WEB NEWS Deal Flow
Item 1.01. Entry into a Material Definitive Agreement
On June 23, 2016, China United Insurance Service, Inc. (the “Company” or “CUIS”) entered into a Convertible Bond Purchase Agreement with a non-US person, pursuant to which the Company has issued two units of its convertible bonds with an aggregate principal amount of USD200,000. The term of the convertible bonds is for two years and with an annual interest rate of 8% payable on a quarterly basis. The purchaser of the convertible bonds may cause the company to redeem the convertible bonds before the end of the term, subject to certain penalties depending on the holding period of the convertible bonds when redeemed.
Upon the expiration of the term of the convertible bond, the bond holder may, in its sole discretion, choose to collect the payment of full principal amount of the convertible bond together with any interest accrued or convert the convertible bond into common shares of the Company at the conversion price. The conversion price shall be the product of (i) the average closing trading price for the 10 business days immediately prior to the conversion date times (ii) 80%.
The convertible bonds sold on June 23, 2016 are part of an offering by the Company of convertible bonds with the same or similar terms. The Company intends to issue the convertible bonds during the period commencing on June 23, 2016 and ending on September 30, 2016 with an aggregate principal amount of up to USD10 million. The convertible bonds shall be sold in units, with each unit being USD100,000 in principal amount. The Company will not make any offers or sales of the convertible bonds to U.S. persons and there will be no directed selling efforts in the United States.
Comments & Business Outlook
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME / (LOSS)
(UNAUDITED)
Three Months Ended March 31,
2016
2015
Revenues
$
9,562,296
$
9,856,115
Cost of revenue
6,468,859
6,446,411
Gross profit
3,093,437
3,409,704
Operating expenses:
Selling
898,265
369,259
General and administrative
2,887,108
3,053,644
Total operating expense
3,785,373
3,422,903
Loss from operations
(691,936
)
(13,199
)
Other income (expenses):
Interest income
50,569
37,715
Other - net
(29,350
)
13,015
Total other income
21,219
50,730
Income (loss) before income taxes
(670,717
)
37,531
Income tax expense
3,199
129,629
Net loss
(673,916
)
(92,098
)
Net income (loss) attributable to the noncontrolling interests
(30,215
)
188,568
Net loss attributable to parent's shareholders
(643,701
)
(280,666
)
Other comprehensive items
Foreign currency translation gain (loss)
163,512
94,676
Other
(1,593
)
-
Other comprehensive income attributable to parent's shareholders
161,919
94,676
Other comprehensive items attributable to noncontrolling interest
149,633
108,730
Comprehensive income (loss) attributable to
parent's shareholders
$
(481,782
)
$
(185,990
)
Comprehensive income (loss) attributable to
noncontrolling interest
$
119,418
$
297,298
Weighted average shares outstanding:
Basic
29,452,669
29,452,669
Diluted
29,452,669
29,452,669
Income (loss) per share:
Basic
$
(0.022
)
$
(0.010
)
Diluted
$
(0.022
)
$
(0.010
)
Comments & Business Outlook
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME / (LOSS)
Year Ended December 31,
Six Months Ended
Year Ended June
2015
2014
December 31, 2013
30, 2013
Revenues
$
55,023,766
$
47,449,962
23,689,110
$
37,842,246
Cost of revenue
35,423,762
30,408,118
16,040,303
24,309,716
Gross profit
19,600,004
17,041,844
7,648,807
13,532,530
Operating expenses:
Selling
3,084,408
4,034,409
2,010,744
962,958
General and administrative
12,675,171
11,971,863
5,948,516
9,062,828
Impairment loss of goodwill
-
-
122,250
-
Total operating expense
15,759,579
16,006,272
8,081,510
10,025,786
Income (loss) from operations
3,840,425
1,035,572
(432,703
)
3,506,744
Other income:
Interest income
229,855
229,317
108,654
83,682
Bargain gain on purchase of subsidiaries
-
-
-
5,280,042
Other - net
150,071
365,225
(652,079
)
432,064
Total other income
379,926
594,542
(543,425
)
5,795,788
Income before income taxes
4,220,351
1,630,114
(976,128
)
9,302,532
Income tax expense
1,519,226
1,672,840
143,660
698,508
Net income (loss)
2,701,125
(42,726
)
(1,119,788
)
8,604,024
Net income attributable to the noncontrolling interests
1,623,198
865,406
32,190
1,386,556
Net income (loss) attributable to parent’s shareholders
1,077,927
(908,132
)
(1,151,978
)
7,217,468
Other comprehensive items
Foreign currency translation gain (loss)
(329,562
)
(268,695
)
(38,218
)
13,195
Other comprehensive income(loss)
310
(6,298
)
4,001
384
attributable to parent’s shareholder
(329,252
)
(274,993
)
(34,217
)
13,579
Other comprehensive items
attributable to noncontrolling interest
(477,738
)
(346,783
)
(16,557
)
(1,630
)
Comprehensive income (loss) attributable to parent’s shareholders
$
748,675
$
(1,183,125
)
(1,186,195
)
$
7,231,047
Comprehensive (income) loss attributable to noncontrolling interest
$
(1,145,460
)
$
(518,623
)
(15,633
)
$
(1,388,186
)
Weighted average shares outstanding:
Basic
29,365,834
29,100,503
29,100,503
27,593,654
Diluted
30,365,834
29,100,503
29,100,503
28,588,174
Income (loss) per share:
Basic
$
0.037
$
(0.031
)
0.040
$
0.262
Diluted
$
0.035
$
(0.031
)
0.040
$
0.252
Management Discussion and Analysis
During the year ended December 31, 2015, 89.29% and 10.71% of our revenues in our consolidated financial statements were derived from our Taiwan Subsidiaries and Consolidated Affiliated Entities (“CAE”) in PRC, respectively. During the year ended December 31, 2014, 93.55% and 6.45% of our revenues in our consolidated financial statements were derived from our Taiwan Subsidiaries and CAE, respectively.
Total revenues increased by $7,573,804, or 16%, from $47,449,962 for the year ended December 31, 2014 to $55,023,766 for the year ended December 31, 2015, which is mainly due to the increase of the revenue in Taiwan and PRC for the following reasons:
a) The sales of the products of Farglory Life Insurance Co., Ltd (“Farglory”) increased in 2015 because Farglory bundles its life insurance products to better customize each of its clients’ appeals. By combining insurance contracts with diversified term, premium, and coverage arrangements, the increased flexibility of the products of Farglory drew more attentions from the company’s customers and thus boosting the sales performance for the year ended December 31, 2015. b) The sales of the products of CTBC Life Insurance Co., Ltd. (“CTBC”) increased in 2015 because China Trust has its long-lasting soundly reputation in the local Taiwan market. Many of its insurance products are among the best seller of the company’s items. In fourth quarter of 2014, CTBC launched a newly designed insurance product focuses on the coverage of the handicap medical care that provides the solution for the absence of the coverage from the government funded health insurance; in April, 2015, CTBC launched a newly designed life-time life insurance product, which bears variable interest rate and coverages, and the subject product, given its flexibility to address diverse needs, gains the popularity among the customers, leading to the higher sales compared with that for the year ended December 31, 2014. c) The company relocated its headquarter from Henan to Nanjing in the year of 2014 and tried to exploit more and more local markets and to expand its customer base in the PRC area. By setting up more and more business branch, accompanying with the company’s improved capability to serve more customers in different provinces, the company has gained its notability in China and thus generating more and more revenue for the year ended December 31, 2015.
Comments & Business Outlook
Item 1.01. Entry into Material Definitive Agreement
Amendment to the AHFL Acquisition Agreement
On August 24, 2012, China United Insurance Service, Inc. (the “Company” or “CUIS”) entered into an Acquisition Agreement (the “Acquisition Agreement”) with all of the shareholders of Action Holdings Financial Limited (“AHFL”), a British Virgin Islands limited liability company, to acquire all of the issued and outstanding shares of AHFL, together with its subsidiaries in Taiwan, and consummated the acquisition (the “Acquisition”) contemplated by the Acquisition Agreement.
Pursuant to the provisions of the Acquisition Agreement, the Company was to pay NT$15 million (approximately US$450,977) on or prior to March 31, 2013 and NT$7.5 million (approximately US$225,489) subsequent to March 31, 2013 in cash in two installments, subject to certain terms and conditions. In addition the Company agreed to (i) issue 8,000,000 shares of common stock of the Company to the shareholders of AHFL; (ii) issue 2,000,000 shares of common stock of the Company to certain employees of Law Insurance Broker Co., Ltd. (“Law Broker”), a subsidiary of AHFL; and (iii) create an employee stock option pool, consisting of available options, exercisable for up to 2,000,000 shares of common stock of the Company.
On March 14, 2013, the Company and the selling shareholders of AHFL entered into an Amendment to the Acquisition Agreement (the “First Amendment”), pursuant to which, (i) the cash payment deadline as set forth in the Acquisition Agreement was extended from March 31, 2013 to March 31, 2015 or at any other time or in any other manner otherwise agreed upon by and among the Company and the selling shareholders of AHFL; and (ii) in lieu of the 2,000,000 employee stock option pool described in the Acquisition Agreement, the Company agreed to use its best efforts, as soon as practically possible, to create an employee stock pool consisting of up to 4,000,000 shares of CUIS common stock, among which 2,000,000 shares shall be solely granted to employees of Law Broker, and the remaining 2,000,000 shares to be granted to employees of affiliated entities of the Company (including Law Broker employees).
On March 13, 2015, the Company and the selling shareholders of AHFL entered into a second Amendment to the Acquisition Agreement (the “Second Amendment”), pursuant to which the cash payment deadline as set forth in the Acquisition Agreement was extended from March 31, 2015 to March 31, 2016 or at any other time or in any other manner otherwise agreed upon by and among the Company and the selling shareholders of AHFL.
On February 17, 2016, the Company and the selling shareholders of AHFL entered into a third Amendment to the Acquisition Agreement (the “Third Amendment”), pursuant to which, on or prior to June 30, 2016, (i) the Company is committed to complete the listing of the Company’s shares in a major capital market, where the net proceeds raised through such public offering financing shall be at least US$10,000,000; (ii) the Company is committed to distribute the cash payment in the amount of NT$22.5 million (approximately US$676,466), on a pro rata basis, to the selling shareholders of AHFL and issue 5 million common shares to its selected employees pursuant to its employee stock/option plan, or any alternative plan mutually accepted by the Company and such selling shareholders; and (iii) failure to timely complete either of the above-mentioned criteria shall be deemed as a material breach of the Company under Article 8 of the Acquisition Agreement, whereby the non-breaching party shall be entitled to terminate the Acquisition Agreement and unwind the Acquisition of AHFL by CUIS and restore the status quo of the Company and the Selling Shareholders as if the said acquisition had never happened.
As of the date immediately prior to the consummation of the Acquisition, certain shareholders of AHFL, including Mao Yi Hsiao, were also significant shareholders of the Company: (i) Mao Yi Hsiao, together with Lee Shu Fen (his wife) and Mao Li Chieh (his daughter), owned 17.9% of the outstanding shares of the Company and 24.3% of the outstanding shares of AHFL. Mao Yi Hsiao, one of the directors of the Company, also acts as the sole director of AHFL and the board chairman of Law Enterprise, Law Management and Law Agent, and as the supervisor of Jiangsu Law Broker Co., Ltd. In addition, Lee Shu Fen also acts as general manager of Law Enterprise and the board chairman of Law Broker; (ii) Chao Hui Hsien, a shareholder of AHFL and Law Agent, is also a shareholder of the Company. In addition, Chao Hui Hsien also acts as general manager of Law Broker and director of Law Enterprise and Law Agent; (iii) Chuang Yung Chi, a shareholder of AHFL, is also a shareholder and Chief Financial Officer of the Company; (iv) Hsieh Tung Chi, a shareholder of AHFL, is also a shareholder of the Company. In addition, Hsieh Tung Chi acts as the Chief Operating Officer of the Company; (v) Tu Wen Ti, a shareholder of AHFL, is also a shareholder of the Company. In addition, Tu Wen Ti acts as the assistant general manager of Law Broker; and (vi) Shen Wen Che, a shareholder of AHFL, is also a shareholder of the Company. In addition, Shen Wen Che acts as the assistant general manager of Law Broker.
Subsequent to the closing of the Acquisition, Mao Yi Hsiao holds 100% of the Company’s outstanding preferred shares, and holds, together with his affiliates, 15.6% of the Company’s outstanding common shares, and 37.2% of the voting power of the Company.
The Third Amendment is attached as Exhibit 10.1 to this Current Report on Form 8-K and its terms are incorporated herein by reference.
Amendment to the GHFL Acquisition Agreement
On February 13, 2015, the Company and AHFL entered into an acquisition agreement (the “Genius Acquisition Agreement”) with Mr. Li Chwan Hau, the selling shareholder of Genius Holdings Financial Limited ( “Mr. Li”), a company with limited liability incorporated under the laws of British Virgin Islands (“GHFL”), to issue 352,166 fully paid and non-assessable shares of AHFL Common Stock (“AHFL Shares”) together with a granted put option for 352,166 common shares of CUIS (“Put Option”), in exchange for 704,333 shares of common stock of GHFL, being all of the issued and outstanding capital stock of GHFL, subject to other terms and conditions of the Genius Acquisition Agreement. Subsequent to the acquisition, GHFL became a wholly-owned subsidiary of CUIS. GHFL holds 100% of the issued and outstanding shares of Genius Investment Consultant Co., Ltd. (“Taiwan Genius”), a limited company incorporated under the laws of Taiwan, which in turn holds approximately 15% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius Broker”), a company limited by shares incorporated under the laws of Taiwan. Both GHFL and Taiwan Genius have no substantive business operation other than the holding of shares of its subsidiary. Genius Broker is primarily engaged in broker business across Taiwan. On March 31, 2015, the Put Option was exercised and Mr. Li received 352,166 shares of common shares of CUIS in exchange for his AHFL Shares.
On February 17, 2016, the Company and AHFL entered into an Amendment 2 to the Genius Acquisition Agreement (the “Genius Amendment”) with Mr. Li, pursuant to which, on or prior to February 28, 2016, (i) the Company is committed to complete the listing of the Company into major capital markets, where the net proceeds raised through such public offering financing shall be at least USD 10,000,000; and (ii) failure to timely complete the above-mentioned criteria shall be deemed as a material breach of the Company under Article 8 of the Genius Acquisition Agreement, whereby the Selling Shareholder shall be entitled to revoke the exercised Put Option right set forth in Section 2.8 as if the Put Option had never been exercised.
The Genius Amendment is attached as Exhibit 10.2 to this Current Report on Form 8-K and its terms are incorporated herein by reference.
Loan Agreement with Law Enterprise
On February 15, 2016, Action Holdings Financial Limited Taiwan Branch (hereafter referred to as “AHFLTW”), a branch of AHFL, entered into a loan agreement with Law Enterprise Co., Ltd. (“Law Enterprise”) (the loan agreement hereafter referred to as the “Loan Agreement No. 2 with Law Enterprise”). Law Enterprise is a 65.95% owned Taiwan subsidiary of AHFL while AHFL is a 100% owned subsidiary of the Company. Mao Yi Hsiao, one of the directors of the Company, also acts as the board chairman of Law Enterprise. In addition, Lee Shu Fen, a director of the Company, also acts as general manager of Law Enterprise and the board chairman of Law Broker.
Pursuant to the Loan Agreement No. 2 with Law Enterprise, Law Enterprise will provide a loan to AHFLTW in the amount of 7 million NT$ (approximately US$210,456) The term for the Loan shall be from February 15, 2016 to December 31, 2016 with a fixed annual interest rate at 1.5%. The principal amount of the loan together with the accrued interest shall be paid in one lump sum before December 31, 2016.
The Loan Agreement No. 2 with Law Enterprise is included as Exhibit 10.3 to this Current Report on Form 8-K and its terms are incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of the Registrant.
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.
Deal Flow
Item 1.01. Entry into Material Definitive Agreement
On January 4, 2016, Action Holdings Financial Limited Taiwan Branch (hereafter referred to as “AHFLTW”), a branch of Action Holdings Financial Limited (hereafter referred to as “AHFL”) which is a wholly-owned British Virgin Islands subsidiary of China United Insurance Service, Inc. (hereafter referred to as the “Company” or “CUIS”), entered into a loan agreement with Law Insurance Broker Co., Ltd. (“Law Broker”) (the loan agreement hereafter referred to as the “Loan Agreement with Law Broker”). Law Broker is a wholly owned Taiwan subsidiary of Law Enterprise Co., Ltd. (“Law Enterprise”). Law Enterprise is a 65.95% owned Taiwan subsidiary of AHFL. Mao Yi Hsiao, one of the directors of the Company, also acts as the board chairman of Law Enterprise. In addition, Lee Shu Fen, a director of the Company, also acts as general manager of Law Enterprise and the board chairman of Law Broker.
Pursuant to the Loan Agreement with Law Broker, Law Broker will provide a loan in the amount of 30 million New Taiwan Dollars (NT$) (approximately US$893,682) (the “Loan from Law Broker”) to AHFLTW. The term for the Loan shall be from January 12, 2016 to December 31, 2016 with a fixed annual interest rate at 1.5%. The principal amount of the Loan together with the accrued interest shall be paid in one lump sum before December 31, 2016. The Loan Agreement with Law Broker is included as Exhibit 10.1 to this Current Report on Form 8-K and its terms are incorporated herein by reference.
On January 15, 2016, AHFLTW entered into a loan agreement with Law Enterprise (the loan agreement hereafter referred to as the “Loan Agreement with Law Enterprise”).
Pursuant to the Loan Agreement with Law Enterprise, Law Enterprise will provide a loan in the amount of 10 million NT$ (approximately US$297,894) (the “Loan from Law Enterprise”) to AHFLTW. The term for the Loan shall be from February 15, 2016 to December 31, 2016 with a fixed annual interest rate at 1.5%. The principal amount of the Loan together with the accrued interest shall be paid in one lump sum before December 31, 2016. The Loan Agreement with Law Enterprise is included as Exhibit 10.2 to this Current Report on Form 8-K and its terms are incorporated herein by reference.
Comments & Business Outlook
Item 1.01. Entry into Material Definitive Agreement
On January 6, 2016, Action Holdings Financial Limited (“AHFL”), a wholly-owned British Virgin Islands subsidiary of China United Insurance Service, Inc. (the “Company” or “CUIS”), entered into an Amendment 2 to Strategic Alliance Agreement (the “Amendment No. 2”) with AIA International Limited Taiwan Branch (“AIATW”) to further revise certain provisions in the Strategic Alliance Agreement and the previous amendment entered into by and between AHFL and AIATW.
The purpose of the Strategic Alliance Agreement is to promote life insurance products provided by AIATW within the territory of Taiwan through insurance agency companies or insurance brokerage companies. To the extent permitted by applicable laws and regulations, AHFL shall assist and encourage any insurance agency company or insurance brokerage company duly approved by the competent government authorities of Taiwan (the “Appointed Broker/Agent”), to cooperate with AIATW for the promotion of life insurance products of AIATW.
Pursuant to the Amendment No. 2, the expiration date of the Strategic Alliance Agreement has been extended from May 31, 2018 to December 31, 2021, and the effect of the Strategic Alliance Agreement during the period from October 1, 2014 to December 31, 2015 has been suspended. In addition, both AHFL and AIATW agree to adjust certain terms and conditions set forth in the Strategic Alliance Agreement, among which: (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.
An English translation of the Amendment No. 2 is included as Exhibit 10.1 to this Current Report on Form 8-K and is the legal document that governs the terms of the cooperation described therein and the other actions contemplated by the Amendment No. 2. The foregoing description of the cooperation does not purport to be complete and is qualified in its entirety by reference to the complete text of the Amendment, which is filed as Exhibit 10.1 hereto, and incorporated, herein by reference.
Comments & Business Outlook
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSENDED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME / (LOSS)
(UNAUDITED)
Three Months Ended September 30,
Nine Months Ended September 30,
2015
2014
2015
2014
Revenues
$
11,442,525
$
9,795,058
$
35,556,157
$
30,989,923
Cost of revenue
7,382,823
5,984,679
23,764,574
19,683,245
Gross profit
4,059,702
3,810,379
11,791,583
11,306,678
Operating expenses:
Selling
1,020,934
1,703,365
1,635,494
2,444,031
General and administrative
2,907,104
3,114,005
8,882,547
8,433,578
Total operating expense
3,928,038
4,817,370
10,518,041
10,877,609
Income (loss) from operations
131,664
(1,006,991
)
1,273,542
429,069
Other income (expense):
Interest income
77,411
54,001
174,324
147,954
Other - net
(135,280
)
158,359
107,153
244,260
Total other income (expense)
(57,869
)
212,360
281,477
392,214
Income (loss) before income taxes
73,795
(794,631
)
1,555,019
821,283
Income tax expense
226,397
(12,753
)
845,556
1,171,602
Net income (loss)
(152,602
)
(781,878
)
709,463
(350,319
)
Net income attributable to the noncontrolling interests
253,878
(27,876
)
827,066
524,522
Net income (loss) attributable to parent's shareholders
(406,480
)
(754,002
)
(117,603
)
(874,841
)
Other comprehensive items
Foreign currency translation gain (loss)
(581,269
)
(74,965
)
(426,959
)
(111,894
)
Other comprehensive income(loss)
-
-
-
-
attributable to parent's shareholder
(581,269
)
(74,965
)
(426,959
)
(111,894
)
Other comprehensive items
attributable to noncontrolling interest
(451,719
)
120,695
(283,653
)
87,224
Comprehensive income (loss) attributable to
parent's shareholders
$
(987,749
)
$
(828,967
)
$
(544,562
)
$
(986,735
)
Comprehensive income (loss) attributable to
noncontrolling interest
$
(197,841
)
$
148,571
$
543,413
$
(437,298
)
Weighted average shares outstanding:
Basic
29,452,669
29,100,503
29,336,570
29,100,503
Diluted
29,452,669
29,100,503
29,336,570
29,100,503
Income (loss) per share:
Basic
$
(0.014
)
$
(0.026
)
$
(0.004
)
$
(0.030
)
Diluted
$
(0.014
)
$
(0.026
)
$
(0.004
)
$
(0.030
)
Management Discussion and Analysis
Revenues
As a distributor of insurance products, we derive our revenue primarily from commissions and fees paid by insurance companies, typically calculated as a percentage of premiums paid by our customers to the insurance companies in both Taiwan and People’s Republic of China (“PRC”). We generate revenue primarily through our sales force, which consists of individual sales agents in our distribution and service network.
During the three months ended September 30, 2015, 88.50% and 11.50% of our revenues in our unaudited consolidated financial statements were derived from our Taiwan Subsidiaries and Consolidated Affiliated Entities (“CAE”) in PRC, respectively. During the three months ended September 30, 2014, 92.36% and 7.64% of our revenues in our unaudited consolidated financial statements were derived from our Taiwan Subsidiaries and CAE, respectively.
Total revenues increased by $1,647,467, or 17%, from $9,795,058 for the three months ended September 30, 2014 to $11,442,525 for the three months ended September 30, 2015
Comments & Business Outlook
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSENDED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME / (LOSS)
(UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30,
2015
2014
2015
2014
Revenues
$
14,257,517
$
12,333,142
$
24,113,632
$
21,194,865
Cost of revenue
9,935,340
8,330,341
16,381,751
13,698,566
Gross profit
4,322,177
4,002,801
7,731,881
7,496,299
Operating expenses:
Selling
245,301
437,677
614,560
740,666
General and administrative
2,921,799
2,906,328
5,975,443
5,319,573
Total operating expense
3,167,100
3,344,005
6,590,003
6,060,239
Income from operations
1,155,077
658,796
1,141,878
1,436,060
Other income:
Interest income
59,198
50,369
96,913
93,953
Other - net
229,418
12,957
242,433
85,901
Total other income
288,616
63,326
339,346
179,854
Income before income taxes
1,443,693
722,122
1,481,224
1,615,914
Income tax expense
489,530
940,755
619,159
1,184,355
Net income (loss)
954,163
(218,633
)
862,065
431,559
Net income attributable to the noncontrolling interests
384,620
157,602
573,188
552,396
Net income (loss) attributable to parent's shareholders
569,543
(376,235
)
288,877
(120,837
)
Other comprehensive items
Foreign currency translation gain (loss)
59,634
60,081
154,310
(36,929
)
Other comprehensive income(loss)
-
-
-
-
attributable to parent's shareholder
59,634
60,081
154,310
(36,929
)
Other comprehensive items
attributable to noncontrolling interest
59,336
(113,873
)
168,066
(33,471
)
Comprehensive income (loss) attributable to
parent's shareholders
$
629,177
$
(316,154
)
$
443,187
$
(157,766
)
Comprehensive income (loss) attributable to
noncontrolling interest
$
443,956
$
(271,475
)
$
741,254
$
(585,867
)
Weighted average shares outstanding:
Basic
29,452,669
29,100,503
29,277,559
29,100,503
Diluted
30,452,669
29,100,503
30,277,559
29,100,503
Income (loss) per share:
Basic
$
0.019
$
(0.013
)
$
0.010
$
(0.004
)
Diluted
$
0.019
$
(0.013
)
$
0.010
$
(0.004
)
Management Discussion and Analysis
Revenues
As a distributor of insurance products, we derive our revenue primarily from commissions and fees paid by insurance companies, typically calculated as a percentage of premiums paid by our customers to the insurance companies in both Taiwan and People’s Republic of China (“PRC”). We generate revenue primarily through our sales force, which consists of individual sales agents in our distribution and service network.
During the three months ended June 30, 2015, 88.54% and 11.46% of our revenues in our unaudited consolidated financial statements were derived from our Taiwan Subsidiaries and Consolidated Affiliated Entities (“CAE”) in PRC, respectively. During the three months ended June 30, 2014, 94.53% and 5.47% of our revenues in our unaudited consolidated financial statements were derived from our Taiwan Subsidiaries and CAE, respectively.
Total revenues increased by $1,924,375, or 16%, from $12,333,142 for the three months ended June 30, 2014 to $14,257,517 for the three months ended June 30, 2015, which is mainly due to the increase of the revenue in Taiwan and PRC for following reasons,
a) The sales of the products of Farglory Life Insurance Co., Ltd (“Farglory”) increased in 2015 because Farglory bundles its life insurance products to better customize each of its clients’ appeals. By combining insurance contracts with diversified term, premium, and coverage arrangements, the increased flexibility of the products of Farglory drew more attentions from the company’s customer and thus boosting the sales performance for the period ended June 30, 2015. b) The sales of the products of CTBC Life Insurance Co., Ltd. (“CTBC”) increased in 2015 because China Trust has its long-lasting soundly reputation in the local Taiwan market. Many of its insurance products are among the best seller of the company’s items. In fourth quarter of 2014, CTBC launched a newly designed insurance product focuses on the coverage of the handicap medical care that provides the solution for the absence of the coverage from the government funded health insurance, leading to the increased demands from the customers in the second quarter of 2015 compared with that of 2014. c) The company relocated its headquarter from Henan to Nanjing in the year of 2014 and tried to exploit more and more local markets and to expand its customer base in the PRC area. By setting up more and more business branch, accompanying with the company’s improved capability to serve more customers in different provinces, the company has gained its notability in China and thus generating more and more revenue for the period ended June 30, 2015.
CU WFOE and the CAEs in the PRC are governed by the Income Tax Law of the PRC concerning the private-run enterprises, which are generally subject to tax at 25% on income reported in the statutory financial statements after appropriated adjustments. According to the requirement of local tax authorities, the taxable income of Jiangsu Law is deemed as 10% of total revenue, instead of the income before income tax. The tax rate of Jiangsu Law is also 25%.
Comments & Business Outlook
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME / (LOSS)
(UNAUDITED)
Three Months Ended March 31,
2015
2014
Revenues
$
9,856,115
$
8,861,723
Cost of revenue
6,446,411
5,368,225
Gross profit
3,409,704
3,493,498
Operating expenses:
Selling
369,259
302,989
General and administrative
3,053,644
2,413,245
Total operating expense
3,422,903
2,716,234
Income (loss) from operations
(13,199
)
777,264
Other income:
Interest income
37,715
43,584
Other - net
13,015
72,944
Total other income
50,730
116,528
Income before income taxes
37,531
893,792
Income tax expense
129,629
243,600
Net income (loss)
(92,098
)
650,192
Net income attributable to the noncontrolling interests
188,568
394,794
Net income (loss) attributable to parent's shareholders
(280,666
)
255,398
Other comprehensive items
Foreign currency translation gain (loss)
94,676
(97,010
)
Other comprehensive income(loss)
-
-
attributable to parent's shareholder
94,676
(97,010
)
Other comprehensive items
attributable to noncontrolling interest
108,730
80,402
Comprehensive income (loss) attributable to
parent's shareholders
$
(185,990
)
$
158,388
Comprehensive income (loss) attributable to
noncontrolling interest
$
297,298
$
314,392
Weighted average shares outstanding:
Basic and diluted
29,452,669
29,100,503
Income (loss) per share:
Basic and diluted
$
(0.01
)
$
0.01
Management Discussion and Analysis
Revenues
As a distributor of insurance products, we derive our revenue primarily from commissions and fees paid by insurance companies, typically calculated as a percentage of premiums paid by our customers to the insurance companies in both Taiwan and People’s Republic of China (“PRC”).
Other income
Net other income for the three months ended March 31, 2015 was $50,730 and the net other income for the three months ended March 31, 2014 was $116,528. Other income (expense) mainly consists of interest income; gain on change of fair value of marketable securities and loss on disposal of fixed assets. Compared with the three month ended March 31, 2015, other income decreased due to the decrease of the non-operating income.
Comments & Business Outlook
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME / (LOSS)
Year Ended December 31,
Six Months Ended December 31,
Years Ended June 30,
2014
2013
2013
2012
Revenues
$
47,449,962
$
23,689,110
$
37,842,246
$
3,153,776
Cost of revenue
30,408,118
16,040,303
24,309,716
2,363,581
Gross profit
17,041,844
7,648,807
13,532,530
790,195
Operating expenses:
Selling
4,034,409
2,010,744
962,958
General and administrative
11,971,863
5,948,516
9,062,828
1,166,841
Impairment loss of goodwill
-
122,250
-
-
Income (loss) from operations
1,035,572
(432,703
)
3,506,744
(376,646
)
Other income (expenses):
Interest income
229,317
108,654
83,682
4,756
Bargain gain on purchase of subsidiaries
-
-
5,280,042
-
Other - net
365,225
(652,079
)
432,064
(18
)
Total other income (expenses)
594,542
(543,425
)
5,795,788
4,738
Income (loss) before income taxes
1,630,114
(976,128
)
9,302,532
(371,908
)
Income tax expense
1,672,840
143,660
698,508
(268,440
)
Net income (loss)
(42,726
)
(1,119,788
)
8,604,024
(103,468
)
Net income attributable to the noncontrolling interests
(865,406
)
(32,190
)
(1,386,556
)
-
Net income (loss) attributable to parent's shareholders
(908,132
)
(1,151,978
)
7,217,468
(103,468
)
Other comprehensive items
Foreign currency translation gain (loss)
(268,695
)
(38,218
)
13,195
13,972
Other comprehensive income(loss)
(6,298
)
4,001
384
-
Attributable to parent's shareholders
(274,993
)
(34,217
)
13,579
13,972
Other comprehensive items
attributable to noncontrolling interest
346,783
16,557
(1,630
)
-
Comprehensive income (loss) attributable to
parent's shareholders
$
(1,183,125
)
$
(1,186,195
)
$
7,231,047
$
(89,496
)
Comprehensive income (loss) attributable to
noncontrolling interest
$
(518,623
)
$
(15,633
)
$
(1,388,186
)
$
-
Weighted average shares outstanding:
Basic
29,100,503
29,100,503
27,593,654
20,100,503
Diluted
29,100,503
29,100,503
28,588,174
20,100,503
Income (loss) per share:
Basic
$
(0.031
)
$
(0.040
)
$
0.262
$
(0.005
)
Diluted
$
(0.031
)
$
(0.040
)
$
0.252
$
(0.005
)
Management Discussion and Analysis
Revenues
As a distributor of insurance products, we derive our revenue primarily from commissions and fees paid by insurance companies, typically calculated as a percentage of premiums paid by our customers to the insurance companies. We generate revenue primarily through our sales force, which consists of individual sales agents in our distribution and service network. The acquisition of AHFL enabled us to reach the untapped market in Taiwan. For
During the year ended December 31, 2014, 93.55% and 6.45% of our revenues in our consolidated financial statements were derived from our Taiwan Subsidiaries and CAE, respectively. During the year ended December 31, 2013, 93.98% and 6.02% of our revenues in our consolidated financial statements were derived from our Taiwan Subsidiaries and CAE, respectively.
Total revenues increased by $2,293,388, or 5%, from $45,156,574 for the year ended December 31, 2013 to $47,449,962 for the year ended December 31, 2014, which is mainly due to the increase of the revenue in Taiwan for following reasons,
a) After we entered into a Strategic Alliance Agreement with AIA International Limited Taiwan Branch (“AIATW”) in June 2013, the sales of insurance products of AIATW increased stably.
b) The sales of the products of China Trust Life Insurance Co., Ltd. (“China Trust”) increased in 2014 because China Trust’s good reputation attracted more customers.
Acquisition Activity
Item 1.01 Entry into a Material Definitive Agreement.
On February 13, 2015, China United Insurance Service, Inc. (“CUII”) and Action Holdings Financial Limited (“AHFL”) entered into an acquisition agreement (the “Acquisition Agreement”) with Mr. LI CHWAN HAU, the selling shareholder of Genius Holdings Financial Limited (the “Selling Shareholder”), a company with limited liability incorporated under the laws of British Virgin Islands (“GHFL”), to issue 352,166 fully paid and non-assessable shares of AHFL Common Stock (“AHFL Shares”) together with an granted put option for 352,166 shares of common stock of CUII (“Put Option”), in exchange for 704,333 shares of common stock of GHFL, being all of the issued and outstanding capital stock of GHFL. The Put Option may be exercised within six months of the closing date of the acquisition and the Selling Shareholder would exchange the AHFL Shares as consideration for the exercise of the Put Option. Subsequent to the acquisition, GHFL will become a wholly-owned subsidiary of CUII. GHFL holds 100% issued and outstanding shares of Genius Investment Consultant Co., Ltd. (“Taiwan Genius”), a limited company incorporated under the laws of Taiwan, which in turn holds approximately 15% issued and outstanding shares of Genius Insurance Broker Co., Ltd. (“Genius Broker”), a company limited by shares incorporated under the laws of Taiwan. Both GHFL and Taiwan Genius have no substantive business operation other than the holding of shares of its subsidiary. Genius Broker is primarily engaged in broker business across Taiwan.
The AHFL Shares, and the CUII Shares issuable upon exercise of the Put Option, will be subject to a lock-up, where the Selling Shareholder: (i) will not, for a period of 4 years commencing from the issuance date of the stock certificate, representing his AHFL Shares or CUII Shares, sell, transfer or otherwise dispose (“Transfer”) any of his AHFL Shares or CUII Shares; (ii) may Transfer up to 20% of his AHFL Shares or CUII Shares commencing from the fourth anniversary date; (iii) may Transfer up to an additional 30% of his AHFL Shares or CUII Shares commencing from the fifth anniversary date; and (iv) may freely Transfer any of his remaining AHFL Shares or CUII Shares commencing from the sixth anniversary date.
On the fourth anniversary date described above, depending on the earnings per share achieved during the fiscal years of 2014 through 2017, an adjustment on the acquisition price may be triggered.
On the fourth anniversary of the closing date of the acquisition, if the Guaranteed Price per share is higher than the Average Price per share, then an adjustment shall be made, pursuant to which additional common shares of CUII (the “Additional CUII Shares”) shall be issued to the Selling Shareholder according to the formula below:
Additional CUII Shares = [(Guaranteed Price per share – Average Price per share) X Number of CUII Shares held by the Selling Shareholder] / Average Price per share Guaranteed Price per share = [(Average earnings per share of Genius Broker actually distributed for the fiscal years of 2014, 2015, 2016 and 2017) X 10 + (the aggregate earnings per share of Genius Broker actually distributed for the fiscal years of 2014, 2015, 2016 and 2017)] X 2 / 30 Average Price per share equals to the average closing trading prices of CUII during the full preceding year.
If AHFL or CUII intends to transfer, directly or indirectly, of any shares of Genius Broker, it shall notify the Selling Shareholder, of the intended price and number of shares to be sold in prior written notice, and the Selling Shareholder may, within 30 days of the preceding notice, notify AHFL or CUII to purchase such shares at equal price. Failure to do so, AHFL or CUII is free to Transfer such shares.
Mr. LI CHWAN HAU, is the sole shareholder of Genius Holdings Financial Limited and a director and shareholder of CUII.
The Acquisition Agreement is included as Exhibit 10.1 to this Current Report on Form 8-K. The foregoing description of the acquisition is qualified in its entirety by reference to the complete text of the Acquisition Agreement, which is filed as Exhibit 10.1 hereto, and incorporated, herein by reference.
Deal Flow
Item 3.02 Unregistered Sales of Equity Securities.
Pursuant to the terms of the Acquisition Agreement CUII is issuing a Put Option to purchase 352,166 shares of CUII common stock in exchange for the AHFL shares issued to the Selling Shareholder pursuant to the terms of the Acquisition Agreement. The issuance of the Put Option was made pursuant to an exemption from registration in Regulation S under the Securities Act of 1933, as amended.
Deal Flow
Item 1.01. Entry into Material Definitive Agreement
On January 14, 2015, Action Holdings Financial Limited (“AHFL”), a wholly-owned British Virgin Islands subsidiary of China United Insurance Service, Inc. (the “Company” or “CUIS”), entered into a Loan Agreement (the “Loan Agreement”) with Law Insurance Broker Co., Ltd. (“Law Insurance”). Law Insurance is a wholly owned Taiwan subsidiary of Law Enterprise Co., Ltd. (“Law Enterprise”). Law Enterprise is a 65.95% owned Taiwan subsidiary of AHFL.
Pursuant to the Loan Agreement, Law Insurance will provide a loan in the amount of $632,491 (NTD20 million) (the “Loan”) to AHFL. The term for the Loan shall be from January 14, 2015 to December 31, 2015 with a fixed yearly interest rate at 1.5%. The principal amount of the Loan together with the accrued interest shall be paid in one lump sum prior to December 31, 2015. In the event that AHFL fails to repay the principal amount of the Loan together with the accrued interest on due time, AHFL shall pay twice of the fixed rate as the penalty to Law Insurance.
Deal Flow
Item 1.01. Entry into Material Definitive Agreement
On December 23, 2014, Action Holdings Financial Limited (“AHFL”), a wholly-owned British Virgin Islands subsidiary of China United Insurance Service, Inc. (the “Company” or “CUIS”), entered into a Loan Agreement (the “Loan Agreement”) with Lee Shu-Fen (“Ms. Lee”), the Series A Director of the Company.
Pursuant to the Loan Agreement, Ms. Lee will provide a loan in the amount of $314,942 (NTD10 million) (the “Loan”) to AHFL. The term for the Loan shall be from December 23, 2014 to December 22, 2015 with a fixed interest rate at 1.5%. The principal amount of the Loan together with the accrued interest shall be paid in one lump sum before December 22, 2015.
Comments & Business Outlook
Three Months Ended September 30,
Nine Months Ended September 30,
2014
2013
2014
2013
Revenues
$
9,795,058
$
7,768,329
$
30,989,923
$
29,235,793
Cost of revenue
5,984,679
6,003,344
19,683,245
17,539,790
Gross profit
3,810,379
1,764,985
11,306,678
11,696,003
Operating expenses:
Selling
1,703,365
1,045,617
2,444,031
1,772,004
General and administrative
3,114,005
2,325,135
8,433,578
6,763,354
Total operating expenses
4,817,370
3,370,752
10,877,609
8,535,358
Income from operations
(1,006,991
)
(1,605,767
)
429,069
3,160,645
Other income:
Interest income
54,001
32,096
147,954
80,161
Other - net
158,359
116,656
244,260
383,173
Total other income
212,360
148,752
392,214
463,334
Income before income taxes
(794,631
)
(1,457,015
)
821,283
3,623,979
Income tax expense
(12,753
)
(57,067
)
1,171,602
731,192
Net income (loss)
(781,878
)
(1,399,948
)
(350,319
)
2,892,787
Net income attributable to the noncontrolling interests
27,876
383,072
(524,522
)
(1,214,136
)
Net income (loss) attributable to parent's shareholders
(754,002
)
(1,016,876
)
(874,841
)
1,678,651
Other comprehensive items
Foreign currency translation gain (loss)
(74,965
)
37,439
(111,894
)
(17,278
)
Other comprehensive income(loss)
-
(8
)
-
(183
)
Attributable to parent's shareholders
(74,965
)
37,431
(111,894
)
(17,461
)
Other comprehensive items attributable to noncontrolling interest
120,695
(77,535
)
87,224
(76,103
)
Comprehensive income (loss) attributable to
parent's shareholders
$
(828,967
)
$
(979,445
)
$
(986,735
)
$
1,661,190
Comprehensive income (loss) attributable to
noncontrolling interest
$
148,571
$
305,537
$
(437,298
)
$
(1,290,239
)
Weighted average shares outstanding:
Basic and diluted
29,100,503
29,100,503
29,100,503
29,100,503
Income (loss) per share:
Basic and diluted
$
(0.026
)
$
(0.035
)
$
(0.030
)
$
0.058
Management Discussion and Analysis
Revenues
As a distributor of insurance products, we derive our revenue primarily from commissions and fees paid by insurance companies, typically calculated as a percentage of premiums paid by our customers to the insurance companies. We generate revenue primarily through our sales force, which consists of individual sales agents in our distribution and service network. The acquisition of AHFL enabled us to reach the untapped market in Taiwan.
During the three months ended September 30, 2014, 92.36% and 7.64% of our revenues in our consolidated financial statements were derived from our Taiwan Subsidiaries and CAE, respectively. For the three months ended September 30, 2013, 92.91% and 7.09% of our revenues in our consolidated financial statements were derived from our Taiwan subsidiaries and CAE, respectively.
Total revenues increased by $2,026,729, or 26%, from $7,768,329 for the three months ended September 30, 2013 to $9,795,058 for the three months ended September 30, 2014, which is due to the increase of the revenue in Taiwan for following reasons, a) After we entered into a Strategic Alliance Agreement with AIA International Limited Taiwan Branch (“AIATW”) in June 2013, the sales of insurance products of AIATW increased stably.
b) The sales of the products of Shin Kong Life Insurance Co., Ltd. continue to increase because sub-agents were stimulated by the notice that the Company will stop selling those products from August 2014. In addition, according to the new regulation pronounced by the Financial Supervisory Commission, R.O.C.(Taiwan), the Company has to stop selling four insurance products of Farglory Life Insurance Co.,Ltd. and eight insurance products of Fubon Life Insurance Co., Ltd. from the middle of September 2014. Similarly, the sales of sub-agents for these products increased in July and August.
Comments & Business Outlook
Item 1.01. Entry into Material Definitive Agreement
On September 30, 2014, Action Holdings Financial Limited (“AHFL”), a wholly-owned British Virgin Islands subsidiary of China United Insurance Service, Inc. (the “Company” or “CUIS”), entered into an Amendment to Strategic Alliance Agreement (the “Amendment”) with AIA International Limited Taiwan Branch (“AIATW”).
The purpose of the Strategic Alliance Agreement is to promote life insurance products provided by AIATW within the territory of Taiwan by insurance agency companies or insurance brokerage companies affiliated with AHFL or CUIS. Pursuant to the Alliance Agreement, AHFL shall encourage any insurance agency company and insurance brokerage company owned by itself or the Company (the “Appointed Broker/Agent”), and duly approved by the competent government authorities of Taiwan, to execute the related insurance brokerage or agent agreements with AIATW and assist such Appointed Broker/Agent to negotiate the insurance contracts to be underwritten by the insurance company underlying such executed brokerage or agent agreements with AIATW.
Pursuant to the Amendment, the expiration date of the Strategic Alliance Agreement has been extended from May 31, 2018 to December 31, 2020. In addition, both AHFL and AIATW agree to adjust certain terms and conditions set forth in the Strategic Alliance Agreement, including the downward adjustment of the performance targets as well as the mechanism and formula calculating the Execution Fee to be refunded, if any.
In addition, AHFL agreed to refrain from selling, pledging or transferring more than 30% of its holdings in Law Broker. If such sale of Law Broker securities does take place, AIATW may unilaterally terminate the Strategic Alliance Agreement. Upon such a termination, the Execution Fee shall be recalculated based on formulas provided in the Alliance Agreement.
Deal Flow
Item 1.01. Entry into a Material Definitive Agreement
On September 15, 2014, Law Enterprise Co., Ltd. (“Law Enterprise”) and Action Holdings Financial Limited Taiwan Branch (“AHFL”) entered into a short-term loan agreement, pursuant to which, Law Enterprise will provide AHFL a short loan in the amount of $330,502 (NTD10 million). The term of the loan is from September 15, 2014 to December 31, 2014, with a fixed interest rate at 1.5%. The principal amount of the loan together with the accrued interest shall be paid in one lump sum on December 31, 2014.
AHFL is a wholly owned subsidiary of China United Insurance Service, Inc. and holds 65.95% of the issued and outstanding shares of Law Enterprise.
Comments & Business Outlook
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME / (LOSS)
Three Months Ended June 30,
Six Months Ended June 30,
2014
2013
2014
2013
Revenues
$
12,333,142
$
9,890,661
$
21,194,865
$
21,467,464
Cost of revenue
8,330,341
6,261,417
13,698,566
11,536,446
Gross profit
4,002,801
3,629,244
7,496,299
9,931,018
Operating expenses:
Selling
437,677
457,576
740,666
726,387
General and administrative
2,906,328
2,348,538
5,319,573
4,438,219
Total operating expenses
3,344,005
2,806,114
6,060,239
5,164,606
Income from operations
658,796
823,130
1,436,060
4,766,412
Other income:
Interest income
50,369
22,352
93,953
48,065
Other - net
12,957
124,409
85,901
266,516
Total other income
63,326
146,761
179,854
314,581
Income before income taxes
722,122
969,891
1,615,914
5,080,993
Income tax expense
940,755
240,444
1,184,355
788,259
Net income (loss)
(218,633
)
729,447
431,559
4,292,734
Net income attributable to the noncontrolling interests
(157,602
)
(380,109
)
(552,396
)
(1,597,208
)
Net income (loss) attributable to parent's shareholders
(376,235
)
349,338
(120,837
)
2,695,526
Other comprehensive items
Foreign currency translation gain (loss)
60,081
(31,812
)
(36,929
)
(54,718
)
Other comprehensive income(loss)
-
384
-
(175
)
Attributable to parent's shareholders
60,081
(31,428
)
(36,929
)
(54,893
)
Other comprehensive items attributable to noncontrolling interest
(113,873
)
(21,512
)
(33,471
)
1,432
Comprehensive income (loss) attributable to parent's shareholders
$
(316,154
)
$
317,910
$
(157,766
)
$
2,640,633
Comprehensive income (loss) attributable to noncontrolling interest
$
(271,475
)
$
(401,621
)
$
(585,867
)
$
(1,595,776
)
Weighted average shares outstanding:
Basic and diluted
29,100,503
29,100,503
29,100,503
29,100,503
Income (loss) per share:
Basic and diluted
$
(0.013
)
$
0.012
$
(0.004
)
$
0.093
Management Discussion and Analysis
Total revenues increased by $2,442,481, or 25%, from $9,890,661 for the three months ended June 30, 2013 to $12,333,142 for the three months ended June 30, 2014, which is due to the increase of the revenue in Taiwan for following reasons,
As we disclosed in the last quarter, all principle insurance companies, for which we act as an insurance agent, approved and granted us the persistency awards, which amounted to approximately $2.4 million (NT$70 million), in the three months ended March 31, 2013; however, in the three months ended March 31, 2014, only $0.6 million (NT$18 million), or 33% of the total awards, were granted. The remaining awards of $1.2 million (NT$37 million), or 67% of the total awards, were granted to us in May 2014. Therefore, compared to the three months ended June 30, 2013, the revenue due to persistency awards increased for the three months ended June 30, 2014.
After we entered into a Strategic Alliance Agreement with AIA International Limited Taiwan Branch (“AIATW”) in June 2013, the sales of insurance products of AIATW increased stably.
The sales of the products of Shin Kong Life Insurance Co., Ltd. increased in May and June 2014 because sub-agents were stimulated by the notice that the commission ratio of those products would be reduced from June 2014.
Comments & Business Outlook
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME / (LOSS)
Six Months Ended December 31,
Years Ended June 30,
2013
2013
2012
Revenues
$
23,689,110
$
37,842,246
$
3,153,776
Cost of revenue
16,040,303
24,309,716
2,363,581
Gross profit
7,648,807
13,532,530
790,195
Operating expenses:
Selling
2,010,744
962,958
1,166,841
General and administrative
5,948,516
9,062,828
Impairment of goodwill
122,250
Income (loss) from operations
(432,703
)
3,506,744
(376,646
)
Other income (expenses):
Interest income
108,654
83,682
4,756
Bargain gain on purchase of subsidiaries
-
5,280,042
-
Other - net
(652,079
)
432,064
(18
)
Total other income (expenses)
(543,425
)
5,795,788
4,738
Income (loss) before income taxes
(976,128
)
9,302,532
(371,908
)
Income tax expense
143,660
698,508
(268,440
)
Net income (loss)
(1,119,788
)
8,604,024
(103,468
)
Net income attributable to the noncontrolling interests
(32,190
)
(1,386,556
)
Net income (loss) attributable to parent's shareholders
(1,151,978
)
7,217,468
(103,468
)
Other comprehensive items
Foreign currency translation gain (loss)
(38,218
)
13,195
13,972
Other comprehensive income(loss)
4,001
384
Attributable to parent's shareholders
(34,217
)
13,579
13,972
Other comprehensive items attributable to noncontrolling interest
16,557
(1,630
)
Comprehensive income (loss) attributable to parent's shareholders
$
(1,186,195
)
$
7,231,047
$
(89,496
)
Comprehensive income (loss) attributable to noncontrolling interest
$
(15,633
)
$
(1,388,186
)
$
Weighted average shares outstanding:
Basic and diluted
29,100,503
27,593,654
20,100,503
Income (loss) per share:
Basic and diluted
$
(0.04
)
$
0.26
$
0.00
Management Discussion and Analysis
Overview of the years ended June 30, 2013 and 2012
Revenues
Revenues increased by $34,688,470, or 1,100%, from $3,153,776 for the year ended June 30 2012 to $37,842,246 for the year ended June 30, 2013. The increase in revenues was mainly attributable to our new operations in Taiwan after August 24, 2012 that occurred as a result of our acquisition of AHFL.
As a distributor of insurance products, we derive our revenue primarily from commissions and fees paid by insurance companies, typically calculated as a percentage of premiums paid by our customers to the insurance companies. We generate revenue primarily through our sales force, which consists of individual sales agents in our distribution and service network. The acquisition of AHFL enabled us to reach the untapped market in Taiwan and increased our sub agent numbers from 1,098 as of June 30, 2012 to 2,691 as of June 30, 2013.
Comments & Business Outlook
ZHENGZHOU, China and TAIPEI, Taiwan , Jan. 30, 2014 /PRNewswire/ -- China United Insurance Service, Inc. (CUIS) (OTCBB: CUII), a leading insurance intermediary company with operations in the People's Republic of China and Taiwan , today announced that its board of directors has approved a change in the company's fiscal year end to December 31 from June 30. The change to a calendar year-end from a fiscal year-end better aligns the company's financial reporting cycle with its business activities and budgeting process.
CUIS' 2014 fiscal year commenced on January 1, 2014 and the company will begin reporting quarterly results on a calendar-year basis. CUIS has filed an Annual Report on Form 10-K for the year ended June 30, 2013 and the company will report results for the transitional period of July 1 to December 31, 2013.
Auditor trail
Item 4.01
Changes in Registrant's Certifying Accountant
(a)
Dismissal of independent registered public accounting firm
On January 17, 2014, China United Insurance Service, Inc. (the “Company”) dismissed Goldman Kurland and Mohidin, LLP (“GKM”), as the Company’s independent registered public accounting firm.
The Company’s Board of Directors approved GKM’s dismissal on January 17, 2014.
The reports of GKM on the Company’s financial statements as of, and for, the years ended June 30, 2013 and 2012 did not contain any adverse opinion or disclaimer of opinion, nor were any such reports qualified or modified as to uncertainty, audit scope or accounting principles.
During the recent fiscal years ended June 30, 2013 and June 30, 2012, and during the subsequent interim periods through January 17, 2014, there have been no (i) disagreements between the Company and GKM on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to GKM’s satisfaction would have caused GKM to make reference to the subject matter of the disagreement(s) in connection with its report, or (ii) reportable events defined in Item 304(a)(1)(v) of Regulation S-K.
The Company has provided GKM with a copy of the above disclosure and requested that GKM furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements, and, if not, stating the respects in which it does not agree. A copy of GKM’s letter, dated January 29, 2014, is filed as Exhibit 16.1 to this Current Report on Form 8-K.
(b)
New independent registered public accounting firm
On January 17, 2014, the Company engaged Simon & Edward LLP (“Simon”) as the Company’s new independent registered public accounting firm. The Board of Directors approved the engagement of Simon on January 17, 2014.
During the recent fiscal years ended June 30, 2013 and June 30, 2012 and during the subsequent interim periods through January 17, 2014, the Company did not consult with Simon regarding (i) the application of accounting principles to any specified transaction, either completed or proposed, (ii) the type of audit opinion that might be rendered on the Company’s financial statements, or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv)) or a reportable event (as defined in Item 304(a)(1)(v)).
Comments & Business Outlook
First Quarter 2014 Financial Results
Revenues of $7.8 million; gross profit of $1.6 million
Net loss attributable to CUIS' shareholders was $1.0 million, or $0.03 per share vs. last years $ 0.00. Comparative results for the prior-year period are not meaningful because of the acquisition of AHFL
"Results for the first quarter were impacted primarily by expenses associated with completing the acquisition of AHFL," said Chung-Mei Lo, Chief Executive Officer. "We are confident that the transaction, which helped to establish a foundation for future growth, along with our recently formed AIA International Limited Taiwan Branch partnership, will position the company for the long-term and facilitate the penetration of new markets and services.
"We are continuing to explore growth opportunities, including new partnerships with large insurance companies, to expand our offerings and our leadership position as one of the preeminent insurance intermediary companies in the region. We are also seeking additional M&A opportunities to further strengthen our organization and gain market share in Taiwan," Mr. Lo added.
Comments & Business Outlook
ZHENGZHOU, China and TAIPEI, Taiwan, Oct. 17, 2013 /PRNewswire / -- China United Insurance Service, Inc. ("CUIS") (OTCBB: CUII), a leading insurance intermediary company with operations in the People's Republic of China and Taiwan, today announced sharply improved pro-forma financial results for its fiscal year ended June 30, 2013.
Financial Highlights for Fiscal 2013 (Pro Forma):
Revenues rose 7.68% to $44.1 million from $41.0 million a year ago.
Gross profit increased 24.9% to $15.6 million from $12.5 million last year.
Operating income advanced 31.7% to $4.4 million from $3.4 million for fiscal 2012.
In August 2012, CUIS acquired Action Holding Financial Limited ("AHFL"), the holding company of Taiwan-based Law Insurance Broker Company. AHFL, which owns 69.95% of Taiwan-based Law Insurance Broker Company, is a dominant brokerage and insurance agency service business with 21 branches, three training centers and nearly 2,000 brokers in Taiwan.
Pro-forma results were derived from the combined income statements for the twelve months ended June 30, 2013 and 2012 of AHFL and CUIS. Pro-forma consolidated statements of operations and other comprehensive income results are attached to this release.
For the fiscal fourth quarter from April 1 to June 30, 2013, the company reported revenues of $9.9 million; gross profit of $3.6 million; operating income of $823,000; and net income attributable to CUIS's shareholders of $318,000, or $0.01 per diluted share. Comparative results for the prior-year period are not meaningful because of the acquisition of AHFL.
For the 2013 fiscal year, the company reported revenues of $37.8 million; gross profit of $13.5 million; operating income of $3.5 million; and net income attributable to CUIS's shareholders of $7.2 million, including a bargain gain on the purchase of AHFL of $5.3 million, or $0.26 per diluted share.
On June 10, 2013, AHFL entered into a strategic partnership with AIA International Limited Taiwan Branch ("AIATW") to promote life insurance products provided by AIATW within Taiwan by insurance agency companies or insurance brokerage companies affiliated with AHFL or CUIS.
"Our financial results continue to reflect the successful acquisition of AHFL, which helped the company establish a foundation for future growth," said Chung-Mei Lo, Chief Executive Officer. "The new strategic partnership AIATW further strengthens our competitive position in the growing Taiwanese insurance market, allowing us to better serve our clients with the tailored products they seek. In recognition of our high levels of customer service and satisfaction, we were awarded the 2013 Taiwan Insurance Excellence Award, one of the most prestigious insurance industry awards granted in the country.
"We remain committed to growing into one of the top insurance enterprises in Asia and are optimistic about our future prospects," said Mr. Lo.
CUIS' strategic growth objectives include continuing its M&A activities, leveraging Taiwan's operational strength and enhancing efficiencies in China, along with recruiting motivated insurance agents, improving service quality, seeking good insurance products in the market, and investing in educating its agents to help customers make well-informed decisions and retentions.
Joint Venture
ZHENGZHOU, China and TAIPEI, Taiwan , July 29, 2013 /PRNewswire / -- China United Insurance Service, Inc. ("CUIS") (OTCBB:CUII), a leading insurance brokerage company with operations in Taiwan and the People's Republic of China , today announced one of its subsidiaries has entered into a strategic partnership with AIA International Limited Taiwan Branch ("AIATW").
AIATW is an entity of AIA Group Limited that has operations in 16 markets in the Asia-Pacific region, with total assets of approximately U.S. $134 billion. AIA serves the holders of more than 25 million individual policies and over 13 million participating members of group insurance organizations.
"The strategic partnership with AIATW further strengthens our leading position in the growing insurance market in Taiwan ," saidChung-Mei Lo , CEO of CUIS. "Adding AIA's products to our platform will allow us to even better satisfy our clients' needs for tailored products, along with recognizing customers' increasing demands for individualized insurance plans."
"Taiwan is one of the major insurance markets in the Asia-Pacific region," said Tan, Kar-Hor, CEO of AIATW. "This agreement allows us to quickly enlarge our distribution reach, while also reinforcing our competitive position in the market."
Comments & Business Outlook
ZHENGZHOU, China and TAIPEI, Taiwan, May 23, 2013 /PRNewswire / -- China United Insurance Service, Inc. ("CUIS") (OTCBB: CUII), a leading insurance intermediary company with operations in the People's Republic of China and Taiwan, today announced sharply improved pro-forma financial results for its fiscal nine-months ended March 31, 2013.
Financial Highlights for Year-To-Date Fiscal 2013 (Pro Forma):
Revenues rose 40.6% to $34.2 million from $24.3 million a year ago.
Gross profit increased 75.2% to $11.9 million from $6.8 million last year.
Operating income advanced 136.5% to $3.8 million from $1.6 million for the first nine months of fiscal 2012.
Net income attributable to CUIS's shareholders rose more than three-fold to $7.6 million, including a gain on acquisition of $5.3 million, or $0.29 per diluted share, from $2.5 million, or $0.09 per diluted share, for the corresponding prior year period.
In August 2012, CUIS acquired Action Holding Financial Limited ("AHFL"), the holding company of Taiwan-based Law Insurance Broker Company. AHFL, which owns 69.95% of Taiwan-based Law Insurance Broker Company, is a dominant brokerage and insurance agency service business with 21 branches, three training centers and nearly 2,000 brokers in Taiwan.
Pro-forma results were derived from the combined income statements for the nine months ended March 31, 2013 and 2012 of AHFL and CUIS. Pro-forma consolidated statements of operations and other comprehensive income results are attached to this release.
For the fiscal third quarter from January 1 to March 31, 2013, the company reported revenues of $11.9 million; gross profit of $9.9 million; operating income of $1.3 million; and net income attributable to CUIS's shareholders was $668,000, or $0.02 per diluted share. Comparative results for the prior year period are not meaningful because of the acquisition of AHFL.
"Our positive results reflect the successful integration of our newly acquired Taiwan business into China United Insurance Service, representing an important milestone that is paving the way for continued growth," said Chung-Mei Lo, Chief Executive Officer. "This achievement is a direct result of the superior team work of our employees.
"We are focused on becoming one of the top financial insurance enterprises in Asia, and we are well on our way to accomplishing that goal," added Mr. Lo. "Given our current visibility, we expect to continue our strong growth trajectory, with revenue growth in the range of $17 to $18 million, or roughly 50 percent, in the fiscal fourth quarter."
CUIS' strategic growth objectives include continuing its M&A activities, leveraging Taiwan's operational strength and enhancing efficiencies in China, along with recruiting motivated insurance agents, improving service quality, seeking good insurance products in the market, and investing in educating its agents to help customers make well-informed decisions and retentions
Comments & Business Outlook
ZHENGZHOU, China and TAIPEI, Taiwan , April 30, 2013 /PRNewswire / -- China United Insurance Service, Inc. ("CUIS") (OTCBB: CUII), a leading insurance intermediary company with operations in Taiwan and the People's Republic of China , today outlined recent developments and highlighted strategic objectives. The company also unveiled a new corporate and investor relations website, which can be accessed at http://cuis.asia/, and is designed to enhance the quality and availability of information to investors.
"China United Insurance Service is committed to offering its clients tailored insurance solutions supported through highly trained dedicated agents. Our vision is clear � to become one of the largest financial insurance service platforms in Asia , and today I am happy to report that we are well on our way," said Chung-Mei Lo , CEO. "In Taiwan , where merger activity has heated up as a result of recent legislation, we are well positioned as the consolidator of choice. At the same time, in China , we are rapidly expanding our presence to better serve consumer demand for insurance. We are committed to providing our agents with the very best training to ensure superior service."
China United Insurance Service's strategic objectives include:
Continuing M&A activity in the Taiwan market with the goal of more than doubling the size of operations in 2013;
Building presence in China through both organic growth and acquisition of other brokerage firms;
Leveraging strength in Taiwan markets to improve efficiencies in China ; and
Investing in education of agents to help customers make well-informed decisions;
"Our goal is to become the top financial insurance enterprises in Asia ," Mr. Lo added. "The talent and expertise of our team is well poised to execute our strategy and deliver value for CUIS' shareholders and customers alike."
To enhance communication with the investor community, the company has retained PondelWilkinson Inc., a leading investor relations and strategic public relations firm in the United States .
Form 10 RTO
On December 22, 2011 China United Insurance became a public entity after its
an S-1 filed on May 13, 2011 became effective whereby shareholders registered stock. The company was originally a shell formed to purchase operating companies.
Company Snapshot:
provides insurance agency services in the PRC
Post Merger Share Calculation :
20,000,000: Pre S-1 offering
0: Newly issued shares of Common Stock
GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions: 20,000,000
Financial Snapshot at time of the S-1 Filing : June Year End
Summary of Operations - Pro Forma
Year Ended
June 30, 2011
Year Ended
June 30, 2010
Three Months Ended
September 1 0, 2010
(Unaudited Pro
Forma)
(Unaudited Pro
Forma)
(Unaudited Pro
Forma)
Net revenue
$
2,968,482
$
2,154,629
$
541,311
Net loss
$
(215,181
)
$
(150,738
)
$
(115,199
)
Net loss per common share (basic and diluted)
$
(0.01
)
$
(0.01
)
$
(0.01
)
Weighted average common shares outstanding, basic and diluted
20,000,000
20,000,000
20,000,000
Statement of Financial Position
As of
June 30, 2011
As of
June 30, 2010
As of
September 30,
2011
Cash and cash equivalents
$
1,297,213
$
17,071
$
1,172,754
Total assets
$
1,771,432
$
135,957
$
1,649,015
Current Liabilities
$
982,772
$
1,439,569
$
1,149,329
Long-term Liabilities
$
-
$
-
$
-
Stockholders’ equity / (deficit)
$
788,660
$
(1,303,612
)
$
499,686
Liquidity Requirements
On going forward basis, the Group’s primary requirements for cash over the next 12 months consist of:
providing insurance agency services to its existing clients in its existing branches;
developing new clients; l promoting sales activities;
opening more branches and offices in China;
expanding its business scale in China, through mergers & acquisitions.
The Group anticipates that its current operating activities will not enable it to meet its anticipated cash requirements for the next 12 months. Besides continually relying on its internally generated funds, the Group also plans to raise funding through loans and equity to support its operational cash needs.
Acquisition Activity
On August 24, 2012, the Company acquired all of the issued and outstanding shares of AHFL, a limited liability company (“LLC”) incorporated under the laws of British Virgin Islands on April 30, 2012, together with its subsidiaries in Taiwan. Subsequent to the acquisition, AHFL becomes a 100% subsidiary of the Company.
Law Enterprise acts as a holding company of its operating subsidiaries in Taiwan. Law Broker primarily engages in insurance brokerage and insurance agency service business across Taiwan, while Law Management and Law Agent are not in active operation. We operate our Taiwan business primarily through Law Broker.
Pursuant to the provisions of the Acquisition Agreement and in exchange for all of the issued and outstanding shares of AHFL, the Company will (i) issue eight million shares of common stock of the Company to the shareholders of AHFL; (ii) issue two million shares of common stock of the Company to certain employees of Dinglv Broker; (iii) create an employee stock option pool, consisting of available options, exercisable for up to two million shares of common stock of the Company; and (iv) pay NT$15 million (US$500,708) and NT$7.5 million (UD$250,354) in cash in two installments, subject to terms and conditions therein. “NT$” shall mean the official currency of Taiwan.
The total consideration to be paid by the Company for the shares of AHFL was established by negotiation by the parties. Upon the completion of the acquisition, the former shareholders of AHFL and certain employees of Dinglv Broker will receive a total of 10,000,000 shares of the Company. This will constitute 34.36% of the common stock and 25.58% of the voting power of the Company. Assuming the exercise of all of the options to be issued from the employee option pool contemplated in the Acquisition Agreement, the employees of Dinglv Broker will receive an additional 2,000,000 shares which will increase the total ownership of the former shareholders of AHFL and certain employees of Dinglv Broker by a total of 12,000,000 shares of the Company. This will constitute 38.58% of the common stock and 29.2% of the voting power of the Company, based on the number of shares currently outstanding and contemplated by the Acquisition Agreement.
Related Party Issues
Comments & Business Outlook
CHINA UNITED INSURANCE SERVICE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Year Ended June 30
2012
2011
Revenues
$
3,153,776
$
2,740,519
Cost of revenue
2,363,581
1,897,359
Gross profit
790,195
843,160
Operating expenses:
General and administrative
1,166,841
1,095,869
Loss from operations
(376,646
)
(252,709
)
Other income / (expenses)
Interest income
4,756
12,760
Gain on acquisition of subsidiary
-
267,156
Other - net
(18
)
(2,753
)
4,738
277,163
Income / (loss) before income taxes
(371,908
)
24,454
Income tax expense (benefit)
(268,440
)
354,441
Net loss
(103,468
)
(329,987
)
Other comprehensive income
13,972
1,619
Comprehensive loss
$
(89,496
)
$
(328,368
)
Weighted average shares outstanding:
Basic and diluted
20,100,503
20,000,000
Loss per share:
Basic and diluted
(0.00
)
(0.02
)