Our subsidiaries in Taiwan are governed by the Income Tax Law of Taiwan, and are generally subject to tax at 17% on income reported in the statutory financial statements after appropriate adjustments. Also, the Income Tax Law of Taiwan provides that a company is taxed an additional 10% on any undistributed earnings to its shareholders.
On January 17, 2011, after approved by the Board of Directors and stockholders of both Companies, the CU WFOE entered a series of agreements (“VIE Agreement”), including Exclusive Business Cooperation Agreement, Option Agreement, and Share Pledge Agreement with Law Anhou Insurance Agency Co., Limited (“Anhou”, formerly known as Zhengzhou Anhou Insurance Agency Co., Limited or Henan Law Anhou Insurance Agency Co., Limited) in Nanjing City, PRC. These agreements established a Variable Interest Entity (“VIE”) and Primary Beneficiary relationship between the two entities.
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.
Accounts receivable includes commission receivables and is 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, 2017 and 2016.
· Exclusive Business Cooperation Agreement (“EBCA” or the “Agreement”) through which: (1) CU WFOE has the right to provide Anhou with complete technical support, business support and related consulting services during the term of this Agreement; (2) Anhou agrees to accept all the consultations and services provided by CU WFOE. Anhou further agrees that unless with CU WFOE’s prior written consent, during the term of this Agreement, Anhou shall not directly or indirectly accept the same or any similar consultations and/or services provided by any third party and shall not establish similar cooperation relationship with any third party regarding the matters contemplated by this Agreement; (3) Anhou shall pay CU WFOE fees equal to 90% of the net income of Anhou, and the payment is quarterly, and (4) CU WFOE retains all exclusive and proprietary rights and interests in all rights, ownership, interests and intellectual properties arising out of or created during the performance of this Agreement.
Goodwill arose from the acquisition of PFAL in April 2014. The fair value of the net identifiable assets of PFAL at acquisition date was $324,871, and 51% of which was $165,684. The Company recorded $31,651 excess of purchase price over the fair value of assets acquired and liabilities assumed as goodwill. No intangible assets were identified as of the acquisition date. As of December 31, 2017 and 2016, there were no indications of the impairment of the goodwill.
The Company’s short-term loans consisted of the following as of December 31, 2017 and 2016:
· Liquidation. In the event of a voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Registrant, the holders of common stock and the holders of Series A Stock shall be entitled to share equally on a per share basis, in all assets of the Registrant of whatever kind available for distribution.
The following table reconciles the US statutory rates to the Company’s effective tax rate for the year ended December 31, 2017, 2016 and 2015:
Convertible bonds - The Company determined the fair value of the convertible bonds is 80% of the average closing trading price for the ten (10) business days immediately prior to the conversion date.