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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-54884

CHINA UNITED INSURANCE SERVICE, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation)

30-0826400
(I.R.S Employer
Identification No.)

7F, No. 311 Section 3

Nan-King East Road

Taipei City, Taiwan

(Address of principal executive offices, with zip code)

+8862-87126958

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

None

Securities registered under Section 12(g) of the Act:


Title of each class		Common Stock, par value of $0.00001

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻ No ⌧

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ◻ No ⌧

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ◻	Accelerated filer ☐
Non-accelerated filer ⌧	Smaller reporting company ☒
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, based upon the closing sale price of the registrant’s common stock on June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter was $39,375,044.

As of March 21, 2022, there were 30,286,199 shares of common stock issued and outstanding, and 1,000,000 preferred shares issued and outstanding.

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TABLE OF CONTENTS


PART I		4
ITEM 1.	BUSINESS	4
ITEM 1A.	RISK FACTORS	40
ITEM 1B.	UNRESOLVED STAFF COMMENTS	46
ITEM 2.	PROPERTIES	46
ITEM 3.	LEGAL PROCEEDINGS	47
ITEM 4.	MINE SAFETY DISCLOSURES	48
PART II		48
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	48
ITEM 6.	SELECTED FINANCIAL DATA	49
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS	49
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	55
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	55
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	55
ITEM 9A.	CONTROLS AND PROCEDURES	56
ITEM 9B.	OTHER INFORMATION	57
PART III		57
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	57
ITEM 11.	EXECUTIVE COMPENSATION	64
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	66
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	67
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	68
PART IV		69
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	69
ITEM 16.	FORM 10-K SUMMARY	71
SIGNATURES		72

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This annual report contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward- looking statements. These risks and uncertainties include, but are not limited to, the factors described under Item 1 “Description of Business,” Item 1A “Risk Factors” and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Forward-looking statements represent our estimates and assumptions only as of the date of this annual report. You should read this annual report and the documents that we reference in this annual report, or that we filed as exhibits to this annual report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

OTHER PERTINENT INFORMATION

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

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

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

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

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PART I

ITEM 1. BUSINESS

Corporate History and Structure Overview

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

Taiwan Segment

•

Lawbroker

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

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

•

Joint Venture-Uniwill

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

On March 3, 2021, the parties thereto entered into an amendment to the Joint Venture Agreement (the “Amendment to the Joint Venture Agreement”), pursuant to which AIlife shall fulfill the paid-up capital obligation in the aggregate amount of NT$400 million (the “Total Cash Contribution”) during a period of eight (8) years (the “Period”) from November 15, 2019, provided that the number of the registered sales agents of Uniwill exceeds 1,000 and the cumulative revenue of the JV reaches NT$8.7 billion (the “Revenue Threshold”) within the Period. Subject to the terms of the Amendment to the Joint Venture Agreement and Joint Venture Agreement, in the event that Uniwill fails to reach the Revenue Threshold within the Period, AIlife shall only be obligated to make cash contributions through the Period to the Joint Venture in the aggregate amount (the “Total Adjusted Cash Contribution”) calculated as follows:

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

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

●

Acquisition of AHFL

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

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

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

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

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

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

On March 12, 2017, a fifth Amendment to the Acquisition Agreement (the “Fifth Amendment to AHFL Acquisition Agreement”) was entered into by and among the Company and the selling shareholders of AHFL named therein. Pursuant to the Fifth Amendment to AHFL Acquisition Agreement, the Company agreed to distribute the cash payments in the aggregate amount of NT$15 million to the selling shareholders of AHFL named therein on or prior to March 31, 2019.

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

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

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Acquisition of GHFL

Genius Holdings Financial Limited (“GHFL”) is a wholly owned subsidiary of AHFL. On February 13, 2015, our Company, AHFL and Mr. Chwan Hau Li, the then sole shareholder of GHFL, entered into an acquisition agreement (the “GHFL Acquisition Agreement”). Pursuant to the GHFL Acquisition Agreement, our Company issued Mr. Chwan Hau Li 352,166 fully paid and non-assessable shares of AHFL common stock (the “AHFL Shares”) together with put options to sell 352,166 shares of common stock of our Company (the “Put Option”), in exchange for 704,333 shares of common stock of GHFL previously held by Mr. Chwan Hau Li, which constituted all of the then issued and outstanding capital stock of GHFL. The Put Option was exercisable within six months of the closing date of the acquisition. The holder of the Put Option would need to forfeit the AHFL Shares to exercise the Put Option. Subsequent to the acquisition, GHFL became a wholly-owned subsidiary of our Company. GHFL holds 100% issued and outstanding shares of Genius Investment Co., Ltd. (“GIC”), a company limited by shares and incorporated under the laws of Taiwan, which in turn holds approximately 15.64% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius Broker”), a company limited by shares and incorporated under the laws of Taiwan. Both GHFL and GIC have no substantive business operation other than the holding of shares of its subsidiary. Genius Broker is primarily engaged in broker business across Taiwan. On March 31, 2015, Mr. Chwan Hau Li exercised the Put Option, pursuant to which Mr. Chwan Hau Li transferred 352,166 shares of AHFL to our Company and received 352,166 shares of common stock of our Company in exchange. After the exercise of the Put Option, the Company became the sole shareholder of GHFL and AHFL.

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

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

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

In July of 2018, the Company acquired Joint Broker Co., Limited (“JIB”), a Taiwan Insurance brokerage company, previously known as Kao Te Insurance Broker (“KT Broker”), through GIC. On July 1, 2018, GIC entered into an acquisition agreement (“KT Broker Acquisition Agreement”) with the selling shareholder of KT Broker, Ms. Ma. Pursuant to the KT Broker Acquisition Agreement, GIC agreed to pay $29,545 (NT$ 900,000) in exchange for the insurance brokerage licenses issued to KT Broker by the Taiwan government, along with right to the KT Broker’s company name and $13,131 (NT$ 400,000) of legal deposits, which were required by the Taiwan insurance regulations. The Company has no intention of operating the KT Broker existing brokerage business nor retaining any of its sales personnel, did therefore the Company recognize for accounting purposes only the acquisition of assets as part of this transaction. The Taiwan laws do not allow a legal entity to transfer its brokerage license. In order to obtain the desired licenses that KT Broker had, we acquired KT Broker and renamed KT Broker as Joint Insurance Broker Co., Limited to serve as a holding entity for the brokerage licenses. The change of control due to KT Broker Acquisition Agreement and name change did not affect the effectiveness of the insurance brokerage license owned by JIB in Taiwan. On January 31, 2022, GIC entered into a stock transfer agreement with AIlife International Investment Co., Ltd. (“AIlife”), whereby GIC sold and transferred its 100% equity in JIB to AIlife.

PRC Segment

●

Anhou

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

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

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

The registered capital increase of Anhou was in response to the promulgations of certain regulations by the China Insurance Regulatory Commission (“CIRC”). On April 27, 2013, CIRC issued the Decision on Revising the Provisions of the Supervision and Administration of Specialized Insurance Agencies (the “Decision on Revising the Agency Provisions”), pursuant to which, CIRC mandated any insurance agency established subsequent to the Decision on Revising the Agency Provisions to meet a minimum registered capital requirement of RMB50 million. On May 16, 2013, CIRC issued Notice for Further Clarification on Related Issues of Access to Professional Insurance Intermediary Market (the “2013 Notice”), pursuant to which, professional insurance agencies established prior to the issuance of the Decision on Revising the Agency Provisions, with registered capital less than RMB50 million, can continue operation of their existing business within the provinces where they have the registered office or branch office, but shall not set up any new branches in any province where they do not have the registered office or any branch office. To better implement the expansion strategies of our Company, Anhou increased its registered capital to RMB50 million to meet the requirement of CIRC so that it is able set up new branches in any province beyond its current operations in the PRC.

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

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

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

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

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

Sichuan Kangzhuang Insurance Agency Co., Ltd. (“Sichuan Kangzhuang”), a wholly owned subsidiary of Anhou, was established with limited liability on September 4, 2006 in Sichuan province of the PRC. On September 6, 2010, shareholders of Sichuan Kangzhuang transferred their interest in Sichuan Kangzhuang to Anhou for an aggregate consideration of RMB532,622. For the purpose of procuring certain economic benefits and enabling a centralized control over the business operations in Sichuan province, the Company commenced the dissolution process of Sichuan Kangzhuang, a wholly owned subsidiary of Anhou and set up a branch office of Anhou in Sichuan province. Accordingly, Sichuan Kangzhuang filed a dissolution application to the local Bureau of Administration and Commerce and made a public announcement published in local newspaper in October 2017. As Sichuan Kangzhuang ceased operations, it was dissolved on October 8, 2018.

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

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On February 25, 2022, Anhou, a contract controlled entity of China United Insurance Service, Inc. entered into a Share Purchase Agreement with Jiangsu Law and third-party buyers, pursuant to which Anhou shall sell and transfer 100% of its equity ownership in Jiangsu Law and a wholly owned subsidiary of Anhou to the following buyers: Xuzhou Guosheng Furui Asset Management Co., Ltd., Jiangsu Zhongbozhixin Financial Service Outsourcing Co., Ltd., and Xuzhou Xinrui Service Outsourcing Co., Ltd. The disposal of Jiangsu Law is immaterial to the Company’s consolidated financial statements. For more information, please refer to the Note 26 and Form 8-K Footnote of the Consolidated Financial Statements for the years ended December 31, 2021 and 2020 and current report on filed on March 3, 2022.

●

Our Consolidated Affiliated Entities

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

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

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

an Exclusive Business Cooperation Agreement, pursuant to which CU WFOE is appointed as the exclusive services provider to Anhou of complete technical support, business support and related consulting services in exchange for 90% of the net profits of Anhou. The Exclusive Business Cooperation Agreement was effective on January 17, 2011 with a term of ten years subject to renewal at the discretion of CU WFOE. CU WFOE may terminate the agreement at any time with 30 days’ written notice but Anhou may only terminate the agreement if CU WFOE commits gross negligence or a fraudulent act against Anhou;

a Power of Attorney, pursuant to which the shareholders of Anhou have vested their collective voting control in Anhou to CU WFOE;

an Option Agreement, pursuant to which the shareholders of Anhou granted to CU WFOE the irrevocable right and option to acquire all of their equity interests in Anhou. The Option Agreement was effective on October 24, 2013 with a term of ten years subject to renewal at CU WFOE’s election; and

a Share Pledge Agreement, pursuant to which the shareholders of Anhou have pledged all of their equity interests in Anhou to CU WFOE to guarantee Anhou’s performance of its obligations under the Exclusive Business Cooperation Agreement.

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

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Hong Kong Segment

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Reinsurance Brokerage- PFAL

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

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

On July 2, 2020, the Company had liquidated a subsidiary in the PRC, Prime Management Consulting (Nanjing) Co., Ltd. (PTC Nanjing) and recognized a loss on disposal of such subsidiary in the amount of $5,645 for both the three-month and nine-month periods ended September 30, 2020.

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

Revenue Generation

As a holding company with no business other than holding equity interest of our operating subsidiary, CU WFOE in China and the Taiwan Segment, we rely principally on dividends to be paid by CU WFOE in China and the Taiwan Segment. CU WFOE, being the exclusive service provider to Anhou, relies on the service fees to which it is entitled from Anhou. Pursuant to the Exclusive Cooperation Agreement (the “Cooperation Agreement”) between CU WFOE and Anhou (“the Parties”), CU WFOE has the right to collect 90% of the net profits of Anhou. The Parties further agree that, according to the actual cooperation between the Parties, the revenue and expenditure situation of Anhou, the Parties may adjust the calculation ratio of the Service Fees provided herein through mutual agreement, and CU WFOE is entitled to determine, in its sole discretion, whether to permit Anhou to defer the payment of part or all of the Service Fees under certain particular circumstances. Anhou has been paying service fees according to the Cooperation Agreement, but has not paid any dividend to CU WFOE to date. As of December 31, 2021, Anhou was operating at loss, but since Anhou remains a growing company that requires financial resources to support further expansion, the decision as to a dividend payment will be decided in the future depending on the financial circumstances, including maintaining prudent cash reserves. Our capability to receive dividends from CU WFOE, convert them into USD and make the repatriation out of China is subject to the applicable PRC restrictions on the payment of dividends by PRC companies, laws and regulations on foreign exchange and restrictions on foreign investment.

For the year ended December 31, 2021, 95.64%, 4.33% and 0.03% of our revenues in our consolidated financial statements were derived from our Taiwan Segment, PRC Segment, and Hong Kong Segment, respectively. For the year ended December 31, 2020, 94.58%, 5.17% and 0.25% of our revenues in our consolidated financial statements were derived from our Taiwan Segment, PRC Segment, and Hong Kong Segment, respectively. Revenues in our consolidated financial statements are composed of commissions earned from insurance companies according to the terms of each insurance company service agreement, as well as revenues earned in association with the Strategic Alliance Agreement with AIA International Limited Taiwan Branch.

Reclassification of Shares

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

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stock shall be entitled to one vote for each share of common stock held of record by such holder as of the applicable record date on any matter that is submitted to a vote of the stockholders of our Company; while each holder of Series A Preferred Stock shall be entitled to ten votes for each share of Series A Preferred Stock held of record by such holder as of the applicable record date on any matter that is submitted to a vote of the stockholders of our Company.

2017 Long Term Incentive Plan

On May 12, 2017, the Company’s 2017 Long Term Incentive Plan (the “2017 Plan”) was approved by the shareholders at the 2017 Annual Meeting of Stockholders of China United Insurance Service, Inc. Up to 10,000,000 shares of our Common Stock may be granted under the 2017 Plan (the “Share Pool”), provided that 2,000,000 shares of the Share Pool is reserved for issuance to eligible participants providing services to AHFL and its subsidiaries. Eligibility to participate is open to officers, directors and employees of, and other individuals (including sales agents who are exclusive agents of the Company or its subsidiaries or derive more than 50% of their income from those entities) who provide bona fide services to or for, us or any of our subsidiaries. Given that metrics for evaluating performance goals are rather complex and exhaustive, and that the Company’s management and Board of Directors are still working to develop a series of reward policies that specify various performance target levels and the size of the award or payout of performance shares with respect to each different target level attained, no awards were granted under the 2017 Plan as of December 31, 2021.

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The following flow chart illustrates our Company’s organizational structure as of December 31, 2021:

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

On February 25, 2022, Anhou, a contract controlled entity of the Company entered into a Share Purchase Agreement. For more information, please refer to Note 26 and Form 8-K Footnote of the Consolidated Financial Statements for the years ended December 31, 2021 and 2020 and current report on filed on March 3, 2022.

Products and Services

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

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

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

Life Insurance Products

The Taiwan Segment

The life insurance products the Taiwan segment distributes can be broadly classified into the categories set forth below. Due to continuous product innovation by insurance companies, some of the insurance products Taiwan segment distributes combine features of one or more of the categories listed below. Total revenues from life insurance products contributed by Taiwan segment in the fiscal year of 2020 was approximately $111.44 million, accounted for approximately 94.82% of Taiwan segment’s total revenues. Total revenues from life insurance products generated by Taiwan segment in the fiscal year of 2021 was approximately $116.81 million, representing approximately 92.97% of Taiwan segment’s total revenues for the fiscal year ended December 31, 2021.

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Individual Whole Life Insurance. The individual whole life insurance products the Taiwan segment distributes provide insurance for the insured person’s entire life in exchange for the periodic payment of fixed premiums over a pre-determined period, generally ranging from six to 20 years, or until the insured reaches a certain age. The face amount of the policy or, for some policies, the face amount plus accumulated interest is paid upon the death of the insured.

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Individual Term Life Insurance. The individual term life insurance products the Taiwan segment distributes provide insurance for the insured for a specified time period or until the attainment of a certain age, in return for the periodic payment of fixed premiums over a pre-determined period, generally ranging from six to 20 years. Term life insurance policies generally expire without value if the insured survives the coverage period.

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Individual Health Insurance. The individual health insurance products the Taiwan segment distributes pay the insured amount of reasonable hospitalization cost, or certain death benefit in case of the death of the insured, due to illness, accident or childbirth. Individual health insurance policies expire when the premium is not paid or a certain age is attained.

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Accidental Injury Insurance. The accidental injury insurance products the Taiwan segment distributes provide benefits when the insured is dead or disabled because of accidental injury, which is unforeseen by the injured or against his will.

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Investment-Oriented Insurance. The investment-oriented insurance products the Taiwan segment distributes are market linked insurance plans which also provide life coverage, combining advantages of investment and protection. The premium amount (after deduction of certain charges) is invested into different funds. The performance of the fund will depend on the market conditions. A growing upward trend in market will increase the fund value. Every investment-oriented insurance policy has market risk exposure depending on the fund invested and such investment risk is solely borne by the policyholder. Depending on the death benefit, investment-oriented insurance policies are categorized into two broad categories: (1) the death benefit is equal to the higher of insured amount or fund value; (2) the death benefit is equal to the insured amount plus fund value.

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Foreign Currency Insurance Commodities. The foreign currency insurance commodities the Taiwan segment distributes are life insurance policies in which policy benefits are paid in foreign currencies. The foreign currency policy provides insurance for the insured person’s life in exchange for the periodic payment of fixed premiums over a pre-determined period, generally ranging from six to 20 years, or until the insured reaches a certain age. The face amount of the policy or, for some policies, the face amount plus accumulated interest, is paid upon the death of the insured.

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Travel Accident Insurance. The travel accident insurance products the Taiwan segment distributes provide accident coverage for accidental death, bodily injury, and other travel injuries. The premium is based on the number of travel days and the insured amount.

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The life insurance products the Taiwan segment distributed in the year ending December 31, 2021 were primarily underwritten by, in alphabetical order, AIA International Limited Taiwan Branch, Chubb Tempest Life Reinsurance Ltd. Taiwan Branch, Farglory Life Insurance Co., Ltd., Taiwan Life Insurance Co., Ltd. and TransGlobe Life Insurance Inc. Among them, Taiwan Life Insurance Co., Ltd., Farglory Life Insurance Co., Ltd., and TransGlobe Life Insurance Inc. accounted for 18.75%, 12.69%, and 25.56% of our total revenues in the fiscal year ending December 31, 2021, respectively.

Anhou

The life insurance products Anhou distributes can be broadly classified into the categories set forth below. Due to constant product innovation by insurance companies, some of the insurance products Anhou distributes combine features of one or more of the categories listed below. Anhou’s total revenues from life insurance products in the fiscal year of 2020 was approximately $5.77 million, accounting for approximately 89.81% of Anhou’s total revenues and the total revenues from life insurance products in the fiscal year of 2021 was $5.02 million, accounting for approximately 88.14% of Anhou’s total revenues for the year ending December 31, 2021.

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Individual Whole Life Insurance. The individual whole life insurance products Anhou distributes provide insurance for the insured person’s entire life in exchange for the periodic payment of fixed premiums over a pre-determined period, generally ranging from five to 20 years, or until the insured reaches a certain age. The face amount of the policy or, for some policies, the face amount plus accumulated interest is paid upon the death of the insured.

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Individual Term Life Insurance. The individual term life insurance products Anhou distributes provide insurance for the insured for a specified time period or until the attainment of a certain age, in return for the periodic payment of fixed premiums over a pre-determined period, generally ranging from five to 20 years. Term life insurance policies generally expire without value if the insured survives the coverage period.

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Individual Endowment Life Insurance. The individual endowment products Anhou distributes generally provide maturity benefits if the insured reaches a specified age, and provide to a beneficiary designated by the insured guaranteed benefits upon the death of the insured within the coverage period. In return, the insured makes periodic payment of premiums over a pre-determined period, generally ranging from five to 25 years.

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Individual Annuity Insurance. The individual annuity insurance products Anhou distributes provide annual benefit payments after the insured attains a certain age, or for a fixed time period, and provide a lump payment at the end of the coverage period. In addition, the beneficiary designated in the annuity contract will receive guaranteed benefits upon the death of the insured during the coverage period. In return, the purchaser of the annuity products makes periodic payment of premiums during a pre-determined accumulation period.

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Individual Health Insurance. The individual health insurance products Anhou distributes primarily consist of critical illness insurance products, which provide guaranteed benefits for specified critical illnesses during the coverage period. In return, the insured makes periodic payment of premiums over a pre-determined period.

The life insurance products Anhou distributed in the year ending December 31, 2021 were primarily underwritten by, in alphabetical order, Aegon THTF Life Insurance Co., Ltd., Aviva-COFCO Life Insurance Co., Ltd., Evergrande Life Assurance Co., Ltd., Funde Sino Life Insurance Co., Ltd., and Huaxia Insurance Co., Ltd.. None of these insurance company partners accounted for more than 10% of our total revenues for the year ended December 31, 2021.

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

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Property and Casualty Insurance Products

The Taiwan Segment

The Taiwan Segment’s main property and casualty insurance products are automobile insurance, casualty insurance, and liability insurance. The Taiwan Segment commenced sale of automobile insurance, casualty insurance and liability insurance business in August 2003. Our total revenues from property and casualty insurance products in the fiscal year of 2020 year was approximately $6.05 million, accounted for approximately 5.15% of the Taiwan Segment’s total revenues and approximately $8.82 million, accounted for approximately 7.02% of Taiwan Segment’s total revenues in the year ending December 31, 2021, respectively.

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

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Automobile Insurance. The Taiwan Segment distributes both standard automobile insurance policies and supplemental policies, which we refer to as riders. The standard automobile insurance policies the Taiwan Segment sells generally have a term of one year and cover damages of the insured vehicle caused by collision and other traffic accidents, falling or flying objects, fire, explosion and natural disasters. The Taiwan Segment also sells standard third party liability insurance policies, which cover bodily injury and property damages caused by an accident involving an insured vehicle to a person not in the insured vehicle. The riders the Taiwan Segment distributes cover additional losses, such as liability to passengers, losses arising from vehicle theft and robbery, broken glass and vehicle body scratches.

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Casualty Insurance. The casualty insurance the Taiwan Segment distributes are primarily designed to insure any losses or damages to properties caused directly by accidents. The policy period is usually one year and the premium is generally calculated based on the insured amount.

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Liability Insurance. The liability insurance products the Taiwan Segment distributes are primarily designed to protect an individual or business from the risk that they may be sued and held legally liable for something, such as malpractice, third party injuries or negligence. The policy period is usually one year and the premium is generally calculated based on the insured amount.

The property and casualty insurance products the Taiwan Segment distributed in the year ending December 31, 2021 were primarily underwritten by, in alphabetical order, Fubon Insurance Co., Ltd., Hotai Insurance Co., Ltd., Shinkong Insurance Co., Taian Insurance Co., Ltd, and Taiwan Fire & Marine Insurance Co., Ltd. None of these insurance company partners accounted for more than 10% of our total revenues for the year ended December 31, 2021.

Anhou

Anhou’s main property and casualty insurance product is commercial property insurance. Anhou commenced its sale of commercial property insurance in 2009 and developed its automobile insurance business in 2010. The total revenues from property and casualty insurance products generated by Anhou in the 2020 fiscal year was approximately $0.65 million, accounting for approximately 10.19% of Anhou’s total revenues, and approximately $0.67 million, accounted for approximately 11.86% of Anhou’s total revenues for the fiscal year ended December 31, 2021.

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

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Automobile Insurance. Automobile insurance is one of property and casualty insurance in the PRC in terms of gross written premiums. Anhou distributes both standard automobile insurance policies and supplemental policies, which we refer to as riders. The standard automobile insurance policies Anhou sells generally have a term of one year and cover damages caused to the insured vehicle by collision and other traffic accidents, falling or flying objects, fire, explosion and natural disasters. Anhou also sells standard third party liability insurance policies, which cover bodily injury and property damage caused by an accident involving an insured vehicle to a person not in the insured vehicle. The riders Anhou distributes cover additional losses, such as liability to passengers, losses arising from vehicle theft and robbery, broken glass and vehicle body scratches.

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Commercial Property Insurance. The commercial property insurance products Anhou distributes include basic, comprehensive and all risk policies. Basic commercial property insurance policies generally cover damages to the insured property caused by fire, explosion and thunder and lightning. Comprehensive commercial property insurance policies generally cover damages to the insured property caused by fire, explosion and certain natural disasters. All risk commercial property insurance policies cover all causes of damage to the insured property not specifically excluded from the policies.

The property and casualty insurance products Anhou distributed in the fiscal year ending December 31, 2021 were primarily underwritten by, in alphabetical order, Asia-Pacific Property & Casualty Insurance Co., Ltd., China Life Property & Casualty Insurance Co. Ltd., China Pacific (Group) Co., Ltd., PICC Property and Casualty Co., Ltd., and Tianan Property Insurance Co., Ltd. None of these insurance company partners accounted for more than 10% of our total revenues for the year ended December 31, 2021.

Strategic Alliance with AIATW

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

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

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

Pursuant to the Second Amendment to the Alliance Agreement, the expiration date of the Alliance Agreement was extended from May 31, 2018 to December 31, 2021, and the effect of the Alliance Agreement during the period from October 1, 2014 to December 31, 2015 was suspended. In addition, both AHFL and AIATW agree to adjust certain terms and conditions set forth in the Alliance Agreement, among which are to: (i) expand the scope of services to be provided by AHFL to AIATW to include, without limitation, assessment and advice on suitability of cooperative partners, advice on product strategies suitable for promotion channel development, advice on promotion/sales channel improvement, advice on promotion channel marketing and strategic planning, and promotion channel talent training; and (ii) remove certain provisions related to performance milestones and refund of execution fees. On March 15, 2016, AHFL unilaterally issued a confirmation letter to AIATW (the “2016 Letter”), where it emphasized its commitment to achieve certain sales targets within a specific time frame and covenanted to refund a certain portion of execution fees calculated based on the formula therein upon failure to achieve such sales target, as applicable.

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

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

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

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

Online Business

In recent years, the online insurance business has experienced rapid growth. Many insurance companies, portal websites, and professional insurance intermediaries have begun launching its e-commerce platforms, providing real-time information to consumers and allowing consumers to directly complete transactions online. Law Broker began developing its online platform in 2016, and became the first brokerage company to receive formal approval from the Financial Supervisory Commission of Taiwan (“FSC”) to commence online business on May 9, 2016. The platform, SARAcares (website: https://www.saracares.com.tw), was launched on January 26, 2017. It offers a broad range of insurance products underwritten by multiple insurance companies, policy comparison features, and post-sale services that are backed by our online service staffs and nationwide sales network. As required by the relevant laws and regulations regarding e-commerce provided by the FSC, Law Broker has obtained the ISO 27001 certification of Information Security Management System (ISMS) and BS 10012 certification of Personal Information Management System since June 20, 2017. Our online business in Taiwan was still at a nascent stage with the majority of the sales still being completed by off-line agents as of the date of this annual report.

Unified Operating Platform

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

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A centralized client and insurance policy management and analysis system, which encompasses our life insurance unit and property and casualty insurance unit, that will better support business operations and facilitate risk control;

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A centralized client relations management system, that manages and analyzes client interactions to drive sales growth;

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An integrated administrative and information system, that increases the management efficiency among the subsidiaries, branches and sales departments;

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A centralized and computerized accounting and financial management system, that improves the efficiency of commission distribution and enforcement;

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A human resources management and performance tracking system; and

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An e-training system to provide online trainings to sales professionals.

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The Unified Operating Platform has proved to be an efficient and streamlined operating system which has contributed to the successful expansion and growth of Law Broker into one of the leading insurance brokerage companies in Taiwan, with 54 sales and service outlets (including the headquarters) across Taiwan and 3,348 insurance sales professionals as of December 31, 2021. Law Broker, Uniwill Insurance Broker Co., Ltd. (“Uniwill Insurance Broker”) and Joint Insurance Broker Co., Ltd. (“Joint Insurance”) have a total of 54 sales and service outlets (including the headquarters) across Taiwan and 5,569 insurance sales professionals as of December 31, 2021.

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

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

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

Distribution and Service Network and Marketing

The Taiwan Segment had a total of 54 sales and service outlets (including the headquarters) across Taiwan as of December 31, 2021, among which, 20 were located in the northern region, 22 in the central region, 10 in the southern region and 2 in the eastern region. As of December 31, 2021, Law Broker, Uniwill Insurance Broker and Joint Insurance together had 194 administrative staff members.

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

Since Anhou’s establishment in 2003, it has devoted substantial resources in building up its distribution and service network in the PRC. Anhou has targeted its distribution and service network in certain heavily populated provinces in China, such as Henan, Jiangsu, Sichuan, and Fujian. As of December 31, 2021, Anhou had one insurance agency and one insurance brokerage firm, with 1,352 sales professionals and 124 administrative staff members operating across 25 cities within these four provinces.

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

Customers

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

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

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

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

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

Insurance Company Partners

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

In the fiscal year ended December 31, 2021, our major insurance carrier partners in Taiwan, after aggregating the business conducted between the Taiwan Segment and the various local branches of the insurance companies, included AIA International Limited Taiwan Branch, Chubb Tempest Life Reinsurance Ltd. Taiwan Branch, Farglory Life Insurance Co., Ltd., Taiwan Life Insurance Co., Ltd. and TransGlobe Life Insurance Inc., arranged in alphabetical order. Among them, Taiwan Life Insurance Co., Ltd., Farglory Life Insurance Co., Ltd., and TransGlobe Life Insurance Inc., accounted for approximately 18.75%, 12.69%, and 25.56% of the Company’s total revenues for the year ended December 31, 2021, respectively.

In the fiscal year ended December 31, 2021, Anhou’s major insurance carrier partners, after aggregating the business conducted between Anhou and the various local branches of the insurance companies, were Aegon THTF Life Insurance Co., Ltd., Aviva-COFCO Life Insurance Co., Ltd., Evergrande Life Insurance Co., Ltd., Funde Sino Life Insurance Co., Ltd., and Huaxia Insurance Co., Ltd., arranged in alphabetical order. None of these insurance company partners accounted for more than 10% of our total revenues for the year ended December 31, 2021.

Competition

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

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Professional insurance intermediaries. Life insurance is our core business and has a strong regional feature. Through years of business development, we believe that we can compete effectively with other insurance intermediary companies as we have a longer operational history and over the years have assembled a strong and stable team of managers and sales professionals. With the implementation of our unified operating platform, we believe that we could strengthen our lead in our developed local regions and expand our operation to our newly selected areas. However, with increasing consolidation expected in the insurance intermediary sector in the coming years, we expect competition within this sector to intensify.

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Insurance companies. The distribution of individual life insurance products in Taiwan and China historically has been dominated by insurance companies, which usually use both in-house sales force and exclusive sales agents to distribute their own products. We believe that we can compete effectively with insurance companies because we focus only on distribution and offer our customers a broad range of insurance products underwritten by multiple insurance companies.

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Other business entities. In recent years, business entities that distribute insurance products as an ancillary business, primarily commercial banks and postal offices have been playing an increasingly important role in the distribution of insurance products, especially life insurance products. However, the insurance products distributed by these entities are usually confined to those related to their main lines of business, such as investment-related life insurance products. We believe that we can compete effectively with these business entities because we offer our customers a broader variety of products.

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

Anhou has expanded its business across 25 cities within Henan, Sichuan, Jiangsu, and Fujian provinces as of December 31, 2021. Based on the insurance products Anhou and its branch offices are offering, Anhou’s primary competitors are small-sized and middle-sized insurance agency companies. Anhou is relatively large in terms of the number of salesmen and the sales revenue comparing to those competing insurance agency companies.

Awards and Recognitions

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


Year of Award	Award/Recognition
2021	Ninth Taiwan Insurance Excellence Award
	Excellence in Talent Training Award–Gold Medal
	Excellence in Corporate Social Responsibility Award–Silver Medal
	Excellence in Customer Service–Silver Medal

2019	Eighth Taiwan Insurance Excellence Award
	Excellence in Talent Training Award–Gold Medal
	Excellence in Corporate Social Responsibility Award–Gold Medal
	Excellence in Digital Application Award–Silver Medal
	Excellence in Customer Service–Silver Medal

2017	Seventh Taiwan Insurance Excellence Award
	Excellence in Talent Training Award–Gold Medal
	Excellence in Corporate Social Responsibility Award–Silver Medal
	Excellence in Digital Application Award–Silver Medal
	Excellence in Customer Service–Silver Medal

2015	Sixth Taiwan Insurance Excellence Award
	Excellence in Talent Training Award–Silver Medal
	Excellence in Customer Service–Silver Medal

2013	Fifth Taiwan Insurance Excellence Award
	Excellence in Digital Application Award–Gold Medal
	Excellence in Talent Training Award–Silver Medal
	Excellence in Customer Service–Silver Medal

2011	Fourth Taiwan Insurance Excellence Award
	Excellence in Talent Training Award
	Excellence in Customer Service

Intellectual Property

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

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Law Enterprise and Law Broker jointly own the following trademarks registered in Taiwan:

the Service Mark of Law Insurance Broker Co., Ltd. under the registration number 01462327, with a 10-year validity from June 16, 2021 to June 15, 2031;

the logo of Law Insurance Broker Co., Ltd. under the registration number 01604254, with a 10-year validity from October 16, 2013 to October 15, 2023;

the logo of Blue Magpie (藍鵲), under the registration number 01462329, with a 10-year validity from June 16, 2021 to June 15, 2031;

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the logo of Law (錠嵂) under the registration number 01462328, with a 10-year validity from June 16, 2021 to June 15, 2031;

the logo of Law (錠嵂) under the registration number 01611772, with a 10-year validity from December 1, 2013 to November 30, 2023;

the logo of Bao Xian Tong and INS under the registration number 01580261, with a 10-year validity from May 16, 2013 to May 15, 2023; and

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the logo of Magpie Baby under the registration number 01518573, with a 10-year validity from May 16, 2012 to May 15, 2022.

the logo of Magpie Baby 2.0 under the registration number 01763557, with a 10 year validity from April 1, 2016 to March 31, 2026; and

the logo of SARACARES under the registration number 01876419, with a 10 year validity from October 16, 2017 to October 15, 2027

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Law Broker has the following registered trademarks in Taiwan. All of the trademarks will be renewed for another 10-year before their respective expiry:

the logo of Blue Magpie Cycling Team Fleet, under the registration number 01340567, with a 10-year validity from December 1, 2018 to November 30, 2028;

the logo of Law Insurance Broker under the registration 01340565, with a 10-year validity from December 1, 2018 to November 30, 2028;

the logo of Law Blue Magpie under the registration number 01340566, with a 10-year validity from December 1, 2018 to November 30, 2028;

the logo of Symbiosis, Co-cultivation Co-Prosperity and Law Blue Magpie Picture under the registration number 01317020, with a 10-year validity from July 1, 2018 to June 30, 2028;

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

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

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

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

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the logo of Blue Magpie Fleet Picture under the registration number 01310350, with a 10-year validity from May 1, 2018 to April 30, 2028; and

the logo of Fighting Blue Magpie under the registration number 01313466, with a 10-year validity from June 1, 2018 to May 31, 2028.

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Jiangsu Law has one registered trademark in China, the logo of Jiangsu Law:

Employees

As of December 31, 2021, Law Broker, Uniwill Insurance Broker and Joint Insurance together had 194 administrative staff members and Anhou had 124 full-time employees. Our employees are not represented by any collective bargaining agreement. We believe that we have good relations with our employees and we have never experienced a work stoppage.

Segments

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

Regulations

Taiwan Regulations of the Insurance Industry

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

Taiwan Insurance Law

The current principal regulation governing insurance in Taiwan is the Insurance Law, most recently amended on May 26, 2021 by Legislative Yuan, which provided the basic framework for regulating the insurance industry.

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

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

Taiwan FSC

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

Financial system and supervision policy.

The preparation, amendment and abolishment of financial laws and regulations.

Supervision and management of the financial institutions, including its establishment, revocation, abolishment, change, merger, dissolution, and business scope.

Development, supervision and management of financial market.

Inspection of financial institution.

Inspection on public listing company related to their securities market-related matters.

Foreign financial matters.

Protection of financial customers.

Dealing and penalizing the violation of related laws and regulations of finance.

10.

Collection of and analysis on relevant statistic data related to financial supervision, management and inspection.

11.

Other matters related to financial supervision, management and inspection.

Regulation of Insurance Brokers and Brokerage Companies

The current principal regulation governing insurance brokers and brokerage companies is the Regulations Governing Insurance Brokers last amended on March 3, 2021 by Insurance Bureau of FSC (the “Broker Rule”). An insurance broker stipulated under the Insurance Law refers to a person who negotiates to conclude an insurance contract on behalf of the insured and charges fees from the insured. Depending on their focused insurance areas, i.e. property or life insurance, insurance brokers can be divided into property insurance brokers and life insurance brokers. No matter what insurance industry an insurance broker is engaged in, it must have one of the following qualifications: (1) have passed the insurance brokerage examination for professional and technical staff; (2) have passed the insurance brokerage qualification test; or (3) have obtained the insurance brokerage practitioner certificate and practiced the same business.

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

The Practitioner Certificate

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

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Education and Training

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

Management of Insurance Brokerages

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

Regulation of Insurance Salespersons

The current principal regulation governing individual insurance salespersons is the Rules on the Administration of Insurance Salespersons latest amended on April 6, 2016 by Insurance Bureau of FSC (the “Salesperson Rule”). An insurance salesperson falling under the Insurance Law refers to a person who is engaged in attracting insurance business for insurance companies, insurance brokerage companies and insurance agency companies. A salesperson is not allowed to attract business for the company he belongs to unless he has completed the registration in accordance with the Salesperson Rules and has obtained the registration certificate. In order to obtain the registration certificate, an insurance salesperson must be at least 20 years old and has at least graduated from a senior high school or a senior vocational school or have an equivalent educational background. In addition, the salesperson must meet one of the following requirements: (1) having passed the salesperson qualification examination held by relevant associations; or (2) holding a valid the registration certificate. Once the salespersons has passed the qualification examination, the relevant association will notify the company where the salesperson works, then the company will issue a registration certificate for the salesperson and file such registration certificate with the relevant authorities. The registration certificate is valid for five years and must be renewed before expiration. The salesperson must present the registration certificate before they start to engage in the insurance business. Unless approved by the company, the salesperson may not work for any other insurance company, insurance brokerage company or insurance agency company. The company supervises the work of the salesperson and is joint and severally liable for any damages caused by its salesperson.

Education and Training

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

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

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Taiwan Regulations on Foreign Exchange

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

the disorder in domestic or international economy to the detriment of the stability of Taiwan’s economy; or

Taiwan suffers serious trade deficit.

Taiwan Regulation on Foreign Investment

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

Eminent Domain

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

Taiwan Regulations on Tax

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

●

Income Tax Law, latest amended on April 28, 2021;

●

Enforcement rules of Income Tax Act, latest amended on Feb 21, 2022;

●

Value-Added and Non-Value-Added Business Tax Law, latest amended on June 14, 2017; and

●

The Enforcement Rules of Value-Added and Non-Value-Added Business Tax Law, latest amended on June 25, 2018.

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

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

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

Rates of Income Tax

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

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

PRC Regulations of the Insurance Industry

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

Initial Development of Regulatory Framework

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

(a)

Licensing of insurance companies and insurance intermediaries, such as agencies and brokerages. The 1995 Insurance Law established requirements for minimum registered capital levels, form of organization, and qualification of senior management and adequacy of the information systems for insurance companies, insurance agencies and brokerages.

(b)

Separation of property and casualty insurance and life insurance. The 1995 Insurance Law distinguished insurance between property, casualty, liability and credit insurance businesses, on the one hand, and life, accident and health insurance businesses on the other, and prohibited insurance companies from engaging in both types of businesses.

(c)

Regulation of market conduct by participants. The 1995 Insurance Law prohibited fraudulent and other unlawful conduct by insurance companies, agencies and brokerages.

(d)

Substantive regulation of insurance products. The 1995 Insurance Law gave insurance regulators the authority to approve the policy terms and premium rates for certain insurance products.

(e)

Financial condition and performance of insurance companies. The 1995 Insurance Law established reserve and solvency standards for insurance companies, imposed restrictions on investment powers and established mandatory reinsurance requirements, and put in place a reporting regime to facilitate monitoring by insurance regulators.

(f)

Supervisory and enforcement powers of the principal regulatory authority. The principal regulatory authority, then the People’s Bank of China, was given broad powers under the 1995 Insurance Law to regulate the insurance industry in China.

Establishment of the CIRC and 2002 Amendments to the Insurance Law

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

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

(a)

Authorizing the CIRC to be the insurance supervisory and regulatory body nationwide. The 2002 Insurance Law expressly grants the CIRC the authority to supervise and administer the insurance industry nationwide.

(b)

Expanding the permitted scope of business of property and casualty insurers. Under the 2002 Insurance Law, property and casualty insurance companies may engage in the short-term health insurance and accident insurance businesses upon the CIRC’s approval.

(c)

Providing additional guidelines for the relationship between insurance companies and insurance agents. The 2002 Insurance Law requires an insurance company to enter into an agent agreement with each insurance agent that will act as an agent for such insurance company. The agent agreement sets forth the rights and obligations of the parties to the agreement as well as other matters pursuant to law. An insurance company is responsible for the acts of its agents when the acts are within the scope authorized by the insurance company.

(d)

Relaxing restrictions on the use of funds by insurance companies. Under the 2002 Insurance Law, an insurance company may use its funds to make equity investments in insurance-related enterprises, such as asset management companies.

(e)

Allowing greater freedom for insurance companies to develop insurance products. The 2002 Insurance Law allowed insurance companies to set their own policy terms and premium rates, subject to the approval of, or a filing with, the CIRC.

2009 Amendments to the Insurance Law

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

(a)

Strengthening protection of the insured’s interests. The 2009 Insurance Law added a variety of clauses such as incontestable clause, abstained and estoppel clause, common disaster clause and amending immunity clause, claims-settlement prescription clause, reasons for claims rejection and contract modification clause.

(b)

Strengthening supervision on the qualification of the shareholders of the insurance companies and setting forth specific qualification requirements for the major shareholders, directors, supervisors and senior managers of insurance companies.

(c)

Expanding the business scope of insurers and further relaxing restriction on the use of fund by insurers.

(d)

Strengthening supervision on solvency of insurers with stricter measures.

(e)

Tightening regulations governing the administration of insurance intermediary companies, especially those relating to behaviors of insurance agents.

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

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

The CIRC

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

(a)

promulgate regulations applicable to the Chinese insurance industry;

(b)

investigate insurance companies and insurance intermediaries;

(c)

establish investment regulations;

(d)

approve policy terms and premium rates for certain insurance products;

(e)

set the standards for measuring the financial soundness of insurance companies and insurance intermediaries;

(f)

require insurance companies and insurance intermediaries to submit reports concerning their business operations and condition of assets; order the suspension of all or part of an insurance company or an insurance intermediary’s business;

(g)

approve the establishment, change and dissolution of an insurance company, an insurance intermediary or their branches;

(h)

review and approve the appointment of senior managers of an insurance company, an insurance intermediary or their branches; and

(i)

take enforcement actions against improper behaviors or misconducts of an insurance company or an insurance intermediary.

Regulations of Insurance Agencies

The principal regulation governing insurance agencies is the Provisions on the Supervision and Administration of Specialized Insurance Agencies (the “Agency Provisions”) promulgated by the CIRC on September 25, 2009 and effective on October 1, 2009, which replaced the Provisions on the Administration of Insurance Agencies issued by the CIRC on December 1, 2004 and effective on January 1, 2005. According to the Agency Provisions, the establishment of an insurance agency is subject to minimum registered capital requirement and other requirements and the approval of the CIRC. The term “insurance agency” refers to an entity that engages in insurance agency business within the authorization of, and collects commissions from, insurance companies, including the professional insurance agency companies and their branches. The insurance agency shall meet the qualification requirements specified by the CIRC, obtain the license to conduct an insurance agency business with the approval of the CIRC. An insurance agency may take any of the following forms: (i) a limited liability company; or (ii) a joint stock limited company. An insurance agency must have a registered capital of at least RMB2 million ($313,332). Where it is established as a nationwide company, its registered capital must be at least RMB10 million ($1,566,661). The registered capital must be paid up in cash. On April 27, 2013, CIRC issued the Decision on Revising the Agency Provisions (the “2013 Agency Provisions”), pursuant to which, CIRC has mandated any insurance agency established subsequent to the Decision on Revising the Agency Provisions to meet a minimum registered capital requirement of RMB50 million ($8.1 million). On October 19, 2015, CIRC issued the Decision on Revising Eight Regulations including Provisions on Insurance Companies Setting up Offshore Insurance Organizations, which made certain revisions to the 2013 Agency Provisions (the “2015 Agency Provisions”), among which, (i) eliminate the requirement of prior approval by CIRC to establish an insurance agency; (ii) eliminate the requirement on personnel or senior managers of an insurance agency to obtain certain relevant qualification certificate; or (iii) eliminate the requirement of prior approval by CIRC on split, merger or change of organizational form of an insurance agency company.

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

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

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

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

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

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

(a)

selling insurance products on behalf of the insurer principal;

(b)

collecting insurance premiums on behalf of the insurer principal; and

(c)

conducting loss surveys and handling claims of insurance businesses on behalf of the insurer principal; and other business activities specified by the CIRC.

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

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Regulation of Insurance Brokerages

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

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

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

An insurance brokerage may conduct the following insurance brokerage businesses:

(a)

making insurance proposals, selecting insurance companies and handling the insurance application procedures for the insurance applicants;

(b)

assisting the insured or the beneficiary to claim compensation;

(c)

reinsurance brokering business; and

(d)

providing consulting services to clients with respect to disaster and damage prevention, risk assessment and risk management; and other business activities specified by the CIRC.

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

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

Regulation of Insurance Salespersons

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

Regulations of Insurance Brokerage Practitioner and Insurance Adjustment Practitioners

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

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

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

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

PRC Regulations on Foreign Exchange

Foreign Currency Exchange

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

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Foreign Currency Administration Rules (2008 Revision), as amended or revised, or the Exchange Rules; and

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Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), as amended or revised, or the Administration Rules.

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

Under the Administration Rules, foreign-invested enterprises may only buy, sell or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from the SAFE. Capital investments by foreign-invested enterprises outside of China are also subject to limitations, which include approvals by the Ministry of Commerce, the SAFE and the State Development and Reform Commission.

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

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

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

Because we do not hold equity interests in Anhou, our variable interest entity (the “VIE”), we are subject to risks due to the uncertainty of the interpretation and application of the PRC laws and regulations, including but not limited to regulatory review of oversea listing of PRC companies through a special purpose vehicle, and the validity and enforcement of the contractual arrangement with our VIE.

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

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

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

The Holding Foreign Companies Accountable Act

On May 20, 2020, the U.S. Senate passed the Holding Foreign Companies Accountable Act (the “HFCAA”) requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited to trade on a national exchange. On December 18, 2020, the Holding Foreign Companies Accountable Act was signed into law. On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which became law in December 2020 and prohibits foreign companies from listing their securities on U.S. exchanges if the company has been unavailable for PCAOB inspection or investigation for three consecutive years. In June 2021, the Senate passed the Accelerating Holding Foreign Companies Accountable Act (the “AHFCAA”), which, if signed into law, would reduce the time period for the delisting of foreign companies under the HFCAA to two consecutive years, instead of three years. Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021, which found that the PCAOB was unable to inspect or investigate completely certain named registered public accounting firms headquartered in mainland China of the PRC and Hong Kong.

Our auditor, an independent registered public accounting firm that issues the audit report incorporated in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our

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auditor is headquartered in the State of Michigan, and has been inspected by the PCAOB on a regular basis. Therefore, our auditor is currently not subject to the PCAOB Determination Report.

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

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

PRC Regulations on Dividend Distribution

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

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Wholly Foreign-Owned Enterprise Law (2016), as amended or revised; and

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Wholly Foreign-Owned Enterprise Law Implementing Rules (2016 Revision), as amended or revised.

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

PRC Regulations on Tax

PRC Enterprise Income Tax (“EIT”)

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

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

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

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and October 1, 2012 for entities in Jiangsu. In March 2016, the PRC State Council further expanded the application of VAT to several other key sectors, including real estate, construction, financial services and lifestyle services, effective May 1, 2016.

As of December 31, 2021, all of our Consolidated Affiliated Entities have been requested to convert into the VAT system.

Dividend Withholding Tax

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

ITEM 1A. RISK FACTORS

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

Risks Relating to Our Business

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

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

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

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

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

The occurrence of the COVID-19 pandemic, an uncontrollable event, had adversely affected our operations in mainland China and Hong Kong and may negatively affect our operations in Taiwan. A pandemic typically results in social distancing, travel bans and quarantine, and this has limited our business travel and regular business activities, such as access to our facilities, customers, management, support staff and professional advisors. These, in turn, will not only impact our operations, financial condition and demand for our services but our overall ability to react timely to mitigate the impact of this pandemic. Also it may substantially hamper our efforts to provide our investors with timely information and comply with our filing obligations with the Securities and Exchange Commission during and shortly after the pandemic. Please refer to ITEM 7 for the COVID-19 impact assessment.

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

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

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

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

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

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

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

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international economic and political changes;

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the imposition of governmental controls or changes in government regulations, including tax laws, regulations and treaties;

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changes in, or impositions of, legislative or regulatory requirements regarding the display screen and power bank industries;

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compliance with U.S. and international laws involving international operations, including the Foreign Corrupt Practices Act and export control laws;

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difficulties in achieving headcount reductions due to unionized labor and works councils;

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restrictions on transfers of funds and assets between jurisdictions;

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China- U.S. political instability;

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Mainland China and Taiwan political tension; and

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Outbreaks of diseases and the fears of a pandemic disease.

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

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

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

Risks Relating to Ownership of Our Shares

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

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

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

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

Risks Relating to Our PRC Segment Doing Business in China

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

The regulatory requirements with respect to cybersecurity and data privacy are constantly evolving and can be subject to varying interpretations, and significant changes, resulting in uncertainties about the scope of our responsibilities in that regard. Failure to comply with the cybersecurity and data privacy requirements in a timely manner, or at all, may subject our PRC Segment to government enforcement actions and investigations, fines, penalties, suspension or disruption of our PRC Segment’s operations,

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

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

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

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

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

For example, the M&A Rules require that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the PRC Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress effective 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (i) the total global turnover of all operators participating in the transaction exceeds RMB10 billion and at least two of these operators each had a turnover of more than RMB400 million within China, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB2 billion, and at least two of these operators each had a turnover of more than RMB400 million within China) must be cleared by the anti-monopoly

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enforcement authority before they can be completed. In addition, in 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, also known as Circular 6, which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors. Further, MOFCOM promulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors, effective 2011, to implement Circular 6. Under Circular 6, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises with “national security” concerns. Under the foregoing MOFCOM regulations, MOFCOM will focus on the substance and actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review. If MOFCOM decides that a specific merger or acquisition is subject to a security review, it will submit it to the Inter-Ministerial Panel, an authority established under Circular 6 led by the National Development and Reform Commission, and MOFCOM under the leadership of the State Council, to carry out security review. The regulations prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation stating that the merging or acquisition of a company engaged in the internet content business requires security review, and there is no requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to MOFCOM review.

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

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

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

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

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

On April 21, 2020, the SEC and the PCAOB released a joint statement highlighting the risks associated with investing in companies based in or having substantial operations in certain “restrictive markets,” including China. The joint statement emphasized the risks

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associated with lack of access from the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in the markets where the PCAOB has limited access to the local auditing firms and their work.

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply a minimum offering size requirement for companies primarily operating in a restrictive market, (ii) adopt a new requirement relating to the qualification of management or the board of directors of companies in the restrictive markets, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditor.

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

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

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

Our auditor, an independent registered public accounting firm that issues the audit report, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor has been inspected by the PCAOB on a regular basis. Pursuant to the HFCAA, the PCAOB issued a Determination Report on December 16, 2021, which found that the PCAOB was unable to inspect or investigate completely certain named registered public accounting firms headquartered in mainland China of the PRC and Hong Kong. Our independent registered public accounting firm has been inspected by the PCAOB on a regular basis and as such it is not subject to the PCAOB Determination Report.

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

Risks Related to Our Corporate Structure

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

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

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

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

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

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

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

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not Applicable.

ITEM 2. PROPERTIES.

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

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

Anhou’s current registered address is located at Room 2006-2010, No. 215 Jiangzhong Middle Road, Jianye District, Nanjing, Jiangsu Province, China, with 553.26 square meters (equivalent to 5,955 square feet) of office space. The lease agreement is by and among Zheng Yong Xiang, Zhang Guo Qiang and Anhou. The term is from November 3, 2018 to November 2, 2024. Anhou paid the rent of

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the headquarters space in Nanjing in the total amount of RMB739,099 or approximately $114,590 during the fiscal year ended December 31, 2021.

Jiangsu Law’s office is located at No. 888 Jintong Road, Xingren County, Tongzhou District, Nantong City, Jiangsu province, China, with 2,000 square meters (equivalent to 21,527 square feet) of office space. The lease was between Xiangriya Industrial (Nantong) Co., Ltd., which is an affiliate of Yi-Hsiao Mao. The lease term renewed from January 1, 2022 to December 31, 2022 with monthly rent of RMB10,917 or approximately $1,693.

ITEM 3. LEGAL PROCEEDINGS.

We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results. From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. However, two of our subsidiaries each received regulatory decision letters in 2021 as described below.

Rays Technology Co., Ltd.

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

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

Law Broker

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

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

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

Further, the FSC found that Law Broker’s current "Customer Risk Assessment Standards for Preventing Money Laundering and Combating Terrorism," underestimated customers’ risk levels and therefore such standards may have deficiency in screening the risks

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of money laundering or terrorism of potential insurance customers. Lastly, FSC also ruled that Law Broker has not enhanced its due diligence review on its high-risk customers.

Law Broker paid the Fine in full on or prior to the prescribed due date according to the Law Broker Decision Letter and is in the process of adjusting their business models to regain compliance with the Insurance Act and the Regulation.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

Market Information

Our common stock has been quoted on the various tiers of the OTC Market under the symbol “CUII” since August 2012. The latest available closing price of our common stock prior to March 4, 2022 was US$1.90.

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


	Fiscal Year Ended
	December 31, 2021
	Low		High
First Quarter ended March 31, 2021	$	1.47	$	2.00
Second Quarter ended June 30, 2021	$	1.74	$	1.87
Third Quarter ended September 30, 2021	$	1.28	$	1.75
Fourth Quarter ended December 31, 2021	$	1.50	$	1.95

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

Shareholders

As of December 31, 2021, there were 739 record owners of our common stock and one record owner of our preferred stock.

Transfer Agent

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

Dividends

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

Securities Authorized for Issuance Under Equity Compensation Plans

Pursuant to the provisions of the AHFL Acquisition Agreement dated August 24, 2012 and its amendments on March 14, 2013, March 13, 2015, February 17, 2016 and August 8, 2016, in lieu of the 2 million employee stock option pool (the “ESOP”) described in the AHFL Acquisition Agreement, our Company is committed to create an employee stock pool or similar plan consisting of up to 5

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million shares of common stock to be granted to employees of affiliated entities of our Company (including Law Broker employees). Law Broker, being the only actively operating subsidiary in Taiwan, primarily engages in insurance brokerage and insurance agency service business across Taiwan. Upon satisfaction of respective performance criteria of Law Broker employees, the board of directors of Law Broker may submit its recommendation to our Company for its approval and issuance of such options under the ESOP. Details of terms and conditions on the said ESOP shall be set forth in separate ESOP documents duly approved by our Company.

On May 12, 2017, the Company’s 2017 Long Term Incentive Plan (the “2017 Plan”) was approved by the shareholders at the 2017 Annual Meeting of Stockholders of China United Insurance Service, Inc. Up to 10,000,000 shares of our Common Stock may be granted under the 2017 Plan (the “Share Pool”), provided that 2,000,000 shares of the Share Pool is reserved for issuance to eligible participants providing services to Action Holdings Financial Limited and its subsidiaries. Eligibility to participate is open to officers, directors and employees of, and other individuals (including sales agents who are exclusive agents of the Company or its subsidiaries or derive more than 50% of their income from those entities) who provide bona fide services to or for, us or any of our subsidiaries. Given that metrics for evaluating performance goals are rather complex and exhaustive, and that the Company’s management and Board of Directors are still working to develop a series of reward policies that specify various performance target levels and the size of the award or payout of performance shares with respect to each different target level attained, no awards were granted under the 2017 Plan as of December 31, 2021.

Options and Warrants

As of December 31, 2021, we had no outstanding options or warrants to purchase shares of our Common Stock.

ITEM 6. SELECT FINANCIAL DATA

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

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

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

Overview

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

We have three operating subsidiaries in our Taiwan segment and conduct brokerage and insurance agency services through the subsidiaries across Taiwan. Through our recent acquisitions and integrations, our Taiwan segment is able to achieve synergies among group companies and generate more commission revenues from marketing and selling insurance products. Revenues from the Taiwan segment continues to increase and contributed about 95.6% of the total revenue of the Company for the year ended December 31, 2021. As of December 31, 2021, we had 54 sales and service outlets (including the headquarters) with 5,569 sales professionals and 276 administrative staff in the Taiwan segment.

Through our Consolidated Affiliated Entities in the PRC segment, we had one insurance agency and one insurance brokerage company. We have total 32 service outlets (including the headquarters) with 1,352 full-time sales professionals and 124 administrative staff in the PRC segment as of December 31, 2021. Our PRC segment contributed 4.3% of total revenue of the Company for the year ended December 31, 2021.

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Our Hong Kong segment mainly consists of one operating subsidiary, which acts as a broker for reinsurance products and earns commissions on sales of insurance products from other insurers. As of December 31, 2021, we had one sales and service outlet (including the headquarters) with no sales professionals and one administrative staff in Hong Kong segment. Our Hong Kong segment contributed 0.1% of total revenue of the Company for the year ended December 31, 2021.

Impact of COVID-19

There has continued to be widespread impact from the coronavirus disease (“COVID-19”) pandemic including potentially more contagious strains of COVID-19 such as the Delta and Omicron variants. It has created significant volatility and uncertainty and economic disruption. The extent to which the pandemic impacts our business and operations will depend on numerous evolving factors, many of which are not within our control and which we may not be able to accurately predict, including its duration and scope; the ultimate availability, administration and effectiveness of vaccines around the world; governmental actions that have been and continue to be taken in response to the pandemic, including vaccine coverage; the impact of the pandemic on economic activity and actions taken in response; the ability of our clients to pay their insurance premiums which could impact our commission and fee revenues for our services; and the long-term impact of employees working from home, including increased technology costs.

The restrictions implemented might impact our business operation, particularly from the first year commission (“FYC”) perspective. However, the decrease of FYC is offset by the receiving more contingent commissions which earned from the previous years. As a result, the total revenue of the Company in the year of 2021 is 5.7% higher compare to that one in the year of 2020.

Critical Accounting Policies and Estimates

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

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

●

Revenue recognition – the majority of our revenue is derived from insurance agency and brokerage services. The Company, through its subsidiaries and the variable interest entity, sells insurance products provided by insurance companies to customers who are seeking to transfer risk, and is compensated in the form of commissions and fees from the respective insurance companies, according to the terms of each service agreement made by and between the Company and the insurance companies. The performance obligation is considered complete and satisfied upon the effective date of the bound policy, as such, that is when the associated revenue is recognized. For the revenue related to first year commission, the Company will recognize the revenue when the individuals’ policies are effective; for the revenue related to variable consideration (primarily the contingent commissions for subsequent years), it is only recorded when it is probable that a significant reversal in the amount of cumulative recognized revenue will not occur. However, those contingent commissions are considered highly susceptible to factors outside the Company’s control and depend on the actions of third parties (i.e., the occurrence of the renewal or the subsequent premiums paid by individual policyholders), and the uncertainty about how many years the contingency will last. Therefore, the Company does not have high confidence to estimate the amount of such variables considerations that will not be reversed in subsequent reporting periods, and determines to recognize such considerations as revenue in the year when the renewal of the policy is effective;

●

Fair value measurement on earn-out provision – the recorded purchase prices for all acquisitions include an estimation of the fair value of liabilities associated with any potential earn-out provisions, where an earn-out is part of the negotiated transaction. The determination of fair value of the earn-out provision involves the estimate and judgment on the forecast of operating results of the seller and the future share price of the Company. Subsequent changes in the fair value of earn-out obligations are recorded in the consolidated statement of operation as a result of updated expectations for the performance of the Company and the seller; and

●

Complexity in estimates of income taxes – given complexity and uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income, the differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes tax provisions, based on reasonable estimates, for possible consequences of audits by the tax

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authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group entities’ domicile.

For other significant accounting policies and new accounting pronouncements affecting our financial statements, see Note 1 to our 2021 consolidated financial statements.

Results of Operations

Overview of the years ended December 31, 2021 and 2020

The following table shows the results of operations for the years ended December 31, 2021 and 2020:


	Years Ended December 31,
	2021			2020			Change			Percent
Revenue	$	131,363,175		$	124,267,072		$	7,096,103		5.7	%
Cost of revenue		84,943,319			87,695,053			(2,751,734)		(3.1)	%
Gross profit		46,419,856			36,572,019			9,847,837		26.9	%
Gross profit margin		35.3	%		29.4	%		5.9	%	20.1	%

Operating expenses:
Selling		2,285,956			3,226,109			(940,153)		(29.1)	%
General and administrative		27,400,845			26,955,278			445,567		1.7	%
Total operating expenses		29,686,801			30,181,387			(494,586)		(1.6)	%

Income from operations		16,733,055			6,390,632			10,342,423		161.8	%

Other income (expenses):
Interest income		448,657			453,536			(4,879)		(1.1)	%
Interest expenses		(183,927)			(202,239)			18,312		(9.1)	%
Dividend income		258,601			390,030			(131,429)		(33.7)	%
Fair value remeasurement on earn-out provisions		(1,106,513)			—			(1,106,513)		—	%
Other - net		497,746			(590,319)			1,088,065		(184.3)	%
Total other income (expense), net		(85,436)			51,008			(136,444)		(267.5)	%

Income before income tax		16,647,619			6,441,640			10,205,979		158.4	%
Income tax expense		(4,994,651)			(3,407,868)			(1,586,783)		46.6	%

Net income		11,652,968			3,033,772			8,619,196		284.1	%
Less: net income attributable to the noncontrolling interests		(5,422,847)			(2,103,659)			(3,319,188)		157.8	%
Net income attributable to China United’s shareholders	$	6,230,121		$	930,113		$	5,000,008		569.8	%

Revenue

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

The Company’s majority revenues are derived from the commissions from sales of life insurance products. Total commission revenue from sales of life insurance products accounted for 92.8% and 94.6% of total revenue for the years ended December 31, 2021 and 2020, respectively; whereas commission revenue from sales of property and casualty insurance products only contributed 7.2% and 5.4% of total revenue for the years ended December 31, 2021 and 2020, respectively.

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Most of the individual life insurance products we distribute allow the insured to choose to make a single, lump-sum premium payment at the beginning of the policy term. If a periodic payment schedule is adopted by the insured, a life insurance policy can generate periodic payment of fixed premiums to the insurance company for a specified period of time and enables the Company to derive commission and fee income from that policy for an extended period of time, sometimes up to 25 years. Because of this feature and the expected sustained growth of life insurance sale, we have placed significant resources to expand and sell the life insurance products with periodic payment schedules. We expect that sales of life insurance products will continuously be our primary source of revenue in the next several years.

Our total revenue of $131.4 million for the year ended December 31, 2021 increased by $7.1 million (or 5.7%) compared to the total revenue of $124.3 million for the year ended December 31, 2020. The increase was attributable primarily to the constant business growth in the Taiwan segment. For the years ended December 31, 2021 and 2020, the revenue generated respectively from Taiwan, PRC and Hong Kong segments was as follows:


	Year Ended December 31,
Geographic Areas	2021			2020			Change		Percent
Revenue
Taiwan segment	$	125,636,326		$	117,524,429		$	8,111,897	6.9	%
Percentage of revenue		95.6	%		94.6	%
PRC segment		5,691,835			6,426,670			(734,835)	(11.4)	%
Percentage of revenue		4.3	%		5.2	%
Hong Kong segment		35,014			315,973			(280,959)	(88.9)	%
Percentage of revenue		0.1	%		0.2	%
Total revenue	$	131,363,175		$	124,267,072		$	7,096,103	5.7	%

Revenue from our Taiwan segment increased by $8.1 million, or 6.9%, from $117.5 million for the year ended December 31, 2020 to $125.6 million for the same period ended December 31, 2021. We continued to deliver solid financial results through our Taiwan segment due to the following reasons:

(i)

Uniwill had contributed $6.7 million of the increased revenue during the year 2021. The increase in Uniwill's revenue for the year ended December 31, 2021 mainly due to the high performance of selling investment-type insurance policies.

(ii)

The insurance company discontinued certain long-term care and disability insurance products in the year of 2020. Prior to such discontinuation, many individual customers decided to lock in the long-term care and disability insurance policy that we had offered because the individual customers believed that these insurances products provided more favorable terms to them than the other ones available on the market. Such surge in the sales of those insurance policies in 2020 had boosted the total sales in our insurance policies. The surge in 2020 also caused the increase in persistency rate linked bonuses during 2021.

(iii)

We received more contingent commissions, which include trailing commissions, persistency rate linked bonuses and some other service allowance, for the year ended December 31, 2021 due to our continued growth in the sales of insurance products in the past recent years.

Revenue from our PRC segment decreased by $0.7 million, or 11.4% to $5.7 million for the year ended December 31, 2021 from $6.4 million for the same period ended December 31, 2020. Decrease in revenue for the PRC segment was due to the adverse impact on the outbreak of COVID-19. In addition, a new Chinese policy for insurance products in August 2020 which requesting sales agents to have audio and video recording during promotion of insurance, has increased difficulties for sales agents to expand the market and promote insurance products to individual customers.

The revenue in the Hong Kong segment primarily derived from reinsurance commission on sales of insurance products from other insurers to Taiwan Life Insurance Co., Ltd. (“Taiwan Life”) for risk management. Revenue from our Hong Kong segment decreased by $0.3 million, or 88.9% to 0.04 million for the year ended December 31, 2021 from $0.3 million for the same period ended December 31, 2020. Decrease in revenue was due to the termination of reinsurance agreements and the discontinuation of travel insurance.

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

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Cost of revenue and gross profit

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

The cost of revenue for the year ended December 31, 2021 decreased by $2.8 million or 3.1%, to $84.9 million compared to $87.7 million for the year ended December 31, 2020. The decrease in the cost of revenue was due to the impact of outbreak of COVID-19 in Taiwan, resulting in a drop in first year commissions. Related commission cost has also decreased correspondingly. In addition, the increase of persistency rate linked bonuses from life insurance products for the year ended December 31, 2021 also resulted in a higher gross margin. The cost of revenue for property and casualty insurance products are immaterial for the years ended December 31, 2021 and 2020.

Consequently, the gross profit margin increased from 29.4% for the year ended December 31, 2020 to 35.3% for the year ended December 31, 2021.

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

Selling expenses

Selling expenses were mainly incurred by Law Broker and Uniwill in connection with online marketing and advertising. Selling expenses decreased $0.9 million or 29.1% from $3.2 million for the year ended December 31, 2020 to $2.3 million for the year ended December 31, 2021. Decrease in the selling expenses was caused by the adverse impact from the outbreak of COVID-19 in Taiwan that restricted marketing activities for the year ended December 31, 2021.

General and administrative expenses

G&A expenses are principally comprised of salaries and benefits for our administrative staff, office lease expenses, travel expenses, depreciation and amortization, entertainment expenses, and professional service fees.

For the year end December 31, 2021, G&A expenses were $27.4 million, reflecting an increase of $0.4 million or 1.7%, compared with $27.0 million for year ended December 31, 2020. For the year ended December 31, 2021, the increase in the general and administrative expenses was caused by the foreign exchange fluctuation.

Other income (expenses)

Other income (expenses) mainly consisted of interest income, interest expenses, gain or loss on valuation of financial assets, foreign currency exchange gain or loss. Net other expenses for the year ended December 31, 2021 was $0.09 million, reflecting a decrease of $0.14 million or 267.5%, compared with net other income $0.05 million for the same period of 2020. The decrease in net other income mainly due to the settlement of earn-out shares for the year ended December 31, 2021. However, the decrease was partially offset by exchange gains for the year ended December 31, 2021.

Income tax

For the year ended December 31, 2021, income tax expense was $5.0 million, an increase of $1.6 million or 46.6%, compared with $3.4 million for the year ended December 31, 2020. The increase in income tax was mainly due to the Uniwill’s turnaround from loss to profit.

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Liquidity and Capital Resources

Cash requirements

Our primary sources of liquidity are cash and cash equivalents, time deposits, marketable securities, and cash generated from operations. Cash available from operations, including our cash, time deposits, and borrowings under our revolving line of credit, will be sufficient for our working capital needs, including commissions payable to sales professionals, performance bonus payable to management, payments of tax liabilities, marketing and adverting needs to promoting sales, as well as purchase of equipment. However, future business opportunities may cause a change in our estimate.

Contractual cash obligations

The following represents a summary of the Company’s contractual cash obligations and related scheduled maturities as of December 31, 2021:


	Payments due by period
			Less than						More than
Obligations	Total		1 year		1-3 years		3-5 years		5 years
Debt obligations ⁽¹⁾	$	18,835,932	$	18,835,932	$	—	$	—	$	—
Operating lease		6,569,058		3,193,004		3,235,817		140,237		—
Contractual obligations ⁽²⁾		3,127,349		2,585,595		541,754		—		—
Capital commitment ⁽³⁾		10,293,322		—		—		—		10,293,322
	$	38,825,661	$	24,614,531	$	3,777,571	$	140,237	$	10,293,322

(1)	Debt obligations include our revolving credit facilities from banks.

(2)	Contractual obligations include other obligations related to compensation plans with Law Broker’s officers, amount due to previous shareholders of AHFL.

(3)	Capital commitment related to the Joint Venture Agreement (the “JV Agreement”) with non-related parties with AIlife, see Note 14 to our 2021 consolidated financial statements.

Cash flows

The following table represents a comparison of our cash flows for the years ended December 31, 2021 and 2020:


	Year Ended December 31,
	2021		2020		Change		Percent
Net cash provided by operating activities	$	13,775,488	$	3,293,760	$	10,481,728	318.2	%
Net cash used in investing activities		(9,446,329)		(13,829,956)		4,383,627	(31.7)	%
Net cash provided by financing activities		4,516,778		5,398,802		(882,024)	(16.3)	%

Operating activities

Net cash provided by operating activities for the year ended December 31, 2021 was $13.8 million in comparison with net cash of $3.3 million provided by operating activities for the year ended December 31, 2020. The increase of $10.5 million or 318.2% was mainly due to the rise in persistency rate linked bonuses and the turnaround of Uniwill, a subsidiary of the Company, from loss to profit for the year ended December 31, 2021.

Investing activities

Net cash used in investing activities was $9.4 million for the year ended December 31, 2021 in comparison with net cash of $13.8 million used in investing activities for the year ended December 31, 2020. The decrease in the cash outflows of $4.4 million used in investing activities resulted from the increase of the proceeds from sales of marketable securities and long-term investment.

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Financing activities

Net cash provided by financing activities was $4.5 million for the year ended December 31, 2021 in comparison with net cash of $5.4 million used in financing activities for the year ended December 31, 2020. The cash inflows from the financing activities for the year ended December 31, 2021 was mainly due to a decrease in the net proceeds from additional borrowings under the revolving credit agreements for the year ended December 31, 2021.

Off Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2021.

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

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of China United Insurance Service, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of China United Insurance Service, Inc. and subsidiaries (the “Company”) as of December 31, 2021, and the related consolidated statements of operations and other comprehensive income, changes in stockholders’ equity, and cash flows for year then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Revenue Recognition

Critical Audit Matter Description

As described in Note 1 to the consolidated financial statements, the Company generally recognizes its brokerage commission revenue when the insurance policy is effective. In addition, the Company may earn a performance bonus from insurance companies once achieving certain sales volume and targets based on the respective contracts with the insurance companies. The performance bonus is included as part of the transaction price and represents a form of variable consideration associated with the sales volume and targets. The Company estimates the amount of variable consideration that will be received with a constraint whereby a significant reversal of revenue is not probable.

We identified the estimated performance bonus as a critical audit matter because (1) the revenue is material to the consolidated financial statements, which amounted to approximately $7.4 million for the year ended December 31, 2021; (2) our audit involved subjectivity and complexity in evaluating management's estimates on the variable consideration. Auditing such estimates required extensive audit effort due to the complexity of management’s assumptions on the variable consideration.

How the Critical Audit Matter Was Addressed in the Audit

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

/s/ UHY LLP

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

Irvine, California

April 7, 2022

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Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders of China United Insurance Services Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of China United Insurance Services Inc. and subsidiaries (the “Company”) as of December 31, 2020, and the related consolidated statements of operations and other comprehensive income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Brokerage revenue recognition

Critical Audit Matter Description

As described in Note 1 to the consolidated financial statements, The Company’s revenue is derived from insurance agency and brokerage services. The Company, through its subsidiaries and variable interest entities, sells insurance products provided by insurance companies to individuals, and is compensated in the form of commissions from the respective insurance companies, according to the terms of each service agreement made by and between the Company and the insurance companies. The sale of an insurance product by the Company is considered complete when initial insurance premium is paid by an individual and the insurance policy is approved by the respective insurance company. When a policy is effective, the insurance company is obligated to pay the agreed-upon commission to the Company under the terms of its service agreement with the Company and such commission is recognized as revenue.

The Company considers the contracts with insurance companies contain one performance obligation and consideration should be recorded when performance obligation is satisfied at point in time. The amount of revenue to be recognized when the insurance policy is effective includes first year commission and other contingent commission that a significant reversal of revenue would not occur in the subsequent periods. When other contingent commission that could not be determined if a significant reversal of revenue would occur, the Company recognizes the commission after receiving insurance companies' notice.

The Company is obligated to pay commissions to its sales professionals when an insurance policy becomes effective. The Company recognizes commission revenue granted from insurance companies on a gross basis, and the commissions paid to its sales professionals are recognized as cost of revenue.

Auditing the accounting for revenue recognition involved subjectivity and complexity in evaluating management's estimates. Specifically, the judgments necessary to determine the amount, timing and presentation of revenue and to estimate total costs and fees for the performance obligations that recognize the revenue. Auditing such estimates required extensive audit effort due to the volume and complexity of these contracts.

How the Critical Audit Matter Had Been Addressed in the Audit

Our audit procedures related to management’s conclusion on amount, timing and presentation of revenue recognition, as well as the estimates of total costs and fees for the performance obligations that recognize the revenue included the following, among others:

●

Obtained an understanding of controls over contract revenue, including management’s controls over the initial setup of new contract arrangements and the estimates of total costs and fees for performance obligations.

●

Submitted and obtained the revenue and accounts receivable confirmations for a selection of insurance companies.

●

For a selection of contracts:

o

Evaluated the terms and conditions of each contract and the appropriateness of the accounting treatment within the context of the five-step model prescribed by ASC 606, Revenue from Contracts with Customers, and evaluating whether management’s conclusions were appropriate.

oTested the accuracy and completeness of the costs incurred to date for the performance obligation.

oTested the mathematical accuracy of management’s calculation of revenue for the performance obligation.

●

Evaluated the reasonableness of the estimated revenue during the year by comparing the estimated revenue from the sale of the effective insurance policies without the insurance companies' notice to the sales of the insurance policies confirmed by the insurance companies in the subsequent period. In cases where estimated revenue by the insurance company was significantly higher or lower than expected, we obtained further explanations and corroborating supporting documentation to evaluate the impact to the estimated revenue.

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Recognition of stock-based compensations and the valuation of fair value to equity securities due to multi- performance targets with counter parties in the arrangement

Critical Audit Matter Description

The Company has preferred stock-based compensation issued to non-related entities for Uniwill. The Company accounts for equity-based compensation cost in accordance with ASC 718, Compensation-Stock Compensation after adoption of ASC 2018-07, which requires the measurement and recognition of compensation expense related to the fair value of equity-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all share-based compensation payments granted to employees and nonemployees, net of estimated forfeitures, over the employees’ requisite service period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied towards modified, repurchased, or cancelled during the periods reported.

On November 15, 2019, AIlife entered into a Joint Venture Agreement (the “JV Agreement”) with two non-related entities (collectively, the “Labor Parties”) and agreed to invest funds, labor, and technology into Uniwill. Pursuant to the JV Agreement, the paid-in capital of Uniwill should increase to an aggregate amount of $13.3 million (NTD 400 million) by AIlife, provided that the Labor Parties fulfill their commitments no later than December 31, 2021. On August 15, 2019, AIlife increased and completed the capital injections in Uniwill to the amount of $3.3 million (NTD 100 million).

According to the term of the JV Agreement, the Labor Parties shall be entitled of 9,608 preferred stock if the following milestones are met:(a) the registered number of insurance business professional sales of Uniwill is more than 200, (b) the business performance shall reach FYB (i.e. first year commission is earned from the insurance company) NTD 5 million or more, and (c) one of two employees of the Labor Parties designated by AIlife shall join Uniwill within 6 months after the paid-in capital of Uniwill increased to NTD 100 million (hereinafter refer to the “performance target”). The preferred stock shall provide for (a) the right to receive a distribution of 50% of the net-income of Uniwill, (b) the right to convert such preferred stock into common stock at 1 to 1000 after the date when the registered number of sales reaches 1,000 and FYC reaches NT$250 million, (c) the right to elect directors, (d) the voting rights owned by the Company and the Labor Parties should be 51:49 due to 1,000 voting right per preferred stock, and (e) the number of the preferred stock to the Labor Parties shall be issued along with the proportion when the paid-in capital of Uniwill increases to NTD 400 million once the registered number of sales reaches 1,000.

On February 10, 2020, the grant date, Uniwill issued a total of 9,608 preferred stock (the “initial preferred stock”) to the Labor Parties for cash and recognized compensation cost when the performance target was achieved. The Company determined that each of the preferred stock has a value of approximately $102 (NTD 3,070) using the Black-Scholes-Merton option pricing model. Compensation cost of $980,466 was recognized on the grant date when the performance target was achieved.

In December 2020, when the registered number of sales reaches 1,000, the Labor Parties are entitled of the incremental preferred stock of 28,823. Each incremental preferred stock (the “incremental preferred stock”) to be issued along with the proportion of the paid-in capital has a value of approximately $16 (NTD 437), and the compensation cost of $447,137 was recorded. For the year ended December 31, 2020, a total of the compensation cost related to the JV agreement was $1,427,603, which was considered as the Labor Parties’ contributions to Uniwill.

How the Critical Audit Matter Had Been Addressed in the Audit

Our audit procedures related to management’s conclusion on amount, timing and presentation of transactions with recognition of stock-based compensations and the valuation of fair value to equity securities due to multi-performance targets with counter parties in the arrangement, included the following, among others:

●

Obtained an understanding of Management’s process and evaluate the design of controls relating to the Company's methods, significant assumptions, and inputs used for valuing the Company’s equity securities.

●

A high degree of subjective auditor judgment was involved in evaluating certain inputs to the model used to determine the fair value of the equity securities. We assessed methodologies and tested the significant assumptions and underlying data used by the Company.

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●

Considered management’s policy of reviewing valuation methodologies, inputs and assumptions utilized by third-party valuation services.

●

We used a valuation specialist to assist us in evaluating the Company’s models, valuation methodology, and significant assumptions used in the fair value estimates.

/s/ Macias Gini & O’Connell LLP

We have served as the Company's auditor since 2020

San Francisco, California

March 25, 2021

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CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	December 31,
(Amount in USD)	2021		2020
ASSETS
Current assets
Cash and cash equivalents	$	18,234,350	$	9,063,338
Time deposits		64,299,176		53,339,508
Accounts receivable and notes receivable		26,761,678		25,346,250
Marketable securities		—		1,272,573
Other current assets		1,207,496		1,491,168
Total current assets		110,502,700		90,512,837

Right-of-use assets under operating leases		6,449,182		6,524,555
Property and equipment, net		2,061,755		2,373,245
Intangible assets, net		333,118		381,747
Long-term investments		2,696,812		2,835,095
Restricted cash – noncurrent		88,282		66,490
Deferred tax assets		909,032		1,021,890
Other assets		4,740,640		4,012,370
TOTAL ASSETS	$	127,781,521	$	107,728,229

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Commissions payable to sales professionals	$	14,003,541	$	12,088,291
Short-term loans		18,835,932		14,159,108
Contract liabilities - current		—		1,119,361
Income tax payable - current		3,893,047		3,146,018
Operating lease liabilities - current		3,059,329		3,043,056
Due to related parties		50,531		94,047
Other current liabilities		13,997,603		13,591,034
Total current liabilities		53,839,983		47,240,915

Income tax payable - noncurrent		539,636		719,515
Operating lease liabilities - noncurrent		3,298,089		3,440,343
Net defined benefit liabilities - noncurrent		389,198		318,542
Other liabilities		541,754		771,680
TOTAL LIABILITIES		58,608,660		52,490,995

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS EQUITY
Preferred stock, $0.00001 par value, 10,000,000 authorized, 1,000,000 issued and outstanding as of December 31, 2021 and 2020, respectively		10		10
Common stock, $0.00001 par value, 100,000,000 authorized, 30,286,199 and 29,421,736 issued and outstanding as of December 31, 2021 and 2020, respectively		303		294
Additional paid-in capital		9,296,953		8,190,449
Statutory reserves		11,101,064		9,463,903
Retained earnings		13,690,368		9,097,408
Accumulated other comprehensive income		4,664,848		3,889,429
Total stockholders’ equity attributable to China United’s shareholders		38,753,546		30,641,493
Noncontrolling interests		30,419,315		24,595,741
TOTAL STOCKHOLDERS’ EQUITY		69,172,861		55,237,234
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	127,781,521	$	107,728,229

The accompanying notes are an integral part of these consolidated financial statements

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CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME


	Years ended
	December 31,
(Amount in USD)	2021		2020
Revenue	$	131,363,175	$	124,267,072
Cost of revenue		84,943,319		87,695,053

Gross profit		46,419,856		36,572,019

Operating expenses:
Selling		2,285,956		3,226,109
General and administrative and other operating expense		27,400,845		26,955,278
Total operating expenses		29,686,801		30,181,387

Income from operations		16,733,055		6,390,632

Other income/(expenses):
Interest income		448,657		453,536
Interest expenses		(183,927)		(202,239)
Dividend income		258,601		390,030
Fair value remeasurement on earn-out provisions		(1,106,513)		—
Other - net		497,746		(590,319)
Total other income (expense), net		(85,436)		51,008

Income before income tax		16,647,619		6,441,640
Income tax expense		(4,994,651)		(3,407,868)

Net income		11,652,968		3,033,772
Less: net income attributable to noncontrolling interests		(5,422,847)		(2,103,659)
Net income attributable to the Company's shareholders		6,230,121		930,113

Other comprehensive items, net of tax:
Foreign currency translation gain		1,159,971		5,046,115
Other		16,175		(22,767)
Other comprehensive income		1,176,146		5,023,348

Comprehensive income		12,829,114		8,057,120
Less: comprehensive income attributable to noncontrolling interests		(5,823,574)		(3,654,593)

Comprehensive income attributable to China United’s shareholders	$	7,005,540	$	4,402,527

Weighted average shares outstanding:
Basic		29,604,102		29,421,736
Diluted		29,604,102		29,421,736

Earnings per share attributable to China United's shareholders:
Basic	$	0.204	$	0.031
Diluted	$	0.204	$	0.031

The accompanying notes are an integral part of these consolidated financial statements

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CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


												Accumulated
								Additional				Other
	Common			Preferred				Paid-in		Statutory		Comprehensive		Retained				Noncontrolling		Total
(Amount in USD)	Stock	Amount		Stock		Amount		Capital		Reserves		Income		Earnings		Total		Interests		Equity

Balance December 31, 2019	29,421,736		294		1,000,000		10		8,190,449		8,228,904		417,015		9,402,294		26,238,966		19,512,526		45,751,492

Appropriation of reserves	—		—		—		—		—		1,234,999		—		(1,234,999)		—		—		—
Issuance of preferred stock-based compensation	—		—		—		—		—		—		—		—		—		1,427,603		1,427,603
Business acquisition	—		—		—		—		—		—		—		—		—		1,019		1,019
Foreign currency translation gain	—		—		—		—		—		—		3,487,429		—		3,487,429		1,558,686		5,046,115
Other comprehensive loss	—		—		—		—		—		—		(15,015)		—		(15,015)		(7,752)		(22,767)
Net income	—		—		—		—		—		—		—		930,113		930,113		2,103,659		3,033,772

Balance December 31, 2020	29,421,736	$	294		1,000,000	$	10	$	8,190,449	$	9,463,903	$	3,889,429	$	9,097,408	$	30,641,493	$	24,595,741	$	55,237,234

Appropriation of reserves	—		—		—		—		—		1,637,161		—		(1,637,161)		—		—		—
Issuance of common stock	864,463		9		—		—		1,106,504		—		—		—		1,106,513		—		1,106,513
Foreign currency translation gain	—		—		—		—		—		—		764,751		—		764,751		395,220		1,159,971
Other comprehensive gain	—		—		—		—		—		—		10,668		—		10,668		5,507		16,175
Net income	—		—		—		—		—		—		—		6,230,121		6,230,121		5,422,847		11,652,968

Balance December 31, 2021	30,286,199	$	303		1,000,000	$	10	$	9,296,953	$	11,101,064	$	4,664,848	$	13,690,368	$	38,753,546	$	30,419,315	$	69,172,861

The accompanying notes are an integral part of these consolidated financial statements

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CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Years ended December 31,
(Amount in USD)	2021		2020
Cash flows from operating activities:
Net income	$	11,652,968	$	3,033,772
Adjustment to reconcile net income to net cash provided by operating activities:
Noncash stock-based compensation		—		1,427,603
Loss from settlement of contingency		1,106,513		—
Depreciation and amortization		1,170,743		987,689
Amortization of right-of-use assets		3,966,854		3,009,101
Net periodic pension cost		15,812		73,421
Amortization of bond premium		58		274
Loss (Gain) on valuation of financial assets		81,022		(111,463)
Gain on sales of financial assets		(75,947)		(50,251)
(Gain)Loss on disposal of property and equipment		(1)		8,967
Deferred income tax		154,678		(420,262)
Changes in operating assets and liabilities:
Accounts receivable		(1,047,547)		(1,253,807)
Other current assets		254,167		563,666
Other assets		(653,321)		(1,322,920)
Commissions payable to sales professionals		1,727,790		(1,234,427)
Contract liabilities		(1,125,689)		(1,812,922)
Income tax payable		527,177		517,202
Other current liabilities		453,525		3,441,350
Other liabilities		(173,155)		(253,218)
Lease liabilities		(4,260,159)		(3,310,015)
Net cash provided by operating activities		13,775,488		3,293,760

Cash flows from investing activities:
Cash received from issuance of preferred stock		—		375
Purchases of time deposits		(79,319,618)		(70,684,051)
Proceeds from maturities of time deposits		69,194,779		59,244,053
Acquisition of equity investments under cost method using the measurement alternative		(46,512)		—
Purchases of trading securities		(1,727,668)		(961,416)
Proceeds from sales of trading securities		3,083,386		240,063
Proceeds from sales of long-term investment - REITs		142,191		—
Purchase of property and equipment		(674,948)		(1,611,668)
Purchase of intangible assets		(116,539)		(94,214)
Proceeds from disposals of equipment		18,600		36,902
Net cash used in investing activities		(9,446,329)		(13,829,956)

Cash flows from financing activities:
Proceeds from short-term loans		22,536,112		27,280,129
Repayment of short-term loans		(17,970,000)		(21,500,000)
Repayment to related party borrowings		(49,334)		(381,327)
Net cash provided by financing activities		4,516,778		5,398,802

Foreign currency translation		346,867		1,608,722
Net increase (decrease) in cash, cash equivalents and restricted cash		9,192,804		(3,528,672)

Cash, cash equivalents and restricted cash, beginning balance		9,129,828		12,658,500
Cash, cash equivalents and restricted cash, ending balance	$	18,322,632	$	9,129,828

SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid	$	181,911	$	200,900
Income tax paid	$	3,588,250	$	3,298,391
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Lease liabilities arising from new right-of-use assets	$	3,891,481	$	4,010,991

The accompanying notes are an integral part of these consolidated financial statements

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

China United Insurance Service, Inc. (“China United” or “CUII”), its subsidiaries and variable-interest entity and its subsidiaries (collectively referred to herein as the “Company”) primarily engages in brokerage and insurance agency services. The Company markets and sells to customers two broad categories of insurance products: life insurance products and property and casualty insurance products, both focused on meeting the particular insurance needs of individuals. The insurance products are underwritten by some of the leading insurance companies in Taiwan and China. The Company manages its business through aggregating them into three geographic operating segments, Taiwan, the PRC, and Hong Kong. The Company’s common stock currently trades over the counter under the ticker symbol “CUII” on the OTCQB.

There has continued to be widespread impact from the coronavirus disease (“COVID-19”) pandemic including potentially more contagious strains of COVID-19 such as the Delta and Omicron variants. It has created significant volatility and uncertainty and economic disruption. The extent to which the pandemic impacts the Company’s business and operations will depend on numerous evolving factors, many of which are not within our control and which we may not be able to accurately predict, including its duration and scope; the ultimate availability, administration and effectiveness of vaccines around the world; governmental actions that have been and continue to be taken in response to the pandemic, including vaccine coverage; the impact of the pandemic on economic activity and actions taken in response; the ability of the Company’s customers to pay their insurance premiums which could impact the Company’s commission and fee revenues for the services provided; and the long-term impact of employees working from home, including increased technology costs.

Acquisitions in 2020

On May 27, 2020, the Company completed the acquisition of Rays Technology Corporation ("Rays") for its 90% equity interest. The consideration to acquire 27,000 shares of Ray was US$9,177 (NTD 270,000). The transaction is accounted for a business acquisition. However, the Company did not recognize any goodwill or gain on bargain purchase as a result of the net asset value acquired approximating to the consideration paid. In December 2020, the equity interest in Rays increased from 90% to 99% due to additional capital injections by the Company.

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The corporate structure as of December 31, 2021 is as follows:

On January 31, 2022, Genius Investment Consultant Co., Ltd (“GIC”), a subsidiary entity of China United Insurance Service, Inc. entered into a stock transfer agreement with AIlife International Investment Co., Ltd. (“AIlife”), pursuant to which GIC shall sell and transfer 100% of its equity ownership in Joint Insurance Broker Co., Ltd., a wholly-owned subsidiary of GIC to AIlife.

On February 25, 2022, Anhou, a contract controlled entity of China United Insurance Service, Inc. entered into a Share Purchase Agreement. For more information, please refer to Note 26 and Form 8-K Footnote of the Consolidated Financial Statements for the years ended December 31, 2021 and 2020 and current report on filed on March 3, 2022.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of China United, its subsidiaries and variable interest entities as shown in Note 1. All significant intercompany transactions and balances have been eliminated in the consolidation. The Company consolidates variable interest entities where it has been determined that the Company is the primary beneficiary of those entities’ operations. Certain reclassifications have been made to the consolidated financial statements for prior year to the current year’s presentation. Such reclassifications have no effect on net income as previously reported.

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Use of Estimates

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”).

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and footnotes thereto. Actual results may differ from those estimates and assumptions.

Variable Interest Entities

Due to the legal restrictions on foreign ownership and investment in insurance agency and brokerage businesses in China, especially those on qualifications as well as capital requirement of the investors, China United, through its subsidiary, Zhengzhou Zhonglian Hengfu Business Consulting Co., Limited (“WFOE”), entered into Exclusive Business Cooperation Agreement (the “EBCA”), Power of Attorney, Option Agreement, and Share Pledge Agreement (collectively, the First VIE Agreements) on January 17, 2011 with Anhou and Anhou original shareholders so as to operate and conduct the insurance agency and brokerage business in the PRC.

Pursuant to the EBCA, (a) WFOE has the right to provide Anhou with complete technical support, business support and related consulting services during the term of the EBCA; (b) Anhou agrees to accept all the consultations and services provided by WFOE. Anhou further agrees that unless with WFOE’s prior written consent, during the term of the EBCA, Anhou shall not directly or indirectly accept the same or any similar consultations and/or services provided by any third party and shall not establish similar cooperation relationship with any third party regarding the matters contemplated by the EBCA; (c) within 90 days after the end of each fiscal year Anhou shall pay an amount to WFOE equal to the shortfall, if any, of the aggregate net income of Anhou for such fiscal; (d) WFOE retains all exclusive and proprietary rights and interests in all rights, ownership, interests and intellectual properties arising out of or created during the performance of the EBCA; and (e) the shareholders of Anhou have pledged all of their equity interests in Anhou to WFOE to guarantee Anhou’s performance of its obligations under the EBCA. The term of the EBCA is 10 years and may be extended and determined by WFOE prior to the expiration thereof, and Anhou shall accept such extended term unconditionally.

On March 23, 2022, Anhou and WFOE entered into an amendment to the EBCA, pursuant to which the EBCA shall be automatic renewed for successive terms unless WFOE gives a 30-day notice to terminate such agreement, with each term being 10 years.

To extend the business within the PRC, Anhou intended to increase its registered capital to RMB50 million (approximately $8 million) to meet the requirement of the China Insurance Regulatory Commission (the “CIRC”) so that it can set up new branches in any province beyond its current operations in China. China United increased the investment in Anhou through various loan agreements with the shareholders of Anhou. The aggregate funding provided by WFOE was RMB 40 million. Due to the capital increase, a series of variable interest agreements (the “Second VIE Agreements”), which include Power of Attorneys, Exclusive Option Agreements, Share Pledge Agreements, were signed on October 24, 2013 and entered in the same form as the First VIE Agreements, other than the change of shareholder names and their respective shareholdings. The First VIE Agreements were terminated by and among WFOE, Anhou and Anhou original shareholders on the same date. The EBCA executed by and between WFOE and Anhou on January 17, 2011 remains in full effect.

As a result of the Second VIE Agreements, WFOE is considered the primary beneficiary of Anhou and has effective control over Anhou. Accordingly, the results of operations, assets and liabilities of Anhou and its subsidiaries (collectively, the “Consolidated Affiliated Entities” or the “CAE”) are consolidated from the earliest period presented. The Company reviews the VIE’s status on an annual basis and determine if any events have occurred that could cause its primary beneficiary status to change, which include (a) the legal entity’s governing documents or contractual arrangements are changed in a manner that changes the characteristics or adequacy of the legal entity’s equity investment at risk; (b) the equity investment or some part thereof is returned to the equity investors, and other interests become exposed to expected losses of the legal entity; (c) the legal entity undertakes additional activities or acquires additional assets, beyond those anticipated at the later of the inception of the entity or the latest reconsideration event, that increase the entity’s expected losses; and (d) the legal entity receives an additional equity investment that is at risk, or the legal entity curtails or modifies its activities in a way that decreases its expected losses. For the years ended December 31, 2021 and 2020, no event taken place that would change the Company’s primary beneficiary status.

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Noncontrolling Interests

Noncontrolling interests represent amounts related to majority-owned subsidiaries in which the Company has a controlling financial interest. The amount of noncontrolling interest is consisted of the amount of such interests at the date of the Company's original acquisition of an equity interest and the noncontrolling holders' percentage share of income or losses from the subsidiaries.

Foreign Currency

China United’s financial statements are presented in U.S. dollars ($), which is the China United’s reporting and functional currency. The functional currencies of the China United’s subsidiaries are New Taiwan dollar (“NTD”), China yuan (“RMB”) and Hong Kong dollar (“HKD”). Each subsidiary maintains its financial records in its own functional currency. Transactions denominated in foreign currencies are measured at the exchange rates prevailing on the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured at the exchange rates prevailing at the balance sheet date. Non-monetary items that are measured in terms of historical cost in foreign currency are remeasured using the exchange rates at the dates of the initial transactions. Exchange gains and losses are included in the consolidated statements of operations and other comprehensive income (loss).

The Company translates the assets and liabilities into U.S. dollars using the rate of exchange prevailing at the balance sheet date and the statements of operations and cash flows are translated at an average rate during the reporting period. Adjustments resulting from the translation from NTD, RMB and HKD into U.S. dollars are recorded in stockholders’ equity as part of accumulated other comprehensive income. The exchange rates used for financial statements are as follows:


	Years Ended December 31,
	2021		2020
Average rate:
Taiwan dollar (NTD)	NTD	27.91940	NTD	29.44185
China yuan (RMB)	RMB	6.44995	RMB	6.90013
Hong Kong dollar (HKD)	HKD	7.77225	HKD	7.75576
United States dollar ($)	$	1.00000	$	1.00000


	December 31,
	2021		2020
Exchange rate:
Taiwan dollar (NTD)	NTD	27.68785	NTD	28.07725
China yuan (RMB)	RMB	6.35877	RMB	6.52765
Hong Kong dollar (HKD)	HKD	7.79713	HKD	7.75249
United States dollar ($)	$	1.00000	$	1.00000

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, bank deposits, and highly liquid investments with maturities of three months or less at the date of origination.

Restricted Cash

Restricted cash represent amounts held in banks by the Company in conformity with Provisions of the Supervision and Administration of Specialized Insurance Agencies by the CIRC and a trust account held for bonus accrued for officers.

Time Deposits

Time deposits are short-term bank deposits with maturities of more than three months but less than one year at the date of origination.

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Marketable Securities

The Company invests part of its excessive cash in equity securities and money market funds. Marketable securities represent trading securities bought and held primarily for sale in the near-term to generate income on short-term price differences and are stated at fair value. Realized and unrealized gains and losses are recorded in other income (expense).

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable include commission receivables stated at net realizable values. The Company reviews its accounts receivable regularly to determine if a bad debt allowance is necessary at each quarter-end. Management reviews the composition of accounts receivable and analyzes the age of receivables outstanding, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the necessity of making such allowance. No allowance was deemed necessary as of December 31, 2021 and 2020.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Expenditures for improvements are capitalized; repairs and maintenance are charged to expense as incurred. Upon sale of retirement, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is recorded in other income (expense).

Depreciation of office equipment, office furniture, transportation equipment and other equipment is computed using straight-line method based on estimated useful lives ranging from one to ten years with estimated salvage value. Leasehold improvements are depreciated or amortized over the shorter of the estimated useful life of the asset or the remaining expected lease term.

Goodwill and Intangible Assets

Goodwill represents the excess of acquisition cost over the fair value of the net assets in the acquisition of a business. Goodwill is not amortized but instead is evaluated for impairment annually or more frequently if events or changes in circumstances indicate it might be impaired, using two-step goodwill impairment test. The first step screens for potential impairment of goodwill to determine if the fair value of the reporting unit is less than its carrying value, while the second step measures the amount of goodwill impairment, if any, by comparing the implied fair value of goodwill to its carrying value. Intangible assets, which primarily consist of software, are stated at cost, less accumulated amortization, and amortized over estimated useful lives ranging from 3 to 5 years. The intangible assets recorded in the Company’s financial statement were acquired externally.

For internally developed software, costs incurred in the development phase are capitalized and amortized over the product’s estimated useful life. All costs incurred that relate to planning and post implementation phases of development are expensed. Development phase costs generally include salaries and personnel costs and third-party contractor expenses associated with software development, configuration and coding. Capitalized costs related to internally developed software under development are treated as construction in progress until the program, feature or functionality is ready for its intended use, at which time amortization commences. The Company did not capitalize any expenditure related to internally developed software for the period 2021 and 2020

Impairment of Long-Lived Assets

The Company reviews the carrying values of the long-lived assets when circumstances warrant as to whether the carrying value has become impaired. The Company considers assets to be impaired if the carrying value of an asset exceeds the present value of future net undiscounted cash flows from its related operations. There was no impairment recognized for the years ended December 31, 2021 and 2020.

Long-Term Investments

Long-term investments include government bonds held as available-for-sale, investment in real estate investment trusts (“REITs”) measured at fair value through net income, and equity investments using cost method under the measurement alternative. Available-for-sale investments are carried at fair value and unrealized gains and losses as a result of changes in the fair value are recorded as a separate component within accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets. The Company

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evaluates its available-for-sale debt securities to assess whether those with unrealized loss positions are other-than-temporarily impaired. Impairments are considered to be other-than-temporary if they are related to deterioration in credit risk or if it is likely that the Company will sell the securities before the recovery of its cost basis. Realized gains and losses and declines in value judged to be other-than-temporary are determined based on the specific identification method and are reported in other income (expense) in the consolidated statements of comprehensive loss.

The Company measures equity investments in companies that do not have a readily determinable fair value in which it holds an interest of less than 20% using cost method under the measurement alternative, which is defined as cost, less any impairments, a plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any. Significant judgments are required to determine (i) whether observable price changes are orderly transactions and identical or similar to an investment held by the Company; and (ii) the selection of appropriate valuation methodologies and underlying assumptions, including expected volatility and the probability of exit events as it relates to liquidation and redemption features used to measure the price adjustments for the difference in rights and obligations between instruments. For equity investments measured at fair value with changes in fair value recorded in earnings, the Company does not assess whether those securities are impaired. For equity investments that the Company elects to use the measurement alternative, the Company makes a qualitative assessment considering impairment indicators to evaluate whether investments are impaired at each reporting date. Impairment indicators considered include, but are not limited to, a significant deterioration in the earnings performance or business prospects of the investee, including factors that raise significant concerns about the investee’s ability to continue as a going concern, a significant adverse change in the regulatory, economic, or technologic environment of the investee and a significant adverse change in the general market condition of either the geographical area or the industry in which the investee operates. If a qualitative assessment indicates that the investment is impaired, the Company has to estimate the investment’s fair value in accordance with the principles of ASC 820, Fair Value Measurement. If the fair value is less than the investment’s carrying value, the Company recognizes an impairment loss in earnings equal to the difference between the carrying value and fair value.

Advertising Costs

The Company expenses all advertising costs, which include promotions and branding, as incurred. The Company incurred $203,754 and $237,418 in advertising and marketing costs under selling expenses during the years ended December 31, 2021 and 2020, respectively.

Revenue Recognition

The Company’s revenue is derived from insurance agency and brokerage services with respect to life insurance and property and casualty insurance products. The Company, through its subsidiaries and variable interest entities, sells insurance products provided by insurance companies to individuals, and is compensated in the form of commissions from the respective insurance companies, according to the terms of each service agreement made by and between the Company and the insurance companies. The core revenue recognition principle under ASC 606, the Company considers the contracts with insurance companies contain one performance obligation and consideration should be recorded when performance obligation is satisfied at point in time. For life insurance products, the amount of revenue recognition includes (i) the first year commission (“FYC”); (ii) contingent commissions for subsequent years; (iii) annual performance and operation bonus; (iv) bonus based on persistency ratio bonus; (v) service allowances. The sale of an insurance product by the Company is considered complete when initial insurance premium is paid by an individual and the insurance policy is approved by the respective insurance company. When a policy is effective, the insurance company is obligated to pay the agreed-upon commission to the Company under the terms of its service agreement with the Company and such commission is recognized as revenue.

For the FYC, the Company recognizes the revenue when the individuals’ policies are effective. The Company makes the estimation amount to be entitled for annual performance and operating bonus which is based on the FYC. From the experiences and information received from the insurance company, the accumulated recognized revenue amount will not be significantly reversed as the historical policy cancellations are immaterial. Therefore, the Company makes an estimation on performance and operation bonus which are based on the accumulated FYC on quarterly basis, and make reconciliation between actual and estimation amount on annual basis. The estimated revenue in the fiscal year of 2021 and 2020 was approximately $7.4 million and $7.3 million, respectively.

Others includes the contingent commissions for subsequent years, the bonus based on persistency ratio bonus, and service allowances, are considered highly susceptible to factors outside the company's influence and depend on the actions of third parties (i.e., the subsequent premiums paid by individual policyholders), and the uncertainty can be extended for many years. Therefore, the Company does not have high confidence to estimate the amount of such variables considerations that will not be reversed in subsequent reporting

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periods. Considering the effect of uncertainties, the contingent commissions for subsequent years, the bonus based on persistency ratio, and service allowances will be recognized as revenue based on the actual amount received from the insurance companies after the uncertain event is resolved.

For property and casualty insurance products, the Company recognizes the revenue when the individuals’ policies are effective. The revenue from property and casualty insurance products were 7.2% and 5.4% of total revenue for the years ended December 31, 2021 and 2020, respectively.

The Company enters into service agreements with insurance companies, which may give rise to contract assets and contract liabilities. When the timing of revenue recognition differs from the timing of payments made by insurance companies, the Company recognizes either contract assets (its performance precedes the billing date) or contract liabilities (customer payment is received in advance of performance).

Contract assets represent unbilled amounts resulting from the insurance agency and brokerage services provided by the Company to the insurance companies when the Company has an unconditional right to payment once the individuals’ insurance policies are effective. Contract assets are classified as current and the full balance is reclassified to accounts receivables when the right to payment becomes unconditional. The balance of contract assets was insignificant as of January 1, 2021 and December 31, 2021.

Contract liabilities represents the commissions received upfront from the insurance companies related to services that has not yet been recognized as revenue. The Company classifies contract liabilities as current based on the timing of when the Company expects to recognize revenue, which typically occurs within one year. Please refer to Note 18 for contract liabilities in AIATW.

The Company generally expenses sales commissions to its sales professionals when incurred because such expenses would be settled within one year or less. These costs are recorded within sales expenses in the consolidated statements of operations and other comprehensive income, as the expenses are settled less than one year and the Company has elected the practical expedient included in ASC 606.

For the years ended December 31, 2021 and 2020, the Company recorded revenue of $131,363,175 and $124,267,072, respectively. Disaggregation information of revenue is disclosed in Note 24.

Stock-Based Compensation

The Company have preferred stock-based compensation issued to non-related entities for Uniwill. The Company accounts for equity-based compensation cost in accordance with ASC 718, Compensation-Stock Compensation after adoption of ASC 2018-07, which requires the measurement and recognition of compensation expense related to the fair value of equity-based compensation awards that are ultimately expected to vest. Stock-based compensation expense recognized includes the compensation cost for all share-based compensation payments granted to employees and nonemployees, net of estimated forfeitures, over the employees’ requisite service period or the non-employee performance period based on the grant date fair value estimated in accordance with the provisions of ASC 718. ASC 718 is also applied to awards modified, repurchased, or cancelled during the periods reported. Please see Note 14 for additional information.

Retirement Plan and Net Periodic Pension Cost

Under the Company defined benefit pension plan, net periodic pension cost, which includes service cost, interest cost, expected return on plan assets, amortization of unrecognized net transition obligation and gains or losses on plan assets, is recognized based on an actuarial valuation report. The Company recognizes the funded status of pension plan as an asset or a liability in the consolidated balance sheets. Each overfunded plan is recognized as an asset and each underfunded plan is recognized as a liability. The recognition of prior service costs or credits and net actuarial gains or losses, as well as subsequent changes in the funded status, are recognized as components of accumulated other comprehensive income or loss, net of tax, in shareholders’ equity, until they are amortized as a component of net periodic benefit cost.

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Income Taxes

The Company records income tax expense using the asset-and-liability method of accounting for deferred income taxes. Under this method, deferred taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Deferred tax assets are reduced by a valuation allowance if, based on available evidence, it is more likely than not that the deferred tax assets will not be realized. The Company has elected to recognize a tax on global intangible low-taxed income ("GILTI"), which was imposed by the 2017 Tax Cuts and Jobs Act (the "2017 Tax Act"), as tax expense in the period the tax is incurred.

When tax returns are filed, it is likely some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more-likely-than-not the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits is classified as interest expense and penalties are classified in general and administrative expenses in the consolidated statements of operations and other comprehensive income (loss).

Earnings Per Share

Basic earnings per common share (“EPS”) is computed by dividing net income attributable to the common shareholders of the Company by the weighted-average number of common shares outstanding. Diluted EPS is computed in the same manner as basic EPS, except the number of shares includes additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued.

As the holders of preferred stock of the Company are entitled to share equally with the holders of common stock, on a per share basis, in such dividends and other distributions of cash, property or shares of stock of the Company as may be declared by the board of directors, the preferred stock is treated as a participating security. When calculating the basic earnings per common share, the two-class method is used to allocate earnings to common stock and participating security as required by FASB ASC Topic 260, “Earnings Per Share.” As of December 31, 2021 and 2020, the Company does not have any potentially dilutive instrument.

The following is a reconciliation of the income and share data used in the basic and diluted EPS computations for the years ended December 31, 2021 and 2020 under the two-class method.


	December 31,
	2021				2020
Numerator:	Common stock		Preferred stock		Common stock		Preferred stock
Allocation of net income attributable to the Company.	$	6,026,550	$	203,571	$	899,539	$	30,574

Denominator:
Weighted average shares of the Company’s common/preferred stock outstanding - basic		29,604,102		1,000,000		29,421,736		1,000,000
Basic and diluted earnings per share	$	0.204	$	0.204	$	0.031	$	0.031

The participating rights (liquidation and dividend rights) of the holders of the Company’s common stock and preferred stock are identical, except with respect to voting right (Note 15). As a result, and in accordance with ASC 260, the undistributed earnings for each year are allocated based on the contractual participation rights of the common stock and preferred stock as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis.

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Concentration of Credit Risk

The Company maintains cash and cash equivalents with banks or high credit, quality financial institutions in the USA, PRC, Hong Kong, and Taiwan with balances in excess of the limits insured by various governments. In Taiwan, a depositor has up to NTD3,000,000 insured by Central Deposit Insurance Corporation (“CDIC”). In China, a depositor has up to RMB500,000 insured by the People’s Bank of China Financial Stability Bureau (“FSD”). In Hong Kong, a depositor has up to HKD500,000 insured by Hong Kong Deposit Protection Board (“DPB”). In the United States, the standard insurance amount is $250,000 per depositor in a bank insured by the Federal Deposit Insurance Corporation (“FDIC”).

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, time deposits, restricted cash, register capital deposits included under other non-current assets and accounts receivable. As of December 31, 2021, and 2020, approximately $2,712,000 and $2,229,000 of the Company’s cash and cash equivalents, time deposits, restricted cash, and register capital deposits held by financial institutions, was insured, and the remaining balance of approximately $83,446,000 and $63,222,000, was not insured. With respect to accounts receivable, the Company generally does not require collateral and does not have collectability concern.

For the years ended December 31, 2021 and 2020, the Company earns commission revenues from an insurance company individually more than 10%of the total revenue of the Company were:


	Years Ended December 31,
	2021				2020
			% of Total				% of Total
	Amount		Revenue		Amount		Revenue
TransGlobe Life Insurance Inc.	$	33,579,165	26	%	$	29,120,466	23	%
Taiwan Life Insurance Co., Ltd.		24,626,829	19	%		25,227,920	20	%
Farglory Life Insurance Co., Ltd.		16,676,479	13	%		15,336,439	12	%

As of December 31, 2021, and 2020, the Company’s accounts and notes receivable due from an insurance company individually accounted more than 10% of the total accounts and notes receivable were:


	December 31,
	2021				2020
			% of Total				% of Total
			Accounts				Accounts
	Amount		Receivable		Amount		Receivable
TransGlobe Life Insurance Inc.	$	8,569,590	32	%	$	7,761,664	31	%
Taiwan Life Insurance Co., Ltd.		4,483,343	17	%		4,557,862	18	%
Farglory Life Insurance Co., Ltd.		2,729,673	10	%		2,787,906	11	%

The Company derives its revenue from insurance agency and brokerage services provided and operates their business in the PRC, Hong Kong 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, Hong Kong 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, Hong Kong and Taiwan, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, and rates and methods of taxation, among other things.

Operating Leases

Under ASC 842, Leases, the Company determines if an arrangement is a lease at inception of the contract and whether a contract is or contains a lease by determining whether it conveys the right to control the use of the identified asset for a period of time. If the contract provides us the right to substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the identified asset, we consider it to be, or contain, a lease. The Company records a right-of-use asset and a corresponding lease liability based on the present value of the minimum lease payments. The lease term used in the calculation of right-of-use assets and lease liabilities include renewal and termination options that are reasonably certain to be exercised. Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheet and the related lease expense is recognized on a straight-line basis

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over the lease term. Our leases do not provide an implicit borrowing rate, and we estimate the Company’s incremental borrowing rate to discount the lease payments based on information available at lease commencement.

Acquisitions

The Company evaluate acquisitions pursuant to ASC 805, Business Combinations, to determine whether the acquisition should be classified as either an asset acquisition or a business combination.

Acquisitions for which substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets are accounted for as an asset acquisition. The cost of a group of assets acquired in an asset acquisition is allocated to the individual assets acquired or liabilities assumed based on their relative fair values and does not give rise to goodwill. Acquisitions that meet the definition of a business combination are recorded at fair value using a fair value model under which the assets and liabilities are generally recognized at their fair values and the difference between the consideration transferred, excluding transaction costs, and the fair values of the assets and liabilities is recognized as goodwill. For acquisitions that meet the definition of a business combination, we allocate the purchase price of those properties on a fair value basis and expense the acquisitions related transaction costs as incurred. For asset acquisitions and business combinations, we allocate the purchase price to net tangible and identified intangible assets acquired based on their fair values.

The Company has incorporated contingent consideration, or earn out provisions, into the structure of its acquisitions. These arrangements may result in the payment of additional purchase price consideration to the sellers based on certain financial thresholds for periods following the closing of the respective acquisition. The additional purchase price consideration is payable in the form of cash and, in some cases, equity. The Company recognizes the fair value of estimated contingent consideration at the acquisition date as part of the consideration transferred in exchange for the acquired business or assets. The contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved. Any changes in fair value are recognized each reporting period in non-cash changes in fair value of estimated contingent consideration in the accompanying consolidated statements of operations.

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which could result in a loss to the Company which will be resolved when one or more future events occur or fail to occur. The Company’s management assesses such contingent liabilities, and such assessment inherently involves judgment. In assessing loss contingencies arising from legal proceedings pending against the Company or unasserted claims that may rise from such proceedings, the Company’s management evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates it is probable a material loss will be incurred and the amount of the loss can be reasonably estimated, then the estimated loss is accrued in the Company’s financial statements. If the assessment indicates a material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.

Subsequent event

The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration.

Recent Accounting Pronouncements

Credit Losses

In June 2016, the FASB issued ASU No. 2016-13, (FASB ASC Topic 326), Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, rather than the “incurred loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans and other instruments.

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In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company believes the adoption of ASU No. 2016-13 will not have a material impact on the Company’s consolidated financial statements.

Income Tax

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes which is intended to simplify various aspects related to accounting for income taxes. The Company adopted the guidance on January 1, 2021. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Reference Rate Reform

In March 2020, the FASB issued ASU No. 2020–04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burden related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. The guidance was effective for all entities upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. The Company is currently evaluating the effects of the guidance on the Company’s consolidated financial statements and related disclosures

Equity Securities, Equity-method Investments and Certain Derivatives

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The guidance provides clarification of the interaction of rules for equity securities, the equity method of accounting and forward contracts and purchase options on certain types of securities. ASU 2020-01 was effective for the Company in the first quarter of 2021. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

The management does not believe that other than disclosed above, accounting pronouncements the recently issued but not yet adopted will have a material impact on its financial position, results of operations or cash flows.

NOTE 2 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash, cash equivalents and restricted cash consisted of the following as of December 31, 2021 and 2020:


	December 31,
	2021		2020
Cash and cash equivalents:
Cash on hand and in banks	$	18,234,350	$	9,063,338
Restricted cash – noncurrent		88,282		66,490
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	18,322,632	$	9,129,828

Noncurrent restricted cash includes a mandatory deposit in the bank in conformity with Provisions of the Supervision and Administration of Specialized Insurance Agencies in PRC, which is not allowed to be withdrawn without the permission of the regulatory commission.

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NOTE 3 – TIME DEPOSITS

Time deposits are short-term bank deposits with maturities of more than three months but less than one year at the date of origination and consisted of the following:


	December 31,
	2021		2020

Total time deposits	$	71,161,391	$	53,339,508
Less: time deposits – original maturities less than three months under cash and cash equivalents		(6,862,215)		—
Time deposits – original maturities over three months but less than one year	$	64,299,176	$	53,339,508

The deposits are presented at their cost, including accrued interest. The deposits bear annual interest rates ranging from 0.05% to 2.79% and from 0.05% to 2.60% during 2021 and 2020, respectively.

The Company had a total of $23,811,616 (NTD 659.3 million) and $15,930,161 (NTD 447.3 million) restricted time deposits, respectively, as of December 31, 2021 and 2020. Time deposits of $36,117 (NTD 1 million) and $35,616 (NTD 1 million) were pledged as collateral for the Company’s credit card as of December 31, 2021 and 2020, respectively. In addition, the Company had time deposits of $23,775,499 and $15,894,545 pledged as collateral for short-term loans, respectively, as of December 31, 2021 and 2020. See Note 10.

NOTE 4 – MARKETABLE SECURITIES

Marketable securities, consisted of stock mutual funds, were nil and $1,272,573 as of December 31, 2021 and 2020, respectively. Realized and unrealized gains (losses) for the years ended December 31, 2021 and 2020 are summarized below:


		Years Ende

China United Insurance Service, Inc. 10-K