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 March 31, 2009


 ̈
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: May 10, 2009 - 23,691,925 shares of
Common Stock









FORM
10-Q




For
the Quarter Ended March 31, 2009




INDEX




PagePART
      I. FINANCIAL INFORMATION
              3Item
      1.
              Financial
      Statements
              3Consolidated
      Balance Sheets
              3Consolidated
      Statements of Operations
              4Consolidated
      Statements of Cash Flows
              5Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              15Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              21Item
      4.
              Controls
      and Procedures
              21PART
      II. OTHER INFORMATION
              22Item
      1.
              Legal
      Proceedings
              22Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              22Item
      3.
              Defaults
      Upon Senior Securities
              22Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              22Item
      5.
              Other
      Information
              22Item
      6.
              Exhibits
              22SIGNATURES
              22




2


PART
I - FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS





Sunrise
Real Estate Group, Inc.


Unaudited
Condensed Consolidated Balance Sheets


(Expressed
in US Dollars)


March
      31,
                    
                    
                    December
      31,2009
                    
                    
                    2008(Unaudited)
                    
                    
                    (Audited)ASSETSCurrent
      assetsCash
      and cash equivalents
                    
                    $
                    595,413
                    
                    
                    $
                    587,468Restricted
      cash (Note7)
                    
                    
                    25,318
                    
                    
                    
                    32,411Accounts
      receivable
                    
                    
                    638,889
                    
                    
                    
                    720,789Promissory
      deposits (Note 3)
                    
                    
                    1,050,522
                    
                    
                    
                    1,126,620Other
      receivables and deposits (Note 4)
                    
                    
                    409,986
                    
                    
                    
                    322,095Total
      current assets
                    
                    
                    2,720,128
                    
                    
                    
                    2,789,383Property,
      plant and equipment – net (Note 5)
                    
                    
                    2,581,160
                    
                    
                    
                    2,650,023Investment
      properties (Note 6)
                    
                    
                    8,042,120
                    
                    
                    
                    8,194,880Goodwill
                    
                    
                    13,307
                    
                    
                    
                    13,307Total
      assets
                    
                    $
                    13,356,715
                    
                    
                    $
                    13,647,593LIABILITIES
      AND SHAREHOLDERS’ DEFICITCurrent
      liabilitiesBank
      loans (Note 7)
                    
                    $
                    6,043,743
                    
                    
                    $
                    6,044,893Promissory
      notes payable (Note 8)
                    
                    
                    1,087,926
                    
                    
                    
                    963,006Accounts
      payable
                    
                    
                    702,676
                    
                    
                    
                    340,353Amount
      due to directors (Note 9)
                    
                    
                    203,991
                    
                    
                    
                    169,355Amount
      due to related party (Note 9)
                    
                    
                    127,876
                    
                    
                    
                    127,900Other
      payables and accrued expenses (Note 10)
                    
                    
                    2,160,659
                    
                    
                    
                    2,359,068Other
      tax payable (Note 11)
                    
                    
                    607,460
                    
                    
                    
                    593,899Income
      tax payable
                    
                    
                    1,067,596
                    
                    
                    
                    1,083,477Total
      current liabilities
                    
                    
                    12,001,927
                    
                    
                    
                    11,681,951Commitments
      and contingencies (Note 12)Long-term
      bank loans (Note 7)
                    
                    
                    153,601
                    
                    
                    
                    204,840Long-term
      promissory notes payable (Note 8)
                    
                    
                    -
                    
                    
                    
                    11,111Deposits
      received from underwriting sales (Note 13)
                    
                    
                    8,274,151
                    
                    
                    
                    8,275,725Minority
      interest of consolidated subsidiaries
                    
                    
                    425,542
                    
                    
                    
                    488,330Total
      liabilities
                    
                    $
                    20,855,221
                    
                    
                    $
                    20,661,957Shareholders’
      deficitCommon
      stock, par value $0.01 per share; 200,000,000 shares authorized;
      23,691,925 shares issued and outstanding as of December 31, 2008 and
      December 31, 2007
                    
                    
                    236,919
                    
                    
                    
                    236,919Additional
      paid-in capital
                    
                    
                    3,620,008
                    
                    
                    
                    3,620,008Statutory
      reserve (Note 14)
                    
                    
                    731,762
                    
                    
                    
                    731,762Accumulated
      losses
                    
                    
                    (12,671,529
                    )
                    
                    
                    (12,188,648
                    )Accumulated
      other comprehensive income (Note 15)
                    
                    
                    584,334
                    
                    
                    
                    585,595Total
      shareholders’ deficit
                    
                    
                    (7,498,506
                    )
                    
                    
                    (7,014,364
                    )Total
      liabilities and shareholders’ deficit
                    
                    $
                    13,356,715
                    
                    
                    $
                    13,647,593





See
accompanying notes to consolidated financial statements.




3




Sunrise
Real Estate Group, Inc.





Unaudited Condensed
Consolidated Statements of Operations





(Expressed
in US Dollars)


Three
      Months Ended March 31,2009
                          
                          
                          2008(Unaudited)
                          
                          
                          (Unaudited)Net
      Revenues
                          
                          $
                          1,495,528
                          
                          
                          $
                          1,319,545Cost
      of Revenues
                          
                          
                          (1,230,271
                          )
                          
                          
                          (1,428,752
                          )Gross
      Profit
                          
                          
                          265,257
                          
                          
                          
                          (109,207
                          )Operating
      Expenses
                          
                          
                          (191,640
                          )
                          
                          
                          (310,626
                          )General
      and Administrative Expenses
                          
                          
                          (481,555
                          )
                          
                          
                          (767,394
                          )Operating
      Loss
                          
                          
                          (407,938
                          )
                          
                          
                          (1,187,227
                          )Interest
      Income
                          
                          
                          899
                          
                          
                          
                          5,769Other
      Income, Net
                          
                          
                          14,613
                          
                          
                          
                          6,532Interest
      Expenses
                          
                          
                          (144,374
                          )
                          
                          
                          (143,640
                          )Loss
      Before Income Tax and Minority Interest
                          
                          
                          (536,800
                          )
                          
                          
                          (1,318,566
                          )Income
      Tax
                          
                          
                          (8,769
                          )
                          
                          
                          (5,496
                          )Loss
      Before Minority Interest
                          
                          
                          (545,569
                          )
                          
                          
                          (1,324,062
                          )Minority
      Interest
                          
                          
                          62,688
                          
                          
                          
                          10,031Net
      Loss
                          
                          $
                          (482,881
                          )
                          
                          $
                          (1,314,031
                          )Loss
      Per Share – Basic and Fully Diluted
                          
                          $
                          (0.02
                          )
                          
                          $
                          (0.06
                          )Weighted
      average common shares outstanding
                            –
      Basic and Fully Diluted
                          
                          
                          23,691,925
                          
                          
                          
                          23,691,925





Note: In
our 2008 year-end financial statement, we reclassified the depreciation expenses
of investment properties from General and Administrative Expenses to Cost of
Revenues. For the first quarter of 2009, we have done the same reclassification
of depreciation expense of investment properties in the amount of $125,828 from
General and Administrative Expenses to Cost of Revenues.





See
accompanying notes to unaudited condensed consolidated financial
statements.


4


Sunrise
Real Estate Group, Inc.





Consolidated
Statements of Cash Flows





Increase/(Decrease)
in Cash and Cash Equivalents





(Expressed
in US Dollars)


Three
      Months Ended March 31,2009
                          
                          
                          2008(Unaudited)
                          
                          
                          (Unaudited)Cash
      flows from operating activitiesNet
      Loss
                          
                          $
                          (482,881
                          )
                          
                          $
                          (1,314,031
                          )Adjustments
      to reconcile net loss tonet
      cash used in operating activitiesDepreciation
      of property, plant and equipment
                          
                          
                          217,343
                          
                          
                          
                          191,144Loss/
      (Gain) on disposal of property, plant and equipment
                          
                          
                          4,609
                          
                          
                          
                          (7,429
                          )Minority
      interest
                          
                          
                          (62,688
                          )
                          
                          
                          (10,031
                          )Change
      in:Accounts
      receivable
                          
                          
                          81,755
                          
                          
                          
                          561,901Promissory
      deposits
                          
                          
                          75,876
                          
                          
                          
                          (430,547
                          )Other
      receivables and deposits
                          
                          
                          (87,943
                          )
                          
                          
                          (299,747
                          )Amount
      due from related party
                          
                          
                          -
                          
                          
                          
                          (55,442
                          )Accounts
      payable
                          
                          
                          362,351
                          
                          
                          
                          (139,264
                          )Amounts
      with venturers
                          
                          
                          -
                          
                          
                          
                          67,098Other
      payables and accrued expenses
                          
                          
                          (197,940
                          )
                          
                          
                          (759,414
                          )Interest
      payable on promissory notes
                          
                          
                          938
                          
                          
                          
                          17,291Interest
      payable on amount due to director
                          
                          
                          (1,600
                          )
                          
                          
                          2,897Amount
      due to related party
                          
                          
                          -
                          
                          
                          
                          48,006Other
      tax payable
                          
                          
                          13,673
                          
                          
                          
                          (18,748
                          )Income
      tax payable
                          
                          
                          (15,673
                          )
                          
                          
                          5,496Restricted
      cash
                          
                          
                          7,086
                          
                          
                          
                          1,883,023Net
      cash used in operating activities
                          
                          
                          (85,094
                          )
                          
                          
                          (257,797
                          )Cash
      flows from investing activitiesAcquisition
      of property, plant and equipment
                          
                          
                          (2,413
                          )
                          
                          
                          (272,021
                          )Proceeds
      from disposal of property, plant and equipment
                          
                          
                          -
                          
                          
                          
                          86,668Net
      cash used in investing activities
                          
                          
                          (2,413
                          )
                          
                          
                          (185,353
                          )Cash
      flows from financing activitiesBank
      loans repayment
                          
                          
                          (51,195
                          )
                          
                          
                          (48,925
                          )Repayment
      of promissory note
                          
                          
                          (33,333
                          )
                          
                          
                          (373,440
                          )Proceeds
      from promissory note
                          
                          
                          146,272
                          
                          
                          
                          -Repayment
      to director
                          
                          
                          (43,881
                          )
                          
                          
                          (104,380
                          )Advance
      from director
                          
                          
                          80,130
                          
                          
                          
                          -Net
      cash provided by/ (used in) financing activities
                          
                          
                          97,993
                          
                          
                          
                          (526,745
                          )Effect
      of exchange rate changes on cash and cash equivalents
                          
                          
                          (2,541
                          )
                          
                          
                          144,064Net
      increase/(decrease) in cash and cash equivalents
                          
                          
                          7,945
                          
                          
                          
                          (825,831
                          )Cash
      and cash equivalents at beginning of period
                          
                          
                          587,468
                          
                          
                          
                          2,281,516Cash
      and cash equivalents at end of period
                          
                          $
                          595,413
                          
                          
                          $
                          1,455,685Supplemental
      disclosure of cash flow informationCash
      paid during the period:Income
      tax paid
                          
                          
                          24,650
                          
                          
                          
                          -Interest
      paid
                          
                          
                          145,036
                          
                          
                          
                          129,468





See
accompanying notes to unaudited condensed consolidated financial
statements.


5


NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





(Expressed
in US Dollars)





NOTE
1 – ORGANIZATION AND DESCRIPTION OF BUSINESS





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





LIN RAY
YANG Enterprise Ltd. (“LRY”) was established in the British Virgin Islands on
November 13, 2003 as a limited liability company.  LRY was owned by
Ace Develop, Planet Technology Corporation (“Planet Tech”) and Systems &
Technology Corporation (“Systems Tech”).  On February 5, 2004, LRY
established a wholly owned subsidiary, Shanghai Shang Yang Real Estate
Consultation Company Limited (“SHSY”) in the PRC as a limited liability company.
On January 10, 2005, LRY and a PRC third party established a subsidiary, Suzhou
Gao Feng Hui Property Management Company Limited (“SZGFH”), in the PRC, with LRY
holding 80% of the equity interest in SZGFH. On May 8, 2006, LRY acquired 20% of
the equity interest in SZGFH from the third party. Following the acquisition,
LRY effectively holds 100% of the equity interest in SZGFH. On September 11,
2007 SHSY and other third parties established a subsidiary, namely, Suzhou Bin
Fen Nian Dai Administration Consultancy Company Limited (“SZBFND”) in the PRC,
with SHSY holding a 19% equity interest in SZBFND. On September 18, 2008, SHSY
established a wholly owned subsidiary, San Ya Shang Yang Real Estate
Consultation Company Limited (“SYSY”) in the PRC as a limited liability
company.





SHXJY,
SZXJY, BJXJY, SHSY, SZGFH, SZSY, SZXJYB, KSSY and SYSY commenced operations in
November 2001, June 2004, January 2004, February 2004, January 2005, November
2006, November 2007, May 2008 and September 2008 respectively.  Each
of SHXJY, SZXJY, BJXJY, SHSY, SZGFH, SZSY, SZXJYB and KSSY has been granted a
twenty-year operation period and SYSY has been granted a thirty-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, SZGFH and SYSY 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





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, SZGFH and SYSY.  All inter-company
transactions and balances have been eliminated.





Foreign
Currency Translation and Transactions





The
functional currency of SRRE, CY-SRRE and LRY is United States Dollars (“US$”)
and the financial records are maintained and the financial statements prepared
in US $. The functional currency of SHXJY, SZXJY, SZXJYB, SZSY, KSSY, BJXJY,
SHSY, SZGFH and SYSY 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 little fluctuation during the periods
presented. The rates as of March 31, 2009 and December 31, 2008 are US$1:
RMB6.8359 and US$1: RMB6.8346, 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.




8




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 when
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 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.





We
continue to account for income taxcontingencies using a
benefit recognition model.Beginning January 1,
2007, if we considered 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.


9




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.





Segment
information





The
Company believes that it operates in one business segment. Management views 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 $1,050,522 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.





As of
March 31, 2009, $731,433 out of the total promissory deposits was pledged to
secure a promissory note payable in note 8.




NOTE
4 - OTHER RECEIVABLES AND DEPOSITS





March
      31
                  
                  
                  December
      312009
                  
                  
                  2008Advances
      to staff
                  
                  $
                  12,494
                  
                  
                  $
                  11,389Rental
      deposits
                  
                  
                  70,086
                  
                  
                  
                  72,228Prepaid
      rental
                  
                  
                  282,492
                  
                  
                  
                  205,811Other
      receivables
                  
                  
                  44,914
                  
                  
                  
                  32,667$
                  409,986
                  
                  
                  $
                  322,095




NOTE 5 – PROPERTY, PLANT AND
EQUIPMENT – NET





March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008Furniture
      and fixtures
                  
                  $
                  162,075
                  
                  
                  $
                  146,873Computer
      and office equipment
                  
                  
                  286,830
                  
                  
                  
                  325,862Motor
      vehicles
                  
                  
                  653,570
                  
                  
                  
                  654,349Properties
                  
                  
                  2,213,237
                  
                  
                  
                  2,213,6593,315,712
                  
                  
                  
                  3,340,743Less:
      Accumulated depreciation
                  
                  
                  (734,552
                  )
                  
                  
                  (690,720
                  )$
                  2,581,160
                  
                  
                  $
                  2,650,023





All above
properties as of March 31, 2009 and as of
December 31, 2008 were pledged to
secure a loan in note 7.




10





NOTE
6 – INVESTMENT PROPERTIES





March
      31,
                  
                  
                  December
      31,2009
                  
                  
                  2008Investment
      property
                  
                  $
                  9,058,183
                  
                  
                  $
                  9,059,905Less:
      Accumulated depreciation
                  
                  
                  (1,016,063
                  )
                  
                  
                  (865,025
                  )$
                  8,042,120
                  
                  
                  $
                  8,194,880





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 7. The carrying
amount of $6,004,869 was pledged to a promissory note payable in note 8.





As of May
10, 2009, the four units of the investment properties were leased to SZBFND, a
related party of the Company, and 95% of the total area of the one remaining
floor was leased out.




NOTE
7 - BANK LOANS





Bank
loans at March 31, 2009 included two bank
loans, as listed below:





First,
the balance includes a bank loan of $5,838,942, bears interest at prime rate as
announced by the People’s Bank of China and repayable by an approximately
$1,450,346 payment on
February 1, 2010 and $4,388,596 payment on
August 2, 2010. This bank loan is secured by the properties as mentioned in Note
6 above.





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
transactions 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 $358,402 bears interest at prime rate as announced by
the People’s Bank of China, 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
8 –
PROMISSORY NOTES PAYABLE





There are
five promissory notes, as listed below:





First,
the balance includes a promissory note of $111,110 and accrued interest of
$5,002 thereon. This promissory note of $111,110 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
$11,667 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.





Fourth,
the balance includes a promissory note of $146,287. This promissory note of
$146,287 bears interest at a rate of 15% per annum. This promissory note is
unsecured and the term of repayment is not specifically defined.





Fifth,
the balance includes a promissory note of $438,860. This promissory note of
$438,943 bears interest at a rate of 18% per annum. This promissory note is
secured by the promissory deposit of $731,572 as mentioned in Note 3 above and
one floor of the investment properties as mentioned in Note 6 above and the term
of repayment is not specifically defined.


11





NOTE
9 – 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
directors





Amount due to Lin
Chin-Jung


As of
March 31, 2009, the balance includes one loan and
advances obtained from Lin Chin-Jung.





The loan includes principal of
$142,742 and accrued interest of $13,684
thereon. The principal is unsecured, bears interest at a rate of 9.6% per annum
and the term of repayment is not specifically defined.





The
advances and reimbursements of $12,609 represented the
salary payable and rental reimbursement to Lin Chin-Jung outstanding as of March 31, 2009.





Amount due to Lin
Chao-Chin


A balance
of $34,956
represented the salary payable and rental reimbursement to Lin Chao-Chin
outstanding as of March 31, 2009.





Amount due to related
party


The
amount includes a rental deposit received from SZBFND. This amount is unsecured,
interest free and repayable on demand.





NOTE
10 - OTHER PAYABLES AND ACCRUED EXPENSES





March
      31,
                
                
                December
      31,2009
                
                
                2008Accrued
      staff commission & bonus
                
                $
                404,125
                
                
                $
                556,293Rental
      deposits received
                
                
                816,417
                
                
                
                676,121Accrual
      for onerous contracts
                
                
                486,125
                
                
                
                446,456Other
      payables
                
                
                453,992
                
                
                
                680,198$
                2,160,659
                
                
                $
                2,359,068





NOTE
11 – OTHER TAX PAYABLE





Other tax
payable mainly represents the outstanding payables of business tax, urban real
estate tax and land appreciation tax in the PRC.





NOTE
12- COMMITMENTS AND CONTINGENCIES





Operating Lease
Commitments





During
the three months ended March 31, 2009 and 2008, the Company incurred lease
expenses amounting to $86,772 and $99,943, respectively. As of March 31, 2009,
the Company had commitments under operating leases, requiring annual minimum
rentals as follows:





March
      31,
                
                
                December
      31,2009
                
                
                2008Within
      one year
                
                $
                78,562
                
                
                $
                144,325Two
      to five years
                
                
                20,700
                
                
                
                42,995Operating
      lease commitments
                
                $
                99,262
                
                
                $
                187,320


12





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 March 31, 2009, 113
sub-leasing agreements have been signed, the area of these sub-leasing
agreements represented 89% of total area with these lease
commitments.





As of
March 31, 2009, the lease commitments are as follows:





March
      31,
                
                
                December
      31,2009
                
                
                2008Within
      one year
                
                $
                3,239,015
                
                
                $
                3,225,101Two
      to five years
                
                
                7,794,692
                
                
                
                7,850,226Over
      five years
                
                
                330,831
                
                
                
                346,550Operating
      lease commitments arising from the promotional package
                
                $
                11,364,538
                
                
                $
                11,421,877





An
accrual for onerous contracts was recognized which is equal to the difference
between the present value of the sublease income and the present value of the
associated lease expense at the appropriate discount rate. The accrual for
onerous contracts was $534,889 as of March 31, 2009 and $446,456 as of December
31, 2008.





According
to the leasing agreements, the Company has an option to terminate any agreement
by paying a predetermined compensation. As of March 31, 2009, the compensation
to terminate all leasing agreements is $2,908,473. According to the sub-leasing
agreements that have been signed through March 31, 2009, the rental income from
these sub-leasing agreements will be $ 2,026,239 within one year and $ 1,001,129
within two to five years. However, no assurance can be given that we can collect
all of the rental income.





NOTE
13 –DEPOSITS RECEIVED FROM UNDERWRTING SALES





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





NOTE
14 – 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
15 – ACCUMULATED OTHER COMPREHENSIVE INCOME





As of
March 31, 2009, the only component of accumulated other comprehensive income was
translation reserve.


13





NOTE
16 – CONCENTRATION OF CUSTOMERS





During
the three months ended March 31, 2009 and 2008, the following customer accounted
for more than 10% of total net revenue:





Percentage
      of Net Sales
                    Three
      Months Ended
                    March
      31,
                  
                  
                  Percentage
      of
                    Accounts
      Receivable
                    as
      at March 31,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Customer
      A
                  
                  
                  16
                  
                  
                  
                  *
                  
                  
                  
                  *
                  
                  
                  
                  *Customer
      B
                  
                  
                  15
                  
                  
                  
                  *
                  
                  
                  
                  *
                  
                  
                  
                  *Customer
      C
                  
                  
                  *
                  
                  
                  
                  15
                  
                  
                  
                  *
                  
                  
                  
                  *Customer
      D
                  
                  
                  *
                  
                  
                  
                  11
                  
                  
                  
                  *
                  
                  
                  
                  *Customer
      E
                  
                  
                  *
                  
                  
                  
                  *
                  
                  
                  
                  *
                  
                  
                  
                  21Customer
      F
                  
                  
                  *
                  
                  
                  
                  *
                  
                  
                  
                  *
                  
                  
                  
                  19





* less
than 10%


14





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





CAUTIONARY
STATEMENT





The
following Management’s Discussion and Analysis (“MD&A”) is intended to help
the reader understand Sunrise Real Estate Group, Inc. (“SRRE”). The MD&A is
provided as a supplement to, and should be read in conjunction with, our
financial statements and the accompanying notes. The information contained in
this quarterly report on Form 10-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-K for the year
ended December 31, 2008, 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-K for the year ended
December 31, 2008.





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.


15





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”), Kunshan Shang Yang Real Estate Brokerage Company Limited
(“KSSY”) and San Ya Shang Yang Real Estate Consultation Company Limited (“SYSY”)
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, Beijing, Kunshan and Hainan, and
branches in NanChang, YangZhou, NanJing and ChongQing.





During
the years 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 May 10, 2009, 115 sub-leasing
agreements have been signed, the area of these sub-leasing agreements
represented 91% of total area with these lease commitments.





RECENTLY
ISSUED ACCOUNTING STANDARDS





In
October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair
Value of a Financial Asset When the Market for That Asset is Not Active.” This
FSP clarifies the application of SFAS No. 157 in a market for that is not active
and provides an example to illustrate key considerations in determining the fair
value of a financial asset when the market for that financial asset is not
active. This FSP was effective for the Company upon issuance, including prior
periods for which financial statements have not been issued; and, therefore was
effective for the Company’s financial statements as of and for the three and
nine month periods ended September 30, 2008. There was no impact of adoption of
FAS 157 as the Company has no financial assets or liabilities which were not
classified as level I.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.” SFAS No. 162 is intended to improve financial reporting
by identifying a consistent framework, or hierarchy, for selecting accounting
principles to be used in preparing financial statements that are presented in
conformity with U.S. generally accepted accounting principles (“GAAP”) for
nongovernmental entities. SFAS No. 162 is effective 60 days following the SEC's
approval of the Public Company Accounting Oversight Board Auditing amendments to
AU Section 411, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles. Management does not anticipate that the
provisions of SFAS No. 162 will have an impact on the Company’s consolidated
results of operations or consolidated financial position.





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.


16





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.





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 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 views 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.


17





RESULTS
OF OPERATIONS





We
provide the following discussion and analyses of our changes in financial
condition and results of operations for the first quarter, 2009, with
comparisons to the first quarter, 2008.





Revenue





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





Three
      months ended March 31,2009
                    
                    
                    % to total
                    
                    
                    2008
                    
                    
                    % to total
                    
                    
                    % changeAgency
      sales
                    
                    $
                    727,714
                    
                    
                    
                    49
                    %
                    
                    $
                    746,777
                    
                    
                    
                    57
                    %
                    
                    
                    (3
                    )%Property
      management
                    
                    $
                    767,814
                    
                    
                    
                    51
                    %
                    
                    $
                    572,768
                    
                    
                    
                    43
                    %
                    
                    
                    34
                    %Net
      revenue
                    
                    $
                    1,495,528
                    
                    
                    
                    100
                    %
                    
                    $
                    1,319,545
                    
                    
                    
                    100
                    %
                    
                    
                    13
                    %





The net
revenue in the first quarter, 2009 was $1,495,528, which was an increase of 13%
from $1,319,545 in the first quarter, 2008. In the first quarter, 2009, agency
sales represented 49% of net revenue and property management represented
51%.  In the first quarter, 2008, agency sales represented 57% of net
revenue and property management represented 43%.  The increase in net
revenue in the first quarter, 2009 was mainly due to the increase in our
property management.





Agency
sales





Agency
sales represented 49% of our net revenue in the first quarter, 2009 and net
revenue of agency sales in the first quarter, 2009 decreased 3% compared with
same period in 2008. The primary reason was that:


1)
            In
      first quarter, 2009, there were 9 agency sales projects contributing net
      revenue to the Company, compared to 18 projects in the same period in
      2008.


2)
            There
      were several projects in the initial stage, which didn’t contribute net
      revenue to the Company in the first quarter,
  2009.





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 2009. However, there can be no assurance that we will
be able to do so.





Property
Management





During
the years 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 the Sovereign Building are for 62% of the
floor space that was sold to third party buyers. The leasing period started in
the second quarter of 2006, and in the leasing period SZGFH has the right to
sublease the leased properties to earn rental income. As of March 31, 2009, 113
sub-leasing agreements were signed. The area of these sub-leasing agreements
represents 89% of total area under these lease commitments. We expect that the
income from the sub-leasing business will be on a stable growth trend in 2009
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.





Cost of
Revenue





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





Three
      months ended March 31,2009
                    
                    
                    % to total
                    
                    
                    2008
                    
                    
                    % to total
                    
                    
                    % changeAgency
      sales
                    
                    $
                    245,310
                    
                    
                    
                    20
                    %
                    
                    $
                    534,322
                    
                    
                    
                    37
                    %
                    
                    
                    (54
                    )%Property
      management
                    
                    $
                    984,961
                    
                    
                    
                    80
                    %
                    
                    $
                    894,430
                    
                    
                    
                    63
                    %
                    
                    
                    10
                    %Cost
      of revenue
                    
                    $
                    1,230,271
                    
                    
                    
                    100
                    %
                    
                    $
                    1,428,752
                    
                    
                    
                    100
                    %
                    
                    
                    (14
                    )%


18





The cost
of revenue in the first quarter, 2009 was $1,230,271, a decrease of 14% from
$1,428,752 in the same period in 2008. In the first quarter, 2009, agency sales
represented 20% of cost of revenue and property management represented 80%. In
the first quarter, 2008, agency sales represented 37% of cost of revenue and
property management represented 63%. The decrease in cost of revenue in first
quarter, 2009 was mainly due to the decrease in our agency sales.





Agency
sales





The cost
of revenue for agency sales in the first quarter, 2009 was $245,310, a decrease
of 54% from $534,322 in the same period in 2008. This decrease was mainly due to
the decrease in our staff costs, commissions and consulting fees in the first
quarter, 2009, compared to the same period in 2008, the decrease of such
expenses was $76,951, $36,354 and $155,579 respectively.





Property
management





During
the years of 2005 and 2006, SZGFH entered into leasing agreements with certain
buyers of the Sovereign Building underwriting project to lease the properties
for them. In accordance with the leasing agreements, the owners of the
properties can enjoy an annual rental return at 8.5% and 8.8% per annum for a
period of 5 years and 8 years, respectively.





The
leasing period started in the second quarter, 2006, and we recognized the rental
coverage that we pay under these leasing agreements as our cost. As certain
properties under this promotion package were not leased out in the first quarter
of 2009, the Company recorded a negative gross profit margin for this period. We
expect that these properties will be leased out in 2009, the gross margin will
be improved. However, no assurance can be given that this will be the
case.





An
accrual for onerous contracts was recognized which is equal to the difference
between the present value of the sublease income and the present value of the
associated lease expense at appropriate discount rate. The accrual for onerous
contacts was$534,889 as of March 31, 2009 and $446,456 as
of December 31, 2008.





Operating
Expenses





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





Three
      months ended March 31,2009
                    
                    
                    % to total
                    
                    
                    2008
                    
                    
                    % to total
                    
                    
                    % changeAgency
      sales
                    
                    $
                    146,720
                    
                    
                    
                    77
                    %
                    
                    $
                    278,451
                    
                    
                    
                    90
                    %
                    
                    
                    (47
                    )%Property
      management
                    
                    $
                    44,920
                    
                    
                    
                    23
                    %
                    
                    $
                    32,175
                    
                    
                    
                    10
                    %
                    
                    
                    40
                    %Operating
      expenses
                    
                    $
                    191,640
                    
                    
                    
                    100
                    %
                    
                    $
                    310,626
                    
                    
                    
                    100
                    %
                    
                    
                    (38
                    )%





The
operating expenses in the first quarter, 2009 were $191,640, a decrease of 38%
from $310,626 in the same period in 2008. In the first quarter, 2009, agency
sales represented 77% of operating expenses and property management represented
23%.  In the first quarter, 2008, agency sales represented 90% of
operating expenses and property management represented 10%.  The
decrease in operating expenses in the first quarter of 2009 was mainly due to
the decrease in our agency sales.





Agency
sales





The
operating expenses for agency sales in the first quarter, 2009 were $146,720
which decreased 47% from $278,451 in the same period in 2008.  This
decrease was mainly due to the decrease in staff costs and office expenses in
the first quarter, 2009, compared to the same period in 2008, the decrease of
such expenses was $88,987 and $24,308 respectively.





Property
management





The
operating expenses for property management in the first quarter, 2009 were
$44,920, an increase of 40% from $32,175 in the same period in
2008.  This increase was mainly due to the increase in staff costs and
commissions in the first quarter, 2009, compared to the same period in 2008, the
increase of such expenses was $5,981 and $6,825 respectively.


19





General and Administrative
Expenses





The
general and administrative expenses in the first quarter, 2009 were $481,555, a
decrease of 37% from $767,394  in the same period in
2008.  This decrease was mainly due to the decrease in staff costs and
business travel expenses in the first quarter, 2009, compared to the same period
in 2008, the decrease of such expenses was $151,325 and $55,094
respectively.





Interest
Expenses





Interest
expenses in the first quarter, 2009 were $144,374, increasing 1% from $143,640
in the same period in 2008. The interest expenses were mainly incurred for bank
loans and promissory notes payable.





LIQUIDITY
AND CAPITAL RESOURCES





In the first quarter
of 2009, our principal sources of cash were revenues from our agency sales and
property management business. 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 and the maintenance of regional offices,
and the repayments of our bank loans and promissory notes.





We ended
the period with a cash position of $620,731 (including cash and cash equivalents
of $595,413 and restricted cash of $25,318).





The
Company’s operating activities used cash in the amount of $85,094, which was
primarily attributable to the Company’s net loss in the amount of
$482,881.  The net loss in the first quarter of 2009 represented a
reduction in net losses of  $831,150, compared to the Company’s net
loss for the first quarter of 2008 of $1,314,031.,





The
Company’s investing activities provided cash resources of $2,413, which was
primarily attributable to the use of restricted cash.





The
Company’s financing activities provided cash resources of $97,993, which was
primarily attributable to the advance from director and proceeds from promissory
notes.





The
potential cash needs for 2009 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 providing
property agency services and management services, the proceeds from investment
properties and the impending sale of shares of Common Stock to Whole World will
be sufficient to meet our anticipated needs for working capital expenditures,
business expansion and the potential cash needs during 2009.





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





The
Company incurred losses of  $482,881 for the first quarter of 2009 and
had a net working capital deficiency of $9,281,799 as of March 31, 2009. 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.





On March
10, 2009, we entered into a Share Purchase Agreement with Whole World Holding
Corporation (“Whole World”) to issue 57 million shares to Whole World for US $20
million. This agreement, subject to standard closing terms and conditions, was
scheduled to close on or before May 17, 2009.   On May 17, 2009,
the Company and Whole World agreed to extend the closing date until on or before
August 17, 2009 and the terms and conditions of the Share Purchase Agreement
otherwise remained unchanged. Management believes that the successful completion
of the Share Purchase Agreement will enable the Company to have 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.


20





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 Chief
Executive Officer and our Chief Financial Officer have evaluated the
effectiveness of our disclosure controls and procedures as of March 31, 2009.
Based on this evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that the Company's disclosure controls and procedures
were effective at March 31, 2009, to ensure that information required to be
disclosed in reports that we file or submit under the Securities Exchange Act of
1934 is recorded, processed, summarized, and reported within the time periods
specified in Securities and Exchange Commission rules and forms. There were no
changes in our internal controls over financial reporting during the quarter
ended March 31, 2009, that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial
reporting.


21





PART
II - OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





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





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





On March
10, 2009, we entered into
a Share Purchase Agreement with Whole World Holding Corporation (“Whole World”)
to issue 57 million shares to Whole World for US $20 million. This agreement,
subject to standard closing terms and conditions, is scheduled to close on or
before August17,
2009.In
connection with the issue of its shares to Whole World or their designees,
Sunrise will rely on Regulation S as its exemption from the registration
requirements of the Securities Act of 1933. All of such persons are non-US
persons and agree that the shares may not be transferred or sold except in
accordance with the provisions of Regulation S and/or compliance with the
registration requirements of the Securities Act of 1933 or in reliance upon an
applicable exemption therefrom. The certificates representing the Sunrise shares
shall bear a legend reflecting such transfer restrictions and stop transfer
orders will be placed with the transfer agent against these
shares.





ITEM
3.  DEFAULTS UPON SENIOR SECURITIES





None.





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





None.





ITEM
5.  OTHER INFORMATION





None.




ITEM
6.  EXHIBITS




Exhibit
              DescriptionNumber31.1
              Section
      302 Certification by the Corporation's Chief Executive
      Officer.31.2
              Section
      302 Certification by the Corporation's Chief Financial
      Officer.32.1
              Section
      1350 Certification by the Corporation's Chief Executive Officer and
      Corporation's Chief Financial
Officer.





SIGNATURES




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




SUNRISE
REAL ESTATE GROUP, INC.





Date:
      May 19, 2009
                By: /s/ Lin, Chi-JungLin,
      Chi-Jung, Chief Executive OfficerDate:
      May 19, 2009
                By: /s/ Wang Wen-YanWang
      Wen-Yan, Chief Financial
Officer


22