On February 13, 2015, CUIS and AHFL entered into an acquisition agreement with the sole shareholder of GHFL, Mr. ChwanHau Li, under the terms of which the Company issued 352,166 fully paid and non-assessable shares of AHFL Common Stock and granted an option to purchase 352,166 shares of common stock of CUIS (the “Option”), in exchange for all of the issued and outstanding 704,333 shares of common stock of GHFL. On February 13, 2015, the acquisition was completed; the selling shareholder transferred 100% of the shares in GHFL to AHFL. The Option was exercised by the selling shareholder on March 31, 2015. The GHFL Acquisition was accounted for as the acquisition of a business in the Company’s consolidated financial statements as of and for the year ended December 31, 2015 and 2016, but upon reflection and further analysis, the Company has come to the conclusion that it would be more accurately accounted for as an asset acquisition. As a result of the restatement of these financial statements. The effect of restatement reduced our goodwill in each year was reduced from $2,071,491 to $31,651. Please refer to Note 27 of the Notes to the Consolidated Financial Statements for additional information.
During the year ended December 31, 2016, 87.52%, 12.10% and 0.38% of our revenue in our audited consolidated financial statements were derived from Taiwan, Consolidated Affiliated Entities in PRC and Hong Kong, respectively. During the year ended December 31, 2015, 88.45%, 10.71% and 0.84% of our revenue in our restated audited consolidated financial statements were derived from Taiwan, PRC and Hong Kong, respectively. Total revenue increased by $14,910,240, or over 27%, from $55,023,766, as restated, for the year ended December 31, 2015 to $69,934,006 for the year ended December 31, 2016, which was mainly due to the increase of the revenue in Taiwan and PRC for the following reasons:
The Company’s revenue is from insurance agency and brokerage services. The Company, through its subsidiaries and VIEs, sells insurance products to customers, and obtains commissions from the respective insurance companies according to the terms of each insurance company service agreement. The Company recognizes revenue when the following have occurred: persuasive evidence of an agreement between the insurance company and insured exists, services were provided, the fee for such services is fixed or determinable and collectability of the fee is reasonably assured. Insurance agency and brokerage services are considered complete and revenue is recognized, when an insurance policy becomes effective. The customers are entitled to a 10-day cancellation period from the date of issuance of the policies, in which customers can cancel the contract without any fees. The Company is notified of such cancellations by the insurance companies. For the fiscal years ended December 31, 2017, 2016 and 2015, policy cancellations were $227,901, $340,086 and $291,325, respectively.
The Company pays commissions to its sales professionals when an insurance product is sold by the sales professionals. The Company recognizes commission revenue from insurance companies on a gross basis, and the commissions paid to its sales professionals are recognized as cost of revenue.
a. The power, through voting rights or similar rights, to direct the activities of a legal entity that most significantly impact the entity’s economic performance
On January 17, 2011, CU WFOE and Anhou and Anhou Original Shareholders entered into the VIE Agreements (the “First VIE Agreements”) which included:
The Company’s long-term loans consisted of the following as of December 31, 2017 and 2016:
On June 10, 2013, AHFL entered into a Strategic Alliance Agreement (the “Alliance Agreement”) with AIATW, the purpose to which is to promote life insurance products provided by AIATW within Taiwan by insurance agencies or brokerage companies affiliated with AHFL or CUIS. 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 paid AHFL an execution fee approximately $8,326,700 (NTD250,000,000, including the tax of NTD11,904,762, the “Execution Fee”), which is to be recorded as revenue upon fulfilling sales targets and the 13-month persistency ratio, as defined, over the next five years. The Execution Fee may be required to be recalculated if certain performance targets are not met by AHFL.