UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-Q  xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2011  or  oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____  Commission File Number: 000-50002


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|SINO ASSURANCE INC.                                   
|(Exact name of registrant as specified in its charter)




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




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|20th 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)




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|----------------------------------------------------------------------------------
|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).  N/A  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.


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

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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 May 1, 2011, there were 60,200,000 shares of the registrants common stock, $0.001 par value, outstanding    2       TABLE OF CONTENTS


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|------------------------------ | ---------------------------------------------------------------------------------------------- | --
|PART I - FINANCIAL INFORMATION | 4                                                                                             
|                               | ITEM 1.  FINANCIAL STATEMENTS                                                                  | 4 
|                               | ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 22
|                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                             | 27
|                               | ITEM 4. CONTROLS AND PROCEDURES                                                                | 27
|PART II  OTHER INFORMATION    | 28                                                                                            
|                               | ITEM 1. LEGAL PROCEEDINGS                                                                      | 28
|                               | ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                            | 28
|                               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                        | 28
|                               | ITEM 4. (REMOVED AND RESERVED)                                                                 | 28
|                               | ITEM 5. OTHER INFORMATION                                                                      | 28
|                               | ITEM 6. EXHIBITS                                                                               | 28

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, 2010, and all amendments thereto.    4





SINO ASSURANCE INC. CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2011 AND DECEMBER 31, 2010 (Currency expressed in United States Dollars (US$), except for number of shares)


|                                                                                                                      |                |            |                   |   |           
|--------------------------------------------------------------------------------------------------------------------- | -------------- | ---------- | ----------------- | - | ----------
|                                                                                                                      | March 31, 2011 |            | December 31, 2010
|                                                                                                                      | (Unaudited)    |            | (Audited)        
|ASSETS                                                                                                                |                |            |                   |   |           
|Current assets:                                                                                                       |                |            |                   |   |           
|Cash and cash equivalents                                                                                             | $              | 12,071,541 |                   | $ | 7,074,893 
|Restricted cash                                                                                                       |                | 14,374,397 |                   |   | 13,050,117
|Guarantee fee receivable                                                                                              |                | 25,251     |                   |   | 18,003    
|Loans receivable, unsecured                                                                                           |                | -          |                   |   | 2,842,001 
|Prepayments and other receivable                                                                                      |                | 299,459    |                   |   | 262,127   
|Total current assets                                                                                                  |                | 26,770,648 |                   |   | 23,247,141
|                                                                                                                      |                |            |                   |   |           
|Non-current assets:                                                                                                   |                |            |                   |   |           
|Plant and equipment, net                                                                                              |                | 514,703    |                   |   | 410,807   
|TOTAL ASSETS                                                                                                          | $              | 27,285,351 |                   | $ | 23,657,948
|                                                                                                                      |                |            |                   |   |           
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                  |                |            |                   |   |           
|Current liabilities:                                                                                                  |                |            |                   |   |           
|Accounts payable, trade                                                                                               | $              | 28,639     |                   | $ | 130,209   
|Customer collateral                                                                                                   |                | 10,069,025 |                   |   | 8,830,517 
|Deferred revenue                                                                                                      |                | 1,025,031  |                   |   | 915,847   
|Amount due to a related party                                                                                         |                | 62,004     |                   |   | 61,614    
|Income tax payable                                                                                                    |                | 554,898    |                   |   | 529,447   
|Deferred tax liabilities                                                                                              |                | 1,864,774  |                   |   | 1,422,843 
|Accrued liabilities and other payable                                                                                 |                | 1,661,463  |                   |   | 1,455,009 
|Total current liabilities                                                                                             |                | 15,265,834 |                   |   | 13,345,486
|                                                                                                                      |                |            |                   |   |           
|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                                                                                |                | 539,004    |                   |   | 468,837   
|Statutory reserve                                                                                                     |                | 332,153    |                   |   | 332,153   
|Retained earnings                                                                                                     |                | 8,118,115  |                   |   | 6,481,227 
|Total stockholders equity                                                                                            |                | 12.019,517 |                   |   | 10,312,462
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                            | $              | 27,285,351 |                   | $ | 23,657,948

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, 2011 AND 2010 (Currency expressed in United States Dollars (US$)) (Unaudited)


|                                                               |  |                              |             |      |   |           
|-------------------------------------------------------------- |  | ---------------------------- | ----------- | ---- | - | ----------
|                                                               |  | Three months ended March 31,
|                                                               |  | 2011                         |             | 2010
|REVENUES, NET                                                  |  |                              |             |      |   |           
|Guarantee fee income                                           |  | $                            | 3,466,370   |      | $ | 1,871,679 
|Interest income                                                |  |                              | 30,545      |      |   | 22,591    
|                                                               |  |                              |             |      |   |           
|Total revenues, net                                            |  |                              | 3,496,915   |      |   | 1,894,270 
|                                                               |  |                              |             |      |   |           
|COST OF REVENUE                                                |  |                              | (337,271)   |      |   | (345,901) 
|                                                               |  |                              |             |      |   |           
|GROSS PROFIT                                                   |  |                              | 3,159,644   |      |   | 1,548,369 
|                                                               |  |                              |             |      |   |           
|Operating expenses:                                            |  |                              |             |      |   |           
|Depreciation                                                   |  |                              | (26,577)    |      |   | (29,524)  
|Selling, general and administrative                            |  |                              | (785,186)   |      |   | (645,249) 
|Provision for guarantee losses                                 |  |                              | (190,234)   |      |   | (107,654) 
|Total operating expenses                                       |  |                              | (1,001,997) |      |   | (782,427) 
|                                                               |  |                              |             |      |   |           
|INCOME BEFORE INCOME TAXES                                     |  |                              | 2,157,647   |      |   | 765,942   
|                                                               |  |                              |             |      |   |           
|Income tax expense                                             |  |                              | (520,759)   |      |   | (181,039) 
|                                                               |  |                              |             |      |   |           
|NET INCOME                                                     |  | $                            | 1,636,888   |      | $ | 584,903   
|                                                               |  |                              |             |      |   |           
|Other comprehensive income:                                    |  |                              |             |      |   |           
|- Foreign currency translation gain                            |  |                              | 70,167      |      |   | 794       
|                                                               |  |                              |             |      |   |           
|COMPREHENSIVE INCOME                                           |  | $                            | 1,707,055   |      | $ | 585,697   
|                                                               |  |                              |             |      |   |           
|Net income per share  Basic and diluted                       |  | $                            | 0.03        |      | $ | 0.01      
|                                                               |  |                              |             |      |   |           
|Weighted average common shares outstanding  Basic and diluted |  |                              | 60,200,000  |      |   | 60,000,000

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, 2011 AND 2010 (Currency expressed in United States Dollars (US$)) (Unaudited)


|                                                                                  |  |                              |             |      |           |            
|--------------------------------------------------------------------------------- |  | ---------------------------- | ----------- | ---- | --------- | -----------
|                                                                                  |  | Three months ended March 31,
|                                                                                  |  | 2011                         |             | 2010
|Cash flows from operating activities:                                             |  |                              |             |      |           |            
|Net income                                                                        |  | $                            | 1,636,888   |      | $         | 584,903    
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |             |      |           |            
|Depreciation                                                                      |  |                              | 33,377      |      |           | 29,524     
|Loss on disposal of plant and equipment                                           |  |                              | 206         |      |           | -          
|Provision for guarantee losses                                                    |  |                              | 190,234     |      |           | 107,654    
|Unrealized interest income                                                        |  |                              | -           |      |           | (20,561)   
|Deferred tax expense                                                              |  |                              | 431,632     |      |           | 114,180    
|Changes in operating assets and liabilities:                                      |  |                              |             |      |           |            
|Guarantee fee receivable                                                          |  |                              | (7,113)     |      |           | (103,666)  
|Prepayments and other receivable                                                  |  |                              | (35,564)    |      |           | (39,680)   
|Accounts payable, trade                                                           |  |                              | (102,096)   |      |           | 2,074      
|Deferred revenue                                                                  |  |                              | 103,069     |      |           | 113,308    
|Income tax payable                                                                |  |                              | 22,026      |      |           | 32,890     
|Accrued liabilities and other payable                                             |  |                              | 6,407       |      |           | (32,159)   
|                                                                                  |  |                              |             |      |           |            
|Net cash provided by operating activities                                         |  |                              | 2,279,066   |      |           | 788,467    
|                                                                                  |  |                              |             |      |           |            
|Cash flows from investing activities:                                             |  |                              |             |      |           |            
|Change in restricted cash, net of customer collateral                             |  |                              | (58,819)    |      |           | 2,677      
|Receipts from loans receivable                                                    |  |                              | 7,946,208   |      |           | -          
|Payment on loans receivable                                                       |  |                              | (5,094,546) |      |           | (1,148,332)
|Proceeds from disposal of plant and equipment                                     |  |                              | 137         |      |           | -          
|Purchase of plant and equipment                                                   |  |                              | (134,712)   |      |           | (115,730)  
|                                                                                  |  |                              |             |      |           |            
|Net cash provided by (used in) investing activities                               |  |                              | 2,658,268   |      |           | (1,261,385)
|                                                                                  |  |                              |             |      |           |            
|Effect of exchange rate changes in cash and cash equivalents                      |  | 59,314                       |             |      | 97       
|                                                                                  |  |                              |             |      |           |            
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                           |  | 4,996,648                    |             |      | (472,821)
|                                                                                  |  |                              |             |      |           |            
|CASH AND CASH EQUIVALENT, BEGINNING OF PERIOD                                     |  |                              | 7,074,893   |      |           | 559,105    
|                                                                                  |  |                              |             |      |           |            
|CASH AND CASH EQUIVALENT, END OF PERIOD                                           |  | $                            | 12,071,541  |      | $         | 86,284     
|                                                                                  |  |                              |             |      |           |            
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                 |  |                              |            
|Cash paid for income taxes                                                        |  | $                            | 35,241      |      | $         | 29,118     
|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, 2011 (Currency expressed in United States Dollars (US$), except for number of shares) (Unaudited)  Common StockAdditional paid-in capitalAccumulated other comprehensive incomeStatutory reserveRetained earningsTotal stockholders equityNo. of sharesAmountBalance as of January 1, 2011 (Audited)60,200,000$60,200$2,970,045$468,837$332,153$6,481,227$10,312,462Net income for the period-----1,636,8881,636,888Foreign currency translation adjustment---70,167--70,167Balance as of March 31, 201160,200,000$60,200$2,970,045$539,004$332,153$8,118,115$12,019,517                 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, 2011 (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, 2010 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, 2011 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2011 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, 2010, and all amendments thereto.   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  NamePlace of incorporation
and kind of
legal entityPrincipal activities
and place of operationParticulars of issued/
registered capitalEffective interest
heldLinking Target Limited (LTL)British Virgin Island (BVI), a limited liability companyInvestment holding1 issued shares of US$1 each100%Century Maker Limited (CML)Hong Kong, a limited liability companyInvestment holding1 issued shares of HK$1 each100%


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SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)    Zhong Heng Jiang Investment Consulting (Shenzhen) Company Limited (ZHJ)The PRC, a limited liability companyProvision of business consulting service in the PRCRMB100,000100%China Construction Guaranty Company Ltd (CCG) #The PRC, a limited liability companyProvision of guarantee and financial service in the PRCRMB50,000,000- # 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  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.  On September 23, 2008, the Company through its subsidiary, LTL entered into a series of agreements (VIE agreements) amongst CCG and the individual owner of CCG and details of the VIE agreements are as follows :


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SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)    1.Cooperation Agreement, LTL has the exclusive right to provide to CCG consulting services, including operational management, human resources management, research and development of the technologies related to the operations of CCG. CCG pays to LTL monthly consulting service fees in an amount equal to all of CCGs net profit for such month. The agreement runs for 20 year terms and are subject to automatic renewal for an additional 20 years, provided that no objection is made by both parties on the renewal.2.Option Agreement, LTL has the option to purchase CCG all assets and ownership at any time.3.Equity Pledge Agreement, CCG agree to pledge their legal interest to LTL as a security for the obligations under the Cooperation Agreement.4.Proxy Agreement, CCG irrevocably grants and entrusts LTL the right to exercise its voting and other stockholders right.5.Operating Agreement, LTL agrees to participate in the operations of CCG in different aspects.  With the above agreements, LTL demonstrates its ability to control CCG as the primary beneficiary, as such the operating results of the VIE were included in the condensed consolidated financial statements for the three months ended March 31, 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.  The Company maintains cash accounts with a number of financial institutions in the PRC. As of March 31, 2011, the Company has cash concentration risk of $11,347,488 which held by various financial institutions in the PRC as follow:  China Construction Bank$2,888,443Shenzhen Rural Commercial Bank2,560,083Ping An Bank1,978,801Zhongshan Xiaolan County Bank1,978,774Bank of China1,941,387$11,347,488  · Restricted cash  The Company mainly maintains restricted cash in depository accounts with financial institutions in the PRC, which are generally insured by the Peoples Bank of China.  · 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


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SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)   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 livesResidual valueLeasehold improvement3-5 years-Furniture, fittings, office equipment3-10 years5%Motor vehicles5 years5%  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, 2011 and 2010 were $33,377 and $29,524, 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  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


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SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)   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.  (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 guarantor business, 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. Provision for guarantee losses reflects the Companys best projection of defaults, which is based upon 5% of its total revenue for the period presented. The Company believes that it is more likely as a result of loss events that have occurred through March 31, 2011.  For the three months ended March 31, 2011 and 2010, the Company has recognized $190,234 and $107,654 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


13


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)   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, 2011 and 2010, the Company did not have any interest and penalties associated with tax positions. As of March 31, 2011, 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 income per share  The Company calculates net income per share in accordance with ASC Topic 260,Earnings per Share. Basic net income per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net 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


14


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)   in the PRC maintains its books and records in its local currency, Renminbi Yuan ("RMB"), which is functional currency as being the primary currency of the economic environment in which its operation is conducted.  In general, for consolidation purposes, assets and liabilities of its subsidiary and VIE whose functional currency is not US$ 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, 2011 |  | March 31, 2010
|Period-end RMB : US$1 exchange rate     |  | 6.5701         |  | 6.8361        
|Average period RMB : US$1 exchange rate |  | 6.5894         |  | 6.8360        

· 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 operates in one reportable operating segment in the PRC.  · Fair value of financial instruments  The carrying value of the Companys financial instruments: 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.   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;


15


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)    ·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 April 2011, the Financial Accounting Standards Board (FASB) issued new accounting guidance for purposes of measuring the impairment of receivables and evaluating whether a troubled debt restructuring has occurred. An entity should disclose the total amount of receivables and the allowance for credit losses as of the end of the period of adoption related to those receivables that are newly considered impaired under Section 310-10-35 for which impairment was previously measured under ASC Topic 450-20,ContingenciesLoss Contingencies. Currently, this guidance is anticipated to be effective for interim and annual periods ending after June 15, 2011. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial position, results of operations, cash flows, or disclosures.  In December 2010, the FASB issued ASU 2010-28, Intangibles  Goodwill and Other (ASC Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. The ASU does not prescribe a specific method of calculating the carrying value of a reporting unit in the performance of step 1 of the goodwill impairment test (i.e. equity-value-based method or enterprise-value-based method). However, it requires entities with a zero or negative carrying value to assess, considering qualitative factors such as those used to determine whether a triggering event would require an interim goodwill impairment test (listed in ASC Topic 350-20-35-30, Intangibles  Goodwill and Other  Subsequent Measurement ), whether it is more likely than not that a goodwill impairment exists and perform step 2 of the goodwill impairment test if so concluded. ASU 2010-28 is effective for the Company beginning January 1, 2011 and early adoption is not permitted. The Company does not expect the adoption of ASU 2010-28 to have a material impact on its consolidated financial position or results of operations.  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.


16


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)   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, 2011, the Company had surety and tendering guarantees outstanding resulting in restricted cash with approximately $10,069,025 from customer collateral and $4,305,372 for escrow deposits at the bank.   NOTE-5 AMOUNT DUE TO A RELATED PARTY  As of March 31, 2011 and December 31, 2010, 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-6 ACCRUED LIABILITIES AND OTHER PAYABLE  Accrued liabilities and other payable consisted of following:  March 31, 2011December 31, 2010(Unaudited)(Audited)Provision for guarantee losses$1,229,145$1,031,803Accrued payroll and employee welfare132,080196,376Accrued operating expenses133,533134,228Customer deposits115,66841,986Other payables51,03750,616$1,661,463$1,455,009   NOTE-7 INCOME TAXES  For the three months ended March 31, 2011 and 2010, the local (United States) and foreign components of income from operations before income taxes were comprised of the following:  Three months ended March 31,20112010Tax jurisdictions from: Local$$- Foreign2,157,647765,942Income before income taxes$2,157,647$765,942  The provision for income taxes consisted of the following:


17


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)    Three months ended March 31,20112010Current: Local$-$- Foreign89,12766,859Deferred: Local-- Foreign431,632114,180Income tax expense$520,759$181,039  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, 2011, 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 2031, 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, 2011 and 2010, 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


18


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (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, 2011 and 2010, 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, 2011 and 2010, is as follows:  Three months ended March 3120112010Income before income taxes$2,157,647$765,942Statutory income tax rate25%25%Income tax expense at statutory tax rate539,412191,486Effect of tax holiday(19,978)(15,042)Effect of non-taxable items1,325(4,832)Effect of non-deductible items-9,427Income tax expense$520,759$181,039  The following table sets forth the significant components of the aggregate deferred tax (assets) and liabilities of the Company as of March 31, 2011 and December 31, 2010:   March 31, 2011December 31, 2010Deferred tax (assets):Net operating loss carryforward$(14,000)$(14,000)Deferred revenue(251,133)(215,224)Total deferred tax (assets)(265,133)(229,224)Less: valuation allowance14,00014,000Total deferred tax (assets)(251,133)(215,224)Deferred tax liabilities:Provision for guarantee losses2,115,9071,638,067Deferred tax liabilities, net$1,864,774$1,422,843   NOTE-8 CONCENTRATIONS OF RISK  The Company is exposed to the following concentrations of risk:


19


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)   (a) Major customers  For the three months ended March 31, 2011 and 2010, there was no single customer who accounted for 10% or more of the Company’s revenues.  (b) Major vendors  For the three months ended March 31, 2011 and 2010, there was no single vendor who accounted for 10% or more of the Companys purchases.  (c) Credit risk  Financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash, restricted cash and guarantee fee receivable. Substantially all of cash and restricted cash are held by the recognized financial institutions in the PRC. The Company also performs ongoing credit evaluations of its customers financial condition, but does not require collateral to support such receivables.  (d) Political and country risk  The Companys operations are carried out in the PRC. Accordingly, the Companys business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, by the general state of the PRCs economy. The Companys business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.  (e) Guarantee default risk  The Company has a significant concentration risk related to its guarantees on potential loss if the customers fail to the completion of their performance obligation in a timely manner under the surety guarantees. To reduce these potential losses, the Company holds collateral in the form of cash equivalents, which are reflected in customer collateral on the balance sheets as they are held in restricted cash in the Companys name.  (f) Exchange rate risk  The reporting currency of the Company is US$, 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.  NOTE-9 COMMITMENTS AND CONTINGENCIES  (a) Operating lease commitments


20


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2011 (Currency expressed in United States Dollars (US$)) (Unaudited)   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, 2011 and 2010, was $114,541 and $89,920 respectively.  As of March 31, 2011, the Company has future minimum rent payments due under various non-cancelable operating leases in the next five years, as follows:  Years ending March 31:2012$309,2832013270,0002014265,0972015246,1522016140,170Total:$1,230,702  (b) Guarantees  As of March 31, 2011, the Company has 421 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 $108,567,076 (RMB713,296,547) 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, 2011. 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, 2011 and 2010, the Company experienced no claims for actual guarantee loss. At March 31, 2011, the Company has accrued $1,229,145 on the provision for guarantee losses for any potential claims.   NOTE-10 SUBSEQUENT EVENTS  In accordance with ASC Topic 855, Subsequent Events, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after March 31, 2011 up through the date was the Company issued the audited consolidated financial statements. During the period, the Company did not have any material recognizable subsequent events.


21     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 10-Q 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.  PLAN OF OPERATIONS  Management Team's 2011 Operational Plan  I.     Operational Environment of Year 2011  1. In terms of legal environment, the country 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 to it. Recently, in addition to the already existing fundamental laws and regulations that govern the industry of assurance (e.g. the "Company Law"); the country has passed the first "Property Law". 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 represented by the "Small to Medium Enterprises Promoting 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" and the "Certain Trial Rules for the Introduction of Construction Contract Guarantee in Real Estate Developing Projects". 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 for the credit environment, the gradual establishment of social credit system in China has attracted the general public's attention. It is emphasized during the 16th National Congress of Communist Party of China that the country will start to straighten up and improve the order of the market economy, and will implement the construction work of social credit system as a strategic task. It is further clearly stated by the Third Plenary Sessions of the Sixteenth Central Committee that: the whole society's credit awareness shall be  22    enhanced, the social credit system shall be established with the morality as the prop, the property as the foundation and the law as the assurance. Within the scope of five years, the basic framework and operational mechanism for China's social credit system shall be completed."  II.   Market Opportunity  1. In the field of construction projects, with 385.6 billion central government budget arranged and 200 billion local government bonds promised as stated in the plan of the state government, six key areas will be given priority for development, the prior two areas are the social welfare housing development, the construction projects for rural infrastructure and the construction projects for the improvement of rural citizens livelihood. Meanwhile, almost all local governments have identified their own significant construction projects, for instance, the city of Beijing plans to invest 161 billion RMB in year 2011 to develop 230 key projects, which represents a 15% growth comparing with last year. These important projects include the construction of Beijings new airport and connected highways, the establishment of the new airport surrounding economic zone in southern Beijing, the infrastructure construction projects for rail transit facilities and urban roads, the reconstruction of the old town and the urbanization of 50 major villages. Xinjiang province, however, will continue to invest in the fields of railway, highway, pipelines, and electric power facilities. The provincial government of Xinjiang has identified 252 important projects with 40 projects newly launched; the budget has been loaded with over 150 billion RMB. By the end of September 2010, the total turnover of Chinas project contract undertaken abroad has exceeded 400 billion USD with the contract amount reaching 642.3 billion USD. From January 2010 to September 2010, completed turnover of Chinas project undertaken abroad has increased by 16.6% and reached the amount of 59.3 billion USD, the total amount of newly signed contracts also reached 81.98 billion USD. As for the performance guarantee business, the letter of guarantee for foreign contract performance alone, calculated as of 10% of the total contract amount, will account for 6 billion USD.  2. As for the sector of railway material purchase, according to the announcement of the Ministry of Railways, Chinas railway fixed assets investment will be around 850 billion RMB with 700 billion RMB known as investment for infrastructure. Based on the national collection of completion indicators for major railway development projects as released by the Ministry of Railways on February 12th, last years railway related fixed assets investment has increased by 18.8% comparing with the figure of 702 billion RMB of year 2009. Meanwhile, last years railway infrastructure investment has also increased by 18.1% comparing with the figure of 600.4 billion RMB of year 2009. Drawing a comparison between the two types of investments in previous two years, it could be noted that the scale of infrastructure investment remains unchanged while the fixed assets investment has been expanded. 3. Other business sectors. The State Grid has revealed in its annual working conference that, in the next five years, four major areas that will be preferentially developed, are the extra-high voltage, the smart grid, the new round of rural grid construction and the internationalization. The Annual Working Plan of State Grid has mapped out that the investment for smart transformer substation will grow by 2000%, the investment for distribution automation will grow by 100%, and the intelligent ammeter will grow by 4%. Thus, it could be expected that demands for the letter of guarantee business for the State Grids purchase of power equipment and the grid construction projects will also experience a tide of considerable growth.     23    III.   2011 Market Expansion Proposal and Safeguard Measures  Market Expansion Proposal (Research for New Products and Market)  1. The Company will accelerate the process of expansion by targeting new markets, 5 subsidiaries will be established in 2011 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 endeavor to create more products to further cultivate the letter of guarantee business for railway material purchase as well as touching the business of commercial letter of guarantee and the international letter of guarantee, for example: Letter of Guarantee of International Leasing, Performance Guarantee Letter for Commercial Property, Letter of Guarantee for International Projects, Letter of Guarantee for Temporary Custom Import Tax and the Letter of Guarantee for the Risk Security for foreign labor cooperation.  Safeguard Measures  1. The Company will develop innovative risk control mechanism to reduce the risk. The guarantee industry is a high risk industry, and one negative business may bring in tremendous burden to the operation of the company. To effectively avoid the risk, the internal control system needs to be enhanced and improved. The Company will set up a project assessment panel in 2011 to build up a risk-control and discussion mechanism to ensure a steady growth of business with comparatively low risks.  2. The Company will try to ensure the talent-oriented developing strategy by redesigning the current employing mechanism. As a new industry in China, the assurance industry is often quoted as a high risky and strongly professional industry, thus this industry would impose strict requirements for the practitioners. Inferring from the development status of the whole countrys assurance entities, lack of human resource now becomes a universal phenomenon. In order to promote sustainable development, the Company will start to form a professional team in 2011. Also, the Company will recruit intelligent graduates from developed regions such as Beijing, Shanghai and Shenzhen to establish a better environment for educating and selecting talents, while creating a better employing and reserve of talents system.  3. The Company will continue to be client-centric in 2011, the whole Company will act more closely and professionally to increase clients confidence in the company. Post-sale service will become the major task in year 2011, the Companys service will not end when the client makes the purchase, instead, the Company will track the new status of the client after the service to promptly reduce the business risks and maintain a good relationship between the Company and clients.  4. The Company will reinforce the communication with business partners by more actively participating in various activities organized by the industrial association, the construction bodies and the cooperating banks. Therefore, the Company will be able to acquire the most up-to-date information of the industry, to embrace the new operational theories to enable the Company to develop in the same pace of time.  24    RESULTS OF OPERATIONS  THREE MONTHS ENDED MARCH 31, 2011 COMPARED WITH THREE MONTHS ENDED MARCH 31, 2010  Net revenue  Net revenue for the three months ended March 31, 2011, was $3,496,915 as compared to $1,894,270 for the same period in 2010. The increase of $1,602,645 or approximately 85% was due to significant year-over-year growth of our customer base in the tender and surety guarantee business and market share in China. The gross margin increased to 90% from 82% for the three months ended March 31, 2011, due to tightening of control of our cost of sales.  As a result, the cost of sales decreased for the period and the percentage of the guarantee fee income substantially increased.  Net income before tax  Net income before tax for the three months ended March 31, 2011 was $2,157,647 compared to $765,942 for the same period in 2010, an increase in pre-tax income of $1,391,705, or approximately 182%.  The increase in pre-tax net income was a result of the fact that we tightened control of our selling, general and administrative expenses during the period, and also employed more agents to promote our guarantee business which resulted in an increase in guarantee fee income from bank referrals.  Operating expenses  Total operating expenses were $1,001,997 for the three months ended March 31, 2011, as compared to $782,427 for the same period in 2010.  The increase of $219,570 or 28% was primarily due to the increase in staff costs, provision for guarantee losses, rent and rate, audit fee and other professional fee.  The reasons for the increases in the major items are as follows:  (1) Provision for guarantee losses - increase by $82,580 or 77% from $107,654 for the three months ended March 31, 2010 to $190,234 for the same period of 2011. The increase was mainly due to increase of guarantee fee income for the same period.  (2) Staff costs - increase by $65,643 or 18% from $370,594 for the three months ended March 31, 2010 to $436,237 for the same period of 2011. The increase was mainly due to increase in headcounts and pay rates for the same period.  (3) Audit fee and other professional fee to fulfill the obligation as a listing company - increase by $12,697 or 32% from $40,099 for the three months ended March 31, 2010 to $52,796 for the same period of 2011.  The increase was mainly due to the increment by the services provider.  (4) Rent and rates - increase by $24,621 or 27% from $89,920 for the three months ended March 31, 2010 to $114,541 for the same period of 2011. The increase was mainly due to expansion of the business and which was related to revenue growth.  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, 2011, guarantee fee receivable was $25,251, as compared to a December 31, 2010 balance of $18,003. As of March 31, 2011, customer collateral was $10,069,025, as compared to a December 31, 2010 bal  25    ance of $8,830,517. These changes were due to the increase of the tender and surety guarantee business.  As of March 31, 2011, deferred revenue was $1,025,031, as compared to deferred revenue of $915,847 as of December 31, 2010.  For the three months ended March 31, 2011, cash provided by operating activities totaled $2,279,066. This was primarily due to the net income for the period plus increase in deferred revenue and income tax payable, partially offset by the increase in guarantee fee receivables, prepayments and other receivable and decrease in accounts payable.  For the three months ended March 31, 2011, cash provided by investing activities amounted to $2,658,268. The receipt of funds was mainly due to the receipts from loans receivable, partially offset by the payment on loan receivable, purchase of plant and equipment and the change in restricted cash, net of customer collateral.  As of March 31, 2011, we owed $62,004 to Mr. Guokang Tu, a director. The loan was unsecured, interest-free, and has no fixed repayment terms.  As of March 31, 2011, our balance sheet reflects total assets of $27,285,351 and total liabilities of $15,265,834. The Company had bank and cash equivalents of approximately $12,071,541 as of March 31, 2011.  As of March 31, 2011, the Company had surety and tendering guarantees outstanding resulting in restricted cash of approximately $10,069,025 from customer collateral and $4,305,372 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.  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, 2011, we had total future lease commitments under non-cancelable operating leases of $1,230,702. We currently have working capital sufficient to fund these lease commitments.  As of March 31, 2011, we had contingent liabilities in respect of guarantees granted under the surety and tendering guarantee services business in the aggregate amount of $108,567,076. As of March 31, 2011, the Company has 421 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 $108,567,076 (RMB713,296,547) 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, 2011. 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, 2011 and 2010, the Company experienced no actual guarantee loss claims. At March 31, 2011, the Company has accrued $1,229,145 on the provision for guarantee losses for any potential claims.  26     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 2010 Form 10-K, and all amendments thereto.    ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Not applicable.     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, 2011 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, 2011, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.     27     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. (REMOVED AND RESERVED)     ITEM 5. OTHER INFORMATION  None     ITEM 6. EXHIBITS  The following exhibits are filed herewith:  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 Form 8-KA filed with the Securities and Exchange Commission on December 9, 2008).  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.   28    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.   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 13, 2011   By: /s/ Mengyou Tong, Chief Financial Officer  Date:  May 13, 2011    29