**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D. C. 20549**





**FORM
      10-Q**





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


For
      the
      quarterly period ended June 30, 2008


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


For
      the
      transition period from __________ to __________





*Commission
      File Number 000-32585*





**SUNRISE
      REAL ESTATE GROUP, INC.**





(Exact
      name of registrant as specified in its charter)





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





Suite
      701, No. 333, Zhaojiabang Road


Shanghai,
      PRC 200032


(Address
      of principal executive offices Zip Code)





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





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes x No  ̈





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large
      accelerated filer  ̈ Accelerated filer  ̈


Non-accelerated
      filer  ̈ Smaller reporting company x





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





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








**FORM
      10-Q**




**For
      the Quarter Ended June 30, 2008**




**INDEX** ****


**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
            16Item
                3.Quantitative
                and Qualitative Disclosures About Market Risk
            22Item
                4.Controls
                and Procedures
            22PART
                II. OTHER INFORMATION
            23Item
                1.Legal
                Proceedings
            23Item
                2.Unregistered
                Sales of Equity Securities and Use of Proceeds
            23Item
                3.Defaults
                Upon Senior Securities
            23Item
                4.Submission
                of Matters to a Vote of Security Holders
            23Item
                5.Other
                Information
            23Item
                6.Exhibits
            23SIGNATURES
            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,****2008**
            
            **2007****(Unaudited)**
            
            **(Restated)**ASSETSCurrent
                assetsCash
                and cash equivalents
            
            $
            922,232
            
            $
            2,281,516Restricted
                cash (Note 9)
            
            
            230,242
            
            
            2,441,579Accounts
                receivable
            
            
            601,476
            
            
            842,868Promissory
                deposits (Note 3)
            
            
            947,646
            
            
            273,800Amounts
                due from venturers
            
            
            -
            
            
            79,662Amount
                due from related party (Note 11)
            
            
            332,405
            
            
            312,132Other
                receivables and deposits (Note 4)
            
            
            838,006
            
            
            602,373Total
                current assets
            
            
            3,872,007
            
            
            6,833,930Property,
                plant and equipment – net (Note 5)
            
            
            2,745,848
            
            
            2,519,585Equity
                investment (Note 6)
            
            
            83,101
            
            
            78,033Investment
                properties (Note 7)
            
            
            8,044,389
            
            
            7,800,228Deferred
                tax asset (Note 8)
            
            
            1,367,962
            
            
            1,284,532Goodwill
            
            
            13,307
            
            
            13,307Total
                assets
            
            $
            16,126,614
            
            $
            18,529,615LIABILITIES
                AND SHAREHOLDERS’ EQUITYCurrent
                liabilitiesBank
                loans (Note 9)
            
            $
            204,108
            
            $
            191,660Promissory
                notes payable (Note 10)
            
            
            517,187
            
            
            976,435Accounts
                payable
            
            
            267,459
            
            
            230,654Amount
                due to director (Note 11)
            
            
            71,481
            
            
            171,458Amount
                due to related party (Note 11)
            
            
            127,443
            
            
            159,561Other
                payables and accrued expenses (Note 12)
            
            
            1,613,595
            
            
            1,917,022Other
                tax payable (Note 13)
            
            
            605,002
            
            
            546,873Income
                tax payable
            
            
            1,044,887
            
            
            1,238,912Total
                current liabilities
            
            
            4,451,162
            
            
            5,432,575Commitments
                and contingencies (Note 14)Long-term
                bank loans (Note 9)
            
            
            6,125,355
            
            
            5,847,606Long-term
                promissory notes payable (Note 10)
            
            
            57,223
            
            
            111,112Deposits
                received from underwriting sales (Note 15)
            
            
            8,246,164
            
            
            7,743,240Minority
                interest
            
            
            457,296
            
            
            431,674Shareholders’
                equityCommon
                stock, par value $0.01 per share; 200,000,000 shares authorized;
                23,691,925 and 23,691,925 shares issued and outstanding as of June
                30,
                2008 and December 31, 2007, respectively
            
            
            236,919
            
            
            236,919Additional
                paid-in capital
            
            
            3,620,008
            
            
            3,620,008Statutory
                reserve (Note 16)
            
            
            729,744
            
            
            729,744Accumulated
                losses
            
            
            (8,465,989
            )
            
            (6,348,261
            )Accumulated
                other comprehensive income (Note 17)
            
            
            668,732
            
            
            724,998Total
                shareholders’ equity
            
            
            (3,210,586
            )
            
            (1,036,592
            )Total
                liabilities and shareholders’ equity
            
            $
            16,126,614
            
            $
            18,529,615




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 30,2008
            
            2007
            
            2008
            
            2007(Unaudited)Net
                Revenues
            
            $
            2,641,681
            
            $
            1,520,047
            
            $
            3,961,226
            
            $
            2,655,202Cost
                of Revenues
            
            
            (1,820,183
            )
            
            (1,434,946
            )
            
            (3,137,830
            )
            
            (2,622,606
            )Gross
                Profit
            
            
            821,498
            
            
            85,101
            
            
            823,396
            
            
            32,596Operating
                Expenses
            
            
            (328,489
            )
            
            (255,412
            )
            
            (639,115
            )
            
            (494,921
            )General
                and Administrative Expenses
            
            
            (1,098,242
            )
            
            (936,714
            )
            
            (1,991,464
            )
            
            (1,831,289
            )Operating
                Loss
            
            
            (605,233
            )
            
            (1,107,025
            )
            
            (1,807,183
            )
            
            (2,293,614
            )Interest
                Income
            
            
            3,561
            
            
            3,344
            
            
            9,330
            
            
            7,571Other
                Income/(Expenses), Net
            
            
            (1,394
            )
            
            (34,851
            )
            
            5,138
            
            
            (42,242
            )Interest
                Expenses
            
            
            (154,836
            )
            
            (222,785
            )
            
            (298,476
            )
            
            (425,347
            )Loss
                Before Income Tax and Minority Interest
            
            
            (757,902
            )
            
            (1,361,317
            )
            
            (2,091,191
            )
            
            (2,753,632
            )Income
                Tax
            
            
            (23,388
            )
            
            (28,973
            )
            
            (28,884
            )
            
            (28,973
            )Loss
                Before Minority Interest
            
            
            (781,290
            )
            
            (1,390,290
            )
            
            (2,120,075
            )
            
            (2,782,605
            )Minority
                Interest
            
            
            (7,684
            )
            
            (38,533
            )
            
            2,347
            
            
            (35,453
            )Net
                Loss
            
            $
            (788,974
            )
            $
            (1,428,823
            )
            $
            (2,117,728
            )
            $
            (2,818,058
            )Loss
                Per Share – Basic and Fully Diluted
            
            $
            (0.03
            )
            $
            (0.06
            )
            $
            (0.09
            )
            $
            (0.12
            )Weighted
                average common shares outstanding–
                Basic and Fully Diluted1
            
            
            23,691,925
            
            
            23,691,925
            
            
            23,691,925
            
            
            23,691,925





See
      accompanying notes to consolidated financial statements.




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


4





**Sunrise
      Real Estate Group, Inc.**





**Consolidated
      Statements of Cash Flows**





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





(Expressed
      in US Dollars)


**Six
                Months Ended June 30,****2008**
            
            **2007****(Restated)****(Unaudited)****Cash
                flows from operating activities****Net
                Loss**
            
            $
            (2,117,728
            )
            $
            (2,818,058
            )Adjustments
                  to reconcile net loss to net cash used in operating
                  activitiesDepreciation
                of property, plant and equipment
            
            
            389,097
            
            
            240,757(Gain)/loss
                on disposal of property, plant and equipment
            
            
            (1,019
            )
            
            848Minority
                interest
            
            
            (2,347
            )
            
            35,453Change
                in:Accounts
                receivable
            
            
            287,701
            
            
            4,285,194Promissory
                deposits
            
            
            (637,376
            )
            
            (647,752
            )Other
                receivables and deposits
            
            
            (190,911
            )
            
            (488,359
            )Accounts
                payable
            
            
            21,202
            
            
            (387,163
            )Amount
                with related party
            
            
            (41,271
            )
            
            -Amounts
                with venturers
            
            
            82,420
            
            
            578,679Other
                payables and accrued expenses
            
            
            (415,749
            )
            
            (4,826
            )Interest
                payable on promissory notes
            
            
            (119,142
            )
            
            186,238Interest
                payable on amount due to director
            
            
            4,403
            
            
            (10,974
            )Other
                tax payable
            
            
            21,965
            
            
            (224,817
            )Income
                tax payable
            
            
            (266,674
            )
            
            (387,064
            )**Net
                cash (used in)/provided by operating activities**
            
            
            (2,980,735
            )
            
            358,156**Cash
                flows from investing activities**Acquisition
                of plant and equipment
            
            
            (289,956
            )
            
            (167,373
            )Deposits
                paid for acquisition of properties
            
            
            -
            
            
            (1,850,424
            )Proceeds
                from disposal of property, plant and equipment
            
            
            95,883
            
            
            -Restricted
                cash
            
            
            2,302,414
            
            
            -**Net
                cash****provided
                by/(used in) investing activities**
            
            
            2,108,341
            
            
            (2,017,797
            )**Cash
                flows from financing activities**Bank
                loans repayment
            
            
            (99,148
            )
            
            (630,508
            )Repayment
                of promissory note
            
            
            (393,995
            )
            
            (205,556
            )Proceeds
                from promissory note
            
            
            -
            
            
            2,565,903Repayment
                to director
            
            
            (104,380
            )
            
            (79,026
            )****Advances
                from director
            
            
            -
            
            
            250,000**Net
                cash (used in)/provided by financing activities**
            
            
            (597,523
            )
            
            1,900,813**Effect
                of exchange rate changes on cash and cash
                equivalents**
            
            
            110,633
            
            
            62,691**Net
                (decrease)/increase in cash and cash equivalents**
            
            
            (1,359,284
            )
            
            303,863**Cash
                and cash equivalents at beginning of****period**
            
            
            2,281,516
            
            
            945,727**Cash
                and cash equivalents at end of period**
            
            $
            922,232
            
            $
            1,249,590**Supplemental
                disclosure of cash flow****information**Cash
                paid during the period:Income
                tax paid
            
            
            295,558
            
            
            428,513Interest
                paid
            
            
            741,558
            
            
            250,083





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





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





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





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





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


6





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





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





Figure
      1:
      Company Organization Chart











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





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


7


Restatement
      Summary





The
      Company discovered errors to previously issued financial statements for the
      fiscal years ended December 31, 2007 and 2006 and the quarter ended March 31,
      2008. The company intends to file the restated financial statements for these
      periods as soon as practicable but has not filed them. However, the current
      financial statements are stated as if the correction of the error had been
      made





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





The
      Securities and Exchange Commission has provided the Company with comments
      concerning the Company’s Form 10-K for the fiscal year ended December 31, 2006,
      particularly with respect to certain revenue recognition policies on
      underwriting sales. The
      Company has subsequently determined that the correct application of accounting
      principles had not been applied for the
      recognition of underwriting sales revenue .
      In this
      correction, the financial statements for the years ended December 31, 2007
      and
      2006 and the quarter ended March 31, 2008 were restated to increase the
      Company’s deferred tax assets and deposits received from underwriting sales by
      deferring revenue recognition to the consummation of the sale, generally when
      the remaining maximum exposure to loss is reduced below the amount of gain
      deferred. As a result, the Company’s net asset values as of December 31, 2007
      and March 31, 2008 were reduced by $6,300,897 and $6,563,699, respectively.
      The
      correction of this error reduced the Company’s losses for the year ended
      December, 2007 by $157,811 and gave no effect on the income statement of the
      Company for each of the two quarters ended June 30, 2008 and 2007.





An
      additional restatement relates to correct the overstatement of the minority
      shareholders’ share of the Company’s result by US$106,759. As a result of the
      correction of this item, the Company’s financial statements for the year ended
      2007 were restated and the Company’s loss for the year ended December 31, 2007
      and the accumulated losses as of December 31, 2007 were reduced by
      US$106,759.





Certain
      comparative figures have been reclassified in conformity of the current period’s
      presentation.





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





**Basis
      of Accounting and Principles of Consolidation**





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





**Going
      Concern**





The
      Company’s financial statements are prepared according to the accounting
      principles generally accepted in the United States of America applicable to
      a
      going concern, which contemplates the realization of assets and liquidation
      of
      liabilities in the normal course of business. The Company has incurred losses
      of
      $2,117,728 for the first and second quarters of 2008 and had net working capital
      deficiency of $579,155 as of June 30, 2008. The Company ’ s
      net
      working capital deficiency, recurring losses and negative cash flows from
      operations raise substantial doubt about its ability to continue as a going
      concern.





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





8




**Foreign
      Currency Translation and Transactions**





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





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





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





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





**Property,
      Plant, Equipment and Depreciation**





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


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





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





**Investment
      property**





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





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





9


**Goodwill**





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





**Revenue
      Recognition**





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





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





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





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





All
      revenues represent gross revenues less sales and business tax.





**Net
      Earnings per Common Share**





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





**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.




10




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





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





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





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





**Non-employee
      stock based compensation**





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





**Segment
      information**





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





**NOTE
      3 - PROMISSORY DEPOSITS**





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





**NOTE
      4 - OTHER RECEIVABLES AND DEPOSITS**





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




11


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





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





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





**NOTE
      6 – EQUITY INVESTMENT**





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





**NOTE
      7 – INVESTMENT PROPERTIES**





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





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





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





**NOTE
      8** **–
      DEFERRED TAX ASSET**





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





**NOTE
      9 - BANK LOANS**





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





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





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


12


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





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





**NOTE
      10 – PROMISSORY NOTES PAYABLE**





There
      are
      three promissory notes, as listed below:





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





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





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





**NOTE
      11 – AMOUNTS WITH RELATED PARTIES AND DIRECTORS**





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





Amount
      due to director


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





Amount
      due from related party


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





Amount
      due to related party


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





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





June 30,
            
            December 31,2008
            
            2007(Unaudited)
            
            (Audited)Accrued
                staff commission & bonus
            
            $
            344,448
            
            $
            1,013,650Rental
                deposits received
            
            
            657,058
            
            
            519,352Other
                payables
            
            
            612,089
            
            
            384,019$
            1,613,595
            
            $
            1,917,021




13


**NOTE
      13 – OTHER TAX PAYABLE**





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





**NOTE
      14- COMMITMENTS AND CONTINGENCIES**





Operating
      Lease Commitments





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





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





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





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





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





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





**NOTE
      15 –DEPOSITS RECEIVED FROM UNDERWRTING SALES**





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


14


**NOTE
      16 – STATUTORY RESERVE**





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





**NOTE
      17 – ACCUMULATED OTHER COMPREHENSIVE INCOME**





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





**NOTE
      18 – COMPARATIVE FIGURES**




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





**NOTE
      19 – CONCENTRATION OF CUSTOMERS**





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





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





*
      less
      than 10%


15


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





**CAUTIONARY
      STATEMENT**




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




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




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




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





**OVERVIEW**





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





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





16





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





**RECENT
      DEVELOPMENTS**





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





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





**RECENTLY
      ISSUED ACCOUNTING STANDARDS**





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





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





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





**APPLICATION
      OF CRITICAL ACCOUNTING POLICIES**





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


17


**Revenue
      Recognition**





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





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





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





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





All
      revenues represent gross revenues less sales and business tax.





**Net
      Earnings per Common Share**





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





**Income
      Taxes**





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





**Segment
      Information**





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


18


**RESULTS
      OF OPERATIONS**





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





**Revenue**





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





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





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





Agency
      sales





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


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


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





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





Underwriting
      sales





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





Property
      Management





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


19


**Cost
      of Revenue**





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





Three Months Ended June 30,
            
            Six Months Ended June 30,2008
            
            % to
              total
            
            2007
            
            % to
              total
            
            %
              change
            
            2008
            
            % to
              total
            
            2007
            
            % to
              total
            
            %
              changeAgency
                sales
            
            
            1,003,271
            
            
            55
            
            
            514,587
            
            
            36
            
            
            95
            
            
            1,537,593
            
            
            49
            
            
            1,023,979
            
            
            39
            
            
            50Underwriting
                sales
            
            
            -
            
            
            -
            
            
            39,978
            
            
            3
            
            
            (100
            )
            
            -
            
            
            -
            
            
            12,370
            
            
            1
            
            
            (100
            )Property
                Management
            
            
            816,912
            
            
            45
            
            
            880,381
            
            
            61
            
            
            (7
            )
            
            1,600,237
            
            
            51
            
            
            1,586,257
            
            
            60
            
            
            1Cost
                of revenue
            
            
            1,820,183
            
            
            100
            
            
            1,434,946
            
            
            100
            
            
            27
            
            
            3,137,830
            
            
            100
            
            
            2,622,606
            
            
            100
            
            
            20





The
      cost
      of revenue of the second quarter of 2008 was $1,820,183, which increased 27%
      from $1,434,946 of the second quarter of 2007. The total cost of revenue of
      the
      first two quarters of 2008 was $3,137,830, which increased 20% from $2,622,606
      of the first two quarters of 2007. In the second quarter of 2008, agency sales
      represented 55% of the total cost of revenue and property management represented
      45%. In the first two quarters of 2008, agency sale represented 49% of the
      total
      cost of revenue and property management represented 51%. The increase in cost
      of
      revenue in the second quarter and first two quarters of 2008 was due to the
      increase in our agency sales.





Agency
      sales





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





Underwriting
      sales





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





Property
      management





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





**Operating
      Expenses**





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





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




20


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





Agency
      sales





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





Underwriting
      sales





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





Property
      management





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





**General
      and Administrative Expenses**





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





**Interest
      Expenses**





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




**LIQUIDITY
      AND CAPITAL RESOURCES**





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





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





We
      ended
      the period with a cash position of $1,152,474 (including cash and cash
      equivalents of $922,232 and restricted cash of $230,242). The Company’s
      operating activities used cash in the amount of $2,980,735 in the first two
      quarters of 2008, which was primarily attributable to the Company’s net loss and
      payment of promissory deposits.


21


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





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





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





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





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





**OFF
      BALANCE SHEET ARRANGEMENTS**





The
      Company has no off-balance sheet arrangements.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





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





**ITEM
      4. CONTROLS AND PROCEDURES**





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





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





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





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





22




**PART
      II - OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





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





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





None.





**ITEM
      3.**  **DEFAULTS UPON SENIOR SECURITIES**





None.





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





None.





**ITEM
      5.**  **OTHER INFORMATION**





None.




**ITEM
      6. EXHIBITS**


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




**SIGNATURES**




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




**SUNRISE
      REAL ESTATE GROUP, INC.**





Date:
                August 19, 2008
            By:
                /s/ Lin, Chi-JungLin,
                Chi-Jung, Chief Executive OfficerDate:
                August 19, 2008
            By:
                /s/ Wang, Wen-YanWang,
                Wen-Yan, Chief Financial Officer




23