UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2012

or

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

For the transition period from ____ to ____

Commission File Number: 0-50002

SINO ASSURANCE INC.

(Exact name of registrant as specified in its charter)

Delaware	52-2175896
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

20^th Floor, 6009 Yitian Road, New World Center,

Futian District, Shenzhen, People’s Republic of China

(Address of principal executive offices)

86-0755-82520166

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

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 x   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every  Data File required to be submitted and posted 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 and post such files).                    Yes x  No o

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company x

1

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.                Yes o  No o

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  As of March 31, 2012, there were 60,200,000 shares of the registrant’s common stock, $0.001 par value, outstanding

2

TABLE OF CONTENTS

3

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

The condensed consolidated financial statements of Sino Assurance Inc. and subsidiaries (collectively, the "Company"), included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission.  Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company as included in the Company's Form 10-K for the year ended December 31, 2011, and all amendments thereto.

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SINO ASSURANCE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2012 AND DECEMBER 31, 2011

(Currency expressed in United States Dollars (“US$”), except for number of shares)

	March 31, 2012		December 31, 2011
	(Unaudited)		(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,108,216	$	1,544,199
Restricted cash		22,164,475		20,930,970
Marketable securities		-		1,416,810
Guarantee fee receivable		54,858		48,154
Loans receivable, unsecured		11,643,734		10,716,525
Prepayments and other receivable		500,729		366,416
Total current assets		35,472,012		35,023,074
Non-current assets:
Plant and equipment, net		623,383		573,161
TOTAL ASSETS	$	36,095,395	$	35,596,235
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade	$	60,458	$	145,103
Customer collateral		19,002,270		17,782,504
Deferred revenue		2,247,120		1,972,424
Amount due to a related party		64,410		64,130
Income tax payable		171,363		210,202
Deferred tax liabilities		1,150,645		1,221,740
Accrued liabilities and other payable		2,833,759		3,651,371
Total current liabilities		25,530,025		25,047,474
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value; 200,000,000 shares authorized; 60,200,000 shares issued and outstanding, respectively		60,200		60,200
Additional paid-in capital		2,970,045		2,970,045
Accumulated other comprehensive income		933,242		887,189
Statutory reserve		497,538		497,538
Retained earnings		6,104,345		6,133,789
Total stockholders’ equity		10,565,370		10,548,761
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	36,095,395	$	35,596,235

See accompanying notes to condensed consolidated financial statements.

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SINO ASSURANCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

	Three months ended March 31,
	2012		2011
REVENUES, NET
Guarantee fee income	$	1,363,868	$	3,466,370
Interest income		95,928		30,545
Total revenues, net		1,459,796		3,496,915
COST OF REVENUE		(389,395)		(337,271)
GROSS PROFIT		1,070,401		3,159,644
Operating expenses:
Depreciation		(46,715)		(26,577)
Selling, general and administrative		(1,083,255)		(785,186)
Provision for guarantee losses		(46,358)		(190,234)
Total operating expenses		(1,176,328)		(1,001,997)
(LOSS) INCOME BEFORE INCOME TAXES		(105,927)		2,157,647
Income tax benefit (expense)		76,483		(520,759)
NET (LOSS) INCOME	$	(29,444)	$	1,636,888
Other comprehensive income:
- Foreign currency translation gain		46,053		70,167
COMPREHENSIVE INCOME	$	16,609	$	1,707,055
Net (loss) income per share – Basic and diluted	$	(0.00)	$	0.03
Weighted average common shares outstanding – Basic and diluted		60,200,000		60,200,000

See accompanying notes to condensed consolidated financial statements.

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SINO ASSURANCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

	Three months ended March 31,
	2012		2011
Cash flows from operating activities:
Net (loss) income	$	(29,444)	$	1,636,888
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation		46,715		33,377
Loss on disposal of plant and equipment		606		206
Provision for guarantee losses		46,358		190,234
Deferred tax (benefit) expense		(76,483)		431,632
Changes in operating assets and liabilities:
Guarantee fee receivable		(6,499)		(7,113)
Prepayments and other receivable		(132,810)		(35,564)
Accounts payable, trade		(85,340)		(102,096)
Deferred revenue		266,281		103,069
Income tax payable		(39,786)		22,026
Accrued liabilities and other payable		(880,506)		6,407
Net cash (used in) provided by operating activities		(890,908)		2,279,066
Cash flows from investing activities:
Change in restricted cash, net of customer collateral		-		(58,819)
Proceeds from disposal of marketable securities		1,424,024		-
Receipts from loans receivable		2,283,415		7,946,208
Payment on loans receivable		(3,164,497)		(5,094,546)
Proceeds from disposal of plant and equipment		-		137
Purchase of plant and equipment		(95,076)		(134,712)
Net cash provided by investing activities		447,866		2,658,268
Effect of exchange rate changes in cash and cash equivalents		7,059		59,314
NET CHANGE IN CASH AND CASH EQUIVALENTS		(435,983)		4,996,648
CASH AND CASH EQUIVALENT, BEGINNING OF PERIOD		1,544,199		7,074,893
CASH AND CASH EQUIVALENT, END OF PERIOD	$	1,108,216	$	12,071,541
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	39,786	$	35,241
Cash paid for interest	$	-	$	-

See accompanying notes to condensed consolidated financial statements.

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SINO ASSURANCE INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

	Common Stock			Additional paid-in capital		Accumulated other comprehensive income		Statutory reserve			Retained earnings		Total stockholders’ equity
	No. of shares	Amount
Balance as of January 1, 2012 (Audited)	60,200,000	$	60,200	$	2,970,045	$	887,189		$	497,538	$	6,133,789	$	10,548,761
Net loss for the period	-		-		-		-			-		(29,444)		(29,444)
Foreign currency translation adjustment	-		-		-		46,053			-		-		46,053
Balance as of March 31, 2012	60,200,000	$	60,200	$	2,970,045	$	933,242		$	497,538	$	6,104,345	$	10,565,370

See accompanying notes to condensed consolidated financial statements.

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SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

NOTE－1

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, the consolidated balance sheet as of December 31, 2011 which has been derived from audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended March 31, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2012 or for any future period.

These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2011.

NOTE－2

ORGANIZATION AND BUSINESS BACKGROUND

Sino Assurance Inc. (the “Company” or “SNAS”) was incorporated in the State of Delaware on August 19, 1997 as Sheffield Products, Inc. On November 30, 2004, the Company changed its name to “Digital Network Alliance International, Inc.” On November 20, 2008, the Company further changed its current name to “Sino Assurance Inc.”

The Company, through its subsidiaries and variable interest entity, is principally engaged in the provision of surety and tendering guarantees and financial service to corporations and individuals in the People’s Republic of China (the “PRC”).

Details of subsidiaries and variable interest entity

Name	Place of incorporation and kind of legal entity	Principal activities and place of operation	Particulars of issued/ registered capital	Effective interest held
Linking Target Limited (“LTL”)	British Virgin Island (“BVI”), a limited liability company	Investment holding	1 issued shares of US$1 each	100%
Century Maker Limited (“CML”)	Hong Kong, a limited liability company	Investment holding	1 issued shares of HK$1 each	100%

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SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

Zhong Heng Jiang Investment Consulting (Shenzhen) Company Limited (“ZHJ”)	The PRC, a limited liability company	Provision of business consulting service in the PRC	RMB100,000	100%
China Construction Guaranty Company Ltd (“CCG”) #	The PRC, a limited liability company	Provision of guarantee and financial service in the PRC	RMB50,000,000	-

#

represents variable interest entity

SNAS and its subsidiaries including its variable interest entity are hereinafter collectively referred to as (“the Company”).

NOTE－3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

·

Basis of presentation

The accompanying condensed consolidated financial statements reflect the application of certain significant accounting policies as described in this note and elsewhere in the accompanying condensed consolidated financial statements and notes.

·

Use of estimates

In preparing these condensed consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the periods reported. Actual results may differ from these estimates.

·

Basis of consolidation

The condensed consolidated financial statements include the accounts of SNAS and its subsidiaries and variable interest entity (“VIE”). All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

·

Variable interest entity

To comply with the PRC laws and regulations, the Company currently conducts substantially all of its businesses through CCG, which is considered as a VIE.

Zhong Heng Jiang Investment Consulting (Shenzhen) Company Limited (“ZHJ”), a wholly-owned subsidiary of the Company, entered into a series of contractual arrangements with CCG. Through the contractual arrangements, described below, the Company has variable interest of CCG and consequently is the primary beneficiary of CCG. Agreements that provide ZHJ effective control over CCG are as follows:

1. Operating Agreement

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SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

	CCG and the registered legal owner of CCG mutually agree to grant CCG with the principal operating decision making rights, such as appointment of directors and senior executive officers of the VIE. Also, ZHJ is a guarantor to CCG in connection with the operational performance of all contracts entered between CCG and third parties.
2.	Exclusive Management Service and Business Consulting Agreement
	ZHJ is an exclusive provider of the business consulting, related services and financial support to CCG for a period of 20 years, in return for a service fee which is equal to all of CCG’s annual net profit. The service fees are eliminated upon consolidation.
3.	Option Agreement
	ZHJ has the irrecoverable right to purchase the equity interests of CCG from the registered legal equity owners of CCG, to the extent permitted under PRC laws and regulations at the request of the Company.
4.	Proxy Statement
	All of the registered legal equity owners of CCG irrecoverably grant and entrust with their voting rights and vote on their behalf on all matters they are entitled to vote on, under the laws of the PRC and the Articles of Association of CCG.
5.	Equity Pledge Agreement
	All of the registered legal equity owners of CCG have pledged their respective equity interests in CCG as a security the obligations of the registered legal equity owners and CCG under the agreements and for the payment by CCS under the exclusive management service and business consulting agreement.

Management believes that all these contractual agreements with CCG are in compliance with PRC law and are legally enforceable.

The Company has adopted ASC Topic 810-10-5-8, “Variable Interest Entities” . ASC Topic 810-10-5-8 requires a variable interest entity or VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIE or is entitled to receive a majority of the VIE’s residual returns. With the above agreements, the Company, through ZHJ demonstrates its ability to control CCG as the primary beneficiaries and the operating results of the VIE was included in the condensed consolidated financial statements for the three months ended March 31, 2012 and 2011.

·

Cash and cash equivalents

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

·

Restricted cash

The Company mainly maintains restricted cash in depository accounts with several financial institutions in the PRC, which are held by China Construction Bank and Shanghai Pudong Development Bank.

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SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

·

Guarantee fee receivable

Guarantee fee receivables are fees owed to the Company for its guarantee services but not yet received from its customers. In the guarantee transactions, the Company will place funds on deposit with the banks to guaranty the completeness of performance obligation by the Company’s customers. Fees received in advance under the guarantee transactions are recorded as deferred revenue and amortized as revenue over the term of the guarantee period on a straight-line basis.

The Company regularly monitors the guarantee activities to ensure that the performance obligation was completed in a timely manner and that the Company is allowed to receive its guarantee fee. If necessary, the Company charges against as a deduction in the customer collateral held to recover the guarantee fee receivable. Guarantee fee receivables are considered impaired if payment of the fee is not received by the Company in accordance with the terms of the guarantee agreement with each customer. When any receivable balances are determined to be uncollectible, these balances are written off immediately.

·

Plant and equipment

Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

	Expected useful lives	Residual value
Leasehold improvement	3-5 years	-
Furniture, fittings, office equipment	3-10 years	5%
Motor vehicles	5 years	5%

Expenditure for maintenance and repairs is expensed as incurred. The gain or loss on the disposal of plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the statement of operations.

Depreciation expenses for the three months ended March 31, 2012 and 2011 were $46,715 and $33,377, respectively.

·

Impairment of long-lived assets

Long-lived assets primarily include plant and equipment. In accordance with the provisions of Accounting Standards Codification ("ASC") Topic 360-10-5, “Impairment or Disposal of Long-Lived Assets”, the Company periodically reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value using an undiscounted cash flow analysis. There has been no impairment charge during the periods presented.

·

Customer collateral

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SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

The Company maintains and safeguards cash deposits from certain customers in order to ensure the satisfaction of their performance obligations arising from the surety or tendering guarantees. The cash collateral assets are restricted under the caption of “Restricted cash” and are presented on the balance sheet.

·

Deferred revenue

Guarantee fee received in advance from rendering of service are recorded as deferred revenue and are amortized into revenue ratably over the related contract period.

·

Revenue recognition

In accordance with ASC Topic 605, “Revenue Recognition”, the Company recognizes revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.

(a)

Guarantee revenue

The Company provides guarantees service to corporations and individuals in issuing and obtaining surety or tendering guarantees for their business operations and/or personal use. In exchange for the Company’s guarantee services, the borrower pays the Company a certain percentage of the surety amount as an upfront guarantee fee. Maturities of surety and tendering guarantees will generally range from 2 days to 2 years, and are secured by bank deposits made by the Company. If a customer fails to fulfill its obligations to a lender, the bank will take possession of the Company’s deposit.

The Company follows ASC Topic 605-20-25-8, “Fees for Guaranteeing a Loan” and recognizes the guarantee fee income over the term of the contract on a straight line basis, net of business taxes, the price to the client is fixed or determinable, and collectability of the resulting receivable is reasonably assured.

At the balance sheet date, any fees received in advance under the guarantee contracts are recorded as deferred revenue and amortized as revenue over the term of the guarantee period on a straight-line basis.

Concurrently, the Company recognizes the bank charges associated with the guarantee as cost of revenue when incurred.

(b)

Interest income

Interest income is recognized on a time apportionment basis, taking into account the principal amounts outstanding and the interest rates applicable.

·

Provision for guarantee losses

In connection with the nature of its guarantee business, the Company is exposed to the potential losses from the shortfall of the guaranteed amount over its customer collateral, if the customers fail to the completion of their performance obligation in a timely manner under the surety guarantees. Therefore, the Company regularly reviews actual claims from guarantee loss to determine if any necessary adjustments may be

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SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

recognized to the reserve in the period in which those differences arise or are identified. The Company follows ASC Topic 450-20-25, “Loss Contingencies” and assesses the estimated losses from a loss contingency among the outstanding guarantee contracts at the balance sheet date. Provision for guarantee losses reflects the Company’s best projection of defaults and the Company believes that it is more likely as a result of loss events that have occurred through the balance sheet date.

For the three months ended March 31, 2012 and 2011, the Company has recognized $46,358 and $190,234 on the provision for guarantee losses for any potential claims, respectively.

·

Income taxes

Income taxes are determined in accordance with the provisions of ASC Topic 740, “Income Taxes” (“ASC 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and discloses in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

For the three months ended March 31, 2012 and 2011, the Company did not have any interest and penalties associated with tax positions. As of March 31, 2012, the Company did not have any significant unrecognized uncertain tax positions.

The Company conducts major businesses in the PRC and is subject to tax in this jurisdiction. As a result of its business activities, the Company files tax returns that are subject to examination by the foreign tax authority.

·

Comprehensive income

ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income, as presented in the accompanying condensed consolidated statement of stockholders’ equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

·

Net (loss) income per share

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SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

The Company calculates net (loss) income per share in accordance with ASC Topic 260, “Earnings per Share.” Basic net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per share reflects the potential dilution of securities by including common stock equivalents, such as stock options, stock warrants and convertible preferred stock, in the weighted average number of common shares outstanding for a period, if dilutive.

·

Foreign currencies translation

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.

The reporting currency of the Company is the United States Dollars ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Company’s subsidiary and VIE in the PRC maintains its books and records in its local currency, Renminbi Yuan ("RMB"), which is functional currency as being the primary currency of the economic environment in which its operation is conducted.

In general, for consolidation purposes, assets and liabilities of its subsidiary and VIE whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “Translation of Financial Statement”, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign entities are recorded as a separate component of accumulated other comprehensive income within the statements of stockholders’ equity.

Translation of amounts from RMB into US$1 has been made at the following exchange rates for the respective years:

	March 31, 2012	March 31, 2011
Period-end RMB : US$1 exchange rate	6.3247	6.5701
Average period RMB : US$1 exchange rate	6.3201	6.5894

·

Related parties

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

·

Segment reporting

ASC Topic 280, “Segment Reporting” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. The Company

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SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

operates in one reportable operating segment in the PRC.

·

Fair value of financial instruments

The carrying value of the Company’s financial instruments (excluding loans receivable): cash and cash equivalents, restricted cash, guarantee fee receivable, prepayments and other receivables, accounts payable, customer collateral, deferred revenue, income tax payable, amount due to a related party, accrued liabilities and other payables approximate at their fair values because of the short-term nature of these financial instruments.

Management believes, based on the discounted cash flows using current interest rates, the fair value of loans receivable approximates the carrying value at March 31, 2012.

The Company also follows the guidance of ASC Topic 820-10, “Fair Value Measurements and Disclosures” ("ASC 820-10"), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

· Level 1 : Inputs are based upon unadjusted quoted prices for identical instruments traded in active markets;

· Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and; and

· Level 3 : Inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models.

Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

·

Recent accounting pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2011-05,“Comprehensive Income: Presentation of Comprehensive Income”(“ASU 2011-05”). ASU 2011-05 requires companies to present the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements of net income and other comprehensive income. This statement is effective for interim and annual periods beginning after December 15, 2011. Early adoption is permitted and the amendments in this update will be applied retro

16

SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

spectively. The adoption has not had a material effect on the Company’s financial statements.

NOTE－4

RESTRICTED CASH

Restricted cash represents (i) fund received from customers for the purpose of trust deposits held at the banks by the Company to pledge against the surety and tendering guarantee under the contractual guarantee period and (ii) escrow deposits as security to the bank for the provision of banking surety guarantee service. Such restricted cash under item (i) is an asset of the Company and is recorded as customer collateral payable to the customers upon the expiry of the guarantee contracts.

As of March 31, 2012, the Company had surety and tendering guarantees outstanding resulting in restricted cash with approximately $19,002,270 from customer collateral and $3,162,205 for escrow deposits at the bank.

NOTE－5

LOANS RECEIVABLE, UNSECURED

Loans receivable, unsecured consist of the following:

	March 31, 2012		December 31, 2011
	(Unaudited)		(Audited)
Due from Party A, in a term of 12 months, repayable on June 29, 2012, with an interest rate of 2.52% per annum payable at its due date	$	964,472	$	960,283
Due from Party A, in a term of 12 months, repayable on September 29, 2012, with an interest rate of 2.52% per annum payable at its due date		1,375,558		1,369,581
Due from Party A, in a term of 12 months, repayable on December 30, 2012, with an interest rate of 2.52% per annum payable at its due date		3,261,904		3,247,732
Due from Party A, in a term of 12 months, repayable on March 30, 2013, with an interest rate of 2.52% per annum payable at its due date		3,162,205		-
Due from Party B, in a term of 12 months, repayable on June 29, 2012, with an interest rate of 2.52% per annum payable at its due date		2,256,104		4,502,406
Due from Party B, in a term of 12 months, repayable on December 30, 2012, with an interest rate of 2.52% per annum payable at its due date		623,491		620,781

17

SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

Due from Party C, in a term of 12 months, repayable on December 30, 2012, with an interest rate of 2.52% per annum payable at its due date		-		15,742
Total:	$	11,643,734	$	10,716,525

NOTE－6

AMOUNT DUE TO A RELATED PARTY

As of March 31, 2012, amount due to a related party represented temporary advances made by Mr. Guokang Tu, chief executive officer and a director of the Company, which were unsecured, interest-free with no fixed repayment term. Imputed interest is considered insignificant.

NOTE－7

ACCRUED LIABILITIES AND OTHER PAYABLE

Accrued liabilities and other payable consisted of following:

	March 31, 2012		December 31, 2011
	(Unaudited)		(Audited)
Commission payable	$	861,701	$	1,648,222
Provision for guarantee losses		1,597,860		1,544,795
Accrued payroll and employee welfare		169,883		279,758
Accrued operating expenses		146,200		110,320
Customer deposits		48,595		52,054
Other payables		9,520		16,222
	$	2,833,759	$	3,651,371

NOTE－8

INCOME TAXES

For the three months ended March 31, 2012 and 2011, the local (United States) and foreign components of (loss) income from operations before income taxes were comprised of the following:

	Three months ended March 31,
	2012		2011
Tax jurisdictions from:
– Local	$	-	$	-
– Foreign		(105,927)		2,157,647
(Loss) income before income taxes	$	(105,927)	$	2,157,647

The provision for income taxes consisted of the following:

18

SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

	Three months ended March 31,
	2012		2011
Current:
– Local	$	-	$	-
– Foreign		-		89,127
Deferred:
– Local		-		-
– Foreign		(76,483)		431,632
Income tax (benefit) expense	$	(76,483)	$	520,759

The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company has operations in various countries: United States, BVI, Hong Kong and the PRC that are subject to taxes in the jurisdictions in which they operate, as follows:

United States of America

SNAS is registered in the State of Delaware and is subject to United States of America tax law.

As of March 31, 2012, the operations in the United States of America incurred $40,000 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2032, if unutilized. The Company has provided for a full valuation allowance against the deferred tax assets of $14,000 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

British Virgin Island

Under the current BVI law, LTL is not subject to tax on income.

Hong Kong

CML is subject to Hong Kong Profits Tax, which is charged at the statutory income rate of 16.5% on its assessable income. For the three months ended March 31, 2012 and 2011, CML does not have operations in Hong Kong.

The PRC

The Company generated substantially its net income from its subsidiary, ZHJ and its VIE, CCG in the PRC. ZHJ and CCG are subject to the Corporate Income Tax governed by the Income Tax Law of the People’s Republic of China with a unified statutory income tax rate of 25%.

CCG is registered and operates in Shenzhen City, the PRC and is recognized as “Enterprise Located in

19

SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

Special Economic Zone”. Hence, the Company is entitled to Corporate Income Taxes (“CIT”) at a preferential tax rate of 15%. For the three months ended March 31, 2012 and 2011, the Company has established various provincial and municipal branches, as well as representative offices in the PRC, which are generally subject to the statutory tax rate of 25%. Under a transitional policy under the CIT Law, the Company will continue to enjoy the unexpired tax holiday in a special economic zone in Shenzhen City and its applicable tax rate will be increased progressively to 25% over a 5-years’ period, starting from January 1, 2008.

The reconciliation of income tax rate to the effective income tax rate for the three months ended March 31, 2012 and 2011, is as follows:

	Three months ended March 31
	2012		2011
(Loss) income before income taxes	$	(105,927)	$	2,157,647
Statutory income tax rate		25%		25%
Income tax (benefit) expense at statutory tax rate		(26,482)		539,412
Effect of tax holiday		-		(19,978)
Effect of non-taxable items		(50,001)		-
Effect of non-deductible items		-		1,325
Income tax (benefit) expense	$	(76,483)	$	520,759

The following table sets forth the significant components of the aggregate deferred tax (assets) and liabilities of the Company as of March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
Deferred tax (assets):
Net operating loss carryforward	$	(14,000)	$	(14,000)
Deferred revenue		(561,780)		(483,244)
Total deferred tax (assets)		(575,780)		(497,244)
Less: valuation allowance		14,000		14,000
Total deferred tax (assets)		(561,780)		(483,244)
Deferred tax liabilities:
Provision for guarantee losses		1,712,425		1,704,984
Deferred tax liabilities, net	$	1,150,645	$	1,221,740

NOTE－9

CONCENTRATIONS OF RISK

The Company is exposed to the following concentrations of risk:

20

SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

(a)

Major customers

For the three months ended March 31, 2012, one customer represented 15% of the Company’s revenue amounting to $225,470, with no balance of guarantee fee receivable

For the three months ended March 31, 2011, there was no single customer who accounted for 10% or more of the Company’s revenues.

(b)

Major vendors

For the three months ended March 31, 2012 and 2011, there was no single vendor who accounted for 10% or more of the Company’s purchases.

(c)

Credit risk

Financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash, restricted cash and guarantee fee receivable. Substantially all of cash and restricted cash are held by the recognized financial institutions in the PRC. The Company also performs ongoing credit evaluations of its customers’ financial condition, but does not require collateral to support such receivables.

(d)

Political and country risk

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, by the general state of the PRC’s economy. The Company’s business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

(e)

Guarantee default risk

The Company has a significant concentration risk related to its guarantees on potential loss if the customers fail to the completion of their performance obligation in a timely manner under the surety guarantees. To reduce these potential losses, the Company holds collateral in the form of cash equivalents, which are reflected in customer collateral on the balance sheets as they are held in restricted cash in the Company’s name.

(f)

Exchange rate risk

The reporting currency of the Company is US$, to date the majority of the revenues and costs are denominated in RMB and a significant portion of the assets and liabilities are denominated in RMB. As a result, the Company is exposed to foreign exchange risk as its revenues and results of operations may be affected by fluctuations in the exchange rate between US$ and RMB. If RMB depreciates against US$, the value of RMB revenues and assets as expressed in US$ financial statements will decline. The Company does not hold any derivative or other financial instruments that expose to substantial market risk.

21

SINO ASSURANCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

NOTE－10

COMMITMENTS AND CONTINGENCIES

(a)

Operating lease commitments

The Company is committed under various non-cancelable operating leases with fixed monthly rentals, due through September 2015. Total rent expenses for the three months ended March 31, 2012 and 2011 was $136,593 and $114,541, respectively.

As of March 31, 2012, the Company has future minimum rent payments due under various non-cancelable operating leases in the next five years, as follows:

Years ending March 31:
2013	$	520,790
2014		318,450
2015		256,325
2016		128,902
Total:	$	1,224,467

(b)

Guarantees

As of March 31, 2012, the Company has 769 surety and tendering guarantees outstanding. If the Company’s customers fail to complete their performance obligation in a timely manner so that the Company is obligated to pay on its guarantees, the Company would have the maximum potential amount of future payments of approximately $305,326,480 (RMB1,931,098,386) in total.

Provision for guarantee losses reflects the Company’s best projection of defaults and the Company believes that it is more likely as a result of loss events that have occurred through March 31, 2012. However, the uncertainty in macroeconomic factors and the uncertainty of the effect of any current or future government actions to the global economic crisis make forecasting of default rates increasingly imprecise. The Company regularly reviews actual guarantee loss claims experience to determine if any necessary adjustments may be recognized to the reserve in the period in which those differences arise or are identified. For the three months ended March 31, 2012 and 2011, the Company experienced no claims for actual guarantee loss. At March 31, 2012, the Company has accrued $1,597,860 on the provision for guarantee losses for any potential claims.

NOTE－11

SUBSEQUENT EVENTS

The Company evaluated subsequent events through the date the financial statements were issued and filed with this Form 10-Q. There were no subsequent events that required recognition or disclosure.

22

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report, including statements in the following discussion, which are not statements of historical fact, are what are known as “forward-looking statements”, which are basically statements about the future.  For that reason, these statements involve risk and uncertainty since no one can accurately predict the future.  Words such as “plans,” “intends,” “will,” “hopes,” “seeks,” “anticipates,” “expects,” and the like, often identify such forward-looking statements, but are not the only indication that a statement is a forward-looking statement.  Such forward-looking statements include statements concerning our plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits.  Numerous factors and future events could cause the Company to change such plans and objectives, or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits.  Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report on Form 10Q and in the Company’s other filings with the Securities and Exchange Commission.  No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.

OVERVIEW

Sino Assurance, Inc., a Delaware corporation (hereinafter “Sino Assurance”, “We”, the Company or the “Registrant"), was incorporated under the laws of the State of Delaware on August 19, 1997, under the name of Sheffield Products, Inc. We changed our name to Digital Network Alliance International, Inc. on November 30, 2004, and changed our name again to Sino Assurance Inc. on November 20, 2008.  The Company, through its subsidiaries and variable interest entity, is principally engaged in the provision of surety and tendering guarantees service to corporations and individuals in the Peoples Republic of China.  

PLAN OF OPERATIONS

Management Team's 2012 Operational Plan

I. Operational Environment of Year 2012

1.

In terms of legal environment, China has established the Assurance Law framework based on two basic legislations, known as the "Contract Law" and the "Civil Law", the whole framework is further pivoted on the "Assurance Law" as supplemented by the Judicial Interpretation.

2.

With regard to the policy aspect, in order to regulate the assurance business while promoting the growth of this industry, relating governmental bodies have enacted a series of laws, regulations and policies such as the "Small to Medium Enterprises Promotion Law", the "Interim Administrative Rules Guiding the Risk Control Work of Small to Medium Enterprises Engaged in the Assurance Business", the "Notice Regarding the Establishment of Credit Assurance System for Small to Medium Enterprises ", the "Administrative Rules for Small-Sum Guaranteed Loan for Unemployed Persons", the "Trial Methods for Undertaking Housing Credit Insurance Business", the "Certain Trial Rules for the Introduction of Construction Contract Guarantee in Real Estate Developing Projects" and the “Trail Rules for the Financing Guarantee Company”. All such rules and regulations have on one hand described the common practices of the assurance industry, strengthened the management of risk control, and on the other hand improved the industrial environment of the assurance business, thus have expanded the assurance business scope and boosted the growth of this industry.

3.

As to the credit environment, the construction of social credit system of enterprises in relation to the man

23

agement and customer credit information of the security industry merges into the existing banking and financial regulatory system. In 2011 the China Banking Regulatory Commission’s “Joint Conference on the risks of illegal business operation of assurance enterprises” and People’s Bank’s policy of putting guarantee deposits into deposits reserves fully describes the fact that the assurance industry is very important to the social credit system construction, it also reflects the development of assurance industry in China economic development is causing more and more national and social concern.

II. Market Opportunity

1.

In the field of construction projects on 2012, the central government intends to invest RMB402.6 billion in six areas, which consists of 3 letter of guarantee of construction businesses: " proposed arrangements for $ 69 billion to accelerate the affordable housing program to support the construction of low-rent housing and accelerate the shantytown improvement; proposed arrangement of RMB140.6 billion to strengthen the "three agriculture" construction for rural "water circuit" livelihood projects; proposed arrangement of RMB24.1 billion to promoting the construction of major infrastructure such as transportation, energy; all of the above reflects a substantial need of demand of assurance services.

2.

As for the sector of railway material purchase, the Ministry of Railways disclosed on the National Railway Work Conference held in Beijing on November 23, 2011 that in 2012 the total investment in fixed assets of China railway will be RMB500 billion, and new railway line construction 6,366 km, although it reflects a decrease of 1/3 compared to 2011, the capital investment is still up to RMB400 billion, which is still one of the most important market.

3.

As to the energy-saving and environmental protection aspects, in the central government’s investment budget of 2012, to strengthen energy-saving, environmental protection and ecological construction amounts to RMB$48.8 billion.

III. 2012 Market Expansion Proposal and Safeguard Measures

Market Expansion Proposal

1.

The Company will accelerate the process of expansion by targeting new markets, 5 subsidiaries will be established in 2012 to make the sales network covering all major medium to large cities of China. Additionally, the sales model will be diversified to comprehensively use the sales modes of call-center, internet and shop-at-home.

2.

The Company will further extend its business scope, by strengthening the existing relationship with China Construction Bank and Shanghai Pudong Development Bank, to acquire more favorable treatments for the company's existing business and broaden the business scope.

3.

The company will pay more attention to the development of new products: while continuing to promote the purchase and supply of such letter of guarantee business, we also target to promote the businesses of foreign letter of guarantees, develop new products such as litigation evidence preservation guarantees, expand the existing customer base in order to increase business revenue streams;

4.

Giving full support for application of new technologies: on the basis of the successful launching of e-commerce web site in 2011, the company looks for achieving double breakthrough in online products and on-line process, striving to line up to the platform data of banks, so as to ensure "safe, efficient, and accurate" process and to achieve the ultimate goal of total electronic processing.

Safeguard Measures

24

In 2012, the company will focus in the building of a team of internal elites as the core of human resources, paying more attention to professional training and internal control management, in order to achieve all business objectives eventually.

1.

To build an elite team, emphasize in training and performance appraisal.

2.

To upgrade the existing services to customer in order to achieve high and fast business growth.

3.

The Company will develop an innovative risk control mechanism to reduce the business risk in 2012.

4.

The Company will strengthen the communication with business partners and regulatory bodies in order to acquire the most up-to-date information of the industry to make sure the Company can continue to be the leader in the industry.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2012 COMPARED WITH THREE MONTHS ENDED MARCH 31, 2011

Net revenue

Net revenue for the three months ended March 31, 2012, was $1,459,796 as compared to $3,496,915 for the same period in 2011. The decrease of $2,037,119 or approximately 58% was due to the continuous tightening control of bank loan supply in China during the period and as a result reduce the demand of tender and surety guarantee business. The gross margin decreased to 71% from 90% for the three months ended March 31, 2012, it was due to the percentage of the guarantee fee income with higher profit margin decreased and the guarantee fee income with lower profit margin increased.

Loss before income tax

Loss before income tax for the three months ended March 31, 2012 was $105,927 compared to income  before income tax $2,157,647 for the same period in 2011, the decrease in pre-tax income of $2,263,574, or approximately 105% was mainly due to decrease in guarantee fee income by the tightening control of bank loan supply in China during the period and reduce demand of tender and surety guarantee business, as well as we employed more agents to promote guarantee business, and increasing our selling, general and administrative expenses.

Operating expenses

Total operating expenses were $1,176,328 for the three months ended March 31, 2012, as compared to $1,001,997 for the same period in 2011.  The increase of $174,331 or 17% was primarily due to the increase in depreciation, staff costs, rent and rate, and professional fee.

The reasons for the increases in the major items are as follows:

(1)

Depreciation - increase by $20,138 or 76% from $26,577 for the three months ended March 31, 2011 to $46,715 for the same period of 2012. The increase was primarily due to the addition of fixed assets during the same period.

(2)

Staff costs - increase by $77,961 or 18% from $436,237 for the three months ended March 31, 2011 to $514,198 for the same period of 2012. The increase was mainly due to increase in headcounts and pay rates for the same period.

25

(3)

Rent and rates - increase by $22,052 or 19% from $114,541 for the three months ended March 31, 2011 to $136,593 for the same period of 2012. The increase was mainly due to the renewal of the tenancy agreement in the same period.

(4)

Professional fee to fulfill the obligation as a listing company - increase by $45,263 or 86% from $52,796 for the three months ended March 31, 2011 to $98,059 for the same period of 2012.  The increase was mainly due to the increment by the services provider.

We anticipate that our operating expenses will increase in future periods, as we increase sales and marketing operations, and fulfill our obligation as a listing company under the Exchange Act.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2012, our unaudited balance sheet reflects total current assets of $35,472,012 and total current liabilities $25,530,025. These items increased by $448,938 (or 1.28%) and $482,551 (or 1.93%) respectively as compared to the year ended December 31, 2011. The increase of total current assets was mainly due to an increase of restricted cash, loan receivable as well as prepayments and other receivable, partially offset by decrease in marketable securities, cash and cash equivalents. The increase in total current liabilities was mainly due to increase in customer collateral and deferred revenue, partially offset by decrease in account payable, accrued liabilities and other payable, income tax payable and deferred tax liabilities.

As of March 31, 2012, cash and cash equivalents was $1,108,216, as compared to December 31, 2011 balance of 1,544,199. The decrease was mainly due to the cash used in operating activities, partially offset by the cash provided by investing activities.

For the three months ended March 31, 2012, cash used in operating activities totaled $890,908. This was primarily due to the net loss for the period plus increase in prepayments and other receivable, decrease in account payable, accrued liabilities and other payable, partially offset by the increase in deferred revenue.

For the three months ended March 31, 2012, cash provided by investing activities amounted to $447,866. The receipt of funds was mainly due to the receipts from loans receivable and proceeds from disposal of marketable securities, partially offset by the payment on loan receivable.

As of March 31, 2012, we owed $64,410 to Mr. Guokang Tu, a director. The loan was unsecured, interest-free, and has no fixed repayment terms.

As of March 31, 2012, the Company had surety and tendering guarantees outstanding resulting in restricted cash of approximately $19,002,270 from customer collateral and $3,162,205 for escrow deposits at the bank. Restricted cash represents (i) funds received from customers for the purpose of trust deposits held at the banks by the Company to pledge against the surety and tendering guarantee under the contractual guarantee period and (ii) escrow deposits as security to the bank for the provision of banking surety guarantee service. Such restricted cash under item (i) is an asset of the Company and is recorded as customer collateral payable to the customers upon the expiry of the guarantee contracts.

As of March 31, 2012, the loans receivable consist of the followings:

Due from Party A	$	8,764,139
Due from Party B		2,879,595
	$	11,643,734

The Company entered into loan agreements to provide financing to Party A and Party B as general working capital

26

and both of these Parties are independent third parties of the Company.

The loan to Party A is unsecured, interest bearing at 2.52% per annum and payable on June 29, 2012, September 29, 2012, December 30, 2012 and March 30, 2013 in the terms of 12 months.

The loan to Party B is unsecured, interest bearing at 2.52% per annum and payable on June 29, 2012 and December 30, 2012 in the terms of 12 months.

The demand for loans to small and medium size enterprises in China is expected to remain high and the Company is exploring new business to provide full spectrum of financial services to customers. We believe that this will greatly enhance the level of services that we provide to our customers and further expand our market share in the financing services business.

We believe our existing cash, cash equivalents, and cash provided by operating activities will be sufficient to meet our working capital and capital expenditure needs over the next twelve months. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our marketing and sales activities, the expansion of our operating capacity, and the continuing market acceptance of our services.

As of March 31, 2012, we had total future lease commitments under non-cancelable operating leases of $1,224,467. We currently have working capital sufficient to fund these lease commitments.

As of March 31, 2012, we had contingent liabilities in respect of guarantees granted under the surety and tendering guarantee services business in the aggregate amount of $305,326,480. As of March 31, 2012, the Company has 769 surety and tendering guarantees outstanding. If the Company’s customers fail to complete their performance obligation in a timely manner so that the Company is obligated to pay on its guarantees, the Company would have the maximum potential amount of future payments of approximately $305,326,480 (RMB1,931,098,386) in total.  We have significant concentration of risk related to our guarantees of potential loss if our customers fail to complete their performance obligations under the surety guarantees in a timely manner.  To reduce these potential losses, we hold collateral in the form of cash equivalents, which are reflected in customer collateral on the balance sheets as they are held in restricted cash in our name.

Provision for guarantee losses reflects the Company’s best projection of defaults and the Company believes that it is more likely as a result of loss events that have occurred through March 31, 2012. However, the uncertainty in macroeconomic factors and the uncertainty of the effect of any current or future government actions to the global economic crisis make forecasting of default rates increasingly imprecise. The Company regularly reviews actual guarantee loss claims experience to determine if any necessary adjustments may be recognized to the reserve in the period in which those differences arise or are identified. For the three months ended March 31, 2012 and 2011, the Company experienced no actual guarantee loss claims. At March 31, 2012, the Company has accrued $1,597,860 on the provision for guarantee losses for any potential claims.

OFF BALANCE SHEET ARRANGEMENTS

We do not have any material off-balance sheet arrangements.

RECENT ACCOUNTING PRONOUNCEMENTS

For information about new accounting pronouncements and the potential impact on our Condensed Consolidated Financial Statements, see Note 3 of the Notes to Condensed Consolidated Financial Statements in this Form 10-Q and Note 2 of the Notes to Consolidated Financial Statements in our 2011 Form 10-K, and all amendments thereto.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

27

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean the controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.

As of the end of the period covered by this report, the Company's management, with the participation of the chief executive officer and the chief financial officer, carried out an evaluation of the effectiveness of the design and operation of the Company's "disclosure, controls and procedures" (as defined in the Exchange Act Rules 13a-15(3) and 15-d-15(3) as of the end of the period covered by this report (the "Evaluation Date").  Based on that evaluation, the chief executive officer and the chief financial officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported with the time periods specified.  Our chief executive office and chief financial officer also concluded that our disclosure controls and procedures were effective as of March 31, 2012 to provide reasonable assurance of the achievement of these objectives.

Changes in Internal Controls Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) or any other factors during the most recent fiscal quarter ended March 31, 2012, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

28

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

3.1

Articles of Incorporation (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on September 12, 2002).

3.2

Bylaws (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on September 12, 2002).

10.4

Exclusive Cooperation Agreement between Linking Target Limited, a British Virgin Islands corporation, and China Construction Guaranty, Inc., dated August 1, 2008, (herein incorporated by reference from report on Form 8-K/A for report dated September 23, 2008 and filed with the Securities and Exchange Commission on December 9, 2008).

10.5

Operating Agreement between to Zhong Heng Jiang Investment Consulting (Shenzhen) Company Limited, China Construction Guaranty, Inc., and the shareholders of China Construction Guaranty, Inc. dated November 2, 2009, (herein incorporated by reference from Form 10-K/A filed with the Securities and Exchange Commission on August 10, 2011).

10.6

Exclusive Management Service and Business Consulting Agreement between to Zhong Heng Jiang Investment Consulting (Shenzhen) Company Limited and China Construction Guaranty, Inc. dated November 2, 2009, (herein incorporated by reference from Form 10-K/A filed with the Securities and Exchange Commission on August 10, 2011).

10.7

Option Agreement between to Zhong Heng Jiang Investment Consulting (Shenzhen) Company Limited and China Construction Guaranty, Inc., and the shareholders of China Construction Guaranty, Inc., dated November 2, 2009, (herein incorporated by reference from Form 10-K/A filed with the Securities and Exchange Commission on August 10, 2011).

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10.8

Proxy Statement between to Zhong Heng Jiang Investment Consulting (Shenzhen) Company Limited and the shareholders of China Construction Guaranty, Inc., dated November 2, 2009, (herein incorporated by reference from Form 10-K/A filed with the Securities and Exchange Commission on August 10, 2011).

10.9

Equity Pledge Agreement between to Zhong Heng Jiang Investment Consulting (Shenzhen) Company Limited and China Construction Guaranty, Inc., and the shareholders of China Construction Guaranty, Inc., dated November 2, 2009, (herein incorporated by reference from Form 10-K/A filed with the Securities and Exchange Commission on August 10, 2011).

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101

SCH XBRL Schema Document.*

101

CAL XBRL Taxonomy Extension Calculation Linkbase Document.*

101

LAB XBRL Taxonomy Extension Label Linkbase Document.*

101

PRE XBRL Taxonomy Extension Presentation Linkbase Document.*

101

DEF XBRL Taxonomy Extension Definition Linkbase Document.*

* filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SINO ASSURANCE INC.

(Registrant)

By: /s/ Guokang Tu, Chief Executive Officer and Chairman

Date:  May 11, 2012

By: /s/ Mengyou Tong, Chief Financial Officer

Date:  May 11, 2012

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