SUNRISE REAL ESTATE GROUP INC - FORM 10-Q

Attached files

file	filename
EX-32 - EXHIBIT 32 - SUNRISE REAL ESTATE GROUP INC	v427871_ex32.htm
EX-31.1 - EXHIBIT 31.1 - SUNRISE REAL ESTATE GROUP INC	v427871_ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - SUNRISE REAL ESTATE GROUP INC	v427871_ex31-2.htm

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, 2014

¨ 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.)

No. 638, Hengfeng Road 25th Floor, Building A

Shanghai, PRC 200070

(Address of Principal Executive Offices) (Zip Code) Issuer's telephone number: + 86-21-6167-2800

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 ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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: February 26, 2016– 68,691,925 shares of Common Stock.

FORM 10-Q

For the Quarter Ended June 30, 2014

INDEX

		Page
PART I. FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2014and December 31, 2013	3
	Condensed Consolidated Statements of Operations for The Six Months and Three Months Ended June 30, 2014 and 2013	5
	Condensed Consolidated Statements of Comprehensive Income (Loss) for The Six Months and Three Months Ended June 30, 2014 and 2013	6
	Condensed Consolidated Statements of Cash Flows for The Six Months Ended June 30, 2014 and 2013	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

PART II. OTHER INFORMATION		33
Item 1.	Legal Proceedings	33
Item 1A	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	33

SIGNATURES		33

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Expressed in U.S. Dollars)

	June 30,		December 31,
	2014		2013
ASSETS

Current assets
Cash and cash equivalents	$	2,167,437	$	3,503,510
Restricted cash (Note 3)		23,464		246,895
Accounts receivable		1,145,849		1,289,469
Promissory deposits (Note 4)		747,627		754,482
Real estate property under development (Note 5)		35,368,142		31,119,043
Amount due from an affiliate (Note 9)		2,421,280		3,086,185
Other receivables and deposits (Note 6)		10,288,089
Total current assets		52,161,889		40,204,141

Property and equipment, net (Note 7)		8,722,911		9,139,734
Investment properties, net (Note 8)		5,903,517		6,137,819
Deferred tax assets		766,914		469,400
Investment in affiliates(Note 9)		5,362,799		5,642,909
Other investments, net of allowance for impairment loss		146,275		104,315
Total assets	$	73,064,305	$	61,698,318

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities
Short term borrowings (Note 12)		18,446,886		18,616,018
Current portion of long term borrowings (Note 13)		7,963,854		8,036,871
Promissory notes payable (Note 14)		17,767,609		5,076,547
Accounts payable	$	638,352	$	489,582
Amounts due to directors (Note 10)		10,196,003		10,440,238
Amount due to an affiliate		67,754		-
Customer deposits		5,959,411		3,168,369
Other payables and accrued expenses (Note 11)		5,176,196		3,001,581
Other taxes payable		207,849		190,036
Income taxes payable		123,473		190,152
Dividends payables		288,594		-
Total current liabilities		66,835,802		49,209,394

Long term bank loan (Note 13)		0		3,444,374
Deferred government subsidy (Note 15)		5,391,922		5,441,360
Total liabilities		72,227,723		58,095,128

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Continued)

(Expressed in U.S. Dollars)

	June 30,			December 31,
	2014			2013

Shareholders’ equity
Common stock, par value $0.01 per share; 200,000,000 shares authorized; 28,691,925 and 28,691,925 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively	$	286,919		$	286,919
Additional paid-in capital		4,570,008			4,570,008
Statutory reserve (Note 16)		783,101			782,987
Accumulated losses		(16,574,585	)		(14,668,376	)
Accumulated other comprehensive income		122,037			172,214
Total deficit of Sunrise Real Estate Group, Inc.		(10,812,520	)		(8,856,248	)
Non-controlling interests		11,649,102			12,459,438
Total shareholders’ equity		836,582			3,603,190
Total liabilities and shareholders’ equity	$	73,064,305		$	61,698,318

See accompanying notes to unaudited condensed consolidated financial statements.

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Expressed in U.S. Dollars)

	Three Months Ended June 30,						Six Months Ended 30 June,
	2014			2013			2014			2013

Net revenues	$	1,481,098		$	4,487,385		$	4,202,251		$	6,600,814
Cost of revenues		(929,877	)		(1,216,265	)		(2,251,795	)		(2,380,204	)
Gross income		551,221			3,271,120			1,950,456			4,220,610

Operating expenses		(313,745	)		(372,891	)		(944,818	)		(685,815	)
General and administrative expenses		(839,885	)		(771,099	)		(1,673,524	)		(1,822,858	)
Operating income (loss)		(602,409	)		2,127,130			(667,887	)		1,711,937
Other income (expenses)
Interest income		100,686			221,270			200,954			379,218
Interest expense		(835,184	)		(957,045	)		(1,665,943	)		(1,872,192	)
Other income (loss), net		224			932			(12,702	)		16,243
Total other expenses		(734,275	)		(734,843	)		(1,477,691	)		(1,476,731	)

Income (Loss) before income taxes		(1,336,683	)		1,392,287			(2,145,578	)		235,206

Income tax benefit (expense)		88,536			(35,419	)		293,263			(19,638	)
Equity in net loss of unconsolidated affiliates, net of income taxes		(117,071	)		(79,765	)		(229,450	)		(272,787	)

Net loss		(1,365,219	)		1,277,103			(2,081,766	)		(57,219	)
Less: Net income (loss) attributable to non-controlling interests		200,125			(54,716	)		534,544			75,353
Net income (loss) attributable to shareholders of Sunrise Real Estate Group, Inc.	$	(1,165,094	)	$	1,222,387		$	(1,547,221	)	$	18,134
Loss per share – basic and fully diluted	$	(0.04	)	$	(0.04	)	$	(0.06	)		(0.00	)

Weighted average common shares outstanding
- Basic and fully diluted		28,691,925			28,691,925			28,691,925			28,691,925

See accompanying notes to unaudited condensed consolidated financial statements.

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Expressed in U.S. Dollars)

	Three Months Ended June 30,						Six Months Ended 30 June,
	2014			2013			2014			2013

Net loss		(1,365,219	)		1,277,103			(2,081,766	)		(57,219	)
Other comprehensive income (loss)
- Foreign currency translation adjustment		58			120,915			(325,969	)		147,781
Total comprehensive loss		(1,365,161	)		1,398,018			(2,407,735	)		90,562

Less: Comprehensive income attributable to non-controlling interests		201,861			(244,638	)		810,336		$	(145,886	)
Total comprehensive income attributable to shareholders of Sunrise Real Estate Group, Inc.		(1,163,300	)		1,153,380			(1,597,399	)		(55,324	)
Total comprehensive income attributable to shareholders of Sunrise Real Estate Group, Inc.		(1,163,300	)		1,153,380			(1,597,399	)		(55,324	)

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Expressed in U.S. Dollars)

	Six Months Ended June 30,
	2014			2013
Cash flows from operating activities
Net Loss	$	(2,081,766	)	$	(57,219	)

Adjustments to reconcile net loss to net cash used in operating activities
Loss on disposal of property, plant and equipment		14,092			326
Depreciation and amortization		559,113			559,088
Bad debts		(1,454	)		-
Equity in net loss of an unconsolidated affiliate		229,450			193,022
Changes in operating assets and liabilities
Accounts receivable		132,255			896,835
Promissory deposits		-			309,786
Real estate property under development		(4,543,862	)		(4,869,856	)
Customer deposits		2,827,318			-
Amount due from unconsolidated affiliates		(638,558	)		-
Other receivables and deposits		(10,110,726	)		(158,281	)
Deferred tax assets		(302,582	)		(42,592	)
Accounts payable		153,626			(126,917	)
Amount due to an affiliate		67,754
Other payables and accrued expenses		2,207,734			(2,269,731	)
Interest payable on promissory notes		689,447			59,694
Interest payable on amounts due to directors		563,742			444,313
Other taxes payable		19,591			(14,840	)
Income taxes payable		(65,124	)		(103,635	)
Deposits received from underwriting sales		-			(834,411	)
Net cash used in operating activities		(9,002,834	)		(6,014,418	)

Cash flows from investing activities
Advances to an unconsolidated affiliate, net		-			(2,841,709	)
Acquisition of property and equipment		(56,537	)		(7,431	)
Acquisition of equity investment		-			(138,450	)

Net cash used in investing activities		(56,537	)		(2,987,590	)

Cash flows from financing activities
Capital contribution from non-controlling interests of new consolidated subsidiaries		-			40,128
Bank loan repayments		(5,093,421	)		-
Restricted cash		221,776			-
New bank loans		1,666,600			12,638,824
Advances from directors		1,722,177			8,179,198
Repayments of advances from directors		(2,530,154	)		(6,161,859	)
Proceeds from new promissory notes		12,726,428			963,066
Repayment of promissory notes		(724,811	)		(1,765,621	)
Dividend paid to non-controlling interests		(69,544	)		(144,460	)
Net cash provided by financing activities		7,919,051			13,749,276

Effect of exchange rate changes on cash and cash equivalents		(195,753	)		69,028

Net decrease in cash and cash equivalents		(1,336,072	)		4,816,296
Cash and cash equivalents at beginning of period		3,503,510			934,123
Cash and cash equivalents at end of period	$	2,167,438		$	5,750,419

Supplemental disclosure of cash flow information
Income taxes paid	$	75,898		$	164,827
Interest paid		2,059,320			1,510,076

See accompanying notes to unaudited condensed consolidated financial statements.

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

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, 2014, the Company has the following major subsidiaries and equity investments.

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 XinJi 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 GaoFengHui 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

38.5

%¹

Subsidiary

Property brokerage and management services

Suzhou Xi Ji Yang Real Estate Consultation Company Limited (“SZXJY”)

June 25, 2004

PRC

Subsidiary

Property brokerage services

Linyi Shangyang Real Estate Development Company Limited (“LYSY”)

October 13, 2011

PRC

%²

Subsidiary

Real estate development

Shangqiu Shang Yang Real Estate Consultation Company Limited (“SQSY”)

October 20, 2010

PRC

100

Subsidiary

Property brokerage services

Wuhan GaoFengHui Consultation Company Limited (“WHGFH”)

November 10, 2010

PRC

Subsidiary

Property brokerage services

Sanya Shang Yang Real Estate Consultation Company Limited (“SYSY”)

September 18, 2008

PRC

100

Subsidiary

Property brokerage services

Shanghai RuiJian Design Company Limited (“SHRJ”)

August 15, 2011

PRC

100

Subsidiary

Property brokerage services

LinyiRui Lin Construction and Design Company Limited (“LYRL”)

March 6, 2012

PRC

100

%³

Subsidiary

Investment holding

PutianXinJi Yang Real Estate Consultation Company Limited (“PTXJY”)

June 5, 2012

PRC

Subsidiary

Property brokerage services

Company Name

Date of
Incorporation

Place of
Incorporation

% of
Ownership
held by the
Company

Relationship
with the
Company

Principal activity

Shanghai XinJi Yang Real Estate Brokerage Company Limited (“SHXJYB”)

January 28, 2013

PRC

%⁴

Subsidiary

Property brokerage services

Wuhan Yuan Yu Long Real Estate Development Company Limited (“WHYYL”)

December 28, 2009

PRC

Equity investment

Real Estate development

Shanghai Xin Xing Yang Real Estate Brokerage Company Limited (“SHXXY”)

September 28, 2011

PRC

Equity investment

Property brokerage services

Xin Guang Investment Management and Consulting Company Limited (“XG”)

December 17, 2012

PRC

Equity investment

Investment management and consulting

Shanghai Daerwei Commercial Company, Ltd.

June 6, 2013

PRC

Equity Investment

Import and export trading

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 equity interest in LYRL is held by three Chinese individuals in trust for SHXJY.

On January28, 2013, CY-SRRE, SZXJY and an unrelated party established a subsidiary in the PRC, SHXJYB, with CY-SRRE holding a 15% equity interest and SZXJY holding a 60% equity interest in SHXYJB.

The accompanying condensed consolidated balance sheet as of December 31, 2013, 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 the Company as of June 30, 2014 and the results of operations for the three months and six months ended June 30, 2014 and 2013, and the cash flows for the six months ended June 30, 2014 and 2013. 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, 2013. The results of operations for the three months and six months ended June 30, 2014 are not necessarily indicative of the results that 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.

Going Concern

The Company’s condensed consolidated financial statements have been prepared on a going concern, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As of June 30, 2014, the Company has a working capital deficiency, accumulated deficit from recurring net losses, and significant short-term debt obligations currently in default or maturing in less than one year. These factors raise substantial doubts about the Company’s ability to continue as a going concern.

Management believes that the Company will generate sufficient cash flows to fund its operations and to meet its obligations on timely basis for the next twelve months by successful implementation of its business plans, obtaining continued support from its lenders to rollover debts when they became due, and securing additional financing as needed. There is no assurance that the Company will be able to obtain additional financing on acceptable terms and any financing that the Company does obtain will be sufficient to meet its needs in the long term. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations in the case of debt financing, or cause substantial dilution for our shareholders in the case of equity financing. If events or circumstances occur that the Company is unable to successfully implement its business plans, fails to obtain continued supports from its lenders or to secure additional financing, or incurs significant unplanned cash outlays, the Company may be required to suspend operations or cease business entirely.

The accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

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 condensed 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 condensed 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 condensed consolidated statements of operations. The effect of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in shareholders’ equity.

The exchange rates as of June 30, 2014 and December 31, 2013 are $1: RMB 6.1528 and $1: RMB 6.0969 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.

Major Customers

There were no customers that accounted for more than 10% or our net revenues during the six months ended June 30, 2014, and there was one customer that accounted for 29%of our net revenues, during the six months ended June 30, 2013. There were no accounts receivable from these customers as of June 30, 2014 and December 31, 2013.

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 and six months ended June 30, 2014 and 2013, the Company had not recognized any impairment for real estate property under development.

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 in the condensed consolidated balance sheets.

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.

The Company has received refundable government subsidy of $5,391,922as of June 30, 2014. The subsidy is 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 according to the agreed schedules. The Company recorded the subsidy received as a deferred government subsidy.

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 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 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.

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

In December 2011, the FASB issued ASU No. 2011-11, Topic 210 - Balance Sheet: Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU 2011-11 became effective for fiscal years beginning on or after January 1, 2013, with retrospective application for all comparable periods presented. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In February 2013, the FASB issued ASU 2013-12, Topic 220 - Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02 changes the presentation requirements of significant reclassifications out of accumulated other comprehensive income in their entirety and their corresponding effect on net income. For other significant amounts that are not required to be reclassified in their entirety, the standard requires the company to cross-reference to related footnote disclosures. ASU 2013-02 became effective for the company on January 1, 2013. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

New Accounting Pronouncements

In March 2013, the FASB issued ASU 2013-05 Topic 830 – Foreign Currency Matters (“ASU 2013-05”). ASU 2013-05 resolves the diversity in practice about whether Subtopic 810-10, Consolidation—Overall, or Subtopic 830-30, ASU 2013-05 applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. In addition, the amendments in this Update resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. ASU 2013-02 became effective for the company prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material effect on the Company’s condensed consolidated financial statements.

The FASB has issued ASU 2013-04 Topic 405 - Liabilities: Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). ASU 2013-04 provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this ASU is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. The guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on the Company’s condensed consolidated financial statements.

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, 2014 and December 31, 2013, the Company held cash deposits of $23,464 and $246,895 respectively, as security for its bank loans (see Note 12). These balances are subject to withdrawal restrictions and are 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 are 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 in the 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 2012 fiscal year.

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 Project, which is located in the Putuo district, Shanghai, PRC. This project covers a site area of approximately 2,502 square meters for the development of one building of apartment.

As of June 30, 2014, land use rights included in real estate property under development totaled $35,368,142.

Real estate property under development as of June 30, 2014 has been pledged as collateral for the Company’s bank loans (See Note 13).

NOTE 6 - OTHER RECEIVABLES AND DEPOSITS, NET

	June 30,		December 31,
	2014		2013

Advances to staff	$	13,110		40,477
Rental deposits		134,576		44,154
Prepaid expenses		60,949		-
Prepaid tax		352,244		-
GuangXinlu Project		9,515,716		-
Other receivables		211,493		269,144
	$	10,288,089	$	204,557

Other receivables and deposits as of June 30, 2014 and December 31, 2013 are stated net of allowance for doubtful accounts of $109,223 and $99,437, respectively.

NOTE 7 – PROPERTY AND EQUIPMENT, NET

	June 30,			December 31,
	2014			2013

Furniture and fixtures	$	249,580		$	423,461
Computer and office equipment		279,674			293,100
Motor vehicles		747,570			878,732
Properties		9,794,262			9,657,427
		11,071,086			11,252,720
Less: Accumulated depreciation		(2,348,175	)		(2,112,986	)
	$	8,722,911		$	9,139,734

Depreciation and amortization expense for property and equipment amounted to$380,100 and $286,372 for the six months ended June 30, 2014 and 2013, respectively.

All properties as of June 30, 2014 and December 31, 2013were pledged as collateral for the Company’s bank loans (See Note 12).

NOTE 8 – INVESTMENT PROPERTIES, NET

	June 30,			December 31,
	2014			2013

Investment properties	$	10,063,845		$	10,156,116
Less: Accumulated depreciation		(4,160,328	)		(4,018,297	)
	$	5,903,517		$	6,137,819

Depreciation and amortization expense for investment properties amounted to$179,013and $272,716 for the six months ended June 30, 2014 and 2013, respectively.

All investment properties as of June 30, 2014 and December 31, 2013were pledged as collateral for the Company’s bank loans (See Note12).

NOTE 9 – INVESTMENT IN AND AMOUNT DUE FROM AN UNCONSOLIDATED AFFILIATE

In 2011, the Company invested $4,147,027 for acquiring 49% equity interest in WHYYL to expand its operations to real estate development business. WHYYL is 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. The Company has accounted for this investment using the equity method as the Company has the ability to exercise significant influence over their activities.

As of June 30, 2014, the net investment in WHYYL was $5,362,799 which included its equity in net loss of WHYYL, net of income taxes, totaling $468,266 as of June 30, 2014. The Company’s equity in net loss of the unconsolidated affiliate, net of income taxes, during the three months ended June 30, 2014 and 2013 amounted to $117,071 and $79,765, respectively; and during the six months ended June 30, 2014 and 2013 amounted to $229,450 and $272,787, respectively.

The following table sets forth the financial information of WHYYL.

	Three Months Ended June 30,				Six Months Ended 30 June,
	2014		2013		2014		2013

Revenue	$	-	$	-	$	-	$	-

Net loss		238,921		162,786		468,266		556,708

	June 30,		December 31,
	2014		2013

Current assets	$	62,012,718	$	56,344,599
Non-current assets		876,735		794,446
Total assets		62,889,453		57,139,045

Current liabilities		51,944,402		45,581,987
Total equity	$	11,003,357	$	11,557,058

As of June 30, 2014 and December 31, 2013, the Company has a balance of $2,416,836 and $3,086,185 due from WHYYL, which bears interest at a rate of 15% per annum, is unsecured and has no fixed term of repayment. The Company recorded interest income from WHYYL of $97,838 and $195,156, respectively, for the three months and six months ended June 30, 2014. There was no interest income from WHYYL during 2013.

During the three months and six months ended June 30, 2014 and 2013, the Company had no impairment loss for investment in an unconsolidated affiliate.

NOTE 10– AMOUNTS DUE TO DIRECTORS

	June 30,		December 31,
	2014		2013

Lin Chi-Jung	$	10,148,221	$	10,398,904
Lin Hsin-Hung		47,782		1,484
Lin Chao-Chin		-		39,850
	$	10,196,003	$	10,440,238

(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, 2014 and December 31, 2013 were $10,148,221 and $10,398,904, respectively. The balances are unsecured and interest bearing at rates ranging from 18% to 30% per annum.

(b)

The balances due to Lin Chao-Chin and Lin Hsin-Hung are unsecured, interest-free and have no fixed term of repayment.

The interest expenses on amounts due to directors amounted to $434,145 and $396,612 for the three months ended June 30, 2014 and 2013; and $930,400 and $741,179, respectively, for the six months ended June 30, 2014 and 2013.

NOTE 11- OTHER PAYABLES AND ACCRUED EXPENSES

	June 30,		December 31,
	2014		2013

Accrued staff commission and bonus	$	475,853	$	1,058,882
Rental deposits received		527,806		687,700
Customer deposits		87,698		151,243
GuangXinLu Project		3,029,546		-
Accrued expenses		-		597,453
Other payables		1,055,293		506,303
	$	5,176,196	$	3,001,581

Other payables amount of $1,055,293 including payables to Nanjing Longchang, Xu Zhiling, Huiying, Mclaughlin & Stern, LLP, amount of $455,077, $162,527, $109,040 and $58,831, respectively.

NOTE 12 – BANK LOANS

In January 2014, the Company obtained a bank loan of $1,300,221 (RMB 8,000,000) from the Bank of China, bearing interest at a rate of 7.56% per annum. The loan is secured by the properties of two unrelated parties and matured on March 1, 2014. This loan is renewed automatically every year. This loan will mature on March 1, 2015. As of June 30, 2014, the outstanding balance of this loan was $1,300,221. As of December 31, 2013, the outstanding balance of this loan was $1,312,143.

In August 2012, the Company entered into a 3-year revolving facility line of credit agreement with First Sino Bank. Under the terms of the agreement, the Company could borrow a maximum amount of $4,957,093 (RMB 30,500,000) as of June 30, 2014. The borrowings under this facility bear interest at a rate per annum equal to 125% of the prevailing base lending rate for periods ranging from 1 year to 3 years as announced by the People’s Bank of China (“PBOC”). The average interest rate for the six months ended June 30, 2014 was 7.6875% per annum. The credit facility is secured by all of the Company’s properties included in property and equipment (See Note 7), guaranteed by a director of the Company, and matures on March 31, 2015. Borrowings under this facility are renewable for an additional period no longer than 12 months and are due no later than March 31, 2015. As of June 30, 2014 and December 31, 2013, the Company had outstanding loan balances of $4,957,093 (RMB 30,500,000) and $5,002,543 (RMB 30,500,000), respectively, under this facility line of credit.

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 $12,189,572 (RMB 75,000,000) as of June 30, 2014. The borrowings under this facility bear interest at a rate per annum equal to 125% 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, 2014 was 7.6875% per annum. The facility of credit is secured by all of the Company’s investment properties (See Note 8) and guaranteed by a director of the Company, and matures on March 31, 2015. Borrowings under this facility are renewable for an additional period no longer than 36 months and are due no later than March 31, 2015. As of June 30, 2014 and December 31, 2013, the Company had outstanding loan balances of $12,189,572 (RMB 75,000,000) and $12,301,332 (RMB 75,000,000), respectively, under this facility line of credit.

NOTE 13- CURRENT PORTION OF LONG TERM BORROWINGS

On May 16, 2013, the Company entered into a project finance loan agreement with China CITIC Bank to finance the development of the Company’s Linyi Project. The loan has a 2-year term in the principal amount of $11,379,229 (RMB 70,000,000) at an interest rate of 14.21% per annum, which is 8.06% over the benchmark lending rate from PBOC.

	June 30,		December 31,
	2014		2013

Outstanding borrowings	$	7,963,854	$	11,481,245
Less: Current portion of long term borrowings		7,963,854		8,036,871
		0		3,444,374

For the period ended June 30, 2014, total loan interest was approximately $812,822, which was capitalized in the development cost of the Linyi project.

The Company pledged its real estate properties in the Linyi project with carrying value of $34,035,913 as of June 30, 2014. The loan is also subject to certain covenants including floating mortgage ratio not more than 50%. Floating mortgage rate is calculated as the outstanding principal and unpaid interest after deduction of guaranteed funds kept in the stipulated bank account divided by the value of pledged properties. In addition, the Company is required to maintain all monies received from sales of any properties relating to the Linyi project in a stipulated bank account as guaranteed funds, which will be classified as restricted cash, the cash restricted in relation to the borrowings from China CITIC Bank was $23,464 (2013: $246,895). In May 2014, the Company paid $3,413,080(RMB 21,000,000) to the bank. As of June 30, 2014, the Company had outstanding loan balance of $7,963,854 (RMB 49,000,000) under this facility line of credit.

NOTE 14 – PROMISSORY NOTES PAYABLE

The promissory notes payable consist of the following unsecured notes to unrelated parties.

The promissory notes payable consist of the following unsecured notes to unrelated parties. Included in the balances are promissory notes with an aggregate outstanding principal and unpaid interest are $17,767,609 and $5,076,547 as of June 30, 2014 and December 31, 2013, respectively.

The promissory note with an outstanding principal of $1,963,164 bears interest at a rate of 12% per annum, is unsecured and has a maturity date of January 31, 2013 and the new terms of repayment had not been determined with the debtor and therefore has no fixed term of repayment As of June 30, 2014 and December 31, 2013, the outstanding principal in default and unpaid interest related to this promissory note amounted to $1,980,600 and $2,308,974, respectively. The Company is currently making payments towards this loan.

The promissory note with a principal of $812,638 bears interest at a rate of 15% per annum, is unsecured and has no fixed term of repayment. As of June 30, 2014 and December 31, 2013, the outstanding principal and unpaid interest related to this promissory note amounted to $1,174,574 and $1,252,276, respectively.

The promissory note with a principal of $1,625,276bears an interest rate of 20% per annum is unsecured and has no fixed term of repayment. As of June 30, 2014, the outstanding principal and unpaid interest related to this promissory note amounted to $1,719,676.

The promissory note with a principal and unpaid interest of $4,875,829 as of June 30, 2014 bears interest at the rate of 26.7% per annum, is unsecured and has no fixed term of repayment. As of June 30, 2014, the outstanding principal and unpaid interest related to this promissory note amounted to $5,207,160.

The promissory note with a principal and unpaid interest of $162,528 as of June 30, 2014 bears interest at the rate of 20% per annum is unsecured and has no fixed term of repayment. As of June 30, 2014, the outstanding principal and unpaid interest related to this promissory note amounted to $170,899.

The promissory note with a principal and unpaid interest of $2,299,766 as of June 30, 2014 bears interest at the rate of rate of 36% per annum is unsecured and has no fixed term of repayment. As of June 30, 2014, the outstanding principal and unpaid interest related to this promissory note amounted to $1,974,711.

The promissory note with a principal and unpaid interest of $812,638 as of June 30, 2014 bears interest at the rate of 15% per annum is unsecured and has no fixed term of repayment. As of June 30, 2014, the outstanding principal and unpaid interest related to this promissory note amounted to $825,997.

The promissory note with a principal of $3,250,922 bears no interest, is unsecured and has no fixed terms of repayment. As of June 30, 2014, the outstanding principal and unpaid interest related to this promissory note amounted to $3,250,922.

The promissory note with a principal of $300,000 bears interest at a rate of 15% per annum, is unsecured and has no fixed term of repayment. As of June 30, 2014 and December 31, 2013, the outstanding principal and unpaid interest related to this promissory note amounted to $356,250 and $280,176, respectively.

The outstanding principal and unpaid interest related to a promissory note of $178,779 at December 31, 2013 was paid in the first quarter of 2014.

The interest expense on promissory notes amounted to $636,930 and $174,821 for the three months ended June 30, 2014 and 2013; and $814,342 and $405,986, respectively, for the six months ended June 30, 2014 and 2013.

NOTE 15 – DEFERRED GOVERNMENT SUBSIDY

Deferred government subsidy consists of the cash subsidy provided by the local government.

Government subsidies received as of June 30, 2014 and December 31, 2013 were $5,391,922 and $5,441,360, 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 the condensed consolidated balance sheets.

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.

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, 2014 and December 31, 2013, the Company’s statutory reserve funds were $783,101 and$782,987, respectively.

NOTE 17- 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 were $55,510 and $95,522 for the three months ended June 30, 2014 and 2013, respectively; and $120,785 and $95,522 for the six months ended June 30, 2014 and 2013, respectively.

As of June 30, 2014, the Company had the following operating lease obligations falling due.

	Amount

Within one year	$	73,139
Two to five years		6,800
	$	79,939

NOTE 18- 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, loss from operations and net loss. The following tables show the operations of the Company's operating segments:

	Three Months Ended June 30, 2014
	Property
	Brokerage			Real Estate
	Services			Development			Corporate			Total
Net revenues		1,481,098		$	-		$	-		$	1,481,098
Cost of revenues		(929,877	)		-			-			(929,877	)
Gross income		551,221			-			-			551,221

Operating expenses		(220,655	)		(93,090	)		-			(313,745	)
General and administrative expenses		(640,757	)		(117,530	)		(81,598	)		(839,885	)
Operating profit(loss)		(310,191	)		(210,620	)		(81,598	)		(602,409	)

Other income (expenses)
Interest income		100,372			314			-			100,686
Interest expense		(823,935	)		2,775			(11,250	)		(835,184	)
Other income, Net		(2,551	)		2,775			-			224
Total other (expenses) income		(726,113	)		3,088			(11,250	)		(734,275	)

Income (loss) before income tax		(1,036,304	)		(207,532	)		(92,848	)		(1,336,683	)

Income tax expense		79,724			8,812			-			88,536
Equity in net loss of an affiliate of income taxes		(117,071	)		-			-			(117,071	)
Net income (loss)	$	1,073,652		$	(198,719	)	$	(92,848	)	$	(1,365,219	)

	Three Months Ended June 30, 2013
	Property Brokerage Services			Real Estate Development			Corporate			Total
Net revenues		4,487,385		$	-		$	-		$	4,487,385
Cost of revenues		(1,216,265	)		-			-			(1,216,265	)
Gross income		3,271,120			-			-			3,271,120

Operating expenses		(321,058	)		(51,833	)		-			(372,891	)
General and administrative expenses		(667,226	)		(81,233	)		(22,640	)		(771,099	)
Operating profit(loss)		2,282,836			(133,066	)		(22,640	)		2,127,130

Other income (expenses)
Interest income		195,423			25,847			-			221,270
Interest expense		(955,030	)		-			(2,015	)		(957,045	)
Other income, Net		932			-			-			932
Total other (expenses) income		(758,675	)		25,847			(2,015	)		(734,843	)

Income (loss) before income tax		1,524,161			(107,219	)		(24,655	)		1,392,287

Income tax expense		(35,419	)		-			-			(35,419	)
Equity in net loss of an affiliate of income taxes		-			(79,765	)		-			(79,765	)
Net income (loss)	$	1,488,742		$	(186,984	)	$	(24,655	)	$	1,277,103

	Six Months Ended June 30, 2014
	Property
	Brokerage			Real Estate
	Services			Development			Corporate			Total
Net revenues		4,202,251		$	-		$	-		$	4,202,251
Cost of revenues		(2,251,795	)		-			-			(2,251,795	)
Gross income		1,950,456			-			-			1,950,456

Operating expenses		(496,233	)		(448,585	)		-			(944,818	)
General and administrative expenses		(1,303,768	)		(253,589	)		(116,168	)		(1,673,524	)
Operating income(loss)		150,456			(702,174	)		(116,168	)		(667,887	)

Other income (expenses)
Interest income		200,076			878			-			200,954
Interest expense		(1,643,443	)		-			(22,500	)		(1,665,943	)
Other income, Net		(14,967	)		2,264			-			(12,702	)
Total other (expenses) income		(1,458,334	)		3,142			(22,500	)		(1,477,691	)

Profit/ (loss) before income taxes		(1,307,878	)		(699,032	)		(138,668	)		(2,145,578	)

Income tax (expense) benefit		168,932			130,034			(5,704	)		293,263
Equity in net loss of unconsolidated affiliate		(229,450	)		-			-			(229,450	)
Net loss	$	(1,368,396	)	$	(568,998	)	$	(144,372	)	$	(2,081,766	)

	Six Months Ended June 30, 2013
	Property Brokerage Services			Real Estate			Corporate			Total
Net revenues	$	6,600,814		$	-		$	-		$	6,600,814
Cost of revenues		(2,380,204	)		-			-			(2,380,204	)
Gross income		4,220,610			-			-			4,220,610

Operating expenses		(622,491	)		(63,324	)		-			(685,815	)
General and administrative expenses		(1,478,540	)		(153,669	)		(190,650	)		(1,822,858	)
Operating income (loss)		2,119,579			(216,993	)		(190,650	)		1,711,937

Other income (expenses)
Interest income		329,382			49,836			-			379,218
Interest expense		(1,845,661	)		-			(26,531	)		(1,872,192	)
Other income, Net		16,243			-			-			16,243
Total other (expenses) income		(1,500,036	)		49,836			(26,531	)		(1,476,732	)

Profit/ (loss) before income taxes		619,543			(167,157	)		(217,181	)		235,205

Income tax (expense) benefit		(35,419	)		15,781			-			(19,638	)
Equity in net loss of an affiliate of income taxes		(79,765	)		(193,022	)		-			(272,787	)
Net income/ (loss)	$	504,359		$	(344,398	)	$	(217,181	)	$	(57,220	)

	Property
	Brokerage		Real Estate
	Services		Development		Corporate		Total
As of June 30, 2014
Real estate property under development	$	-	$	35,368,142	$	-	$	35,368,142
Total assets		35,618,357		37,430,892		15,056		73,064,305

As of December 31, 2013
Real estate property under development	$	-	$	31,119,043	$	-	$	31,119,043
Total assets		19,282,576		42,400,822		14,921		61,698,318

NOTE 19 - SUBSEQUENT EVENTS

On August 20, 2014, the Company entered into a Share Purchase Agreement with Ace Develop Properties Limited (“Ace”) to issue 20 million shares to Ace for RMB 10,472,000 (US $1,700,000 equivalent). This agreement, subject to standard closing terms and conditions, is scheduled to close on or before August 31, 2014. Ace is wholly-owned by Lin Chi-Jung, our Chief Executive Officer, President and Chairman of the Board. On August 30, 2014 the Company received the funds from Ace and has issued 20 million shares of common stock to Ace.

On November 10, 2014, the Company entered into a Share Purchase Agreement with Ace Develop Properties Limited (“Ace”) to issue 20 million shares to Ace for RMB 10,460,000 (US $1,700,000 equivalent). This agreement, subject to standard closing terms and conditions, is scheduled to close on or before November 28, 2014. Ace is wholly-owned by Lin Chi-Jung, our Chief Executive Officer, President and Chairman of the Board.

On March 13, 2015, our Board of Directors engaged Kenne Ruan, CPA, P.C. (“Kenne Ruan”) as the Registrant’s certifying accountant to audit the registrant's financial statements, replacing its former certifying accountant, Finesse CPA, P.C. (“Finesse”). Upon receipt of the notice that the Registrant’s acceptance of the proposal from Kenne Ruan to audit its consolidated financial statements for the fiscal year ending December 31, 2014, Finesse resigned as the Registrant’s certifying accountant on March 13, 2015.

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

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q

In addition to historical information, this Form 10-Q contains forward-looking statements. Forward-looking statements are based on our current beliefs and expectations, information currently available to us, estimates and projections about our industry, and certain assumptions made by our management. These statements are not historical facts. We use words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", and similar expressions to identify our forward-looking statements, which include, among other things, our anticipated revenue and cost of our agency and investment business.

Because we are unable to control or predict many of the factors that will determine our future performance and financial results, including future economic, competitive, and market conditions, our forward-looking statements are not guarantees of future performance. They are subject to risks, uncertainties, and errors in assumptions that could cause our actual results to differ materially from those reflected in our forward-looking statements. We believe that the assumptions underlying our forward-looking statements are reasonable. However, the investor should not place undue reliance on these forward-looking statements. They only reflect our view and expectations as of the date of this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement in light of new information, future events, or other occurrences.

There are several risks and uncertainties, including 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. These risks and uncertainties can materially affect the results predicted. The Company’s future operating results over both the short and long term will be subject to annual and quarterly fluctuations due to several factors, some of which are outside our control. These factors include but are not limited to fluctuating market demand for our services, and general economic conditions.

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand Sunrise Real Estate Group, Inc. (“SRRE”). MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes.

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 (“GAAP”) 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 XinJi Yang Real Estate Consultation Company Limited (“SHXJY”), Shanghai Shang Yang Real Estate Consultation Company, Ltd. (“SHSY”), Suzhou GaoFengHui Property Management Company, Ltd, (“SZGFH”), Suzhou Shang Yang Real Estate Consultation Company (“SZSY”), Suzhou XinJi Yang Real Estate Consultation Company, Ltd. (“SZXJY”), Linyi Shang Yang Real Estate Development Company Ltd (“LYSY”), Shangqiu Shang Yang Real Estate Consultation Company, Ltd., (“SQSY”), Wuhan GaoFengHui Consultation Company Ltd. (“WHGFH”), Sanya Shang Yang Real Estate Consultation Company, Ltd. (“SYSH”), Shanghai RuiJian Design Company, Ltd., (“SHRJ”), Shanghai XinJi Yang Real Estate Brokerage Company Limited (“SHXJYB”), and its equity investment in an affiliate, namely Wuhan Yuan Yu Long Real Estate Development Company, Ltd. (“WHYYL”) 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, property management services, and real estate development 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 and branches in Shanghai, Suzhou, Yangzhou, Chongqing, Quanjiao, Hainan, Shangqiu, Chengdu, Wuhan, Kunshan and Linyi.

In mid-2011, we established a project company in Wuhan in which we have a 49% ownership. We commenced the construction of Phase 1 of the project in the third quarter of 2012 and the pre-sale of Phase 1 in the first quarter of 2013. We have begun Phase 2 construction of the project in the second quarter of 2013 and the pre-sale of Phase 2 was started in mid-August. The Wuhan project is planned to include seven residential buildings with three buildings being part of Phase 1 and four buildings in Phase 2.

The Wuhan project was supposed to have its handover from the construction contractor, Hubei Fifth Constructions Co. (“HFCC”), on December 31, 2014, but because of a dispute between the Company and HFCC, the handover was delayed and is currently under court review.

In January 2012, we established Linyi Shang Yang Real Estate Development (“LYSY”) in which we have a 24% ownership. During the first quarter of 2012, we acquired approximately 103,385 square meters for the purpose of developing villa-style residential housing. We began construction in mid-2012 and to date have constructed 98 units which encompasses approximately one-third of the gross sales area. Proceeds from sales will be used to finance the construction of the subsequent phases of the project. We are applying for bank loans and other forms of funding, however there are no assurances we will be able to obtain future financings.

In March 13, 2014, the Company has signed a joint development agreement with Zhongji Pufa Real Estate Co. According to this agreement, the Company has got the right to develop the Guangxinglu Project, which is 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.

RECENTLY ADOPTED ACCOUNTING STANDARDS

In February 2013, the FASB issued ASU 2013-12, Topic 220 - Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02 changes the presentation requirements of significant reclassifications out of accumulated other comprehensive income in their entirety and their corresponding effect on net income. For other significant amounts that are not required to be reclassified in their entirety, the standard requires the company to cross-reference to related footnote disclosures. ASU 2013-02 became effective for the Company for fiscal years starting from January 1, 2013. The adoption of this guidance did not have a material impact on the Company’s financial statements.

NEW ACCOUNTING PRONOUNCEMENTS

In March 2013, the FASB issued ASU 2013-05 Topic 830 – Foreign Currency Matters (“ASU 2013-05”). ASU 2013-05 resolves the diversity in practice about whether Subtopic 810-10, Consolidation - Overall, or Subtopic 830-30, ASU 2013-05 applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business (other than a sale of in substance real estate or conveyance of oil and gas mineral rights) within a foreign entity. In addition, the amendments in this Update resolve the diversity in practice for the treatment of business combinations achieved in stages (sometimes also referred to as step acquisitions) involving a foreign entity. ASU 2013-02 became effective for the company prospectively for fiscal years (and interim reporting periods within those years) beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material effect on the Company’s financial statements.

In July 2013, the FASB issued ASU 2013-11 Topic 740 – Income Taxes: Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). This update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, unless otherwise provided in the update. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not expect the adoption of this guidance to have a material impact on the Company’s financial statements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenues and expenses, to disclose contingent assets and liabilities on the date of the consolidated financial statements, and to disclose the reported amounts of revenues and expenses incurred during the financial reporting period. The most significant estimates and assumptions include revenue recognition, and the useful lives and impairment of property and equipment, and investment properties, the valuation of real estate property under development, the recognition of government subsidies, and the provisions for income taxes. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe critical accounting policies as disclosed in this Form 10-Q reflect the more significant judgments and estimates used in preparation of our consolidated financial statements. We believe there have been no material changes to our critical accounting policies and estimates.

The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our condensed consolidated financial statements.

Revenue Recognition

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.

All revenues represent gross revenues less sales and business taxes.

Real Estate Property under Development

For the three months and six months ended June 30, 2014 and 2013, the Company had not recognized any impairment for real estate property under development.

Impairment of Long-lived Assets

In accordance with ASC 360, "Accounting for the Impairment or Disposal of Long-Lived Assets", the Company is required to review its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

The Company tests long-lived assets, including property and equipment, investment properties and other assets, for recoverability when events or circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally determined by using the asset's expected future discounted cash flows or market value. The Company estimates fair value of the assets based on certain assumptions such as budgets, internal projections, and other available information as considered necessary. There is no impairment of long-lived assets during the three months and six months ended June 30, 2014 and 2013.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”), which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

The Company recognizes tax benefits that satisfy a greater than 50% probability threshold and provides for the estimated impact of interest and penalties for such tax benefits. The Company did not incur any interest or penalties related to potential underpaid income tax expenses during the three months and six months ended June 30, 2014 and 2013.

Government Subsidies

Government subsidies include cash subsidies received by the Company’s subsidiaries in the PRC from local governments.

As of June 30, 2014, the Company received refundable government subsidies of $5,391,922. 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 by the agreed date. The Company recorded the subsidy received as a deferred government subsidy in the condensed consolidated balance sheets.

RESULTS OF OPERATIONS

We provide the following discussion and analyses of our changes in financial condition and results of operations for the three months and six months ended June 30, 2014 with comparisons to the three months and six months ended June 30, 2013.

Net Revenues

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

	Three Months Ended June 30,											Six Months Ended June 30,
	2014		% to total		2013		% to total		% change			2014		% to total		2013		% to total		% change
Agency sales		826,641		56		3,467,371		77		(76	)		2,497,516		59		4,421,301		67		(44	)
Property management		654,456		44		649,689		15		1			1,704,735		41		1,089,248		17		57
Underwriting sales		-		0		370,305		8		(100	)		-		0		1,090,265		17		(100	)
Net revenues		1,481,097		100		4,487,365		100		(67	)		4,202,251		100.00		6,600,814		100.00		(36	)

The net revenue in the second quarter of 2014 was $1,481,097, which decreased 67% from $4,487,365 in the second quarter of 2013. The net revenues of the first two quarters of 2014 were$4,202,251, which decreased 36% from $6,600,814 of the first two quarters of 2013. In the second quarter of 2014, agency sales represented 56% of our net revenues, property management represented 44%, and underwriting sales represented 0%. In the first two quarters of 2014, agency sales represented 59% of our net revenues property management represented 41%, and underwriting sales represented 0%. The decrease in net revenue was due to the decrease in agency sales projects as well as the revenue from property management.

Agency sales

In the second quarter and first two quarters of 2014, 56% and 59%, respectively, of our net revenues were attributable to agency sales. As compared with similar periods in 2013, net revenue of agency sales decreased 76% and 44%, respectively, in the second quarter and the first two quarters of 2013. The primary reason was that there were less sales agency projects that were completed during the second quarter of 2014, which contributed to the decrease in our agency sales revenue.

Because of our diverse market locations, the risk of market fluctuations has reduced our business operations in agency sales in 2014, and we are seeking stable growth in our agency sales business in 2014. However, there can be no assurance that we will be able to do so.

Property management

In 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 a rental return of 8.5% and 8.8% per annum for a period of 5 years and 8 years, respectively. Regarding the leasing agreements, we have negotiated with the buyers and have lowered the annual rental return rate for the remaining leasing period from 8.5% for 5 years to 5.8%, and from 8.8% for 8 years to 6%.The leasing period started in the second quarter, of 2006, and the Company has the right to sublease the leased properties to cover these lease commitments in the leasing period.

As of 2014 the sub-leasing program is complete and there are no more subleasing obligations.

Underwriting sales

In February 2004, SHSY entered into an agreement to underwrite an office building in Suzhou, known as Suzhou Sovereign Building. Being the sole distribution agent for this office building, SHSY committed to a sales target. Property underwriting sales are comparatively a higher risk business model compared to our pure commission based agency business. Under this higher risk business model, the Underwriting Model, our commission is not calculated as a percentage of the selling price; instead, our commission revenue is equivalent to the price difference between the final selling price and underwriting price. We negotiate with a developer for an underwriting price that is as low as possible, with the guarantee that all or a majority of the units will be sold by a specific date. In return, we are given the flexibility to establish the final selling price and earn the price difference between the final selling price and the underwriting price. The risk of this kind of arrangement is that if there is any unsold unit on the expiration date of the agreement, we may have to absorb the unsold property units from developers at the underwriting price and hold them in our inventory or as investments.

The Company accounts for its underwriting sales revenue with underwriting rent guarantees in accordance with ASC976-605, “Accounting for Sales of Real Estate” (Formerly Statement of Financial Accounting Standards No. 66, “Accounting for Sales of Real Estate”). The deposit method has been used for the revenue from the sales of floor space with underwriting rent guarantees until the revenues generated by sub-leasing properties exceed the guaranteed rental amount due to the purchasers. As of 2014 there was no more underwriting obligation.

Cost of Revenues

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

	Three Months Ended June 30,											Six Months Ended June 30,
	2014		% to total		2013		% to total		% change			2014		% to total		2013		% to total		% change
Agency sales		534,418		57		666,401		55		(20	)		1,204,714		54		1,205,204		50		0
Property management		395,459		43		459,573		38		(14	)		1,047,081		46		920,383		39		14
Underwriting sales		0		0		90,291		7		(100	)		0		0		254,617		11		(100	)
Cost of revenues		929,877		100.00		1,216,265		100		(24	)		2,251,795		100.00		2,380,204		100		(5	)

The cost of revenues of the second quarter of 2014 was $929,877, which decreased 24% from $1,216,265 during the second quarter of 2013. The cost of revenues of the first two quarters of 2014 was $2,251,795, which decreased 5% from $2,380,204 during the first two quarters of 2013. In the second quarter of 2014 agency sales represented 57% of our cost of revenues, property management represented 43%, and underwriting sales represented 0%. In the first two quarters of 2014, agency sales represented 54% of our cost of revenues, property management represented 46%, and underwriting sales represented 0%. The increase in cost of revenue in the second quarter and first two quarters of 2014 was mainly due to the increase in the cost of revenue for our agency sales and property management.

Agency sales

As compared with similar periods in 2013, cost of revenue of agency sales decreased 20% in the second quarter of 2014 and almost no change for the first two quarters of 2014 and 2013, respectively.=The decrease was due to less commission paid resulting from the decrease in agency sales.

Property management

The cost of revenue from property management of the second quarter of 2014 was $395,459, which decreased 14% from $459,573 for the second quarter of 2013. The cost of revenue of the first two quarters of 2014 was $1,047,081, which increased 14% from $920,383 during the first two quarters of 2013. This decrease in cost was an overall cost saving in marketing, promotion and minor staff costs.

Underwriting sales

We had no underwriting cost for the six months ended June 30, 2014 as the underwriting operation has been terminated.

Operating Expenses

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

	Three Months Ended June 30,											Six Months Ended June 30,
	2014		% to total		2013		% to total		% change			2014		% to total		2013		% to total		% change
Agency sales		192,598		61		304,081		92		(37	)		452,485		48		583,488		85		(22	)
Property management		28,057		9		16,977		8		65			43,748		5		39,003		6		12
Real estate development		93,090		30		51,833		0		80			448,585		47		63,324		9		608
Operating expenses		313,745		100		372,891		100		(16	)		944,818		100		685,815		100		38

The operating expenses for the second quarter of 2014 were $313,745, which decreased 16% from $372,891 for the same period in 2013. The total operating expenses for the first two quarters of 2014 were $944,818, which increased 38% from $685,815 for the same period in 2013. In the second quarter of 2014, agency sales represented 61% of the total operating expenses, property management represented 9%, and real estate development represented 30%. In the first two quarters of 2014, agency sales represented 48% of the total operating expenses, property management represented 5%, and real estate development represented 47%. The increase in the overall operating expense was due to the increase in real estate development for the second quarter and the first two quarters of 2014.

Agency sales

Compared to the same periods in 2013, the operating expenses for agency sales in the second quarter and the first two quarters of 2014 decreased by 37% and 22%, respectively. The reason for the decrease was less sales activity and therefore less expenses such as travel and marketing expenses.

Property management

Compared to same periods in 2013, the operating expenses for property management in the second quarter and first two quarters of 2014 increased by 65% and 12%, respectively. This increase was due to the increase in new personnel expenses.

Real estate development

The Company commenced the construction of its real estate development project in mid-2012. During the second quarter and the first two quarters of 2014, the Company’s real estate development operation incurred operating expenses of $93,090 and $448,585 respectively.

General and Administrative Expenses

General and administrative expenses increased in the second quarter and first two quarters in 2014 by 9% and decreased by 8%, respectively, as compared to the same periods in 2013. This increase was due to staff expenditure expenses.

Operating Income (Loss)

In the second quarter and first two quarters of 2014, the Company had an operating loss of $602,409 and $667,887, respectively, as compared to our operating income of $2,127,130 and $1,711,937, respectively, in the similar periods in 2013. The reason for the loss for the same periods in 2014 is due to the decrease in revenues from all our operations.

Interest Income

Interest income decreased to $100,686 in the second quarter of 2014 from $221,270 in the same period of 2013, and decreased to $200,954 in the first two quarters of 2014 from $379,218 during the same period in 2013. The decrease was mainly due to the decrease of interest income from WHYYL, which had got a bank loan carried lower interest rates and borrowing from the Company had been repaid a lot.

Interest Expense

Interest expenses in the second quarter and first two quarters of 2014 were $835,184 and $1,665,943, respectively, which decreased from $957,054 and $1,872,192 for the similar periods in 2013. The interest expenses were mainly incurred for bank loans, promissory notes payable and amount due to directors. This decrease was mainly due to the capitalized interest expenses of Linyi project.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2014, our principal sources of cash were revenues from our agency sales and property management business, new bank loan and promissory notes, and advances from directors. Most of our cash resources were used to fund our property development investment and revenue related expenses, such as salaries and commissions paid to the sales force, daily administrative expenses and the maintenance of regional offices, and the repayments of our bank loans, promissory notes and advances from directors.

We ended the period with a cash position of $2,167,437.

Net cash used in operating activities

Net cash used in the Company’s operating activities for the six months ended June 30, 2014 was $9,002,834, representing an increase of $2,988,416 as compared to the cash used in operating activities for the six months ended June 30, 2013. The increase was primarily attributable to the increase in other receivables and deposits of $9,952,445 in the six months ended June 30, 2014 as compared to the same period in 2013.

Net cash used by investing activities

Net cash used in the Company’s investing activities for the six months ended June 30, 2014 was $56,537, representing a decrease of $2,931,053 as compared to cash used in investing activities of $2,987,590 for the same period in 2013. The decrease was primarily due to the advances from an unconsolidated affiliate of $2,841,709 and the payment to acquire equity interest of $138,450 during the six months ended June 30, 2013.

Net cash provided by financing activities

Net cash provided by financing activities for the six months ended June 30, 2014 was $7,919,051, representing a decrease of $5,830,225 from the same period in 2013. The reason was during the six months ended June 30, 2014, and the Company paid the bank loan of $5,093,421

Indebtedness

The company’s indebtedness is described under “Note 10- Amounts due to directors”, “Note 12- Bank Loans”, “Note 14- Promissory Notes Payable, and “Note 13- Current portion of long term borrowings” to the Company’s accompanying unaudited condensed consolidated financial statements in Item 1 of Part I.

Promissory Notes as of June 30, 2014, the Company had an aggregate amount due under outstanding promissory notes to parties other than banks in the amount of $17,767,609 bearing interest at rates varying from 12% to 22%. The interest expense on promissory notes amounted to $636,930 and $174,821 for the three months ended June 30, 2014 and 2013; and $814,342 and $405,986, respectively, for the six months ended June 30, 2014 and 2013.

Bank Loans - In January 2014, the Company obtained a bank loan of $1,300,221 (RMB 8,000,000) from the Bank of China, bearing interest at a rate of 7.56% per annum. The loan is secured by the properties of two unrelated parties and matures on March 1, 2015. As of June 30, 2014, the outstanding balance of this loan was $1,300,221.

As of June 30, 2014, the Company had outstanding bank loans totaling $18,446,886 bearing interest at rates ranging from 7.56% to 14.20% per annum. Interest expenses amounted to $385,696 and $178,815 for the three months ended June 30, 2014 and 2013, respectively; and $725,027 and $352,022 for the six months ended June 30, 2014 and 2013, respectively.

Advances from Officers and Directors - The Company has also financed its operations in part with advances from officers and directors. At June 30, 2014, the Company had borrowings together with unpaid interest expense of $10,863,306 from officers and directors, including $10,815,524 from Lin Chi-Jung, our Chief Executive Officer, President and Chairman.

The interest expense on amounts due to directors amounted to $396,612 and $242,022 for the three months ended June 30, 2014 and 2013; and $741,179 and $487,048, respectively, for the six months ended June 30, 2014 and 2013.

Capital resources

The cash needs for 2014 will be for the repayments of our bank loans, promissory notes and advances from directors and funds required to finance promissory deposits for various future property projects as well as our real estate development projects in Wuhan and Linyi.

If our business grows more rapidly than we predict, we plan to raise funds through the issuance of additional shares of our equity securities in one or more public or private offerings. We will also consider raising funds through credit facilities obtained with lending institutions and affiliates, as we have done previously, but 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.

As of June 30, 2014, the Company had a working capital deficit of $14,673,913, an accumulated deficit from recurring net losses of $16,574,585 and short-term debt obligations of $54,442,106. These factors raise substantial doubts about the Company’s ability to continue as a going concern.

Management believes that the Company will generate sufficient cash flows to fund its operations and to meet its obligations on timely basis for the next twelve months by successful implementation of its business plans, obtaining continued support from its lenders to rollover debts when they became due, and securing additional financing as needed, including advances from affiliates. We have been able to secure new bank lines of credit and secure additional loans from affiliates to fund our operations to date. However, there is no assurance that the Company will be able to obtain additional financing on acceptable terms and any financing that the Company does obtain will be sufficient to meet its needs in the long term. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations in the case of debt financing, or cause substantial dilution for our shareholders in the case of equity financing. If events or circumstances occur that the Company is unable to successfully implement its business plans, fails to obtain continued supports from its lenders or to secure additional financing or incurs significant unplanned cash outlays, the Company may be required to suspend operations or cease business entirely.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not have any outstanding derivative financial instruments, off-balance sheet guarantees or interest rate swap transactions of foreign currency forward contracts. The Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. The Company does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to the Company or that engages in leasing, hedging or research and development services with the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

A.	Material weakness

As discussed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2013, we identified one material weakness in the design and operation of our internal controls. The material weakness was related to the Company’s accounting department personnel having limited knowledge and experience in U.S. GAAP. In response to the above identified material weakness and to continue strengthening the Company’s internal control over financial reporting, we are undertaking the following remediation initiatives:

hiring additional personnel with sufficient knowledge and experience in U.S. GAAP; and

providing ongoing training course in U.S. GAAP to existing personnel, including our Chief Financial Officer and Financial Controller.

During the six months ended June 30, 2014, additional qualified accounting personnel have been hired and put into place to assist in preparation of financial information, as required for interim and annual reporting, in accordance with generally accepted accounting principles in the U.S. As the newly implemented remediation activities have not operated for a sufficient period of time to demonstrate operating effectiveness, we will continue to monitor and assess our remediation activities to ensure that the aforementioned material weakness is remediated.

B.	Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures and internal controls designed to ensure that information required to be disclosed in the Company’s filings under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Company’s management, with the participation of its principal executive and financial officers, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation and solely due to the unremediated material weakness described above, the Company’s principal executive and financial officers have concluded that such disclosure controls and procedures were ineffective for the purpose for which they were designed as of the end of such period. As a result of this conclusion, the financial statements for the period covered by this report were prepared with particular attention to the unremediated material weakness previously disclosed. Accordingly, management believes that the condensed consolidated financial statements included in this report fairly present, in all material respects, the Company’s financial condition, results of operations and cash flows as of and for the periods presented, in accordance with generally accepted accounting principles, notwithstanding the unremediated weaknesses.

C.	Changes in Internal Control over Financial Reporting

During the six months ended June 30, 2014, we put into place additional qualified accounting personnel to address the aforementioned material weakness. This action strengthened our internal controls over financial reporting.

Except for the above, there was no change in the Company’s internal control over financial reporting that was identified in connection with such evaluation that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material developments in any legal proceedings since the disclosures contained in the Registrant’s Form 10-K for the year ended December 31, 2013.

ITEM 1A. RISK FACTORS

Not required.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

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 and 32.2*	Section 1350 Certification by the Corporation's Chief Executive Officer and Corporation's Chief Financial Officer.

101	XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q.

* Filed herewith

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: March 17, 2016
	By:	/s/ Lin, Chi-Jung
	Lin, Chi-Jung, Chief Executive Officer

	Date: March 17, 2016
	By:	/s/ Mi, Yong Jun
	Mi, Yong Jun, Chief Financial Officer

SUNRISE REAL ESTATE GROUP INC - FORM 10-Q - March 17, 2016

Attached files

SUNRISE REAL ESTATE GROUP INC Reports