Sunrise Real Estate Group Inc - Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2008

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

For the transition period from __________ to __________

Commission File Number 000-32585

SUNRISE REAL ESTATE GROUP, INC.

(Exact name of registrant as specified in its charter)

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

Suite 701, No. 333, Zhaojiabang Road

Shanghai, PRC 200032

(Address of principal executive offices Zip Code)

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

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

Yes x No ¨

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

Large accelerated filer ¨ Accelerated filer ¨

Non-accelerated filer ¨ Smaller reporting company x

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

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

FORM 10-Q

For the Quarter Ended June 30, 2008

INDEX

	Page
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Consolidated Balance Sheets	3
Consolidated Statements of Operations	4
Consolidated Statements of Cash Flows	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	22
Item 4. Controls and Procedures	22

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

SIGNATURES	23

PART I - FINANCIAL INFORMATION

ITEM 1. F INANCIAL STATEMENTS

Sunrise Real Estate Group, Inc.

Consolidated Balance Sheets

(Expressed in US Dollars)

	June 30,			December 31,
	2008			2007
	(Unaudited)			(Restated)
ASSETS

Current assets
Cash and cash equivalents	$	922,232		$	2,281,516
Restricted cash (Note 9)		230,242			2,441,579
Accounts receivable		601,476			842,868
Promissory deposits (Note 3)		947,646			273,800
Amounts due from venturers		-			79,662
Amount due from related party (Note 11)		332,405			312,132
Other receivables and deposits (Note 4)		838,006			602,373

Total current assets		3,872,007			6,833,930

Property, plant and equipment – net (Note 5)		2,745,848			2,519,585
Equity investment (Note 6)		83,101			78,033
Investment properties (Note 7)		8,044,389			7,800,228
Deferred tax asset (Note 8)		1,367,962			1,284,532
Goodwill		13,307			13,307

Total assets	$	16,126,614		$	18,529,615

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities
Bank loans (Note 9)	$	204,108		$	191,660
Promissory notes payable (Note 10)		517,187			976,435
Accounts payable		267,459			230,654
Amount due to director (Note 11)		71,481			171,458
Amount due to related party (Note 11)		127,443			159,561
Other payables and accrued expenses (Note 12)		1,613,595			1,917,022
Other tax payable (Note 13)		605,002			546,873
Income tax payable		1,044,887			1,238,912

Total current liabilities		4,451,162			5,432,575

Commitments and contingencies (Note 14)

Long-term bank loans (Note 9)		6,125,355			5,847,606
Long-term promissory notes payable (Note 10)		57,223			111,112
Deposits received from underwriting sales (Note 15)		8,246,164			7,743,240
Minority interest		457,296			431,674

Shareholders’ equity
Common stock, par value $0.01 per share; 200,000,000 shares authorized; 23,691,925 and 23,691,925 shares issued and outstanding as of June 30, 2008 and December 31, 2007, respectively		236,919			236,919
Additional paid-in capital		3,620,008			3,620,008
Statutory reserve (Note 16)		729,744			729,744
Accumulated losses		(8,465,989	)		(6,348,261	)
Accumulated other comprehensive income (Note 17)		668,732			724,998

Total shareholders’ equity		(3,210,586	)		(1,036,592	)

Total liabilities and shareholders’ equity	$	16,126,614		$	18,529,615

See accompanying notes to consolidated financial statements.

Sunrise Real Estate Group, Inc.

Consolidated Statements of Operations

(Expressed in US Dollars)

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
	(Unaudited)

Net Revenues	$	2,641,681		$	1,520,047		$	3,961,226		$	2,655,202

Cost of Revenues		(1,820,183	)		(1,434,946	)		(3,137,830	)		(2,622,606	)

Gross Profit		821,498			85,101			823,396			32,596

Operating Expenses		(328,489	)		(255,412	)		(639,115	)		(494,921	)

General and Administrative Expenses		(1,098,242	)		(936,714	)		(1,991,464	)		(1,831,289	)

Operating Loss		(605,233	)		(1,107,025	)		(1,807,183	)		(2,293,614	)

Interest Income		3,561			3,344			9,330			7,571

Other Income/(Expenses), Net		(1,394	)		(34,851	)		5,138			(42,242	)

Interest Expenses		(154,836	)		(222,785	)		(298,476	)		(425,347	)

Loss Before Income Tax and Minority Interest		(757,902	)		(1,361,317	)		(2,091,191	)		(2,753,632	)

Income Tax		(23,388	)		(28,973	)		(28,884	)		(28,973	)

Loss Before Minority Interest		(781,290	)		(1,390,290	)		(2,120,075	)		(2,782,605	)

Minority Interest		(7,684	)		(38,533	)		2,347			(35,453	)

Net Loss	$	(788,974	)	$	(1,428,823	)	$	(2,117,728	)	$	(2,818,058	)

Loss Per Share – Basic and Fully Diluted	$	(0.03	)	$	(0.06	)	$	(0.09	)	$	(0.12	)

Weighted average common shares outstanding – Basic and Fully Diluted ¹		23,691,925			23,691,925			23,691,925			23,691,925

See accompanying notes to consolidated financial statements.

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

Sunrise Real Estate Group, Inc.

Consolidated Statements of Cash Flows

(Decrease) /Increase in Cash and Cash Equivalents

(Expressed in US Dollars)

	Six Months Ended June 30,
	2008			2007
				(Restated)
	(Unaudited)
Cash flows from operating activities
Net Loss	$	(2,117,728	)	$	(2,818,058	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation of property, plant and equipment		389,097			240,757
(Gain)/loss on disposal of property, plant and equipment		(1,019	)		848
Minority interest		(2,347	)		35,453
Change in:
Accounts receivable		287,701			4,285,194
Promissory deposits		(637,376	)		(647,752	)
Other receivables and deposits		(190,911	)		(488,359	)
Accounts payable		21,202			(387,163	)
Amount with related party		(41,271	)		-
Amounts with venturers		82,420			578,679
Other payables and accrued expenses		(415,749	)		(4,826	)
Interest payable on promissory notes		(119,142	)		186,238
Interest payable on amount due to director		4,403			(10,974	)
Other tax payable		21,965			(224,817	)
Income tax payable		(266,674	)		(387,064	)
Net cash (used in)/provided by operating activities		(2,980,735	)		358,156

Cash flows from investing activities
Acquisition of plant and equipment		(289,956	)		(167,373	)
Deposits paid for acquisition of properties		-			(1,850,424	)
Proceeds from disposal of property, plant and equipment		95,883			-
Restricted cash		2,302,414			-
Net cash provided by/(used in) investing activities		2,108,341			(2,017,797	)

Cash flows from financing activities
Bank loans repayment		(99,148	)		(630,508	)
Repayment of promissory note		(393,995	)		(205,556	)
Proceeds from promissory note		-			2,565,903
Repayment to director		(104,380	)		(79,026	)
Advances from director		-			250,000
Net cash (used in)/provided by financing activities		(597,523	)		1,900,813

Effect of exchange rate changes on cash and cash equivalents		110,633			62,691

Net (decrease)/increase in cash and cash equivalents		(1,359,284	)		303,863
Cash and cash equivalents at beginning of period		2,281,516			945,727
Cash and cash equivalents at end of period	$	922,232		$	1,249,590

Supplemental disclosure of cash flow information
Cash paid during the period:
Income tax paid		295,558			428,513
Interest paid		741,558			250,083

See accompanying notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

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

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

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

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

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

Figure 1: Company Organization Chart

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

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

Restatement Summary

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

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

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

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

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

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

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

Going Concern

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

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

Foreign Currency Translation and Transactions

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

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

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

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

Property, Plant, Equipment and Depreciation

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

		Estimated Useful Life (in years)

Furniture and fixtures		5-10
Computer and office equipment		5
Motor vehicles		5
Properties		20

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

Investment property

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

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

Goodwill

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

Revenue Recognition

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

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

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

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

All revenues represent gross revenues less sales and business tax.

Net Earnings per Common Share

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

Income Taxes

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

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

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

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

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

Non-employee stock based compensation

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

Segment information

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

NOTE 3 - PROMISSORY DEPOSITS

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

NOTE 4 - OTHER RECEIVABLES AND DEPOSITS

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

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT – NET

	June 30,			December 31,
	2008			2007
	(Unaudited)			(Audited)
Furniture and fixtures	$	146,348		$	133,970
Computer and office equipment		318,107			275,988
Motor vehicles		667,106			618,024
Properties		2,205,751			2,071,225
		3,337,312			3,099,207
Less: Accumulated depreciation		(591,464	)		(579,622	)
	$	2,745,848		$	2,519,585

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

NOTE 6 – EQUITY INVESTMENT

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

NOTE 7 – INVESTMENT PROPERTIES

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

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

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

NOTE 8 – DEFERRED TAX ASSET

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

NOTE 9 - BANK LOANS

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

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

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

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

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

NOTE 10 – PROMISSORY NOTES PAYABLE

There are three promissory notes, as listed below:

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

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

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

NOTE 11 – AMOUNTS WITH RELATED PARTIES AND DIRECTORS

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

Amount due to director

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

Amount due from related party

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

Amount due to related party

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

NOTE 12 - OTHER PAYABLES AND ACCRUED EXPENSES

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

NOTE 13 – OTHER TAX PAYABLE

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

NOTE 14- COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

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

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

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

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

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

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

NOTE 15 –DEPOSITS RECEIVED FROM UNDERWRTING SALES

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

NOTE 16 – STATUTORY RESERVE

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

NOTE 17 – ACCUMULATED OTHER COMPREHENSIVE INCOME

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

NOTE 18 – COMPARATIVE FIGURES

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

NOTE 19 – CONCENTRATION OF CUSTOMERS

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

	Percentage of Net Sales Three Months Ended June 30,						Percentage of Net Sales Six Months Ended June 30,					Percentage of Accounts Receivable as of June 30,
	2008			2007			2008			2007		2008			2007

Customer A		21	%		11	%		13	%		*		26	%		*
Customer B		15	%		*			15	%		*		*			*
Customer C		14	%		*			*			*		*			*

* less than 10%

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.

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

RECENT DEVELOPMENTS

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

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

RECENTLY ISSUED ACCOUNTING STANDARDS

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

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

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

APPLICATION OF CRITICAL ACCOUNTING POLICIES

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

Revenue Recognition

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.

All revenues represent gross revenues less sales and business tax.

Net Earnings per Common Share

Income Taxes

Segment Information

RESULTS OF OPERATIONS

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

Revenue

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

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

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

Agency sales

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

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

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

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

Underwriting sales

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

Property Management

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

Cost of Revenue

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

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

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

Agency sales

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

Underwriting sales

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

Property management

Operating Expenses

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

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

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

Agency sales

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

Underwriting sales

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

Property management

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

General and Administrative Expenses

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

Interest Expenses

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

LIQUIDITY AND CAPITAL RESOURCES

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

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

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

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

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

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

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

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

OFF BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

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

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

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

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

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit
Number		Description

31.1		Section 302 Certification by the Corporation's Chief Executive Officer.

31.2		Section 302 Certification by the Corporation's Chief Financial Officer.

32.1		Section 1350 Certification by the Corporation's Chief Executive Officer and Corporation's Chief Financial Officer.

SIGNATURES

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

SUNRISE REAL ESTATE GROUP, INC.

Date: August 19, 2008	By: /s/ Lin, Chi-Jung
	Lin, Chi-Jung, Chief Executive Officer

Date: August 19, 2008	By: /s/ Wang, Wen-Yan
	Wang, Wen-Yan, Chief Financial Officer