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 March 31, 2018, 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 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
|
|
*
|
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, 2017, 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 March 31, 2018 and the results of operations for the three months ended
March 31, 2018 and 2017, and the cash flows for the three months ended March 31, 2018 and 2017. 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, 2017. The results of operations for the three months ended March 31, 2018 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 March 31, 2018 and
December 31, 2017 are $1: RMB6.2881 and $1: RMB6.5342, 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 three months ended March 31, 2018
and 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 March 31, 2018 and December 31, 2017, the balance
of deferred government subsidy was $5,271,134 and $5,072,605, 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 underwriting 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”). The commission revenue on underwriting sales is recognized when the sales have been consummated,
generally when title is transferred and the Company no longer has substantial continuing involvement with the real estate asset
sold. If the Company provides certain rent guarantees or other forms of support where the maximum exposure to loss exceeds the
gain, it defers the related commission income and expenses by applying the deposit method. In future periods, the commission income
and related expenses are recognized when the remaining maximum exposure to loss is reduced below the amount of income deferred.
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 tax.
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 March 31, 2018 and December 31, 2017, the Company held
cash deposits of $1,111,293 and $1,068,805, 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 - TRANSACTIONAL FINANCIAL ASSETS
As of March 31, 2017, we have $28,194,148
invested in bank wealth management investment products. The investments are short termed with maturity periods and can be rolled
into a maturity date of our choosing or automatically rolled into subsequent maturity period. The annualized rate of return may
range from 4.8% to 5.35% depending on the amount and time period invested.
NOTE
5
- 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 6 – 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 Xiemen 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 March 31, 2018, the
company had recognized the net revenue and cost of revenue of Linyi project at a certain proportion. As of March 31, 2018, land
use rights included in real estate property under development totaled $70,156,329.
NOTE 7 - OTHER RECEIVABLES AND DEPOSITS,
NET
|
|
March31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
Advances to staff
|
|
$
|
111,471
|
|
|
|
118,835
|
|
Rental deposits
|
|
|
59,021
|
|
|
|
72,531
|
|
Prepaid expense
|
|
|
1,902,052
|
|
|
|
22,572
|
|
Prepaid tax
|
|
|
4,915,158
|
|
|
|
4,687,947
|
|
Other receivables
|
|
|
21,408
|
|
|
|
1,817,193
|
|
|
|
$
|
7,009,110
|
|
|
$
|
6,719,078
|
|
Other receivables and deposits as of March
31, 2018 and December 31, 2017 were stated net of allowance for doubtful accounts of $855,985 and $674,478, respectively.
NOTE 8 – PROPERTY AND EQUIPMENT
,
NET
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
Furniture and fixtures
|
|
$
|
173,183
|
|
|
$
|
166,660
|
|
Computer and office equipment
|
|
|
169,607
|
|
|
|
163,969
|
|
Motor vehicles
|
|
|
581,998
|
|
|
|
602,260
|
|
Properties
|
|
|
2,406,048
|
|
|
|
2,315,428
|
|
|
|
|
3,331,663
|
|
|
|
3,248,317
|
|
Less: Accumulated depreciation
|
|
|
(2,035,915
|
)
|
|
|
(1,964,416
|
)
|
|
|
$
|
1,295,748
|
|
|
$
|
1,283,901
|
|
Depreciation and amortization expense for
property and equipment amounted to $126,765 and $28,412 for the three months ended March 31, 2018 and 2017, respectively.
NOTE 9 – INVESTMENT PROPERTIES, NET
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
Investment properties
|
|
$
|
9,847,303
|
|
|
$
|
9,476,420
|
|
Less: Accumulated depreciation
|
|
|
(5,519,308
|
)
|
|
|
(5,221,155
|
)
|
|
|
$
|
4,327,995
|
|
|
$
|
4,255,265
|
|
Depreciation and amortization expense for
investment properties amounted to $834,335 and $428,845 for the three months ended March 31, 2018 and 2017, respectively.
NOTE 10 – INVESTMENT IN AND AMOUNT
DUE FROM UNCONSOLIDATED AFFILIATES
The investments in unconsolidated affiliates
primarily consist of WHYYL (49%) and SHDEW (23.08%) As of March 31, 2018, the investment amount in WHYYL and SHDEW were $10,858
and $74,693,846 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 manufacture and sales 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 March 31, 2018, the
investment in WHYYL was $10,858, which included its equity in net loss of WHYYL, net of income taxes, totaling $91,451 as of March
31, 2018. The following table sets forth the unaudited financial information of WHYYL. For the period ended of March 31, 2018,
the company had recognized the net revenue and cost of revenue of WHYYL project at a certain proportion.
|
|
Three Months ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
91,451
|
|
|
$
|
209,069
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
Current assets
|
|
$
|
17,143,915
|
|
|
$
|
19,066,691
|
|
Non-current assets
|
|
|
8,808
|
|
|
|
9,736
|
|
Total assets
|
|
|
17,152,723
|
|
|
|
19,076,427
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
17,130,011
|
|
|
|
18,965,514
|
|
Total equity
|
|
$
|
22,712
|
|
|
$
|
110,914
|
|
As of March 31, 2018 and December 31, 2017,
the Company has a balance of $2,794,503 and $2,686,498 due from WHYYL, which was no longer charged interest from September 1,
2014.
SHDEW was established in June 2013 with its
business as a skincare and cosmetic company. SHDEW’s online Wechat stores had a membership of over a million members as
of March 31, 2018. SHDEW is developing its own skincare products as well as improving its online ecommerce platform. SHDEW sells
products under its own brands as well as the products of third parties. The products include skincare, cosmetics, personal care
products such as soaps, shampoos, skin care devices and children’s apparel. SHDEW is developing its own online shopping
platform where consumers can purchase its n cosmetics and skincare products as well as products imported into China. The online
shopping platform was in operation in 2017.
As of March 31, 2018, the net profit for SHDEW
was $94,578,607 with total equity in the amount of $323,646,086.
|
|
Three Months ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
Revenues
|
|
$
|
212,372,312
|
|
|
$
|
172,347,128
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
94,578,607
|
|
|
$
|
100,843,389
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
Current assets
|
|
$
|
704,418,074
|
|
|
$
|
647,287,630
|
|
Non-current assets
|
|
|
20,895,911,
|
|
|
|
19,471,756
|
|
Total assets
|
|
|
725,313,985
|
|
|
|
666,759,387
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
401,667,899
|
|
|
|
447,406,389
|
|
Total equity
|
|
$
|
323,646,086
|
|
|
$
|
219,337,694
|
|
NOTE 11– 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 $1,590,305 and $1,530,409 as of March 31, 2018 and December
31, 2017, respectively.
The promissory note with a principal as of
March 31, 2018 amounting to $795,153 bears interest at a rate of 0% per annum, is unsecured and has no fixed term of repayment.
As of March 31, 2018 and December 31, 2017, the outstanding principal and unpaid interest related to this promissory note amounted
to $795,153 and $765,205, respectively.
The promissory note with a principal as of
March 31, 2018 amounts to $795,153 bears interest at a rate of 0% per annum, is unsecured and has no fixed term of repayment.
As of March 31, 2018 and December 31, 2017, the outstanding principal and unpaid interest related to this promissory note amounted
to $795,153 and $765,205, respectively.
For the three months ended March 31, 2018,
the interest expense related to these promissory notes was $NIL.
NOTE 12– AMOUNTS DUE TO DIRECTORS
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
Lin Chi-Jung
|
|
$
|
1,367,983
|
|
|
$
|
5,154,329
|
|
Lin Hsin-Hung
|
|
|
115,757
|
|
|
|
108,842
|
|
|
|
$
|
1,483,740
|
|
|
$
|
5,263,171
|
|
|
(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 March 31, 2018 and
December 31, 2017 were $1,367,983 and $5,154,329, 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 13- OTHER PAYABLES AND ACCRUED EXPENSES
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
Accrued staff commission and bonus
|
|
$
|
314,930
|
|
|
$
|
302,710
|
|
Rental deposits received
|
|
|
94,062
|
|
|
|
161,055
|
|
Customer deposits
|
|
|
-
|
|
|
|
-
|
|
Dividends payable to no controlling interest
|
|
|
213,983
|
|
|
|
291,546
|
|
Other payables
|
|
|
330,814
|
|
|
|
205,924
|
|
|
|
$
|
953,789
|
|
|
$
|
961,235
|
|
NOTE 14- ACCOUNT PAYABLE
Account payable was mostly derived from our
property development of Linyi project and GXL project. As of March 31, 2018 and December 31, 2017, the company’s account
payable amounted to $2,361,447 and $3,767,578.
NOTE 15 – AMOUNT DUE TO AFFILIATES
The total balance is $31,300,260. Of that
total balance, the temporary borrowing, in the amount of $30,719,448 from SHDEW is for operations and is unsecured, interest free
with no fixed payment terms. The amount due to JXSY, in the amount of $561,092 and SHXG, in the amount of $19,720 were intercompany
transfers for day to day operation.
NOTE 16 – CUSTOMER DEPOSITS
Customer deposits were mostly derived from
our property development of Linyi project and GXL project, which were pre-sale collections from our customers. As of March 31,
2018 and December 31, 2017, the Company’s customer deposits amounted to $41,613,715 and $41,468,361, respectively.
NOTE 17 - INCOME TAXES PAYABLE
The 2017 Tax Act was enacted on December 22,
2017. Due to the complexities involved in the accounting for the 2017 Tax Act, the SEC issued SAB 118, which provides guidance
on the application of US GAAP for income taxes in the period of enactment. SAB 118 requires companies to include in their financial
statements a reasonable estimate of the impact of the 2017 Tax Act, to the extent such an estimate has been determined. As a result,
our financial results reflect the income tax effects of the 2017 Tax Act for which the accounting is complete, as well as provisional
amounts for those impacts for which the accounting is incomplete but a reasonable estimate could be determined.
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 March 31, 2018 and December 31, 2017, the Company’s deferred government subsidy amounted to $5,271,134 and $5,072,605,
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 three months ended March31, 2018 and 2017 were
$
31,943 and $50,579,
respectively.
As of March 31, 2018, the Company had the
following operating lease obligations.
|
|
Amount
|
|
|
|
|
|
Within one year
|
|
$
|
28,890
|
|
Two to five years
|
|
|
-
|
|
|
|
$
|
28,890
|
|
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 March 31, 2018 and December 31, 2017,
the Company’s statutory reserve fund was $931,510 and $931,510, 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 March 31, 2018
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
Net revenues
|
|
|
|
|
|
$
|
1,150,325
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,578,795
|
|
Cost of revenues
|
|
|
(226,006
|
)
|
|
|
(857,441
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,083,447
|
)
|
Gross profit
|
|
|
202,464
|
|
|
|
292,884
|
|
|
|
-
|
|
|
|
-
|
|
|
|
495,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(513,610
|
)
|
|
|
(279,808
|
)
|
|
|
-
|
|
|
|
(99
|
)
|
|
|
(793,517
|
)
|
General and administrative expenses
|
|
|
(322,982
|
)
|
|
|
(156,418
|
)
|
|
|
-
|
|
|
|
(5,750
|
)
|
|
|
(485,150
|
)
|
Operating loss
|
|
|
(634,128
|
)
|
|
|
(143,342
|
)
|
|
|
-
|
|
|
|
(5,849
|
)
|
|
|
(783,319
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5,051
|
|
|
|
2,490
|
|
|
|
-
|
|
|
|
3,307
|
|
|
|
10,848
|
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other income, Net
|
|
|
(39
|
)
|
|
|
(145,330
|
)
|
|
|
296,101
|
|
|
|
-
|
|
|
|
150,732
|
|
Equity in net income (loss) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
21,783,932
|
|
|
|
-
|
|
|
|
21,783,932
|
|
Total other (expenses) income
|
|
|
5,012
|
|
|
|
(142,840
|
)
|
|
|
22,080,033
|
|
|
|
3,307
|
|
|
|
21,945,512
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(629,116
|
)
|
|
|
(286,182
|
)
|
|
|
22,080,033
|
|
|
|
(2,542
|
)
|
|
|
21,162,193
|
|
Income tax
|
|
|
(95,415
|
)
|
|
|
67,739
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(31,676
|
)
|
Net Income( loss)
|
|
$
|
724,531
|
|
|
$
|
(222,443
|
)
|
|
$
|
22,080,033
|
|
|
$
|
(2,542
|
)
|
|
$
|
21,130,517
|
|
|
|
Three Months Ended March 31, 2017
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
Net revenues
|
|
$
|
2,581,116
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,581,116
|
|
Cost of revenues
|
|
|
(312,188
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
447
|
|
|
|
(311,741
|
)
|
Gross profit
|
|
|
2,268,928
|
|
|
|
-
|
|
|
|
-
|
|
|
|
447
|
|
|
|
2,269,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(130,820
|
)
|
|
|
(292,831
|
)
|
|
|
-
|
|
|
|
(2,384
|
)
|
|
|
(426,035
|
)
|
General and administrative expenses
|
|
|
(181,328
|
)
|
|
|
(433,049
|
)
|
|
|
-
|
|
|
|
25,276
|
|
|
|
(589,099
|
)
|
Operating loss
|
|
|
1,956,780
|
|
|
|
(725,880
|
)
|
|
|
-
|
|
|
|
23,341
|
|
|
|
1,254,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
4,660
|
|
|
|
4,636
|
|
|
|
-
|
|
|
|
73
|
|
|
|
9,369
|
|
Interest expense
|
|
|
(118,982
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(118,982
|
)
|
Other income, Net
|
|
|
1,111,800
|
|
|
|
(1,417
|
)
|
|
|
|
|
|
|
-
|
|
|
|
1,110,383
|
|
Equity in net income (loss) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
22,747,707
|
|
|
|
-
|
|
|
|
22,747,707
|
|
Total other (expenses) income
|
|
|
997,478
|
|
|
|
3,219
|
|
|
|
22,747,707
|
|
|
|
73
|
|
|
|
23,748,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2,954,258
|
|
|
|
(722,661
|
)
|
|
|
22,747,707
|
|
|
|
23,414
|
|
|
|
25,002,718
|
|
Income tax
|
|
|
-
|
|
|
|
62,113
|
|
|
|
|
|
|
|
-
|
|
|
|
62,113
|
|
Net Income( loss)
|
|
$
|
2,954,258
|
|
|
$
|
(660,548
|
)
|
|
$
|
22,747,707
|
|
|
$
|
23,414
|
|
|
$
|
25,064,831
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
As of March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate property under development
|
|
$
|
-
|
|
|
$
|
70,156,329
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
70,156,329
|
|
Total assets
|
|
|
9,757,072
|
|
|
|
84,874,568
|
|
|
|
103,057,883
|
|
|
|
10,477
|
|
|
|
197,700,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate property under development
|
|
$
|
-
|
|
|
$
|
78,648,609
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
78,648,609
|
|
Total assets
|
|
|
9,593,368
|
|
|
|
94,378,073
|
|
|
|
60,060,943
|
|
|
|
71,716
|
|
|
|
164,104,100
|
|