UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark One)
| x | ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended December 31, 2014
or
| ¨ | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
file number: 000-54884
CHINA
UNITED INSURANCE SERVICE, INC.
(Exact
name of registrant as specified in its charter)
Delaware |
|
30-0826400 |
(State
or other jurisdiction
of incorporation) |
|
(I.R.S.
Employer
Identification
No.) |
7F,
No. 311 Section 3
Nan-King
East Road
Taipei
City, Taiwan
(Address
of principal executive offices, with zip code)
+8862-87126958
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Securities registered
under Section 12(g) of the Act: |
|
Title of each class |
Common Stock, par
value of $0.00001 |
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ¨ No x
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ¨ No x
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes
x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted 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 and post such files).
Yes
x No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ |
|
Accelerated filer |
x |
Non-accelerated filer ¨ |
|
Smaller reporting company |
¨ |
(Do not check if a smaller reporting company) |
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
¨ No x
The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, as of the last business
day of the registrant’s most recently completed second fiscal quarter was $246,865,397.
As
of March 15, 2015, there were 29,100,503 shares of common stock issued and outstanding, and 1,000,000 preferred shares issued
and outstanding.
TABLE OF
CONTENTS
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This annual
report contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to be materially different from any future results, performances
or achievements expressed or implied by the forward- looking statements. These risks and uncertainties include, but are not limited
to, the factors described under Item 1 “Description of Business,” Item 1A “Risk Factors” and Item 7 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward- looking
statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,”
“intends,” “may,” “plans,” “potential,” “predicts,” “projects,”
“should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking
statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.
Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Forward-looking
statements represent our estimates and assumptions only as of the date of this annual report. You should read this annual report
and the documents that we reference in this annual report, or that we filed as exhibits to this annual report completely and with
the understanding that our actual future results may be materially different from what we expect. Except as required by law, we
assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially
from those anticipated in any forward-looking statements, even if new information becomes available in the future.
OTHER PERTINENT
INFORMATION
References
in this annual report to “we,” “us,” “our” and the “Company” and words of like
import refer to China United Insurance Service, Inc., its subsidiaries and variable interest entities.
References
to China or the PRC refer to the People’s Republic of China (excluding Hong Kong, Macao and Taiwan). References to Taiwan
refer to Republic of China.
Our business
is conducted in Taiwan and China using NT$, the currency of Taiwan and RMB, the currency of China, respectively, and our financial
statements are presented in United States dollars (“USD” or “$”). In this annual report, we refer to assets,
obligations, commitments and liabilities in our financial statements in USD. These dollar references are based on the exchange
rate of NT$ and RMB to USD, determined as of a specific date. Changes in the exchange rate will affect the amount of our obligations
and the value of our assets in terms of USD which may result in an increase or decrease in the amount of our obligations (expressed
in USD) and the value of our assets, including accounts receivable (expressed in USD).
PART
I
ITEM
1. BUSINESS
Corporate
History and Structure
China United
Insurance Service, Inc. (“China United,” “CUIS,” or the “Company”) is a Delaware corporation
organized on June 4, 2010 by Mao Yi Hsiao, a Taiwanese citizen, and is quoted on the Over the Counter Bulletin Board (“OTCBB”).
The Company’s operating companies are in Taiwan and China. Unless context indicates otherwise, reference to the “Company”
throughout this annual report refers to China United and its subsidiaries. Reference to Action Holdings Financial Limited (“AHFL”),
refers to the combined operations of AHFL and its Taiwan Subsidiaries. Reference to Anhou refers to the combined operations of
Anhou and its subsidiaries.
ZLI Holdings
Limited (“CU Hong Kong”), a wholly owned Hong Kong-based subsidiary of China United, was originally founded by China
United, on July 12, 2010 under Hong Kong laws. On October 20, 2010, CU Hong Kong founded a wholly foreign owned enterprise, Zhengzhou
ZhonglianHengfu Consulting Co., Ltd. (“CU WFOE”) in Henan province of the PRC.
Law Anhou Insurance
Agency Co., Ltd. (“Anhou”, formerly known as Zhengzhou Anhou Insurance Agency Co., Ltd.) was founded in Henan province
of the PRC on October 9, 2003. Anhou provides insurance agency services in the PRC. On November 26, 2013, Anhou changed its name
into Law Anhou Insurance Agency Co., Ltd. and obtained its new business license. On December 18, 2013, Anhou obtained its new
Professional Insurance Agency License from local bureau of China Insurance Regulatory Commission (“CIRC”) which reflects
its new name.
On September
26, 2013, several new PRC individual investors, namely Wang Yanyan, Chen Zhaohui, Yue Jing, Hou Weizhe, Zhang Yong, Chen Li (“Anhou
New Investors”) and the original shareholders of Anhou, namely, Zhu Shuqin, Wei Qun, Fang Qunlei and Chen Yanxia (“Anhou
Original Shareholders”) entered into a shareholders resolution of Anhou, pursuant to which, Anhou Original Shareholders
and Anhou New Investors agreed to increase the registered capital of Anhou to RMB50 million ($8,165,895), among which, Wang Yanyan
would invest RMB10 million ($1,633,179), accounting for 20%, Chen Zhaohui would invest RMB10 million ($1,633,179), accounting
for 20%, Yue Jing would invest RMB7.5 million ($1,224,871), accounting for 15%, HouWeizhe would invest RMB5 million ($816,589),
accounting for 10%, Zhang Yong would invest RMB4.5 million ($734,930), accounting for 9%, and Chen Li would invest RMB3 million
($489,949), accounting for 6%, of the registered capital of Anhou.
Due to PRC
legal restrictions on foreign ownership and investment in the insurance agency businesses in China, particularly those based on
qualifications as well as capital requirements of the investors, Able Capital Holding Co., Ltd., a limited liability company established
and registered in Hong Kong, delegated four PRC individuals, namely Wang Yanyan, Chen Zhaohui, Hou Weizhe and Zhang Yong, to invest
in Anhou on its behalf.
On October
24, 2013, Anhou completed the registration with local Administration Industry and Commerce (“AIC”) on the above-mentioned
capital increase. The new business license was issued to Anhou on October 25, 2013.
The registered
capital increase of Anhou is in response to the promulgations of certain regulations by China Insurance Regulatory Commission
(“CIRC”). On April 27, 2013, CIRC issued the Decision on Revising the Provisions of the Supervision and Administration
of Specialized Insurance Agencies (the “Decision on Revising the Agency Provisions”), pursuant to which, CIRC has
mandated any insurance agency established subsequent to the Decision on Revising the Agency Provisions to meet a minimum registered
capital requirement of RMB50 million ($8,165,890). On May 16, 2013, CIRC issued Notice for Further Clarification on Related Issues
of Access to Professional Insurance Intermediary Market (the “Notice”), pursuant to which, professional insurance
agencies established prior to the issuance of the Decision on Revising the Agency Provisions, with registered capital less than
RMB50 million ($8,165,890), can continue operation of their existing business within the provinces where they have the registered
office or branch office, but shall not set up any new branches in any province where they do not have the registered office or
any branch office.
Prior to the
capital increase, Anhou, a professional insurance agency with a PRC nationwide license, has a registered capital in the amount
of RMB10 million ($1,633,178). The branch offices of Anhou were all in Henan province. To better implement its expansion strategies,
Anhou increased its registered capital to RMB50 million ($8,165,890) to meet the requirement of CIRC so that it can set up new
branches in any province beyond its current operations in Mainland China.
On October
24, 2013, Anhou Original Shareholders entered into share transfer agreements (the “Share Transfer Agreements”) with
Hu Changrong, a PRC citizen (“Mr. Hu” together with Anhou New Investors, “Anhou Existing Shareholders”),
respectively. Under the Share Transfer Agreements, Anhou Original Shareholders transferred all of their equity interests in Anhou
to Mr. Hu for an aggregate transfer price of RMB10 million ($1,633,178). Mr. Hu is currently the legal representative, General
Manager and the sole director of Anhou.
On October
24, 2013, Anhou completed the share transfer registration with the local AIC. At the end of October 2013, Anhou completed its
filing with local CIRC with respect to its previously-conducted share transfer and capital increase.
Anhou’s
wholly owned subsidiary Sichuan Kangzhuang Insurance Agency Co., Ltd. (“Sichuan Kangzhuang”) was founded on September
4, 2006 in Sichuan province of the PRC, and it provides insurance agency services in the PRC. On August 23, 2010, at Sichuan Kangzhuang’s
general meeting of shareholders, its shareholders voted for transferring all of their equity interests in Sichuan Kangzhuang to
Anhou for RMB532,622 ($83,444). On September 6, 2010, the equity transfer agreements were signed between Anhou and each shareholder
of Sichuan Kangzhuang. Anhou has complied with all of the applicable laws and regulations with respect to its holding 100% equity
interests in Sichuan Kangzhuang.
Jiangsu Law
Insurance Brokers Co., Ltd. (“Jiangsu Law” collectively with Anhou, Sichuan Kangzhuang, the “Consolidated Affiliated
Entities”, each a “Consolidated Affiliated Entity”) was founded on September 19, 2005 in Jiangsu province of
the PRC. Jiangsu Law is allowed to provide insurance brokerage services. On August 12, 2010, at Jiangsu Law’s general meeting
of shareholders, its shareholders voted for transferring all of their shareholdings to Anhou for RMB518,000 ($81,153). On September
28, 2010, the equity transfer agreements were signed between Anhou and each individual shareholder of Jiangsu Law. Pursuant to
Provisions on the Supervision and Administration of Insurance Brokerage Institutions, effective on October 1, 2009, if an insurance
brokerage entity fails to bring its registered capital to no less than RMB10,000,000 ($1,566,661) on or prior to October 1, 2012,
the China Insurance Regulatory Commission (“CIRC”) or its local counterpart, as applicable, may determine not to extend
the insurance brokerage license. To meet such minimum registered capital requirement, on February 11, 2011, Anhou invested RMB4.82
million ($755,131) in Jiangsu Law to increase the registered capital to RMB10 million ($1,566,661). Anhou has complied with all
of the applicable laws and regulations with respect to its holding 100% equity interests in Jiangsu Law.
On January
16, 2011, China United issued 20,000,000 shares of common stock, $0.00001 par value per share, to several non-US persons for their
investment of $300,000 in cash in the Company’s subsidiaries. The issuance was made pursuant to an exemption from registration
contained in Regulation S under the Securities Act of 1933, as amended. The consideration was paid to the account of CU Hong Kong
by May 6, 2011. All $300,000 was contributed into the bank account of CU WFOE as registered capital.
Due to PRC
legal restrictions on foreign ownership and investment in insurance agency and brokerage businesses in China, especially those
on qualifications as well as capital requirement of the investors, we operate our PRC business primarily through our Consolidated
Affiliated Entities in China. We do not hold equity interests in our Consolidated Affiliated Entities. However, through the VIE
Agreements (as described in more details below) with Anhou and its shareholders, we effectively control, and are able to derive
substantially all of the economic benefits from, these Consolidated Affiliated Entities. On January 19, 2015, the Ministry of
Commerce of China (“MOFCOM”) published a draft version of a proposed Foreign Investment Law (the “Draft Foreign
Investment Law”) with an explanatory note. MOFCOM has requested comments from the public on the Draft Foreign Investment
Law by February 17, 2015, which, once promulgated, will replace and integrate the three existing laws over foreign investment,
however, how these changes will affect entities currently operating in China, particularly foreign controlled variable interest
entities, is not entirely clear. See “Risks Related to Our Corporate Structure in the PRC”.
Our Consolidated
Affiliated Entities in China are variable interest entities through which all of our insurance services in China are operated.
It is through the VIE Agreements that we have effective control of the Consolidated Affiliated Entities, which allows us to consolidate
the financial results of the Consolidated Affiliated Entities in our financial statements. If Anhou and its shareholders fail
to perform their obligations under the VIE Agreements, we could be limited in our ability to enforce the VIE Agreements that give
us effective control. Furthermore, if we are unable to maintain effective control of our Consolidated Affiliated Entities, we
would not be able to continue to consolidate the Consolidated Affiliated Entities’ financial results with our financial
results. During each of the fiscal years ended June 30, 2011 and 2012, 100% of our revenues in our consolidated financial statements
were derived from our Consolidated Affiliated Entities. For the year ended June 30, 2013, the first fiscal year after the acquisition
of AHFL together with its Taiwan Subsidiaries, 92.66% and 7.34% of our revenues in our consolidated financial statements were
derived from our Taiwan Subsidiaries and Consolidated Affiliated Entities, respectively. During the six months ended December
31, 2013, 93.72% and 6.28% of our revenues in our consolidated financial statements were derived from our Taiwan Subsidiaries
and Consolidated Affiliated Entities, respectively. For the year ended December 31, 2014, 93.55% and 6.45% of our revenues in
our consolidated financial statements were derived from our Taiwan Subsidiaries and Consolidated Affiliated Entities, respectively.
On January
17, 2011, CU WFOE, Anhou and Anhou Original Shareholders entered into a series of agreements known as variable interest agreements
(the “Old VIE Agreements”) pursuant to which CU WFOE has executed effective control over Anhou through these contractual
arrangements. As a result of the capital increase and the share transfer described above, on October 24, 2013, CU WFOE, Anhou
and Anhou Existing Shareholders entered into a series of variable interest agreements (the “VIE Agreements”), including
Power of Attorneys, Exclusive Option Agreements, Share Pledge Agreements, in the same form as the previous Old VIE Agreements,
other than the change of shareholder names and their respective shareholdings. The Old VIE Agreements were terminated by and among
CU WFOE, Anhou and Anhou Original Shareholders on the same date. The Exclusive Business Cooperation Agreement executed by and
between CU WFOE and Anhou on January 17, 2011 remains in full effect. The VIE Agreements now in effect included:
|
(1) |
An Exclusive Business Cooperation
Agreement through which CU WFOE is appointed the exclusive services provider to provide Anhou with complete technical support,
business support and related consulting services (as described in the agreement) in exchange for 90% of the net profits (as
defined in the agreement) of Anhou. The agreement does not provide that CU WFOE is responsible for the debts of the Consolidated
Affiliated Entities. The term of the Exclusive Business Cooperation Agreement began on January 17, 2011 and lasts ten years,
unless earlier terminated as provide in the agreement. The term of the agreement may be extended at CU WFOE’s discretion
prior to the expiration thereof. CU WFOE may terminate the agreement at any time with 30 days’ written notice but Anhou
may only terminate the agreement if CU WFOE commits gross negligence or a fraudulent act against Anhou; |
|
(2) |
a Power of Attorney under which
the shareholders of Anhou have vested their collective voting control over Anhou to CU WFOE; |
|
(3) |
an Option Agreement under
which the shareholders of Anhou granted to CU WFOE the irrevocable right and option to acquire all of their equity interests
in Anhou, subject to applicable PRC laws and regulations. The Option Agreement began on October 24, 2013 and lasts ten years,
but may be renewed at CU WFOE’s election; and |
|
(4) |
a Share Pledge Agreement under
which the shareholders of Anhou have pledged all of their equity interests in Anhou to CU WFOE to guarantee Anhou’s
performance of its obligations under the Exclusive Business Cooperation Agreement. |
As a holding
company with no business other than holding equity interest of our operating subsidiary, CU WFOE in China and Law Broker in Taiwan,
we rely principally on dividends to be paid by CU WFOE in China and Law Broker in Taiwan. CU WFOE, being the exclusive service
provider to Anhou, relies on the service fees to which it is entitled from Anhou. Pursuant to the Exclusive Cooperation Agreement
between CU WFOE and Anhou, CU WFOE has the right to collect 90% of the net profits of Anhou. As Anhou is still operating at a
loss, Anhou has not paid any service fees to CU WFOE yet and CU WFOE has not paid any dividend to us to date. We expect Anhou
to make a profit beginning in the fiscal year ending December 31, 2016, when it should start to pay service fees to CU WFOE, although
there can be no assurance that Anhou will become profitable by that time or ever. Our capability to receive dividends from CU
WFOE, convert them into USD and make the repatriation out of China is subject to the applicable PRC restrictions on the payment
of dividends by PRC companies, laws and regulations on foreign exchange and restrictions on foreign investment. Law Broker, being
the only operating entity for our Taiwan business, is primarily focused on life and property insurance brokerage and agency business.
Through years of operation, Law Broker has become one of the leading insurance brokerage firms in Taiwan and has expanded its
business across Taiwan, with 27 sales and service outlets (including the headquarters) and 2,182 employees and insurance sales
professionals.
On February
26, 2014, Anhou completed the registration of the change of its registered address to Room 1906-1910, No. 215 Jiangdong Middle
Road, Jianye District, Nanjing, Jiangsu Province with the local AIC of Jiangsu Province. The new business license was issued to
Anhou on February 26, 2014. Anhou obtained the Professional Insurance Agency License issued by Jiangsu Bureau of CIRC on April
21, 2014. Anhou has completed the registration of the share pledge with local AIC. Anhou’s previous headquarters located
at Building 4K, Hesheng Plaza, No. 26 Yousheng South Road, Jinshui District, Zhengzhou, Henan province, has been registered as
the Henan branch office of Anhou and it obtained the Professional Insurance Agency License issued by Henan Bureau of CIRC on January
3, 2014 and the business license issued by local AIC on January 9, 2014.
Anhou owns
100% equity interest in both Sichuan Kangzhuang and Jiangsu Law. The shareholders of Anhou are Hu Changrong, Wang Yanyan, Chen
Zhaohui, Yue Jing, Hou Weizhe, Zhang Yong and Chen Li. All of these shareholders are PRC citizens and do not hold any shares in
the Company. Pursuant to the VIE Agreements, CU WFOE becomes the primary beneficiary of Anhou and only leaves Anhou shareholders
nominal value therein.
On January
28, 2011, the Company increased the number of authorized shares from 30,000,000 shares of common stock to 100,000,000 shares of
common stock and 10,000,000 shares of preferred stock. On July 2, 2012, the Board of Directors and stockholders of the Company
approved, in connection with a reclassification of 1,000,000 issued and outstanding shares of common stock (the “Reclassified
Shares”), par value $0.00001 per share held by Mao Yi Hsiao (“Mr. Mao”) into 1,000,000 shares of Series A Convertible
Preferred Stock, par value $0.00001 per share (the “Series A Preferred Stock”) on a share-for-share basis (the “Reclassification”),
the issuance of 1,000,000 shares of Series A Preferred Stock to Mr. Mao and cancellation of 1,000,000 common stock held and submitted
by Mr. Mao pursuant to the Reclassification. All of the 1,000,000 shares of Series A Preferred Stock are reclassified from the
1,000,000 common stock held by Mr. Mao and no additional consideration has been paid by Mr. Mao in connection with the Reclassification.
Each holder of common stock shall be entitled to one vote for each share of common stock held of record by such holder as of the
applicable record date on any matter that is submitted to a vote of the stockholders of the Company; while each holder of Series
A Preferred Stock shall be entitled to ten votes for each share of Series A Preferred Stock held of record by such holder as of
the applicable record date on any matter that is submitted to a vote of the stockholders of the Company. On August 8, 2014, Mr.
Lo Chung Mei (“Mr. Lo”), who had been serving as the Company’s Chief Executive Officer, resigned from his position
with the Company. Following the resignation of Mr. Lo, the Company’s Board of Directors appointed Mr. Mao as the Company’s
Chief Executive Officer.
On August 24,
2012, the Company acquired all of the issued and outstanding shares of AHFL, a limited liability company (“LLC”) incorporated
under the laws of British Virgin Islands on April 30, 2012, together with its subsidiaries in Taiwan. Subsequent to the acquisition,
AHFL becomes a 100% subsidiary of the Company. On August 5, 2013, AHFL, Taiwan Branch (“AHFLTW”) was established with
registered capital of NT$100,000.
AHFL holds
65.95% of the issued and outstanding shares of Law Enterprise Co., Ltd. (“Law Enterprise”), a company limited by shares
incorporated under the laws of Taiwan on January 30, 1996. Law Enterprise holds (i) 100% Law Insurance Broker Co., Ltd. (“Law
Broker”), a company limited by shares incorporated in Taiwan on October 9, 1992; (ii) 97.84% of Law Risk Management &
Consultant Co., Ltd. (“Law Management”), a company limited by shares incorporated in Taiwan on December 5, 1987; and
(iii) 96% of Law Insurance Agent Co., Ltd. (“Law Agent” collectively with “Law Enterprise”, “Law
Broker” and “Law Agent”, the “Taiwan Subsidiaries”, each a “Taiwan Subsidiary”), a LLC
incorporated in Taiwan on June 3, 2000.
Law Enterprise
acts as a holding company of its operating subsidiaries in Taiwan. Law Broker primarily engages in insurance brokerage and insurance
agency service business across Taiwan, while Law Management and Law Agent are not in active operation. We operate our Taiwan business
primarily through Law Broker.
In the fourth
quarter of 2014, the shareholders of the Law Management and Law Agent made the resolution to dissolve Law Management and Law Agent,
respectively, because those companies have not been in operation. The dissolution of Law Management and Law Agent was approved
by the Taiwan Government on November 26, 2014 and on January 13, 2015, respectively. In accordance with the law in Taiwan, the
liquidator was appointed by the shareholders of the Law Management and Law Agent and the liquidator shall complete the liquidation
process no later than six months from the appointment date. Both Law Management and Law Agent are under the process of liquidation.
On
April 23, 2014, AHFL entered into a capital increase agreement (the “Agreement”) with Wong Chun Kwok Johnny (“Mr.
Wong”), the owner of Prime Financial Asia Ltd. (PFAL) which is a re-insurance broker company residing in Hong Kong. Upon
the Agreement, Mr. Wong would increase PFAL’s registered capital from HK$500,000 ($64,424) to HK$1,470,000 ($189,404), and
AHFL would contribute HK$1,530,000 ($197,133) to PFAL’s registered capital. Upon the completion of capital increase by both
parties, Mr. Wong and AHFL would own 49% and 51% of PFAL’s equity interest, respectively. The transaction was completed
on April 30, 2014.
On February
13, 2015, the Company and AHFL entered into an acquisition agreement (the “Acquisition Agreement”) with Mr. Li Chwan
Hau, the selling shareholder of Genius Holdings Financial Limited (the “Selling Shareholder”), a company with limited
liability incorporated under the laws of British Virgin Islands (“GHFL”), to issue 352,166 fully paid and non-assessable
shares of AHFL Common Stock (“AHFL Shares”) together with an granted put option for 352,166 shares of common stock
of the Company (“Put Option”), in exchange for 704,333 shares of common stock of GHFL, being all of the issued and
outstanding capital stock of GHFL. The Put Option may be exercised within six months of the closing date of the acquisition and
the Selling Shareholder would exchange the AHFL Shares as consideration for the exercise of the Put Option. Subsequent to the
acquisition, GHFL will become a wholly-owned subsidiary of the Company. GHFL holds 100% issued and outstanding shares of Genius
Investment Consultant Co., Ltd. (“Taiwan Genius”), a limited company incorporated under the laws of Taiwan, which
in turn holds approximately 15% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius Broker”),
a company limited by shares incorporated under the laws of Taiwan. Both GHFL and Taiwan Genius have no substantive business operation
other than the holding of shares of its subsidiary. Genius Broker is primarily engaged in broker business across Taiwan. The acquisition
price may be further adjusted on the fourth anniversary of the closing date of the acquisition and depending on the earnings per
share of GHFL during the fiscal years of 2014 through 2017, subject to other terms and conditions therein. Mr. Li Chwan Hau
is the sole shareholder of GHFL and a director and shareholder of the Company. On February 13, 2015, the acquisition was completed,
the Selling Shareholder transferred 100% shares in GHFL to AHFL. The Put Option has not been exercised by the Selling Shareholder
as of March 15, 2015.
On January
17, 2014, the board of directors of the Company approved a change in our fiscal year end from June 30 to December 31.
Please refer
to the chart below for detailed information of the Company’s shareholders who serve as a director or officer of the Company,
the Company’s subsidiaries, or the Consolidated Affiliated Entities.
Name | |
Position in the
Company | |
Position
in AHFL | |
Position in
Law Enterprise | |
Position in
Law Broker | |
Position in
Law Agent | |
Position in Law
Management | |
Position
in GHFL | |
Position
in Taiwan
Genius | |
Position in
CU Hong Kong | |
Position in CU
WFOE | |
Position in
Anhou | |
Position in
Jiangsu Law |
Mao Yi
Hsiao | |
Director
Chief Executive Officer | |
Director | |
Director | |
| |
Director | |
Director | |
| |
| |
General Manager
and Chairman | |
General Manager
and Chairman | |
| |
Supervisor |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Li ChwanHau | |
Director | |
| |
| |
| |
| |
| |
Director | |
Director | |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Li Fu
Chang | |
Director | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
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| |
| |
| |
| |
| |
| |
|
Chen
KueiChiao | |
Director | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Chuang
Yung Chi | |
Chief Financial
Officer | |
| |
| |
Manager of Financial
Department | |
| |
| |
| |
| |
| |
| |
| |
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
|
Hsieh
Tung Chi | |
Chief Operating
Officer | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Division Chief
of Management |
| |
| |
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| |
| |
| |
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Chiang
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Chief Technology
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Manager |
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Chao
HuiHsien | |
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Director | |
General Manager | |
Director | |
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Vice-General
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Lee Shu
Fen | |
Director | |
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General Manager | |
Director | |
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Tu Wen
Ti | |
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Senior Assistant
General Manager | |
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Shen
Wen Che | |
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Senior Assistant
General Manager | |
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See “Related
Party Transactions” for further information on our contractual arrangements with these parties.
The
following flow chart illustrates our Company’s organizational structure:
Products
and Services
Law Broker
and Anhou market and sell to customers two broad categories of insurance products: life insurance products and property and casualty
insurance products, both focused on meeting the particular insurance needs of individuals. The insurance products that Law Broker
and Anhou sell are underwritten by some of the leading insurance companies in Taiwan and China, respectively.
Through Anhou’s
wholly-owned insurance brokerage firm Jiangsu Law, it also closely interacts with insurance companies and actively locates and
introduces the right customers in Anhou’s database matching the insurance products offered by such insurance companies to
them.
Life
Insurance Products
The life insurance
products Law Broker distributes can be broadly classified into the categories set forth below. Due to constant product innovation
by insurance companies, some of the insurance products Law Broker distributes combine features of one or more of the categories
listed below. Total net revenues from life insurance products distributed by Law Broker accounted for 94.33 % of Law Broker’s
total net revenues in the fiscal year ended December 31, 2014. Total net revenues from life insurance products distributed by
Law Broker accounted for 94.39% of CUIS’ total net revenues of life insurance iin the fiscal year ended December 31, 2014.
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Individual Whole Life
Insurance. The individual whole life insurance products Law Broker distributes provide insurance for the insured person’s
entire life in exchange for the periodic payment of fixed premiums over a pre-determined period, generally ranging from six
to 20 years, or until the insured reaches a certain age. The face amount of the policy or, for some policies, the face amount
plus accumulated interests is paid upon the death of the insured. |
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Individual Term Life
Insurance. The individual term life insurance products Law Broker distributes provide insurance for the insured for a
specified time period or until the attainment of a certain age, in return for the periodic payment of fixed premiums over
a pre-determined period, generally ranging from six to 20 years. Term life insurance policies generally expire without value
if the insured survives the coverage period. |
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Individual Health Insurance.
The individual health insurance products Law Broker distributes pay the insured amount of reasonable hospitalization cost,
or certain death benefit in case of the death of the insured, due to sickness, accident or childbirth. Individual health insurance
policies expire when the premium is not paid or a certain age is attained. |
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Casualty Insurance. Accidental
Injury Insurance is the kind of life insurance that insurance benefit is given when the insured is dead or disabled because
of accidental injury, which is unforeseen by the injured or against his will. Casualty insurance policies expire when the
premium is not paid or a certain age is attained. |
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Investment-oriented Insurance.
Investment-oriented insurance products are the market linked insurance plan which also provide life coverage. The premium
amount (after deduction of certain charges) is invested into different funds. The performance of the fund will depend on the
market. A growing upward trend in market will increase the fund value. Every investment-oriented insurance policy has market
risk exposure depending on the fund invested and such investment risk is solely borne by the policyholder. Depending on the
death benefit, Investment-oriented insurance policies are categorized into two broad categories: (1) The death benefit is
equal to the higher of insured amount or fund value. (2) The death benefit is equal to the insured amount plus fund value.
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Foreign Currency Policy
Commodity. It is a life insurance policy in which a policy benefit shall all be paid in foreign currencies. The foreign
currency policy provides insurance for the insured person’s life in exchange for the periodic payment of fixed premiums
over a pre-determined period, generally ranging from six to 20 years, or until the insured reaches a certain age. The face
amount of the policy or, for some policies, the face amount plus accumulated interests, is paid upon the death of the insured.
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Travel Accident Insurance.
It is a kind of casualty insurance. The travel accident insurance provides monetary compensation in case the insured dies
or loses a limb in an accident while he or she is traveling. The premium is based on the days of traveling and the insured
amount. |
The life
insurance products Law Broker distributed in the fiscal year ending December 31, 2014 were primarily underwritten by Farglory
Life Insurance Co., Ltd., CTBC Life Insurance Co., Ltd., Shin Kong Life Insurance Co., Ltd., Fubon Life Insurance Co., Ltd. and
AIA International Limited, Taiwan Branch.
The life insurance
products Anhou distributes can be broadly classified into the categories set forth below. Due to constant product innovation by
insurance companies, some of the insurance products Anhou distributes combine features of one or more of the categories listed
below. Total net revenues from life insurance products accounted for 80.8% of Anhou’s total net revenues in the fiscal year
ending December 31, 2014.
Total net revenues
from life insurance products distributed by Anhou accounted for approximately 5.61% of CUIS’ total net revenues of life
insurance products in the fiscal year ending December 31, 2014.
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Individual Whole Life
Insurance. The individual whole life insurance products Anhou distributes provide insurance for the insured person’s
entire life in exchange for the periodic payment of fixed premiums over a pre-determined period, generally ranging from five
to 20 years, or until the insured reaches a certain age. The face amount of the policy or, for some policies, the face amount
plus accumulated interests is paid upon the death of the insured. |
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Individual Term Life
Insurance. The individual term life insurance products Anhou distributes provide insurance for the insured for a specified
time period or until the attainment of a certain age, in return for the periodic payment of fixed premiums over a pre-determined
period, generally ranging from five to 20 years. Term life insurance policies generally expire without value if the insured
survives the coverage period. |
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Individual Endowment
Life Insurance. The individual endowment products Anhou distributes generally provide maturity benefits if the insured
reaches a specified age, and provide to a beneficiary designated by the insured guaranteed benefits upon the death of the
insured within the coverage period. In return, the insured makes periodic payment of premiums over a pre-determined period,
generally ranging from five to 25 years. |
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Individual Education
Annuity. The individual annuity products Anhou distributes are primarily education related products. They provide annual
benefit payments after the insured attains a certain age, e.g., 18, for a fixed time period, or e.g., four years, and a lump
payment at the end of the coverage period. In addition, the beneficiary designated in the annuity contract will receive guaranteed
benefits upon the death of the insured during the coverage period. In return, the purchaser of the annuity products makes
periodic payment of premiums during a pre-determined accumulation period. |
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Individual Health Insurance.
The individual health insurance products Anhou distributes primarily consist of dread disease insurance products, which
provide guaranteed benefits for specified dread diseases during the coverage period. In return, the insured makes periodic
payment of premiums over a pre-determined period. |
The life insurance
products Anhou distributed in the fiscal year ending December 31, 2014 were primarily underwritten by Taikang Life Insurance Company,
YINGDA TAIHE Life Insurance Co., Ltd., Sunshine Insurance Group Corporation Limited, Sino Life Insurance Co., Ltd. and AVIVA Life
Insurance Co., Ltd.
In addition
to the periodic premium payment schedules described above, most of the individual life insurance products we distribute also allow
the insured to choose to make a single, lump-sum premium payment at the beginning of the policy term. If a periodic payment schedule
is adopted by the insured, a life insurance policy can generate periodic payment of fixed premiums to the insurance company for
a specified period of time. This means that once Anhou or Law Broker sells a life insurance policy with a periodic premium payment
schedule, they will be able to derive commission and fee income from that policy for an extended period of time, sometimes up
to 25 years. Because of this feature and the expected sustained growth of life insurance sales in China and Taiwan, we have focused
significant resources ever since the incorporation of Anhou and Law Broker on developing our capability to distribute individual
life insurance products with periodic payment schedules. We expect that sales of life insurance products will continuously be
our primary source of revenue in the next several years.
Property
and Casualty Insurance Products
Law Broker’s
main property and casualty insurance products are automobile insurance, casualty insurance and liability insurance. Law Broker
commenced sale of automobile insurance, casualty insurance and liability insurance business in August 2003. Total net revenues
from property and casualty insurance products accounted for 5.67% of Law Broker’s total net revenues in the fiscal year
ending December 31, 2014.
Total net revenues
from property and casualty insurance products distributed by Law Broker accounted for 81.42% of CUIS’ total net revenues
of property and casualty insurance products in the fiscal year ending December 31, 2014.
The property
and casualty insurance products Law Broker distributes can be further classified into the following categories:
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Automobile Insurance. Law Broker distributes
both standard automobile insurance policies and supplemental policies, which we refer to as riders. The standard automobile
insurance policies Law Broker sells generally have a term of one year and cover damages caused to the insured vehicle by collision
and other traffic accidents, falling or flying objects, fire, explosion and natural disasters. Law Broker also sells standard
third party liability insurance policies, which cover bodily injury and property damage caused by an accident involving an
insured vehicle to a person not in the insured vehicle. The riders Law Broker distributes cover additional losses, such as
liability to passengers, losses arising from vehicle theft and robbery, broken glass and vehicle body scratches. |
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Casualty Insurance. Casualty insurance
is made to insure any loss or damage to property. This is designed to cover loss that is made by direct accident. The policy
period is usually one year. The premium is based on the insured amount. |
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Liability Insurance. When the insured is
legally obligated to indemnify a third party and subject to a claim in connection therewith, the liability insurer is liable
to provide such indemnification on behalf of the insured. The policy period is usually one year. The premium is based on the
insured amount. |
The property
and casualty insurance products Law Broker distributed in the fiscal year ending December 31, 2014 were primarily underwritten
by Fubon Insurance Co., Ltd., Zurich Insurance Company, ACE Insurance Company, Union Insurance Company and Taian Insurance Co.,
Ltd.
Anhou’s
main property and casualty insurance products are automobile insurance and commercial property insurance. Anhou commenced its
sale of commercial property insurance in 2009 and had developed its automobile insurance business since 2010. Total net revenues
from property and casualty insurance products distributed by Anhou accounted for 19.2% of Anhou’s total net revenues in
the fiscal year ending December 31, 2014.
Total net revenues
from property and casualty insurance products distributed by Anhou accounted for 18.58% of CUIS’ total net revenues of property
and casualty insurance products in the fiscal year ending December 31, 2014.
The property
and casualty insurance products Anhou distributes can be further classified into the following categories:
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Automobile Insurance. Automobile insurance
is the largest segment of property and casualty insurance in the PRC in terms of gross written premiums. Anhou distributes
both standard automobile insurance policies and supplemental policies, which we refer to as riders. The standard automobile
insurance policies Anhou sells generally have a term of one year and cover damages caused to the insured vehicle by collision
and other traffic accidents, falling or flying objects, fire, explosion and natural disasters. Anhou also sells standard third
party liability insurance policies, which cover bodily injury and property damage caused by an accident involving an insured
vehicle to a person not in the insured vehicle. The riders Anhou distributes cover additional losses, such as liability to
passengers, losses arising from vehicle theft and robbery, broken glass and vehicle body scratches. |
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Commercial Property Insurance. The commercial
property insurance products Anhou distributes include basic, comprehensive and all risk policies. Basic commercial property
insurance policies generally cover damage to the insured property caused by fire, explosion and thunder and lightning. Comprehensive
commercial property insurance policies generally cover damage to the insured property caused by fire, explosion and certain
natural disasters. All risk commercial property insurance policies cover all causes of damage to the insured property not
specifically excluded from the policies. |
The property
and casualty insurance products Anhou distributed in the fiscal year ending December 31, 2014 were primarily underwritten by PICC
Property and Casualty Co., Ltd., China Pacific Insurance (Group) Co., Ltd., Ping An Property and Casualty Insurance Co., Ltd.,
China Life Property &Casualty Insurance Co., Ltd. and Fubon Property& Casualty Insurance Co., Ltd. .
Strategic
Alliance with AIATW
On June 10,
2013, AHFL entered into a Strategic Alliance Agreement (the “Alliance Agreement”) with AIA International Limited Taiwan
Branch (“AIATW”). The purpose of the Alliance Agreement is to promote life insurance products provided by AIATW within
the territory of Taiwan by insurance agency companies or insurance brokerage companies affiliated with AHFL or CUIS. The term
of the Alliance Agreement is from April 15, 2013 to August 31, 2018. Pursuant to the terms of the Alliance Agreement, AIATW shall
pay AHFL an Execution Fee of $8,367,947 (NT$ 250,000,000). The fee will be recorded as revenue upon fulfilling sales target over
the next five years. As of September 23, 2013, AHFL has received $8,367,947 (NT$250,000,000) from AIATW under the Alliance Agreement.
Pursuant to the Alliance Agreement, AHFL is entitled to the payment of the execution fee, subject to certain terms and conditions
therein, including the satisfaction of the performance targets and the threshold 13-month persistency ratio. The Execution Fee
may be required to be recalculated if certain performance targets are not met by AHFL.
On
September 30, 2014, AHFL entered into an Amendment to Strategic Alliance Agreement (the “Amendment”) with
AIATW.
Pursuant to
the Amendment, the expiration date of the Strategic Alliance Agreement has been extended from May 31, 2018 to December 31, 2020.
In addition, both AHFL and AIATW agree to adjust certain terms and conditions set forth in the Strategic Alliance Agreement, including
the downward adjustment of the performance targets as well as the mechanism and formula calculating the Execution Fee to be refunded,
if any.
In addition,
AHFL agreed to refrain from selling, pledging or transferring more than 30% of its holdings in Law Broker. If such sale of Law
Broker securities does take place, AIATW may unilaterally terminate the Strategic Alliance Agreement. Upon such a termination,
the Execution Fee shall be recalculated based on formulas provided in the Alliance Agreement.
Unified
Operating Platform
Law Broker
has its own self-developed Unified Operating Platform. Since Law Broker’s establishment in 1992, it has successfully implemented
the following components of its operating platform across its branch offices in Taiwan through a hub center located in Taipei:
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A centralized clients and insurance
policy management and analysis system, which encompasses our life insurance unit and property and casualty insurance unit,
that will better support business operations and facilitate risk control; |
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An integrated administrative
and information system, that increases the management efficiency among the subsidiaries, branches and sales departments; |
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A centralized and computerized
accounting and financial management system, that increases the commission distribution and enforcement; |
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A human resources management
and analysis system; and |
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An e-learning system to provide
online training to sales professionals. |
Through years
of operation, the Unified Operating Platform has proved to be an efficient and streamlined operating system which contributes
to the successful expansion and growth of Law Broker into one of the leading companies in Taiwan, with 27 sales and service outlets
(including the headquarter) across Taiwan and 2,182 employees and insurance sales professionals.
In accordance
with our growth strategy in China, Anhou has made significant effort to adapt the Unified Operating Platform utilized by Law Broker
to better meet the operational need in China. Since September 2010, Anhou has successfully implemented the tailored operating
platform across the PRC subsidiaries through a hub center located in Nantong, Jiangsu province. We expect that this tailored operating
platform will make selling easier for sales agents in China, facilitate standardized business and financial management, enhance
risk control and increase operational efficiency for the PRC subsidiaries.
Anhou has tailored
and refined the platform on the basis of Law Broker’s well-developed operating platform in Taiwan and believes that it is
difficult for our competitors in China, particularly new market entrants, to reproduce a similar platform without substantial
financial resources, time and operating experience.
Because the
various systems, policies and procedures under both of operating platforms utilized by Law Broker and Anhou can be rolled out
quickly as we enter new regions or make acquisitions, we believe we can expand our distribution network rapidly and efficiently
while maintaining the quality of our services.
Distribution
and Service Network and Marketing
Since Law Broker’s
establishment in 1991, it has devoted substantial resources in building up its distribution and service network. Law Broker currently
has 27 sales and service outlets spread across Taiwan (including the headquarter), among which, 6 located in northern region,
13 located in central region, 6 located in southern region and 2 located in eastern region. As of December 31, 2014, Law Broker
had 1,635 full-time sales professionals, 394 part-time sales professionals and 153 administrative staff.
The following
table sets forth some additional information of Law Broker’s distribution and service network as of December 31, 2014, broken
down by the four regions:
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Number of
Full-time | | |
Number of
Full-time | | |
Number of
Part-time | |
Province | |
Number
of Sales and Service Outlets | | |
Sales
Professionals | | |
Sales
Professionals | |
Northern region | |
| 6 | | |
| 414 | | |
| 97 | |
Southern region | |
| 6 | | |
| 358 | | |
| 100 | |
Central region | |
| 13 | | |
| 830 | | |
| 187 | |
Eastern region | |
| 2 | | |
| 33 | | |
| 10 | |
Total | |
| 27 | | |
| 1,635 | | |
| 394 | |
Law Broker
markets and sells life insurance products, property and casualty insurance products directly to the targeted customers through
the sales professionals, who are not its employees.
Since Anhou’s
establishment in 2003, it has devoted substantial resources in building up its distribution and service network. Anhou has targeted
its distribution and service network in provinces with most population in China, such as Henan, Jiangsu and Sichuan. As
of December 31, 2014, Anhou has two insurance agencies and one insurance brokerage firm, with 1,177 full time sales professionals
and 91 administrative staffs operating across 36 cities within these three provinces.
The following
table sets forth some additional information of Anhou’s distribution and service network as of December 31, 2014, broken
down by provinces:
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| | |
Number of
Full-time | | |
Number of
Part-time | |
Province | |
Number
of Sales and Service Outlets | | |
Sales
Agents | | |
Sales
Agents | |
Henan | |
| 30 | | |
| 1,022 | | |
| - | |
Sichuan | |
| 5 | | |
| 146 | | |
| - | |
Jiangsu | |
| 1 | | |
| 9 | | |
| 0 | |
Total | |
| 36 | | |
| 1,177 | | |
| 0 | |
Anhou markets
and sells life insurance products, property and casualty insurance products directly to the targeted customers through the sales
agents, who are not its employees.
Customers
As of December
31, 2014, Law Broker had approximately 560,000 customers, among which approximately 94% purchased life insurance products and
approximately 6% purchased property and casualty insurance products from Law Broker.
Due to its
extensive line of insurance products underwritten by the insurance companies in Taiwan, Law Broker managed to offer a variety
of insurance products to customers of different ages or professions. However, as aging population in Taiwan has gradually become
a more recognized social issue, despite of a relatively healthy government-sponsored retirement and medial programs, more and
more Taiwanese, especially those with stable financial means and aiming for high-end retirement and medical treatment, has been
focusing on endowment and medical type of commercial insurance products, while the investment type of insurance products have
been playing a less significant role since the economic downturn.
In addition,
from time to time, Law Broker has been, either voluntarily or upon request of insurance companies, advising insurance companies
or providing feedback on particular type of insurance products before they are put on the market. This interaction with insurance
companies has not only enhanced the close cooperation between Law Broker and the insurance companies, but also gives it an edge
in understanding the in-depth feature of such insurance products for marketing and distribution purposes.
Law Broker
sells automobile insurance and casualty insurance primarily to individual customers. Law Broker sells liability insurance to institutional
customers.
As of December
31, 2014, Anhou had 32,398 customers, among which 31,682 purchased life insurance products and 716 purchased property and casualty
insurance products from Anhou.
Anhou sells
automobile insurance and individual accident insurance primarily to individual customers. Anhou sells commercial property insurance
to institutional customers.
Anhou
targeted middle class individuals and family members under 50 years age to be its priority clients, which represent 89.1% of
its client base. The revenues of Anhou are primarily generated from the sale of life insurance products and we expect the
continuous growth in this regard, as more and more customers in China realized the insufficiency of the mandatory social
insurance coverage and the necessity to supplement it with commercial insurance. With the implementation of the national
one-child policy through the past decades in China, approximately 39% of the insurance policies distributed by Anhou have
designated children under 14 years age as the beneficiary of such policies, Anhou expects the continuous growth of insurance
market of these factors in the near future.
In the fiscal
year ended December 31, 2014, no single customer accounted for more than 3% of the net revenues of CUIS, Law Broker or Anhou.
Insurance
Company Partners
We are selective
in terms of choosing insurance company as our partners. We take into consideration of a variety of factors, such as the reputation
and integrity of the insurance company, the quality and competitiveness of insurance products offered, the prudence and health
of the financial standing of the insurance company as well as the complexity and efficiency of claim adjustment and settlement.
During years of operation, both Law Broker and Anhou have formed strategic relationships with numerous insurance companies in
Taiwan and China, respectively, as of December 31, 2014, Law Broker had established business relationships with 19 insurance companies
in Taiwan and Anhou had established business relationships with 31 insurance companies in China.
On June 10,
2013, AHFL entered into an Alliance Agreement with AIATW. The purpose of the Alliance Agreement is to promote life insurance products
provided by AIATW within the territory of Taiwan by insurance agency companies or insurance brokerage companies affiliated with
AHFL or CUIS. The term of the Alliance Agreement is from April 15, 2013 to August 31, 2018. Pursuant to the terms of the Alliance
Agreement, AIATW shall pay AHFL an Execution Fee of $8,367,947(NT$ 250,000,000). The fee will be recorded as revenue upon fulfilling
sales target over the next five years. As the date of September 23, 2013, AHFL has received $8,367,947 (NT$250,000,000) from AIATW.
Pursuant to the Alliance Agreement, AHFL is entitled to the payment of the execution fee, subject to certain terms and conditions
therein, including the satisfaction of the performance targets and the threshold 13-month persistency ratio. The Execution Fee
may be required to be recalculated if certain performance targets are not met by AHFL.
On September
30, 2014, AHFLentered into an Amendment to Strategic Alliance Agreement (the “Amendment”) with AIA TW. Pursuant to
the Amendment, the expiration date of the Strategic Alliance Agreement has been extended from May 31, 2018 to December 31, 2020.
In addition, both AHFL and AIATW agree to adjust certain terms and conditions set forth in the Strategic Alliance Agreement, including
the downward adjustment of the performance targets as well as the mechanism and formula calculating the Execution Fee to be refunded,
if any. In addition, AHFL agreed to refrain from selling, pledging or transferring more than 30% of its holdings in Law Broker.
If such sale of Law Broker securities does take place, AIATW may unilaterally terminate the Strategic Alliance Agreement. Upon
such a termination, the Execution Fee shall be recalculated based on formulas provided in the Alliance Agreement.
In the
fiscal year ended December 31, 2014, Law Broker’s top five insurance company partners, after aggregating the business
conducted between Law Broker and the various local branches of the insurance companies were Farglory Life Insurance Co.,
Ltd., CTBC Life Insurance Co., Ltd., Shin Kong Life Insurance Co., Ltd., Fubon Life Insurance Co., Ltd., and AIA
International Limited, Taiwan Branch. Among them, Farglory Life Insurance Co., Ltd. accounted for 30.4 % of Law
Broker’s total net revenues from commissions and fees in the fiscal year ending December 31, 2014.
In the fiscal
year ended December 31, 2014, Anhou’s top five insurance company partners, after aggregating the business conducted between
Anhou and the various local branches of the insurance companies were Taikang Life Insurance Co., Ltd., YINGDA TAIHE Life Insurance
Co., Ltd., Sunshine Insurance Group Corporation Limited, Sino Life Insurance Co., Ltd., and AVIVA Life Insurance Co., Ltd. Among
them, Taikang Life Insurance Co., Ltd. accounted for 20.12% of Anhou’stotal net revenues from commissions and fees in the
fiscal year ending December 31, 2014.
Competition
A number of
industry players are involved in the distribution of insurance products in Taiwan and PRC. We compete for customers on the basis
of product offerings, customer services and reputation. Because we primarily distribute individual insurance products, our principal
competitors include:
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Professional insurance intermediaries.
Life insurance is our core business and has a strong regional feature. Through years of business development, we believe
that we can compete effectively with other insurance intermediary companies as we have a longer operational history and over
the years have assembled a strong and stable team of managers and sales professionals. With the implementation of our unified
operating platform, we believe that we could strengthen our lead in our developed local regions and expand our operation to
our newly selected areas. However, with increasing consolidation expected in the insurance intermediary sector in the coming
years, we expect competition within this sector to intensify. |
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Insurance companies. The
distribution of individual life insurance products in Taiwan and China historically has been dominated by insurance companies,
which usually use both in-house sales force and exclusive sales agents to distribute their own products. We believe that we
can compete effectively with insurance companies because we focus only on distribution and offer our customers a broad range
of insurance products underwritten by multiple insurance companies. |
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Other business entities.
In recent years, business entities that distribute insurance products as an ancillary business, primarily commercial banks
and postal offices have been playing an increasingly important role in the distribution of insurance products, especially
life insurance products. However, the insurance products distributed by these entities are usually confined to those related
to their main lines of business, such as investment-related life insurance products. We believe that we can compete effectively
with these business entities because we offer our customers a broader variety of products. |
Law Broker
is one of the leading insurance brokerage firms in Taiwan. During the past two decades, Law Broker has expanded its business across
Taiwan, with 27 sales and service outlets (including the headquarter) and 1,635 full time sales professionals and 394 part-time
sales professionals and 153 administrative staffs spread over the four regions of Taiwan. Other than insurance companies and commercial
banks, Law Broker’s primary competitors are Taiwan insurance brokerage companies of relatively large size, such as Everpro
Insurance Brokers Co., Ltd. Through years of operation, Law Broker has won numerous awards from various Taiwan government authorities
for its excellence in the insurance brokerage industry. Among which, from year 2005 to year 2008, Law Broker has won the “Taiwan
Insurance Excellence Award - Talent Training” for four consecutive years, the “Taiwan Insurance Excellence Award -
E-commerce” in 2009, the "Taiwan Insurance Excellence Award - Customer Service and Personal Training” in 2011,
the “Taiwan Insurance Excellence Award - Golden Medal for Information Application, Silver Medal for Personnel Training and
Silver Medal for Customer Service” in 2013, the “Insurance Dragon and Phoenix Award” in 2012 and 2013 as well
as the Most Desirable Insurance Brokerage Company of Finance Insurance Graduates in 2013. The “Taiwan Insurance Excellence
Award" is one of most prestigious as well as well-participated insurance events in Taiwan, co-sponsored by the Taiwan Insurance
Institute, Taiwan Financial Supervisory Committee and Taiwan Consumer Protection Committee, to encourage the insurance industry
participants to actively enhance insurance service quality as well as to improve customer services.
During the
past 11 years, Anhou has expanded its business across 36 cities within Henan, Sichuan and Jiangsu provinces with 1,177 full time
sales professionals and 91 administrative staffs. Based on the insurance products Anhou is offering and the geographic areas of
its branch offices, Anhou’s primary competitors are small-sized and middle-sized insurance agency companies. Anhou is relatively
larger in terms of the number of salesmen as well as the sales revenue comparing to those competing insurance agency companies.
On April 20, 2012, Anhou obtained the nationwide license from CIRC, pursuant to which Anhou may set up its branch office across
the PRC, to carry out the insurance agency business, with no further approval requirement from CIRC other than filing with the
local CIRC at the provincial level.
On March 26,
2012, CIRC issued the Notice on Suspension of Market Entry Approval of Regional Insurance Agencies and Certain Part-time Insurance
Agencies (“2012 Notice”). Pursuant to the 2012 Notice, CIRC and its local counterparts will suspend granting any new
license to full-time insurance agencies operating on a regional basis (“Regional Insurance Agencies”) as well as to
branch offices of existing Regional Insurance Agencies. In addition, no new license for part-time insurance agency businesses
will be granted unless such applicant is a financial institution or a China Post office. However, CIRC emphasized in the 2012
Notice that its local counterparts shall continue to support the establishment of insurance intermediary groups and full-time
insurance agencies operating on a nationwide basis, as well as continue to support their respective branch offices.
As indicated
in the 2012 Notice, it appears that CIRC is aiming to increase the entry thresholds of Regional Insurance Agencies and part-time
insurance agencies with a view to reducing the number, as well as, enhancing the quality of insurance agencies in the market.
CIRC has also indicated in the 2012 Notice that it intends to further amend related rules and regulations to improve the market
entry and exit mechanism for insurance agencies, and promote the professionalism as well as enhance the quality of insurance agencies
in the market.
On April 27,
2013, CIRC issued the Decision on Revising the Provisions of the Supervision and Administration of Specialized Insurance Agencies
(the “Decision on Revising the Agency Provisions”), pursuant to which, CIRC has mandated any insurance agency established
subsequent to the Decision on Revising the Agency Provisions to meet a minimum registered capital requirement of RMB50 million
($8.1 million).
On May 16,
2013, CIRC issued Notice for Further Clarification on Related Issues of Access to Professional Insurance Intermediary Market (the
“2013 Notice”), pursuant to which, professional insurance agencies established prior to the issuance of the Decision
on Revising the Agency Provisions, with registered capital less than RMB50 million ($8.1 million), can continuously operate their
existing business within the provinces where they have the registered office or branch office, but shall not set up any new branches
in any province where they do not have the registered office or any branch office.
With the promulgation
and implementation of the above-mentioned regulations, we expect a better regulated insurance agency market in China with orderly
competition and pursuit for professional excellence, which will accentuate our competitive advantage due to our continuous commitment
to quality service. On October 24, 2013, Anhou has increased its registered capital to RMB50 million ($8,165,890). As of the date
of filing of this Annual Report on Form 10-K, Anhou is one of the approximately 100 insurance agencies with a PRC nationwide license.
We believe that we will be in a better position to obtain the full support expressly provided in the 2012 Notice from the local
CIRC on our expansion strategy nationwide.
Intellectual
Property
To protect
our intellectual property, we rely on a combination of trademark, copyright and trade secret laws as well as confidentiality agreements
with our employees, sales agents, contractors and others.
Law Enterprise,
Law Broker and Law Agent jointly own the following registered trademarks in Taiwan:
the
Service Mark of Law Insurance Broker Co., Ltd. under the registration number 01462327, with a 10-year validity from June 16, 2011
to June 15, 2021;
the
logo of Law Insurance Broker Co., Ltd. under the registration number 01604254, with a 10-year validity from October 16, 2013 to
October 15, 2023;
the
logo of Blue Magpie, with a 10-year validity from June 16, 2011 to June 15, 2021;
the
logo of Law (定律) under the registration number 01462328,
with a 10-year validity from June 16, 2011 to June 15, 2021;
the
logo of Law (定律) under the registration number 01611772,
with a 10-year validity from December 1, 2013 to November 30, 2023;
the
logo of Bao Xian Tong and INS, with a 10-year validity from May 16, 2013 to May 15, 2023; and
the
logo of Magpie Baby, with a 10-year validity from May 16, 2012 to May 15, 2022.
Law
Broker has the following registered trademarks in Taiwan:
the
logo of Blue Magpie Fleet, with a 10-year validity from December 1, 2008 to November 30, 2018;
the
logo of Law Insurance Broker, with a 10-year validity from December 1, 2008 to November 30, 2018;
the
logo of Law Blue Magpie, with a 10-year validity from December 1, 2008 to November 30, 2018;
the
logo of Symbiosis, Co-cultivation Co-Prosperity and Law Blue Magpie Picture, with a 10-year validity from July 1, 2008 to June
30, 2018;
the
logo of Education Training Blue Magpie, with a 10-year validity from June 1, 2008 to May 31, 2018;
the
logo of Cartoon Blue Magpie, with a 10-year validity from June 1, 2008 to May 31, 2018;
the
logo of Little Blue Magpie, with a 10-year validity from June 1, 2008 to May 31, 2018;
the
logo of Triumph Blue Magpie, with a 10-year validity from June 1, 2008 to May 31, 2018;
the logo of
Blue Magpie Fleet Picture, with a 10-year validity from May 1, 2008 to April 30, 2018; and
the
logo of Fighting Blue Magpie, with a 10-year validity from June 1, 2008 to May 31, 2018.
Jiangsu
Law has one registered trademark in China, the logo of Jiangsu Law:
Employees
As of December
31, 2014, Law Broker has a total of 153 full-time employees and Anhou has 91 full-time employees. Our employees are not represented
by any collective bargaining agreement. We believe that we have good relations with our employees and we have never experienced
a work stoppage.
Regulation
Taiwan
Regulations of the Insurance Industry
The insurance
industry in Taiwan is highly regulated. Financial Supervisory Committee of Republic of China, the FSC, is the regulatory authority
responsible for the supervision of the insurance industry in Taiwan. Insurance activities undertaken within Taiwan are primarily
governed by the Insurance Law and the related rules and regulations.
Insurance
Law
The current
principal regulation governing insurance in Taiwan is Insurance Law, latest amended on January 8, 2014 by Legislative Yuan, which
provided the initial framework for regulating the insurance industry.
The Insurance
Law defines several subjects of insurance industry, such as insurer, insurance agency, insurance brokerage and insurance adjustor.
It established requirements for form of organization, and qualifications and procedures to establish an insurance organization
as well as separation of property insurance businesses and life insurance businesses. The Insurance Law distinguishes insurance
between fire disaster, marine, land and air, liability, surety , and other casualty and property insurance businesses on the one
hand, and life insurance, health insurance, casualty insurance and annuity businesses on the other. Unless permitted by the FSC,
insurance companies are not allowed to engage in both types of insurance businesses.
The insurers,
insurance agencies, insurance brokerages and insurance adjustors must join the related industry associations, or they are prohibited
from conducting business operation.
FSC
The FSC is
in charge of the financial market and financial service industries, among the insurance industry and has the power to control
the following items:
|
1. |
Financial system and supervision policy. |
|
2. |
The preparation, amendment and abolishment of financial
laws and regulations. |
|
3. |
Supervision and management of the financial institutions,
include its establishment, revocation, abolishment, change, merger, dissolution, and business scope. |
|
4. |
Development, supervision and management of financial
market. |
|
5. |
Inspection of financial institution. |
|
6. |
Inspection on public listing company related to their
securities market-related matters. |
|
7. |
Foreign financial matters. |
|
8. |
Protection of financial customers. |
|
9. |
Dealing and penalizing the violation of related laws
and regulations of finance. |
|
10. |
Collection of and analysis on relevant statistic
data related to financial supervision, management and inspection. |
|
11. |
Other matters related to financial supervision, management
and inspection. |
Regulation
of Insurance Agents and Agencies
The current
principal regulation governing insurance agents and agencies is the Rules on the Administration of Insurance Agent latest amended
on June 24, 2014 by Insurance Bureau of FSC (the “Agent Rule”). An insurance agent stipulated under the Insurance
Law refers to a person who is on behalf of the insurer to conduct agency business pursuant to the agency contract or the power
of attorney and charges fees from the insurer. Depending on their focused insurance areas, i.e. property insurance and life insurance,
insurance agents can be divided into property insurance agents and life insurance agents. No matter what insurance industry an
insurance agent is engaged in, it must have one of the following qualifications: (1) having passed the insurance agency examination
for professional and technical staff; (2) having passed the insurance agency qualification test; or (3) having obtained the agency
practitioner certificate and practiced the same business. Those who have agent qualifications required by the Agent Rule may conduct
business after they obtain the practitioner certificates under the name of themselves or the company they work for. An agency
company must hire more than one agent to act as signatory(ies), and registered with the administrative authority, the number of
whom can be adjusted appropriately in accordance with the scale of business. If necessary, the administrative authority may, in
its discretion, require the company to add more signatories. An insurance agent may only work for one insurance agency company
as signatory at one time.
There are special
requirements for agency companies, such as the name of an agent company must contain the words "insurance agency", and
when an agency company applies to operate agency business, the minimum registered capital must be at least NT$5 million ($157,953)
fully paid up in cash, according to which, insurance agency companies with business license obtained prior to the implementation
of this latest Agent Rule shall adjust their registered capital within five years upon the its implementation.
The Practitioner
Certificate
The practitioner
certificate has a duration of five years, and must be renewed before expiration. In case an agent has the qualifications for both
of property and life insurance, unless otherwise approved by the administrative authority, only one kind of insurance agency practitioner
certificate may be obtained upon his selection.
Education and
Training
There’re
two types of education and training for an insurance agent, pre-vocational and on-the-job education and training. An insurance
agent must attend in pre-vocational education and training for at least 32 hours during the one year before applying for practicing
insurance agency business and on-the-job education and training for at least 16 hours with law courses for no less than 8 hours
per year, commencing after one year from the issuance of this latest Agent Rule.
Management
of Insurance Agencies
The rules describing
how to conduct insurance agency business concentrate on the concept that the agencies must take care of customers' matters in
good faith. To ensure this concept is properly carried out, the rules require insurance agency companies must have legal compliance
officers with one of the following qualifications: (1) are qualified to be insurance agents or brokers and have worked as actual
signatories; (2) have five years working experience in the insurance industry, insurance agency or insurance brokerage; or (3)
having graduated from departments related to insurance or law departments of colleges and universities with more than three years
working experience in insurance industry, insurance agency or insurance brokerage.
Regulation
of Insurance Brokers and Brokerage Companies
The current
principal regulation governing insurance brokers and brokerage companies is the Rules on the Administration of Insurance Broker
last amended on June 24, 2014 by Insurance Bureau of FSC (the “Broker Rule”). An insurance broker stipulated under
the Insurance Law refers to a person who negotiates to conclude an insurance contract on behalf of the insured and charges fees
from the insured. Depending on their focused insurance areas, i.e. property or life insurance, insurance brokers can be divided
into property insurance brokers and life insurance brokers. No matter what insurance industry an insurance broker is engaged in,
it must have one of the following qualifications: (1) have passed the insurance brokerage examination for professional and technical
staff; (2) have passed the insurance brokerage qualification test; or (3) have obtained the insurance brokerage practitioner certificate
and practiced the same business.
Those who have
brokerage qualifications required by the Broker Rule may conduct business after they obtain the practitioner certificates under
their own name or the company they work for. A brokerage company must hire more than one broker to act as signatory(ies), and
registered with the administrative authority, the number of whom can be adjusted appropriately in accordance with the scale of
business. If necessary, the administrative authority may, in its discretion, require the company to add signatories. An insurance
broker may only work for one insurance brokerage company as signatory at one time.
There are special
requirements for brokerage companies, such as the name of an brokerage company must contain the words "insurance broker";
when an brokerage company applies to operate brokerage business, the minimum registered capital must be at least NT$5 million
($157,953) fully paid up in cash, according to which, insurance brokerage companies with business license obtained prior to the
implementation of this latest Broker Rule shall adjust their registered capital within five years upon the its implementation.
The Practitioner
Certificate
The insurance
broker practitioner certificate has a validation duration of five years, and must be renewed before expiration. In case a broker
has the qualifications for both property insurance and life insurance, he may obtain both insurance brokerage practitioner certificates.
Education and
Training
There’re
two types of education and training for an insurance broker, pre-vocational and on-the-job education and training. An insurance
broker must attend pre-vocational education and training for at least 32 hours during the one year before applying for practicing
insurance broker business and on-the-job education and training for at least 16 hours with law courses for no less than 8 hours
per year, commencing after one year from the issuance of this latest Broker Rule.
Management
of Insurance Brokerages
The rules describing
how to conduct brokerage business concentrate on the concept that the brokerages must take care of customers' matters in good
faith. To ensure that this concept is properly carried out, the rules require insurance brokerage companies must have legal compliance
officers who have one of the following qualifications: (1) are qualified to be insurance agents or brokers and have worked as
actual signatories; (2) have five years working experience in the insurance industry, insurance agency or insurance brokerage;
or (3) have graduated from college and university departments related to insurance or law with more than three years working experience
in insurance industry, insurance agency or insurance brokerage.
Regulation
of Insurance Salespersons
The current
principal regulation governing individual insurance salespersons is the Rules on the Administration of Insurance Salespersons
latest amended on September 14, 2010 by Insurance Bureau of FSC (the “Salesperson Rule”). An insurance salesperson
falling under the Insurance Law refers to a person who is engaged in attracting insurance business for insurance companies, insurance
brokerage companies and insurance agency companies. A salesperson is not allowed to attract business for the company he belongs
unless he has completed the registration in accordance with the Salesperson Rules and has obtained the registration certificate.
In order to obtain the registration certificate, an insurance salesperson must be at least 20 years old and has at least graduated
from a senior high school or a senior vocational school or have an equivalent educational background. In addition, the salesperson
must meet one of the following requirements: (1) passed the salesperson qualification examination held by relevant associations;
or (2) have a valid the registration certificate. Once the salespersons passed the qualification examination, the relevant association
will notify the company where the salesperson works, then the company will issue a registration certificate for the salesperson
and file such registration certificate with the relevant authorities. The registration certificate is valid for five years and
must be renewed before expiration. The salesperson must present the registration certificate before they start attracting insurance
business. Unless approved by the company, the salesperson may not work for any other insurance company, insurance brokerage company
or insurance agency company. The company supervises the work of the salesperson and is joint and severally liable for any damage
caused by its salesperson.
Education and
Training
Salespersons
must attend in education and training held by their companies every year, or the companies shall revoke the registration certificates
of those who fail to attend such education and training.
The Salesperson
Rule also stipulates the proper ways and manners to be followed by the salespersons in conducting their businesses and specifies
the penalties in case of their violation of the Salesperson Rule.
Taiwan
Regulations on Foreign Exchange
Foreign exchange
regulation in Taiwan is primarily governed by the Ordinance of Foreign Exchange Administration, latest amended on April 29, 2009
(the “Foreign Exchange Ordinance”). Under the Foreign Exchange Ordinance, foreign exchange refers to foreign currency,
bills and marketable securities. The authority managing the administration of foreign exchange is Ministry of Finance of Republic
of China, while the authority managing the practical operation of foreign exchange business is Central Bank of Republic of China.
The Foreign Exchange Ordinance also specifies the allocated power of Ministry of Finance and Central Bank, respectively. To the
extent that any foreign exchange receipts, payments or transactions reach the threshold of NT$500,000 ($16,653) or equivalent
in foreign currency, it must be reported to the Central Bank or its designated authorities. Upon incurrence of any of the following
events, the State Council of Republic of China may determine and announce that for a period of time, to close the foreign exchange
market, suspend or restrict all or partial foreign exchange payment, order a mandatory sale or deposit of all or partial foreign
exchange into a designed bank, or dispose in any other manner as it deems necessary:
|
· |
the disorder in domestic or international economy
to the detriment of the stability of Taiwan’s economy; or |
|
· |
Taiwan suffers serious trade deficit. |
Taiwan
Regulation on Foreign Investment
The current
principal regulation governing foreign investment is Foreign Investment Regulation latest amended on November 19, 1997 (the “Investment
Regulation”). Under the Investment Regulation, investment refers to any activities involving (1) holding share capital of
a company incorporated in Taiwan; (2) establishing branches, wholly-owned or partnership enterprises in Taiwan; or (3) providing
more than one-year term loan to the above-mentioned investee enterprises. The authority in charge of foreign investment is Ministry
of Economic Affairs of Republic of China. The industries in Taiwan are categorized into permitted, restricted and prohibited foreign
investment areas. Investors may apply for settlement of exchange in accordance with the annual yield of their investment or the
allocation of surplus.
Eminent Domain
When the investment
made by an investor constitutes less than 45% of the total amount of capital of the investee enterprise, and the investee enterprise
has been expropriated or acquired by the government for the purpose of national defense, reasonable government compensation shall
be paid to the investors. However, if the capital contribution made by the investor constitutes at least 45% of the total amount
of capital of the investee enterprise and continues remaining above 45% for two decades since its establishment, then the government
may not exercise its eminent domain power over such investee enterprise.
Taiwan
Regulations on Tax
The current
principal regulations governing tax in Taiwan include the following:
|
· |
Income Tax Law, latest amended on January 8, 2014; |
|
· |
The Implementation Rules of Income Tax Law, latest
amended on August 26, 2013; |
|
· |
Value-Added and Non-Value-Added Business Tax Law,
latest amended on June 4, 2014; and |
|
· |
The Enforcement Rules of Value-Added And Non-Value-Added
Business Tax Law, latest amended on May 2, 2014. |
Under the Income
Tax Law, there are two kinds of income tax, comprehensive income tax for individuals and income tax for enterprises operating
for profit, respectively.
Individuals
who have income with a source within Taiwan must pay comprehensive income tax on their income sourced within Taiwan; while non-resident
individuals having income with a source within Taiwan, except otherwise provided in the Income Tax Law, shall pay tax based on
the amount attributable to the sources of their income.
The enterprise
with head office located in Taiwan shall pay profit-seeking income tax on its global income both within and outside Taiwan; while
the enterprises with head office outside Taiwan shall only pay profit-seeking income tax on its business income sourced from within
Taiwan.
Rate of Income
Tax
The individual
comprehensive income tax exemption threshold is NT$60,000 ($1,998) per person per year. Any income beyond such exemption threshold
is subject to a progressive tax rate ranging from 5% to 40%.
With respect
to enterprises operating for profit, the exemption threshold is NT$120,000 ($3,997). Any income beyond such exemption threshold
is subject to 17% tax rate on its taxable income.
Sale of goods
or service, import of goods in Taiwan are subject to a Value-Added or Non-Value-Added Business Tax. The Rate of business tax,
except as otherwise stipulated in the relevant tax law, ranges from 5% to 10% as determined by the State Council of Taiwan.
PRC Regulations
of the Insurance Industry
The insurance
industry in the PRC is highly regulated. CIRC is the regulatory authority responsible for the supervision of the Chinese insurance
industry. Insurance activities undertaken within the PRC are primarily governed by the Insurance Law and the related rules and
regulations.
Initial
Development of Regulatory Framework
The Chinese
Insurance Law was enacted in 1995. This original insurance law, which we refer to as the 1995 Insurance Law, provided the initial
framework for regulating the domestic insurance industry. Among the steps taken under the 1995 Insurance Law were the following:
|
(a) |
Licensing of insurance companies
and insurance intermediaries, such as agencies and brokerages. The 1995 Insurance Law established requirements for minimum
registered capital levels, form of organization, qualification of senior management and adequacy of the information systems
for insurance companies, insurance agencies and brokerages. |
|
(b) |
Separation of property and
casualty insurance and life insurance businesses. The 1995 Insurance Law distinguished insurance between property, casualty,
liability and credit insurance businesses, on the one hand, and life, accident and health insurance businesses on the other,
and prohibited insurance companies from engaging in both types of businesses. |
|
(c) |
Regulation of market conduct
by participants. The 1995 Insurance Law prohibited fraudulent and other unlawful conduct by insurance companies, agencies
and brokerages. |
|
(d) |
Substantive regulation of
insurance products. The 1995 Insurance Law gave insurance regulators the authority to approve the policy terms and premium
rates for certain insurance products. |
|
(e) |
Financial condition and performance
of insurance companies. The 1995 Insurance Law established reserve and solvency standards for insurance companies, imposed
restrictions on investment powers and established mandatory reinsurance requirements, and put in place a reporting regime
to facilitate monitoring by insurance regulators. |
|
(f) |
Supervisory and enforcement
powers of the principal regulatory authority. The principal regulatory authority, then the People’s Bank of China, was
given broad powers under the 1995 Insurance Law to regulate the insurance industry. |
Establishment
of the CIRC and 2002 Amendments to the Insurance Law
China’s
insurance regulatory regime was further strengthened with the establishment of the CIRC in 1998. The CIRC was given the mandate
to implement reform in the insurance industry, minimize insolvency risk for Chinese insurers and promote the development of the
insurance market.
The 1995 Insurance
Law was amended in 2002 and the amended insurance law, which we refer to as the 2002 Insurance Law, became effective on January
1, 2003. The major amendments to the 1995 Insurance Law include:
|
(a) |
Authorizing the CIRC to be
the insurance supervisory and regulatory body nationwide. The 2002 Insurance Law expressly grants the CIRC the authority to
supervise and administer the insurance industry nationwide. |
|
(b) |
Expanding the permitted scope
of business of property and casualty insurers. Under the 2002 Insurance Law, property and casualty insurance companies may
engage in the short-term health insurance and accident insurance businesses upon the CIRC’s approval. |
|
(c) |
Providing additional guidelines
for the relationship between insurance companies and insurance agents. The 2002 Insurance Law requires an insurance company
to enter into an agent agreement with each insurance agent that will act as an agent for such insurance company. The agent
agreement sets forth the rights and obligations of the parties to the agreement as well as other matters pursuant to law.
An insurance company is responsible for the acts of its agents when the acts are within the scope authorized by the insurance
company. |
|
(d) |
Relaxing restrictions on the
use of funds by insurance companies. Under the 2002 Insurance Law, an insurance company may use its funds to make equity investments
in insurance-related enterprises, such as asset management companies. |
|
(e) |
Allowing greater freedom for
insurance companies to develop insurance products. The 2002 Insurance Law allowed insurance companies to set their own policy
terms and premium rates, subject to the approval of, or a filing with, the CIRC. |
2009 Amendments
to the Insurance Law
The 2002 Insurance
Law was amended again in 2009 and the amended insurance law, which we refer to as the 2009 Insurance Law, became effective on
October 1, 2009. The major amendments to the 2009 Insurance Law include:
(a) |
Strengthening protection of the insured’s
interests. The 2009 Insurance Law added a variety of clauses such as incontestable clause, abstained and estoppel clause,
common disaster clause and amending immunity clause, claims-settlement prescription clause, reasons for claims rejection and
contract modification clause. |
(b) |
Strengthening supervision on the qualification of
the shareholders of the insurance companies and setting forth specific qualification requirements for the major shareholders,
directors, supervisors and senior managers of insurance companies. |
(c) |
Expanding the business scope of insurers and further
relaxing restriction on the use of fund by insurers. |
(d) |
Strengthening supervision on solvency of insurers
with stricter measures. |
(e) |
Tightening regulations governing the administration
of insurance intermediary companies, especially those relating to behaviors of insurance agents. |
According to
the 2009 Insurance Law, the minimum registered capital required to establish an insurance agency or insurance brokerage as a company
must comply with the PRC Company Law. The registered capital or the capital contribution of insurance agencies or insurance brokerages
must be paid-up capital in cash. The 2009 Insurance Law also sets forth some specific qualification requirements for insurance
agency and brokerage practitioners. The senior managers of insurance agencies or insurance brokerages must meet specific qualification
requirements, and their appointments are subject to approval of the CIRC. Personnel of an insurance agency or insurance brokerage
engaging in the sales of insurance products must meet the qualification requirements set by the CIRC and obtain a qualification
certificate issued by the CIRC. Under the 2009 Insurance Law, the parties to an insurance transaction may engage insurance adjusting
firms or other independent appraisal firms that are established in accordance with applicable laws, or persons who possess the
requisite professional expertise, to conduct assessment and adjustment of the insured subject matters. Additionally, the 2009
Insurance Law specifies additional legal obligations for insurance agencies and brokerages.
The CIRC
The CIRC has
extensive authority to supervise insurance companies and insurance intermediaries operating in the PRC, including the power to:
|
(a) |
promulgate regulations applicable to the Chinese
insurance industry; |
|
(b) |
investigate insurance companies and insurance intermediaries; |
|
(c) |
establish investment regulations; |
|
(d) |
approve policy terms and premium rates for certain
insurance products; |
|
(e) |
set the standards for measuring the financial soundness
of insurance companies and insurance intermediaries; |
|
(f) |
require insurance companies and insurance intermediaries
to submit reports concerning their business operations and condition of assets; order the suspension of all or part of an
insurance company or an insurance intermediary’s business; |
|
(g) |
approve the establishment, change and dissolution
of an insurance company, an insurance intermediary or their branches; |
|
(h) |
review and approve the appointment of senior managers
of an insurance company, an insurance intermediary or their branches; and |
|
(i) |
punish improper behaviors or misconducts of an insurance
company or an insurance intermediary. |
Regulation
of Insurance Agencies
The principal
regulation governing insurance agencies is the Provisions on the Supervision and Administration of Specialized Insurance Agencies
(the “Agency Provisions”) promulgated by the CIRC on September 25, 2009 and effective on October 1, 2009, which replaced
the Provisions on the Administration of Insurance Agencies issued by the CIRC on December 1, 2004 and effective on January 1,
2005. According to the Agency Provisions, the establishment of an insurance agency is subject to minimum registered capital requirement
and other requirements and the approval of the CIRC. The term “insurance agency” refers to an entity that engages
in insurance agency business within the authorization of, and collects commissions from, insurance companies, including the professional
insurance agency companies and their branches. The insurance agency shall meet the qualification requirements specified by the
CIRC, obtain the license to conduct an insurance agency business with the approval of the CIRC. An insurance agency may take any
of the following forms: (i) a LLC; or (ii) a joint stock limited company. An insurance agency must have a registered capital of
at least RMB2 million ($313,332). Where it is established as a nationwide company, its registered capital must be at least RMB10
million ($1,566,661). The registered capital must be paid up in cash. On April 27, 2013, CIRC issued the Decision on Revising
the Agency Provisions, pursuant to which, CIRC has mandated any insurance agency established subsequent to the Decision on Revising
the Agency Provisions to meet a minimum registered capital requirement of RMB50 million ($8.1 million).
On May 16,
2013, CIRC issued Notice for Further Clarification on Related Issues of Access to Professional Insurance Intermediary Market (the
“2013 Notice”), pursuant to which, professional insurance agency established prior to the issuance of the Decision
on Revising the Agency Provisions, with registered capital less than RMB50 million ($8.1 million), can operate their existing
business within the provinces where they have the registered office or branch office, but shall not set up any new branches in
any province where they do not have the registered office or any branch office.
An insurance
agency may engage in the following insurance agency businesses:
|
(a) |
selling insurance products on behalf
of the insurer principal; |
|
(b) |
collecting insurance premiums on behalf of the insurer
principal; and |
|
(c) |
conducting loss surveys and handling claims of
insurance businesses on behalf of the insurer principal; and other business activities specified by the CIRC. |
The name of
an insurance agency must contain the words “insurance agency” or “insurance sales.” The license of an
insurance agency is valid for a period of three years and may be renewed with due application 30 days prior to its expiration.
An insurance agency must report to the CIRC when it (i) changes its registered name or the name of its branches; (ii) changes
its registered address or the operating address of its branches; (iii) the sponsors or major shareholders change their respective
name; (iv) changes its major shareholders; (v) change its registered capital; (vi) materially change its equity structure; (vii)
amends its articles of association; or (viii) closes its branches. Personnel of an insurance agency, including those of its branches
engaging in the sales of insurance products or relevant loss survey and claim settlement, must pass a qualification examination
for insurance agency practitioners organized by the CIRC and obtain a “Qualification Certificate for Insurance Agency Practitioners.”
The senior managers of an insurance agency including its branches must meet specific qualification requirements set forth in the
Agency Provisions. The appointment of the senior managers of an insurance agency including its branches is subject to review and
approval of the CIRC.
Regulation
of Insurance Brokerages
The principal
regulation governing insurance brokerages is the Provisions on the Supervision and Administration of Insurance Brokerage Institutions
(the “Brokerage Provisions”) promulgated by the CIRC on September 25, 2009 and effective on October 1, 2009, which
replaced the Provisions on the Administration of Insurance Brokerages issued by the CIRC on December 15, 2004 and effective on
January 1, 2005. According to this Brokerage Provisions, the establishment of an insurance brokerage is subject to the approval
of the CIRC. The term “insurance brokerage” refers to an entity provides brokerages service on the execution of the
insurance contract between the insured and the insurance company based on the interests of the insured and collects commission
as agreed, including the insurance brokerage companies and their branches, The insurance brokerage shall meet the qualification
requirements specified by the CIRC and obtain the license to operate an insurance brokering business with the approval of the
CIRC. Insurance brokering business includes both direct insurance brokering, which refers to brokering activities on behalf of
insurance applicants or the insured in their dealings with the insurance companies, and reinsurance brokering, which refers to
brokering activities on behalf of insurance companies in their dealings with reinsurance companies. An insurance brokerage may
take any of the following forms: (i) a LLC; or (ii) a joint stock limited company. An insurance brokerage company must have a
registered capital or capital contribution of at least RMB10 million ($1,566,661). The registered capital must be paid up in cash.
On April 27, 2013, CIRC issued the Decision on Revising the Brokerage Provisions (the “Decision on Revising the Brokerage
Provisions”), pursuant to which, CIRC has mandated any insurance brokerage established subsequent to the Decision on Revising
the Brokerage Provisions to meet a minimum registered capital requirement of RMB50 million ($8.1 million).
On May 16,
2013, CIRC issued Notice for Further Clarification on Related Issues of Access to Professional Insurance Intermediary Market (the
“2013 Notice”), pursuant to which, professional insurance brokerage established prior to the issuance of the Decision
on Revising the Brokerage Provisions, with registered capital less than RMB50 million ($8.1 million), can operate their existing
business within the provinces where they have the registered office or branch office, but shall not set up any new branches in
any province where they do not have the registered office or any branch office.
An insurance
brokerage may conduct the following insurance brokering businesses:
|
(a) |
making insurance proposals, selecting
insurance companies and handling the insurance application procedures for the insurance applicants; |
|
(b) |
assisting the insured or the beneficiary to claim
compensation; |
|
(c) |
reinsurance brokering business; and |
|
(d) |
providing consulting services to clients with respect
to disaster and damage prevention, risk assessment and risk management; and other business activities specified by the CIRC. |
The name of
an insurance brokerage must contain the words “insurance brokerage.” The license of an insurance brokerage is valid
for three years and may be renewed with due application 30 days prior to its expiration. An insurance brokerage must report to
the CIRC when it (i) changes its registered name or the name of its branches; (ii) change its registered address or the operating
address of its branches; (iii) the sponsors or the major shareholders change their respective name; (iv) changes its major shareholders;
(v) changes its registered capital; (vi) materially changes its equity structure; (vii) amends its articles of association; or
(viii) closes its branches. Personnel of an insurance brokerage, including those of its branches engaging in any of the insurance
brokering businesses described above, must pass a qualification examination for insurance brokering practitioners organized by
the CIRC and obtain a “Qualification Certificate for Insurance Brokerage Practitioners”. The senior managers of an
insurance brokerage including its branches must meet specific qualification requirements set forth in the Brokerage Provisions.
Appointment of the senior managers of an insurance brokerage including its branches is subject to review and approval by the CIRC.
Regulation
of Insurance Salespersons
The principal
regulation governing individual insurance salespersons is the Measures on the Supervision of Insurance Salespersons issued by
the CIRC on January 6, 2013 and effective on July 1, 2013, which replaced the Provisions on the Administration of Insurance Salespersons
promulgated on April 6, 2006 and effective on July 1, 2006. Under this regulation, the term “insurance salesperson”
refers to an individual who sells insurance products for an insurance company, including those who are engaged by insurance companies
or by insurance agencies. To engage in insurance sales activities as an insurance salesperson, a person first must pass the qualification
examination for the insurance agency practitioners organized by the CIRC to obtain a “Qualification Certificate of Insurance
Agency Practitioners”. The person must have a junior high school education or above to be qualified for the examination.
In addition to the qualification certificate, a person must be registered with the CIRC’s Insurance Intermediary Supervision
Information System and obtain a “Practice Certificate of Insurance Salespersons” issued by the insurance company or
insurance agency to which he or she belongs in order to conduct insurance sales activities.
Regulation
of Insurance Brokerage Practitioner and Insurance Adjustment Practitioners
The principal
regulation governing insurance brokerage practitioners and insurance adjustment practitioners is the Measures on the Supervision
of Insurance Brokerage Practitioners and Insurance Adjustment Practitioners issued by the CIRC on January 6, 2013 and effective
on July 1, 2013. To engage in the insurance brokerage activities as an insurance brokerage practitioner, or in the insurance adjustment
activities as an insurance adjustment practitioner, a person first must pass the qualification examination organized by the CIRC
for the insurance brokerage practitioners or for the insurance adjustment practitioners to obtain a “Qualification Certificate
of Insurance Brokerage Practitioners” or a “Qualification Certificate of Insurance Adjustment Practitioners”.
The person must have a tertiary education or above to be qualified for the examination. In addition to the qualification certificate,
a person also must be registered with the CIRC’s Insurance Intermediary Supervision Information System and obtain a “Practice
Certificate of Insurance Brokerage Practitioners” or “Practice Certificate of Insurance Adjustment Practitioners”
issued by the insurance brokerage firm or insurance claims adjusting company to which he or she belongs in order to conduct insurance
brokerage or claims adjustment activities. An insurance brokerage practitioner is not allowed to conduct insurance brokerage activities
on behalf of himself or herself.
Content
Related to Insurance Industry in the Legal Documents of China’s Accession to the WTO
According to
the Circular of the CIRC on Distributing the Content Related to Insurance Industry in the Legal Documents of China’s Accession
to the WTO, for the life insurance sector, within three years of China’s accession to the WTO on December 11, 2001, geographical
restrictions were to be lifted, equity joint venture companies allowed to provide health insurance, group insurance, and pension/annuity
services to Chinese citizens and foreign citizens, and no other restrictions allowed except those on the proportion of foreign
investment (no more than 50%) and establishment conditions. For the non-life insurance sector, within three years of China’s
accession, the geographical restrictions were to be lifted and no restrictions allowed other than establishment conditions. For
the insurance brokerage sector, within five years of China’s accession, the establishment of wholly foreign-funded subsidiary
companies was to be allowed, and no restrictions allowed other than establishment conditions and restrictions on business scope.
PRC Regulations
on Foreign Exchange
Foreign
Currency Exchange
Foreign exchange
regulation in China is primarily governed by the following rules:
|
· |
Foreign Currency Administration Rules (2008 Revision),
as amended or revised, or the Exchange Rules; and |
|
· |
Administration Rules of the Settlement, Sale and
Payment of Foreign Exchange (1996), as amended or revised, or the Administration Rules. |
Under the Exchange
Rules, the RMB is convertible for current account items, including the distribution of dividends, interest payments, trade and
service-related foreign exchange transactions. Conversion of RMB for capital account items, such as direct investment, loan, security
investment and repatriation of investment, however, is still subject to the approval of the SAFE or relevant authorities.
Under the Administration
Rules, foreign-invested enterprises may only buy, sell or remit foreign currencies at those banks authorized to conduct foreign
exchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining
approval from the SAFE. Capital investments by foreign-invested enterprises outside of China are also subject to limitations,
which include approvals by the Ministry of Commerce, the SAFE and the State Development and Reform Commission.
PRC Regulations
on Dividend Distribution
The principal
regulations governing dividend distributions of wholly foreign-owned companies include:
|
· |
Wholly Foreign-Owned Enterprise Law (1986), as
amended or revised; and |
|
· |
Wholly Foreign-Owned Enterprise Law Implementing
Rules (2001 Revision), as amended or revised. |
Under these
regulations, wholly foreign-owned companies in the PRC may pay dividends only out of their accumulated profits as determined in
accordance with PRC accounting standards. In addition, these wholly foreign-owned companies are required to set aside at least
10% of their respective accumulated profits each year, if any, to fund certain reserve funds, until the accumulative amount of
such fund reaches 50% of its registered capital. These reserve funds are not distributable as cash dividends.On January 19, 2015,
the Ministry of Commerce of China (“MOFCOM”) published a draft version of a proposed Foreign Investment Law (the “Draft
Foreign Investment Law”) with an explanatory note. MOFCOM has requested comments from the public on the Draft Foreign Investment
Law by February 17, 2015, which, once promulgated, will replace and integrate the three existing laws over foreign investment,
including the Foreign-Invested Enterprise Law.
PRC Regulations
on Tax
PRC Enterprise
Income Tax
The PRC EIT
is calculated base on the taxable income determined under the PRC accounting standards and regulations, as well as the EIT law.
On March 16, 2007, the National People’s Congress of China enacted the EIT Law, a new EIT law which became effective on
January 1, 2008. On December 6, 2007, the State Council promulgated the Implementation Rules which also became effective on January
1, 2008. On December 26, 2007, the State Council issued the Notice on Implementation of Enterprise Income Tax Transition Preferential
Policy under the EIT Law, or the Transition Preferential Policy Circular, which became effective simultaneously with the EIT Law.
The EIT Law imposes a uniform EIT rate of 25% on all domestic enterprises and foreign-invested enterprises unless they qualify
under certain exceptions. Under the EIT Law, as further clarified by the Implementation Rules, the Transition Preferential Policy
Circular and other related regulations, enterprises that were established and already enjoyed preferential tax treatments before
March 16, 2007 will continue to enjoy them in the following manners: (i) in the case of preferential tax rates, for a five-year
period starting from January 1, 2008, during which the tax rate will gradually increase to 25%; or (ii) in the case of preferential
tax exemption or reduction for a specified term, until the expiration of such term. However, if such an enterprise has not enjoyed
the preferential treatments yet because of its failure to make a profit, its term for preferential treatment will be deemed to
start from 2008.
PRC Business
Tax
Taxpayers providing
taxable services in China are required to pay a business tax at a normal tax rate of 5% of their revenues, unless otherwise provided.
According to the Announcement on the VAT Reform Pilot Program of the Transportation and Selected Modern Service Sectors issued
by the State Tax Bureau in July 2012, the transportation and some selected modern service sectors, including research and development
and technical services, information technology services, cultural creative services, logistics support services, tangible personal
property leasing services, and assurance and consulting service sectors, should pay value-added tax instead of business tax based
on a predetermined timetable (hereinafter referred to as the “VAT Reform”), effective September 1, 2012 for entities
in Beijing and October 1, 2012 for entities in Jiangsu. As of March 15, 2015 none of our Consolidated Affiliated Entities has
been requested to convert into the VAT system.
Dividend Withholding
Tax
Under the PRC
tax laws effective prior to January 1, 2008, dividends paid to foreign investors by foreign-invested enterprises are exempt from
PRC withholding tax. Pursuant to the EIT Law and the Implementation Rules, dividends generated after January 1, 2008 and distributed
to us by our PRC subsidiaries are under a 5% withholding tax subject to PRC laws and regulations, provided that we are determined
by the relevant PRC tax authorities to be a “non-resident enterprise” under the EIT Law.
PRC regulations
relating to the establishment of offshore SPVs by PRC residents
SAFE has promulgated
several regulations, including the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Round-trip
Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or SAFE Circular No. 75, effective
on November 1, 2005. On July 4, 2014, SAFE promulgated the Notice on Issues Relating to Administration of Foreign Exchange in
Offshore Investment & Fund-Raising and Round-trip Investment by Domestic Residents Utilizing Special Purpose Vehicles, or
SAFE Circular No. 37, effective on July 14, 2014, which replaced Circular 75. On February 13, 2015, SAFE promulgated the Notice
on Further Simplifying and Improving Management Policies of Foreign Exchange in Direct Investment, or SAFE Circular No. 13, which
will be effective on June 1, 2015. According to SAFE Circular No. 13, foreign exchange registrations for both domestic and foreign
direct investment shall be undertaken by banks, while SAFE and its branches execute indirect supervision on foreign exchange registration
of direct investment via banks.The regulation requires PRC residents and PRC corporate entities to register with local banks or
local branches (for the supplementary registatration) of SAFE in connection with their direct or indirect offshore investment
activities. These regulations apply to our shareholders who are PRC residents and may apply to any offshore acquisitions that
we make in the future.
Under
these foreign exchange regulations, PRC residents who will makeinvestments in Special Purpose Vehicles or SPVs are required
to register those investments with the bank where the domestic company incorporated, and the PRC residents who have
previously made, prior to the implementation of the SAFE Circular No. 37, direct or indirect investments in SPVs are required
to register those investments with local SAFE for the supplementary registration.In addition, any PRC resident who is a
direct or indirect shareholder of a SPV, is required to update the previously filed registration with the localbanks, with
respect to that SPV, to reflect any material change. If any PRC shareholder fails to make the required registration or update
the previously filed registration, the PRC subsidiaries of that SPV may be prohibited from distributing their profits and the
proceeds from any reduction in capital, share transfer or liquidation to their SPV parent, and the SPV may also be prohibited
from injecting additional capital into its PRC subsidiaries. Moreover, failure to comply with the various foreign exchange
registration requirements described above could result in liabilities for such PRC subsidiaries under PRC laws for evasion of
applicable foreign exchange restrictions. Furthermore, the persons-in-charge and other persons at such PRC subsidiaries who
are held directly liable for the violations may be subject to administrative sanctions.
These foreign
exchange regulations provide that PRC residents include both PRC citizens, meaning any individual who holds a PRC passport or
resident identification card, and individuals who are non-PRC citizens but primarily reside in the PRC due to their economic ties
to China.
ITEM
1A. RISK FACTORS.
You should
carefully consider the risks described below together with all of the other information included in this Form 10-K. The statements
contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties
that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. See “Cautionary
Statement Regarding Forward-Looking Statements.” If any of the following risks actually occurs, our business, financial
condition or results of operations could be harmed. In that case, you may lose all or part of your investment.
Risks Relating
to Our Business
The recent
global macroeconomic events could cause disruptions to our customers and their demand for insurance services. Demand for our products
has been, and will continue to be, adversely affected by overall macroeconomic conditions.
The recent
global macroeconomic events could have a negative impact on businesses around the world. For example, on August 5, 2011, Standard
& Poor’s lowered its long term sovereign credit rating on the United States of America from AAA to AA+. In addition,
the European sovereign debt crisis that started in 2009 has also had a negative impact on the credit ratings of several European
countries and general market sentiment. Furthermore, from May 2013, emerging markets in Asia are facing a capital flight as funds
flow back into Europe and the United States. Emerging markets from Thailand to India plunged into the red amid a heavy sell-off,
as investors reassessed the implications of another shift in the global economy. These downgrades could have material adverse
impacts on financial markets and economic conditions throughout the world. In general, the continuousbad economic situation will
cause weak consumer confidence and diminish consumer and business spending, which will have a negative impact on the general market
demand for insurance services around the world.
Volatility
in the financial markets and overall economic uncertainty increases the risk of substantial quarterly and annual fluctuations
in our earnings. Given the current economic environment, we remain cautious and we expect our customers to be cautious as well,
which could affect our future results. If the economic recovery slows down or dissipates, our business, financial condition, results
of operations and cash flows could be materially and adversely affected.
If we
are unable to obtain and maintain the licenses to operate our business, our business prospects and future results of operations
would be adversely affected.
We operate
our businesses with approvals and licenses granted by the government. If these approvals or licenses are revoked or suspended
or are not renewed, or if we are unable to obtain any additional licenses that we may need to operate or expand our business in
the manner we desire, then our financial condition and results of operations, as well as our prospects, will suffer.
We face
substantial political risks associated with doing business in Taiwan, particularly due to domestic political events and the tense
relationship between Taiwan and the People’s Republic of China, which could adversely affect our financial condition and
results of operations.
Law Broker’s
executive office and substantial assets are located in Taiwan and most of our revenues are derived from our operations in Taiwan
currently. Accordingly, our business, financial condition and results of operations and the market price of our common shares
may be affected by changes in Taiwan governmental policies, taxation, inflation or interest rates and by social instability and
diplomatic and social developments in or affecting Taiwan which are outside of our control. Taiwan has a unique international
political status. Since 1949, Taiwan and the Chinese mainland have been separately governed. The PRC claims it is the sole government
in China and that Taiwan is part of China. Although significant economic and cultural relations have been established between
Taiwan and the PRC, such as the engagement of Economic Cooperation Framework Agreement (“ECFA”) in 2010 and Cross-strait
Investment Protection and Promotion Agreement in 2012, relations may become strained again. On June 21, 2013, Association for
Relations Across the Taiwan Straits of the PRC and Straits Exchange Foundation of Taiwan entered into the Cross-Strait Agreement
on Trade in Services, with the aim of smoothing and extending the cooperation between Mainland China and Taiwan accordingly. However,
as of the date of this Annual Report on Form 10-K, the Taiwan government has not approved Cross-Strait Agreement on Trade in Services.
The PRC government has refused to renounce the use of military force to gain control over Taiwan. Past developments in relations
between the Taiwan and the PRC have on occasion depressed the market prices of the securities of companies in Taiwan. Relations
between the Taiwan and the PRC and other factors affecting military, political or economic conditions in Taiwan could materially
and adversely affect our financial condition and results of operations, as well as the market price and the liquidity of our securities.
In addition, the complexities of the relationship between the Taiwan and PRC require companies involved in cross-strait business
operations to carefully monitor its actions and manage its relationships with both Taiwan and PRC governments. We cannot assure
you that we will be able to successfully manage our relationships with the Taiwan and PRC governments for our cross-strait business
operations, which could have an adverse effect on our ability to expand our business and conduct cross-strait business operations.
Any future
outbreak of contagious diseases may materially and adversely affect our business and operations, as well as our financial condition
and results of operations.
Any future
outbreak of contagious diseases, such as severe acute respiratory syndrome or avian influenza, may disrupt our ability to adequately
staff our business and may generally disrupt our operations. If any of our employees is suspected of having contracted any contagious
disease, we may under certain circumstances be required to quarantine such employees and the affected areas of our premises. As
a result, we may have to temporarily suspend part or all of our operations. Furthermore, any future outbreak may restrict the
level of economic activity in affected regions, which may adversely affect our business and prospects. As a result, we cannot
assure you that any future outbreak of contagious diseases would not have a material adverse effect on our financial condition
and results of operations.
If we
fail to attract and retain productive sales professionals or agents, our business could suffer.
Our entire
sales of life, property and casualty insurance products are conducted through its individual sales professionals or agents, who
are not our employees. Some of these sales professionals or sales agents are significantly more productive than others in generating
sales. If we are unable to attract and retain the core group of highly productive sales professionals or sales agents, our business
could be materially and adversely affected. Competition for sales personnel from insurance companies and other insurance intermediaries
may also force us to increase the compensation of our sales professionals or sales agents, which would increase operating costs
and reduce our profitability.
Our business
and prospects could be materially and adversely affected if we are not able to manage our growth successfully.
Law Broker
commenced its insurance intermediary business in 1992. During the past two decades, Law Broker has expanded its distribution and
service networks across Taiwan, with 27 sales and service outlets (including the headquarters) and 2,182 employees and sales professionals.
Anhou commenced its insurance intermediary business in 2003 and has expanded its operations substantially in recent years. Anhou’s
distribution and service networks expanded from one company in one province to two insurance agencies and one brokerage in 3 provinces
and 36 service outlets as of December 31, 2014. Meanwhile, we broadened our service offerings from the distribution of only life
insurance products to cover a wide variety of property and casualty insurance and automobile insurance products. We anticipate
continued growth in the future through multiple means. Our expansion has placed, and will continue to place, substantial demands
on our managerial, operational, technological and other resources. To manage and support our continued growth, we must continue
to improve our operational, administrative, financial and technological systems, procedures and controls, and expand, train and
manage our growing employee and agent base. Furthermore, our management will be required to maintain and expand our relationships
with insurance companies, other insurance intermediaries, regulators and other third parties. We cannot assure you that our current
and planned personnel, systems, procedures and controls will be adequate to support our future operations. Any failure to effectively
and efficiently manage our expansion could materially and adversely affect our ability to capitalize on new business opportunities,
which in turn could have a material adverse effect on our results of operations.
We may
be unsuccessful in identifying and acquiring suitable acquisition candidates, which could adversely affect our growth.
We expect our
future growth to come from acquisitions of high-quality independent insurance agencies and brokerages as well as establishment
of new insurance agencies and brokerages. There is no assurance we can successfully identify suitable acquisition candidates,
especially in those areas where we do not yet have a presence. Even if we identify suitable candidates, we may not be able to
complete an acquisition on terms that are commercially acceptable to us. In addition, we compete with other entities to acquire
high-quality independent insurance agencies and brokerages. Many of our competitors may have substantially greater financial resources
than we do and may be able to outbid us for these acquisition targets. If we are unable to complete acquisitions, our growth strategy
may be impeded and our earnings or revenue growth may be negatively affected.
If we
fail to integrate acquired companies efficiently, or if the acquired companies do not perform to our expectations, our business
and results of operations may be adversely affected.
Even if we
succeed in acquiring other insurance agencies and brokerages, our ability to integrate an acquired entity and its operations is
subject to a number of factors. These factors include difficulties in the integration of acquired operations and retention of
personnel, especially the sales professionals and sales agents who are not employees of the acquired company, entry into unfamiliar
markets, unanticipated problems or legal liabilities, and tax and accounting issues. The need to address these factors may divert
management’s attention from other aspects of our business and materially and adversely affect our business prospects. In
addition, costs associated with integrating newly acquired companies could negatively affect our operating margins.
Furthermore,
the acquired companies may not perform to our expectations for various reasons, including legislative or regulatory changes that
affect the insurance products in which a company specializes, the loss of key clients after the acquisition closes, general economic
factors that impact a company in a direct way and the cultural incompatibility of an acquired company’s management team
with us. If an acquired company cannot be operated at the same profitability level as our existing operations, the acquisition
would have a negative impact on our operating margin. Our inability to successfully integrate an acquired entity or its failure
to perform to our expectations may materially and adversely affect our business, prospects, results of operations and financial
condition.
Because
the commission and fee revenue we earn on the sale of insurance products is based on premiums and commission and fee rates set
by insurance companies, any decrease in these premiums or commission and fee rates may have an adverse effect on our results of
operations.
We are engaged
in the insurance agency and brokerage business and derive revenues primarily from commissions and fees paid by the insurance companies
whose policies our customers purchase. The commission and fee rates are set by insurance companies and are based on the premiums
that the insurance companies charge. Commission and fee rates and premiums can change based on the prevailing economic, regulatory,
taxation-related and competitive factors that affect insurance companies. These factors, which are not within our control, include
the ability of insurance companies to place new business, underwriting and non-underwriting profits of insurance companies, consumer
demand for insurance products, the availability of comparable products from other insurance companies at a lower cost, the availability
of alternative insurance products such as government benefits and self-insurance plans, as well as the tax deductibility of commissions
and fees and the consumers themselves. In addition, premium rates for certain insurance products, such as the mandatory automobile
liability insurance that each automobile owner in Taiwan and the PRC is legally required to purchase, are tightly regulated by
Insurance Bureau of Financial Supervisory Commission, Republic of China, or the FSC in Taiwan and China Insurance Regulatory Commission,
or the CIRC in China.
Because we
do not determine, and cannot predict, the timing or extent of premium or commission and fee rate changes, we cannot predict the
effect any of these changes may have on our operations. Intense competition among insurance companies has led to a gradual decline
in premium rate levels of some property and casualty insurance products. Although such decline may stimulate demand for insurance
products and increase our total sales volume, it also reduces the commissions and fees we earn on each policy sold. Any decrease
in premiums or commission and fee rates may significantly affect our profitability. In addition, our budget for future acquisitions,
capital expenditures and other expenditures may be disrupted by unexpected decreases in revenues caused by decreases in premiums
or commission and fee rates, thereby adversely affecting our operations.
Competition
in our industry is intense and, if we are unable to compete effectively, we may lose customers and our financial results may be
negatively affected.
The insurance
intermediary industry in Taiwan and China is highly competitive, and we expect competition to persist and intensify. In insurance
product distribution, we face competition from insurance companies that use their in-house sales force and exclusive sales agents
to distribute their products, and from business entities that distribute insurance products on an ancillary basis, such as commercial
banks, postal offices and automobile dealerships, as well as from other professional insurance intermediaries. We sell insurance
products through our exclusive sales professionals and sales agents pursuant to agency contracts entered into with our subsidiaries
or Consolidated Affiliated Entities in Taiwan and China, as applicable. The term of these agency contracts with Law Broker generally
is for three years and will be re-signed upon expiration, while the term of these agency contracts with Anhou generally is for
one year with automatic extension in case neither party objects at the end of the term. These sales professionals and sales agents
are not our employees and we cannot assure you that they will continue their services subsequent to the expiration of such agency
contracts. We compete for customers on the basis of product offerings, customer services and reputation. Many of our competitors
have greater financial and marketing resources than we do and may be able to offer products and services that we do not currently
offer and may not offer in the future. If we are unable to compete effectively against those competitors, we may lose customers
and our financial results may be negatively affected.
Quarterly
and annual variations in our commission and fee revenue may have unexpected impacts on our results of operations.
Our commission
and fee revenue is subject to both quarterly and annual fluctuations as a result of the seasonality of its business, the timing
of policy renewals and the net effect of new and lost business. Historically, Law Broker’s commission and fee revenue, particularly
revenue derived from distribution of life insurance products, for the second and fourth quarters of any given year have been higher
than the first and third quarters. Anhou’s commission and fee revenue, particularly revenue derived from distribution of
life insurance products, for the fourth quarter of any given year has been the highest among all four quarters, while Anhou’s
commission and fee revenue for the first quarter of any given year has been the lowest among all four quarters. The factors that
cause the quarterly and annual variations are not within our control. Specifically, consumer demand for insurance products can
influence the timing of renewals, new business and lost business, which generally includes policies that are not renewed, and
cancellations. As a result, you may not be able to rely on quarterly or annual comparisons of our operating results as an indication
of our future performance.
If our
contracts with insurance companies are terminated or changed, our business and operating results could be adversely affected.
We primarily
act as agents for insurance companies in distributing their products to retail customers. Our relationships with the insurance
companies are governed by agreements between Law Broker or Anhou and the insurance companies. See “Corporate History and
Structure - Insurance Company Partners.” These contracts establish, among other things, the scope of authority, the pricing
of the insurance products we distributes and its fee rates. These contracts typically have a term of one year and will be automatically
extended for successive one-year term unless terminated earlier with at least 30 days or 60 days advance notice prior to its expiration.
In the fiscal
year ended December 31, 2014, Law Broker’s top five insurance company partners, after aggregating the business conducted
between Law Broker and the various local branches of the insurance companies were Farglory Life Insurance Co., Ltd., CTBC Life
Insurance Co., Ltd., Shin Kong Life Insurance Co., Ltd., Fubon Life Insurance Co., Ltd., and AIA International Limited, Taiwan Branch.
Among them, Farglory Life Insurance Co., Ltd. accounted for 30.4% of Law Broker’s total net revenues from commissions and
fees in the fiscal year ending December 31, 2014.
In the fiscal
year ended December 31, 2014, Anhou’s top five insurance company partners, after aggregating the business conducted between
Anhou and the various local branches of the insurance companies, were Taikang Life Insurance Co., Ltd., YINGDA TAIHE Life Insurance
Co., Ltd., Sunshine Insurance Group Corporation Limited, Sino Life Insurance Co., Ltd., PICC Property and Casualty Co., Ltd.,
and AVIVA Life Insurance Co., Ltd. Among them, Taikang Life Insurance Co., Ltd. accounted for 20.12% of Anhou’s total net
revenues from commissions and fees the fiscal year ending December 31, 2014.
The termination
of our contracts with insurance companies that in aggregate account for a significant portion of our business, or changes to material
terms of these contracts, could adversely affect our business and operating results.
Our future
success depends on the continuing efforts of our senior management team and other key personnel, and our business may be harmed
if we lose their services.
Our future
success depends heavily upon the continuing services of the members of our senior management team and other key personnel, in
particular Mr. Mao Yi Hsiao, the Chief Executive Officer, Ms. Chuang Yung Chi, the Chief Financial Officer, Mr. Hsu Wen Yuan,
the Chief Marketing Officer, Mr. Hsieh Tung Chi, the Chief Operating Officer, and Mr. Chiang Te-Yun, the Chief Technology Officer.
If one or more of our senior executives or other key personnel, are unable or unwilling to continue in their present positions,
we may not be able to replace them easily, or at all. As such, our business may be disrupted and our financial condition and results
of operations may be materially and adversely affected. Competition for senior management and key personnel is intense, the pool
of qualified candidates is very limited, and we may not be able to retain the services of our senior executives or key personnel,
or attract and retain high-quality senior executives or key personnel in the future. As is customary in the PRC and Taiwan, we
do not have insurance coverage for the loss of our senior management team or other key personnel.
In addition,
if any member of our senior management team or any of our other key personnel joins a competitor or forms a competing company,
we may lose customers, sensitive trade information and key professionals and staff members. Most of our executive officers and
key employees have entered into an employment agreement with our subsidiaries or Consolidated Affiliated Entities, respectively.
If any disputes arise between any of our senior executives or key personnel and us, we cannot assure you of the extent to which
any of these agreements may be enforced.
Sales
professionals or sales agent and employee misconduct is difficult to detect and deter and could harm our reputation or lead to
regulatory sanctions or litigation costs.
Sales professionals
or sales agent and employee misconduct could result in violations of law by us, regulatory sanctions, litigation or serious reputational
or financial harm. Misconduct could include:
|
· |
making misrepresentation when marketing or selling
insurance products to customers; |
|
· |
hindering insurance applicants from making full and
accurate mandatory disclosures or inducing applicants into making misrepresentations; |
|
· |
hiding or falsifying material information in relation
to the insurance contracts; |
|
· |
fabricating or altering insurance contracts without
authorization from relevant parties, selling false policies, or providing false documents on behalf of the applicants; |
|
· |
falsifying insurance agency business or fraudulently
returning insurance policies to obtain commissions; |
|
· |
colluding with applicants, insured, or beneficiaries
to obtain insurance benefits; |
|
· |
engaging in false claims; or |
|
· |
otherwise not complying with laws and regulations
or our control policies or procedures. |
We cannot always
deter sales professionals or sales agent or employee misconduct, and the precautions we take to prevent and detect these activities
may not be effective in all cases. We cannot assure you, therefore, that sales professionals or sales agent or employee misconduct
will not lead to a material adverse effect on our business, results of operations or financial condition.
All of our
personnel engaging in insurance agency or brokering are required under relevant regulations to have a qualification certificate
issued by the relevant government authorities in Taiwan or PRC. If these qualification requirements are strictly enforced in the
future, our business may be materially and adversely affected.
All of Law
Broker’s personnel who engage in insurance agency and brokering are required under relevant Taiwan regulations to obtain
a registration certificate. To obtain the registration certificate, the sale professionals have to pass the insurance sales professionals
qualification test sponsored by the Life Insurance Association of the Republic of China or Property Insurance Association of the
Republic of China (collectively the “Associations”, each a “Association”). Once the applicants passed
such test, the Associations will notify Law Broker of those applicants who passed the test and Law Broker is obligated to issue
the registration certificate to them. The registration certificate is valid for five years and the holder shall renew the registration
certificate prior to its expiration date. See “Corporate History and Structure —Regulation.” As of December
31, 2014, all of Law Broker’s sales professionals had received and held a valid registration certificate.
All of Anhou’s
personnel who engage in insurance agency and brokering are required under relevant PRC regulations to obtain a qualification certificate
from the CIRC in order to conduct insurance agency or brokering. To obtain the qualification certificate, the sale professionals
have to pass the insurance agency or brokerage practitioner qualification test sponsored by the CIRC. Once the applicants passed
such test, the CIRC may, subject to certain other conditions set forth in Measures on the Supervision of Insurance Salespersons
and Measures on the Supervision of Insurance Brokerage Practitioners and Insurance Adjustment Practitioners, determine whether
to grant such qualification certificate to the applicants. According to related regulations published by CIRC, qualification certificates
obtained before July 1, 2013 have a validity period of three years, starting from the issuance date of such certificates. Holders
of those qualification certificates must apply for renewal in local Insurance Regulatory Bureau at least 30 days before the validity
period expires. Qualification certificates for insurance intermediaries practitioners (agency, brokerage and adjustment practitioners)
obtained after July 1, 2013 are not subject to any validity period. In addition, we understand that the CIRC requires every individual
agent carry the qualification certificate and other credentials showing specific information when conducting agency business.
Under the relevant PRC regulations, an insurance agency or brokerage that retains unqualified personnel to engage in insurance
intermediary activities may be imposed a fine up to RMB100,000 ($16,000). As of December 31, 2014, all of Anhou’s sales
professionals had received and held a valid qualification certificate. If more local CIRC agencies were to strictly enforce these
regulations in the future, and if a substantial number of our sales forces become unqualified, our business may be adversely affected.
Moreover, we may be subject to fines and other administrative proceedings for the failure of our insurance professionals to obtain
the necessary CIRC qualification certificate. Any such fines or administrative proceedings could materially and adversely affect
our business, financial condition and results of operations.
If we
fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our
financial results or prevent fraud.
As a public
company, we are subject to reporting obligations under U.S. securities laws. Pursuant to Section 404 of the Sarbanes-Oxley Act
of 2002 and the related rules adopted by the Securities and Exchange Commission, every public company is required to include a
management report on the Company’s internal controls over financial reporting (“ICFR”) in its annual report,
which contains management’s assessment of the effectiveness of the company’s internal controls over financial reporting.
While we believe
our ICFR is currently effective, there is no assurance we will be able to maintain effective ICFR in the future. If we fail to
do so, we may not be able to produce reliable financial reports and prevent fraud. Moreover, if we were not able to conclude we
have effective ICFR, investors may lose confidence in the reliability of our financial statements, which would negatively impact
the trading price of our shares. Our reporting obligations as a public company, including our efforts to comply with Section 404
of the Sarbanes-Oxley Act, will continue to place a significant strain on our management, operational and financial resources
and systems for the foreseeable future.
Any significant
failure in our information technology systems could have a material adverse effect on our business and profitability.
Our business
is highly dependent on the ability of our information technology systems to timely process a large number of transactions across
different markets and products at a time when transaction processes have become increasingly complex and the volume of such transactions
is growing rapidly. The proper functioning of our financial control, accounting, customer database, customer service and other
data processing systems, together with the communication systems of our Taiwan Subsidiaries and Consolidated Affiliated Entities
and our main offices in Taiwan and Jiangsu are critical to our business and to our ability to compete effectively. We cannot assure
you that our business activities would not be materially disrupted in the event of a partial or complete failure of any of these
primary information technology or communication systems, which could be caused by, among other things, software malfunction, computer
virus attacks or conversion errors due to system upgrading. In addition, a prolonged failure of our information technology system
could damage our reputation and materially and adversely affect our future prospects and profitability.
If we
are unable to respond in a timely and cost-effective manner to rapid technological change in the insurance intermediary industry,
there may be a resulting adverse effect on business and operating results.
The insurance
industry is increasingly influenced by rapid technological change, frequent new product and service introductions and evolving
industry standards. For example, the insurance intermediary industry has increased use of the Internet to communicate benefits
and related information to consumers and to facilitate information exchange and transactions. We believe that our future success
will depend on our ability to continue to anticipate technological changes and to offer additional product and service opportunities
that meet evolving standards on a timely and cost-effective basis. There is a risk that we may not successfully identify new product
and service opportunities or develop and introduce these opportunities in a timely and cost-effective manner. In addition, product
and service opportunities that our competitors develop or introduce may render our products and services uncompetitive. As a result,
we can give no assurances that technological changes that may affect our industry in the future will not have a material adverse
effect on our business and results of operations.
The Company’s
affiliates have significant control over matters requiring approval by shareholders.
The affiliates
to the Company hold 100% of the Company’s outstanding preferred shares, 43.11% of the Company’s outstanding common
shares, and 57.66% of the voting power of the Company as of March 15, 2015 (calculated in accordance with Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended). As a result, the Company’s affiliates, in view of their ownership
percentage of our common stock and voting power, have significant control over matters requiring approval by our shareholders,
including the selection of our Board of Directors, approval or rejection of mergers, sales or licenses of all or substantially
all of our assets, or other business combination transactions. The interests of the Company’s affiliates may not always
coincide with the interests of our other shareholders and as such the Company may take action in advancement of its affiliates’
interests to the detriment of our other shareholders, including you. Accordingly, you may not be able to influence any action
we take or consider taking, even if it requires a shareholder vote.
Risks Related
to Our Corporate Structure in the PRC
If the
PRC government finds that the agreements that establish the structure for operating our China business do not comply with applicable
PRC laws and regulations, we could be subject to severe penalties.
PRC laws and
regulations place certain restrictions on foreign ownership of companies that engage in insurance agencies and brokerages business,
especially those on qualifications as well as capital requirement of the investors. We conduct our operations in China principally
through contractual arrangements among our wholly-owned PRC subsidiary, CU WFOE and our operating company in the PRC, namely,
Anhou and its shareholders, where Anhou directly holds 100% equity interests in one PRC insurance agency, namely Sichuan Kangzhuang
and one insurance brokerage, namely Jiangsu Law. Anhou, Sichuan Kangzhuang and Jiangsu Law hold the licenses and permits necessary
to conduct our insurance intermediary business and related businesses in China.
Our contractual
arrangements with Anhou, its shareholders enable us to:
|
· |
exercise effective control over Anhou and its subsidiaries; |
|
· |
receive a substantial portion of the economic benefits
of Anhou and its subsidiaries in consideration for the services provided by our wholly- owned subsidiary in China; and |
|
· |
have an exclusive option to purchase all or part
of the equity interests in Anhou when and to the extent permitted by PRC law. |
Because
of these contractual arrangements, we are the primary beneficiary of Anhou and its subsidiaries and have consolidated them into
our consolidated financial statements. Although we believe that these agreements are in compliance with current PRC regulations,
we cannot assure you that the PRC government would agree that these contractual arrangements comply with PRC licensing, registration
or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future,
such as the DraftForeign Investment Law described below.
On
January 19, 2015, the Ministry of Commerce of China (“MOFCOM”) published a draft version of a proposed Foreign Investment
Law (the “Draft Foreign Investment Law”) with an explanatory note. This Draft Foreign Investment Law, once promulgated,
will replace and integrate the three existing laws over foreign investment, the Law of the PRC on Chinese-Foreign Equity Joint
Ventures, the Wholly Foreign-owned Enterprise Law and the Law of the PRC on Sino-foreign Cooperative Enterprises. The Draft Foreign
Investment Law was formulated with a view to opening wider to the outside, promoting and regulating foreign investment, protecting
the legitimate rights and interests of foreign investors, safeguarding national security and public interests, and facilitating
the healthy development of the socialist market economy. MOFCOM has requested comments from the public on the draft Law by February
17, 2015.
Some of
the more significant concepts in the Foreign Investment Law include the following:
Effective
Control
The
proposed law has adopted the concept of effective control in the foreign investment area. The Draft Foreign Investment Law notes
that a company established in China but controlled by foreign investors shall be deemed a foreign investor and foreign entities
controlled by Chinese investors can, in some circumstances, be deemed Chinese domestic investors. According to Draft Foreign Investment
Law “control” refers to several circumstances including the contractual control by imposing decisive influences on
the operation, finance, personnel or technology of the enterprise by contract, trust or other means.
Negative
List Management
Most
foreign investments will not need pre-approval as was previously required. It means that the Chinese market could be more open
and efficient in some sectors to set up foreign invested companies. However, the Draft Foreign Investment Law sets out a Negative
List, or Catalogue of Prohibitions. Foreign investors are not allowed to invest in any sector set out in the Catalogue of Prohibitions.
Further, a Catalogue of Restrictions will note those sectors with restrictions imposed on foreign investors. The use of Negative
lists represent a method of management or administration of foreign investments.
How
domestic VIEs, potentially deemed to be foreign enterprises under the Draft Foreign Investment Law and currently operating in
Negative List sectors, will be treated is unclear.
National
Security Reviews
The
Draft Foreign Investment Law also establishes a united foreign investment national security review system which will conduct examinations
on the foreign investments that endangers or may endanger the national security.
Information
Reporting System
The
Draft Foreign Investment Law establishes a foreign investment information reporting system. The new rules include submission of
a foreign investment report (such as when setting up a company), a report of any Changes of Foreign Investment (any adjustments
of investment) and an annual report. Generally, reporting obligations arise when a foreign investor purchases not less than 10%
of the stock of a domestic entity, or less than 10% but the purchase results in a change of control of the domestic entity.
Supervision
and Inspection
The Draft Foreign
Investment Law establishes a mechanism for the supervision and inspection of foreign investors and foreign invested enterprises
from industrial and commercial, taxation, foreign exchange, auditing and other administrative departments. The government’s
eye on foreign investments and foreign investment management has shifted from the approval prior to a foreign invested company
being established to the supervision and inspection after it is set up.
PRC laws and
regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have
broad discretion in interpreting these laws and regulations. If the PRC government determines that our contractual arrangements
do not comply with applicable laws and regulations, it could revoke our business and operating licenses, require us to discontinue
or restrict our operations, restrict our right to collect revenues, block our website, require us to restructure our operations,
impose additional conditions or requirements with which we may not be able to comply, or take other regulatory or enforcement
actions against us that could be harmful to our business. The imposition of any of these penalties would result in a material
and adverse effect on our ability to conduct our business.
If the
PRC government finds that we, our PRC subsidiary and Consolidated Affiliated Entities do not comply with applicable PRC laws and
regulations, we could be subject to severe penalties.
If we, our
Consolidated Affiliated Entity, Anhou or any of the existing and future subsidiaries of Anhou are found to be in violation of
any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant
PRC regulatory authorities, including the CIRC, will have broad discretion in dealing with such violations, including:
|
· |
revoking the business and operating licenses of our
PRC subsidiary and Consolidated Affiliated Entities; |
|
· |
restricting or prohibiting any related-party transactions
among our PRC subsidiary and Consolidated Affiliated Entities; |
|
· |
imposing fines or other requirements with which we,
our PRC subsidiary or our Consolidated Affiliated Entities may not be able to comply; |
|
· |
requiring us, our PRC subsidiary or our Consolidated
Affiliated Entities to restructure the relevant ownership structure or operations; or |
|
· |
restricting or prohibiting us from providing additional
funding for our business and operations in China. |
The imposition
of any of these penalties could result in a material and adverse effect on our ability to conduct our business in the PRC.
We rely
on contractual arrangements with Anhou and its shareholders for our China operations, which may not be as effective in providing
operational control as direct ownership.
We have relied
and expect to continue to rely on contractual arrangements with our PRC Consolidated Affiliated Entity, Anhou, and its shareholders
to operate our business in China. For a description of these contractual arrangements, see “Corporate History and Structure”.
These contractual arrangements may not be as effective in providing us with control over Anhou and its subsidiaries as direct
ownership. We have no direct or indirect equity interests in Anhou or any of its subsidiaries.
Since PRC laws
restrict foreign equity ownership in companies engaged in insurance agencies and brokerages businesses in China, especially those
on qualifications as well as capital requirement of the investors, we rely on contractual arrangements with Anhou to operate our
business in China. If we had direct ownership of Anhou and its subsidiaries, we would be able to exercise our rights as a shareholder
to effect changes in the board of directors of Anhou and its subsidiaries, which in turn could effect changes, subject to any
applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, we rely on Anhou
and its shareholders’ performance of their contractual obligations to exercise effective control. In addition, our contractual
arrangements generally have a term of ten-year with an automatic extension of another ten-year term unless our PRC subsidiary,
CU WFOE, determines otherwise. Though neither Anhou nor its shareholders has any right under these agreements to terminate such
agreements prior to the expiration date, we may not be able to strictly enforce these agreements in case they choose to do so,
due to the uncertainty associated with PRC government’s determination on the validity of these contractual arrangements
or the lack of assets enforceable outside PRC. Certain affiliates of the Company are also directors and executive officers of
our Consolidated Affiliated Entities. In addition, though Anhou is under the effective control of CU WFOE through these
contractual arrangements, the shareholders and officers of Anhou may not act in the best interests of our company or may not perform
their obligations under these agreements, including the obligation to renew these agreements when their initial ten-year term
expires. Furthermore, as all of Anhou’s assets are located in China, if Anhou or its shareholders determine to terminate
the VIE agreements, the unaffiliated investors will have little or no recourse against them. Such risks exist throughout the period
in which we intend to operate our business through the contractual arrangements with Anhou. Therefore, these contractual arrangements
may not be as effective as direct ownership in providing us with control over these Consolidated Affiliated Entities.
If Anhou and
its shareholders fail to perform their obligations under these contractual arrangements, we may have to incur substantial costs
and other resources to enforce such arrangements and rely on legal remedies under PRC law, including seeking specific performance
or injunctive relief and claiming damages, which may not be effective. For example, if the shareholders and officers of Anhou
were to refuse to transfer their equity interest in Anhou to us or our designee when we exercise the call option pursuant to these
contractual arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal action to compel
them to fulfill their contractual obligations. However, due to the uncertainty associated with PRC government’s determination
on the validity of these contractual arrangements or the lack of assets enforceable against Anhou outside PRC, we may not be able
to effectively enforce our right under these agreements.
All of our
contractual arrangements with Anhou and shareholders are governed by PRC law and provide for the resolution of disputes through
arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be
resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in some other jurisdictions,
such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual
arrangements. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control
over our Consolidated Affiliated Entities, and our ability to conduct our business in the PRC may be negatively affected.
Contractual
arrangements we have entered into with Anhou may be subject to scrutiny by the PRC tax authorities. A finding that we owe additional
taxes could substantially reduce our consolidated net income and the value of your investment.
Under PRC laws
and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities.
Since both of CU WFOE and Anhou are under our common control, either under direct ownership or through contractual arrangements,
and certain our officers and directors used to be and are currently the employees of Anhou and its subsidiaries (for example,
Hsieh Tung Chi and Chiang Te Yun, our Chief Operating Officer and Chief Technology Officer, also act as Division Chief of Management
and Manager of Jiangsu Law respectively, and Hus Wen Yuan, our Chief Marketing Officer, also acts as the General Manager of Sichuan
Kangzhuang), the VIE Agreements are likely to be deemed as arrangements between related parties. In addition, CU WFOE has been
granted substantial unilateral right under the VIE Agreements. We could face material and adverse tax consequences if the PRC
tax authorities determine that the contractual arrangements between our PRC subsidiary and Anhou are not on an arm’s-length
basis and adjust the income of Anhou in the form of a transfer pricing adjustment, where the relevant PRC tax authorities may,
in their discretion, disregard the tax filing of Anhou and impose a different tax amount payable by Anhou. A transfer pricing
adjustment could among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by Anhou, which
could in turn increase their respective tax liabilities. Moreover, the PRC tax authorities may impose interest and other penalties
on Anhou for underpayment of taxes. Though we have not encountered any challenge or transfer pricing adjustment by the PRC tax
authorities so far, we could not assure you that the PRC tax authorities will not do so in the future. Our consolidated net income
may be materially and adversely affected by the occurrence of any of the foregoing.
PRC regulation
of direct investment by offshore holding companies to PRC entities may delay or prevent us from making additional capital contributions
to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
We are an offshore
holding company conducting our operations in China through our PRC subsidiary and Consolidated Affiliated Entities. In order to
provide additional funding to our PRC subsidiary and Consolidated Affiliated Entities, we may make additional capital contributions
to our PRC subsidiary.
Any capital
contributions we make to our PRC subsidiary, must be approved by the PRC Ministry of Commerce or its local counterparts, which
usually takes approximately 30 days or longer, and registered with the SAFE or its local counterparts. Such applications and registrations
could be time consuming and their outcomes would be uncertain. The registered capital of CU WFOE is $300,000 and has been contributed.
We cannot assure
you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a
timely basis, if at all, with respect to future capital contributions by us to our PRC subsidiary. If we fail to complete such
registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected,
which could adversely and materially affect our liquidity and our ability to fund and expand our business.
Risks Related
to Doing Business in Taiwan
Extensive
regulation of our industry may limit our flexibility to respond to market conditions and competition, and our business may suffer.
Subsequent
to our acquisition of AHFL on August 24, 2012, we operate our insurance agency and brokerage business in Taiwan through our operating
entity Law Broker. As an insurance agency and brokerage service provider in Taiwan, Law Broker is subject to extensive regulation.
See “Item 1.Business—Regulation” for a discussion of the regulatory environment applicable to Law Broker. As
revenue generated by Law Broker constitutes a substantial part of our revenue, any changes in the regulatory environment applicable
to Law Broker may adversely affect our business, financial condition and results of operations.
Currently,
Law Broker’s principal regulator is the Financial Supervisory Committee of Republic of China, or the FSC, which was formed
on July 1, 2004 in accordance with the Financial Supervisory Organization Act, which was intended to grant regulatory authority
over the Taiwan insurance industry to the FSC.
Our operations
and financial results could be severely harmed by natural disasters.
Law Broker’s
executive office is located in Taiwan, which suffered a severe earthquake during fiscal year of 2000. We did not experience significant
disruption to our operations as a result of that earthquake. Taiwan is also exposed to typhoons and tsunamis. If a major earthquake,
typhoon, tsunami or other natural disaster were to affect our operations, which would seriously harm our business.
Stockholders
may have more difficulty protecting their interests under the laws of the Taiwan than they would under the laws of the United
States.
Our corporate
affairs are governed by our articles of incorporation, the Company Law, and by the laws governing corporations incorporated in
Taiwan. In addition, our corporate affairs may remain governed by the Statute of Law Broker. The rights of stockholders and the
responsibilities of management and the members of the board of directors of Taiwan companies are different from those applicable
to a corporation incorporated in the United States. For example, controlling or major stockholders of Taiwan companies do not
owe fiduciary duties to minority stockholders. As a result, holders of our common shares may have more difficulty in protecting
their interests in connection with actions taken by our management or members of our board of directors than they would as public
stockholders of a United States corporation.
Fluctuation
in the value of the New Taiwanese Dollar may have a material adverse effect on your investment.
The value of
the New Taiwanese Dollar (“NTD” or “NT$”) against the US dollar (“USD”) and other currencies
may fluctuate and is affected by, among other things, changes in political and economic conditions. As of March 15, 2015, the
exchange rate of NT$ to the USD was 1NT$=0.03USD.
In Taiwan,
our revenues and costs are denominated in the NT$, and a significant portion of our financial assets are also denominated in NT$.
We rely substantially on dividends and other fees paid to us by our Taiwan Subsidiary. Any significant appreciation or depreciation
of the NT$ against the USD may affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends
payable on, our shares in USD. For example, a further appreciation of the NT$ against the USD would make any new NT$-denominated
investments or expenditures more costly to us, to the extent that we need to convert USD into the NT$ for such purposes. An appreciation
of the NT$ against the USD would also result in foreign currency translation losses for financial reporting purposes when we translate
our USD denominated financial assets into the NT$, as the NT$ is our reporting currency in Taiwan. Conversely, a significant depreciation
of the NT$ against the USD may significantly reduce the USD equivalent of our reported earnings, and may adversely affect the
price of our shares.
Sensitivity
analysis
The following
table indicates the instantaneous change in the Company's (loss) / profit after tax (and accumulated losses) that would arise
if foreign exchange rates at the reporting date had changed at that date, assuming all other risk variables remained constant.
For the year ended December 31, 2014 | |
Depreciation in NTD | | |
Decrease in net income | | |
Decrease in retained
earnings | |
| | | |
| | | |
| | |
| 3 | % | |
$ | 77,590 | | |
$ | 129,297 | |
The weakening
of the US Dollar against the above currencies by the same percentages would have had the equal but opposite effect on the above
currencies to the amounts shown above, on the basis that all other variables remain constant.
The sensitivity
analysis assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments held by
the Company which expose the Company to foreign currency risk at the reporting date. The analysis excludes differences that would
result from the translation of the financial statements of foreign operations into the Company's presentation currency.
Risks Related
to Doing Business in China
Our limited
operating history in China, especially our limited experience in distributing property and casualty insurance products may not
provide an adequate basis to judge our future prospects and results of operations.
We have a limited
operating history in China. Anhou commenced our insurance intermediary business in 2003 by distributing life insurance products
and expanded our offerings to other types of property and casualty insurance products in 2009. Anhou started distributing automobile
insurance business in 2010. Life insurance products distributed by Anhou accounted for 80.8% of Anhou’s total net revenues
in the fiscal year ending December 31, 2014. Property and casualty insurance products distributed by Anhou accounted for 19.2%
of Anhou’s total net revenues in the fiscal year ending December 31, 2014. While life insurance and property and casualty
insurance distribution are two major areas of our future growth strategy in China, we cannot assure you that our efforts to further
develop these businesses will be successful. If Anhou’s life insurance distribution and property and casualty insurance
distribution fail to grow, our future growth in China will be significantly affected. In addition, our limited operating history
in China, especially our limited experience in selling property and casualty insurance products, may not provide a meaningful
basis for you to evaluate our business, financial performance and prospects.
PRC regulations
relating to the establishment of offshore SPVs by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary
to liability or penalties, limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability
to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.
SAFE has promulgated
several regulations, including the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Round-trip
Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or SAFE Circular No. 75, effective
on November 1, 2005. The regulation requires PRC residents and PRC corporate entities to register with local branches of SAFE
in connection with their direct or indirect offshore investment activities. On July 4, 2014, SAFE promulgated the Notice on Issues
Relating to Administration of Foreign Exchange in Offshore Investment & Fund-Raising and Round-trip Investment by Domestic
Residents Utilizing Special Purpose Vehicles, or SAFE Circular No. 37, effective on July 14, 2014, which replaced Circular 75.
On February 13, 2015, SAFE promulgated the Notice on Further Simplifying and Improving Management Policies of Foreign Exchange
in Direct Investment, or SAFE Circular No. 13, which will be effective on June 1, 2015. According to SAFE Circular No. 13, foreign
exchange registrations for both domestic and foreign direct investment shall be undertaken by banks, while SAFE and its branches
execute indirect supervision on foreign exchange registration of direct investment via banks.These regulations apply to our shareholders
who are PRC residents and may apply to any offshore acquisitions that we make in the future.
Under these
foreign exchange regulations, PRC residents who will make, investments in Special Purpose Vehicles or SPVs are required to register
those investments with the bank where the domestic company incorporated, andthePRC residents who have previously made, prior to
the implementation of the SAFE Circular No. 37, investments in SPVs are required to register those investments with local SAFE
for the supplementary registration.In addition, any PRC resident who is a direct or indirect shareholder of a SPV, is required
to update the previously filed registration with the bank where the domestic company incorporated, with respect to that SPV, to
reflect any material change. If any PRC shareholder fails to make the required registration or update the previously filed registration,
the PRC subsidiaries of that SPV may be prohibited from distributing its profits and the proceeds from any reduction in capital,
share transfer or liquidation to their SPV parent, and the SPV may also be prohibited from injecting additional capital into its
PRC subsidiaries. Moreover, failure to comply with the various foreign exchange registration requirements described above could
result in liabilities for such PRC subsidiaries under PRC laws for evasion of applicable foreign exchange restrictions, including
(i) the requirement by SAFE to return the foreign exchange remitted overseas within a period specified by SAFE, with a fine of
up to 30% of the total amount of foreign exchange remitted overseas and deemed to have been evasive and (ii) in circumstances
involving serious violations, a fine of no less than 30% of and up to the total amount of remitted foreign exchange deemed evasive.
Furthermore, the persons-in-charge and other persons at such PRC subsidiaries who are held directly liable for the violations
may be subject to administrative sanctions.
These foreign
exchange regulations provide that PRC residents include both PRC citizens, meaning any individual who holds a PRC passport or
resident identification card, and individuals who are non-PRC citizens but primarily reside in the PRC due to their economic ties
to China.
Li Fu Chang,
Lo Chung Mei, Hsieh Tung Chi and Chiang Te Yun, our shareholders, who do not directly hold any interests in the Consolidated Affiliated
Entities, are permanent residents of Taiwan, stay in Mainland China for over 183 days per annum. However, as a result of our inquiries
with the local branch of SAFE responsible for our PRC subsidiary’s foreign exchange registrations, we were informed that,
given the lack of any publicly-available implementing rules or official interpretations issued by the SAFE regarding the issue
of whether the registration and amendment filing requirements under SAFE Circular No. 37 and related rules should apply to non-PRC
citizens, Li Fu Chang, Lo Chung Mei, Hsieh Tung Chi and Chiang Te Yun should not be deemed a PRC resident for these purposes,
and any attempt to submit an application to such local SAFE branch with respect to Li Fu Chang, Lo Chung Mei, Hsieh Tung Chi and
Chiang Te Yun’s investment and shareholdings in our offshore SPV will not be officially accepted or examined.
However, we
cannot conclude the SAFE or the local branch responsible for our PRC subsidiary’s foreign exchange registrations will not
later alter its position on and interpretation of the applicability of these foreign exchange regulations to Mr. Li Fu Chang,
Lo Chung Mei, Hsieh Tung Chi and Chiang Te Yun. If the registration procedures set forth in these foreign exchange regulations
become applicable to Mr. Li Fu Chang, Lo Chung Mei, Hsieh Tung Chi and Chiang Te Yun, we will urge these individuals to, and believe
they will, file necessary registrations and amendments as required under SAFE Circular No. 37 and related rules. However, as SAFE
regulations and policies have been evolving rapidly in the past few years, we cannot assure that all of these individuals can
successfully make or update any applicable registration or obtain the necessary approval required by these foreign exchange regulations
as these individuals may not be able to fully satisfy the new requirements or interpretations that SAFE or its local branch may
impose or adopt from time to time. The failure or inability of such individuals to comply with the registration procedures set
forth in these regulations may subject us to fines or legal sanctions, restrictions on our cross-border investment activities
or our PRC subsidiary’s ability to distribute dividends to, or obtain foreign-exchange-dominated loans from, the Company,
or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions
to our stockholders could be materially and adversely affected.
Furthermore,
as these foreign exchange regulations are still relatively new and there is uncertainty concerning the reconciliation of the new
regulations with the approval requirements under other existing PRC laws and regulations, such as tax laws, it is unclear how
these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and
implemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations
or future strategy. For example, we may be subject to a more stringent review and approval process with respect to our foreign
exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our
financial condition and results of operations. In addition, if we decide to acquire a PRC domestic company, we cannot assure you
that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary
filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition
strategy and could adversely affect our business and prospects.
Our businesses
in China are highly regulated, and the administration, interpretation and enforcement of the laws and regulations currently applicable
to us involve uncertainties, which could materially and adversely affect our business and results of operations.
Anhou operates
in a highly regulated industry. The CIRC has authority to supervise and regulate the insurance industry in China. In exercising
its authority, the CIRC has wide discretion, and the administration, interpretation and enforcement of the laws and regulations
applicable to us involve uncertainties that could materially and adversely affect our business and results of operations. For
example, it is not clear when the CIRC will start strictly enforcing the qualification requirements for sales professionals affiliated
with professional insurance intermediaries like our Consolidated Affiliated Entities. Although we have not had any material violations
to date, we cannot assure you that our operations will always be consistent with the interpretation and enforcement of the laws
and regulations by the CIRC from time to time.
The principal
regulation governing insurance agencies in China is the Provisions on the Supervision and Administration of Specialized Insurance
Agencies (the “Agency Provisions”) promulgated by the CIRC on September 25, 2009 and effective on October 1, 2009,
which replaced the Provisions on the Administration of Insurance Agencies issued by the CIRC on December 1, 2004 and effective
on January 1, 2005. The Agency Provisions have not only set forth the market entrance standards for applicants to establish an
insurance agency, but also stipulate the qualification criteria of senior management for such insurance agency. The Agency Provisions
have also provided general rules on business operations as well as granted relatively broad supervision rights to the CIRC. The
principal regulation governing insurance brokerages in China is the Provisions on the Supervision and Administration of Insurance
Brokerage Institutions (the “Brokerage Provisions”) promulgated by the CIRC on September 25, 2009 and effective on
October 1, 2009, which replaced the Provisions on the Administration of Insurance Brokerages issued by the CIRC on December 15,
2004 and effective on January 1, 2005. The Brokerage Provisions have not only set forth the market entrance standards for applicants
to establish a brokerage firm, but also stipulate the qualification criteria of senior management for such brokerage firm. The
Brokerage Provisions have also provided general rules on business operations as well as granted relatively broad supervision rights
to the CIRC. On January 6, 2013, CIRC issued Measures on the Supervision of Insurance Salespersons and Measures on the Supervision
of Insurance Brokerage Practitioners and Insurance Adjustment Practitioners, which sets forth a higher academic requirement for
candidates to take the qualification examination for the insurance agency and brokerage practitioners organized by the CIRC. The
enactment of any new laws and regulations in replacement of the above-mentioned laws or the change of interpretations of any such
current laws and regulations may have a significant impact on the operation and financial results of the Company.
For an expanded
discussion of the material regulations affecting the Company, please review the discussion located under the “Regulation”
heading in the “Corporate History and Structure” section of this annual report.
Further
development of regulations in China may impose additional costs and restrictions on our activities.
China’s
insurance regulatory regime is undergoing significant changes. Some of these changes and the further development of regulations
applicable to us may result in additional restrictions on our activities or more intensive competition in this industry. For example,
under the provisions for administration of professional insurance agencies and brokerages promulgated on September 25, 2009, insurance
agencies and brokerage companies are required to increase their guaranty deposit, which generally cannot be withdrawn without
the CIRC’s approval, when they open any new branches. Furthermore, pursuant to the provisions, the minimum registered capital
requirements for insurance agencies and brokerages were increased substantially. On April 27, 2013, CIRC issued the Decision on
Revising the Agency Provisions and Decision on Revising the Brokerage Provisions, pursuant to which, CIRC has mandated any insurance
agency and insurance brokerage established subsequent to the Decisions to meet a minimum registered capital requirement of RMB50
million ($8.1 million). On May 16, 2013, CIRC issued Notice for Further Clarification on Related Issues of Access to Professional
Insurance Intermediary Market (the “2013 Notice”), pursuant to which, professional insurance agencies and insurance
brokerages established prior to the issuance of the above Decisions, with registered capital less than RMB50 million($8.1 million),
can continuously operate their existing business within the provinces where they have the registered office or branch office,
but shall not set up any new branches in any province where they do not have the registered office or any branch office. See “Corporate
History and Structure - Regulation.” Such increase would reduce the amount of cash available for other business purposes.
In addition, the CIRC issued an Opinion of CIRC on Reforming and Improving the Management System of Insurance Salespersons in
September 2010 (the “Reforming Opinion”), which requires the insurance companies and insurance intermediaries to build
up a clear legal relationship with the insurance salespersons, improve the fundamental protection rights of the insurance salespersons,
and encourage the insurance companies and insurance intermediaries to actively explore new models and marketing channels for insurance
sales system. On September 14, 2012, CIRC issued another opinion to reiterate and push forward the Reforming Opinion above.
Adverse
changes in economic and political policies of the PRC government could have a material adverse effect on the overall economic
growth of China, which could adversely affect our business.
We conduct
our business in China primarily through our PRC subsidiary and Consolidated Affiliated Entities. Accordingly, our results of operations,
financial condition and prospects in China are subject to a significant degree to economic, political and legal developments in
China. China’s economy differs from the economies of most developed countries in many respects, including with respect to
the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.
While the PRC economy has experienced significant growth in the past 30 years or so, growth has been uneven across different regions
and among various economic sectors of China and has been slowed down during the past few years. The PRC government has implemented
various measures to encourage economic development and guide the allocation of resources. While some of these measures benefit
the overall PRC economy, they may also have a negative effect on us. For example, our financial condition and results of operations
may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to
us.
Although the
PRC government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform,
the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises,
the PRC government still owns a substantial portion of productive assets in China. In addition, the PRC government continues to
play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises
significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Actions and policies
of the PRC government could materially affect our ability to operate our business.
Uncertainties
with respect to the PRC legal system could adversely affect us.
We conduct
our business in China primarily through our PRC subsidiary and Consolidated Affiliated Entities. The business conducted by our
PRC subsidiary and Consolidated Affiliated Entities in China are governed by PRC laws and regulations. Our PRC subsidiary is generally
subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to wholly foreign-owned
enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited
precedential value.
Although, since
1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments
in China, China has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently
cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because
of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and
regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules
(some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware
of our violation of these policies and rules until some time after the violation. In addition, any litigation in China may be
protracted and result in substantial costs and diversion of resources and management attention.
Governmental
control of currency conversion may affect the value of your investment.
The PRC government
imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out
of China. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions,
interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from
the SAFE by complying with certain procedural requirements. But approval from appropriate government authorities is required where
RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans
denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies
for current account transactions. Under our current corporate structure in the PRC, the primary source of our income at the holding
company level from our PRC operations is dividend payments from our PRC subsidiary. Shortages in the availability of foreign currency
may restrict the ability of our PRC subsidiary and our Consolidated Affiliated Entities to remit sufficient foreign currency to
pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. If the foreign exchange
control system in China prevents us from obtaining sufficient foreign currency to satisfy our currency needs, we may not be able
to pay dividends in foreign currencies to our shareholders.
We rely
principally on dividends and other distributions on equity paid by our subsidiary to fund any cash and financing requirements
we may have, and any limitation on the ability of our subsidiary to make payments to us could have a material adverse effect on
our ability to conduct our business.
We are a holding
company, and in PRC we rely principally on dividends from our PRC subsidiary in China and service, license and other fees paid
to our PRC subsidiary by our Consolidated Affiliated Entities for our cash requirements, including any debt we may incur. Current
PRC regulations permit our PRC subsidiary to pay dividends to us only out of their accumulated profits, if any, determined in
accordance with PRC accounting standards and regulations. In addition, our PRC subsidiary is required to set aside at least 10%
of its after-tax profits each year as reported in its PRC statutory financial statements, if any, to fund a statutory reserve
until such reserve reaches 50% of its registered capital, and our PRC subsidiary that is considered foreign-invested enterprises
is required to further set aside a portion of its after-tax profits as reported in its PRC statutory financial statements to fund
the employee welfare fund at the discretion of the board. These reserves are not distributable as cash dividends. However, according
to the Draft Foreign Investment Law, which may replace the Wholly Foreign-owned Enterprise Law once promulgated, no such reserve
is required. Furthermore, if our PRC subsidiary and Consolidated Affiliated Entities in China incur debt on their own behalf in
the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. In addition,
the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements we currently have in place
in a manner that would materially and adversely affect our PRC subsidiary’s ability to pay dividends and other distributions
to us.
The PRC subsidiary
has not made any profits to date and as a result has no accumulated profits available for the purposes of dividend distribution.
Even though we expect the PRC subsidiary to become profitable in 2016, we intend to use any profits to fund our business operations
or expansion of our business.
Any limitation
on the ability of our subsidiary and Consolidated Affiliated Entities to distribute dividends or other payments to us could materially
and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends,
or otherwise fund and conduct our business.
The PRC
Labor Contract Law and its implementing rules may adversely affect our business and results of operations.
On June 29,
2007, the Standing Committee of the National People’s Congress of China promulgated the Labor Contract Law, which became
effective on January 1, 2008 and revised in 2012. On September 18, 2008, the State Council promulgated the implementing rules
for the Labor Contract Law, which became effective upon adoption. This new labor law and its implementing rules have reinforced
the protection for employees, who, under the existing PRC Labor Law, already have certain rights, such as the right to have written
labor contracts, the right to enter into labor contracts with indefinite terms under specific circumstances, the right to receive
overtime wages when working overtime, and the right to terminate in the labor contracts. In addition, the Labor Contract Law and
its implementing rules have made some amendments to the existing PRC Labor Law and added some clauses that could increase cost
of labor to employers. In the event that we decide to significantly reduce our workforce, the Labor Contract Law and its implementing
rules could adversely affect our ability to effect these changes cost-effectively or in the manner we desire, which could lead
to a negative impact on our business and results of operations in the PRC.
We may
have difficulty establishing adequate management, legal and financial controls in the People’s Republic of China.
The PRC historically
has been deficient in Western style management and financial reporting concepts and practices, as well as in modern banking, computer
and other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in
the PRC. Currently, we do not have any employees that are formally trained in US GAAP or in ICFR in the PRC. As a result of these
factors, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and
preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards.
It may
be difficult to affect service of process and enforcement of legal judgments upon us and our officers and directors because they
reside outside the United States.
To better operate
our business in PRC, some of our directors and officers reside in PRC, our service of process on such directors and officers may
be difficult to effect within the United States. Also, with respect to the assets for PRC operation located in PRC, any judgment
obtained in the United States against us may not be enforceable outside the United States.
The PRC
legal system contains uncertainties which could limit the legal protections available to us and you, or could lead to penalties
on us.
The PRC legal
system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases
have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations
governing economic matters in general. Our PRC subsidiary is subject to laws and regulations applicable to foreign investment
in China. In addition, our PRC subsidiary and Consolidated Affiliated Entities are incorporated in China and subject to all applicable
PRC laws and regulations. Because of the relatively short period for enacting such a comprehensive legal system, it is possible
that the laws, regulations and legal requirements are relatively recent, and their interpretation and enforcement involve uncertainties.
These uncertainties could limit the legal protections available to us and our stockholders, and may lead to penalties imposed
on us because of the different understanding between the relevant authority and us. In addition, we cannot predict the effect
of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation
or enforcement thereof, or the preemption of local regulations by national laws.
We may
have limited legal recourse under the PRC laws if disputes arise under our contracts with parties in China.
The Chinese
government has enacted significant laws and regulations dealing with matters such as corporate organization and governance, foreign
investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and
regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. The Company
faces the risk that the parties to contracts may seek ways to terminate the transactions. For example, management of our Consolidated
Affiliated Entities may hinder or prevent us from accessing important information regarding the financial and business operations
of the Consolidated Affiliated Entities or refuse to pay us contractual consideration due under the VIE Agreements. The resolution
of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated
to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance,
or to seek an injunction under the PRC laws, in either of these cases, are severely limited, and without a means of recourse by
virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events
could have a material adverse effect on our business, financial condition and results of operations. Although legislation in China
over the past 30 years has significantly improved the protection afforded to various forms of foreign investment and contractual
arrangements in China, these laws, regulations and legal requirements are relatively new and their interpretation and enforcement
involve uncertainties, which could limit the legal protection available to us, and our stockholders. The inability to enforce
or obtain a remedy under any of our existing or future agreements could result in a significant loss of business, business opportunities
or capital and could have a material adverse impact on our operations.
Certain affiliates
of ours are also directors and executive officers of our Consolidated Affiliated Entities. PRC laws provide that a director or
certain members of senior management owes a fiduciary duty to the company he/ she directs or manages. These individuals must therefore
act in good faith and in the best interests of the relevant PRC company pursuant PRC laws and must not use their respective positions
for personal gains. These laws do not require them to consider our best interests when making decisions as a director or member
of management of the relevant PRC company. For example, it may be possible for management of Anhou to breach the VIE agreements
and while their actions may be in violation of US laws they could be legal in the PRC. Any judgment for violation of fiduciary
duty under US law may not be enforceable outside the United States. It may not be possible to effect service of process within
the United States or elsewhere outside China upon certain our directors or senior executive officers residing in China, irrespective
of matters arising under U.S. federal securities laws or applicable state securities laws. Any court judgment of United States
for violation of fiduciary duty under US law may not be enforceable in the PRC due to the lack of bilateral treaties between PRC
and the United States providing for the reciprocal recognition and enforcement of civil judgment of courts.
Risks Relating
to Ownership of Our Shares
You may
not be able to liquidate your investment since there is no assurance that a public market will develop for our common stock or
that our common stock will ever be approved for trading on a recognized exchange.
There is no
established public trading market for our securities. Though we have engaged a market maker to apply for a quotation on the OTCBB
in the United States and obtained the approval for trading, our shares are not and have not been listed on any recognized exchange.
We cannot assure you that a regular trading market will develop or that if developed, will be sustained. In the absence of a regular
trading market, you may be unable to liquidate its investment, which will result in the loss of your investment.
We have
no plans to declare any dividends to shareholders in the near future.
We currently
intend to retain our future earnings, if any, to support our operations and to finance expansion. The declaration, and amount
of any future dividends will be made at the discretion of the Board of Directors (“BOD”), and will depend upon, among
other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other
factors as the BOD considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there
is no assurance with respect to the amount of any such dividend. If you require dividend income, you should not rely on an investment
in the Company. Income received from an investment in the Company will only come from a rise in the market price in the Company’s
stock, which is uncertain and unpredictable.
ITEM
1B. UNRESOLVED STAFF COMMENTS.
Not Applicable.
ITEM
2. PROPERTIES.
Facilities
Law Enterprise,
Law Broker, Law Management and Law Agent shared the same address as their registered address, which is located at 5th Floor, No.
311 3rd Section, Nanjing East Road, Taipei City, Taiwan, with approximately 753.29 square meters of office space. The lease was
between Pengcheng Co., Ltd. and Law Broker, for two years commencing from June 1, 2013 to May 31, 2015 and with a monthly rent
of $12,432 (NT$373,251). Law Broker has also entered into 34 leases for each of its sales and service outlets and training centers
(excluding its headquarter), with an aggregate office size of 17,845 square meters for an aggregate monthly fee of $117,673 (NT$3,713,584).
Anhou’s
current registered address located at Room 1906-1910, No. 215 Jiangzhong Middle Road, Jianye District, Nanjing, Jiangsu Province,
China, with 6,458 square feet (600 square meters) of office space. The lease agreement is between Qing Tian and Anhou. The term
is from February 1, 2014 to January 31, 2019 with rent of first year being $120,578 (RMB750,000), second year being $125,592 (RMB795,000),
third year being $135,482 (RMB842,700), the fourth year being $143,611 (RMB893,262), and the fifth year being $152,227 (RMB946,857).
Sichuan
Kangzhuang’s office is located at A and B areas, 14th Floor Renbao Building, No.57 Dongyu Street, Jinjiang District,
Chengdu City, Sichuan province, China, with 8,353 square feet (776 square meters) of office space. The lease was between
People's Insurance Company of China, Sichuan Branch and Sichuan Kangzhuang. The lease term is from September 1, 2006 to
August 31, 2011 for four years, with rent of approximately $4,862 (RMB31,040) per month, to be increased by 8% per annum
commencing from September 1, 2008, payable every three months. Upon the expiration of the above lease, Sichuan Kangzhuang
entered into a new lease with People's Insurance Company of China, Sichuan Branch, which is located at B area, 14th Floor
Renbao Building, No.57 Dongyu Street, Chengdu City, Sichuan province, China, with 6,672 square feet (612 square meters) of
office space. The lease term is from September 1, 2011 to August 31, 2014 for three years, with rent of $5,313 (RMB33,652 )
per month in the first year commencing from September 1, 2011, $5,844 (RMB37,017) per month in the second year commencing
from September 1, 2012, $6,429 (RMB40,719) per month in the third year commencing from September 1, 2013, payable every three
months. On August 8, 2014, the lease was renewed and the term was extended to August 31, 2017 for three (3) years, with rent
of $6,643 (RMB41,606) per month payable every three months.
Jiangsu Law’s
office is located at No. 888 Jintong Road, Xingren County, Tongzhou District, Nantong City, Jiangsu province, China, with 10,764
square feet (1,000 square meters) of office space. The lease was between Xiangriya Industrial (Nantong) Co., Ltd., which is an
affiliate of Mao Yi Hsiao. The lease term is from January 1, 2013 to December 31, 2017 for five years, with rent of approximately
$1,122 (RMB 7,083) per month, payable every year.
ITEM
3. LEGAL PROCEEDINGS.
From time to
time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that
may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material
adverse effect on our business, financial condition or operating results.
ITEM
4. MINE SAFETY DISCLOSURES
Not applicable.
PART
II
ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock
has been quoted on the Over the Counter Bulletin Board (“OTCBB”) under the symbol “CUII” since August
1, 2012. The latest available closing price of our common stock prior to March 15, 2015 was $13.09.
The following
table sets forth for the respective periods indicated the high and low closing prices for the common stock, as reported by the OTCBB.
Such prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may
not represent actual transactions.
| |
Fiscal Year Ended December
31, 2014 | |
| |
Low | | |
High | |
First Quarter ended March 31, 2014 | |
$ | 11.50 | | |
$ | 16.00 | |
Second Quarter ended June 30, 2014 | |
$ | 10.01 | | |
$ | 14.43 | |
Third Quarter ended September 30, 2014 | |
$ | 11.02 | | |
$ | 13.50 | |
Fourth Quarter ended December 31, 2014 | |
$ | 7.95 | | |
$ | 13.75 | |
Shareholders
As of March
15, 2015, there were 121 record owners of our common stock and one record owner of our preferred stock.
Transfer
Agent
Our transfer
agent is Globex Transfer, LLC, at the address of 780 Deltona Blvd., Suite 202, Deltona, FL 32725.
Dividends
We have never
declared or paid any cash dividends or distributions on our common stock. We currently intend to retain our future earnings, if
any, to support operations and to finance future growth and expansion and, therefore, do not anticipate paying any cash dividends
on our common stock in the foreseeable future.
Securities
Authorized for Issuance Under Equity Compensation Plans
Pursuant to
the provisions of the Acquisition Agreement dated August 24, 2012 and its amendment on March 14, 2013, in lieu of the 2 million
employee stock option pool (the “ESOP”) described in the Acquisition Agreement, the Company agrees to use its best
efforts, as soon as practically possible, to create an employee stock pool consisting of up to 4 million shares of CUIS common
stock, among which 2 million shares shall be solely granted to employees of Law Broker, and the remaining 2 million shares to
be granted to employees of affiliated entities of the Company (including Law Broker employees). Law Broker, being the only actively
operated subsidiary in Taiwan, primarily engages in insurance brokerage and insurance agency service business across Taiwan. Upon
satisfaction of respective performance criteria of Law Broker employees, the Board of Directorsof Law Broker may submit its recommendation
to the Company for its approval and issuance of such options under the ESOP. Details of terms and conditions on the said ESOP
shall be set forth in separate ESOP documents duly approved by the Company. As of March 15, 2015, the Company has not yet set
up the ESOP.
Options
and Warrants
As of March
15, 2015, we had outstanding put option granted to Li Chwan-Hau for the GHFL Acquisition (Note 25).
ITEM
6. SELECTED FINANCIAL DATA.
The following
selected consolidated statement of operations data for the year ended December 31, 2014, the six months ended December 31,
2013, and the years ended June 30, 2013 and 2012 and the selected consolidated balance sheet data as of December 31, 2014 and
2013 are derived from our audited consolidated financial statements included elsewhere in this Form 10-K. The consolidated statement
of operations data for the year ended June 30, 2011 is derived from our audited consolidated financial statements not included
in this Form 10-K.
On January
17 2014, the Company’s Board of Directors approved a change in our fiscal year end to December 31 from June 30. As China
United acquired AHFL and its Taiwan subsidiaries on August 24, 2012, AHFL’s operating results from September 1, 2012 are
included in the consolidated statements of operations. The consolidated statements of operations for the years ended June 30,
2012 and 2011 doesn’t include the operating result of AHFL and its subsidiaries.
Our historical
results are not necessarily indicative of the results that may be expected in the future. You should read the following selected
financial data in conjunction with the section titled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”,
our consolidated financial statements, related notes, and other financial information included elsewhere in this Form 10-K.
| |
Year
Ended
December 31, | | |
Six
Months Ended
December 31, | | |
Years
Ended June 30, | |
| |
2014 | | |
2013 | | |
2013 | | |
2012 | | |
2011 | |
| |
| | |
| | |
| | |
| | |
| |
Revenues | |
$ | 47,449,962 | | |
$ | 23,689,110 | | |
$ | 37,842,246 | | |
$ | 3,153,776 | | |
$ | 2,740,519 | |
Cost of revenue | |
| 30,408,118 | | |
| 16,040,303 | | |
| 24,309,716 | | |
| 2,363,581 | | |
| 1,897,359 | |
Gross profit | |
| 17,041,844 | | |
| 7,648,807 | | |
| 13,532,530 | | |
| 790,195 | | |
| 843,160 | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | | |
| | |
Selling | |
| 4,034,409 | | |
| 2,010,744 | | |
| 962,958 | | |
| | | |
| | |
General and administrative | |
| 11,971,863 | | |
| 5,948,516 | | |
| 9,062,828 | | |
| 1,166,841 | | |
| 1,095,869 | |
Impairment
loss of goodwill | |
| - | | |
| 122,250 | | |
| - | | |
| - | | |
| | |
Income (loss) from operations | |
| 1,035,572 | | |
| (432,703 | ) | |
| 3,506,744 | | |
| (376,646 | ) | |
| (252,709 | ) |
Other income (expenses): | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 229,317 | | |
| 108,654 | | |
| 83,682 | | |
| 4,756 | | |
| 12,760 | |
Bargain gain on purchase of
subsidiaries | |
| - | | |
| - | | |
| 5,280,042 | | |
| - | | |
| 267,156 | |
Other
- net | |
| 365,225 | | |
| (652,079 | ) | |
| 432,064 | | |
| (18 | ) | |
| (2,753 | ) |
Total other income (expenses) | |
| 594,542 | | |
| (543,425 | ) | |
| 5,795,788 | | |
| 4,738 | | |
| 277,163 | |
Income (loss) before income taxes | |
| 1,630,114 | | |
| (976,128 | ) | |
| 9,302,532 | | |
| (371,908 | ) | |
| 24,454 | |
Income tax expense | |
| 1,672,840 | | |
| 143,660 | | |
| 698,508 | | |
| (268,440 | ) | |
| 354,441 | |
Net income (loss) | |
| (42,726 | ) | |
| (1,119,788 | ) | |
| 8,604,024 | | |
| (103,468 | ) | |
| (329,987 | ) |
Net income attributable to the
noncontrolling interests | |
| (865,406 | ) | |
| (32,190 | ) | |
| (1,386,556 | ) | |
| - | | |
| - | |
Net income (loss) attributable to parent's shareholders | |
| (908,132 | ) | |
| (1,151,978 | ) | |
| 7,217,468 | | |
| (103,468 | ) | |
| (329,987 | ) |
Income (loss) per share: | |
| | | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.031 | ) | |
$ | (0.040 | ) | |
$ | 0.262 | | |
$ | (0.005 | ) | |
$ | (0.016 | ) |
Diluted | |
$ | (0.031 | ) | |
$ | (0.040 | ) | |
$ | 0.252 | | |
$ | (0.005 | ) | |
$ | (0.016 | ) |
Selected
consolidated balance sheet data | |
As
of December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Total assets | |
$ | 32,336,764 | | |
$ | 32,284,692 | |
Total current liabilities | |
| 11,023,387 | | |
| 10,871,582 | |
Total long-term liabilities | |
| 7,500,645 | | |
| 7,095,062 | |
Total shareholders' equity | |
| 13,812,732 | | |
| 14,318,048 | |
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
You should
read this Management’s Discussion and Analysis in conjunction with the Consolidated Financial Statements and Related Notes.
Overview
China
United Insurance Service, Inc. (“China United”, ”CUIS” or the “Company”) is a Delaware corporation
organized on June 4, 2010 by Mao Yi Hsiao, a Taiwanese citizen, as a listing vehicle for ZLI Holdings Limited (“CU Hong
Kong”) to be quoted on the Over the Counter Bulletin Board (the “OTCBB”). CU Hong Kong, a wholly owned Hong
Kong-based subsidiary of China United, was founded by China United on July 12, 2010 under Hong Kong laws. On October 20, 2010,
CU Hong Kong founded a wholly foreign owned enterprise, Zhengzhou Zhonglian Hengfu Business Consulting Co., Ltd. (“CU WFOE”)
in Henan province in the People’s Republic of China (“the PRC”).
On
January 16, 2011, China United issued 20,000,000 shares of common stock, $0.00001 par value per share, to several non
US persons for $300,000 in cash invested in the Company’s subsidiaries. The issuance was made pursuant to an exemption
from registration contained in Regulation S under the Securities Act of 1933, as amended. The consideration was paid as of June
30, 2012. On January 28, 2011, the Company increased the number of authorized shares from 30,000,000 shares of common stock to
100,000,000 shares of common and 10,000,000 shares of preferred stock.
Law Anhou Insurance
Agency Co., Ltd. (“Anhou”, formerly known as Zhengzhou Anhou Insurance Agency Co., Ltd. or Henan Law Anhou Insurance
Agency Co., Ltd.) was founded in Henan province of the PRC on October 9, 2003. Anhou provides insurance agency services in the
PRC.
Due to PRC
legal restrictions on foreign ownership and investment in the insurance agency businesses in China, particularly those based on
qualifications as well as capital requirements of the investors, Able Capital Holding Co., Ltd., a limited liability company established
and registered in Hong Kong, delegated four PRC individuals, namely Wang Yanyan, Chen Zhaohui, Hou Weizhe and Zhang Yong, to invest
in Anhou on its behalf. On September 26, 2013, the new PRC individual investors, namely Wang Yanyan, Chen Zhaohui, Yue Jing, Hou
Weizhe, Zhang Yong, Chen Li (“Anhou New Investors”) and the original shareholders of Anhou (“Anhou Original
Shareholders”) entered into a shareholders resolution of Anhou, pursuant to which, Anhou Original Shareholders and Anhou
New Investors agreed to increase the registered capital of Anhou to RMB50 million (approximately
$8 million). On October 24, 2013, Anhou Original Shareholders entered into share transfer agreements (the “Share
Transfer Agreements”) with Hu Changrong, a PRC citizen (“Mr. Hu” together with Anhou New Investors, “Anhou
Existing Shareholders”), respectively. Under the Share Transfer Agreements, Anhou Original Shareholders transferred all
of their equity interests in Anhou to Mr. Hu for an aggregate transfer price of RMB10 million ($1,633,178). Mr. Hu is currently
the legal representative and the sole director of Anhou.
On October
24, 2013, Anhou completed the registration with local Administration Industry and Commerce (“AIC”) on the above-mentioned
capital increase. The new business license was issued to Anhou on October 25, 2013.
The registered
capital increase of Anhou is in response to the promulgations of certain regulations by China Insurance Regulatory Commission
(“CIRC”). On April 27, 2013, CIRC issued the Decision on Revising the Provisions of the Supervision and Administration
of Specialized Insurance Agencies (the “Decision on Revising the Agency Provisions”), pursuant to which, CIRC has
mandated any insurance agency established subsequent to the Decision on Revising the Agency Provisions to meet a minimum registered
capital requirement of RMB50 million ($8,165,890). On May 16, 2013, CIRC issued Notice for Further Clarification on Related Issues
of Access to Professional Insurance Intermediary Market (the “Notice”), pursuant to which, professional insurance
agencies established prior to the issuance of the Decision on Revising the Agency Provisions, with registered capital less than
RMB50 million ($8,165,890), can continue operation of their existing business within the provinces where they have the registered
office or branch office, but shall not set up any new branches in any province where they do not have the registered office or
any branch office.
Prior to the
capital increase, Anhou, a professional insurance agency with a PRC nationwide license, has a registered capital in the amount
of RMB10 million ($1,633,178). The branch offices of Anhou were all in Henan province. To better implement its expansion strategies,
Anhou increased its registered capital to RMB50 million ($8,165,890) to meet the requirement of CIRC so that it can set up new
branches in any province beyond its current operations in Mainland China.
On February
26, 2014, Anhou completed the registration of the change of its registered address to Room 1906-1910, No. 215 Jiangdong Middle
Road, Jianye District, Nanjing, Jiangsu Province with the local AIC of Jiangsu Province. The new business license was issued to
Anhou on February 26, 2014. Anhou obtained the Professional Insurance Agency License issued by Jiangsu Bureau of CIRC on April
21, 2014. Anhou’s previous headquarters located at Building 4K, Hesheng Plaza, No. 26 Yousheng South Road, Jinshui District,
Zhengzhou, Henan province, has been registered as the Henan branch office of Anhou and it obtained the Professional Insurance
Agency License issued by Henan Bureau of CIRC on January 3, 2014 and the business license issued by local AIC on January 9, 2014.
Sichuan
Kangzhuang Insurance Agency Co., Ltd. (“Sichuan Kangzhuang”) was founded on September 4, 2006 in Sichuan province
in the PRC and provides insurance agency services in the PRC. On August 23, 2010, at Sichuan Kangzhuang’s general
meeting of shareholders, its shareholders voted to sell their shares to Anhou for RMB532,622 ($78,318). On September 6, 2010,
the equity transfer agreements were signed between Anhou and each shareholder of Sichuan Kangzhuang.
Sichuan Kangzhuang then had net liabilities of RMB219,123 ($32,134). Goodwill of RMB751,745 ($110,452)
was therefore recorded. However, Sichuan Kangzhuang suffered loss since the acquisition, indicating the impairment of goodwill.
As of December 31, 2014, the carrying value of the goodwill was fully impaired.
Jiangsu
Law Insurance Broker Co., Ltd. (“Jiangsu Law”) was founded on September 19, 2005 in Jiangsu Province in the PRC and
provides insurance brokerage services in the PRC. On August 12, 2010, at Jiangsu Law’s general meeting of shareholders,
its shareholders voted to sell their shares to Anhou for RMB518,000 ($75,475) and Anhou increased Jiangsu Law’s paid-in
capital to RMB10,000,000 ($1,355,000) from RMB5,180,000 ($625,113) on January 18, 2011 to meet the PRC paid-in capital requirements
for insurance brokerage companies. On September 28, 2010, the equity transfer agreements were signed between Anhou and each shareholder
of Jiangsu Law. On acquisition date, Jiangsu Law had net assets of RMB2,286,842 ($341,425). Based on the purchase price allocation,
the fair value (“FV”) of the identifiable assets and liabilities assumed exceeded the FV of the consideration paid.
As a result, the Company recorded a gain on acquisition of RMB1,768,842 ($267,156).
Due to PRC
legal restrictions on foreign ownership and investment in insurance agency and brokerage businesses in China, especially those
on qualifications and capital requirements of the investors, we operate our business primarily through our Consolidated Affiliated
Entities (“CAE”) in China. On January 17, 2010, CU WFOE and Anhou and Anhou Original Shareholders entered into a series
of agreements known as variable interest agreements (the “Old VIE Agreements”) pursuant to which CU WFOE has executed
effective control over Anhou through these contractual arrangements. As a result of the capital increase and the share transfer
described above, on October 24, 2013, CU WFOE, Anhou and Anhou Existing Shareholders entered into a series of variable interest
agreements (the “VIE Agreements”), including Power of Attorneys, Exclusive Option Agreements, Share Pledge Agreements,
in the same form as the previous Old VIE Agreements, other than the change of shareholder names and their respective shareholdings.
The Old VIE Agreements were terminated by and among CU WFOE, Anhou and Anhou Original Shareholders on the same date. The Exclusive
Business Cooperation Agreement executed by and between CU WFOE and Anhou on January 17, 2011 remains in full effect. We do not
hold equity interests in our CAE. However, through the VIE Agreements with these CAE and their respective shareholders, we effectively
control, and are able to derive substantially all of the economic benefits from, these CAE.
Our
CAE in China are VIE through which part of our insurance services are operated. It is through the VIE Agreements that we have
effective control of the CAE, which allows us to consolidate the financial results of the CAE in our financial statements.
If Anhou and its shareholders fail to perform their obligations under the VIE Agreements, we could be limited in our ability
to enforce the VIE Agreements that give us effective control. Furthermore, if we are unable to maintain effective control of our
CAE, we would not be able to continue to consolidate the CAE’s financial results with our financial results. On January
19, 2015, the Ministry of Commerce of China (“MOFCOM”) published a draft version of a proposed Foreign Investment
Law (the “Draft Foreign Investment Law”) with an explanatory note. MOFCOM has requested comments from the public on
the Draft Foreign Investment Law by February 17, 2015, which, once promulgated, will replace and integrate the three existing
laws over foreign investment, however, how these changes will affect entities currently operating in China, particularly foreign
controlled variable interest entities, is not entirely clear. For more information see “Risk Factors-Risks Related to Our
Corporate Structure.”
On July 2,
2012, the Board of Directors and stockholders of the Company approved, in connection with a reclassification of 1,000,000 issued
and outstanding shares of common stock (the “Reclassified Shares”), par value $0.00001 per share held by Mao Yi Hsiao
(“Mr. Mao”) into 1,000,000 shares of Series A Convertible Preferred Stock, par value $0.00001 per share (the “Series
A Preferred Stock”) on a share-for-share basis (the “Reclassification”), the issuance of 1,000,000 shares of
Series A Preferred Stock to Mr. Mao and cancellation of 1,000,000 common stock held and submitted by Mr. Mao pursuant to the Reclassification.
Mr. Mao has
extensive experience in the insurance agency and brokerage industry and has acted as the chairman of the board of Law Broker.
Under the leadership of Mr. Mao, Law Broker has grown into one of the top insurance brokerage firms in Taiwan, has sustained stable
growth for the past decades and generated substantial shareholder value for its stockholders. The management of the Company wanted
Mr. Mao to apply his years of experience in insurance industry into the Company’s expansion and to lead its growth. As a
result the Company approached Mr. Mao to discuss the possibility of Mr. Mao to play more of a managerial role and commit more
time on the strategy design and operation of the Company and its subsidiaries. To ensure the consistently implementation of strategies
and policies of the Company, through mutual discussion and negotiations, both the Company and Mr. Mao (and subsequently a majority
of the shareholders) agreed to the reclassification, pursuant to which, 1,000,000 shares of Series A Convertible Preferred Stock
(with 1 to 10 special voting power) were issued to Mr. Mao in replacement of the 1,000,000 shares of Common Stock previously held
by Mr. Mao. In exchange for the reclassification, Mr. Mao agreed to be engaged by the Company as its Chief Executive Officer within
6 months after July 2, 2012 or according to a timetable otherwise agreed upon. On August 8, 2014, the Board of Directors appointed
Mr. Mao as the Chief Executive Officer, effective immediately.
All
1,000,000 shares of Series A Preferred Stock were reclassified from the 1,000,000 shares of common stock held by Mr. Mao and no
additional consideration was paid by Mr. Mao in connection with the Reclassification. The preferred stock has no material quantitative
preferences over common stock, such as liquidation preferences and dividend preferences, and it specifically granted equal status
to common stock pursuant to the terms of the Certificate of Designation. Each holder of common stock is entitled to one vote for
each share of common stock held of record by such holder as of the applicable record date on any matter submitted to a vote of
the stockholders of the Company; while each holder of Series A Preferred Stock is entitled to ten votes for each share of Series
A Preferred Stock held of record by such holder as of the applicable record date on any matter submitted to a vote of the stockholders
of the Company.
On
August 24, 2012, the Company acquired all of the issued and outstanding shares of Action Holdings Financial Limited (“AHFL”),
a limited liability company (“LLC”) incorporated under the laws of British Virgin Islands on April 30, 2012, together
with its subsidiaries in Taiwan. Subsequent to the acquisition, AHFL became a 100% owned subsidiary of the Company.
AHFL
holds 65.95% of the issued and outstanding shares of Law Enterprise Co., Ltd. (“Law Enterprise”), a company limited
by shares incorporated under the laws of Taiwan on January 30, 1996. Law Enterprise holds (i) 100% Law Insurance Broker Co., Ltd.
(“Law Broker”), a company limited by shares incorporated in Taiwan on October 9, 1992; (ii) 97.84% of Law Risk Management
& Consultant Co., Ltd. (“Law Management”), a company limited by shares incorporated in Taiwan on December 5, 1987;
and (iii) 96% of Law Insurance Agent Co., Ltd. (“Law Agent” collectively with “Law Enterprise”, “Law
Broker” and “Law Agent”, the “Taiwan Subsidiaries”, each a “Taiwan Subsidiary”), a LLC
incorporated in Taiwan on June 3, 2000.
Pursuant to
the provisions of the Acquisition Agreement between the Company and the selling shareholders of AHFL and for all of the issued
and outstanding shares of AHFL, the Company was to pay NT$15 million ($500,815) on or prior to March 31, 2013 and NT$7.5 million
($250,095) subsequent to March 31, 2013 in cash in two installments, subject to terms and conditions therein. In addition the
Company agreed to (i) issue 8,000,000 shares of common stock of the Company to the shareholders of AHFL; (ii) issue 2,000,000
shares of common stock of the Company to certain employees of Law Broker; and (iii) create an employee stock option pool, consisting
of available options, exercisable for up to 2,000,000 shares of common stock of the Company.
On March
14, 2013, the Company and the selling shareholders of AHFL entered into an Amendment to the Acquisition Agreement (the “Amendment”),
pursuant to which, (i) the cash payment deadline as set forth in the Acquisition Agreement was extended from March 31, 2013 to
March 31, 2015 or at any other time or in any other manner otherwise agreed upon by and among the Company and the selling shareholders
of AHFL; and (ii) in lieu of the 2,000,000 employee stock option pool described in the Acquisition Agreement, the Company agrees
to use its best efforts, as soon as practically possible, to create an employee stock pool consisting of up to 4,000,000 shares
of CUIS common stock, among which 2,000,000 shares shall be solely granted to employees of Law Broker, and the remaining 2,000,000
shares to be granted to employees of affiliated entities of the Company (including Law Broker employees). On March 13, 2015, the
Company and the selling shareholders of AHFL entered into a second Amendment to the Acquisition Agreement (the “Second Amendment”),
pursuant to which, the cash payment deadline as set forth in the Acquisition Agreement has been extended from March 31, 2013 to
March 31, 2016 or at any other time or in any other manner otherwise agreed upon by and among the Company and the selling shareholders
of AHFL.
Law
Enterprise is a holding company for its operating subsidiaries in Taiwan. Law Broker primarily engages in insurance brokerage
and insurance agency service business across Taiwan, while Law Management and Law Agent are not active. We operate our Taiwan
business primarily through Law Broker.
On
April 23, 2014, AHFL entered into a capital increase agreement (“Agreement”) with Wong Chun Kwok Johnny (“Mr
Wong”), the owner of Prime Financial Asia Ltd (PFAL) which is a re-insurance broker company resided in Hong Kong. Upon the
Agreement, Mr Wong would increase PFAL’s capital contribution from HK$500,000 to HK$1,470,000, and AHFL would contribute
HK$1,530,000 to PFAL’s registered capital. Upon the completion of capital contribution by both parties, Mr. Wong and AHFL
would own 49% and 51% of PFAL’s equity interest, respectively. The transaction was completed on April 30, 2014.
In
the fourth quarter of 2014, the shareholders of the Law Management and Law Agent made the resolution to dissolve Law Management
and Law Agent, respectively, because those companies have not been in operation. The dissolution of Law Management and Law Agent
was approved by the Taiwan (R.O.C) Government on November 26, 2014 and on January 13, 2015, respectively. Abide by the law in
Taiwan, the liquidator was appointed by the shareholders of the Law Management and Law Agent and the liquidator shall complete
the liquidation process no later than six months from the appointment date. Both Law Management and Law Agent are under the process
of liquidation as of now.
On
February 13, 2015, the Company and AHFL entered into an acquisition agreement (the “Acquisition Agreement”) with Mr.
Li Chwan Hau, the selling shareholder of Genius Holdings Financial Limited (the “Selling Shareholder”), a company
with limited liability incorporated under the laws of British Virgin Islands (“GHFL”), to issue 352,166 fully paid
and non-assessable shares of AHFL Common Stock (“AHFL Shares”) together with an granted put option for 352,166 shares
of common stock of the Company (“Put Option”), in exchange for 704,333 shares of common stock of GHFL, being all of
the issued and outstanding capital stock of GHFL. The Put Option may be exercised within six months of the closing date of the
acquisition and the Selling Shareholder would exchange the AHFL Shares as consideration for the exercise of the Put Option. Subsequent
to the acquisition, GHFL will become a wholly-owned subsidiary of the Company. GHFL holds 100% issued and outstanding shares of
Genius Investment Consultant Co., Ltd. (“Taiwan Genius”), a limited company incorporated under the laws of Taiwan,
which in turn holds approximately 15% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius Broker”),
a company limited by shares incorporated under the laws of Taiwan. Both GHFL and Taiwan Genius have no substantive business operation
other than the holding of shares of its subsidiary. Genius Broker is primarily engaged in broker business across Taiwan. The acquisition
price may be further adjusted on the fourth anniversary of the closing date of the acquisition and depending on the earnings per
share of GHFL during the fiscal years of 2014 through 2017, subject to other terms and conditions therein. Mr. Li Chwan Hau is
the sole shareholder of GHFL and a director and shareholder of the Company. On February 13, 2015, the acquisition was completed,
the Selling Shareholder transferred 100% shares in GHFL to AHFL. The Put Option has not been exercised by the Selling Shareholder
as of March 15, 2015.
As
of December 31, 2014, through our CAE, we had two insurance agencies, one brokerage and 36 service outlets with 1,177 full-time
sales professionals and 91 administrative staff in Henan, Sichuan and Jiangsu provinces in China. In addition, through Law Insurance
Broker Co., Ltd., we had 27 sales and service outlets (including the headquarters) with 1,637 full-time sales professionals, 394
part-time sales professionals and 153 administrative staff in Taiwan.
During
the year ended December 31, 2014, 93.55% and 6.45% of our revenues in our consolidated financial statements were derived from
our Taiwan Subsidiaries and CAE, respectively. During the six months ended December 31, 2013, 93.72% and 6.28% of our revenues
in our consolidated financial statements were derived from our Taiwan Subsidiaries and CAE, respectively. For the year ended June
30, 2013, the first fiscal year after the acquisition of AHFL together with its Taiwan Subsidiaries, 92.66% and 7.34% of our revenues
in our consolidated financial statements were derived from our Taiwan Subsidiaries and CAE, respectively. During the year ended
June 30, 2012, 100% of our revenues in our consolidated financial statements were derived from our CAE.
On January
17 2014, the Company’s Board of Directors approved a change in our fiscal year end to December 31 from June 30.
Critical
Accounting Policies
The
preparation of financial statements in conformity with Accounting Principles generally accepted in the United States of America
(“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the amounts of revenues
and expenses during the period. Management makes these estimates using the best information available when they are made.
However, actual results could differ materially from those estimates. While there are a number of significant accounting policies
affecting the Company’s financial statements; the Company believes the following critical accounting policies involve the
most complex, difficult and subjective estimates and judgments The Company has not made any material changes in the methodology
used in these accounting polices during the past two years.
Principles
of consolidation
The accompanying
consolidated financial statements include the accounts of China United and its subsidiaries as shown in the organization structure
in Note 1 above. All significant intercompany transactions and balances were eliminated in consolidation.
Basis
of Presentation
The Company’s
financial statements are prepared in accordance with accounting principles generally accepted in the United States of America
(“US GAAP”).
Noncontrolling
Interest
Noncontrolling
interest consists of direct and indirect equity interest in AHFL and subsidiaries arising from the acquisition of AHFL by CUIS.
The Company
follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic
810, “Consolidation,” which governs the accounting for and reporting of noncontrolling interests (“NCIs”)
in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate,
among other things, that NCIs be treated as a separate component of equity, not as a liability, that increases and decreases in
the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions
or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such
allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements.
The net income
(loss) attributed to the NCI is separately designated in the accompanying statements of operations and other comprehensive income
(loss). Losses attributable to the NCI in a subsidiary may exceed the NCI’s interests in the subsidiary’s equity.
The excess attributable to the NCI is attributed to those interests. The NCI shall continue to be attributed its share of losses
even if that attribution results in a deficit NCI balance.
Use
of Estimates
The preparation
of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the
consolidated financial statements and the amounts of revenues and expenses during the reporting periods.
Management
makes these estimates using the best information available when they are made; however, actual results could differ materially
from those estimates.
Risks
and Uncertainties
The Company
is subject to risks from, among other things, competition associated with the industry in general, other risks associated with
financing, liquidity requirements, rapidly changing customer requirements, limited operating history, and foreign currency exchange
rates.
Foreign
Currency Transactions
The functional
currency for our subsidiaries in Taiwan is New Taiwan Dollar (“NT$”) and for the VIEs in China is Renminbi (“RMB”).
The consolidated
financial statements were translated into United States Dollars (“USD” or “$”) in accordance with FASB
ASC Topic 830 “Foreign Currency Transaction.” According to the standard, all assets and liabilities were
translated at the exchange rate on the balance sheet dates; stockholders’ equity is translated at historical rates and statement
of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments
are reported under other comprehensive income in accordance with ASC 220. Gains and losses resulting from the translation of foreign
currency transactions are reflected in the consolidated statements of operations and other comprehensive income (loss).
Marketable
Securities
The Company
invests part of its excess cash in equity securities, money market funds and government bonds. Such investments are included in
“Marketable securities” in the accompanying consolidated balance sheets. Held-to-maturity represents securities the
Company has intends and has the ability to hold to maturity; trading securities represent securities bought and held primarily
for sale in the near-term to generate income on short-term price differences; available-for-sale represents securities not classified
as held-to-maturity or trading securities.
The
Company classifies the equity security investments as trading securities and reports them at FV with changes in FV recorded in
“Other Income” in the statements of operations and other comprehensive income (loss). The Company classifies bonds
as available-for-sale and reports them at FV with unrealized gains and losses included in “Accumulated other comprehensive
income (loss)” on the equity section of the balance sheets.
Revenue
recognition
The Company’s
revenue is from insurance agency and brokerage services. The Company, through its subsidiaries, sells insurance products to customers,
and obtains commissions from the respective insurance companies according to the terms of each insurance company service agreement.
The Company recognizes revenue when the following have occurred: persuasive evidence of an agreement between the insurance company
and insured exists, services were provided, the fee for such services is fixed or determinable and collectability of the fee is
reasonably assured. Insurance agency services are considered complete, and revenue is recognized, when an insurance policy becomes
effective. The customers are entitled to a 10-day cancellation period from the date of issuance of the policies, in which customers
can cancel the contract without any fees. The Company is notified of such cancellations by the insurance carriers. For the six
months ended December 31, 2013 and for the fiscal years ended December 31, 2014 and June 30, 2013 and 2012, policy cancellations
were $22,553, $84,476, $12,809 and nil, respectively.
The
Company pays commissions to its sub-agents when an insurance product is sold by the sub-agent. The Company recognizes commission
revenue on a gross basis. The commissions paid by the Company to its sub-agents are recorded as costs of revenue.
Income
taxes
The
Company utilizes ASC Topic 740 “Income Taxes”, which requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that were included in the financial statements or tax returns. Under this method,
deferred income 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 period end based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to 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 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). As of December 31,
2014 and 2013, the Company did not have any uncertain tax positions.
The Company
was not subjected to income tax examinations by taxing authorities during the current or past fiscal years. In connection
with the acquisition of China entities, the Company is required to comply with the information return reporting requirements such
as Foreign Bank Accounts Reporting (FBAR), Information Return on Foreign-Owned U.S. Corporation or U.S. Corporation owning certain
foreign corporation (Under Section 6038A and 6038C of Internal Revenue Code, etc.). The Company failed to comply with such requirements
for the years of 2010, 2011 and 2012. The potential penalty is estimated to be $370,000 in the event of a tax audit.
Impairment
of Long-Lived Assets
In
accordance with ASC Topic 360, “Property, Plant and Equipment”, the Company reviews the carrying values of
long-lived assets whenever facts and circumstances indicate that the assets may be impaired. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected
to be generated by the asset. If an asset is considered impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the asset exceeds the fair value (“FV”). Assets to be disposed of are reported
at the lower of the carrying amount or FV, less costs of disposal. No impairment was recognized for the years ended December 31,
2014, June 30, 2013 and 2012, and the six months ended December 31, 2013.
Goodwill
Goodwill arose
from the acquisition of PFAL and Sichuan Kangzhuang. Goodwill is the excess of the cost of an acquisition over the FV of the net
assets acquired. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate
it might be impaired, using the prescribed two-step process under US GAAP. The first step screens for potential impairment of
goodwill to determine if the FV of the reporting unit is less than its carrying value, while the second step measures the amount
of goodwill impairment, if any, by comparing the implied FV of goodwill to its carrying value. Sichuan Kangzhuang has been suffering
net loss since the acquisition, indicating the impairment of goodwill. As of December 31, 2013, the carrying value of the goodwill
was fully impaired. Accordingly, we recorded a goodwill impairment loss of $122,250 in the six months ended December 31, 2013.
As of December 31, 2014, there were no any indications of the impairment of goodwill that arose from the acquisition of PFAL.
Recent
Accounting Pronouncements
The FASB has
issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting
Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard
requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective
on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the
cumulative effect of initially applying the ASU recognized at the date of initial application. The adoption of this standard is
not expected to have a material impact on the Company’s consolidated financial position and results of operations.
The FASB has
issued ASU No. 2014-12, Compensation - Stock Compensation (ASC Topic 718): Accounting for Share-Based Payments When the Terms
of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance
target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition.
As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further
clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will
be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already
been rendered.. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning
after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact
on the Company's consolidated financial position and results of operations.
In March 2013,
the FASB issued guidance on a parent’s accounting for the cumulative translation adjustment upon derecognition of a subsidiary
or group of assets within a foreign entity. This new guidance requires the parent release any related cumulative translation adjustment
into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity
in which the subsidiary or group of assets had resided. The new guidance will be effective for us beginning July 1, 2014. We do
not anticipate a material impact on our financial statements upon adoption.
In July 2013,
the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating
Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” This standard provides guidance regarding when
an unrecognized tax benefit should be classified as a reduction to a deferred tax asset or when it should be classified as a liability
in the consolidated balance sheet. The new guidance will be effective for us beginning July 1, 2014. Early adoption and retrospective
application is permitted. The Company is evaluating the potential impact of this adoption on our consolidated financial statements.
In May 2014,
the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, (“ASU 2-14-09”). ASU 2-14-09 amends revenue
recognition principles and provides a single set of criteria for revenue recognition among all industries. This new standard provides
a five step framework whereby revenue is recognized when promised goods or services are transferred to a customer at amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also
requires enhanced disclosure pertaining to revenue recognition in both interim and annual periods. ASU 2014-09 is effective for
interim and annual periods beginning after December 15, 2016. We are currently evaluating the potential impact that ASU 2014-09
may have on our financial position and results of operations.
Results
of Operations
Overview of the years ended
December 31, 2014 and 2013
The
following table shows the results of operations for the years ended December 31, 2014 and 2013:
| |
Years
Ended December 31, | | |
| | |
| |
| |
2014 | | |
2013 | | |
| | |
| |
| |
(Audited) | | |
(Unaudited) | | |
Change | | |
Percent | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 47,449,962 | | |
$ | 45,156,574 | | |
$ | 2,293,388 | | |
| 5 | % |
Cost of revenue | |
| 30,408,118 | | |
| 27,576,749 | | |
| 2,831,369 | | |
| 10 | % |
Gross
profit | |
| 17,041,844 | | |
| 17,579,825 | | |
| (537,981 | ) | |
| -3 | % |
Gross profit margin | |
| 36 | % | |
| 39 | % | |
| -3 | % | |
| -8 | % |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Selling | |
| 4,034,409 | | |
| 2,737,131 | | |
| 1,297,278 | | |
| 47 | % |
General and administrative | |
| 11,971,863 | | |
| 10,386,735 | | |
| 1,585,128 | | |
| 15 | % |
Impairment of goodwill | |
| | | |
| 122,250 | | |
| (122,250 | ) | |
| -100 | % |
| |
| | | |
| | | |
| | | |
| | |
Income
(loss) from operations | |
| 1,035,572 | | |
| 4,333,709 | | |
| (3,298,137 | ) | |
| -76 | % |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses): | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 229,317 | | |
| 156,719 | | |
| 72,598 | | |
| 46 | % |
Other
- net | |
| 365,225 | | |
| (385,563 | ) | |
| 750,788 | | |
| 195 | % |
Total
other income (expenses) | |
| 594,542 | | |
| (228,844 | ) | |
| 823,386 | | |
| 360 | % |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) before
income taxes | |
| 1,630,114 | | |
| 4,104,865 | | |
| (2,474,751 | ) | |
| -60 | % |
Income
tax expense | |
| 1,672,840 | | |
| 931,919 | | |
| 740,921 | | |
| 80 | % |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| (42,726 | ) | |
| 3,172,946 | | |
| (3,215,672 | ) | |
| -101 | % |
Net
income attributable to the noncontrolling interests | |
| (865,406 | ) | |
| (1,629,398 | ) | |
| 763,992 | | |
| -47 | % |
Net income (loss) attributable
to parent's shareholders | |
| (908,132 | ) | |
| 1,543,548 | | |
| (2,451,680 | ) | |
| -159 | % |
Revenues
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. We generate revenue primarily through our sales
force, which consists of individual sales agents in our distribution and service network. The acquisition of AHFL enabled us to
reach the untapped market in Taiwan. For the years ended December 31, 2014 and 2013, the revenue generated respectively from Taiwan
and PRC is as follows:
| |
Years ended December
31, | |
Geographical Areas | |
2014 | | |
2013 | |
PRC | |
$ | 3,060,765 | | |
$ | 2,720,382 | |
Taiwan | |
| 44,389,197 | | |
| 42,436,192 | |
| |
$ | 47,449,962 | | |
$ | 45,156,574 | |
During the
year ended December 31, 2014, 93.55% and 6.45% of our revenues in our consolidated financial statements were derived from our
Taiwan Subsidiaries and CAE, respectively. During the year ended December 31, 2013, 93.98% and 6.02% of our revenues in our consolidated
financial statements were derived from our Taiwan Subsidiaries and CAE, respectively.
Total revenues
increased by $2,293,388, or 5%, from $45,156,574 for the year ended December 31, 2013 to $47,449,962 for the year ended December
31, 2014, which is mainly due to the increase of the revenue in Taiwan for following reasons,
| a) | After we entered
into a Strategic Alliance Agreement with AIA International Limited Taiwan Branch (“AIATW”)
in June 2013, the sales of insurance products of AIATW increased stably. |
| b) | The sales
of the products of China Trust Life Insurance Co., Ltd. (“China Trust”) increased
in 2014 because China Trust’s good reputation attracted more customers. |
Cost of
revenue and gross profit
The cost of
revenue mainly consists of commissions paid to our sales agents. The cost of revenue for the year ended December 31, 2014 increased
by $2,831,369 or 10%, to $30,408,118 compared to $27,576,749 for the year ended December 31, 2013. The cost of revenue increased
with the increase in revenue.
| a) | Direct commission
cost: Compared with the comparable period of 2013, the share of the first-year commission
(FYC) revenue in the total revenue increased. Accordingly, the cost matched with the
FYC revenue increased. Compared with the commission cost of other types of commission
revenue, the cost of the FYC is higher. |
| b) | Indirect
commission cost: With the increase in sales, indirect commission cost, including special
allowance, high-performance awards, practicing bonus, etc. increased compared to the
comparable period of 2013. |
The gross profit
for the year ended December 31, 2014 decreased by $537,981, or 3%, to $17,041,844 compared to $17,579,825 for the year ended December
31, 2013. The gross profit ratio decreased to 36% for the year ended December 31, 2014 from 39% for the year ended December 31,
2013. The decrease was mainly because the bonuses and awards to subagents increased and the share of revenue from the FYC increased
in the total revenue compared to the year ended December 31, 2013.
Selling expenses
Selling expenses
were mainly occurred in Law Broker, representing the expense for marketing promotion. The selling expense for the year ended December
31, 2014 increased by $1,297,278 or 47%, to $4,034,409 compared to $2,737,131 for the year ended December 31, 2013, which is mainly
because the advertizing expense spent in publicity of the company’s brand increased by approximately $1 million.
General and administrative expenses
The general
and administrative (“G&A”) expenses principally comprise of salaries and benefits for our administrative staff,
office rental expenses, travel expenses, depreciation and amortization, entertainment expenses, and professional service fees
to the auditor and attorney.
For the year
ended December 31, 2014, G&A expenses were $11,971,863, increased by $1,585,128, or 15%, compared with $10,386,735 for the
year ended December 31, 2013, which mainly due to the rate of the business tax directly related to sales in Taiwan Subsidiaries
increased from 2% to 5% from July 2014. In addition, the G&A expense increased in Anhou due to the relocation expense of moving
the Company’s headquarter to Nanjing and setup expense of opening an outlet in Yunnan by Anhou.
Other income
Net other income
for the year ended December 31, 2014 was $594,542 and the net other expense for the year ended December 31, 2013 is $228,844.
Other income (expense) mainly consists of interest income (expense), gain (loss) on change of fair value of marketable securities
and rental income of sub-leased spare offices and garage. In the year ended December 31, 2013, the Company recorded $303,000 of
loss from disposal of fixed assets and $370, 000 of estimated tax penalties for late filings of income tax return in the U.S.A.
Compared with the year ended December 31, 2013, the Company’s interest income increased by approximately $70,000 due to
the fixed deposit of RMB. In the meantime, the loss from disposal of fixed assets decreased by approximately $0.2 million and
the gain on change of fair value of marketable securities increased by approximately $0.17 million.
Income tax
For the year ended December 31,
2014, the income tax expense were $1,672,840, increased by $740,921, or 80%, compared with $931,919 for the year ended December
31, 2013.
The Company’s
subsidiaries in Taiwan are governed by the Income Tax Law of Taiwan, and are generally subject to tax at 17% on income reported
in the statutory financial statements after appropriate adjustments. In the meanwhile, Income Tax Law of Taiwan provides that
a company is taxed at additional 10% on any undistributed earnings to its shareholders. In June 2014, Law Enterprises decided
not to distribute its earnings accumulated as of December 31, 2013. Accordingly, NT$18,903,349, approximately $626,406, of income
tax was accrued for the undistributed earnings. On December 31, 2014, Law Enterprises decided not to distribute its earnings in
2014. Accordingly, additional NT$9,200,945, approximately $303,589, of income tax was accrued as of December 31, 2014.
CU WFOE and
the CAEs in the PRC are governed by the Income Tax Law of the PRC concerning the private-run enterprises, which are generally
subject to tax at 25% on income reported in the statutory financial statements after appropriated adjustments. According to the
requirement of local tax authorities, the taxable income of Jiangsu Law is deemed as 10% of total revenue, instead of the income
before income tax. The tax rate of Jiangsu Law is also 25%.
According to
Chinese tax regulations by the Chinese tax authorities effective January 1, 2008, commissions paid to sub-agents in excess of
5% of the commission revenue were not tax deductible. According to China State Administration of Taxation #15 Announcement in
2012, effective from 2011, such commissions can be fully deducted. Also, such tax payable over three years can be reversed. In
the year ended December 31, 2013, the Company reversed tax payable of $160,780 accordingly.
In
connection with the acquisition of China entities, the Company is required to comply with the information return reporting requirements
such as Foreign Bank Accounts Reporting (FBAR), Information Return on Foreign-Owned U.S. Corporation or U.S. Corporation owning
certain foreign corporation (Under Section 6038A and 6038C of Internal Revenue Code, etc.). The Company failed to comply with
such requirements for the years of 2010, 2011 and 2012. The potential penalty is estimated to be $370,000 in the event of a tax
audit which was accrued in the year ended December 31, 2013.
Overview of the six months
ended December 31, 2013 Compared to six months ended December 31, 2012
The
following table shows the results of operations for the six months ended December 31, 2013 and 2012:
| |
Six
Months Ended December 31, | | |
| |
| |
2013 | | |
2012 | | |
| | |
| |
| |
(Audited) | | |
(Unaudited) | | |
Change | | |
Percent | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 23,689,110 | | |
$ | 16,006,079 | | |
$ | 7,683,031 | | |
| 48 | % |
Cost of revenue | |
| 16,040,303 | | |
| 10,097,295 | | |
| 5,943,008 | | |
| 59 | % |
| |
| | | |
| | | |
| | | |
| | |
Gross
profit | |
| 7,648,807 | | |
| 5,908,784 | | |
| 1,740,023 | | |
| 29 | % |
Gross profit margin | |
| 32 | % | |
| 37 | % | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Selling | |
| 2,010,744 | | |
| - | | |
| 2,010,744 | | |
| NA | |
General and administrative | |
| 5,948,516 | | |
| 4,404,177 | | |
| 1,544,339 | | |
| 35 | % |
Impairment of goodwill | |
| 122,250 | | |
| - | | |
| 122,250 | | |
| NA | |
| |
| | | |
| | | |
| | | |
| | |
Income
(loss) from operations | |
| (432,703 | ) | |
| 1,504,607 | | |
| (1,937,310 | ) | |
| (129 | %) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses): | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 108,654 | | |
| 36,144 | | |
| 72,510 | | |
| 201 | % |
Bargain gain on purchase
of subsidiaries | |
| - | | |
| 5,280,042 | | |
| (5,280,042 | ) | |
| (100 | %) |
Other
- net | |
| (652,079 | ) | |
| 43,214 | | |
| (695,293 | ) | |
| (1,609 | %) |
Total
other income (expenses) | |
| (543,425 | ) | |
| 5,359,400 | | |
| (5,902,825 | ) | |
| (110 | %) |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) before
income taxes | |
| (976,128 | ) | |
| 6,864,007 | | |
| (7,840,135 | ) | |
| (114 | %) |
Income
tax expense | |
| 143,660 | | |
| 155,470 | | |
| (11,810 | ) | |
| (8 | %) |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| (1,119,788 | ) | |
| 6,708,537 | | |
| (7,828,325 | ) | |
| (116 | %) |
Net
income attributable to the noncontrolling interests | |
| (32,190 | ) | |
| (532,213 | ) | |
| 500,023 | | |
| (94 | %) |
Net income (loss) attributable
to parent's shareholders | |
| (1,151,978 | ) | |
| 6,176,324 | | |
| (7,328,302 | ) | |
| (118 | %) |
On
August 24, 2012, the Company acquired all of the issued and outstanding shares of AHFL and its subsidiaries in Taiwan. Subsequent
to the acquisition, AHFL became a 100% owned subsidiary of the Company.
Our results
of operations for the six months ended December 31, 2013 contains the results for the six months ended December 31, 2013 of AHFL.
Our results of operations for the six months ended December 31, 2012 contains the results for four month ended December 31, 2012
of AHFL. The majority of AHFL’s result is generated by Law Broker, its subsidiary in Taiwan. Acquisition of AHFL enables
us to expand our business to Taiwan.
Revenues
Revenues increased
by $7,683,031, or 48%, from $16,006,079 for the six months ended December 31, 2012 to $23,689,110 for the six months ended December
31, 2013. The increase in revenues was mainly attributable to our new operations in Taiwan after August 24, 2012 that occurred
as a result of our acquisition of AHFL.
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. We generate revenue primarily through our sales
force, which consists of individual sales agents in our distribution and service network. The acquisition of AHFL enabled us to
reach the untapped market in Taiwan. For six months ended December 31, 2013, our business in Taiwan generated $22,201,000 of revenue,
which accounts for 94% of our total revenue.
Cost of
revenue and gross profit
The cost of
revenue for the six months ended December 31, 2013 increased by $5,943,008 or 59%, to $16,040,303 compared to $10,097,295 for
the six months ended December 31, 2012. Over 88% of the cost of revenue is commissions paid to our sales agents. Therefore the
cost of revenue increased as our sales increased. For the six months ended December 31, 2013, $15,222,816 of our cost of revenue
occurred in the Taiwan business we acquired.
The gross profit for the six months
ended December 31, 2013 increased by $1,740,023, or 29%, to $7,648,807 compared to $5,908,784 for the six months ended December
31, 2012. The gross profit ratio decreased to 32% for the six months ended December 31, 2013 from 37% for the six months ended
December 31, 2012. The decrease was mainly because Law Broker increased the portion of commission paid to sub-agent by paying
special bonus.
Selling expenses
Selling expenses
were mainly occurred in Law Broker, representing the expense for marketing promotion. For the six months ended December 31, 2012,
such expenses were included in operating expenses.
General and administrative expenses
The general
and administrative (“G&A”) expenses principally comprise of salaries and benefits for our administrative staff,
office rental expenses, travel expenses, depreciation and amortization, entertainment expenses, and office supply expenses for
our administrative staff.
For the six
months ended December 31, 2013, G&A expenses were $5,948,516, increased by $1,544,339, or 35%, compared with $4,404,177 for
the six months ended December 31, 2012. The growth of expenses is due to the overall growth of our business and expansion to Taiwan.
For the six months ended December 31, 2013, $4,770,589 of our G&A expenses occurred in the Taiwan business we acquired.
Other income (expenses)
Net other expenses
for the six months ended December 31, 2013 was $543,425, which was mainly due to $303,000 of loss from disposal of fixed assets
and $370, 000 of estimated tax penalties for late filings of income tax return in the U.S.A. For the six months ended December
31, 2012, the Company had a net other income of $5,359,400 which is mainly due to the $5.2 million of bargain gain on purchase
of subsidiaries.
Income tax
CU WFOE, the
Company’s subsidiary, and the VIEs in the PRC, are governed by the Income Tax Law of the PRC concerning the private-run
enterprises, which are generally subject to tax at 25% on income reported in the statutory financial statements after appropriated
adjustments. Except for Jiangsu Law, according to the requirement of local tax authorities, the taxable income is deemed as 10%
of total revenue, instead of net income. The tax rate of Jiangsu Law is also 25%.
According to
tax regulations by PRC tax authorities effective January 1, 2008, commissions paid to sub-agents in excess of 5% of the commission
revenue was not tax deductible. According to China State Administration of Taxation #15 Announcement in 2012, effective from 2011,
such commissions can be fully deducted. Also, such tax payable over the past five years can be adjusted.
The Company’s
subsidiaries in Taiwan are governed by the Income Tax Law of Taiwan, and are generally subject to tax at 17% of income reported
in the statutory financial statements after appropriate adjustments.
In connection
with the acquisition of China entities, the Company is required to comply with the information return reporting requirements such
as Foreign Bank Accounts Reporting (FBAR), Information Return on Foreign-Owned U.S. Corporation or U.S. Corporation owning certain
foreign corporation (Under Section 6038A and 6038C of Internal Revenue Code, etc.). The Company failed to comply with such requirements
for the years of 2010, 2011 and 2012. The potential penalty is estimated to be $370,000 in the event of a tax audit which was
accrued in the six months ended December 31, 2013.
Overview of the years Ended
June 30, 2013 and 2012
The
following table shows the results of operations for the years ended June 30, 2013 and 2012:
| |
Years
Ended June 30, | | |
| | |
| |
| |
2013 | | |
2012 | | |
| | |
| |
| |
(Audited) | | |
(Audited) | | |
Change | | |
Percent | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 37,842,246 | | |
$ | 3,153,776 | | |
$ | 34,688,470 | | |
| 1100 | % |
Cost of revenue | |
| 24,309,716 | | |
| 2,363,581 | | |
| 21,946,135 | | |
| 929 | % |
Gross
profit | |
| 13,532,530 | | |
| 790,195 | | |
| 12,742,335 | | |
| 1613 | % |
Gross profit margin | |
| 36 | % | |
| 25 | % | |
| 11 | % | |
| 43 | % |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Selling | |
| 962,958 | | |
| | | |
| 962,958 | | |
| NA | |
General
and administrative | |
| 9,062,828 | | |
| 1,166,841 | | |
| 7,895,987 | | |
| 677 | % |
| |
| | | |
| | | |
| | | |
| | |
Income
(loss) from operations | |
| 3,506,744 | | |
| (376,646 | ) | |
| 3,883,390 | | |
| 1031 | % |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses): | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 83,682 | | |
| 4,756 | | |
| 78,926 | | |
| 1660 | % |
Bargain gain on purchase
of subsidiaries | |
| 5,280,042 | | |
| - | | |
| 5,280,042 | | |
| NA | |
Other
- net | |
| 432,064 | | |
| (18 | ) | |
| 432,082 | | |
| 2400456 | % |
Total
other income (expenses) | |
| 5,795,788 | | |
| 4,738 | | |
| 5,791,050 | | |
| 122226 | % |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) before
income taxes | |
| 9,302,532 | | |
| (371,908 | ) | |
| 9,674,440 | | |
| 2601 | % |
Income
tax expense | |
| 698,508 | | |
| (268,440 | ) | |
| 966,948 | | |
| 360 | % |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| 8,604,024 | | |
| (103,468 | ) | |
| 8,707,492 | | |
| 8416 | % |
Net
income attributable to the noncontrolling interests | |
| (1,386,556 | ) | |
| | | |
| (1,386,556 | ) | |
| NA | |
Net income (loss) attributable
to parent's shareholders | |
| 7,217,468 | | |
| (103,468 | ) | |
| 7,320,936 | | |
| 7076 | % |
Overview
of the years ended June 30, 2013 and 2012
Revenues
Revenues increased
by $34,688,470, or 1,100%, from $3,153,776 for the year ended June 30 2012 to $37,842,246 for the year ended June 30, 2013. The
increase in revenues was mainly attributable to our new operations in Taiwan after August 24, 2012 that occurred as a result of
our acquisition of AHFL.
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. We generate revenue primarily through our sales
force, which consists of individual sales agents in our distribution and service network. The acquisition of AHFL enabled us to
reach the untapped market in Taiwan and increased our sub-agent numbers from 1,098 as of June 30, 2012 to 2,691 as of June 30,
2013.
Cost of revenue and gross profit
The cost of
revenue for the year ended June 30, 2013 increased by $21,946,135 or 929%, to $24,309,716 compared to $2,363,581 for the year
ended June 30, 2012. Over 90% of the cost of revenue is commissions paid to our sales agents. Therefore the cost of revenue increased
as our sales increased.
The gross profit
for the year ended June 30, 2013 increased by $12,742,335, or 1,613%, to $13,532,530 compared to $790,195 for the year ended June
30, 2012. The gross profit ratio increased to 36% for the year ended June 30, 2013 from 25% for the year ended June 30, 2012.
The increase in profitability was mainly due to the higher margins of Law Broker.
General and administrative expenses
The general
and administrative (“G&A”) expenses principally comprise of salaries and benefits for our administrative staff,
office rental expenses, travel expenses, depreciation and amortization, entertainment expenses, and office supply expenses for
our administrative staff.
For the year
ended June 30, 2013, G&A expenses were $9,062,828 and increased by $7,895,987, or 677%, compared with $1,166,841 for the year
ended June 30, 2012. The growth of expenses is due to the overall growth of our business and the acquisition of AHFL.
Other income
Other income
for the year ended June 30, 2013 was mainly bargain gain on acquisition of AHFL and its subsidiaries and rental income of sub-leased
spare offices and garage.
For the year
ended June 30, 2012, no material other income and expenses such as gain on acquisition of subsidiary occurred.
Income tax
The Company’s
subsidiaries in Taiwan are governed by the Income Tax Law of Taiwan, and are generally subject to tax at 17% of income reported
in the statutory financial statements after appropriate adjustments.
CU WFOE, the
Company’s subsidiary, and the VIEs in the PRC, are governed by the Income Tax Law of the PRC concerning the private-run
enterprises, which are generally subject to tax at 25% on income reported in the statutory financial statements after appropriated
adjustments. Except for Jiangsu Law, according to the requirement of local tax authorities, the taxable income is deemed as 10%
of total revenue, instead of net income. The tax rate of Jiangsu Law is also 25%.
According to
tax regulations by PRC tax authorities effective January 1, 2008, commissions paid to sub-agents in excess of 5% of the commission
revenue was not tax deductible. According to China State Administration of Taxation #15 Announcement in 2012, effective from 2011,
such commissions can be fully deducted. Also, such tax payable over the past five years can be adjusted. Therefore, in the years
ended June 30, 2013 and 2012, Anhou and Sichuan Kangzhuang reversed the tax payable of $274,489 and $283,880, respectively, which
was accrued before 2011 tax year for such deductible commission and credited as income tax benefit.
Liquidity and Capital Resources
The following
table represents a comparison of the net cash provided by operating activities, net cash provided by (used in) investing activities,
and net cash provided by (used in) financing activities for the years ended December 31, 2014 and 2013:
| |
Years
Ended December 31, | | |
| |
| |
2014 | | |
2013 | | |
| | |
| |
| |
(AUDITED) | | |
(UNAUDITED) | | |
Change | | |
Percent | |
Net cash provided
by operating activities | |
$ | 469,470 | | |
$ | 10,411,924 | | |
| (9,942,454 | ) | |
| -95 | % |
Net cash provided by (used
in) in investing activities | |
| 1,205,962 | | |
| (1,706,555 | ) | |
| 2,912,517 | | |
| 171 | % |
Net cash provided by (used
in) financing activities | |
| 391,812 | | |
| (1,071,853 | ) | |
| 1,463,665 | | |
| 137 | % |
Operating activities
Net cash provided
by operating activities during the year ended December 31, 2014 was $469,470, significantly decreased in comparison with $10,411,924,
net cash provided by operating activities during the year ended December 31, 2013. The decrease is mainly because AHFL entered
into a Strategic Alliance Agreement (the “Alliance Agreement”) with AIA International Limited Taiwan Branch (“AIATW”)
in June 2013. Then AHFL received an Execution Fee of approximately $8.3 million from AIATW, which is recorded as unearned revenue
by the Company. In addition, compared with the year ended December 31, 2013, the Company’s income from operations decreased
by approximately $3.2 million, which is the other factor that result in the decrease of net cash provided by the operating activities.
Investing activities
Net cash provided
by investing activities was $1,205,962 during the year ended December 31, 2014, which is mainly due to selling investment of approximately
$1.6 million in current deposit and cash of approximately $0.2 million obtained by acquisition of PFAL. During the year ended
December 31, 2013, net cash used in investing activities was $1,706,555, which is mainly due to the investment in purchase of
marketable securities. In addition, compared with the year ended December 31, 2013, during the year ended December 31, 2014, the
Company’s investment in property, plant and equipment decreased by approximately $0.3 million.
Financing activities
Net cash provided
by financing activities was $391,812 during the year ended December 31, 2014, which is mainly due to the loan borrowed from Lee
Shu-Fen, the Series A Director of the Company, in the amount of $314,644 (NTD10 million) to AHFL. The term for the loan is from
December 23, 2014 to December 22, 2015 with a fixed interest rate at 1.5%. In January 2015, the principal amount of this loan
together with the accrued interests was fully repaid by AHFL.
During the
year ended December 31, 2013, net cash used in financing activities was $1,071,853, which is mainly due to the repayment for the
borrowing from the related parties.
The following table represents a
comparison of the net cash provided by (used in) operating activities, net cash provided by (used in) investing activities, and
net cash provided by (used in) financing activities for the six months ended December 31, 2013 and 2012 and for the years ended
June 30, 2013 and 2012:
| |
Six
Months Ended December 31, | | |
Years
Ended June 30, | |
| |
2013 | | |
2012 | | |
| | |
| | |
2013 | | |
2012 | |
| |
(AUDITED) | | |
(UNAUDITED) | | |
Change | | |
Percent | | |
(AUDITED) | | |
(AUDITED) | |
Net cash provided by (used in) operating
activities | |
$ | 7,816,783 | | |
$ | (222,457 | ) | |
$ | 8,039,240 | | |
| 3614 | % | |
$ | 1,598,575 | | |
$ | (344,495 | ) |
Net cash provided by (used in) in investing activities | |
| (4,837,045 | ) | |
| 9,285,476 | | |
| (14,122,521 | ) | |
| -152 | % | |
| 12,738,126 | | |
| (24,557 | ) |
Net cash provided by (used in) financing activities | |
| (1,614,159 | ) | |
| 325,427 | | |
| (1,939,586 | ) | |
| -596 | % | |
| 1,260,382 | | |
| 304,872 | |
Operating activities
Net cash provided
by operating activities during the six months ended December 31, 2013, was $7,816,783, including $7,930,190 advance payment received
from AIA International Limited Taiwan Branch. Net cash used in operating activities during the six months ended December 31, 2012
was $222,457. The increase was mainly contributed by our Taiwan business.
Net cash provided
by operating activities during the year ended June 30, 2013 was $1,598,575. Net cash used in operating activities during the year
ended June 30, 2012 was $344,495. The increase was mainly contributed by our Taiwan business.
Investing activities
Net cash used
in investing activities was $4,837,045 during the six months ended December 31, 2013, which is mainly due to the purchase of $4,190,739
fund by Law Broker during the period. The net cash provided by investing activities was $9,285,476 for the six months ended December
31, 2012, which was the combined effect of cash acquired in acquisition of AHFL and purchase of marketable securities.
Net cash provided
by investing activities was $12,738,126 during the year ended June 30, 2013. This was the combined effect of cash acquired in
acquisition of AHFL and purchase of marketable securities. The net cash used in investing activities was $24,557 for the year
ended June 30, 2012.
Financing activities
For the six
months ended December 31, 2013, net cash used in financing activities was $1,614,159, which is mainly due to the $1,668,838 repayment
to related parties. Net cash provided by financing activities was $325,427 in the six months ended December 31, 2012, which is
the result of borrowings from the Company’s related parties.
For the year
ended June 30, 2013, net cash provided in financing activities was $1,260,382 and net cash provided by financing activities was
$304,872 in the year ended June 30, 2012. The increase was mainly due to the proceeds of borrowing from Mrs. Lee Shu Fen,
director of CUIS, and Ms. Zhu Shuqin, a shareholder of Anhou.
Related Party Loan and Loans
to Unrelated Third Parties
Anhou Registered
Capital Increase
On April 27,
2013, the China Insurance Regulatory Commission (“CIRC”) issued the Decision on Revising the Provisions of the Supervision
and Administration of Specialized Insurance Agencies (the “Decision on Revising the Agency Provisions”), pursuant
to which, CIRC mandated any insurance agency established subsequent to the Decision on Revising the Agency Provisions to meet
a minimum registered capital requirement of RMB50 million (approximately $ 8 million).
On May 16, 2013, CIRC issued Notice for Further Clarification on Related Issues of Access to Professional Insurance Intermediary
Market (the “Notice”), pursuant to which, professional insurance agencies established prior to the issuance of the
Decision on Revising the Agency Provisions, with registered capital less than RMB50 million (approximately
$8 million) can continue to operate its existing business within the provinces where they have a registered office or branch
office, but shall not set up any new branches in any provinces where it has no registered office or a branch office.
Prior to the
capital increase, Anhou, a professional insurance agency with a PRC nationwide license, used to have a registered capital of RMB10
million (approximately $1.6 million). The branch offices of Anhou currently were all in Henan province. To better implement its
expansion strategies, Anhou intended to increase its registered capital to RMB50 million (approximately
$8 million) to meet the requirement of CIRC so that it can set up new branches in any province beyond its current operations
in Mainland China.
Due to certain
restrictions on direct foreign investment in insurance agency business under current PRC legal regime, Anhou has sought certain
investments made by the Investor Borrowers and they may need funds through individual loans. Upon the completion of the contemplated
increase of registered capital of Anhou, each Investor Borrower shall, or cause their designated persons to, enter into the Variable
Interest Entities Agreement with CU WFOE, Anhou and other parties so as to consolidate any additional VIE interest generated from
the said registered capital increase into the Company.
On June 9,
2013, AHFL entered into a Loan Agreement (the “Company Loan Agreement”) with CU Hong Kong.
Under the Company
Loan Agreement, AHFL agreed to provide a loan to the CU Hong Kong with the principal amount equal to the US Dollar equivalent
of RMB40,000,000 ($6,389,925). The term for such was ten years which could be extended upon the agreement of the parties. The
amount of such loan was remitted to the account of CU Hong Kong on August 30, 2013.
In August 2013,
the CU Hong Kong entered into several Loan Agreements (collectively, the “Investor Loan Agreements”) with the following
unrelated parties: Able Capital Holding Co., Ltd., a limited liability company established and registered in Hong Kong, Mr. Chen
Li and Ms. Yue Jing, both PRC citizens (collectively, the “Investor Borrowers”).
Under the Investor
Loan Agreements, the Investor Borrowers loaned cash from CU Hong Kong for their investment in Anhou and CU Hong Kong agreed to
provide certain loans to each of the Investor Borrowers with an aggregate principal amount equal to the US Dollar equivalent of
RMB40,000,000 ($6,389,925). The term for such loans was ten years which could be extended upon the agreement of the parties. Pursuant
to the Investor Loan Agreements, each of the Investor Borrowers covenants to enter into certain Variable Interest Entities Agreements
with Anhou, CU WFOE and certain existing shareholders of Anhou. The proceeds received from the said loans by the Investor Borrowers
shall be solely used to increase the registered capital of Anhou, and CU Hong Kong may determine the repayment methods including
transferring of the Investor Borrowers’ corresponding registered capital in Anhou or through other manner as full payment
of the loans subject to terms and conditions therein in the event that the Investor Borrowers fails to repay the loan in currency
to CU Hong Kong.
The specific
amounts loaned to the Investor Borrowers were as follows:
Able Capital
Holding Co., Ltd.: RMB29,500,000 ($4,712,570)
Mr. Chen: RMB3,000,000
($479,244)
Ms. Yue: RMB7,500,000
($1,198,111)
On October
20, 2013, the Investor Borrowers, through certain nominees, increased Anhou’s registered capital by RMB 40 million ($6,389,925).
Related Party Loan
On December
23, 2014, AHFL entered into a Loan Agreement (the “Loan Agreement”) with Lee Shu-Fen (“Ms. Lee”), the
Series A Director of the Company. Pursuant to the Loan Agreement, Mrs. Lee provided a loan in the amount of $314,644 (NTD10 million)
(the “Loan”) to AHFL. The term for the Loan is from December 23, 2014 to December 22, 2015 with a fixed interest rate
at 1.5%. The principal amount of the Loan together with the accrued interest shall be paid in one lump sum before December 22,
2015. In January 2015, the principal amount of this loan together with the accrued interests was fully repaid by AHFL.
Due to related
parties
The related
parties listed below loaned money to the Company for working capital. Due to related parties consisted of the following as of
December 31, 2014 and 2013:
| |
December
31, 2014 | | |
December
31, 2013 | |
Due to Mr. Mao (Principal Shareholder
of the Company) | |
$ | 214,165 | | |
$ | 117,471 | |
Due to Mr. Zhu (Legal Representative of Jiangsu Law) | |
| 2,255 | | |
| 2,265 | |
Due to Mrs. Lee(Director of
CUIS) | |
| 315,027 | | |
| 35,062 | |
Total | |
$ | 531,447 | | |
$ | 154,798 | |
On a going
forward basis, the Company’s primary requirements for cash over the next 12 months consist of:
| · | providing
insurance agency services to its existing clients in its existing branches; |
| · | promoting
sales activities; |
| · | opening
more branches in China; and |
| · | expanding
business scale in China, through mergers & acquisitions. |
Contractual Obligations
We have total contractual obligations
over the next year of $1,719,838 and $3,067,876 over the next three years primarily consisting of various operating office lease
agreements.
A summary of our fixed contractual
obligations and commitments at December 31, 2014, is as follows:
| |
Payments
Due by Period | |
| |
Total | | |
1
Year | | |
2-3 Years | | |
4-5 Years | | |
> 5 Years | |
Operating
leases | |
$ | 3,381,910 | | |
$ | 1,719,838 | | |
$ | 1,348,038 | | |
$ | 306,116 | | |
$ | 7,918 | |
Off Balance
Sheet Arrangements
As of December
31, 2014, the Company had no off balance sheet arrangements.
ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
We are exposed
to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position
due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in
interest rates and foreign currency exchange rates.
Interest Rate
Sensitivity
As of December 31,
2014, we had cash of RMB26.4 million, approximately $4.3 million, and NT$472.1 million, approximately $15.1 million. We hold our
cash for working capital purposes. Declines in interest rates would reduce future interest income. For the year ended December 31,
2014, the effect of a hypothetical 10% increase or decrease in overall interest rates would not have had a material impact on
our interest income.
Foreign Currency
Risk
The functional
currency for the subsidiaries in Taiwan is NT$ and the functional currency for the subsidiaries and CAE in PRC is RMB.The financial
statements of the Company are in USD. The fluctuation of NT$ and RMB will affect our operating results expressed in USD. The Company
reviews its foreign currency exposures. To date, we have not entered into any hedging arrangements with respect to foreign currency
risk or other derivative financial instruments. The management does not consider its present foreign exchange risk to be significant.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Report
of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
China United Insurance Service,
Inc.
We have audited
the accompanying consolidated balance sheets of China United Insurance Service, Inc. and Subsidiaries (collectively the “Company”)
as of December 31, 2014 and 2013 and the related consolidated statements of operations and other comprehensive income (loss),
changes in stockholders’ equity and cash flows for the year ended December 31, 2014 and six months ended December 31, 2013.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted
our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion,
the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position
of the Company at December 31, 2014 and 2013, and the results of its consolidated operations and its cash flows for the year ended
December 31, 2014 and six months ended December 31, 2013, in conformity with accounting principles generally accepted in the United
States of America.
Simon & Edward, LLP
Diamond Bar, California
March 16, 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Shareholders of
China United Insurance Service, Inc.
We have audited the accompanying consolidated
statements of operations and comprehensive income (loss), stockholders’ equity and cash flows for each of the years in the
two-year period ended June 30, 2013 of China United Insurance Service, Inc. China United Insurance Service, Inc's., management
is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial
statements of China United Insurance Service, Inc referred to above present fairly, in all material respects, the results of its
operations and its cash flows for each of the years in the two-year period ended June 30, 2013, in conformity with accounting principles
generally accepted in the United States of America.
Goldman Kurland and Mohidin LLP
September 23, 2013, except for Note 1 for which the date is
June 25, 2014
Encino, California
CHINA
UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
December
31, 2014 |
|
|
December
31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and equivalents |
|
$ |
19,571,799 |
|
|
$ |
18,070,093 |
|
Marketable securities |
|
|
2,437,006 |
|
|
|
2,563,685 |
|
Accounts receivable, net |
|
|
7,706,273 |
|
|
|
7,282,183 |
|
Current assets associated with discontinued operations |
|
|
174,308 |
|
|
|
184,360 |
|
Other current assets |
|
|
400,159 |
|
|
|
2,145,317 |
|
Total current assets |
|
|
30,289,545 |
|
|
|
30,245,638 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
1,061,762 |
|
|
|
1,041,189 |
|
Intangible assets |
|
|
270,956 |
|
|
|
308,267 |
|
Goodwill |
|
|
31,651 |
|
|
|
- |
|
Long-term Investment |
|
|
95,328 |
|
|
|
102,295 |
|
Other assets |
|
|
587,522 |
|
|
|
587,303 |
|
TOTAL ASSETS |
|
$ |
32,336,764 |
|
|
$ |
32,284,692 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Taxes payable |
|
$ |
919,907 |
|
|
$ |
498,441 |
|
Unearned revenue |
|
|
- |
|
|
|
1,586,038 |
|
Other current liabilities |
|
|
9,533,589 |
|
|
|
8,631,639 |
|
Deferred tax liability |
|
|
37,662 |
|
|
|
- |
|
Current liabilities associated with discontinued
operations |
|
|
782 |
|
|
|
666 |
|
Due to related parties |
|
|
531,447 |
|
|
|
154,798 |
|
Total current liabilities |
|
|
11,023,387 |
|
|
|
10,871,582 |
|
|
|
|
|
|
|
|
|
|
Long-term liabilities |
|
|
7,500,645 |
|
|
|
7,095,062 |
|
TOTAL LIABILITIES |
|
|
18,524,032 |
|
|
|
17,966,644 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Preferred stock, par value $0.00001, 10,000,000
authorized, 1,000,000 issued and outstanding |
|
|
10 |
|
|
|
10 |
|
Common stock, par value $0.00001, 100,000,000 |
|
|
- |
|
|
|
|
|
authorized, 29,100,503
issued and outstanding |
|
|
291 |
|
|
|
291 |
|
Additional paid-in capital |
|
|
4,674,593 |
|
|
|
4,674,593 |
|
Statutory Reserve |
|
|
1,388,014 |
|
|
|
415,041 |
|
Accumulated other comprehensive loss |
|
|
(350,881 |
) |
|
|
(75,888 |
) |
Retained earnings (accumulated
deficit) |
|
|
1,717,278 |
|
|
|
3,598,383 |
|
Stockholder’s equity attribute to parent’s
shareholders |
|
|
7,429,305 |
|
|
|
8,612,430 |
|
Noncontrolling interest |
|
|
6,383,427 |
|
|
|
5,705,618 |
|
TOTAL STOCKHOLDERS’ EQUITY |
|
|
13,812,732 |
|
|
|
14,318,048 |
|
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
$ |
32,336,764 |
|
|
$ |
32,284,692 |
|
The
accompanying notes are an integral part of these consolidated financial statements.
CHINA
UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME / (LOSS)
|
|
Year Ended
December 31, |
|
|
Six Months
Ended December
31, |
|
|
Years Ended June 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
47,449,962 |
|
|
$ |
23,689,110 |
|
|
$ |
37,842,246 |
|
|
$ |
3,153,776 |
|
Cost of revenue |
|
|
30,408,118 |
|
|
|
16,040,303 |
|
|
|
24,309,716 |
|
|
|
2,363,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
17,041,844 |
|
|
|
7,648,807 |
|
|
|
13,532,530 |
|
|
|
790,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling |
|
|
4,034,409 |
|
|
|
2,010,744 |
|
|
|
962,958 |
|
|
|
|
|
General and administrative |
|
|
11,971,863 |
|
|
|
5,948,516 |
|
|
|
9,062,828 |
|
|
|
1,166,841 |
|
Impairment loss of goodwill |
|
|
- |
|
|
|
122,250 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
1,035,572 |
|
|
|
(432,703 |
) |
|
|
3,506,744 |
|
|
|
(376,646 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
229,317 |
|
|
|
108,654 |
|
|
|
83,682 |
|
|
|
4,756 |
|
Bargain gain on purchase of subsidiaries |
|
|
- |
|
|
|
- |
|
|
|
5,280,042 |
|
|
|
- |
|
Other - net |
|
|
365,225 |
|
|
|
(652,079 |
) |
|
|
432,064 |
|
|
|
(18 |
) |
Total other income (expenses) |
|
|
594,542 |
|
|
|
(543,425 |
) |
|
|
5,795,788 |
|
|
|
4,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
1,630,114 |
|
|
|
(976,128 |
) |
|
|
9,302,532 |
|
|
|
(371,908 |
) |
Income tax expense |
|
|
1,672,840 |
|
|
|
143,660 |
|
|
|
698,508 |
|
|
|
(268,440 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(42,726 |
) |
|
|
(1,119,788 |
) |
|
|
8,604,024 |
|
|
|
(103,468 |
) |
Net income attributable to the noncontrolling
interests |
|
|
(865,406 |
) |
|
|
(32,190 |
) |
|
|
(1,386,556 |
) |
|
|
- |
|
Net income (loss) attributable to parent's shareholders |
|
|
(908,132 |
) |
|
|
(1,151,978 |
) |
|
|
7,217,468 |
|
|
|
(103,468 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain (loss) |
|
|
(268,695 |
) |
|
|
(38,218 |
) |
|
|
13,195 |
|
|
|
13,972 |
|
Other comprehensive income(loss) |
|
|
(6,298 |
) |
|
|
4,001 |
|
|
|
384 |
|
|
|
- |
|
Attributable to parent's shareholders |
|
|
(274,993 |
) |
|
|
(34,217 |
) |
|
|
13,579 |
|
|
|
13,972 |
|
Other comprehensive items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
attributable to noncontrolling
interest |
|
|
346,783 |
|
|
|
16,557 |
|
|
|
(1,630 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
parent's shareholders |
|
$ |
(1,183,125 |
) |
|
$ |
(1,186,195 |
) |
|
$ |
7,231,047 |
|
|
$ |
(89,496 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling interest |
|
$ |
(518,623 |
) |
|
$ |
(15,633 |
) |
|
$ |
(1,388,186 |
) |
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
29,100,503 |
|
|
|
29,100,503 |
|
|
|
27,593,654 |
|
|
|
20,100,503 |
|
Diluted |
|
|
29,100,503 |
|
|
|
29,100,503 |
|
|
|
28,588,174 |
|
|
|
20,100,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.031 |
) |
|
$ |
(0.040 |
) |
|
$ |
0.262 |
|
|
$ |
(0.005 |
) |
Diluted |
|
$ |
(0.031 |
) |
|
$ |
(0.040 |
) |
|
$ |
0.252 |
|
|
$ |
(0.005 |
) |
The
accompanying notes are an integral part of these consolidated financial statements.
CHINA
UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Year
Ended December 31, |
|
|
Six
Months Ended December 31, |
|
|
Years
Ended June 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2013 |
|
|
2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(42,726 |
) |
|
$ |
(1,119,788 |
) |
|
$ |
8,604,024 |
|
|
$ |
(103,468 |
) |
Adjustments to reconcile net income to net cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
407,390 |
|
|
|
152,362 |
|
|
|
108,492 |
|
|
|
39,366 |
|
Gain on valuatin of financial assets |
|
|
(11,181 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Loss on disposal of fixed assets |
|
|
99,443 |
|
|
|
303,079 |
|
|
|
- |
|
|
|
- |
|
Bargain gain on purchase of subsidiaries |
|
|
- |
|
|
|
- |
|
|
|
(5,280,042 |
) |
|
|
- |
|
Impairment loss on goodwill |
|
|
- |
|
|
|
122,250 |
|
|
|
- |
|
|
|
- |
|
Share-based payment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,508 |
|
Write off VAT to be deducted |
|
|
|
|
|
|
68,003 |
|
|
|
- |
|
|
|
- |
|
Change in deferred tax liabilities |
|
|
39,447 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Accounts receivable |
|
|
(841,719 |
) |
|
|
(3,181,659 |
) |
|
|
(1,773,181 |
) |
|
|
(102,830 |
) |
Other current assets |
|
|
(200,081 |
) |
|
|
(514,736 |
) |
|
|
103,643 |
|
|
|
(7,051 |
) |
Other assests |
|
|
(22,502 |
) |
|
|
(73,905 |
) |
|
|
(19,207 |
) |
|
|
- |
|
Tax payable |
|
|
460,524 |
|
|
|
(398,047 |
) |
|
|
(123,260 |
) |
|
|
(295,807 |
) |
Other current liabilities |
|
|
580,875 |
|
|
|
6,115,072 |
|
|
|
(21,894 |
) |
|
|
123,787 |
|
Long-term unearned revenue |
|
|
- |
|
|
|
6,344,152 |
|
|
|
- |
|
|
|
- |
|
Net cash provided by
(used in) operating activities |
|
|
469,470 |
|
|
|
7,816,783 |
|
|
|
1,598,575 |
|
|
|
(344,495 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from acuqisition |
|
|
128,933 |
|
|
|
- |
|
|
|
12,766,882 |
|
|
|
- |
|
Sale of investment in current deposit |
|
|
1,627,816 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Purchase of Marketable securities |
|
|
- |
|
|
|
(4,190,739 |
) |
|
|
(2,553 |
) |
|
|
- |
|
Purchase of property, plant and equipment |
|
|
(464,286 |
) |
|
|
(450,864 |
) |
|
|
(8,912 |
) |
|
|
(24,557 |
) |
Purchase of intangible
assets |
|
|
(86,501 |
) |
|
|
(195,442 |
) |
|
|
(17,291 |
) |
|
|
- |
|
Net cash provided by
(used in) investing activities |
|
|
1,205,962 |
|
|
|
(4,837,045 |
) |
|
|
12,738,126 |
|
|
|
(24,557 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from related party borrowing |
|
|
391,812 |
|
|
|
54,679 |
|
|
|
1,260,382 |
|
|
|
323,029 |
|
Repayment to related parties |
|
|
- |
|
|
|
(1,668,838 |
) |
|
|
- |
|
|
|
(18,157 |
) |
Net cash provided by
(used in) financing activities |
|
|
391,812 |
|
|
|
(1,614,159 |
) |
|
|
1,260,382 |
|
|
|
304,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
(565,538 |
) |
|
|
(813 |
) |
|
|
(149,967 |
) |
|
|
25,178 |
|
Net increase (Decrease) in cash and cash
equivalents |
|
|
1,501,706 |
|
|
|
1,364,766 |
|
|
|
15,447,116 |
|
|
|
(39,002 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents,
beginning balance |
|
|
18,070,093 |
|
|
|
16,705,327 |
|
|
|
1,258,211 |
|
|
|
1,297,213 |
|
Cash and cash equivalents,
ending balance |
|
$ |
19,571,799 |
|
|
$ |
18,070,093 |
|
|
$ |
16,705,327 |
|
|
$ |
1,258,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Income tax paid |
|
$ |
1,187,694 |
|
|
$ |
483,058 |
|
|
$ |
974,615 |
|
|
$ |
15,720 |
|
The
accompanying notes are an integral part of these consolidated financial statements.
CHINA
UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
| |
Common
stock | | |
Amount | | |
Preferred
stock | | |
Amount | | |
Additioanl
Paid -in Capital | | |
Statutory
Reserves | | |
Other
comprehensive loss | | |
(Accumulated
Deficit)/ Retained earnings | | |
Total | | |
Noncontrolling
interest | | |
Total
equity | |
Balance July
1, 2011 | |
| 20,000,000 | | |
$ | 200 | | |
| - | | |
| - | | |
| 2,673,186 | | |
| - | | |
| (69,222 | ) | |
| (1,815,504 | ) | |
$ | 788,660 | | |
$ | - | | |
$ | 788,660 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Share-based payment | |
| 100,503 | | |
| 1 | | |
| - | | |
| - | | |
| 1,507 | | |
| - | | |
| - | | |
| - | | |
| 1,508 | | |
| - | | |
| 1,508 | |
Foreign currency translation
gain | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,972 | | |
| - | | |
| 13,972 | | |
| - | | |
| 13,972 | |
Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (103,468 | ) | |
| (103,468 | ) | |
| - | | |
| (103,468 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance June 30, 2012 | |
| 20,100,503 | | |
| 201 | | |
| - | | |
| - | | |
| 2,674,693 | | |
| - | | |
| (55,250 | ) | |
| (1,918,972 | ) | |
| 700,672 | | |
| - | | |
| 700,672 | |
Reclassification to preferred
stock | |
| (1,000,000 | ) | |
| (10 | ) | |
| 1,000,000 | | |
| 10 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Issuance of common stock | |
| 10,000,000 | | |
| 100 | | |
| - | | |
| - | | |
| 1,999,900 | | |
| - | | |
| - | | |
| - | | |
| 2,000,000 | | |
| - | | |
| 2,000,000 | |
Foreign currency translation
gain (loss) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,195 | | |
| - | | |
| 13,195 | | |
| (1,630 | ) | |
| 11,565 | |
Other comprerhensive gain
(loss) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 384 | | |
| | | |
| | | |
| | | |
| | |
Appropriation of reserves | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 257,785 | | |
| - | | |
| (390,879 | ) | |
| (133,094 | ) | |
| 133,094 | | |
| - | |
Net income | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 7,217,468 | | |
| 7,217,468 | | |
| 1,386,556 | | |
| 8,604,024 | |
Acquisition
of noncontrolling interests | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,171,965 | | |
| 4,171,965 | |
Balance
June 30, 2013 | |
| 29,100,503 | | |
$ | 291 | | |
| 1,000,000 | | |
$ | 10 | | |
$ | 4,674,593 | | |
$ | 257,785 | | |
$ | (41,671 | ) | |
$ | 4,907,617 | | |
$ | 9,798,625 | | |
$ | 5,689,985 | | |
$ | 15,488,610 | |
Appropriation of reserves | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| 157,256 | | |
| | | |
| (157,256 | ) | |
| - | | |
| - | | |
| - | |
Foreign currency translation
gain (loss) | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| | | |
| (38,218 | ) | |
| | | |
| (38,218 | ) | |
| (18,623 | ) | |
| (56,841 | ) |
Other comprerhensive gain
(loss) | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| | | |
| 4,001 | | |
| | | |
| 4,001 | | |
| 2,066 | | |
| 6,067 | |
Net income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (1,151,978 | ) | |
| (1,151,978 | ) | |
| 32,190 | | |
| (1,119,788 | ) |
Balance
December 31, 2013 | |
| 29,100,503 | | |
$ | 291 | | |
| 1,000,000 | | |
$ | 10 | | |
$ | 4,674,593 | | |
$ | 415,041 | | |
$ | (75,888 | ) | |
$ | 3,598,383 | | |
$ | 8,612,430 | | |
$ | 5,705,618 | | |
$ | 14,318,048 | |
Appropriation of reserves | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 972,973 | | |
| | | |
| (972,973 | ) | |
| - | | |
| | | |
| - | |
Foreign currency translation
gain (loss) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (268,695 | ) | |
| | | |
| (268,695 | ) | |
| (343,537 | ) | |
| (612,232 | ) |
Other comprerhensive gain
(loss) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (6,298 | ) | |
| | | |
| (6,298 | ) | |
| (3,246 | ) | |
| (9,544 | ) |
Net income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| (908,132 | ) | |
| (908,132 | ) | |
| 865,406 | | |
| (42,726 | ) |
Increase
in noncontrolling interest of newly acquired subsidiary | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 159,186 | | |
| 159,186 | |
Balance
December 31, 2014 | |
| 29,100,503 | | |
$ | 291 | | |
| 1,000,000 | | |
$ | 10 | | |
$ | 4,674,593 | | |
$ | 1,388,014 | | |
$ | (350,881 | ) | |
$ | 1,717,278 | | |
$ | 7,429,305 | | |
$ | 6,383,427 | | |
$ | 13,812,732 | |
The accompanying
notes are an integral part of these consolidated financial statements.
CHINA
UNITED INSURANCE SERVICE, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2014 and 2013, June 30, 2013 and 2012
NOTE 1 –
ORGANIZATION AND PRINCIPAL ACTIVITIES
China United
Insurance Service, Inc. (“China United”, “CUIS” or the “Company”) is a Delaware corporation
organized on June 4, 2010 by Mao Yi Hsiao, a Taiwanese citizen, as a listing vehicle for ZLI Holdings Limited (“CU Hong
Kong”) to be quoted on the United States Over the Counter Bulletin Board (the “OTCBB”).
CU Hong Kong,
a wholly owned Hong Kong-based subsidiary of China United, was founded by China United, on July 12, 2010 under Hong Kong law.
On October 20, 2010, CU Hong Kong founded a wholly foreign owned enterprise, Zhengzhou Zhonglian Hengfu Business Consulting Co.,
Ltd. (“CU WFOE”) in Henan province in the People’s Republic of China (“PRC”).
On January
16, 2011, the Company issued 20,000,000 shares of common stock, $0.00001 par value, to several non-US persons for $300,000. The
issuance was made pursuant to an exemption from registration in Regulation S under the Securities Act of 1933, as amended. The
consideration was paid to the account of CU Hong Kong by May 6, 2011. All $300,000 was contributed into the bank account of CU
WFOE as registered capital. On January 28, 2011, the Company increased the number of authorized shares of common stock from 30,000,000
to 100,000,000 and authorized 10,000,000 shares of preferred stock.
Law Anhou Insurance
Agency Co., Ltd. (“Anhou”, formerly known as Zhengzhou Anhou Insurance Agency Co., Ltd. or Henan Law Anhou Insurance
Agency Co., Ltd.) was founded in Henan province of the PRC on October 9, 2003. Anhou provides insurance agency services in the
PRC.
Due to PRC
legal restrictions on foreign ownership and investment in the insurance agency businesses in China, particularly those based on
qualifications as well as capital requirements of the investors, Able Capital Holding Co., Ltd., a limited liability company established
and registered in Hong Kong, delegated four PRC individuals, namely Wang Yanyan, Chen Zhaohui, Hou Weizhe and Zhang Yong, to invest
in Anhou on its behalf. On September 26, 2013, the new PRC individual investors, namely Wang Yanyan, Chen Zhaohui, Yue Jing, Hou
Weizhe, Zhang Yong, Chen Li (“Anhou New Investors”) and the original shareholders of Anhou (“Anhou Original
Shareholders”) entered into a shareholders resolution of Anhou, pursuant to which, Anhou Original Shareholders and Anhou
New Investors agreed to increase the registered capital of Anhou to RMB50 million (approximately
$8 million). On October 24, 2013, Anhou Original Shareholders entered into share transfer agreements (the “Share
Transfer Agreements”) with Hu Changrong, a PRC citizen (“Mr. Hu” together with Anhou New Investors, “Anhou
Existing Shareholders”), respectively. Under the Share Transfer Agreements, Anhou Original Shareholders transferred all
of their equity interests in Anhou to Mr. Hu.
On February
26, 2014, Anhou completed the registration of the change of its registered address to Room 1906-1910, No. 215 Jiangdong Middle
Road, Jianye District, Nanjing, Jiangsu Province with the local AIC of Jiangsu Province. The new business license was issued to
Anhou on February 26, 2014. Anhou obtained the Professional Insurance Agency License issued by Jiangsu Bureau of CIRC on April
21, 2014. Anhou’s previous headquarters located at Building 4K, Hesheng Plaza, No. 26 Yousheng South Road, Jinshui District,
Zhengzhou, Henan province, has been registered as the Henan branch office of Anhou and it obtained the Professional Insurance
Agency License issued by Henan Bureau of CIRC on January 3, 2014 and the business license issued by local AIC on January 9, 2014.
Sichuan Kangzhuang
Insurance Agency Co., Ltd. (“Sichuan Kangzhuang”) was founded on September 4, 2006 in the Sichuan province in the
PRC and provides insurance agency services in the PRC. On August 23, 2010, at Sichuan Kangzhuang’s general meeting
of shareholders, its shareholders voted to sell their shares to Anhou for RMB532,622 ($78,318). On September 6, 2010, the equity
transfer agreements were signed between Anhou and each shareholder of Sichuan Kangzhuang. Sichuan Kangzhuang then had net liabilities
of RMB219,123 ($32,134). Goodwill of RMB751,745 ($110,452) was therefore recorded. However, Sichuan Kangzhuang suffered loss since
the acquisition, indicating the impairment of goodwill. As of December 31, 2013, the carrying value of the goodwill was fully
impaired.
Jiangsu Law
Insurance Broker Co., Ltd. (“Jiangsu Law”) was founded on September 19, 2005 in Jiangsu Province in the PRC. Jiangsu
Law provides insurance brokerage services in the PRC. On August 12, 2010, at Jiangsu Law’s general meeting of shareholders,
its shareholders voted to sell their shares to Anhou for RMB518,000 ($75,475) and Anhou increased Jiangsu Law’s
paid-in capital to RMB10,000,000 ($1,355,150) from RMB5,180,000 ($625,113), on January 18, 2011, to meet the PRC paid-in capital
requirements for insurance brokerage companies. On September 28, 2010, the equity transfer agreements were signed between Anhou
and each shareholder of Jiangsu Law. On acquisition date, Jiangsu Law had net assets of RMB2,286,842 ($341,425). Based on the
purchase price allocation, the fair value (“FV”) of the identifiable assets and liabilities assumed exceeded the FV
of the consideration paid. As a result, the Company recorded a gain on acquisition of RMB1,768,842 ($267,156).
Due to PRC
legal restrictions on foreign ownership and investment in insurance agency and brokerage businesses in China, especially those
on qualifications and capital requirements of the investors, we operate our business primarily through our Consolidated Affiliated
Entities (“CAE”) in PRC. On January 17, 2011, CU WFOE and Anhou and Anhou Original Shareholders entered into a series
of agreements known as variable interest agreements (the “Old VIE Agreements”) pursuant to which CU WFOE has executed
effective control over Anhou through these contractual arrangements. As a result of the capital increase and the share transfer
described above, on October 24, 2013, CU WFOE, Anhou and Anhou Existing Shareholders entered into a series of variable interest
agreements (the “VIE Agreements”), including Power of Attorneys, Exclusive Option Agreements, Share Pledge Agreements,
in the same form as the previous Old VIE Agreements, other than the change of shareholder names and their respective shareholdings.
The Old VIE Agreements were terminated by and among CU WFOE, Anhou and Anhou Original Shareholders on the same date. The Exclusive
Business Cooperation Agreement executed by and between CU WFOE and Anhou on January 17, 2011 remains in full effect. We do not
hold equity interests in our CAE. However, through the VIE Agreements with these CAE and their respective shareholders, we effectively
control, and are able to derive substantially all of the economic benefits from, these CAE, which allows us to consolidate the
financial results of the CAE in our financial statements.
On July 2,
2012, the Board of Directors and stockholders of the Company approved, in connection with a reclassification of 1,000,000 issued
and outstanding shares of common stock (the “Reclassified Shares”), par value $0.00001 per share held by Mao Yi Hsiao
(“Mr. Mao”) into 1,000,000 shares of Series A Convertible Preferred Stock, par value $0.00001 per share (the “Series
A Preferred Stock”) on a share-for-share basis (the “Reclassification”), the issuance of 1,000,000 shares of
Series A Preferred Stock to Mr. Mao and cancellation of 1,000,000 common stock held and submitted by Mr. Mao pursuant to the Reclassification.
Mr. Mao has
extensive experience in the insurance agency and brokerage industry and has acted as the chairman of the board of Law Broker.
Under the leadership of Mr. Mao, Law Broker has grown into one of the top insurance brokerage firms in Taiwan, has sustained stable
growth for the past decades and generated substantial shareholder value for its stockholders. The management of the Company wanted
Mr. Mao to apply his years of experience in insurance industry into the Company’s expansion and to lead its growth. As a
result the Company approached Mr. Mao to discuss the possibility of Mr. Mao to play more of a managerial role and commit more
time on the strategy design and operation of the Company and its subsidiaries. To ensure the consistently implementation of strategies
and policies of the Company, through mutual discussion and negotiations, both the Company and Mr. Mao (and subsequently a majority
of the shareholders) agree to the reclassification, pursuant to which, 1,000,000 shares of Series A Convertible Preferred Stock
(with 1 to 10 special voting power) were issued to Mr. Mao in replacement of the 1,000,000 shares of Common Stock previously held
by Mr. Mao. In exchange for the reclassification, Mr. Mao agreed to be engaged by the Company as its Chief Executive Officer within
6 months after July 2, 2012 or according to a timetable otherwise agreed upon. On August 8, 2014, the Board of Directors appointed
Mr. Mao as the Chief Executive Officer, effective immediately.
All 1,000,000
shares of Series A Preferred Stock were reclassified from the 1,000,000 shares of common stock held by Mr. Mao and no additional
consideration was paid by Mr. Mao in connection with the Reclassification. The preferred stock has no material quantitative preferences
over common stock, such as liquidation preferences and dividend preferences, and it specifically granted equal status to common
stock pursuant to the terms of the Certificate of Designation. Each holder of common stock is entitled to one vote for each share
of common stock held of record by such holder as of the applicable record date on any matter submitted to a vote of the stockholders
of the Company; while each holder of Series A Preferred Stock is entitled to ten votes for each share of Series A Preferred Stock
held of record by such holder as of the applicable record date on any matter submitted to a vote of the stockholders of the Company.
On
August 24, 2012, the Company acquired all of the issued and outstanding shares of Action Holdings Financial Limited (“AHFL”),
a limited liability company (“LLC”) incorporated under the laws of British Virgin Islands on April 30, 2012, together
with its subsidiaries in Taiwan. Subsequent to the acquisition, AHFL became a 100% owned subsidiary of the Company.
AHFL holds
65.95% of the issued and outstanding shares of Law Enterprise Co., Ltd. (“Law Enterprise”), a company limited by shares
incorporated under the laws of Taiwan on January 30, 1996. As of August 24, 2012, Law Enterprise held (i) 100% of Law Insurance
Broker Co., Ltd. (“Law Broker”), a company limited by shares incorporated in Taiwan on October 9, 1992; (ii) 97.84%
of Law Risk Management & Consultant Co., Ltd. (“Law Management”), a company limited by shares incorporated in
Taiwan on December 5, 1987; and (iii) 96% of Law Insurance Agent Co., Ltd. (“Law Agent”), an LLC incorporated in Taiwan
on June 3, 2000.
Pursuant to
the provisions of the Acquisition Agreement between the Company and the selling shareholders of AHFL and for all of the issued
and outstanding shares of AHFL, the Company was to pay NT$15 million ($500,815) on or prior to March 31, 2013 and NT$7.5 million
($250,095) subsequent to March 31, 2013 in cash in two installments, subject to terms and conditions therein. In addition the
Company agreed to (i) issue 8,000,000 shares of common stock of the Company to the shareholders of AHFL; (ii) issue 2,000,000
shares of common stock of the Company to certain employees of Law Broker; and (iii) create an employee stock option pool, consisting
of available options, exercisable for up to 2,000,000 shares of common stock of the Company.
On March 14,
2013, the Company and the selling shareholders of AHFL entered into an Amendment to the Acquisition Agreement (the “Amendment”),
pursuant to which, (i) the cash payment deadline as set forth in the Acquisition Agreement was extended from March 31, 2013 to
March 31, 2015 or at any other time or in any other manner otherwise agreed upon by and among the Company and the selling shareholders
of AHFL; and (ii) in lieu of the 2,000,000 employee stock option pool described in the Acquisition Agreement, the Company agrees
to use its best efforts, as soon as practically possible, to create an employee stock pool consisting of up to 4,000,000 shares
of CUIS common stock, among which 2,000,000 shares shall be solely granted to employees of Law Broker, and the remaining 2,000,000
shares to be granted to employees of affiliated entities of the Company (including Law Broker employees).
Law Enterprise
is a holding company for its operating subsidiaries in Taiwan. Law Broker primarily engages in insurance brokerage and insurance
agency service business across Taiwan, while Law Management and Law Agent are not in operation. We operate our Taiwan business
primarily through Law Broker.
On April 23,
2014, AHFL entered into a capital increase agreement (“Agreement”) with Wong Chun Kwok Johnny (“Mr Wong”),
the owner of Prime Financial Asia Ltd (PFAL) which is a re-insurance broker company resided in Hong Kong. Pursuant to the Agreement,
Mr Wong would increase PFAL’s capital contribution from HK$500,000 to HK$1,470,000, and AHFL would contribute HK$1,530,000
to PFAL’s registered capital. Upon the completion of capital contribution by both parties, Mr. Wong and AHFL would own 49%
and 51% of PFAL’s equity interest, respectively. The transaction was completed on April 30, 2014.
In the fourth
quarter of 2014, the shareholders of the Law Management and Law Agent made the resolution to dissolve Law Management and Law Agent,
respectively, because those companies have not been in operation. The dissolution of Law Management and Law Agent was approved
by the Taiwan (R.O.C) Government on November 26, 2014 and on January 13, 2015, respectively. Abide by the law in Taiwan, the liquidator
was appointed by the shareholders of the Law Management and Law Agent and the liquidator shall complete the liquidation process
no later than six months from the appointment date. Both Law Management and Law Agent are under the process of liquidation as
of now.
The corporate
structure as of December 31, 2014 is as follows:
On January
17 2014, the Company’s Board of Directors approved a change in our fiscal year end to December 31 from June 30.
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation
The accompanying
consolidated financial statements include the accounts of China United and its subsidiaries as shown in the organization structure
in Note 1 above. All significant intercompany transactions and balances were eliminated in consolidation.
Basis of
Presentation
The Company’s
financial statements are prepared in accordance with accounting principles generally accepted in the United States of America
(“US GAAP”).
Noncontrolling Interest
Noncontrolling
interest consists of direct and indirect equity interest in AHFL and subsidiaries arising from the acquisition of AHFL by CUIS.
The Company
follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic
810, “Consolidation,” which governs the accounting for and reporting of noncontrolling interests (“NCIs”)
in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate,
among other things, that NCIs be treated as a separate component of equity, not as a liability, that increases and decreases in
the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions
or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such
allocation might result in a deficit balance. This standard also required changes to certain presentation and disclosure requirements.
The net income
(loss) attributed to the NCI is separately designated in the accompanying statements of operations and other comprehensive income
(loss). Losses attributable to the NCI in a subsidiary may exceed the NCI’s interests in the subsidiary’s equity.
The excess attributable to the NCI is attributed to those interests. The NCI shall continue to be attributed its share of losses
even if that attribution results in a deficit NCI balance.
Use of Estimates
The preparation
of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the
consolidated financial statements and the amounts of revenues and expenses during the reporting periods.
Management
makes these estimates using the best information available when they are made; however, actual results could differ materially
from those estimates.
Risks and
Uncertainties
The Company
is subject to risks from, among other things, competition associated with the industry in general, other risks associated with
financing, liquidity requirements, rapidly changing customer requirements, limited operating history, and foreign currency exchange
rates.
Comprehensive
Income
The Company
follows FASB ASC Topic 220 (“ASC 220”), “Reporting Comprehensive Income,” which establishes standards
for the reporting and display of comprehensive income, its components and accumulated balances in a full set of general purpose
financial statements. ASC 220 defines comprehensive income as net income and all changes to stockholders' equity, except those
due to investments by stockholders, changes in paid-in capital and distributions to stockholders, including adjustments to minimum
pension liabilities, accumulated foreign currency translation, and unrealized gains or losses on marketable securities.
Foreign
Currency Transactions
The functional
currency for our subsidiaries in Taiwan is New Taiwan Dollar (“NT$”) and for the VIEs in China is Renminbi (“RMB”).
The consolidated
financial statements were translated into United States Dollars (“USD” or “$”) in accordance with FASB
ASC Topic 830 “Foreign Currency Transaction.” According to the standard, all assets and liabilities were
translated at the exchange rate on the balance sheet dates; stockholders’ equity is translated at historical rates and statement
of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments
are reported under other comprehensive income in accordance with ASC 220. Gains and losses resulting from the translation of foreign
currency transactions are reflected in the consolidated statements of operations and other comprehensive income (loss).
Cash and
Equivalents
For Statements
of Cash Flows purposes, the Company considers cash on hand, bank deposits, and other highly-liquid investments with maturities
of three months or less when purchased, such as commercial paper, to be cash and equivalents.
The Company
maintains cash with banks in the PRC and Taiwan. Cash accounts with the bank institutions in the PRC are not insured or
otherwise protected. Should any bank holding cash become insolvent, or if the Company is otherwise unable to withdraw funds,
the Company would lose the cash 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 NT$3,000,000 insured
in a bank. In Hong Kong, a depositor has up to HKD$500,000 insured in a bank. In the United States, the standard insurance amount
is $250,000 per depositor in a bank under the FDIC’s general deposit insurance rules.
Marketable
Securities
The Company
invests part of its excess cash in equity securities, money market funds and government bonds. Such investments are included in
“Marketable securities” in the accompanying consolidated balance sheets. Held-to-maturity represents securities the
Company has intends and has the ability to hold to maturity; trading securities represent securities bought and held primarily
for sale in the near-term to generate income on short-term price differences; available-for-sale represents securities not classified
as held-to-maturity or trading securities.
The Company
classifies the equity security investments as trading securities and reports them at FV with changes in FV recorded in “Other
Income” in the statements of operations and other comprehensive income (loss). The Company classifies bonds as available-for-sale
and reports them at FV with unrealized gains and losses included in “Accumulated other comprehensive income (loss)”
on the equity section of the balance sheets.
Accounts
Receivable, net
The Company
reviews its accounts receivable regularly to determine if a bad debt allowance is necessary at each year-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 December 31, 2014 and 2013.
Property,
Plant and Equipment, net
Property, plant
and equipment are recorded at cost. Gain or loss on disposal of property, plant and equipment is recorded in other income
at disposal. Expenditures for betterments, renewals and additions are capitalized. Repairs and maintenance expenses are expensed
as incurred.
Depreciation
for financial reporting purposes is provided using the straight-line method over a useful life of three to ten years with salvage
value of 10% to 25%. Property, plant and equipment mainly consist of office furniture, computers, vehicles and leasehold improvements.
Impairment
of Long-Lived Assets
In accordance
with ASC Topic 360, “Property, Plant and Equipment,” the Company reviews the carrying values of long-lived
assets whenever facts and circumstances indicate an asset may be impaired. Recoverability of assets to be held and used
is measured by comparing the carrying amount of an asset to future net undiscounted cash flows expected to be generated by it.
If an asset is considered impaired, the impairment recognized is measured by the amount by which the carrying amount of the asset
exceeds its FV. Assets to be disposed of are reported at the lower of the carrying amount or FV, less cost of disposal.
No impairment was recognized for the years ended December 31, 2014, June 30, 2013 and 2012, and six months ended December 31,
2013.
Goodwill
Goodwill arose
from the acquisition of PFAL and Sichuan Kangzhuang (Note 10). Goodwill is the excess of the cost of an acquisition over the FV
of the net assets acquired. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances
indicate it might be impaired, using the prescribed two-step process under US GAAP. The first step screens for potential impairment
of goodwill to determine if the FV of the reporting unit is less than its carrying value, while the second step measures the amount
of goodwill impairment, if any, by comparing the implied FV of goodwill to its carrying value. Sichuan Kangzhuang has been suffering
net loss since the acquisition, indicating the impairment of goodwill. As of December 31, 2013, the carrying value of the goodwill
was fully impaired. Accordingly, we recorded a goodwill impairment loss of $122,250 in the six months ended December 31, 2013.
As of December 31, 2014, there were no any indications of the impairment of goodwill that arose from the acquisition of PFAL.
Revenue
Recognition
The Company’s
revenue is from insurance agency and brokerage services. The Company, through its subsidiaries, sells insurance products to customers,
and obtains commissions from the respective insurance companies according to the terms of each insurance company service agreement.
The Company recognizes revenue when the following have occurred: persuasive evidence of an agreement between the insurance company
and insured exists, services were provided, the fee for such services is fixed or determinable and collectability of the fee is
reasonably assured. Insurance agency services are considered complete, and revenue is recognized, when an insurance policy becomes
effective. The customers are entitled to a 10-day cancellation period from the date of issuance of the policies, in which customers
can cancel the contract without any fees. The Company is notified of such cancellations by the insurance carriers. For the six
months ended December 31, 2013 and for the fiscal years ended December 31, 2014 and June 30, 2013 and 2012, policy cancellations
were $22,553, $84,476, $12,809 and nil, respectively.
The Company
pays commissions to its sub-agents when an insurance product is sold by the sub-agent. The Company recognizes commission revenue
on a gross basis. The commissions paid by the Company to its sub-agents are recorded as cost of revenue.
Income Taxes
The Company
utilizes ASC Topic 740, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events included in the financial statements or tax returns. 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. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to 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 the position will be sustained upon examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement
with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount
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 is classified as interest expense and penalties are classified in general and administrative expenses in the statements
of income and other comprehensive income (loss). As of December 31, 2014 and 2013, the Company did not have any uncertain tax
positions.
The Company
was not subjected to income tax examinations by taxing authorities during the current or past fiscal years. In connection
with the acquisition of China entities, the Company is required to comply with the information return reporting requirements such
as Foreign Bank Accounts Reporting (FBAR), Information Return on Foreign-Owned U.S. Corporation or U.S. Corporation owning certain
foreign corporation (Under Section 6038A and 6038C of Internal Revenue Code, etc.). The Company failed to comply with such requirements
for the years of 2010, 2011 and 2012. The potential penalty is estimated to be $370,000 in the event of a tax audit, which has
been accrued in the six months ended December 31, 2013, and it has not been paid during the year ended December 31, 2014.
Preferred
Stock
The
Company is authorized to issue 10,000,000 shares of preferred stock, $.00001 par value. We currently have 1,000,000 shares of
Series A Preferred Stock (“Series A Stock”) outstanding as of December 31, 2014, which was classified as equity.
Section 480-10-25
requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances)
because that financial instrument embodies an obligation of the issuer. Section 480-10-05-2 classifies all of the following as
examples of an obligation:
a.
An entity incurs a conditional obligation to transfer assets by issuing (writing) a put option that would, if exercised, require
the entity to repurchase its equity shares by physical settlement. (Further, an instrument that requires the issuer to settle
its obligation by issuing another instrument [for example, a note payable in cash] ultimately requires settlement by a transfer
of assets.)
b.
An entity incurs a conditional obligation to transfer assets by issuing a similar contract that requires or could require net
cash settlement.
c.
An entity incurs a conditional obligation to issue its equity shares by issuing a similar contract that requires net share settlement.
The Series
A Preferred Stock does not fall in to any of the above categories as an obligation. The preferred stock is convertible into a
fixed number of common shares (one for one). Therefore, the preferred stock has been classified as equity.
Fair Values
of Financial Instruments
FASB ASC Topic
820, “Fair Value Measurements and Disclosures,” defines FV, establishes a three-level valuation hierarchy for
disclosures of FV measurement and enhances disclosure requirements for FV measures. The carrying amounts reported in the balance
sheets for receivables and current liabilities each qualify as financial instruments and are reasonable estimates of FV because
of the short period of time between the origination of such instruments and their expected realization and their current market
rate of interest. The three levels are defined as follows:
• Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
• Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial
instruments.
• Level
3 inputs to the valuation methodology are unobservable and significant to the FV.
Concentration
of Risk
Financial instruments
that potentially subject the Company to significant concentrations of credit risk consist principally of cash and equivalents
and accounts receivable. As of December 31, 2014, approximately $824,108 of the Company’s cash and equivalents held by financial
institutions, including $104,285 from discontinued operation, was insured, and the remaining balance of $18,587,487, including
$55,919 from discontinued operation, was not insured. With respect to accounts receivable, the Company generally does not require
collateral and does not have an allowance for doubtful accounts.
Before acquired
AHFL and its Taiwan subsidiaries on August 24, 2012, the company has two principle insurance companies for which it acts as insurance
agent. After acquired AHFL and its Taiwan subsidiaries, the Company has several principal insurance companies, for which it acts
as an insurance agent. For the six months ended December 31, 2013 and for the years ended December 31, 2014 and June 30, 2013
and 2012, the Company’s revenues from sale of insurance policies underwritten by these companies were:
| |
Year ended
December 31, 2014 | | |
Six
months ended December 31, 2013 | | |
Year ended
June 30, 2013 | | |
Year ended
June 30, 2012 |
| |
Amount | | |
%
of Total Revenue | | |
Amount | | |
%
of Total Revenue | | |
Amount | | |
%
of Total Revenue | | |
Amount | | |
%
of Total Revenue |
Farglory Life Insurance Co.,Ltd. | |
$ | 13,493,644 | | |
| 28 | % | |
$ | 6,590,776 | | |
| 28 | % | |
$ | 12,118,121 | | |
| 32 | % | |
| |
|
| |
Fubon Life Insurance Co.,Ltd. | |
| 7,621,634 | | |
| 16 | % | |
| 4,894,133 | | |
| 21 | % | |
| 9,245,419 | | |
| 24 | % | |
| |
|
| |
AIA International Ltd.,Taiwan | |
| 6,938,013 | | |
| 15 | % | |
| 3,424,615 | | |
| 14 | % | |
| | | |
| | | |
| |
|
| |
TransGlobe Life Insurance Inc. | |
| 5,584,124 | | |
| 12 | % | |
| 3,983,464 | | |
| 17 | % | |
| | | |
| | | |
| |
|
| |
Sunshine | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | 830,954 | | |
26% |
Taiping | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 751,126 | | |
24% |
As of December
31, 2014 and 2013, and June 30, 2013 and 2012, the Company’s accounts receivable from these companies were:
| |
December
31, 2014 | | |
December
31, 2013 | | |
June
30, 2013 | | |
June
30, 2012 |
| |
Amount | | |
%
of Total Accounts Receivable | | |
Amount | | |
%
of Total Accounts Receivable | | |
Amount | | |
%
of Total Accounts Receivable | | |
Amount | | |
%
of Total Accounts Receivable |
Farglory Life Insurance Co.,Ltd. | |
$ | 2,150,294 | | |
| 28 | % | |
$ | 1,967,886 | | |
| 27 | % | |
$ | 1,501,865 | | |
| 36 | % | |
| |
|
| |
AIA International Ltd.,Taiwan | |
| 1,098,879 | | |
| 14 | % | |
| | | |
| | | |
| | | |
| | | |
| |
|
| |
Fubon Life Insurance Co.,Ltd. | |
| 963,118 | | |
| 12 | % | |
| 1,390,208 | | |
| 19 | % | |
| 673,710 | | |
| 16 | % | |
| |
|
| |
TransGlobe Life Insurance Inc. | |
| 735,755 | | |
| 10 | % | |
| | | |
| | | |
| | | |
| | | |
| |
|
| |
Sunshine | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | 73,812 | | |
40% |
Taiping | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| 21,618 | | |
12% |
The Company's
operations are in the PRC and Taiwan. Accordingly, the Company's business, financial condition and results of operations may be
influenced by the political, economic, foreign currency exchange and legal environments in the PRC and Taiwan, and by the state
of each economy. The Company’s results may be adversely affected by changes in the political and social conditions in the
PRC and Taiwan, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and
rates and methods of taxation, among other things.
Operating
Leases
Leases, where
substantially all the rewards and risks of ownership of assets remain with the leasing company, that do not meet the capitalization
criteria of FASB ASC Topic 840 “Leases,” are accounted for as operating leases. Rentals under operating leases
are expensed on the straight-line basis over the lease term.
Segment
Reporting
The Company
follows FASB ASC Topic 280, “Segment Reporting” for its segment reporting. In the past periods, the Company managed
and reviewed its business as two operating segments. The business of CU WOFE and 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.
ASC-280-10-50-12
states, a public entity shall report separately information about an operating segment that meets any of the following quantitative
thresholds:
a.
Its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10 percent or more of
the combined revenue, internal and external, of all operating segments.
b.
The absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount, of either:
1.
The combined reported profit of all operating segments that did not report a loss
2.
The combined reported loss of all operating segments that did report a loss.
c.
Its assets are 10 percent or more of the combined assets of all operating segments.
The PRC segment
does not meet any of the above quantitative thresholds and Taiwan segment is substantially all of the reported consolidated amounts.
Therefore, we are not reporting these two segments separately. Note 21 disclose revenues from the two segments.
Contingencies
Certain conditions
may exist as of the date the financial statements are issued, which could result in a loss to the Company which will be resolved
when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and
such assessment inherently involves judgment. In assessing loss contingencies arising from legal proceedings pending against the
Company or unasserted claims that may rise from such proceedings, the Company’s management evaluates the perceived merits
of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be
sought.
If the assessment
of a contingency indicates it is probable a material loss will be incurred and the amount of the loss can be reasonably estimated,
then the estimated loss is accrued in the Company’s financial statements. If the assessment indicates a material loss contingency
is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability,
together with an estimate of the range of possible loss if determinable and material would be disclosed.
Statement
of Cash Flows
In accordance
with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company's operations are calculated
based upon the local currencies and an average exchange rate is used. As a result, amounts related to assets and liabilities reported
on the consolidated statements of cash flows may not necessarily agree with changes in the corresponding balances on the consolidated
balance sheets. Cash from operating, investing and financing activities is net of the effect of acquisition described in
Note 10.
Variable
Interest Entities
The Company
follows FASB ASC Subtopic 810-10-05-8”, “Consolidation of VIEs,” states that a VIE is a corporation,
partnership, limited liability corporation, trust or any other legal structure used to conduct activities or hold assets that
either (1) has an insufficient amount of equity to carry out its principal activities without additional subordinated financial
support, (2) has a group of equity owners that are unable to make significant decisions about its activities, or (3) has a group
of equity owners that do not have the obligation to absorb losses or the right to receive returns generated by its operations.
Due to the
PRC legal restrictions on foreign ownership and investment in insurance agency and brokerage businesses in China, especially those
on qualifications as well as capital requirement of the investors, the Company operates its insurance agency and brokerage business
in PRC primarily through Anhou, a VIE owned by seven individual shareholders, and two subsidiaries of Anhou.
On January
17, 2011, CU WFOE and Anhou and Anhou Original Shareholders (as defined in Note1) entered into the Old VIE Agreements (as defined
in Note1) which included:
| ¨ | Exclusive
Business Cooperation Agreement (“EBCA” or the “Agreement”) through
which: (1) CU WFOE has the right to provide Anhou with complete technical support, business
support and related consulting services during the term of this Agreement; (2) Anhou
agrees to accept all the consultations and services provided by CU WFOE. Anhou further
agrees that unless with CU WFOE's prior written consent, during the term of this Agreement,
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 this Agreement; (3) Anhou
shall pay CU WFOE fees equal to 90% of the net income of Anhou, and the payment is quarterly,
and (4) CU 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 this Agreement. |
The term of
this Agreement is 10 years. Subsequent to the execution of this Agreement, both CU WFOE and Anhou shall review this Agreement
on an annual basis to determine whether to amend or supplement the provisions. The term of this Agreement may be extended if confirmed
in writing by CU WFOE prior to the expiration thereof. The extended term shall be determined by CU WFOE, and Anhou shall accept
such extended term unconditionally.
During the
term of this Agreement, unless CU WFOE commits gross negligence, or a fraudulent act, against Anhou, Anhou may not terminate this
Agreement. Nevertheless, CU WFOE shall have the right to terminate this Agreement upon giving 30 days prior written notice to
Anhou at any time.
| ¨ | Power
of Attorney under which each shareholder of Anhou executed an irrevocable power of attorney
to authorize CU WFOE to act on behalf of the shareholder to exercise all of his/her rights
as equity owner of Anhou, including without limitation to: (1) attend shareholders' meetings
of Anhou; (2) exercise all the shareholder's rights and shareholder's voting rights that
he/she is entitled to under the laws of the PRC and Anhou's Articles of Association,
including but not limited to the sale or transfer or pledge or disposition of the shareholder’s
shareholding in part or in whole, and (3) designate and appoint on behalf of the shareholder
the legal representative, the director, supervisor, the chief executive officer and other
senior management members of Anhou. |
| ¨ | Option
Agreement under which the shareholders of Anhou irrevocably granted CU WFOE or its designated
person an exclusive and irrevocable right to acquire, at any time, the entire portion
of Anhou’s equity interest held by each shareholder of Anhou, or any portion thereof,
to the extent permitted by PRC law. The purchase price for the shareholders’
equity interests in Anhou shall be the lower of (i) RMB1 ($0.16) and (ii) the lowest
price allowed by relevant laws and regulations. If appraisal is required
by the laws of PRC when CU WFOE exercises the Equity Interest Purchase Option (as defined
in the Option Agreement), the Parties shall negotiate in good faith and based on the
appraisal result make necessary adjustment to the Equity Interest Purchase Price (as
defined in the Option Agreement) so that it complies with any and all then applicable
laws of the PRC. The term of this Agreement is 10 years, and may be renewed at CU WFOE's
election. |
| ¨ | Share
Pledge Agreement under which the owners of Anhou pledged their equity interests in Anhou
to CU WFOE to guarantee Anhou’s performance of its obligations under the EBCA.
Pursuant to this agreement, if Anhou fails to pay the exclusive consulting or service
fees in accordance with the EBCA, CU WFOE shall have the right, but not the obligation,
to dispose of the owners of Anhou’s equity interests in Anhou. This Agreement shall
be continuously valid until all payments due under the EBCA have been repaid by Anhou
or its subsidiaries. |
As a result
of the capital increase and the share transfer described in Note1, on October 24, 2013, CU WFOE, Anhou and Anhou Existing Shareholders
(as defined in Note1) entered into a series of variable interest agreements (the “VIE Agreements”), including Power
of Attorneys, Exclusive Option Agreements, Share Pledge Agreements, in the same form as the previous Old VIE Agreements, other
than the change of shareholder names and their respective shareholdings. The Old VIE Agreements were terminated by and among CU
WFOE, Anhou and Anhou Original Shareholders on the same date. The EBCA executed by and between CU WFOE and Anhou on January 17,
2011 remains in full effect.
As a result
of the agreements among CU WFOE, the shareholders of Anhou and Anhou, CU WFOE is considered the primary beneficiary of Anhou,
CU WFOE has effective control over Anhou; therefore, CU WFOE consolidates the results of operations of Anhou and its subsidiaries.
Accordingly the results of operations, assets and liabilities of Anhou and its subsidiaries are consolidated in the Company’s
financial statements from the earliest period presented. However, the VIE is monitored by the Company to determine if any events
have occurred that could cause its primary beneficiary status to change. These events 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. |
|
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. |
The Company
reviews the VIE’s status on an annual basis. For the six months ended December 31, 2013, and the years ended December 31,
2014, June 30, 2013 and 2012, no event including a-d above took place that would change the Company’s primary beneficiary
status.
Reclassifications
Certain prior
period amounts were reclassified to conform to the manner of presentation in the current period. These reclassifications had no
effect on the net income (loss) or stockholders’ equity.
Recent Accounting
Pronouncements
The FASB has
issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting
Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard
requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective
on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the
cumulative effect of initially applying the ASU recognized at the date of initial application. The adoption of this standard is
not expected to have a material impact on the Company’s consolidated financial position and results of operations.
The FASB has
issued ASU No. 2014-12, Compensation - Stock Compensation (ASC Topic 718): Accounting for Share-Based Payments When the Terms
of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance
target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition.
As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further
clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will
be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already
been rendered.. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning
after December 15, 2015. Earlier adoption is permitted. The adoption of this standard is not expected to have a material impact
on the Company's consolidated financial position and results of operations.
In March 2013,
the FASB issued guidance on a parent’s accounting for the cumulative translation adjustment upon derecognition of a subsidiary
or group of assets within a foreign entity. This new guidance requires the parent release any related cumulative translation adjustment
into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity
in which the subsidiary or group of assets had resided. The new guidance will be effective for us beginning July 1, 2014. We do
not anticipate a material impact on our financial statements upon adoption.
In July 2013,
the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating
Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” This standard provides guidance regarding when
an unrecognized tax benefit should be classified as a reduction to a deferred tax asset or when it should be classified as a liability
in the consolidated balance sheet. The new guidance will be effective for us beginning July 1, 2014. Early adoption and retrospective
application is permitted. The Company is evaluating the potential impact of this adoption on our consolidated financial statements.
In May 2014,
the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, (“ASU 2-14-09”). ASU 2-14-09 amends revenue
recognition principles and provides a single set of criteria for revenue recognition among all industries. This new standard provides
a five step framework whereby revenue is recognized when promised goods or services are transferred to a customer at amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also
requires enhanced disclosure pertaining to revenue recognition in both interim and annual periods. ASU 2014-09 is effective for
interim and annual periods beginning after December 15, 2016. We are currently evaluating the potential impact that ASU 2014-09
may have on our financial position and results of operations.
NOTE 3 – CASH AND EQUIVALENTS
As of December
31, 2014 and 2013, our cash and equivalents primarily consisted of cash and certificates of deposits with original maturities
of three months or less. The carrying amounts reported on the consolidated balance sheets for cash and cash equivalents approximate
fair value.
NOTE 4 -
MARKETABLE SECURITIES
Marketable
securities represent investment in equity securities of listed stocks and funds, which are classified as Level 1 securities as
follows:
|
|
December
31, 2014 |
|
|
|
Cost or |
|
|
Gross |
|
|
|
|
|
|
Amortized |
|
|
Unrealized |
|
|
Total |
|
|
|
Cost |
|
|
Gains
(Losses) |
|
|
Fair
Value |
|
Level 1 securities: |
|
|
|
|
|
|
|
|
|
|
|
|
Stocks |
|
$ |
31,210 |
|
|
$ |
(2,932 |
) |
|
$ |
28,278 |
|
Funds |
|
|
2,532,475 |
|
|
|
(123,747 |
) |
|
|
2,408,728 |
|
|
|
$ |
2,563,685 |
|
|
$ |
(126,679 |
) |
|
$ |
2,437,006 |
|
| |
December
31, 2013 | |
| |
Cost or | | |
Gross | | |
| |
| |
Amortized | | |
Unrealized | | |
Total | |
| |
Cost | | |
Gains
(Losses) | | |
Fair Value | |
Level 1 securities: | |
| | | |
| | | |
| | |
Stocks | |
$ | 29,453 | | |
$ | 1,757 | | |
$ | 31,210 | |
Funds | |
| 2,531,317 | | |
| 1,158 | | |
| 2,532,475 | |
| |
$ | 2,560,770 | | |
$ | 2,915 | | |
$ | 2,563,685 | |
NOTE 5 – OTHER CURRENT
ASSETS
The Company’s
other current assets consisted of the following as of December 31, 2014 and 2013:
| |
December
31, 2014 | | |
December
31, 2013 | |
Prepaid rent and rent deposit | |
$ | 191,995 | | |
$ | 121,361 | |
Refundable business tax | |
| 912 | | |
| 40 | |
Investment in current deposit | |
| - | | |
| 1,630,789 | |
Other | |
| 207,252 | | |
| 393,127 | |
Total other
current assets | |
$ | 400,159 | | |
$ | 2,145,317 | |
Refundable
business tax, similar to VAT in mainland China, represents business tax prepaid by Risk Management and AHFL, expected to be refunded
by Taiwan tax bureau. Investment in current deposit is a semiannual investment product that Anhou purchased in November 2013.
Others mainly represent advances to staff and other miscellaneous receivables.
NOTE 6–
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant
and equipment consisted of the following, as of December 31, 2014 and 2013:
| |
December
31, 2014 | | |
December
31,2013 | |
Office Equipment | |
$ | 1,026,426 | | |
$ | 1,204,386 | |
Office Furniture | |
| 139,755 | | |
| 111,699 | |
Leasehold improvements | |
| 478,154 | | |
| 469,102 | |
Transportation equipment | |
| 89,240 | | |
| 89,598 | |
Other equipment | |
| 64,002 | | |
| 51,421 | |
Total | |
| 1,797,577 | | |
| 1,926,206 | |
Less: accumulated depreciation | |
| (735,815 | ) | |
| (885,017 | ) |
Total property,
plant and equipment, net | |
$ | 1,061,762 | | |
$ | 1,041,189 | |
NOTE 7 –
INTANGIBLE ASSETS
As of December
31, 2014 and 2013, the Company’s intangible assets consisted the following:
| |
December
31, 2014 | | |
December
31, 2013 | |
Software | |
$ | 462,903 | | |
$ | 402,096 | |
Less accumulated amortization | |
| (191,947 | ) | |
| (93,829 | ) |
Total other
current assets | |
$ | 270,956 | | |
$ | 308,267 | |
Estimated future
intangible amortization as of December 31, 2014 is as follows:
Years
ending December 31, | |
Amount | |
2015 | |
$ | 113,831 | |
2016 | |
| 75,936 | |
2017 | |
| 22,802 | |
2018 | |
| 22,802 | |
2019 | |
| 17,254 | |
Thereafter | |
| 18,331 | |
Total | |
$ | 270,956 | |
NOTE 8 –
LONG-TERM INVESTMENT
According to
Taiwan regulatory requirements, Law Broker is required to maintain a minimum of NT$3,000,000 ($94,508) in a separate account.
Law Broker chose to buy government bonds and has the right to trade such bonds with other debt or equity instruments. The amount,
however, was defined as restricted asset.
| |
December
31, 2014 | |
| |
Cost or | | |
Gross | | |
| |
| |
Amortized | | |
Unrealized | | |
Total | |
| |
Cost | | |
Gains
(Losses) | | |
Fair
Value | |
Government bonds | |
| 95,405 | | |
| (77 | ) | |
| 95,328 | |
| |
$ | 95,405 | | |
$ | (77 | ) | |
$ | 95,328 | |
| |
December
31, 2013 | |
| |
Cost or | | |
Gross | | |
| |
| |
Amortized | | |
Unrealized | | |
Total | |
| |
Cost | | |
Gains
(Losses) | | |
Fair Value | |
Government bonds | |
| 101,599 | | |
| 696 | | |
| 102,295 | |
| |
$ | 101,599 | | |
$ | 696 | | |
$ | 102,295 | |
NOTE 9–OTHER
ASSETS
The Company’s
other assets consisted of the following as of December 31, 2014 and 2013:
| |
December
31, 2014 | | |
December
31, 2013 | |
Restricted cash | |
$ | 162,906 | | |
$ | 163,559 | |
Rental deposits | |
| 384,670 | | |
| 405,935 | |
Other | |
| 39,946 | | |
| 17,809 | |
Total other
assets | |
$ | 587,522 | | |
$ | 587,303 | |
Restricted
cash is a deposit in bank by the Company in conformity with Provisions of the Supervision and Administration of Specialized Insurance
Agencies, and cannot be withdrawn without the permission of the regulatory commission. Deposits include long-term leasing deposits.
NOTE 10
– ACQUISITION AND GOODWILL
On September
6, 2010, Henan Anhou paid RMB532,622 ($78,318) to acquire 100% of Sichuan Kangzhuang from its previous shareholders. Sichuan Kangzhuang
then had net liabilities of RMB219,123 ($32,134). Goodwill of RMB751,745 ($110,452) was therefore recorded. Sichuan Kangzhuang
has been suffering net loss since the acquisition, indicating the impairment of goodwill. As of December 31, 2013, the carrying
value of the goodwill was fully impaired. Accordingly, we recorded a goodwill impairment loss of $122,250.
On April 23,
2014, AHFL entered into a capital increase agreement (“Agreement”) with Wong Chun Kwok Johnny (“Mr Wong”),
the owner of Prime Financial Asia Ltd (PFAL) which is a re-insurance broker company resided in Hong Kong. Upon the Agreement,
Mr Wong would increase PFAL’s capital contribution from HK$500,000 to HK$1,470,000, and AHFL would contribute HK$1,530,000,
approximately $197,335, to PFAL’s capital contribution. Upon the completion of capital increase by both parties, Mr. Wong
and AHFL would own 49% and 51% of PFAL’s equity interest, respectively. The transaction was completed on April 30, 2014.
The FV of the
net identifiable assets of PFAL at acquisition date was $324,871, and 51% of which was $165,684. The Company recorded $31,651
excess of purchase price over the FV of assets acquired and liabilities
assumed acquired as goodwill. No intangible assets were identified as of the acquisition date. As of December 31, 2014, there
were no any indications of the impairment of the goodwill.
NOTE 11
– TAXES PAYABLE
The Company’s
taxes payable consisted of the following as of December 31, 2014 and 2013:
| |
December
31, 2014 | | |
December
31, 2013 | |
PRC Tax | |
$ | 172,765 | | |
$ | 152,105 | |
Taiwan Tax | |
| 747,142 | | |
| 346,336 | |
Total tax
payable | |
$ | 919,907 | | |
$ | 498,441 | |
PRC tax represents
income tax and other taxes accrued according to PRC tax law by our subsidiaries and CAE in the PRC. Taiwan tax represents income
tax and other taxes accrued according to Taiwan tax law by our subsidiaries and branches in Taiwan. Both will be settled within
the next twelve months according to the respective tax laws.
NOTE 12
– UNEARNED REVENUE
On June 10,
2013, AHFL entered into a Strategic Alliance Agreement (the “Alliance Agreement”) with AIA International Limited Taiwan
Branch (“AIATW”). The purpose of the Alliance Agreement is to promote life insurance products provided by AIATW within
Taiwan by insurance agencies or brokerage companies affiliated with AHFL or CUIS. The term of the Alliance Agreement is from April
15, 2013 to August 31, 2018. Pursuance to the terms of the Alliance Agreement, AIATW paid AHFL the Execution Fee of $8,326,700
(NT$250,000,000, including the tax of NT$11,904,762), which is to be recorded as revenue upon fulfilling sales targets and the
13-month persistency ratio, as defined, over the next five years. The Execution Fee may be required to be recalculated if certain
performance targets are not met by AHFL. On September 30, 2014, AHFL entered into a Strategic Alliance Supplemental Agreement
(the “Supplemental Agreement”) with AIATW. In the Supplemental Agreement, the performance targets and the provision
about refunding the Execution Fee when the performance targets are not met were revised. In the meantime, two parties agreed that
the Alliance Agreement would be terminated when AHFL’s ownership in Law Enterprise or Law Enterprise’s ownership in
Law Broker changed by 30% or above. The term of the Alliance Agreement is changed to the period from June 1, 2013 through December
31, 2020.
As of December
31, 2013, the Company booked $1,586,038 as short-term liability since we expected to record this amount as revenue within the
next twelve months. The remaining balance of $6,344,152 was recorded as long-term liability (Note 14). According to the revised
agreement, as of December 31, 2014, the Company did not book any short-term unearned revenue since we did not expect to achieve
the sales target within the next twelve months, and the Company booked the whole $7,500,645 as long-term liability. For the year
ended December 31, 2014, no income was recorded under the Alliance Agreement as performance targets were not met.
NOTE 13
– OTHER CURRENT LIABILITIES
Other current
liabilities are as follows, as of December 31, 2014 and 2013:
| |
December
31, 2014 | | |
December
31, 2013 | |
Commissions payable to sub agents | |
$ | 5,311,365 | | |
$ | 4,972,338 | |
Salary payable to administrative staff | |
| 144,158 | | |
| 75,934 | |
Due to previous shareholders of Jiangsu Law | |
| - | | |
| 84,238 | |
Due to previous shareholders of AHFL | |
| 750,910 | | |
| - | |
Withholding employee personal tax | |
| 259,458 | | |
| 326,652 | |
Accrued expenses | |
| 2,844,166 | | |
| 3,053,140 | |
Other | |
| 223,532 | | |
| 119,337 | |
Total other
current liabilities | |
$ | 9,533,589 | | |
$ | 8,631,639 | |
Commissions
payable to sub-agents and salaries payable to administrative staff are usually settled within 12 months. The amount due to previous
shareholders of AHFL is the remaining balance of the acquisition cost described in Note 1. Due to previous shareholders of Jiangsu
Law is the remaining balance of the acquisition cost. The acquisition agreement between the parties has not specified the exact
time for payment of the acquisition price or imposed any interest for late payment. Withholding employee personal tax will be
paid to local tax bureau within one month. Accrued expenses are mainly for operating expenses payable within the credit terms
provided by suppliers. Other mainly represents short term payable for expenses such as training and travelling.
NOTE 14
– LONG-TERM LIABILITIES
Long-term liabilities
are as follows as of December 31, 2014 and 2013:
| |
December
31, 2014 | | |
December
31, 2013 | |
| |
| | |
| |
Long-term other
payable | |
$ | - | | |
$ | 750,910 | |
Unearned
revenue | |
| 7,500,645 | | |
| 6,344,152 | |
Total
other long-term liabilities | |
$ | 7,500,645 | | |
$ | 7,095,062 | |
Long-term other
payable as of December 31, 2013 is the result of the Company’s acquisition of AHFL as described in Note 1. It’s the
cash payment to be made to the selling shareholders of AHFL. On March 14, 2013, the payment deadline was extended to March 31,
2015. As of December 31, 2014, it was reclassified as short-term liabilities.
As described
in Note 12, the Company recorded $7,500,645 (NT$238,095,238, net of tax) received from AIATW as unearned revenue. According to
the revised agreement, as of December 31, 2014, the Company did not book any short-term unearned revenue since we did not expect
to achieve the sales target within the next twelve months, and the Company booked the whole $7,500,645 as long-term liability.
As of December 31, 2013, the Company booked $6,344,152 as long-term liability for the same reason.
NOTE 15
– STATUTORY RESERVES
According to
Taiwan accounting rules and corporation regulations, the company’s subsidiaries in Taiwan must appropriate 10% of net income
to statutory reserves until the accumulated reserve hits registered capital. The reserve can be converted into share capital by
issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently
held by them, with a limitation that the reserve left is not less than 25% of the registered capital after converting to share
capital.
Pursuant to
the PRC regulations, the Company’s Consolidated Affiliated Entities (“CAE”) are required to transfer 10% of
their net profit, as determined under the PRC accounting regulations, to a Statutory Common Reserve Fund (“Reserve Fund”).
Appropriation to the Reserve Fund may cease when the fund equals 50% of a company’s registered capital or when a company
has accumulated losses. The transfer to this reserve must be made before distribution of dividends to shareholders. The Company’s
CAE did not appropriate such reserve as they have accumulated losses.
NOTE 16–
INCOME TAX
CU WFOE and
the VIEs in the PRC are governed by the Income Tax Law of the PRC concerning the private-run enterprises, which are generally
subject to tax at 25% on income reported in the statutory financial statements after appropriated adjustments. Except for Jiangsu
Law, according to the requirement of local tax authorities, the tax basis is deemed as 10% of total revenue, instead of net income.
The tax rate of Jiangsu Law is also 25%.
According
to Chinese tax regulations by the Chinese tax authorities effective January 1, 2008, commissions paid to sub-agents in excess
of 5% of the commission revenue were not tax deductible. According to China State Administration of Taxation #15 Announcement
in 2012, effective from 2011, such commissions can be fully deducted. Also, such tax payable over three years can be reversed.
Therefore, in the years ended June 30, 2013 and 2012, Anhou and Sichuan Kangzhuang reversed
the tax payable of $274,489 and $283,880, respectively, which
was accrued before 2011 tax year for such deductible commission and credited as income tax benefit, which is stated as “change
in tax status” on the income tax rate reconciliation tables below.
The Company’s
subsidiaries in Taiwan are governed by the Income Tax Law of Taiwan, and are generally subject to tax at 17% on income reported
in the statutory financial statements after appropriate adjustments. In the meanwhile, Income Tax Law of Taiwan provides that
a company is taxed at additional 10% on any undistributed earnings to its shareholders. In June 2014, Law Enterprises decided
not to distribute its earnings accumulated as of December 31, 2013. Accordingly, NT$18,903,349, approximately $626,406, of additional
tax was accrued. In December 31, 2014, Law Enterprises decided not to distribute its earnings in 2014. Accordingly, additional
NT$9,200,945, approximately $303,589, of income tax was accrued as of December 31, 2014, which is stated as “income tax
on undistributed earnings” on the income tax rate reconciliation tables below.
The following
table reconciles the US statutory rates to the Company’s effective tax rate for the six months ended December 31, 2013 and
the years ended December 31, 2014 and June 30, 2013 and 2012:
| |
Year
ended
December 31, 2014 | | |
Six
months ended
December 31, 2013 | | |
Year
ended
June 30, 2013 | | |
Year
ended
June 30, 2012 | |
US statutory rate | |
| 34 | % | |
| 34 | % | |
| 34 | % | |
| 34 | % |
Tax rate difference | |
| (33 | )% | |
| (2 | )% | |
| (8 | )% | |
| (9 | )% |
Tax base difference | |
| 1 | % | |
| (1 | )% | |
| - | % | |
| 3 | % |
Change in tax status | |
| - | % | |
| - | % | |
| (3 | )% | |
| 76 | % |
Income tax on undistributed earnings | |
| 57 | % | |
| (6 | )% | |
| - | % | |
| - | % |
Loss in subsidiaries | |
| 45 | % | |
| (38 | )% | |
| 2 | % | |
| (33 | )% |
Write-off residual value of fixed assets | |
| 1 | % | |
| (5 | )% | |
| - | % | |
| - | % |
Impairment of goodwill | |
| - | % | |
| (3 | )% | |
| - | % | |
| - | % |
Gain on bargain purchase of subsidiary | |
| - | % | |
| - | % | |
| (19 | )% | |
| - | % |
Un-deductible and non-taxable
items | |
| (2 | )% | |
| 6 | % | |
| 2 | % | |
| 1 | % |
Tax
per financial statements | |
| 103 | % | |
| (15 | )% | |
| 8 | % | |
| 72 | % |
Un-deductible and non-taxable items
mainly represent un-deductible expenses according to PRC tax laws and the non-taxable tax income or loss.
NOTE 17
- RELATED PARTY TRANSACTIONS
Due to related
parties
The related
parties listed below loaned money to the Company for working capital. Due to related parties consisted of the following as of
December 31, 2013 and 2014:
| |
December
31, 2014 | | |
December
31, 2013 | |
Due to Mr. Mao (Principal Shareholder
of the Company) | |
$ | 214,165 | | |
$ | 117,471 | |
Due to Mr. Zhu (Legal Representative of Jiangsu Law) | |
| 2,255 | | |
| 2,265 | |
Due to Mrs. Lee (Director of
CUIS) | |
| 315,027 | | |
| 35,062 | |
Total | |
$ | 531,447 | | |
$ | 154,798 | |
On December
23, 2014, AHFL entered into a Loan Agreement (the “Loan Agreement”) with Lee Shu-Fen (“Ms. Lee”), the
Series A Director of the Company. Pursuant to the Loan Agreement, Mrs. Lee provided a loan in the amount of $314,644 (NTD10 million)
(the “Loan”) to AHFL. The term for the Loan is from December 23, 2014 to December 22, 2015 with a fixed interest rate
at 1.5%. The principal amount of the Loan together with the accrued interest shall be paid in one lump sum before December 22,
2015.
NOTE 18–
COMMITMENTS
Operating
Leases
The Company
has operating leases for its offices. Rental expenses for the six months ended December 31, 2013 and for the years ended December
31, 2014, and June 30, 2013 and 2012 were $754,029, $1,668,571, $1,410,945 and $889,080, respectively. At December 31, 2014, total
future minimum annual lease payments under operating leases were as follows, by years:
Twelve months ended
December 31, 2015 | |
$ | 1,719,838 | |
Twelve months ended December
31, 2016 | |
| 937,485 | |
Twelve months ended December
31, 2017 | |
| 410,553 | |
Thereafter | |
| 314,034 | |
Total | |
$ | 3,381,910 | |
NOTE 19
- DISCONTINUED OPERATION
In the fourth
quarter of 2014, the shareholders of the Law Management and Law Agent made the resolution to dissolve Law Management and Law Agent,
respectively, because those companies have not been in operation. The dissolution of Law Management and Law Agent was approved
by the Taiwan (R.O.C) Government on November 26, 2014 and on January 13, 2015, respectively. Abide by the law in Taiwan, the liquidator
was appointed by the shareholders of the Law Management and Law Agent and the liquidator shall complete the liquidation process
no later than six months from the appointment date. Both Law Management and Law Agent are under the process of liquidation as
of now.
Law Management
and Law Agent were acquired by the Company together with their parent Company, Law Enterprise, on August 24, 2012. The combined
Total Assets and Total Liabilities of Law Management and Law Agent as of December 31, 2014 and 2013 and June 30, 2013 are as follows:
| |
As
of December 31, 2014 | | |
As
of December 31, 2013 | | |
As
of June 30, 2013 | |
Total Assets (including
cash) | |
| 334,512 | | |
| 203,597 | | |
| 277,582 | |
Total Liabilities | |
| 255,954 | | |
| 117,240 | | |
| 121,134 | |
The combined
Revenue, Net Loss and EPS of Law Management and Law Agent for the six months ended December 31, 2013 and the years ended December
31, 2014 and June 30, 2013 are as follows:
| |
Year
Ended December 31, 2014 | | |
Six
Months Ended December 31, 2013 | | |
Year
Ended June 30, 2013 | |
Revenue | |
| - | | |
| - | | |
| - | |
Net Loss | |
| (3,270 | ) | |
| (132,229 | ) | |
| (4,173 | ) |
EPS | |
| - | | |
| - | | |
| - | |
NOTE 20
– FINANCIAL RISK MANAGEMENT AND FAIR VALUE
The Company
has exposure to credit, liquidity and market risks which arise in the normal course of its business. This note presents information
about the Company's exposure to each of these risks, the Company's objectives, policies and processes for measuring and managing
risk, and the Company's management of capital. Further quantitative disclosures are included throughout these consolidated financial
statements.
The Board of
Directors (“BOD”) has overall responsibility for the establishment and oversight of the Company's risk management
framework. The Company's risk management policies are established to identify and analyze the risks faced by the Company, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed
regularly to reflect changes in market conditions and the Company's activities. The Company, through its training and management
standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand
their roles and obligations.
The Company's
BOD oversees how management monitors compliance with the Company's risk management policies and procedures and reviews the adequacy
of the risk management framework in relation to the risks faced by the Company.
The Company's
credit risk arises principally from accounts and other receivables, pledged deposits and cash and equivalents. Management has
a credit policy in place and monitors exposures to these credit risks on an ongoing basis. The carrying amounts of trade and other
receivables, pledged deposits and cash and cash equivalents represent the Company's maximum exposure to credit risks. Accounts
receivable are due within 30 days from the date of billing.
The BOD of
the Company is responsible for the overall cash management and raising borrowings to cover expected cash demands. The Company
regularly monitors its liquidity requirements, to ensure it maintains sufficient reserves of cash and readily realizable marketable
securities and adequate committed lines of funding from major financial institutions to meet its liquidity requirements in the
short and longer term.
The functional
currency for the subsidiaries in Taiwan is NT$ and the functional currency for the subsidiaries and VIEs in PRC is RMB. The financial
statements of the Company are in USD. The fluctuation of NT$ and RMB will affect our operating results expressed in USD. The Company
reviews its foreign currency exposures. The management does not consider its present foreign exchange risk to be significant.
NOTE 21
– GEOGRAPHICAL REVENUE
The geographical
distribution of China United’s revenue for the six months ended December 31, 2013 and for the years ended December 31, 2014,
and June 30, 2013 and 2012 were as follows:
Geographical Areas | |
Year
ended December 31, 2014 | | |
Six
months ended December 31,2013 | | |
Year
ended
June 30,2013 | | |
Year
ended
June 30,2012 | |
PRC | |
$ | 3,060,765 | | |
$ | 1,488,110 | | |
$ | 2,775,431 | | |
$ | 3,153,776 | |
Taiwan | |
| 44,389,197 | | |
| 22,201,000 | | |
| 35,066,815 | | |
| | |
| |
$ | 47,449,962 | | |
$ | 23,689,110 | | |
$ | 37,842,246 | | |
$ | 3,153,776 | |
NOTE 22
– LOAN TO SHAREHOLDERS
Anhou Registered
Capital Increase
On April 27,
2013, China Insurance Regulatory Commission mandated any insurance agency have a minimum registered capital requirement of RMB50
million (approximately $ 8 million). At the time, Anhou, a professional insurance
agency with a PRC nationwide license, had a registered capital of RMB10 million (approximately
$ 1.6 million). To better implement its expansion strategies, Anhou intends to increase its registered capital to RMB50
million so that it can set up new branches in any province beyond its current operations in Mainland China.
Due to certain
restriction on direct foreign investment in insurance agency business under current PRC legal requirements, Anhou sought investments
from certain Investor Borrowers who in turn needed funds through individual loans.
On June 9,
2013, AHFL entered into a Loan Agreement with ZLI Holdings, whereby AHFL agreed to provide a loan to ZLI Holdings of RMB40 million
($6,389,925). The term for such loan is 10 years which may be extended upon the agreement of the parties. The loan was remitted
to ZLI Holdings on August 30, 2013. In August 2013, ZLI Holdings entered into three loan agreements (“Investor Loan Agreements”)
with the following independent third parties, collectively, the Investor Borrowers:
| 1. | Able Capital
Holding Co., Ltd., a limited liability company established and registered in Hong Kong
(RMB29,500,000 ($4,712,570)) |
| 2. | Mr. Chen
Li, PRC citizen (RMB3,000,000 ($479,244)) |
| 3. | Ms. Yue
Jing, PRC citizen (RMB7,500,000 ($1,198,111)) |
The term for
the above loans is 10 years which may be extended upon the agreement of the parties. Pursuant to the Investor Loan Agreements,
each of the Investor Borrowers entered into a binding VIE agreement with Anhou, the WFOE and certain existing shareholders of
Anhou. The proceeds received from the said loans by the Investor Borrowers were solely used to increase the registered capital
of Anhou. As of December 31, 2014 and 2013, the loan was offset against equity.
On October
20, 2013, the investor borrowers increased Anhou’s registered capital by RMB 40 million ($6,389,925).
NOTE 23
– PREFERRED STOCK
The
Company is authorized to issue 10,000,000 shares of preferred stock, $.00001 par value. We currently have 1,000,000 shares of
Series A Preferred Stock (“Series A Stock”) outstanding as of December 31, 2014. The Series A Stock has the following
rights and preferences:
Voting
Rights. Except as otherwise provided by law, the Series A Stock and the common stock vote together on all matters submitted to
a vote of our shareholders. Each holder of Series A Stock is entitled to ten votes for each share of Series A Stock held of record
by such holder as of the applicable record date on any matter that is submitted to a vote of the stockholders of the Registrant.
Series
A Board Designee and Board Restriction. In addition to the voting rights disclosed above, the holders of the Series A Stock shall
be entitled to appoint one director (the “Series A Director”). No Board resolution regarding certain material Company
actions can be made without the affirmative vote of the Series A Director.
Dividends.
The holders of Series A Stock are entitled to share equally with the holders of common stock, on a per share basis, in such dividends
and other distributions of cash, property or shares of stock of the Registrant as may be declared by the Board.
Liquidation.
In the event of a voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Registrant, the
holders of common stock and the holders of Series A Stock shall be entitled to share equally on a per share basis, in all assets
of the Registrant of whatever kind available for distribution.
Conversion
Rights. The holders of the Series A Stock have the right to convert their shares thereof at any time into shares of the Registrant's
common stock. Each share of Series A Stock is convertible into one share of common stock.
If
the Registrant in any manner subdivides or combines the outstanding shares of common stock, the outstanding shares of the Series
A Stock will be subdivided or combined in the same manner.
Business
Combinations. In any merger, consolidation, reorganization or other business combination, the consideration received per share
by the holders the common stock and the holders of the Series A Stock in such merger, consolidation, reorganization or other business
combination shall be identical; provided however, that if such consideration consists, in whole or in part, of certain equity
interests, the rights and limitations of such equity interests may differ to the extent that the rights and limitations of the
common stock and the Series A Stock differ.
Fully
Paid and Nonassessable. All of our outstanding shares of preferred stock are fully paid and nonassessable.
The fair value
of the 1,000,000 preferred shares was $225,000 at the time of the preferred share issuance. The Fair value of the common shares
was $200,000 at the time of the preferred share issuance based on its market price at the date of the transaction. Therefore,
the incremental value of the preferred shares was $25,000. This amount may be deemed compensation.
From the qualitative
aspect, the Company notes the following regarding this deemed compensation:
Does not violate
any debt or other contract covenants;
Does not change
any earnings or EPS trends;
Does not affect
any previous earnings or EPS guidance;
Does not affect
any segment or class of revenue;
Does not affect
any regulatory compliance matters;
Does not affect
cash compensation of management;
Does not involve
concealment of an unlawful act
Additional
preferred stock may be authorized and issued in the future in connection with acquisitions, financings, or other matters, as the
Board of Directors deems appropriate. In the event that the Registrant issues any shares of preferred stock, a certificate
of designation containing the rights, privileges and limitations of this series of preferred stock will be filed with the Secretary
of State of the State of Delaware. The effect of this preferred stock designation power is that our Board of Directors alone,
subject to Federal securities laws, applicable blue sky laws, and Delaware law, may be able to authorize the issuance of preferred
stock which could have the effect of delaying, deferring, or preventing a change in control without further action by our stockholders,
and may adversely affect the voting and other rights of the holders of our common stock.
NOTE 24
– PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The
basis of pro forma consolidated statements of income of the Company is as if the Acquisition Agreement for AHFL was signed on
July 1, 2011 and 2012, and AHFL’s acquisition of Law Enterprise happened on the same date. The pro forma consolidated statements
of income were derived from the statement of income for the years ended June 30, 2013 and 2012 of AHFL and CUIS. The Company recorded
the excess of purchase price over the fair value of assets and liabilities acquired as bargain gain on purchase in the pro forma
consolidated statements of income.
| |
Years
Ended June 30, | |
| |
2012 | | |
2013 | |
| |
| | |
| |
Revenues | |
$ | 40,966,268 | | |
$ | 44,111,682 | |
Cost of revenue | |
| 28,485,785 | | |
| 28,529,338 | |
Gross profit | |
| 12,480,485 | | |
| 15,582,344 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
Selling | |
| 1,046,457 | | |
| 962,958 | |
General
and administrative | |
| 8,056,531 | | |
| 10,172,209 | |
| |
| | | |
| | |
Income (loss) from operations | |
| 3,377,497 | | |
| 4,447,177 | |
| |
| | | |
| | |
Other income (expenses) | |
| | | |
| | |
Interest income | |
| 8,399 | | |
| 83,163 | |
Gain on acquisition of subsidiary | |
| 5,442,523 | | |
| 5,280,042 | |
Other
- net | |
| 477,523 | | |
| 511,609 | |
Total other
income | |
| 5,928,445 | | |
| 5,874,814 | |
| |
| | | |
| | |
Income before income taxes | |
| 9,305,942 | | |
| 10,321,991 | |
Income tax expense (benefit) | |
| 578,067 | | |
| 873,343 | |
| |
| | | |
| | |
Net income | |
| 8,727,875 | | |
| 9,448,648 | |
NOTE 25
- SUBSEQUENT EVENTS
Subsequent
Acquisition
On
February 13, 2015, CUIS and AHFL entered into an acquisition agreement (the “Acquisition Agreement”) with Mr. LI CHWAN
HAU, the selling shareholder of Genius Holdings Financial Limited (the “Selling Shareholder”), a company with limited
liability incorporated under the laws of British Virgin Islands (“GHFL”), to issue 352,166 fully paid and non-assessable
shares of AHFL Common Stock (“AHFL Shares”) together with an granted put option for 352,166 shares of common stock
of CUIS (“Put Option”), in exchange for 704,333 shares of common stock of GHFL, being all of the issued and outstanding
capital stock of GHFL. The Put Option may be exercised within six months of the closing date of the acquisition and the Selling
Shareholder would exchange the AHFL Shares as consideration for the exercise of the Put Option. Subsequent to the acquisition,
GHFL will become a wholly-owned subsidiary of CUIS. GHFL holds 100% issued and outstanding shares of Genius Investment Consultant
Co., Ltd. (“Taiwan Genius”), a limited company incorporated under the laws of Taiwan, which in turn holds approximately
15% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius Broker”), a company limited by shares
incorporated under the laws of Taiwan. Both GHFL and Taiwan Genius have no substantive business operation other than the holding
of shares of its subsidiary. Genius Broker is primarily engaged in broker business across Taiwan. On
February 13, 2015, the acquisition was completed, the Selling Shareholder transferred 100% shares in GHFL to AHFL. The Put Option
has not been exercised by the Selling Shareholder as of March 15, 2015.
Loan Agreement
and Repayment of Loans
In January
2015, the principal amount of loans previously disclosed together with the accrued interests under the loan agreements entered
into by and between AHFL with Ms. Lee Shu-Fen on December 23, 2014 was fully repaid by AHFL.
Discontinued
Operation
As
stated in Note 19, in the fourth quarter of 2014, the shareholders of the Law Management and
Law Agent made the resolution to dissolve Law Management and Law Agent, respectively, because those companies have not been in
operation. The dissolution of Law Agent was approved by the Taiwan (R.O.C) Government on January 13, 2015. Abide by the law in
Taiwan, the liquidator was appointed by the shareholders of the Law Management and Law Agent and the liquidator shall complete
the liquidation process no later than six months from the appointment date. Both Law Management and Law Agent are under the process
of liquidation as of now.
The Company
has evaluated all other subsequent events through the date these consolidated financial statements were issued, and determine
that there were no other subsequent events or transactions, except as stated above, that require recognition or disclosures in
the consolidated financial statements.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM
9A. CONTROLS AND PROCEDURES.
Evaluation
of Disclosure Controls and Procedures
As required
by SEC Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried
out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2014. Based on that evaluation,
our management, including the Chief Executive Officer and Chief Financial Officer, concluded that as of December 31, 2014, our
disclosure controls and procedures were effective to ensure the information required to be disclosed by an issuer in the reports
it files or submits under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms relating to us, and was accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions,
as appropriate, to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of
any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding
of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance
of achieving their control objectives.
Management’s
annual report on internal control over financial reporting
Our management
is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. The internal controls for the Company are provided by executive management's
review and approval of all transactions. Our internal control over financial reporting also includes those policies
and procedures that:
|
(1) |
pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
|
(2) |
provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts
and expenditures are being made only in accordance with the authorization of our management; and |
|
(3) |
provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the
financial statements. |
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management
assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2014. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control-Integrated Framework. Management's assessment included an evaluation of the design of our internal control over
financial reporting and testing of the operational effectiveness of these controls.
Based
on this assessment, management has concluded that as of December 31, 2014, our internal control over financial reporting was effective
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with U.S. generally accepted accounting principles.
This
annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control
over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm
pursuant tothe Company’s status as an emerging growth company undertheJumpstart Our Business Startups Act of 2012.
ITEM
9B. OTHER INFORMATION.
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Executive
Officers and Directors
The following
table sets forth, as of March 15, 2015, the names and ages of our directors and executive officers. The directors will hold such
office until the next annual meeting of shareholders and until his or her successor has been elected and qualified.
Name |
|
Age |
|
Position |
|
|
|
|
|
Mao Yi Hsiao |
|
56 |
|
Director and Chief
Executive Officer |
Li Fu Chang |
|
59 |
|
Director |
Li Chwan Hau |
|
54 |
|
Director |
Chen Kuei Chiao |
|
49 |
|
Director |
Lee Shu Fen |
|
54 |
|
Director |
Chuang Yung Chi |
|
43 |
|
Chief Financial
Officer |
Hsieh Tung Chi |
|
40 |
|
Chief Operating
Officer |
Hsu Wen Yuan |
|
45 |
|
Chief Marketing
Officer |
Chiang Te Yun |
|
37 |
|
Chief Technology
Officer |
Business
Experience
The following
summarizes the occupation and business experience for our officers, directors, key employees and consultants.
Mao Yi Hsiao,
Director and CEO
Mr. Mao has
served as a director of the Company since June 2010. Mr. Mao, with 25 years of insurance industry experience, is the founder of
Taiwan Law Broker Co., Ltd., the biggest insurance broker company in Taiwan. In addition, Mr. Mao has served as a supervisor for
the Company’s Consolidated Affiliated Entity Jiangsu Law since March 2005 to the present, also serves as the chairman of
Law Enterprise, Law Agent and Law Management. He received his Bachelor’s degree from Taiwan Soochow University School of
Law and acquired a Taiwan lawyer's practice certificate. Mr. Mao was selected as a director because of his experience in both
the insurance industry and the Company’s PRC operations.
Li Fu Chang,
Director
Mr. Li has
served as a director of the Company since January 2011. Mr. Li has 30 years of insurance industry experience, including 17 years
in the insurance agency industry. From 1980 to 1992, he worked as a manager for Guohua Life Insurance Co., Ltd. From 1992 to 1993
Mr. Li worked as General Manager for Gongxin insurance brokers Co., Ltd. or KHIB. Mr. Li served as a president to Time Insurance
Brokers Co., Ltd. from 1993 to 2003. Mr. Li served as a consultant to the Company’s affiliated entity Anhou from October
2003 to October 2009 and as the Chairman of Anhou from October 2009 to May 2012. Mr. Li received a Bachelor degree in Mass Communication
from Fu Jen Catholic University. He is one of the primary insurance brokers in Taiwan. Mr. Li was selected as a director because
of his experience in both the insurance industry and the Company’s PRC operations.
Li Chwan
Hau, Director
Mr. Li has
served as a director of the Company since January 2011. Mr. Li has 20 years of insurance industry experience. Mr. Li has served
as a service manager at Taiwan Life Insurance from 1987 to 2000. In addition Mr. Li founded Genius Insurance Brokers Co., Ltd.,
and has served as its Chairman from April 2000 to the present. Mr. Li has also served as Chairman of Genius Financial Consultants
Co., Ltd., a Taiwan company from February 2001 to the present. Mr. Li has served as a director to the Company’s affiliated
entity Sichuan Kangzhuang from 2006 to 2010. He received a M.S. Degree in Actuarial Science in The University of Iowa and acquired
North American actuarial qualification. Mr. Li was selected as a director because of his experience in both the insurance industry
and the Company’s PRC operations.
Chen Kuei
Chiao, Director
Ms. Chen served
as a director of the Company since February 13, 2013. Prior to her appointment as a director of the Company, Ms. Chen served as
store manager for KFC in Taiwan from 1987 to 1996. Ms. Chen has not served in any professional capacity in the past six years.
Ms. Chen graduated from Yongda Technology College with an associate degree in chemical engineering. Ms. Chen was selected as a
director because of her personnel management skills accumulated during her years at KFC.
Lee Shu
Fen, Director
Ms. Lee served
as a director of the Company since December 6, 2013. Ms. Lee has served as the Law Broker’s Chief Executive Officer since
1987. Ms. Lee worked in Nan Shan Life Insurance Company, Ltd. from September 1983 to September 1987. Ms. Lee serves as the Chairman
of the Law Insurance Broker Co., Ltd. from February 2013 to the present. Ms. Lee also serves as the general manager of Law Enterprise
Co., Ltd. from February 2013 to the present. Ms. Lee has 30 years of insurance industry experience. Ms. Lee graduated from the
National Taiwan Ocean University in Taiwan in the year of 1983, where she received a bachelor's degree of Department of Aquaculture.
Chuang Yung
Chi, Chief Financial Officer
Ms. Chuang
has served as the Company’s Chief Financial Officer since July 2012. Ms. Chuang has served as financial manager of Law Insurance
Broker Co., Ltd. in Taiwan for 16 years, where she has been responsible for overall financial management of such company, including
financial and strategic planning, auditing and reporting, and communications to the investors. Prior to her joining Law Insurance
Broker Co., Ltd., Ms. Chuang served as business secretary in Pacific Realtor, Inc. since 1996. Ms. Chuang graduated from the Ming
Chuan University in Taiwan in the year of 2000, where she received a Bachelor degree of risk management and insurance.
Hsieh Tung
Chi, Chief Operating Officer
Mr. Hsieh has
served as the Chief Operating Officer of the Company since January 2011. Mr. Hsieh has served as Chief Operating Officer and Division
Chief of Management of the Company’s Consolidated Affiliated Entity Jiangsu Law from January 2005 to the present. Mr. Hsieh
has worked at First Bank, Head Office, as an Asset Management Specialist in 2000. He has worked at Taiwan Law brokers Co., Ltd.,
Operating Department, as an Administrative Personnel from 2000 to 2001, officer from 2001 to 2002, Assistant Manager in 2003 and
Manager from 2004 to 2005. Mr. Hsieh graduated from the NATIONAL CHUNG HSING University in Taiwan in the year of 1998, where he
received a Bachelor degree of Department of Land Economics & Administration.
Hsu Wen
Yuan, Chief Marketing Officer
Mr. Hsu has
served as the Company’s Chief Marketing Director since January 2011. Mr. Hsu has 17 years of insurance industry experience.
From February 2001 to May 2006, Mr. Hsu served as a Vice Business Executive at Alexander Leed Risks Service Inc., an insurance
brokerage company. From September 2006 to May 2009, Mr. Hsu served as General Manager of KunshanWoma Insurance Agency Co., Ltd.,
an insurance agency company. From June 2009 to the present, Mr. Hus served as General Manager of the Company’s affiliated
entity Sichuan Kangzhuang. Mr. Hsu graduated from Feng Chia University with a major in Risk Management and Insurance.
Chiang Te
Yun, Chief Technology Officer
Mr. Chiang
has served as the Company’s Chief Technology Officer since January 2011. Mr. Chiang graduated from insurance department
of Shih Chien University and has ten years of experience in the insurance industry. From January 2004 to the present, Mr. Chiang
has served as the Manager of the Company’s affiliated entity Jiangsu Law.
Code of
Ethics
We have not
adopted a code of ethics that applies to our officers, employees and directors, including our Chief Executive Officer and senior
executives. However, we plan to adopt one in the future.
Family relationships
Ms. Lee Shu
Fen, a director of the Company designated by the preferred shareholders of the Company, is the spouse of Mr. Mao Yi Hsiao who
is the Chief Executive Officer and a director of the Company. Other than as described above, there are no family relationships
by and between or among the members of the Board or other executives. None of our directors and officers is directors or executive
officers of any company that files reports with the SEC.
Involvement
in certain legal proceedings
No bankruptcy
petition has been filed by or against any business of which any of our executive officers was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to that time.
No director
has been convicted in a criminal proceeding and is not subject to a pending criminal proceeding (excluding traffic violations
and other minor offenses).
No director
has been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business,
securities or banking activities.
No director
has been found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission
to have violated a federal or state securities or commodities law, that has not been reversed, suspended, or vacated.
Audit Committee
and Audit Committee Financial Expert
Our Board of
Directors (“BOD”) functions as an audit committee and performs some of the same functions as an audit committee including:
(1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment
of complaints regarding accounting, internal controls and auditing matters; and (3) engaging outside advisors. We are not a "listed
company" under SEC rules and is therefore not required to have an audit committee comprised of independent directors. Our
BOD has determined that its members do not include a person who is an "audit committee financial expert" within the
meaning of the rules and regulations of the SEC. Our BOD has determined that each of its members is able to read and understand
fundamental financial statements and has substantial business experience that results in that member's financial sophistication.Accordingly,
the BOD believes that each of its members have the sufficient knowledge and experience necessary to fulfill the duties and obligations
that an audit committee would have.
Indemnification
Under Delaware
law and pursuant to our articles of incorporation and bylaws, we may indemnify our officers and directors for various expenses
and damages resulting from their acting in these capacities. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our officers or directors pursuant to those provisions, our counsel has informed us that, in the
opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable.
Section
16(a) Beneficial Ownership Reporting Compliance
The following
officers, directors or beneficial owners of more than 10% of the Company’s common stock failed to file on a timely basis
the reports required by Section 16(a) of the Exchange Act during the years ended December 31, 2013 and December 31, 2014: Chief
Executive Officer Mao Yi Hsiao (Form 3and Form 4), Chief Financial Officer Chuang Yung Chi (Form 3), Chief Operating Officer Hsieh Tung Chi
(Form 3), Chief Marketing Officer Hsu Wen Yuan (Form 3), Chief Technology Officer Chiang Te Yun (Form
3), Directors Li Fu Chang (Form 3), Li Chwan Hau (Form 3), Chen Kuie Chiao (Form
3), and former Chief Executive Officer Lo Chung Mei (Form 3). As of the date of the filing of this annual report, all of the above mentioned reports have been filed with the SEC.
ITEM
11. EXECUTIVE COMPENSATION.
The following
table reflects the compensation paid to our principal executive officer during our fiscal years ended December 31, 2014.
SUMMARY
COMPENSATION TABLE
| |
| | |
| | |
| | |
| | |
| | |
| | |
Nonqualified | | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| | |
Non-Equity | | |
Deferred | | |
| | |
| |
| |
| | |
| | |
| | |
Stock | | |
Option | | |
Incentive Plan | | |
Compensation | | |
All Other | | |
| |
Name and | |
Fiscal | | |
Salary | | |
Bonus | | |
Awards | | |
Awards | | |
Compensation | | |
Earnings | | |
Compensation | | |
Total | |
principal position | |
Year | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Mao Yi Hsiao Chief Executive
Officer | |
| 2014 | | |
$ | 287,482 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 287,482 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Lo Chung Mei | |
| 2014 | | |
$ | 28,755 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | 28,755 | |
Former Chief Executive Officer | |
| 2013 | | |
$ | 26,219 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
$ | 26,219 | |
On August 8, 2014,
Mr. Lo resigned as the Company’s Chief Executive Officer and Mr. Mao was appointed Chief Executive Officer.
In the Fiscal
year ended December 31, 2014, Mr. Mao Yi Hsiao also served as the consultant of Law Broker and president of Law Enterprise and
received all of his compensation from Law Broker and Law Enterprise. In the Fiscal years ended June 30, 2013, the transition period
(from July 1, 2013 to December 31, 2013) and in the Fiscal years ended December 31, 2014, Mr. Lo Chung Mei also served as the
general manager of Anhou and received all of his compensation from Anhou. The above table identifies all compensation received
by the named officer directly or indirectly from the Company, its subsidiaries, and its Consolidated Affiliated Entities.
Outstanding
Equity Awards At Fiscal Year End
None.
Director
Compensation
Our directors
do not currently receive compensation for their service as directors of the Company. Set forth below is the compensation paid
to each of our directors during the fiscal year ended December 31, 2014 for compensation not related to their role as directors.
DIRECTOR
COMPENSATION TABLE
Name | |
Fees
Earned or Paid in Cash ($) | | |
All
Other Compensation ($)(1)(2)(3) | | |
Total
($) | |
Mao Yi Hsiao | |
| | | |
| - | | |
$ | 287,482 | | |
$ | 287,482 | |
Li Fu Chang | |
| | | |
| - | | |
$ | 56,863 | | |
| 56,863 | |
Li Chwan Hau | |
| | | |
| - | | |
| - | | |
| | |
Chen Kuei Chiao Lee Shu Fen | |
| | | |
| - | | |
$ | 171,114 | | |
| 171,114 | |
| (1) | The compensation
in the amount $11,373 was paid to Mr. Mao since he worked as the president of Law Enterprise,
and the remaining amount was paid to Mr. Mao since he worked as the consultant of Law
Broker for the provision of consultation, training and promotion to Law Broker in the
fiscal year ended December 31, 2014. |
| (2) | The compensation
paid to Li Fu Chang since he has worked as a consultant ofthe Company in the fiscal year
ended December 31, 2014. |
| (3) | The compensation
paid to Lee Shu Fen since she has worked as president of Law Broker in the fiscal year
ended December 31, 2014. |
Employment
Agreements
Pursuant to
an employment agreement between Chuang Yung Chi and the Company, dated July 2, 2012 (the “Chuang Agreement”), Ms.
Chuang earns a salary of $2,300 per month to serve as Chief Financial Officer of the Company and will be eligible for other monetary
rewards based on her performance evaluations. The term of the Chuang Agreement is indefinite. Chuang Yung Chi also serves as the
manager of financial department of Law Broker.
Pursuant to
an employment agreement between Law Broker and Chao Hui-Hsien, dated January 7, 2013 (the “Chao Agreement”), Chao
Hui-Hsien serves as General Manager of Law Broker. The term of Chao Agreement is from January 7, 2013 to January 6, 2015. On January
7, 2015, the Chao Agreement was renewed and the term was extended to January 6, 2016, Ms. Chao is entitled to the payment of the
remuneration, calculated as progressive percentage on commissions achieved and subject to the satisfaction of the threshold 13-month
and 25-month persistency ratio. The remuneration is paid each year. Ms. Chao is subject to a non-compete which prohibits her from
competing with Law Broker during the term of the Chao Agreement within the territories of ROC and the PRC. Chao Agreement shall
be terminated upon the expiration. In addition, Ms. Chao and Law Broker may terminate the contract for enumerated reasons listed
in the Chao Agreement.
Pursuant to
an employment agreement between Hsieh Tung Chi and Jiangsu Law, dated December 30, 2009 (the “Hsieh Agreement”), Mr.
Hsieh earns a salary of RMB3,000 ($490) per month to serve as Division Chief of Management. The original term of the Hsieh Agreement
expired on December 29, 2011, with an automatic extension of the Hsieh Agreement if neither party terminates the Hsieh Agreement.
After the expiration date, Mr. Hsieh may terminate the Hsieh Agreement at any time and Jiangsu Law may terminate the contract
with 30 days notice to Mr. Hsieh.
Jiangsu Law
may immediately terminate the Hsieh Agreement under any of the following circumstances: (1) Mr. Hsieh’s failure to meet
the recruitment requirements during the probation period; (2) Mr. Hsieh’s serious violation of the internal disciplines
or rules of Jiangsu Law; (3) Mr. Hsieh’s negligent or intentional act causing significant loss to Jiangsu Law; and (4) criminal
investigation against Mr. Hsieh.
Under any of
the following circumstances, Jiangsu Law may terminate the Hsieh Agreement with at least 30 days advance written notice to Mr.
Hsieh: (1) where Mr. Hsieh fails to perform after medical treatment and recovery from illness or non-work-related injury; (2)
where Mr. Hsieh fails to perform after training or reassignment of work; and (3) no modification to the Hsieh Agreement can be
agreed upon in case of frustration of purposes, where the basis for the original contract have changed substantially and the purposes
of such original contract can no longer be carried out.
Mr. Hsieh may
terminate the Hsieh Agreement with at least 30 days prior notice at any time during the term of the Hsieh Agreement, or may immediately
terminate such labor contract under any of the following circumstances: (1) within the probation period; (2) where Mr. Hsieh is
illegally forced to work under violence, intimidation or illegal restriction of personal freedom; or (3) upon employer’s
failure to make remuneration payment or to provide appropriate working conditions.
Pursuant to
an employment agreement between Hsu Wen Yuan and Sichuan Kangzhuang, dated October 1, 2010 (the “Hsu Agreement”),
Mr. Hsu earns a salary of RMB13,000 ($2,124) per month to serve as General Manager of Marketing for Sichuan Kangzhuang, the Hsu
Agreement is not a fixed term employment agreement, it has no expiration date. The Hsu Agreement also provides for reimbursement
of four trips by Mr. Hsu to Taiwan per year, an official car and gas subsidy, 20 days paid vacation, and reimbursement for business
related travel and expenses. The Hsu Agreement initially provided for the performance targets with the total first year premium,
or FYP, in 2011 must reach RMB10,000,000 ($1,566,661). Though Mr. Hsu failed to achieve the performance target, considering depressing
general business environment as well as the extensive managerial experience of Mr. Hsu, Sichuan Kangzhuang continued the employment
relationship with Mr. Hsu. Considering the slow-down of general economic environment in China, no FYP target has been set for
the calendar year of 2012 and 2013. Mr. Hsu is subject to a non-compete which prohibits him from competing with Sichuan Kangzhuang
during the term of the Hsu Agreement and for two years following the termination of his employment with Sichuan Kangzhuang. If
Mr. Hsu violates the non-compete provisions of the Hsu Agreement, he is subject to a penalty fee of RMB100,000 ($16,340). Either
party may terminate the Hsu Agreement prior to the expiration date of the agreement if such party (i) provides the non- terminating
party 30 days notice and (ii) pays the non-terminating party RMB100,000 ($16,340). In addition, Mr. Hsu and Sichuan Kangzhuang
may terminate the contract for enumerated reasons listed in the Hsu Agreement without payment of the termination fee.
Pursuant to
an employment agreement between Jiangsu Law and Chiang Te Yun, dated December 30, 2009 (the “Chiang Agreement”), Mr.
Chiang earns a salary of RMB2,250 ($352) per month to serve as Manager of Jiangsu Law. The original term of the Chiang Agreement
expires on December 29, 2011, with an automatic extension of the Chiang Agreement if neither party terminates the Chiang Agreement.
After the expiration date Mr. Chiang may terminate the Chiang Agreement at any time and Jiangsu Law may terminate the contract
with 30 days notice to Mr. Chiang. Prior to the expiration date, the Chiang Agreement may be terminated by either party subject
to applicable PRC labor laws and regulations, among which:
Jiangsu Law
may immediately terminate the Chiang Agreement under any of the following circumstances: (1) Mr. Chiang’s failure to meet
the recruitment requirements during the probation period; (2) Mr. Chiang’s serious violation of the internal disciplines
or rules of Jiangsu Law; (3) Mr. Chiang’s negligent or intentional act causing significant loss to Jiangsu Law; and (4)
criminal investigation against Mr. Chiang.
Under any of
the following circumstances, Jiangsu Law may terminate the Chiang Agreement with at least 30 days advance written notice to Mr.
Chiang: (1) where Mr. Chiang fails to perform after medical treatment and recovery from illness or non-work-related injury; (2)
where Mr. Chiang fails to perform after training or reassignment of work; and (3) no modification to the Chiang Agreement can
be agreed upon in case of frustration of purposes, where the basis for the original contract have changed substantially and the
purposes of such original contract can no longer be carried out.
Mr. Chiang
may terminate the Chiang Agreement with at least 30 days prior notice at any time during the term of the Chiang Agreement, or
may immediately terminate such labor contract under any of the following circumstances: (1) within the probation period; (2) where
Mr. Chiang is illegally forced to work under violence, intimidation or illegal restriction of personal freedom; or (3) upon employer’s
failure to make remuneration payment or to provide appropriate working conditions.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following
table sets forth information, as of March 15, 2015, concerning, except as indicated by the footnotes below:
|
· |
Each person whom we know beneficially owns more
than 5% of our common stock or Series A Preferred Stock. |
|
· |
Each of our directors. |
|
· |
Each of our named executive officers (see the
section titled “Executive Compensation”). |
|
· |
All of our directors and executive officers as
a group. |
Unless otherwise
noted below, the address of each of the persons set forth below is in care of China United Insurance Service, Inc., 7F, No. 311
Section 3, Nan-King East Road, Taipei City, Taiwan.
We have determined
beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on
the information furnished to us, that the persons and entities named in the table below have sole voting and investment power
with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.
Applicable
percentage ownership is based on 29,100,503 shares of common stock and 1,000,000 shares of Series A Preferred Stock outstanding
at March 15, 2015. Beneficial ownership representing less than 1% is denoted with an asterisk (*).
The information
provided in the table is based on our records, information filed with the SEC, and information provided to us, except where otherwise
noted.
|
|
|
|
|
Shares |
|
|
Beneficially |
|
|
Owned
Preferred |
|
|
% Total |
|
|
|
Common |
|
|
Stock |
|
|
Series A |
|
|
Stock |
|
|
Voting Power |
|
Name |
|
Shares |
|
|
% |
|
|
Shares |
|
|
% |
|
|
(1) |
|
Executive Officers and Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mao Yi Hsiao |
|
|
4,640,234 |
(2) |
|
|
15.9 |
|
|
|
1,000,000 |
|
|
|
100 |
|
|
|
37.4 |
|
Lee Shu Fen |
|
|
4,640,234 |
(2) |
|
|
15.9 |
|
|
|
1,000,000 |
|
|
|
100 |
|
|
|
37.4 |
|
Li Fu Chang |
|
|
800,000 |
|
|
|
2.7 |
|
|
|
- |
|
|
|
- |
|
|
|
2.0 |
|
Li Chwan Hau |
|
|
1,000,000 |
|
|
|
3.4 |
|
|
|
- |
|
|
|
- |
|
|
|
2.6 |
|
Chen Kuei Chiao |
|
|
0 |
|
|
|
0 |
|
|
|
- |
|
|
|
- |
|
|
|
0 |
|
All executive officers and directors as a group (5 persons) |
|
|
6,440,234 |
|
|
|
22.1 |
|
|
|
1,000,000 |
|
|
|
100 |
|
|
|
42 |
|
Other 5% Beneficial Owners |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Able Capital Holdings Co., Ltd. |
|
|
1,648,700 |
|
|
|
5.67 |
|
|
|
- |
|
|
|
- |
|
|
|
4.2 |
|
(1)
Percentage total voting power represents voting power with respect to all shares of our common stock and Series A Preferred Stock,
voting together as a single class. Each holder of common stock is entitled to one vote per share of common stock and each holder
of Series A Preferred Stock is entitled to 10 votes per share of Series A Preferred Stock on all matters submitted to our stockholders
for a vote.
(2)
Includes 200,000 shares of common stock held by Lee Shu Fen, Mao Yi Hsiao’s spouse, 200,000 shares of common stock held
by Mao Li Chieh, Mao Yi Hsiao’s daughter, 969,322 shares of common stock held by U-Li Investment Consulting Enterprise Co.,
Ltd. and 100,000 shares of common stock held by U-Link International CO LTD, Mao Yi Hsiao and Lee Shu Fee hold 34% and 66%
shares of U-Li Investment Consulting Enterprise Co., Ltd. respectively and U-Link International CO LTD is solely owned by Lee
Shu Fen, Mao Yi Hsiao’s spouse.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Related
Party Loans
The related
parties below loaned money to the Company for working capital. As of the dates below, the following amounts were due to the related
parties.
| |
June 30, | | |
June 30, | | |
December
31, | | |
December
31, | |
| |
2012 | | |
2013 | | |
2013 | | |
2014 | |
Due to Mr. Mao (Shareholder of China
United) | |
$ | 1,871 | | |
$ | 71,487 | | |
$ | 117,471 | | |
$ | 214,165 | |
Due to Ms. Zhu | |
| 441,272 | | |
| 1,099,331 | | |
| - | | |
| - | |
Due to Mr. Zhu (Legal representative of Jiangsu Law) | |
| 2,139 | | |
| - | | |
| 2,265 | | |
| 2,255 | |
Due to Mrs. Lee (Director
of China United) | |
| - | | |
| 566,478 | | |
| 35,062 | | |
| 315,027 | |
Total | |
$ | 445,332 | | |
| 1,737,296 | | |
$ | 154,798 | | |
$ | 531,447 | |
The term for
the loan from Mrs. Lee is from December 23, 2014 to December 22, 2015 with a fixed interest rate at 1.5%. The borrowing from other
related parties are interest-free, unsecured and repayable on demand.
During the six
months ended December 31, 2013, Mr. Mao paid $54,679 on behalf of the Company for the operating expense and registered capital
of AHFL’s Taiwan branch.
During the
six months ended December 31, 2013, the company repaid Mrs. Lee $564,608 and Ms. Zhu ShuQin $1,104,230.
During the year
ended December 31, 2014, the Company borrowed $314,644 from Mrs. Lee and $96,694 from Mr. Mao.
In January
2015, the principal amount of loans from Mrs. Lee was fully repaid by the Company.
VIE Agreements
On January
17, 2011, CU WFOE and Anhou and Anhou Original Shareholders entered into a series of agreements known as variable interest agreements
(the “Old VIE Agreements”) pursuant to which CU WFOE has executed effective control over Anhou through these contractual
arrangements. As a result of the capital increase and the share transfer described above, on October 24, 2013, CU WFOE, Anhou
and Anhou Existing Shareholders entered into a series of variable interest agreements (the “VIE Agreements”), including
Power of Attorneys, Exclusive Option Agreements, Share Pledge Agreements, in the same form as the previous Old VIE Agreements,
other than the shareholder names and their respective shareholdings. The Old VIE Agreements were terminated by and among CU WFOE,
Anhou and Anhou Original Shareholders on the same date. The Exclusive Business Cooperation Agreement executed by and between CU
WFOE and Anhou on January 17, 2011 remains in full effect. The VIE Agreements now in effect included:
(1) An Exclusive
Business Cooperation Agreement through which CU WFOE is appointed the exclusive services provider to provide Anhou with complete
technical support, business support and related consulting services (as described in the agreement) in exchange for 90% of the
net profits (as defined in the agreement) of Anhou. The agreement does not provide that CU WFOE is responsible for the debts of
the Consolidated Affiliated Entities. The term of the Exclusive Business Cooperation Agreement began on January 17, 2011 and lasts
ten years, unless earlier terminated as provide in the agreement. The term of the agreement may be extended at CU WFOE’s
discretion prior to the expiration thereof. CU WFOE may terminate the agreement at any time with 30 days’ written notice
but Anhou may only terminate the agreement if CU WFOE commits gross negligence or a fraudulent act against Anhou;
(2) a Power
of Attorney under which the shareholders of Anhou have vested their collective voting control over Anhou to CU WFOE;
(3) an Option
Agreement under which the shareholders of Anhou have granted to CU WFOE the irrevocable right and option to acquire all of their
equity interests in Anhou, subject to applicable PRC laws and regulations. The term of the Option Agreement began on October 24,
2013 and lasts ten years, but may be renewed at CU WFOE’s election; and
(4) a Share
Pledge Agreement under which the owners of Anhou have pledged all of their equity interests in Anhou to CU WFOE to guarantee Anhou’s
performance of its obligations under the Exclusive Business Cooperation Agreement.
The foregoing
description of the terms of the Exclusive Business Cooperation Agreement, the Power of Attorney, the Option Agreement and the
Share Pledge Agreement is qualified in its entirety by reference to the provisions of the agreements filed as Exhibits 10.2 and
10.55-10.57 to this report which are incorporated by reference herein.
Anhou owns
100% equity interest in both Sichuan Kangzhuang and Jiangsu Law. The shareholders of Anhou are Hu Changrong (20%), Wang Yanyan
(20%), Chen Zhaohui (20%), Yue Jing (15%), HouWeizhe (10%), Zhang Yong (9%) and Chen Li (6%).All of these shareholders are PRC
citizens and none of them holds any shares in the Company. Pursuant to the VIE Agreements, CU WFOE becomes the primary beneficiary
of Anhou and only leaves Anhou shareholders nominal value therein. Please refer to the chart below for detailed information on
any of the Company’s shareholders being a director or officer of the Company, the Company’s subsidiaries or our Consolidated
Affiliated Entities.
Name |
|
Position in the
Company |
|
Position
in
AHFL |
|
Position in
Law
Enterprise |
|
Position in
Law
Broker |
|
Position in
Law Agent |
|
Position in Law
Management |
|
Position
in
GHFL |
Position
in
Taiwan
Genius |
Position in
CU Hong
Kong |
|
Position in CU
WFOE |
|
Position in
Anhou |
|
Position in
Jiangsu Law |
Mao Yi Hsiao |
|
Director
Chief
Executive Officer |
|
Director |
|
Director |
|
|
|
Director |
|
Director |
|
|
|
General Manager and Chairman |
|
General Manager and Chairman |
|
|
|
Supervisor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Li ChwanHau |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
Director |
Director |
|
|
|
|
|
|
|
Li Fu Chang |
|
Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chen KueiChiao |
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Director |
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Chuang Yung Chi |
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Chief Financial Officer |
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Manager of Financial Department |
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Hsieh Tung Chi |
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Chief Operating Officer |
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Division Chief of Management |
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Chiang Te Yun |
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Chief Technology Officer |
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Manager |
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Chao HuiHsien |
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Director |
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General Manager |
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Director |
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Vice-General Manager |
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Lee Shu Fen |
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Director |
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General Manager |
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Director |
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Tu Wen Ti |
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Senior Assistant General Manager |
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Shen Wen Che |
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Senior Assistant General Manager |
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Reclassification
of Certain Common Stock into Preferred Shares
On July 2,
2012, the BOD and stockholders of the Company approved, in connection with a reclassification of 1,000,000 issued and outstanding
shares of common stock (the “Reclassified Shares”), par value $0.00001 per share held by Mao Yi Hsiao (“Mr.
Mao”) into 1,000,000 shares of Series A Convertible Preferred Stock, par value $0.00001 per share (the “Series A Preferred
Stock”) on a share-for-share basis (the “Reclassification”), the issuance of 1,000,000 shares of Series A Preferred
Stock to Mr. Mao and cancellation of 1,000,000 common stock held and submitted by Mr. Mao pursuant to the Reclassification. All
of the 1,000,000 shares of Series A Preferred Stock are reclassified from the 1,000,000 common stock held by Mr. Mao and no additional
consideration has been paid by Mr. Mao in connection with the Reclassification. Each holder of common stock shall be entitled
to one vote for each share of common stock held of record by such holder as of the applicable record date on any matter that is
submitted to a vote of the stockholders of the Company; while each holder of Series A Preferred Stock shall be entitled to ten
votes for each share of Series A Preferred Stock held of record by such holder as of the applicable record date on any matter
that is submitted to a vote of the stockholders of the Company.
Immediately
prior to the Reclassification, the Common Stock beneficially owned by Mr. Mao, a director of the Company, represents 17.91% of
the voting power of all of the Company’s voting power; immediately subsequent to the Reclassification, the Common Stock
and the Series A Preferred Stock represents approximately 43.3% of the combined voting power of all of the Company’s voting
stock.
Acquisition
of AHFL
On August 24,
2012, the BOD and the shareholders of the Company have, through unanimous consent, approved the acquisition of all of the issued
and outstanding shares of Action Holdings Financial Limited (“AHFL”), a LLC incorporated under the laws of British
Virgin Islands on April 30, 2012, together with its subsidiaries in Taiwan. Subsequent to the acquisition, AHFL becomes a 100%
subsidiary of the Company.
Pursuant to
the provisions of the Acquisition Agreement and in exchange for all of the issued and outstanding shares of AHFL, the Company
will (i) issue eight million shares of common stock of the Company to the shareholders of AHFL; (ii) issue two million shares
of common stock of the Company to certain employees of Law Broker; (iii) create an employee stock option pool, consisting of available
options, exercisable for up to two million shares of common stock of the Company; and (iv) pay NT$15 million ($500,815) and NT$7.5
million ($250,095) in cash in two installments, subject to terms and conditions therein.
On March 14,
2013, the Company and the selling shareholders of AHFL entered into an Amendment to the Acquisition Agreement (the “Amendment”),
pursuant to which, (i) the cash payment deadline as set forth in the Acquisition Agreement has been extended from March 31, 2013
to March 31, 2015 or at any other time or in any other manner otherwise agreed upon by and among the Company and the selling shareholders
of AHFL; and (ii) in lieu of the 2 million employee stock option pool described in the Acquisition Agreement, the Company agrees
to use its best efforts, as soon as practically possible, to create an employee stock pool consisting of up to 4 million shares
of CUIS common stock, among which 2 million shares shall be solely granted to employees of Law Broker, and the remaining 2 million
shares to be granted to employees of affiliated entities of the Company (including Law Broker employees).
On March 13,
2015, the Company and the selling shareholders of AHFL entered into a second Amendment to the Acquisition Agreement (the “Second
Amendment”), pursuant to which, the cash payment deadline as set forth in the Acquisition Agreement has been extended from
March 31, 2013 to March 31, 2016 or at any other time or in any other manner otherwise agreed upon by and among the Company and
the selling shareholders of AHFL.
AHFL holds
65.95% of the issued and outstanding shares of Law Enterprise Co., Ltd. (“Law Enterprise”), a company limited by shares
incorporated under the laws of Taiwan on January 30, 1996. Law Enterprise holds (i) 100% Law Insurance Broker Co., Ltd. (“Law
Broker”), a company limited by shares incorporated in Taiwan on October 9, 1992; (ii) 97.84% of Law Risk Management &
Consultant Co., Ltd. (“Law Management”), a company limited by shares incorporated in Taiwan on December 5, 1987; and
(iii) 96% of Law Insurance Agent Co., Ltd. (“Law Agent”), a LLC incorporated in Taiwan on June 3, 2000.
Law Enterprise
acts as a holding company of its operating subsidiaries in Taiwan. Law Broker primarily engages in insurance brokerage and insurance
agency service business across Taiwan, while Law Management and Law Agent are not in active operation. We operate our Taiwan business
primarily through Law Broker.
In the fourth
quarter of 2014, the shareholders of the Law Management and Law Agent made the resolution to dissolve Law Management and Law Agent,
respectively, because those companies have not been in operation. The dissolution of Law Management and Law Agent was approved
by the Taiwan Government on November 26, 2014 and on January 13, 2015, respectively. In accordance with the law in Taiwan, the
liquidator was appointed by the shareholders of the Law Management and Law Agent and the liquidator shall complete the liquidation
process no later than six months from the appointment date. Both Law Management and Law Agent are under the process of liquidation.
As of the date
immediately prior to the consummation of the acquisition, certain shareholders of AHFL, including Mao Yi Hsiao, are also significant
shareholders of the Company: (i) Mao Yi Hsiao, together with Lee Shu Fen (his wife) and Mao Li Chieh (his daughter), own 17.9%
of the outstanding shares of the Company and 24.3% of the outstanding shares of AHFL. Mao Yi Hsiao, one of the directors of the
Company, also acts as the sole director of AHFL and the board chairman of Law Enterprise, Law Management and Law Agent, and as
the supervisor of Jiangsu Law Broker Co., Ltd. In addition, Lee Shu Fen also acts as general manager of Law Enterprise and the
board chairman of Law Broker; (ii) Chao HuiHsien, a shareholder of AHFL and Law Agent, is also a shareholder of the Company. In
addition, Chao HuiHsien also acts as general manager of Law Broker and director of Law Enterprise and Law Agent; (iii) Chuang
Yung Chi, a shareholder of AHFL, is also a shareholder and Chief Financial Officer of the Company; (iv) Hsieh Tung Chi, a shareholder
of AHFL, is also a shareholder of the Company. In addition, Hsieh Tung Chi acts as the Chief Operating Officer of the Company;
(v) Tu Wen Ti, a shareholder of AHFL, is also a shareholder of the Company. In addition, Tu Wen Ti acts as the assistant general
manager of Law Broker; and (vi) Shen Wen Che, a shareholder of AHFL, is also a shareholder of the Company. In addition, Shen Wen
Che acts as the assistant general manager of Law Broker.
Subsequent
to the closing of the acquisition, Mao Yi Hsiao holds 100% of the Company’s outstanding preferred shares, and holds, together
with his affiliates, 15.6% of the Company’s outstanding common shares, and 37.2% of the voting power of the Company.
Intercompany
Loan and Loans to Unrelated Third Parties
On June 9,
2013, Action Holdings Financial Limited (“AHFL”), a wholly-owned British Virgin Islands subsidiary of China United
Insurance Service, Inc. (the “Company” or “CUIS”), entered into a Loan Agreement (the “Company Loan
Agreement”) with ZLI Holdings Limited, a wholly-owned Hong Kong subsidiary of CUIS (the “HK Company”).
Under the Company
Loan Agreement, AHFL agreed to provide a loan to the HK Company with the principal amount equal to the US Dollar equivalent of
RMB 40,000,000 ($6,532,716). The term for such was ten (10) years which could be extended upon the agreement of the parties. The
amount of such loan was remitted to the account of the HK Company on August 30, 2013.
In August 2013,
the HK Company entered into several Loan Agreements (collectively, the “Investor Loan Agreements”) with the following
unrelated parties: Able Capital Holding Co., Ltd., a limited liability company established and registered in Hong Kong, Mr. Chen
Li (“Mr.Chen”) and Ms. Yue Jing (Ms. Yue”), both PRC citizens (collectively, the “Investor Borrowers”).
Under the Investor
Loan Agreements, the Investor Borrowers loaned cash from the HK Company for their investment in Henan Law Anhou Insurance Agency
Co., Ltd. (“Anhou”) and the HK Company agreed to provide certain loans to each of the Investor Borrowers with an aggregate
principal amount equal to the US Dollar equivalent of RMB40,000,000 ($6,532,716). The term for such loans was ten (10) years which
could be extended upon the agreement of the parties. Pursuant to the Investor Loan Agreements, each of the Investor Borrowers
covenants to enter into certain Variable Interest Entities Agreements with Anhou, Zhengzhou ZhonglianHengfu Business Consulting
Co., Ltd. (the “WFOE”) and certain existing shareholders of Anhou. The proceeds received from the said loans by the
Investor Borrowers shall be solely used to increase the registered capital of Anhou, and the HK Company may determine the repayment
methods including transferring of the Investor Borrowers’ corresponding registered capital in Anhou or through other manner
as full payment of the loans subject to terms and conditions therein in the event that the Investor Borrowers fails to repay the
loan in currency to the HK Company.
The specific
amounts loaned to the Investor Borrowers were as follows:
Able: RMB29,500,000
($4,817,896)
Mr. Chen: RMB3,000,000
($489,949)
Ms. Yue: RMB7,500,000
($1,224,871)
Recent development
of relevant laws and background of the loans
On April 27,
2013, the China Insurance Regulatory Commission (“CIRC”) issued the Decision on Revising the Provisions of the Supervision
and Administration of Specialized Insurance Agencies (the “Decision on Revising the Agency Provisions”), pursuant
to which, CIRC has mandated any insurance agency established subsequent to the Decision on Revising the Agency Provisions to meet
a minimum registered capital requirement of RMB50 million ($8,165,895). On May 16, 2013, CIRC issued Notice for Further Clarification
on Related Issues of Access to Professional Insurance Intermediary Market (the “Notice”), pursuant to which, professional
insurance agencies established prior to the issuance of the Decision on Revising the Agency Provisions, with registered capital
less than RMB50 million ($8,165,895), can continue to operate their existing business within the provinces where they have a registered
office or branch office, but shall not set up any new branches in any provinces where they do not have a registered office or
a branch office.
On September
26, 2013, several new PRC individual investors, namely Wang Yanyan, Chen Zhaohui, Yue Jing, HouWeizhe, Zhang Yong, Chen Li (“Anhou
New Investors”) and the original shareholders of Anhou, namely, Zhu Shuqin, Wei Qun, Fang Qunlei and Chen Yanxia (“Anhou
Original Shareholders”) entered into a shareholders resolution of Anhou (the “Capital Increase Resolution”),
pursuant to which, Anhou Original Shareholders and Anhou New Investors agreed to increase the registered capital of Anhou to RMB50
million ($8,165,895), among which, Wang Yanyan would invest RMB10 million ($1,633,179), accounting for 20%, Chen Zhaohui would
invest RMB10 million ($1,633,179), accounting for 20%, Yue Jing would invest RMB7.5 million ($1,224,871), accounting for 15%,
HouWeizhe would invest RMB5 million ($816,589), accounting for 10%, Zhang Yong would invest RMB4.5 million ($734,930), accounting
for 9%, and Chen Li would invest RMB3 million ($489,949), accounting for 6%, of the registered capital of Anhou.
Due to PRC
legal restrictions on foreign ownership and investment in the insurance agency businesses in China, particularly those based on
qualifications as well as capital requirements of the investors, Able Capital Holding Co., Ltd., a limited liability company established
and registered in Hong Kong, delegated four PRC individuals, namely Wang Yanyan, Chen Zhaohui, HouWeizhe and Zhang Yong, to invest
in Anhou on its behalf.
On October
24, 2013, Anhou completed the registration with local Administration Industry and Commerce (“AIC”) on the above-mentioned
capital increase. The new business license was issued to Anhou on October 25, 2013.
On October
24, 2013, Anhou Original Shareholders entered into share transfer agreements (the “Share Transfer Agreements”) with
Hu Changrong, a PRC citizen (“Mr. Hu” together with Anhou New Investors, “Anhou Existing Shareholders”),
respectively. Under the Share Transfer Agreements, Anhou Original Shareholders transferred all of their equity interests in Anhou
to Mr. Hu for an aggregate transfer price of RMB10 million ($1,633,178). Mr. Hu is currently the legal representative and the
sole director of Anhou.
On October
24, 2013, Anhou completed the share transfer registration with the local AIC. At the end of October 2013, Anhou completed its
filing with Local CIRC with respect to its previously-conducted share transfer and capital increase.
As a result
of the capital increase and the share transfer described above, on October 24, 2013, CU WFOE, Anhou and Anhou Existing Shareholders
entered into a series of variable interest agreements (the “VIE Agreements”), including Power of Attorneys, Exclusive
Option Agreements, Share Pledge Agreements, in the same form as the previous Old VIE Agreements, other than the shareholder names
and their respective shareholdings. The Old VIE Agreements were terminated by and among CU WFOE, Anhou and Anhou Original Shareholders
on the same date. The Exclusive Business Cooperation Agreement executed by and between CU WFOE and Anhou on January 17, 2011 remains
in full effect.
Insider
Transactions Policies and Procedures
The Company
does not currently have an insider transaction policy.
Director
Independence
All of the
Company’s directors except Mr. Mao and Ms. Lee are “independent directors” as defined by the NYSE Amex Stock
Exchange.
ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Goldman Kurland
and Mohidin LLP (“GKM”) has served as our independent auditors for the fiscal years ended June 30, 2013 and 2012.
During the fiscal years ended June 30, 2013 and 2012, fees for services billed by GKM were as follows:
| |
2013 | | |
2012 | |
Audit fees(1) | |
$ | 336,970 | | |
$ | 146,833 | |
Audit-related fees | |
| - | | |
| - | |
Tax fees(2) | |
| - | | |
| - | |
All other fees | |
| - | | |
| - | |
Total | |
$ | 336,970 | | |
$ | 146,833 | |
(1)
Consists of fees billed for the audit of our annual financial statements, review of financial statements included in our Quarterly
Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings
or engagements.
(2)
“Tax Fees” consisted of fees billed for professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning.
Simon &
Edward LLP (“Simon & Edward”) has served as our independent auditors for the transitional period from July 1,
2013 to December 31, 2013 and for the year ended December 31, 2014. During the periods, fees for services billed by Simon &
Edward were as follows:
| |
2014 | | |
Transition
Period | |
Audit fees(1) | |
$ | 275,500 | | |
$ | 127,500 | |
Audit-related fees(2) | |
| 6,828 | | |
| - | |
Tax fees(3) | |
| 20,000 | | |
| - | |
All other fees | |
| | | |
| - | |
Total | |
$ | 284,328 | | |
$ | 127,500 | |
(1)
Consists of fees billed for the audit of our transition financial statements, and services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements.
(2)
Consists of fees billed for all out-of-pocket expenses associated with performing audit and review services.
(3)
“Tax Fees” consisted of fees billed for professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning.
Pre-Approval
Policies and Procedures
Under
the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our
Board to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and
procedures, our Board pre-approved the audit service performed by Simon & Edward for our consolidated financial statements
as of December 31, 2014 and for the transitional period from July 1, 2013 to December 31, 2013.
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) Index of Financial Statements: |
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(1) |
The financial statements required by Item 15(a) are
filed in Item 8 of this AnnualReport on Form 10-K. |
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(2) |
Schedules required by Item 15(a) are omitted because
they are not required, are not applicable or the information is included in the consolidated financial statements or notes thereto. |
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(b) Index of Exhibits: |
Exhibit |
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Number |
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Description of Exhibit |
2.1 |
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Acquisition Agreement dated August 24, 2012 between
the Company and the shareholders of Action Holdings Financial Limited (incorporated by reference to Exhibit 2.1 to the Form
8-K filed with the SEC on August 24, 2012) |
2.2 |
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Amendment to Acquisition Agreement, between the Company
and the shareholders of Action Holdings Financial Limited, effective March 14, 2013 (incorporated by reference to Exhibit
10.1 to the Form 8-K filed with the SEC on March 14, 2013) |
2.3 |
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Second Amendment to Acquisition Agreement, between
the Company and the shareholders of Action Holdings Financial Limited, effective March 13, 2015. |
2.4 |
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Acquisition Agreement dated February 13, 2015, between
the Company, AHFL and Li ChwanHau. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC
on February 18, 2015) |
3.1 |
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Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the Form 8-K filed with the SEC on July 3, 2012) |
3.2 |
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Amended and Restated Bylaws (incorporated
by reference to Exhibit 3.2 to the Form 8-K filed with the SEC on July 3, 2012) |
4.1 |
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Certificate of Designation of Series A Preferred
Stock (incorporated by reference to Exhibit 4.1 to the Form 8-K filed with the SEC on July 3, 2012) |
10.1 |
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Stock Purchase Agreement, dated January 17, 2011
(incorporated by reference to Exhibit 10.1 to the Form S-1 filed with the SEC on May 13, 2011) |
10.2 |
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Exclusive Business Cooperation Agreement, dated January
17, 2011 (incorporated by reference to Exhibit 10.2 to the Form S-1 filed with the SEC on May 13, 2011) |
10.3 |
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Share Pledge Agreement, dated January 17, 2011 -
Zhu Shuqin (incorporated by reference to Exhibit 10.3 to the Form S-1 filed with the SEC on May 13, 2011) |
10.4 |
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Share Pledge Agreement, dated January 17, 2011 –
Wei Qun (incorporated by reference to Exhibit 10.4 to the Form S-1 filed with the SEC on May 13, 2011) |
10.5 |
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Share Pledge Agreement, dated January 17, 2011 –
Fang Qunlei (incorporated by reference to Exhibit 10.5 to the Form S-1 filed with the SEC on May 13, 2011) |
10.6 |
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Share Pledge Agreement, dated January 17, 2011 –
Chen Yanxia (incorporated by reference to Exhibit 10.6 to the Form S-1 filed with the SEC on May 13, 2011) |
10.7 |
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Power of Attorney, dated January 17, 2011 –
Zhu Shuqin (incorporated by reference to Exhibit 10.7 to the Form S-1 filed with the SEC on May 13, 2011) |
10.8 |
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Power of Attorney, dated January 17, 2011 –
Wei Qun (incorporated by reference to Exhibit 10.8 to the Form S-1 filed with the SEC on May 13, 2011) |
10.9 |
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Power of Attorney, dated January 17, 2011 –
Fang Qunlei (incorporated by reference to Exhibit 10.9 to the Form S-1 filed with the SEC on May 13, 2011) |
10.10 |
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Power of Attorney, dated January 17, 2011 –
Chen Yanxia (incorporated by reference to Exhibit 10.10 to the Form S-1 filed with the SEC on May 13, 2011) |
10.11 |
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Exclusive Option Agreement, dated January 17, 2011
– Zhu Shuqin (incorporated by reference to Exhibit 10.11 to the Form S-1 filed with the SEC on May 13, 2011) |
10.12 |
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Exclusive Option Agreement, dated January 17, 2011
– Wei Qun (incorporated by reference to Exhibit 10.12 to the Form S-1 filed with the SEC on May 13, 2011) |
10.13 |
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Exclusive Option Agreement, dated January
17, 2011 – Fang Qunlei (incorporated by reference to Exhibit 10.13 to the Form S-1 filed with the SEC on May 13, 2011) |
10.14 |
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Exclusive Option Agreement, dated January 17, 2011
– Chen Yanxia (incorporated by reference to Exhibit 10.14 to the Form S-1 filed with the SEC on May 13, 2011) |
10.15 |
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Sichuan Kangzhuang Share Transfer Agreement, between
Anhou and Allianz China Life Insurance Company Limited, dated September 6, 2010 (incorporated by reference to Exhibit
10.15 to the Form S-1 filed with the SEC on May 13, 2011) |
10.16 |
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Sichuan Kangzhuang Share Transfer Agreement, between
Anhou and Chengdu Jingzhan Enterprise Management & Consulting Company Limited, dated September 6, 2010 (incorporated
by reference to Exhibit 10.16 to the Form S-1 filed with the SEC on May 13, 2011) |
10.17 |
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Sichuan Kangzhuang Share Transfer Agreement, between
Anhou and Li Dan, dated September 6, 2010 (incorporated by reference to Exhibit 10.17 to the Form S-1 filed with the
SEC on May 13, 2011) |
10.18 |
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Sichuan Kangzhuang Share Transfer Agreement, between
Anhou and Yan Fang, dated September 6, 2010 (incorporated by reference to Exhibit 10.18 to the Form S-1 filed with the
SEC on May 13, 2011) |
10.19 |
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Jiangsu Law Share Transfer Agreement, between Anhou
and Liu Jianxin, dated September 28, 2010 (incorporated by reference to Exhibit 10.19 to the Form S-1 filed with the
SEC on May 13, 2011) |
10.20 |
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Jiangsu Law Share Transfer Agreement, between Anhou
and Zhu Xudong, dated September 28, 2010 (incorporated by reference to Exhibit 10.20 to the Form S-1 filed with the SEC
on May 13, 2011) |
10.21 |
|
Jiangsu Law Share Transfer Agreement, between Anhou
and Zhu Xumin, dated September 28, 2010 (incorporated by reference to Exhibit 10.21 to the Form S-1 filed with
the SEC on May 13, 2011) |
10.22 |
|
Translation of Insurance Agency Contract with Taiping
Life Insurance Co., Ltd,, dated November 5, 2003 (incorporated by reference to Exhibit 10.22 to the Form S-1 filed with
the SEC on May 13, 2011) |
10.23 |
|
Translation of Legal Representative Agreement with
Li Fu Chang, dated January 1, 2011 (incorporated by reference to Exhibit 10.23 to the Form S-1/A filed with the SEC on November
14, 2011) |
10.24 |
|
Translation of Employment Agreement with Lo Chung
Mei, dated January 1, 2013 (Incorporated by reference to Exhibit 10.24 to the Form 10-K filed with the SEC on September 30,
2013) |
10.25 |
|
Translation of Employment Agreement with Chiang Te
Yun, dated December 30, 2009 (incorporated by reference to Exhibit 10.25 to the Form S-1 filed with the SEC on May 13,
2011) |
10.26 |
|
Translation of Employment Agreement with Hsu Wen
Yuan, dated October 1, 2010 (incorporated by reference to Exhibit 10.26 to the Form S-1/A filed with the SEC on October 28,
2011) |
10.27 |
|
Translation of Employment Agreement with
Tsai Shiu Fang, dated January 1, 2011 (incorporated by reference to Exhibit 10.27 to the Form S-1/A filed with
the SEC on October 28, 2011) |
10.28 |
|
Translation of Employment Agreement with Hsieh Tung
Chi, dated December 30, 2009 (incorporated by reference to Exhibit 10.28 to the Form S-1 filed with the SEC on May 13,
2011) |
10.29 |
|
Translation of Tenancy Contract, Building 4K, dated
January 10, 2011 (incorporated by reference to Exhibit 10.29 to the Form S-1 filed with the SEC on May 13, 2011) |
10.30 |
|
Translation of Tenancy Contract, Building 4F, dated
October 5, 2012 (incorporated by reference to Exhibit 10.30 to the Form S-1 filed with the SEC on May 13, 2011) |
10.31 |
|
Translation of Creditors Right Subrogation Agreement
(incorporated by reference to Exhibit 10.31 to the Form S-1/A filed with the SEC on November 14, 2011) |
10.32 |
|
Translation of Debt Waiver Agreement (incorporated
by reference to Exhibit 10.32 to the Form S-1/A filed with the SEC on November 14, 2011) |
10.33 |
|
Translation of Legal Representative Agreement with
Li Fu Chang, dated January 1, 2010 (incorporated by reference to Exhibit 10.33 to the Form S-1/A filed with the SEC on November
14, 2011) |
10.34 |
|
Translation of Insurance Agency Contract with Cathay
Insurance Co., Ltd., dated November 30, 2011 (incorporated by reference to Exhibit 10.34 to the Form S-1/A filed with the
SEC on December 2, 2011) |
10.35 |
|
Translation of Insurance Agency Contract
with Tianan Insurance Co., Ltd., dated July 1, 2011 (incorporated by reference to Exhibit 10.35 to the Form S-1/A filed with
the SEC on December 2, 2011) |
10.36 |
|
Translation of Employment Agreement with Chuang Yun
Chi, dated July 2, 2012 (incorporated by reference to Exhibit 10.36 to the Form 10-K filed with the SEC on September 28, 2012) |
10.37 |
|
Translation of Insurance Agency Contract between
Law Broker and China Life Insurance Company dated January 1, 2008 (incorporated by reference to Exhibit 10.37 to the Form
10-K filed with the SEC on September 28, 2012) |
10.38 |
|
Translation of Insurance Agency Contract between
Law Broker and Farglory Life Insurance Co, Ltd. dated December 30, 2000 (incorporated by reference to Exhibit 10.38 to the
Form 10-K filed with the SEC on September 28, 2012) |
10.39 |
|
Translation of Insurance Agency Contract between
Law Broker and Fubon Life Insurance Co, Ltd. dated February 20, 2004 (incorporated by reference to Exhibit 10.39 to the Form
10-K filed with the SEC on September 28, 2012) |
10.40 |
|
Translation of Insurance Agency Contract between
Law Broker and KuoHua Life Insurance Company dated July 22, 1993 (incorporated by reference to Exhibit 10.40 to the Form 10-K
filed with the SEC on September 28, 2012) |
10.41 |
|
Translation of Insurance Agency Contract between
Law Broker and TransGlobe Life Insurance Company dated January 1, 2002 (incorporated by reference to Exhibit 10.41 to the
Form 10-K filed with the SEC on September 28, 2012) |
10.42 |
|
Translation of Insurance Agency Contract between
Law Broker and ACE Insurance Company dated September 1, 2009 (incorporated by reference to Exhibit 10.42 to the Form 10-K
filed with the SEC on September 28, 2012) |
10.43 |
|
Translation of Insurance Agency Contract between
Law Broker and Fubon Insurance Co, Ltd. dated December 1, 2006 (incorporated by reference to Exhibit 10.43 to the Form 10-K
filed with the SEC on September 28, 2012) |
10.44 |
|
Translation of Insurance Agency Contract between
Law Broker and Taian Insurance Co., Ltd. dated August 5, 2010 (incorporated by reference to Exhibit 10.44 to the Form 10-K
filed with the SEC on September 28, 2012) |
10.45 |
|
Translation of Insurance Agency Contract between
Law Broker and Union Insurance Company dated April 1, 2008 (incorporated by reference to Exhibit 10.45 to the Form 10-K filed
with the SEC on September 28, 2012) |
10.46 |
|
Translation of Insurance Agency Contract between
Law Broker and Zurich Insurance Company dated October 1, 2005. (incorporated by reference to Exhibit 10.46 to the Form 10-K
filed with the SEC on September 28, 2012) |
10.47 |
|
Reclassification Agreement between the Company and
Mao Yi Hsiao, dated July 2, 2012 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on July 3,
2012). |
10.48 |
|
Strategic Alliance Agreement between Action Holdings
Financial and AIA International Limited Taiwan Branch, dated June 10, 2013 (incorporated by reference to Exhibit 10.1 to the
Form 8-K filed with the SEC on July 29, 2013) |
10.49 |
|
Loan Agreement between Action Holdings Financial
Limited and ZLI Holdings Limited, dated June 9, 2013 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with
the SEC on September 6, 2013) |
10.50 |
|
Loan Agreement between ZLI Holdings and Able Capital
Holding Co., Ltd., dated August 28, 2013 (incorporated by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on
September 6, 2013) |
10.51 |
|
Loan Agreement between ZLI Holdings and Chen Li,
dated August 9, 2013 (incorporated by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on September 6, 2013) |
10.52 |
|
Loan Agreement between ZLI Holdings and
Yue Jing, dated August 9, 2013 (incorporated by reference to Exhibit 10.4 to the Form 8-K filed with the SEC on September
6, 2013) |
10.53 |
|
Translation of Tenancy Contract, between Pon-Chen
Co., Ltd. and Law Insurance Broker Co., Ltd., dated October 5, 2012 (incorporated by reference to Exhibit 10.1 to the Form
10-Q filed with the SEC on February 14, 2013). |
10.54 |
|
Consulting Service Agreement between the Company
and Li Fu-Chang, dated December 7, 2013 (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the SEC on December
12, 2013). |
10.55 |
|
Form of Share Pledge Agreement, dated October 24,
2013. (incorporated by reference to Exhibit 10.55 to the Form 10-KT filed with the SEC on April 17, 2014) |
10.56 |
|
Form of Power of Attorney, dated October 24, 2013. (incorporated by reference to Exhibit 10.56 to the Form 10-KT filed with the SEC on April 17, 2014) |
10.57 |
|
Form of Exclusive Option Agreement, dated October
24, 2013. (incorporated by reference to Exhibit 10.57 to the Form 10-KT filed with the SEC on April 17, 2014) |
10.58 |
|
Translation Lease Agreement between Qing Tian and Law Anhou Insurance Agency Co., Ltd., dated January 17, 2014. (incorporated by reference to Exhibit 10.58 to the Form 10-KT filed with the SEC on April 17, 2014) |
10.59 |
|
Translated Broker Agreement between AIA International Limited, Taiwan Branch and Law Insurance Broker, Co. Ltd. (incorporated by reference to Exhibit 10.59 to the Form 10-KT filed with the SEC on April 17, 2014) |
10.60 |
|
Translated Employment Agreement between Law Anhou Insurance Agency Co., Ltd. and Lo Chung Mei, dated January 1, 2014. (incorporated by reference to Exhibit 10.60 to the Form 10-KT filed with the SEC on April 17, 2014) |
10.61 |
|
Employment Agreement between Chao Hui-Hsien and Law Insurance Broker Co. Ltd., dated, dated January 7, 2013 (incorporated by reference to Exhibit 10.61 to the Form 10-KT filed with the SEC on April 17, 2014) |
10.62 |
|
Translation of Tenancy Renewal Contract, Building 4F, dated January 10, 2014 (incorporated by reference to Exhibit 10.62 to the Form 10-KT filed with the SEC on April 17, 2014) |
10.63 |
|
Translation of Tenancy Renewal Contract, Building 4K, dated January 10, 2014 (incorporated by reference to Exhibit 10.63 to the Form 10-KT filed with the SEC on April 17, 2014) |
10.64 |
|
Translation of Loan Agreement between Law Enterprise and AHFL, dated September 15, 2014 (incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K filed with the Securities Exchange Commission on September 23, 2014). |
10.65 |
|
Amendment to Strategic Alliance Agreement (incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K filed with the Securities Exchange Commission on September 30, 2014). |
10.66 |
|
Loan Agreement between AHFL and Lee Shu-Fen, dated December 23, 2014. (incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K filed with the Securities Exchange Commission on December 23, 2014). |
10.67 |
|
Loan Agreement between AHFL and Law Insurance Broker Co., Ltd., dated January 14, 2015. (incorporated by reference to Exhibit 10.1 of Current Report on Form 8-K filed with the Securities Exchange Commission on January 16, 2015). |
10.68 |
|
Insurance Agency Contract, dated March 1, 2012, between CTBC Life Insurance and Law Broker. |
10.69 |
|
Insurance Agency Contract, dated January 1, 2011, between Shin Kong Life and Law Broker. |
10.70 |
|
Insurance Contract, dated December 31, 2013, between Yingda Life Insurance Co. Ltd. and Anhou. |
10.71 |
|
Insurance Contract, dated January 1, 2015, between Aviva Life Insurance Co. Ltd. and Anhou. |
10.72 |
|
Engagement Agreement dated January 7, 2015 between Chao Hui-Hsien and Law Insurance Broker Co., Ltd., dated January 7, 2015. |
21 |
|
Subsidiaries of the registrant (incorporated by reference to the Exhibit 21 to the Form 10-K filed with the SEC on September 28, 2012) |
31.1 |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 |
31.2 |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 |
32.1* |
|
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2* |
|
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS |
|
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 |
*The certifications
attached as Exhibits 32.1 and 32.2 accompany this annual report on Form 10-K 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.
SIGNATURES
Pursuant to
the requirements of Section 13 or 15(d) 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: March 18, 2015 |
By: |
/s/ Mao Yi Hsiao
|
|
|
Principal Executive Officer |
|
|
|
Date: March 18, 2015 |
By: |
/s/ Chuang Yung Chi |
|
|
Principal Accounting Officer |
Pursuant to
the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Mao Yi Hsiao |
|
Chief Executive Officer (Principal Executive Officer) |
|
March 18, 2015 |
Mao Yi Hsiao |
|
|
|
|
|
|
|
|
|
/s/ Chuang Yung Chi
|
|
Chief Financial Officer (Principal Accounting Officer) |
|
March 18, 2015 |
Chuang Yung Chi |
|
|
|
|
|
|
|
|
|
/s/ Mao Yi Hsiao |
|
Director |
|
March 18, 2015 |
Mao Yi Hsiao |
|
|
|
|
|
|
|
|
|
/s/ Li Fu Chang |
|
Director |
|
March 18, 2015 |
Li Fu Chang |
|
|
|
|
|
|
|
|
|
/s/ Li ChwanHau |
|
Director |
|
March 18, 2015 |
Li ChwanHau |
|
|
|
|
|
|
|
|
|
/s/ Chen KueiChiao
|
|
Director |
|
March 18, 2015 |
Chen KueiChiao |
|
|
|
|
|
|
|
|
|
/s/ Lee Shu Fen |
|
Director |
|
March 18, 2015 |
Lee Shun Fen |
|
|
|
|
Exhibit 2.3
AMENDMENT 2 TO ACQUISITION
AGREEMENT
This Amendment 2 to Acquisition
Agreement (this “Amendment”), dated March 13, 2015 is entered into by and among China United Insurance Service, Inc.,
a company with limited liability incorporated under the laws of Delaware (“CUIS”) and the selling shareholders of Action
Holdings Financial Limited (“AHFL”) as listed in Schedule I of this Amendment (the “Selling Shareholders”)
.
CUIS and the Selling Shareholders
are collectively referred to as the “Parties” and each a “Party” under this Amendment.
WHEREAS, the Parties entered
into the Acquisition Agreement on August 24, 2012 (the “Agreement”), pursuant to which CUIS acquired any and all issued
and outstanding shares of AHFL and became the sole shareholder of AHFL, and the Parties agreed that CUIS shall pay the consideration
set forth in Section 2.2 of the Agreement for such acquisition.
WHEREAS, the Selling Shareholders
and CUIS desire to amend certain provisions of Sections 2.2 of the Agreement.
Capitalized terms defined
in the Agreement have, unless expressly defined in this Amendment or the context requires otherwise, the same meaning in the Agreement.
NOW, THEREFORE, in consideration
of the mutual covenants and undertakings contained herein and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, and subject to and on the terms and conditions set forth herein, the Parties hereto agree as
follows:
To amend and restate Sections
2.2(iii), (iv) and (v):
(iii) pay NT$15 million
to the Selling Shareholders in the amounts set forth opposite each Selling Shareholder's name on Schedule I on or prior to March
31, 2016 or at any other time or in any other manner otherwise agreed upon by and among the Parties; (iv) pay NT$7.5 million to
the Selling Shareholders in the amounts set forth opposite each Selling Shareholder's name on Schedule I on or subsequent to March
31, 2016 or at any other time or in any other manner otherwise agreed upon by and among the Parties; and (v) set up an employee
stock pool, consisting of up to 4 million shares of CUIS Common Stock, among which 2 million shares shall be solely granted to
employees of Dinglv Broker pursuant to Section 2.8 herein, and the remaining 2 million shares to be granted to employees of affiliated
entities of CUIS (including Dinglv Broker employees).
Except amended by this
Amendment, any other provision of the Agreement shall remain unchanged. This Amendment together with the Agreement shall constitute
the entire agreement among the Parties with respect to the subject matter of the Agreement and shall supersede all previous communications
of the Parties in respect of the subject matter of the Agreement. This Amendment is made in one or more counterparts, all of which
will be considered one and the same agreement and will become effective. When one or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.
IN WITNESS WHEREOF the
Parties hereto have executed this Amendment as of the day and year first above written.
China United Insurance Service, Inc. |
|
By: |
/s/ MAO YI HSIAO |
Name: |
MAO YI HSIAO |
Title: |
Director |
IN WITNESS WHEREOF
the Parties hereto have executed this Amendment as of the day and year first above written.
Selling Shareholders
By: /s/ MAO YI HSIAO
Name: MAO YI HSIAO |
By: /s/ CHOU CHUNG HSIEN
Name: CHOU CHUNG HSIEN |
|
|
By: /s/ CHEN HUNG JU
Name: CHEN HUNG JU |
By: /s/ YU HENG CHI
Name: YU HENG CHI |
|
|
By: /s/ CHENG MIN LUNG
Name: CHENG MIN LUNG |
By: /s/ CHEN HSIN CHU
Name: CHEN HSIN CHU |
|
|
By: /s/ LEE TSUN HSING
Name: LEE TSUN HSING |
By: /s/ CHEN SHU TZU
Name: CHEN SHU TZU |
|
|
By: /s/ YEH FU CHAO
Name: YEH FU CHAO |
By: /s/ CHEN YING CHANG
Name: CHEN YING CHANG |
|
|
By: /s/ HSU MING CHU
Name: HSU MING CHU |
By: /s/ CHEN YI CHING
Name: CHEN YI CHING |
|
|
By: /s/ YU WANG CHIN
Name: YU WANG CHIN |
By: /s/ YANG LI LING
Name: YANG LI LING |
|
|
By: /s/ WANG LING SHUEH
Name: WANG LING SHUEH |
By: /s/ CHEN PO CHIANG
Name: CHEN PO CHIANG |
By: /s/ CHEN HSIAO HUNG
Name: CHEN HSIAO HUNG |
By: /s/ CHIANG WEN TE
Name: CHIANG WEN TE |
|
|
By: /s/ LI BI E
Name: LI BI E |
By: /s/ LIN KUNG YEN
Name: LIN KUNG YEN |
By: /s/ YANG CHE CHIA
Name: YANG CHE CHIA |
By: /s/ HONG ZHONG NAN
Name: HONG ZHONG NAN |
|
|
By: /s/ CHOU SHIOU HUEI
Name: CHOU SHIOU HUEI |
By: /s/ JIAN SU HUA
Name: JIAN SU HUA |
|
|
By: /s/ HSU YA LIN
Name: HSU YA LIN |
By: /s/ HAO CHIEH
Name: HAO CHIEH |
By: /s/ WANG JEN CHUAN
Name: WANG JEN CHUAN |
By: /s/ WANG MEI HUI
Name: WANG MEI HUI |
|
|
By: /s/ LIAO YUNG MING
Name: LIAO YUNG MING |
By: /s/ LIU TA WEI
Name: LIU TA WEI |
By: /s/ CHANG CHIEN HAN CHUNG
Name: CHANG CHIEN HAN CHUNG |
By: /s/ CHENG HSING LING
Name: CHENG HSING LING |
|
|
By: /s/ YANG HSIU YUN
Name: YANG HSIU YUN |
By: /s/ LIN TING HUA
Name: LIN TING HUA |
|
|
By: /s/ LIN CHU CHUN
Name: LIN CHU CHUN |
By: /s/ LEE YAO TUNG
Name: LEE YAO TUNG |
|
|
By: /s/ TSAI CHIH HUNG
Name: TSAI CHIH HUNG |
By: /s/ HUANG SHU JHEN
Name: HUANG SHU JHEN |
|
|
By: /s/ TSAI KUO SUNG
Name: TSAI KUO SUNG |
By: /s/ CHAO HUI HSIEN
Name: CHAO HUI HSIEN |
|
|
By: /s/ WU CHI TAI
Name: WU CHI TAI |
By: /s/ HSU PEI YU
Name: HSU PEI YU |
|
|
By: /s/ CHEN HSUAN YU
Name: CHEN HSUAN YU |
By: /s/ TU WEI PIN
Name: TU WEI PIN |
|
|
By: /s/ JIANG KAI WEI
Name: JIANG KAI WEI |
By: /s/ TU CHENG WEI
Name: TU CHENG WEI |
By: /s/ LIN CHUN WEI
Name: LIN CHUN WEI |
By: /s/ CHAN HUI YING
Name: CHAN HUI YING |
By: /s/ TU WEN TI
Name: TU WEN TI |
By: /s/ CHUANG YUNG CHI
Name: CHUANG YUNG CHI |
|
|
By: /s/ SHEN WEN CHE
Name: SHEN WEN CHE |
By: /s/ CHIN LI HSUN
Name: CHIN LI HSUN |
|
|
By: /s/ HSIEH TUNG CHI
Name: HSIEH TUNG CHI |
By: /s/ YEH JEI HUA
Name: YEH JEI HUA |
|
|
By: /s/ CHEN YU ZHEN
Name: CHEN YU ZHEN |
By: /s/ LIN CHIN CHIANG
Name: LIN CHIN CHIANG |
By: /s/ TSAO CHIH TANG
Name: TSAO CHIH TANG |
By: /s/ SHIH YEN CHIN
Name: SHIH YEN CHIN |
|
|
By: /s/ CHENG YA FEN
Name: CHENG YA FEN |
By: /s/ CHEN HSIANG LI
Name: CHEN HSIANG LI |
|
|
By: /s/ HUANG CHUN CHIEH
Name: HUANG CHUN CHIEH |
By: /s/ LIU YU FANG
Name: LIU YU FANG |
|
|
By: /s/ TUNG SU LAN
Name: TUNG SU LAN |
By: /s/ CHANG HUI CHUN
Name: CHANG HUI CHUN |
By: /s/ YEN YU HSUN
Name: YEN YU HSUN |
By: /s/ YEH WAN YU
Name: YEH WAN YU |
|
|
By: /s/ CHEN MING HSIU
Name: CHEN MING HSIU |
By: /s/ YANG HSIANG HUI
Name: YANG HSIANG HUI |
|
|
By: /s/ NIEN HUI CHU
Name: NIEN HUI CHU |
By: /s/ CHIH YING PEI
Name: CHIH YING PEI |
By: /s/ SHEN KAI FONG
Name: SHEN KAI FONG |
By: /s/ WANG LING SHIH
Name: WANG LING SHIH |
|
|
By: /s/ CHEN HSIAO MEI
Name: CHEN HSIAO MEI |
By: /s/ CHENG YEN WEN
Name: CHENG YEN WEN |
|
|
U-Li Investment Consulting Enterprise Co.,
Ltd.
By: /s/ LEE SHU FEN
Name: LEE SHU FEN
Title: Director |
Marcopolo Investment Company Ltd.
By: /s/ CHOU CHUNG HSIEN
Name: CHOU CHUNG HSIEN
Title: Director |
|
|
CHENG HENG Investment Co., Ltd.
By: /s/ YU HENG CHI
Name: YU HENG CHI
Title: Director |
HONG YUAN Investment Co., Ltd.
By: /s/ LEE TSUN HSING
Name: LEE TSUN HSING
Title: Director |
FENG SHOU Investment Co., Ltd.
By: /s/ CHEN HUNG JU
Name: CHEN HUNG JU
Title: Director |
By: /s/ CHEN CHANG CHIH
Name: CHEN CHANG CHIH |
SCHEDULE
I CASH CONSIDERATION
China United Insurance Service, Inc.
No. | |
Shareholder Name | |
Amount of Cash Payable to the Selling Shareholders on or prior to March 31, 2015 | | |
Amount of Cash Payable to the Selling Shareholders on or subsequent to March 31, 2015 | |
1 | |
MAO YI HSIAO | |
| 1,366,117 | | |
| 683,058 | |
2 | |
CHOU CHUNG HSIEN | |
| 91,941 | | |
| 45,970 | |
3 | |
CHEN HUNG JU | |
| 974,276 | | |
| 487,138 | |
4 | |
YU HENG CHI | |
| 487,345 | | |
| 243,673 | |
5 | |
CHENG MIN LUNG | |
| 583,112 | | |
| 291,556 | |
6 | |
CHEN HSIN CHU | |
| 155,285 | | |
| 77,642 | |
7 | |
LEE TSUN HSING | |
| 20,633 | | |
| 10,316 | |
8 | |
CHEN SHU TZU | |
| 103,089 | | |
| 51,545 | |
9 | |
YEH FU CHAO | |
| 109,494 | | |
| 54,747 | |
10 | |
CHEN YING CHANG | |
| 206,357 | | |
| 103,178 | |
11 | |
HSU MING CHU | |
| 315,082 | | |
| 157,541 | |
12 | |
CHEN YI CHING | |
| 40,122 | | |
| 20,061 | |
13 | |
YU WAN CHIN | |
| 33,440 | | |
| 16,720 | |
14 | |
YANG LI LING | |
| 100,036 | | |
| 50,018 | |
15 | |
WANG LING SHUEH | |
| 8,345 | | |
| 4,172 | |
16 | |
CHEN PO CHIANG | |
| 8,741 | | |
| 4,370 | |
17 | |
CHEN HSIAO HUNG | |
| 36,292 | | |
| 18,146 | |
18 | |
CHIANG WEN TE | |
| 380,343 | | |
| 190,172 | |
19 | |
LE BI E | |
| 26,914 | | |
| 13,457 | |
20 | |
LIN KUNG YEN | |
| 38,362 | | |
| 19,181 | |
China United Insurance Service, Inc.
No. | |
Shareholder Name | |
Amount of Cash Payable to the Selling Shareholders on or prior to March 31, 2015 | | |
Amount of Cash Payable to the Selling Shareholders on or subsequent to March 31, 2015 | |
21 | |
YANG CHE CHIA | |
| 98,248 | | |
| 49,124 | |
22 | |
HONG ZHONG NAN | |
| 43,317 | | |
| 21,659 | |
23 | |
CHOU SHIOU HUEI | |
| 26,049 | | |
| 13,024 | |
24 | |
JIAN SU HUA | |
| 37,669 | | |
| 18,834 | |
25 | |
HSU YA LIN | |
| 170,464 | | |
| 85,232 | |
26 | |
HAO CHIEH | |
| 40,020 | | |
| 20,010 | |
27 | |
WANG JEN CHUAN | |
| 14,514 | | |
| 7,257 | |
28 | |
WANG MEI HUI | |
| 7,457 | | |
| 3,729 | |
29 | |
LIAO YUNG MING | |
| 29,793 | | |
| 14,897 | |
30 | |
LIU TA WEI | |
| 102,102 | | |
| 51,051 | |
31 | |
CHANG CHIEN HAN CHUNG | |
| 50,507 | | |
| 25,253 | |
32 | |
CHENG HSING LING | |
| 40,319 | | |
| 20,159 | |
33 | |
YANG HSIU YUN | |
| 20,126 | | |
| 10,063 | |
34 | |
LIN TING HUA | |
| 101,928 | | |
| 50,964 | |
35 | |
LIN CHU CHUN | |
| 34,232 | | |
| 17,116 | |
36 | |
LEE YAO TUNG | |
| 27,535 | | |
| 13,768 | |
37 | |
TSAI CHIH HUNG | |
| 42,855 | | |
| 21,428 | |
38 | |
HUANG SHU CHEN | |
| 6,651 | | |
| 3,326 | |
39 | |
TSAI KUO SUNG | |
| 96,892 | | |
| 48,446 | |
40 | |
WU CHI TAI | |
| 14,053 | | |
| 7,026 | |
41 | |
HSU PEI YU | |
| 15,215 | | |
| 7,607 | |
42 | |
CHEN HSUAN YU | |
| 37,659 | | |
| 18,829 | |
43 | |
TU WEI PIN | |
| 38,304 | | |
| 19,152 | |
44 | |
JIANG KAI WEI | |
| 29,187 | | |
| 14,594 | |
45 | |
TU CHENG WEI | |
| 25,681 | | |
| 12,841 | |
China United Insurance Service, Inc.
No. | |
Shareholder Name | |
Amount of Cash Payable to the Selling Shareholders on or prior to March 31, 2015 | | |
Amount of Cash Payable to the Selling Shareholders on or subsequent to March 31, 2015 | |
46 | |
LIN CHUN WEI | |
| 6,589 | | |
| 3,295 | |
47 | |
CHAN HUI YING | |
| 7,688 | | |
| 3,844 | |
48 | |
CHAO HUI HSIEN | |
| 115,275 | | |
| 57,637 | |
49 | |
TU WEN TI | |
| 32,531 | | |
| 16,266 | |
50 | |
CHUANG YUNG CHI | |
| 35,360 | | |
| 17,680 | |
51 | |
SEHN WEN CHE | |
| 39,684 | | |
| 19,842 | |
52 | |
CHIN LI HSUN | |
| 20,206 | | |
| 10,103 | |
53 | |
HSIEH TUNG CHI | |
| 30,440 | | |
| 15,220 | |
54 | |
YEH JEI HUA | |
| 37,886 | | |
| 18,943 | |
55 | |
CHEN YU ZHEN | |
| 10,103 | | |
| 5,051 | |
56 | |
LIN CHIN CHIANG | |
| 12,558 | | |
| 6,279 | |
57 | |
TSAO CHIH TANG | |
| 3,293 | | |
| 1,647 | |
58 | |
SHIH YEN CHIN | |
| 10,224 | | |
| 5,112 | |
59 | |
CHENG YA FEN | |
| 6,627 | | |
| 3,314 | |
60 | |
CHEN HSIANG LI | |
| 10,224 | | |
| 5,112 | |
61 | |
HUANG CHUN CHIEH | |
| 10,224 | | |
| 5,112 | |
62 | |
LIU YU FANG | |
| 10,224 | | |
| 5,112 | |
63 | |
TUNG SU LAN | |
| 6,890 | | |
| 3,445 | |
64 | |
CHANG HUI CHUN | |
| 20,460 | | |
| 10,230 | |
65 | |
YEN YU HSUN | |
| 5,819 | | |
| 2,910 | |
66 | |
YEH WAN YU | |
| 10,224 | | |
| 5,112 | |
67 | |
CHEN MING HSIU | |
| 6,890 | | |
| 3,445 | |
68 | |
YANG HSIANG HUI | |
| 10,224 | | |
| 5,112 | |
69 | |
NIEN HUI CHU | |
| 10,224 | | |
| 5,112 | |
70 | |
CHIH YIN PEI | |
| 10,224 | | |
| 5,112 | |
71 | |
SHEN KAI FONG | |
| 3,334 | | |
| 1,667 | |
China United Insurance Service, Inc.
No. | |
Shareholder Name | |
Amount of Cash Payable to the Selling Shareholders on or prior to March 31, 2015 | | |
Amount of Cash Payable to the Selling Shareholders on or subsequent to March 31, 2015 | |
72 | |
WANG LING SHIH | |
| 3,596 | | |
| 1,798 | |
73 | |
CHEN HSIAO MEI | |
| 3,596 | | |
| 1,798 | |
74 | |
CHENG YEN WEN | |
| 3,596 | | |
| 1,798 | |
75 | |
U-Li Investment Consulting Enterprise Co., Ltd. | |
| 5,107,500 | | |
| 2,553,750 | |
76 | |
Marcopolo Investment Company Ltd. | |
| 909,254 | | |
| 454,627 | |
77 | |
CHENG HENG Investment Co., Ltd. | |
| 858,740 | | |
| 429,370 | |
78 | |
HONG YUAN Investment Co., Ltd. | |
| 626,375 | | |
| 313,188 | |
79 | |
FENG SHOU Investment Co., Ltd. | |
| 757,712 | | |
| 378,856 | |
80 | |
CHEN CHANG CHIH | |
| 10,103 | | |
| 5,051 | |
Total | |
| |
| NT$15 MILLION | | |
| NT$7.5 MILLION | |
Exhibit 10.68
Party A: Law Insurance Broker Co., Ltd.
Party B: CTBC life Insurance Co., Ltd.
Both parties agreed the terms and conditions
set forth in this Contract (the “Contract”) as follows:
Article 1 Definition
This contract, unless otherwise defined, the definition of the following
terms is:
| 1. | Confidential Information: Business, technology, finance, operation, management, marketing, recruiting,
economic, insurance product plan and other material, regardless of the storage system in written, oral or other form or medium
and been marked as confidential by disclosing party or protected by reasonable protection way. |
| 2. | Insurance Product: Any insurance products approved by the competent authority in sales of merchandise
from Party B notices Party A in the written consent of the insurance product. Party B plans to cancel a particular Insurance Product
or modify its contents, Party B shall notify Party A in fifteen before, unless the authorities policy or not attributable to the
Party's cause can not be the subject of notification. |
Article 2 Approval and Scope of Service
The scope of cooperation which is authorized
by Party A are as fellows:
| (1) | The Insurance Products provided by Party B should be approved by the competent authority in sales
of merchandise. |
| (2) | Party A should retain effective license and approval for this Contract. |
| (1) | Party B has the right, within a limited period of this Contract, to visit Party A for the actual
operation of the services provided by the management. |
| (2) | Party A shall cooperate with Party B with the checks based on business requirements of government
agencies and financial inspection and supervision unit of the PRC, and provide detailed information to the Party B. Same as reversed. |
Article 3 Obligations Of The Parties
| 1. | Party A should work in accordance with the relevant provisions of the insurance, underwriting rules and the agreed way of marketing
to sell the Insurance Product. Party A, without the prior written consent, shall not alter or modify the terms of the insurance
contracts or other Contracts. Any insurance contract solicited by Party A, Party has the right to decide, Party A has no right
to give any commitment to proposer agent or insurer. In addition to legally for sale or termination of this contract, Party B shall
not refuse any policies sold by Party A. |
| 2. | Party A though is not parties to the insurance contract, but any right between the beneficiary and obligations or dispute between
Party B, the proposer, and the insured, shall first notify the Party A, then Party B shall deal with the client. If Party A considers
to participate or Party B thinks it is necessary to have Party A to participate, Party shall endeavor to assist. |
| 3. | Received by the Cooperative Extension, to attract customers want to fill out the warranty book and other relevant documents
shall be aggregated by Party A and, after the signing, forward to Party B. |
| 4. | Except otherwise agreed, under this contract, if the solicitation of business is invalid, cancellation, termination, policy
stopped efficiency, or the sum insured change or other reasons, not caused by Party B shall return the premiums to policyholders
, Party A shall refund the actual premiums the amount, according to the ratio of return in respect of insurance contracts has led
the commission and other remuneration, and B is derived from payments to be deducted from the payment. |
| 5. | Party shall guarantee during the operation period: |
| (1) | Its owned sales persons have qualification to sell life insurance and obey Regulations Governing the Supervision of Insurance
Solicitors, Regulations Governing Business Solicitation, Policy Underwriting and Claim Adjusting of Insurance Enterprises and other
regulations and any rule regarding the insurance business between Parties. |
| (2) | Operations related to the subject of goodwill was prejudicial and B's, and shall not pay any money, property or other interests
to Party B’s personnel. |
| (3) | Not to discount premiums or other inappropriate incentives to sell Insurance Product. |
| (4) | Not to damage the rights of the policyholders. |
| (5) | Obey the insurance law, Regulations Governing Insurance Brokers, Regulations Governing the Supervision of Insurance Solicitors,
Fair Trade Act, Consumer Protection Act, Regulations Governing Business Solicitation, Policy Underwriting and Claim Adjusting of
Insurance Enterprises, Money Laundering Control Act, Financial Consumer Protection Act, Personal Information Protection Act and
other law and regulations. |
| 6. | Party A agree that promised amount of responsibility for each contract year, beginning with its annual life insurance premium
income by total real income of not less than NT $ 200 million, and continues to not less than 65%. Party B has the right to terminate
this Contract if fail to achieve either conditions. |
| 7. | Party B shall guarantee during the period of cooperation: |
| (1) | Compliance with insurance supervisory agencies for the financial capability and its ability to perform the requirements |
| (2) | Monthly remuneration in accordance with Article 9 |
| (3) | Not cause any loss of goodwill and policyholders' interests or party B and not pay the money improperly to Party A’s
personnel, finance eligible for other benefits. |
| (4) | When the dispute happens between the Party B and the policyholders, Party B should notify Party A, Party B shall not take the
initiative to contact any officer of Party A or policyholders. If Party A does not respond within three working days, not provide
the assistance, Party B should be continuous follow-up matters relating to policy holders in order to protect the interests of
policyholders. |
| (5) | The business of providing dedicated window, responsible for co-operation deal with the business, informing, consulting services
and etc. |
| (6) | Notify the proposer overdue premiums are not paid premium pay. Notify the proposer to renew the policy and copy Party A. |
| (7) | In the event that Party B has to revised the operation requirements, Party B should advance written notice to the Party A,
a period of not less than 20. Party A, after the receipt of the notification, has concern about the modifying, and should send
a written notice to Party B. Both parties shall uphold the utmost good faith and reciprocity to reach the Contract. Party B amended
the existing rights of the insurance contract, such as when the contact set of the adverse Party, A the other insurance contract
shall not take effect. This provision shall remain valid after this contract is terminated, except the law or the authority orders
to amend. |
Article 4 Propaganda and Administrative Support
| 1. | Except otherwise agreed, the obligations of Party B is: |
| (1) | Provide as the article 5 as appropriate training to Party A’s alleged participation in the
actual commodity specific insurance solicitation, introduction, personnel services and related costs burden. |
| (2) | Party B shall prepare and provide propaganda and required document and required cost. |
| (3) | Any fees or cost related to Party A’s direct sale of the Insurance Product shall be paid
by Party B in the condition that Party B agrees in advance in writing. |
| 2. | Party A may prepare additional material and tools supporting business operation at its cost. Party
A shall gain prior written consent from Party B when using Party B’s trademark. |
| 3. | The propaganda and marketing tools and service, shall: |
| (1) | Obey Trademark Act, Consumer Protection Act, Financial Consumer Protection Act, Fair Trade Act,
Personal Information Protection Act and other regulations. |
| 4. | Both parties agree to pass the information to the other party or any third party designated by
either party when proceed the insurance contract, management, service except those are forbidden by the law. This provision shall
remain valid after this contract is terminated. |
Article 5 Training
Party B agrees to provide the following training
to Party’s personnel who actually do the insurance business, the schedule, content shall be negotiated by both Parties.
| 1. | Comply with the provisions of the competent authority to acquire the qualifications requisite standard. |
| 2. | Assist Party B’s personnel with recruiting, introduce standards of service and management
specific Insurance Products. |
Article 6 Service
| 1. | Both Parties shall work together to set service standards for the development of co-operation of
the business and customer service. |
| 2. | The following specific matters related insurance products, only Party B has the right to deal with,
Party A shall require its employees shall not deal with. |
| (1) | Underwriting, risk and valuation rates |
| (2) | For indication of insurance coverage, valuation or amendment |
| (4) | In accordance with the terms and conditions of insurance, handling matters concerning the assessment
of claims, investigation and resolve. |
| 3. | Party A may, at any time, provided the following recommendations to the Party B, but Party B has
the right to decide to accept or not: |
| (1) | Modify specific insurance products to gain market competitiveness |
| (2) | Modify the new insurance merchandise to meet customer needs |
| 4. | Either Party or its employees received any notice of the competent authority or a specific commodity-related
insurance, shall notify the other party. |
Article 7 Accounting, Recording and Database
| 1. | The two sides should keep proper books about business, the records and accounts data, and in the
front end of each month in accordance with the format agreed by providing information on the previous month's accounts. |
| 2. | The two sides should bear its own costs incurred in the previous data transferring. |
Article 8 Customer Data
| 1. | Party A consistent set by the customer's insurance contract for customers Party, the Party and
its affiliated persons or persons, except to fulfill the insurance contract, Party B shall not use or disclose any information. |
| 2. | When a breach of this Contract by Party B, it should bear the liability for damages. |
| 3. | Customer set forth in first paragraph is a customer of Party B before the insurance contract for
Party B will not be the subject of this provision. |
| 4. | This provision shall remain valid after this contract is terminated. |
Article 9 Remuneration
| 1. | Party B agrees to pay the monthly payment and pay the prescribed manner in accordance with the
Party A, the calculation of the specific insurance commodity remuneration will be provided by written notice to Party A. After
the receipt of the notice, Party A does not indicate the dissidents, as deemed as agreed. |
| 2. | The payment regarding the insurance policies made by Party A, Party B shall not cut it afterwards. |
| 3. | This provision shall remain valid after this contract is terminated. However, in accordance with
Article 11, Party B agreed to terminate the Contract, Party B shall have to deal with on their own after-sales service and since
the termination of the insurance contract from the day following the stop payment order annual service commission. |
Article 10 Effect
This Contract will be effective after it has
been agreed and signed and expire at the end of December 31 each year. If either party fails to send written notice before the
expiry of the 30 days to the other party, then this contract is automatically renewed thereafter likewise.
Article 11 Termination
| 1. | Both Parties can agree to terminate this Contract. |
| 2. | Either party may terminate this Contract, at any time, if the other party breaches any material
term of this Contract and fails to cure that breach within reasonable period after notice thereof from the non-breaching party. |
| 3. | If either Party is likely to be foreclosed from check clearing services, liquidated or to be adjudicated
bankrupt, the other Party shall have the right to terminate this Contract. |
| 4. | Party B has the right to terminate this Contract if the Party A fails to achieve the target set
forth in Article 3.6. If such fails due to force majeure, Party A shall assist Party B according to actual circumstance. |
| 5. | After the termination of this contract, Party B should still carry on insurance contract made by
Party A in this contract until all insurance contract terminated. |
| 6. | The expiration or termination of this Contract shall not prejudice any rights and obligations incurred
under this Contract prior to the expiration or termination. |
Article 12 Obligation
| 1. | Both parties shall fulfill its obligations under this contract. |
| 2. | Because the other party can be attributed to the responsibility of the other party caused by the
losses, expenses, damages should bear responsibility. |
Article 13 Confidentiality
| 1. | Both parties have the following obligations for the information received from the other Party: |
| (1) | For the other party's confidential information, shall be confidential for five years, in addition
to laws and regulations should be permanent secrecy. |
| (2) | The Receiving Party shall neither disclose to any third party any Confidential Information of the
Disclosing Party in any manner including written or oral. |
| (3) | The Receiving Party shall not use the Confidential Information except for this Contract. |
| (4) | The Receiving Party shall use at least the degree of care, to avoid disclosure of such Confidential
Information as it uses with respect to its own proprietary information of like importance, but no less than the same degree of
care generally used by others in the industry to protect their own proprietary information. |
| (5) | To obey all current laws and regulations regarding the information protection and confidentiality
and notify the other party if any violation or is like violation of regulations and this Contract. |
| 2. | Notwithstanding any other provisions of this Contract, this Contract imposes no obligation and
restrictions upon the Receiving Party with respect to Confidential Information received hereunder which: |
| (1) | is, or becomes, part of the public domain without breach of this Contract by the Receiving Party |
| (2) | at the time of receipt, was otherwise known to the Receiving Party |
| (3) | becomes known or available to the Receiving Party from a source other than the Disclosing Party
and without breach of this Contract by the Receiving Party |
| (4) | according to the provision Article 7.3 |
| 3. | If it is required to be disclosed by the Receiving Party by applicable law or court orders; in
such case the Receiving Party shall give prompt notice to the Disclosing Party upon receipt of such request. |
| 4. | No right or license, express or implied, under any patent, copyright, trade secret, or other intellectual
property right of the Disclosing Party is granted, implied or created under this Contract. |
Article 14 Non-Transfer
| 1. | Either Party may not assign or transfer this Contract, in whole or in part, by operation of law
or otherwise, without the other Party’s express prior consent. |
| 2. | When either the sale or transfer of its assets or merge with another company, this Party shall
notify the other party, and the responsibility of the contract by the transferee will broadly accept unconditionally. The other
Party shall have the right to terminate this Contract and ask to return all confidential information or destroy. |
| 3. | In the event that Party B sell part or all insurance contracts made by Party A, the rights or benefits
of Party A and its clients shall not be damaged. |
Article 15 Fees
Either shall bear its own any related fees about for negotiating,
preparing and executing this Contract.
Article 16 Independent Contractor
The parties are independent contractors and this Contract will not
establish any relationship of partnership, joint venture, employment, franchise or agency between the parties. Neither party will
have the power to bind the other party or to incur any obligations on its behalf, without the other party’s prior written
consent.
Article 17 Notice
| 1. | Any notice or requirements under this Contract will be deemed given having been sent by writing to the physical address and
contact window provided in this Contract. If any changes of such address of either party, such party shall notify the other party
in writing; if not, any notice shall be sent to the address in this Contract. |
| 2. | Notification referred to in the preceding paragraph, or other information,
after notice, after the period post deemed delivered. |
Article 18 General Provisions
| 1. | This Contract, including all appendices and attachments hereto, constitutes the complete and exclusive understanding and Contract
between the parties regarding its subject matter and supersedes all prior or contemporaneous Contracts or understandings, whether
written or oral, relating to its subject matter. |
| 2. | Any waiver, modification, addendum or amendment of any provision of this Contract will be effective only if in writing and
signed by duly authorized representatives of each party. |
| 3. | If for any reason a court of competent jurisdiction finds any provision of this Contract invalid or unenforceable, that provision
of the Contract will be enforced to the maximum extent permissible and the other provisions of this Contract will remain in full
force and effect. |
| 4. | Regarding section 18.3, both parties agree to sign an amendment to keep this Contract effective if it is necessary or both
reach the Contract. |
| 5. | The failure by either party to enforce any provision of this Contract will not constitute a waiver of future enforcement of
that or any other provision. |
| 6. | Either Party shall not disclose this Contract without prior written consent from the other Party unless it’s required
by the laws. |
| 7. | Any matters not covered in this Contract which shall be handled in accordance with relevant laws and regulations. |
Article 19 Jurisdiction
This Contract
will be governed by and construed in accordance with the laws of Republic of China. The parties irrevocably agree that all
disputes arising in any way out of this Contract which may be resolved by lawsuit will be submitted to District Court of Taipei,
Taiwan as the first instance court.
Article 20 Copies
This Contract will be executed in two copies; one for each party.
March 1st, 2012
Exhibit 10.69
Party A: Shin Kong Life Insurance., Ltd.
Party B: Law Insurance Broker Co., Ltd.
Both parties agreed the terms and conditions
set forth in this Contract (the “Contract”) as follows:
Article 1
This Contract will be effective after it
has been agreed and signed and expire at the end of December 31 each year. If no event set forth in Section 9 or 10.1 happens,
then this contract is automatically renewed one-year thereafter likewise.
Article 2
The scope of cooperation which is authorized
by Party B is as follows:
| (1) | Party B can make the insurance contract on behalf of the insured with Party A. Party B and its
sales can explain insurance product, policy content, terms and rules of Party B and forward the first phase of the premium of insurance
product to Party A. |
| (2) | Any collection of the proposer, application documents from the insured or the beneficiary of insurance
book, contract changes, insurance, and shall be forwarded to Party A immediately upon receipt of the Party B. |
| (3) | Party B shall not forward any self-fulfillment part of this contract to be handled by a third party
on behalf of the Party B, including not take any insurance contract made by any other insurance broker as its own contracts. |
Article 3
Party A shall pay the commission to Party B pursuant to solicit
the business of the commission table as the attachment. If any changes according to the government law and regulation, Party B
can change the table upon agreement with Party. Such change shall not back to influence any effective insurance contract made by
Party B.
Article 4
Party A shall pay the commission according to the Article 3.
If the client pays for the insurance product by checks, the commission for 1st year and continuous years shall be paid
after cashing the check.
Article 5
| 1. | Party B agree that promised amount of responsibility for each contract year, beginning with its
annual life insurance premium income by total real income of not less than NT $ 600 million, and continues to not less than 80%.
Party A has the right to terminate this Contract if fail to achieve either conditions. If such fails due to force majeure, Party
A shall assist Party B according to actual circumstance. |
| 2. | If the first premium payment by check, the cashing period shall be no more than 28 days. |
| 3. | Party B and its personnel shall forward the money, checks, property and securities belong to Party
A to Party A immediately according to section 30 of the Regulations Governing Insurance Brokers. Party B shall not offset in order
to receive the commission. |
| 4. | During the period that Party B receive the premium from the client and fails to forward to Party
A, all liability and damage caused afterwards shall be responsible by Party B. |
| 5. | Party B solicit the business approved by Party A, except in accordance with the relevant laws and
regulations, the contents of the insurance policy and the terms of the notes, should honestly inform the customer, not harm Party
A’ s goodwill. |
| 6. | Party B shall not alter or change the article of the policy made by Party A and not make any commitment
beyond the article of the policy. |
| 7. | If Party B plans to use Party A’s name to make advertisement or marketing, Party B shall
gain prior written consent from Party A. |
| 8. | Party B shall provide necessary service to the policyholder agreed by Party A, and Party A shall
provide related information regarding service to Party B. |
| 9. | Party B shall not deal any things beyond this Contract with Party A’s name. |
| 10. | Except otherwise agreed, under this contract, if the solicitation of business is invalid, cancellation,
termination, policy stopped efficiency, or the sum insured change or other reasons, not caused by Party A shall return the premiums
to policyholders , Party B shall refund the actual premiums the amount, according to the ratio of return in respect of insurance
contracts has led the commission and other remuneration, and Party A is derived from payments to be deducted from the payment. |
| 11. | The life insurance contracts solicited by Party B shall comply with the quality standards of the
Party A. |
| (1) | If any short-term mortality or bad-quality cases (refer to attachment 2), Party B shall return
all paid commission to Party without argument and Party retains the right to terminate this Contract. |
| (2) | If any medical claims higher than the standard set by Party A (refer to attachment 3), Party A
has the right to terminate this Contract. |
| 12. | Any insurance products approved by the competent authority in sales of merchandise from Party A
notices Party B in the written consent of the insurance product. Party A plans to cancel a particular Insurance Product or modify
its contents, Party A shall notify Party B in fifteen before, unless the authorities policy or not attributable to the Party's
cause can not be the subject of notification. |
| 13. | Party B may prepare additional material and tools supporting business operation at its cost. Party
B shall gain prior written consent from Party A when using Party A’s trademark. |
| 14. | If it’s necessary to change the operation rules or underwriting rules of the insurance products,
Party A shall notify Party B immediately. All insurance contracts made prior to such changes will be influenced. |
| 15. | Notwithstanding any other provisions of this Contract, the effective date of all documents received
by Party B on behalf of Party will be decided by the rules of Party A. |
| 16. | Party A shall provide the contact window for Party B to deal with consulting, replying. |
Article 6
Party B shall not sign any contract or provide any commission
to the sales person employed by Party A; any violation of this article will be dealt by following:
| 1. | All insurance will be belong to the original unit. |
| 2. | The other party may notify such breaching party in writing to reach the agreement and stop the above behavior. If such violation
is severe, NT 30,000 penalty for each event and not over 3 time half year. |
Article 7
| 1. | Party B is not entitled to receive the initial brokerage for newly entered insurance contract when
the former insurance contract of the insured is defaulted or surrendered 6 months before the new insurance contract is entered.
Party B shall return the brokerage to Party A when the former insurance contract of the insured is defaulted or surrendered 6 months
after the new insurance contract is entered. |
| 2. | However, Party B is still entitled to receive the brokerage base on the difference of the amount
of insurance between the former contact and the new contract. |
Article 8
| 1. | The Receiving Party shall neither disclose to any third party any Confidential Information of the
Disclosing Party in any manner including written or oral. The Receiving Party shall not use the Confidential Information except
for this Contract. |
| 2. | The Receiving Party shall use at least the degree of care, to avoid disclosure of such Confidential
Information as it uses with respect to its own proprietary information of like importance, but no less than the same degree of
care generally used by others in the industry to protect their own proprietary information. |
| 3. | This provision shall remain valid after this contract is terminated. |
Article 9
| 1. | Either party may terminate this Contract, at any time, if the other party breaches any material
term of this Contract and fails to cure that breach within reasonable period after notice thereof from the non-breaching party. |
| 2. | The breaching party shall indemnify, defend and hold non-breaching Party harmless against all damage
directly or indirectly arising out of breach of the terms and conditions of this Agreement or the applicable laws. |
Article 10
| 1. | Either party may terminate this Contract, at any time, if the other party breaches any material
term of this Contract and fails to cure that breach within reasonable period after notice thereof from the non-breaching party. |
| 2. | If either Party is likely to be foreclosed from check clearing services, liquidated or to be adjudicated
bankrupt, the other Party shall have the right to terminate this Contract. |
| 3. | After the termination of this contract, Party B should still carry on insurance contract made by
Party A in this contract until all insurance contract terminated. |
| 4. | The expiration or termination of this Contract shall not prejudice any rights and obligations incurred
under this Contract prior to the expiration or termination. |
Article 11
Upon the termination of this Contract
| 1. | Remuneration Paid to Party B will be limited to the life insurance in the first year and renewal
commissions annual service fee. The payment regarding the insurance policies will be made by Party A and Party A has the right
to offset any unpaid amount plus interest owed by Party B. |
| 2. | If Party B decides to stop the business and Party A agrees to forward the first year and renewal
commissions annual service fee to the third party legally receive the business. Party A shall have agreement with such third party. |
Article 12
Any matters not agreed in this Contract,
the Insurance Law, Civil Law, insurance broker management rules and relevant laws will be applied.
Article 13
When the party responsible person is unable
to perform their duties, should immediately apply for a successor agreement to sign and acknowledge this procedure.
Article 14
Any waiver, modification, addendum or amendment of any provision
of this Contract will be effective only if in writing and signed by duly authorized representatives of each party.
1.
Article 15
The parties irrevocably agree that all disputes arising in any
way out of this Contract which may be resolved by lawsuit will be submitted to District Court of Taipei, Taiwan as the first instance
court.
Article 16 Copies
This Contract will be executed in two copies; one for each party.
January 1st, 2011
Exhibit 10.70
Insurance Agency Contract
Party A: Yingda Taihe Life Insurance Co., Ltd.
Party B: Law Anhou Insurance Agency Co., Ltd.
According
to the "People's Republic of China Insurance Law", "insurance agency regulatory requirements" and other relevant
laws and regulations, the Party B commissioned within their authority to handle the insurance business matters, both parties through
equal and friendly consultations, agree as follows:
Article 1
Both
sides should uphold the principles of solidarity and cooperation, strict compliance with the provisions of this contract.
Party B according to the scope of authorization does the insurance business
for the Party A, Party A shall pay commission to Party B.
Article 2 Term
This
contract is valid from January 1st, 2014 until year ended March 31, 2015. If
Party A or Party B fails to sent notice before the expiration of the effective period of this contract within 60 days of each other
in writing not to renew the contract, the contract is automatically renewed after the expiration of one year.
Article 3 Geographical Scope of Authorization
of Agency
Party A
engages Party B as the insurance agents, the geographical scope of insurance products for Party B is the area approved by the authority.
Party B shall not do business out of the area.
Depending
on the business development of the Party A, with written notice to change or supplement the purview of the preceding paragraph
agent.
Article 4 The Scope of Agency
Party
B in the authorized geographical scope of insurance provided by Party A shall, in accordance with the relevant provisions of national
laws, regulations and insurance regulators, insurance business to handle the following:
1)
publicity, promotion party designated insurance products as the attachment;
2) Representing
Party A to negotiate with Client, analyze their need and design the insurance product, explain exactly the content and policies
of the contract and forward any comments to Party A;
3) publicity,
promotion party designated insurance products, life insurance business to attract and guide the insured for the relevant insurance
procedures (including the interpretation of insurance products and contents insurance policy, insurance explanation precautions
fill the book, the correct guidance of the insured, the insured fill in the Proposal Form and related documents);
4) Providing
customers to the policy renewal insurance services (including but not limited to the timely payment of premiums to remind customers,
customer visits, assisting customers for policy changes to help customers apply for claims, claims guidance, customer complaints
and complaints handling and other after-sales consulting services.
Article 5 Premium collection
1, Party shall guide the
client to pay the insurance via wire-transfer according to the regulation of Party A.
2, The fees of body examination
shall be paid by Party B under following conditions:
| (1) | Client applies to lower the premium to the product which does not need body examination |
| (2) | Non-medical projects to do on their own examination |
| (3) | Have the item not listed in examination list |
| (4) | After examination, the client refuse to pay the insurance, revoke the application. |
Article 6 Commission
| 1. | The calculation or payment of the commission method is ruled in the
attachment. |
| 2. | After 10 days of receiving the signature of the client, such commission
will be calculated in the current month. |
| 3. | Any insurance contracts agented by Party B, such as after the commencement
of the contract, is held invalid, or is canceled or revoked, or discharged due to customer breach of this obligation is to exercise
the right to rescind the Party under the Insurance Act and other factors led to the Party the insured shall be fully refunded premiums,
commissions and other compensation of all Party B within ten days after receipt of notice of Party A, should be under the protection
of individual charged, full refund to the Party A, even after the termination of this contract likewise. Party B is not entitled
to receive the initial brokerage for newly entered insurance contract when the former insurance contract of the insured is defaulted
or surrendered 6 months before the new insurance contract is entered. Party B shall return the brokerage to Party A when the former
insurance contract of the insured is defaulted or surrendered 6 months after the new insurance contract is entered. |
| 4. | If any information provided by the client shall be corrected, the
Party A will not pay the commission to Party B before such correction has been completed. If such the commission has been made,
such amount will be deducted from next payment. |
| 5. | Party B, in the termination of this contract, the two sides signed
the "insurance agency business cooperation termination agreement, the Party has in fact not (such as closure, dissolution,
is revoked, is declared bankrupt, etc.) or upon the law not (if a legal person under license or business license withdrawn or revoked),
the Party can be made in writing immediately lift the "termination of the insurance agency business cooperation agreement. |
Article 7 Rights and Obligations of
Party A
1, Party A’s
rights:
| (1) | supervise and inspect the condition of the provision of agency services, the basic situation of
the customer has the right to know and make the appropriate supervision and inspection. |
| (2) | Make all rule and structure related to the insurance agency business according to the actual business
development |
| (3) | Adjust the procedure of underwriting, including the policy, rate, commission ratio. |
| (4) | Retain the right to confirm the insurance contract made by Party B
and review all documents sent by Party B. |
2, Party A’
Obligations:
| (1) | Make timing underwriting for the contract made by Party B |
| (2) | Paying the commission to Party B on time according to the attachment. |
| (3) | Depending on the actual situation, the Party A shall provide to the Party B to carry out the necessary
business related materials. |
| (4) | based on the relevant laws, regulations and insurance regulatory agencies, training and management
for the Party B and depending on the actual situation of counseling training to assist employees in their insurance agents and
other staff of Party B. |
| (5) | Notify Party any changes to the procedure of underwriting, including the policy, rate, commission
ratio. |
| (6) | Provide other business supporting to Party B. |
| (7) | Not recruit any personnel of Party B. |
| (8) | Not provide any other economic benefit except the commission. |
| (9) | Notify Party B any change to its business address or contact information. |
Article 8 Rights
and Obligations of Party B
1, Party B’s
rights:
| (1) | Doing business in the authorized scope. |
| (2) | Receiving the commission according to this Contract. |
| (3) | Attending all activities held by Party A for promoting business. |
2, Party B’s
obligations:
| (1) | Guarantee that its agency license has been effective during this contract. |
| (2) | Party B sells dividends, investment and even when other new universal life insurance products,
should take the initiative to read tips policyholder dividends insurance, universal insurance and investment-linked insurance product
descriptions, witness the policyholder on the product description autographs and special tips dividends insurance dividend uncertainty,
universal insurance settlement rate expense deduction situation and uncertainty of investment-linked products and investment income
situation expense deduction may be negative risks and other content |
| (3) | Obey the Insurance Act and other relevant acts and inspection regulation and other rule made by
Party A. |
| (4) | Doing business according to the principle , rate and procedure, and bearing the cost and cooperate
with Party A to do the inspection. |
| (5) | Party B shall return all marketing materials within 30 days after termination of this Contract. |
| (6) | After receiving the notice regarding stop selling or changes to the insurance product, Party B
shall adjust accordingly and notify related person. |
| (7) | If any dispute or is likely to happen, Party B shall notify Party A with details in writing within
4 hour at working days and 8 hours at holidays. |
| (8) | Party B shall not print and advertisement in any media without prior written consent from Party
A. |
| (9) | Party B shall not engage other third party to do any business for Party A, or open any sales outlet
without Party A’s prior written consent. |
| (10) | Party B shall keep all material, the content of this Contract and other information from Party
A or the client and not to disclose to any third party. This shall be still effective after the termination of this Contract. |
| (11) | Not recruit Party’A sales person. |
| (12) | Party B shall notify Party A if any change to the address or contact information. |
| (13) | Not alter or forge their own insurance contracts and related documents, forms, product promotional
materials, or fictitious insurance agency business or fabricate surrender, taking a commission; |
| (14) | Party B has no right to issue on behalf of any insurance policy or contract of insurance or repair
hair in any way to make a commitment underwritten agree not to engage in any insurance claims on behalf of Party A work, right
to represent the Party A to the insured, the insured or the beneficiary entered into any agreement or make any form of payment
of the debts commitment. |
| (15) | Party B shall not Misrepresented or failed to explain any matter that affects the rights and interests
of the applicant or the insured, Instigated an applicant or an insured to conceal information from or give false information to
the insurer, or knowingly concealed the fact that an applicant or an insured has concealed information from or given false information
to the insurer, Prevented an applicant or an insured from disclosing information, Solicited business from an applicant or an insured
by means of unfair discrimination, improper rebate, or any other inappropriate reduction of insurance premium. |
| (16) | All information relating to insurance contracts should be engaged in insurance agency business
in the process learned truthfully inform Party A. |
| (17) | replace or assist others to replace customers examination, forgery or modify the medical report |
| (18) | Explain to the client that Party will not take the insurance liability before the insurance has
been made to Party A. |
| (19) | Party B shall not instigated an applicant by means of threat, inducement with promise of gain,
concealment, deceit, or any other inappropriate means, or false representation to terminate an in-force insurance contract and
enter into a new contract that resulted in damage to the applicant |
Article 9 Amendment
| 1. | Any waiver, modification, addendum or amendment of any provision of this Agreement will be effective
only if in writing and signed by duly authorized representatives of each party. |
| 2. | Party reserves the right to adjust the insurance products, underwriting
rule including the policy, rate and procedure. |
| 3. | Party A has the right to adjust the commission rate according to the
request by insurance inspection rules. |
Article 10 Termination
| 1. | Either party may terminate this Contract with prior 60 days writing notice to the other Party. |
| 2. | Party A could terminate this Contract with notice to Party and effective upon notice delivered: |
| (1) | Any violation to section 8.2 of this Contract |
| (2) | Having received a crime. |
| (3) | Refusing to adjust according to section 7.1. |
| (4) | Other violations to this contract and laws. |
| 3. | This Contract is terminated upon following situations: |
| (1) | Any party to this contract before the expiration of the effective period of 60 days notice in writing
to the other party not to renew the contract, the contract on its expiry date of the validity period shall terminate. |
| (2) | If there is any fact that either party (including, but not limited to, suspension of business, dissolution,
bankruptcy law, etc.), or on the law (including, but not limited to revoke the business license was being revoked, ordered to close
down or cancellation of a license) not running business, the other party may immediately be made in writing to terminate this contract. |
| 4. | Party A is entitled to recover the full insurance policy contract which is terminated before the original
contract and not in accordance with the life insurance agent (agency) fee payment approach" to pay money not paid the first
year, such as commissions, sales bonuses, monthly performance bonuses, year-end bonuses, commissions and renewal, renewal annual
service allowance, bonus rates continued agency agreed to pay Party. Party policy has been to attract all the post-service transfer
back all Party B should compensate losses caused to the owner. |
Article 11 General
Provisions
| 1. | Any matters not agreed in this Contract, the relevant provisions of
the relevant laws and regulations or state insurance regulators will be applied or both parties agree to sign separate agreement.
This Agreement, including all appendices and attachments hereto, constitutes the complete and exclusive understanding and agreement
between the parties regarding its subject matter and supersedes all prior or contemporaneous agreements or understandings, whether
written or oral, relating to its subject matter. |
| 2. | The notifying in this contract shall be sent to the address shown
in the contract in writing or according to the other party written notice of change of address. |
| 3. | When the contract is signed, Party B should provide a copy of the
relevant certificates of insurance agent license, business license, legal license, organization code certificate, etc. to the Party
A for the record. If there is a change in the license contract period, Party B shall immediately seized a new certificate and a
copy of the memorandum sent to the Party A. Without the written consent of the other party, either party shall not assign or transfer
its rights or obligations based born of this contract. |
| 4. | Due to disputes arising from this contract, the two parties through
friendly consultation, negotiation fails, either party shall have the right to sue in the local people's court. |
| 5. | This Contract will be executed in four copies; two for each party. |
Dec. 31, 2013
Exhibit 10.71
Insurance Agency Contract
Party A: AVIVA-COFCO life insurance Co. ltd
Party B: Law Anhou Insurance Agency Co., Ltd.
According
to the "People's
Republic of China Insurance Law", "insurance
agency regulatory requirements" and other relevant
laws and regulations, the Party
B commissioned within their authority
to handle the insurance business matters,
both parties through
equal and friendly
consultations, agree as follows:
Article 1 Term
1、This
contract is valid from January 1st, 2015 until
year ended
December 31, 2017.
2、If
Party A or
Party B fails to sent notice
before the expiration of
the effective period of this contract
within 60 days of each other in writing
not to renew the contract,
the contract is automatically renewed
after the expiration of one year,
to renew
the contract period ended
on December 31, 2018.
3、Renew
the contract expires in the
preceding 60 days
before the contract period,
the parties can negotiate
a contract to determine whether
adjourned; if
both sides agree to renew
should be entered into separate
"insurance agency business
cooperation contract," or other written
supplementary agreement, otherwise that
contract expires
at the termination of
the contract.
4、Both
parties may
terminate this contract
prior and have other special agreement.
Article 2 Cooperation
Party
A engages Party as a sales agents
of insurance products, namely
within the authorization scope,
in accordance with relevant laws
and regulations of the state
insurance regulators, the introduction
and sale of
insurance products issued by Party A;
Party A shall pay operation fees to Party B.
Both parties should be
sincere cooperation, honesty,
equality and mutual benefit, and strictly comply with
the provisions of this contract.
Article 3、Geographical Scope of Authorization
of Agency
Party
A engages Party B as the insurance agents,
the geographical scope of insurance products
for Party B is Henan Province.
Party
B in the authorized geographical
scope of insurance
provided by Party A
shall, in accordance with
the relevant provisions of national laws,
regulations and insurance regulators, insurance business
to handle the following:
1)
publicity, promotion party
designated insurance products,
life insurance business to attract
and guide the insured
for the relevant insurance procedures
(including the interpretation
of insurance products and
contents insurance policy,
insurance explanation
precautions fill
the book, the correct guidance of
the insured, the insured fill in
the Proposal Form and related documents);
2)
establish a special account,
the collection of the preceding business
insurance, and
insurance on
the date of receipt of the
two days of
transfer to
the account designated
by Party A;
3)
the collection of insurance
policyholders, contract changes,
termination application,
claims application, loan
applications and other relevant
documents, and within the stipulated time
promptly forwarded to Party
A;
4)
collection of insurance benefits
beneficiaries and other relevant
application documents,
and within the stipulated time promptly forwarded
to Party A
5)
According to the requirements of
the Party A, on behalf of
not more than 500 yuan
(inclusive) of the
micro-insurance and surrender
payments and other related
payments transferred to the
policyholder, the insured or
the beneficiary;
6)
According to the requirements of
the Party A, on behalf of
the insurance
contract and
the notice or other document
within a specified period
Party promptly forwarded to
customers. Depending on the business
development of the Party A,
with written notice to change or
supplement the purview of
the preceding paragraph agent.
Party B
acts beyond
the scope of authorization, the
Party B shall be liable,
regardless of the party,
resulting in losses to the
Party A, the Party
A should be compensated.
Article 4 The Scope of insurance
1, the
insurance scope
of bilateral cooperation in Annex
"in the British
life insurance agent
(agency) fee
payment method."
2, In the
effective period of the contract, both parties
can change
the scope of cooperation
through negotiation of insurance,
the only such changes need to supplement
the written
agreement signed
by both parties, except as otherwise agreed by
the contract.
Article 5 Independent Contractor
Both parties
signed a cooperation
and performance of this contract,
does not mean that both parties
constitutes an employment relationship
or a legal partnership relationship
or de facto.
Article 6 Commission Payment and Refund
1, in the
effective period the contract, the real effective
insurance contract
with the insured
party and
signed by the
Party B in accordance with
the sales agent sales agent
and Party B
under the premiums
already paid, under this
contract and
Accessories "British Life remuneration
calculated insurance
agent (agency)
fee payment
approach "agreed to pay
fees to the
Party B.
2. If
the preceding paragraph of the
commission "effective
insurance contract"
for at
least one year during the
insurance policies
of the new contract, Party A to Party B
to pay agreed upon
in the preceding paragraph need to meet
the following conditions:
1)
policy has been
successful visit
and
2)
The policy
is the customer's signature pieces,
and
3)
to reach the other requirements
of this contract relating to
fees paid.
These
"successful visit"
means a party designated by
specialized departments and personnel
designated by Party A linked to the insured
by telephone or letter
and completed
a return visit. Above
the "customer's signature piece"
means a Party
B to attract, insurance
documents (including,
but not limited to, insurance
book, insurance
tips, product brochures, a statement
of investment-oriented insurance
products) for
the insured and the insured
himself autographed
and receipt
policy autographed
policyholders insurance
contract.
Party
A has the right to modify, "In the Life Insurance Agents
(agency) fees
paid approach"
remuneration calculation method
based on the actual situation of
business development, provided that such
modification must prior written
notice to Party B; Party
A issued a written notice
should be clearly modifications
"in the British
life insurance agent
(agency) fee
payment methods," the effective time.
In the modification
of the "Sino-British
life insurance agent
(agency) fee
payment method" has been signed
before the commencement of a valid
insurance contract, receives
insurance policy
and obtain
receipt handwritten
signature of
the insured business,
the original "In
the Life Insurance Agents require the person
(organization) fee
payment methods, "the meter
to pay commission.
Party
A, prior to the 25th of each month
(in case of extended holidays
to the next business day),
to provide
a calendar month to party B based on successfully represented
the actual underwriting
and successful
visit done by Party B,
a signature piece
for the client himself,
and hesitant
after the expiry of the
warranty period is still
valid details,
and the details
of the insurance premium
for the base
commission rate according to
"in the Life Insurance agents
(agency) fee
payment approach"
to deal with the calculation of
the fee. For
returning unsuccessful
party or
client's signature piece
of the insurance contract,
if the
insurance contract to complete the
visit and
become a customer's signature piece
of time
in the 18th
month (including
the first day of the 18th,
in case of holidays in advance),
the policy Party
will accompany the month
covered by fees
charged to cope
with issuing
Party. However, if
the policy is to complete the
visit and
become a customer's signature pieces
after 18 hours
in a month,
the policy implications of
the policy
owner the right fee
and complete
a return visit next month
to become the customer's
signature pieces, with the next month
to deal with the formalities
Party fees
paid together
This contract
means the insured
alleged hesitation period
from the date of receipt
of insurance contracts during the
10 days (subject
to receipt
documented), and during this period
the insured may
terminate the insurance contract according to the provisions
of the insurance contract, the Party A will be
under the insurance contract
all insured
paid premiums
refunded without interest.
Party
A, prior to the 25th of each month,
shall (in case of extended holidays
to the next business day)
make the payment of
the agreed fee
in the preceding paragraph to Party B.
Party B
shall deliver the invoice after receiving the fee
from the date within
two business days
of the payment. If Party B
does not deliver,
within this period,
the invoice,
the payment for next month shall paid on the condition that
Party A has provided
the invoices to Party
A.
Party A
shall pay the
fee to the following account designated by Party B:
Bank:
Bank account:
Account Name:
Party
B shall pay to
the money the Party
A the following account:
Bank: Branch of
ICBC Beijing
Chaoyang Gate
Bank account: 0200216919000002621
Account Name: China Life Insurance Company Limited
Any
insurance contracts agented by Party B, such as
after the commencement of the contract,
is held invalid, or
is canceled or revoked,
or discharged
due to customer breach of this obligation
is to exercise
the right to rescind the Party
under the Insurance Act
and other factors led to
the Party the insured
shall be fully refunded
premiums, commissions and other
compensation of all
Party B within ten days
after receipt of notice
of Party A, should be
under the
protection of individual
charged, full
refund to the Party A,
even after the termination of this contract
likewise. Party B is not entitled to receive the initial
brokerage for newly entered insurance contract when the former insurance contract of the insured is defaulted or surrendered 6
months before the new insurance contract is entered. Party B shall return the brokerage to Party A when the former insurance contract
of the insured is defaulted or surrendered 6 months after the new insurance contract is entered.
The
contract term
insurance contract is canceled,
including the insured hesitate
to terminate the contract period,
and after the end of
the contract period
to lift hesitation.
The termination of the contract
of insurance contract
term refers to the
insured at the end of
the grace period has yet
to pay the renewal premium,
resulting in termination of the contract
of insurance
cases.
In the event that, in the
conduct of insurance
agency business in the process of
illegal, illegal, in violation of the
contract or other damages
the insured, the behavior of
the insured, the beneficiary or
the interests of
the Party, the Party A has the right to
claw back the appropriate commission
paid to Party B, etc. remuneration.
Party B’s behavior
caused loss to Party
A, Party B shall
compensate all losses
suffered by the Party A.
Party
A, at the time of the monthly
settlement fee, could ask payable
directly deducted
from the income
of this contract, including Article VI,
paragraphs 8 and 9 of the agreement,
including a refund of the
entry fee
should be, or to request
a refund from Party B
the payment of
the appropriate fee.
For Party B
shall refund
owed in addition to the
entry fee
should be returned or
outside, including but not limited to
Party B
under this contract
shall pay
liquidated damages and
damages, such as money,
from the
collection deducting
fees or other benefits
agency. Any
overdue return commissions or
overdue unpaid
damages, for each overdue
day, five thousandths of
calculating the amount
owed shall be
liquidated.
Article 7 Obligations of Party A
1, in the
effective period of the contract, Party A
shall pay to the
agency commission in accordance with
this contract to Party B.
2,
Depending on the actual situation, the Party
A shall provide
to the Party B
to carry out the necessary
business related materials.
3, If Party
A decided to stop selling
some products within
the scope of cooperation in this
contract or
contract modification
within the scope
of this cooperation
some insurance products
Party A shall promptly
notify Party B in writing,
the notice shall be effective
when delivered
to Party B, without the consent
by the Party B.
4, If the Party
A decided to modify or change
product sales regulations,
shall immediately notify the Party B;
to change or modify the provisions
of the Party
B causing the hard
blocks of rows,
the parties shall negotiate
in good faith to resolve
this, the negotiation fails,
the parties may
terminate the contract.
5,
Party A should be based on
the relevant laws, regulations
and insurance regulatory agencies,
training and
management for the Party
B and
depending on the actual situation of
counseling training
to assist employees in
their insurance agents
and other staff of Party B.
Article 8 Obligations
of Party B
1, Party B
has committed to
fulfill the qualifications and
capabilities of this contract,
including but not limited to,
obtaining appropriate insurance
agent qualification, a legitimate
and effective "insurance
agent license", "business license" and so on. When
Party B in the conduct
of insurance agency business
process or
the performance of this contract
shall be in accordance with
the principles of good faith
and strictly abide by relevant laws and
relevant regulations,
insurance regulators,
and the
provisions of this contract,
the insurance agent to fulfill
obligations and
responsibilities, not
illegal, illegal, in violation of the
contract or the insured
prejudicial behavior
insured, the beneficiary or the
party interests,
otherwise Party B shall bear all
legal responsibilities of its
behavior, causing
losses to customers,
Party B shall be liable for
the customer; causing
losses to
the Party, Party
B shall be liable for damages.
2, Party B
must conduct business within
the authorized scope by the Party A.
Party B has no
agency, beyond
the scope or any conduct after termination of agency. Any
losses caused to Party A by the Party B’s behavior,
Party B shall
be liable for damages.
3,
Party B
has no right to issue
on behalf of any
insurance policy or contract of insurance
or repair
hair in any way
to make a commitment
underwritten agree
not to
engage in any insurance claims
on behalf of Party A
work, right to represent
the Party A to the insured,
the insured or the beneficiary entered into any
agreement or
make any form of
payment of the debts
commitment.
4,
Party B sells insurance products
offered strictly
in accordance with relevant laws and regulations,
regulatory requirements and
the terms of the insurance contract,
the premium rate tables,
insurance documents or
insurance requirements
provided by Party A. Party B shall not make any
changes, modifications, or misinterpreted,
shall not be granted shares,
options or interests
of the insured, the
insured or the beneficiary of
the insurance contract make any commitment
beyond. Any violation
of Party B, Party B
shall take the responsibility.
5,Party
B should strictly abide by
the relevant provisions of the relevant laws,
regulations, insurance regulators,
and the provisions of this
contract to carry out
the insurance agency business
for insurance
documents (including,
but not limited to, insurance
notes, inform
the relevant matters,
the statement
authorization books,
etc.), insurance policy, policy endorsement,
endorsement or other supplemental
insurance regulators require
agreement or matters
described by Party A. Party B
shall truly questioning
the customer, inform
or explain;
exemptions for
insurance contract liability
insurer, insurance
liability provisions, surrender
and other charges deducted from
the cash value, such as
the terms of
hesitation, Party B shall
clearly prompted customers
and clearly stated,
and prompts customers to
read the relevant exclusion clauses
carefully when receive
insurance, insurance or other insurance
certificate to fulfill
the obligation of the insurer;
the matters required
to make a statement or tell
the customer, the Party
B shall procure that its
factual description,
if the customer has added
Party B shall
promptly convey to Party A;
Party B shall witness
Customer signatures
on insurance
application documents, power of attorney,
insurance policies and other documents
receipt. Party B
sales dividends,
investment and even when
other new universal
life insurance products, should
take the initiative to read
tips policyholder
dividends insurance, universal insurance and
investment-linked insurance
product descriptions, witness
the policyholder on
the product description
autographs and
special tips dividends
insurance dividend
uncertainty, universal insurance
settlement rate expense deduction
situation and
uncertainty of
investment-linked products
and investment income
situation expense deduction
may be negative risks
and other content, and
transcribed testimony
insured when completing the
proposal form below
after signature
statement: "I
have read the terms of insurance,
product brochures and insurance
tips book,
understand the features and
benefits of
this product
policy uncertainty."
6,
All information relating to insurance contracts
should be engaged in
insurance agency business
in the process learned
truthfully inform Party A.
7,
In accordance with the requirements, any
collection (turn)
the insurance or
insurance, surrender
payment or other payment
shall be delivered
to Party A , respectively,
according to the beneficiary or
payee Party,
and shall not in order to offset
a reward
or for
other purposes. If
unjustified delays
by Party B or handed
over the money,
should be forwarded
to the delay in
the amount of the base,
a daily two hundred
dollars to pay
liquidated damages; and
constitutes unlawful or
criminal acts,
should bear the corresponding legal
responsibility.
8, Party
B shall ensure that its employees
comply with the conditions
of China
Insurance Regulatory Commission, China
Insurance Regulatory Commission with a
qualification certificate and
insurance should be
legal and
business knowledge training and
professional ethics education and
further education for
employees in accordance with
laws and
regulations. Sales
of new products, Party B shall
ensure compliance "in the
British life insurance products
through the generation
of new marketing
sales management approach" requirement, and strictly
in accordance with the "Sino-British
life insurance products through the
generation of new
marketing sales management
approach" its
management. Party
shall ensure that its employees
show exhibition industry
permits, work permits or
practicing certificates and other
credentials when
visiting customers sales,
but also the name of
the insurance company shall inform
the customer agent.
9,
Party B, for
this contract
and any
information from the
party because of
a business relationship learned
(including, but not limited to,
party info, insurance
product information, customer information
and other Party
and other information provided by the
Party operation)
are to be
confidential, regardless of
whether the termination of
this contract, and by written consent,
Party B shall not disclose
to others or
used for commercial purposes, but
for the exercise or
protection of rights under this
contract or
by law are
born for,
unless.
10, Party B
should use and manage properly the use of
a variety of documents
and materials provided by Party A,
and shall, within 30
days of the remaining
documents and material
return to Party
A at the date of termination
of this contract.
11,
Party B has the obligation to actively cooperate with
Party A for its proxy service
status and management
supervision and inspection.
12,
Party B is obliged
intact and promptly
handed it
to the party
A obtained the agent
activity during
the insurance contract
and all documents
and information relating to.
13,
Party B reserves the right to
supervise and inspect
the condition of the provision of agency
services, the basic situation of
the customer has
the right to know and
make the appropriate supervision
and inspection,
Party B must cooperate.
Article 9 Termination
1.
The contract
is terminated due to the following
circumstances, if any debt
repayment should be fulfilled
first:
(1),
If there is any fact
that either party
(including, but not limited to,
suspension of business, dissolution,
bankruptcy law,
etc.), or on the law
(including, but not limited to
revoke the business license
was being
revoked, ordered to close down
or cancellation of a license)
not running business, the other party may
immediately be made in writing
to terminate this contract.
(2)
When any party
business has seriously deteriorated, the other party is
entitled to have 60 days
advance written
notice to the other to terminate this contract,
the expiration of
60 days notice
of this contract shall be terminated.
(3)
Any party to
this contract before
the expiration of the effective period of
60 days notice
in writing to the other party
not to renew the contract,
the contract on its expiry date of
the validity period shall terminate.
(4),
Party B agree that promised amount of responsibility for each contract year, beginning with its annual life insurance premium income
by total real income of not less than RMB $ 0.6 million, and continues to not less than 70%. Party A has the right to terminate
this Contract if fail to achieve either conditions. If such fails due to force majeure, Party A shall assist Party B according
to actual circumstance. Party A has the right to terminate this Contract if the Party B fails to achieve the target set forth in
above article.
2.
After termination of this contract, either party shall pay shall
pay the amount owed to the other
Party, within 30 days after termination of
the contract.
3.
During the insurance
agent process, if
one of the following circumstances happens,
Party A reserves the right to terminate this contract,
no agency commission paid to the
Party B and other related
remuneration and claim
damages Party,
constitutes a crime submit
to judicial organs according to law:
1)
concealment or fictional
important information relating to
the insurance contract, or
misleading sales;
2)
unauthorized changes to the insurance provisions,
arbitrarily raise or lower insurance rates,
selling fake insurance documents,
or provide false evidence
of insurance
contract parties;
3)
in the insurance agency business
fraud, breach of trust,
forgery or
Sike seal of;
4)
hinder the insured
to perform the obligations or
induce it does not
perform the obligations;
5)
deceive the insured,
the insured, the beneficiary or the party,
or collusion
insured, the insured
party to be deceived,
the beneficiary or other third parties;
6)
misappropriation, interception, embezzlement insurance,
insurance premiums or
surrender of gold;
7)
alter or
forge their own
insurance contracts and
related documents,
forms, product promotional materials, or fictitious
insurance agency business or fabricate
surrender, taking
a commission;
8)
counterfeit insured,
the insured signature;
9)
in sales
dividends, investment-linked,
universal life insurance, and other new products,
the counterfeit insured
reproduces the following statement:
"I have read the
insurance policy, product brochures and
insure prompt
book, to understand
the features and benefits
of this
product policy
uncertainty. "
10)
issued by the insurance policy or
unauthorized repair
insurance contracts issued;
11)
replace or assist others to
replace customers
examination, forgery or modify
the medical report, but
I knew
examination of non-customer
behavior truthfully inform
Party;
12)
false claims;
13)
participate in or abet
influence customers to make
the Party's reputation, brand
image and
social behavior;
| 14) | Other privileges
beyond insurance agent
or violation of state laws
and regulations, the relevant regulatory
agencies regulatory requirements,
the provisions of this contract
or Party, or damage to
the party
or the insured,
the insured acts,
the beneficiary's interests. |
4.
Whether the contract
for any reason and
the dissolution or termination, shall
pay the
agency commission to Party
B, Party B
is limited to the premium
by agents of the
insurance contract before
the dissolution or termination of this contract
has actually been received by
the computing
Party the
agency commission; after
the dissolution or termination of this contract,
for reasons
of insurance contract
Party agents,
regardless of the dissolution or termination
of this contract in
the future whether
to pay the corresponding premium,
Party B
has the right to require
payment of any agency
procedures continue
to Party fees.
But except for
rescission or termination of this contract,
the two sides had signed
an insurance contract renewal
services and corresponding
compensation payment standard
to reach a supplementary agreement
5.
Party B, after the
termination of this contract, continue the operation (refer
to their insurance
agent license and business license
is still valid, continue to operate
the insurance agency business),
and the two sides signed the "insurance
agency business cooperation contract
termination agreement
(a)", the Party
continues providing
customers to Party
policy renewal
insurance services (including
but not limited to the timely payment of
premiums to remind customers,
customer visits, assisting
customers for policy
changes to help customers
apply for claims,
claims guidance, customer complaints
and complaints handling and
other after-sales
consulting services.
5.
Remuneration Paid to Party B will be limited to the life insurance in the first year and renewal commissions annual service fee.
The payment regarding the insurance policies will be made by Party A and Party A has the right to offset any unpaid amount plus
interest owed by Party B.
6.
Party B, in the termination of this contract,
the two sides signed the "insurance agency business
cooperation termination
agreement, the Party
has in fact
not (such
as closure, dissolution, is revoked,
is declared bankrupt,
etc.) or upon the
law not (if a legal person
under license
or business license
withdrawn or revoked),
the Party can be made in writing
immediately lift the
"termination of the insurance
agency business cooperation
agreement.
7.
Party A
is entitled to recover the full
insurance policy contract
which is terminated before the
original contract and
not in accordance with the
life insurance agent
(agency) fee
payment approach"
to pay money
not paid
the first year, such as
commissions, sales
bonuses, monthly performance
bonuses, year-end
bonuses, commissions
and renewal,
renewal annual service allowance,
bonus rates
continued agency
agreed to
pay Party.
Party policy
has been to attract
all the post-service
transfer back
all Party
B should
compensate losses
caused to the owner.
8.
Either party
agreed to terminate this contract
in accordance with the law
or the contract,
the contract will be terminated
when the
notice served on the other
party to terminate the contract,
but the contract
for contract
termination, except as otherwise agreed upon
time. Either
by courier service,
by registered letter, or other
forms of delivery record
of sending
notice of the termination of the contract,
the contract at the end
of the notice delivered
to the address
shown on page or
the other depending on
the other party written notice of
change of
address shall be deemed
served.
Article 9 General Provisions
| 1. | Any matters not agreed in this Contract, the
relevant provisions of the relevant laws and regulations
or state
insurance regulators will be applied or both parties agree to sign separate agreement. This Agreement, including all appendices
and attachments hereto, constitutes the complete and exclusive understanding and agreement between the parties regarding its subject
matter and supersedes all prior or contemporaneous agreements or understandings, whether written or oral, relating to its subject
matter. |
| 2. | The notifying in this contract
shall be sent to the address shown in
the contract in writing
or according to
the other party written notice of
change of address. |
| 3. | When the
contract is signed,
Party B should provide
a copy of the relevant certificates
of insurance agent license,
business license, legal license,
organization code certificate, etc. to
the Party A for the record.
If there is a change
in the license
contract period, Party B shall immediately
seized a new
certificate and a copy
of the memorandum
sent to the Party A.
Without the written consent of
the other party, either party
shall not assign or
transfer its rights or obligations
based born of
this contract. |
| 4. | Due to disputes
arising from this contract,
the two parties through friendly consultation,
negotiation fails, either
party shall have the right
to sue
in the local people's court. |
| 5. | This Contract will be executed in four copies; two for each party. |
January 1st, 2015
Exhibit 10.72
Engagement Agreement
This agreement is signed by the two parties:
Name of party A: LAW Insurance Broker Co.,Ltd.
(hereinafter referred to as Party A)
Registered address: 7F, No. 311, Nanjing E.
Rd., Songshan Dist., Taipei City, Taiwan
Postcode: 10595
Name of party B: Chao, Hui-Hsien
ID No.: H220435536
Party A and party B shall reach following agreements:
Article I Term and Position of Employment
| 1. | Party A employ Party B as senior management personnel of Party A (position: General Manager),
the term of employment is from January 7th, 2015 to January 6th, 2016. |
| 2. | Article II Job description →depending on the authorized scope |
Party B shall assist Party
A in operating and managing insurance agency businesses during his term of employment, including but not limited to the following
matters:
| (1) | Annual operating policies: Party B shall explain the annual operating policies to the Board of
Directors (“BoD”). If the meeting schedule of BoD is not held on time, then should be on the actual meeting date. |
| (2) | Temporary operating policies: Party B may adjust the operating policies based on the following
circumstances and report to the BoD at the coming meeting: |
| B. | Change, repeal or abandon of laws or regulations |
| C. | Other causes causing the original operating policies difficult to enforce. |
| (3) | Organize and exert company's annual operation plan and scheme |
| (4) | Preside over the operation and management of insurance company, organize and exert decisions of
the meeting of board. |
| (5) | Decide to employ or dismiss employees or brokers, except the auditor. |
| (6) | Execute company's financial management and use (the amount of NT ) thirty million or less with
proper authority, but the resolution over more than $ 10 million, Party B shall explain at the coming BoD meeting. |
| (7) | As the representatives (including the need to text whom acts (such as signing or posting) and without
whom the text behaviors (such as participation in a meeting or event). |
| (8) | Attend BoD and shareholders meetings, report the appointed duties, provide timely suggestions,
and answer to questions raised by the BoD. |
| (9) | Other jobs assigned by the BoD. |
| 3. | Remuneration and Condition of employment |
| (1) | Salary: Party A shall pay NT$ to party B as remuneration each month payable monthly in arrears
on fifth day of each calendar month, which may be advanced to the previous working day if it falls on public holidays or weekends. |
| A. | 13-Month Persistency Ratio |
| a. | Above 80%: 1% of the commissions paid to Party by the insurance companies. |
| b. | Above 85%: 1.5% of the commissions paid to Party by the insurance companies. |
| B. | 25-Month Persistency Ratio |
| a. | Above 80%: 0.5% of the commissions paid to Party by the insurance companies. |
| b. | Above 85%: 1% of the commissions paid to Party by the insurance companies. |
Party A agrees to provide Party
B following benefits in the period of engagement:
| (3) | Group insurance (the premium will be in accordance with the negotiation between the Party A and
insurance company); |
| (4) | Domestic and foreign studies (unlimited domestic and one time for foreign); |
| (5) | Travelling (20 days for foreign, seven days 2 times in domestic); |
| (6) | General health examination (once a year, and with a (PET) photographic examination during the engagement.);
and |
| (7) | Other benefits according to the Labor Standards Act or related regulations, including but not limited
to, Severance compensation, workers' compensation or labor pension. |
Party B shall be under the care
of a good manager, take care of the Party A’s affairs with proper implementation and bear the following obligations during
the engagement period:
| (1) | During the engagement period shall not be appointed as the party of business and others engaged
in the same or similar nature of the business as the Party A, but in the Taiwan Area and the Mainland Area is limited. |
| (2) | Fulfill the obligation to protect the equipment (including software and hardware). |
| (3) | In the event of a major incident on company operations, shall immediately report to the chairman
of the Board or the shareholders' meeting convened to discuss coping methods. |
| (4) | Execute the matters relating to the bounden duty of the manager to perform the Companies Act, the
Insurance Act or related regulations. |
preside over the operation and management of
insurance company, organize and exert decisions of the meeting of board.
(1) organize and exert company's annual operation
plan and scheme.
(2) draft the set plan of inner managing organizations.
(3) draft the basic system of management.
(4) draft the specific regulations.
(5) Apply to employing or dismissing manager,
vice-manager and the one who is in charge of finance.
(6) decide to employ or dismiss the one that
is in charge of management and that shall be decided by the board meeting.
(7) other rights authorized by the board meeting.
(8) rights regulated by other rules.
This engagement shall be terminated
upon the expiration of this engagement except the following conditions:
| (1) | This engagement shall be terminated once re-election of all directors and supervisors of Party
A. |
| (2) | Either party to the other party written notice of termination of the contract, but it should be
in two months time before the termination of the above notice, but due to causes attributed to the other party for the purpose
of notice of termination of the contract, unless. Violation of the provisions hereof either party may terminate this contract who
should bear the liability for damages. |
| (3) | In the event that Party B disqualifies to act as manager of the engagement, this engagement shall
be terminated. |
| (4) | Due to personal physical factors have been diagnosed by doctors and Party B can’t do the
jobs as the managers, Party B may terminate this Agreement at any time after notifying Party A. |
| (5) | Party A dismisses the Party B according to the Article 29 of the Company Act as the manager. |
| (6) | Party A decides to close the business, merge or make with 1/2 or more of its businesses or other
capital to any third party, this engagement shall terminated. |
| (7) | Either party fails to cure the breach to the engagement after receiving the written notice from
the other party within a reasonable period. But breach of severe circumstances, the non-breaching party may terminate this engagement
without prior notice. |
Except the above articles for terminating
this engagement, either party may claim damages incurred by any termination of this contract or refuse to fulfill the contractual
obligations.
Either party may not assign or transfer
this Agreement, in whole or in part, by operation of law or otherwise, without the other party’s express prior consent.
| (1) | This Agreement shall be governed by the laws of Taiwan R.O.C. |
| (2) | Any waiver, modification, addendum or amendment of any provision of this Agreement will be effective
only if in writing and signed by duly authorized representatives of each party. |
| (3) | All disputes arising out or in connection with this Agreement shall be settled by the first instance
of the District Court of Taipei, Taiwan, Republic of China. |
This Agreement may be executed in counterparts,
each of which will be deemed an original, but all of which together will constitute one and the same instrument.
In case this Agreement is contraindicated to
previous verbal and written agreements, this contract shall be applied. Any modification of this contract s must adopt each party's
agreement in written.
Party A: LAW Insurance Broker Co.,Ltd.
legal representative or principal (sealed by):
|
Party B (Sealed by): Chao, Hui-Hsien |
Date: January 7th, 2015 |
Date: January 7th, 2015 |
EXHIBIT 31.1
Certification
of Chief Executive Officer
Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
I, Mao Yi Hsiao, certify that:
1. I have reviewed this Annual Report
on Form 10-K of China United Insurance Service, Inc.;
2. Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial
statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a. Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b. Designed such internal control
over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of
the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any
change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying
officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 18, 2015 |
/s/ Mao Yi Hsiao |
|
|
Mao Yi Hsiao |
|
|
Chief Executive Officer |
|
|
(Principal Executive Office |
|
EXHIBIT 31.2
Certification of Chief Financial
Officer
Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
I, Chuang Yung Chi, certify that:
1. I have reviewed this Annual Report
on Form 10-K of China United Insurance, Service, Inc.;
2. Based on my knowledge, this report
does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial
statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
a. Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b. Designed such internal control
over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of
the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any
change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter
(the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying
officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud,
whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: March 18, 2015 |
/s/ Chuang Yung Chi |
|
|
Chuang Yung Chi |
|
|
Chief Financial Officer |
|
|
(Principal Accounting Officer) |
|
Exhibit 32.1
CERTIFICATION
PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE)
Pursuant to section 906 of the
Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States Code), the undersigned
officer of China United Insurance Service, Inc. (the “Company”), does hereby certify with respect to the Annual Report
of the Company on Form 10-K for the period ended December 31, 2014 as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), that:
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: March 18, 2015 |
/s/ Mao Yi Hsiao |
|
|
Mao Yi Hsiao |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
Exhibit 32.2
CERTIFICATION
PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18, UNITED STATES CODE)
Pursuant to section 906 of the
Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of Title 18, United States Code), the undersigned
officer of China United Insurance Service, Inc. (the “Company”), does hereby certify with respect to the Annual Report
of the Company on Form 10-K for the period ended December 31, 2014 as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), that:
|
(1) |
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: March 18, 2015 |
/s/ Chuang Yung Chi |
|
|
Chuang Yung Chi |
|
|
Chief Financial Officer |
|
|
(Principal Accounting Officer) |
|
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