Sino Assurance (OTC BB:SNAS)

SINO ASSURANCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

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

(Unaudited)

Third Quarter 2011 Results

• Net revenue for the nine months ended September 30, 2011, was $6,963,539 as compared to $7,344,206 for the same period in 2010.
• Net income before tax for the nine months ended September 30, 2011 was $2,444,688 compared to $3,613,345 for the same period in 2010
• EPS of $0.00 vs $0.02 in prior year

Net revenue for the three months ended September 30, 2011, was $1,373,686 as compared to $3,034,904 for the same period in 2010. The decrease of $1,661,218 or approximately 55% was due to the continuous tightening control of bank loan supply in China during this period and as a result reduce the demand of application for banking facility business. At the same time, the tender and surety guarantee business slightly increased as compared to the same period in 2010 which was because the Company employed more sales representatives during that period to promote its business. The gross margin decreased to 69% from 83% for the three months ended September 30, 2011, due to the percentage of guarantee fee income that with lower gross margin was increased from 36% to 90% during that period. Due to the significant decrease in the higher gross margin guarantee business such as application for banking facility business, the gross margin also decreased.

Second Quarter 2011 Results

Net revenue

Net revenue for the six months ended June 30, 2011, was $5,589,853 as compared to $4,309,302 for the same period in 2010. The increase of $1,280,551 or approximately 30% 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 86% from 82% for the six months ended June 30, 2011, due to tightening of control of our cost of sales. As a result, the cost of sales decreased for the period and the percentage of the guarantee fee income substantially increased.

Net revenue for the three months ended June 30, 2011, was $2,092,938 as compared to $2,415,032 for the same period in 2010. The decrease of $322,094 or approximately 13% was due to the tightening control of bank loan supply in China during this period and as a result reduce the demand of tender and surety guarantee business. The gross margin decreased to 78% from 83% for the three months ended June 30, 2011, due to the percentage of the guarantee fee income that without cost was decreased and the percentage of guarantee fee income that with cost was increased.

Net income before tax

Net income before tax for the six months ended June 30, 2011 was $2,732,175 compared to $2,000,122 for the same period in 2010, an increase in pre-tax income of $732,053, or approximately 37%. 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 June 30, 2011 was $574,528 compared to $1,234,181 for the same period in 2010, a decrease in pre-tax income of $659,653, or approximately 53%. The decrease in pre-tax net income was due the decrease in net revenue and gross margin during this period, as well as the increase in selling, general and administrative expenses.

Operating expenses

Total operating expenses were $2,057,022 for the six months ended June 30, 2011, as compared to $1,541,376 for the same period in 2010. The increase of $515,646 or 33% was primarily due to the increase in staff costs, provision for guarantee losses, rent and rate, audit fee and other professional fee.

Total operating expenses were $1,055,025 for the three months ended June 30, 2011, as compared to $758,948 for the same period in 2010. The increase of $296,077 or 39% was primarily due to the increase in staff costs, provision for guarantee losses, rent and rate, audit fee and other professional fee.

LIQUIDITY

For the six months ended June 30, 2011, cash provided by operating activities totaled $2,510,752. This was primarily due to the net income for the period plus increase in deferred revenue, partially offset by the increase in guarantee fee receivables, prepayments and other receivable and decrease in income tax payable, accounts payable and accrued liability and other payable.

For the six months ended June 30, 2011, cash used in investing activities amounted to $2,045,666. The use of funds was mainly due to the payment on loan receivable and purchase of plant and equipment, partially offset by the receipts from loans receivable and the change in restricted cash, net of customer collateral.

First Quarter Results:

• Net revenue for the three months ended March 31, 2011, was $3,496,915 as compared to $1,894,270 for the same period in 2010.
• Net income for the three months ended March 31, 2011 was $1,636,888 compared to $584,903 for the same period in 2010, an increase in net income of $1,051,985, or approximately 180%. GAAP earnings per diluted share for the first quarter of 2011 were $0.03, as compared to $0.01 for the first quarter of 2010.

Financial Outlook

Management believes that the opportunities for sustained growth in revenue and earnings will be largely associated with the customer demand for the financial services provided by the Company, which primarily take the form of credit guaranty. Other elements expected to drive the growth in revenue include the potential impact of the regulatory governance of the credit guaranty market and development of the company's new personal credit products and services.

Management believes that for the year 2011, the company will generate earning per share $0.16 to $0.17, with revenue projection of $23 to $24 million.

Earnings Recap

This company offers surety products for businesses and individuals. Industry dynamics outlined in the 2010 10K seem compelling. EPS for the 2010 fourth quarter doubled to $0.04, breaking out of a 7 quarter range of $0.01 to $0.02. The fact that the company has issued 2011 EPS guidance of $0.16 and has goals of strengthening its banking relationships may imply that SNAS does not intend to tap the equity market. This stock is very illiquid. We will be pulling PRC filings on SNAS.

Fourth Quarter Highlights:

• For Q4, our revenue was $4.81 million, compared to $2.81 million in the same period of 2009, an increase of $2.00 million, or 71.04%. Higher balances of cash advance guarantee services contributed the largest share of the growth in total revenue during the fourth quarter.
• Gross profit margin for the fourth quarter was 87% up from 80% in the same period of 2009. The increase reflected the growing demand for credit services, the success of bank facility arrangement and our effective cost control measures
• Income from operations reached $2.90 million in the fourth quarter of 2010 compared to $1.74 million in the same period of 2009, which was mainly due to the growth in net revenue and lower levels of insurance claims.
• GAAP diluted EPS for the fourth quarter was $0.04, compared to $0.02 for the fourth quarter of 2009.

The company believes that the opportunities for sustained growth in revenue and earnings will be largely associated with the customer demand for the financial services provided by the Company, which primarily take the form of credit guaranty. Other elements expected to drive the growth in revenue include the potential impact of the regulatory governance of the credit guaranty market and development of the company's new personal credit products and services.

• For fiscal year 2011, the company updates its guidance with projected revenue in the range of $23 million to $24 million, and the EPS in the range of $0.16 to $0.17.

Market Expansion Proposal (Research for New Products and Market)

1. The Company will accelerate the process of expansion by targeting new markets, 5 subsidiaries will be established in 2011 to make the sales network covering all major medium to large cities of China. Additionally, the sales model will be diversified to comprehensively use the sales modes of call-center, internet and shop-at-home.

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

3. The Company will endeavor to create more products to further cultivate the letter of guarantee business for railway material purchase as well as touching the business of commercial letter of guarantee and the international letter of guarantee, for example: Letter of Guarantee of International Leasing, Performance Guarantee Letter for Commercial Property, Letter of Guarantee for International Projects, Letter of

Third Quarter Revenue and Earnings Growth

• Revenue increase of 75% to $3,034,904 versus the same quarter last year.

• Net income attributable to the Company this quarter increased 162.7% to $1,362,141 compared to the third quarter of 2009 which was $518,601.

• Diluted earnings per share totaled $0.02 versus $0.01 last year.

Financial Outlook

Management believes that the opportunities for sustained growth in revenue and earnings will be largely associated with the customer demand for the financial services provided by the Company, which primarily take the form of credit guaranty. Other elements expected to drive the growth in revenue include the potential impact of the regulatory governance of the credit guaranty market and development of the company's new personal credit products and services.

Management believes that the fiscal year of 2010, company will produce between $0.08 to $0.09 earnings per share, with revenue projection of $11 to $13 million.

For the full year 2009, Sino's revenues totaled $6,201,287, up 136% versus $2,626,380 in 2008. The Company finished fiscal year 2009 with net income of $2,167,141 ($0.04 per share) compared to net loss $402,346 ($-0.01 per share) for the full fiscal year ended in 2008. Gross profit totaled $4,789,784, up 152% from $1,901,686 in 2008. Gross margin was 78%, up 500 basis points from 73% last year. Operating income increased to $2,599,455, while operating margin was 42%, as a result of higher gross margin.

Management believes that the opportunities for sustained growth in revenue and earnings will be largely associated with the customer demand for the financial services provided by the Company, which primarily take the form of credit guaranty. Other elements expected to drive the growth in revenue include the potential impact of the regulatory governance of the credit guaranty market and development of the company's new personal credit products and services.

 Management believes that the fiscal year of 2010, company will produce between $0.08 to $0.09 earnings per share, with revenue projection of $14 to $15 million.

Source: PR Newswire (March 31, 2010)

PLAN OF OPERATIONS:

The Company’s development has reached a critical moment. It aims to achieve steady growth in 2009 by getting its core employee guarantee business started on a clear commercial development pattern, by further elevating the market status of its engineering guarantee business as well as leading the whole Company at a relatively fast development stage.

Source: SEC form 10Q (For the quarterly period ended September 30, 2009)