UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x |
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September
30, 2015
OR
¨ |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from _____________to
________________
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
or
organization) |
(IRS Employer Identification No.) |
7F, No. 311 Section 3
Nan-King East Road
Tapei City, Tawain
(Address of principal executive offices)
+8862-87126958
(Registrant’s Telephone Number, Including
Area Code)
N/A
(Former Name, Former Address and Former
Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
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 whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition
of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer ¨ |
Non-Accelerated Filer ¨ |
Accelerated Filer x |
Smaller Reporting Company ¨ |
Indicate
by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No x
As of November 5, 2015, there are 29,452,669
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 report contains forward-looking statements.
These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance or achievement expressed or implied by the forward-looking
statements. These risks and uncertainties include, but are not limited to, the factors described under Part 1 Item 2 “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking
statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,”
“intends,” “may,” “plans,” “potential,” “predicts,” “projects,”
“should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking
statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties.
Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Forward-looking statements represent our estimates
and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report,
or that we filed as exhibits to this report completely and with the understanding that our actual future results may be materially
different from what we expect.
Except as required by law, we assume no obligation
to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated
in any forward-looking statements, even if new information becomes available in the future.
OTHER PERTINENT INFORMATION
References in this 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 Taiwan, 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 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. FINANCIAL INFORMATION
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
(UNAUDITED) | | |
| |
ASSETS | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and equivalents | |
$ | 18,820,097 | | |
$ | 19,571,799 | |
Marketable securities | |
| 2,347,973 | | |
| 2,437,006 | |
Accounts receivable, net | |
| 3,873,001 | | |
| 7,706,273 | |
Other current assets | |
| 1,175,575 | | |
| 574,467 | |
Total current assets | |
| 26,216,646 | | |
| 30,289,545 | |
| |
| | | |
| | |
Property, plant and equipment, net | |
| 909,676 | | |
| 1,061,762 | |
Intangible assets | |
| 337,126 | | |
| 270,956 | |
Goodwill | |
| 2,071,491 | | |
| 31,651 | |
Long-term Investment | |
| 1,254,932 | | |
| 95,328 | |
Other assets | |
| 862,333 | | |
| 587,522 | |
TOTAL ASSETS | |
$ | 31,652,204 | | |
$ | 32,336,764 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Taxes payable | |
$ | 806,841 | | |
$ | 919,907 | |
Other current liabilities | |
| 6,004,145 | | |
| 9,534,371 | |
Deferred tax liability | |
| 36,159 | | |
| 37,662 | |
Due to related parties | |
| 317,639 | | |
| 531,447 | |
TOTAL CURRENT LIABILITIES | |
| 7,164,784 | | |
| 11,023,387 | |
| |
| | | |
| | |
Long-term liabilities | |
| 7,201,172 | | |
| 7,500,645 | |
TOTAL LIABILITIES | |
| 14,365,956 | | |
| 18,524,032 | |
| |
| | | |
| | |
COMMITMENTS AND CONTINGENCIES | |
| | | |
| | |
| |
| | | |
| | |
STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Preferred stock, par value $0.00001, 10,000,000 authorized, 1,000,000 issued and outstanding | |
| 10 | | |
| 10 | |
Common stock, par value $0.00001, 100,000,000 authorized, 29,452,669 and 29,100,503 issued and outstanding | |
| 295 | | |
| 291 | |
Additional paid-in capital | |
| 8,157,516 | | |
| 4,674,593 | |
Statutory Reserves | |
| 1,918,635 | | |
| 1,388,014 | |
Accumulated other comprehensive gain/(loss) | |
| (777,840 | ) | |
| (350,881 | ) |
Retained earnings | |
| 1,066,999 | | |
| 1,717,278 | |
Stockholder’s equity attribute to parent’s shareholders | |
| 10,365,615 | | |
| 7,429,305 | |
Noncontrolling interest | |
| 6,920,633 | | |
| 6,383,427 | |
TOTAL STOCKHOLDERS’ EQUITY | |
| 17,286,248 | | |
| 13,812,732 | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 31,652,204 | | |
$ | 32,336,764 | |
The accompanying notes are an integral part of these consolidated financial statements.
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSENDED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME / (LOSS)
(UNAUDITED)
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 11,442,525 | | |
$ | 9,795,058 | | |
$ | 35,556,157 | | |
$ | 30,989,923 | |
Cost of revenue | |
| 7,382,823 | | |
| 5,984,679 | | |
| 23,764,574 | | |
| 19,683,245 | |
| |
| | | |
| | | |
| | | |
| | |
Gross profit | |
| 4,059,702 | | |
| 3,810,379 | | |
| 11,791,583 | | |
| 11,306,678 | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Selling | |
| 1,020,934 | | |
| 1,703,365 | | |
| 1,635,494 | | |
| 2,444,031 | |
General and administrative | |
| 2,907,104 | | |
| 3,114,005 | | |
| 8,882,547 | | |
| 8,433,578 | |
Total operating expense | |
| 3,928,038 | | |
| 4,817,370 | | |
| 10,518,041 | | |
| 10,877,609 | |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) from operations | |
| 131,664 | | |
| (1,006,991 | ) | |
| 1,273,542 | | |
| 429,069 | |
| |
| | | |
| | | |
| | | |
| | |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 77,411 | | |
| 54,001 | | |
| 174,324 | | |
| 147,954 | |
Other - net | |
| (135,280 | ) | |
| 158,359 | | |
| 107,153 | | |
| 244,260 | |
Total other income (expense) | |
| (57,869 | ) | |
| 212,360 | | |
| 281,477 | | |
| 392,214 | |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) before income taxes | |
| 73,795 | | |
| (794,631 | ) | |
| 1,555,019 | | |
| 821,283 | |
Income tax expense | |
| 226,397 | | |
| (12,753 | ) | |
| 845,556 | | |
| 1,171,602 | |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| (152,602 | ) | |
| (781,878 | ) | |
| 709,463 | | |
| (350,319 | ) |
Net income attributable to the noncontrolling interests | |
| 253,878 | | |
| (27,876 | ) | |
| 827,066 | | |
| 524,522 | |
Net income (loss) attributable to parent's shareholders | |
| (406,480 | ) | |
| (754,002 | ) | |
| (117,603 | ) | |
| (874,841 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive items | |
| | | |
| | | |
| | | |
| | |
Foreign currency translation gain (loss) | |
| (581,269 | ) | |
| (74,965 | ) | |
| (426,959 | ) | |
| (111,894 | ) |
Other comprehensive income(loss) | |
| - | | |
| - | | |
| - | | |
| - | |
attributable to parent's shareholder | |
| (581,269 | ) | |
| (74,965 | ) | |
| (426,959 | ) | |
| (111,894 | ) |
Other comprehensive items | |
| | | |
| | | |
| | | |
| | |
attributable to noncontrolling interest | |
| (451,719 | ) | |
| 120,695 | | |
| (283,653 | ) | |
| 87,224 | |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive income (loss) attributable to | |
| | | |
| | | |
| | | |
| | |
parent's shareholders | |
$ | (987,749 | ) | |
$ | (828,967 | ) | |
$ | (544,562 | ) | |
$ | (986,735 | ) |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive income (loss) attributable to | |
| | | |
| | | |
| | | |
| | |
noncontrolling interest | |
$ | (197,841 | ) | |
$ | 148,571 | | |
$ | 543,413 | | |
$ | (437,298 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average shares outstanding: | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 29,452,669 | | |
| 29,100,503 | | |
| 29,336,570 | | |
| 29,100,503 | |
Diluted | |
| 29,452,669 | | |
| 29,100,503 | | |
| 29,336,570 | | |
| 29,100,503 | |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) per share: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.014 | ) | |
$ | (0.026 | ) | |
$ | (0.004 | ) | |
$ | (0.030 | ) |
Diluted | |
$ | (0.014 | ) | |
$ | (0.026 | ) | |
$ | (0.004 | ) | |
$ | (0.030 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
Nine Months Ended September 30, | |
| |
2015 | | |
2014 | |
| |
| | | |
| | |
Cash flows from operating activities: | |
| | | |
| | |
Net income (Loss) | |
$ | 709,463 | | |
$ | (350,319 | ) |
Adjustments to reconcile net income to net cash | |
| | | |
| | |
Depreciation and amortization | |
| 328,139 | | |
| 285,740 | |
Gain on valuation of financial assets | |
| (8,696 | ) | |
| (5,347 | ) |
Loss (Gain) on disposal of fixed assets | |
| 57,241 | | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Accounts receivable | |
| 3,716,237 | | |
| 3,529,527 | |
Other current assets | |
| (647,465 | ) | |
| (41,348 | ) |
Other assets | |
| (102,015 | ) | |
| (4,468 | ) |
Tax payable | |
| (79,281 | ) | |
| (9,736 | ) |
Other current liabilities | |
| (3,413,703 | ) | |
| (3,153,091 | ) |
Net cash provided by operating activities | |
| 559,920 | | |
| 250,958 | |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Cash from acquisition | |
| 320 | | |
| 128,933 | |
Sale of investment in current deposit | |
| - | | |
| 1,625,955 | |
Dividend received in excess of earnings as reductions of cost of the investment | |
| 246,357 | | |
| - | |
Purchase of government bonds | |
| (97,264 | ) | |
| - | |
Proceeds from sales of government bonds | |
| 96,266 | | |
| - | |
Purchase of property, plant and equipment | |
| (177,004 | ) | |
| (472,971 | ) |
Purchase of intangible assets | |
| (381,618 | ) | |
| - | |
Net cash provided by (used in) investing activities | |
| (312,943 | ) | |
| 1,281,917 | |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from related party borrowing | |
| 134,510 | | |
| 45,527 | |
Repayment to related parties | |
| (313,072 | ) | |
| - | |
Net cash provided by (used in) financing activities | |
| (178,562 | ) | |
| 45,527 | |
| |
| | | |
| | |
Foreign currency translation | |
| (820,117 | ) | |
| (260,078 | ) |
Net increase (decrease) in cash and cash equivalents | |
| (751,702 | ) | |
| 1,318,324 | |
| |
| | | |
| | |
Cash and cash equivalents, beginning balance | |
| 19,571,799 | | |
| 18,070,093 | |
Cash and cash equivalents, ending balance | |
$ | 18,820,097 | | |
$ | 19,388,417 | |
| |
| | | |
| | |
SUPPLEMENTARY DISCLOSURE: | |
| | | |
| | |
| |
| | | |
| | |
Interest paid | |
$ | 288 | | |
$ | - | |
Income tax paid | |
$ | 820,322 | | |
$ | 757,343 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW FOR NON-CASH TRANSACTION: | |
| | | |
| | |
| |
| | | |
| | |
Issuance of common stock for acquisition of GHFL | |
$ | 3,482,923 | | |
$ | - | |
The accompanying notes are an integral part of these financial statements.
CHINA UNITED INSURANCE SERVICE, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)
NOTE 1 – ORGANIZATION
China United Insurance Service, Inc.
(“China United”, “CUIS” or the “Company”) is a Delaware corporation organized on June 4,
2010 by Mao Yi Hsiao, a Taiwanese citizen, and is quoted on the United States Over the Counter Bulletin Board (the “OTCBB”).
The corporate structure as of September
30, 2015 is as follows:
![](http://www.sec.gov/Archives/edgar/data/1512927/000114420415063778/image_001.jpg)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Principles of Consolidation
The unaudited accompanying condensed consolidated
financial statements include the accounts of China United and its subsidiaries as shown in the organization structure in Note 1
above. All significant intercompany transactions and balances were eliminated in consolidation.
Basis of Presentation
The unaudited condensed consolidated financial
statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States
(“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Regulation S-X.
Accordingly, the financial statements do not include all of the information and notes required by GAAP for complete financial statements.
In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement
of the financial statements have been included. Operating results for the nine months ended September 30, 2015 are not necessarily
indicative of the results that may be expected for the year ended December 31, 2015.
These unaudited condensed consolidated
financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements
and notes thereto for the year ended December 31, 2014, which were included in the Company’s 2014 Annual Report on Form 10-K.
The accompanying condensed consolidated balance sheet as of December 31, 2014, has been derived from the Company’s audited
consolidated financial statements as of that date.
Concentration of Risk
Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist principally of cash and equivalents and accounts receivable.
As of September 30, 2015, $1,289,924 of the Company’s cash and equivalents held by financial institution was insured and
the remaining balance of $17,530,173 was not insured. With respect to accounts receivable, the Company generally does not require
collateral and does not have an allowance for doubtful accounts.
For the three months ended September 30,
2015 and 2014, the Company’s revenues from sale of insurance policies underwritten by these companies were:
| |
Three months ended September 30, | |
| |
2015 | | |
2014 | |
| |
Amount | | |
% of Total Revenue | | |
Amount | | |
% of Total Revenue | |
Farglory Life Insurance Co.,Ltd. | |
$ | 3,074,196 | | |
| 27 | % | |
$ | 2,539,976 | | |
| 26 | % |
Fubon Life Insurance Co.,Ltd. | |
| 1,357,519 | | |
| 12 | % | |
| 1,488,371 | | |
| 15 | % |
AIA International Ltd.,Taiwan | |
| (*) | | |
| (*) | | |
| 1,429,382 | | |
| 15 | % |
TransGlobe Life Insurance Inc. | |
| (*) | | |
| (*) | | |
| 1,326,987 | | |
| 14 | % |
CTBC Life Insurance Co., Ltd | |
| 1,688,274 | | |
| 15 | % | |
| (*) | | |
| (*) | |
(*) Revenue
for the three months ended had not exceeded 10% or more of the consolidated revenue.
For the nine months ended September 30,
2015 and 2014, the Company’s revenues from sale of insurance policies underwritten by these companies were:
| |
Nine months ended September 30, | |
| |
2015 | | |
2014 | |
| |
Amount | | |
% of Total Revenue | | |
Amount | | |
% of Total Revenue | |
Farglory Life Insurance Co.,Ltd. | |
$ | 10,082,711 | | |
| 28 | % | |
$ | 8,415,238 | | |
| 27 | % |
Fubon Life Insurance Co.,Ltd. | |
| 4,459,040 | | |
| 13 | % | |
| 4,992,976 | | |
| 16 | % |
AIA International Ltd.,Taiwan | |
| (*) | | |
| (*) | | |
| 4,679,385 | | |
| 15 | % |
TransGlobe Life Insurance Inc. | |
| (*) | | |
| (*) | | |
| 4,132,067 | | |
| 13 | % |
CTBC Life Insurance Co., Ltd. | |
| 4,106,414 | | |
| 12 | % | |
| (*) | | |
| (*) | |
(*) Revenue
for the nine months ended had not exceeded 10% or more of the consolidated revenue.
As of September 30, 2015 and December 31,
2014, the Company’s accounts receivable from these companies were:
| |
September 30, 2015 | | |
December 31, 2014 | |
| |
Amount | | |
% of Total Accounts Receivable | | |
Amount | | |
% of Total Accounts Receivable | |
Farglory Life Insurance Co.,Ltd. | |
$ | 1,031,431 | | |
| 44 | % | |
$ | 2,150,294 | | |
| 28 | % |
Fubon Life Insurance Co., Ltd | |
| 478,064 | | |
| 20 | % | |
| 963,118 | | |
| 12 | % |
AIA International Ltd.,Taiwan | |
| - | | |
| - | % | |
| 1,098,879 | | |
| 14 | % |
TransGlobe Life Insurance Inc. | |
| 276,434 | | |
| 12 | % | |
| 735,755 | | |
| 10 | % |
CTBC Life Insurance Co., Ltd | |
| 409,223 | | |
| 17 | % | |
| 1,200,562 | | |
| 16 | % |
The Company's operations are in the PRC
and Taiwan. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political,
economic, foreign currency exchange and legal environments in the PRC and Taiwan, and by the state of each economy. The Company’s
results may be adversely affected by changes in the political and social conditions in the PRC and Taiwan, and by changes in governmental
policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.
Recent Accounting Pronouncements
In September 2015, the FASB issued ASU
2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. The ASU will require
an acquirer to recognize provisional amounts that are identified during the measurement period in the reporting period in which
the adjustment amounts are determined rather than restating prior periods. The ASU will be effective on a prospective basis for
interim and annual period beginning after December 15, 2015. The Company will adopt this new standard beginning with the 2016 fiscal
year, and does not expect the adoption of this standard to have a material impact on the Company's consolidated financial position,
results of operations, cash flows, and related disclosures.
In May 2015, the FASB issued ASU 2015-09,
Financial Services-Insurance (Topic 944): Disclosures about Short-Duration Contracts. The updated accounting guidance requires
enhanced disclosures to provide additional information about insurance liabilities for short-duration contracts. The updated guidance
is effective for annual financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within
the annual periods beginning after December 15, 2016. The Company is currently evaluating the effect the updated guidance will
have on the Company's financial statement disclosures.
In May 2015, the FASB issued ASU 2015-07,
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent). The ASU removes the
requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset
value per share practical expedient and also removes certain disclosure requirements. The new requirements are effective for the
Company beginning January 1, 2016 with retrospective application to all periods presented required and early adoption permitted.
The Company does not expect the ASU to materially affect our financial statements and disclosures.
In April 2015, the FASB issued ASU No.
2015-05, Intangibles-Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud
Computing Agreement. The ASU will require an entity's management to assess, for each annual and interim period, whether a cloud
computing arrangement includes a software license. All software licenses within the scope of Subtopic 350-40 will be accounted
for consistent with other licenses of intangible assets. If the arrangement does not include a software license, the arrangement
should be accounted for as a service contract. The ASU will be effective for interim and annual periods beginning after December
15, 2015 and early adoption is permitted. Entities will have the choice of prospective or retrospective adoption of the standard.
The Company believes the adoption of this ASU will not have a material impact on its consolidated financial statements.
In April 2015, the FASB issued ASU No.
2015-03, Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be
presented as a deduction from the carrying amount of the debt liability, consistent with debt discounts or premiums. Recognition
and measurement guidance for debt issuance costs is not affected by this ASU. The ASU is effective for periods beginning after
December 15, 2015, and the Company does not expect the implementation to have a material effect on its financial position or results
of operations.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting
for revenue arising from contracts with customers and supersedes current revenue recognition guidance. In August 2015, the FASB
issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendment in this update
defers the effective date of ASU 2014-09 for all entities by one year to annual periods beginning after December 15, 2017. Early
adoption is permitted as of the original effective date, interim and annual reporting periods after December 15, 2016. Entities
have the option of using either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company is
still in the process of analyzing the effect of this new standard, including the transition method, to determine the impact on
the Company's consolidated financial position, results of operations, cash flows, and related disclosures.
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.
NOTE 3 – CASH AND EQUIVALENTS
As of September 30, 2015 and December 31,
2014, our cash and equivalents primarily consisted of cash and certificates of deposits. The carrying amounts reported on the consolidated balance sheets for cash and cash equivalents approximate fair value.
NOTE 4 - MARKETABLE SECURITIES
Marketable securities represent investment
in equity securities of listed stocks and funds, which are classified as Level 1 securities as follows:
| |
September 30, 2015 | |
| |
Cost or | | |
Gross | | |
| |
| |
Amortized | | |
Unrealized | | |
Total | |
| |
Cost | | |
Gains (Losses) | | |
Fair Value | |
Level 1 securities: | |
| | | |
| | | |
| | |
Stocks | |
$ | 28,278 | | |
$ | (2,472 | ) | |
$ | 25,806 | |
Funds | |
| 2,408,728 | | |
| (86,561 | ) | |
| 2,322,167 | |
| |
$ | 2,437,006 | | |
$ | (89,033 | ) | |
$ | 2,347,973 | |
| |
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 | |
NOTE 5 – OTHER CURRENT ASSETS
The Company’s other current assets
consisted of the following as of September 30, 2015 and December 31, 2014:
|
|
September 30, 2015 |
|
|
December 31, 2014 |
|
Prepaid rent and rent deposit |
|
$ |
163,461 |
|
|
$ |
191,995 |
|
Refundable business tax |
|
|
1,880 |
|
|
|
912 |
|
Prepaid expenses |
|
|
384,280 |
|
|
|
77,150 |
|
Other receivable |
|
|
464,659 |
|
|
|
69,546 |
|
Current assets associated with discontinued operations |
|
|
161,295 |
|
|
|
174,308 |
|
Others |
|
|
- |
|
|
|
60,556 |
|
Total other current assets |
|
$ |
1,175,575 |
|
|
$ |
574,467 |
|
NOTE 6 – PROPERTY, PLANT AND EQUIPMENT,
NET
As of September 30, 2015 and December 31,
2014, the Company’s property, plant and equipment consisted of the following,
| |
September 30, 2015 | | |
December 31,2014 | |
Office Equipment | |
$ | 1,050,287 | | |
$ | 1,026,426 | |
Office Furniture | |
| 127,336 | | |
| 139,755 | |
Leasehold improvements | |
| 463,623 | | |
| 478,154 | |
Transportation equipment | |
| 86,216 | | |
| 89,240 | |
Other equipment | |
| 97,894 | | |
| 64,002 | |
Total | |
| 1,825,356 | | |
| 1,797,577 | |
Less: accumulated depreciation | |
| (915,680 | ) | |
| (735,815 | ) |
Total property, plant and equipment, net | |
$ | 909,676 | | |
$ | 1,061,762 | |
NOTE 7 – INTANGIBLE ASSETS
As of September 30, 2015 and December 31,
2014, the Company’s intangible assets consisted the following:
| |
September 30, 2015 | | |
December 31, 2014 | |
Software | |
$ | 608,827 | | |
$ | 462,903 | |
Less accumulated amortization | |
| (271,701 | ) | |
| (191,947 | ) |
Total other current assets | |
$ | 337,126 | | |
$ | 270,956 | |
Estimated future intangible amortization
as of September 30, 2015 is as follows:
Years ending September 30, | |
Amount | |
2016 | |
$ | 128,462 | |
2017 | |
| 55,064 | |
2018 | |
| 54,773 | |
2019 | |
| 53,411 | |
2020 | |
| 32,343 | |
Thereafter | |
| 13,073 | |
Total | |
$ | 337,126 | |
NOTE 8 – LONG-TERM INVESTMENT
The Company classifies its investments
as available-for-sale in accordance with ASC 320 “Debt and Equity Securities”, Investments – Debt and Equity
Securities, and are reported at fair value. Unrealized gains and losses as a result of changes in the fair value of the available-for-sale
investments are recorded as a separate component within accumulated other comprehensive income in the accompanying consolidated
balance sheets.
The Company uses the cost method of accounting
for investments in companies that do not have a readily determinable fair value in which it holds an interest of less than 20%
and over which it does not have the ability to exercise significant influence. Investments are considered to be impaired when a
decline in fair value is judged to be other-than-temporary. Once a decline in fair value is determined to be other-than-temporary,
an impairment charge is recorded and a new cost basis in the investment is established.
As of September 30, 2015 and December 31,
2014, the Company’s long-term investment consisted the following:
| |
September 30, 2015 | | |
December 31, 2014 | |
Equity Investment Co., Ltd | |
$ | 1,162,461 | | |
$ | - | |
Government Bonds | |
| 92,471 | | |
| 95,328 | |
Total | |
$ | 1,254,932 | | |
$ | 95,328 | |
The Company had the following long-term
investment in equity:
Type | |
Investee | |
September 30, 2015 Investment Ownership | | |
Amount | |
Cost | |
Genius Insurance Broker Co., Ltd | |
| 15.64 | % | |
$ | 1,162,461 | |
The Company received dividend of $234,217
from Genius Insurance Broker Co., Ltd in the year of 2015. According to ASC 325-20-35-1, the dividends received in excess of earnings
subsequent to the date of investment are considered a return of investment and are recorded as reduction of cost of the investment.
Since the divided received by the Company belongs to the retained earning accumulated prior to the acquisition date of the ling-term
investment, the amount of $234,217 is classified as reduction of cost of the investment by the Company, instead of dividend income.
According to Taiwan regulatory requirements,
Law Broker is required to maintain a minimum of NT$3,000,000 ($97,859) 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.
| |
September 30, 2015 | |
| |
Cost or | | |
Gross | | |
| |
| |
Amortized | | |
Unrealized | | |
Total | |
| |
Cost | | |
Gains (Losses) | | |
Fair Value | |
Government bonds | |
| 92,471 | | |
| - | | |
| 92,471 | |
| |
$ | 92,471 | | |
$ | - | | |
$ | 92,471 | |
| |
| | | |
| | | |
| | |
| |
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 | |
NOTE 9 – OTHER
ASSETS
The Company’s other assets consisted
of the following as of September 30, 2015 and December 31, 2014:
| |
September 30, 2015 | | |
December 31, 2014 | |
Restricted cash | |
$ | 265,719 | | |
$ | 162,906 | |
Rental deposits | |
| 398,207 | | |
| 384,670 | |
Prepaid intangible assets | |
| 198,407 | | |
| - | |
Others | |
| - | | |
| 39,946 | |
Total other assets | |
$ | 862,333 | | |
$ | 587,522 | |
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
(1) Acquisition of PFAL
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 September 30, 2015, there were no any indications of the impairment of the goodwill.
(2) Acquisition of GHFL
On February 13, 2015, CUIS and AHFL entered
into an acquisition agreement with the selling shareholder (Mr. Li Chwanhau, the director of the Company) of Genius Holdings Financial
Limited ( “GHFL”), a company with limited liability incorporated under the laws of British Virgin Islands , to issue
352,166 fully paid and non-assessable shares of AHFL Common Stock together with an granted option for 352,166 shares of common
stock of CUIS (“Option”), in exchange for 704,333 shares of common stock of GHFL, being all of the issued and outstanding
capital stock of GHFL. Subsequent to the acquisition, GHFL became a wholly-owned subsidiary of CUIS. GHFL holds 100% issued and
outstanding shares of Genius Investment Consultant Co., Ltd. (“Taiwan Genius”), a limited company incorporated under
the laws of Taiwan, which in turn holds 15.64% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius
Broker”), a company limited by shares incorporated under the laws of Taiwan. Both GHFL and Taiwan Genius have no substantive
business operation other than the holding of shares of its subsidiary. Genius Broker is primarily engaged in broker business across
Taiwan. On February 13, 2015, the acquisition was completed; the selling shareholder transferred 100% shares in GHFL to AHFL. The
Option has been exercised by the selling shareholder on March 31, 2015. The total fair value of AHFL 352,166 shares ($1,771,395)
and CUIS 352,166 option ($1,711,562) at acquisition date was $3,482,957. The Company recorded $2,039,840 excess of purchase price
as goodwill.
The acquisition was accounted for under
the purchase method of accounting. Accordingly, the results of GHFL have been included in the unaudited condensed consolidated
financial statements since the date of acquisition. The purchase price has been allocated to the assets acquired and liabilities
assumed based upon their estimated fair values and the price were allocated as follows:
| |
February 13, 2015 | |
Current assets | |
$ | 321 | |
Long-term investment | |
| 1,488,829 | |
Goodwill | |
| 2,039,840 | |
Current liabilities | |
| (46,033 | ) |
Total purchase price | |
$ | 3,482,957 | |
No supplemental pro forma information is
presented for the acquisition due to the immaterial effect of the acquisition on the Company’s results of operations.
NOTE 11 – TAXES PAYABLE
The Company’s taxes payable consisted
of the following as of September 30, 2015 and December 31, 2014:
| |
September 30, 2015 | | |
December 31, 2014 | |
PRC Tax | |
$ | 63,733 | | |
$ | 172,765 | |
Taiwan Tax | |
| 743,108 | | |
| 747,142 | |
Total tax payable | |
$ | 806,841 | | |
$ | 919,907 | |
PRC tax represents income tax and other
taxes accrued according to PRC tax law by our subsidiaries and CAE in the PRC. Taiwan tax represents income tax and other taxes
accrued according to Taiwan tax law by our subsidiaries and branches in Taiwan. Both will be settled within the next twelve months
according to the respective tax laws.
NOTE 12 – OTHER CURRENT LIABILITIES
Other current liabilities are as follows,
as of September 30, 2015 and December 31, 2014:
| |
September 30, 2015 | | |
December 31, 2014 | |
Commissions payable to sub agents | |
$ | 3,431,802 | | |
$ | 5,311,365 | |
Salary payable to administrative staff | |
| 119,818 | | |
| 144,158 | |
Due to previous shareholders of AHFL | |
| 750,910 | | |
| 750,910 | |
Withholding employee personal tax | |
| 322,321 | | |
| 259,458 | |
Accrued expenses | |
| 1,252,134 | | |
| 2,844,166 | |
Current liabilities associated with discontinued operations | |
| 4,650 | | |
| 782 | |
Others | |
| 122,510 | | |
| 223,532 | |
Total other current liabilities | |
$ | 6,004,145 | | |
$ | 9,534,371 | |
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. 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 13 – LONG-TERM LIABILITIES
Long-term liabilities are as follows as
of September 30, 2015 and December 31, 2014:
| |
September 30, 2015 | | |
December 31, 2014 | |
Unearned revenue | |
$ | 7,201,172 | | |
$ | 7,500,645 | |
Total other long-term liabilities | |
$ | 7,201,172 | | |
$ | 7,500,645 | |
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.
According to the revised agreement, as
of September 30, 2015, the Company did not book any short-term unearned revenue since it did not expect to achieve the sales target
within the next twelve months, and the Company booked the whole $7,201,172 as long-term liability.
NOTE 14 – 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 15 – 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%.
The Company’s subsidiaries in Taiwan
are governed by the Income Tax Law of Taiwan, and are generally subject to tax at 17% on income reported in the statutory financial
statements after appropriate adjustments. In the meanwhile, Income Tax Law of Taiwan provides that a company is taxed at additional
10% on any undistributed earnings to its shareholders.
The following table reconciles the US statutory
rates to the Company’s effective tax rate for the three months ended September 30, 2015 and 2014:
| |
Three months ended September 30, 2015 | | |
Three months ended September 30, 2014 | |
US statutory rate | |
| 34 | % | |
| 34 | % |
Tax rate difference | |
| (95 | )% | |
| (8 | )% |
Income tax on undistributed earnings | |
| 92 | % | |
| (1 | )% |
Loss in subsidiaries | |
| 285 | % | |
| (25 | )% |
Un-deductible and non-taxable items | |
| (9 | )% | |
| 2 | % |
Tax per financial statements | |
| 307 | % | |
| 2 | % |
The following table reconciles the US statutory
rates to the Company’s effective tax rate for the nine months ended September 30, 2015 and 2014:
| |
Nine months ended September 30, 2015 | | |
Nine months ended September 30, 2014 | |
US statutory rate | |
| 34 | % | |
| 34 | % |
Tax rate difference | |
| (29 | )% | |
| (40 | )% |
Income tax on undistributed earnings | |
| 16 | % | |
| 76 | % |
Loss in subsidiaries | |
| 30 | % | |
| 65 | % |
Change in tax status | |
| - | % | |
| 1 | % |
Un-deductible and non-taxable items | |
| 3 | % | |
| 7 | % |
Tax per financial statements | |
| 54 | % | |
| 143 | % |
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 16 – RELATED PARTY TRANSACTIONS
On February 13, 2015, CUIS and AHFL entered
into an acquisition agreement with Mr. Li Chwan Hau (the director of the Company), the selling shareholder of Genius Holdings Financial
Limited. (Please see detail in Note 10 (2))
Due to related parties
The related parties listed below loaned
money to the Company for working capital. Due to related parties consisted of the following as of September 30, 2015 and December
31, 2014:
| |
September 30, 2015 | | |
December 31, 2014 | |
Due to Mr. Mao (Principal Shareholder of the Company) | |
$ | 283,294 | | |
$ | 214,165 | |
Due to Mr. Zhu (Legal Representative of Jiangsu Law) | |
| 2,179 | | |
| 2,255 | |
Due to Mrs. Lee (Director of CUIS) | |
| - | | |
| 315,027 | |
Due to Genius Broker (*) | |
| 32,166 | | |
| - | |
Total | |
$ | 317,639 | | |
$ | 531,447 | |
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. The entire loan and interest
amount of $288 have been paid off in January 2015.
(*) The legal representative of the
Genius Broker serves as one of the board members of CUIS.
NOTE 17 –
COMMITMENTS
Operating Leases
The Company has operating leases for its
offices. Rental expenses for the nine months ended September 30, 2015 and 2014 were $1,389,274 and $1,286,054, respectively. Rental
expenses for the three months ended September 30, 2015 and 2014 were $506,921 and $402,545, respectively. At September 30, 2015,
total future minimum annual lease payments under operating leases were as follows, by years:
Twelve months ended September 30, 2016 | |
$ | 1,892,494 | |
Twelve months ended September 30, 2017 | |
| 1,037,776 | |
Twelve months ended September 30, 2018 | |
| 588,781 | |
Twelve months ended September 30, 2019 | |
| 148,243 | |
Twelve months ended September 30, 2020 | |
| 20,087 | |
Total | |
$ | 3,687,381 | |
Acquisition Agreement
On February 22, 2015, the Company and the
selling shareholder of GHFL entered into an Amendment to the Acquisition Agreement dated February 13, 2015, pursuant to which if
the Guaranteed Price per share is higher than the Average Price per share, then the Parties shall negotiate in good faith on an
adjustment to the Purchase Price as necessary, if any.
NOTE 18 - 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. The liquidator was appointed by the shareholders of the Law Management and Law
Agent and the liquidator will complete the liquidation process no later than six months from the appointment date. Law Management
is currently in the process of liquidation and Law Agent has completed the liquidation process and filed the liquidation completion
declaration to the court during the three months ended September 30, 2015.
Law Management and Law Agent were acquired
by the Company together with their parent Company, Law Enterprise, on August 24, 2012. As of September 30, 2015, Law Agent has
completed the liquidation process and proceeded to file the liquidation completion declaration to the court. . The Total Assets
and Total Liabilities of Law Management as of September 30, 2015 and December 31, 2014 are as follows:
| |
As of September 30, 2015 | | |
As of December 31, 2014 | |
Total Assets (including cash) | |
| 161,301 | | |
| 334,512 | |
Total Liabilities | |
| 5,115 | | |
| 255,954 | |
The combined Revenue, Net Loss and EPS
of Law Management and Law Agent for the nine months ended September 30, 2013 and the year ended December 31, 2014 are as follows:
| |
Nine Months Ended September 30, 2015 | | |
Year Ended December 31, 2014 | |
Revenue | |
| - | | |
| - | |
Net Loss | |
| (1,058 | ) | |
| (3,270 | ) |
EPS | |
| - | | |
| - | |
NOTE 19 – 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 20 – GEOGRAPHICAL REVENUE
The geographical distribution of China
United’s revenue for the nine months ended September 30, 2015 and 2014 were as follows:
| |
Three months ended September 30, | |
Geographical Areas | |
2015 | | |
2014 | |
PRC | |
$ | 1,315,641 | | |
$ | 748,295 | |
Taiwan | |
| 10,126,884 | | |
| 9,046,763 | |
| |
$ | 11,442,525 | | |
$ | 9,795,058 | |
| |
Nine months ended September 30, | |
Geographical Areas | |
2015 | | |
2014 | |
PRC | |
$ | 4,194,921 | | |
$ | 2,137,652 | |
Taiwan | |
| 31,361,236 | | |
| 28,852,271 | |
| |
$ | 35,556,157 | | |
$ | 30,989,923 | |
NOTE 21 – 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 September 30, 2015
and December 31, 2014, 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 22 – SUBSEQUENT EVENTS
The Company has evaluated all other subsequent
events through the date these consolidated financial statements were issued, and determine that there were no other subsequent
events or transactions that require recognition or disclosures in the consolidated financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
The following discussion of the results
of operations and financial condition should be read in conjunction with our condensed consolidated financial statements and notes
thereto included in Item 1 of this report. This report, including the information incorporated by reference, contains forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995. The use of any of the words “believe,”
“expect,” “anticipate,” “plan,” “estimate,” and similar expressions are intended
to identify such statements. Forward-looking statements include statements concerning our possible or assumed future results. The
actual results that we achieve may differ materially from those discussed in such forward-looking statements due to the risks and
uncertainties described in the Risk Factors section of this report, in Management’s Discussion and Analysis of Financial
Condition and Results of Operations, and in other sections of this report, as well as in our annual report on Form 10-K. We undertake
no obligation to update any forward-looking statements.
Overview
We provide two broad categories
of insurance products, life insurance products and property and casualty insurance products, in Taiwan and People’s Republic
of China (“PRC”). The insurance products that the Company’s subsidiaries sell are underwritten by some of leading
insurance companies in Taiwan and PRC, respectively.
|
(1) |
Life Insurance Products |
Total net revenues from Taiwan
life insurance products were 81.94% and 87.65% of total net revenues for the nine months ended September 30, 2015 and 2014, respectively.
Total net revenues from PRC life insurance products were 10.76% and 5.90% of total net revenues for the nine month ended September
30, 2015 and 2014, respectively.
In addition to the periodic premium
payment schedules, most of the individual life insurance products we distribute also allow the insured to choose to make a single,
lump-sum premium payment at the beginning of the policy term. If a periodic payment schedule is adopted by the insured, a life
insurance policy can generate periodic payment of fixed premiums to the insurance company for a specified period of time. This
means that once the Company sells a life insurance policy with a periodic premium payment schedule, they 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.
|
(2) |
Property and Casualty Insurance Products |
Taiwan subsidiary commenced sale
of automobile insurance, casualty insurance and liability insurance business in August 2003. Total net revenues from Taiwan property
and casualty insurance products were 5.82% and 5.45% of total net revenues for the nine months ended September 30, 2015 and 2014,
respectively. CAE commenced its sales of commercial property insurance in 2009 and developed its automobile insurance business
in 2010. Total net revenues from PRC property and casualty insurance products were 1.48% and 1.00% of total net revenues for the
nine months ended September 30, 2015 and 2014, respectively.
Critical Accounting Policies
and Estimates
A critical accounting policy is
one that is both important to the portrayal of our financial condition and results of operation and requires our management’s
most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that
are inherently uncertain. Our significant accounting policies are described in Note 2 of “Summary of Significant Accounting
Policies” included within our 2014 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Following
is a discussion of the accounting policies that we believe involve the most difficult, subjective or complex judgments and estimates.
Accrued Expense
As part of the process of preparing our
financial statements, we are required to estimate accrued expenses. The estimation basis of the majority of the accrued expenses
is dependent on our sales force’s achievement of the sales targets identified by our clients. Examples of estimated accrued
expenses include brokerage commission bonus, such as bonus payable to our sales agents, and incentive program rewards, such as
the estimated expenditures to fund the reward programs. We develop estimates of liabilities using our judgment based upon the facts
and circumstances known at the time.
Long-term investment
The Company classifies its investments
as available-for-sale in accordance with ASC 320 “Debt and Equity Securities”, Investments – Debt and Equity
Securities, and are reported at fair value. Unrealized gains and losses as a result of changes in the fair value of the available-for-sale
investments are recorded as a separate component within accumulated other comprehensive income in the accompanying consolidated
balance sheets.
The Company uses the cost method of accounting
for investments in companies that do not have a readily determinable fair value in which it holds an interest of less than 20%
and over which it does not have the ability to exercise significant influence. Investments are considered to be impaired when a
decline in fair value is judged to be other-than-temporary. Once a decline in fair value is determined to be other-than-temporary,
an impairment charge is recorded and a new cost basis in the investment is established.
Recent Accounting Pronouncements
In September 2015, the FASB issued ASU
2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. The ASU will require
an acquirer to recognize provisional amounts that are identified during the measurement period in the reporting period in which
the adjustment amounts are determined rather than restating prior periods. The ASU will be effective on a prospective basis for
interim and annual period beginning after December 15, 2015. The Company will adopt this new standard beginning with the 2016 fiscal
year, and does not expect the adoption of this standard to have a material impact on the Company's consolidated financial position,
results of operations, cash flows, and related disclosures.
In May 2015, the FASB issued ASU 2015-09,
Financial Services-Insurance (Topic 944): Disclosures about Short-Duration Contracts. The updated accounting guidance requires
enhanced disclosures to provide additional information about insurance liabilities for short-duration contracts. The updated guidance
is effective for annual financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within
the annual periods beginning after December 15, 2016. The Company is currently evaluating the effect the updated guidance will
have on the Company's financial statement disclosures.
In May 2015, the FASB issued ASU 2015-07,
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent). The ASU removes the
requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset
value per share practical expedient and also removes certain disclosure requirements. The new requirements are effective for the
Company beginning January 1, 2016 with retrospective application to all periods presented required and early adoption permitted.
The Company does not expect the ASU to materially affect our financial statements and disclosures.
In April 2015, the FASB issued ASU No.
2015-05, Intangibles-Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Fees Paid in a Cloud
Computing Agreement. The ASU will require an entity's management to assess, for each annual and interim period, whether a cloud
computing arrangement includes a software license. All software licenses within the scope of Subtopic 350-40 will be accounted
for consistent with other licenses of intangible assets. If the arrangement does not include a software license, the arrangement
should be accounted for as a service contract. The ASU will be effective for interim and annual periods beginning after December
15, 2015 and early adoption is permitted. Entities will have the choice of prospective or retrospective adoption of the standard.
The Company believes the adoption of this ASU will not have a material impact on its consolidated financial statements.
In April 2015, the FASB issued ASU No.
2015-03, Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be
presented as a deduction from the carrying amount of the debt liability, consistent with debt discounts or premiums. Recognition
and measurement guidance for debt issuance costs is not affected by this ASU. The ASU is effective for periods beginning after
December 15, 2015, and the Company does not expect the implementation to have a material effect on its financial position or results
of operations.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting
for revenue arising from contracts with customers and supersedes current revenue recognition guidance. In August 2015, the FASB
issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendment in this update
defers the effective date of ASU 2014-09 for all entities by one year to annual periods beginning after December 15, 2017. Early
adoption is permitted as of the original effective date, interim and annual reporting periods after December 15, 2016. Entities
have the option of using either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. The Company is
still in the process of analyzing the effect of this new standard, including the transition method, to determine the impact on
the Company's consolidated financial position, results of operations, cash flows, and related disclosures.
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.
Overview of the three months ended
September 30, 2015 and 2014
The following table shows the results
of operations for the three months ended September 30, 2015 and 2014:
| |
Three Months Ended September 30, | | |
| | |
| |
| |
2015 | | |
2014 | | |
| | |
Percentage | |
| |
(Unaudited) | | |
(Unaudited) | | |
Change | | |
Change | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 11,442,525 | | |
$ | 9,795,058 | | |
$ | 1,647,467 | | |
| 17 | % |
Cost of revenue | |
| 7,382,823 | | |
| 5,984,679 | | |
| 1,398,144 | | |
| 23 | % |
Gross profit | |
| 4,059,702 | | |
| 3,810,379 | | |
| 249,323 | | |
| 7 | % |
Gross profit margin | |
| 35 | % | |
| 39 | % | |
| 15 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Selling | |
| 1,020,934 | | |
| 1,703,365 | | |
| (682,431 | ) | |
| (40 | )% |
General and administrative | |
| 2,907,104 | | |
| 3,114,005 | | |
| (206,901 | ) | |
| (7 | )% |
Total operating expenses | |
| 3,928,038 | | |
| 4,817,370 | | |
| (889,332 | ) | |
| (18 | )% |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) from operations | |
| 131,664 | | |
| (1,006,991 | ) | |
| 1,138,655 | | |
| (113 | )% |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses): | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 77,411 | | |
| 54,001 | | |
| 23,410 | | |
| 43 | % |
Other - net | |
| (135,280 | ) | |
| 158,359 | | |
| (293,639 | ) | |
| (185 | )% |
Total other income (expenses) | |
| (57,869 | ) | |
| 212,360 | | |
| (270,229 | ) | |
| (127 | )% |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) before income taxes | |
| 73,795 | | |
| (794,631 | ) | |
| 868,426 | | |
| (109 | )% |
Income tax expense | |
| 226,397 | | |
| (12,753 | ) | |
| 239,150 | | |
| (1875 | )% |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| (152,602 | ) | |
| (781,878 | ) | |
| 629,276 | | |
| (80 | )% |
Net income attributable to the noncontrolling interests | |
| 253,878 | | |
| (27,876 | ) | |
| 281,754 | | |
| (1011 | )% |
Net income (loss) attributable to parent's shareholders | |
| (406,480 | ) | |
| (754,002 | ) | |
| 347,522 | | |
| (46 | )% |
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 in both Taiwan and People’s Republic of China (“PRC”).
We generate revenue primarily through our sales force, which consists of individual sales agents in our distribution and service
network. For the three months ended September 30, 2015 and 2014, the revenue generated respectively from Taiwan and PRC is as follows:
| |
Three months ended September 30, | |
Geographical Areas | |
2015 | | |
2014 | |
PRC | |
$ | 1,315,641 | | |
$ | 748,295 | |
Taiwan | |
| 10,126,884 | | |
| 9,046,763 | |
| |
$ | 11,442,525 | | |
$ | 9,795,058 | |
During the three months ended September
30, 2015, 88.50% and 11.50% of our revenues in our unaudited consolidated financial statements were derived from our Taiwan Subsidiaries
and Consolidated Affiliated Entities (“CAE”) in PRC, respectively. During the three months ended September 30, 2014,
92.36% and 7.64% of our revenues in our unaudited consolidated financial statements were derived from our Taiwan Subsidiaries and
CAE, respectively.
Total revenues increased by $1,647,467,
or 17%, from $9,795,058 for the three months ended September 30, 2014 to $11,442,525 for the three months ended September 30, 2015,
which is mainly due to the increase of the revenue in Taiwan and PRC for the following reasons,
a) |
The sales of the products of CTBC Life Insurance Co., Ltd. (“CTBC”) increased in 2015 because China Trust has its long-lasting soundly reputation in the local Taiwan market. Many of its insurance products are among the best seller of the company’s items. In April, 2015, CTBC launched a newly designed life-time life insurance product, which bears variable interest rate and coverages, and the subject product, given its flexibility to address diverse needs, gains the popularity among the customers, leading to the higher sales compared with that for the three months ended September 30, 2014. |
|
|
b) |
The company relocated its headquarters from Henan to Nanjing in the year of 2014 and tried to exploit more and more local markets and to expand its customer base in the PRC area. By setting up more and more business branch, accompanying with the company’s improved capability to serve more customers in different provinces, the company has gained its notability in China and thus generating more and more revenue for the period ended September 30, 2015. |
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 three months ended September 30, 2015 increased by $1,398,144
or 23%, to $7,382,823 compared to $5,984,679 for the three months ended September 30, 2014. The cost of revenue increased with
the increase in revenue.
a) |
Direct commission cost: Compared with the comparable period of 2014, 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 2014. |
The gross profit for the three months ended
September 30, 2015 increased by $249,323 or 7%, to $4,059,702 compared to $3,810,379 for the three months ended September 30, 2014.
The gross profit ratio decreased to 35% for the three months ended September 30, 2015 from 39% for the three months ended September
30, 2014. 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 three months ended September 30, 2014.
Selling expenses
Selling expenses mainly occurred in Law
Broker, representing the expense for marketing promotion. The selling expense for the three months ended September 30, 2015 decreased
by $682,431 or 40%, to $1,020,934 compared to $1,703,365 for the three months ended September 30, 2014. The decrease is mainly
a result from the decrease of the advertisement expense and other business expenses incurred by the sales department.
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 three months ended September 30,
2015, G&A expenses were $2,907,104, decreased by $206,901, or 7%, compared with $3,114,005 for the three month ended September
30, 2014, 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. The rate of the subject business tax was back to 2% from March 2015.
Other income (expenses)
Net other income (expenses) for the three
months ended September 30, 2015 was $(57,869) and the net other income (expenses) for the three months ended September 30, 2014
was $212,360. Other income (expense) mainly consists of interest income, gain on change of fair value of marketable securities
and loss on disposal of fixed assets. Compared with the three month ended September 30, 2015, net other income decreased due to
the increase of other expenses and loss on disposal of fixed assets.
Income tax
For the three months ended September 30,
2015, the income tax expense was $226,397, increased by $239,150, or 1875%, compared with $(12,753) for the three months ended
September 30, 2014. The increase was mainly due to increase income before income taxes for the three months ended September 30,
2015 compared to the three months ended September 30, 2014.
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.
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%.
Discontinued operations
Law Agent has completed the liquidation
process and proceeded to file the liquidation completion declaration to the court for the three months ended September 30, 2015.
Overview
of the nine months ended September 30, 2015 and 2014
The
following table shows the results of operations for the nine months ended September 30, 2015 and 2014:
| |
Nine Months Ended September 30, | | |
| | |
| |
| |
2015 | | |
2014 | | |
| | |
Percentage | |
| |
(Unaudited) | | |
(Unaudited) | | |
Change | | |
Change | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 35,556,157 | | |
$ | 30,989,923 | | |
$ | 4,566,234 | | |
| 15 | % |
Cost of revenue | |
| 23,764,574 | | |
| 19,683,245 | | |
| 4,081,329 | | |
| 21 | % |
Gross profit | |
| 11,791,583 | | |
| 11,306,678 | | |
| 484,905 | | |
| 4 | % |
Gross profit margin | |
| 33 | % | |
| 36 | % | |
| 11 | % | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Selling | |
| 1,635,494 | | |
| 2,444,031 | | |
| (808,537 | ) | |
| (33 | )% |
General and administrative | |
| 8,882,547 | | |
| 8,433,578 | | |
| 448,969 | | |
| 5 | % |
Total operating expenses | |
| 10,518,041 | | |
| 10,877,609 | | |
| (359,568 | ) | |
| (3 | )% |
| |
| | | |
| | | |
| | | |
| | |
Income from operations | |
| 1,273,542 | | |
| 429,069 | | |
| 844,473 | | |
| 197 | % |
| |
| | | |
| | | |
| | | |
| | |
Other income: | |
| | | |
| | | |
| | | |
| | |
Interest income | |
| 174,324 | | |
| 147,954 | | |
| 26,370 | | |
| 18 | % |
Other - net | |
| 107,153 | | |
| 244,260 | | |
| (137,107 | ) | |
| (56 | )% |
Total other income | |
| 281,477 | | |
| 392,214 | | |
| (110,737 | ) | |
| (28 | )% |
| |
| | | |
| | | |
| | | |
| | |
Income before income taxes | |
| 1,555,019 | | |
| 821,283 | | |
| 733,736 | | |
| 89 | % |
Income tax expense | |
| 845,556 | | |
| 1,171,602 | | |
| (326,046 | ) | |
| (28 | )% |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) | |
| 709,463 | | |
| (350,319 | ) | |
| 1,059,782 | | |
| (303 | )% |
Net income attributable to the noncontrolling interests | |
| 827,066 | | |
| 524,522 | | |
| 302,544 | | |
| (58 | )% |
Net income (loss) attributable to parent's shareholders | |
| (117,603 | ) | |
| (874,841 | ) | |
| 757,238 | | |
| (87 | )% |
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 in both Taiwan and People’s Republic of China (“PRC”).
We generate revenue primarily through our sales force, which consists of individual sales agents in our distribution and service
network. For the nine months ended September 30, 2015 and 2014, the revenue generated respectively from Taiwan and PRC is as follows:
| |
Nine months ended September 30, | |
Geographical Areas | |
2015 | | |
2014 | |
PRC | |
$ | 4,194,921 | | |
$ | 2,137,652 | |
Taiwan | |
| 31,361,236 | | |
| 28,852,271 | |
| |
$ | 35,556,157 | | |
$ | 30,989,923 | |
During the nine months ended September
30, 2015, 88.20% and 11.80% of our revenues in our unaudited consolidated financial statements were derived from our Taiwan Subsidiaries
and Consolidated Affiliated Entities (“CAE”) in PRC, respectively. During the nine months ended September 30, 2014,
93.10% and 6.90% of our revenues in our unaudited consolidated financial statements were derived from our Taiwan Subsidiaries and
CAE, respectively.
Total revenues increased by $4,566,234,
or 15%, from $30,989,923 for the nine months ended September 30, 2014 to $35,556,157 for the nine months ended September 30, 2015,
which is mainly due to the increase of the revenue in Taiwan and PRC for the following reasons,
a) |
The sales of the products of Farglory Life Insurance Co., Ltd (“Farglory”) increased in 2015 because Farglory bundles its life insurance products to better customize each of its clients’ appeals. By combining insurance contracts with diversified term, premium, and coverage arrangements, the increased flexibility of the products of Farglory drew more attentions from the company’s customer and thus boosting the sales performance for the period ended September 30, 2015. |
|
|
b) |
The sales of the products of CTBC Life Insurance Co., Ltd. (“CTBC”) increased in 2015 because China Trust has its long-lasting soundly reputation in the local Taiwan market. Many of its insurance products are among the best seller of the company’s items. In fourth quarter of 2014, CTBC launched a newly designed insurance product focuses on the coverage of the handicap medical care that provides the solution for the absence of the coverage from the government funded health insurance; in April, 2015, CTBC launched a newly designed life-time life insurance product, which bears variable interest rate and coverages, and the subject product, given its flexibility to address diverse needs, gains the popularity among the customers, leading to the higher sales compared with that for the nine months ended September 30, 2014. |
|
|
c) |
The company relocated its headquarters from Henan to Nanjing in the year of 2014 and tried to exploit more and more local markets and to expand its customer base in the PRC area. By setting up more and more business branch, accompanying with the company’s improved capability to serve more customers in different provinces, the company has gained its notability in China and thus generating more and more revenue for the period ended September 30, 2015. |
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 nine months ended September 30, 2015 increased by $4,081,329
or 21%, to $23,764,574 compared to $19,683,245 for the nine months ended September 30, 2014. The cost of revenue increased with
the increase in revenue.
a) |
Direct commission cost: Compared with the comparable period of 2014, 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 2014. |
The gross profit for the nine months ended
September 30, 2015 increased by $484,905 or 4%, to $11,791,583 compared to $11,306,678 for the nine months ended September 30,
2014. The gross profit ratio decreased to 33% for the nine months ended September 30, 2015 from 36% for the nine months ended September
30, 2014. 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 nine months ended September 30, 2014.
Selling expenses
Selling expenses were mainly occurred in
Law Broker, representing the expense for marketing promotion. The selling expense for the nine months ended September 30, 2015
decreased by $808,537 or 33%, to $1,635,494 compared to $2,444,031 for the nine months ended September 30, 2014. The decrease is
mainly results from the decrease of the advertisement expense and other business expenses incurred by the sales department.
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 nine months ended September 30,
2015, G&A expenses were $8,882,547, increased by $448,969, or 5%, compared with $8,433,578 for the nine month ended September
30, 2014, 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. The rate of the subject business tax was back to 2% from March 2015. In addition, the G&A expense increased
in Anhou due to the fact the company recently moved its headquarter to Nanjing in April 2014 and requires more expenditures to
start the business operation and increased the number of employee in Nanjing.
Other income
Net other income for the nine months ended
September 30, 2015 was $281,477 and the net other income for the nine months ended September 30, 2014 was $392,214. Other income
(expense) mainly consists of interest income, gain on change of fair value of marketable securities and loss on disposal of fixed
assets. Compared with the nine month ended September 30, 2015, net other income decreased due to the increase of other expenses
and loss on disposal of fixed assets.
Income tax
For the nine months ended September 30,
2015, the income tax expense was $845,556, decreased by $326,046, or 28%, compared with $1,171,602 for the nine months ended September
30, 2014. The decrease was mainly due to the company paid additional 10% on any undistributed earnings income tax from prior period
for the nine months ended September 30, 2015 compared to that for the nine months ended September 30, 2014.
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.
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%.
Discontinued operations
Law Agent has completed the liquidation
process and proceeded to file the liquidation completion declaration to the court for the nine months ended September 30, 2015.
Liquidity and Capital Resources
The following table represents a comparison
of the net cash provided by operating activities, net cash provided by (used in) operating activities, net cash provided by (used
in) investing activities and net cash used in financing activities for the nine months ended September 30, 2015 and 2014:
| |
Nine Months Ended September 30, | | |
| |
| |
2015 | | |
2014 | | |
| | |
Percentage | |
| |
(UNAUDITED) | | |
(UNAUDITED) | | |
Change | | |
Change | |
Net cash provided by operating activities | |
$ | 559,920 | | |
$ | 250,958 | | |
| 308,962 | | |
| 123 | % |
Net cash provided by (used in) investing activities | |
| (312,943 | ) | |
| 1,281,917 | | |
| (1,594,860 | ) | |
| (124 | )% |
Net cash provided by (used in) financing activities | |
| (178,562 | ) | |
| 45,527 | | |
| (224,089 | ) | |
| (492 | )% |
Operating activities
Net cash provided by operating activities
during nine months ended September 30, 2015 was $559,920, increased by 308,962 in comparison with $250,958 net cash provided by
operating activities during nine months ended September 30, 2014. The increase was mainly due to increased net income for the nine
months ended September 30, 2015 compared to that for the nine months ended September 30, 2014.
Investing activities
Net cash used in investing activities
was $312,943 during the nine months ended September 30, 2015, which is mainly due to the increased purchase of property, plan
equipment and purchase of intangible assets. The net cash provided by investing activities was $1,281,917 for the nine months
ended September 30, 2014, which is mainly due to the sale of investment in current deposit assets during the period.
Financing activities
Net cash used in financing activities was
$178,562 during the nine months ended September 30, 2015, which is the result of repayment of the borrowings from the Company’s
related parties. Net cash provided by financing activities was $45,527 during the nine months ended September 30, 2014, which is
the result of the borrowings from the Company’s related parties.
Related Party Loan and Loans to Unrelated
Third Parties
Anhou Registered Capital Increase
On April 27, 2013, the China Insurance
Regulatory Commission (“CIRC”) issued the Decision on Revising the Provisions of the Supervision and Administration
of Specialized Insurance Agencies (the “Decision on Revising the Agency Provisions”), pursuant to which, CIRC mandated
any insurance agency established subsequent to the Decision on Revising the Agency Provisions to meet a minimum registered capital
requirement of RMB50 million (approximately $ 8 million). On May 16, 2013, CIRC issued
Notice for Further Clarification on Related Issues of Access to Professional Insurance Intermediary Market (the “Notice”),
pursuant to which, professional insurance agencies established prior to the issuance of the Decision on Revising the Agency Provisions,
with registered capital less than RMB50 million (approximately $8 million) can continue
to operate its existing business within the provinces where they have a registered office or branch office, but shall not set up
any new branches in any provinces where it has no registered office or a branch office.
Prior to the capital increase, Anhou, a
professional insurance agency with a PRC nationwide license, used to have a registered capital of RMB10 million (approximately
$1.6 million). The branch offices of Anhou currently were all in Henan province. To better implement its expansion strategies,
Anhou intended to increase its registered capital to RMB50 million (approximately $8 million)
to meet the requirement of CIRC so that it can set up new branches in any province beyond its current operations 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. The entire loan and interest amount of $288 has
been paid off in January 2015.
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 September 30, 2015 and December
31, 2014:
| |
September 30, 2015 | | |
December 31, 2014 | |
Due to Mr. Mao (Principal Shareholder of the Company) | |
$ | 283,294 | | |
$ | 214,165 | |
Due to Mr. Zhu (Legal Representative of Jiangsu Law) | |
| 2,179 | | |
| 2,255 | |
Due to Mrs. Lee (Director of CUIS) | |
| - | | |
| 315,027 | |
Due to Genius Broker (*) | |
| 32,166 | | |
| - | |
Total | |
$ | 317,639 | | |
$ | 531,447 | |
(*) The legal representative of the
Genius Broker serves as one of the board members of CUIS.
Contractual Obligations
The Company has operating leases for its
offices. Rental expenses for the nine months ended September 30, 2015 and 2014 were $1,382,414 and $1,286,054, respectively. Rental
expenses for the three months ended September 30, 2015 and 2014 were $500,061 and $402,545, respectively. At September 30, 2015,
total future minimum annual lease payments under operating leases were as follows, by years:
Twelve months ended September 30, 2016 | |
$ | 1,892,494 | |
Twelve months ended September 30, 2017 | |
| 1,037,776 | |
Twelve months ended September 30, 2018 | |
| 588,781 | |
Twelve months ended September 30, 2019 | |
| 148,243 | |
Twelve months ended September 30, 2020 | |
| 20,087 | |
Total | |
$ | 3,687,381 | |
Acquisition Agreement
On February 22, 2015, the Company and the
selling shareholder of GHFL entered into an Amendment to the Acquisition Agreement dated February 13, 2015, pursuant to which if
the Guaranteed Price per share is higher than the Average Price per share, then the Parties shall negotiate in good faith on an
adjustment to the Purchase Price as necessary, if any.
Off Balance Sheet Arrangements
We have not participated in any transactions
with unconsolidated entities, such as special purpose entities, which would have been established for the purpose of facilitating
off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISK.
We are exposed to market risk in the ordinary
course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in
financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in interest rates and foreign
currency exchange rates.
Interest Rate Sensitivity
As of September 30, 2015, we had cash of
RMB 16 million, approximately $3 million, and NT$537 million, approximately $16 million. We hold our cash for working capital purposes.
Declines in interest rates would reduce future interest income. For the three months ended September 30, 2015, the effect of a
hypothetical 10% increase or decrease in overall interest rates would not have had a material impact on our interest income.
Foreign Currency Risk
The functional currency for the subsidiaries
in Taiwan is NT$ 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 4. INTERNAL CONTROLS OVER FINANCIAL
REPORTING.
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 September 30, 2015. Based on that evaluation, our management, including
the Chief Executive Officer and Chief Financial Officer, concluded that as of September 30, 2015, 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.
Changes in internal control over financial
reporting
During the three months ended September 30,
2015, there were no changes in our internal control over financial reporting identified in connection with the evaluation performed
during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect our
internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time we are
involved in legal proceedings arising in the ordinary course of our business. Although the results of litigation and claims cannot
be predicted with certainty, we currently believe that there is no litigation pending that is likely to have a material adverse
effect on our business. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement
costs, diversion of management resources and other factors.
ITEM 1A. RISK FACTORS.
There have been no material
changes from the risk factors disclosed in our annual report on Form 10-K for the fiscal year period ended December 31, 2014.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION.
The information contained in “Part II,
Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds” of this Quarterly Report is incorporated herein
by reference.
ITEM 6. EXHIBITS
(a) Exhibits:
Exhibit |
|
|
Number |
|
Description of Exhibit |
|
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 |
31.2 |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 |
32.1* |
|
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2* |
|
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS |
|
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 quarterly report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18
of the Securities Exchange Act of 1934, as amended.
SIGNATURES
Pursuant to the requirements of Section
13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report on Form 10-Q
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 9, 2015 |
By: |
/s/ Mao Yi Hsiao |
|
Name: |
Mao Yi Hsiao |
|
Its: |
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
Date: November 9, 2015 |
By: |
/s/ Chuang Yung Chi |
|
Name: |
Chuang Yung Chi |
|
Its: |
Chief Financial Officer |
|
|
(Principal Financial and Accounting Officer) |
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 Quarterly Report
on Form 10-Q 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: November 9, 2015 |
/s/ Mao Yi Hsiao |
|
Mao Yi Hsiao |
|
Chief Executive Officer |
|
(Principal Executive Officer) |
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 Quarterly Report
on Form 10-Q 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: November 9, 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 Quarterly Report of the Company
on Form 10-Q for the period ended September 30, 2015 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: November 9, 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 Quarterly Report of the Company
on Form 10-Q for the period ended September 30, 2015 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: November 9, 2015 |
/s/ Chuang Yung Chi |
|
Chuang Yung Chi |
|
Chief Financial Officer |
|
(Principal Accounting Officer) |
China United Insurance S... (CE) (USOTC:CUII)
Historical Stock Chart
From Jun 2024 to Jul 2024
China United Insurance S... (CE) (USOTC:CUII)
Historical Stock Chart
From Jul 2023 to Jul 2024