CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 1 – ORGANIZATION
China United Insurance Service, Inc. (“China
United”, “CUIS” or the “Company”) is a Delaware corporation organized on June 4, 2010 by Yi Hsiao
Mao, a Taiwanese citizen, as a listing vehicle for ZLI Holdings Limited (“CU Hong Kong”) to be quoted on the United
States Over the Counter Bulletin Board (the “OTCBB”).
The corporate structure as of March 31,
2016 is as follows:
NOTE 2 - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The unaudited accompanying condensed consolidated
financial statements include the accounts of China United and its subsidiaries as shown in the organization structure in Note 1
above. All significant intercompany transactions and balances were eliminated in consolidation.
Basis of Presentation
The unaudited condensed consolidated financial
statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States
(“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X.
Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements.
In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement
of the financial statements have been included. Operating results for the three months ended March 31, 2016 are not necessarily
indicative of the results that may be expected for the year ended December 31, 2016.
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, 2015, which were included in the Company’s 2015 Annual Report on Form 10-K.
The accompanying condensed consolidated balance sheet as of December 31, 2015, has been derived from the Company’s audited
consolidated financial statements as of that date.
Concentration of Risk
Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist principally of cash and equivalents and accounts receivable.
As of March 31, 2016, $1,346,439 of the Company’s cash and equivalents held by financial institutions was insured, and the
remaining balance of $19,086,719 was not insured. With respect to accounts receivable, the Company generally does not require collateral
and does not have an allowance for doubtful accounts.
For the three months ended March 31, 2016
and 2015, the Company’s revenues from sale of insurance policies underwritten by these companies were:
|
|
Three months ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Amount
|
|
|
% of Total Revenue
|
|
|
Amount
|
|
|
% of Total Revenue
|
|
Farglory Life Insurance Co., Ltd.
|
|
$
|
2,242,125
|
|
|
|
23
|
%
|
|
$
|
2,217,851
|
|
|
|
23
|
%
|
Fubon Life Insurance Co., Ltd.
|
|
|
1,377,986
|
|
|
|
14
|
%
|
|
|
1,275,718
|
|
|
|
13
|
%
|
AIA International Ltd., Taiwan
|
|
|
(*
|
)
|
|
|
(*
|
)
|
|
|
1,051,534
|
|
|
|
11
|
%
|
TransGlobe Life Insurance Inc.
|
|
|
(*
|
)
|
|
|
(*
|
)
|
|
|
1,108,691
|
|
|
|
11
|
%
|
CTBC Life Insurance Co., Ltd.
|
|
|
(*
|
)
|
|
|
(*
|
)
|
|
|
994,481
|
|
|
|
10
|
%
|
|
(*)
|
Revenue
for the three months ended had not exceeded 10% or more of the consolidated revenue.
|
As of March 31, 2016 and December 31, 2015,
the Company’s accounts receivable from these companies were:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
|
|
Amount
|
|
|
% of Total Accounts Receivable
|
|
|
Amount
|
|
|
% of Total Accounts Receivable
|
|
Farglory Life Insurance Co., Ltd.
|
|
$
|
1,231,335
|
|
|
|
30
|
%
|
|
$
|
3,689,404
|
|
|
|
43
|
%
|
Fubon Life Insurance Co., Ltd
|
|
|
533,268
|
|
|
|
13
|
%
|
|
|
990,327
|
|
|
|
11
|
%
|
AIA International Ltd., Taiwan
|
|
|
(*
|
)
|
|
|
(*
|
)
|
|
|
(**
|
)
|
|
|
(**)
|
|
TransGlobe Life Insurance Inc.
|
|
|
(*
|
)
|
|
|
(*
|
)
|
|
|
(**
|
)
|
|
|
(**)
|
|
CTBC Life Insurance Co., Ltd
|
|
|
(*
|
)
|
|
|
(*
|
)
|
|
|
994,978
|
|
|
|
11
|
%
|
|
(**)
|
Accounts receivable for the year ended had not exceeded
10% or more of the consolidated accounts receivable.
|
The Company's operations are in the PRC
and Taiwan. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political,
economic, foreign currency exchange and legal environments in the PRC and Taiwan, and by the state of each economy. The Company’s
results may be adversely affected by changes in the political and social conditions in the PRC and Taiwan, and by changes in governmental
policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting
Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 outlines a single comprehensive model
for entities to use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition
guidance. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective
Date. The amendment in this update defers the effective date of ASU 2014-09 for all entities by one year to annual periods beginning
after December 15, 2017. Early adoption is permitted as of the original effective date, interim and annual reporting periods after
December 15, 2016. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt
ASU 2014-09. The Company is still in the process of analyzing the effect of this new standard, including the transition method,
to determine the impact on the Company's consolidated financial position, results of operations, cash flows, and related disclosures.
In September 2015, the FASB issued Accounting
Standards Update No. 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments". Measurement period adjustments
are changes to provisional amounts recorded when the accounting for a business combination is incomplete as of the end of a reporting
period. The measurement period can extend for up to a year following the transaction date. The new guidance requires companies
to recognize these adjustments, including any related impacts to net income, in the reporting period in which the adjustments are
determined. Companies are no longer required to retroactively apply measurement period adjustments to the prior period. This update
is effective for annual and interim periods beginning after December 15, 2016. We have early adopted this standard beginning in
fiscal 2016. There was no material impact to the Consolidated Financial Statements.
In November 2015, the FASB issued Accounting
Standards Update No. 2015-17, "Balance Sheet Classification of Deferred Taxes". The new guidance requires that all deferred
tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. This
update is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. ASU 2015-17
will be effective for us, but will not cause a material impact on our financial condition or the results of our operations.
In January 2016, the FASB issued Accounting
Standards Update No. 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets
and Financial Liabilities," which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments.
Changes to the current guidance primarily 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 the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale
debt securities. 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 of a cumulative-effect adjustment to the balance sheet at the beginning
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 in other
comprehensive income. The Company is currently evaluating the impact of adopting this guidance.
In February 2016, the FASB issued Accounting
Standards Update No. 2016-02, Leases (Topic 842). The guidance in ASU 2016-02 supersedes the lease recognition requirements in
ASC Topic 840, Leases (FAS 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 2016-02 is effective for 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 2016-03,
“Intangibles-Goodwill and Other (Topic 350); Business Combinations (Topic 805); Consolidation (Topic 810); Derivatives and
Hedging (Topic 815): Effective Date and Transition Guidance”. The amendments in this ASU make the guidance in ASUs 2014-02,
2014-03, 2014-07, and 2014-18 effective immediately by removing their effective dates. The amendments also include transition provisions
that provide that private companies are able to forgo a preferability assessment the first time they elect the accounting alternatives
within the scope of this ASU. Any subsequent change to an accounting policy election requires justification that the change is
preferable under Topic 250, Accounting Changes and Error Corrections. The amendments in this ASU also extend the transition guidance
in ASUs 2014-02, 2014-03, 2014-07, and 2014-18 indefinitely. While this ASU extends transition guidance for Updates 2014-07 and
2014-18, there is no intention to change how transition is applied for those two ASUs. The Company is currently in the process
of evaluating the impact of the adoption on its consolidated financial statements.
In March 2016, the FASB issued ASU No.
2016-07, "Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the Equity Method of Accounting."
ASU No. 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 No. 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 2014-09, “Revenue from Contracts with Customers (Topic 606)”. Public entities
should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim reporting
periods therein. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial
statements.
In March 2016, the FASB issued ASU No.
2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." ASU
No. 2016-09 impacts certain aspects of the accounting for share-based payment transactions, including income tax consequences,
classification of awards as either equity or liabilities, and classification on the statements of cash flows. ASU No. 2016-09 will
be effective for the Company for the quarter ending December 31, 2017, with early adoption permitted. The Company is currently
assessing the impact adoption of this guidance will have on its consolidated financial statements.
NOTE 3 – CASH AND EQUIVALENTS
As of March 31, 2016 and December 31, 2015,
our cash and equivalents primarily consisted of cash and certificates of deposits. The carrying amounts reported on the consolidated
balance sheets for cash and cash equivalents approximate fair value.
NOTE 4 - MARKETABLE SECURITIES
Marketable securities represent investment
in equity securities of listed stocks and funds, which are classified as Level 1 securities as follows:
|
|
March 31, 2016
|
|
|
|
Cost or
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Total
|
|
|
|
Cost
|
|
|
Gains (Losses)
|
|
|
Fair Value
|
|
Level 1 securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks
|
|
$
|
28,863
|
|
|
$
|
(8
|
)
|
|
$
|
28,855
|
|
Funds
|
|
|
2,340,219
|
|
|
|
48,921
|
|
|
|
2,389,140
|
|
|
|
$
|
2,369,082
|
|
|
$
|
48,913
|
|
|
$
|
2,417,995
|
|
|
|
December 31, 2015
|
|
|
|
Cost or
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Total
|
|
|
|
Cost
|
|
|
Gains (Losses)
|
|
|
Fair Value
|
|
Level 1 securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stocks
|
|
$
|
28,278
|
|
|
$
|
585
|
|
|
$
|
28,863
|
|
Funds
|
|
|
2,408,728
|
|
|
|
(68,509
|
)
|
|
|
2,340,219
|
|
|
|
$
|
2,437,006
|
|
|
$
|
(67,924
|
)
|
|
$
|
2,369,082
|
|
NOTE 5 – OTHER CURRENT ASSETS
The Company’s other current assets
consisted of the following as of March 31, 2016 and December 31, 2015:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Prepaid expenses
|
|
$
|
273,998
|
|
|
$
|
603,557
|
|
Current assets associated with discontinued operations
|
|
|
-
|
|
|
|
224,140
|
|
Prepaid rent and rent deposit
|
|
|
269,169
|
|
|
|
133,179
|
|
Other receivable
|
|
|
16,141
|
|
|
|
86,539
|
|
Other commission receivable
|
|
|
43,758
|
|
|
|
-
|
|
Interest receivable
|
|
|
61,386
|
|
|
|
-
|
|
Refundable business tax
|
|
|
8,524
|
|
|
|
7,600
|
|
Deferred tax assets
|
|
|
77
|
|
|
|
-
|
|
Total other current assets
|
|
$
|
673,053
|
|
|
$
|
1,055,015
|
|
NOTE 6 – PROPERTY, PLANT AND
EQUIPMENT, NET
Property, plant and equipment consisted
of the following, as of March 31, 2016 and December 31, 2015:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Office Equipment
|
|
$
|
1,038,435
|
|
|
$
|
1,080,621
|
|
Office Furniture
|
|
|
177,412
|
|
|
|
125,746
|
|
Leasehold improvements
|
|
|
527,595
|
|
|
|
511,874
|
|
Transportation equipment
|
|
|
84,958
|
|
|
|
84,398
|
|
Other equipment
|
|
|
102,907
|
|
|
|
97,996
|
|
Total
|
|
|
1,931,307
|
|
|
|
1,900,635
|
|
Less: accumulated depreciation
|
|
|
(972,889
|
)
|
|
|
(981,837
|
)
|
Total property, plant and equipment, net
|
|
$
|
958,418
|
|
|
$
|
918,798
|
|
NOTE 7 – INTANGIBLE ASSETS
As of March 31, 2016 and December 31, 2015,
the Company’s intangible assets consisted the following:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Software
|
|
$
|
1,211,498
|
|
|
$
|
780,355
|
|
Less: accumulated amortization
|
|
|
(492,981
|
)
|
|
|
(311,576
|
)
|
Total intangible assets
|
|
$
|
718,517
|
|
|
$
|
468,779
|
|
Estimated future intangible amortization
as of March 31, 2016 is as follows:
Years ending March 31,
|
|
Amount
|
|
2017
|
|
$
|
215,784
|
|
2018
|
|
|
138,329
|
|
2019
|
|
|
138,329
|
|
2020
|
|
|
128,626
|
|
2021
|
|
|
87,124
|
|
Thereafter
|
|
|
10,325
|
|
Total
|
|
$
|
718,517
|
|
The Company reclassified amount of
$175,925 and $89,340 from property, plant and equipment and accumulated depreciation to intangible assets and accumulated
amortization, respectively, in January 2016.
NOTE 8 – ACQUISITION AND GOODWILL
(1) Acquisition of PFAL
On April 23, 2014, AHFL entered into a
capital increase agreement (“Agreement”) with Chun Kwok Wong (“Mr. Wong”), the owner of Prime Financial
Asia Ltd (PFAL) which is a re-insurance broker company resided in Hong Kong. Upon the Agreement, Mr. Wong would increase PFAL’s
capital contribution from HK$500,000 to HK$1,470,000, and AHFL would contribute HK$1,530,000, approximately $197,000, to PFAL’s
capital contribution. Upon the completion of capital increase by both parties, Mr. Wong and AHFL would own 49% and 51% of PFAL’s
equity interest, respectively. The transaction was completed on April 30, 2014.
The FV of the net identifiable assets of
PFAL at acquisition date was $324,871, and 51% of which was $165,684. The Company recorded $31,651 excess of purchase price over
the FV of assets acquired and liabilities assumed as goodwill. No intangible assets were identified as of the acquisition date.
As of March 31, 2016, there were no indications of the impairment of the goodwill.
(2) Acquisition of GHFL
On February 13, 2015, CUIS and AHFL entered
into an acquisition agreement with the selling shareholder (Mr. Chwanhau Li, the director of the Company) of Genius Holdings Financial
Limited ( “GHFL”), a company with limited liability incorporated under the laws of British Virgin Islands, to issue
352,166 fully paid and non-assessable shares of AHFL Common Stock together with an granted option for 352,166 shares of common
stock of CUIS (“Option”), in exchange for 704,333 shares of common stock of GHFL, being all of the issued and outstanding
capital stock of GHFL. Subsequent to the acquisition, GHFL became a wholly-owned subsidiary of CUIS. GHFL holds 100% issued and
outstanding shares of Genius Investment Consultant Co., Ltd. (“Taiwan Genius”), a limited company incorporated under
the laws of Taiwan, which in turn holds 15.64% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius
Broker”), a company limited by shares incorporated under the laws of Taiwan. Both GHFL and Taiwan Genius have no substantive
business operation other than the holding of shares of its subsidiary. Genius Broker is primarily engaged in broker business across
Taiwan. On February 13, 2015, the acquisition was completed; the selling shareholder transferred 100% shares in GHFL to AHFL. The
Option has been exercised by the selling shareholder on March 31, 2015. The total fair value of AHFL 352,166 shares ($1,771,395)
and CUIS 352,166 option ($1,711,562) at acquisition date was $3,482,957. The Company recorded $2,039,840 excess of purchase price
as goodwill. As of March 31, 2016, there were no indications of the impairment of the goodwill.
The acquisition was accounted for under
the purchase method of accounting. Accordingly, the results of GHFL have been included in the consolidated financial statements
since the date of acquisition. The purchase price has been allocated to the assets acquired and liabilities assumed based upon
their estimated fair values and the price were allocated as follows:
|
|
February 13, 2015
|
|
Current assets
|
|
$
|
321
|
|
Long-term investment
|
|
|
1,488,829
|
|
Goodwill
|
|
|
2,039,840
|
|
Current liabilities
|
|
|
(46,033
|
)
|
Total purchase price
|
|
$
|
3,482,957
|
|
No supplemental pro forma information is
presented for the acquisition due to the immaterial effect of the acquisition on the Company’s results of operations.
NOTE 9 – LONG-TERM INVESTMENT
The Company classifies its investments
as available-for-sale in accordance with ASC 320 “Debt and Equity Securities”, Investments – Debt and Equity
Securities, which 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.
As of March 31, 2016 and December 31, 2015,
the Company’s long-term investment consisted the following:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Equity Investment Co., Ltd
|
|
$
|
1,193,583
|
|
|
$
|
1,170,230
|
|
Government Bonds
|
|
|
96,265
|
|
|
|
94,381
|
|
Total
|
|
$
|
1,289,848
|
|
|
$
|
1,264,611
|
|
As of March 31, 2016 and December 31, 2015,
the Company had the following long-term investment in equity:
Type
|
|
Investee
|
|
March 31, 2016
Investment
Ownership
|
|
|
Amount
|
|
Cost
|
|
Genius Insurance Broker Co., Ltd
|
|
|
15.64
|
%
|
|
$
|
1,193,583
|
|
|
|
|
|
|
|
|
|
|
|
|
Type
|
|
Investee
|
|
December 31, 2015
Investment
Ownership
|
|
|
Amount
|
|
Cost
|
|
Genius Insurance Broker Co., Ltd
|
|
|
15.64
|
%
|
|
$
|
1,170,230
|
|
|
|
|
|
|
|
|
|
|
|
|
According to Taiwan regulatory requirements,
Law Broker is required to maintain a minimum of NT$3,000,000 ($96,265) in a separate account. Law Broker chose to buy government
bonds and has the right to trade such bonds with other debt or equity instruments. The amount, however, was defined as restricted
asset.
|
|
March 31, 2016
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Fair Value at
|
|
|
Unrealized
|
|
|
Total
|
|
|
|
December 31, 2015
|
|
|
Gains (Losses)
|
|
|
Fair Value
|
|
Government bonds
|
|
|
94,381
|
|
|
|
1,884
|
|
|
|
96,265
|
|
|
|
$
|
94,381
|
|
|
$
|
1,884
|
|
|
$
|
96,265
|
|
|
|
December 31, 2015
|
|
|
|
Cost or
|
|
|
Gross
|
|
|
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Total
|
|
|
|
Cost
|
|
|
Gains (Losses)
|
|
|
Fair Value
|
|
Government bonds
|
|
|
93,089
|
|
|
|
1,292
|
|
|
|
94,381
|
|
|
|
$
|
93,089
|
|
|
$
|
1,292
|
|
|
$
|
94,381
|
|
NOTE 10 – OTHER ASSETS
The Company’s
other assets consisted of the following as of March 31, 2016 and December 31, 2015:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Rental deposits
|
|
$
|
403,012
|
|
|
$
|
401,920
|
|
Restricted cash
|
|
|
232,634
|
|
|
|
231,100
|
|
Prepayments
|
|
|
133,331
|
|
|
|
156,772
|
|
Other
|
|
|
1,460
|
|
|
|
1,431
|
|
Total other assets
|
|
$
|
770,437
|
|
|
$
|
791,223
|
|
Rental deposits include long-term leasing
deposits. Restricted cash is a deposit in bank by the Company in conformity with Provisions of the Supervision and Administration
of Specialized Insurance Agencies, and cannot be withdrawn without the permission of the regulatory commission. Prepayments are
prepaid long-term software-maintenance contract pending for final acceptance, and will be transferred to intangible assets upon
acceptance.
NOTE 11 – TAXES PAYABLE
The Company’s taxes payable consisted
of the following as of March 31, 2016 and December 31, 2015:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
PRC Tax
|
|
$
|
81,363
|
|
|
$
|
99,505
|
|
Taiwan Tax
|
|
|
1,451,752
|
|
|
|
1,422,457
|
|
Total tax payable
|
|
$
|
1,533,115
|
|
|
$
|
1,521,962
|
|
PRC tax represents income tax and other
taxes accrued according to PRC tax law by our subsidiaries and CAE in the PRC. Taiwan tax represents income tax and other taxes
accrued according to Taiwan tax law by our subsidiaries and branches in Taiwan. Both will be settled within the next twelve months
according to the respective tax laws.
NOTE 12 – OTHER CURRENT LIABILITIES
Other current liabilities are as follows,
as of March 31, 2016 and December 31, 2015:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Commissions payable to sub-agents
|
|
$
|
3,256,281
|
|
|
$
|
6,644,989
|
|
Accrued bonus
|
|
|
481,489
|
|
|
|
1,050,411
|
|
Refund to AIATW
|
|
|
-
|
|
|
|
502,532
|
|
Accrued tax penalties
|
|
|
370,000
|
|
|
|
370,000
|
|
Accrued business tax
|
|
|
116,701
|
|
|
|
326,954
|
|
Withholding employee personal tax
|
|
|
211,970
|
|
|
|
295,989
|
|
Salary payable to administrative staff
|
|
|
111,115
|
|
|
|
229,624
|
|
Due to previous shareholders of AHFL
|
|
|
685,057
|
|
|
|
685,059
|
|
Accrued advertisement fee
|
|
|
73,584
|
|
|
|
151,535
|
|
Accrued labor, health insurance and employee retirement plan
|
|
|
84,431
|
|
|
|
84,138
|
|
Other accrued expenses
|
|
|
253,922
|
|
|
|
396,117
|
|
Others
|
|
|
175,094
|
|
|
|
130,259
|
|
Total other current liabilities
|
|
$
|
5,819,644
|
|
|
$
|
10,867,607
|
|
Commissions payable to sub-agents, salaries
payable to administrative staff, accrued bonus, and accrued advertisement fee are usually settled within 12 months. Refund to AIATW
is described in Note 14. Accrued tax penalties are estimated potential penalty in the event of a tax audit. Withholding employee personal tax and accrued labor, health
insurance and employee retirement plan will be paid to local tax bureau within one month. The amount due to previous shareholders
of AHFL is the remaining balance of the acquisition cost. Other accrued expenses are mainly for operating expenses payable within
the credit terms provided by suppliers. Others mainly represent short term payable for expenses such as training and travelling.
NOTE 13 – SHORT TERM LOANS
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Loan A, interest at 1.5%, maturity date December 31, 2016
|
|
$
|
70,000
|
|
|
$
|
70,000
|
|
Loan B, interest at 1.5%, maturity date December 31, 2016
|
|
|
108,691
|
|
|
|
152,235
|
|
Total short term loans
|
|
$
|
178,691
|
|
|
$
|
222,235
|
|
On October 12, 2015, the Company entered
into a loan agreement ("Loan A") with Zhengxiong Huang. The Short-term Loan Agreement provided for a $70,000 loan to
the Company. The Short-term Loan bore an interest rate of 1.5% per annum and the principle and interest were due on December 31,
2015. On December 31, 2015, the Company extended this loan agreement to December 31, 2016 with same conditions.
On December 3, 2015, the Company entered
into a loan agreement ("Loan B") with Yuzhen Chen. The Short-term Loan Agreement provided for a $152,235 (NT$ 5,000,000)
loan to the Company. The Short-term Loan bore an interest rate of 1.5% per annum and the principle and interest were due on December
31, 2015. On December 31, 2015, the Company extended this loan agreement to December 31, 2016 with same conditions. On January
13, 2016, the Company paid amount of $46,582 (NT$ 1,500,000) back. As of March 31, 2016, the Company had a loan amount of $108,691
(NT$3,500,000).
NOTE 14 – LONG-TERM LIABILITIES
Long-term liabilities are as follows as
of March 31, 2016 and December 31, 2015:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Unearned revenue
|
|
|
6,726,129
|
|
|
|
6,594,530
|
|
Total other long-term liabilities
|
|
$
|
6,726,129
|
|
|
$
|
6,594,530
|
|
On June 10, 2013, AHFL entered into a Strategic
Alliance Agreement (the “Alliance Agreement”) with AIA International Limited Taiwan Branch (“AIATW”). The
purpose of the Alliance Agreement 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.
Pursuant to the terms of the Alliance Agreement, AIATW paid AHFL the Execution Fee of $8,326,700 (NT$250,000,000, including the
tax of NT$11,904,762), which is to be recorded as revenue upon fulfilling sales targets and the 13-month persistency ratio, as
defined, over the next five years. The Execution Fee may be required to be recalculated if certain performance targets are not
met by AHFL. On September 30, 2014, AHFL entered into a Strategic Alliance Supplemental Agreement (the “Supplemental Agreement”)
with AIATW. In the Supplemental Agreement, the performance targets and the provision about refunding the Execution Fee 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 in the Strategic Alliance Agreement and the
previous amendment entered into by and between AHFL and AIATW. The purpose 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 the effect of the Strategic Alliance
Agreement during the period from October 1, 2014 to December 31, 2015 has been suspended. In addition, 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 to AIATW that AHFL is required
to (i) fulfill sales targets and (ii) the 13-month persistency ratio.
AHFL refunded amount of $152,235 (NTD 5,000,000)
and $502,532 (NTD 16,505,144) to AIATW on December 3, 2015 and February 23, 2016, respectively, due to the portion of performance
sales targets are not met during the period from June 10, 2013 to September 30, 2014. AHFL did not book any short-term unearned
revenue since the Strategic Alliance Agreement will end on December 31, 2021 and the performance will calculate then to determine
how much revenue AHFL can book accordingly, and the Company booked the whole $6,726,129 as long-term liability.
NOTE 15 – PREFERRED STOCK
The Company is authorized to
issue 10,000,000 shares of preferred stock, $.00001 par value. We currently have 1,000,000 shares of Series A Preferred Stock (“Series
A Stock”) outstanding as of December 31, 2014. The Series A Stock has the following rights and preferences:
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 our 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 Registrant.
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 Registrant 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 Registrant, 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 Registrant
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 Registrant's common stock.
Each share of Series A Stock is convertible into one share of common stock.
If the Registrant 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 our 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 deems appropriate.
In the event that the Registrant 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 our Board of Directors 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 our stockholders, and may adversely affect the voting and
other rights of the holders of our common stock.
NOTE 16 – 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, the Company’s
Consolidated Affiliated Entities (“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 17 – NON-CONTROLLING
INTERESTS
Non-controlling interests consisted of
the following:
|
|
|
|
|
|
|
|
Acquisition
and
|
|
|
Adjustments
/Net
|
|
|
|
|
|
|
|
|
|
% of Non-
|
|
|
As of
|
|
|
Increase
|
|
|
Income of
|
|
|
|
|
|
As of
|
|
|
|
controlling
|
|
|
December
31,
|
|
|
Investment
|
|
|
Non-controlling
|
|
|
|
|
|
March 31,
|
|
Name
of Affiliate
|
|
Interest
|
|
|
2015
|
|
|
(Fair
Value)
|
|
|
Interest
|
|
|
Discontinued
|
|
|
2016
|
|
Law Enterprise
|
|
|
34.05
|
%
|
|
$
|
199,699
|
|
|
$
|
-
|
|
|
$
|
146,295
|
|
|
$
|
-
|
|
|
$
|
345,994
|
|
Law Broker
|
|
|
34.05
|
%
|
|
|
7,197,128
|
|
|
|
-
|
|
|
|
687
|
|
|
|
-
|
|
|
|
7,197,815
|
|
PFAL
|
|
|
49.00
|
%
|
|
|
206,098
|
|
|
|
-
|
|
|
|
(3,626
|
)
|
|
|
-
|
|
|
|
202,472
|
|
MKI
|
|
|
49.00
|
%
|
|
|
(1,065
|
)
|
|
|
-
|
|
|
|
(51
|
)
|
|
|
-
|
|
|
|
(1,116
|
)
|
PTC Taiwan
|
|
|
49.00
|
%
|
|
|
(26,292
|
)
|
|
|
-
|
|
|
|
(23,946
|
)
|
|
|
-
|
|
|
|
(50,238
|
)
|
PTC
Nanjing
|
|
|
49.00
|
%
|
|
|
(837
|
)
|
|
|
-
|
|
|
|
59
|
|
|
|
-
|
|
|
|
(778
|
)
|
Total
|
|
|
|
|
|
$
|
7,574,731
|
|
|
$
|
-
|
|
|
$
|
119,418
|
|
|
$
|
-
|
|
|
$
|
7,694,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
and
|
|
|
Adjustments
/Net
|
|
|
|
|
|
|
|
|
|
% of Non-
|
|
|
As of
|
|
|
Increase
|
|
|
Income of
|
|
|
|
|
|
As of
|
|
|
|
controlling
|
|
|
December
31,
|
|
|
Investment
|
|
|
Non-controlling
|
|
|
|
|
|
December
31,
|
|
Name
of Affiliate
|
|
Interest
|
|
|
2014
|
|
|
(Fair
Value)
|
|
|
Interest
|
|
|
Discontinued
|
|
|
2015
|
|
Law Enterprise
|
|
|
34.05
|
%
|
|
$
|
882,327
|
|
|
$
|
-
|
|
|
$
|
(682,628
|
)
|
|
$
|
-
|
|
|
$
|
199,699
|
|
Law Broker
|
|
|
34.05
|
%
|
|
|
5,471,140
|
|
|
|
-
|
|
|
|
1,725,988
|
|
|
|
-
|
|
|
|
7,197,128
|
|
Law Agent
|
|
|
36.69
|
%
|
|
|
24,689
|
|
|
|
-
|
|
|
|
(1,033
|
)
|
|
|
(23,656
|
)
|
|
|
-
|
|
Risk Management
|
|
|
35.47
|
%
|
|
|
(91,809
|
)
|
|
|
-
|
|
|
|
22,309
|
|
|
|
69,500
|
|
|
|
-
|
|
PFAL
|
|
|
49.00
|
%
|
|
|
97,080
|
|
|
|
-
|
|
|
|
109,018
|
|
|
|
-
|
|
|
|
206,098
|
|
MKI
|
|
|
49.00
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,065
|
)
|
|
|
-
|
|
|
|
(1,065
|
)
|
PTC Taiwan
|
|
|
49.00
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
(26,292
|
)
|
|
|
-
|
|
|
|
(26,292
|
)
|
PTC
Nanjing
|
|
|
49.00
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
(837
|
)
|
|
|
-
|
|
|
|
(837
|
)
|
Total
|
|
|
|
|
|
$
|
6,383,427
|
|
|
$
|
-
|
|
|
$
|
1,145,460
|
|
|
$
|
45,844
|
|
|
$
|
7,574,731
|
|
NOTE 18– INCOME TAX
CU WFOE and the VIEs in the PRC are governed
by the Income Tax Law of the PRC concerning the 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, according to the requirement of local
tax authorities, the tax basis is deemed as 10% of total revenue, instead of net income. The tax rate of Jiangsu is also 25%.
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 the meanwhile, Income Tax Law of Taiwan provides that a company is taxed at additional
10% on any undistributed earnings to its shareholders.
The following table reconciles the US statutory
rates to the Company’s effective tax rate for the three months ended March 31, 2016 and 2015:
|
|
March 31, 2016
|
|
|
March 31, 2015
|
|
US statutory rate
|
|
|
34
|
%
|
|
|
34
|
%
|
Tax rate difference
|
|
|
(8
|
)%
|
|
|
80
|
%
|
Tax base difference
|
|
|
(4
|
)%
|
|
|
(2
|
)%
|
Loss in subsidiaries
|
|
|
(28
|
)%
|
|
|
266
|
%
|
Un-deductible and non-taxable items
|
|
|
6
|
%
|
|
|
(33
|
)%
|
Tax per financial statements
|
|
|
0
|
%
|
|
|
345
|
%
|
Un-deductible and non-taxable items mainly
represent un-deductible expenses according to PRC tax laws and the non-taxable tax income or loss.
NOTE 19 - RELATED PARTY TRANSACTIONS
On February 13, 2015, CUIS and AHFL entered
into an acquisition agreement with Mr. Chwanhau Li (the director of the Company), the selling shareholder of Genius Holdings Financial
Limited. (Please see detail in Note 8 (2))
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 as of March 31, 2016 and December 31,
2015:
|
|
March 31, 2016
|
|
|
December 31, 2015
|
|
Due to Mr. Mao (Principal Shareholder of the Company)
|
|
$
|
314,666
|
|
|
$
|
297,414
|
|
Due to Xude Investment (Owned by Mr. Chwan Hau Li)
|
|
|
32,397
|
|
|
|
32,223
|
|
Due to Mr. Zhu (Legal Representative of Jiangsu)
|
|
|
2,147
|
|
|
|
2,133
|
|
Due to Ms. Lee (Director of CUIS)
|
|
|
831
|
|
|
|
826
|
|
Due to Multiple Capital Enterprise
|
|
|
-
|
|
|
|
608,941
|
|
Due to other shareholders
|
|
|
-
|
|
|
|
4,395
|
|
Total
|
|
$
|
350,041
|
|
|
$
|
945,932
|
|
On December 23, 2014, AHFL entered into
a Loan Agreement (the “Loan Agreement”) with Shu-Fen Lee (“Ms. Lee”), the Series A Director of the Company.
Pursuant to the Loan Agreement, Ms. Lee provided a loan in the amount of $314,644 (NT$10 million) (the “Loan”) to AHFL.
The term for the Loan is from December 23, 2014 to December 22, 2015 with a fixed interest rate at 1.5%. The entire loan and interest
amount of $314,928 (NT$10,009,041) have been paid off on January 14, 2015.
On December 25, 2015, the Company entered
into a loan agreement (the “Short-term Loan Agreement”) with Multiple Capital Enterprise Co., Ltd. The Short-term Loan
Agreement provided for a $608,941 (NT$20,000,000) loan to the Company. The Short-term Loan bore an interest rate of 1.5% per annum
and the principle and interest were due on June 30, 2016. Majority of Multiple Capital Enterprise shareholders are the Company’s
management level. The entire loan and interest amount of $598,905 (NT$20,014,795) have been paid off on January 12, 2016.
Except for the two aforementioned loans,
the loans arose from Due to related parties bore no interest and were payable on demand.
NOTE 20 – COMMITMENTS
Operating Leases
The Company has operating leases for its
offices. Rental expenses for the three months ended March 31, 2016 and 2015 were $507,460 and $410,459 respectively. On March 31,
2016, total future minimum annual lease payments under operating leases were as follows, by years:
Twelve months ended March 31, 2017
|
|
$
|
1,794,846
|
|
Twelve months ended March 31, 2018
|
|
|
1,184,502
|
|
Twelve months ended March 31, 2019
|
|
|
684,686
|
|
Twelve months ended March 31, 2020
|
|
|
22,471
|
|
Twelve months ended March 31, 2021
|
|
|
13,631
|
|
Thereafter
|
|
|
-
|
|
Total
|
|
$
|
3,700,136
|
|
Acquisition Agreement
On February 22, 2015, the Company and the
selling shareholder of GHFL entered into an Amendment to the Acquisition Agreement dated February 13, 2015, pursuant to which if
the Guaranteed Price per share is higher than the Average Price per share, then the Parties shall negotiate in good faith on an
adjustment to the Purchase Price as necessary, if any.
On February 17, 2016, the Company and AHFL
entered into an Amendment 2 to the Genius Acquisition Agreement (the “Genius Amendment”) with Mr. Li, pursuant to which,
on or prior to February 28, 2016, (i) the Company is committed to complete the listing of the Company into major capital markets,
where the net proceeds raised through such public offering financing shall be at least $10,000,000; and (ii) failure to timely
complete the above-mentioned criteria shall be deemed as a material breach of the Company under Article 8 of the Genius Acquisition
Agreement, whereby the Selling Shareholder shall be entitled to revoke the exercised Put Option right set forth in Section 2.8
as if the Put Option had never been exercised. The right to revoke the Put Option has not been exercised as of reporting date.
The following table summarizes what the
results of operations of the Company would have been on a pro forma basis for the three months ended March 31, 2016, if the Put
Option has not been exercised on March 31, 2015. These results do not purport to represent what the results of operations for the
Company would have actually been or to be indicative of the future results of operations of the Company.
|
|
Three Months Ended
March 31, 2016
|
|
Net loss attributable to the noncontrolling interests
|
|
$
|
(32,123
|
)
|
Net loss attributable to parent’s shareholders
|
|
|
(641,793
|
)
|
Other comprehensive items
|
|
|
|
|
Other comprehensive income attributable to parent's shareholders
|
|
|
150,978
|
|
Other comprehensive items attributable to noncontrolling interest
|
|
|
160,574
|
|
Comprehensive loss attributable to parent’s
shareholders
|
|
|
(490,815
|
)
|
Comprehensive income attributable to noncontrolling
interest
|
|
|
128,451
|
|
On February 17, 2016, the Company and the selling shareholders of AHFL entered into a third Amendment to the 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 $10,000,000; (ii) the Company is committed to distribute the cash payment in the amount of NT$22.5
million (approximately $676,466), 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 as if the said acquisition had never happened. The Company is doing its best to achieve
the targeted milestones as set forth in the third Amendment to the Acquisition Agreement. However, given the tight schedule
and harsh general environment, despite every efforts of the Company, it might be really difficult for the Company to do so
within the stipulated deadline. Therefore, the Company is actually negotiating with the Selling Shareholders of AHFL to convince
them to give up such termination rights in case of failure to comply with the first and second requirements under Third Amendment
within the stipulated deadline while continuously using its best efforts to fulfill such obligations.
NOTE 21 – DISCONTINUED OPERATION
In the fourth quarter of 2014, the shareholders
of the Risk Management and Law Agent made the resolution to dissolve Risk Management and Law Agent, respectively, because those
companies have not been in operation. The dissolution of Risk Management and Law Agent was approved by the Taiwan (R.O.C) Government
on November 26, 2014 and on January 13, 2015, respectively. Abide by the law in Taiwan, the liquidator was appointed by the shareholders
of the Risk Management and Law Agent and the liquidator shall complete the liquidation process no later than six months from the
appointment date. Both Risk Management and Law Agent completed the process of liquidation in April 2016.
Risk Management and Law Agent were acquired
by the Company together with their parent Company, Law Enterprise, on August 24, 2012. The Total Assets and Total Liabilities of
Risk Management as of March 31, 2016 and December 31, 2015 are as follows:
|
|
As of
March
31, 2016
|
|
|
As of
December 31, 2015
|
|
Total Assets (including cash)
|
|
|
-
|
|
|
|
224,140
|
|
Total Liabilities
|
|
|
-
|
|
|
|
4,834
|
|
The combined Revenue, Net Loss and EPS
of Risk Management and Law Agent for the three months ended March 31, 2016 and 2015 are as follows:
|
|
Three Months Ended
March 31, 2016
|
|
|
Three
Months Ended
March 31, 2015
|
|
Revenue
|
|
|
-
|
|
|
|
-
|
|
Net Income (Loss)
|
|
|
-
|
|
|
|
(2,362
|
)
|
EPS
|
|
|
-
|
|
|
|
-
|
|
NOTE 22 – FINANCIAL RISK MANAGEMENT
AND FAIR VALUE
The Company has exposure to credit, liquidity
and market risks which arise in the normal course 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, and the Company's management
of capital. Further quantitative disclosures are included throughout these consolidated financial statements.
The Board of Directors (“BOD”)
has overall responsibility for the establishment 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.
The Company's credit risk arises principally
from accounts and other receivables, pledged deposits and cash and equivalents. Management has a credit policy in place and monitors
exposures to these credit risks on an ongoing basis. The carrying amounts of trade and other receivables, pledged deposits and
cash and cash equivalents represent the Company's maximum exposure to credit risks. Accounts receivable are due within 30 days
from the date of billing.
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.
The functional currency for the subsidiaries
in Taiwan is NT$ and the functional currency for the subsidiaries and VIEs in PRC is RMB. The financial statements of the Company
are in USD. The fluctuation of NT$ and RMB will affect our operating results expressed in USD. The Company reviews its foreign
currency exposures. The management does not consider its present foreign exchange risk to be significant.
NOTE 23 – GEOGRAPHICAL REVENUE
The geographical distribution of China
United’s revenue for the three months ended March 31, 2016 and 2015 were as follows:
Geographical Areas
|
|
Three months ended
March 31, 2016
|
|
|
Three months ended
March 31, 2015
|
|
PRC
|
|
$
|
1,585,767
|
|
|
$
|
1,245,575
|
|
Taiwan
|
|
|
7,976,529
|
|
|
|
8,610,540
|
|
Total
|
|
$
|
9,562,296
|
|
|
$
|
9,856,115
|
|
NOTE 24 – LOAN TO SHAREHOLDERS
Anhou Registered Capital Increase
On April 27, 2013, China Insurance Regulatory
Commission mandated any insurance agency have 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 to increase its registered capital to RMB50 million so that it can set up new branches in any province
beyond its current operations in Mainland China.
Due to certain restriction on direct foreign
investment in insurance agency business under current PRC legal requirements, Anhou sought investments from certain Investor Borrowers
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). The term for
such loan is 10 years which may be extended upon the agreement 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 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.
|
Mr.
Li Chen, PRC citizen (RMB3,000,000 ($479,244))
|
|
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 of the parties. Pursuant to the Investor Loan Agreements, each of the Investor Borrowers
entered into a binding VIE agreement with Anhou, the 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. As of December 31, 2014
and 2013, the loan was offset against equity.
On October 20, 2013, the Investor Borrowers
increased Anhou’s registered capital by RMB 40 million ($6,389,925).
NOTE 25 - SUBSEQUENT EVENTS
On
April 15, 2016, the Company entered into a loan agreement (“Loan Agreement”) with Chinchiang Lin (“Mr. Lin”).
Pursuant to the Loan Agreement, Mr. Lin provided a loan in the amount of $77,637 (NT$2.5 million) to the Company. The term for
the Loan is from April 15, 2016 to December 31, 2016
with
a fixed interest rate at 1.5% per annum and the principle and interest is due on December 31, 2016.
The Company has entered into a service
agreement (“Service Agreement”) with Farglory Life Insurance Co., Ltd. (Farglory), pursuant to which AHFL provides
consulting services to Farglory for NT$ 4,000,000 per year. The term for the Service Agreement is from May 1, 2016 to April 30,
2021.
The Company has evaluated all other subsequent
events through the date these consolidated financial statements were issued, and determine that there were no other subsequent
events or transactions that require recognition or disclosures in the consolidated financial statements.