**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 September 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 companyx





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: November 10, 2008 - 23,691,925 shares
      of Common Stock





**FORM
      10-Q**




**For
      the Quarter Ended September 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
            15Item
                3.Quantitative
                and Qualitative Disclosures About Market Risk
            21Item
                4.Controls
                and Procedures
            21PART
                II. OTHER INFORMATION
            21Item
                1.Legal
                Proceedings
            21Item
                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. F** **INANCIAL
      STATEMENTS**


**Sunrise
      Real Estate Group, Inc.**


**Unaudited
      Condensed** **Consolidated
      Balance Sheets**


**(Expressed
      in US Dollars)**


**September 30,**
            
            **December 31,****2008**
            
            **2007********(Restated)**ASSETSCurrent
                assetsCash
                and cash equivalents
            
            $
            733,600
            
            $
            2,281,516Restricted
                cash (Note 9)
            
            
            107,636
            
            
            2,441,579Accounts
                receivable
            
            
            870,868
            
            
            842,868Promissory
                deposits (Note 3)
            
            
            1,129,314
            
            
            273,800Amounts
                due from venturers
            
            
            -
            
            
            79,662Amount
                due from related party (Note 11)
            
            
            327,108
            
            
            312,132Other
                receivables and deposits (Note 4)
            
            
            398,479
            
            
            602,373Total
                  current assets
            
            
            3,567,005
            
            
            6,833,930Property,
                plant and equipment - net (Note 5)
            
            
            2,733,376
            
            
            2,519,585Equity
                investment (Note 6)
            
            
            83,599
            
            
            78,033Investment
                properties (Note 7)
            
            
            8,366,063
            
            
            7,800,228Deferred
                tax asset (Note 8)
            
            
            1,376,148
            
            
            1,284,532Goodwill
            
            
            13,307
            
            
            13,307Total
                assets
            
            $
            16,139,498
            
            $
            18,529,615LIABILITIES
                AND SHAREHOLDERS’ EQUITYCurrent
                liabilitiesBank
                loans (Note 9)
            
            $
            205,330
            
            $
            191,660Promissory
                notes payable (Note 10)
            
            
            959,784
            
            
            976,435Accounts
                payable
            
            
            335,929
            
            
            230,654Amount
                due to director (Note 11)
            
            
            72,987
            
            
            171,458Amount
                due to related party (Note 11)
            
            
            134,043
            
            
            159,561Other
                payables and accrued expenses (Note 12)
            
            
            2,121,097
            
            
            2,452,833Other
                tax payable (Note 13)
            
            
            608,058
            
            
            546,873Income
                tax payable
            
            
            1,060,565
            
            
            1,238,912Total
                current liabilities
            
            
            5,497,793
            
            
            5,968,386Commitments
                and contingencies (Note 14)Long-term
                bank loans (Note 9)
            
            
            6,110,676
            
            
            5,847,606Long-term
                promissory notes payable (Note 10)
            
            
            22,222
            
            
            111,112Deposits
                received from underwriting sales (Note 15)
            
            
            8,295,509
            
            
            7,743,240Minority
                interest
            
            
            439,907
            
            
            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 September
                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
            
            
            (9,496,992
            )
            
            (6,884,072
            )Accumulated
                other comprehensive income (Note 17)
            
            
            683,712
            
            
            724,998Total
                shareholders’ equity
            
            
            (4,226,609
            )
            
            (1,572,403
            )Total
                liabilities and shareholders’ equity
            
            $
            16,139,498
            
            $
            18,529,615


See
      accompanying notes to unaudited condensed consolidated financial
      statements.


3


**Sunrise
      Real Estate Group, Inc.**





**Unaudited
      Condensed** **Consolidated
      Statements of Operations**





(Expressed
      in US Dollars)


Three Months Ended
              September 30,
            
            Nine Months Ended
              September 30,2008
            
            2007
            
            2008
            
            2007**(Restated)**
            
            
            
            **(Restated)**Net
                Revenues
            
            $
            2,475,921
            
            $
            1,817,590
            
            $
            6,437,147
            
            $
            4,472,792Cost
                of Revenues
            
            
            (1,697,306
            )
            
            (1,506,577
            )
            
            (4,797,779
            )
            
            (4,286,991
            )Gross
                Profit
            
            
            778,651
            
            
            311,013
            
            
            1,639,368
            
            
            185,801Operating
                Expenses
            
            
            (361,464
            )
            
            (311,956
            )
            
            (1,000,579
            )
            
            (806,877
            )General
                and Administrative Expenses
            
            
            (802,226
            )
            
            (1,155,748
            )
            
            (2,793,690
            )
            
            (2,987,037
            )Operating
                Loss
            
            
            (385,075
            )
            
            (1,156,691
            )
            
            (2,154,901
            )
            
            (3,608,113
            )Interest
                Income
            
            
            2,191
            
            
            5,505
            
            
            11,521
            
            
            13,076Other
                Income/(Expenses), Net
            
            
            11,183
            
            
            (224,452
            )
            
            16,321
            
            
            (203,662
            )Interest
                Expenses
            
            
            (161,652
            )
            
            (267,551
            )
            
            (460,128
            )
            
            (692,898
            )Loss
                Before Income Tax and Minority Interest
            
            
            (533,353
            )
            
            (1,643,189
            )
            
            (2,587,187
            )
            
            (4,491,597
            )Income
                Tax
            
            
            (18,845
            )
            
            (23,835
            )
            
            (47,729
            )
            
            (52,808
            )Loss
                Before Minority Interest
            
            
            (552,198
            )
            
            (1,667,024
            )
            
            (2,634,916
            )
            
            (4,544,405
            )Minority
                Interest
            
            
            19,649
            
            
            3,613
            
            
            21,996
            
            
            (31,840
            )Net
                Loss
            
            $
            (532,549
            )
            $
            (1,663,411
            )
            $
            (2,612,920
            )
            $
            (4,576,245
            )Loss
                Per Share – Basic and Fully Diluted
            
            $
            (0.02
            )
            $
            (0.07
            )
            $
            (0.11
            )
            $
            (0.19
            )Weighted
                average common shares outstanding
              – Basic
                and Fully Diluted1
            
            
            23,691,925
            
            
            23,691,925
            
            
            23,691,925
            
            
            23,691,925





See
      accompanying notes to unaudited condensed consolidated financial statements.




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


4


**Sunrise
      Real Estate Group, Inc.**





**Unaudited
      Condensed Consolidated Statements of Cash Flows**





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


(Expressed
      in US Dollars)


**Nine Months Ended September 30,****2008**
            
            **2007****(Restated)****Cash
                flows from operating activities****Net
                Loss**
            
            $
            (2,612,920
            )
            $
            (4,576,245
            )Adjustments
                to reconcile net loss to net
                cash used in operating activitiesDepreciation
                of property, plant and equipment
            
            
            586,666
            
            
            498,547(Gain)/loss
                on disposal of property, plant and equipment
            
            
            (2,360
            )
            
            6,749Loss
                on disposal of equity interest in subsidiary
            
            
            -
            
            
            14,750Bad
                debts
            
            
            -
            
            
            349,195Minority
                interest
            
            
            21,996
            
            
            31,840Change
                in:Accounts
                receivable
            
            
            31,321
            
            
            4,421,404Promissory
                deposits
            
            
            (815,299
            )
            
            (652,078
            )Other
                receivables and deposits
            
            
            240,748
            
            
            (840,816
            )Accounts
                payable
            
            
            86,626
            
            
            (332,909
            )Amount
                with related party
            
            
            (28,879
            )
            
            -Amounts
                with venturers
            
            
            83,232
            
            
            582,544Other
                payables and accrued expenses
            
            
            (458,069
            )
            
            111,452Interest
                payable on promissory notes
            
            
            (381,642
            )
            
            301,911Interest
                payable on amount due to director
            
            
            5,909
            
            
            (21,604
            )Other
                tax payable
            
            
            21,632
            
            
            (216,226
            )Income
                tax payable
            
            
            (260,110
            )
            
            (1,158,493
            )**Net
                cash used in by operating activities**
            
            
            (3,481,149
            )
            
            (1,479,979
            )**Cash
                flows from investing activities**Acquisition
                of plant and equipment
            
            
            (370,063
            )
            
            (79,733
            )Deposits
                paid for acquisition of properties
            
            
            -
            
            
            (1,981,956
            )Investment
                properties renovation
            
            
            (401,882
            )
            
            -Proceeds
                from disposal of property, plant and equipment
            
            
            136,009
            
            
            6,199,246Restricted
                cash
            
            
            2,446,021
            
            
            -**Net
                cash****provided
                by investing activities**
            
            
            1,810,085
            
            
            4,137,557**Cash
                flows from financing activities**Bank
                loan obtained
            
            
            -
            
            
            8,477,008Bank
                loans repayment
            
            
            (150,186
            )
            
            (4,685,624
            )Repayment
                of promissory note
            
            
            (163,891
            )
            
            (250,000
            )Proceeds
                from promissory note
            
            
            429,105
            
            
            2,565,903Repayment
                to director
            
            
            (104,380
            )
            
            (109,026
            )Advances
                from director
            
            
            -
            
            
            250,000**Net
                cash provided by financing activities**
            
            
            10,648
            
            
            6,248,261**Effect
                of exchange rate changes on cash and cash
                equivalents**
            
            
            112,500
            
            
            296,678**Net
                (decrease)/increase in cash and cash equivalents**
            
            
            (1,547,916
            )
            
            9,202,517**Cash
                and cash equivalents at beginning of****period**
            
            
            2,281,516
            
            
            945,727**Cash
                and cash equivalents at end of period**
            
            $
            733,600
            
            $
            10,148,244**Supplemental
                disclosure of cash flow****information**Cash
                paid during the period:Income
                tax paid
            
            
            307,838
            
            
            1,181,313Interest
                paid
            
            
            835,861
            
            
            412,591


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.





**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
      $2,612,920 for the first three quarters of 2008 and had a net working capital
      deficiency of $1,930,788 as of September 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.





**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 September 30, 2008 and December 31, 2007 are US$1:
      RMB6.8183 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.


8


**Investment
      property**





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





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





**Goodwill**





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





**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.


9


**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 tax **** contingencies
      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.





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 $1,129,314 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
      September 30, 2008, $733,321 out of the total promissory deposits were pledged
      to secure a promissory note payable in note 10.





**NOTE
      4 - OTHER RECEIVABLES AND DEPOSITS**





September 30
            
            December 31,2008
            
            2007Advances
                to staff
            
            $
            23,201
            
            $
            20,486Rental
                deposits
            
            
            87,247
            
            
            101,370Prepaid
                rental
            
            
            263,822
            
            
            406,833Other
                receivables
            
            
            24,209
            
            
            73,684$
            398,479
            
            $
            602,373


10


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





September,
            
            December 31,2008
            
            2007Furniture
                and fixtures
            
            $
            147,224
            
            $
            133,970Computer
                and office equipment
            
            
            325,896
            
            
            275,988Motor
                vehicles
            
            
            667,541
            
            
            618,024Properties
            
            
            2,218,950
            
            
            2,071,2253,359,611
            
            
            3,099,207Less:
                Accumulated depreciation
            
            
            (626,235
            )
            
            (579,622
            )$
            2,733,376
            
            $
            2,519,585





All
      above
      properties as of September 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**





September 30,
            
            December 31,2008
            
            2007Investment
                property
            
            $
            9,081,565
            
            $
            8,092,319Less:
                Accumulated depreciation
            
            
            (715,502
            )
            
            (292,091
            )$
            8,366,063
            
            $
            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 . The
      carrying amount of $6,121,114 was pledged to a promissory note payable in note
      10 .





As
      of
      November 10, 2008, the four units of the investment properties were leased
      to
      SZBFND, a related party of the Company, and 64% 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 September 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 at September 30, 2008 included two bank loans, as listed
      below:





First,
      the balance includes a bank loan of $5,854,014. 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
            
            $
            1,466,641August
                2, 2010
            
            $
            4,387,373


11


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 $461,992 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
      four promissory notes, as listed below:





First,
      the balance includes a promissory note of $155,554 and accrued interest of
      $1,668 thereon. This promissory note of $155,554 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 $9,792
      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 $439,992. This promissory note of
      $439,992 bears interest at a rate of 18% per annum. This promissory note is
      secured by the promissory deposit of $733,321 as mentioned in Note 3 above
      and
      one floor of the investment properties as mentioned in Note 7 above and will
      be
      repayable before February 11, 2009.





**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 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 director


The
      amount due to one of the directors bears interest at a rate of 9.6% per annum.
      As of September 30, 2008, the balance includes principal of $62,742
      and accrued interest of $10,245 thereon .
      The
      principal is unsecured and the
      term
      of repayment is not specifically defined .





Amount
      due to related party


The
      amount includes a rental deposit received from SZBFND. Rental income of $458,456
      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**





September
                30,
            
            December
                31,2008
            
            2007Accrued
                staff commission & bonus
            
            $
            484,902
            
            $
            1,013,650Rental
                deposits received
            
            
            665,930
            
            
            519,352Accrual
                for onerous contracts
            
            
            487,380
            
            
            535,811Other
                payables
            
            
            482,885
            
            
            384,020$
            2,121,097
            
            $
            2,452,833


12





**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 September 30, 2008 was $369,901.
 
 **NOTE
        14- COMMITMENTS AND CONTINGENCIES**
 
 Operating
        Lease Commitments
 
 During
        the nine months ended September 30, 2008 and 2007, the Company incurred lease
        expenses amounting to $318,413 and $178,693, respectively. As of September
        30,
        2008, the Company had commitments under operating leases, requiring annual
        minimum rentals as follows:
 
 September
                  30,
              
              December
                  31,2008
              
              2007Within
                  one year
              
              $
              173,555
              
              $
              132,628Two
                  to five years
              
              
              74,029
              
              
              133,847Operating
                  lease commitments
              
              $
              247,584
              
              $
              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 September
        30 ,
        2008,
        121 sub-leasing agreements have been signed, the area of these sub-leasing
        agreements represented 92% of total area with these lease
        commitments.
 
 As
        of
        September 30, 2008, the lease commitments are as follows:
 
 September
                  30,
              
              December
                  31,2008
              
              2007Within
                  one year
              
              $
              3,264,552
              
              $
              3,047,216Two
                  to five years
              
              
              6,755,192
              
              
              8,412,157Over
                  five years
              
              
              2,445,160
              
              
              2,181,446Operating
                  lease commitments arising from the promotional package
              
              $
              12,464,904
              
              $
              13,640,819
 
 An
        accrual for onerous contracts was recognised which is equal to the difference
        between the present value of the sublease income and the present value of
        the
        associated lease expense at appropriate discount rate. The accrual for onerous
        contacts was $535,811 as of December 31, 2007 and $487,380 as of September
        30,
        2008.
 
 According
        to the leasing agreements, the Company has an option to terminate any agreement
        by paying a predetermined compensation. As of September 30, 2008, the
        compensation to terminate all leasing agreements is $3,018,375. According
        to the
        sub-leasing agreements that have been signed through September 30, 2008,
        the
        rental income from these sub-leasing agreements will be $2,250,166 within
        one
        year and $1,492,396 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.
  13
  **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
        September 30, 2008, the only component of accumulated other comprehensive
        income
        was translation reserve.
 
 **NOTE
        18 – CONCENTRATION OF CUSTOMERS**
 
 During
        the three months and nine months ended September 30, 2008 and 2007, the
        following customers accounted for more than 10% of total net
        revenue:
 
 Percentage of
                Net Sales
                Three Months
                Ended September 30,
              
              Percentage of
                Net Sales
                Nine Months
                Ended September 30,
              
              Percentage of
                Accounts Receivable
                as of September 30,2008
              
              2007
              
              2008
              
              2007
              
              2008
              
              2007Customer
                  A
              
              
              23
              %
              
              *
              
              
              15
              %
              
              *
              
              
              23
              %
              
              *Customer
                  B
              
              
              *
              
              
              *
              
              
              10
              %
              
              *
              
              
              *
              
              
              *Customer
                  C
              
              
              *
              
              
              10
              %
              
              *
              
              
              10
              %
              
              11
              %
              
              *Customer
                  D
              
              
              *
              
              
              13
              %
              
              *
              
              
              *
              
              
              *
              
              
              *Customer
                  E
              
              
              *
              
              
              10
              %
              
              *
              
              
              *
              
              
              *
              
              
              39
              %
 
 *
        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-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.
  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 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 November 10, 2008, 116 sub-leasing agreements have
        been
        signed, the area of these sub-leasing agreements represented 90% 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.
 
 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.
  16
  **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 discussion and analysis of our changes in financial condition
        and
        results of operations for the three and nine months ended September 30, 2008,
        with comparisons to the historical three and nine months ended September
        30,
        2007.
 
 **Revenue**
 
 The
        following table shows the net revenue detail by line of business:
 
 Three Months Ended September 30,
              
              Nine Months Ended September 30,2008
              
              % to
                total
              
              2007
              
              % to
                total
              
              %
                change
              
              2008
              
              % to
                total
              
              2007
              
              % to
                total
              
              %
                changeAgency
                  sales
              
              
              1,561,122
              
              
              63
              
              
              1,432,271
              
              
              79
              
              
              9
              
              
              4,069,064
              
              
              63
              
              
              3,432,808
              
              
              77
              
              
              19Underwriting
                  sales
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              216,085
              
              
              5
              
              
              (100
              )Property
                  Management
              
              
              914,799
              
              
              37
              
              
              385,319
              
              
              21
              
              
              137
              
              
              2,368,083
              
              
              37
              
              
              823,899
              
              
              18
              
              
              187Net
                  revenue
              
              
              2,475,921
              
              
              100
              
              
              1,817,590
              
              
              100
              
              
              36
              
              
              6,437,147
              
              
              100
              
              
              4,472,792
              
              
              100
              
              
              44
 
 The
        net
        revenue of the third quarter, 2008 was $2,475,921, which increased 36% from
        $1,817,590 of the third quarter, 2007. The total net revenue of the first
        three
        quarters of 2008 was $6,437,147, which increased 44% from $4,472,792 of the
        first three quarters of 2007. In the third quarter of 2008, agency sales
        represented 63% of the total net revenue and property management represented
        37%. In the first three quarters of 2008, agency sales represented 63% of
        the
        total net revenue and property management represented 37%. The increase in
        net
        revenue in the third quarter and first three quarters, 2008 was primarily
        due to
        the increase in property management.
 
 Agency
        sales
 
 In
        the
        third quarter and first three quarters of 2008, 63% of our net revenue was
        due
        to agency sales. As compared with the same period in 2007, agency sales’ net
        revenue in the third quarter and first three quarters of 2008 increased 9%
        and
        19% respectively. The primary reason for the increase in revenue was the
        two
        projects that contributed a net revenue of $1.56 million to our agency sales
        in
        the first three quarters of 2008, and there were no such projects in the
        same
        period in 2007.
 
 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 September
        30 ,
        2008,
        121 sub-leasing agreements have been signed, the area of these sub-leasing
        agreements represented 92% 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.
  18
  **Cost
        of Revenue**
 
 The
        following table shows the cost of revenue detail by line of
        business:
 
 Three Months Ended September 30,
              
              Nine Months Ended September 30,2008
              
              % to
                total
              
              2007
              
              % to
                total
              
              %
                change
              
              2008
              
              % to
                total
              
              2007
              
              % to
                total
              
              %
                changeAgency
                  sales
              
              
              828,553
              
              
              49
              
              
              685,932
              
              
              46
              
              
              21
              
              
              2,366,146
              
              
              49
              
              
              1,709,911
              
              
              40
              
              
              38Underwriting
                  sales
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              75,906
              
              
              2
              
              
              (100
              )Property
                  Management
              
              
              868,753
              
              
              51
              
              
              820,645
              
              
              54
              
              
              16
              
              
              2,431,633
              
              
              51
              
              
              2,501,094
              
              
              58
              
              
              3Cost
                  of revenue
              
              
              1,697,306
              
              
              100
              
              
              1,506,577
              
              
              100
              
              
              11
              
              
              4,797,779
              
              
              100
              
              
              4,286,991
              
              
              100
              
              
              12
 
 The
        cost
        of revenue of the third quarter of 2008 was $1,697,306, which increased 11%
        from
        $1,506,577 of the third quarter of 2007. The total cost of revenue of the
        first
        three quarters of 2008 was $4,797,779, which increased 12% from $4,286,991
        of
        the first three quarters of 2007. In the third quarter of 2008, agency sales
        represented 49% of the total cost of revenue and property management represented
        51%. In the first three quarters of 2008, agency sales represented 49% of
        the
        total cost of revenue and property management represented 51%. The increase
        in
        cost of revenue in the third quarter and first three quarters of 2008 was
        mainly
        due to the increase in agency sales.
 
 Agency
        sales
 
 As
        compared with same period in 2007, cost of revenue of agency sales in the
        third
        quarter and first three quarters of 2008 increased 21% and 38% respectively.
        The
        primary reason for the change was that as compared to the same period in
        2007,
        the staff cost and designing fees increased $231,139 and $365,099 respectively
        in the first three quarters of 2008.
 
 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.
  19
  **Operating
        Expenses**
 
 The
        following table shows operating expenses detail by line of
        business:
 
 Three Months Ended September 30,
              
              Nine Months Ended September 30,2008
              
              % to
                total
              
              2007
              
              % to
                total
              
              %
                change
              
              2008
              
              % to
                total
              
              2007
              
              % to
                total
              
              %
                changeAgency
                  sales
              
              
              183,318
              
              
              51
              
              
              228,787
              
              
              73
              
              
              (20
              )
              
              759,892
              
              
              76
              
              
              598,299
              
              
              74
              
              
              27Underwriting
                  sales
              
              
              -
              
              
              -
              
              
              25,451
              
              
              8
              
              
              (100
              )
              
              -
              
              
              -
              
              
              80,208
              
              
              10
              
              
              (100
              )Property
                  Management
              
              
              178,146
              
              
              49
              
              
              57,718
              
              
              19
              
              
              209
              
              
              240,687
              
              
              24
              
              
              128,370
              
              
              16
              
              
              87Operating
                  expenses
              
              
              361,464
              
              
              100
              
              
              311,956
              
              
              100
              
              
              16
              
              
              1,000,579
              
              
              100
              
              
              806,877
              
              
              100
              
              
              24
 
 The
        operating expenses of the third quarter of 2008 were $361,464, which increased
        16% from $311,956 of the third quarter of 2007. The total operating expenses
        of
        the first three quarters of 2008 were $1,000,579, which increased 24% from
        $806,877 of the first three quarters of 2007. In the third quarter of 2008,
        agency sales represented 51% of the total operating expenses and property
        management represented 49%. In the first three quarters of 2008, agency sales
        represented 76% of the total operating expenses and property management
        represented 24%. This increase was mainly due to the increase in property
        management.
 
 Agency
        sales
 
 When
        compared to 2007, the operating expenses for agency sales in the third quarter
        and first three quarters of 2008 decreased 20% and increased 27% respectively.
        The primary reason for the decrease in the third quarter of 2008 was that
        as
        compared to the same period in 2007, the staff cost, office expenses and
        transportation expenses decreased $21,208, $4,696 and $8,984 respectively
        in the
        third quarter of 2008. The primary reason for the increase in the first three
        quarters of 2008 was that as compared to the same period in 2007, the staff
        cost
        and business traveling expenses increased $83,698 and $33,169 respectively
        in
        the first three quarters of 2008.
 
 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 third
        quarter and first three quarters of 2008 increased 209% and 87% respectively.
        The main reason for the increase was the staff cost increased $84,652 in
        the
        first three quarters of 2008 with comparing to the same period in
        2007.
 
 **General
        and Administrative Expenses**
 
 When
        compared to 2007, the general and administrative expenses in the third quarter
        and first three quarters of 2008 decreased 31% and 6% respectively. The primary
        reason for the change was
 i)
              The
                  decrease in our legal fees. In the first three quarters of 2008,
                  our legal
                  fees decreased $68,715, compared to the same period in 2007. The
                  legal
                  fees are mainlyfor
                  the maintenance of the Company’s listing
                  status.
 ii)
              The
                  decrease in our business traveling expenses. In the first three
                  quarters
                  of 2008, our business traveling expenses decreased $81,004, compared
                  to
                  the same period in 2007.
 iii)
              A
                  US$349,195 allowance for other receivables was required in the
                  third
                  quarter of 2007, and there was no such expense in the first quarters
                  of
                  2008.
 
 **Interest
        Expenses**
 
 When
        compared to 2007, the interest expenses in the third quarter and first three
        quarters of 2008 decreased 40% and 34% respectively. The interest expense
        relates to bank loans and promissory notes payable.
  20
  **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 In
        the
        first three 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 $841,236 (including cash and cash equivalents
        of $733,600 and restricted cash of $107,636). The Company’s operating activities
        used cash in the amount of $3,481,149 in the first three quarters of 2008,
        which
        was primarily attributable to the Company’s net loss and payment of promissory
        deposits.
 
 The
        Company’s investing activities generated cash in the amount of $ 1,810,085 in the
        first three quarters of 2008, which was primarily attributable to the decreased
        in restricted cash balance.
 
 The
        Company’s financing activities generated cash in the amount of $10,648 in the
        first three quarters of 2008, which was primarily attributable to the obtain
        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**
 
 Not
        Applicable.
 
 **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 September 30,
        2008. 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 September 30, 2008, 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 September 30, 2008, that have materially affected, or are reasonably
        likely to materially affect, our internal controls over financial
        reporting.
 
 **PART
        II** **- OTHER INFORMATION**
 
 **ITEM
        1. LEGAL PROCEEDINGS**
 
 The
        Company is not a party to any legal proceedings of a material
        nature.
  21
  **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:
                  November 19, 2008
              By:
                  /s/ Lin, Chi-JungLin,
                  Chi-Jung, Chief Executive OfficerDate:
                  November 19, 2008
              By:
                  /s/ Wang, Wen-YanWang,
                  Wen-Yan, Chief Financial
                  Officer
  22