NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Sunrise Real Estate Group, Inc. “SRRE” was incorporated
in Texas on October 10, 1996 under the name of Parallax Entertainment, Inc. SRRE together with its subsidiaries and equity investment
described below is collectively referred to as “the Company”, “our” or “us”. The Company is
primarily engaged in the provision of property brokerage services, which include property marketing, leasing and management services;
and real estate development in the People’s Republic of China (the “PRC”).
As of June 30, 2017, the Company has the
following major subsidiaries and equity investment.
Company Name
|
|
Date of
Incorporation
|
|
Place of
Incorporation
|
|
% of
Ownership
held by the
Company
|
|
Relationship
with the
Company
|
|
Principal activity
|
Sunrise Real Estate Development Group, Inc. (CY-SRRE)
|
|
April 30, 2004
|
|
Cayman Islands
|
|
100%
|
|
Subsidiary
|
|
Investment holding
|
Lin Ray Yang Enterprise Limited (“LRY”)
|
|
November 13, 2003
|
|
British Virgin Islands
|
|
100%
|
|
Subsidiary
|
|
Investment holding
|
Shanghai Xin Ji Yang Real Estate Consultation Company Limited (“SHXJY”)
|
|
August 20, 2001
|
|
PRC
|
|
100%
|
|
Subsidiary
|
|
Property brokerage services
|
Shanghai Shang Yang Real Estate consultation Company Limited (“SHSY”)
|
|
February 5, 2004
|
|
PRC
|
|
100%
|
|
Subsidiary
|
|
Property brokerage services
|
Suzhou Gao Feng Hui Property Management Company Limited (“SZGFH”)
|
|
January 10, 2005
|
|
PRC
|
|
100%
|
|
Subsidiary
|
|
Property management and leasing services
|
Suzhou Shang Yang Real Estate Consultation Company Limited (“SZSY”)
|
|
November 24, 2006
|
|
PRC
|
|
75.25%*
|
|
Subsidiary
|
|
Property brokerage and management services
|
Suzhou Xi Ji Yang Real Estate Consultation Company Limited (“SZXJY”)
|
|
June 25, 2004
|
|
PRC
|
|
75%
|
|
Subsidiary
|
|
Property brokerage services
|
Linyi Shangyang Real Estate Development Company Limited (“LYSY”)
|
|
October 13, 2011
|
|
PRC
|
|
24%**
|
|
Subsidiary
|
|
Real estate development
|
Shangqiu Shang Yang Real Estate Consultation Company Limited (“SQSY”)
|
|
October 20, 2010
|
|
PRC
|
|
100%
|
|
Subsidiary
|
|
Property brokerage services
|
Wuhan Gao Feng Hui Consultation Company Limited (“WHGFH”)
|
|
November 10, 2010
|
|
PRC
|
|
60%
|
|
Subsidiary
|
|
Property brokerage services
|
Sanya Shang Yang Real Estate Consultation Company Limited (“SYSY”)
|
|
September 18, 2008
|
|
PRC
|
|
100%
|
|
Subsidiary
|
|
Property brokerage services
|
Shanghai Rui Jian Design Company Limited (“SHRJ”)
|
|
August 15, 2011
|
|
PRC
|
|
100%
|
|
Subsidiary
|
|
Property brokerage services
|
Linyi Rui Lin Construction and Design Company Limited (“LYRL”)
|
|
March 6, 2012
|
|
PRC
|
|
100%
|
|
Subsidiary
|
|
Investment holding
|
Wuhan Yuan Yu Long Real Estate Development Company Limited (“WHYYL”)
|
|
December 28, 2009
|
|
PRC
|
|
49%
|
|
Equity investment
|
|
Real estate development
|
Shanghai Xin Xing Yang Real Estate Brokerage Company Limited (“
SHXXY
”)
|
|
September 28, 2011
|
|
PRC
|
|
40%
|
|
Equity investment
|
|
Property brokerage services
|
Xin Guang Investment Management and Consulting Company Limited (“
XG
”)
|
|
December 17, 2012
|
|
PRC
|
|
49%
|
|
Equity investment
|
|
Investment management and consulting
|
Shanghai Da Er Wei Trading Company Limited (“SHDEW”)
|
|
June 6, 2013
|
|
PRC
|
|
23.08%
|
|
Equity investment
|
|
Import and export trading
|
Shanghai Hui Tian (“SHHT”)
|
|
July 25, 2014
|
|
PRC
|
|
100%
|
|
Subsidiary
|
|
Investment holding
|
Shanghai Tian Xi (“SHSYTX”)
|
|
August 19, 2014
|
|
PRC
|
|
100%
|
|
Subsidiary
|
|
Investment holding
|
Suzhou Shangyang Huitian Wealth Investment Management Co,. Ltd(SZSYHT)
|
|
January 14, 2015
|
|
PRC
|
|
75%
|
|
Subsidiary
|
|
Investment holding
|
|
*
|
The Company and a shareholder of SZSY, which holds 12.5%
equity interest in SZSY, entered into a voting agreement that the Company is entitled to exercise the voting rights in respect
of the shareholder’s 12.5% equity interest in SZSY. The Company effectively holds 51% voting rights in SZSY and therefore
considers SZSY as a subsidiary of the Company.
|
|
**
|
The Company and a shareholder of LYSY, which holds 51% equity interest in LYSY, entered into a voting agreement that the Company
is entitled to exercise the voting rights in respect of her 51% equity interest in LYSY. The Company effectively holds 75% voting
rights in LYSY and therefore considers LYSY as a subsidiary of the Company.
|
The accompanying condensed consolidated
balance sheet as of December 31, 2016, which has been derived from the audited consolidated financial statements and the accompanying
unaudited condensed consolidated financial statements, have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”)
have been condensed or omitted pursuant to those rules and regulations and the Company believes that the disclosures made are adequate
to make the information not misleading.
In the opinion of management, these condensed
consolidated financial statements reflect all adjustments which are of a normal recurring nature and which are necessary to present
fairly the financial position of Sunrise Real Estate as of June 30, 2017 and the results of operations for the six months ended
June 30, 2017 and 2016, and the cash flows for the six months ended June 30, 2017 and 2016. These condensed consolidated financial
statements and related notes should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year
ended December 31, 2016. The results of operations for the six months ended June 30, 2017 are not necessarily indicative of the
results which may be expected for the entire fiscal year.
The preparation of condensed consolidated
financial statements in conformity with U.S. GAAP requires the Company 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. Actual results could differ from those estimates.
NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting and Principles of
Consolidation
The
condensed
consolidated financial statements include the financial statements of Sunrise Real
Estate Group, Inc. and its subsidiaries. All significant inter-company accounts and transactions have been eliminated on consolidation.
Investments in business entities, in which the Company does
not have control but has the ability to exercise significant influence over operating and financial policies, are accounted for
using the equity method.
Foreign Currency Translation and Transactions
The functional currency of SRRE, CY-SRRE
and LRY is U.S. dollars (“$”) and their financial records are maintained and the financial statements prepared in U.S.
dollars. The functional currency of the Company’s subsidiaries and affiliate in China is Renminbi (“RMB”) and
their financial records and statements are maintained and 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 U.S. dollars in accordance with ASC830. 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 U.S. dollars, period-end exchange rates are applied to the condensed
consolidated balance sheets, while average exchange rates as to revenues and expenses are applied to consolidated statements of
operations. The effect of foreign currency translation adjustments is included as a component of accumulated other comprehensive
income in shareholders’ equity.
The exchange rates as of June 30, 2017
and December 31, 2016 are $1: RMB6.7744 and $1: RMB6.6312, respectively.
The RMB is not freely convertible into
foreign currency and all foreign exchange transaction must take place through authorized institutions. No representation is made
that the RMB amounts could have been, or could be, converted into U.S. dollars at the rate used in translation.
Real Estate Property under Development
Real estate property under development,
which consists of residential unit sites and commercial and residential unit sites under development, is stated at the lower of
carrying amounts or fair value less selling costs.
Expenditures for land development, including
cost of land use rights, deed tax, pre-development costs and engineering costs, are capitalized and allocated to development projects
by the specific identification method. Costs are allocated to specific units within a project based on the ratio of the sales value
of units to the estimated total sales value times the total project costs.
Costs of amenities transferred to buyers
are allocated as common costs of the project that are allocated to specific units as a component of total construction costs. For
amenities retained by the Company, costs in excess of the related fair value of the amenity are also treated as common costs. Results
of operations of amenities retained by the Company are included in current operating results.
In accordance with ASC 360, “Property,
Plant and Equipment” (“ASC 360”), real estate property under development is subject to valuation adjustments
when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not
recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows
expected to be generated by the assets.
For the six months ended June 30, 2017, the company had recognized the net revenue and cost of revenue
of Linyi project at a certain proportion.
Long Term Investments
The Company accounts for long term investments
in equities as follows.
Investment in Unconsolidated Affiliates
Affiliates are entities over which the
Company has significant influence, but which it does not control. The Company generally considers an ownership interest of 20%
or higher to represent significant influence. Investments in unconsolidated affiliates are accounted for by the equity method of
accounting. Under this method, the Company’s share of the post-acquisition profits or losses of affiliates is recognized
in the income statement and its shares of post-acquisition movements in other comprehensive income are recognized in other comprehensive
income. Unrealized gains on transactions between the Company and its affiliates are eliminated to the extent of the Company’s
interest in the affiliates; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
When the Company’s share of losses
in an affiliate equals or exceeds its interest in the affiliate, the Company does not recognize further losses, unless the Company
has incurred obligations or made payments on behalf of the affiliate.
The Company is required to perform an impairment
assessment of its investments whenever events or changes in business circumstances indicate that the carrying value of the investment
may not be fully recoverable. An impairment loss is recorded when there has been a loss in value of the investment that is other
than temporary. The Company recorded any impairment losses in any of the periods reported.
Other Investments
Where the Company has no significant influence,
the investment is classified as other assets in the balance sheet and is carried under the cost method. Investment income is recognized
by the Company when the investee declares a dividend and the Company believes it is collectible. The Company periodically evaluates
the carrying value of its investment under the cost method and any decline in value is included in impairment of cost of the investment.
Government Subsidies
Government subsidies include cash subsidies
received by the Company’s subsidiaries in the PRC from local governments.
In recognizing the benefit of government
subsidies in accordance with U.S. GAAP, the Company considers intended use of and restrictions of the subsidy, the requirements
for the receipt of funds, and whether or not the incentive is given for immediate financial support, or to encourage activities
such as land development in specified area. Each grant is evaluated to determine the propriety of classification on the consolidated
statements of operations and consolidated balance sheets. Those grants that are substantively reimbursements of specified costs
are matched with those costs and recorded as a reduction in costs. Those benefits that are more general in nature or driven by
business performance measures are classified as revenue.
Government subsidy was received in 2012
and the company recorded it as deferred government subsidy in balance sheets. As of June 30, 2017 and December 31, 2016, the deferred
government subsidy amounted to $4,897,174 and $4,782,387, respectively. The subsidy was given to reimburse the land acquisition
costs and certain construction costs incurred for the Company’s property development project in Linyi, and are repayable
if the Company fails to complete the subsidized property development project by the agreed date.
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, fees associated to services are fixed or determinable, and collection of the fees is assured.
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 real estate development sales in accordance
with the ASC 976-605, “Accounting for Sales of Real Estate” (Formerly Statement of Financial Accounting Standards No.
66) (“ASC 976-605”). A real estate development sale is recognized by the percentage-of-completion method on the sale
of individual units when the individual unit sites are being sold separately and all the following criteria are met as below:
a. Construction is beyond a preliminary stage.
b. The buyer is committed to the extent of being unable to require
a refund except for no delivery of the unit.
c. Sufficient units have already been sold to assure that the
entire property will not revert to rental property.
d. Sales prices are collectible.
e. Aggregate sales proceeds and costs can be reasonably estimated.
If any of the above criteria is not met,
proceeds shall be accounted for as deposits until the criteria are met.
All revenues represent gross revenues less
sales and business taxes.
Net Earnings (Loss) per Common Share
The Company computes net earnings (loss)
per share in accordance with ASC 260, “Earnings per Share” (“ASC 260”). Under the provisions of ASC 260,
basic net earnings (loss) per share is computed by dividing net earnings (loss) 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
(loss) 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.
Recently Adopted Accounting Standards
The Company evaluated all recent accounting pronouncements issued
and determined that the adoption of these pronouncements would not have a material effect on the financial position, results of
operations or cash flows of the Company.
New Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board (“FASB”)
issued an Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805) Clarifying the Definition
of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist
entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The
definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance
is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the
effective date. The Company is in the process of evaluating the impact of this accounting standard update.
In November 2016, the FASB issued ASU 2016-18, Statement of
Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement
of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately
from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December
15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update
on its financial statements.
In August, 2016, the FASB issued ASU No. 2016-15, Classification
of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The ASU is intended to reduce diversity
in practice in the presentation and classification of certain cash receipts and cash payments by providing guidance on eight specific
cash flow issues. The ASU is effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted,
including adoption during an interim period. We are currently assessing the impact this standard will have on our consolidated
statement of cash flows.
In August 2014, the FASB issued Accounting
Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which provides
guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires
management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the
date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial
doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December
15, 2016, and interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the impact of the adoption
of ASU 2014-15 on the Company's financial statements and disclosures.
NOTE 3– RESTRICTED CASH
The Company is required to maintain certain
deposits with the bank that provides secured loans to the Company. As of June 30, 2017 and December 31, 2016, the Company held
cash deposits of $1,036,996 and $304,681, respectively, as security for its bank loans (see Note 10). These balances were subject
to withdrawal restrictions and were not covered by insurance.
NOTE
4
- PROMISSORY DEPOSITS
Promissory deposits are paid to property developers
in respect of the real estate projects where the Company has been appointed as sales agent. The balances were unsecured, interest
free and recoverable on completion of the respective projects.
NOTE 5 – REAL ESTATE PROPERTY UNDER
DEVELOPMENT
Real estate property under development
represents the Company’s real estate development project in Linyi, the PRC (“Linyi Project”), which is located
on the junction of Xiamen Road and Hong Kong Road in Linyi City Economic Development Zone, Shandong Province, PRC. This project
covers a site area of approximately 103,385 square meters for the development of villa-style residential housing buildings. The
Company acquired the site and commenced construction of this project during the fiscal year of 2012.
On March 13, 2014, the Company has signed a joint development agreement with Zhongji Pufa Real Estate
Co. According to this agreement, the Company has obtained a right to develop the Guangxinglu (“GXL”) project, which
located on 182 lane Guangxinglu, Putuo district, Shanghai, PRC. This project covers a site area of approximately 2,502 square meters
for the development of one building of apartment.
For the period ended of June 30, 2017, the
company had recognized the net revenue and cost of revenue of Linyi project at a certain proportion. As of June 30, 2017, land
use rights included in real estate property under development totaled $66,368,683.
NOTE 6 - OTHER RECEIVABLES AND DEPOSITS,
NET
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Advances to staff
|
|
$
|
202,859
|
|
|
|
175,585
|
|
Rental deposits
|
|
|
84,316
|
|
|
|
69,390
|
|
Prepaid expense
|
|
|
895,283
|
|
|
|
524,622
|
|
Prepaid tax
|
|
|
5,028,484
|
|
|
|
4,731,739
|
|
Other receivables
|
|
|
840,866
|
|
|
|
370,429
|
|
|
|
$
|
7,051,808
|
|
|
$
|
5,871,765
|
|
Other receivables and deposits as of June 30,
2017 and December 31, 2016 were stated net of allowance for doubtful accounts of $330,879 and $299,327, respectively.
NOTE 7 – PROPERTY AND EQUIPMENT
,
NET
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Furniture and fixtures
|
|
$
|
181,926
|
|
|
$
|
177,662
|
|
Computer and office equipment
|
|
|
292,381
|
|
|
|
307,682
|
|
Motor vehicles
|
|
|
581,582
|
|
|
|
689,539
|
|
Properties
|
|
|
2,233,330
|
|
|
|
2,180,981
|
|
|
|
|
3,289,218
|
|
|
|
3,355,863
|
|
Less: Accumulated depreciation
|
|
|
(1,963,143
|
)
|
|
|
(1,943,460
|
)
|
|
|
$
|
1,326,075
|
|
|
$
|
1,412,403
|
|
Depreciation and amortization expense for property
and equipment amounted to $88,820 and $106,955 for the six months ended June 30, 2017 and 2016, respectively.
All properties as of June 30, 2017 and December
31, 2016 were pledged as collateral for the Company’s bank loans (See Note 10).
NOTE 8 – INVESTMENT PROPERTIES, NET
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Investment properties
|
|
$
|
9,140,414
|
|
|
$
|
8,926,167
|
|
Less: Accumulated depreciation
|
|
|
(4,861,874
|
)
|
|
|
(4,577,843
|
)
|
|
|
$
|
4,278,540
|
|
|
$
|
4,348,324
|
|
Depreciation and amortization expense for investment
properties amounted to $515,889 and $178,407 for the six months ended June 30, 2017 and 2016, respectively.
All investment properties as of June 30, 2017
and December 31, 2016 were pledged as collateral for the Company’s bank loans (See Note 10).
NOTE 9 – INVESTMENT IN AND AMOUNT
DUE FROM AN UNCONSOLIDATED AFFILIATE
The investments in unconsolidated affiliates
primarily consist of WHYYL (49%) and SHDEW (23%) As of June 30, 2017, the investment amount in WHYYL and SHDEW were $2,886,362
and $50,972,761 separately.
WHYYL is primarily developing a real estate project in Wuhan, the PRC on a parcel of land covering approximately
27,950 square meters with a 3-year planned construction period.
SHDEW
is a company engaged principally in the R&D and sale of skincare and cosmetic products. The Company has accounted for these
investments using the equity method as the Company has the ability to exercise significant influence over their activities.
In 2011, the Company invested $4,697,686 for
acquiring 49% equity interest in WHYYL to expand its operations to real estate development business. As of June 30, 2017 the investment
in WHYYL was $2,886,362, which included its equity in net loss of WHYYL, net of income taxes, totaling $1,090,090 as of June 30,
2017. The following table sets forth the unaudited financial information of WHYYL.
|
|
Six Months ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
1,090,090
|
|
|
$
|
457,804
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Current assets
|
|
$
|
62,076,679
|
|
|
$
|
62,859,330
|
|
Non-current assets
|
|
|
1,700,456
|
|
|
|
1,392,618
|
|
Total assets
|
|
|
63,790,637
|
|
|
|
64,251,949
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
57,899,590
|
|
|
|
57,420,884
|
|
Total equity
|
|
$
|
5,891,047
|
|
|
$
|
6,831,065
|
|
As of June 30, 2017 and December 31, 2016,
the Company has a balance of $2,586,047 and $2,508,251 due from WHYYL, which was no longer charged interest from September 1, 2014.
SHDEW was established in June of 2013 with
its business as a skincare and cosmetic company. The company has made progress in its operation. Its Wechat stores have a membership
of over a million members. It is developing its own skincare products as well as solidifying its position in the ecommerce platform.
As of June 30, 2016, the net profit for SHDEW
was $37,044,242 with total equity in the amount of $55,599,461.
|
|
Six Months ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Revenues
|
|
$
|
344,292,109
|
|
|
$
|
135,343,268
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
162,553,533
|
|
|
$
|
37,044,242
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Current assets
|
|
$
|
546,177,877
|
|
|
$
|
122,345,251
|
|
Non-current assets
|
|
|
34,488,756
|
|
|
|
319,725,610
|
|
Total assets
|
|
|
580,666,633
|
|
|
|
442,070,961
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
359,799,355
|
|
|
|
293,430,056
|
|
Total equity
|
|
$
|
220,867,278
|
|
|
$
|
145,667,618
|
|
NOTE 10 – BANK LOANS
In April 2012,
the Company entered into a 3-year non-revolving facility line of credit agreement with First Sino Bank. Under the terms of the
agreement, the Company could borrow a maximum amount of $ 12,256,905 (RMB75,000,000).. The borrowings under this facility bear
interest at a rate per annum equal to 150% of the prevailing base lending rate for periods ranging from 1 year to 3 years as announced
by PBOC. The average interest rate for the six months ended June 30, 2017 was 7.5% per annum. The facility of credit was secured
by all of the Company’s investment properties (See Note 8) and guaranteed by a director of the Company, and matured on March
31, 2016. In March 2016, this facility was extended for 3-year period matured on March 31, 2019. As of
June 30
,
2017 and December 31, 2016, the Company had outstanding loan balances of $7,034,985 (RMB47,657,802) and $6,870,088 (RMB47,657,802),
respectively, under this facility line of credit.
NOTE 11- LONG TERM BORROWINGS
On December 16, 2014, the Company entered into a project finance loan agreement with HUAXIA Bank to finance
the development of the Company’s GXL
project in
Shanghai. The loan has a 3-year term in the principal amount of $18,479,734 (RMB120,000,000) at an interest rate of 7.025% per
annum. At the end of June 30, 2017, the Company had outstanding loan balances of $2,509,447 (RMB17,000,000) under this facility
line of credit.
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Outstanding borrowings
|
|
$
|
2,509,447
|
|
|
$
|
7,496,036
|
|
Less: Current portion of long term borrowings
|
|
|
2,509,447
|
|
|
|
7,496,036
|
|
|
|
|
-
|
|
|
|
-
|
|
For the period ended June 30, 2017, total loan interest was approximately $164,737, which was capitalized
in the development cost of the GXL project.
NOTE 12– PROMISSORY NOTES PAYABLE
The
promissory
notes payable consist of the following unsecured notes to unrelated parties. Included in the balances are promissory
notes with outstanding principal and unpaid interest of an aggregate of $1,476,145 and $1,616,603 as of June 30, 2017 and December
31, 2016, respectively.
The promissory note
with a principal as of June 30, 2017 amounting to $738,073 bears interest at a rate of 0% per annum, is unsecured and has no fixed
term of repayment.
As of June 30, 2017
and December 31, 2016
, the outstanding principal
and unpaid interest related to this promissory note amounted to $738,073 and $720,773, respectively.
The promissory note with a principal as of
June 30 amounts to $738,073 bears interest at a rate of 0% per annum, is unsecured and has no fixed term of repayment. As of June
30, 2017 and December 31, 2016, the outstanding principal and unpaid interest related to this promissory note amounted to $738,073
and $720,773, respectively.
For the three months ended June 30, 2017, the
interest expense related to these promissory notes was $NIL.
NOTE 13– AMOUNTS DUE TO DIRECTORS
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Lin Chi-Jung
|
|
$
|
6,549,827
|
|
|
$
|
6,446,181
|
|
Lin Hsin-Hung
|
|
|
98,820
|
|
|
|
87,105
|
|
|
|
$
|
6,648,647
|
|
|
$
|
6,533,288
|
|
|
(a)
|
The balance due to Lin Chi-Jung consists of unpaid salaries and reimbursements and advances together with unpaid interest.
|
The balances are unsecured, interest-free
and have no fixed term of repayment.
The advances together with unpaid interest
as of June 30, 2017 and December 31, 2016 were $6,648,647 and $6,533,288, respectively. The balances are unsecured and interest
bearing at rates ranging from 18% to 30% per annum.
|
(b)
|
The balances due to Lin Hsin-Hung are unsecured, interest-free and have no fixed term of repayment.
|
NOTE 14- OTHER PAYABLES AND ACCRUED EXPENSES
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
Accrued staff commission and bonus
|
|
$
|
338,946
|
|
|
$
|
792,203
|
|
Rental deposits received
|
|
|
141,236
|
|
|
|
275,725
|
|
Customer deposits
|
|
|
-
|
|
|
|
-
|
|
Dividends payable to non-controlling interest
|
|
|
198,623
|
|
|
|
193,967
|
|
Other payables
|
|
|
257,837
|
|
|
|
374,922
|
|
|
|
$
|
936,642
|
|
|
$
|
1,636,817
|
|
NOTE 15- ACCOUNT PAYABLE
Account payable was mostly derived from our
property development of Linyi project and GXL project. As of June 30, 2017 and December 31, 2016, the company’s account payable
amounted to $1,710,423 and $2,486,348.
NOTE 16 – AMOUNT DUE TO AFFILIATES
The temporary borrowing, in the amount
of $17,095,412 from SHDEW is for operations and is unsecured, interest free and payable on demands. The amount due to JXSY, in
the amount of $521,079 and SHXG, in the amount of $18,304 were intercompany transfers for day to day operation.
NOTE 17 – CUSTOMER DEPOSITS
Customer deposits were mostly derived from
our property development of Linyi project and GXL project, which was pre-sale collection from our customers. As of June 30, 2017
and December 31, 2016, the company’s customer deposits amounted to $50,603,842 and $54,263,661.
NOTE 18– DEFERRED GOVERNMENT SUBSIDY
Deferred government subsidy consists of the
cash subsidy provided by the local government.
Government subsidy was received in 2012, and
as of June 30, 2017 and December 31, 2016, the Company’s deferred government subsidy amounted to $4,897,174 and $4,782,387,
respectively. The subsidy is given to reimburse the land acquisition costs and certain construction costs incurred for the Company’s
property development project, and are repayable if the Company fails to complete the subsidized property development project before
the agreed date. The entire government subsidy is deferred and included as deferred government subsidy in consolidated balance
sheets.
NOTE 19- COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
The Company leases certain of its office properties
under non-cancellable operating lease arrangements. Payments under operating leases are expensed on a straight-line basis over
the periods of their respective terms, and the terms of the leases do not contain rent escalation, or contingent rent, renewal,
or purchase options. There are no restrictions placed upon the Company by entering into these leases. Rental expenses under operating
leases for the six months ended June 30, 2017 and 2016 were $118,606 and $65,508, respectively.
As of June 30, 2017, the Company had the following
operating lease obligations.
|
|
Amount
|
|
|
|
|
|
Within one year
|
|
$
|
119,014
|
|
Two to five years
|
|
|
21,256
|
|
|
|
$
|
140,270
|
|
NOTE 20– 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.
According to the Law of the PRC on Enterprises
with Wholly-Owned Foreign Investment, the Company PRC’s subsidiaries are required to make appropriations from after-tax profits
as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) to non-distributable reserves.
These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion reserve and (iii)
a staff bonus and welfare fund. A wholly-owned PRC subsidiary is not required to make appropriations to the enterprise expansion
reserve but annual appropriations to the general reserve are required to be made at 10% of the profit after tax as determined under
PRC GAAP at each year-end, until such fund has reached 50% of its respective registered capital. The staff welfare and bonus reserve
is determined by the board of directors. The general reserve is used to offset future losses. The subsidiary may, upon a resolution
passed by the stockholders, convert the general reserve into capital. The staff welfare and bonus reserve are used for the collective
welfare of the employees of the subsidiary. The enterprise expansion reserve is for the expansion of the subsidiary operations
and can be converted to capital subject to approval by the relevant authorities. These reserves represent appropriations of the
retained earnings determined in accordance with Chinese law.
In addition to the general reserve, the Company’s
PRC subsidiaries are required to obtain approval from the local PRC government prior to distributing any registered share capital.
Accordingly, both the appropriations to general reserve and the registered share capital of the Company’s PRC subsidiary
are considered as restricted net assets and are not distributable as cash dividends. As of June 30, 2017 and December 31, 2016,
the Company’s statutory reserve fund was $938,128 and $938,128, respectively.
NOTE 21 - SEGMENT INFORMATION
The Company's chief executive officer and chief
operating officer have been identified as the chief operating decision makers. The Company's chief operating decision makers direct
the allocation of resources to operating segments based on the profitability and cash flows of each respective segment.
The Company evaluates performance based on several
factors, including net revenue, cost of revenue, operating expenses, and income from operations. The following tables show the
operations of the Company's operating segments:
|
|
Three Months Ended June 30, 2017
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
Net revenues
|
|
$
|
435,039
|
|
|
$
|
15,744,305
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
16,179,344
|
|
Cost of revenues
|
|
|
(205,036
|
)
|
|
|
(14,588,519
|
)
|
|
|
-
|
|
|
|
(70,574
|
)
|
|
|
(14,864,129
|
)
|
Gross profit
|
|
|
230,003
|
|
|
|
1,155,786
|
|
|
|
-
|
|
|
|
(70,574
|
)
|
|
|
1,315,215
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(138,539
|
)
|
|
|
(46,598
|
)
|
|
|
-
|
|
|
|
(1,666
|
)
|
|
|
(186,803
|
)
|
General and administrative expenses
|
|
|
(374,806
|
)
|
|
|
(389,677
|
)
|
|
|
-
|
|
|
|
(34,452
|
)
|
|
|
(798,935
|
)
|
Operating loss
|
|
|
(283,342
|
)
|
|
|
719,511
|
|
|
|
|
|
|
|
(106,692
|
)
|
|
|
329,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5,241
|
|
|
|
2,459
|
|
|
|
-
|
|
|
|
74
|
|
|
|
7,774
|
|
Interest expense
|
|
|
(112,350
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(112,350
|
)
|
Other income, Net
|
|
|
(7,398
|
)
|
|
|
21,269
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,871
|
|
Equity in net income (loss) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
10,007,184
|
|
|
|
-
|
|
|
|
10,007,184
|
|
Total other (expenses) income
|
|
|
(114,507
|
)
|
|
|
23,728
|
|
|
|
10,007,184
|
|
|
|
74
|
|
|
|
9,916,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(397,849
|
)
|
|
|
743,239
|
|
|
|
10,007,184
|
|
|
|
(106,618
|
)
|
|
|
10,245,956
|
|
Income tax
|
|
|
-
|
|
|
|
(9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(9
|
)
|
Net Income( loss)
|
|
$
|
(397,849
|
)
|
|
$
|
743,230
|
|
|
$
|
10,007,184
|
|
|
$
|
(106,618
|
)
|
|
$
|
10,245,947
|
|
|
|
Six Months Ended June 30, 2017
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
Net revenues
|
|
$
|
3,016,155
|
|
|
$
|
15,744,305
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
18,760,460
|
|
Cost of revenues
|
|
|
(517,224
|
)
|
|
|
(14,588,519
|
)
|
|
|
-
|
|
|
|
(70,127
|
)
|
|
|
(15,175,870
|
)
|
Gross profit
|
|
|
2,498,931
|
|
|
|
1,155,786
|
|
|
|
-
|
|
|
|
(70,127
|
)
|
|
|
3,584,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(269,359
|
)
|
|
|
(339,429
|
)
|
|
|
-
|
|
|
|
(4,050
|
)
|
|
|
(612,838
|
)
|
General and administrative expenses
|
|
|
(556,134
|
)
|
|
|
(822,726
|
)
|
|
|
-
|
|
|
|
(9,174
|
)
|
|
|
(1,388,034
|
)
|
Operating loss
|
|
|
1,673,438
|
|
|
|
(6,369
|
)
|
|
|
-
|
|
|
|
(83,351
|
)
|
|
|
1,583,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
9,901
|
|
|
|
7,095
|
|
|
|
-
|
|
|
|
147
|
|
|
|
17,143
|
|
Interest expense
|
|
|
(231,332
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(231,332
|
)
|
Other income, Net
|
|
|
1,104,402
|
|
|
|
19,852
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,124,254
|
|
Equity in net income (loss) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
32,754,891
|
|
|
|
-
|
|
|
|
32,754,891
|
|
Total other (expenses) income
|
|
|
882,971
|
|
|
|
26,947
|
|
|
|
32,754,891
|
|
|
|
147
|
|
|
|
33,664,956
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2,556,409
|
|
|
|
20,578
|
|
|
|
32,754,891
|
|
|
|
(83,204
|
)
|
|
|
35,248,674
|
|
Income tax
|
|
|
-
|
|
|
|
62,104
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,104
|
|
Net Income( loss)
|
|
$
|
2,556,409
|
|
|
$
|
82,682
|
|
|
$
|
32,754,891
|
|
|
$
|
(83,204
|
)
|
|
$
|
35,310,778
|
|
|
|
Three Months Ended June 30, 2016
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
Net revenues
|
|
$
|
2,250,977
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
26,501
|
|
|
$
|
2,277,478
|
|
Cost of revenues
|
|
|
(654,709
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(142,570
|
)
|
|
|
(797,279
|
)
|
Gross profit
|
|
|
1,596,268
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(116,069
|
)
|
|
|
1,480,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(443,983
|
)
|
|
|
(332,878
|
)
|
|
|
-
|
|
|
|
(20,289
|
)
|
|
|
(797,150
|
)
|
General and administrative expenses
|
|
|
(314,851
|
)
|
|
|
(239,096
|
)
|
|
|
-
|
|
|
|
(131,481
|
)
|
|
|
(685,428
|
)
|
Operating loss
|
|
|
837,434
|
|
|
|
(571,974
|
)
|
|
|
-
|
|
|
|
(267,839
|
)
|
|
|
(2,379
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
3,850
|
|
|
|
2,309
|
|
|
|
-
|
|
|
|
38
|
|
|
|
6,197
|
|
Interest expense
|
|
|
(532,903
|
)
|
|
|
(86,016
|
)
|
|
|
-
|
|
|
|
(15,174
|
)
|
|
|
(634,093
|
)
|
Other income, Net
|
|
|
(8,156
|
)
|
|
|
(14,076
|
)
|
|
|
-
|
|
|
|
(47
|
)
|
|
|
(22,279
|
)
|
Equity in net income (loss) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
6,233,956
|
|
|
|
-
|
|
|
|
6,233,956
|
|
Total other (expenses) income
|
|
|
(537,903
|
)
|
|
|
(97,783
|
)
|
|
|
6,233,956
|
|
|
|
(15,183
|
)
|
|
|
5,583,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
300,225
|
|
|
|
(669,757
|
)
|
|
|
6,233,956
|
|
|
|
(283,022
|
)
|
|
|
5,581,402
|
|
Income tax
|
|
|
(2,028
|
)
|
|
|
77,857
|
|
|
|
-
|
|
|
|
-
|
|
|
|
79,886
|
|
Net Income( loss)
|
|
$
|
302,254
|
|
|
$
|
(591,890
|
)
|
|
$
|
6,233,956
|
|
|
$
|
(283,022
|
)
|
|
$
|
5,661,288
|
|
|
|
Six Months Ended June 30, 2016
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
Net revenues
|
|
$
|
2,916,358
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
26,501
|
|
|
$
|
2,942,859
|
|
Cost of revenues
|
|
|
(1,336,846
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(142,570
|
)
|
|
|
(1,479,416
|
)
|
Gross profit
|
|
|
1,579,512
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(116,069
|
)
|
|
|
1,463,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(637,652
|
)
|
|
|
(505,790
|
)
|
|
|
|
|
|
|
(24,463
|
)
|
|
|
(1,167,905
|
)
|
General and administrative expenses
|
|
|
(750,413
|
)
|
|
|
(561,474
|
)
|
|
|
|
|
|
|
(181,831
|
)
|
|
|
(1,493,718
|
)
|
Operating loss
|
|
|
191,447
|
|
|
|
(1,067,264
|
)
|
|
|
|
|
|
|
(322,363
|
)
|
|
|
(1,198,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
35,237
|
|
|
|
2,578
|
|
|
|
|
|
|
|
41
|
|
|
|
37,856
|
|
Interest expense
|
|
|
(1,166,225
|
)
|
|
|
(251,309
|
)
|
|
|
|
|
|
|
(26,424
|
)
|
|
|
(1,443,958
|
)
|
Other income, Net
|
|
|
3,151,696
|
|
|
|
(23,191
|
)
|
|
|
|
|
|
|
(47
|
)
|
|
|
3,128,458
|
|
Equity in net income (loss) of unconsolidated affiliates
|
|
|
|
|
|
|
|
|
|
|
8,361,087
|
|
|
|
|
|
|
|
8,361,087
|
|
Total other (expenses) income
|
|
|
2,020,708
|
|
|
|
(271,922
|
)
|
|
|
8,361,087
|
|
|
|
(26,430
|
)
|
|
|
10,083,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2,212,155
|
|
|
|
(1,339,186
|
)
|
|
|
8,361,087
|
|
|
|
(348,793
|
)
|
|
|
8,885,263
|
|
Income tax
|
|
|
(3,345
|
)
|
|
|
90,961
|
|
|
|
|
|
|
|
-
|
|
|
|
87,616
|
|
Net Income( loss)
|
|
$
|
2,208,810
|
|
|
$
|
(1,248,225
|
)
|
|
$
|
8,361,087
|
|
|
$
|
(348,793
|
)
|
|
$
|
8,972,879
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment*
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
As of June 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate property under development
|
|
$
|
-
|
|
|
$
|
66,368,683
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
66,368,683
|
|
Total assets
|
|
|
10,120,878
|
|
|
|
82,293,920
|
|
|
|
54,006,738
|
|
|
|
110,638
|
|
|
|
146,532,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate property under development
|
|
$
|
-
|
|
|
$
|
78,541,247
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
78,541,247
|
|
Total assets
|
|
|
10,272,373
|
|
|
|
88,888,741
|
|
|
|
16,704,953
|
|
|
|
181,215
|
|
|
|
116,047,282
|
|
NOTE 22 - SUBSEQUENT EVENTS
None.