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 accounted for the cost method. 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 in the accompanying consolidated balance sheets.
The gross profit for the year ended December 31, 2018 decreased by $(694,415) or 2%, to $29,353,022 compared with $30,047,437 for the year ended December 31, 2017. The gross profit margin decreased to 37% for the year ended December 31, 2018 from 41% for the year ended December 31, 2017. The decrease was a result of increased commissions paid to our sales professionals under the new commission program.
For the year ended December 31, 2018, income tax expense was $3,610,172, an increase of $96,455, or 3%, compared with $3,513,717 for the year ended December 31, 2017. The Company had increased income tax expense in the year ended December 31, 2018, despite having lower earnings before income taxes in comparison with the year ended December 31, 2017 due to the one-time tax on accumulated earnings of foreign subsidiaries imposed by the 2017 Tax Cuts and Jobs Act.
Leases, where substantially all the rewards and risks of ownership of assets remain with the leasing company, that do not meet the capitalization criteria of FASB ASC Topic 840 “Leases,” are accounted for as operating leases.
On December 14, 2018, the Company purchased a commercial paper of $654,006 (NTD 19,989,649) with a maturity of 25 days and 0.70% interest rate annum.
On May 15, 2016, Anhou entered into a loan agreement (“Loan A”) with an individual third party. The loan agreement provided for approximately $123,611 (RMB 850,000) and $130,641 (RMB 850,000) as of December 31, 2018 and 2017, respectively, loan to the Company. The Loan A bears an interest rate of 8% per annum and interest is payable annually. The principal and the accrued interest will be due on May 15, 2019. As of December 31, 2018, the principal amount was reclassified to current liabilities.
On December 7, 2016, the Company entered into an advisory agreement with Mr. Fu Chang Li, the Director of the Company. Pursuant to this Advisory Agreement, Mr. Li provided investment consulting services to the Company from December 7, 2016 to December 6, 2017. On December 7, 2017, both parties agreed to extend this advisory agreement from December 7, 2017 to December 6, 2018. On December 7, 2018, both parties agreed to extend this advisory agreement from December 7, 2018 to December 6, 2019. The total advisory fee was approximately $60,204 (NTD 1,800,000). For the years ended December 31, 2018 and 2017, the Company recognized $59,368 and $59,214, respectively, general and administrative expenses in connection to this advisory agreement.
The carrying amounts of current financial assets and liabilities in the consolidated balance sheets for cash and cash equivalents, time deposits, restricted cash equivalents, accounts receivable, short-term loans and accrued expense approximate fair value due to the short-term duration of those instruments.
The geographical distributions of the Company’s financial information for the years ended December 31, 2018 and 2017 were as follows: