SNAS’s current total rental payment for its facilities is approximately US$515,706 in the fiscal year 2011. We intend to renew both of these leases upon their expiration.
As to the credit environment, the construction of social credit system of enterprises in relation to the management and customer credit information of the security industry merges into the existing banking and financial regulatory system. In 2011 the China Banking
In the field of construction projects on 2012, the central government intends to invest RMB402.6 billion in six areas, which consists of 3 letter of guarantee of construction businesses: " proposed arrangements for $ 69 billion to accelerate the affordable housing program to support the construction of low-rent housing and accelerate the shantytown improvement; proposed arrangement of RMB140.6 billion to strengthen the "three agriculture" construction for rural "water circuit" livelihood projects; proposed arrangement of RMB24.1 billion to promoting the construction of major infrastructure such as transportation, energy; all of the above reflects a substantial need of demand of assurance services.
As to the energy-saving and environmental protection aspects, in the central government’s investment budget of 2012, to strengthen energy-saving, environmental protection and ecological construction amounts to RMB$48.8 billion.
The Company will accelerate the process of expansion by targeting new markets, 5 subsidiaries will be established in 2012 to make the sales network covering all major medium to large cities of China. Additionally, the sales model will be diversified to comprehensively use the sales modes of call-center, internet and shop-at-home.
The company will pay more attention to the development of new products: while continuing to promote the purchase and supply of such letter of guarantee business, we also target to promote the businesses of foreign letter of guarantees, develop new products such as
litigation evidence preservation guarantees, expand the existing customer base in order to increase business revenue streams;
To upgrade the existing services to customer in order to achieve high and fast business growth.
Operating expenses: Total operating expenses were $7,314,330 for year ended December 31, 2011, as compared to $3,713,837 for the same period in 2010. The increase of $3,600,493 or 97% was mainly due to increase in rent, depreciation, staffs cost and sales commission. The reasons for the changes in the major items are as follows:
Rent - increase by $116,543 or 29% from $399,163 in 2010 to $515,706 in 2011. The increase was mainly due to expansion of the business during the year 2011 and increasing rent in renewal of the tenancy agreement.
Staff costs - increase by $591,256 or 39 % from $1,516,692 in 2010 to $2,107,948 in 2011. The increase was mainly due to increase in headcounts and pay rates during the year of 2011.
For the year ended December 31, 2011, cash provided by operating activities totaled $2,384,840 compared to $8,043,993 for the fiscal year ended December 31, 2010. The decrease in receipt of funds was primarily due to the decrease in net income, an increase in deferred revenue, trade payable, accrued liabilities and other payable, and off-set by increase in guarantee fee receivable, prepayment and other receivable and decrease in income tax payable.
As of December 31, 2011, cash and cash equivalent was $1,544,199, as compared to December 31, 2010 balances of $7,074,893. The decrease was mainly due to the increase in cash used in investing activities. As of December 31, 2011, escrow deposits at the bank was $3,148,466, as compared to December 31, 2010 balances of $4,219,600. The decrease was mainly due to the decrease of the tender and surety guarantee business. As of December 31, 2011, deferred revenue was $1,972,424 as compared to $915,847 for the same period in 2010. The increase was due to the increase of surety guarantee business with which the services lasted for more than one year. As of December 31, 2011, accrued liabilities and other payable was $3,651,371 as compared to $1,455,009 for the same period in 2010. The increase was due to the increase in provision for guarantee loss, commission payables and advance from customers.
The Company maintained cash and cash equivalent $1,544,199 as of December 31, 2011. The Company has sufficient funds to satisfy its financial commitments and working capital requirements for 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 December 31, 2011, the Company owed $64,130 to Mr. Guokang Tu, a director. The loan was unsecured, interest-free with no fixed repayment term.
In December 2011, the Company also provided a loan sum of $5,462,689, $1,369,581 and $3,884,255 in a term of 12 months, receivable by June 29, 2012, September 29, 2012 and December 30, 2012 respectively, with an interest rate of 2.52% per annum payable at its due
For the year ended December 31, 2011, the Company had the total future lease commitments under non-cancellable operating leases are $1,231,307. The Company currently has working capital sufficient to fund these lease commitments.
As of December 31, 2011, the Company has contingent liabilities in respect of guarantees granted under the surety and tendering guarantee services business in the aggregate amount of $256,213,528. As of December 31, 2011, the Company has 709 surety and tendering guarantees outstanding. If all 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 $256,213,528 (RMB1,627,545,197) in total. The Company has 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.
We prepare financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (i) the reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the end of each fiscal period and (iii) the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and reasonable assumptions, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of
The 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.
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.
Marketable securities consist of investments in unit trust in the PRC. The Company classifies marketable securities as “available-for-sale”, which are stated at fair value, with the unrealized gains and losses, reported in accumulated other comprehensive income. The Company uses quoted prices in active markets for identical assets (consistent with the Level 1 definition in the fair value hierarchy) to measure the fair value of its investments on a recurring basis pursuant to Accounting Standards Codification ("ASC") Topic 820, “Fair Value Measurements and Disclosures”.
In order to reduce a certain level of default risk under the guarantee contracts, the Company also requests the required amount of cash deposits from the customers as security to the Company to assure the satisfaction of their performance obligations arising from the surety or tendering guarantees. These cash collaterals are recorded under the caption of “Restricted cash” as assets and “Customer collateral” as liabilities on the balance sheet. Upon the expiry of the guarantee contract, the Company will refund the cash deposit to the customers in full.
Common stock, $0.001 par value; 200,000,000 shares authorized; 60,200,000 shares issued and outstanding, respectively
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.”
These accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”).
The 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.
CCG and the registered legal owner of CCG mutually agree to grant CCG with the principal operating decision making rights, such as appointment of directors and senior executive officers of the VIE. Also, ZHJ is a guarantor to CCG in connection with the operational performance of all contracts entered between CCG and third parties.
ZHJ is an exclusive provider of the business consulting, related services and financial support to CCG for a period of 20 years, in return for a service fee which is equal to all of CCG’s annual net profit. The service fees are eliminated upon consolidation.
All of the registered legal equity owners of CCG have pledged their respective equity interests in CCG as a security the obligations of the registered legal equity owners and CCG under the agreements and for the payment by CCS under the exclusive management service and business consulting agreement.
Management believes that all these contractual agreements with CCG are in compliance with PRC law and are legally enforceable.
The Company mainly maintains restricted cash in depository accounts with several financial institutions in the PRC, which are held by China Construction Bank and Shanghai Pudong Development Bank, respectively.
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
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:
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.
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 changes for the years presented.
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.
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. For the year ended December 31, 2011, the Company filed and cleared a 2010 tax return with its local tax authority in the PRC.
The Company calculates net (loss) income per share in accordance with ASC Topic 260, “Earnings per Share.” Basic net (loss) income per share is calculated by dividing net (loss) income by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per share reflects the potential dilution of securities by including common stock equivalents, such as stock options, stock warrants and convertible preferred stock, in the weighted average number of common shares outstanding for a period, if dilutive.
Translation of amounts from RMB into US$1 has been made at the following exchange rates for the respective years:
Contributions to retirement plans (which are defined contribution plans) are charged to general and administrative expenses in the consolidated statements of operations and comprehensive income as and when the related employee service is provided.
The carrying value of the Company’s financial instruments (excluding loans receivable): cash and cash equivalents, restricted cash, guarantee fee receivable, prepayments and other receivables, accounts payable, customer collateral, deferred revenue, income tax payable, amount due to a related party, accrued liabilities and other payables approximate at their fair values because of the short-term nature of these financial instruments.
Management believes, based on the discounted cash flows using current interest rates, the fair value of loans receivable approximates the carrying value at December 31, 2011.
Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and; and
In December 2010, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2010-28 regarding the goodwill impairment test for reporting units with zero or negative carrying amounts. The guidance clarifies the steps to be performed to determine whether goodwill has been impaired and addresses the steps for reporting units with zero or negative carrying amounts. This guidance is effective for fiscal years (and interim periods within such years) beginning after December 15, 2010. The adoption of this guidance had no impact on the Company’s consolidated financial statements.
In May 2011, the FASB issued ASU No. 2011-04 regarding fair value measurements and disclosures. This new guidance clarifies the application of existing fair value measurement guidance and revises certain measurement and disclosure requirements to achieve convergence with International Financial Reporting Standards. This guidance is effective for the first interim or annual period beginning after December 15, 2011. In the period of adoption, the Company will include the required disclosures in its filings and believes the adoption will have no impact on its consolidated financial statements.
In December 2011, the FASB issued ASU No. 2011-11 regarding disclosures about offsetting assets and liabilities. This new guidance requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. This guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company is currently evaluating the impact the adoption will have on its consolidated financial statements.
As of December 31, 2011, the Company had surety and tendering guarantees outstanding resulting in restricted cash with approximately $17,782,504 from customer collateral and $3,148,466 for escrow deposits at the bank.
Due from Party A, in a term of 12 months, repayable on December 30, 2011, with an interest rate of 2.52% per annum payable at its due date
Due from Party A, in a term of 12 months, repayable on June 29, 2012, with an interest rate of 2.52% per annum payable at its due date
Due from Party A, in a term of 12 months, repayable on December 30, 2012, with an interest rate of 2.52% per annum payable at its due date
Due from Party B, in a term of 12 months, repayable on June 29, 2012, with an interest rate of 2.52% per annum payable at its due date
Due from Party C, in a term of 12 months, repayable on December 30, 2012, with an interest rate of 2.52% per annum payable at its due date
Depreciation expense for the years ended December 31, 2011 and 2010 was $156,715 and $111,138, respectively.
For the years ended December 31, 2011 and 2010, the local (United States) and foreign components of (loss) income from operations before income taxes were comprised of the following:
As of December 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.
For the years ended December 31, 2011 and 2010, the Company made an appropriation of $165,385 and $173,839 to the statutory reserve, respectively.
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 December 31, 2011 up through the date the Company issued the audited consolidated financial statements. During the period, the Company did not have any material recognizable subsequent events.