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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 8/15/22 China United Ins Service, Inc. 10-Q 6/30/22 90:11M Toppan Merrill/FA2 |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 2.68M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 31K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 31K
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12: R2 Unaudited Condensed Consolidated Balance Sheets HTML 169K
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15: R5 Unaudited Condensed Consolidated Statements of HTML 72K
Changes in Stockholders' Equity
16: R6 Unaudited Condensed Consolidated Statements of HTML 133K
Cash Flows
17: R7 Organization and Principal Activities HTML 31K
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20: R10 Time Deposits HTML 41K
21: R11 Long-Term Investments HTML 59K
22: R12 Short-Term Loans HTML 85K
23: R13 Commissions Payable to Sales Professionals HTML 39K
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25: R15 Other Liabilities HTML 38K
26: R16 Contracts With Customers HTML 103K
27: R17 Lease HTML 72K
28: R18 Noncontrolling Interests HTML 114K
29: R19 Income Tax HTML 66K
30: R20 Related Party Transactions HTML 41K
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32: R22 Variable Interest Entities HTML 103K
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40: R30 Long-Term Investments (Tables) HTML 57K
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Reconciliation of the income and share data used
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(Details)
55: R45 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair HTML 35K
Value of Financial Instruments (Details)
56: R46 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - HTML 44K
Concentration of Risk (Revenue) (Details)
57: R47 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - HTML 37K
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(Details)
58: R48 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - HTML 65K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM i 10-Q
(Mark One)
i ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended i June 30, 2022
OR
i ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER: i 000-54884
i CHINA UNITED INSURANCE SERVICE, INC.
(Exact name of registrant as specified in its charter)
i Delaware | i 30-0826400 |
(State
or other jurisdiction of | (IRS Employer |
i 7F, No. 311 Section 3
i Nan-King East Road
i Taipei City, i Taiwan, i 105405
(Address of principal executive offices)
+ i 8862- i 87126958
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
i Non-accelerated filer ☒ | Smaller reporting company i ☒ |
| Emerging growth company i ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.
Yes i ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which |
N/A |
| N/A |
| N/A |
As of June 30, 2022, there were i 30,286,199 shares of common stock issued and outstanding, and 1,000,000 preferred shares issued and outstanding.
| 5 | |||
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| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | | 31 | |
| | | ||
| | 38 | ||
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| | 38 | ||
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| | 40 | ||
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2
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described under Part 1 Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report, or that we filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
3
OTHER PERTINENT INFORMATION
References in this quarterly report to “we,” “us,” “our” and the “Company” refer to China United Insurance Service, Inc., its subsidiaries and variable interest entities.
References to China or the PRC refer to the People’s Republic of China (excluding Taiwan). References to Taiwan refer to Republic of China.
Unless context indicates otherwise, reference to the “Company” in this quarterly report refers to China United Insurance Service, Inc. and its subsidiaries. Reference to “AHFL” refers to the combined operations of Action Holdings Financial Limited and its Taiwan Subsidiaries (as defined below). Reference to “Anhou” or the “VIE” refers to the combined operations of Law Anhou Insurance Agency Co., Ltd. and its subsidiaries.
Our business is conducted in Taiwan and China using New Taiwanese Dollars (“NT$” or “NTD”), the currency of Taiwan, Hong Kong Dollars (“HK$” or “HKD”), the currency of Hong Kong, and RMB, the currency of China, respectively, and our financial statements are presented in United States dollars (“USD”, “US$” or “$”). In this quarterly report, we refer to assets, obligations, commitments and liabilities in our financial statements in U.S. dollars. These dollar references are based on the exchange rate of NT$, HK$ and RMB to USD, determined as of a specific date. Changes in the exchange rate will affect the amount of our obligations and the value of our assets in terms of U.S. dollars which may result in an increase or decrease in the amount of our obligations (expressed in USD) and the value of our assets, including accounts receivable (expressed in USD).
4
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PART I. FINANCIAL INFORMATION
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| | | | | | |
| | June 30, | | December 31, | ||
(Amount in USD) |
| 2022 |
| 2021 | ||
ASSETS | | | | | | |
Current assets | | | | | | |
Cash and cash equivalents | | $ | i 21,046,411 | | $ | i 18,234,350 |
Time deposits | |
| i 70,126,140 | |
| i 64,299,176 |
Accounts receivable | |
| i 15,139,136 | |
| i 26,761,678 |
Contract assets | | | i 2,921,951 | | | — |
Marketable securities | | | i 831,395 | | | — |
Other current assets | |
| i 1,062,539 | |
| i 1,207,496 |
Total current assets | |
| i 111,127,572 | |
| i 110,502,700 |
| | | | | | |
Right-of-use assets under operating leases | | | i 6,542,188 | | | i 6,449,182 |
Property and equipment, net | |
| i 1,855,328 | |
| i 2,061,755 |
Intangible assets, net | |
| i 348,870 | |
| i 333,118 |
Long-term investments | |
| i 2,485,593 | |
| i 2,696,812 |
Restricted cash – noncurrent | |
| i 10,694 | |
| i 88,282 |
Deferred tax assets | | | i 651,342 | | | i 909,032 |
Other assets | |
| i 4,528,987 | |
| i 4,740,640 |
TOTAL ASSETS | | $ | i 127,550,574 | | $ | i 127,781,521 |
| | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
|
| |
|
|
Current liabilities | |
|
| |
|
|
Commission payable to sales professionals | | $ | i 11,291,104 | | $ | i 14,003,541 |
Short-term loans | | | i 20,516,075 | | | i 18,835,932 |
Contract liabilities - current | | | i 117,712 | | | — |
Income tax payable - current | |
| i 3,281,867 | |
| i 3,893,047 |
Operating lease liabilities - current | | | i 3,146,909 | | | i 3,059,329 |
Due to related parties | |
| i 25,177 | |
| i 50,531 |
Other current liabilities | |
| i 13,075,777 | |
| i 13,997,603 |
Total current liabilities | |
| i 51,454,621 | |
| i 53,839,983 |
| | | | | | |
Contract liabilities - noncurrent | | | i 1,441,690 | | | — |
Income tax payable - noncurrent | |
| i 299,797 | |
| i 539,636 |
Operating lease liabilities - noncurrent | | | i 3,321,857 | | | i 3,298,089 |
Net defined benefit liabilities - noncurrent | | | i 362,501 | | | i 389,198 |
Other liabilities | |
| i 504,591 | |
| i 541,754 |
TOTAL LIABILITIES | |
| i 57,385,057 | |
| i 58,608,660 |
| | | | | | |
COMMITMENTS AND CONTINGENCIES | |
| | |
| |
| | | | | | |
STOCKHOLDERS’ EQUITY | |
| | |
| |
Preferred stock, par value $ i i 0.00001 / , i i 10,000,000 / authorized, i i 1,000,000 / issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | |
| i 10 | |
| i 10 |
Common stock, par value $ i i 0.00001 / , i i 100,000,000 / authorized, i i 30,286,199 / issued and outstanding as of June 30, 2022 and December 31, 2021, respectively | |
| i 303 | |
| i 303 |
Additional paid-in capital | |
| i 9,296,953 | |
| i 9,296,953 |
Statutory reserves | | | i 11,091,448 | |
| i 11,101,064 |
Retained earnings | |
| i 18,263,071 | |
| i 13,690,368 |
Accumulated other comprehensive income | |
| i 219,275 | |
| i 4,664,848 |
Total stockholders’ equity attributable to China United’s shareholders | |
| i 38,871,060 | |
| i 38,753,546 |
Noncontrolling interests | |
| i 31,294,457 | |
| i 30,419,315 |
TOTAL STOCKHOLDERS’ EQUITY | |
| i 70,165,517 | |
| i 69,172,861 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | i 127,550,574 | | $ | i 127,781,521 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS)
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
(Amount in USD) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Revenue | | $ | i 31,655,708 | | $ | i 32,973,680 | | $ | i 62,636,231 | | $ | i 63,503,797 |
Cost of revenue | |
| i 21,329,935 | |
| i 23,536,213 | |
| i 40,339,454 | |
| i 42,509,645 |
| | | | | | | | | | | | |
Gross profit | |
| i 10,325,773 | |
| i 9,437,467 | |
| i 22,296,777 | |
| i 20,994,152 |
| | | | | | | | | | | | |
Operating expenses: | |
| | |
| | |
| | |
| |
Selling | |
| i 433,681 | |
| i 96,297 | |
| i 1,117,831 | |
| i 676,074 |
General and administrative | |
| i 6,770,309 | |
| i 6,189,833 | |
| i 12,743,348 | |
| i 12,280,087 |
Total operating expense | |
| i 7,203,990 | |
| i 6,286,130 | |
| i 13,861,179 | |
| i 12,956,161 |
| | | | | | | | | | | | |
Income from operations | |
| i 3,121,783 | |
| i 3,151,337 | |
| i 8,435,598 | |
| i 8,037,991 |
| | | | | | | | | | | | |
Other income (expenses): | |
| | |
| | |
| | |
| |
Interest income | |
| i 161,075 | |
| i 129,779 | |
| i 266,052 | |
| i 213,777 |
Interest expenses | |
| ( i 69,804) | |
| ( i 46,636) | |
| ( i 122,139) | |
| ( i 89,106) |
Foreign currency exchange gain (loss), net | |
| i 704,463 | |
| ( i 427,652) | |
| i 1,442,013 | |
| ( i 99,186) |
Dividend income | | | i 212,369 | | | i 251,328 | | | i 212,369 | | | i 251,328 |
Other - net | |
| ( i 38,767) | |
| i 80,669 | |
| i 123,281 | |
| i 259,609 |
Total other income (expenses), net | |
| i 969,336 | |
| ( i 12,512) | |
| i 1,921,576 | |
| i 536,422 |
| | | | | | | | | | | | |
Income before income taxes | |
| i 4,091,119 | |
| i 3,138,825 | |
| i 10,357,174 | |
| i 8,574,413 |
Income tax expense | |
| ( i 1,117,372) | |
| ( i 1,001,598) | |
| ( i 2,699,269) | |
| ( i 2,400,404) |
| | | | | | | | | | | | |
Net income | |
| i 2,973,747 | |
| i 2,137,227 | |
| i 7,657,905 | |
| i 6,174,009 |
Less: net income attributable to noncontrolling interests | |
| ( i 1,355,537) | |
| ( i 946,344) | |
| ( i 3,094,818) | |
| ( i 2,572,740) |
Net income attributable to China United’s shareholders | |
| i 1,618,210 | |
| i 1,190,883 | |
| i 4,563,087 | |
| i 3,601,269 |
| | | | | | | | | | | | |
Other comprehensive items, net of tax: | |
| | |
| | |
| | |
| |
Foreign currency translation gain (loss) | |
| ( i 3,551,754) | |
| i 1,698,987 | |
| ( i 6,665,249) | |
| i 507,688 |
Other | |
| i — | |
| i — | |
| i — | |
| i 364 |
Total other comprehensive gain (loss) | | | ( i 3,551,754) | | | i 1,698,987 | | | ( i 6,665,249) | | | i 508,052 |
| | | | | | | | | | | | |
Comprehensive income (loss) | | | ( i 578,007) | | | i 3,836,214 | | | i 992,656 | | | i 6,682,061 |
Less: comprehensive income attributable to noncontrolling interests | | | ( i 177,697) | | | ( i 1,495,321) | | | ( i 875,142) | | | ( i 2,758,642) |
| | | | | | | | | | | | |
Comprehensive income (loss) attributable to China United’s shareholders | | $ | ( i 755,704) | | $ | i 2,340,893 | | $ | i 117,514 | | $ | i 3,923,419 |
| | | | | | | | | | | | |
Weighted average shares outstanding: | |
| | |
| | |
| | |
| |
Basic and diluted | |
| i 30,286,199 | |
| i 29,421,736 | |
| i 30,286,199 | |
| i 29,421,736 |
| | | | | | | | | | | | |
Earnings per share attributable to common stockholders of China United: | |
| | |
|
| |
| | |
| |
Basic and diluted | | $ | i 0.052 | | $ | i 0.039 | | $ | i 0.146 | | $ | i 0.118 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | |
| | | | | | | | | | | | | Additional | | | | | Other | | | | | | | | | | | | | ||
| | Common | | | | | Preferred | | | | | Paid-in | | Statutory | | Comprehensive | | Retained | | | | | Noncontrolling | | Total | |||||||
(Amount in USD) |
| Stock |
| Amount |
| Stock |
| Amount |
| Capital |
| Reserves |
| Income |
| Earnings |
| Total |
| Interests |
| Equity | ||||||||||
Balance March 31, 2022 |
| i 30,286,199 | | $ | i 303 | | | i 1,000,000 | | $ | i 10 | | $ | i 9,296,953 | | $ | i 11,101,064 | | $ | i 2,593,189 | | $ | i 16,635,245 | | $ | i 39,626,764 | | $ | i 31,116,760 | | $ | i 70,743,524 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reversal of reserves | | — | | | — | | | — | | | — | | | — | | | ( i 9,616) | | | — | | | i 9,616 | | | — | | | — | | | — |
Foreign currency translation loss |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| ( i 2,373,914) | |
| — | |
| ( i 2,373,914) | |
| ( i 1,177,840) | |
| ( i 3,551,754) |
Other comprehensive income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Net income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| i 1,618,210 | |
| i 1,618,210 | |
| i 1,355,537 | |
| i 2,973,747 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance June 30, 2022 |
| i 30,286,199 | | $ | i 303 | | | i 1,000,000 | | $ | i 10 | | $ | i 9,296,953 | | $ | i 11,091,448 | | $ | i 219,275 | | $ | i 18,263,071 | | $ | i 38,871,060 | | $ | i 31,294,457 | | $ | i 70,165,517 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | |
| | | | | | | | | | | | | Additional | | | | | Other | | | | | | | | | | | | | ||
| | Common | | | | | Preferred | | | | | Paid-in | | Statutory | | Comprehensive | | Retained | | | | | Noncontrolling | | Total | |||||||
(Amount in USD) |
| Stock |
| Amount |
| Stock |
| Amount |
| Capital |
| Reserves |
| Income |
| Earnings |
| Total |
| Interests |
| Equity | ||||||||||
Balance December 31, 2021 |
| i 30,286,199 | | $ | i 303 | | | i 1,000,000 | | $ | i 10 | | $ | i 9,296,953 | | $ | i 11,101,064 | | $ | i 4,664,848 | | $ | i 13,690,368 | | $ | i 38,753,546 | | $ | i 30,419,315 | | $ | i 69,172,861 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reversal of reserves | | — | | | — | | | — | | | — | | | — | | | ( i 9,616) | | | — | | | i 9,616 | | | — | | | — | | | — |
Foreign currency translation loss |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| ( i 4,445,573) | |
| — | |
| ( i 4,445,573) | |
| ( i 2,219,676) | |
| ( i 6,665,249) |
Other comprehensive income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Net income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| i 4,563,087 | |
| i 4,563,087 | |
| i 3,094,818 | |
| i 7,657,905 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance June 30, 2022 |
| i 30,286,199 | | $ | i 303 | | | i 1,000,000 | | $ | i 10 | | $ | i 9,296,953 | | $ | i 11,091,448 | | $ | i 219,275 | | $ | i 18,263,071 | | $ | i 38,871,060 | | $ | i 31,294,457 | | $ | i 70,165,517 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | |
| | | | | | | | | | | | | Additional | | | | | Other | | | | | | | | | | | | | ||
| | Common | | | | | Preferred | | | | | Paid-in | | Statutory | | Comprehensive | | Retained | | | | | Noncontrolling | | Total | |||||||
(Amount in USD) |
| Stock |
| Amount |
| Stock |
| Amount |
| Capital |
| Reserves |
| Income |
| Earnings |
| Total |
| Interests |
| Equity | ||||||||||
Balance March 31, 2021 |
| i 29,421,736 | | $ | i 294 | | | i 1,000,000 | | $ | i 10 | | $ | i 8,190,449 | | $ | i 9,463,903 | | $ | i 3,061,569 | | $ | i 11,507,794 | | $ | i 32,224,019 | | $ | i 25,859,062 | | $ | i 58,083,081 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reversal of reserves | | — | | | — | | | — | | | — | | | — | | | i 1,267,518 | | | — | | | ( i 1,267,518) | | | — | | | — | | | — |
Foreign currency translation gain |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| i 1,150,010 | |
| — | |
| i 1,150,010 | |
| i 548,977 | |
| i 1,698,987 |
Other comprehensive income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — |
Net income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| i 1,190,883 | |
| i 1,190,883 | |
| i 946,344 | |
| i 2,137,227 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance June 30, 2021 |
| i 29,421,736 | | $ | i 294 | | | i 1,000,000 | | $ | i 10 | | $ | i 8,190,449 | | $ | i 10,731,421 | | $ | i 4,211,579 | | $ | i 11,431,159 | | $ | i 34,564,912 | | $ | i 27,354,383 | | $ | i 61,919,295 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | |
| | | | | | | | | | | | | Additional | | | | | Other | | | | | | | | | | | | | ||
| | Common | | | | | Preferred | | | | | Paid-in | | Statutory | | Comprehensive | | Retained | | | | | Noncontrolling | | Total | |||||||
(Amount in USD) |
| Stock |
| Amount |
| Stock |
| Amount |
| Capital |
| Reserves |
| Income |
| Earnings |
| Total |
| Interests |
| Equity | ||||||||||
Balance December 31, 2020 |
| i 29,421,736 | | $ | i 294 | | | i 1,000,000 | | $ | i 10 | | $ | i 8,190,449 | | $ | i 9,463,903 | | $ | i 3,889,429 | | $ | i 9,097,408 | | $ | i 30,641,493 | | $ | i 24,595,741 | | $ | i 55,237,234 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Reversal of reserves | | — | | | — | | | — | | | — | | | — | | | i 1,267,518 | | | — | | | ( i 1,267,518) | | | — | | | — | | | — |
Foreign currency translation gain |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| i 321,910 | |
| — | |
| i 321,910 | |
| i 185,778 | |
| i 507,688 |
Other comprehensive income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| i 240 | | | — | | | i 240 | | | i 124 | | | i 364 |
Net income |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| — | |
| i 3,601,269 | |
| i 3,601,269 | |
| i 2,572,740 | |
| i 6,174,009 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance June 30, 2021 |
| i 29,421,736 | | $ | i 294 | | | i 1,000,000 | | $ | i 10 | | $ | i 8,190,449 | | $ | i 10,731,421 | | $ | i 4,211,579 | | $ | i 11,431,159 | | $ | i 34,564,912 | | $ | i 27,354,383 | | $ | i 61,919,295 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | |
(Amount in USD) | | Six Months Ended June 30, | ||||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities: | | | | | | |
Net income | | $ | i 7,657,905 | | $ | i 6,174,009 |
Adjustments to reconcile net income to net cash provided by operating activities | |
| | |
| |
Depreciation and amortization | |
| i 573,625 | |
| i 580,884 |
Amortization of right-of-use assets | | | i 1,853,315 | | | i 1,870,255 |
Amortization of bond premium | |
| — | |
| i 58 |
Gain on sales of financial assets | |
| — | | | ( i 141,203) |
Loss on valuation of financial assets | |
| i 193,111 | | | i 212,896 |
(Gain) loss on disposals of equipment | | | ( i 3,704) | | | i 71 |
Deferred income tax | |
| i 62,835 | |
| i 121,020 |
Unrealized foreign currency exchange gains | | | ( i 429,979) | | | — |
Net changes in operating assets and liabilities: | |
| | |
| |
Accounts receivable | |
| i 10,149,076 | |
| i 9,522,790 |
Contract assets | | | ( i 3,026,190) | | | ( i 1,046,822) |
Other current assets | |
| ( i 33,746) | |
| ( i 9,684) |
Other assets | |
| i 123,290 | |
| ( i 242,568) |
Commission payable to sales professionals | |
| ( i 1,818,313) | |
| ( i 854,127) |
Contract liabilities | | | i 1,615,033 | | | — |
Income tax payable | |
| ( i 649,048) | |
| ( i 339,769) |
Other current liabilities | |
| ( i 2,615,065) | |
| ( i 3,343,428) |
Other liabilities | |
| — | |
| ( i 197,413) |
Lease liabilities | | | ( i 2,128,416) | | | ( i 2,126,670) |
Net cash provided by operating activities | |
| i 11,523,729 | |
| i 10,180,299 |
| | | | | | |
Cash flows from investing activities: | |
| | |
| |
Purchases of time deposits | |
| ( i 52,109,660) | |
| ( i 45,655,824) |
Proceeds from maturities of time deposits | |
| i 41,936,742 | |
| i 39,967,511 |
Acquisition of equity investments under cost method using the measurement alternative | | | — | | | ( i 46,370) |
Purchases of marketable securities | |
| ( i 1,026,116) | |
| — |
Proceeds from sales of marketable securities | | | — | | | i 1,427,731 |
Proceeds from receipts in advance of disposal of a subsidiary | |
| i 2,951,785 | |
| — |
Purchase of equipment | |
| ( i 450,476) | |
| ( i 298,712) |
Purchase of intangible assets | | | ( i 114,822) | | | ( i 17,012) |
Proceeds from disposal of equipment | | | i 26,300 | | | i 143 |
Net cash used in investing activities | |
| ( i 8,786,247) | |
| ( i 4,622,533) |
| | | | | | |
Cash flows from financing activities: | |
|
| |
|
|
Proceeds from short-term loans | |
| i 20,356,259 | |
| i 9,873,845 |
Repayment of short-term loans | |
| ( i 17,998,554) | |
| ( i 6,100,000) |
Repayment of related party borrowings | |
| ( i 23,513) | |
| ( i 39,797) |
Net cash provided by financing activities | | | i 2,334,192 | |
| i 3,734,048 |
| |
| | | | |
Foreign currency translation | |
| ( i 2,337,201) | |
| i 187,057 |
Net increase in cash, cash equivalents and restricted cash | |
| i 2,734,473 | |
| i 9,478,871 |
| | | | | | |
Cash, cash equivalents and restricted cash, beginning balance | |
| i 18,322,632 | |
| i 9,129,828 |
Cash, cash equivalents and restricted cash, ending balance | | $ | i 21,057,105 | | $ | i 18,608,699 |
| | | | | | |
SUPPLEMENTARY DISCLOSURE: | | | | | | |
Interest paid | | $ | i 119,595 | | $ | i 87,953 |
Income tax paid | | $ | i 4,415,522 | | $ | i 3,588,250 |
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | | | | | | |
Lease liabilities arising from new right-of-use assets | | $ | i 1,946,320 | | $ | i 2,468,173 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amount in USD)
iNOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES
China United Insurance Service, Inc. (“China United” or “CUII”), its subsidiaries and variable-interest entity and its subsidiaries (collectively referred to herein, as the “Company”) primarily engage in insurance brokerage and insurance agency services. The Company markets and sells to customers two broad categories of insurance products: life insurance products and property and casualty insurance products, both focused on meeting the particular insurance needs of individuals. The insurance products are underwritten by some of the leading insurance companies in Taiwan and China. The Company manages its business through aggregating them into three geographic operating segments, Taiwan, the PRC, and Hong Kong. The Company’s common stock currently trades over the counter under the ticker symbol “CUII” on the OTCQB.
The corporate structure as of June 30, 2022 is as follows:
On January 31, 2022, Genius Investment Consultant Co., Ltd. (“GIC”), a subsidiary entity of CUII entered into a stock transfer agreement with AIlife International Investment Co., Ltd. (“AIlife”), pursuant to which GIC sold and transferred to AIlife i 100% of its equity ownership in Joint Insurance Broker Co., Ltd. (“JIB”), a former wholly-owned subsidiary of GIC, resulting in AIlife owning i 100% equity interest in JIB. Such exchange of equity interests between CUII’s subsidiaries are under common control of the Company and therefore, they were accounted for at the carrying amount of the equity interests transferred and there was no impact on consolidated financial statements as of and for the three and six months ended June 30, 2022, respectively.
/10
On February 25, 2022, Law Anhou Insurance Agency Co., Ltd. (“Anhou”), a contractually controlled entity of CUII entered into a Share Purchase Agreement with Jiangsu Law Insurance Brokerage Co., Ltd. (“Jiangsu Law”) and third-party buyers, pursuant to which Anhou shall sell and transfer i 100% of its equity ownership in Jiangsu Law, a wholly owned subsidiary of Anhou, for a total consideration of $ i 3,262,889 (or RMB i 21 million) to the following buyers: Xuzhou Guosheng Furui Asset Management Co., Ltd., Jiangsu Zhongbozhixin Financial Service Outsourcing Co., Ltd., and Xuzhou Xinrui Service Outsourcing Co., Ltd. Anhou has received the first installment of $ i 2,326,615 (RMB i 14.7 million) and the second installment of $ i 625,170 (RMB i 4.2 million) pursuant to the Share Purchase Agreement, which were recorded under other current liabilities as of June 30, 2022. On July 28, 2022, the Jiangsu Regulatory Bureau of the China Banking and Insurance Regulatory Commission (the “CBIRC Jiangsu Regulatory Bureau”) approved the change of shareholders of Jiangsu Law from Anhou to the aforementioned third-party buyers and accordingly, and therefore Anhou has transferred out the control over Jiangsu Law. As of June 30, 2022, the Company paid severance payment in the amount of $ i 651,833(RMB i 4.22 million). The total assets from Jiangsu Law as of June 30, 2022 accounted for i i 0.11 / % of the total assets of CUII on a consolidated basis, and revenue from Jiangsu Law for the three and six months ended June 30, 2022 were i 0.38% and i 0.55% of the total revenue of the Company on a consolidated basis, respectively, which were immaterial to the Company’s consolidated financial statements.
iNOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
iPrinciples of Consolidation
The unaudited condensed consolidated financial statements include the accounts of China United, its subsidiaries and variable interest entity and its subsidiaries as shown in the corporate structure in Note 1. All significant intercompany transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to the consolidated financial statements for prior year to the current year’s presentation. Such reclassifications have no effect on net income and the cash flow statements operating activities as previously reported.
iBasis of Presentation
The unaudited condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2021, which were included in the Company’s 2021 Annual Report on Form 10-K (“2021 Form 10-K”). The accompanying consolidated balance sheet as of December 31, 2021, has been derived from the Company’s audited consolidated financial statements as of that date.
iUse of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and footnotes thereto. Actual results may differ from those estimates and assumptions.
iVariable Interest Entities
Due to the legal restrictions on foreign ownership and investment in insurance agency and brokerage businesses in China, especially those on qualifications as well as capital requirement of the investors, China United, through its subsidiary, Zhengzhou Zhonglian Hengfu Business Consulting Co., Limited (“WFOE”), entered into Exclusive Business Cooperation Agreement (the “EBCA”), Power of Attorney, Option Agreement, and Share Pledge Agreement (collectively, the First VIE Agreements) on January 17, 2011 with Anhou and Anhou original shareholders so as to operate and conduct the insurance agency and brokerage business in the PRC.
/11
Pursuant to the EBCA, (a) WFOE has the right to provide Anhou with complete technical support, business support and related consulting services during the term of the EBCA; (b) Anhou agrees to accept all the consultations and services provided by WFOE. Anhou further agrees that unless with WFOE’s prior written consent, during the term of the EBCA, Anhou shall not directly or indirectly accept the same or any similar consultations and/or services provided by any third party and shall not establish similar cooperation relationship with any third party regarding the matters contemplated by the EBCA; (c) within 90 days after the end of each fiscal year Anhou shall pay an amount to WFOE equal to the shortfall, if any, of the aggregate net income of Anhou for such fiscal; (d) WFOE retains all exclusive and proprietary rights and interests in all rights, ownership, interests and intellectual properties arising out of or created during the performance of the EBCA; and (e) the shareholders of Anhou have pledged all of their equity interests in Anhou to WFOE to guarantee Anhou’s performance of its obligations under the EBCA. The term of the EBCA is 10 years and may be extended and determined by WFOE prior to the expiration thereof, and Anhou shall accept such extended term unconditionally.
On March 23, 2022, Anhou and WFOE entered into an amendment to the EBCA, pursuant to which the EBCA shall be automatic renewed for successive terms unless WFOE gives a i 30-day notice to terminate such agreement, with each term being 10 years.
To extend the business within the PRC, Anhou intended to increase its registered capital to RMB i 50 million (approximately $ i 8 million) to meet the requirement of the China Insurance Regulatory Commission (the “CIRC”) so that it can set up new branches in any province beyond its current operations in China. China United increased the investment in Anhou through various loan agreements with the shareholders of Anhou. The aggregate funding provided by WFOE was RMB i 40 million. Due to the capital increase, a series of variable interest agreements (the “Second VIE Agreements”), which include Power of Attorneys, Exclusive Option Agreements, Share Pledge Agreements, were signed on October 24, 2013 and entered in the same form as the First VIE Agreements, other than the change of shareholder names and their respective shareholdings. The First VIE Agreements were terminated by and among WFOE, Anhou and Anhou original shareholders on the same date. The EBCA executed by and between WFOE and Anhou on January 17, 2011 remains in full effect.
As a result of the Second VIE Agreements, WFOE is considered the primary beneficiary of Anhou and has effective control over Anhou. Accordingly, the results of operations, assets and liabilities of Anhou and its subsidiaries (collectively, the “Consolidated Affiliated Entities” or the “CAE”) are consolidated from the earliest period presented. The Company reviews the VIE’s status on an annual basis and determine if any events have occurred that could cause its primary beneficiary status to change, which include (a) the legal entity’s governing documents or contractual arrangements are changed in a manner that changes the characteristics or adequacy of the legal entity’s equity investment at risk; (b) the equity investment or some part thereof is returned to the equity investors, and other interests become exposed to expected losses of the legal entity; (c) the legal entity undertakes additional activities or acquires additional assets, beyond those anticipated at the later of the inception of the entity or the latest reconsideration event, that increase the entity’s expected losses; and (d) the legal entity receives an additional equity investment that is at risk, or the legal entity curtails or modifies its activities in a way that decreases its expected losses. For the six months ended June 30, 2022 and 2021, no event taken place that would change the Company’s primary beneficiary status.
iMarketable Securities
The Company invests part of its excessive cash in equity securities and money market funds. Marketable securities represent trading securities bought and held primarily for sale in the near-term to generate income on short-term price differences and are stated at fair value. Realized and unrealized gains and losses are recorded in other income (expense).
iAccounts Receivable and Allowance for Doubtful Accounts
Accounts receivable includes commission receivables stated at net realizable values. The Company reviews its accounts receivable regularly to determine if a bad debt allowance is necessary at each quarter-end. Management reviews the composition of accounts receivable and analyzes the age of receivables outstanding, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the necessity of making such allowance. No allowance was deemed necessary as of June 30, 2022 and December 31, 2021.
12
Revenue Recognition
The Company’s revenue is derived from insurance agency and brokerage services with respect to life insurance and property and casualty insurance products. The Company, through its subsidiaries and variable interest entities, sells insurance products provided by insurance companies to individuals, and is compensated in the form of commissions from the respective insurance companies, according to the terms of each service agreement made by and between the Company and the insurance companies. The core revenue recognition principle under ASC 606, the Company considers the contracts with insurance companies contain one performance obligation and consideration should be recorded when performance obligation is satisfied at point in time. The sale of an insurance product by the Company is considered complete when initial insurance premium is paid by an individual and the insurance policy is approved by the respective insurance company. When a policy is effective, the insurance company is obligated to pay the agreed-upon commission to the Company under the terms of its service agreement with the Company and such commission is recognized as revenue.
For the first year commission (FYC), the Company recognizes the revenue when the individuals’ policies are effective. The Company makes the estimation amount to be entitled for annual performance and operating bonus which is based on the FYC. The Company makes an estimation on performance and operation bonus which are based on the accumulated FYC on quarterly basis, and make reconciliation between actual and estimation amount on annual basis. The estimated revenue for the three and six months ended June 30, 2022 were approximately $ i 2.9 million and $ i 5.7 million, and for the three and six months ended June 30, 2021, were approximately $ i 3.5 million and $ i 5.5 million, respectively.
Others includes the contingent commissions for subsequent years, the bonus based on persistency ratio bonus, and service allowances, are considered highly susceptible to factors outside the company’s influence and depend on the actions of third parties (i.e., the subsequent premiums paid by individual policyholders), and the uncertainty can be extended for many years. Considering the high uncertainties, the contingent commissions for subsequent years, the bonus based on persistency ratio, and service allowances will be recognized as revenue based on the actual amount received from the insurance companies after the uncertain event is resolved.
For property and casualty insurance products, the Company recognizes the revenue when the individuals’ policies are effective. The revenue from property and casualty insurance products was i 7.5% and i 7.3% of total revenue for the three and six months ended June 30, 2022, and was i 7.7% and i 6.7% of total revenue for the three and six months ended June 30, 2021, respectively.
The Company is obligated to pay commissions to its sales professionals when an insurance policy becomes effective. The Company recognizes commission revenue granted from insurance companies on a gross basis, and the commissions paid to its sales professionals are recognized as cost of revenue.
The Company enters into service agreements with insurance companies, which may give rise to contract assets and contract liabilities. When the timing of revenue recognition differs from the timing of payments made by insurance companies, the Company recognizes either contract assets (its performance precedes the billing date) or contract liabilities (customer payment is received in advance of performance).
/ iForeign Currency Transactions
China United’s financial statements are presented in U.S. dollars ($), which is the China United’s reporting and functional currency. The functional currencies of the China United’s subsidiaries are New Taiwan dollar (“NTD”), China yuan (“RMB”) and Hong Kong dollar (“HKD”). Each subsidiary maintains its financial records in its own functional currency. Transactions denominated in foreign currencies are measured at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured at the exchange rates prevailing at the balance sheet date. Non-monetary items that are measured in terms of historical cost in foreign currency are remeasured using the exchange rates at the dates of the initial transactions. Exchange gains and losses are included in the consolidated statements of operations and other comprehensive income (loss).
13
The Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from NTD, RMB and HKD into U.S. dollars are recorded in stockholders’ equity as part of accumulated other comprehensive income. The exchange rates used for unaudited condensed consolidated financial statements are as follows:
i
| | | | | | |
| | Average Rate for the six months ended | ||||
| | |||||
|
| 2022 |
| 2021 | ||
| | (unaudited) | | (unaudited) | ||
Taiwan dollar (NTD) | | NTD | i 28.70306 |
| NTD | i 28.01126 |
China yuan (RMB) | | RMB | i 6.47625 |
| RMB | i 6.46967 |
Hong Kong dollar (HKD) | | HKD | i 7.82541 |
| HKD | i 7.76102 |
United States dollar ($) | | $ | i 1.00000 |
| $ | i 1.00000 |
| | | | | | |
| | Exchange Rate at | ||||
|
|
| | |||
| | (unaudited) | | |||
Taiwan dollar (NTD) | | NTD | i 29.72703 |
| NTD | i 27.68785 |
China yuan (RMB) | | RMB | i 6.69637 |
| RMB | i 6.35877 |
Hong Kong dollar (HKD) | | HKD | i 7.84644 |
| HKD | i 7.79713 |
United States dollar ($) | | $ | i 1.00000 | | $ | i 1.00000 |
/ iEarnings Per Share
Basic earnings per common share (“EPS”) is computed by dividing net income attributable to the common shareholders of the Company by the weighted-average number of common shares outstanding. Diluted EPS is computed in the same manner as basic EPS, except the number of shares includes additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued.
As the holders of preferred stock of the Company are entitled to share equally with the holders of common stock, on a per share basis, in such dividends and other distributions of cash, property or shares of stock of the Company as may be declared by the board of directors, the preferred stock is treated as a participating security. When calculating the basic earnings per common share, the two-class method is used to allocate earnings to common stock and participating security as required by FASB ASC Topic 260, “Earnings Per Share.” As of June 30, 2022 and 2021, the Company does not have any potentially dilutive instrument.
iThe following is a reconciliation of the income and share data used in the basic and diluted EPS computations for the three and six months ended June 30, 2022 and 2021, respectively, under the two-class method.
| | | | | | | | | | | | |
|
| Three Months Ended June 30, | ||||||||||
| | 2022 | | 2021 | ||||||||
Numerator: |
| Common stock |
| Preferred stock |
| Common stock |
| Preferred stock | ||||
Allocation of net income attributable to the Company | | $ | i 1,566,487 | | $ | i 51,723 | | $ | i 1,151,737 | | $ | i 39,146 |
| | | | | | | | | | | | |
Denominator: | |
|
| |
|
| |
|
| |
|
|
Weighted average shares of the Company’s common/preferred stock outstanding - basic | |
| i 30,286,199 | |
| i 1,000,000 | |
| i 29,421,736 | |
| i 1,000,000 |
Basic and diluted earnings per share | | $ | i 0.052 | | $ | i 0.052 | | $ | i 0.039 | | $ | i 0.039 |
| | | | | | | | | | | | |
| | Six Months Ended June 30, | ||||||||||
| | 2022 | | 2021 | ||||||||
Numerator: |
| Common stock |
| Preferred stock |
| Common stock |
| Preferred stock | ||||
Allocation of net income attributable to the Company | | $ | i 4,417,237 | | $ | i 145,850 | | $ | i 3,482,891 | | $ | i 118,378 |
| | | | | | | | | | | | |
Denominator: | |
|
| |
|
| |
|
| |
|
|
Weighted average shares of the Company’s common/preferred stock outstanding - basic | |
| i 30,286,199 | |
| i 1,000,000 | |
| i 29,421,736 | |
| i 1,000,000 |
Basic and diluted earnings per share | | $ | i 0.146 | | $ | i 0.146 | | $ | i 0.118 | | $ | i 0.118 |
/14
The participating rights (liquidation and dividend rights) of the holders of the Company’s common stock and preferred stock are identical, except with respect to voting right. As a result, and in accordance with ASC 260, the undistributed earnings for each year are allocated based on the contractual participation rights of the common stock and preferred stock as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis.
iFair Value of Financial Instruments
Fair value accounting establishes a framework for measuring fair value and expands disclosure about fair value measurements. Fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
- | Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
-Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments.
-Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.
In determining the appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are measured and reported on a fair value basis. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.
iThe following table summarize financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021:
| | | | | | | | | | | | |
| | |||||||||||
| | Fair Value | | Carrying | ||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Value | ||||
Assets | | | | | | | | | ||||
Marketable securities : | | | | | | | | | | | | |
Stock and mutual funds | | $ | i 831,395 | | $ | — | | $ | — | | $ | i 831,395 |
Long-term investments: | |
| | |
| | |
| | |
| |
REITs | |
| i 1,147,865 | |
| — | |
| — | |
| i 1,147,865 |
Total assets measured at fair value | | $ | i 1,979,260 | | $ | — | | $ | — | | $ | i 1,979,260 |
| | | | | | | | | | | | |
| | |||||||||||
| | Fair Value | | Carrying | ||||||||
|
| Level 1 |
| Level 2 |
| Level 3 |
| Value | ||||
Assets | | | | | | | | | ||||
Long-term investments: | |
| | |
| | |
| | |
| |
REITs | | $ | i 1,261,482 | | $ | — | | $ | — | | $ | i 1,261,482 |
Total assets measured at fair value | | $ | i 1,261,482 | | $ | — | | $ | — | | $ | i 1,261,482 |
The carrying amounts of current financial assets and liabilities in the consolidated balance sheets for cash equivalents, time deposits, and restricted cash equivalents approximate fair value due to the short-term duration of those instruments, which are considered level 2 fair value measurement.
Marketable securities and long-term investments in REITs – The fair values of mutual funds and REITs were valued based on quoted market prices in active markets.
/15
Concentration of Risk
The Company maintains cash with banks in the USA, People’s Republic of China (“PRC”), Hong Kong, and Taiwan. Should any bank holding the Company’s cash become insolvent, or if the Company is otherwise unable to withdraw funds, the Company would lose all or part of its cash deposit with that bank; however, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. In Taiwan, a depositor has up to NTD i 3,000,000 insured by Central Deposit Insurance Corporation (“CDIC”). In China, a depositor has up to RMB i 500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”). In Hong Kong, a depositor has up to HKD i 500,000 insured by Hong Kong Deposit Protection Board (“DPB”). In the United States, the standard insurance amount is $ i 250,000 per depositor in a bank insured by the Federal Deposit Insurance Corporation (“FDIC”).
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, time deposits, restricted cash, register capital deposit, contract assets and accounts receivable. As of June 30, 2022 and December 31, 2021, approximately $ i 2,580,000 and $ i 2,712,000 of the Company’s cash and cash equivalents, time deposits, and registered capital deposits held by financial institutions, was insured, and the remaining balance of approximately $ i 92,003,000 and $ i 83,446,000, was not insured. With respect to accounts receivable, the Company generally does not require collateral and does not have an allowance for doubtful accounts.
iFor the three months ended June 30, 2022 and 2021, the Company’s revenues from sale of insurance policies underwritten by these companies were:
| | | | | | | | | | | |
| | Three Months Ended June 30, | | ||||||||
| | 2022 | | 2021 | | ||||||
| | (unaudited) | | (unaudited) | | ||||||
| | | | | % of Total | | | | | % of Total |
|
|
| Amount |
| Revenue |
| Amount |
| Revenue |
| ||
TransGlobe Life Insurance Inc. | | $ | i 9,467,710 |
| i 30 | % | $ | i 9,185,048 | | i 28 | % |
Farglory Life Insurance Co., Ltd. | |
| i 4,410,388 |
| i 14 | % |
| i 3,961,983 | | i 12 | % |
Taiwan Life Insurance Co., Ltd. | |
| i 3,673,477 |
| i 12 | % |
| i 5,923,846 | | i 18 | % |
For the six months ended June 30, 2022 and 2021, the Company’s revenues from sale of insurance policies underwritten by these companies were:
| | | | | | | | | | | |
| | Six Months Ended June 30, | | ||||||||
| | 2022 | | 2021 |
| ||||||
| | (unaudited) | | (unaudited) | | ||||||
| | | | | % of Total | | | | | % of Total |
|
|
| Amount |
| Revenue |
| Amount |
| Revenue |
| ||
TransGlobe Life Insurance Inc. | | $ | i 17,148,135 |
| i 27 | % | $ | i 15,785,677 | | i 25 | % |
Taiwan Life Insurance Co., Ltd. | | | i 8,080,061 |
| i 13 | % | | i 13,155,304 | | i 21 | % |
Farglory Life Insurance Co., Ltd. | |
| i 7,841,696 |
| i 13 | % |
| i 8,481,824 | | i 13 | % |
/ iAs of June 30, 2022 and December 31, 2021, the Company’s accounts receivable and contract assets from these companies were:
| | | | | | | | | | | |
| | | | | | |
| ||||
| | (unaudited) | |
| |||||||
| | | | | % of Total | | | | | % of Total |
|
| | | | | Accounts | | | | | Accounts |
|
| | | | | Receivable | | | | | Receivable | |
|
| Amount |
| and contract assets |
| Amount |
| and contract assets | | ||
TransGlobe Life Insurance Inc. | | $ | i 5,975,007 | | i 33 | % | $ | i 8,569,590 | | i 32 | % |
Farglory Life Insurance Co., Ltd. | | | i 2,147,470 | | i 12 | % | | i 2,729,673 | | i 10 | % |
Taiwan Life Insurance Co., Ltd | | | i 1,863,694 | | i 10 | % | | i 4,483,343 | | i 17 | % |
The Company’s operations are in Taiwan, the PRC, and Hong Kong. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic, foreign currency exchange and legal environments in the PRC, Hong Kong and Taiwan, and by the state of each economy. The Company’s results of operations may be adversely affected by changes in the political and social conditions in the PRC, Hong Kong and Taiwan, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
/16
Income Taxes
The Company records income tax expense using the asset-and-liability method of accounting for deferred income taxes. Under this method, deferred taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that the deferred tax assets will not be realized.
When tax returns are filed, it is likely some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than i 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of operations and other comprehensive income (loss).
/ iNew Accounting Pronouncements and Other Guidance
New accounting pronouncements not yet adopted
Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, (FASB ASC Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, rather than the “incurred loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments.
In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company believes the adoption of ASU No. 2016-13 will not have a material impact on the Company’s consolidated financial statements.
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020–04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance was effective for all entities upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. The Company is currently evaluating the effects of the guidance on the Company’s consolidated financial statements and related disclosures.
The management does not believe that other than disclosed above, accounting pronouncements the recently issued but not yet adopted will have a material impact on its financial position, results of operations or cash flows.
17
NOTE 3 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH
iCash, cash equivalents and restricted cash consisted of the following as of June 30, 2022 and December 31, 2021:
| | | | | | | |
| | |
| | | ||
|
| (unaudited) |
| | |||
Cash and cash equivalents: | | | | | | | |
Cash on hand and in banks | | $ | i 21,046,411 | | $ | i 18,234,350 | |
Restricted cash – noncurrent | |
| i 10,694 | |
| i 88,282 | |
Total cash, cash equivalents and restricted cash shown in the statements of cash flows | | $ | i 21,057,105 | | $ | i 18,322,632 | |
Noncurrent restricted cash includes a mandatory deposit in the bank in conformity with Provisions of the Supervision and Administration of Specialized Insurance Agencies in PRC, which is not allowed to be withdrawn without the permission of such Agencies.
/
iNOTE 4 – TIME DEPOSITS
i
| | | | | | | |
| | | | | | ||
|
| (unaudited) |
| | |||
| | | | | | | |
Total time deposits | | $ | i 70,126,140 | | $ | i 71,161,391 | |
Less: Time deposits – with original maturities less than three months | |
| — | |
| ( i 6,862,215) | |
Time deposits – original maturities over three months but less than one year | | $ | i 70,126,140 | | $ | i 64,299,176 | |
Time Deposits Pledged as Collateral
The Company had a total of $ i 31,551,876 (NTD i 937.9 million) and $ i 23,811,616 (NTD i 659.3 million) restricted time deposits, respectively, as of June 30, 2022 and December 31, 2021. As of June 30, 2022 and December 31, 2021, time deposits of $ i 33,639 (NTD i 1 million) and $ i 36,117 (NTD i 1 million) were pledged as collateral for the Company’s credit card, respectively. In addition, the Company had time deposits of $ i 31,518,237 and $ i 23,775,499 pledged as collateral for short-term loans, respectively, as of June 30, 2022 and December 31, 2021. See Note 6.
/
iNOTE 5 – LONG-TERM INVESTMENTS
iAs of June 30, 2022 and December 31, 2021, the Company’s long-term investments consisted of the following:
| | | | | | |
| | | | | ||
| | (unaudited) | | |||
Equity investments under cost method | | $ | i 1,337,728 | | $ | i 1,435,330 |
REITs |
| | i 1,147,865 |
| | i 1,261,482 |
Total long-term investments | | $ | i 2,485,593 | | $ | i 2,696,812 |
iEquity Investments under cost method using the measurement alternative
| | | | | | | | | | |
|
|
| | | | | ||||
| | (unaudited) | | |||||||
| | Investment | | | | | Investment | | | |
Investee | | Ownership | | | Amount | | Ownership | | | Amount |
i i Genius Insurance Broker Co., Ltd (“GIB”) / | | i 11.73 | % | $ | i 1,292,928 | | i 11.73 | % | $ | i 1,388,151 |
i i Hainan Haoguan Yucheng Technology Service LLP (“HAINAN”) / |
| i 9.99 | % | | i 44,800 |
| i 9.99 | % | | i 47,179 |
On February 13, 2015, the Company and AHFL, a wholly owned subsidiary of the Company, entered into an acquisition agreement with Mr. Chwan Hau Li, the selling shareholder of GHFL. Subsequent to the acquisition, GHFL became a wholly-owned subsidiary of the Company which in turn holds approximately i 15.64% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius Broker”). Accordingly, the acquisition was accounted for as an asset acquisition of Genius Broker, which is an equity investment under cost method using the measurement alternative acquired by the Company.
/18
The total paid-in capital with GIB changed from NTD i 45 million to NTD i 60 million due to capital increase taken place on August 14, 2020. GIC didn’t subscribe the new shares during the capital increase. As a result, the equity interest of GIB owned by GIC reduced from i 15.64% to i 11.73%.
A new investee in the investment ownership was due to the Company’s investment in HAINAN in 2021. HAINAN operates projects for insurance platforms, which contain insurance product centralized procurement, share service platform of sub-hierarchy distribution channel, and IoT business requirement. The Company invested HAINAN for RMB i 300,000, or i 9.99%, to engage in the qualification of supplier membership and distributor membership.
The change in carrying value of equity investment resulted from the fluctuation of exchange rates.
REITs
REITs are valued based on quoted market prices in the active market of Taiwan. The fair value of REITs as of June 30, 2022 and December 31, 2021 were $ i 1,147,865 and $ i 1,261,482, respectively.
Unrealized losses included in earnings for assets held at the end of the reporting periods were $ i 11,610 and $ i 61,635 for the three months ended June 30, 2022 and 2021, and were $ i 28,051 and $ i 82,124 for the six months ended June 30, 2022 and 2021, respectively.
For the three and six months ended June 30, 2022 and 2021, no other-than temporary impairment were recorded related to the long-term investments.
iNOTE 6 – SHORT-TERM LOANS
iThe Company’s short-term loans consisted of the following as of June 30, 2022 and December 31, 2021:
| | | | | | | | | | | | | | |
| | | | | | | | | | |||||
| | | | (unaudited) | | |||||||||
|
| |
| Debt |
| Collateral |
| Debt |
| Collateral | ||||
Line of Credit | | Collateral | | balance | | value | | balance | | value | ||||
$ i 8.4 million (NTD i 250 million) revolving line of credit with Cathay United Bank Company Limited (“CUB”); the loan bears interest the 1-month TAIBOR rate plus a margin of i 0.46% and matures on April 11, 2023. |
| Time deposits | | $ | i 5,247,750 | | $ | i 5,264,570 | | $ | i 9,011,172 | | $ | i 9,047,289 |
$ i 4.0 million revolving line of credit with O-Bank; the loan bears interest at the TAIFX3 rate plus a margin of i 0.5% and matures on December 2, 2022. |
| Time deposits | |
| i 4,000,000 | |
| i 4,642,240 | |
| i 4,000,000 | |
| i 4,984,135 |
$ i 6.0 million revolving line of credit with Taishin International Bank (“TSIB”); the loan bears interest at the TSIB’s cost of funds plus a margin of i 0.7% and matures on May 31, 2023. |
| Time deposits | |
| i 200,000 | |
| i 3,065,801 | | | i 2,200,000 | |
| i 3,065,801 |
$ i 2.5
million revolving line of credit with Far Eastern International Bank |
| Time deposits | |
| i 2,500,000 | |
| i 2,758,433 | |
| i 1,850,000 | |
| i 2,961,588 |
$ i 3.4 million (NTD i 100 million) revolving line of credit with Far Eastern International Bank (“FEIB”); the loan bears interest at the FEIB’s adjustable rates for loans plus a margin of i 0.6% and matures on January 13, 2023. | | Time deposits | | | i 3,363,942 | | | i 3,363,942 | | | — | | | — |
$ i 1.5 million revolving line of credit with CTBC Bank Co., Ltd. (“CTBC”); the loan bears interest at the CTBC’s cost of funds plus a negotiated margin on individual case basis and matured on February 28, 2023. | | Time deposits | | | i 1,500,000 | | | i 1,681,971 | | | — | | | — |
$ i 3.1 million revolving line of credit with KGI; the loan bears interest at the TAIFX Fixing rate plus a margin of i 0.9% and matures on May 18, 2022. |
| Time deposits | |
| — | |
| i 2,293,348 | |
| i 1,540,000 | |
| i 2,481,926 |
$ i 6.7 million (NTD i 200 million) revolving line of credit with Taishin International Bank (“TSIB”); the loan bears interest at the TSIB’s cost of funds plus a margin of i 0.625% and matures on May 31, 2023. |
| Time deposits | | | — | |
| i 3,582,599 | |
| i 234,760 | |
| i 234,760 |
$ i 3.0 million revolving line of credit with E. Sun Bank (“E. Sun”); the loan bears interest at the TAIFX3 rate plus a margin of i 0.4% and matures on November 30, 2022. | | Time deposits | | | i 2,490,000 | | | i 2,611,492 | | | — | | | i 1,000,000 |
$ i 6.7 million (NTD i 200 million) revolving line of credit with E. Sun Bank (“E. Sun”); the loan bears interest at the E. Sun’s adjustable rates for loans plus a margin of i 0.1% and matures on October 15, 2022. | | Time deposits | | | i 1,214,383 | | | i 2,253,841 | | | — | | | — |
| | | | $ | i 20,516,075 | | $ | i 31,518,237 | | $ | i 18,835,932 | | $ | i 23,775,499 |
/19
Borrowings under the revolving credit agreements are generally due 90 days or less. Total interest expenses for short-term loans incurred were $ i 69,804 and $ i 46,636 for the three months ended June 30, 2022 and 2021, respectively, and were $ i 122,139 and $ i 89,106 for the six months ended June 30, 2022 and 2021, respectively.
iNOTE 7 – COMMISSIONS PAYABLE TO SALES PROFESSIONALS
iCommissions payable to sales professionals consisted of the following as of June 30, 2022 and December 31, 2021:
| | | | | | | |
| | | | | |||
|
| (unaudited) |
| | |||
Taiwan | | $ | i 11,080,741 | | $ | i 13,793,343 | |
PRC | |
| i 210,363 | |
| i 210,198 | |
Total commissions payable to sales professionals | | $ | i 11,291,104 | | $ | i 14,003,541 | |
Commissions payable to sales professionals are usually settled within twelve months.
/
iNOTE 8 – OTHER CURRENT LIABILITIES
iOther current liabilities were as follows, as of June 30, 2022 and December 31, 2021:
| | | | | | |
| | | | | ||
|
| (unaudited) |
| |||
Accrued bonus | | $ | i 4,876,697 | | $ | i 6,645,496 |
Payroll payable and other benefits | | | i 1,889,801 | | | i 2,188,074 |
Accrued business tax and tax withholdings | | | i 1,658,588 | | | i 1,903,039 |
Proceeds from receipts in advance of disposal of a subsidiary | | | i 2,822,424 | | | — |
Execution fees payable – AIA(Note 10) | | | — | | | i 1,191,858 |
Other accrued liabilities | | | i 1,828,267 | | | i 2,069,136 |
Total other current liabilities | | $ | i 13,075,777 | | $ | i 13,997,603 |
Accrued Bonus
The Company’s foreign subsidiaries have various bonus plans, which provide cash awards to employees based upon their performance, and had accrued bonus of $ i 2,555,958 and $ i 4,059,901, respectively, related to cash awards to employees as of June 30, 2022 and December 31, 2021.
The Company has other compensation plans solely provided by Law Broker to its officers. The compensation plans eligible to Law Broker’s officers include a surplus bonus based on a percentage of income after tax and other performance bonuses such as retention and non-competition. For the three months ended June 30, 2022 and 2021, the bonus expenses to Law Broker’s officers under the compensation plans were $ i 27,690 and $ i 153,120, respectively, and for the six months ended June 30, 2022 and 2021, the bonus expenses to Law Broker’s officers under the compensation plans were $ i 100,595 and $ i 245,016, respectively.
As of June 30, 2022 and December 31, 2021, the Company had accrued bonus of $ i 2,320,739 and $ i 2,585,595 payable within next 12 months, respectively, related to the compensation plans for Law Broker’s officers. See Note 15 for additional information of agreements with Law Broker’s officers.
/
iNOTE 9 – OTHER LIABILITIES
iThe Company’s other liabilities consisted of the following as of June 30, 2022 and December 31, 2021:
| | | | | | | |
| | | | | | ||
|
| (unaudited) |
|
| |||
Due to previous shareholders of AHFL | | $ | i 504,591 | | $ | i 541,754 | |
Total other liabilities | | $ | i 504,591 | | $ | i 541,754 | |
/20
Due to Previous Shareholders of AHFL
Due to previous shareholders of AHFL is the entire remaining balance payable of the acquisition cost. In March 2021, the Company entered a seventh amendment with the selling shareholders in negotiation with the previous shareholders of AHFL to extend the repayment date to March 31, 2024. As of June 30, 2022 and December 31, 2021, the amount due to previous shareholders of AHFL were $ i 504,591 and $ i 541,754, respectively.
iNOTE 10 – CONTRACTS WITH CUSTOMERS
iInformation about accounts receivable, contract assets and contract liabilities from contracts with customers is as follows:
| | | | | | |
| | | | | ||
|
| (unaudited) |
| |||
Accounts receivable | | $ | i 15,139,136 | | $ | i 26,761,678 |
Contract assets | | | i 2,921,951 | | | — |
Contract liabilities – current | | | i 117,712 | | | — |
Contract liabilities – noncurrent | | | i 1,441,690 | | | — |
/Contract assets are the Company’s conditional rights to consideration for completed performance obligation and are in relation to the performance bonus to be rewarded based on the annual performance. The Company recognizes the contingent commission as a contract asset when the performance obligation is fulfilled, and the Company has not had the unconditional rights to the payment. As of June 30, 2022 and December 31, 2021, the Company had $ i 2,921,951 and i nil of contract assets, respectively.
Contract with AIATW
On June 10, 2013, AHFL entered into a Strategic Alliance Agreement (the “Alliance Agreement”) with AIA International Limited Taiwan Branch (“AIATW”), the purpose of which is to promote life insurance products provided by AIATW within Taiwan by insurance agencies or brokerage companies affiliated with AHFL or China United. Pursuant to the terms of the Alliance Agreement, AIATW paid AHFL an execution fee, which was recorded as revenue upon fulfilling certain criteria over the original term of the Alliance Agreement from June 1, 2013 to May 31, 2018. From 2014 to 2017, AHFL has entered into three amendments to the Alliance Agreement with AIATW to further revise certain terms and conditions in the Alliance Agreement, including the extension of the expiration date from May 31, 2018 to December 31, 2021. Pursuant to the Third Amendment to the Alliance Agreement (the “Amendment 3”), both AHFL and AIATW agreed to adjust certain terms and conditions set forth in this amendment, some of which included (i) except the first contract year (April 15th, 2013 to September 30th, 2014), the sales target of the alliance between the parties shall be changed to (a) value of new business (“VONB”) and (b) the 13-month persistency ratio; and (ii) AIATW will calculate and recognize the VONB and 13-month persistency ratio each contract year and inform the Company the result; and (iii) the Company agrees to return the basic business promotion fees to AIATW within thirty (30) days of receipt of the notice sent by AIATW if the Company fails to meet the targets set forth in the Amendment 3, AIATW reserves the right to offset such amount against the amount payable by it to the Company; and (iv) upon the termination of the Alliance Agreement and its amendments pursuant to the Section 8.2 of the Alliance Agreement, both parties agreed to calculate the amount to be returned or repaid, as applicable, based on the past and current contract years. The Company shall return the basic business execution fees at NTD i 50 million for the first contract year, NTD i 35 million for the second contract year, and NTD i 33 million for each contract year thereafter within one month after the termination. Accordingly, for the last contract year of 2021, no revenue was recognized because the Company failed to meet the targets set forth in the Amendment 3 and therefore, the Company shall refund the basic business execution fees of NTD i 33 million based on the calculation of VONB and 13-month persistency for the same contract period. On May 6, 2022, AIATW issued a formal letter to the Company and agreed to reduce the refund amount of $ i 1,159,039 (NTD i 33.0 million) to $ i 807,127 (NTD i 23.1 million), for which the Company has paid to AIATW on May 13, 2022. As of June 30, 2022 and December 31, 2021, the basic business execution fees of i nil and $ i 1,191,858 were payable and recorded under other current liabilities, respectively.
/21
On March 15, 2022, AHFL entered into the Fourth Amendment to the Alliance Agreement (the “Amendment 4”), which, among other things, extended the expiration date of the Alliance Agreement to December 31, 2031. Pursuant to Amendment 4, the sales targets for the remaining contract term under the Alliance Agreement shall be changed by reference to (i) the amount of VONB and (ii) the 13-month persistency ratio as set forth therein, provided that to the extent any underlying insurance contract is revoked, invalidated or terminated and premiums are refunded to such policyholder, the amount of the related VONB shall be correspondingly reduced. Amendment 4 provides that AIATW shall pay the strategic alliance business promotion fee of NTD i 50 million to AHFL; however, AHFL shall be required to return certain portions of or all of the business promotion fees within thirty (30) days of receipt of notice provided by AIATW if AFHL fails to meet certain goals set in Table 2 and Table 3 of Amendment 4. The primary factor under formula one focuses on the annual and/or accumulated achievement rate(s), while the primary factor under formula two focuses on the 13-month persistency ratio(s), among others.
iThe following table presents the amounts recognized as revenue and refund for each contract year:
| | | | | | | | | | | | | | | | | |
| | | | | | Revenue | | Revenue VAT | | Refund | | Refund VAT | |||||
Year |
| Period |
| Execution Fees |
| Amount |
| Amount |
| Amount |
| Amount | |||||
First | | i 01/01/2022 - i 12/31/2022 | | NTD | i 5,000,000 | | NTD | i 2,525,341 | (1) | NTD | i 126,268 | | NTD | i 2,236,563 | (1) | NTD | i 111,828 |
Second | | i 01/01/2023 - i 12/31/2023 | | NTD | i 5,000,000 | | NTD | — | | NTD | — | | NTD | — | | NTD | — |
Third | | i 01/01/2024 - i 12/31/2024 | | NTD | i 5,000,000 | | NTD | — | | NTD | — | | NTD | — | | NTD | — |
Fourth | | i 01/01/2025 - i 12/31/2025 | | NTD | i 5,000,000 | | NTD | — | | NTD | — | | NTD | — | | NTD | — |
Fifth | | i 01/01/2026 - i 12/31/2026 | | NTD | i 5,000,000 | | NTD | — | | NTD | — | | NTD | — | | NTD | — |
Sixth | | i 01/01/2027 - i 12/31/2027 | | NTD | i 5,000,000 | | NTD | — | | NTD | — | | NTD | — | | NTD | — |
Seventh | | i 01/01/2028 - i 12/31/2028 | | NTD | i 5,000,000 | | NTD | — | | NTD | — | | NTD | — | | NTD | — |
Eighth | | i 01/01/2029 - i 12/31/2029 | | NTD | i 5,000,000 | | NTD | — | | NTD | — | | NTD | — | | NTD | — |
Ninth | | i 01/01/2030 - i 12/31/2030 | | NTD | i 5,000,000 | | NTD | — | | NTD | — | | NTD | — | | NTD | — |
Tenth | | i 01/01/2031 - i 12/31/2031 | | NTD | i 5,000,000 | | NTD | — | | NTD | — | | NTD | — | | NTD | — |
TOTAL | |
| | NTD | i 50,000,000 | | NTD | i 2,525,341 | | NTD | i 126,268 | | NTD | i 2,236,563 | | NTD | i 111,828 |
| 1) | The Company estimated VONB and 13-month persistency ratio for the year ending December 31, 2022 and calculated the revenue amount to be $ i 87,982 (NTD i 2,525,341) for the year. The amount will be reassessed every quarter until receiving AIATW’s notice. |
The Company recognized the revenue related to AIATW of $ i 21,856 (NTD i 643,244) and i nil, net of VAT, for the three months ended June 30, 2022 and 2021, respectively, and $ i 43,991 (NTD i 1,262,672) and i nil, net of VAT, for the six months ended June 30, 2022 and 2021, respectively.
As of June 30, 2022 and December 31, 2021, the Company had $ i 1,441,690 and i nil of non-current portion of contract liabilities, respectively, and current contract liabilities of $ i 117,712 and i nil, respectively, related to the Alliance Agreement.
iNOTE 11 –LEASE
The Company has operating leases for its offices with lease terms ranging from one to five years. The Company recorded its operating lease cost of $ i 1,037,946 and $ i 2,122,818 for the three and six months ended June 30, 2022, and $ i 1,056,094 and $ i 2,076,967 for the three and six months ended June 30, 2021, respectively.
Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. As of June 30, 2022 and December 31, 2021, operating lease right-of-use assets and lease liabilities were as follows:
i
| | | | | | |
|
|
| | | ||
|
| (unaudited) |
| |||
Right-of-use assets under operating leases | | $ | i 6,542,188 | | $ | i 6,449,182 |
Operating lease liabilities – current | |
| i 3,146,909 | |
| i 3,059,329 |
Operating lease liabilities – noncurrent | |
| i 3,321,857 | |
| i 3,298,089 |
/22
Lease term and discount rate
| | | | | | | |
| |
| | | | ||
|
| (unaudited) |
| | |||
Weighted average remaining lease term | | | |
| | |
|
Operating lease | |
| i 2.26 | years | | i 2.31 | years |
Weighted average discount rate | |
| |
| | |
|
Operating lease | |
| i 3.22 | % | | i 2.80 | % |
/ iSupplemental cash flow information related to leases
| | | | | | |
|
| Six Months Ended June 30, | ||||
| | 2022(unaudited) | | 2021(unaudited) | ||
Cash paid for amounts included in the measurement of lease liabilities |
| | | | | |
Operating cash flows related to operating leases | | $ | i 2,128,416 | | $ | i 2,126,670 |
Amortization of right-of-use assets under operating leases | | | i 1,853,315 | | | i 1,870,255 |
iThe minimum future lease payments as of June 30, 2022 are as follows:
| | | |
|
| Amount | |
2022 (remainder of year) | | | i 1,751,599 |
2023 | |
| i 2,875,945 |
2024 | |
| i 1,673,884 |
2025 | |
| i 352,785 |
2026 | | | i 11,435 |
Thereafter | |
| i — |
Total minimum lease payments | | | i 6,665,648 |
Less: Interest | |
| ( i 196,882) |
Present value of future minimum lease payments | | $ | i 6,468,766 |
iNOTE 12 – NONCONTROLLING INTERESTS
Noncontrolling interests consisted of the following as of June 30, 2022 and December 31, 2021:
i
| | | | | | | | | | | | | | |
| | % of Non- | | | | | | | | Other | | June 30, | ||
| | controlling | | December 31, | | Net Income | | Comprehensive | | 2022 | ||||
Name of Entity |
| Interest |
| 2021 |
| (Loss) |
| Loss |
| (unaudited) | ||||
Law Enterprise |
| i 34.05 | % | $ | ( i 676,166) | | $ | ( i 128,474) | | $ | ( i 8,905) | | | ( i 813,545) |
Law Broker |
| i 34.05 | % |
| i 31,016,203 | | | i 2,685,197 | |
| ( i 2,164,075) | |
| i 31,537,325 |
Uniwill |
| i 50.00 | % |
| i 48,802 | | | i 536,675 | |
| ( i 45,512) | |
| i 539,965 |
Rays | | i 1.00 | % | | ( i 6,461) | | | ( i 202) | | | — | | | ( i 6,663) |
PFAL |
| i 49.00 | % |
| i 364,056 | | | i 2,334 | |
| ( i 1,184) | |
| i 365,206 |
MKI |
| i 49.00 | % |
| ( i 327,119) | | | ( i 712) | |
| — | |
| ( i 327,831) |
Total | | | | $ | i 30,419,315 | | $ | i 3,094,818 | | $ | ( i 2,219,676) | | $ | i 31,294,457 |
| | | | | | | | | | | | | | | | | |
| | % of Non- | | | | | | | | Other | | Impact from | | | | ||
| | controlling | | December 31, | | Net Income | | Comprehensive | | Liquidation of | | December 31, | |||||
Name of Entity |
| Interest |
| 2020 |
| (Loss) |
| Income (Loss) |
| PA Taiwan |
| 2021 | |||||
Law Enterprise |
| i 34.05 | % | $ | ( i 414,957) | | $ | ( i 264,642) | | $ | i 3,433 | | $ | — | | $ | ( i 676,166) |
Law Broker |
| i 34.05 | % |
| i 25,177,272 | |
| i 5,444,673 | |
| i 394,258 | | | — | |
| i 31,016,203 |
Uniwill | | i 50.00 | % | | ( i 421,035) | | | i 466,934 | | | i 2,903 | | | — | | | i 48,802 |
Rays | | i 1.00 | % | | ( i 5,772) | | | ( i 689) | | | — | | | — | | | ( i 6,461) |
PFAL |
| i 49.00 | % |
| i 423,978 | |
| ( i 63,441) | |
| i 3,519 | | | — | |
| i 364,056 |
MKI |
| i 49.00 | % |
| ( i 732) | |
| ( i 161,090) | |
| — | | | ( i 165,297) | |
| ( i 327,119) |
PA Taiwan |
| i 49.00 | % |
| ( i 163,013) | |
| i 1,102 | |
| ( i 3,386) | | | i 165,297 | |
| — |
Total | | | | $ | i 24,595,741 | | $ | i 5,422,847 | | $ | i 400,727 | | $ | — | | $ | i 30,419,315 |
/23
NOTE 13 – INCOME TAX
iThe following table reconciles the Company’s statutory tax rates to effective tax rates for the three and six months ended June 30, 2022 and 2021:
| | | | | |
| | Three Months Ended June 30, | | ||
| | 2022 | | 2021 | |
|
| (unaudited) |
| (unaudited) |
|
U.S. statutory rate |
| i 21 | % | i 21 | % |
Tax rate difference |
| ( i 4) | % | ( i 1) | % |
Change in valuation allowance |
| i 5 | % | i 6 | % |
Income tax on undistributed earnings |
| i 3 | % | i 4 | % |
Utilization of deferred tax assets not previously recognized |
| ( i 10) | % | — | % |
Reversal of deferred tax assets not previously recognized | | — | % | i 2 | % |
Non-deductible and non-taxable items | | i 13 | % | ( i 3) | % |
True up of prior year income tax |
| ( i 1) | % | i 3 | % |
Other | | — | % | — | % |
Effective tax rate |
| i 27 | % | i 32 | % |
| | | | | |
| | Six Months Ended June 30, | | ||
| | 2022 | | 2021 | |
|
| (unaudited) |
| (unaudited) |
|
U.S. statutory rate |
| i 21 | % | i 21 | % |
Tax rate difference |
| ( i 3) | % | ( i 1) | % |
Change in valuation allowance |
| i 7 | % | i 5 | % |
Income tax on undistributed earnings | | i 3 | % | i 4 | % |
Utilization of deferred tax assets not previously recognized | | ( i 5) | % | — | % |
Non-deductible and non-taxable items |
| i 5 | % | ( i 1) | % |
Other | | ( i 2) | % | — | % |
Effective tax rate |
| i 26 | % | i 28 | % |
/The Company’s income tax expense is mainly generated by its subsidiaries in Taiwan. The Company’s subsidiaries in Taiwan are governed by the Income Tax Law of Taiwan and subject to a statutory tax rate on income reported in the statutory financial statements at i 20% and a tax on undistributed earnings at i 5%. The Company had no plan to distribute earnings earned for the years ended December 2021 and 2020, and the tax on undistributed earnings on entities in Taiwan of i i 5 / % was estimated. As of June 30, 2022 and December 31, 2021, the Company had current tax payable of $ i 2,798,375 and $ i 3,703,412 for Taiwan income tax, respectively.
WFOE and the Consolidated Affiliated Entities (“CAE”) in the PRC are governed by the Income Tax Law of PRC concerning private-run enterprises, which are generally subject to tax at i 25% on income reported in the statutory financial statements after appropriate adjustments. As of June 30, 2022 and December 31, 2021, the Company had current tax payable of $ i 243,653 and i nil for PRC income tax.
The Company’s subsidiaries in Hong Kong are governed by the Inland Revenue Ordinance Tax Law and subject to two-tiered profits tax regime. The first HK$ i 2 million assessable profits is taxed at i 8.25% and any assessable profits over HK$ i 2 million is taxed at i 16.25%. As of June 30, 2022 and December 31, 2021, the Company had current tax payable of i nil and $ i 9,756 for Hong Kong income tax.
The 2017 Tax Act was enacted into law on December 22, 2017 and imposed a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. Based on the Company’s total post-1986 earnings and profits (“E&P”) that it previously deferred from U.S. income taxes, we recorded the one-time transition tax $ i 1,199,195 in eight annual installments for the transition tax on undistributed earnings of non-U.S. subsidiaries during the year ended December 31, 2018. As of June 30, 2022 and December 31, 2021, the Company had current tax payable of $ i 239,839 and $ i 179,879, and noncurrent tax payable of $ i 299,797 and $ i 539,636 for U.S. income tax.
/
24
NOTE 14 – RELATED PARTY TRANSACTIONS
iThe following summarized the Company’s loans payable related parties as of June 30, 2022 and December 31, 2021:
| | | | | | | |
| | | | | | ||
|
| (unaudited) |
| | |||
Due to Ms. Lu (A shareholder of Anhou) | | $ | — | | $ | i 41,311 | |
Others | |
| i 25,177 | |
| i 9,220 | |
Total | | $ | i 25,177 | | $ | i 50,531 | |
Amounts due to Ms. Lu were borrowings from Ms. Lu to support Anhou’s business operation. The amounts were non-interesting bearing and payable on demand.
With respect to due to bonus to officers, please refer to Note 8; and due to AHFL previous shareholders, please refer to Note 9.
There was no other material related party transactions other than those disclosed above.
/
iNOTE 15– COMMITMENTS AND CONTINGENCIES
Operating Leases
See future minimum annual lease payments in Note 11.
Time Deposits Pledged as Collateral
See time deposits pledged as collateral in Notes 4 and 6.
Appointment agreement
On June 30, 2022, Law Broker entered into an appointment agreement with Shu-Fen, Lee (“Ms. Lee”), pursuant to which, she served and will continue serving as the president of Law Broker from December 21, 2021 to June 29, 2025. Ms. Lee’s primary responsibilities included 1) overall business planning, 2) implementation of resolution of the shareholders’ meeting or the board of directors, 3) the appointment and dismissal of the Law Broker’s employees and sales professionals, except for internal auditors, 4) financial management and application, 5) being the representative of Law Broker, 6) other matters assigned by the board of directors. According to the appointment agreement, Ms. Lee’s compensation plan included: 1) base salary, 2) managerial allowance, 3) surplus bonus based on i 1.25% of Law Broker’s income after tax, and 4) annual year-end bonus. For the three and six months ended June 30, 2022 the Company has recorded the compensation expense of $ i 33,686 and $ i 106,591 under the appointment agreement, respectively. For the three and six months ended June 30, 2021, the Company has recorded the compensation expense of $ i 51,999 and $ i 114,207 under the appointment agreement, respectively.
Engagement agreement
On December 23, 2021, Law Broker entered into a new engagement agreement with Hui-Hsien Chao (“Ms. Chao”), pursuant to which she served and will continue serving as the general manager of Law Broker from December 23, 2021 to December 22, 2024. Ms. Chao’s primary responsibilities are to assist Law Broker in operating and managing insurance agency business. According to the engagement agreement, Ms. Chao’s Bonus plans shall include: 1) execution, 2) long-term service fees and 3) non-competition. The payment of such bonuses will only occur upon satisfaction of certain conditions and subject to the terms in the engagement agreement. Ms. Chao has agreed to act as the general manager or equivalent position of Law Broker for a term of at least i three years. For the three and six months ended June 30, 2021, the Company has recorded the compensation expense of $ i 101,120 and $ i 130,809 under the engagement agreement, respectively.
/
25
NOTE 16 –VARIABLE INTEREST ENTITIES
The carrying amounts of the assets, liabilities and the results of operations of the VIE and its subsidiaries (i.e., Zhengzhou Zhonglia Hengfu Business Consulting Co., Limited and its subsidiaries) included in the Company’s consolidated balance sheets and statements of comprehensive loss after the elimination of intercompany balances and transactions among VIE and its subsidiaries within the Company are as follows:
i
| | | | | | |
|
|
| | | ||
(Amount in USD) | | (unaudited) | | |||
ASSETS |
| |
|
| |
|
Current assets | | | | | | |
Cash and cash equivalents | | $ | i 2,697,290 | | $ | i 1,001,974 |
Accounts receivable and notes receivable | |
| i 394,118 | |
| i 455,884 |
Other current assets | |
| i 142,636 | |
| i 120,113 |
Total current assets | |
| i 3,234,044 | |
| i 1,577,971 |
| | | | | | |
Right-of-use assets under operating leases | |
| i 1,201,190 | |
| i 1,528,856 |
Property and equipment, net | |
| i 171,299 | |
| i 199,056 |
Prepaid expenses - intangible assets | |
| i 18,706 | |
| i 9,377 |
Long-term investments | |
| i 44,800 | |
| i 47,179 |
Restricted cash – noncurrent | |
| i 364 | |
| i 72,870 |
Registered capital deposits | |
| i 1,045,342 | |
| i 1,100,842 |
Deferred tax assets | |
| — | |
| i 74,709 |
Other assets | |
| i 79,718 | |
| i 83,951 |
TOTAL ASSETS | | $ | i 5,795,463 | | $ | i 4,694,811 |
| | | | | | |
LIABILITIES | |
| | |
| |
Current liabilities | |
| | |
| |
Commissions payable to sales professionals | | $ | i 210,363 | | $ | i 210,198 |
Income tax payable | | | i 243,653 | | | — |
Operating lease liabilities-current | | | i 437,166 | | | i 500,720 |
Other current liabilities | |
| i 3,303,706 | |
| i 617,018 |
Due to related parties - Ms. Lu (the shareholder of Anhou) | |
| — | |
| i 41,311 |
Total current liabilities | |
| i 4,194,888 | |
| i 1,369,247 |
| | | | | | |
Operating lease liabilities - noncurrent | |
| i 665,380 | |
| i 908,971 |
TOTAL LIABILITIES | | $ | i 4,860,268 | | $ | i 2,278,218 |
| | | | | | |
| | Three Months Ended June 30, | ||||
(Amount in USD) |
| 2022 |
| 2021 | ||
Revenue | | $ | i 1,085,112 | | $ | i 1,265,100 |
Net loss |
| | ( i 1,242,663) | |
| ( i 252,265) |
| | | | | | |
|
| Six Months Ended June 30, | ||||
(Amount in USD) | | 2022 | | 2021 | ||
Revenue | | $ | i 2,432,928 | | $ | i 3,216,569 |
Net loss | |
| ( i 1,444,609) | |
| ( i 303,046) |
| | | | |
| | Six Months Ended June 30, | ||
(Amount in USD) |
| 2022 |
| 2021 |
Net cash used in operating activities |
| ( i 1,066,630) |
| ( i 574,243) |
Net cash provided by (used in) investing activities |
| i 2,912,361 |
| ( i 75,523) |
Net cash used in financing activities |
| ( i 40,562) |
| ( i 38,642) |
/26
The VIE contributed $ i 1,085,112 and $ i 2,432,928 of the Company’s consolidated revenue for the three and six months ended June 30, 2022, and contributed $ i 1,265,100 and $ i 3,216,569 of the Company’s consolidated revenue for the three and six months ended June 30, 2021, respectively, after elimination of inter-company transactions.
As of June 30, 2022, there was no pledge or collateralization of the VIE’s assets that can only be used to settle obligations of the VIE, other than the share pledge agreements, restricted cash and registered capital deposits. Other than the amounts due to the Company and its non-VIE subsidiaries (which are eliminated upon consolidation), the creditors of the VIEs’ third-party liabilities did not have recourse to the general credit of the Company in normal course of business. The Company did not provide or intend to provide financial or other supports not previously contractually required to the VIEs during the years presented.
iNOTE 17 – SEGMENT REPORTING
The Company organizes and manages its business as i three operating segments by operating geographic areas. The business of WFOE, CU Hong Kong and the CAE in PRC was managed and reviewed as PRC segment. The business of AHFL and its subsidiaries in Taiwan was managed and reviewed as Taiwan segment. The business of PFAL was managed and reviewed as Hong Kong segment. PRC and Taiwan segments retain majority of reported consolidated amounts.
The geographical distributions of the Company’s financial information for the three and six months ended June 30, 2022 and 2021 were as follows:
i
| | | | | | |
| | Three Months Ended June 30, | ||||
| | (unaudited) | | (unaudited) | ||
|
| 2022 |
| 2021 | ||
Geographical Areas | | | | | | |
Revenue | | | | | | |
Taiwan | | $ | i 31,563,292 | | $ | i 32,271,253 |
PRC | |
| i 1,085,112 | |
| i 1,265,100 |
Hong Kong | |
| i 129 | |
| i 28,436 |
Elimination adjustment | |
| ( i 992,825) | |
| ( i 591,109) |
Total revenue | | $ | i 31,655,708 | | $ | i 32,973,680 |
| | | | | | |
Income (loss) from operations | |
| | |
| |
Taiwan | | $ | i 3,865,743 | | $ | i 3,169,768 |
PRC | |
| ( i 949,648) | |
| ( i 294,490) |
Hong Kong | |
| ( i 38,347) | |
| ( i 11,320) |
Elimination adjustment | |
| i 244,035 | |
| i 287,379 |
Total income from operations | | $ | i 3,121,783 | | $ | i 3,151,337 |
| | | | | | |
Non operating income (expense) | | | | | | |
Taiwan | | $ | i 955,462 | | $ | i 365,564 |
PRC | | | i 210,146 | | | ( i 147,418) |
Hong Kong | | | ( i 4,792) | | | i 2 |
Elimination adjustment | | | ( i 191,480) | | | ( i 230,660) |
Total non-operating income (expense) | | $ | i 969,336 | | $ | ( i 12,512) |
| | | | | | |
Net income (loss) | |
| | |
| |
Taiwan | | $ | i 3,951,106 | | $ | i 2,488,501 |
PRC | |
| ( i 989,924) | |
| ( i 401,328) |
Hong Kong | |
| ( i 39,992) | |
| ( i 10,385) |
Elimination adjustment | |
| i 52,557 | |
| i 60,439 |
Total net income | | $ | i 2,973,747 | | $ | i 2,137,227 |
/ /27
| | | | | | |
| | Six Months Ended June 30, | ||||
|
| (unaudited) |
| (unaudited) | ||
|
| 2022 |
| 2021 | ||
Geographical Areas | | | | | | |
Revenue | | | | | | |
Taiwan | | $ | i 62,068,649 | | $ | i 61,122,753 |
PRC | |
| i 2,432,928 | |
| i 3,216,569 |
Hong Kong | |
| i 82,951 | |
| i 139,421 |
Elimination adjustment | |
| ( i 1,948,297) | |
| ( i 974,946) |
Total revenue | | $ | i 62,636,231 | | $ | i 63,503,797 |
| | | | | | |
Income (loss) from operations | |
| | |
| |
Taiwan | | $ | i 9,079,266 | | $ | i 7,860,497 |
PRC | |
| ( i 1,105,567) | |
| ( i 298,408) |
Hong Kong | |
| i 54 | |
| i 50,173 |
Elimination adjustment | |
| i 461,845 | |
| i 425,729 |
Total income from operations | | $ | i 8,435,598 | | $ | i 8,037,991 |
| | | | | | |
Non operating income (expense) | | | | | | |
Taiwan | | $ | i 1,815,989 | | $ | i 953,033 |
PRC | |
| i 466,731 | |
| ( i 51,266) |
Hong Kong | |
| i 4,710 | |
| ( i 116) |
Elimination adjustment | |
| ( i 365,854) | |
| ( i 365,229) |
Total non-operating income | | $ | i 1,921,576 | | $ | i 536,422 |
| | | | | | |
Net income (loss) | |
| | |
| |
Taiwan | | $ | i 8,521,275 | | $ | i 6,421,991 |
PRC | |
| ( i 964,126) | |
| ( i 354,410) |
Hong Kong | |
| i 4,764 | |
| i 45,927 |
Elimination adjustment | |
| i 95,992 | |
| i 60,501 |
Total net income | | $ | i 7,657,905 | | $ | i 6,174,009 |
28
The geographical distribution of the Company’s financial information as of June 30, 2022 and December 31, 2021 were as follows:
| | | | | | |
| | | | | ||
| | | | | ||
|
| (unaudited) |
| |||
Geographical Areas | | | | | | |
Reportable assets | | | | | | |
Taiwan | | $ | i 190,710,314 | | $ | i 195,981,770 |
PRC | |
| i 13,423,727 | |
| i 12,326,308 |
Hong Kong | |
| i 748,064 | |
| i 756,692 |
Elimination adjustment | |
| ( i 77,331,531) | |
| ( i 81,283,249) |
Total reportable assets | | $ | i 127,550,574 | | $ | i 127,781,521 |
| | | | | | |
Long-lived assets | |
| | |
| |
Taiwan | | $ | i 7,026,927 | | $ | i 6,784,644 |
PRC | |
| i 1,372,490 | |
| i 1,727,911 |
Hong Kong | |
| i 1,008 | |
| i 1,287 |
Elimination adjustment | |
| ( i 2,909) | |
| ( i 2,905) |
Total long-lived assets | | $ | i 8,397,516 | | $ | i 8,510,937 |
| | | | | | |
Capital investments (CAPEX cash flows) | |
| | |
| |
Taiwan | | $ | i 418,182 | | $ | i 595,591 |
PRC | |
| i 32,294 | |
| i 79,203 |
Hong Kong | |
| — | |
| i 154 |
Total capital investments | | $ | i 450,476 | | $ | i 674,948 |
iNOTE 18 –RISKS AND UNCERTAINTIES
There has continued to be widespread impact from the coronavirus disease (“COVID-19”) pandemic including potentially more contagious strains of COVID-19 such as the Delta and Omicron variants. It has created significant volatility and uncertainty and economic disruption. The extent to which the pandemic impacts the Company’s business and operations will depend on numerous evolving factors, many of which are not within the Company’s control and which the Company may not be able to accurately predict, including its duration and scope; the ultimate availability, administration and effectiveness of vaccines around the world; governmental actions that have been and continue to be taken in response to the pandemic, including vaccine coverage; the impact of the pandemic on economic activity and actions taken in response; the ability of the Company’s customers to pay their insurance premiums which could impact the Company’s commission and fee revenues for the services provided; and the long-term impact of employees working from home, including increased technology costs.
On August 2, 2022, U.S. House Speaker Nancy Pelosi (“Pelosi”) visited Taiwan, which marked the first time that a U.S. House speaker has visited Taiwan in 25 years. China’s military announced it was conducting military exercises in response to Pelosi’s visit, including joint air and sea drills and live-fire exercises near Taiwan. The government of the P.R.C. asserts sovereignty over Taiwan, and does not recognize the legitimacy of the R.O.C. government. Therefore, Pelosi’s visit may affect the direction of economic and political developments and negatively impact the economic and political environment in Taiwan. Relations between the R.O.C. and the P.R.C. and other factors affecting the political or economic conditions in Taiwan could have an adverse effect on the Company’s financial condition and results of operations, all of which are not within the Company’s control and the Company may not be able to accurately predict at this time.
29
NOTE 19 – SUBSEQUENT EVENTS
The Company has evaluated all subsequent events through the date these consolidated financial statements were issued and determine that there were no subsequent events or transactions that require recognition or disclosures in the consolidated financial statements, except for the following:
As disclosed in Note 1, the CBIRC Jiangsu Regulatory Bureau approved the change of shareholders of Jiangsu Law from Anhou to the third party buyers on July 28, 2022 and accordingly, Anhou has transferred out the control over Jiangsu Law. As of August 11, the Company received the final installment in the amount of $ i 311,104 (RMB i 2,100,000).
/
30
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
The following discussion of the results of operations and financial condition should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Item 1 of this part. This report, including the information incorporated by reference, contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The use of any of the words “believe,” “expect,” “anticipate,” “plan,” “estimate,” and similar expressions are intended to identify such statements. Forward-looking statements include statements concerning our possible or assumed future results. The actual results that we achieve may differ materially from those discussed in such forward-looking statements due to the risks and uncertainties described in the Risk Factors section of this report, in Management’s Discussion and Analysis of Financial Condition and Results of Operations, and in other sections of this report, as well as in our annual report on Form 10-K. We undertake no obligation to update any forward-looking statements.
Overview
The Company primarily provides two broad categories of insurance products, life insurance products and property and casualty insurance products, in Taiwan and PRC. The Company also provides reinsurance brokerage services and insurance consulting services in Hong Kong and Taiwan. The percentage of reinsurance brokerage services and insurance consulting services is less than 1% of our total revenue. The insurance products that the Company’s subsidiaries sell are underwritten by some of the leading insurance companies in Taiwan and PRC, respectively.
(1) | Life Insurance Products |
Total revenue from Taiwan segment’s sales of life insurance products were 89.4% and 88.6% of total revenue for the three months ended June 30, 2022 and 2021, respectively. Total revenue from PRC segment’s sales of life insurance products were 3.0% and 3.7% of total revenue for the three months ended June 30, 2022 and 2021, respectively.
Total revenue from Taiwan segment’s sales of life insurance products were 89.3% and 88.3% of total revenue for the six months ended June 30, 2022 and 2021, respectively. Total revenue from PRC segment’s sales of life insurance products were 3.3% and 4.8% of total revenue for the six months ended June 30, 2022 and 2021, respectively.
In addition to the periodic premium payment schedules, most of the individual life insurance products we distribute also allow the insured to choose to make a single, lump-sum premium payment at the beginning of the policy term. If a periodic payment schedule is adopted by the insured, a life insurance policy can generate periodic payment of fixed premiums to the insurance company for a specified period of time. This means that once the Company sells a life insurance policy with a periodic premium payment schedule, it 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 the PRC and Taiwan, we have invested significant resources ever since the incorporation of Anhou and Law Broker on developing our capability to distribute individual life insurance products with periodic payment schedules. We expect that sales of life insurance products will continue being our primary source of revenue in the next several years.
(2) | Property and Casualty Insurance Products |
Total revenue from Taiwan segment’s sales of property and casualty insurance products were 7.1% and 7.5% of total revenue for the three months ended June 30, 2022 and 2021, respectively. Total revenue from PRC segment’s sales of property and casualty insurance products were 0.4% and 0.2% of total revenue for the three months ended June 30, 2022 and 2021, respectively.
Total revenue from Taiwan segment’s sales of property and casualty insurance products were 6.7% and 6.4% of total revenue for the six months ended June 30, 2022 and 2021, respectively. Total revenue from PRC segment’s sales of property and casualty insurance products were 0.6% and 0.3% of total revenue for the six months ended June 30, 2022 and 2021, respectively.
As the impacts of COVID-19 and its duration remain uncertain, we have been monitoring and will continue to measure and modify our business attempting to keep our customers, sales professionals and employees healthy and safe. The extent of the COVID-19 impact to the Company will depend on numerous factors and developments. Consequently, any potential impacts of COVID-19 remain highly uncertain and cannot be predicted with confidence.
31
Critical Accounting Policies and Estimates
A critical accounting policy is one that is both important to the portrayal of our financial condition and results of operation and requires our management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We have had no changes to our Critical Accounting Policies as described in our most recent Form 10-K for the year ended December 31, 2021 and believe that of our significant accounting and reporting policies, the more critical policies include our accounting for revenue recognition and estimate of income taxes. Our significant accounting policies are described in Note 1 of “Summary of Significant Accounting Policies” included within our 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Results of Operations- Three Months ended June 30, 2022 Compared to Three Months ended June 30, 2021
The following table shows the results of operations for the three months ended June 30, 2022 and 2021:
| | | | | | | | | | | | |
| | Three Months Ended June 30, |
| |||||||||
| | 2022 | | 2021 | | | | | |
| ||
|
| (Unaudited) |
| (Unaudited) |
| Change |
| Percent |
| |||
Revenue | | $ | 31,655,708 | | $ | 32,973,680 | | $ | (1,317,972) |
| (4.0) | % |
Cost of revenue | |
| 21,329,935 | |
| 23,536,213 | |
| (2,206,278) |
| (9.4) | % |
Gross profit | |
| 10,325,773 | |
| 9,437,467 | |
| 888,306 |
| 9.4 | % |
Gross profit margin | |
| 32.6 | % |
| 28.6 | % |
| 4.0 | % | 14.0 | % |
| | | | | | | | | | | | |
Operating expenses: | |
| | |
| | |
| |
| | |
Selling | |
| 433,681 | |
| 96,297 | |
| 337,384 |
| 350.4 | % |
General and administrative | |
| 6,770,309 | |
| 6,189,833 | |
| 580,476 |
| 9.4 | % |
Total operating expenses | |
| 7,203,990 | |
| 6,286,130 | |
| 917,860 |
| 14.6 | % |
| | | | | | | | | | | | |
Income from operations | |
| 3,121,783 | |
| 3,151,337 | |
| (29,554) |
| (0.9) | % |
| | | | | | | | | | | | |
Other income (expenses): | |
| | |
| | |
| |
| | |
Interest income | |
| 161,075 | |
| 129,779 | |
| 31,296 |
| 24.1 | % |
Interest expenses | |
| (69,804) | |
| (46,636) | |
| (23,168) |
| 49.7 | % |
Foreign currency exchange gain (loss), net | |
| 704,463 | |
| (427,652) | |
| 1,132,115 |
| (264.7) | % |
Dividend income | | | 212,369 | | | 251,328 | | | (38,959) | | (15.5) | % |
Other - net | |
| (38,767) | |
| 80,669 | |
| (119,436) |
| (148.1) | % |
Total other income (expenses), net | |
| 969,336 | |
| (12,512) | |
| 981,848 |
| (7,847.3) | % |
| | | | | | | | | | | | |
Income before income taxes | |
| 4,091,119 | |
| 3,138,825 | |
| 952,294 |
| 30.3 | % |
Income tax expense | |
| (1,117,372) | |
| (1,001,598) | |
| (115,774) |
| 11.6 | % |
| | | | | | | | | | | | |
Net income | |
| 2,973,747 | |
| 2,137,227 | |
| 836,520 |
| 39.1 | % |
Net income attributable to noncontrolling interests | |
| (1,355,537) | |
| (946,344) | |
| (409,193) |
| 43.2 | % |
Net income attributable to China United’s shareholders | | | 1,618,210 | | | 1,190,883 | | | 427,327 |
| 35.9 | % |
| | | | | | | | | | | | |
Other comprehensive items, net of tax: | | | (3,551,754) | | | 1,698,987 | | | (5,250,741) | | (309.1) | % |
| | | | | | | | | | | | |
Comprehensive income (loss) | | | (578,007) | | | 3,836,214 | | | (4,414,221) | | (115.1) | % |
Comprehensive loss attributable to noncontrolling interests | | | (177,697) | | | (1,495,321) | | | 1,317,624 | | (88.1) | % |
Comprehensive income (loss) attributable to China United’s shareholders | | $ | (755,704) | | $ | 2,340,893 | | $ | (3,096,597) | | (132.3) | % |
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, PRC and Hong Kong.
32
We generate revenue primarily through our sales force, which consists of individual sales agents in our distribution and service network. For the three months ended June 30, 2022 and 2021, the revenues generated from Taiwan, PRC and Hong Kong were as follows:
| | | | | | | | | | | | |
Geographic Areas | | Three Months Ended June 30, |
| |||||||||
|
| 2022 |
| 2021 |
| Change |
| Percent |
| |||
Revenue |
| |
|
| |
|
| |
|
|
| |
Taiwan segment | | $ | 30,570,467 | | $ | 31,680,144 | | $ | (1,109,677) |
| (3.5) | % |
Percentage of revenue | |
| 96.6 | % |
| 96.1 | % |
| |
| | |
PRC segment | |
| 1,085,112 | |
| 1,265,100 | |
| (179,988) |
| (14.2) | % |
Percentage of revenue | |
| 3.4 | % |
| 3.8 | % |
| |
| | |
Hong Kong segment | |
| 129 | |
| 28,436 | |
| (28,307) |
| (99.5) | % |
Percentage of revenue | |
| — | % |
| 0.1 | % |
| |
| | |
Total revenue | | $ | 31,655,708 | | $ | 32,973,680 | | $ | (1,317,972) |
| (4.0) | % |
Revenue from our Taiwan segment decreased by $1.1 million from $31.7 million for the three months ended June 30, 2021 to $30.6 million for the three months ended June 30, 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 commission revenue from Lawbroker. Another reason is the substantial depreciation of the New Taiwan Dollar against the U.S. dollar has offset the above increase and further caused the decrease in the revenue.
Revenue from our PRC segment decreased by $0.2 million from $1.3 million for the three months ended June 30, 2021 to $1.1 million for the three months ended June 30, 2022. The overall insurance industry environment was declining during 2022 in PRC and customers in PRC were less willing to buy those insurance products in 2022, which resulted in the decrease of revenue in the PRC segment.
Revenue from the Hong Kong Segment was primarily derived from reinsurance commission on sales of insurance products from other insurers to Taiwan Life Insurance Co., Ltd. (“Taiwan Life”) for risk management. Revenue decrease from our Hong Kong segment for the three months ended June 30, 2022 continued compared to that of the three months ended June 30, 2021 due to the termination of certain of our reinsurance agreements and the discontinuation of travel insurance.
Cost of revenue and gross profit
The cost of revenue mainly consists of commissions paid to our sales professionals. The cost of revenue decreased by $2.2 million from $23.5 million for the three months ended June 30, 2021 to $21.3 million for the three months ended June 30, 2022. The decrease in the cost of revenue was mainly resulted from the revenue decrease of Lawbroker and therefore decreased the commissions paid to the agents accordingly, and also influenced by the foreign exchange fluctuation from the substantial depreciation of the New Taiwan Dollar against the U.S. dollar.
In addition, the Company received the additional bonuses provided by the insurance companies which did not incur cost of commissions paid to sales agents. Consequently, the gross profit margin increased from 28.6% for the three months ended June 30, 2021 to 32.6% for the three months ended June 30, 2022.
Selling expenses
Selling expenses were mainly incurred by Law Broker and Uniwill in connection with online marketing and advertising. For the three months ended June 30, 2022, selling expenses were $0.4 million, reflecting an increase of $ 0.3 million, compared with $0.1 million of selling expenses for the three months ended June 30, 2021. The increase in the selling expenses was caused by the marketing activities during the three months ended June 30, 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, leading to less selling expenses in such period.
33
General and administrative expenses
General and administrative (“G&A”) expenses are principally comprised of salaries and benefits for our administrative staff, office rental expenses, travel expenses, depreciation and amortization, entertainment expenses, and professional service fees. For the three months ended June 30, 2022, G&A expenses were $6.8 million, reflecting an increase of $0.6 million, compared with $6.2 million of G&A expenses for the three months ended June 30, 2021. The increase in G&A expenses was mainly due to the recognition of severance pay arising from the disposal of subsidiary Jiangsu Law in the three months ended June 30, 2022.
Other income (expenses)
Other income mainly consisted of interest income, interest expenses, gain or loss on valuation of financial assets, and foreign currency exchange gain or loss. Other income were $1.0 million, reflecting an increase of $1.0 million, compared with the other income (expenses) of $0.0 million for the three months ended June 30, 2021. The increase in other income was mainly due to foreign currency exchange gain recognized from foreign currency time deposits assets and intercompany receivable and payable because of the substantial depreciation of the New Taiwan Dollar against the U.S. dollar and Chinese Yuan during the second quarter of 2022.
Income tax expense
For the three months ended June 30, 2022, income tax expense was $1.1 million, reflecting an increase of $0.1 million or 11.6%, compared with the income tax expense of $1.0 million for the three months ended June 30, 2021. The increase in tax expenses was mainly due to the increase in revenues generated in the Taiwan segment. In addition, the recognition of estimated tax expenses for the disposal of a subsidiary also contributed to the increase in income tax expenses.
Other comprehensive items
Other comprehensive items mainly consisted of foreign currency translation gain or loss. The foreign currency translation loss was $3.6 million, reflecting a decrease of $5.3 million, compared with foreign currency translation gain of $1.7 million for the three months ended June 30, 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 the three months ended June 30, 2022.
34
Results of Operations- Six Months ended June 30, 2022 Compared to Six Months ended June 30, 2021
The following table shows the results of operations for the six months ended June 30, 2022 and 2021:
| | | | | | | | | | | | |
| | Six Months Ended June 30, |
| |||||||||
| | 2022 | | 2021 | | | | | |
| ||
|
| (Unaudited) |
| (Unaudited) |
| Change |
| Percent |
| |||
Revenue |
| $ | 62,636,231 |
| $ | 63,503,797 |
| $ | (867,566) |
| (1.4) | % |
Cost of revenue | |
| 40,339,454 | |
| 42,509,645 | |
| (2,170,191) |
| (5.1) | % |
Gross profit | |
| 22,296,777 | |
| 20,994,152 | |
| 1,302,625 |
| 6.2 | % |
Gross profit margin | |
| 35.6 | % |
| 33.1 | % |
| 2.5 | % | 7.6 | % |
| | | | | | | | | | | | |
Operating expenses: | |
|
| |
|
| |
|
|
|
| |
Selling | |
| 1,117,831 | |
| 676,074 | |
| 441,757 |
| 65.3 | % |
General and administrative | |
| 12,743,348 | |
| 12,280,087 | |
| 463,261 |
| 3.8 | % |
Total operating expenses | |
| 13,861,179 | |
| 12,956,161 | |
| 905,018 |
| 7.0 | % |
| | | | | | | | | | | | |
Income from operations | |
| 8,435,598 | |
| 8,037,991 | |
| 397,607 |
| 4.9 | % |
| | | | | | | | | | | | |
Other income (expenses): | |
|
| |
|
| |
|
|
|
| |
Interest income | |
| 266,052 | |
| 213,777 | |
| 52,275 |
| 24.5 | % |
Interest expenses | |
| (122,139) | |
| (89,106) | |
| (33,033) |
| 37.1 | % |
Foreign currency exchange gain (loss), net | |
| 1,442,013 | |
| (99,186) | |
| 1,541,199 |
| (1,553.8) | % |
Dividend income | |
| 212,369 | |
| 251,328 | |
| (38,959) |
| (15.5) | % |
Other - net | |
| 123,281 | |
| 259,609 | |
| (136,328) |
| (52.5) | % |
Total other income, net | |
| 1,921,576 | |
| 536,422 | |
| 1,385,154 |
| 258.2 | % |
| | | | | | | | | | | | |
Income before income taxes | |
| 10,357,174 | |
| 8,574,413 | |
| 1,782,761 |
| 20.8 | % |
Income tax expense | |
| (2,699,269) | |
| (2,400,404) | |
| (298,865) |
| 12.5 | % |
| | | | | | | | | | | | |
Net income | |
| 7,657,905 | |
| 6,174,009 | |
| 1,483,896 |
| 24.0 | % |
Net income attributable to noncontrolling interests | |
| (3,094,818) | |
| (2,572,740) | |
| (522,078) |
| 20.3 | % |
Net income attributable to China United’s shareholders | | | 4,563,087 | | | 3,601,269 | | | 961,818 |
| 26.7 | % |
| | | | | | | | | | | | |
Other comprehensive items, net of tax: | | | (6,665,249) | | | 508,052 | | | (7,173,301) | | (1,412.0) | % |
| | | | | | | | | | | | |
Comprehensive income | | | 992,656 | | | 6,682,061 | | | (5,689,405) | | (85.1) | % |
Comprehensive loss attributable to noncontrolling interests | | | (875,142) | | | (2,758,642) | | | 1,883,500 | | (68.3) | % |
Comprehensive income attributable to China United’s shareholders | | $ | 117,514 | | $ | 3,923,419 | | $ | (3,805,905) | | (97.0) | % |
35
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, PRC and Hong Kong. We generate revenue primarily through our sales force, which consists of individual sales agents in our distribution and service network. For the six months ended June 30, 2022 and 2021, the revenues generated from Taiwan, PRC and Hong Kong were as follows:
| | | | | | | | | | | | |
Geographic Areas | | Six Months Ended June 30, |
| |||||||||
|
|
| 2022 |
|
| 2021 |
|
| Change |
| Percent | |
Revenue | |
|
| |
|
| |
|
|
|
| |
Taiwan segment |
| $ | 60,120,352 |
| $ | 60,147,807 |
| $ | (27,455) |
| — | % |
Percentage of revenue | | | 96.0 | % | | 94.7 | % | | |
| | |
PRC segment | | | 2,432,928 | | | 3,216,569 | | | (783,641) |
| (24.4) | % |
Percentage of revenue | | | 3.9 | % | | 5.1 | % | | |
| | |
Hong Kong segment | | | 82,951 | | | 139,421 | | | (56,470) |
| (40.5) | % |
Percentage of revenue | | | 0.1 | % | | 0.2 | % | | |
| | |
Total revenue |
| $ | 62,636,231 |
| $ | 63,503,797 |
| $ | (867,566) |
| (1.4) | % |
Revenue from our Taiwan segment for the six months ended June 30, 2022 remained consistent with that of the same period in 2021.
Revenue from our PRC segment decreased by $0.8 million from $3.2 million for the six months ended June 30, 2021 to $2.4 million for the six months ended June 30, 2022. The overall insurance industry environment in PRC was declining during 2022 and customers in PRC were less willing to buy those insurance products in 2022, which resulted in the decrease of revenue in the PRC segment.
Revenue from the Hong Kong Segment was primarily derived from reinsurance commission on sales of insurance products from other insurers to Taiwan Life for risk management. Decrease in revenue from our Hong Kong segment for the six months ended June 30, 2022 continued compared to that of the six months ended June 30, 2021 due to the termination of certain reinsurance agreements and the discontinuation of travel insurance.
Cost of revenue and gross profit
The cost of revenue mainly consists of commissions paid to our sales professionals. The cost of revenue decreased by $2.2 million from $42.5 million for the six months ended June 30, 2021 to that of $40.3 million for the six months ended June 30, 2022. The decrease in the cost of revenue was mainly resulted from the revenue decrease of Lawbroker and therefore decreased the commissions paid to the agents accordingly, and also influenced by the foreign exchange fluctuation from the substantial depreciation of the New Taiwan Dollar against the U.S. dollar.
In addition, the Company received the additional bonuses provided by the insurance companies which did not incur cost of commissions paid to sales agents. Consequently, the gross profit margin increased from 33.1% for the six months ended June 30, 2021 to 35.6% for the six months ended June 30, 2022.
Selling expenses
Selling expenses were mainly incurred by Law Broker and Uniwill in connection with online marketing and advertising. For the six months ended June 30, 2022, selling expenses were $1.1 million, reflecting an increase of $ 0.4 million, compared with that of $0.7 million of selling expenses for the six months ended June 30, 2021. The increase in the selling expenses was caused by the increase of marketing activities during the six months ended June 30, 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 six months ended June 30, 2021.
36
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 six months ended June 30, 2022, the G&A expenses were $12.7 million, reflecting an increase of $0.45 million, compared with that of $12.32 million for the six months ended June 30, 2021. The increase in G&A expenses was mainly due to the recognition of severance pay arising from the disposal of subsidiary Jiangsu Law during the six months ended June 30, 2022.
Other income (expenses)
Other income mainly consisted of interest income, interest expenses, gain or loss on valuation of financial assets, and foreign currency exchange gain or loss. Other income during the six months ended June 30, 2022 was $1.9 million, reflecting an increase of $1.4 million, compared with that of $0.5 million for the six months ended June 30, 2021. The increase in other income was mainly due to foreign currency exchange gain recognized from foreign currency time deposit assets because of the substantial depreciation of the New Taiwan Dollar against the U.S. dollar and Chinese Yuan during the first six months of 2022.
Income tax expense
For the six months ended June 30, 2022, income tax expense was $2.7 million, reflecting an increase of $0.3 million or 12.5%, compared with that of $2.4 million for the six months ended June 30, 2021. The increase in income tax expenses was mainly due to the increase in revenues generated in the Taiwan segment during the first six months of 2022 and the estimated tax expenses recognized for the disposal gain of the subsidiary in Jiangsu Law.
Other comprehensive items
Other comprehensive items mainly consisted of foreign currency translation gain or loss. Foreign currency translation loss were $6.7 million, reflecting a decrease of $7.2 million, compared with foreign currency translation gain of $0.5 million for the six months ended June 30, 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 the six months ended June 30, 2022.
Liquidity and Capital Resources
The following table presents a comparison of the net cash provided by operating activities, net cash used in investing activities and net cash provided by financing activities for the six-month periods ended June 30, 2022 and 2021:
| | | | | | | | | | | | |
| | Six Months Ended June 30, |
| |||||||||
|
| 2022 |
| 2021 |
| Change |
| Percent |
| |||
Net cash provided by operating activities | | $ | 11,523,729 | | $ | 10,180,299 | | $ | 1,343,430 |
| 13.2 | % |
Net cash used in investing activities | |
| (8,819,676) | |
| (4,622,533) | |
| (4,197,143) |
| 90.8 | % |
Net cash provided by financing activities | |
| 2,334,192 | |
| 3,734,048 | |
| (1,399,856) |
| (37.5) | % |
Operating activities
Net cash provided by operating activities during the six months ended June 30, 2022 was $11.5 million, reflecting an increase of $1.3 million or 13.2% in comparison with that of $10.2 million during the six months ended June 30, 2021. The increase in cash inflows was mainly due to the higher net income and collection from accounts receivable for the six months ended June 30, 2022 compared with that of the same period in 2021.
Investing activities
Net cash used in investing activities during the six months ended June 30, 2022 was $8.8 million, reflecting an increase of $4.2 million or 90.8% in comparison with that of $4.6 million for the six months ended June 30, 2021. Increases in the cash used in the investing activities mainly resulted from the increase of the purchases of marketable securities and time deposits, and the decrease of proceeds from maturities of time deposits during six months ended June 30, 2022. However, the cash outflow was partially offset by proceeds from receipts in advance of disposal of a subsidiary.
37
Financing activities
Net cash provided by financing activities was $2.3 million during the six months ended June 30, 2022, which decreased by $1.4 million from that of $3.7 million during the same period of 2021. The decrease was mainly due to the decrease in the net proceeds from additional borrowings under the revolving credit agreements and partially offset by the decrease of repayment of related party borrowings during the six months ended June 30, 2022.
Contractual Obligations
There have been no significant changes to the Company’s contractual obligations as disclosed in the Company’s 2021 Annual Report on Form 10-K.
Off Balance Sheet Arrangements
The Company had no off-balance sheet arrangements as of June 30, 2022.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit of possible controls and procedures.
Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2022. This conclusion was based on the material weaknesses in our internal control over financial reporting described in Part II, Item 9A, “Controls and Procedures” of our annual report on Form 10-K for the year ended December 31, 2021. The material weaknesses have not been remediated as of June 30, 2022. We continue to work on the remediation of the material weakness, we may determine to take additional measures to address our control deficiencies. The material weakness will continue to exist until the remediation steps identified in our 2021 Form 10-K are fully implemented and concluded to be operating effectively.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. If not remediated, the material weaknesses in our internal control over financial reporting described in the Form 10-K for the year of 2021 could result in a material misstatement of our annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.
Changes in Internal Control over Financial Reporting
During the fiscal quarter ended June 30, 2022, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
38
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
39
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
During the three months ended June 30, 2022, we were not aware of any other legal proceedings or claims that we believed would have a material adverse effect on our business, financial condition or operating results. From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business, such as labor and employment disputes. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
ITEM 1A. RISK FACTORS.
As a smaller reporting company, we are not required to make disclosure under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Not applicable during this reporting period.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable during this reporting period.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable during this reporting period.
40
ITEM 6. EXHIBITS
Exhibit |
|
| ||
Number |
| Description of Exhibit | ||
31.1 |
| |||
31.2 |
| |||
32.1* |
| |||
32.2* |
| |||
101.INS |
| XBRL Instance Document | ||
101.SCH |
| XBRL Taxonomy Extension Schema Document | ||
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document | ||
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||
*The certifications attached as Exhibits 32.1 and 32.2 accompany this quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
| China United Insurance Service, Inc. | |
| | | |
Date: August 15, 2022 | | By: | /s/ Yi-Hsiao Mao |
| | Name: | |
| | Its: | Chief Executive Officer |
| | | (Principal Executive Officer) |
| | | |
Date: August 15, 2022 | | By: | /s/ Mei-Kuan Yeh |
| | Name: | |
| | Its: | Chief Financial Officer |
| | | (Principal Financial and Accounting Officer) |
42
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 12/31/31 | ||||
| 6/29/25 | ||||
| 12/22/24 | ||||
| 3/31/24 | ||||
| 5/31/23 | ||||
| 4/11/23 | ||||
| 2/28/23 | ||||
| 1/13/23 | ||||
| 12/31/22 | ||||
| 12/15/22 | ||||
| 12/2/22 | ||||
| 11/30/22 | ||||
| 10/15/22 | ||||
| Filed on: | 8/15/22 | |||
| 8/2/22 | ||||
| 7/28/22 | ||||
| For Period end: | 6/30/22 | |||
| 5/18/22 | ||||
| 5/13/22 | ||||
| 5/6/22 | ||||
| 3/31/22 | 10-Q, NT 10-K | |||
| 3/23/22 | ||||
| 3/15/22 | 8-K | |||
| 2/25/22 | 8-K | |||
| 1/31/22 | ||||
| 12/31/21 | 10-K, NT 10-K | |||
| 12/23/21 | ||||
| 12/21/21 | ||||
| 6/30/21 | 10-Q | |||
| 3/31/21 | 10-Q | |||
| 12/31/20 | 10-K | |||
| 8/14/20 | ||||
| 12/31/18 | 10-K, 10-K/A, NT 10-K | |||
| 5/31/18 | ||||
| 12/22/17 | ||||
| 2/13/15 | 4, 8-K | |||
| 10/24/13 | 8-K | |||
| 6/10/13 | 8-K | |||
| 6/1/13 | ||||
| 1/17/11 | ||||
| List all Filings | ||||