UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D. C. 20549





FORM
10-Q/A





xQUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For the
quarterly period ended June 30, 2008




oTRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934




For the
transition period from __________ to __________





Commission
File Number 000-32585





SUNRISE
REAL ESTATE GROUP, INC.





(Exact
name of registrant as specified in its charter)





Texas
            
            75-2713701(State
      or other jurisdiction of incorporation or
organization)
            
            (I.R.S.
      Employer Identification No.)





Suite
701, No. 333, Zhaojiabang Road


Shanghai,
PRC 200032


(Address
of principal executive offices  Zip Code)





Registrant’s
telephone number: + 86-21-6422-0505





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 xNo o





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. (Check one):


Large
accelerated filer o       Accelerated
filer o


Non-accelerated
filer o        
Smaller reporting company x





Indicate
by checkmark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act): Yes oNo x





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: August 11, 2008 - 23,691,925 shares of
Common Stock










FORM
10-Q




For
the Quarter Ended June 30, 2008




INDEX




PagePART
      I. FINANCIAL INFORMATION
            
            
            4Item
      1. Financial Statements
            
            
            4Consolidated
      Balance Sheets
            
            
            4Consolidated
      Statements of Operations
            
            
            5Consolidated
      Statements of Cash Flows
            
            
            6Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
            
            
            19Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
            
            
            25Item
      4. Controls and Procedures
            
            
            25PART
      II. OTHER INFORMATION
            
            
            26Item
      1. Legal Proceedings
            
            
            26Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds
            
            
            26Item
      3. Defaults Upon Senior Securities
            
            
            26Item
      4. Submission of Matters to a Vote of Security
Holders
            
            
            26Item
      5. Other Information
            
            
            26Item
      6. Exhibits
            
            
            26SIGNATURES
            
            
            26





2




Explanatory
Note





This
Quarterly Report on Form 10-Q/A (Amendment No. 1) discloses and discusses the
impact and effect of a restatement of our previously filed unaudited
consolidated financial statements contained in our originally-filed Quarterly
Report on Form 10-Q for the period ended June 30, 2008 filed with the Securities
and Exchange Commission on August 19, 2008. This restatement is necessary
because after consideration of the comments from the Securities and Exchange
Commission, we concluded that our previously reported consolidated financial
statements for the fiscal years ended December 31, 2007, 2006 and 2005 and the
quarters ended March 31, 2008, June 30, 2008 and September 30, 2008 did not
correctly apply accounting principles for the recognition of underwriting sales
revenue. The impact of the incorrect application of accounting principles is
summarized below under Restatement Summary.





As a result, we are filing this amended
Quarterly Report on Form 10-Q/A for June 30, 2008, to make the necessary
corrections to account for the underwriting sales revenue, the overstatement of
minority interests and provision for onerous contracts during this period, which
contains an explanation in Note 1 to the financial
statements.




3




PART
I - FINANCIAL INFORMATION




ITEM
1.  FINANCIAL STATEMENTS




Sunrise
Real Estate Group, Inc.




Unaudited
Condensed Consolidated Balance Sheets


(Expressed
in US Dollars)




June
      30,
            
            
            December
      31,2008
            
            
            2007(Restated)
            
            
            (Restated)ASSETSCurrent
      assetsCash
      and cash equivalents
            
            $
            922,232
            
            
            $
            2,281,516Restricted
      cash (Note 10)
            
            
            230,242
            
            
            
            2,441,579Accounts
      receivable
            
            
            601,476
            
            
            
            842,868Promissory
      deposits (Note 3)
            
            
            947,646
            
            
            
            273,800Amounts
      due from venturers (Note 4)
            
            
            989,822
            
            
            
            1,069,484Amount
      due from related party (Note 12)
            
            
            332,405
            
            
            
            312,132Other
      receivables and deposits (Note5)
            
            
            838,006
            
            
            
            602,373Total
      current assets
            
            
            4,861,829
            
            
            
            7,823,752Property,
      plant and equipment – net (Note 6)
            
            
            2,745,848
            
            
            
            2,519,585Equity
      investment (Note 7)
            
            
            83,101
            
            
            
            78,033Investment
      properties (Note 8)
            
            
            8,044,389
            
            
            
            7,800,228Deferred
      tax asset (Note 9)
            
            
            1,104,489
            
            
            
            1,021,059Goodwill
            
            
            13,307
            
            
            
            13,307Total
      assets
            
            $
            16,852,963
            
            
            $
            19,255,964LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilitiesBank
      loans (Note 10)
            
            $
            204,108
            
            
            $
            191,660Promissory
      notes payable (Note 11)
            
            
            517,187
            
            
            
            976,435Accounts
      payable
            
            
            267,459
            
            
            
            230,654Amount
      due to director (Note 12)
            
            
            71,481
            
            
            
            171,458Amount
      due to related party (Note 12)
            
            
            127,443
            
            
            
            159,561Other
      payables and accrued expenses (Note 13)
            
            
            2,112,049
            
            
            
            2,452,833Other
      tax payable (Note 14)
            
            
            605,002
            
            
            
            546,873Income
      tax payable
            
            
            1,044,887
            
            
            
            1,238,912Total
      current liabilities
            
            
            4,949,616
            
            
            
            5,968,386Commitments
      and contingencies (Note 15)Long-term
      bank loans (Note 10)
            
            
            6,125,355
            
            
            
            5,847,606Long-term
      promissory notes payable (Note 11)
            
            
            57,223
            
            
            
            111,112Deposits
      received from underwriting sales (Note 16)
            
            
            8,246,164
            
            
            
            7,743,240Minority
      interest
            
            
            457,296
            
            
            
            431,674Shareholders’
      equityCommon
      stock, par value $0.01 per share; 200,000,000 shares authorized;
      23,691,925 and 23,691,925 shares issued and outstanding as of June 30,
      2008 and December 31, 2007, respectively
            
            
            236,919
            
            
            
            236,919Additional
      paid-in capital
            
            
            3,620,008
            
            
            
            3,620,008Statutory
      reserve (Note 17)
            
            
            729,744
            
            
            
            729,744Accumulated
      losses
            
            
            (8,238,094
            )
            
            
            (6,157,723
            )Accumulated
      other comprehensive income (Note 18)
            
            
            668,732
            
            
            
            724,998Total
      shareholders’ equity
            
            
            (2,982,691
            )
            
            
            (846,054
            )Total
      liabilities and shareholders’ equity
            
            $
            16,852,963
            
            
            $
            19,255,964




See
accompanying notes to unaudited condensed consolidated financial
statements.




4




Sunrise
Real Estate Group, Inc.





Unaudited Condensed
Consolidated Statements of Operations





(Expressed
in US Dollars)




Three
      Months Ended June 30,
            
            
            Six
      Months Ended June 30,2008
            
            
            2007
            
            
            2008
            
            
            2007(Restated)
            
            
            (Restated)
            
            
            (Restated)
            
            
            (Restated)Net
      Revenues
            
            $
            2,641,681
            
            
            $
            1,520,047
            
            
            $
            3,961,226
            
            
            $
            2,655,202Cost
      of Revenues
            
            
            (1,797,549
            )
            
            
            (1,490,796
            )
            
            
            (3,100,473
            )
            
            
            (2,717,382
            )Gross
      Profit/ (Loss)
            
            
            844,132
            
            
            
            29,251
            
            
            
            860,753
            
            
            
            (62,180
            )Operating
      Expenses
            
            
            (328,489
            )
            
            
            (255,412
            )
            
            
            (639,115
            )
            
            
            (494,921
            )General
      and Administrative Expenses
            
            
            (1,098,242
            )
            
            
            (936,714
            )
            
            
            (1,991,464
            )
            
            
            (1,831,289
            )Operating
      Loss
            
            
            (582,599
            )
            
            
            (1,162,875
            )
            
            
            (1,769,826
            )
            
            
            (2,388,390
            )Interest
      Income
            
            
            3,561
            
            
            
            3,344
            
            
            
            9,330
            
            
            
            7,571Other
      Income/(Expenses), Net
            
            
            (1,394
            )
            
            
            (34,851
            )
            
            
            5,138
            
            
            
            (42,242
            )Interest
      Expenses
            
            
            (154,836
            )
            
            
            (222,785
            )
            
            
            (298,476
            )
            
            
            (425,347
            )Loss
      Before Income Tax and Minority Interest
            
            
            (735,268
            )
            
            
            (1,417,167
            )
            
            
            (2,053,834
            )
            
            
            (2,848,408
            )Income
      Tax
            
            
            (23,388
            )
            
            
            (28,973
            )
            
            
            (28,884
            )
            
            
            (28,973
            )Loss
      Before Minority Interest
            
            
            (758,656
            )
            
            
            (1,446,140
            )
            
            
            (2,082,718
            )
            
            
            (2,782,605
            )Minority
      Interest
            
            
            (7,684
            )
            
            
            (38,533
            )
            
            
            2,347
            
            
            
            (35,453
            )Net
      Loss
            
            $
            (766,340
            )
            
            $
            (1,484,673
            )
            
            $
            (2,080,371
            )
            
            $
            (2,912,834
            )Loss
      Per Share – Basic and Fully Diluted
            
            $
            (0.03
            )
            
            $
            (0.06
            )
            
            $
            (0.09
            )
            
            $
            (0.12
            )Weighted
      average common shares outstanding
              –
      Basic and Fully Diluted1
            
            
            23,691,925
            
            
            
            23,691,925
            
            
            
            23,691,925
            
            
            
            23,691,925





See
accompanying notes to unaudited condensed consolidated financial
statements.







1 Share
amounts have been retroactively restated to reflect the effect of a 3% stock
dividend of common stock for each share of common stock outstanding at
August 1, 2007.




5




Sunrise
Real Estate Group, Inc.





Unaudited Condensed
Consolidated Statements of Cash Flows





(Decrease)/Increase
in Cash and Cash Equivalents





(Expressed
in US Dollars)




Six
      Months Ended June 30,2008
            
            
            2007(Restated)
            
            
            (Restated)Cash
      flows from operating activitiesNet
      Loss
            
            $
            (2,080,371
            )
            
            $
            (2,912,834
            )Adjustments
      to reconcile net loss tonet
      cash used in operating activitiesDepreciation
      of property, plant and equipment
            
            
            389,097
            
            
            
            240,757(Gain)/loss
      on disposal of property, plant and equipment
            
            
            (1,019
            )
            
            
            848Minority
      interest
            
            
            (2,347
            )
            
            
            35,453Change
      in:Accounts
      receivable
            
            
            287,701
            
            
            
            4,285,194Promissory
      deposits
            
            
            (637,376
            )
            
            
            (647,752
            )Other
      receivables and deposits
            
            
            (190,911
            )
            
            
            (488,359
            )Accounts
      payable
            
            
            21,202
            
            
            
            (387,163
            )Amount
      with related party
            
            
            (41,271
            )
            
            
            -Amounts
      with venturers
            
            
            82,420
            
            
            
            578,679Other
      payables and accrued expenses
            
            
            (453,106
            )
            
            
            89,950Interest
      payable on promissory notes
            
            
            (119,142
            )
            
            
            186,238Interest
      payable on amount due to director
            
            
            4,403
            
            
            
            (10,974
            )Other
      tax payable
            
            
            21,965
            
            
            
            (224,817
            )Income
      tax payable
            
            
            (266,674
            )
            
            
            (387,064
            )Restricted
      cash
            
            
            2,302,414
            
            
            
            -Net
      cash (used in)/provided by operating activities
            
            
            (683,015
            )
            
            
            358,156Cash
      flows from investing activitiesAcquisition
      of plant and equipment
            
            
            (289,956
            )
            
            
            (167,373
            )Deposits
      paid for acquisition of properties
            
            
            -
            
            
            
            (1,850,424
            )Proceeds
      from disposal of property, plant and equipment
            
            
            95,883
            
            
            
            -Net
      cash used in investing activities
            
            
            (194,073
            )
            
            
            (2,017,797
            )Cash
      flows from financing activitiesBank
      loans repayment
            
            
            (99,148
            )
            
            
            (630,508
            )Repayment
      of promissory note
            
            
            (393,995
            )
            
            
            (205,556
            )Proceeds
      from promissory note
            
            
            -
            
            
            
            2,565,903Repayment
      to director
            
            
            (104,380
            )
            
            
            (79,026
            )Advances
      from director
            
            
            -
            
            
            
            250,000Net
      cash (used in)/provided by financing activities
            
            
            (597,523
            )
            
            
            1,900,813Effect
      of exchange rate changes on cash and cash equivalents
            
            
            115,327
            
            
            
            62,691Net
      (decrease)/increase in cash and cash equivalents
            
            
            (1,359,284
            )
            
            
            303,863Cash
      and cash equivalents at beginning of period
            
            
            2,281,516
            
            
            
            945,727Cash
      and cash equivalents at end of period
            
            $
            922,232
            
            
            $
            1,249,590Supplemental
      disclosure of cash flow informationCash
      paid during the period:Income
      tax paid
            
            
            295,558
            
            
            
            428,513Interest
      paid
            
            
            741,558
            
            
            
            250,083





See
accompanying notes to unaudited condensed consolidated financial
statements.




6





NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS





(Expressed
in US Dollars)





NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS





Sunrise
Real Estate Development Group, Inc. (“CY-SRRE”) was established in the Cayman
Islands on April 30, 2004 as a limited liability company. CY-SRRE was wholly
owned by Ace Develop Properties Limited, a corporation, (“Ace Develop”), of
which Lin Chi-Jung, an individual, is the principal and controlling shareholder.
Shanghai Xin Ji Yang Real Estate Consultation Company Limited (“SHXJY”) was
established in the People’s Republic of China (the “PRC”) on August 14, 2001 as
a limited liability company.  SHXJY was originally owned by a
Taiwanese company, of which the principal and controlling shareholder was Lin
Chi-Jung. On June 8, 2004, all the fully paid up capital of SHXJY was
transferred to CY-SRRE. On June 25, 2004 SHXJY and two individuals established a
subsidiary, namely, Suzhou Xin Ji Yang Real Estate Consultation Company Limited
(“SZXJY”) in the PRC, at which point in time, SHXJY held a 90% equity interest
in SZXJY. On December 24, 2004, SHXJY acquired 85% of equity interest in Beijing
Xin Ji Yang Real Estate Consultation Company Limited (“BJXJY”), a PRC company
incorporated on April 16, 2003 with limited liability.  On August 9,
2005, SHXJY sold a 10% equity interest in SZXJY to a company owned by a director
of SZXJY, and transferred a 5% equity interest in SZXJY to
CY-SRRE.  Following the disposal and the transfer, CY-SRRE effectively
held an 80% equity interest in SZXJY. On November 24, 2006, CY-SRRE, SHXJY, a
director of SZXJY and a third party established a subsidiary, namely, Suzhou
Shang Yang Real Estate Consultation Company Limited (“SZSY”) in the PRC, with
CY-SRRE holding a 12.5% equity interest, SHXJY holding a 26% equity interest and
the director of SZXJY holding a 12.5% equity interest in SZSY. At the date of
incorporation, SRRE and the director of SZXJY entered into a voting agreement
that SRRE is entitled to exercise the voting right in respect of his 12.5%
equity interest in SZSY. Following that, SRRE effectively holds 51% equity
interest in SZSY. On September 24, 2007, CY-SRRE sold a 5% equity interest in
SZXJY to a company owned by a director of SZXJY.  Following the
disposal, CY-SRRE effectively holds 75% equity interest in SZXJY.  On
November 1, 2007, SZXJY established a wholly owned subsidiary, Suzhou Xin Ji
Yang Real Estate Brokerage Company Limited (“SZXJYB”) in the PRC as a limited
liability company.  On May 8, 2008, SHXJY established a wholly owned
subsidiary, Kunshan Shang Yang Real Estate Brokerage Company Limited (“KSSY”) in
the PRC as a limited liability company.





LIN RAY
YANG Enterprise Ltd. (“LRY”) was established in the British Virgin Islands on
November 13, 2003 as a limited liability company.  LRY was owned by
Ace Develop, Planet Technology Corporation (“Planet Tech”) and Systems &
Technology Corporation (“Systems Tech”).  On February 5, 2004, LRY
established a wholly owned subsidiary, Shanghai Shang Yang Real Estate
Consultation Company Limited (“SHSY”) in the PRC as a limited liability company.
On January 10, 2005, LRY and a PRC third party established a subsidiary, Suzhou
Gao Feng Hui Property Management Company Limited (“SZGFH”), in the PRC, with LRY
holding 80% of the equity interest in SZGFH. On May 8, 2006, LRY acquired 20% of
the equity interest in SZGFH from the third party. Following the acquisition,
LRY effectively holds 100% of the equity interest in SZGFH. On September 11,
2007 SHSY and other third parties established a subsidiary, namely, Suzhou Bin
Fen Nian Dai Administration Consultancy Company Limited (“SZBFND”) in the PRC,
with SHSY holding a 19% equity interest in SZBFND.





SHXJY,
SZXJY, BJXJY, SHSY, SZGFH, SZSY, SZXJYB and KSSY commenced operations in
November 2001, June 2004, January 2004, February 2004, January 2005, November
2006, November 2007 and May 2008 respectively.  Each of SHXJY, SZXJY,
BJXJY, SHSY, SZGFH, SZSY, SZXJYB and KSSY has been granted a twenty-year
operation period from the PRC, which can be extended with approvals from
relevant PRC authorities.





On August
31, 2004, Sunrise Real Estate Group, Inc. (“SRRE”), CY-SRRE and Lin Chi-Jung, an
individual and agent for the beneficial shareholder of CY-SRRE, i.e., Ace
Develop, entered into an exchange agreement under which SRRE issued 5,000,000
shares of common stock to the beneficial shareholder or its designees, in
exchange for all outstanding capital stock of CY-SRRE.  The
transaction closed on October 5, 2004.  Lin Chi-Jung is Chairman of
the Board of Directors of SRRE, the President of CY-SRRE and the principal and
controlling shareholder of Ace Develop.





Also on
August 31, 2004, SRRE, LRY and Lin Chi-Jung, an individual and agent for
beneficial shareholders of LRY, i.e., Ace Develop, Planet Tech and Systems Tech,
entered into an exchange agreement under which SRRE issued 10,000,000 shares of
common stock to the beneficial shareholders, or their designees, in exchange for
all outstanding capital stock of LRY.  The transaction was closed on
October 5, 2004. Lin Chi-Jung is Chairman of the Board of Directors of SRRE, the
President of LRY and the principal and controlling shareholder of Ace
Develop.  Regarding the 10,000,000 shares of common stock of SRRE
issued in this transaction, SRRE issued 8,500,000 shares to Ace Develop, 750,000
shares to Planet Tech and 750,000 shares to Systems Tech.





7





As a
result of the acquisition, the former owners of CY-SRRE and LRY hold a majority
interest in the combined entity.  Generally accepted accounting
principles require in certain circumstances that a company whose shareholders
retain the majority voting interest in the combined business be treated as the
acquirer for financial reporting purposes.  Accordingly, the
acquisition has been accounted for as a “reverse acquisition” arrangement
whereby CY-SRRE and LRY are deemed to have purchased SRRE.  However,
SRRE remains the legal entity and the Registrant for Securities and Exchange
Commission reporting purposes.  All shares and per share data prior to
the acquisition have been restated to reflect the stock issuance as a
recapitalization of CY-SRRE and LRY.





SRRE was
initially incorporated in Texas on October 10, 1996, under the name of Parallax
Entertainment, Inc. (“Parallax”).  On December 12, 2003, Parallax
changed its name to Sunrise Real Estate Development Group, Inc.  On
April 25, 2006, Sunrise Estate Development Group, Inc. filed Articles of
Amendment with the Texas Secretary of State, changing the name of Sunrise Real
Estate Development Group, Inc. to Sunrise Real Estate Group, Inc., effective
from May 23, 2006.





Figure 1:
Company Organization Chart









SRRE and
its subsidiaries, namely, CY-SRRE, LRY, SHXJY, SZXJY, SZXJYB, SZSY, KSSY, BJXJY,
SHSY and SZGFH are sometimes hereinafter collectively referred to as “the
Company.”





The principal activities of the Company
are property brokerage services, real estate marketing services, property
leasing services and property management services in the
PRC.




8





Restatement
Summary





The
Company discovered errors to previously issued financial statements for the
fiscal years ended December 31, 2007 and 2006 and 2005. The company has filed
the restated financial statements for these periods to make the correction of
the errors.





The first
restatement relates to the recognition of revenue from underwriting sales. The
Company entered into an agreement in 2004 to underwrite an office building in
Suzhou, known as Suzhou Sovereign Building. Under the Underwriting Model, our
commission revenue is equivalent to the price difference between the final
selling price and underwriting price. In marketing of the property, the Company
also launched a promotional package by entering into leasing agreements with
certain buyers to lease the properties for them. The leasing period started in
the second quarter of 2006, and in the leasing period the Company has the right
to sublease the leased properties to earn rental income. The Company recognised
commission revenue from underwriting service when the property developer and the
buyer complete a property sales transaction, which is normally at the time when
the property developer has confirmed that the predetermined level of sales
proceeds have been received from buyers. The Company accounted for its liability
for its obligations under a guarantee in accordance with FASB Interpretation No.
45, (FIN45) Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Direct Guarantees of Indebtedness of Others. It is the only
underwriting agreement the Company entered since its incorporation.





The
Company has subsequently determined that the correct application of accounting
principles had not been applied for the recognition of underwriting sales
revenue. In this correction, the financial statements for the years ended
December 31, 2007 and 2006 and 2005 were restated to increase the Company’s
deferred tax assets, advances to venturers and deposits received from
underwriting sales by deferring revenue recognition from the closing of the
sale, to generally when the remaining maximum exposure to loss is reduced below
the amount of gain deferred. As a result, the Company’s net asset values as of
December 31, 2007, 2006 and 2005 were reduced by $$5,574,548, $5,315,410 and
$1,806,588, respectively. The Company’s net assets values as of June 30, 2007
were reduced by $5,205,212,. No restatement on the Company’s net assets value as
of June 30, 2008 as the effect of $6,878,203 has been taken up in filing on
August 19, 2008. The correction of this error reduced the Company’s losses for
the year ended December, 2007 by $157,811 and reduced the Company’s profit for
the year ended December 31, 2006 and 2005 by $3,365,274 and $1,779,656,
respectively. The correction of this error does not have any effect on Company’s
income statement for the three months and six months period June 30, 2007 and
2008.





The
second restatement relates to correct the overstatement of the minority
shareholders’ share of the Company’s result by $111,135.  As a result
of the correction of this item, the Company’s financial statements for the year
ended 2007 were restated and the Company’s loss for the year ended December 31,
2007 were reduced by $106,759 and total of the accumulated losses and
accumulated comprehensive other income as of December 31, 2007 were reduced by
$111,135. The effect of this restatement for the period ended June 30, 2008 was
taken up in the 10Q, which was filed on August 19, 2008.





The third
restatement relates to correct the unprovided commission accrual of $335,873 and
the under-provision for China taxes of US$566,879 for the year ended December
31, 2006. The effect of this restatement was taken up in the 10KSB for year
ended December 31, 2007 and 2006, which were filed on May 16, 2008. As a result
of the correction, the retained earnings and accumulated comprehensive other
income for period ended June 30, 2007 were reduced by $902,752 in
total.





The
fourth restatement relates to reclassifying from the cost of revenue to minority
interest in regards to the venturers’ profit sharing of the underwriting sales
project. As a result of the reclassification, the cost of revenue in 2006 was
reduced by $579,729.





The fifth
restatement relates to recognize an accrual for onerous contracts which is equal
to the difference between the present value of the sublease income and the
present value of the associated lease expense at appropriate discount rate. The
provisions for onerous contacts for the year ended December 31, 2007 and 2006
were $252,070 and $283,741, respectively. The provisions for onerous contacts
for the six months and three months period ended June 30, 2007 were $94,776 and
$55,850, respectively. The utilization for onerous contacts for the six months
and three months period ended June 30, 2008 were $37,357 and $22,634,
respectively.  As a result of the restatement, the total of retained
earnings and accumulated other comprehensive income for 2007 and 2006 were
reduced by $535,811 and $283,741, respectively. The retained earnings as of June
30, 2007 and June 30, 2008 by $378,517 and $498,454, respectively.





9




The
following summarizes the above restatements.





For
      the year ended December 31, 2007As
      reported
            
            
            Adjustments
            
            
            As
      restatedDeferred
      tax assets
            
            $
            -
            
            
            $
            1,021,059
            
            
            $
            1,021,059Amount
      due from venturers
            
            
            79,662
            
            
            
            989,822
            
            
            
            1,069,484Other
      payables and accrued expenses
            
            
            2,074,833
            
            
            
            378,000
            
            
            
            2,452,833Deposits
      received from underwriting sales
            
            
            -
            
            
            
            7,743,240
            
            
            
            7,743,240Minority
      interest of consolidated subsidiaries
            
            
            542,809
            
            
            
            (111,135
            )
            
            
            431,674Retained
      earnings (Accumulated losses)
            
            
            (741,548
            )
            
            
            (5,416,175
            )
            
            
            (6,157,723
            )Accumulated
      other comprehensive income
            
            
            1,308,047
            
            
            
            (583,049
            )
            
            
            724,998Cost
      of revenues
            
            
            6,711,704
            
            
            
            94,259
            
            
            
            6,805,963Minority
      interest of consolidated subsidiaries – Income statements
            
            
            157,589
            
            
            
            (106,759
            )
            
            
            50,830Net
      profit (loss)
            
            
            (4,765,749
            )
            
            
            (12,500
            )
            
            
            (4,753,249
            )





For
      the year ended December 31, 2006As
      reported
            
            
            Adjustments
            
            
            As
      restatedDeferred
      tax assets
            
            $
            142,842
            
            
            $
            795,292
            
            
            $
            938,134Amounts
      due from venturers
            
            
            1,939,616
            
            
            
            159,174
            
            
            
            2,098,790Other
      payables and accrued expenses
            
            
            1,874,577
            
            
            
            283,741
            
            
            
            2,158,318Deposits
      received from underwriting sales
            
            
            -
            
            
            
            7,243,366
            
            
            
            7,243,366Income
      tax payable
            
            
            1,933,491
            
            
            
            (142,842
            )
            
            
            1,790,649Amounts
      due to venturers
            
            
            1,410,377
            
            
            
            1,410,377
            
            
            
            -Minority
      interest of controlled joint venture
            
            
            -
            
            
            
            579,729
            
            
            
            579,729Retained
      earnings (Accumulated losses)
            
            
            4,857,948
            
            
            
            (5,428,675
            )
            
            
            (570,727
            )Accumulated
      other comprehensive income
            
            
            456,743
            
            
            
            (170,476
            )
            
            
            286,267Net
      revenues
            
            
            16,417,471
            
            
            
            (4,905,767
            )
            
            
            11,511,704Cost
      of revenues
            
            
            7,246,933
            
            
            
            (1,285,810
            )
            
            
            5,961,123Income
      tax
            
            
            1,767,088
            
            
            
            (550,667
            )
            
            
            1,216,421Minority
      interest of consolidated joint venture – Income statements
            
            
            -
            
            
            
            579,729
            
            
            
            579,729Net
      profit (loss)
            
            
            2,773,310
            
            
            
            (3,649,019
            )
            
            
            (875,709
            )





For
      the year ended December 31, 2005As
      reported
            
            
            Adjustments
            
            
            As
      restatedDeferred
      tax assets
            
            $
            144,333
            
            
            $
            214,590
            
            
            $
            358,923Deposits
      received from underwriting sales
            
            
            -
            
            
            
            2,165,511
            
            
            
            2,165,511Income
      tax payable
            
            
            511,700
            
            
            
            (144,333
            )
            
            
            367,367Retained
      earnings (Accumulated losses)
            
            
            2,559,836
            
            
            
            (1,779,656
            )
            
            
            780,180Accumulated
      other comprehensive income
            
            
            147,349
            
            
            
            (26,932
            )
            
            
            120,417Net
      revenues
            
            
            10,880,468
            
            
            
            (2,133,234
            )
            
            
            8,747,234Income
      tax
            
            
            500,732
            
            
            
            (353,578
            )
            
            
            147,154Net
      profit (loss)
            
            
            2,096,143
            
            
            
            (1,779,656
            )
            
            
            316,487




10





For
      the three months ended June 30, 2007As
      reported
            
            
            Adjustments
            
            
            As
      restatedDeferred
      tax assets
            
            
            -
            
            
            
            968,618
            
            
            
            968,618Amounts
      due from venturers
            
            
            -
            
            
            
            945,944
            
            
            
            945,944Other
      payables and accrued expenses
            
            
            1,526,784
            
            
            
            714,390
            
            
            
            2,241,174Amount
      due to venturers
            
            
            43,878
            
            
            
            (43,878
            )
            
            
            -Deposits
      received from underwriting sales
            
            
            -
            
            
            
            7,427,125
            
            
            
            7,427,125Income
      tax payable
            
            
            1,008,958
            
            
            
            566,879
            
            
            
            1,575,838Retained
      earnings (Accumulated losses)
            
            
            2,924,529
            
            
            
            (6,408,088
            )
            
            
            (3,483,559
            )Accumulated
      other comprehensive income
            
            
            793,912
            
            
            
            (341,866
            )
            
            
            452,046Cost
      of revenues
            
            
            1,434,946
            
            
            
            55,850
            
            
            
            1,490,796Net
      profit (loss)
            
            
            (1,428,823
            )
            
            
            (55,850
            )
            
            
            (1,484,673
            )





For
      the six months ended June 30, 2007As
      reported
            
            
            Adjustments
            
            
            As
      restatedDeferred
      tax assets
            
            
            -
            
            
            
            968,618
            
            
            
            968,618Amounts
      due from venturers
            
            
            -
            
            
            
            945,944
            
            
            
            945,944Other
      payables and accrued expenses
            
            
            1,526,784
            
            
            
            714,390
            
            
            
            2,241,174Amount
      due to venturers
            
            
            43,878
            
            
            
            (43,878
            )
            
            
            -Deposits
      received from underwriting sales
            
            
            -
            
            
            
            7,427,125
            
            
            
            7,427,125Income
      tax payable
            
            
            1,008,958
            
            
            
            566,879
            
            
            
            1,575,838Retained
      earnings (Accumulated losses)
            
            
            2,924,529
            
            
            
            (6,408,088
            )
            
            
            (3,483,559
            )Accumulated
      other comprehensive income
            
            
            793,912
            
            
            
            (341,866
            )
            
            
            452,046Cost
      of revenues
            
            
            2,622,606
            
            
            
            94,776
            
            
            
            2,717,383Net
      profit (loss)
            
            
            (2,818,058
            )
            
            
            (94,776
            )
            
            
            (2,912,834
            )





For
      the three months ended June 30, 2008As
      reported
            
            
            Adjustments
            
            
            As
      restatedOther
      payables and accrued charges
            
            
            1,613,595
            
            
            
            498,454
            
            
            
            2,112,049Advances
      to venturers
            
            
            -
            
            
            
            989,822
            
            
            
            989,822Retained
      earnings (Accumulated losses)
            
            
            (8,465,989
            )
            
            
            227,895
            
            
            
            (8,238,094
            )Cost
      of revenues
            
            
            1,820,183
            
            
            
            (22,634
            )
            
            
            1,797,549Net
      profit (loss)
            
            
            (788,974
            )
            
            
            22,634
            
            
            
            (766,340
            )





For
      the six months ended June 30, 2008As
      reported
            
            
            Adjustments
            
            
            As
      restatedAmounts
      due from venturers
            
            
            -
            
            
            
            989,822
            
            
            
            989,822Other
      payables and accrued charges
            
            
            1,613,595
            
            
            
            498,454
            
            
            
            2,112,049Retained
      earnings (Accumulated losses)
            
            
            (8,465,989
            )
            
            
            227,895
            
            
            
            (8,238,094
            )Cost
      of revenues
            
            
            3,137,830
            
            
            
            (37,357
            )
            
            
            3,100,473Net
      profit (loss)
            
            
            (2,117,728
            )
            
            
            37,357
            
            
            
            (2,080,371
            )




NOTE
2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Basis
of Accounting and Principles of Consolidation





The
consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America and present the
financial statements of SRRE and its subsidiaries, CY-SRRE, LRY, SHXJY, SZXJY,
SZXJYB, SZSY, KSSY, BJXJY, SHSY and SZGFH.  All inter-company
transactions and balances have been eliminated.





Going
Concern





The
Company’s financial statements are prepared according to the accounting
principles generally accepted in the United States of America applicable to a
going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has incurred losses of
$87,787 for the first and second quarters of 2008 and had net working capital
deficiency of $1,077,609 as of June 30, 2008. The Company’s net working capital
deficiency, recurring losses and negative cash flows from operations raise
substantial doubt about its ability to continue as a going concern.




11





However,
management believes that the company is able to generate sufficient cash flow to
meet its obligations on a timely basis and ultimately to attain successful
operations in respect of the agency sales and building management operations.
Accordingly, the accompanying financial statements do not include any
adjustments that may be necessary if the Company is unable to continue as a
going concern.





Foreign
Currency Translation and Transactions





The
functional currency of SRRE, CY-SRRE and LRY is United States Dollars (“US$”)
and the financial records are maintained and the financial statements prepared
in US $. The functional currency of SHXJY, SZXJY, SZXJYB, SZSY, KSSY, BJXJY,
SHSY and SZGFH is Renminbi (“RMB”) and the financial records are maintained and
the financial statements prepared in RMB.





Foreign
currency transactions during the period are translated into each company’s
denominated currency at the exchange rates ruling at the transaction dates. Gain
and loss resulting from foreign currency transactions are included in the
consolidated statement of operations. Assets and liabilities denominated in
foreign currencies at the balance sheet date are translated into each company’s
denominated currency at period end exchange rates.  All exchange
differences are dealt with in the consolidated statements of
operations.





The
financial statements of the Company’s operations based outside of the United
States have been translated into US$ in accordance with SFAS
52.  Management has determined that the functional currency for each
of the Company’s foreign operations is its applicable local
currency.  When translating functional currency financial statements
into US$, period-end exchange rates are applied to the consolidated balance
sheets, while average period rates are applied to consolidated statements of
operations.  Translation gains and losses are recorded in translation
reserve as a component of shareholders’ equity.





The
exchange rate between US$ and RMB had a little fluctuation during the periods
presented. The rates as of June 30, 2008 and December 31, 2007 are US$1:
RMB6.8591 and US$1: RMB7.3046, respectively.





Property,
Plant, Equipment and Depreciation





Property,
plant and equipment are stated at cost. Depreciation is computed using the
straight-line method to allocate the cost of depreciable assets over the
estimated useful lives of the assets as follows:





Estimated
      Useful Life (in years)Furniture
      and fixtures
            
            
            5-10Computer
      and office equipment
            
            
            5Motor
      vehicles
            
            
            5Properties
            
            
            20





Maintenance,
repairs and minor renewals are charged directly to the statement of operations
as incurred. Additions and improvements are capitalized. When assets are
disposed of, the related cost and accumulated depreciation thereon are removed
from the accounts and any resulting gain or loss is included in the statement of
operations.





Investment
property





Investment
properties are stated at cost. Depreciation is computed using the straight-line
method to allocate the cost of depreciable assets over the estimated useful
lives of 20 years.





Significant
additions that extend property lives are capitalized and are depreciated over
their respective estimated useful lives. Routine maintenance and repair costs
are expensed as incurred. The Company reviews its investment property for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an investment property may not be recoverable.





Goodwill





SFAS No.
142, “Goodwill and Other Intangible Assets,” requires that goodwill be tested
for impairment on an annual basis (December 31 for us) and between annual tests
if an event occurs or circumstances change that would more likely than not
reduce the fair value of a reporting unit below its carrying value. These events
or circumstances could include a significant change in the business climate,
legal factors, operating performance indicators, competition, sale or
disposition of a significant portion of a company. Application of the goodwill
impairment test requires judgment, including the determination of the fair value
of a company. The fair value of a company is estimated using a discounted cash
flow methodology. This requires significant judgments including estimation of
future cash flows, which is dependent on internal forecasts, estimation of the
long-term rate of growth for our business, the useful life over which cash flows
will occur, and the determination of our weighted average cost of capital.
Changes in these estimates and assumptions could materially affect the
determination of fair value and/or goodwill impairment for a
company.




12





Revenue
Recognition





Agency
commission revenue from property brokerage is recognized when the property
developer and the buyer complete a property sales transaction, and the property
developer grants confirmation to us to be able to invoice them accordingly. The
time when we receive the commission is normally at the time when the property
developer receives from the buyer a portion of the sales proceeds in accordance
with the terms of the relevant property sales agreement, or the balance of the
bank loan to the buyer has been funded, or recognized under the sales schedule
or other specific items of agency sales agreement with developer. At no point
does the Company handle any monetary transactions nor act as an escrow
intermediary between the developer and the buyer.





Revenue
from marketing consultancy services is recognized when services are provided to
clients.





Rental
revenue from property management and rental business is recognized on a
straight-line basis according to the time pattern of the leasing
agreements.





The
Company accounts for underwriting sales in accordance with SFAS No. 66
“Accounting for Sales of Real Estate” (SFAS 66). The gain on underwriting sales
is recognized when the criteria in SFAS No. 66 have been met, generally at the
title is transferred and the Company no longer has substantial continuing
involvement with the real estate asset sold. If the Company provides certain
rent guarantees or other forms of support where the maximum exposure to loss
exceeds the gain, it defers the related commission income and expenses by
applying the deposit method. In future periods, the commission income and
related expenses are recognized when the remaining maximum exposure to loss is
reduced below the amount of gain deferred.





All
revenues represent gross revenues less sales and business tax.





Net
Earnings per Common Share





The
Company computes net earnings per share in accordance with SFAS No. 128,
“Earnings per Share.”  Under the provisions of SFAS No. 128, basic net
earnings per share is computed by dividing the net earnings available to common
shareholders for the period by the weighted average number of shares of common
stock outstanding during the period. The calculation of diluted net earnings per
share gives recognizes common stock equivalents, however; potential common stock
in the diluted EPS computation is excluded in net loss periods, as their effect
is anti-dilutive.




13





Income
Taxes





The
Company accounts for income taxes in accordance with SFAS No. 109 “Accounting
for Income Taxes.” Under SFAS No. 109, deferred tax liabilities or assets at the
end of each period are determined using the tax rate expected to be in effect
when taxes are actually paid or recovered. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.





We
continue to account for income taxcontingencies using a
benefit recognition model.Beginning January 1,
2007, if we consider that a tax position is 'more likely than not' of being
sustained upon audit, based solely on the technical merits of the position, we
recognize the benefit. We measure the benefit by determining the amount that is
greater than 50% likely of being realized upon settlement, presuming that the
tax position is examined by the appropriate taxing authority that has full
knowledge of all relevant information. These assessments can be complex and we
often obtain assistance from external advisors.





Under the
benefit recognition model, if our initial assessment fails to result in the
recognition of a tax benefit, we regularly monitor our position and subsequently
recognize the tax benefit if there are changes in tax law or analogous case law
that sufficiently raise the likelihood of prevailing on the technical merits of
the position to more likely than not; if the statute of limitations expires; or
if there is a completion of an audit resulting in a settlement of that tax year
with the appropriate agency.





Uncertain
tax positions, represented by liabilities on our balance sheet, are now
classified as current only when we expect to pay cash within the next 12 months.
Interest and penalties, if any, continue to be recorded in Provision for taxes
on income and are classified on the balance sheet with the related tax
liability.





Historically,
our policy had been to account for income tax contingencies based on whether we
determined our tax position to be 'probable' under current tax law of being
sustained, as well as an analysis of potential outcomes under a given set of
facts and circumstances. In addition, we previously considered all tax
liabilities as current once the associated tax year was under
audit.





Non-employee
stock based compensation





The cost
of stock based compensation awards issued to non-employees for services are
recorded at either the fair value of the services rendered or the instruments
issued in exchange for such services, whichever is more readily determinable,
using the measurement date guidelines enumerated in Emerging Issues Task Force
Issue ("EITF") 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services" ("EITF 96-18").





Segment
information





The
Company believes that it operates in one business segment. Management does with
the business as consisting of several revenue streams; however it is not
possible to attribute assets or indirect costs to the individual streams other
than direct expenses.





NOTE
3 - PROMISSORY DEPOSITS





The
balance of $947,646 represents the deposits placed with several property
developers in respect of a number of real estate projects where the Company is
appointed as sales agent.




NOTE
4 – AMOUNTS DUE FROM VENTURERS





The
Company has entered into co-operation agreements with two venturers (one of them
is an independent third party; the other is the Company’s ex-director, Chang
Shu-Ching) to jointly carry out a property underwriting project for a commercial
building in Suzhou, the PRC.  According to the agreements, the
Company, Chang Shu-Ching and the other venturer are entitled to share 65%, 10%
and 25% of the net results of the project, respectively. On February 14, 2007,
the venturers entered into an additional agreement that Chang Shu-Ching obtained
25% of the net results of the project from the other venturer. As a result, the
Company and Chang Shu-Ching are entitled to share 65% and 35% of the net results
of the project, respectively.





14




NOTE
5 - OTHER RECEIVABLES AND DEPOSITS





June
      30
            
            
            December
      31,2008
            
            
            2007Advances
      to staff
            
            $
            20,335
            
            
            $
            20,486Rental
      deposits
            
            
            91,341
            
            
            
            101,370Prepaid
      rental
            
            
            362,876
            
            
            
            406,833Renovation
      deposit
            
            
            279,262
            
            
            
            -Other
      receivables
            
            
            84,192
            
            
            
            73,684$
            838,006
            
            
            $
            602,373




NOTE 6 – PROPERTY, PLANT AND
EQUIPMENT – NET





June
      30,
            
            
            December
      31,2008
            
            
            2007Furniture
      and fixtures
            
            $
            146,348
            
            
            $
            133,970Computer
      and office equipment
            
            
            318,107
            
            
            
            275,988Motor
      vehicles
            
            
            667,106
            
            
            
            618,024Properties
            
            
            2,205,751
            
            
            
            2,071,2253,337,312
            
            
            
            3,099,207Less:
      Accumulated depreciation
            
            
            (591,464
            )
            
            
            (579,622
            )$
            2,745,848
            
            
            $
            2,519,585





All above
properties as of June 30, 2008 and as of December 31, 2007 were pledged to
secure a loan in note 9.





NOTE
7 – EQUITY INVESTMENT





On
September 11, 2007, SHSY invested a 19% equity interest in a PRC company named
Suzhou Bin Fen Nian Dai Administration Consultancy Company Limited
(“SZBFND”).





NOTE
8 – INVESTMENT PROPERTIES





June
      30,
            
            
            December
      31,2008
            
            
            2007Investment
      property
            
            $
            8,617,917
            
            
            $
            8,092,319Less:
      Accumulated depreciation
            
            
            (573,528
            )
            
            
            (292,091
            )$
            8,044,389
            
            
            $
            7,800,228





The
investment properties included one floor and four units of a commercial building
in Suzhou, the PRC, from which the Company derives its underwriting sales
income. The investment properties were acquired by the Company for long-term
investment purposes and were pledged to secure a loan in note 9.





As of
August 11, 2008, the four units of the investment properties were leased to
SZBFND, a related party of the Company, and 21% of the total area of the one
remaining floor was leased out.





NOTE
9 – DEFERRED TAX ASSET





The net
deferred tax assets from continuing operations are determined under the
liability method based on the difference between the financial statement and tax
basis of assets and liabilities as measured by the enacted statutory tax rates.
The deferred tax provision (benefit) is the result of changes in these temporary
differences. As of December 31, 2007 and June 30, 2008, the tax effect of the
temporary differences mainly represent the deferred tax assets arising from the
deferred gain of the underwriting sale using the deposit method.





15




NOTE
10 - BANK LOANS





Bank
loans of June 30, 2008 included two bank loans, as listed below:





First,
the balance includes a bank loan of $5,819,192. This bank loan is repayable
before August 2, 2010 and bears interest at a rate of 8.217% per annum. This
bank loan is secured by the properties as mentioned in Note 7 above. The
repayment schedule of this bank loan is as follows:





February
      1, 2010
            
            $
            1,457,917August
      2, 2010
            
            $
            4,361,275





Pursuant
to the relevant loan agreement, the using of the bank loan is restricted to pay
for deposits and expenditures incurred in performing any real estate marketing
projects of the Company, and approval from the lending bank is required for any
drawings in excess of RMB1 million from the remaining balance. This balance is
recorded as restricted cash on the balance sheet.





Second,
the remaining bank loan of $510,271 bears interest at 6.48% per annum, and is
repayable before December 15, 2010 in monthly installments. The bank loan is
secured by the properties as mentioned in Note 5 above.





NOTE
11 – PROMISSORY NOTES PAYABLE





There are
three promissory notes, as listed below:





First,
the balance includes a promissory note of $190,556. This promissory note of
$190,556 bears interest at a rate of 5% per annum. The promissory note is
unsecured and will be repayable before October 31, 2009.





Second,
the balance includes a promissory note of $75,000 and accrued interest of $8,854
thereon. This promissory note of $75,000 bears interest at a rate of 5% per
annum. This promissory note is unsecured and the term of repayment is not
specifically defined.





Third,
the balance includes a promissory note of $300,000. This promissory note of
$300,000 bears interest at a rate of 15% per annum. This promissory note is
unsecured and the term of repayment is not specifically defined.





NOTE
12 – AMOUNTS WITH RELATED PARTIES AND DIRECTORS





A related
party is an entity that can control or significantly influence the management or
operating policies of another entity to the extent one of the entities may be
prevented from pursuing its own interests. A related party may also be any party
the entity deals with that can exercise that control.





Amount due to
director




The amount due to one of the directors
with interest at a rate of 9.6% per annum. As of June 30, 2008, the balance
includes principal of $62,742 and accrued interest of $8,739 thereon. The
principal is unsecured and the term of repayment is not specifically
defined.





Amount due from related
party




The
amount represents an advance to SZBFND which is unsecured, interest free and has
no fixed term of repayment.





Amount due to related
party




The
amount represents a rental deposits received from SZBFND. Rental income of
$288,878 is generated from leasing the investment properties to SZBFND during
the period. This amount is unsecured, interest free and repayable on
demand.





16




NOTE
13 - OTHER PAYABLES AND ACCRUED EXPENSES





June
      30,
            
            
            December
      31,2008
            
            
            2007Accrued
      staff commission & bonus
            
            $
            344,448
            
            
            $
            1,013,650Rental
      deposits received
            
            
            657,058
            
            
            
            519,352Accrual
      for onerous contracts
            
            
            498,454
            
            
            
            535,811Other
      payables
            
            
            612,089
            
            
            
            384,019$
            2,112,049
            
            
            $
            2,452,833




NOTE
14 – OTHER TAX PAYABLE





Other tax
payable mainly represents PRC business tax which is charged at a rate of 5% on
the revenue from services rendered. The amount of PRC business tax charged for
the period ended June 30, 2008 was $208,539.




NOTE 15- COMMITMENTS AND
CONTINGENCIES





Operating Lease
Commitments





During
the six months ended June 30, 2008 and 2007, the Company incurred lease expenses
amounting to $200,536 and $127,715, respectively. As of June 30, 2008, the
Company had commitments under operating leases, requiring annual minimum rentals
as follows:





June
      30,
            
            
            December
      31,2008
            
            
            2007Within
      one year
            
            $
            192,562
            
            
            $
            132,628Two
      to five years
            
            
            111,553
            
            
            
            133,847Operating
      lease commitments
            
            $
            304,115
            
            
            $
            266,475





During
the year of 2005 and 2006, SZGFH entered into leasing agreements with certain
buyers of the Sovereign Building underwriting project to lease the properties
for them. These leasing agreements on these properties are for 62% of the floor
space that was sold to third party buyers. In accordance with the leasing
agreements, the owners of the properties can have an annual rental return of
8.5% and 8.8% per annum for a period of 5 years and 8 years,
respectively.  The leasing period started in the second quarter, 2006,
and the Company has the right to sublease the leased properties to cover these
lease commitments in the leasing period.  As of June 30, 2008, 124
sub-leasing agreements have been signed, the area of these sub-leasing
agreements represented 95% of total area with these lease
commitments.




As of
June 30, 2008, the lease commitments are as follows:




June
      30,
            
            
            December
      31,2008
            
            
            2007Within
      one year
            
            $
            3,230,861
            
            
            $
            3,047,216Two
      to five years
            
            
            7,510,217
            
            
            
            8,412,157Over
      five years
            
            
            2,370,280
            
            
            
            2,181,446Operating
      lease commitments arising from the promotional package
            
            $
            13,111,358
            
            
            $
            13,640,819





17




An
accrual for onerous contracts was recognised which is equal to the difference
between the present value of the sublease income and the present value of the
associated lease expense at appropriate discount rate. The accrual for onerous
contacts was $535,811 as of December 31, 2007 and $498,452 as of June 30,
2008.





According
to the leasing agreements, the Company has an option to terminate any agreement
by paying a predetermined compensation. As of June 30, 2008, the compensation to
terminate all leasing agreements is $3,189,634. According to the sub-leasing
agreements that have been signed through June 30, 2008, the rental income from
these sub-leasing agreements will be $2,176,808 within one year and $3,440,809
within two to five years. However, no assurance can be given that we can collect
all of the rental income.




NOTE
16 –DEPOSITS RECEIVED FROM UNDERWRTING SALES





The
Company accounts for its underwriting sales revenue with underwriting rent
guarantees in accordance with SFAS No. 66 “Accounting for Sales of Real Estate”
(SFAS 66). Under SFAS 66, the deposit method should be used for the revenue from
the sales of floor space with underwriting rent guarantees until the rental
revenues generated by sub-leasing properties exceed the guaranteed rental amount
due to the purchasers.




NOTE
17 – STATUTORY RESERVE





According
to the relevant corporation laws in the PRC, a PRC company is required to
transfer at least 10% of its profit after taxes, as determined under accounting
principles generally accepted in the PRC, to the statutory reserve until the
balance reaches 50% of its registered capital. The statutory reserve can be used
to make good on losses or to increase the capital of the relevant
company.




NOTE
18 – ACCUMULATED OTHER COMPREHENSIVE INCOME





As of
June 30, 2008, the only component of accumulated other comprehensive income was
translation reserve.




NOTE
19 – COMPARATIVE FIGURES




Certain
comparative figures have been reclassified to conform with current period’s
presentation




NOTE
20 – CONCENTRATION OF CUSTOMERS





During
the three months and six months ended June 30, 2008 and 2007, the following
customers accounted for more than 10% of total net revenue:





Percentage
      of
              Net
      Sales
              Three
      Months
              Ended
      June 30,
            
            
            Percentage
      of
              Net
      Sales
              Six
      Months
              Ended
      June 30,
            
            
            Percentage
      of
              Accounts
      Receivable
              as
      of June 30,2008
            
            
            2007
            
            
            2008
            
            
            2007
            
            
            2008
            
            
            2007Customer
      A
            
            
            21
            %
            
            
            11
            %
            
            
            13
            %
            
            
            *
            
            
            
            26
            %
            
            
            *Customer
      B
            
            
            15
            %
            
            
            *
            
            
            
            15
            %
            
            
            *
            
            
            
            *
            
            
            
            *Customer
      C
            
            
            14
            %
            
            
            *
            
            
            
            *
            
            
            
            *
            
            
            
            *
            
            
            
            *





* less
than 10%




18




ITEM
2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND
RESULTS OF OPERATIONS





CAUTIONARY
STATEMENT





The
following Management’s Discussion and Analysis (“MD&A”) is intended to help
the reader understand Sunrise Real Estate Group, Inc. (“SRRE”). The MD&A is
provided as a supplement to, and should be read in conjunction with, our
financial statements and the accompanying notes. The information contained in
this quarterly report on Form 10-Q is not a complete description of our business
or the risks associated with an investment in our common stock. We urge you to
carefully review and consider the various disclosures made by us in this report
and in our other reports filed with the Securities and Exchange Commission, or
SEC, including but not limited to our annual report on Form 10-KSB for the year
ended December 31, 2007, which discusses our business in greater
detail.





In this
report we make, and from time to time we otherwise make, written and oral
statements regarding our business and prospects, such as projections of future
performance, statements of management’s plans and objectives, forecasts of
market trends, and other matters that are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Statements containing the words or phrases
“will likely result,” “are expected to,” “will continue,” “is anticipated,”
“estimates,” “projects,” “seeks”, “believes,” “expects,” “anticipates,”
“intends,” “target,” “goal,” “plans,” “objective,” “should” or similar
expressions identify forward-looking statements, which may appear in documents,
reports, filings with the Securities and Exchange Commission, news releases,
written or oral presentations made by officers or other representatives made by
us to analysts, stockholders, current or potential investors, news organizations
and others, and discussions with management and other of our representatives,
customer and suppliers. For such statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.





Our
future results, including results related to forward-looking statements, involve
a number of risks and uncertainties. No assurance can be given that the results
reflected in any forward-looking statements will be achieved. Any
forward-looking statement speaks only as of the date on which such statement is
made. Our forward-looking statements are based upon assumptions that are
sometimes based upon estimates, data, communications and other information from
suppliers, government agencies and other sources that may be subject to
revision. Except as required by law, we do not undertake any obligation to
update or keep current either (i) any forward-looking statement to reflect
events or circumstances arising after the date of such statement, or (ii) the
important factors that could cause our future results to differ materially from
historical results or trends, results anticipated or planned by us, or which are
reflected from time to time in any forward-looking statement.





In
addition to other matters identified or described by us from time to time in
filings with the SEC, there are several important factors that could cause our
future results to differ materially from historical results or trends, results
anticipated or planned by us, or results that are reflected from time to time in
any forward-looking statement. Some of these important factors, but not
necessarily all important factors, include those relating to our ability to
raise money and grow our business, and potential difficulties in integrating new
acquisitions with our current operations, especially as they pertain to foreign
markets and market conditions.  Please also refer to the section
entitled “Risk Factors” in our Annual Report on Form 10-KSB for the year ended
December 31, 2007.





OVERVIEW





In
October 2004, the former shareholders of Sunrise Real Estate Development Group,
Inc. (Cayman Islands) (“CY-SRRE”) and LIN RAY YANG Enterprise Ltd. (“LRY”)
acquired a majority of our voting interests in a share
exchange.  Before the completion of the share exchange, SRRE had no
continuing operations, and its historical results would not be meaningful if
combined with the historical results of CY-SRRE, LRY and their
subsidiaries.





As a
result of the acquisition, the former owners of CY-SRRE and LRY hold a majority
interest in the combined entity.  Generally accepted accounting
principles require in certain circumstances that a company whose shareholders
retain the majority voting interest in the combined business be treated as the
acquirer for financial reporting purposes.  Accordingly, the
acquisition has been accounted for as a “reverse acquisition” arrangement
whereby CY-SRRE and LRY are deemed to have purchased SRRE.  However,
SRRE remains the legal entity and the Registrant for Securities and Exchange
Commission reporting purposes.  The historical financial statements
prior to October 5, 2004 are those of CY-SRRE and LRY and their
subsidiaries.  All equity information and per share data prior to the
acquisition have been restated to reflect the stock issuance as a
recapitalization of CY-SRRE and LRY.





19





SRRE and
its subsidiaries, namely, CY-SRRE, LRY, Shanghai Xin Ji Yang Real Estate
Consultation Company Limited (“SHXJY”), Suzhou Xin Ji Yang Real Estate
Consultation Company Limited (“SZXJY”), Beijing Xin Ji Yang Real Estate
Consultation Company Limited (“BJXJY”), Shanghai Shangyang Real Estate
Consultation Company Limited (“SHSY”), Suzhou Gao Feng Hui Property Management
Company Limited (“SZGFH”), Suzhou Shang Yang Real Estate Consultation Company
Limited (“SZSY”), Suzhou Xin Ji Yang Real Estate Brokerage Company
Limited(“SZXJYB”) and Kunshan Shang Yang Real Estate Brokerage Company Limited
(“KSSY”)are sometimes hereinafter collectively referred to as “the Company,”
“our,” or “us”.  The principal activities of the Company are real
estate agency sales, real estate marketing services, real estate investments,
property leasing services and property management services in the PRC.





RECENT
DEVELOPMENTS





Our major
business was agency sales, whereby our Chinese subsidiaries contracted with
property developers to market and sell their newly developed property
units.  For these services we earned a commission fee calculated as a
percentage of the sales prices. We have focused our sales on the whole China
market, especially in secondary cities. To expand our agency business, we have
established subsidiaries in Shanghai, Suzhou and Beijing, and branches in
NanChang, YangZhou, NanJing and ChongQing.





During
the year of 2005 and 2006, SZGFH entered into leasing agreements with certain
buyers of the Sovereign Building underwriting project to lease the properties
for them. These leasing agreements on these properties are for 62% of the floor
space that was sold to third party buyers. In accordance with the leasing
agreements, the owners of the properties can have an annual rental return of
8.5% and 8.8% per annum for a period of 5 years and 8 years,
respectively.  The leasing period started in the second quarter, 2006,
and the Company has the right to sublease the leased properties to cover these
lease commitments in the leasing period. As of August 11, 2008, 124 sub-leasing
agreements have been signed, the area of these sub-leasing agreements
represented 95% of total area with these lease commitments.





RECENTLY
ISSUED ACCOUNTING STANDARDS





In
February 2008, the FASB issued FSP FAS 157-2, which delayed the effective date
of SFAS No 157 to fiscal years beginning after November 15, 2008 and interim
periods within those fiscal years for all non-financial assets and nonfinancial
liabilities, except those are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually). The Company does
not believe that the adoption of SFAS No. 157 will significantly impact its
financial statements.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations,” (“SFAS 141R”) to improve the relevance, representational
faithfulness, and comparability of the information that a reporting entity
provides in its financial reports about a business combination and its effects.
This Statement applies to all transactions or other events in which an entity
obtains control of one or more businesses, and combinations achieved without the
transfer of consideration. SFAS No. 141 (revised 2007) is effective for business
combinations for which the acquisition date is in on or after the beginning of
the first annual reporting period beginning on or after December 15,
2008.  The impact of adopting SFAS 141R will depend on the nature and
size of the future business combinations the Company consummates after the
effective date.





FASB
statement No. 160 “Noncontrolling Interests in Consolidated Financial
Statements- an amendment of ARB No. 51” was issued December of 2007. This
Statement establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary.  The Company believes that this new pronouncement
will have an immaterial impact on the Company’s financial statements in future
periods.





APPLICATION
OF CRITICAL ACCOUNTING POLICIES





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Critical accounting policies for us include revenue
recognition, net earnings per common share, income taxes and segment
information.




20





Revenue
Recognition





Agency
commission revenue from property brokerage is recognized when the property
developer and the buyer complete a property sales transaction, and the property
developer grants confirmation to us to be able to invoice them accordingly. The
time when we receive the commission is normally at the time when the property
developer receives from the buyer a portion of the sales proceeds in accordance
with the terms of the relevant property sales agreement, or the balance of the
bank loan to the buyer has been funded, or recognized under the sales schedule
or other specific items of agency sales agreement with developer. At no point
does the Company handle any monetary transactions nor act as an escrow
intermediary between the developer and the buyer.





Revenue
from marketing consultancy services is recognized when services are provided to
clients.





Rental
revenue from property management and rental business is recognized on a
straight-line basis according to the time pattern of the leasing
agreements.





The
Company accounts for its underwriting sales revenue with underwriting rent
guarantees in accordance with SFAS No. 66 “Accounting for Sales of Real Estate”
(SFAS 66). Under SFAS 66, the deposit method should be used for the revenue from
the sales of floor space with underwriting rent guarantees until the rental
revenues generated by sub-leasing properties exceed the guaranteed rental amount
due to the purchasers.





All
revenues represent gross revenues less sales and business tax.





Net
Earnings per Common Share





The
Company computes net earnings per share in accordance with SFAS No. 128,
“Earnings per Share.”  Under the provisions of SFAS No. 128, basic net
earnings per share is computed by dividing the net earnings available to common
shareholders for the period by the weighted average number of shares of common
stock outstanding during the period. The calculation of diluted net earnings per
share gives recognizes common stock equivalents, however; potential common stock
in the diluted EPS computation is excluded in net loss periods, as their effect
is anti-dilutive.





Income
Taxes





The
Company accounts for income taxes in accordance with SFAS No. 109 “Accounting
for Income Taxes.” Under SFAS No. 109, deferred tax liabilities or assets at the
end of each period are determined using the tax rate expected to be in effect
when taxes are actually paid or recovered. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized.





Segment
Information





The
Company believes that it operates in one business segment. Management does with
the business as consisting of several revenue streams; however it is not
possible to attribute assets or indirect costs to the individual streams other
than direct expenses.




21





RESULTS OF OPERATIONS





We
provide the discussion and analysis of our changes in financial condition and
results of operations for the three and six months ended June 30, 2008, with
comparisons to the historical three and six months ended June 30,
2007.





Revenue





The
following table shows the net revenue detail by line of business:





Three
      Months Ended June 30,
            
            
            Six
      Months Ended June 30,2008
            
            
            %
      to total
            
            
            2007
            
            
            %
      to total
            
            
            %
      change
            
            
            2008
            
            
            %
      to total
            
            
            2007
            
            
            %
      to total
            
            
            %
      changeAgency
      sales
            
            
            1,761,165
            
            
            
            67
            
            
            
            1,226,165
            
            
            
            81
            
            
            
            44
            
            
            
            2,507,942
            
            
            
            63
            
            
            
            2,000,537
            
            
            
            75
            
            
            
            25Underwriting
      sales
            
            
            -
            
            
            
            -
            
            
            
            34,592
            
            
            
            2
            
            
            
            (100
            )
            
            
            -
            
            
            
            -
            
            
            
            214,654
            
            
            
            8
            
            
            
            (100
            )Property
      Management
            
            
            880,516
            
            
            
            33
            
            
            
            259,290
            
            
            
            17
            
            
            
            239
            
            
            
            1,453,284
            
            
            
            37
            
            
            
            440,011
            
            
            
            17
            
            
            
            230Net
      revenue
            
            
            2,641,681
            
            
            
            100
            
            
            
            1,520,047
            
            
            
            100
            
            
            
            73
            
            
            
            3,961,226
            
            
            
            100
            
            
            
            2,655,202
            
            
            
            100
            
            
            
            49





The net
revenue in the second quarter of 2008 was $$2,641,681, which increased 73% from
$1,520,047 in the second quarter of 2007. The total net revenue of the first two
quarters of 2008 was $3,961,226, which increased 49% from $2,655,202 of the
first two quarters of 2007. In the second quarter of 2008, agency sales
represented 67% of the total net revenue and property management represented
33%. In the first two quarters of 2008, agency sales represented 63% of the
total net revenue and property management represented 37%. The increase in net
revenue in the second quarter and first two quarters of 2008 was due to the both
increase in our agency sales and property management.





Agency
sales





In the
second quarter and first two quarters of 2008, 67% and 63%, respectively, of our
net revenue was due to agency sales. As compared with same period in 2007, net
revenue of agency sales in the second quarter and first two quarters of 2007
increased 44% and 25% respectively. The primary reason for the change was
that:




1)
            In
      the first two quarter of 2008, the net revenue from SZSY was $779,455,
      which increased 215% from the same period in
  2007.


2)
            There
      was one project began to contribute net revenue from the second quarter,
      2008. The net revenue of this project in the second quarter, 2008 was
      $329,553.





Because
of our diverse market locations, the current macro economic policies had little
impact on our agency sales business, and we are seeking stable growth in our
agency sales business in 2008. However, there can be no assurance that we will
be able to do so.





Underwriting
sales





As the
Sovereign Building Project was closed in 2007, there was no net revenue of
underwriting sales in 2008.





Property
Management





During
the year of 2005 and 2006, SZGFH entered into leasing agreements with certain
buyers of the Sovereign Building underwriting project to lease the properties
for them. These leasing agreements on these properties are for 62% of the floor
space that was sold to third party buyers. The leasing period started in the
second quarter, 2006, and the Company has the right to sublease the leased
properties to cover these lease commitments in the leasing period.  As
of June 30, 2008, 124 sub-leasing agreements have been signed, the area of these
sub-leasing agreements represented 95% of total area with these lease
commitments. We expect that the income from the sub-leasing business will be on
a stable growth trend in 2008 and that it can cover the lease commitments in the
leasing period as a whole. However there can be no assurance that we will
achieve these objectives.




22




Cost of
Revenue





The
following table shows the cost of revenue detail by line of
business:





Three
      Months Ended June 30,
            
            
            Six
      Months Ended June 30,2008
            
            
            %
      to total
            
            
            2007
            
            
            %
      to total
            
            
            %
      change
            
            
            2008
            
            
            %
      to total
            
            
            2007
            
            
            %
      to total
            
            
            %
      changeAgency
      sales
            
            
            1,003,271
            
            
            
            56
            
            
            
            514,587
            
            
            
            35
            
            
            
            95
            
            
            
            1,537,593
            
            
            
            50
            
            
            
            1,023,979
            
            
            
            37
            
            
            
            50Underwriting
      sales
            
            
            -
            
            
            
            -
            
            
            
            39,978
            
            
            
            3
            
            
            
            (100
            )
            
            
            -
            
            
            
            -
            
            
            
            12,370
            
            
            
            1
            
            
            
            (100
            )Property
      Management
            
            
            794,278
            
            
            
            44
            
            
            
            936,231
            
            
            
            63
            
            
            
            (15
            )
            
            
            1,562,880
            
            
            
            50
            
            
            
            1,681,033
            
            
            
            62
            
            
            
            (7
            )Cost
      of revenue
            
            
            1,797,549
            
            
            
            100
            
            
            
            1,490,796
            
            
            
            100
            
            
            
            21
            
            
            
            3,100,473
            
            
            
            100
            
            
            
            2,717,382
            
            
            
            100
            
            
            
            14





The cost
of revenue of the second quarter of 2008 was $1,797,549, which increased 21%
from $1,490,796 of the second quarter of 2007. The total cost of revenue of the
first two quarters of 2008 was $3,100,473, which increased 14%
from $2,717,382 of the
first two quarters of 2007. In the second quarter of 2008, agency sales
represented 56% of the total cost of revenue and property management represented
44%. In the first two quarters of 2008, agency sale represented 50% of the total
cost of revenue and property management represented 50%. The increase in cost of
revenue in the second quarter and first two quarters of 2008 was due to the
increase in our agency sales.





Agency
sales





As
compared with same period in 2007, cost of revenue of agency sales in the second
quarter and first two quarters of 2008 increased 95% and 50% respectively. The
primary reason for the change was the increase in our marketing expenses and
consulting fees of agency sales. In the second quarter and first two quarters of
2008, our marketing expenses increased $48,023 and $124,263, and consulting fees
increased $257,599 and $227,709, compared to the same period in
2007.





Underwriting
sales





As the
Sovereign Building Project was closed in 2007, there was no cost of underwriting
sales in 2008.





Property
management





During
the year of 2005 and 2006, SZGFH entered into leasing agreements with certain
buyers of the Sovereign Building underwriting project to lease the properties
for them. These leasing agreements on these properties are for 62% of the floor
space that was sold to third party buyers. In accordance with the leasing
agreements, the owners of the properties can have an annual rental return of
8.5% and 8.8% per annum for a period of 5 years and 8 years,
respectively.  The leasing period started in the second quarter, 2006,
and we recognized the rental return under these leasing agreements as our
cost.





Operating
Expenses





The
following table shows operating expenses detail by line of
business:





Three
      Months Ended June 30,
            
            
            Six
      Months Ended June 30,2008
            
            
            %
      to total
            
            
            2007
            
            
            %
      to total
            
            
            %
      change
            
            
            2008
            
            
            %
      to total
            
            
            2007
            
            
            %
      to total
            
            
            %
      changeAgency
      sales
            
            
            298,123
            
            
            
            91
            
            
            
            193,414
            
            
            
            76
            
            
            
            54
            
            
            
            576,574
            
            
            
            90
            
            
            
            369,512
            
            
            
            75
            
            
            
            56Underwriting
      sales
            
            
            -
            
            
            
            -
            
            
            
            21,679
            
            
            
            8
            
            
            
            (100
            )
            
            
            -
            
            
            
            -
            
            
            
            54,757
            
            
            
            11
            
            
            
            (100
            )Property
      Management
            
            
            30,366
            
            
            
            9
            
            
            
            40,319
            
            
            
            16
            
            
            
            (25
            )
            
            
            62,541
            
            
            
            10
            
            
            
            70,652
            
            
            
            14
            
            
            
            (11
            )Operating
      expenses
            
            
            328,489
            
            
            
            100
            
            
            
            255,412
            
            
            
            100
            
            
            
            29
            
            
            
            639,115
            
            
            
            100
            
            
            
            494,921
            
            
            
            100
            
            
            
            29




23




The
operating expenses of the second quarter of 2008 were $328,489, which increased
29% from $255,412 of the second quarter of 2007. The total operating expenses of
the first two quarters of 2008 were $639,115, which increased 29% from $494,921
of the first two quarters of 2007. In the second quarter of 2008, agency sales
represented 91% of the total operating expenses and property management
represented 9%. In the first two quarters of 2008, agency sale represented 90%
of the total operating expenses and property management represented 10%. This
increase was due to the increase in our agency sales.





Agency
sales





When
compared to 2007, the operating expenses for agency sales in the second quarter
and first two quarters of 2008 increased 54% and 56% respectively. The primary
reason for the change was the increase in our staff cost and traveling expenses
of agency sales. In the second quarter and first two quarters of 2008, our staff
cost increased $39,113 and $96,143, and traveling expenses increased $30,836 and
$31,022, compared to the same period in 2007.





Underwriting
sales





As the
Sovereign Building Project was closed in 2007, there was no operating expense of
underwriting sales in 2008.





Property
management





When
compared to 2007, the operating expenses for property management in the second
quarter and first two quarters of 2008 decreased 25% and 11% respectively. The
primary reason for the change was the decrease in our agency commissions of
property management. In the second quarter and first two quarters of 2008, the
agency commissions decreased $29,122 and $43,128, compared to the same period in
2007.





General and Administrative
Expenses





When
compared to 2007, the general and administrative expenses in the second quarter
and first two quarters of 2008 increased 17% and 9% respectively. The primary
reason for the change was the increase in our staff cost and depreciation
expenses. In the second quarter and first two quarters of 2008, our staff cost
increased $104,916 and $44,166, and depreciation expenses increased $40,960 and
$144,952, compared to the same period in 2007.





Interest
Expenses





When
compared to 2007, the interest expenses in the second quarter and first two
quarters of 2008 decreased 30% and 30% respectively. The interest expenses
relate to bank loans and promissory notes payable. The decrease was mainly due
to the decrease in interest on promissory notes payable.




LIQUIDITY AND CAPITAL RESOURCES





In the
first two quarters of 2008, our principal sources of cash were revenues from our
agency sales business. We expect these sources of revenues will continue to meet
our cash requirements, including debt service, operating expenses and promissory
deposits for various property projects.





Most of
our cash resources were used to fund our revenue related expenses, such as
salaries and commissions paid to the sales force, daily administrative expenses,
the maintenance of regional offices and promissory deposits, and the repayments
of our bank loans and promissory notes.





We ended
the period with a cash position of $1,152,474 (including cash and cash
equivalents of $922,232 and restricted cash of $230,242). The Company’s
operating activities used cash in the amount of $683,015 in the first two
quarters of 2008, which was primarily attributable to the Company’s net loss and
payment of promissory deposits.




24





The
Company’s investing activities generated cash in the amount of $2,108,341 in the
first two quarters of 2008, which was primarily attributable to the decreased in
restricted cash balance.





The
Company’s financing activities used cash in the amount of $597,523 in the first
two quarters of 2008, which was primarily attributable to the repayment of
promissory notes.





The
potential cash needs for 2008 will be the repayments of our bank loans and
promissory notes, the rental guarantee payments and promissory deposits for
various property projects.





We
anticipate that our current available funds, cash inflows from our agency sales
and property management, and proceeds from our investment properties will be
sufficient to meet our anticipated needs for working capital expenditures,
business expansion and the potential cash needs during 2008.





If our
business grows more rapidly than we currently predicted, we plan to raise funds
through the issuance of additional shares of our equity securities in one or
more public or private offerings.  We will also consider raising funds
through credit facilities obtained with lending institutions.  There
can be no guarantee that we will be able to obtain such funds through the
issuance of debt or equity that are with terms satisfactory to management and
our board of directors.





OFF BALANCE SHEET
ARRANGEMENTS





The
Company has no off-balance sheet arrangements.





ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





A smaller
reporting company is not required to provide the information required by this
item.





ITEM
4.  CONTROLS AND PROCEDURES





Our
management, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) or
15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), as of June 30, 2008. Based on such evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that as of June 30, 2008, our
disclosure controls and procedures were ineffective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by us in the reports that we file or submit under the Exchange
Act.





In the
course of evaluating our internal controls over financial reporting as at June
30, 2008, management has identified the significant deficiencies related to the
failure to correctly apply accounting principle in underwriting revenue
recognition and to recognize the minority interest. Because of its inherent
limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.





We rely
on certain compensating controls, including substantive periodic review of the
financial statements by our Chief Executive Officer, Chief Financial Officer and
Audit Committee.





There
were no changes in our internal controls over financial reporting during the
quarter ended June 30, 2008, that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial
reporting.





25




PART
II - OTHER INFORMATION





ITEM
1. LEGAL PROCEEDINGS





The
Company is not a party to any legal proceedings of a material
nature.





ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





None.





ITEM
3. DEFAULTS UPON SENIOR SECURITIES





None.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.





ITEM
5. OTHER INFORMATION





None.




ITEM
6. EXHIBITS





Exhibit
              Number
            
            Description31.1
            
            Section
      302 Certification by the Corporation's Chief Executive
      Officer.31.2
            
            Section
      302 Certification by the Corporation's Chief Financial
      Officer.32.1
            
            Section
      1350 Certification by the Corporation's Chief Executive Officer and
      Corporation's Chief Financial
Officer.




SIGNATURES




In
accordance with the requirements of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.




SUNRISE REAL ESTATE GROUP,
      INC.Date:
      May 14, 2009
              By:
              /s/
      Lin, Chi-JungLin,
      Chi-Jung, Chief Executive OfficerDate:
      May 14, 2009
              By:
              /s/
      Wang, Wen-YanWang,
      Wen-Yan, Chief Financial Officer




26