**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 June 30, 2006


**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.**


**(FORMERLY
      SUNRISE REAL ESTATE DEVELOPMENT 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: August 10, 2006 - 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 June 30, 2006**




**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
            
            
            14Item
                3.Controls
                and Procedures
            
            
            21PART
                II. OTHER INFORMATION
            
            
            22Item
                1.Legal
                Proceedings
            
            
            22Item
                2.Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            
            22Item
                3.Defaults
                Upon Senior Securities
            
            
            22Item
                4.Submission
                of Matters to a Vote of Security Holders
            
            
            22Item
                5.Other
                Information
            
            
            22Item
                6.Exhibits
            
            
            22SIGNATURES
            
            
            23




2




**PART
      I - FINANCIAL INFORMATION**





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





**Sunrise
      Real Estate Group, Inc.**





**Consolidated
      Balance Sheets**





(Expressed
      in US Dollars)


**June
                30,**
            
            
            **December
                31,****2006**
            
            
            **2005****(Unaudited)**ASSETSCurrent
                assetsCash
                and cash equivalents
            
            $
            1,440,191
            
            $
            855,588Accounts
                receivable
            
            
            2,399,671
            
            
            1,359,246Deposits
                for acquisition of properties (Note 7)
            
            
            2,531,649
            
            
            4,150,476Promissory
                deposits (Note 3)
            
            
            554,917
            
            
            247,924Amounts
                due from venturers
            
            
            1,876,332
            
            
            820,040Other
                receivables and deposits (Note 4)
            
            
            500,190
            
            
            168,709Total
                current assets
            
            
            9,302,950
            
            
            7,601,983Plant
                and equipment - net (Note 5)
            
            
            553,747
            
            
            531,458Deferred
                tax assets (Note 6)
            
            
            205,647
            
            
            144,333Deposits
                for acquisitions of properties (Note 7)
            
            
            12,729,746
            
            
            7,488,899Goodwill
            
            
            202,767
            
            
            187,783Total
                assets
            
            $
            22,994,857
            
            $
            15,954,456LIABILITIES
                AND SHAREHOLDERS’ EQUITYCurrent
                liabilitiesBank
                loans (Note 8)
            
            $
            1,567,925
            
            $
            1,073,650Promissory
                notes payable (Note 9)
            
            
            1,332,950
            
            
            1,123,962Accounts
                payable
            
            
            186,641
            
            
            73,522Amounts
                due to venturers (Note 10)
            
            
            2,023,539
            
            
            -Amount
                due to director (Note 11)
            
            
            172,997
            
            
            169,416Other
                payables and accrued expenses (Note 12)
            
            
            701,260
            
            
            1,914,622Other
                tax payable (Note 13)
            
            
            307,181
            
            
            158,439Income
                tax payable
            
            
            1,320,125
            
            
            511,700Total
                current liabilities
            
            
            7,612,618
            
            
            5,025,311Commitments
                and contingencies (Note 14)
            
            
            -
            
            
            -Long-term
                bank loans (Note 8)
            
            
            5,626,848
            
            
            5,306,506Minority
                interest
            
            
            209,300
            
            
            223,580Shareholders’
                equityCommon
                stock, par value $0.01 per share; 200,000,000 shares authorized;
                22,996,614 shares issued and outstanding
            
            
            229,966
            
            
            216,366Additional
                paid-in capital
            
            
            2,913,844
            
            
            2,233,844Statutory
                reserve (Note 15)
            
            
            241,664
            
            
            241,664Retained
                earnings
            
            
            5,930,056
            
            
            2,559,836Accumulated
                other comprehensive income (Note 16)
            
            
            230,561
            
            
            147,349Total
                shareholders’ equity
            
            
            9,546,091
            
            
            5,399,059Total
                liabilities and shareholders’ equity
            
            $
            22,994,857
            
            $
            15,954,456





See
      accompanying notes to consolidated financial statements.




3




**Sunrise
      Real Estate Group, Inc.**





**Consolidated
      Statements of Operations**





(Expressed
      in US Dollars)


Three
                Months Ended June 30,
            Six
                Months Ended June 30,2006
            
            
            2005
            
            
            2006
            
            
            2005(Unaudited)Net
                revenue
            
            $
            5,354,935
            
            $
            2,363,709
            
            $
            9,954,349
            
            $
            4,228,298Cost
                of revenue
            
            
            (1,695,959
            )
            
            (804,259
            )
            
            (3,599,487
            )
            
            (1,258,428
            )Gross
                profit
            
            
            3,658,976
            
            
            1,559,450
            
            
            6,354,862
            
            
            2,969,870Operating
                expenses
            
            
            (235,375
            )
            
            (292,568
            )
            
            (437,747
            )
            
            (551,431
            )General
                and administrative expenses
            
            
            (627,542
            )
            
            (597,826
            )
            
            (1,350,843
            )
            
            (1,155,763
            )Operating
                profit
            
            
            2,796,059
            
            
            669,056
            
            
            4,566,272
            
            
            1,262,676Interest
                income
            
            
            1,606
            
            
            3,912
            
            
            3,081
            
            
            5,277Other
                income, net
            
            
            8,582
            
            
            53,486
            
            
            10,748
            
            
            53,659Interest
                expenses
            
            
            (126,988
            )
            
            (39,255
            )
            
            (256,753
            )
            
            (72,918
            )Profit
                before income tax and minority interest
            
            
            2,679,259
            
            
            687,199
            
            
            4,323,348
            
            
            1,248,694Income
                tax
            
            
            (594,381
            )
            
            (107,876
            )
            
            (895,524
            )
            
            (163,289
            )Profit
                before minority interest
            
            
            2,084,878
            
            
            579,323
            
            
            3,427,824
            
            
            1,085,405Minority
                interest
            
            
            (29,576
            )
            
            (13,765
            )
            
            (57,604
            )
            
            (24,524
            )Net
                profit
            
            $
            2,055,302
            
            $
            565,558
            
            $
            3,370,220
            
            $
            1,060,881Earnings
                per share - basic
            
            $
            0.09
            
            $
            0.03
            
            $
            0.15
            
            $
            0.05Weighted
                average common shares outstanding- basic
            
            
            22,996,614
            
            
            21,636,614
            
            
            22,996,614
            
            
            21,636,614





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)


**Six
                Months Ended June 30,****2006**
            
            
            **2005****(Unaudited)****Cash
                flows from operating activities****Net
                income**
            
            $
            3,370,220
            
            $
            1,060,881Adjustments
                to reconcile net income tonet
                cash provided by/(used in) operating activitiesDepreciation
                of plant and equipment
            
            
            70,070
            
            
            64,365Loss
                on disposal of fixed assets
            
            
            1,042
            
            
            11,763Deferred
                tax credit
            
            
            (59,757
            )
            
            -Minority
                interest
            
            
            57,604
            
            
            24,524Change
                in:Accounts
                receivable
            
            
            (3,467,702
            )
            
            742,107Promissory
                deposits
            
            
            (303,421
            )
            
            187,278Other
                receivables and deposits
            
            
            (325,465
            )
            
            (58,331
            )Accounts
                payable
            
            
            111,961
            
            
            (177,810
            )Amounts
                with venturers
            
            
            970,226
            
            
            -Deferred
                commission income
            
            
            398,381
            
            
            -Other
                payables and accrued expenses
            
            
            (606,082
            )
            
            (1,229,747
            )Interest
                payable on promissory notes
            
            
            32,950
            
            
            -Interest
                payable on amount due to director
            
            
            3,581
            
            
            -Other
                tax payable
            
            
            146,670
            
            
            (97,476
            )Income
                tax payable
            
            
            800,272
            
            
            39,072**Net
                cash provided by operating activities**
            
            
            1,200,550
            
            
            566,626**Cash
                flows from investing activities**Acquisition
                of plant and equipment
            
            
            (89,937
            )
            
            (55,910
            )Proceeds
                from disposal of plant and equipment
            
            
            -
            
            
            4,410Deposits
                paid for acquisition of properties
            
            
            (1,456,782
            )
            
            (798,826
            )Acquisition
                of equity interest in subsidiary
            
            
            (60,000
            )
            
            -**Net
                cash****(used
                in)/provided by investing activities**
            
            
            (1,606,719
            )
            
            850,326**Cash
                flows from financing activities**Bank
                loan obtained
            
            
            2,079,339
            
            
            (129,337
            )Bank
                loans repayment
            
            
            (1,325,073
            )
            
            -Repayment
                of promissory note
            
            
            (123,962
            )
            
            -Proceeds
                from promissory note
            
            
            300,000
            
            
            362,472Capital
                contribution from minority interest
            
            
            47,469
            
            
            12,082Advances
                from director
            
            
            -
            
            
            169,159**Net
                cash provided by financing activities**
            
            
            977,773
            
            
            414,376**Effect
                of exchange rate changes on cash and cash
                equivalents**
            
            
            12,999
            
            
            -**Net
                increase in cash and cash equivalents**
            
            
            584,603
            
            
            130,676**Cash
                and cash equivalents at beginning of****period**
            
            
            855,588
            
            
            969,913**Cash
                and cash equivalents at end of period**
            
            $
            1,440,191
            
            $
            1,100,589**Supplemental
                disclosure of cash flow****information**Cash
                paid during the period:Income
                tax paid
            
            
            137,453
            
            
            124,216Interest
                paid
            
            
            223,803
            
            
            41,724Non-cash
                activities (Note 18)




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. SHXJY holds 90%
      of 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.





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, namely, 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 and SZGFH commenced operations in November 2001, June 2004,
      January 2004, February 2004 and January 2005, respectively. Each of SXJY, SZXJY,
      BJXJY, SHSY and SZGFH 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 was
      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,
      8,500,000 shares were issued to Ace Develop, 750,000 shares were issued to
      Planet Tech and 750,000 shares were issued 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.





6




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, Articles of Amendment were filed
      with
      the Texas Secretary of State changing the name of Sunrise Real Estate
      Development Group, Inc. to Sunrise Real Estate Group, Inc., and became effective
      from May 23, 2006





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





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








**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,
      BJXJY, SHSY and SZGFH. All inter-company transactions and balances have been
      eliminated.





**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, 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.





Exchange
      rate between US$ and RMB had a little fluctuation during the periods presented.
      The rates ruling as of June 30, 2006 and December 31, 2005 are US$1: RMB7.9956
      and US$1: RMB8.067, respectively.





**Plant,
      Equipment and Depreciation**





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
            
            
            5





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.




7




**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
      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.





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.





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





**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 effect to 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. The initial recognition and measurement provisions of
      FIN
      45 are applicable on a prospective basis to guarantees issued or modified after
      December 31, 2002 .




**NOTE
      3 - PROMISSORY DEPOSITS**





The
      balance includes the deposits of $250,138 placed with several property
      developers in respect of a number of real estate projects where the Company
      is
      appointed as sales agent.





The
      balance includes the RMB deposit of $304,292 and accrued interest of $487
      thereon. This RMB promissory deposit is paid by SHSY to secure the USD borrowing
      of $300,000 under the promissory note mentioned in Note 9, which bears interest
      rate at a rate similar to the prevailing bank deposit interest rate of 0.72%
      per
      annum.




8




**NOTE
      4 - OTHER RECEIVABLES AND DEPOSITS**





June
                30,
            
            
            December
                31,2006
            
            
            2005(unaudited)Advances
                to staff
            
            $
            44,875
            
            $
            13,322Rental
                deposits
            
            
            54,612
            
            
            54,580Prepaid
                rental
            
            
            181,392
            
            
            -Other
                receivables
            
            
            219,311
            
            
            100,807$
            500,190
            
            $
            168,709








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





June
                30,
            
            
            December
                31,2006
            
            
            2005(unaudited)Furniture
                and fixtures
            
            $
            58,766
            
            $
            57,811Computer
                and office equipment
            
            
            196,476
            
            
            182,867Motor
                vehicles
            
            
            612,005
            
            
            532,887867,247
            
            
            773,565Less:
                Accumulated depreciation
            
            
            (313,500
            )
            
            (242,107
            )$
            553,747
            
            $
            531,458




**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, 2005
            
            $
            144,333Tax
                effect on deferred commission income for the period
            
            
            59,757Effect
                on change in exchange rate
            
            
            1,557The
                balance of deferred tax assets on June 30, 2006
            
            $
            205,647





9




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





June
                30,
            
            
            
            December
                31,2006
            
            
            
            2005(unaudited)Deposits
                paid for acquisition of properties
            
            $
            16,632,373
            
            
            $
            12,601,596Less:
                Deferred commission income from properties acquired
            
            
            (1,370,978
            )
            
            
            (962,221
            )$
            15,261,395
            
            
            $
            11,639,375





During
      the past two years, the Company entered into sales and purchase agreements
      to
      acquire three floors and eleven units of a commercial building at an aggregate
      consideration of $16,632,373, which is under development in Suzhou, the PRC.
      As
      of June 30, 2006, 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 $1,370,978 generated
      from the properties purchased by the Company was therefore deferred and offset
      against the deposits paid. The properties under development have been completed
      on March 31, 2006, and the title of these properties has not been transferred
      to
      the Company as of June 30, 2006. The Company decided that one floor and five
      units will be held for sale, one floor will be held for the Company’s own use,
      and the remaining properties will be held for long-term investment purposes.
      Accordingly, deposits of $2,531,649 paid for the properties available for sale
      were classified as current assets.




**NOTE
      8 - BANK LOANS**





Bank
      loans are guaranteed by the property developer mentioned in Note 7 above, bear
      interest at banks’ prevailing rates ranging from 5.85% to 6.435% per annum, and
      are repayable within five years by monthly installments. The bank loans will
      be
      secured by the properties as mentioned in Note 7 above when the title of the
      properties is transferred to the Company.




**NOTE
      9 - PROMISSORY NOTES PAYABLE**





The
      balance includes a promissory note of $400,000 and accrued interest of $10,000
      thereon. The promissory note of $400,000 bears interest at a rate of 5% per
      annum. The promissory note is unsecured and the term of repayment is not
      specifically defined .





The
      balance includes a promissory note of $300,000 and accrued interest of $15,000
      thereon. This promissory note of $300,000 bears interest at a rate of 5% per
      annum. This promissory note is unsecured and will
      be
      repayable before October 31, 2006 .





The
      balance includes another 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 will be repayable before December 27, 2006 .





The
      balance includes another promissory note of $300,000 and accrued interest of
      $7,950 thereon. This promissory note of $300,000 bears interest at a rate of
      12%
      per annum. This promissory note is secured by the RMB promissory deposit of
      $300,000 paid by SHSY mentioned in Note 3 and the term of repayment is not
      specifically defined .




**NOTE
      10 - AMOUNTS DUE 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 under development 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.





10




**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 June 30, 2006, the balance includes principal of $159,026
      and
      accrued interest of $13,971 thereon. The principal is unsecured and the
      term
      of repayment is not specifically defined .




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





June
                30,
            
            
            December
                31,2006
            
            
            2005(unaudited)Accrued
                staff commission & bonus
            
            $
            332,573
            
            $
            1,022,333Other
                payables
            
            
            368,687
            
            
            198,689Accrued
                consulting services fees
            
            
            -
            
            
            693,600$
            701,260
            
            $
            1,914,622




**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.





11




**NOTE
      14- COMMITMENTS AND CONTINGENCIES**





Operating
      Lease Commitments





During
      the six months ended June 30, 2006 and 2005, the Company incurred lease expenses
      amounting to $169,448 and $150,530, respectively. As of June 30, the Company
      had
      commitments under operating leases, requiring annual minimum rentals as
      follows:





June
                30,
            
            
            December
                31,2006
            
            
            2005(unaudited)Within
                one year
            
            $
            187,123
            
            $
            183,816Two
                to five years
            
            
            -
            
            
            46,169Operating
                lease commitments
            
            $
            187,123
            
            $
            229,985





In
      order
      to distribute all 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. 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 the Company has the right to sublease the leased
      properties to cover these lease commitments in the leasing period. As of June
      30, 2006, 7 sub-leasing agreements have been signed, the area of these
      sub-leasing agreements represented 5% of total area under these lease
      commitments.





As
      of
      June 30, 2006, the lease commitments under the above promotional package are
      as
      follows:





June
                30,
            
            
            December
                31,2006
            
            
            2005(unaudited)Within
                one year
            
            $
            2,738,669
            
            $
            1,630,983Two
                to five years
            
            
            9,845,121
            
            
            9,210,256Over
                five years
            
            
            3,097,238
            
            
            4,216,715Operating
                lease commitments arising from the promotional package
            
            $
            15,681,028
            
            $
            15,057,954





According
      to the leasing agreements, the Company has an option to terminate any agreement
      by paying a predetermined compensation. As of June 30, 2006, the compensation
      to
      terminate all leasing agreements is approximately $3.3 million. As of June
      30,
      2006, the management of the Company considers that no provision should be made
      for the Company’s obligations under the foregoing guarantees.





Other
      commitments





One
      of
      the buyers of the properties of the property underwriting project mentioned
      above appointed the Company as an agent to sell the properties held by him.
      In
      accordance with this agreement with the buyer, the Company must sell the said
      properties on or before November 30, 2006; otherwise, the Company has to acquire
      the properties at a consideration of $4,462,225 or pay compensation of
      $1,050,795 to the buyer. In July, 2006, the Company has sold 10% of total area
      of these properties at a consideration of $484,768, and we expect we can sell
      out all these properties on or before November 30, 2006.




**NOTE
      15 - 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.





12




**NOTE
      16 - ACCUMULATED OTHER COMPREHENSIVE INCOME**





As
      of
      June 30, 2006, the only component of accumulated other comprehensive income
      was
      translation reserve.




**NOTE
      17 - CONCENTRATION OF CUSTOMERS**





During
      the three months and six months ended June 30, 2006 and 2005, the following
      customer 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 30,2006
            
            
            2005
            
            
            2006
            
            
            2005
            
            
            2006
            
            
            2005Customer
                A
            
            
            72
            %
            
            23
            %
            
            75
            %
            
            41
            %
            
            75
            %
            
            58
            %Customer
                B
            
            
            *
            
            
            16
            %
            
            *
            
            
            *
            
            
            *
            
            
            *Customer
                C
            
            
            *
            
            
            14
            %
            
            *
            
            
            12
            %
            
            *
            
            
            18
            %Customer
                D
            
            
            *
            
            
            12
            %
            
            *
            
            
            11
            %
            
            *
            
            
            *Customer
                E
            
            
            *
            
            
            12
            %
            
            *
            
            
            *
            
            
            *
            
            
            *





*
      less
      than 10%




**NOTE
      18 - NON-CASH ACTIVITIES**





During
      the six months ended June 30, 2006, deposits for the acquisition of properties
      were settled by the accounts receivable from the property developer from whom
      the properties were acquired, and accrued consulting services fees were settled
      by the issuance of common stock.





The
      non-cash financial information is as follows:





Six
                months Ended June 30, 2006Deposits
                for acquisition of properties
            
            $
            2,443,999Accrued
                consulting services fees
            
            
            693,600$
            3,137,599**Satisfied
                by:**Accounts
                receivable
            
            $
            2,443,999Issuance
                of common stock
            
            
            693,600$
            3,137,599




13




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





The
      following Management’s Discussion and Analysis (“MD&A”) is intended to help
      the reader understand Sunrise Real Estate Group, Inc. (“SRRE”). MD&A is
      provided as a supplement to, and should be read in conjunction with, our
      financial statements and the accompanying notes.





**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, and the transaction
      was
      treated as a reverse acquisition, with CY-SRRE and LRY treated as the acquirer
      for accounting purposes. 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 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
      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”), and Suzhou Gao Feng Hui Property
      Management Company Limited (“SZGFH”) are collectively referred to as “the
      Company” hereafter. The principal activities of the Company are real estate
      agency sales, real estate marketing services, property leasing services and
      property management services in the PRC .




**RECENT
      DEVELOPMENTS**





Before
      2004, our major business was an agency business, whereby our only subsidiary
      then, SHXJY, contracted with property developers to market and sells their
      newly
      developed property units; in return we earned a commission fee calculated as
      a
      percentage of the sales price. SHXJY has focused its sales on the whole China
      market, especially at the secondary city level. To expand our agency business,
      SHXJY has established branches in NanChang, YangZhou, ZhenJiang and NanJing;
      subsidiaries in Suzhou and Beijing; and we also plan to establish a new
      subsidiary in Suzhou, named Suzhou Shangyang Real Estate Agency Co., Ltd.
      (“SZSY”). Because of our diverse market locations, our performance did not
      decline in the first two quarters of 2006 under the current macro economic
      policies, and we plan to continue this stable growth trend in 2006. We expect
      our business operation in SHXJY will demonstrate a revenue growth in
      2006.





In
      2004,
      through another subsidiary, SHSY, we ventured into a higher risk business model
      (the “Underwriting Model”) whereby our commission was not calculated as a
      percentage of the sales price. Instead, our commission revenue 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 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
      on the expiry date, we may have to absorb the unsold units from developers
      at
      the underwriting price, and hold these units in our inventory or as
      investments.





14




SHSY
      has
      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. Being
      the
      sole distribution agent for the foregoing office building, SHSY committed
      to a sales target of $51.64 million, we started selling units in the building
      in
      December 2004, and as of July 17, 2006, we achieved the sales target by selling
      46,138 square meters with a total sales price of $67.38 million. The
      properties under development have been completed on March 31, 2006, and the
      title of properties has been transferred to the buyer. However,
      there are still unsold properties with floor area of 955 square meters, which
      represents 2% of total floor area underwritten, as of July 17, 2006. We
      expect
      we can sell the unsold properties out in the third quarter of 2006.





For
      the
      past two years, we have also made some property investments in Suzhou by
      acquiring three floors and eleven units of the aforesaid building at an
      aggregate consideration of $16,632,373. The Company decided that one floor
      and
      five units will be held for sale, one floor will be held for the Company’s own
      use, and the remaining properties will be held for long-term investment purpose.
      As of June 30, 2006, all the deposits have been paid to the property developer.
      The properties under development have been completed on March 31, 2006, and
      the
      title of these properties has not been transferred to the Company as of June
      30,
      2006. We also plan to sell out one floor, which is under current assets in
      the
      third quarter of 2006.





In
      order
      to distribute all the properties of the aforesaid property 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
      as of July 17, 2006, 11 sub-leasing agreements have been signed, the area of
      these sub-leasing agreements represent 14% of total area under these lease
      commitments. We expect the income from the sub-leasing business could cover
      the
      lease commitments for the leasing period as a whole.




**RISKS
      ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB**





In
      addition to historical information, this Form 10-QSB contains forward-looking
      statements. Forward-looking statements are based on our current beliefs and
      expectations, information currently available to us, estimates, projections
      about our industry, and certain assumptions made by our management. These
      statements are not historical facts. We use words such as "anticipates",
      "expects", "intends", "plans", "believes", "seeks", "estimates", and similar
      expressions to identify our forward-looking statements, which include, among
      other things, our anticipated revenue and cost of our agency and investment
      business.





Because
      we are unable to control or predict many of the factors that will determine
      our
      future performance and financial results, including future economic,
      competitive, and market conditions, our forward-looking statements are not
      guarantees of future performance. They are subject to risks, uncertainties,
      and
      errors in assumptions that could cause our actual results to differ materially
      from those reflected in our forward-looking statements. We believe that the
      assumptions underlying our forward-looking statements are reasonable. However,
      you should not place undue reliance on these forward-looking statements. They
      only reflect our view and expectations as of the date of this Form 10-QSB.
      We
      undertake no obligation to publicly update or revise any forward-looking
      statement in light of new information, future events, or other
      occurrences.





There
      are
      several risks and uncertainties, including 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. These risks and uncertainties can materially
      affect the results predicted. The Company’s future operating results over both
      the short and long term will be subject to annual and quarterly fluctuations
      due
      to several factors, some of which are outside our control. These factors include
      but are not limited to fluctuating market demand for our services, and general
      economic conditions.





15




**RECENTLY
      ISSUED ACCOUNTING STANDARDS**





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued a
      revision of Statement of Financial Accounting Standard (“SFAS”) No. 123, (SFAS
      123R) Accounting for Stock-Based Compensation. This Statement supersedes APB
      Opinion No. 25, Accounting for Stock Issued to Employees, and its related
      implementation guidance. SFAS 123R establishes standards for the accounting
      for
      transactions in which an entity exchanges its equity instruments for goods
      or
      services. It also addresses transactions in which an entity incurs liabilities
      in exchange for goods or services that are based on the fair value of the
      entity, equity instruments or that may be settled by the issuance of those
      equity instruments. SFAS 123R focuses primarily on accounting for transactions
      in which an entity obtains employee services in share-based payment
      transactions. SFAS 123R does not change the accounting guidance for share-based
      payment transactions with parties other than employees provided in SFAS 123
      as
      originally issued and EITF Issue No. 96-18, Accounting for Equity Instruments
      That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
      Selling, Goods or Services. SFAS 123R does not address the accounting for
      employee share ownership plans, which are subject to AICPA Statement of Position
      93-6, Employers Accounting for Employee Stock Ownership Plans. For small
      business issuers, SFAS 123R is effective for fiscal years beginning after
      December 15, 2005. The adoption of SFAS 123R has no material impact on our
      financial statements.





In
      June
      2006, the 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 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, although earlier application of the provisions of the interpretation
      is
      encouraged. The Company has not yet determined what the implications of its
      adoption, if any, will be on the consolidated financial position or results
      of
      operations.





**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 and revenue recognition.





**Goodwill**





SFAS
      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
      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.




16




**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.





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.





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




**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, 2006, with
      comparisons to the historical three and six months ended June 30, 2005.





**Revenue**





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





Three
                Months Ended June 30,
            
            
            Six
                Months Ended June 30,2006
            
            
            %
                to total
            
            
            2005
            
            
            %
                to total
            
            
            %
                change
            
            
            2006
            
            
            %
                to total
            
            
            2005
            
            
            %
                to total
            
            
            %
                changeAgency
                sales
            
            
            1,508,152
            
            
            28.2
            
            
            1,665,946
            
            
            70
            
            
            (9
            )
            
            2,502,873
            
            
            25.1
            
            
            2,482,994
            
            
            59
            
            
            1Underwriting
                sales
            
            
            3,841,348
            
            
            71.7
            
            
            697,763
            
            
            30
            
            
            451
            
            
            7,446,041
            
            
            74.8
            
            
            1,745,304
            
            
            41
            
            
            327Property
                Management
            
            
            5,435
            
            
            0.1
            
            
            -
            
            
            -
            
            
            n/a
            
            
            5,435
            
            
            0.1
            
            
            -
            
            
            -
            
            
            n/aNet
                revenue
            
            
            5,354,935
            
            
            100
            
            
            2,363,709
            
            
            100
            
            
            127
            
            
            9,954,349
            
            
            100
            
            
            4,228,298
            
            
            100
            
            
            135





The
      net
      revenue of the second quarter, 2006 was $5,354,935, which increased 127% from
      $2,363,709 of the second quarter, 2005. The total net revenue of the first
      two
      quarters of 2006 was $9,954,349, which increased 135% from $4,228,298 of the
      first two quarters of 2005. In the second quarter of 2006, agency sales
      represented 28.2% of the total net revenue, underwriting sales represented
      71.7%
      and property management represented 0.1%. In the first two quarters of 2006,
      agency sale represented 25.1% of the total net revenue, underwriting sales
      represented 74.8% and property management represented 0.1%. The increase in
      net
      revenue in the second quarter and first two quarters, 2006 was mainly due to
      the
      increase in our underwriting sales revenues.





Agency
      sales





In
      the
      second quarter of 2006, 28.2% of our net revenue was due to agency sales, which
      were from the business activities of SHXJY and its subsidiaries. Net revenue
      of
      agency sales in the second quarter of 2006 decreased 9% compared with same
      period in 2005. The reason for the decrease is that there are two projects,
      where we are in negotiation with the developers on the revision of base price
      and other terms. The revenue of these projects was about $1 million; this
      revenue was not recognized in the second quarter of 2006. We expect that it
      will
      be recognized in the following quarter of 2006.





The
      net
      revenue of agency sales in the first two quarters of 2006 was nearly identical
      to that of the same period in 2005. In the first two quarters of 2006, there
      were 26 agency sales projects that contributed net revenue to the Company,
      compared with 23 projects in the same period in 2005. Because of our diverse
      market location and our professional performance in our agency sales business,
      the current macro economic policies have had little impact on our agency sales
      performance. We hope we can keep this stable growth trend in our agency sales
      business in 2006.





17




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 the foregoing office building, SHSY committed
      to a sales target of $51.64 million. Property underwriting sales is
      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 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 upon the expiry
      period, we may have to absorb the unsold property units from developers at
      the
      underwriting price and hold them in our inventory or as an
      investment.





We
      started selling units in the building in December, 2004, and as of June 30,
      2006, we have achieved the sales target by selling 45,675 square meters with
      a
      total sales price of $66.75 million and this underwriting project has
      contributed a total net revenue of $11,984,799 to the Company. However, there
      are still unsold properties with floor area of 955 square meters, which
      represents 2% of total floor area underwritten, as of July 17, 2006. We
      expect
      we can sell the unsold properties out in the third quarter of 2006. As we
      approach the completion of this project, the property developer will gradually
      receive all sales proceeds from the buyers; at that time, we can recognize
      the
      total underwriting sales revenue of this project.





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. 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 the rental income.
      As of
      June 30, 2006, 7 sub-leasing agreements have been signed, the area of these
      sub-leasing agreements represented 5% of total area under these leasing
      agreements. We expect the income from the sub-leasing business can keep a stable
      growth trend in 2006 and 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 June 30,
            
            
            Six
                Months Ended June 30,2006
            
            
            %
                to total
            
            
            2005
            
            
            %
                to total
            
            
            %
                change
            
            
            2006
            
            
            %
                to total
            
            
            2005
            
            
            %
                to total
            
            
            %
                changeAgency
                sales
            
            
            664,889
            
            
            39
            
            
            579,775
            
            
            72
            
            
            15
            
            
            1,081,193
            
            
            30
            
            
            929,503
            
            
            74
            
            
            16Underwriting
                sales
            
            
            764,473
            
            
            45
            
            
            224,484
            
            
            28
            
            
            241
            
            
            2,251,697
            
            
            63
            
            
            328,925
            
            
            26
            
            
            585Property
                Management
            
            
            266,597
            
            
            16
            
            
            0
            
            
            0
            
            
            n/a
            
            
            266,597
            
            
            7
            
            
            0
            
            
            0
            
            
            n/aNet
                revenue
            
            
            1,695,959
            
            
            100
            
            
            804,259
            
            
            100
            
            
            111
            
            
            3,599,487
            
            
            100
            
            
            1,258,428
            
            
            100
            
            
            186





The
      cost
      of revenue of the second quarter of 2006 was $1,695,959, which increased 111%
      from $804,259 of the second quarter of 2005. The total cost of revenue of the
      first two quarters of 2006 was $3,599,487, which increased 186% from $1,258,428
      of the first two quarters of 2005. In the second quarter of 2006, agency sales
      represented 39% of the total cost of revenue, underwriting sales represented
      45%
      and property management represented 16%. In the first two quarters of 2006,
      agency sale represented 30% of the total cost of revenue, underwriting sales
      represented 63% and property management represented 7%. The increase in cost
      of
      revenue in the second quarter and first two quarters of 2006 was mainly due
      to
      the increase in our underwriting sales and property management.





18




Agency
      sales





The
      cost
      of revenue for agency sales in the first two quarter of 2006 increased 16%
      from
      the same period in 2005. The primary reason was:





i)
            The
                increase of agency sales projects in the first two quarters of
                2006.In
                the first two quarters of 2006, there were 26 agent sales projects
                contributed net revenue to the Company, compared to 23 projects in
                the
                same period in 2005.





ii)
            To
                expand our agency sales business to diverse market location, SHXJY
                established branches in ZhenJiang and NanJing in March, 2006 and
                December,
                2005 respectively. The cost of revenue of these two branches in the
                first
                two quarters of 2006 was $103,571.





Underwriting
      sales





The
      Company has entered into co-operation agreements with two venturers to jointly
      carry out the underwriting project mentioned above. According to the agreements,
      the venturers are entitled to share 35% of the net results of the underwriting
      project.





A
      significant factor contributing to the increase of the cost of underwriting
      sales was that in the first two quarters of 2006, we recognized the profit
      sharing as the cost of the underwriting project of $2,014,519, which represented
      89% of total underwriting sales cost in the first two quarters of 2006, and
      there was no such cost in the same period of 2005.





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 in
      the
      second quarter of 2006.




**Operating
      Expenses**





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





Three
                Months Ended June 30,
            
            
            Six
                Months Ended June 30,2006
            
            
            %
              to
                total
            
            
            2005
            
            
            %
              to
                total
            
            
            %
                change
            
            
            2006
            
            
            %
                to total
            
            
            2005
            
            
            %
              to
                total
            
            
            %
                changeAgency
                sales
            
            
            210,868
            
            
            90
            
            
            269,485
            
            
            92
            
            
            (22
            )
            
            398,364
            
            
            91
            
            
            498,122
            
            
            90
            
            
            (20
            )Underwriting
                sales
            
            
            18,824
            
            
            8
            
            
            23,083
            
            
            8
            
            
            (18
            )
            
            32,107
            
            
            7
            
            
            53,309
            
            
            10
            
            
            (40
            )Property
                Management
            
            
            5,683
            
            
            2
            
            
            0
            
            
            0
            
            
            n/a
            
            
            7,276
            
            
            2
            
            
            0
            
            
            0
            
            
            n/aNet
                revenue
            
            
            235,375
            
            
            100
            
            
            292,568
            
            
            100
            
            
            (20
            )
            
            437,747
            
            
            100
            
            
            551,431
            
            
            100
            
            
            (21
            )





The
      operating expenses of the second quarter of 2006 were $235,375, which decreased
      20% from $292,568 of the second quarter of 2005. The total operating expenses
      of
      the first two quarters of 2006 were $437,747, which decreased 21% from $551,431
      of the first two quarters of 2005. In the second quarter of 2006, agency sales
      represented 90% of the total operating expenses, underwriting sales represented
      8% and property management represented 2%. In the first two quarters of 2006,
      agency sale represented 91% of the total operating expenses, underwriting sales
      represented 7% and property management represented 2%. This decrease was mainly
      due to our efficient cost control performed in the Company.





19




Agency
      sales





The
      operating expenses for agency sales in the first two quarters of 2006 decreased
      20% from the same period in 2005. This decrease was mainly due to the decrease
      in the staff cost and travel expenses of SHXJY and its subsidiaries and branches
      in the first two quarters of 2006; comparing to the same period in 2005, the
      decrease of such expenses was $85,347.





Underwriting
      sales





The
      operating expenses for underwriting sales in the first two quarters of 2006
      decreased 40% from the same period in 2005. This decrease was mainly due to
      the
      decrease in the staff cost, travel expenses and official expenses of SHSY in
      the
      first two quarters of 2006; comparing to the same period in 2005, the decrease
      of such expenses was $18,965.





Property
      management





To
      the
      end of June 30, 2006, SZGFH is still at the start-up stage, and there was a
      low
      level of daily operating expenses incurred in the first two quarters of 2006.
      Following the development of SZGFH, the operating expenses will be increased
      to
      support the business of property management.








**General
      and Administrative Expenses**





The
      general and administrative expenses in the second quarter of 2006 were $627,542,
      increasing 5% from $597,826 in the second quarter of 2005. The general and
      administrative expenses in the first two quarters of 2006 were $1,350,843,
      increasing 17% from $1,155,763 in the first two quarters of 2005. The increase
      in general and administrative expenses was mainly due to:





i)
            The
                increase in professional fees for the maintenance of the
                Company’s
                listing status, e.g., audit, legal and other professional fees in
                the
                first two quarters of 2006; comparing to the same period in 2005,
                the
                increase of such expenses was
                $59,943.





ii)
            The
                increase in salary and office furnishing expensesof
                SRREin
                the first two quarters of 2006; compared to the same period in 2005,
                the
                increase of such expenses was $96,048.





iii)
            The
                expansion of our agency sales business to diversified market locations
                also increased the general and administrative expenses of agency
                sales
                business in the first two quarter of 2006; compared to the same period
                in
                2005, the increase of such expenses was
                $89,282.








**Interest
      Expenses**





Interest
      expenses in the second quarter of 2006 were $126,988, increasing 223% from
      $39,255 in the same period in 2005. Interest expenses in the first two quarters
      of 2006 were $256,753, increasing 252% from $72,918 in the same period in 2005.
      The interest expenses were mainly incurred for bank loans and promissory notes
      payable. The increase was mainly due to increases in interest on bank loans
      for
      the acquisition of properties.





20




**LIQUID** **ITY
      AND CAPITAL RESOURCES**




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





Our
      accounts receivable balance at June 30, 2006 was $2,399,671.





We
      ended
      the period with a cash position of $1,440,191. We had positive operating cash
      flow of $1,200,550. This was primarily attributable to the collection of trade
      receipts from agency business.





The
      Company’s investing activities used cash resources of $1,606,719 for the six
      months ended June 30, 2006, which was mainly devoted to the deposits paid for
      acquisition of properties.





The
      Company’s financing activities provided cash resources of $977,773 for the six
      months ended June 30, 2006, which was primarily attributable to the new loan
      of
      $2,079,339 obtained in the first two quarters of 2006.





We
      anticipate that our current available funds, cash inflows from providing
      property agency services and underwriting 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 through 2006. We also expect SZGFH can contribute cash flow to the Company
      as it started its property management business in the second quarter of 2006.





We
      also
      plan to raise additional funds in the future in order to fund acquisitions,
      develop new projects, or if our business otherwise grows more rapidly than
      we
      currently predict, through the issuance of additional shares of our equity
      securities in one or more public or private offerings, or through credit
      facilities obtained with lending institutions. On June 15, 2006, the Company
      engaged Midtown Partners & Co., LLC as the Company’s exclusive placement
      agent in connection with a proposed placement in the United States of up to
      Five
      million dollars of the Company’s securities upon the terms and conditions set
      forth in Exhibit 10.3 (Placement Agent Agreement dated June 15, 2006 between
      the
      Company and Midtown Partners & Co., LLC). There can be no guarantee that we
      will be able to obtain such funding, whether through the issuance of debt or
      equity, on terms satisfactory to management and our board of
      directors.




**ITEM
      3. CONTROLS AND PROCEDURES**





Based
      on
      the most recent evaluation, which was completed as of the end of the period
      covered by this Form 10-QSB, the Chief Executive Officer and Chief Financial
      Officer have concluded that the Company's disclosure controls and procedures
      were effective at June 30, 2006, 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 June 30, 2006, that have materially affected, or are reasonably likely
      to
      materially affect, our internal controls for financial reporting.





21




**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**





On
      June
      15, 2006, the Company entered into a Placement Agent Agreement (the “Placement
      Agent Agreement”) with Midtown Partners & Co., LLC (“Midtown”) whereby the
      Company engaged Midtown as the Company’s exclusive placement agent in connection
      with a proposed private placement in the United States of up to $5,000,000
      of
      the Company’s securities (the “Financing”). The securities offered under the
      Financing are expected to be Series A Senior Convertible Debentures (the
“Debentures”), Series A Warrants and Series B Warrants. Midtown has agreed that
      the Financing offered and sold by it has been and will be offered and sold
      only
      to Accredited Investors in accordance with Rule 506 of Regulation D of the
      Securities Act of 1933, as amended.





No
      securities have been issued pursuant to the Financing during the period covered
      by this report. However, pursuant to the Placement Agent Agreement, in partial
      consideration for the performance by Midtown of the services set forth therein,
      on July 21, 2006, the Company issued to Midtown as an engagement fee 5,000
      unregistered shares of common stock to be registered on the Company’s next
      registration statement and 15,000 underlying warrants with a 5-year term from
      issuance. The Company has agreed to register the warrants on its next
      registration statement. The warrants have a cashless exercise provision and
      are
      exercisable at a price of $2.25. If Midtown receives subscriptions covered
      by
      the Placement Agent Agreement, Midtown will be entitled to additional fees
      as
      set forth in the Placement Agent Agreement.





**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


2.1
            Exchange
                Agreement dated as of August 31, 2004 by and among Lin Ray Yang Enterprise
                Ltd., Lin Chi-Jung, as agent for the beneficial shareholders of such
                company, and the Company, incorporated by reference to our Current
                Report
                on Form 8-K filed on September 8,
                2004.





2.2
            Exchange
                Agreement dated as of August 31, 2004 by and among Sunrise Real Estate
                Development Group, Inc., a Cayman Islands company, Lin Chi-Jung,
                as agent
                for the beneficial shareholder of such company, and the Company,
                incorporated by reference to our Current Report on Form 8-K filed
                on
                September 8, 2004.


3.1
                Articles
                    of Incorporation, incorporated
                    by reference to Exhibit 3.1 of Form-10QSB filed on April 23,
                    2001.
  22
 3.1a
                  Amendments
                      to the Articles of Incorporation incorporated by reference
                      to Exhibits
                      3.1a and 3.1b to Form-10-KSB for the fiscal year ended December
                      31,2003
                      filed on April 14, 2004.
 3.2
                    Bylaws,
                        incorporated
                        by reference to Exhibit 3.2 of Form-10SB filed on April 23,
                        2001.
 10.1
                          Financial
                              Advisory Agreement dated January 15, 2006 between SunriseReal Estate Group, Inc.and
                              Marco Partners, Inc., incorporated by reference to
                              Exhibit 10.1 to Form
                              SB-2 filed on February 13,
                              2006.
 10.2
                                Consultancy
                                    Service Agreement dated January 15, 2006 between
                                    SunriseReal Estate Group, Inc.and
                                    Chiang Hui Hsiung, incorporated by reference
                                    to Exhibit 10.2 to Form SB-2
                                    filed on February 13, 2006.
 10.3
                                      Placement
                                          Agent Agreement dated June 15, 2006 between
                                          Sunrise Real Estate Group,
                                          Inc. and Midtown Partners & Co., LLC.
 14
                                            Code
                                                of Ethics
 21.1
                                                  Subsidiaries
                                                      of the Company, incorporated
                                                      by reference to Exhibit 21.1
                                                      to Form SB-2
                                                      filed on February 13, 2006.
 
 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.





**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: August
              14, 2006
            By:
            /s/ Lin,
              Chi-JungLin,
              Chi-Jung, Chief Executive OfficerDate: August 14, 2006
            By:
            /s/ Art HonanyanArt
                Honanyan, Chief Financial Officer




23