: accumulated amortization		(938,934	)		(716,120	)
Total intangible assets	$	747,610		$	784,219

Periods ending September 30,	Amount
2018	$	238,905
2019		214,913
2020		184,439
2021		90,116
2022		18,140
Thereafter		1,097
Total	$	747,610

	September 30, 2017		December 31, 2016
Equity investment	$	1,267,475	$	1,190,558
Government bonds		101,475		94,506
Total	$	1,368,950	$	1,285,064

	September 30, 2017		December 31, 2016
Registered capital deposit	$	1,065,176	$	-
Rental deposits		480,589		445,283
Restricted cash		488,822		248,803
Prepayments		61,206		5,576
Deferred tax assets		52,171		25,364
Others		1,655		1,456
Total other assets	$	2,149,619	$	726,482

	September 30, 2017		December 31, 2016
PRC Tax	$	287,138	$	163,461
Hong Kong Tax		9,091		14,233
Taiwan Tax		2,060,397		2,072,175
Total tax payable	$	2,356,626	$	2,249,869

	September 30, 2017		December 31, 2016
Commissions payable to sales professionals	$	5,821,393	$	11,869,181
Unearned revenue (AIATW and Farglory)		1,340,884		2,090,718
Due to previous shareholders of AHFL		-		480,559
Accrued business tax		188,516		469,259
Deferred tax liabilities		125,059		-
Withholding employee personal tax		240,717		362,954
Accrued tax penalties		370,000		370,000
Accrued bonus		1,040,291		1,935,091
Salary payable to administrative staff		464,106		183,066
Accrued labor, health insurance and employee retirement plan		105,015		92,085
Accrued advertisement fee		-		32,525
Other accrued liabilities		724,847		754,471
Total other current liabilities	$	10,420,828	$	18,639,909

	September 30, 2017		December 31, 2016
Loan B, interest at 8%, maturity date May 15, 2019	$	150,274	$	144,015
Loan C, interest at 8%, maturity date July 20, 2019		115,711		110,892
Total long-term loans	$	265,985	$	254,907

	September 30, 2017		December 31, 2016
Unearned revenue – AIATW	$	4,242,585	$	4,742,272
Unearned revenue – Farglory		-		495,615
Due to pervious shareholders of AHFL		480,559		-
Other long-term liabilities		175,191		77,440
Long-term liabilities	$	4,898,335	$	5,315,327


	Amount
2022 (remainder of year)		921,334
2023		3,301,449
2024		2,141,767
2025		770,530
2026		312,332
Thereafter		217,622
Total minimum lease payments		7,665,034
Less: Interest		(283,428)
Present value of future minimum lease payments	$	7,381,606


	% of Non-						Other		September 30,
	controlling		December 31,		Net Income		Comprehensive		2022
Name of Entity	Interest		2021		(Loss)		Loss		(unaudited)
Law Enterprise	34.05	%	$	(676,166)	$	(207,439)	$	(6,043)		(889,648)
Law Broker	34.05	%		31,016,203		4,305,759		(4,224,770)		31,097,192
Uniwill	50.00	%		48,802		1,296,273		(152,940)		1,192,135
Rays	1.00	%		(6,461)		(214)		—		(6,675)
PFAL	49.00	%		364,056		(14,739)		(1,225)		348,092
MKI	49.00	%		(327,119)		(712)		—		(327,831)
Total			$	30,419,315	$	5,378,928	$	(4,384,978)	$	31,413,265


	% of Non-						Other		Impact from
	controlling		December 31,		Net Income		Comprehensive		Liquidation of		December 31,
Name of Entity	Interest		2020		(Loss)		Income (Loss)		PA Taiwan		2021
Law Enterprise	34.05	%	$	(414,957)	$	(264,642)	$	3,433	$	—	$	(676,166)
Law Broker	34.05	%		25,177,272		5,444,673		394,258		—		31,016,203
Uniwill	50.00	%		(421,035)		466,934		2,903		—		48,802
Rays	1.00	%		(5,772)		(689)		—		—		(6,461)
PFAL	49.00	%		423,978		(63,441)		3,519		—		364,056
MKI	49.00	%		(732)		(161,090)		—		(165,297)		(327,119)
PA Taiwan	49.00	%		(163,013)		1,102		(3,386)		165,297		—
Total			$	24,595,741	$	5,422,847	$	400,727	$	—	$	30,419,315

Name of Affiliate	% of Non-controlling Interests			As of December 31, 2016			Net Income and Other Comprehensive Gain/(Loss) of Non-controlling Interests			As of September 30, 2017
Law Enterprise Co., Ltd. (“Law Enterprise”)		34.05	%	$	17,386		$	446,585		$	463,971
Law Broker		34.05	%		9,621,159			2,148,249			11,769,408
Prime Financial Asia Ltd. (“PFAL”)		49.00	%		232,414			(34,973	)		197,441
Max Key Investments Ltd. (“MKI”)		49.00	%		(1,569	)		(548	)		(2,117	)
Prime Asia Corporation Limited. (“PA Taiwan”)		49.00	%		(95,448	)		(64,179	)		(159,627	)
Prime Management Consulting (Nanjing) Co., Ltd. (“PTC Nanjing”)		49.00	%		(2,400	)		261			(2,139	)
Total				$	9,771,542		$	2,495,395		$	12,266,937

Name of Affiliate	% of Non-controlling Interests			As of December 31, 2015			Net Income and Other Comprehensive Gain/(Loss) of Non-controlling Interests			As of December 31, 2016
Law Enterprise		34.05	%	$	199,699		$	(182,313	)	$	17,386
Law Broker		34.05	%		7,197,128			2,424,031			9,621,159
PFAL		49.00	%		206,098			26,316			232,414
MKI		49.00	%		(1,065	)		(504	)		(1,569	)
PA Taiwan		49.00	%		(26,292	)		(69,156	)		(95,448	)
PTC Nanjing		49.00	%		(837	)		(1,563	)		(2,400	)
Total				$	7,574,731		$	2,196,811		$	9,771,542

Nine Months Ended September 30,

2022 (unaudited)

2021 (unaudited)

Cash paid for amounts included in the measurement of lease liabilities

Operating cash flows related to operating leases

Amortization of right-of-use assets under operating leases