**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D. C. 20549**





**FORM
      10-QSB**





**x
      QUARTERLY REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**


For
      the
      quarterly period ended March 31, 2007




**o TRANSITION
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT**


For
      the
      transition period from __________ to __________


*Commission
      File Number 000-32585*





**SUNRISE
      REAL ESTATE GROUP, INC.**





(Exact
      Name of Small Business Issuer 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)





Issuer's
      telephone number: + 86-21-6422-0505





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the issuer was required to file such reports), and (2) has been subject
      to
      such filing requirements for the past 90 days. Yes x No o





Indicate
      by checkmark whether the registrant is a shell company (as defined in Rule
      12b-2
      of the Exchange Act): Yes o  No x





State
      the
      number of shares outstanding of each of the issuer's classes of common equity,
      as of the latest practicable date: May 2, 2007 - 23,001,614 shares of Common
      Stock





Transitional
      Small Business Disclosure Format (check one): Yes o No x















**FORM
      10-QSB**




**For
      the Quarter Ended March 31, 2007**




**INDEX** ****


**Page**PART
                I. FINANCIAL INFORMATION
            3Item
                1.Financial
                Statements
            3Consolidated
                Balance Sheets
            3Consolidated
                Statements of Operations
            4Consolidated
                Statements of Cash Flows
            5Item
                2.Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            15Item
                3.Controls
                and Procedures
            22PART
                II. OTHER INFORMATION
            23Item
                1.Legal
                Proceedings
            23Item
                2.Unregistered
                Sales of Equity Securities and Use of Proceeds
            23Item
                3.Defaults
                Upon Senior Securities
            23Item
                4.Submission
                of Matters to a Vote of Security Holders
            23Item
                5.Other
                Information
            23Item
                6.Exhibits
            23SIGNATURES
            24





2


**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1. F** **INANCIAL
      STATEMENTS**




**Sunrise
      Real Estate Group, Inc.**


**Consolidated
      Balance Sheets**


**(Expressed
      in US Dollars)**


**March
                31,**
            
            **December
                31,****2007**
            
            **2006****(Unaudited)**ASSETSCurrent
                assetsCash
                and cash equivalents
            
            $
            1,944,652
            
            $
            945,727Accounts
                receivable
            
            
            2,029,459
            
            
            4,824,031Promissory
                deposits (Note 3)
            
            
            840,423
            
            
            192,093Amounts
                due from venturers (Note 10)
            
            
            1,958,300
            
            
            1,939,616Other
                receivables and deposits (Note 4)
            
            
            875,698
            
            
            509,745Total
                current assets
            
            
            7,648,532
            
            
            8,411,212Property,
                plant and equipment - net (Note 5)
            
            
            8,790,259
            
            
            2,491,633Deferred
                tax assets (Note 6)
            
            
            144,218
            
            
            142,842Deposits
                for acquisitions of properties (Note 7)
            
            
            4,782,858
            
            
            10,662,642Goodwill
            
            
            209,170
            
            
            207,302Total
                assets
            
            $
            21,575,037
            
            $
            21,915,631LIABILITIES
                AND SHAREHOLDERS’ EQUITYCurrent
                liabilitiesBank
                loans (Note 8)
            
            $
            1,276,608
            
            $
            1,256,282Promissory
                notes payable (Note 9)
            
            
            3,241,566
            
            
            740,833Accounts
                payable
            
            
            192,764
            
            
            528,814Amounts
                due to venturers (Note 10)
            
            
            1,300,575
            
            
            1,410,377Amount
                due to director (Note 11)
            
            
            169,180
            
            
            180,630Other
                payables and accrued expenses (Note 12)
            
            
            1,011,452
            
            
            1,538,704Other
                tax payable (Note 13)
            
            
            115,509
            
            
            258,732Income
                tax payable (Note 14)
            
            
            1,217,319
            
            
            1,366,612Total
                current liabilities
            
            
            8,524,973
            
            
            7,280,984Commitments
                and contingencies (Note 15)Long-term
                bank loans (Note 8)
            
            
            3,643,659
            
            
            3,927,478Long-term
                promissory notes payable (Note 9)
            
            
            211,111
            
            
            244,445Minority
                interest
            
            
            373,078
            
            
            375,406Shareholders’
                equityCommon
                stock, par value $0.01 per share; 200,000,000 shares authorized;
                23,001,614 and 23,001,614 shares issued and outstanding as of March
                31,
                2007 and December 31, 2006, respectively
            
            
            230,016
            
            
            230,016Additional
                paid-in capital
            
            
            2,922,997
            
            
            2,922,997Statutory
                reserve (Note 16)
            
            
            716,862
            
            
            716,862Retained
                earnings
            
            
            4,353,351
            
            
            5,742,586Accumulated
                other comprehensive income (Note 17)
            
            
            598,990
            
            
            474,857Total
                shareholders’ equity
            
            
            8,822,216
            
            
            10,087,318Total
                liabilities and shareholders’ equity
            
            $
            21,575,037
            
            $
            21,915,631




See
      accompanying notes to consolidated financial statements.


3


**Sunrise
      Real Estate Group, Inc.**





**Consolidated
      Statements of Operations**





(Expressed
      in US Dollars)


**Three
                Months Ended March 31,****2007**
            
            **2006****(Unaudited)**Net
                Revenues
            
            $
            1,135,155
            
            $
            4,599,414Cost
                of Revenues
            
            
            (1,250,692
            )
            
            (1,903,528
            )Gross
                (Loss)/ Profit
            
            
            (115,537
            )
            
            2,695,886Operating
                Expenses
            
            
            (239,509
            )
            
            (202,372
            )General
                and Administrative Expenses
            
            
            (894,575
            )
            
            (723,301
            )Operating
                (Loss)/ Profit
            
            
            (1,249,621
            )
            
            1,770,213Interest
                Income
            
            
            4,227
            
            
            1,475Other
                Income, Net
            
            
            55,641
            
            
            2,166Interest
                Expenses
            
            
            (202,562
            )
            
            (129,765
            )(Loss)/
                Income Before Income Tax and Minority Interest
            
            
            (1,392,315
            )
            
            1,644,089Income
                Tax
            
            
            -
            
            
            (301,143
            )(Loss)/
                Income Before Minority Interest
            
            
            (1,392,315
            )
            
            1,342,946Minority
                Interest
            
            
            3,080
            
            
            (28,028
            )Net
                (Loss)/ Income
            
            $
            (1,389,235
            )
            $
            1,314,918(Loss)/
                Earnings Per Share - Basic and Fully Diluted
            
            $
            (0.06
            )
            $
            0.06Weighted
                average common shares outstanding
              -
                Basic and Fully Diluted
            
            
            23,001,614
            
            
            22,996,614





See
      accompanying notes to consolidated financial statements.





4


**Sunrise
      Real Estate Group, Inc.**





**Consolidated
      Statements of Cash Flows**


**Increase/(Decrease)
      in Cash and Cash Equivalents**





(Expressed
      in US Dollars)


**Three
                Months Ended March 31,****2007**
            
            **2006****(Unaudited)****Cash
                flows from operating activities****Net
                (loss)/ income**
            
            $
            (1,389,235
            )
            $
            1,314,918Adjustments
                to reconcile net income tonet
                cash provided by/(used in) operating activitiesDepreciation
                of plant and equipment
            
            
            83,581
            
            
            33,817Loss
                on disposal of fixed assets
            
            
            532
            
            
            1,039Deferred
                tax credit
            
            
            -
            
            
            (136,388
            )Minority
                interest
            
            
            (3,080
            )
            
            29,528Change
                in:Accounts
                receivable
            
            
            2,829,625
            
            
            (2,863,420
            )Promissory
                deposits
            
            
            (643,882
            )
            
            -Other
                receivables and deposits
            
            
            (359,592
            )
            
            (134,605
            )Accounts
                payable
            
            
            (339,773
            )
            
            (9,917
            )Amounts
                with venturers
            
            
            (122,892
            )
            
            1,321,408Deferred
                commission income
            
            
            -
            
            
            909,254Other
                payables and accrued expenses
            
            
            (539,896
            )
            
            (708,531
            )Interest
                payable on promissory notes
            
            
            84,830
            
            
            -Interest
                payable on amount due to director
            
            
            (11,450
            )
            
            -Other
                tax payable
            
            
            (145,130
            )
            
            95,195Income
                tax payable
            
            
            (161,804
            )
            
            372,377**Net
                cash (used in)/provided by operating activities**
            
            
            (718,166
            )
            
            224,675**Cash
                flows from investing activities**Acquisition
                of plant and equipment
            
            
            (375,073
            )
            
            (2,951
            )Deposits
                paid for acquisition of properties
            
            
            -
            
            
            (1,247,349
            )**Net
                cash****(used
                in) investing activities**
            
            
            (375,073
            )
            
            (1,250,300
            )**Cash
                flows from financing activities**Bank
                loan repayment
            
            
            (312,166
            )
            
            (336,419
            )Bank
                loans obtained
            
            
            -
            
            
            1,247,349Repayment
                of promissory note
            
            
            (183,334
            )
            
            (124,735
            )Proceeds
                from promissory note
            
            
            2,565,903
            
            
            -Advances
                from director
            
            
            -
            
            
            (10,458
            )**Net
                cash provided by financing activities**
            
            
            2,070,403
            
            
            775,737**Effect
                of exchange rate changes on cash and cash
                equivalents**
            
            
            21,761
            
            
            21,311**Net
                (decrease)/increase in cash and cash equivalents**
            
            
            998,925
            
            
            (228,577
            )**Cash
                and cash equivalents at beginning of****period**
            
            
            945,727
            
            
            855,588**Cash
                and cash equivalents at end of period**
            
            $
            1,944,652
            
            $
            627,011**Supplemental
                disclosure of cash flow****information**Cash
                paid during the period:Income
                tax paid
            
            
            174,206
            
            
            62,831Interest
                paid
            
            
            129,182
            
            
            140,639





See
      accompanying notes to consolidated financial statements.


5


**NOTES
      TO 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 (“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 holds 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, the director of SZXJY holding a 12.5% equity interest in SZSY.
      Following that, CY-SRRE effectively holds 38.5% equity interest in
      SZSY.





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.





SHXJY,
      SZXJY, BJXJY, SHSY, SZGFH and SZSY commenced operations in November 2001, June
      2004, January 2004, February 2004, January 2005 and November 2006 respectively.
      Each of SHXJY, SZXJY, BJXJY, SHSY, SZGFH and SZSY 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.





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.





6


SRRE
      and
      its subsidiaries, namely, CY-SRRE, LRY, SHXJY, SZXJY, SZSY, 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 .





SRRE
      had
      approximately 1,273 shareholders of record as of May 2, 2007. ****








**NOTE
      2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





**Basis
      of Presentation**





The
      accompanying unaudited financial data as of and for the three months ended
      March
      31, 2007 and 2006 have been prepared by the Company pursuant to the rules and
      regulations of the Securities and Exchange Commission. Certain
      information and footnote disclosures normally included in financial statements
      prepared in accordance with accounting principles generally accepted in the
      United States of America have been condensed or omitted pursuant to such rules
      and regulations. These unaudited condensed consolidated financial statements
      should be read in conjunction with the audited financial statements and the
      Footnotes thereto included in the Company's annual Report on Form 10-KSB for
      the
      fiscal year ended December 31, 2006.





In
      the
      opinion of management, all adjustments (which include only normal recurring
      adjustments) necessary to present fairly the financial position, results of
      operations, and cash flows as of and for the three months ended March 31, 2007
      have been made. The results of operations for the three months ended March
      31,
      2007 are not necessarily indicative of the operating results for the full
      year.





**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,
      SZSY, 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 a loss
      of
      $1,389,235 for the first quarter of 2007 and had negative working capital of
      $876,644 and operating lease obligation on a commercial building in Suzhou
      payable within 12 months of $2,834,894 as of March 31, 2007. These factors
      raise
      substantial doubt about the Company’s ability to continue as a going concern.
      The company's ability to continue as a going concern is dependent upon its
      ability to generate sufficient cash flow to meet its obligations on a timely
      basis, to obtain additional financing as may be required, and ultimately to
      attain successful operations in respect of the agency sales and new investment
      projects. The Company owns investment properties in the commercial building
      in
      Suzhou. These are currently valued on the balance sheet at $11,539,400, with
      $4,241,463 collateralized bank loans. The Company intends to use all
      opportunities to obtain liquidity from the unpledged value of these properties
      in the next 12 months. This includes: sales, additional collateralized bank
      loans or rental. The accompanying financial statements do not include any
      adjustments that may be necessary if the Company is unable to continue as a
      going concern.





7




**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, SZSY, 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 ruling as of March 31, 2007 and December 31, 2006 are
      US$1:
      RMB7.7342 and US$1: RMB7.8087, 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.





**Use
      of Estimates**





The
      preparation of financial statements in accordance with generally accepted
      accounting principles requires the Company’s management to make estimates and
      assumptions that affect 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 revenue and expenses during the reporting
      period. Actual results could differ from those estimates.





**Advertising
      Costs**





All
      advertising costs incurred in the promotion of the Company’s real estate
      projects are expensed as incurred.





**Revenue
      Recognition**





Agency
      commission revenue from property brokerage is recognized when the property
      developer and the buyer complete a property sales transaction, which 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 when it can be confirmed that the balance of the bank loan to
      the
      buyer has been approved.





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





8


Commission
      revenue from underwriting service is recognized 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.





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





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.





**Guarantees**





The
      Company accounts 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. FIN 45 requires that guarantors recognize a liability
      for certain guarantees at the fair value of the guaranteed obligation at the
      inception of the guarantee, even if the likelihood of performance under the
      guarantee is remote.





**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").








**NOTE
      3 - PROMISSORY DEPOSITS**





The
      balance includes the deposits of $840,423 placed with several property
      developers in respect of a number of real estate projects where the Company
      is
      appointed as sales agent.








**NOTE
      4 - OTHER RECEIVABLES AND DEPOSITS**





March
                31,
            
            December
                31,2007
            
            2006(Unaudited)Advances
                to staff
            
            $
            23,000
            
            $
            25,912Rental
                deposits
            
            
            82,121
            
            
            51,333Prepaid
                rental
            
            
            368,655
            
            
            365,138Other
                receivables
            
            
            401,922
            
            
            67,362$
            875,698
            
            $
            509,745





9








**NOTE
      5 - PROPERTY, PLANT AND EQUIPMENT** - **NET**





March
                31,
            
            December
                31,2007
            
            2006(Unaudited)Furniture
                and fixtures
            
            $
            105,905
            
            $
            105,288Computer
                and office equipment
            
            
            236,915
            
            
            234,460Motor
                vehicles
            
            
            613,282
            
            
            607,431Properties
            
            
            8,286,204
            
            
            1,909,6719,242,306
            
            
            2,856,850Less:
                Accumulated depreciation
            
            
            (452,047
            )
            
            (365,217
            )$
            8,790,259
            
            $
            2,491,633








**NOTE
      6 - DEFERRED TAX ASSETS**





The
      components of deferred tax assets are as follows:





Tax
                effect on deferred commission income (Note 7)(Unaudited)The
                balance of deferred tax assets on December 31, 2006
            
            $
            142,842Tax
                effect on deferred commission income for the period
            
            
            -Effect
                on change in exchange rate
            
            
            1,376The
                balance of deferred tax assets onMarch
                31,
                2007
            
            $
            144,218








**NOTE
      7 - DEPOSITS FOR ACQUISITION OF PROPERTIES**





March
                31,
            
            December
                31,2007
            
            2006(Unaudited)Deposits
                paid for acquisition of properties
            
            $
            5,309,791
            
            $
            11,429,307Less:
                Deferred commission income from properties acquired
            
            
            (526,933
            )
            
            (766,665
            )$
            4,782,858
            
            $
            10,662,642





During
      the past two years, the Company entered into sales and purchase agreements
      to
      acquire two floors and five units of a
      commercial building in Suzhou, the PRC at an aggregate consideration of
      $13,381,621. The properties under development were completed on March 31, 2006,
      and all the deposits have been paid to the property developer. As the Company
      acts as that property developer’s sole distribution agent and earns commission
      income, the corresponding commission income of $961,454 generated from the
      properties purchased by the Company was therefore deferred and offset against
      the deposits paid. The Company decided that one floor will be held for the
      Company’s own use, and the remaining properties will be held for long-term
      investment purposes. As of March 31, 2007, the title for two floors and two
      units has been transferred to the Company. The Company is in the process of
      obtaining title to these remaining properties, which we expect will occur before
      May 31 2007. Accordingly, deposits of $8,071,830 paid for these two floors
      and
      two units and corresponding commission income of $434,521 was classified as
      properties in Note 5.








**NOTE
      8 - BANK LOANS**





Bank
      loans bear interest at prevailing rates ranging from 5.85% to 7.128% per annum,
      and are repayable within five years by monthly installments. The bank loans
      are
      secured by the properties as mentioned in Note 7 above when the title of the
      properties is transferred to the Company.





10




**NOTE
      9 - PROMISSORY NOTES PAYABLE**





There
      are
      four promissory notes, as listed below:





First,
      the balance includes a promissory note of $344,444. This promissory note of
      $344,444 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 $150,000 and accrued interest of
      $1,250 thereon. This promissory note of $150,000 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 .





Fourth,
      the balance includes a promissory note of $2,565,903 and accrued interest of
      $91,080 thereon. This promissory note of $2,565,903 bears interest at a rate
      of
      18% per annum. This promissory note is unsecured and will be repayable before
      February 1, 2008.




**NOTE
      10 - AMOUNTS DUE FROM/TO 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 agreement. According to the agreement, 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.




**NOTE
      11 - RELATED PARTY**





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


Prior
      to
      April 25, 2005, the amount due to one of the directors was interest-free.
      Thereafter, the amount due to this director has borne interest at a rate of
      9.6%
      per annum. As of March 31, 2007, the balance includes principal of $159,026
      and
      accrued interest of $10,154 thereon. The principal is unsecured and the
      term
      of repayment is not specifically defined .




**NOTE
      12 - OTHER PAYABLES AND ACCRUED EXPENSES**





March
                31,
            
            December
                31,2007
            
            2006(Unaudited)Accrued
                staff commission & bonus
            
            $
            463,228
            
            $
            997,794Rental
                deposits received
            
            
            270,134
            
            
            240,329Other
                payables
            
            
            278,090
            
            
            300,581$
            1,011,452
            
            $
            1,538,704




**NOTE
      13 - OTHER TAX PAYABLE**





Other
      tax
      payable 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 was $60,498.





11





**NOTE
      14 - INCOME TAX PAYABLE**





United
      States and State of Texas Taxes:





The
      Company has US federal net operating loss carryforwards in the amount of
      $240,000, $475,000 and $16,000 which expire in 2026, 2025 and 2024,
      respectively.





The
      net
      operating loss generated in 2006 was different from the Sunrise US holding
      company’s book loss because $380,000 of foreign assets was considered
      repatriated to and, thus, taxable by the United States through loans made by
      CY-SRRE to SRRE. Another difference between book and tax income in 2006 was
      the
      exclusion from income of $165,000 of dividends which were previously taxed
      as
      subpart F income.





The
      net
      operating loss generated in 2005 was different from the Sunrise US holding
      company’s book loss because $165,000 of undistributed foreign personal holding
      company income of a controlled foreign corporation and $125,000 of China taxes
      thereon which were recognized and are deductible temporary differences because
      the Company expects to pay at least that amount of dividends within the next
      several years. Other differences between book and tax income in 2005 include
      $221,850 of consulting fees incurred to establish an AMEX listing and $81,600
      of
      consulting fees paid with stock subject to substantial risk of forfeiture and
      which were not deductible for tax purposes. Under the American Jobs Creation
      Act
      of 2004 and guidance issued thereunder, the company did not make permitted
      investments in the United States of dividends received; therefore, it did not
      claim an 85% dividend received deduction.





The
      realization of deferred tax assets depends upon the existence of sufficient
      taxable income in the carryforward period. We have considered the following
      possible sources of taxable income when assessing the realization of the
      deferred tax assets:





· Future
      taxable income exclusive of reversing temporary differences and
      carryforwards,


· Future
      reversals of existing taxable temporary differences,


· Taxable
      income in prior carry-back years,


· Tax
      planning strategies.





We
      have
      not relied upon future taxable income exclusive of temporary differences and
      carryforwards for the realization of U.S. deferred tax assets. Reliance on
      this
      source is difficult when there is negative evidence such as current and
      cumulative losses in recent years.





We
      have
      not provided for U.S. deferred income taxes or foreign withholding taxes on
      undistributed earnings of $6.9 and $7.5 million, at March 31, 2007 and December
      31, 2006, respectively, of our non-U.S. subsidiaries because it is not
      practicable to estimate the amount of additional taxes that might be payable
      on
      such undistributed earnings. Distributions are limited under China corporate
      law
      to the entity’s earnings in the preceding calendar year and, then, must be
      approved by China regulators. It is believed that the maximum amount of
      distributions which would be approved in 2007 based on 2006 earnings would
      not
      exceed $750,000. Of this amount, it is expected that $600,000 would be retained
      at the Cayman Islands subsidiary and that only approximately $150,000 would
      be
      distributed to Sunrise US. As indicated above, the US tax net operating loss
      carryovers would completely shelter this amount.





The
      Tax
      Increase Prevention and Reconciliation Act (“TIPRA”) which was signed March 17,
      2006, modified what income is taxed to the Company as an owner of a controlled
      foreign corporation (“CFC”). This modification is effective for Sunrise’s 2006
      through 2008 tax years. For Sunrise, the TIPRA modification means that certain
      dividend or interest income received by SRRE-CY or LRY-BVI will not trigger
      income recognition by SRRE US if the funds remain at the SRRE-CY or LRY-BVI
      level. Such dividends and interest must be properly allocable to non-subpart-F
      income, e.g., active income, of the Chinese level subs of SRRE-CY and
      LRY-BVI.





The
      SRRE
      is incorporated in the State of Texas, which does not have a corporate income
      tax.





12




**NOTE
      15- COMMITMENTS AND CONTINGENCIES**





Operating
      Lease Commitments





During
      the three months ended March 31, 2007 and 2006, the Company incurred lease
      expenses amounting to $74,337 and $94,428, respectively. As of March 31, 2007,
      the Company had commitments under operating leases, requiring annual minimum
      rentals as follows:





March
                31,
            
            December
                31,2007
            
            2006(unaudited)Within
                one year
            
            $
            77,705
            
            $
            124,429Two
                to five years
            
            
            
            
            
            2,349Operating
                lease commitments
            
            $
            77,705
            
            $
            126,778





In
      order
      to distribute the properties of the property underwriting project mentioned
      in
      Note 7 above, during the year of 2005, the Company launched a promotional
      package by entering into leasing agreements with certain buyers to lease the
      properties for them. These leasing agreements on these
      properties are for
      61% of the floor space that was sold to third party buyers. In
      accordance with the leasing agreements, the owners of the properties can enjoy
      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 March
      31 ,
      2007,
      50 sub-leasing agreements have been signed, the area of these sub-leasing
      agreements represented 47% of total area under these lease
      commitments.





As
      of
      March 31, 2007, the lease commitments under the above promotional package are
      as
      follows:





March
                31,
            
            December
                31,2007
            
            2006(unaudited)Within
                one year
            
            $
            2,834,894
            
            $
            2,807,847Two
                to five years
            
            
            9,769,928
            
            
            10,319,497Over
                five years
            
            
            2,422,566
            
            
            2,774,208Operating
                lease commitments arising from the promotional package
            
            $
            15,027,388
            
            $
            15,901,552





According
      to the leasing agreements, the Company has an option to terminate any agreement
      by paying a predetermined compensation. As of March 31, 2007, the compensation
      to terminate all leasing agreements is approximately $3,067,037. As of March
      31,
      2007, the management of the Company considers that no provision should be made
      for the Company’s obligations under the foregoing guarantees.




**NOTE
      16 - STATUTORY RESERVE**





According
      to the relevant corporation laws in the PRC, a PRC company is required to
      transfer a 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
      17- ACCUMULATED OTHER COMPREHENSIVE INCOME**





As
      of
      March 31, 2007, the only component of accumulated other comprehensive income
      was
      translation reserve.





13




**NOTE
      18 - CONCENTRATION OF CUSTOMERS**





During
      the three months ended March 31, 2007 and 2006, the following customer accounted
      for more than 10% of total net revenue:





Percentage
                of Net Sales
              Three
                Months Ended
              March
                31,
            
            Percentage
                of
              Accounts
                Receivable
              as
                at March 31,2007
            
            2006
            
            2007
            
            2006(Unaudited)Customer
                A
            16%
            
            78%
            
            69%
            
            *Customer
                B
            11%
            
            *
            
            *
            
            *





*
      less
      than 10%


14


**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-QSB 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, 2006, 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.




**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 merger. Before the completion
      of the merger, 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.


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”) and Suzhou
      Shang Yang Real Estate Consultation Company Limited (“SZSY”) 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 .





15





**RECENT
      DEVELOPMENTS**





Before
      2004, our major business was an agency business, whereby our only subsidiary
      at
      the time, SHXJY, contracted with property developers to market and sold their
      newly developed property units. For these services we earned a commission fee
      calculated as a percentage of the sales prices. SHXJY has focused its sales
      on
      the whole China market, especially in secondary cities. To expand our agency
      business, SHXJY has established branches in NanChang, YangZhou, ZhenJiang,
      NanJing and ChongQing, and subsidiaries in Suzhou and Beijing. Because of our
      diverse market locations, our business operations in SHXJY have demonstrated
      revenue growth in 2006 under the current macro economic policies, and we expect
      this growth trend to continue in 2007.





In
      2004,
      through another subsidiary, SHSY, we ventured into a higher risk business model
      (the “Underwriting Model”) whereby our commission is not calculated as a
      percentage of the sales price but is equal to the price difference between
      the
      final sales price and the underwriting price. In this model, we negotiate with
      the developer for an underwriting price that is as low as possible, with the
      guarantee that all or majority of the units will be sold by a specific date.
      In
      return, we have the flexibility to establish the final sales price, and earn
      the
      price difference between the final sales price and the underwriting price.
      The
      risk in this kind of agreement is that if there are any unsold units with sales
      guarantees on the expiry date, we may have to buy them from developers at the
      underwriting price. If that occurs we would hold these units in our inventory
      or
      as investments.





In
      February 2004 SHSY entered into a property underwriting agreement with an
      independent property developer to underwrite the Sovereign Building Project,
      a
      commercial building located in the Suzhou Industry Park in Suzhou, PRC, at
      a
      fixed underwriting price. As
      the
      sole distribution agent for this office building, SHSY committed
      to a sales target of $53.39 million, representing all of the units of the
      building. We started selling units in December 2004. As of the end of February,
      2007, we sold
      all
      of the units
      in
      the building and achieved the sales target by selling 47,093 square meters
      with
      a total sales price of $71.66 million. The
      properties under development were completed on March 31, 2006, and titles to
      the
      properties have been transferred to the respective buyers.





During
      the past two years, we have also made some property investments in Suzhou by
      acquiring two floors and five units of the Sovereign Building at an aggregate
      consideration of $13,381,621. The properties under development were completed
      on
      March 31, 2006. One floor will be held for our own use, and the remaining
      properties will be held for long-term investment purposes. As of December 31,
      2006, we had paid the full purchase price to the property developer. As of
      March
      31, 2007, the title for two floors and two units has been transferred to the
      Company. The Company is in the process of obtaining title to these remaining
      properties, which we expect will occur before May 31 2007.





In
      order
      to distribute
      all the properties of the Sovereign Building, during 2005 SZGFH launched a
      promotional package by entering into leasing agreements with certain buyers
      to
      lease the properties for them. These leasing agreements on
      the
      Sovereign Building are for 61% of the floor space that was sold to third party
      buyers. In
      accordance with the leasing agreements, the owners of the properties can enjoy
      an annual rental return at 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 of 2006,
      and as of March 31, 2007, 50 sub-leasing agreements were signed. The area
      represented by the signed sub-leasing agreements represents 47% of the total
      area represented by lease commitments. As of May 10, 2007, 58 sub-leasing
      agreements have been signed, the area of these signed sub-leasing agreements
      represent 52% of total area that have lease commitments. We expect that the
      income from the sub-leasing business will cover the lease commitments for the
      5
      to 8 year leasing period as a whole.





16




**RECENTLY
      ISSUED ACCOUNTING STANDARDS**





In
      March
      2006, EITF 06-03: “How Taxes Collected from Customers and Remitted to
      Governmental Authorities Should be Presented in the Income Statement (That
      Is,
      Gross versus Net Presentation)” was issued. EITF 06-03 provides guidance on how
      to account for any tax assessed by a governmental authority that is imposed
      concurrent with a revenue producing transaction between a seller and a customer.
      The adoption of EITF 06-03 did not have a material impact on the Company’s
      result operations, financial position or liquidity.





In
      June
      2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an
      interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the
      accounting for uncertainty recognized in income taxes in an enterprise’s
      financial statements in accordance with SFAS 109. FIN 48 provides a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      The
      interpretation also provides guidance on de-recognition, classification,
      interest and penalties, accounting in interim periods, disclosure, and
      transition. FIN 48 is effective for fiscal years beginning after December 15,
      2006. On 16 March 2007, the 5th Plenary Session of the 10th National People's
      Congress passed the Corporate Income Tax Law of the People's Republic of China
      ("the New Corporate Income Tax Law") which will take effect on 1 January 2008.
      Consequently, the Company is not able to make an estimate of the expected
      financial effect of the New Corporate Tax Law on its deferred tax assets and
      liabilities. The expected financial effect if any, will be reflected in the
      Company's 2007 financial statements. The enactment of the New Corporate Tax
      Law
      is not expected to have any financial effect on the amounts accrued in the
      balance sheet in respect of current tax payable.





The
      Company is registered in the Shanghai special economic zone and hence enjoys
      a
      preferential income tax rate of 15%. From 1 January 2008, the income tax rate
      is
      expected to gradually increase to the standard rate of 25% over a five-year
      transition period. However, the New Corporate Tax Law has not set out the
      details as to how the existing preferential tax rate will gradually increase
      to
      standard rate of 25%





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
      157”). SFAS 157 defines fair value, establishes a framework for measuring fair
      value, and expands disclosure requirements regarding fair value measurement.
      This statement simplifies and codifies fair value related guidance previously
      issued and is effective for financial statements issued for fiscal years
      beginning after November 15, 2007, and interim periods within those fiscal
      years. The Company does not believe that SFAS 157 will significantly impact
      its
      financial statements.





In
      February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial
      Assets and Financial Liabilities Including an Amendment of SFAS No. 115”(“SFAS
      159”), which permits companies to measure many financial instruments and certain
      other assets and liabilities at fair value on an instrument-by-instrument basis
      (the fair value option). Adoption of SFAS 159 is optional and it may be adopted
      beginning in the first quarter of 2007. The Company does not believe that SFAS
      159 will significantly impact its financial statements.




**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 impairment of
      goodwill, accounting for income taxes, revenue recognition and equity
      instruments issued to non-employees.





17




**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.





**Income
      Taxes**





SFAS
      No.
      109, “Accounting for Income Taxes,” establishes financial accounting and
      reporting standards for the effect of income taxes. The objectives of accounting
      for income taxes are to recognize the amount of taxes payable or refundable
      for
      the current year and deferred tax liabilities and assets for the future tax
      consequences of events that have been recognized in an entity’s financial
      statements or tax returns. Judgment is required in assessing the future tax
      consequences of events that have been recognized in our financial statements
      or
      tax returns. Variations in the actual outcome of these future tax consequences
      could materially impact our financial position or results of our
      operations.





**Revenue
      Recognition**





Agency
      commission revenue from property brokerage is recognized when the property
      developer and the buyer complete a property sales transaction, which 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 when we can confirm that the balance of the bank loan to the
      buyer
      has been approved, or recognized under the sales schedule of agency sales
      agreement with developer.





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





Commission
      revenue from underwriting service is recognized 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.





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





All
      revenues represent gross revenues less sales and business taxes.





**Equity
      Instruments Issued to Non-Employees**





According
      to EITF 96-18, the cost for the warrants
      issued for services was expensed at either the fair value of the services
      rendered or the fair value at the warrant grant dates.





18




**RESULTS
      OF OPERATIONS**





We
      provide the following discussion and analyses of our changes in financial
      condition and results of operations for the three months ended March 31 2007,
      compared to the three months ended March 31, 2006.





**Revenue**





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





Three
                months ended March 31,2007
            
            %
                of total
            
            2006
            
            %
                of total
            
            %
                changeAgency
                sales
            
            $
            774,372
            
            
            68
            %
            $
            994,721
            
            
            22
            %
            
            (22
            )%Underwriting
                sales
            
            $
            180,062
            
            
            16
            %
            $
            3,604,693
            
            
            78
            %
            
            (95
            )%Property
                management
            
            $
            180,721
            
            
            16
            %
            
            -
            
            
            -
            
            
            n/aNet
                revenue
            
            $
            1,135,155
            
            
            100
            %
            $
            4,599,414
            
            
            100
            %
            
            (75
            )%





The
      net
      revenue in the first quarter of 2007 was $1,135,155, which was a decrease of
      75%
      from $4,599,414 in the first quarter of 2006. In the first quarter of 2007,
      agency sales represented 68% of net
      revenue, underwriting
      sales represented 16% and property management represented 16%. In the first
      quarter of 2006, agency sales represented 22% of net revenue and underwriting
      sales represented 78%. The decrease in net revenue in the first quarter of
      2007
      was mainly due to the decrease in our underwriting sales revenue.





Agency
      sales





Agency
      sales represented 68% of our net revenue in the first quarter of 2007. This
      revenue was derived from the business activities of SHXJY and its subsidiaries.
      The net revenue from agency sales in the first quarter of 2007 decreased 22%
      compared with same period in 2006. The primary reason for the change was that
      two projects successfully closed in 2006, which contributed net revenue of
      $483,417 to the Company in the first quarter of 2006. No comparable projects
      closed in the first quarter of 2007, which resulted in lower revenues from
      this
      business line during that period. As a result of our diverse market locations
      and our professional performance in our agency sales business, in the first
      quarter of 2007, there were 21 agency sales projects contributing net revenue
      to
      the Company, compared to 18 projects in the same period in 2006. We hope to
      achieve a stable growth in our agency sales business in 2007.





Underwriting
      sales





In
      February 2004, SHSY entered into an agreement to underwrite an office building
      in Suzhou, known as Suzhou Sovereign Building. Being
      the
      sole distribution agent for this office building, SHSY committed
      to a sales target of $53.39 million. Property underwriting sales are
      comparatively a higher risk business model compared to our pure commission
      based
      agency business. Under this higher risk business model, the Underwriting Model,
      our commission is not calculated as a percentage of the selling price; instead,
      our commission revenue is equivalent to the price difference between the final
      selling price and underwriting price. We negotiate with a developer for an
      underwriting price that is as low as possible, with the condition that we
      guarantee all unsold units will be acquired within a certain period. In return,
      we are given the flexibility to establish the final selling price and earn
      the
      price difference between the final selling price and the underwriting price.
      The
      risk of this kind of arrangement is that if there is any unsold unit on the
      expiry date of the agreement, we may have to absorb the unsold property units
      from developers at the underwriting price and hold them in our inventory or
      as
      investments.





We
      started selling units in the Soverign Building in December 2004. As of the
      end
      of February, 2007, we have sold
      all
      of the units
      in
      the building and achieved the sales target by selling 47,093 square meters
      with
      a total sales price of $71.66 million and this underwriting project has
      contributed total net revenue of $13,915,091 to the Company.





19




Property
      Management





In
      order
      to distribute all the properties of the Sovereign Building, during 2005, SZGFH
      launched a promotional package by entering into leasing agreements with certain
      buyers to lease the properties for them. These leasing agreements on the
      Sovereign Building are for 61% of the floor space that was sold to third party
      buyers. The leasing period started in the second quarter of 2006, and in the
      leasing period SZGFH has the right to sublease the leased properties to earn
      rental income. As of May 10, 2007, 58 sub-leasing agreements were signed. The
      area of these sub-leasing agreements represents 52% of total area under these
      lease commitments. We expect that the income from the sub-leasing business
      will
      be on a stable growth trend in 2007 and that it can cover the lease commitments
      in the leasing period as a whole.





**Cost
      of Revenue**





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





Three
                months ended March 31,2007
            
            %
                of total
            
            2006
            
            %
                of total
            
            %
                changeAgency
                sales
            
            $
            509,392
            
            
            41
            %
            $
            416,304
            
            
            22
            %
            
            22
            %Underwriting
                sales
            
            $
            35,424
            
            
            3
            %
            $
            1,487,224
            
            
            78
            %
            
            (98
            )%Property
                management
            
            $
            705,876
            
            
            56
            %
            
            -
            
            
            -
            
            
            n/aCost
                of revenue
            
            $
            1,250,692
            
            
            100
            %
            $
            1,903,528
            
            
            100
            %
            
            (34
            )%





The
      cost
      of revenue in the first quarter of 2007 was $1,250,692, a decrease of 34% from
      $1,903,528 in the same period in 2006. In the first quarter of 2007, agency
      sales represented 41% of cost of revenue, underwriting sales represented 3%
      and
      property management represented 56%. In the first quarter of 2006, agency sales
      represented 22% of cost of revenue and underwriting sales represented 78% of
      cost of revenue. The decrease in cost of revenue in first quarter of 2007 was
      mainly due to the decrease in our underwriting sales.





Agency
      sales





The
      cost
      of revenue for agency sales in the first quarter of 2007 was $509,392, an
      increase of 22% from $416,304 in the same period in 2006. The primary reason
      for
      this increase is that we started a branch in Chongqing and established SZSY
      in
      Shuzhou in November, 2006 to support the growth of our agency sales and
      diversify our market presence. The cost of revenues for the Chongqing branch
      and
      SZSY in the first quarter of 2007 was $126,411; there
      was
      no such cost in the same period of 2006.





Underwriting
      sales





Since
      all
      of the units under this project were sold by the end of February, 2007, we
      incurred very few costs relating to this project during the first quarter of
      2007.





Property
      management





In
      order
      to distribute all the properties of the aforesaid underwriting project, during
      the year of 2005, SZGFH launched a promotional package by entering into leasing
      agreements with certain buyers to lease the properties for them. In accordance
      with the leasing agreements, the owners of the properties can enjoy an annual
      rental return at 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.





20







**Operating
      Expenses**





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





Three
                months ended March 31,2007
            
            %
                of total
            
            2006
            
            %
                of total
            
            %
                changeAgency
                sales
            
            $
            176,098
            
            
            74
            %
            $
            187,496
            
            
            93
            %
            
            (6
            )%Underwriting
                sales
            
            $
            33,078
            
            
            14
            %
            $
            13,283
            
            
            6
            %
            
            149
            %Property
                management
            
            $
            30,333
            
            
            12
            %
            $
            1,593
            
            
            1
            %
            
            1804
            %Operating
                expenses
            
            $
            239,509
            
            
            100
            %
            $
            202,372
            
            
            100
            %
            
            18
            %





The
      operating expenses in the first quarter of 2007 were $239,509, an increase
      of
      18% from $202,372 in the same period in 2006. In the first quarter of 2007,
      agency sales represented 74% of operating expenses, underwriting sales
      represented 14%, and property management represented 12%. In the first quarter
      of 2006, agency sales represented 93% of operating expenses, underwriting sales
      represented 6%, and property management represented 1%. The increase in
      operating expenses in the first quarter of 2007 was mainly due to the increase
      in our underwriting sales and property management.





Agency
      sales





The
      operating expenses for agency sales in the first quarter of 2007 were $176,098
      which was a decrease of 6% from $187,496 in the same period in 2006. This
      decrease was mainly due to the decrease in the staff cost of SHXJY and its
      subsidiaries and branches in the first quarter of 2007, compared to the same
      period in 2006, the decrease of such expenses was $13,418.





Underwriting
      sales





The
      operating expenses for underwriting sales in the first quarter of 2007 were
      $33,078, an increase of 149% from $13,283 in the same period in 2006. This
      increase was mainly due to the increase in the staff cost of SHSY, compared
      to
      the first quarter of 2006, the increase of such expenses was
      $12,550.





Property
      management





The
      operating expenses for property management in the first quarter of 2007 were
      $30,333, an increase of 1804% from $1,593 in the same period in 2006. The main
      reason for the increase was the payment of agency commissions of SZGFH. The
      agency commissions in the first quarter of 2007 were $24,628 and there was
      no
      such expense in the same period in 2006.





**General
      and Administrative Expenses**





The
      general and administrative expenses in first quarter of 2007 were $894,575,
      increasing 24% from $723,301 in the first quarter of 2006. The increase in
      general and administrative expenses was mainly due to the increase in the staff
      cost. In the first quarter of 2007 and 2006, the staff cost was $350,902 and
      $242,520 respectively. The increase in the staff cost is mainly to support
      our
      more diversified market locations.





**Interest
      Expenses**





Interest
      expense in the first quarter of 2007 was $202,562, increasing 56% from $129,765
      in the same period in 2006. The interest expense relates to bank loans and
      promissory notes payable.





21





**LIQUIDITY
      AND CAPITAL RESOURCES**




The
      Company meets its working capital and capital investment requirements mainly
      by
      using operating cash flows and, to a limited extent, promissory
      notes.





Our
      accounts receivable balance at March 31, 2007 was $2,029,459 compared to
      $4,824,031 as of December 31, 2006.





We
      ended
      the period with a cash position of $1,944,652. The Company’s operating
      activities used cash resources of $718,166 for the three months ended March
      31,
      2007, which are mainly devoted to the payment of promissory
      deposits.





The
      Company’s investing activities used cash resources of $375,073 for the three
      months ended March 31, 2007, which are mainly devoted to the acquisition of
      plant and equipment.





The
      Company’s financing activities provided cash resources of $2,070,403 for the
      three months ended March 31, 2007, which are mainly derived from the proceeds
      from promissory notes.





We
      anticipate that our current available funds, cash inflows from providing
      property agency services, underwriting services and management services, and
      sales proceeds from disposal of properties acquired will be sufficient to meet
      our anticipated needs for working capital expenditures, business expansion
      and
      the potential cash needs during 2007.




We
      also
      plan to raise additional funds in the future in order to fund acquisitions,
      or
      to invest in new projects. If our business otherwise grows more rapidly than
      we
      currently predict, 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. CONTROLS AND PROCEDURES**





Our
      Chief
      Executive Officer and our Chief Financial Officer have evaluated the
      effectiveness of our disclosure controls and procedures as of March 31, 2007.
      Based on this evaluation, the Chief Executive Officer and Chief Financial
      Officer have concluded that the Company's disclosure controls and procedures
      were effective at March 31, 2007, to ensure that information required to be
      disclosed in reports that we file or submit under the Securities Exchange Act
      of
      1934 is recorded, processed, summarized, and reported within the time periods
      specified in Securities and Exchange Commission rules and forms. There were
      no
      changes in our internal controls over financial reporting during the quarter
      ended March 31, 2007, that have materially affected, or are reasonably likely
      to
      materially affect, our internal controls over financial reporting.


22


**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
            Description  31.1
            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.








23








**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 21, 2007
            By:
            /s/ 
              Lin, Chi-JungLin,
              Chi-Jung, Chief Executive
              Officer


Date: May
              21,
              2007
            By:
            /s/ Art
              HonanyanArt
                Honanyan, Chief Financial Officer




24