Table of Contents

TABLE OF CONTENTS

​

​

​

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This annual 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, performances or achievements expressed or implied by the forward- looking statements. These risks and uncertainties include, but are not limited to, the factors described under Item 1 “Description of Business,” Item 1A “Risk Factors” and Item 7 “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 annual report. You should read this annual report and the documents that we reference in this annual report, or that we filed as exhibits to this annual 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.

OTHER PERTINENT INFORMATION

References in this annual report to “we,” “us,” “our” and the “Company” and words of like import refer to China United Insurance Service, Inc., its subsidiaries and variable interest entities.

References to China or the PRC refer to the People’s Republic of China (excluding Hong Kong, Macao and Taiwan). References to Taiwan refer to Republic of China.

Unless context indicates otherwise, reference to the “Company” in this annual report refers to China United Insurance Service, Inc. and its subsidiaries. Reference to “AHFL” refers to the combined operations of Action Holdings Financial Limited and its Taiwan Subsidiaries (as defined below). Reference to “Anhou” refers to the combined operations of Law Anhou Insurance Agency Co., Ltd. and its subsidiaries.

Our business is conducted in Taiwan and China using New Taiwan Dollars (“NT$” or “NTD”), the currency of Taiwan, Hong Kong Dollars (“HK$” or “HKD”), the currency of Hong Kong, and RMB, the currency of China, respectively, and our financial statements are presented in United States dollars (“USD”, “US$” or “$”). In this annual report, we refer to assets, obligations, commitments and liabilities in our financial statements in USD. These dollar references are based on the exchange rate of NT$, HK$ and RMB to USD, determined as of a specific date. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of USD 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

ITEM 1. BUSINESS

Corporate History and Structure Overview

Our Company is a Delaware corporation organized on June 4, 2010 and has been quoted on various tiers of the OTC Markets since August 2012. We provide our customers brokerage and related services with respect to life insurance and property and casualty insurance products. We operate our Taiwan business primarily through Law Insurance Broker Co., Ltd. (“Law Broker”) and Uniwill Insurance Broker Co., Ltd. (“Uniwill”) and our PRC business primarily through Law Anhou Insurance Agency Co., Ltd. (“Anhou”).

Taiwan Segment

The history of our Company dates back to October 9, 1992, when Law Broker was established.

Law Enterprise Co., Ltd. (“Law Enterprise”), a company limited by shares and incorporated under the laws of Taiwan, holds 100% interest in Law Broker, a company limited by shares and incorporated under the laws of Taiwan on October 9, 1992. Law Enterprise used to operate two other subsidiaries during the past three fiscal years, namely Law Risk Management & Consultant Co., Ltd. (“Law Management”), a company limited by shares and incorporated under the laws of Taiwan on December 5, 1987, and Law Insurance Agent Co., Ltd., a company limited by shares and incorporated under the laws of Taiwan on June 3, 2000 (“Law Agent”, collectively with “Law Enterprise”, “Law Broker” and “Law Management”, the “Taiwan Subsidiaries”, each a “Taiwan Subsidiary”). Law Management and Law Agent ceased operations, and they were dissolved on April 20, 2016 and April 12, 2016, respectively.

On November 15, 2019, the Company, through AIlife International Investment Co., Ltd. (“AIlife”), one of the Company’s wholly-owned subsidiaries, entered into a joint venture agreement (the “Joint Venture Agreement”) with Cyun-Jhan Enterprise Co., Ltd. (“Cyun-Jhan”) and Jian-Zao International Industrial Co., Ltd. to contribute funds, human resources, and technology into Uniwill Insurance Broker Co., Ltd. (“Uniwill”), a wholly owned subsidiary of the Company incorporated in Taiwan, according to the Joint Venture Agreement. Under the terms of the Joint Venture Agreement, a total of $13.3 million (NTD 400 million) will be injected to Uniwill if and when all of the conditions are met as set forth in the Joint Venture Agreement no later than December 31, 2021. During the year of 2019, AIlife increased and completed the capital injection in Uniwill to the amount of $3.3 million (NTD 100 million). During the year of 2020, the capital injection completed by AIlife were $0.5 million (NTD 15 million). As of December 31, 2022, the capital injections completed by AIlife were $3.8 million (NTD 115 million).

On March 3, 2021, the parties thereto entered into an amendment to the Joint Venture Agreement (the “Amendment to the Joint Venture Agreement”), pursuant to which AIlife shall fulfill the paid-up capital obligation in the aggregate amount of NT$400 million (the “Total Cash Contribution”) during a period of eight (8) years (the “Period”) from November 15, 2019, provided that the number of the registered sales agents of Uniwill exceeds 1,000 and the cumulative revenue of the JV reaches NT$8.7 billion (the “Revenue Threshold”) within the Period. For the year ended December 31, 2022, Uniwill hasn’t met the Revenue Threshold within the Period and therefore AIlife was not obligated to increase the cash contributions. Subject to the terms of the Amendment to the Joint Venture Agreement and Joint Venture Agreement, in the event that Uniwill fails to reach the Revenue Threshold within the Period, AIlife shall only be obligated to

Table of Contents

make cash contributions through the Period to the Joint Venture in the aggregate amount (the “Total Adjusted Cash Contribution”) calculated as follows:

The Total Adjusted Cash Contribution= (the actual cumulated revenue of Uniwill during the Period/ NT$8.7 billion)*NT$400 million.

For more information, please see the current reports on Form 8-K filed on November 21, 2019 and March 9, 2021.

Action Holdings Financial Limited (“AHFL”) was incorporated in the British Virgin Islands with limited liability on April 30, 2012. AHFL holds a 65.95% interest in Law Enterprise and certain of our other subsidiaries as more fully described below.

On August 24, 2012, an acquisition agreement (the “AHFL Acquisition Agreement”) was entered into by and among our Company and the selling shareholders of AHFL named therein. Pursuant to the AHFL Acquisition Agreement, our Company acquired 100% interest in AHFL and its subsidiaries in Taiwan and our Company agreed to pay NT$15.0 million ($500,815) on or prior to March 31, 2013 and NT$7.5 million ($250,095) subsequent to March 31, 2013 in cash in two installments. In addition, our Company agreed to (i) issue 8,000,000 shares of common stock of our Company to the shareholders of AHFL; (ii) issue 2,000,000 shares of common stock of our Company to certain employees of Law Broker; and (iii) create an employee stock option pool, consisting of available options, exercisable for up to 2,000,000 shares of common stock of our Company. Upon closing of the transaction, we acquired 100% interest in AHFL and its subsidiaries in Taiwan.

On March 14, 2013, an Amendment to the AHFL Acquisition Agreement (the “First Amendment to AHFL Acquisition Agreement”) was entered into by and among our Company and the selling shareholders of AHFL named therein. Pursuant to the First Amendment to AHFL Acquisition Agreement, (i) the deadline for cash payment under the AHFL Acquisition Agreement was extended to March 31, 2015; and (ii) in lieu of the 2,000,000 employee stock option pool, our Company agreed to create an employee stock pool consisting of up to 4,000,000 shares of the common stock of our Company, among which 2,000,000 shares shall be solely granted to employees of Law Broker, and the remaining 2,000,000 shares shall be granted to employees of affiliated entities of our Company (including Law Broker employees).

On March 13, 2015, a second Amendment to the AHFL Acquisition Agreement (the “Second Amendment to AHFL Acquisition Agreement”) was entered into by and among our Company and the selling shareholders of AHFL named therein. Pursuant to the Second Amendment to AHFL Acquisition Agreement, the deadline for cash payment under the AHFL Acquisition Agreement was further extended to March 31, 2016.

On February 17, 2016, a third Amendment to the AHFL Acquisition Agreement (the “Third Amendment to AHFL Acquisition Agreement”) was entered into by and among our Company and the selling shareholders of AHFL named therein. Pursuant to the Third Amendment to AHFL Acquisition Agreement, on or prior to June 30, 2016, (i) our Company committed to complete a public offering in connection with the listing of our Company’s shares on a national stock market, where the Company aimed to raise net proceeds through such public offering of at least $10.0 million; (ii) our Company committed to distribute a cash payment in the amount of NT$22.5 million, on a pro rata basis, to the selling shareholders of AHFL and to issue 5,000,000 common shares to select employees of AHFL pursuant to its employee stock/option plan, and (iii) failure to timely complete either of the above-mentioned criteria would be deemed a material breach by the Company under Article 8 of the Acquisition Agreement, and the non-breaching parties would be entitled to terminate the Acquisition Agreement and unwind the Acquisition of AHFL by us and restore the status quo of our Company and the selling shareholders of AHFL as if the acquisition had never happened.

On August 8, 2016, a fourth Amendment to the AHFL Acquisition Agreement (the “Fourth Amendment to AHFL Acquisition Agreement”) was entered into by and among our Company and the selling shareholders of AHFL named therein. Pursuant to the Fourth Amendment to AHFL Acquisition Agreement, (i) the Third Amendment to AHFL Acquisition Agreement was terminated with immediate effect on August 8, 2016, and (ii) our Company agreed to pay to the selling shareholders of AHFL NT$15.0 million on or prior to March 31, 2017 and NT$4.8 million on July 21, 2016.

On March 12, 2017, a fifth Amendment to the Acquisition Agreement (the “Fifth Amendment to AHFL Acquisition Agreement”) was entered into by and among the Company and the selling shareholders of AHFL named therein. Pursuant to the Fifth Amendment to

Table of Contents

AHFL Acquisition Agreement, the Company agreed to distribute the cash payments in the aggregate amount of NT$15 million to the selling shareholders of AHFL named therein on or prior to March 31, 2019.

On March 27, 2019, a sixth Amendment to the Acquisition Agreement (the “Sixth Amendment to AHFL Acquisition Agreement”) was entered into by and among the Company and the selling shareholders of AHFL named therein. Pursuant to the Sixth Amendment to the AHFL Acquisition Agreement, the Company agreed to distribute cash payments in the aggregate amount of NT$15 million to the selling shareholders of AHFL named therein on or prior to March 31, 2021.

On March 19, 2021, a seventh Amendment to the Acquisition Agreement (the “Seventh Amendment to AHFL Acquisition Agreement”) was entered into by and among the Company and the selling shareholders of AHFL named therein. Pursuant to the Seventh Amendment to the AHFL Acquisition Agreement, the Company agreed to distribute cash payments in the aggregate amount of NT$15 million to the selling shareholders of AHFL named therein on or prior to March 31, 2024.

Genius Holdings Financial Limited (“GHFL”) is a wholly owned subsidiary of AHFL. On February 13, 2015, our Company, AHFL and Mr. Chwan Hau Li, the sole selling shareholder of GHFL, entered into an acquisition agreement (the “GHFL Acquisition Agreement”). Pursuant to the GHFL Acquisition Agreement, our Company issued Mr. Chwan Hau Li 352,166 fully paid and non-assessable shares of AHFL common stock (the “AHFL Shares”) together with put options to sell 352,166 shares of common stock of our Company (the “Put Option”), in exchange for 704,333 shares of common stock of GHFL previously held by Mr. Chwan Hau Li, which constituted all of the then issued and outstanding capital stock of GHFL. The Put Option was exercisable within six months of the closing date of the acquisition. The holder of the Put Option would need to forfeit the AHFL Shares to exercise the Put Option. Subsequent to the acquisition, GHFL became a wholly-owned subsidiary of our Company. GHFL holds 100% issued and outstanding shares of Genius Investment Co., Ltd. (“GIC”), a company limited by shares and incorporated under the laws of Taiwan, which in turn holds approximately 15.64% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius Broker”), a company limited by shares and incorporated under the laws of Taiwan. Both GHFL and GIC 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 March 31, 2015, Mr. Chwan Hau Li exercised the Put Option, pursuant to which Mr. Chwan Hau Li transferred 352,166 shares of AHFL to our Company and received 352,166 shares of common stock of our Company in exchange. After the exercise of the Put Option, the Company became the sole shareholder of GHFL and AHFL.

On February 17, 2016, the Company, AHFL and Mr. Chwan Hau Li entered into an Amendment 2 to the GHFL Acquisition Agreement (the “Second Amendment to GHFL Acquisition Agreement”), pursuant to which the Company agreed to complete a public offering with net proceeds of at least $10 million and listing of our Company’s securities on a national stock market on or prior to February 28, 2016. However, as of the date of this annual report, our Company’s securities had not been listed on a national stock exchange.

On August 8, 2016, our Company, AHFL and Mr. Chwan Hau Li entered into an Amendment 3 to the GHFL Acquisition Agreement (the “Third Amendment to GHFL Acquisition Agreement”), pursuant to which, the Second Amendment to GHFL Acquisition Agreement was terminated.

On August 13, 2021, the Company along with its wholly owned subsidiary Action Holdings Financial Limited entered into the Amendment 4 to the GHFL Acquisition Agreement with Mr. Chwan Hau Li (the “Fourth Amendment to GHFL Acquisition Agreement”). Pursuant to Fourth Amendment to GHFL Acquisition Agreement and as additional consideration for Mr. Li due to certain adjustments, the Company issued Mr. Li 864,463 shares of Company’s common stock on October 15, 2021.

In July of 2018, the Company acquired Joint Broker Co., Limited (“JIB”), a Taiwan Insurance brokerage company, previously known as Kao Te Insurance Broker (“KT Broker”), through GIC. On July 1, 2018, GIC entered into an acquisition agreement (“KT Broker Acquisition Agreement”) with the selling shareholder of KT Broker, Ms. Ma. Pursuant to the KT Broker Acquisition Agreement, GIC agreed to pay $29,545 (NT$ 900,000) in exchange for the insurance brokerage licenses issued to KT Broker by the Taiwan government, along with right to the KT Broker’s company name and $13,131 (NT$ 400,000) of legal deposits, which were required by the Taiwan insurance regulations. The Company has no intention of operating the KT Broker existing brokerage business nor retaining any of its sales personnel, did therefore the Company recognize for accounting purposes only the acquisition of assets as part of this transaction. The Taiwan laws do not allow a legal entity to transfer its brokerage license. In order to obtain the desired licenses that KT Broker had, we acquired KT Broker and renamed KT Broker as Joint Insurance Broker Co., Limited to serve as a holding entity for the brokerage

Table of Contents

licenses. The change of control due to KT Broker Acquisition Agreement and name change did not affect the effectiveness of the insurance brokerage license owned by JIB in Taiwan. On January 31, 2022, GIC entered into a stock transfer agreement with AIlife International Investment Co., Ltd. (“AIlife”), whereby GIC sold and transferred its 100% equity in JIB to AIlife.

PRC Segment

On July 12, 2010, ZLI Holdings Limited (“CU Hong Kong”), a wholly owned subsidiary of our Company, was established under the laws of Hong Kong. On October 20, 2010, Zhengzhou Zhonglian Hengfu Consulting Co., Ltd., a wholly foreign owned enterprise (“CU WFOE”), a wholly owned subsidiary of CU Hong Kong, was established in Henan province of the PRC. On January 16, 2011, our Company issued 20,000,000 shares of common stock to several non-U.S. persons for their investment of $300,000 in CU WFOE. The issuance was made pursuant to an exemption from registration contained in Regulation S under the Securities Act of 1933, as amended.

Zhengzhou Anhou Insurance Agency Co., Ltd., the predecessor entity of Anhou, was founded in Henan province of the PRC on October 9, 2003. Due to PRC legal restrictions on foreign ownership and investment in an insurance agency businesses in China, Able Capital Holding Co., Ltd., a company established with limited liability in Hong Kong, delegated four PRC individuals, namely Yanyan Wang, Zhaohui Chen, Weizhe Hou and Yong Zhang, to invest in Anhou on its behalf.

On September 26, 2013, Yanyan Wang, Zhaohui Chen, Jing Yue, Weizhe Hou, Yong Zhang, Li Chen (“Anhou New Investors”) and Shuqin Zhu, Qun Wei, Qunlei Fang and Yanxia Chen (“Anhou Original Shareholders”) increased the registered capital of Anhou to RMB50 million, among which, (i) Yanyan Wang agreed to invest RMB10 million, accounting for 20% of registered capital in Anhou, (ii) Zhaohui Chen agreed to invest RMB10 million, accounting for 20% of registered capital in Anhou, (iii) Jing Yue agreed to invest RMB7.5 million, accounting for 15% of registered capital in Anhou, (iv) Weizhe Hou agreed to invest RMB5 million, accounting for 10% of registered capital in Anhou, (v) Yong Zhang agreed to invest RMB4.5 million, accounting for 9% of registered capital in Anhou, and (vi) Li Chen agreed to invest RMB3 million, accounting for 6% of registered capital in Anhou, respectively.

The registered capital increase of Anhou was in response to the promulgations of certain regulations by the China Insurance Regulatory Commission (“CIRC”). On April 27, 2013, 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. On May 16, 2013, CIRC issued Notice for Further Clarification on Related Issues of Access to Professional Insurance Intermediary Market (the “2013 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, can continue operation of their existing business within the provinces where they have the registered office or branch office, but shall not set up any new branches in any province where they do not have the registered office or any branch office. To better implement the expansion strategies of our Company, Anhou increased its registered capital to RMB50 million to meet the requirement of CIRC so that it is able set up new branches in any province beyond its current operations in the PRC.

On October 24, 2013, Anhou Original Shareholders transferred their interests in Anhou to Changrong Hu, a PRC citizen (“Mr. Hu,” together with Anhou New Investors, “Anhou Existing Shareholders”), for an aggregate consideration of RMB10 million. Mr. Hu is currently the legal representative, General Manager and the sole director of Anhou.

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

On August 17, 2020, Jing Yue transferred her interests in Anhou to Chunyan Lu for an aggregate consideration of RMB7.5 million.

On August 24, 2020, the Company had liquidated the Guangdong branch in the PRC.

On August 26, 2021, Chunyan Lu transferred back her interests to Jing Yue in Anhou for an aggregate consideration of RMB 7.5 million.

Sichuan Kangzhuang Insurance Agency Co., Ltd. (“Sichuan Kangzhuang”), a wholly owned subsidiary of Anhou, was established with limited liability on September 4, 2006 in Sichuan province of the PRC. On September 6, 2010, shareholders of Sichuan Kangzhuang transferred their interest in Sichuan Kangzhuang to Anhou for an aggregate consideration of RMB532,622. For the purpose of procuring

Table of Contents

certain economic benefits and enabling a centralized control over the business operations in Sichuan province, the Company commenced the dissolution process of Sichuan Kangzhuang, a wholly owned subsidiary of Anhou and set up a branch office of Anhou in Sichuan province. Accordingly, Sichuan Kangzhuang filed a dissolution application to the local Bureau of Administration and Commerce and made a public announcement published in local newspaper in October 2017. As Sichuan Kangzhuang ceased operations, it was dissolved on October 8, 2018.

Jiangsu Law Insurance Brokers Co., Ltd. (“Jiangsu Law”), a wholly owned subsidiary of Anhou, was established with limited liability on September 19, 2005 in Jiangsu province of the PRC. Jiangsu Law is licensed to provide insurance brokerage services in Jiangsu Province. On September 28, 2010, Anhou and the shareholders of Jiangsu Law entered into an equity transfer agreements. Pursuant to Provisions on the Supervision and Administration of Insurance Brokerage Institution, effective on October 1, 2009, if an insurance brokerage entity fails to bring its registered capital to no less than RMB10 million on or prior to October 1, 2012, the CIRC or its local agency, as applicable, may determine not to extend the insurance brokerage license. To meet such minimum registered capital requirement, on February 11, 2011, Anhou invested RMB4.82 million in Jiangsu Law to increase the registered capital to RMB10 million.

On February 25, 2022, Anhou, a contractually controlled entity of China United Insurance Service, Inc. entered into a Share Purchase Agreement with Jiangsu Law and third-party buyers, pursuant to which Anhou shall sell and transfer 100% of its equity ownership in Jiangsu Law and a wholly owned subsidiary of Anhou to the following buyers: Xuzhou Guosheng Furui Asset Management Co., Ltd., Jiangsu Zhongbozhixin Financial Service Outsourcing Co., Ltd., and Xuzhou Xinrui Service Outsourcing Co., Ltd. For more information, please refer to the Note 3 to the consolidated financial statements for the year ended December 31, 2022.

Due to PRC 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, we operate our PRC business primarily through Anhou and Jiangsu Law (collectively, the “Consolidated Affiliated Entities”, each a “Consolidated Affiliated Entity”). We do not directly hold equity interests in our Consolidated Affiliated Entities. However, through the VIE Agreements (defined as below), we effectively control, and are able to derive substantial economic benefits from, these Consolidated Affiliated Entities. On March 12, 2019, the Ministry of Commerce of the People’s Republic of China (“MOFCOM”) passed the Foreign Investment Law, which replaced the three existing laws over foreign investment. From January 1, 2020, foreign individuals, enterprises and other organizations that directly or indirectly make investment activities in China are subject to the Foreign Investment Law. However, it remains unclear as to how these changes will affect entities currently operating in China, particularly foreign controlled variable interest entities.

Our Consolidated Affiliated Entities in China are variable interest entities through which all of our insurance services in China are operated. These VIE Agreements give us effective control over our Consolidated Affiliated Entities in China and allow us to consolidate the financial results of our Consolidated Affiliated Entities in our financial statements.

On January 17, 2011, CU WFOE, Anhou and Anhou Original Shareholders entered into a series of agreements (the “Old VIE Agreements”) pursuant to which CU WFOE exercises effective control over Anhou. As a result of the capital increase and the share transfer described above, on October 24, 2013, CU WFOE, Anhou and Anhou Existing Shareholders entered into a series of agreements (the “VIE Agreements”), including Power of Attorneys, Exclusive Option Agreements, Share Pledge Agreements, in the same form as the previous Old VIE Agreements, other than the change of shareholder names and their respective shareholdings. The Old VIE Agreements were terminated by and among CU WFOE, Anhou and Anhou Original Shareholders on the same date, except that the Exclusive Business Cooperation Agreement executed by and between CU WFOE and Anhou on January 17, 2011 remains in full effect. The VIE Agreements now in effect include:

Table of Contents

On March 23, 2022, Anhou and CU WFOE entered into an amendment to the Exclusive Business Cooperation Agreement, pursuant to which the Exclusive Business Cooperation Agreement shall be automatic renewed for successive terms unless CU WFOE gives a 30-day notice to terminate such Agreement, with each term being ten (10) years.

Hong Kong Segment

Prime Financial Asia Ltd. (“PFAL”) is a re-insurance broker company incorporated in Hong Kong and is a majority-owned subsidiary of the Company due to the fact that AHFL owns 51% of PFAL. On April 23, 2014, AHFL and Chun Kwok Wong (“Mr. Wong”) entered into a Capital Increase Agreement, pursuant to which Mr. Wong increased PFAL’s registered capital from HK$500,000 to HK$1,470,000 and AHFL contributed HK$1,530,000 to PFAL’s registered capital. Upon the completion of capital increase on April 30, 2014, Mr. Wong and AHFL owned 49% and 51% of PFAL’s equity interest, respectively.

On August 7, 2015, Max Key Investment Ltd. (“MKI”) was incorporated with limited liability in the British Virgin Islands. On August 15, 2015, Prime Management Consulting (Nanjing) Co., Ltd. (“PTC Nanjing”) was incorporated with limited liability in Nanjing province of the PRC. On September 3, 2015, Prime Asia Corporation Limited. (“PTC Taiwan”), a company limited by shares, was incorporated in Taiwan. Each of MKI, PTC Nanjing and PTC Taiwan is a wholly owned subsidiary of PFAL.

On July 2, 2020, the Company had liquidated a subsidiary in the PRC, Prime Management Consulting (Nanjing) Co., Ltd. (PTC Nanjing).

In August 2021, PTC Taiwan, the 100% subsidiary of MKI, has completed its liquidation.

Revenue Generation

As a holding company with no business other than holding equity interest of our operating subsidiary, CU WFOE in China and the Taiwan Segment, we rely principally on dividends to be paid by CU WFOE in China and the Taiwan Segment. CU WFOE, being the exclusive service provider to Anhou, relies on the service fees to which it is entitled from Anhou. Pursuant to the Exclusive Cooperation Agreement (the “Cooperation Agreement”) between CU WFOE and Anhou (“the Parties”), CU WFOE has the right to collect 90% of the net profits of Anhou. The Parties further agree that, according to the actual cooperation between the Parties, the revenue and expenditure situation of Anhou, the Parties may adjust the calculation ratio of the Service Fees provided herein through mutual agreement, and CU WFOE is entitled to determine, in its sole discretion, whether to permit Anhou to defer the payment of part or all of the Service Fees under certain particular circumstances. Anhou has not been paying service fees according to the Cooperation Agreement, and has not paid any dividend to CU WFOE to date. As of December 31, 2022, Anhou was operating at loss, but since Anhou remains a growing company that requires financial resources to support further expansion, the decision as to a dividend payment will be decided in the future depending on the financial circumstances, including maintaining prudent cash reserves. Our capability to receive dividends from CU WFOE, convert them into USD and make the repatriation out of China is subject to the applicable PRC restrictions on the payment of dividends by PRC companies, laws and regulations on foreign exchange and restrictions on foreign investment.

For the year ended December 31, 2022, 97.00%, 2.92% and 0.08% of our revenues in our consolidated financial statements were derived from our Taiwan Segment, PRC Segment, and Hong Kong Segment, respectively. For the year ended December 31, 2021, 95.64%, 4.33% and 0.03% of our revenues in our consolidated financial statements were derived from our Taiwan Segment, PRC Segment, and Hong Kong Segment, respectively. Revenues in our consolidated financial statements are composed of commissions earned from insurance companies according to the terms of each insurance company service agreement, as well as revenues earned in association with the Strategic Alliance Agreement with AIA International Limited Taiwan Branch.

Table of Contents

Reclassification of Shares

On January 28, 2011, our Company increased the number of authorized shares from 30,000,000 shares of common stock to 100,000,000 shares of common stock and 10,000,000 shares of preferred stock. On July 2, 2012, our board of directors and stockholders approved, in connection with a reclassification of 1,000,000 issued and outstanding shares of common stock (the “Reclassified Shares”), par value $0.00001 per share held by Mr. Yi Hsiao Mao (“Mr. Mao”) into 1,000,000 shares of Series A Convertible Preferred Stock, par value $0.00001 per share (the “Series A Preferred Stock”) on a share-for-share basis (the “Reclassification”), the issuance of 1,000,000 shares of Series A Preferred Stock to Mr. Mao and cancellation of 1,000,000 common stock held and submitted by Mr. Mao pursuant to the Reclassification. All of the 1,000,000 shares of Series A Preferred Stock are reclassified from the 1,000,000 common stock held by Mr. Mao and no additional consideration has been paid by Mr. Mao in connection with the Reclassification. Each holder of common stock shall be entitled to one vote for each share of common 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 our Company; while each holder of Series A Preferred Stock shall be entitled to ten votes for each share of Series A Preferred 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 our Company.

2017 Long Term Incentive Plan

On May 12, 2017, the Company’s 2017 Long Term Incentive Plan (the “2017 Plan”) was approved by the shareholders at the 2017 Annual Meeting of Stockholders of China United Insurance Service, Inc. Up to 10,000,000 shares of our Common Stock may be granted under the 2017 Plan (the “Share Pool”), provided that 2,000,000 shares of the Share Pool is reserved for issuance to eligible participants providing services to AHFL and its subsidiaries. Eligibility to participate is open to officers, directors and employees of, and other individuals (including sales agents who are exclusive agents of the Company or its subsidiaries or derive more than 50% of their income from those entities) who provide bona fide services to or for, us or any of our subsidiaries. Given that metrics for evaluating performance goals are rather complex and exhaustive, and that the Company’s management and Board of Directors are still working to develop a series of reward policies that specify various performance target levels and the size of the award or payout of performance shares with respect to each different target level attained, no awards were granted under the 2017 Plan as of December 31, 2022.

Table of Contents

The following flow chart illustrates our Company’s organizational structure as of December 31, 2022:

​

On January 31, 2022, Genius Investment Consultant Co., Ltd (“GIC”), a subsidiary entity of the Company entered into a stock transfer agreement with AIlife International Investment Co., Ltd. (“AIlife”), pursuant to which GIC sold and transferred 100% of its equity ownership in Joint Insurance Broker Co., Ltd. to AIlife resulting in AIlife holding 100% equity interest in Joint Insurance Broker Co., Ltd.

On February 25, 2022, Anhou, a controlled entity of the Company entered into a Share Purchase Agreement. For more information, please refer to Note 3 to the consolidated financial statements for the year ended December 31, 2022.

Products and Services

The Taiwan and PRC Segments market and sell to customers, two broad categories of insurance products: life insurance products and property and casualty insurance products, both focused on meeting the particular insurance needs of individuals. The insurance products that the Taiwan and PRC Segments sell are underwritten by some of the leading insurance companies in Taiwan and China, respectively.

Through Anhou’s wholly-owned insurance brokerage firm, Jiangsu Law, Anhou also closely interacts with insurance companies and actively locates and introduces the right customers in Anhou’s database matching the insurance products offered by such insurance companies to them.

Table of Contents

The Taiwan and PRC Segments are compensated primarily by commissions and fees paid by insurance companies, typically based on a percentage of the premium paid by the insured or a percentage of the amount recovered from insurance companies. Commission and fee rates generally depend on the type of insurance products and the particular insurance company that issues the particular insurance products.

Life Insurance Products

The Taiwan Segment

The life insurance products the Taiwan segment distributes can be broadly classified into the categories set forth below. Due to continuous product innovation by insurance companies, some of the insurance products Taiwan segment distributes combine features of one or more of the categories listed below. Total revenues from life insurance products contributed by Taiwan segment in the fiscal year of 2021 was approximately $116.81 million, accounted for approximately 92.97% of Taiwan segment’s total revenues. Total revenues from life insurance products generated by Taiwan segment in the fiscal year of 2022 was approximately $120.05 million, representing approximately 93.81% of Taiwan segment’s total revenues for the fiscal year ended December 31, 2022.

Table of Contents

Anhou

The life insurance products Anhou distributes can be broadly classified into the categories set forth below. Due to constant product innovation by insurance companies, some of the insurance products Anhou distributes combine features of one or more of the categories listed below. Anhou’s total revenues from life insurance products in the fiscal year of 2021 was approximately $5.02 million, accounting for approximately 88.14% of Anhou’s total revenues and the total revenues from life insurance products in the fiscal year of 2022 was $3.5 million, accounting for approximately 90.94% of Anhou’s total revenues for the year ending December 31, 2022.

In addition to the periodic premium payment schedules described above, 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 payments of fixed premiums to the insurance company for a specified period of time. This means that once Anhou or the Taiwan Segment sells a life insurance policy with a periodic premium payment schedule, they will be able to derive commission and fee income from that policy for an extended period of time, sometimes up to 25 years. Because of this feature and the expected sustainable growth of life insurance sales in China and Taiwan, we have devoted significant resources on developing our capability to distribute individual life insurance products with periodic payment schedules since the inception of Anhou and the Taiwan Segment. We expect that sales of life insurance products will continue to be our primary source of revenue in the next several years.

Property and Casualty Insurance Products

The Taiwan Segment

The Taiwan Segment’s main property and casualty insurance products are automobile insurance, casualty insurance, and liability insurance. The Taiwan Segment commenced sale of automobile insurance, casualty insurance and liability insurance business in August 2003. Our total revenues from property and casualty insurance products in the fiscal year of 2021 year was approximately $8.82 million, accounted for approximately 7.02% of the Taiwan Segment’s total revenues and approximately $7.91 million, accounted for approximately 6.18% of Taiwan Segment’s total revenues in the year ending December 31, 2022, respectively.

Table of Contents

The property and casualty insurance products the Taiwan Segment distributes can be further classified into the following categories:

Anhou

Anhou’s main property and casualty insurance product is commercial property insurance. Anhou commenced its sale of commercial property insurance in 2009 and developed its automobile insurance business in 2010. The total revenues from property and casualty insurance products generated by Anhou in the 2021 fiscal year was approximately $0.67 million, accounting for approximately 11.86% of Anhou’s total revenues, and approximately $0.35 million, accounted for approximately 9.06% of Anhou’s total revenues for the fiscal year ended December 31, 2022.

The property and casualty insurance products Anhou distributes can be further classified into the following categories:

Strategic Alliance with AIATW

On June 10, 2013, AHFL entered into a Strategic Alliance Agreement (the “Alliance Agreement”) with AIA International Limited Taiwan Branch (“AIATW”), the purpose of which is to promote life insurance products provided by AIATW within Taiwan by insurance agency companies or insurance brokerage companies affiliated with AHFL or CUII. The original term of the Alliance Agreement was from June 1, 2013 to May 31, 2018. Pursuant to the terms of the Alliance Agreement, AIATW was required to pay AHFL an execution fee of $8,326,700 (NT$ 250,000,000) to be recorded as revenue upon fulfilling sales target over the next five years. As of September 23, 2013, AHFL received $8,326,700 (NT$250,000,000) from AIATW under the Alliance Agreement. Pursuant to the Alliance Agreement, AHFL was entitled to the payment of the execution fee, subject to certain terms and conditions therein, including the satisfaction of the performance targets and the threshold 13-month persistency ratio, which is an indicator of how long customers stay with their policies.

Table of Contents

On September 30, 2014, AHFL entered into an Amendment to the Alliance Agreement (the “First Amendment to the Alliance Agreement”) with AIATW. Pursuant to the First Amendment to the Alliance Agreement, the expiration date of the Alliance Agreement was extended from May 31, 2018 to December 31, 2021. In addition, both AHFL and AIATW agreed to adjust certain terms and conditions set forth in the Alliance Agreement, including the downward adjustment of the performance targets as well as the mechanism and formula calculating the execution fee to be refunded, if any.

On January 6, 2016, AHFL entered into an Amendment No. 2 to the Alliance Agreement (the “Second Amendment to the Alliance Agreement”) with AIATW to further revise certain provisions in the Alliance Agreement and the previous amendment entered into by and between AHFL and AIATW.

Pursuant to the Second Amendment to the Alliance Agreement, the expiration date of the Alliance Agreement was extended from May 31, 2018 to December 31, 2021, and the effect of the Alliance Agreement during the period from October 1, 2014 to December 31, 2015 was suspended. In addition, both AHFL and AIATW agree to adjust certain terms and conditions set forth in the Alliance Agreement, among which are to: (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 unilaterally issued a confirmation letter to AIATW (the “2016 Letter”), where it emphasized its commitment to achieve certain sales targets within a specific time frame and covenanted to refund a certain portion of execution fees calculated based on the formula therein upon failure to achieve such sales target, as applicable.

On June 14, 2017, AHFL entered into an Amendment No. 3 to the Alliance Agreement (the “Third Amendment to the Alliance Agreement) with AIATW to further revise certain provisions in the Alliance Agreement and the previous amendments to the Alliance Agreement entered into by and between AHFL and AIATW.

Pursuant to the Third Amendment to the Alliance Agreement, except for the first contract year (April 15, 2013 to September 30, 2014), the sales targets for the remaining contract term under the Alliance Agreement shall be changed by reference to (i) the amount of the value of new business (“VONB”) and (ii) the 13-month persistency ratio as set forth therein, provided that to the extent any underlying insurance contract is revoked, invalid or terminated and premiums is refunded to such policyholder, the amount of the related VONB shall be correspondingly reduced. Both AHFL and AIATW agreed to calculate the business promotion fees (equivalent to the “execution fee” referred above) to be returned in case of failure to achieve the sales targets or the fees to be increased in case of exceeding the sales targets, as the case may be, based on two formulas specified in the Third Amendment to the Alliance Agreement. The primary factor under formula one focuses on the annual and/or accumulated achievement rate(s), while the primary factor under formula two focuses on the 13-month persistency ratio(s), subject to terms and conditions therein. The expanded scope of services to be provided by AHFL to AIATW as set forth in Section 4 of the Second Amendment to the Alliance Agreement is removed under the Third Amendment to the Alliance Agreement as well.

On June 14, 2017, with AIATW’s consent, the 2016 Letter was revoked in order to conform to the latest terms and conditions regarding the cooperation between AHFL and AIATW as set forth in the Third Amendment to the Alliance Agreement.

On March 15, 2022, AHFL and AIATW entered into the fourth Amendment to the Alliance Agreement for extending the cooperation period to the year end of 2031 with additional alliance business promotion fees at NT 50,000,000 in total, subject to meeting certain performance goals. For more information please see the current report on Form 8-K filed on March 18, 2022.

Online Business

In recent years, the online insurance business has experienced rapid growth. Many insurance companies, portal websites, and professional insurance intermediaries have begun launching its e-commerce platforms, providing real-time information to consumers and allowing consumers to directly complete transactions online. Law Broker began developing its online platform in 2016, and became the first brokerage company to receive formal approval from the Financial Supervisory Commission of Taiwan (“FSC”) to commence online business on May 9, 2016. The platform, SARAcares (website: https://www.saracares.com.tw), was launched on January 26, 2017. It offers a broad range of insurance products underwritten by multiple insurance companies, policy comparison features, and post-sale services that are backed by our online service staffs and nationwide sales network. As required by the relevant laws and regulations regarding e-commerce provided by the FSC, Law Broker has obtained the ISO 27001 certification of Information Security Management

Table of Contents

System (ISMS) and BS 10012 certification of Personal Information Management System since June 20, 2017. Our online business in Taiwan was still at a nascent stage with the majority of the sales still being completed by off-line agents as of the date of this annual report.

Unified Operating Platform

Law Broker has self-constructed a Unified Operating Platform, an information technology infrastructure that serves to enhance operational, sales processes, and administrative efficiency. Since Law Broker’s establishment in 1992, it has successfully implemented the following components of its operating platform across its branch offices in Taiwan through a hub center located in Taipei:

The Unified Operating Platform has proved to be an efficient and streamlined operating system which has contributed to the successful expansion and growth of Law Broker into one of the leading insurance brokerage companies in Taiwan, with 41 sales and service outlets (including the headquarters) across Taiwan and 3,106 insurance sales professionals and 158 administrative staff members as of December 31, 2022. Law Broker, Uniwill Insurance Broker Co., Ltd. (“Uniwill Insurance Broker”) and Joint Insurance Broker Co., Ltd. (“Joint Insurance”) have a total of 22 sales and service outlets (including the headquarters) across Taiwan and 2,835 insurance sales professionals and 44 administrative staff members as of December 31, 2022.

In accordance with our growth strategy in China, Anhou has made significant efforts to adapt the Unified Operating Platform utilized by Law Broker to better meet the operational need in China. Since September 2010, Anhou has successfully implemented the tailored operating platform across the PRC subsidiaries through a hub center located in Nantong, Jiangsu province. We expect that this tailored operating platform will make selling easier for sales agents in China, facilitate standardized business and financial management, enhance risk control and increase operational efficiency for the PRC subsidiaries.

Anhou has tailored and refined the platform on the basis of Law Broker’s well-developed operating platform in Taiwan and believes that it is difficult for our competitors in China, particularly new market entrants, to reproduce a similar platform without substantial financial resources, time and operating experience.

Because the various systems, policies and procedures under both of operating platforms utilized by Law Broker and Anhou can be rolled out quickly as we enter new regions or make acquisitions, we believe we can expand our distribution network rapidly and efficiently while maintaining the quality of our services.

Distribution and Service Network and Marketing

The Taiwan Segment had a total of 66 sales and service outlets (including the headquarters), 289 administrative staff members and 5,941 insurance sales professionals across Taiwan as of December 31, 2022. Law Broker have a total of 41 sales and service outlets (including the headquarters) across Taiwan, 3,106 insurance sales professionals and 158 administrative staff members. Uniwill Insurance Broker have a total of 19 sales and service outlets (including the headquarters) across Taiwan, 2,819 insurance sales professionals and 43 administrative staff members. Joint Insurance have a total of 3 sales and service outlets (including the headquarters) across Taiwan, 16

Table of Contents

insurance sales professionals and 1 administrative staff member. The Company also had 3 offices and 87 staffs providing the administrative service across the organization.

The Taiwan Segment markets and sells life insurance products, property and casualty insurance products directly to the targeted customers through the sales professionals, who are independent contractors, not its employees.

Since Anhou’s establishment in 2003, it has devoted substantial resources in building up its distribution and service network in the PRC. Anhou has targeted its distribution and service network in certain heavily populated provinces in China, such as Henan, Jiangsu, Sichuan, and Fujian. As of December 31, 2022, Anhou had one insurance agency with 1,218 sales professionals and 108 administrative staff members operating across 27 cities within these four provinces.

Anhou markets and sells life insurance products, property and casualty insurance products directly to the targeted customers through the sales agents, who are independent contractors, not its employees.

Customers

Due to its extensive line of insurance products underwritten by the insurance companies in Taiwan, the Taiwan Segment managed to offer a variety of insurance products to customers of different ages or professions. Despite relatively healthy government-sponsored retirement and medical programs, more and more Taiwan people, especially those with stable financial means and desire for high-end retirement life, have been focusing on endowment and medical commercial insurance products, while the investment insurance products have been playing a less significant role since the economic downturn.

In addition, from time to time, the Taiwan Segment has been, either voluntarily or upon request of insurance companies, advising insurance companies or providing feedback on particular types of insurance products before they are put on the market. This interaction with insurance companies has not only enhanced the close cooperation between the Taiwan Segment and the insurance companies, but also gives it an edge in understanding the in-depth features of such insurance products for marketing and distribution purposes.

The Taiwan Segment sells automobile insurance and casualty insurance primarily to individual customers and liability insurance to institutional customers.

Anhou sells automobile insurance and individual accident insurance primarily to individual customers and commercial property insurance to institutional customers.

The revenues of Anhou are primarily generated from the sale of life insurance products and we expect the continuous growth in this sector, as more and more customers in China realized the insufficiency of the mandatory social insurance coverage and the necessity to supplement it with commercial insurance.

Insurance Company Partners

We are selective in terms of choosing insurance companies as our partners. We take into consideration a variety of factors, such as the reputation and integrity of the insurance company, the quality and competitiveness of insurance products offered, the prudence and health of the financial standing of the insurance company as well as the complexity and efficiency of claim adjustment and settlement. Both the Taiwan Segment and Anhou have formed strategic relationships with numerous insurance companies in Taiwan and China, respectively.

In the fiscal year ended December 31, 2022, our major insurance carrier partners in Taiwan, after aggregating the business conducted between the Taiwan Segment and the various local branches of the insurance companies, included AIA International Limited Taiwan Branch, Allianz Taiwan Life Insurance Company Ltd., Farglory Life Insurance Co., Ltd., Taiwan Life Insurance Co., Ltd. and TransGlobe Life Insurance Inc., arranged in alphabetical order. Among them, Taiwan Life Insurance Co., Ltd., Farglory Life Insurance Co., Ltd., and TransGlobe Life Insurance Inc., accounted for approximately 13.92%, 12.11%, and 29.10% of the Company’s total revenues for the year ended December 31, 2022, respectively.

In the fiscal year ended December 31, 2022, Anhou’s major insurance carrier partners, after aggregating the business conducted between Anhou and the various local branches of the insurance companies, were Aegon THTF Life Insurance Co., Ltd., Evergrande Life

Table of Contents

Insurance Co., Ltd., Funde Sino Life Insurance Co., Ltd., Generali China Life Insurance Co. Ltd., and Huaxia Insurance Co., Ltd., arranged in alphabetical order. None of these insurance company partners accounted for more than 10% of our total revenues for the year ended December 31, 2022.

The property and casualty insurance products the Taiwan Segment distributed in the year ended December 31, 2022 were primarily underwritten by, in alphabetical order, Fubon Insurance Co., Ltd., Hotai Insurance Co., Ltd., Shinkong Insurance Co., Taian Insurance Co., Ltd, and Tokio Marine Newa Insurance Co., Ltd. None of these insurance company partners accounted for more than 10% of our total revenues for the year ended December 31, 2022.

The property and casualty insurance products Anhou distributed in the fiscal year ending December 31, 2022 were primarily underwritten by, in alphabetical order, China Life Property & Casualty Insurance Co. Ltd., China Pacific (Group) Co., Ltd., China Ping An Property Insurance Co., Ltd., PICC Property and Casualty Co., Ltd., and Tianan Property Insurance Co., Ltd. None of these insurance company partners accounted for more than 10% of our total revenues for the year ended December 31, 2022.

Competition

A number of industry players are involved in the distribution of insurance products in Taiwan and PRC. We compete for customers on the basis of product offerings, customer services and reputation. Because we primarily distribute individual insurance products, our principal competitors include:

Law Broker is one of the leading insurance brokerage firms in Taiwan. Other than insurance companies and commercial banks, the Taiwan Segment’s primary competitors are Taiwan insurance brokerage companies of relatively large size, such as Everpro Insurance Brokers Co., Ltd.

Anhou has expanded its business across 27 cities within Henan, Sichuan, Jiangsu, and Fujian provinces as of December 31, 2022. Based on the insurance products Anhou and its branch offices are offering, Anhou’s primary competitors are small-sized and middle-sized insurance agency companies. Anhou is relatively large in terms of the number of salesmen and the sales revenue comparing to those competing insurance agency companies.

Table of Contents

Awards and Recognitions

Through years of operation, Law Broker has been recognized by various organizations and government entities for its best practices in the industry. Especially noteworthy is the “Taiwan Insurance Excellence Award”, the highest acclaim in the Taiwan insurance industry, co-sponsored by the Taiwan Insurance Institute, FSC and Taiwan Consumer Protection Committee.

​

Intellectual Property

To protect our intellectual property, we rely on a combination of trademark, copyright and trade secret laws as well as confidentiality agreements with our employees, sales agents, independent contractors and others.

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

the logo of Education Training Blue Magpie under the registration number 01313467, with a 10-year validity from June 1, 2018 to May 31, 2028;

the logo of Cartoon Blue Magpie under the registration number 01313464, with a 10-year validity from June 1, 2018 to May 31, 2028;

Table of Contents

the logo of Little Blue Magpie under the registration number 01313468, with a 10-year validity from June 1, 2018 to May 31, 2028;

the logo of Triumph Blue Magpie under the registration number 01313465, with a 10-year validity from June 1, 2018 to May 31, 2028;

Table of Contents

Table of Contents

Employees

As of December 31, 2022, Law Broker, Uniwill Insurance Broker and Joint Insurance together had 202 full-time employees and Anhou had 108 full-time employees. Our employees are not represented by any collective bargaining agreement. We believe that we have good relations with our employees and we have never experienced a work stoppage.

Segments

The Company currently operates as three reporting segments. Revenues, net income and total assets can be found in Item 8 of Part II, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Regulations

Taiwan Regulations of the Insurance Industry

The insurance industry in Taiwan is highly regulated. The FSC is the regulatory authority responsible for the supervision of the insurance industry in Taiwan. Insurance activities undertaken within Taiwan are primarily governed by the Insurance Law and the related rules and regulations.

Taiwan Insurance Law

The current principal regulation governing insurance in Taiwan is the Insurance Law, most recently amended on November 30, 2022 by Legislative Yuan, which provided the basic framework for regulating the insurance industry.

The Taiwan Insurance Law defines several participants in the insurance industry, such as the insurers, insurance agencies, insurance brokerage and insurance adjustors. It established requirements for form of organization, and qualifications and procedures to establish an insurance organization as well as separation of property insurance and life insurance. The Taiwan Insurance Law distinguishes insurance between fire disaster, marine, land and air, liability, surety, and other casualty and property insurance on one hand, and life insurance, health insurance, casualty insurance and annuity on the other. Unless permitted by the FSC, insurance companies are not allowed to engage in both types of insurance businesses.

The insurers, insurance agencies, insurance brokerages and insurance adjustors must join the related industry associations, or they are prohibited from conducting business operation. An insurance agency company or broker company of certain sizes shall establish internal control and audit systems as well as business solicitation systems and procedures.

Taiwan FSC

The Taiwan FSC is in charge of the financial market and financial service industries, among the insurance industry and has the power to control of the following items:

Table of Contents

Regulations of Insurance Brokers and Brokerage Companies

The current principal regulation governing insurance brokers and brokerage companies is the Regulations Governing Insurance Brokers last amended on September 22, 2022 by Insurance Bureau of FSC (the “Broker Rule”). An insurance broker stipulated under the Insurance Law refers to a person who negotiates to conclude an insurance contract on behalf of the insured and charges fees from the insured. Depending on their focused insurance areas, i.e. property or life insurance, insurance brokers can be divided into property insurance brokers and life insurance brokers. No matter what insurance industry an insurance broker is engaged in, it must have one of the following qualifications: (1) having passed the insurance brokerage examination for professional and technical staff; (2) having passed the insurance brokerage qualification test; or (3) having obtained the insurance brokerage practitioner certificate and practiced the same business.

There are special requirements for Taiwan insurance brokerage companies. Examples of such special requirements include that 1) the name of a brokerage company must contain the words “insurance broker”; and 2) when a brokerage company applies to operate brokerage business, the minimum registered capital must be at least NT$5 million ($157,953) fully paid in cash, according to which insurance brokerage companies with business license obtained prior to the implementation of this latest Broker Rule shall adjust their registered capital within five years upon the its implementation.

The Practitioner Certificate

The insurance broker practitioner certificate is valid for five years, and must be renewed before expiration. In case a broker has the qualifications for both property insurance and life insurance, he may obtain both insurance brokerage practitioner certificates.

Education and Training

There are two types of education and training for an insurance broker, pre-vocational and on-the-job education and training. An insurance broker must attend pre-vocational education and training for at least 32 hours during the year prior to applying for practicing insurance broker business and on-the-job education and training for at least 16 hours with law courses for no less than 8 hours per year, commencing after one year from the issuance of this latest Broker Rule.

Management of Insurance Brokerage

The rules describing how to conduct brokerage business concentrate on the concept that the brokerage must take care of customers’ matters in good faith. To ensure that this concept is properly carried out, the rules require insurance brokerage companies must have legal compliance officers who have one of the following qualifications: (1) being qualified as insurance agents or brokers and have worked as actual signatories; (2) having five years working experience in the insurance industry, insurance agency or insurance brokerage; or (3) having graduated from college and university departments related to insurance or law with more than three years working experience in the insurance industry, insurance agency or insurance brokerage.

Regulation of Insurance Salespersons

The current principal regulation governing individual insurance salespersons is the Rules on the Administration of Insurance Salespersons latest amended on January 8, 2021 by Insurance Bureau of FSC (the “Salesperson Rule”). An insurance salesperson falling under the Insurance Law refers to a person who is engaged in attracting insurance business for insurance companies, insurance brokerage companies and insurance agency companies. A salesperson is not allowed to attract business for the company he belongs to unless he

Table of Contents

has completed the registration in accordance with the Salesperson Rules and has obtained the registration certificate. In order to obtain the registration certificate, an insurance salesperson must be at least 20 years old and has at least graduated from a senior high school or a senior vocational school or have an equivalent educational background. In addition, the salesperson must meet one of the following requirements: (1) having passed the salesperson qualification examination held by relevant associations; or (2) holding a valid the registration certificate. Once the salespersons has passed the qualification examination, the relevant association will notify the company where the salesperson works, then the company will issue a registration certificate for the salesperson and file such registration certificate with the relevant authorities. The registration certificate is valid for five years and must be renewed before expiration. The salesperson must present the registration certificate before they start to engage in the insurance business. Unless approved by the company, the salesperson may not work for any other insurance company, insurance brokerage company or insurance agency company. The company supervises the work of the salesperson and is joint and severally liable for any damages caused by its salesperson.

Education and Training

Salespersons must attend in education and training held by their companies every year; otherwise the companies shall revoke the registration certificates of those who fail to attend such education and training.

The Salesperson Rule also stipulates the proper ways and manners to be followed by the salespersons in conducting their businesses and specifies the penalties in case of their violation of the Salesperson Rule.

Taiwan Regulations on Foreign Exchange

Foreign exchange regulation in Taiwan is primarily governed by the Ordinance of Foreign Exchange Administration, latest amended on April 29, 2009 (the “Foreign Exchange Ordinance”). Under the Foreign Exchange Ordinance, foreign exchange refers to foreign currency, bills and marketable securities. The authority managing the administration of foreign exchange is Ministry of Finance of Republic of China, while the authority managing the practical operation of foreign exchange business is Central Bank of Republic of China. The Foreign Exchange Ordinance also specifies the allocated power of Ministry of Finance and Central Bank, respectively. To the extent that any foreign exchange receipts, payments or transactions reach the threshold of NT$500,000 ($18,058) or equivalent in foreign currency, it must be reported to the Central Bank or its designated authorities. Upon incurrence of any of the following events, the State Council of Republic of China may determine and announce that for a period of time, to close the foreign exchange market, suspend or restrict all or partial foreign exchange payment, order a mandatory sale or deposit of all or partial foreign exchange into a designed bank, or dispose in any other manner as it deems necessary:

Taiwan Regulation on Foreign Investment

The current principal regulation governing foreign investment is Statute For Investment By Foreign Nationals latest amended on November 19, 1997 (the “Investment Statute”). Under the Investment Statute, investment refers to any activities involving (1) holding share capital of a company incorporated in Taiwan; (2) establishing branches, wholly-owned or partnership enterprises in Taiwan; or (3) providing loans of longer than one-year terms to the above-mentioned investee enterprises. The authority in charge of foreign investment is Ministry of Economic Affairs of Republic of China. The industries in Taiwan are categorized into permitted, restricted and prohibited foreign investment areas. Investors may apply for settlement of exchange in accordance with the annual yield of their investment or the allocation of surplus.

Eminent Domain

When the investment made by an investor constitutes less than 45% of the total amount of capital of the investee enterprise, and the investee enterprise has been expropriated or acquired by the government for the purpose of national defense, reasonable government compensation shall be paid to the investors. However, if the capital contribution made by the investor constitutes at least 45% of the total amount of capital of the investee enterprise and continues remaining above 45% for two decades since its establishment, then the government may not exercise its eminent domain power over such investee enterprise.

Table of Contents

Taiwan Regulations on Tax

The current principal regulations governing tax in Taiwan include the following:

Under the Income Tax Law, there are two kinds of income tax, comprehensive income tax for individuals and income tax for enterprises operating for profit, respectively.

Individuals who have income with a source within Taiwan must pay comprehensive income tax on their income sourced within Taiwan; while non-resident individuals having income with a source within Taiwan, except otherwise provided in the Income Tax Law, shall pay tax based on the amount attributable to the sources of their income.

The enterprise with head office located in Taiwan shall pay profit-seeking income tax on its global income both within and outside Taiwan; while the enterprises with head office outside Taiwan shall only pay profit-seeking income tax on its business income sourced from within Taiwan.

Rates of Income Tax

With respect to enterprises operating for profit, the exemption threshold is NT$120,000. Any income beyond such exemption threshold is subject to a 20% tax rate on its taxable income.

The rate of business tax respecting the sale of goods or services and import of goods in Taiwan, except as otherwise stipulated in the relevant tax law, is 5% (Value-Added or Non-Value-Added Business Tax).

PRC Regulations of the Insurance Industry

The insurance industry in the PRC is highly regulated. CIRC is the regulatory authority responsible for the supervision of the Chinese insurance industry. Insurance activities undertaken within the PRC are primarily governed by the Chinese Insurance Law and the related rules and regulations.

Initial Development of Regulatory Framework

The Chinese Insurance Law was enacted in 1995. This original insurance law, which we refer to as the 1995 Insurance Law, provided the initial framework for regulating the domestic insurance industry. Among the steps taken under the 1995 Insurance Law were the following:

Table of Contents

Establishment of the CIRC and 2002 Amendments to the Insurance Law

China’s insurance regulatory regime was further strengthened with the establishment of the CIRC in 1998. The CIRC was given the mandate to implement reform in the insurance industry, minimize insolvency risk for Chinese insurers and promote the development of the insurance market.

The 1995 Insurance Law was amended in 2002 and the amended insurance law, which we refer to as the 2002 Insurance Law, became effective on January 1, 2003. The major amendments to the 1995 Insurance Law include:

2009 Amendments to the Insurance Law

The 2002 Insurance Law was amended again in 2009 and the amended insurance law, which we refer to as the 2009 Insurance Law, became effective on October 1, 2009. The major amendments to the 2002 Insurance Law include:

Table of Contents

According to the 2009 Insurance Law, the minimum registered capital required to establish an insurance agency or insurance brokerage as a company must comply with the PRC Company Law. The registered capital or the capital contribution of insurance agencies or insurance brokerages must be paid-up capital in cash. The 2009 Insurance Law also sets forth some specific qualification requirements for insurance agency and brokerage practitioners. The senior managers of insurance agencies or insurance brokerages must meet specific qualification requirements, and their appointments are subject to approval of the CIRC. Personnel of an insurance agency or insurance brokerage engaging in the sales of insurance products must meet the qualification requirements set by the CIRC and obtain a qualification certificate issued by the CIRC. Under the 2009 Insurance Law, the parties to an insurance transaction may engage insurance adjusting firms or other independent appraisal firms that are established in accordance with applicable laws, or persons who possess the requisite professional expertise, to conduct assessment and adjustment of the insured subject matters. Additionally, the 2009 Insurance Law specifies additional legal obligations for insurance agencies and brokerages.

The 2009 Insurance Law was revised again on April 24, 2015, hereinafter the “2015 Insurance Law”, with an aim to further eliminate various administrative approvals as well as grant more market discretion to participants, among which, (i) the requirement of prior approval by CIRC to establish an insurance agency or an insurance brokerage; (ii) the requirement on personnel or senior managers of an insurance agency or an insurance brokerage to obtain certain relevant qualification certificate; or (iii) the requirement of prior approval for split, merger or change of organizational form of an insurance agency company or an insurance brokerage company.

The CIRC

The CIRC has extensive authority to supervise insurance companies and insurance intermediaries operating in the PRC, including the power to:

Regulations of Insurance Agencies

The principal regulation governing insurance agencies is the Provisions on the Supervision and Administration of Specialized Insurance Agencies (the “Agency Provisions”) promulgated by the CIRC on September 25, 2009 and effective on October 1, 2009, which replaced the Provisions on the Administration of Insurance Agencies issued by the CIRC on December 1, 2004 and effective on January 1, 2005. According to the Agency Provisions, the establishment of an insurance agency is subject to minimum registered capital requirement and other requirements and the approval of the CIRC. The term “insurance agency” refers to an entity that engages in insurance agency business within the authorization of, and collects commissions from, insurance companies, including the professional insurance agency companies and their branches. The insurance agency shall meet the qualification requirements specified by the CIRC, obtain the license

Table of Contents

to conduct an insurance agency business with the approval of the CIRC. An insurance agency may take any of the following forms: (i) a limited liability company; or (ii) a joint stock limited company. An insurance agency must have a registered capital of at least RMB2 million ($313,332). Where it is established as a nationwide company, its registered capital must be at least RMB10 million ($1,566,661). The registered capital must be paid up in cash. On April 27, 2013, CIRC issued the Decision on Revising the Agency Provisions (the “2013 Agency Provisions”), pursuant to which, CIRC has mandated any insurance agency established subsequent to the Decision on Revising the Agency Provisions to meet a minimum registered capital requirement of RMB50 million ($8.1 million). On October 19, 2015, CIRC issued the Decision on Revising Eight Regulations including Provisions on Insurance Companies Setting up Offshore Insurance Organizations, which made certain revisions to the 2013 Agency Provisions (the “2015 Agency Provisions”), among which, (i) eliminate the requirement of prior approval by CIRC to establish an insurance agency; (ii) eliminate the requirement on personnel or senior managers of an insurance agency to obtain certain relevant qualification certificate; or (iii) eliminate the requirement of prior approval by CIRC on split, merger or change of organizational form of an insurance agency company.

On May 16, 2013, CIRC issued the 2013 Notice, pursuant to which, professional insurance agency established prior to the issuance of the Decision on Revising the Agency Provisions, with registered capital less than RMB50 million ($8.1 million), can operate their existing business within the provinces where they have the registered office or branch office, but shall not set up any new branches in any province where they do not have the registered office or any branch office.

On April 20, 2012, Anhou obtained the nationwide license from CIRC, pursuant to which Anhou may set up its branch offices across the PRC to carry out the insurance agency business with no further approval requirement from CIRC other than filing with the local CIRC at the provincial level.

With the promulgation and implementation of the above-mentioned regulations, we expect a better regulated insurance agency market in China with orderly competition and pursuit for professional excellence, which will accentuate our competitive advantage due to our continuous commitment to quality service. On October 24, 2013, Anhou increased its registered capital to RMB50 million. We believe that we will be in a better position to obtain the full support expressly provided in the 2013 Notice from the local CIRC on our expansion strategy nationwide.

On September 17, 2015, CIRC issued Opinions on Deepening the Reformation of Insurance Intermediary Market (the “Reformation Opinions”), pursuant to which, CIRC will take further actions to simplify unnecessary administrative procedures, among which, the elimination of 8 administrative approvals, including the cancellation of previously required qualification certificate for insurance salesperson, the previously required approval for the split, merger, organizational change, set-up of branch office and exit of insurance agency and brokerage company. CIRC will also focus on (i) improving management over entry into and exit from insurance intermediary market and setting up a multilayered service system; (ii) encouraging and pushing forward reformation and innovation to improve intermediary service; (iii) strengthening self-management and supervision and promoting the improvement of industrial quality; (iv) placing stronger supervision and management and improving the comprehensive administrative efficiency; (v) focusing more on organizational construction and industrial self-control; and (vi) consummating information disclosure system and making better use of social supervision.

On September 29, 2016, CIRC circulated the Notice on Issuance of Business License to Insurance Intermediaries. In order to promote the sound and steady development of insurance intermediary market, CIRC instructed its local counterparts to focus on the followings factors while managing the business licenses of insurance intermediaries: (i) capital contributions to be self-owned, genuine and legal; (ii) registered capital to be deposited into an escrow account set up with qualified commercial bank; (iii) to maintain sufficient and valid professional liability insurance; (iv) reasonable and viable business model; (v) established corporate governance; and (vi) to undergo mandatorily required risk assessment.

An insurance agency may engage in the following insurance agency businesses:

Table of Contents

The name of an insurance agency must contain the words “insurance agency” or “insurance sales.” The license of a Chinese insurance agency company is valid for a period of three years and may be renewed with due application 30 days prior to its expiration. An insurance agency must report to the CIRC when it (i) changes its registered name or the name of its branches; (ii) changes its registered address or the operating address of its branches; (iii) the sponsors or major shareholders change their respective names; (iv) changes its major shareholders; (v) changes its registered capital; (vi) materially changes its equity structure; (vii)changes its organizational form; (viii) split, merger; (ix) amends its articles of association; or (x) sets up or closes its branches. The senior managers of an insurance agency including its branches must meet specific qualification requirements set forth in the Agency Provisions. The appointment of the senior managers of an insurance agency including its branches is subject to review and approval of the CIRC.

Regulation of Insurance Brokerages

The principal regulation governing insurance brokerages is the Provisions on the Supervision and Administration of Insurance Brokerage Institutions (the “Brokerage Provisions”) promulgated by the CIRC on September 25, 2009 and effective on October 1, 2009, which replaced the Provisions on the Administration of Insurance Brokerages issued by the CIRC on December 15, 2004 and effective on January 1, 2005. According to this Brokerage Provisions, the establishment of an insurance brokerage is subject to the approval of the CIRC. The term “insurance brokerage” refers to an entity that provides brokerages service on the execution of the insurance contract between the insured and the insurance company, based on the interests of the insured and collects commission as agreed, including the insurance brokerage companies and their branches. The insurance brokerage shall meet the qualification requirements specified by the CIRC and obtain the license to operate an insurance brokering business with the approval of the CIRC. Insurance brokering business includes both direct insurance brokering, which refers to brokering activities on behalf of insurance applicants or the insured in their dealings with the insurance companies, and reinsurance brokering, which refers to brokering activities on behalf of insurance companies in their dealings with reinsurance companies. An insurance brokerage may take any of the following forms: (i) a limited liability company; or (ii) a joint stock limited company. An insurance brokerage company must have a registered capital or capital contribution of at least RMB10 million ($1,566,661). The registered capital must be paid up in cash. On April 27, 2013, CIRC issued the Decision on Revising the Brokerage Provisions (the “2013 Brokerage Provisions”), pursuant to which, CIRC has mandated any insurance brokerage established subsequent to the 2013 Brokerage Provisions to meet a minimum registered capital requirement of RMB50 million ($8.1 million).On October 19, 2015, CIRC issued the Decision on Revising Eight Regulations including Provisions on Insurance Companies Setting up Offshore Insurance Organizations, which made certain revisions to the 2013 Agency Provisions (the “2015 Brokerage Provisions”), among which, (i) eliminate the requirement of prior approval by CIRC to establish an insurance brokerage company; (ii) eliminate the requirement on personnel or senior managers of an insurance brokerage company to obtain certain relevant qualification certificate; or (iii) eliminate the requirement of prior approval by CIRC on split, merger or change of organizational form of an insurance brokerage company.

On May 16, 2013, CIRC issued the 2013 Notice, pursuant to which, professional insurance brokerage established prior to the issuance of the Decision on Revising the Brokerage Provisions, with registered capital less than RMB50 million ($8.1 million), can operate their existing business within the provinces where they have the registered office or branch office, but shall not set up any new branches in any province where they do not have the registered office or any branch office.

On September 17, 2015, CIRC issued Opinions on Deepening the Reformation of Insurance Intermediary Market (the “Reformation Opinions”), pursuant to which, the following targets were erected for future reformation of insurance intermediary market: (i) improve management over entry into and exit from insurance intermediary market and set up a multilayered service system; (ii) encourage and push forward reformation and innovation and improve intermediary service; (iii) strengthen self-management and supervision and promote the improvement of industrial quality; (iv) place stronger supervision and management and improve the comprehensive administrative efficiency; (v) pay more attention to organizational construction and industrial self-control; and (vi) consummate information disclosure system and make better use of social supervision. The Reformation Opinions will be beneficial to both the improvement of reformation and development conducted by insurance intermediaries on their own and transformation and upgrading of the insurance intermediary market.

An insurance brokerage may conduct the following insurance brokerage businesses:

Table of Contents

The name of an insurance brokerage must contain the words “insurance brokerage.” The license of an insurance brokerage company is valid for three years and may be renewed with due application 30 days prior to its expiration. An insurance brokerage must report to the CIRC when it (i) changes its registered name or the name of its branches; (ii) change its registered address or the operating address of its branches; (iii) the sponsors or the major shareholders change their respective name; (iv) changes its major shareholders; (v) changes its registered capital; (vi) materially changes its equity structure; (vii)changes its organizational form; (viii) split, merger; (ix) amends its articles of association; or (x) sets up or closes its branches. The senior managers of an insurance brokerage including its branches must meet specific qualification requirements set forth in the Brokerage Provisions. Appointment of the senior managers of an insurance brokerage including its branches is subject to review and approval by the CIRC.

On February 9, 2018, the CIRC issued the Provisions on the Regulation of Insurance Brokers (the “Provisions”), effective as of May 1, 2018. With a total of 109 articles in eight chapters, the Provisions highlight the improved market access and exit, the effective management of matters no longer requiring licensing, the promotion of specialized and well-regulated operations, and the increased protection of consumers’ rights and interests. In particular, the Provisions make adjustments to optimize licensing procedures for insurance brokerage and tighten examination of shareholders of insurance brokerage firms; also, the Provisions set forth explicit requirements in respect of the source of capital contributed by shareholders, custodian of the registered capital, corporate governance and internal control, and information system, and standardize the requirements on qualifications of senior executives in brokerage firms.

Regulation of Insurance Salespersons

The principal regulation governing individual insurance salespersons is the Measures on the Supervision of Insurance Salespersons issued by the CIRC on January 6, 2013 and effective on July 1, 2013, which replaced the Provisions on the Administration of Insurance Salespersons promulgated on April 6, 2006 and effective on July 1, 2006. Under this regulation, the term “insurance salesperson” refers to an individual who sells insurance products for an insurance company, including those who are engaged by insurance companies or by insurance agencies. To engage in insurance sales activities as an insurance salesperson, a person first must pass the qualification examination for the insurance agency practitioners organized by the CIRC to obtain a “Qualification Certificate of Insurance Agency Practitioners”. The person must have a junior high school education or above to be qualified for the examination. In addition to the qualification certificate, a person must be registered with the CIRC’s Insurance Intermediary Supervision Information System and obtain a “Practice Certificate of Insurance Salespersons” issued by the insurance company or insurance agency to which he or she belongs in order to conduct insurance sales activities. On August 3, 2015, CIRC issued the Notice on Relevant Issues to Management of Insurance Intermediary Practitioners (the “2015 Notice”), pursuant to which, the qualification certificate is no more a pre-requisite condition for insurance intermediary practitioners to practice, instead, the insurance intermediary companies where such practitioners work shall complete the practitioners registration for them and conduct professional training. CIRC branches shall not accept any application for qualification approval of insurance salesperson (including insurance agency practitioners) any more.

Regulations of Insurance Brokerage Practitioner and Insurance Adjustment Practitioners

The principal regulation governing insurance brokerage practitioners and insurance adjustment practitioners is the Measures on the Supervision of Insurance Brokerage Practitioners and Insurance Adjustment Practitioners issued by the CIRC on January 6, 2013 and effective on July 1, 2013. To engage in the insurance brokerage activities as an insurance brokerage practitioner, or in the insurance adjustment activities as an insurance adjustment practitioner, a person first must pass the qualification examination organized by the CIRC for the insurance brokerage practitioners or for the insurance adjustment practitioners to obtain a “Qualification Certificate of Insurance Brokerage Practitioners” or a “Qualification Certificate of Insurance Adjustment Practitioners”. The person must have a tertiary education or above to be qualified for the examination. In addition to the qualification certificate, a person also must be registered with the CIRC’s Insurance Intermediary Supervision Information System and obtain a “Practice Certificate of Insurance Brokerage Practitioners” or “Practice Certificate of Insurance Adjustment Practitioners” issued by the insurance brokerage firm or insurance claims adjusting company to which he or she belongs in order to conduct insurance brokerage or claims adjustment activities. An insurance brokerage practitioner is not allowed to conduct insurance brokerage activities on behalf of himself or herself. On August 3, 2015, CIRC issued the 2015 Notice, pursuant to which, the qualification certificate is no more a pre-requisite condition for insurance intermediary practitioners (including insurance adjustment practitioners) to practice, instead, the insurance intermediary companies where such

Table of Contents

practitioners work shall complete the practitioners registration for them and conduct professional training. CIRC branches shall not accept any application for qualification approval of insurance brokerage practitioners any more.

Content Related to Insurance Industry in the Legal Documents of China’s Accession to the WTO

According to the Circular of the CIRC on Distributing the Content Related to Insurance Industry in the Legal Documents of China’s Accession to the WTO, for the life insurance sector, within three years of China’s accession to the WTO on December 11, 2001, geographical restrictions were to be lifted, equity joint venture companies allowed to provide health insurance, group insurance, and pension/annuity services to Chinese citizens and foreign citizens, and no other restrictions allowed except those on the proportion of foreign investment (no more than 50%) and establishment conditions. For the non-life insurance sector, within three years of China’s accession, the geographical restrictions were to be lifted and no restrictions allowed other than establishment conditions. For the insurance brokerage sector, within five years of China’s accession, the establishment of wholly foreign-funded subsidiary companies was to be allowed, and no restrictions allowed other than establishment conditions and restrictions on business scope.

According to the latest Catalogue of Industries for Guiding Foreign Investment (2015 Revision) issued by Ministry of Commerce on March 10, 2015 with effective date on April 10, 2015, both the insurance agency and insurance brokerage do not fall into the prohibited or restricted category any more. On January 12, 2017, the State Council issued the Notice on Certain Measures to Strengthen Opening up and Utilization of Foreign Investment, pursuant to which, restrictions on foreign investors entry into the industry of insurance institutions and insurance intermediaries within China will be further relaxed. However, as these regulations are still relatively new, local CIRC counterparts may have different interpretations. Based on the consultation by the Company with the relevant local counterparts of CIRC, they are of the view that the proportion of foreign investment in insurance intermediaries shall not exceed 24.9%.

PRC Regulation on information protection

The Personal Information Protection Law of the PRC, or the Personal Information Protection Law, which was effect in November 2021. As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the Personal Information Protection Law provides, among others, that (i) an individual’s consent shall be obtained to use sensitive personal information, such as biometric characteristics and individual location tracking, (ii) personal information operators using sensitive personal information shall notify individuals of the necessity of such use and impact on the individual’s rights, and (iii) where personal information operators reject an individual’s request to exercise his or her rights, the individual may file a lawsuit with a People’s Court.

Given that the above mentioned newly promulgated laws, regulations and policies were recently promulgated or issued, their interpretation, application and enforcement are subject to substantial uncertainties. See also “Risk Factor—We may be liable for improper use or appropriation of personal information provided by our customers”.

PRC Regulations on Foreign Exchange

Foreign Currency Exchange

Foreign exchange regulation in China is primarily governed by the following rules:

Under the Exchange Rules, the Chinese dollars or RMB is convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. Conversion of RMB for capital account items, such as direct investment, loan, security investment and repatriation of investment, however, is still subject to the approval of the SAFE or relevant authorities.

Under the Administration Rules, foreign-invested enterprises may only buy, sell or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions,

Table of Contents

obtaining approval from the SAFE. Capital investments by foreign-invested enterprises outside of China are also subject to limitations, which include approvals by the Ministry of Commerce, the SAFE and the State Development and Reform Commission.

On June 9, 2016, SAFE issued the Notice on Reforming and Regulating Management Policies of Settlement of Foreign Exchange under Capital Accounts, pursuant to which, the domestic entity may, depending on its actual operation need, settle its revenue in foreign currency with the bank, provided such revenue falls into those under capital accounts with explicit policy on settlement by willingness; while for those revenue under capital accounts still subject to restrictive regulations, such applicable policies shall prevail.

On January 26, 2017, SAFE issued the Notice on Further Promoting the Reform of Foreign Exchange Management and Strengthening Verification on Authenticity and Legality, pursuant to which, banks are mandated to strengthen verification on authenticity and legality on foreign exchange conversion and remittance offshore.

Summary of challenges and risks involved in the VIE Arrangements and enforcing the VIE Agreements

Because we do not hold equity interests in Anhou, our variable interest entity (the “VIE”), we are subject to risks due to the uncertainty of the interpretation and application of the PRC laws and regulations, including but not limited to regulatory review of oversea listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangement with our VIE. Our PRC Segment is also subject to the risks of the uncertainty that the PRC government could disallow our VIE structure, which would likely result in a material change in our operations, or a material decline in the value of our shares of common stock. The VIE Arrangements in the PRC Segment are less effective than direct ownership due to the inherent risks of the VIE structure and that we may have difficulty in enforcing any rights we may have under the VIE Agreements with Anhou, its founders and shareholders in the PRC because all of our VIE Agreements are governed by the PRC laws and provide for the resolution of disputes through arbitration in the PRC, where the legal environment is uncertain and not as developed as in the United States, and where the Chinese government has significant oversight and discretion over the conduct of Anhou’s business and may intervene or influence Anhou’s operations at any time with little advance notice, which could result in a material change in our PRC Segment’s operations and/or the value of your common shares. Furthermore, these VIE Agreements may not be enforceable in China if the PRC authorities or courts take a view that such VIE Agreements contravene with the PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event we are unable to enforce these VIE Agreements, we may not be able to exert effective control over our VIE, Anhou, and our ability to conduct business in the PRC may be materially and adversely affected. See “Risk Factors — Risks Related to Our Corporate Structure” and “Risk Factors — Risks Related to Doing Business in China” for more information.

Permissions from the PRC Authorities to Issue Our Shares to Foreign Investors

As of the date of this report, our PRC counsel has advised us that, since the Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies is still in draft, and the Company has confirmed neither itself nor its WFOE nor VIE collect, store or process customers’ information, we, our subsidiaries and VIE and VIE’s subsidiary (1) are not required to obtain permissions from any PRC authorities to offer to sell or issue our shares of common stock to non-Chinese investors, and any offering to non.-U.S. investors is not covered by the permission requirements from the China Securities Regulatory Commission (the “CSRC”), Cyberspace Administration of China (the “CAC”), the CBIRC or any other entity that is required to approve of Anhou’s operations, and (2) have not received nor been denied such permissions by any PRC authorities. Nevertheless, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the “Opinions on Severely Cracking Down on Illegal Securities Activities According to Law,” or the July 6, 2021 Opinions, which were made available to the public on July 6, 2021. The July 6, 2021 Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. The CSRC issued the draft of Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies and Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies for comments on December 24, 2021. Given the current PRC regulatory environment, it is uncertain whether and when we, CU WFOE or VIE, will be required to obtain any permission from the PRC government to list our securities on a U.S. stock exchange or the OTC Markets in the future, and even when we obtain such permission, whether it will be denied or rescinded. If the PRC Segment, including CU WFOE, Anhou and Anhou’s subsidiary, (i) inadvertently concluded that any of such permission was not required or (ii) the applicable laws, regulations, or interpretations thereof changed and the PRC Segment was required to obtain such permissions or approvals in the future, we, together with CU WFOE and VIE, would actively seek such permissions or approvals. In the event that the PRC Segment failed to obtain such required approvals or permissions, it would be likely that we may restructure our PRC Segment. Furthermore, On February 17, 2023, the China Securities Regulatory Commission, or the CSRC, announced the Circular on the Administrative

Table of Contents

Arrangements for Filing of Securities Offering and Listing By Domestic Companies, or the Circular, and released a set of new regulations which consists of the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (“Trial Measures”), and five supporting guidelines. The Trial Measures will come into effect on March 31, 2023 which refines the regulatory system by subjecting both direct and indirect overseas offering and listing activities to the CSRC filing-based administration. A PRC domestic company that seeks to offer and list securities in overseas markets shall fulfill the filing procedure with the CSRC per the requirements of the Trial Measures. Breaches of the Trial Measures, such as offering and listing securities overseas without fulfilling the filing procedures, shall bear legal liabilities, including a fine between RMB 1.0 million and RMB 10.0 million. According to the Circular, the CSRC does not require immediate filing if an overseas listing application submitted before March 31, 2023 has been approved for registration to take effect and if such overseas offering and listing is completed before September 30, 2023. Subsequent filing matters, such as refinancing or subsequent offerings, shall be filed as required. As of the date of this prospectus, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC or any other PRC governmental authorities with respect to this offering. As the Circular and Trial Measures were newly published and there exists uncertainty with respect to the filing requirements and their implementation, if we are required to submit to the CRSC and complete the filing procedure, we cannot be sure that we will be able to complete such filings in a timely manner, or at all. Any failure or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to offer or continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline or be worthless.

The Holding Foreign Companies Accountable Act

On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act (the “HFCAA”) requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which became law in December 2020 and prohibits foreign companies from listing their securities on U.S. exchanges if the company has been unavailable for PCAOB inspection or investigation for three consecutive years. In June 2021, the Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA”), which was signed into law on December 29, 2022, reducing the time period for the delisting of foreign companies under the HFCAA to two consecutive years, instead of three years. Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021, which found that the PCAOB was unable to inspect or investigate completely certain named registered public accounting firms headquartered in mainland China of the PRC and Hong Kong. On August 26, 2022, the SEC issued a statement announcing that the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the People’s Republic of China governing inspections and investigations of audit firms based in China and Hong Kong, jointly agreeing on the need for a framework. On December 15, 2022, the PCAOB announced that it has secured complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate the previous 2021 Determination Report to the contrary. Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China to the PCAOB for inspection or investigation, it could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities, including trading on the national exchange and trading on “over-the-counter” markets, may be prohibited under the HFCAA and AHFCAA and/or PCAOB may consider the need to issue new determinations consistent with the HFCAA and Rule 6100.

Our auditor, an independent registered public accounting firm that issues the audit report incorporated in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor is headquartered in the State of Michigan, and has been inspected by the PCAOB on a regular basis. Therefore, our auditor is currently not subject to the PCAOB Determination Report.

Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in the PRC or Hong Kong to the PCAOB for inspection or investigation, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities, including trading on the OTC Markets or a national exchange.

Table of Contents

The recent developments would add uncertainties to our trading and we cannot assure you whether OTC Markets would apply additional and more stringent criteria to us after considering the effectiveness of our auditor’s audit procedures and quality control procedures, adequacy of personnel and training, or sufficiency of resources, geographic reach, or experience as it relates to our audit.

PRC Regulations on Dividend Distribution

The principal regulations governing dividend distributions of wholly foreign-owned companies include:

Under these regulations, wholly foreign-owned companies in the PRC may pay dividends only out of their accumulated profits as determined in accordance with PRC accounting standards. In addition, these wholly foreign-owned companies are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds, until the accumulative amount of such fund reaches 50% of its registered capital. These reserve funds are not distributable as cash dividends. On March 12, 2019, MOFCOM passed the Foreign Investment Law, which replaced the three existing laws over foreign investment. From January 1, 2020, foreign individuals, enterprises and other organizations that directly or indirectly make investment activities in China are subject to the Foreign Investment Law. However, it remains unclear as to how these changes will affect entities currently operating in China, particularly foreign controlled variable interest entities.

PRC Regulations on Tax

PRC Enterprise Income Tax (“EIT”)

The PRC EIT is calculated based on the taxable income determined under the PRC accounting standards and regulations, as well as the EIT law. On March 16, 2007, the National People’s Congress of China enacted the EIT Law, a new EIT law which became effective on January 1, 2008. On December 6, 2007, the State Council promulgated the Implementation Rules which also became effective on January 1, 2008. On December 26, 2007, the State Council issued the Notice on Implementation of Enterprise Income Tax Transition Preferential Policy under the EIT Law, or the Transition Preferential Policy Circular, which became effective simultaneously with the EIT Law. The EIT Law imposes a uniform EIT rate of 25% on all domestic enterprises and foreign-invested enterprises unless they qualify under certain exceptions. Under the EIT Law, as further clarified by the Implementation Rules, the Transition Preferential Policy Circular and other related regulations, enterprises that were established and already enjoyed preferential tax treatments before March 16, 2007 will continue to enjoy them in the following manners: (i) in the case of preferential tax rates, for a five-year period starting from January 1, 2008, during which the tax rate will gradually increase to 25%; or (ii) in the case of preferential tax exemption or reduction for a specified term, until the expiration of such term. However, if such an enterprise has not enjoyed the preferential treatments yet because of its failure to make a profit, its term for preferential treatment will be deemed to start from 2008.

PRC Business Tax and Implementation of Value-Added Tax “VAT”

Taxpayers providing taxable services in China were required to pay a business tax at a normal tax rate of 5% of their revenues, unless otherwise provided. According to the Announcement on the VAT Reform Pilot Program of the Transportation and Selected Modern Service Sectors issued by the State Tax Bureau in July 2012, the transportation and some selected modern service sectors, including research and development and technical services, information technology services, cultural creative services, logistics support services, tangible personal property leasing services, and assurance and consulting service sectors, should pay value-added tax instead of business tax based on a predetermined timetable (hereinafter referred to as the “VAT Reform”), effective September 1, 2012 for entities in Beijing and October 1, 2012 for entities in Jiangsu. In March 2016, the PRC State Council further expanded the application of VAT to several other key sectors, including real estate, construction, financial services and lifestyle services, effective May 1, 2016.

As of December 31, 2022, all of our Consolidated Affiliated Entities have been requested to convert into the VAT system.

Table of Contents

Dividend Withholding Tax

Under the PRC tax laws effective prior to January 1, 2008, dividends paid to foreign investors by foreign-invested enterprises are exempt from PRC withholding tax. Pursuant to the EIT Law and the Implementation Rules, dividends generated after January 1, 2008 and distributed to us by our PRC subsidiaries are under a 5% withholding tax subject to PRC laws and regulations, provided that we are determined by the relevant PRC tax authorities to be a “non-resident enterprise” under the EIT Law.

​

ITEM 1A. RISK FACTORS

You should carefully consider the risks described below together with all of the other information included in this Form 10-K. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements.” If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.

Risks Relating to Our Business

We have been charged with fraud for manipulating the Company’s trading volume.

On December 20, 2018, the SEC filed a complaint (the “Complaint”) at U.S. District Court for the Southern District of New York (the “Court”) against Company and Cheng-Hsiung Huang (“Mr. Huang”), one of the Company’s former employees, alleging potential violations of Section 10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder based on the alleged manipulative trading scheme of the Company’s common stock, such as wash trades, from approximately December 2013 to March 2018. Neither the Company nor Mr. Huang realized any financial gain from the alleged scheme and both the Company and Mr. Huang substantially cooperated with the SEC’s investigation regarding the alleged manipulative trading scheme. On November 29, 2018, without admitting or denying the allegations in the Complaint, the Company agreed to the entry of a final judgment (the “Final Judgment”) that permanently enjoined it from violating Section 10(b), Rule 10b-5 and Section 17(a) of the Securities Act, ordered the Company to comply with its undertaking to retain an independent compliance monitor for a period of not less than one year to help the Company stay in compliance with the U.S. securities law. On December 6, 2018, without admitting or denying the allegations in the Complaint, Mr. Huang agreed to the entry of the Final Judgment that permanently enjoined him from violating Section 10(b), Rule 10b-5 and Section 17(a) of the Securities Act, ordered Mr. Huang to pay a civil penalty of $30,000 in installments. On January 18, 2019, the Court issued the Final Judgment on this case. Although the Company settled the SEC fraud charges with no economic loss, we suspect that our reputation may suffer as a result of the SEC investigation.

Our Company’s affiliates have significant control over matters requiring approval by shareholders.

The affiliates of the Company hold 100% of our Company’s outstanding preferred shares, and approximately 25.28% of ours Company’s outstanding common shares, total approximately 43.83% of the voting power of our Company as of the date of this annual report (calculated in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended). As a result, our Company’s affiliates, in view of their ownership percentage of our common stock and voting power, have significant control over matters requiring approval by our shareholders, including the selection of our board of directors, approval or rejection of mergers, sales or licenses of all or substantially all of our assets, or other business combination transactions. The interests of our Company’s affiliates may not always coincide with the interests of our other shareholders and as such our Company may take action in advancement of its affiliates’ interests to the detriment of our other shareholders, including you. Accordingly, you may not be able to influence any action we take or consider taking, even if it requires a shareholder vote.

An occurrence of the COVID-19 pandemic is likely to negatively affect our operations.

The occurrence of the COVID-19 pandemic, an uncontrollable event, had adversely affected our operations in mainland China and Hong Kong and may negatively affect our operations in Taiwan. A pandemic typically results in social distancing, travel bans and quarantine, and this has limited our business travel and regular business activities, such as access to our facilities, customers, management, support staff and professional advisors. These, in turn, will not only impact our operations, financial condition and demand for our services but our overall ability to react timely to mitigate the impact of this pandemic. Also it may substantially hamper our efforts to provide our

Table of Contents

investors with timely information and comply with our filing obligations with the Securities and Exchange Commission during and shortly after the pandemic. Please refer to ITEM 7 for the COVID-19 impact assessment.

We are subject to extensive regulations for our insurance brokerage business and operations.

We conduct our insurance brokerage business primarily in Taiwan, mainland China and Hong Kong and our business operations are subject to vigorous regulations in these jurisdictions. Our operating subsidiaries are licensed insurance brokers in Taiwan and mainland China and therefore need to comply with the relevant insurance laws and regulations in Taiwan and mainland China, respectively. Any failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of our licenses as insurance brokers in the jurisdiction where such failure occurs. Even if a sanction imposed against us or our personnel is small in monetary amount, the adverse publicity arising from the imposition of sanctions against us by regulators could harm our reputation and impede our ability to retain customers and develop new customer relationships, which may reduce our revenues.

From time to time, the regulatory landscape in the insurance industry in Taiwan and mainland China involves and changes. We face the risk of significant intervention by regulatory authorities, including increased registered capital requirements, extended training of the insurance agencies’ personnel, and adoption of costly or restrictive new regulations and judicial or administrative proceedings. If any restrictive or costly new regulations and rules become effective and applicable to our business, these regulations may materially limit our activities and operational profitability.

International operations expose us to currency exchange and repatriation risks, and we cannot predict the effect of future exchange rate fluctuations on its business and operating results.

We have our primary business operations in Taiwan, mainland China and Hong Kong. Substantial amounts of revenues are received and expenses are incurred in Taiwan, Chinese and U.S. dollars. Thus, we have exposure to currency fluctuations. We cannot assure you that the effect of currency exchange fluctuations will not materially affect our revenues and net income in the future.

We identified material weaknesses in our internal control over financial reporting, and if we are unable to achieve and maintain effective internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected.

A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Our management identified certain material weaknesses as discussed in Item 9A of this report. These material weaknesses could result in a misstatement of account balances or disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

We have taken several actions towards remediating these material weaknesses as discussed in Item 9A of this report. Although we have taken steps to address the material weaknesses, we are still in the process of completing the remediation and the steps we are taking may not be sufficient to remediate our material weaknesses or prevent future material weaknesses or significant deficiencies from occurring.

We can give no assurance that additional material weaknesses in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements and cause us to fail to meet our reporting obligations.

Because our primary business activities are conducted in Taiwan, mainland China and Hong Kong, we are subject to the risks of doing business internationally, including periodic foreign economic downturns and political instability, which may adversely affect our revenue and cost of doing business.

Our primary places of business are in Taiwan, mainland China and Hong Kong and we have almost all of our employees and management team in those jurisdictions. Foreign economic downturns may affect our results of operations in the future. Additionally, other facts relating to the operation of the Company’s business outside of the U.S. may have a material adverse effect on the Company’s business, financial condition and results of operations, including:

Table of Contents

As we continue to operate our business internationally, our success will depend in part, on our ability to anticipate and effectively manage these risks. The impact of any one or more of these factors could materially adversely affect our business, financial condition and results of operations.

Our PRC Segment is subject to PRC regulations regarding our social security and housing fund for our employees and may fall out of compliance with such regulations from time to time.

Because the PRC Segment is required to provide a social security and housing fund for the employees in the PRC, specifically by the PRC local tax authority, our PRC Segment must abide by such regulations. In particular, the PRC regulations are in place on how to compute the calculation base in order to determine how much to contribute to the fund for a particular employee. We cannot assure you that we have been in compliance with such PRC regulations and from time to time it is likely that we may make mistakes in the calculations about the PRC Segment’s contribution to such fund. If the PRC Segment is found not in compliance with the PRC regulations on social security and housing funds, the PRC Segment may be fined and subject to other punishments by the local authorities.

We may be liable for improper use or appropriation of personal information provided by our customers.

Our business involves collecting and retaining certain internal and customer data. We also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection of our customer, employee and company data is critical to our business. Our customers and employees expect that we will adequately protect their personal information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard such information.

The PRC Criminal Law, as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen’s personal information obtained in performing duties or providing services or obtaining such information through theft or other illegal ways. On November 7, 2016, the Cyber Security Law of the PRC, or Cyber Security Law, which became effective on June 1, 2017. Pursuant to the Cyber Security Law, network operators must not, without users’ consent, collect their personal information, and may only collect users’ personal information necessary to provide their services. Providers are also obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations.

The Civil Code of the PRC (issued by the PRC National People’s Congress on May 28, 2020 and effective from January 1, 2021) provides legal basis for privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the CAC, the Ministry of Industry and Information Technology, or MIIT, and the Ministry of Public Security, have been increasingly focused on regulation in data security and data protection.

Table of Contents

The PRC regulatory requirements regarding cybersecurity are evolving. For instance, various regulatory bodies in China, including the CAC, the Ministry of Public Security and the State Administration for Market Regulation, or the SAMR (formerly known as State Administration for Industry and Commerce, or the SAIC), have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations. In April 2020, the Chinese government promulgated Cybersecurity Review Measures, which came into effect on June 1, 2020. According to the Cybersecurity Review Measures, operators of critical information infrastructure must pass a cybersecurity review when purchasing network products and services which do or may affect national security.

In July 2021, the CAC and other related authorities released the draft amendment to the Cybersecurity Review Measures for public comments through July 25, 2021. The draft amendment proposes the following key changes:

If the draft amendment is adopted into law in the future, we may become subject to enhanced cybersecurity review. Certain internet platforms in China have been reportedly subject to heightened regulatory scrutiny in relation to cybersecurity matters. As of the date of this prospectus, we have not been informed by any PRC governmental authority of any requirement that we file for a cybersecurity review. However, if we are deemed to be a critical information infrastructure operator or a company that is engaged in data processing and holds personal information of more than one million users, we could be subject to PRC cybersecurity review.

As there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, we could be subject to cybersecurity review, and if so, we may not be able to pass such review in relation to this offering. In addition, we could become subject to enhanced cybersecurity review or investigations launched by PRC regulators in the future. Any failure or delay in the completion of the cybersecurity review procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, including suspension of business, website closure and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions against us, which may have material adverse effect on our business, financial condition or results of operations.

On June 10, 2021, the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information.

As uncertainties remain regarding the interpretation and implementation of these laws and regulations, we cannot assure you that we will comply with such regulations in all respects and we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities. We may also become subject to fines and/or other sanctions which may have material adverse effect on our business, operations and financial condition.

While we take various measures to comply with all applicable data privacy and protection laws and regulations, our current security measures and those of our third-party service providers may not always be adequate for the protection of our customer, employee or company data. We may be a target for computer hackers, foreign governments or cyber terrorists in the future.

Table of Contents

Unauthorized access to our proprietary internal and customer data may be obtained through break-ins, sabotage, breach of our secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the security of the networks of our third party service providers, or other misconduct. Because the techniques used by computer programmers who may attempt to penetrate and sabotage our proprietary internal and customer data change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques.

Unauthorized access to our proprietary internal and customer data may also be obtained through inadequate use of security controls. Any of such incidents may harm our reputation and adversely affect our business and results of operations. In addition, we may be subject to negative publicity about our security and privacy policies, systems, or measurements. Any failure to prevent or mitigate security breaches, cyber-attacks or other unauthorized access to our systems or disclosure of our customers’ data, including their personal information, could result in loss or misuse of such data, interruptions to our service system, diminished customer experience, loss of customer confidence and trust, impairment of our technology infrastructure, and harm our reputation and business, resulting in significant legal and financial exposure and potential lawsuits

Risks Relating to Ownership of Our Shares

The value of your investment might not accurately reflect the actual market value of such investment as a result of deceitful historical practices relating to the appearance of greater market demand for our common stock than factually accurate.

On December 20, 2018, we agreed to settle certain fraud charges brought by the SEC relating to an alleged scheme to manipulate the appearance market demand for our common stock and as a result the historical market prices of our common stock might not be reflective of the actual value of our common stock at such time. Even though such alleged fraudulent activities and the SEC settlement did not result in a profit for the Company or any of its employees, these activities may have affected our common stock market prices and as such the value of your investment in our common stock might be less than otherwise presumed.

You may not be able to liquidate your investment since there is no assurance that an active public market will develop for our common stock or that our common stock will ever be approved for trading on a national stock exchange.

There is no active public trading market for our securities and any historic trading activity indicating that an established trading market might have existed cannot be relied upon. Our shares of common stock are currently quoted on the OTCQB and have not been listed on any national stock exchange. We cannot assure you that an active trading market for our common stock will develop or that if developed, will be sustained. In the absence of an active trading market of our common stock, you may not be able to liquidate your investment in our common stock at all or as soon as desired.

The market price of our common stock may be highly volatile, and you could lose all or part of your investment.

The trading price of our common stock is likely to be volatile. This volatility may prevent you from being able to sell your shares at or above the price you paid for your shares. Our stock price could be subject to wide fluctuations in response to a variety of factors, which include:

Table of Contents

In addition, the stock market in general, and the stock of companies that are competitive to us in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

Risks Relating to Our PRC Segment Doing Business in China

In light of recent events indicating greater oversight by the CAC over data security, our PRC Segment may be subject to a variety of PRC laws and other obligations regarding cybersecurity and data protection, and any failure to comply with applicable laws and obligations could have a material adverse effect on our business, financial condition, and results of operations.

The regulatory requirements with respect to cybersecurity and data privacy are constantly evolving and can be subject to varying interpretations, and significant changes, resulting in uncertainties about the scope of our responsibilities in that regard. Failure to comply with the cybersecurity and data privacy requirements in a timely manner, or at all, may subject our PRC Segment to government enforcement actions and investigations, fines, penalties, suspension or disruption of our PRC Segment’s operations, among other things. The Cybersecurity Law, which was adopted by the National People’s Congress on November 7, 2016 and came into force on June 1, 2017, provide that personal information and important data collected and generated by a critical information infrastructure operator (the “CIIO”) in the course of its operations in China must be stored in China, and the Cybersecurity Review Measures which became effective on February 15, 2022, provided that if a critical information infrastructure operator purchases internet products and services that affect or may affect national security, it should be subject to cybersecurity review by the CAC. The Measures of Cybersecurity Review also requires that critical information infrastructure operators and services and data processing operators that possess personal data of at least one (1) million users must apply for a review by the Cybersecurity Review Office of PRC, if they plan to conduct securities listings on foreign exchanges. On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law, which took effect on September 1, 2021. The Data Security Law requires that data shall not be collected by theft or other illegal means, and also provides for a data classification and hierarchical protection system. The data classification and hierarchical protection system puts data into different groups according to its importance in economic and social development, and the damages it may cause to national security, public interests, or the legitimate rights and interests of individuals and organizations in case the data is falsified, damaged, disclosed, illegally obtained or illegally used. Due to the lack of further interpretations, the exact scope of what constitute a “CIIO” remains unclear. Further, the PRC government authorities may have wide discretion in the interpretation and enforcement of these laws. It also remains uncertain whether any future regulatory changes would impose additional restrictions on companies like our PRC Segment.

The PRC Segment is subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and private information. As of the date of this annual report, our PRC Segment’s online transactions were executed and completed on the insurance companies’ websites, not Law Anhou’s. The customers of the PRC Segment provided and uploaded personal data directly to the websites operated by the insurance companies. Therefore, neither Law Anhou nor its subsidiary collected, stored, or processed any personal information and important data from its operation in the PRC. Because our PRC Segment’s current operations do not possess personal information at this moment, we do not believe that our PRC Segment is subject to the cybersecurity review by the CAC. In addition, as of the date of this prospectus, we have not been involved in any investigations on cybersecurity review initiated by any PRC regulatory authority, nor have we received any inquiry, notice, or sanction related to cybersecurity review under the Cybersecurity Review Measures.

The Personal Information Protection Law of the PRC was enacted in November 2021, providing regulations for protecting personal information, including obtaining an individual's consent for using sensitive personal data and allowing individuals to file a lawsuit if their requests are rejected. The Company is required to keep personal information confidential and secure. The PRC has various laws and regulations regarding data privacy and protection, including the Criminal Law, Cyber Security Law, and Civil Code of the PRC. The Company’s businesses involve collecting and retaining certain internal and customer data, also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection of our customer, employee and company’s data are critical to our business. Our customers and employees expect that we will adequately protect their personal information.

The Company is required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard such information.

However, it remains uncertain as to how the Cybersecurity Review Measures will be interpreted or implemented and whether the PRC regulatory agencies, including the CAC, may adopt new laws, regulations, rules, or detailed implementation and interpretation related

Table of Contents

to the Cybersecurity Review Measures. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we expect to take all reasonable measures and actions to comply therewith. However, we cannot assure you that PRC regulatory agencies, including the CAC, would take the same view as we do, and our PRC Segment will not be subject to the cybersecurity review by the CAC or designated as a CIIO. The PRC Segment may experience disruptions to its operations should it be required to have a cybersecurity review by the CAC. Any cybersecurity review could also result in uncertainty to our trading on the OTC Markets, negative impacts on our share trading prices and diversion of our managerial and financial resources.

The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, and some other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the anti-monopoly law enforcement agency be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise.

For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the PRC Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress effective 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (i) the total global turnover of all operators participating in the transaction exceeds RMB10 billion and at least two of these operators each had a turnover of more than RMB400 million within China, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB2 billion, and at least two of these operators each had a turnover of more than RMB400 million within China) must be cleared by the anti-monopoly enforcement authority before they can be completed. In addition, in 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, also known as Circular 6, which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors. Further, MOFCOM promulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors, effective 2011, to implement Circular 6. Under Circular 6, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises with “national security” concerns. Under the foregoing MOFCOM regulations, MOFCOM will focus on the substance and actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger or acquisition is subject to a security review, it will submit it to the Inter-Ministerial Panel, an authority established under Circular 6 led by the National Development and Reform Commission, and MOFCOM under the leadership of the State Council, to carry out security review. The regulations prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation stating that the merging or acquisition of a company engaged in the internet content business requires security review, and there is no requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to MOFCOM review.

In the future, we may grow our business by acquiring complementary businesses in the PRC. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. We believe that it is unlikely that our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in China, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited.

Table of Contents

PRC laws and regulations governing our PRC Segment are sometimes vague and uncertain and any changes in such laws and regulations may impair our PRC Segment’s ability to operate profitably. Changes and uncertainty in PRC laws and interpretation may materially and adversely affect our PRC Segment’s business performance and impede our operations in China only.

There are substantial uncertainties regarding the interpretation and enforcement of PRC laws and regulations including, but not limited to, the laws and regulations governing our insurance agent business. The laws and regulations over Chinese insurance intermediaries are sometimes vague and may be subject to future changes, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness and interpretation of newly enacted laws or regulations and amendments to existing laws and regulations, may adversely affect our business operations. New laws and regulations may also have retroactive effects on our operations in certain circumstances. We cannot predict what effect the new PRC laws and regulations and new interpretation of existing PRC laws or regulations may have on our business. 

On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued an announcement to crack down on illegal activities in the securities market and promote the high-quality development of the capital market, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the PRC securities laws. Since this announcement is relatively new, uncertainties still exist in relation to how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on companies like our PRC Segment. 

Furthermore, On February 17, 2023, the China Securities Regulatory Commission, or the CSRC, announced the Circular on the Administrative Arrangements for Filing of Securities Offering and Listing By Domestic Companies, or the Circular, and released a set of new regulations which consists of the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (“Trial Measures”), and five supporting guidelines. The Trial Measures will come into effect on March 31, 2023 which refines the regulatory system by subjecting both direct and indirect overseas offering and listing activities to the CSRC filing-based administration. A PRC domestic company that seeks to offer and list securities in overseas markets shall fulfill the filing procedure with the CSRC per the requirements of the Trial Measures. Breaches of the Trial Measures, such as offering and listing securities overseas without fulfilling the filing procedures, shall bear legal liabilities, including a fine between RMB 1.0 million and RMB 10.0 million. According to the Circular, the CSRC does not require immediate filing if an overseas listing application submitted before March 31, 2023 has been approved for registration to take effect and if such overseas offering and listing is completed before September 30, 2023. Subsequent filing matters, such as refinancing or subsequent offerings, shall be filed as required. As of the date of this prospectus, we have not received any formal inquiry, notice, warning, sanction, or objection from the CSRC or any other PRC governmental authorities with respect to this offering. As the Circular and Trial Measures were newly published and there exists uncertainty with respect to the filing requirements and their implementation, if we are required to submit to the CRSC and complete the filing procedure, we cannot be sure that we will be able to complete such filings in a timely manner, or at all. Any failure or perceived failure of us to fully comply with such new regulatory requirements could significantly limit or completely hinder our ability to offer or continue to offer securities to investors, cause significant disruption to our business operations, and severely damage our reputation, which could materially and adversely affect our financial condition and results of operations and could cause the value of our securities to significantly decline or be worthless.

The newly enacted “Holding Foreign Companies Accountable Act” and proposed “Accelerating Holding Foreign Companies Accountable Act” both call for additional and more stringent criteria to be applied to restrictive market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments could add uncertainties to our common stock and if our auditors fail to permit the Public Company Accounting Oversight Board (“PCAOB”) to inspect the auditing firm, our common stock may be subject to delisting.

On April 21, 2020, the SEC and the PCAOB released a joint statement highlighting the risks associated with investing in companies based in or having substantial operations in certain “restrictive markets,” including China. The joint statement emphasized the risks associated with lack of access from the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in the markets where the PCAOB has limited access to the local auditing firms and their work.

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply a minimum offering size requirement for companies primarily operating in a restrictive market, (ii) adopt a new requirement relating to the qualification of management or the board of directors of

Table of Contents

companies in the restrictive markets, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditor.

On December 18, 2020, the “Holding Foreign Companies Accountable Act” or the HFCAA, was signed by President Donald Trump and became law. This legislation requires certain issuers to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the PCAOB is unable to audit specified reports because the issuer has retained a foreign public accounting firm that is not subject to inspection by the PCAOB. Furthermore, if the PCAOB is unable to inspect the issuer’s public accounting firm for three consecutive years, the issuer’s securities are banned from trading on a national stock exchange.

On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which became law in December 2020. In June 2021, the Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA”), which was signed into law on December 29, 2022, reducing the time period for the delisting of foreign companies under the HFCAA to two consecutive years, instead of three years.

The limited PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors in China. As a result, investors may be deprived of the benefits of such PCAOB inspections and supervision. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these public accounting firms’ audit procedures or quality control procedures, which could cause existing investors and potential investors in our shares of common stock to lose confidence in our audit procedures and audited financial statements.

Our auditor, an independent registered public accounting firm that issues the audit report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor has been inspected by the PCAOB on a regular basis. Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021, which found that the PCAOB was unable to inspect or investigate completely certain named registered public accounting firms headquartered in mainland China of the PRC and Hong Kong. Our independent registered public accounting firm has been inspected by the PCAOB on a regular basis and as such it is not subject to the PCAOB Determination Report. On August 26, 2022, the SEC issued a statement announcing that the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the People’s Republic of China governing inspections and investigations of audit firms based in China and Hong Kong, jointly agreeing on the need for a framework. On December 15, 2022, the PCAOB announced that it has secured complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate the previous 2021 Determination Report to the contrary. Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China to the PCAOB for inspection or investigation, it could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities, including trading on the national exchange and trading on “over-the-counter” markets, may be prohibited under the HFCAA and AHFCAA and/or PCAOB may consider the need to issue new determinations consistent with the HFCAA and Rule 6100.

In addition, the majority of our operations are based in Taiwan, which is not a restrictive market set forth in the SEC and PCAOB joint statement. Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China or Hong Kong to the PCAOB for inspection or investigation, you may be deprived of the benefits of such inspection which could result in limitation or restriction to our access to the U.S. capital markets and trading of our securities, including trading on a national exchange and trading on “over-the-counter” markets.

Table of Contents

Risks Related to Our Corporate Structure

Contractual arrangements in relation to our VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or our VIE owe additional taxes, which could negatively affect our financial condition and the value of your investment.

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years from the taxable year when the transactions are conducted. We, CU WFOE or Anhou could face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements were not entered into at arm’s length in such as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and transfer pricing adjustments of the income of our subsidiaries and affiliates. A transfer pricing adjustment could, among other things, result in a decrease of expense deductions recorded by our VIE for PRC tax purposes, which could in turn increase its tax liabilities without reducing our subsidiary’s tax expenses. In addition, PRC tax authorities may impose late payment fees and other penalties on our VIE for the adjusted but unpaid taxes according to the applicable regulations. Our financial position could be materially and adversely affected if our VIE’s tax liabilities increase or if Anhou is required to pay late payment fees and other penalties.

Any failure by our consolidated VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material adverse effect on our business.

We, through CU WFOE in the PRC, have entered into a series of contractual arrangements with our consolidated VIE and its shareholders. For a description of these contractual arrangements, see “Business—Corporate History and Structure Overview- PRC Segment.” If our consolidated VIE or its shareholders fail to perform their respective obligations under these contractual arrangements, we may incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking specific performance, injunctive relief, and damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholders of our consolidated VIE refused to transfer its equity interests in the consolidated VIE to CU WFOE or our designee when we exercised the purchase option pursuant to these contractual arrangements, then we might have had to take legal actions to compel the VIE and its Shareholders to perform their contractual obligations.

All the VIE contractual arrangements are governed by PRC laws and provide for the resolution of disputes through litigation in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the U.S. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and formal guidelines as to how contractual arrangements in the context of a VIE should be interpreted or enforced under PRC laws. Our VIE Agreements have not been tested in a court of law in China. There remain significant uncertainties regarding the ultimate outcome of such litigation should legal action be taken. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over our consolidated VIE and relevant permits and licenses held by it which we require to operate our business in the PRC, and our ability to conduct our business in China may be negatively affected.

The shareholders of our VIE may have actual or potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

The shareholders of our VIE may have actual or potential conflicts of interest with us. The shareholders of the VIE may refuse to sign or breach, or cause our VIE to breach, or refuse to renew, the existing contractual arrangements we have with the VIE, which would have a material and adverse effect on our ability to effectively control our VIE and receive economic benefits from it. For example, the shareholders may cause the VIE Agreements to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you that if and when conflicts of interest arise any or all of these shareholders of the VIE will act in the best interests of our company or such conflicts will be resolved in our favor. Currently, we do not have any arrangements to address potential conflicts of interest between the shareholders of the VIE and CU WFOE or the Company. If we cannot resolve any conflict of interest or dispute between us and the shareholders of the VIE, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of the disputes.

​

Table of Contents

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not Applicable.

​

ITEM 2. PROPERTIES.

Law Broker’s headquarters is located at 5th Floor, No. 311 3rd Section, Nanjing East Road, Taipei City, Taiwan, with approximately 753.29 square meters (equivalent to 8,105 square feet) of office space. Law Broker renewed the office lease with Pon-Chen Co., Ltd. for additional two years commencing from June 1, 2021 to May 31, 2023 with a monthly rent of NT $382,822 or approximately $13,712.

Uniwil’s headquarters is located at 7th Floor, No. 311 3rd Section, Nanjing East Road, Taipei City, Taiwan, with approximately 46.28 square meters (equivalent to 498 square feet) of office space. The lease agreement with Pon-Chen Co., Ltd. for additional two years commencing from June 1, 2021 to May 31, 2023 with a monthly rent of NT $32,327 or approximately $1,158.

Anhou’s current registered address is located at Room 2006-2010, No. 215 Jiangzhong Middle Road, Jianye District, Nanjing, Jiangsu Province, China, with 553.26 square meters (equivalent to 5,955 square feet) of office space. The lease agreement is by and among Zheng Yong Xiang, Zhang Guo Qiang and Anhou. The term is from November 3, 2018 to November 2, 2024. Anhou paid the rent of the headquarters space in Nanjing in the total amount of RMB 776,459 or approximately $115,400 during the fiscal year ended December 31, 2022.

​

ITEM 3. LEGAL PROCEEDINGS.

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. From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. 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. However, two of our subsidiaries each received regulatory decision letters in 2021 as described below.

Rays Technology Co., Ltd.

On April 29, 2021, Rays Technology Co., Ltd. (“Rays”), a majority-owned subsidiary of China United Insurance Services, Inc. (the “Company”), received a decision letter (the “Rays Decision Letter”) dated April 27, 2021 from the Financial Supervisory Commission (Taiwan) (the “FSC”) stating that Rays was fined NTD900,000 (equivalent to approximately $32,236 USD) (the “Fine”) by the FSC for violating Article 167-1 Section 3 of the Insurance Act of Taiwan (the “Insurance Act”). The FSC found that from 2019 to 2021 Rays used its website “Triple-I” and its point system thereon to facilitate certain insurance sales and charged the points from certain participating insurance salespersons on the Triple-I point system once clients purchased insurance products from those insurance salespersons. The FSC found that Rays’ operations through the Triple-I website constituted insurance brokerage services but Rays did not have the proper insurance brokerage license while operating the Triple-I website.

Rays adjusted its business model to comply with current laws and regulations and decided to pay the Fine in full without appealing to the Rays Decision Letter.

Law Broker

On May 19, 2021, Lawbroker received the Decision Letter from the FSC stating that Law Broker was fined NTD1.7 million (equivalent to approximately $60,565 USD) and one-month correction period for violating the relevant laws and regulations of the Insurance Act. The FSC found that from 2011 to 2020 Law Broker charged advertising fees and business promotion fees pursuant to certain contracts and agreements with some of its strategic insurance companies and such charges exceeded the scope of remuneration for insurance-related services allowed for Law Broker. The FSC found that such business practices of Law Broker’s did not comply with Article 9 of the Insurance Act and Section 11 of Article 49 of the Regulations Governing Insurance Brokers.

Law Broker adjusted its business models to regain compliance with the relevant laws and regulations and have paid the fines in full.

Table of Contents

On November 29, 2021, Law Broker received a decision letter (the “Law Broker Decision Letter”) dated November 25, 2021 from the FSC stating that Law Broker was fined NTD 200,000 (equivalent to approximately $7,227 USD) (the “Fine”) and a one month correction period (the “Correction Period,” collectively with the Fine, the “Penalty”) by the FSC for violating Article 163 Sections 4 and 8 of the Insurance Act and Section 23 of Article 49 of the Regulations Governing Insurance Brokers (the “Regulation”). The FSC found that one of Law Broker’s insurance agents, within a short period of time, solicited the same customer for insurance policies from different insurance companies but the financial information of the customer in such agent’s report was different. The insurance agent and Law Broker were not able to verify the reason behind such discrepancy.

Further, the FSC found that Law Broker’s current “Customer Risk Assessment Standards for Preventing Money Laundering and Combating Terrorism,” underestimated customers’ risk levels and therefore such standards may have deficiency in screening the risks of money laundering or terrorism of potential insurance customers. Lastly, FSC also ruled that Law Broker has not enhanced its due diligence review on its high-risk customers.

Law Broker paid the Fine in full according to the Law Broker Decision Letter and adjusted their business models to regain compliance with the Insurance Act and the Regulation.

​

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

​

Table of Contents

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock has been quoted on the various tiers of the OTC Market under the symbol “CUII” since August 2012. The latest available closing price of our common stock prior to January 26, 2023 was US$1.52.

The following table sets forth for the respective periods indicated the high and low closing prices for our common stock. Such prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.

​

​

The above stock prices may not be reflective of the actual market value thereof on the dates listed due to our stock’s limited trading volume.

Shareholders

As of December 31, 2022, there were 1,039 record owners of our common stock and one record owner of our preferred stock.

Transfer Agent

Our transfer agent is Securities Transfer Corporation, at the address of 2901 N. Dallas Parkway, Suite 380, Plano, Texas 75093.

Dividends

We have never declared or paid any cash dividends or distributions on our common stock. We currently intend to retain our future earnings, if any, to support operations and to finance future growth and expansion and, therefore, do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

Pursuant to the provisions of the AHFL Acquisition Agreement dated August 24, 2012 and its amendments on March 14, 2013, March 13, 2015, February 17, 2016 and August 8, 2016, in lieu of the 2 million employee stock option pool (the “ESOP”) described in the AHFL Acquisition Agreement, our Company is committed to create an employee stock pool or similar plan consisting of up to 5 million shares of common stock to be granted to employees of affiliated entities of our Company (including Law Broker employees). Law Broker, being the only actively operating subsidiary in Taiwan, primarily engages in insurance brokerage and insurance agency service business across Taiwan. Upon satisfaction of respective performance criteria of Law Broker employees, the board of directors of Law Broker may submit its recommendation to our Company for its approval and issuance of such options under the ESOP. Details of terms and conditions on the said ESOP shall be set forth in separate ESOP documents duly approved by our Company.

Table of Contents

On May 12, 2017, the Company’s 2017 Long Term Incentive Plan (the “2017 Plan”) was approved by the shareholders at the 2017 Annual Meeting of Stockholders of China United Insurance Service, Inc. Up to 10,000,000 shares of our Common Stock may be granted under the 2017 Plan (the “Share Pool”), provided that 2,000,000 shares of the Share Pool is reserved for issuance to eligible participants providing services to Action Holdings Financial Limited and its subsidiaries. Eligibility to participate is open to officers, directors and employees of, and other individuals (including sales agents who are exclusive agents of the Company or its subsidiaries or derive more than 50% of their income from those entities) who provide bona fide services to or for, us or any of our subsidiaries. Given that metrics for evaluating performance goals are rather complex and exhaustive, and that the Company’s management and Board of Directors are still working to develop a series of reward policies that specify various performance target levels and the size of the award or payout of performance shares with respect to each different target level attained, no awards were granted under the 2017 Plan as of December 31, 2022.

Options and Warrants

As of December 31, 2022, we had no outstanding options or warrants to purchase shares of our Common Stock.

​

ITEM 6. SELECT FINANCIAL DATA

As a smaller reporting company, we are not required to make such disclosure under Item 6.

​

​

​

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the accompanying notes thereto included in Item 8 of Part II, “Financial Statements and Supplementary Data” of this Form 10-K Report. Unless otherwise stated, references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in December and the associated quarters, months and periods of those fiscal years.

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. We undertake no obligation to update any forward-looking statements.

Overview

We are a Delaware corporation, incorporated on June 4, 2010 by Mr. Mao, as a holding company for both ZLI Holdings Limited (“CU Hong Kong”) and Action Holdings Financial Limited (“AHFL”, a company incorporated in the British Virgin Islands). Our common stock is quoted over the counter under the ticker symbol “CUII” on the OTCQB. The Company primarily engages in brokerage and insurance agency services by providing two broad categories of insurance products, life insurance products and property and casualty insurance products, and conducts its business primarily in three geographic operating segments, Taiwan, the PRC, and Hong Kong. The insurance products that the Company’s subsidiaries sell are underwritten by certain leading insurance companies in Taiwan, the PRC and regions and countries near the PRC.

We have three operating subsidiaries in our Taiwan segment and conduct brokerage and insurance agency services through the subsidiaries across Taiwan. Through our recent acquisitions and integrations, our Taiwan segment is able to achieve synergies among group companies and generate more commission revenues from marketing and selling insurance products. Revenues from the Taiwan segment continues to increase and contributed about 97.0% of the total revenue of the Company for the year ended December 31, 2022. As of December 31, 2022, we had 66 sales and service outlets (including the headquarters) with 5,941 sales professionals and 289 administrative staff in the Taiwan segment.

Through our Consolidated Affiliated Entities in the PRC segment, we had one insurance agency and one insurance brokerage company. We have total 27 service outlets (including the headquarters) with 1,218 full-time sales professionals and 108 administrative staff in the

Table of Contents

PRC segment as of December 31, 2022. Our PRC segment contributed 2.9% of total revenue of the Company for the year ended December 31, 2022.

Our Hong Kong segment mainly consists of one operating subsidiary, which acts as a broker for reinsurance products and earns commissions on sales of insurance products from other insurers. As of December 31, 2022, we had one sales and service outlet (including the headquarters) with no sales professionals and one administrative staff in Hong Kong segment. Our Hong Kong segment contributed 0.1% of total revenue of the Company for the year ended December 31, 2022.

The Company continues to diligently monitor and manage through the impact of the ongoing COVID-19 pandemic on all aspects of our business, attempting to keep our customers, sales professionals and employees healthy and safe. Although the extent of the COVID-19 impact to the Company will depend on numerous factors and developments, we do not expect the COVID-19 pandemic to materially impact our business and financial conditions in 2023 based on current trends.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the amounts of revenues and expenses during the period. We make these estimates using the best information available when they are made. However, actual results could differ materially from those estimates.

We believe critical accounting policies involve the most complex, difficult and subjective estimates and judgments are as follows:

Table of Contents

For other significant accounting policies and new accounting pronouncements affecting our financial statements, see Note 2 to our 2022 consolidated financial statements.

Table of Contents

Results of Operations

Overview of the years ended December 31, 2022 and 2021

The following table shows the results of operations for the years ended December 31, 2022 and 2021:

​

​

Revenue

As a distributor of insurance products, we derive our revenue primarily from commissions and fees paid by insurance companies, typically calculated as a percentage of premiums paid by our customers to the insurance companies in Taiwan, the PRC and Hong Kong. We generate revenue primarily through our sales force, which consists of individual sales professionals in our distribution and service network.

Table of Contents

The Company’s majority of revenues are derived from the commissions from sales of life insurance products. Total commission revenue from sales of life insurance products accounted for 93.7% and 92.8% of total revenue for the years ended December 31, 2022 and 2021, respectively; whereas commission revenue from sales of property and casualty insurance products only contributed 6.3% and 7.2% of total revenue for the years ended December 31, 2022 and 2021, respectively.

Most of the individual life insurance products we distribute 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 and enables the Company to derive commission and fee income from that policy for an extended period of time, sometimes up to 25 years. Because of this feature and the expected sustained growth of life insurance sale, we have placed significant resources to expand and sell the life insurance products with periodic payment schedules. We expect that sales of life insurance products to continuously be our primary source of revenue in the next several years.

Our total revenue of $131.9 million for the year ended December 31, 2022 increased by $0.5 million (or 0.4%) compared to the total revenue of $131.4 million for the year ended December 31, 2021. The increase was attributable primarily to the constant business growth in the Taiwan segment. For the years ended December 31, 2022 and 2021, the revenue generated respectively from Taiwan, PRC and Hong Kong segments was as follows:

​

​

Revenue from our Taiwan segment increased by $2.4 million, or 1.9%, from $125.6 million for the year ended December 31, 2021 to $128.0 million for the same period ended December 31, 2022. The revenue in local currency was increased due to the performance and operation bonus resulting from the sales of insurance products increase from Uniwill but partially offset by the decrease in revenue from Law Broker and 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 $1.9 million, or 32.4% to $3.8 million for the year ended December 31, 2022 from $5.7 million for the same period ended December 31, 2021. The overall insurance industry environment in PRC was declining during 2022 due to the Covid-19 lockdown imposed by PRC government, which resulted in the decrease of 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 for risk management. Increase in revenue from our Hong Kong segment for the year ended December 31, 2022 compared to that of the year ended December 31, 2021 is primarily due to the receipt of on-going reinsurance commission of 2020 and 2021.

Except the aforementioned analysis, we did not identify any know trends or uncertainties that have had or are reasonably likely to have a material impact on revenues or income.

Cost of revenue and gross profit

The cost of revenue mainly consists of commissions paid to our sales professionals. Our commission policy to our sales professionals designs to divide sales target into smaller and more attainable targets and provides more incentives to our sales professionals to improve the achievement rate, especially for the first-year commissions.

The cost of revenue for the year ended December 31, 2022 increased by $1.9 million or 2.2%, to $86.8 million compared to $84.9 million for the year ended December 31, 2021. The increase in the cost of revenue was mainly resulted from the revenue increase of Uniwill. In addition, the bonuses paid to agents also increased due to the outstanding sales performance from senior agents with higher commission rates.

Table of Contents

Consequently, the gross profit margin decreased from 35.3% for the year ended December 31, 2021 to 34.2% for the year ended December 31, 2022.

Except the aforementioned analysis, we did not identify any know events that are reasonably likely to cause a material increase in our cost of revenue in the future.

Selling expenses

Selling expenses were mainly incurred by Law Broker and Uniwill in connection with marketing and advertising. Selling expenses increased $0.9 million or 38.8% from $2.3 million for the year ended December 31, 2021 to $3.2 million for the year ended December 31, 2022. The increase in the selling expenses was caused by the increase of marketing activities during the year ended December 31, 2022. For the same period in 2021, the adverse impact from the outbreak of COVID-19 in Taiwan had substantially restricted our marketing activities in Taiwan, resulting in less selling expenses during the year ended December 31, 2021.

General and administrative expenses

General and administrative (“G&A”) expenses are principally comprised of salaries and benefits for our administrative staff, office rental expenses, travel expenses, depreciation and amortization, entertainment expenses, and professional service fees.

For the year end December 31, 2022, G&A expenses were $27.0 million, reflecting a decrease of $0.4 million or 1.3%, compared with $27.4 million for year ended December 31, 2021. The decrease in the general and administrative expenses was mainly attributed to the recognition of compensation costs for the issuance of shares of common stock for the year ended December 31, 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 year ended December 31, 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, gain or loss on valuation of financial assets and foreign currency exchange gain or loss. Net other income for the year ended December 31, 2022 was $2.8 million, reflecting an increase of $2.9 million or 3,435.6%, compared with net other expense $0.1 million for the same period of 2021. The increase in other income was mainly due to the foreign currency exchange gain recognized from foreign currency time deposits and intercompany transactions that will be paid back in currency other than the functional currency because of the substantial depreciation of the New Taiwan Dollar against the U.S. dollar during the year ended December 31, 2022 and the settlement expense of earn-out shares for the year ended December 31, 2021.

Income tax

For the year ended December 31, 2022, income tax expense was $4.0 million, a decrease of $1.0 million or 20.3%, compared with $5.0 million for the year ended December 31, 2021. The decrease in tax expenses was mainly due to the reversal of valuation allowance. For the reason of reversal of valuation allowance, please refer to Note 21 to our 2022 consolidated financial statements.

Other comprehensive items

Other comprehensive items mainly consisted of foreign currency translation gain or loss. Foreign currency translation loss was $9.7 million, reflecting a decrease of $10.9 million, compared with foreign currency translation gain of $1.2 million for the year ended December 31, 2021. The decrease was mainly due to a larger foreign currency translation loss resulted from the substantial depreciation of the New Taiwan Dollar against the U.S. dollar for net assets of Taiwan segment for the year ended December 31, 2022.

Table of Contents

Table of Contents

Investing activities

Net cash used in investing activities was $7.4 million for the year ended December 31, 2022 in comparison with net cash of $9.5 million used in investing activities for the year ended December 31, 2021. The decrease in outflow was due to inflow from disposal of subsidiary, which was partially offset by the increased outflow for time deposit purchases.

Financing activities

Net cash provided by financing activities was $3.1 million for the year ended December 31, 2022 in comparison with net cash of $4.5 million provided in financing activities for the year ended December 31, 2021. The decrease was mainly due to the decrease in net proceeds from additional borrowings under the revolving credit agreements during the year ended December 31, 2022.

Off Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2022.

​

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT; MARKET RISK.

As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information under this item.

​

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm (Firm ID:  i 1195).

​

​

​

​

Table of Contents

Table of Contents

Revenue Recognition

Critical Audit Matter Description

As described in Note 2 to the consolidated financial statements, the Company generally recognizes its brokerage commission revenue when the insurance policy is effective. In addition, the Company may earn a performance bonus from insurance companies once achieving certain sales volume and targets based on the respective contracts with the insurance companies. The performance bonus is included as part of the transaction price and represents a form of variable consideration associated with the sales volume and targets. The Company estimates the amount of variable consideration that will be received with a constraint whereby a significant reversal of revenue is not probable.

We identified the estimated performance bonus as a critical audit matter because (1) the revenue is material to the consolidated financial statements, which amounted to approximately $8.5 million for the year ended December 31, 2022; (2) our audit involved subjectivity and complexity in evaluating management's estimates on the variable consideration. Auditing such estimates required extensive audit effort due to the complexity of management’s assumptions on the variable consideration.

How the Critical Audit Matter Was Addressed in the Audit

The primary procedures we performed to address the critical audit matter were (1) we evaluated the design and implementation of controls for estimating revenue, including the Company’s controls around reviewing contract terms and applying the revenue recognition accounting principles to variable consideration, (2) we evaluated the Company’s identification of performance obligations against contractual terms and the analysis of significant assumptions used by management in estimating variable consideration by testing and comparing the sales volume and targets, which include considerations of the successful rate to meet the volume and targets, to the historical data,  and (3) we tested the accuracy and completeness of the underlying data used by management in determining such assumptions by comparing a sample of transactions to source documentation and subsequent collections.

/s/  i UHY LLP

We have served as the Company’s auditor since 2021.

 i Irvine, California

March 30, 2023

​

​

Table of Contents

CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

​