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 September 30, 2010  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: 0-50002


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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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|17th Floor, 6009 Yitian Road, New World Center,
Futian District, Shenzhen, Peoples Republic of China
|(Address of principal executive offices)                                                             




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|----------------------------------------------------
|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).                    Yeso   No o  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 September 30, 2010, there were 60,000,000 shares of the registrants common stock, $0.001 par value, outstanding    2       TABLE OF CONTENTS PART I - FINANCIAL INFORMATION 4 ITEM 1.  FINANCIAL STATEMENTS 4 ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 28 ITEM 4(T). CONTROLS AND PROCEDURES 28 PART II  OTHER INFORMATION 29 ITEM 1. LEGAL PROCEEDINGS 29 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 29 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 29 ITEM 4. (REMOVED AND RESERVED) 29 ITEM 5. OTHER INFORMATION 29 ITEM 6. EXHIBITS 29       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, 2009.    4





SINO ASSURANCE INC. CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009 (Currency expressed in United States Dollars (US$), except for number of shares)  September 30, 2010December 31, 2009(Unaudited)(Audited)ASSETSCurrent assets:Cash and cash equivalents$1,565,431$559,105Restricted cash10,596,4195,817,191Guarantee fee receivable27,331790Prepayments and other receivable438,996203,196Loans receivable5,355,2503,263,032Total current assets17,983,4279,843,314Non-current assets:Plant and equipment, net344,480275,232TOTAL ASSETS$18,327,907$10,118,546LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable, trade$22,603$7,004Customer collateral7,499,5493,729,734Deferred revenue637,631364,636Amount due to a related party75,74959,582Income tax payable293,29629,113Deferred tax liabilities917,430345,577Accrued liabilities and other payable957,316576,768Total current liabilities10,403,5745,112,414Commitments and contingenciesStockholders equity:Common stock, $0.001 par value; 200,000,000 shares authorized; 60,000,000 shares issued and outstanding, respectively60,00060,000Additional paid-in capital2,915,1212,915,121Accumulated other comprehensive income324,868172,065Statutory reserve158,314158,314Retained earnings4,466,0301,700,632Total stockholders equity7,924,3335,006,132TOTAL LIABILITIES AND STOCKHOLDERS EQUITY$18,327,907$10,118,546      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 AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$), except for number of shares) (Unaudited)


|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|------------------------------------------------------------- |  | -------------------------------- | ---------- | ------------------------------- | - | ---------- |  | ---- | ---------- |  | - | ----------
|                                                              |  | Three months ended September 30, |            | Nine months ended September 30,
|                                                              |  | 2010                             |            | 2009                            |   | 2010       |  | 2009
|REVENUES, NET                                                 |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Guarantee fee income                                          |  | $                                | 2,981,863  |                                 | $ | 1,708,504  |  | $    | 7,230,368  |  | $ | 3,299,825 
|Interest income                                               |  |                                  | 53,041     |                                 |   | 25,628     |  |      | 113,838    |  |   | 90,170    
|Total revenues, net                                           |  |                                  | 3,034,904  |                                 |   | 1,734,132  |  |      | 7,344,206  |  |   | 3,389,995 
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|COST OF REVENUE                                               |  |                                  | 524,677    |                                 |   | 420,271    |  |      | 1,292,481  |  |   | 870,701   
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|GROSS PROFIT                                                  |  |                                  | 2,510,227  |                                 |   | 1,313,861  |  |      | 6,051,725  |  |   | 2,519,294 
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Operating expenses:                                           |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Depreciation                                                  |  |                                  | 26,504     |                                 |   | 20,284     |  |      | 82,043     |  |   | 61,386    
|Selling, general and administrative                           |  |                                  | 706,813    |                                 |   | 576,298    |  |      | 1,955,454  |  |   | 1,430,698 
|Provision for guarantee losses                                |  |                                  | 163,687    |                                 |   | 56,359     |  |      | 400,883    |  |   | 165,956   
|Total operating expenses                                      |  |                                  | 897,004    |                                 |   | 652,941    |  |      | 2,438,380  |  |   | 1,658,040 
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|INCOME FROM OPERATIONS                                        |  |                                  | 1,613,223  |                                 |   | 660,920    |  |      | 3,613,345  |  |   | 861,254   
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Other income (expense):                                       |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Other income                                                  |  |                                  | -          |                                 |   | -          |  |      | -          |  |   | 2,288     
|Other expense                                                 |  |                                  | -          |                                 |   | (1,589)    |  |      | -          |  |   | (15,093)  
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|INCOME BEFORE INCOME TAXES                                    |  |                                  | 1,613,223  |                                 |   | 659,331    |  |      | 3,613,345  |  |   | 848,449   
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Income tax expense                                            |  |                                  | (376,984)  |                                 |   | (144,262)  |  |      | (847,947)  |  |   | (154,047) 
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|NET INCOME                                                    |  | $                                | 1,236,239  |                                 | $ | 515,069    |  | $    | 2,765,398  |  | $ | 694,402   
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Other comprehensive income:                                   |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|- Foreign currency translation gain                           |  |                                  | 125,902    |                                 |   | 3,532      |  |      | 152,803    |  |   | 7,388     
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|COMPREHENSIVE INCOME                                          |  | $                                | 1,362,141  |                                 | $ | 518,601    |  | $    | 2,918,201  |  | $ | 701,790   
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Net income per share  basic and diluted                      |  | $                                | 0.02       |                                 | $ | 0.01       |  | $    | 0.05       |  | $ | 0.01      
|                                                              |  |                                  |            |                                 |   |            |  |      |            |  |   |           
|Weighted average common stock outstanding  basic and diluted |  |                                  | 60,000,000 |                                 |   | 60,000,000 |  |      | 60,000,000 |  |   | 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 NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)


|                                                                                  |  |                                 |             |      |         |          
|--------------------------------------------------------------------------------- |  | ------------------------------- | ----------- | ---- | ------- | ---------
|                                                                                  |  | Nine months ended September 30,
|                                                                                  |  | 2010                            |             | 2009
|Cash flows from operating activities:                                             |  |                                 |             |      |         |          
|Net income                                                                        |  | $                               | 2,765,395   |      | $       | 694,402  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |             |      |         |          
|Depreciation                                                                      |  |                                 | 82,043      |      |         | 61,386   
|Loss on disposal of plant and equipment                                           |  |                                 | 1,183       |      |         | 7,490    
|Provision for guarantee losses                                                    |  |                                 | 400,883     |      |         | 165,956  
|Deferred tax expense                                                              |  |                                 | 554,876     |      |         | 6,669    
|Changes in operating assets and liabilities:                                      |  |                                 |             |      |         |          
|Guarantee fee receivable                                                          |  |                                 | (26,064)    |      |         | (301,037)
|Prepayments and other receivable                                                  |  |                                 | (232,788)   |      |         | (36,472) 
|Accounts payable, trade                                                           |  |                                 | 15,185      |      |         | (52,304) 
|Advances from customers                                                           |  |                                 | -           |      |         | 23,035   
|Deferred revenue                                                                  |  |                                 | 260,816     |      |         | (137,342)
|Income tax payable                                                                |  |                                 | 259,004     |      |         | 146,747  
|Accrued liabilities and other payable                                             |  |                                 | (38,711)    |      |         | (54,833) 
|                                                                                  |  |                                 |             |      |         |          
|Net cash provided by operating activities                                         |  |                                 | 4,041,822   |      |         | 523,697  
|                                                                                  |  |                                 |             |      |         |          
|Cash flows from investing activities:                                             |  |                                 |             |      |         |          
|Change in restricted cash, net of customer collateral                             |  |                                 | (949,296)   |      |         | (421,022)
|(Payment on) repayment from loans receivable                                      |  |                                 | (1,984,092) |      |         | 847,233  
|Proceeds from disposal of plant and equipment                                     |  |                                 | 290         |      |         | 835      
|Purchase of plant and equipment                                                   |  |                                 | (145,947)   |      |         | (2,929)  
|                                                                                  |  |                                 |             |      |         |          
|Net cash (used in) provided by investing activities                               |  |                                 | (3,079,045) |      |         | 424,117  
|                                                                                  |  |                                 |             |      |         |          
|Cash flows from financing activities:                                             |  |                                 |             |      |        
|Advance from a related party                                                      |  | 14,930                          |             |      | -      
|                                                                                  |  |                                 |             |      |        
|Net cash provided by financing activities                                         |  | 14,930                          |             |      | -      
|                                                                                  |  |                                 |             |      |        
|Effect of exchange rate changes in cash and cash equivalents                      |  | 28,619                          |             |      | 898    
|                                                                                  |  |                                 |             |      |         |          
|NET CHANGE IN CASH AND CASH EQUIVALENTS                                           |  | 1,006,326                       |             |      | 948,712
|                                                                                  |  |                                 |             |      |         |          
|CASH AND CASH EQUIVALENT, BEGINNING OF PERIOD                                     |  |                                 | 559,105     |      |         | 90,158   
|                                                                                  |  |                                 |             |      |         |          
|CASH AND CASH EQUIVALENT, END OF PERIOD                                           |  | $                               | 1,565,431   |      | $       | 1,038,870
|                                                                                  |  |                                 |             |      |         |          
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                 |  |                                 |            
|Cash paid for income taxes                                                        |  | $                               | 32,368      |      | $       | 3,116    
|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 NINE MONTHS ENDED SEPTEMBER 30, 2010 (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, 201060,000,000$60,000$2,915,121$172,065$158,314$1,700,632$5,006,132Net income for the period----2,765,3982,765,398Foreign currency translation adjustment---152,803--152,803Balance as of September 30, 201060,000,000$60,000$2,915,121$324,868$158,314$4,466,030$7,924,333                  See accompanying notes to condensed consolidated financial statements


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SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (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, 2009 which has been derived from the 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 September 30, 2010 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2010 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, 2009.   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 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 Islands (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 NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (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 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  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 financial statements 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.  · 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 at financial institutions in the PRC, which are insured by the Peoples Bank of China.


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SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (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: Depreciable lifeLeasehold improvement5 yearsFurniture, fittings, office equipment5 yearsMotor vehicles10 years  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 September 30, 2010 and 2009 were $26,504 and $20,284, respectively.  Depreciation expenses for the nine months ended September 30, 2010 and 2009 were $82,043 and $61,386, respectively.  · Impairment of long-life 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 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 a undiscounted cash flow analysis. There has been no impairment as of September 30, 2010.


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SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)   · 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 collectibility is reasonably assured.  · 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  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.  (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 collectibility 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 and the Company believes that it is more likely as a result of loss events that have occurred through September 30, 2010.  For the nine months ended September 30, 2010 and 2009, the Company has recognized $400,883 and $165,956 on the provision for guarantee losses for any potential claims.


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SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)   · Income taxes  The provision for income taxes is determined in accordance with 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 disclose 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 nine months ended September 30, 2010 and 2009, the Company did not have any interest and penalties associated with tax positions. As of September 30, 2010, 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 its own jurisdiction. As a result of its business activities, the Company files separate tax returns that are subject to examination by the foreign tax authorities.  · 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 consolidated statements 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.


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SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)   · Foreign currencies translation  Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the consolidated statement of operations.  The reporting currency of the Company is the United States Dollars ("US$") and the accompanying consolidated financial statements have been expressed in US$. In addition, the Companys operating entity in the PRC maintains its books and records in its local currency, Renminbi Yuan ("RMB"), which is functional currency as being the primary currency of the economic environment in which its operation is conducted.  In general, for consolidation purposes, assets and liabilities of its operating entity whose functional currency is not US$ 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 statement of stockholders equity.  Translation of amounts from RMB into US$1 has been made at the following exchange rates for the respective periods:


|                                        |  |  |  |                    |  |                   
|--------------------------------------- |  |  |  | ------------------ |  | ------------------
|                                        |  |  |  | September 30, 2010 |  | September 30, 2009
|Period-end RMB : US$1 exchange rate     |  |  |  | 6.6981             |  | 6.8376            
|Average period RMB : US$1 exchange rate |  |  |  | 6.8164             |  | 6.8425            

· 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 measurement  ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), establishes a new framework for measuring fair value and expands related disclosures. Broadly, ASC 820 framework requires fair value


14


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)   to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC 820 establishes a three-level valuation hierarchy based upon observable and non-observable inputs. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.  For financial assets and liabilities, fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date.  · Financial instruments  Cash and cash equivalents, restricted cash, guarantee fee receivable, prepayments and other receivable, accounts payable, customer collateral, deferred revenue and amount due to related parties, income tax payable, accrued liabilities and other payable are carried at cost which approximates fair value. The estimated fair value of loans receivable was $5.4 million as of September 30, 2010, based on current market prices or interest rates. Any changes in fair value of assets or liabilities carried at fair value are recognized in other comprehensive income for each period.  · 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 2010, the Financial Accounting Standard Board (FASB) issued Accounting Standards Update (ASU) 2010-13, Compensation  Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. ASU 2010-13 provides guidance on the classification of a share-based payment award as either equity or a liability. A share-based payment that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. ASU 2010-13 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010 and is not expected to have a significant impact on the Companys financial statements.  In July 2010, the FASB issued an accounting standards update to require further disaggregated disclosures that improve financial statement users understanding of (1) the nature of an entitys credit risk associated with its financing receivables and (2) the entitys assessment of that risk in estimating its allowance for credit losses as well as changes in the allowance and the reasons for those changes. This update will be effective for the Company in the second quarter of fiscal 2011, except for the disclosures relating to activity that occurred during a reporting period which is effective for the Company in the third quarter of fiscal 2011. Since this update addresses only disclosures related to credit quality of financing receivables and the


15


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)   allowance for credit losses, it is not expected that the adoption of this update will have a material impact on the Companys financial position, results of operations or cash flows.   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 September 30, 2010, the Company had surety and tendering guarantees outstanding resulting in restricted cash with approximately $7,499,549 from customer collateral and $3,096,870 for escrow deposits at the bank.   NOTE-5 LOANS RECEIVABLE  Loans receivable consist of the following: September 30, 2010December 31, 2009(Unaudited)(Audited)Due from Party A, in a term of 12 months, repayable on October 31, 2010, with an interest rate of 2.52% per annum payable at its due date$537,467$877,552Due from Party A, in a term of 12 months, repayable on November 30, 2010, with an interest rate of 2.52% per annum payable at its due date597,184585,035Due from Party A, in a term of 12 months, repayable on December 31, 2010, with an interest rate of 2.52% per annum payable at its due date742,001726,906Due from Party A, in a term of 12 months, repayable on June 30, 2011, with an interest rate of 2.52% per annum payable at its due date74,648-Due from Party B, in a term of 12 months, repayable on December 31, 2010, with an interest rate of 2.52% per annum payable at its due date1,095,8331,073,539Due from Party B, in a term of 12 months, repayable on March 31, 2011, with an interest rate of 2.52% per annum payable at its due date1,171,974-


16


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)    Due from Party B, in a term of 12 months, repayable on June 30, 2011, with an interest rate of 2.52% per annum payable at its due date134,366-Due from Party B, in a term of 12 months, repayable on September 30, 2011, with an interest rate of 2.52% per annum payable at its due date1,001,777-Total:$5,355,250$3,263,032   NOTE-6 ACCRUED LIABILITIES AND OTHER PAYABLE  Accrued liabilities and other payable consisted of following: September 30, 2010December 31, 2009Business tax payable$51,200$80,294Provision for guarantee losses738,403323,717Accrued payroll and employee welfare114,098109,163Accrued operating expenses32,52741,957Other tax payable14,95816,185Other payable6,1305,452$957,316$576,768   NOTE-7 INCOME TAXES  For the nine months ended September 30, 2010 and 2009, the local (United States) and foreign components of income from operations before income taxes were comprised of the following:  Nine months ended September 30,20102009Tax jurisdictions from: Local$-$- Foreign3,613,345848,449Income before income taxes$3,613,345$848,449    The provision for income taxes consisted of the following:


17


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)    Nine months ended September 30,20102009Current: Local$-$- Foreign293,071147,378Deferred: Local-- Foreign554,8766,669Income tax expense$847,947$154,047  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. No provision for income taxes have been made as SNAS has generated no taxable income during the period.  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 nine months ended September 30, 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 operate in Shenzhen City, the PRC and is recognized as Enterprise Located in Special Economic Zone. As a result, the Company is entitled to Corporate Income Taxes (CIT) at a preferential tax rate of 15%. For the nine months ended September 30, 2010 and 2009, 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, CCG 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,


18


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)   2008.  The reconciliation of income tax rate to the effective income tax rate for the nine months ended September 30, 2010 and 2009 is as follows:  Nine months ended September 30,20102009Income before income taxes$3,613,345$848,449Statutory income tax rate25%25%Income tax expense at statutory tax rate903,336212,112Effect of tax holiday(57,764)(26,226)Effect of non-taxable items(18,251)(35,076)Effect of non-deductible items18,9273,237Under-provision in prior year1,699-Income tax expense$847,947$154,047  The following table sets forth the significant components of the aggregate deferred tax assets and liabilities of the Company as of September 30, 2010 and December 31, 2009:  September 30, 2010December 31, 2009Deferred tax assets:Deferred revenue$(149,843)$(79,936)Deferred tax liabilities:Provision for guarantee losses1,067,273425,513Deferred tax liabilities, net$917,430$345,577   NOTE-8 CONCENTRATIONS OF RISK  The Company is exposed to the following concentrations of risk:  (a) Major customers  For the three and nine months ended September 30, 2010, one customer represented more than 10% of the Company’s revenue.  For the three and nine months ended September 30, 2009, there is no customer who accounts for 10% or more of the Companys revenues.


19


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)   (b) Major vendors  For the three and nine months ended September 30, 2010 and 2009, there is no vendor who accounts for 10% or more of the Companys purchases.  (c) Credit risk  Financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash, restricted cash and guarantee fee receivable. Substantially all of cash and restricted cash are held by the recognized financial institutions in the PRC. The Company also performs ongoing credit evaluations of its customers financial condition, but does not require collateral to support such receivables.  (d) Political and country risk  The Companys operations are carried out in the PRC. Accordingly, the Companys business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, by the general state of the PRCs economy. The Companys business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.  (e) Guarantee default risk  The Company has a significant concentration risk related to its guarantees on potential loss if the customers fail to the completion of their performance obligation in a timely manner under the surety guarantees. To reduce these potential losses, the Company holds collateral in the form of cash equivalents, which are reflected in customer collateral on the balance sheets as they are held in restricted cash in the Companys name.  (f) Exchange rate risk  The reporting currency of the Company is US$, 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  The Company was committed under various non-cancelable operating leases with fixed monthly rentals, due through September 2015. Total rent expenses for the nine months ended September 30, 2010 and 2009 was $294,316 and $230,574, respectively.


20


SINO ASSURANCE INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (Currency expressed in United States Dollars (US$)) (Unaudited)   As of September 30, 2010, future minimum rent payments due under various non-cancelable operating leases in the next five years are as follows:  Years ending September 30:2011$531,3712012384,1312013241,4482014241,4482015241,448Total:$1,639,846  (b) Guarantees  As of September 30, 2010, the Company has 661 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 $118,521,492 (RMB793,868,806) 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 September 30, 2010. 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 nine months ended September 30, 2010 and 2009, the Company experienced no actual guarantee loss claims. At September 30, 2010, the Company has accrued $738,403 on the provision for guarantee losses for any potential claims.


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 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.  PLAN OF OPERATIONS  I. Management Background of 2010  1. Project Assured Guarantee System has been implemented deeply in China. Governmental policies also show steady growing support of this industry. Held on 25 August 2009 in Beijing, the China Project Assured Guarantee Forum organized and undertaken by the China Construction Association and Managing and Administrating Committee of Construction Enterprises respectively, marked the highest standard and the largest scale of the kind. Such a move also evidenced the acceleration of introducing the Project Assured Guarantee to the Chinese construction market.  2. Based on the <<Global Construction Industry Forecast 2020>>, the construction industry will continue to boom in China, and China would surpass USA and become the worlds largest market leader in 2018. The forecast also indicated that the gross domestic product of the Chinas construction market would near 2.4 trillion, attributable for 19.1% of the global construction market shares.  3. Since the recent drought hits hard the southwestern and northwestern part of China, the ongoing South North Water Transfer Project would be injected with abundant funds, approximately 10 times of the total investment in the past 7 years.  4. The Four Trillion Stimulus Plan is still driving the infrastructure construction sector towards a higher phase. It is assumed that in the first half of 2010, the amount of issued contract by rail sector is expected to reach its peak again and the growth rate of rail infrastructure investment would be at 20%. According to the State and local planning materials, the highway construction will continue to expand in 2010. The biggest growth would come from the Urban Rail Transit sector. Following the plan, the total length of Urban Rail Transit system would exceed two thousand kilometers at over RMB 800 billion investment before 2015.  5. Economic recovery would lead to an increase of industrial fixed assets investment, thus helping the professional industrial engineering sector back to the ascending track.      22    II.   Market Opportunities  1. Enabled by the constant penetration of the Project Assured Guarantee System and the accumulation of experience in the bank guarantee business of the Companys branches, the further business development will come along with the growing brand popularity.  2. South North Water Transfer Project would bring more revenue opportunities to the Companys northwestern branches.  3. According to the Strategic Development Plan published by the Ministry of Railways, we are going to establish branches in He Bei and Shaanxi and they would explore more market opportunities by placing extra attention to the railway bidding market.  4. Based on the existing domestic banking guarantee service, the Company would cooperate with China Construction Bank to explore the overseas construction project guarantee market. Such an attempt is being performed in Southeastern Asia and Africa. This new business initiative would be promoted along with the rapid expansion of Chinas construction industry into the global market.  5. Economic recovery attracts huge investment into fixed assets and information technology sectors. This would create new business model, for example: advance payment guarantee in materials purchase transactions, technological performance guarantee in the integrated information system construction projects would all be revenue growth engines for the Companys existing project guarantee business.  III. Expansion Plan and Safeguard Measures of 2010  Expansion Plan  1. Following the trends of governmental investment into the infrastructure, business teams shall be reorganized to perform specific business tracking.  2. To further strengthen the collaboration with China Construction Bank and Shanghai Pudong Development Bank, so that the existing business platform could be expanded, the credit facilities be increased and the steady and efficient business handling environments be ensured.  3. To conduct market surveys in more China regions, to penetrate the business into wider areas within China, and to establish more branch offices which can be conducive to business growth.  4. To expand the existing business coverage to a wider area by redefining the traditional project assured guarantee business to the comprehensive contract performance guarantee service. Benefiting from the quick recovery of the Chinese economy, more and more contractual parties start to concern about their contractual interests. This trend would result in an increase of contract performance guarantee service within the Companys business scope.  5. To take a close look at the China Construction Banks business expansion in the international construction market; to provide its clients with advance payment guarantee and the contract performance guarantee service to redefine the Companys business scope.         23    Safeguard Measures  1. Summarizing past experience in undertaking the engineering guarantee business for the self-learning within the Company to strengthen each branchs risk perceiving abilities.  2. Constantly perfecting the Companys risk control system, paying attention to the building of risk control team, further formalizing the standard procedure of project operation, offering training and practicing sessions for the risk control team members from each branch, and performing consequent monitoring and examining procedures for the ongoing guarantee projects.  3. Credit evaluating system shall be established for the Companys existing clients whereby the highest guarantee limit can be tailored for different clients of different client reference to prevent risks.  4. Irregular investigations shall be performed to evaluate different operational status, to collect any event of default among the peer industry and promptly send message to the Company group and therefore decline guarantee service to the clients concerned well in advance.  5. Regular experience exchange among cooperative partners shall be arranged regularly so that the Companys risk control standard could be improved.  24    RESULTS OF OPERATIONS  NINE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2009 AND THREE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2009  Net revenue  Net revenue for the nine months ended September 30, 2010, was $7,344,206 as compared to $3,389,995 for the same period in 2009. The increase of $3,954,211 or approximately 117% 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 82% from 74% for the nine months ended September 30, 2010, due to tightening of control of our cost of sales.  As a result, the percentage increase in cost of sales for the period was substantially less than the percentage increase in guarantee fee income.  Net revenue for the three months ended September 30, 2010, was $3,034,904 as compared to $1,734,132 for the same period in 2009. The increase of $1,300,772 or approximately 75% 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 83% from 75% for the three months ended September 30, 2010, due to tightening of control of our cost of sales.  As a result, the percentage increase in cost of sales for the period was substantially less than the percentage increase in guarantee fee income.  Net income before tax  Net income before tax for the nine months ended September 30, 2010 was $3,613,345 compared to $848,449 for the same period in 2009, an increase in pre-tax net income of $2,764,896, or approximately 326%. 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.  Net income before tax for the three months ended September 30, 2010 was $1,613,223 compared to $659,331 for the same period in 2009, an increase in pre-tax income of $953,892, or approximately 145%.  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 $2,438,380 for the nine months ended September 30, 2010, as compared to $1,658,040 for the same period in 2009.  The increase of $780,340 or 47% was primarily due to the increase in depreciation, staff costs, provision for guarantee losses, rent and rate, audit fee and other professional fee.  Total operating expenses were $897,004 for the three months ended September 30, 2010, as compared to $652,941 for the same period in 2009.  The increase of $244,063 or 37% was primarily due to the increase in depreciation, 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 $234,927 or 142% for the nine months ended and $107,328 or 190% for three months ended September 30, 2010 as compared to last period. The increase was mainly due to increase of guarantee fee income for the same period.   25    (2) Staff costs - increase $285,240 or 38% for the nine months ended and $64,313 or 22% for three months ended September 30, 2010 as compared to last period. 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 $53,095 or 53% for the nine months ended and $12,536 or 26% for three months ended September 30, 2010 as compared to last year.  The increase was mainly due to the increment by the services provider.  (4) Rent and rates - increase $63,742 or 28% for the nine months ended and $31,959 or 39% for three months ended September 30, 2010 as compared to last period. The increase was mainly due to expansion of the business and which was related to revenue growth.  (5) Depreciation - increase $20,657 or 34% for the nine months ended and $6,220 or 31% for three months ended September 30, 2010 as compared to last period. The increase was mainly due to our acquisition of additional fixed assets during the period.  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 September 30, 2010, guarantee fee receivable was $27,331, as compared to a December 31, 2009 balance of $790. As of September 30, 2010, customer collateral was $7,499,549, as compared to a December 31, 2009 balance of $3,729,734. These changes were due to the increase of the tender and surety guarantee business.  As of September 30, 2010, deferred revenue was $637,631, as compared to deferred revenue of $364,636 as of December 31, 2009.  For the nine months ended September 30, 2010, cash provided by operating activities totaled $4,041,822. 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 accrued liabilities and other payable.  For the nine months ended September 30, 2010, cash used in investing activities amounted to $3,079,045. The use of funds was mainly due to the payment on loans receivable, purchase of plant and equipment and the change in restricted cash, net of customer collateral.  As of September 30, 2010, we owed $75,749 to Mr. Guokang Tu, a director. The loan was unsecured, interest-free, and has no fixed repayment terms.  As of September 30, 2010, our balance sheet reflects total assets of $18,327,907 and total liabilities of $10,403,574. The Company had bank and cash equivalents of approximately $1,565,431 as of September 30, 2010.  As of September 30, 2010, the Company had surety and tendering guarantees outstanding resulting in restricted cash of approximately $7,499,549 from customer collateral and $3,096,870 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.     26     As of September 30, 2010, the loans receivable consist of the followings:  Due from Party A$1,951,300Due from Party B3,403,950$5,355,250  The Company entered into loan agreements to provide financing to Party A and Party B as general working capital 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 October 31, 2010 to June 30, 2011 in the terms of 12 months.  The loan to Party B is unsecured, interest bearing at 2.52% per annum and payable on December 31, 2010 to September 30, 2011 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 September 30, 2010, we had total future lease commitments under non-cancelable operating leases of $1,639,846. We currently have working capital sufficient to fund these lease commitments.  As of September 30, 2010, we had contingent liabilities in respect of guarantees granted under the surety and tendering guarantee services business in the aggregate amount of $118,521,492. As of September 30, 2010, the Company has 661 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 $118,521,492 (RMB793,868,806) 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 September 30, 2010. 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 nine months ended September 30, 2010 and 2009, the Company experienced no actual guarantee loss claims. At September 30, 2010, the Company has accrued $738,403 on the provision for guarantee losses for any potential claims.      27     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 Consolidated Financial Statements, see Note 3 of the Notes to Financial Statements in this Form 10-Q and Note 3 of the Notes to Consolidated Financial Statements in our 2009 Form 10-K.     ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Not applicable.      ITEM 4(T). 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 annual 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 September 30, 2010 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 September 30, 2010, 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. (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).  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.    29    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:  November 8, 2010   By: /s/ Mengyou Tong, Chief Financial Officer  Date:  November 8, 2010    30