Sino Assurance Inc. (OTC: SNAS) Reports Third Quarter 2011 Earnings

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Nov 10, 2011, 08:00 ET

SHENZHEN, China, Nov. 10, 2011 /PRNewswire-Asia-FirstCall/ -- Sino Assurance Inc. (OTCBB: SNAS) today reported third quarter 2011 Earnings.

Net revenue

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. The decrease of $380,667 or approximately 5% was due to the tightening control of bank loan supply in China during last two quarter and as a result reduce the demand of tender and surety guarantee business. The gross margin are remain the same as 82% for the nine months ended September 30, 2011, due to effective control of the cost of sales.

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 tender and surety guarantee business. The gross margin decreased to 69% from 83% for the three months ended September 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 nine months ended September 30, 2011 was $2,444,688 compared to $3,613,345 for the same period in 2010, a decrease in pre-tax income of $1,168,657, or approximately 32%. The decrease in pre-tax net income was mainly due to increase in selling, general and administrative expenses.

Operating expenses

Total operating expenses were $3,294,967 for the nine months ended September 30, 2011, as compared to $2,438,380 for the same period in 2010. The increase of $856,587 or 35% was primarily due to the increase in staff costs, rent and rate, audit fee and other professional fee.

Total operating expenses were $1,237,945 for the three months ended September 30, 2011, as compared to $897,004 for the same period in 2010. The increase of $340,941 or 38% was primarily due to the increase in staff costs, rent and rate, audit fee and other professional fee.

LIQUIDITY

As of September 30, 2011, guarantee fee receivable was $37,774, as compared to a December 31, 2010 balance of $18,003. As of September 30, 2011, customer collateral was $17,722,717, as compared to a December 31, 2010 balance of $8,830,517. These changes were due to the increase of the tender and surety guarantee business. As of September 30, 2011, marketable securities were $156,206 as compared to none in December 31, 2010. As of September 30, 2011, deferred revenue was $1,646,051, as compared to deferred revenue of $915,847 as of December 31, 2010.

For the nine months ended September 30, 2011, cash provided by operating activities totaled $3,032,359. This was primarily due to the net income for the period plus increase in deferred revenue, accrued liability and other payable, partially offset by the increase in guarantee fee receivables, prepayments and other receivable and decrease in income tax payable and accounts payable.

For the nine months ended September 30, 2011, cash used in investing activities amounted to $2,181,056. The use of funds was mainly due to the payment on loan receivable, purchase of marketable securities and purchase of plant and equipment, partially offset by the receipts from loans receivable and the change in restricted cash, net of customer collateral.

Safe Harbor Statement

This press release may include certain statements that are not descriptions of historical facts, but are forward-looking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as 'will,' 'believes,' 'expects' or similar expressions. Such information is based upon expectations of our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and based upon premises with respect to future business decisions, which are subject to change. We do not undertake to update the forward-looking statements contained in this press release. For a description of the risks and uncertainties that may cause actual results to differ from the forward-looking statements contained in this press release, see our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission ('SEC'), and our subsequent SEC filings. Copies of filings made with the SEC are available through the SEC's electronic data gathering analysis retrieval system at http://www.sec.gov.

SINO ASSURANCE INC. CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2011 AND DECEMBER 31, 2010 (Currency expressed in United States Dollars ("US$"), except for number of shares)
	September 30, 2011		December 31, 2010
	(Unaudited)		(Audited)
ASSETS
Current assets:
Cash and cash equivalents	$	8,171,638	$	7,074,893
Restricted cash		20,861,834		13,050,117
Marketable securities		156,206		-
Guarantee fee receivable		37,774		18,003
Loans receivable, unsecured		5,998,310		2,842,001
Prepayments and other receivable		402,790		262,127
Total current assets		35,628,552		23,247,141

Non-current assets:
Plant and equipment, net		520,104		410,807
TOTAL ASSETS	$	36,148,656	$	23,657,948

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade	$	60,176	$	130,209
Customer collateral		17,722,717		8,830,517
Deferred revenue		1,646,051		915,847
Amount due to a related party		63,634		61,614
Income tax payable		-		529,447
Deferred tax liabilities		2,061,562		1,422,843
Accrued liabilities and other payable		2,051,827		1,455,009
Total current liabilities		23,605,967		13,345,486

Commitments and contingencies

Stockholders' equity:
Common stock, $0.001 par value; 200,000,000 shares authorized; 60,200,000 shares issued and outstanding, respectively		60,200		60,200
Additional paid-in capital		2,970,045		2,970,045
Accumulated other comprehensive income		836,937		468,837
Statutory reserve		332,153		332,153
Retained earnings		8,343,354		6,481,227
Total stockholders' equity		12,542,689		10,312,462
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	36,148,656	$	23,657,948

SINO ASSURANCE INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (Currency expressed in United States Dollars ("US$")) (Unaudited)
	Three months ended September 30,				Nine months ended September 30,
	2011		2010		2011		2010
REVENUES, NET
Guarantee fee income	$	1,321,721	$	2,981,863	$	6,853,304	$	7,230,368
Interest income		51,965		53,041		110,235		113,838

Total revenues, net		1,373,686		3,034,904		6,963,539		7,344,206

COST OF REVENUE		423,228		524,677		1,223,884		1,292,481

GROSS PROFIT		950,458		2,510,227		5,739,655		6,051,725

Operating expenses:
Selling, general and administrative		1,150,598		733,317		2,887,546		2,037,497
Provision for guarantee losses		87,347		163,687		407,421		400,883
Total operating expenses		1,237,945		897,004		3,294,967		2,438,380

(LOSS) INCOME BEFORE INCOME TAXES		(287,487)		1,613,223		2,444,688		3,613,345

Income tax benefit (expense)		83,999		(376,984)		(582,561)		(847,947)

NET (LOSS) INCOME	$	(203,488)	$	1,236,239	$	1,862,127	$	2,765,398

Other comprehensive income:
- Foreign currency translation gain		105,748		125,902		368,100		152,803

COMPREHENSIVE (LOSS) INCOME	$	(97,740)	$	1,362,141	$	2,230,227	$	2,918,201

Net (loss) income per share – Basic and diluted	$	(0.00)	$	0.02	$	0.03	$	0.05

Weighted average common shares outstanding – Basic and diluted		60,200,000		60,000,000		60,200,000		60,000,000

SINO ASSURANCE INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 (Currency expressed in United States Dollars ("US$")) (Unaudited)
	Nine months ended September 30,
	2011		2010
Cash flows from operating activities:
Net income	$	1,862,127	$	2,765,398
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		113,112		82,043
Loss on disposal of plant and equipment		5,310		1,183
Provision for guarantee losses		407,421		400,883
Deferred tax expense		582,561		554,876
Changes in operating assets and liabilities:
Guarantee fee receivable		(18,873)		(26,064)
Prepayments and other receivable		(129,949)		(232,788)
Accounts payable, trade		(73,114)		15,185
Deferred revenue		688,947		260,816
Income tax payable		(538,056)		259,004
Accrued liabilities and other payable		132,873		(38,711)

Net cash provided by operating activities		3,032,359		4,041,825

Cash flows from investing activities:
Change in restricted cash, net of customer collateral		1,199,375		(949,296)
Purchase of marketable securities		(153,704)		-
Receipts from loans receivable		2,888,213		283,968
Payment on loans receivable		(5,902,232)		(2,268,060)
Proceeds from disposal of plant and equipment		247		290
Purchase of plant and equipment		(212,955)		(145,947)

Net cash used in investing activities		(2,181,056)		(3,079,045)

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		245,442		28,616

NET CHANGE IN CASH AND CASH EQUIVALENTS		1,096,745		1,006,326

CASH AND CASH EQUIVALENT, BEGINNING OF PERIOD		7,074,893		559,105

CASH AND CASH EQUIVALENT, END OF PERIOD	$	8,171,638	$	1,565,431

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	538,056	$	32,368
Cash paid for interest	$	-	$	-