SUNRISE REAL ESTATE GROUP INC - Quarter Report: 2008 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2008
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________ to __________

Commission File Number 000-32585

SUNRISE REAL ESTATE GROUP, INC.

(Exact name of registrant as specified in its charter)

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

Suite 701, No. 333, Zhaojiabang Road

Shanghai, PRC 200032

(Address of principal executive offices Zip Code)

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

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

Yes x No ¨

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting 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: November 10, 2008 - 23,691,925 shares of Common Stock

FORM 10-Q

For the Quarter Ended September 30, 2008

INDEX

	Page
PART I. FINANCIAL INFORMATION	3

Item 1. Financial Statements	3
Consolidated Balance Sheets	3
Consolidated Statements of Operations	4
Consolidated Statements of Cash Flows	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3. Quantitative and Qualitative Disclosures About Market Risk	21
Item 4. Controls and Procedures	21

PART II. OTHER INFORMATION	21

Item 1. Legal Proceedings	21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3. Defaults Upon Senior Securities	22
Item 4. Submission of Matters to a Vote of Security Holders	22
Item 5. Other Information	22
Item 6. Exhibits	22

SIGNATURES	22

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Sunrise Real Estate Group, Inc.

Unaudited Condensed Consolidated Balance Sheets

(Expressed in US Dollars)

	September 30,			December 31,
	2008			2007
					(Restated)
ASSETS

Current assets
Cash and cash equivalents	$	733,600		$	2,281,516
Restricted cash (Note 9)		107,636			2,441,579
Accounts receivable		870,868			842,868
Promissory deposits (Note 3)		1,129,314			273,800
Amounts due from venturers		-			79,662
Amount due from related party (Note 11)		327,108			312,132
Other receivables and deposits (Note 4)		398,479			602,373

Total current assets		3,567,005			6,833,930

Property, plant and equipment - net (Note 5)		2,733,376			2,519,585
Equity investment (Note 6)		83,599			78,033
Investment properties (Note 7)		8,366,063			7,800,228
Deferred tax asset (Note 8)		1,376,148			1,284,532
Goodwill		13,307			13,307

Total assets	$	16,139,498		$	18,529,615

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities
Bank loans (Note 9)	$	205,330		$	191,660
Promissory notes payable (Note 10)		959,784			976,435
Accounts payable		335,929			230,654
Amount due to director (Note 11)		72,987			171,458
Amount due to related party (Note 11)		134,043			159,561
Other payables and accrued expenses (Note 12)		2,121,097			2,452,833
Other tax payable (Note 13)		608,058			546,873
Income tax payable		1,060,565			1,238,912

Total current liabilities		5,497,793			5,968,386

Commitments and contingencies (Note 14)

Long-term bank loans (Note 9)		6,110,676			5,847,606
Long-term promissory notes payable (Note 10)		22,222			111,112
Deposits received from underwriting sales (Note 15)		8,295,509			7,743,240
Minority interest		439,907			431,674

Shareholders’ equity
Common stock, par value $0.01 per share; 200,000,000 shares authorized; 23,691,925 and 23,691,925 shares issued and outstanding as of September 30, 2008 and December 31, 2007, respectively		236,919			236,919
Additional paid-in capital		3,620,008			3,620,008
Statutory reserve (Note 16)		729,744			729,744
Accumulated losses		(9,496,992	)		(6,884,072	)
Accumulated other comprehensive income (Note 17)		683,712			724,998

Total shareholders’ equity		(4,226,609	)		(1,572,403	)

Total liabilities and shareholders’ equity	$	16,139,498		$	18,529,615

See accompanying notes to unaudited condensed consolidated financial statements.

Sunrise Real Estate Group, Inc.

Unaudited Condensed Consolidated Statements of Operations

(Expressed in US Dollars)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2008			2007			2008			2007
				(Restated)						(Restated)

Net Revenues	$	2,475,921		$	1,817,590		$	6,437,147		$	4,472,792

Cost of Revenues		(1,697,306	)		(1,506,577	)		(4,797,779	)		(4,286,991	)

Gross Profit		778,651			311,013			1,639,368			185,801

Operating Expenses		(361,464	)		(311,956	)		(1,000,579	)		(806,877	)

General and Administrative Expenses		(802,226	)		(1,155,748	)		(2,793,690	)		(2,987,037	)

Operating Loss		(385,075	)		(1,156,691	)		(2,154,901	)		(3,608,113	)

Interest Income		2,191			5,505			11,521			13,076

Other Income/(Expenses), Net		11,183			(224,452	)		16,321			(203,662	)

Interest Expenses		(161,652	)		(267,551	)		(460,128	)		(692,898	)

Loss Before Income Tax and Minority Interest		(533,353	)		(1,643,189	)		(2,587,187	)		(4,491,597	)

Income Tax		(18,845	)		(23,835	)		(47,729	)		(52,808	)

Loss Before Minority Interest		(552,198	)		(1,667,024	)		(2,634,916	)		(4,544,405	)

Minority Interest		19,649			3,613			21,996			(31,840	)

Net Loss	$	(532,549	)	$	(1,663,411	)	$	(2,612,920	)	$	(4,576,245	)

Loss Per Share – Basic and Fully Diluted	$	(0.02	)	$	(0.07	)	$	(0.11	)	$	(0.19	)

Weighted average common shares outstanding – Basic and Fully Diluted¹		23,691,925			23,691,925			23,691,925			23,691,925

See accompanying notes to unaudited condensed consolidated financial statements.

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

Sunrise Real Estate Group, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(Decrease)/Increase in Cash and Cash Equivalents

(Expressed in US Dollars)

	Nine Months Ended September 30,
	2008			2007
				(Restated)

Cash flows from operating activities
Net Loss	$	(2,612,920	)	$	(4,576,245	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation of property, plant and equipment		586,666			498,547
(Gain)/loss on disposal of property, plant and equipment		(2,360	)		6,749
Loss on disposal of equity interest in subsidiary		-			14,750
Bad debts		-			349,195
Minority interest		21,996			31,840
Change in:
Accounts receivable		31,321			4,421,404
Promissory deposits		(815,299	)		(652,078	)
Other receivables and deposits		240,748			(840,816	)
Accounts payable		86,626			(332,909	)
Amount with related party		(28,879	)		-
Amounts with venturers		83,232			582,544
Other payables and accrued expenses		(458,069	)		111,452
Interest payable on promissory notes		(381,642	)		301,911
Interest payable on amount due to director		5,909			(21,604	)
Other tax payable		21,632			(216,226	)
Income tax payable		(260,110	)		(1,158,493	)
Net cash used in by operating activities		(3,481,149	)		(1,479,979	)

Cash flows from investing activities
Acquisition of plant and equipment		(370,063	)		(79,733	)
Deposits paid for acquisition of properties		-			(1,981,956	)
Investment properties renovation		(401,882	)		-
Proceeds from disposal of property, plant and equipment		136,009			6,199,246
Restricted cash		2,446,021			-
Net cash provided by investing activities		1,810,085			4,137,557

Cash flows from financing activities
Bank loan obtained		-			8,477,008
Bank loans repayment		(150,186	)		(4,685,624	)
Repayment of promissory note		(163,891	)		(250,000	)
Proceeds from promissory note		429,105			2,565,903
Repayment to director		(104,380	)		(109,026	)
Advances from director		-			250,000
Net cash provided by financing activities		10,648			6,248,261

Effect of exchange rate changes on cash and cash equivalents		112,500			296,678

Net (decrease)/increase in cash and cash equivalents		(1,547,916	)		9,202,517
Cash and cash equivalents at beginning of period		2,281,516			945,727
Cash and cash equivalents at end of period	$	733,600		$	10,148,244

Supplemental disclosure of cash flow information
Cash paid during the period:
Income tax paid		307,838			1,181,313
Interest paid		835,861			412,591

See accompanying notes to unaudited condensed consolidated financial statements.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

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

LIN RAY YANG Enterprise Ltd. (“LRY”) was established in the British Virgin Islands on November 13, 2003 as a limited liability company. LRY was owned by Ace Develop, Planet Technology Corporation (“Planet Tech”) and Systems & Technology Corporation (“Systems Tech”). On February 5, 2004, LRY established a wholly owned subsidiary, Shanghai Shang Yang Real Estate Consultation Company Limited (“SHSY”) in the PRC as a limited liability company. On January 10, 2005, LRY and a PRC third party established a subsidiary, Suzhou Gao Feng Hui Property Management Company Limited (“SZGFH”), in the PRC, with LRY holding 80% of the equity interest in SZGFH. On May 8, 2006, LRY acquired 20% of the equity interest in SZGFH from the third party. Following the acquisition, LRY effectively holds 100% of the equity interest in SZGFH. On September 11, 2007 SHSY and other third parties established a subsidiary, namely, Suzhou Bin Fen Nian Dai Administration Consultancy Company Limited (“SZBFND”) in the PRC, with SHSY holding a 19% equity interest in SZBFND. On September 18, 2008, SHSY established a wholly owned subsidiary, San Ya Shang Yang Real Estate Consultation Company Limited (“SYSY”) in the PRC as a limited liability company.

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

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

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

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

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

Figure 1: Company Organization Chart

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

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

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

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

Going Concern

The Company’s financial statements are prepared according to the accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred losses of $2,612,920 for the first three quarters of 2008 and had a net working capital deficiency of $1,930,788 as of September 30, 2008. The Company’s net working capital deficiency, recurring losses and negative cash flows from operations raise substantial doubt about its ability to continue as a going concern.

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

Foreign Currency Translation and Transactions

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

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

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

The exchange rate between US$ and RMB had little fluctuation during the periods presented. The rates as of September 30, 2008 and December 31, 2007 are US$1: RMB6.8183 and US$1: RMB7.3046, respectively.

Property, Plant, Equipment and Depreciation

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

		Estimated Useful Life (in years)

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

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

Investment property

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

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

Goodwill

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

Revenue Recognition

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

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

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

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

All revenues represent gross revenues less sales and business tax.

Net Earnings per Common Share

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

Income Taxes

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

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

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

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

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

Segment information

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

NOTE 3 - PROMISSORY DEPOSITS

The balance of $1,129,314 represents the deposits placed with several property developers in respect of a number of real estate projects where the Company is appointed as sales agent.

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

NOTE 4 - OTHER RECEIVABLES AND DEPOSITS

	September 30		December 31,
	2008		2007

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

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT - NET

	September,			December 31,
	2008			2007

Furniture and fixtures	$	147,224		$	133,970
Computer and office equipment		325,896			275,988
Motor vehicles		667,541			618,024
Properties		2,218,950			2,071,225
		3,359,611			3,099,207
Less: Accumulated depreciation		(626,235	)		(579,622	)
	$	2,733,376		$	2,519,585

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

NOTE 6 – EQUITY INVESTMENT

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

NOTE 7 – INVESTMENT PROPERTIES

	September 30,			December 31,
	2008			2007

Investment property	$	9,081,565		$	8,092,319
Less: Accumulated depreciation		(715,502	)		(292,091	)
	$	8,366,063		$	7,800,228

The investment properties included one floor and four units of a commercial building in Suzhou, the PRC, from which the Company derives its underwriting sales income. The investment properties were acquired by the Company for long-term investment purposes and were pledged to secure a loan in note 9. The carrying amount of $6,121,114 was pledged to a promissory note payable in note 10.

As of November 10, 2008, the four units of the investment properties were leased to SZBFND, a related party of the Company, and 64% of the total area of the one remaining floor was leased out.

NOTE 8 – DEFERRED TAX ASSET

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

NOTE 9 – BANK LOANS

Bank loans at September 30, 2008 included two bank loans, as listed below:

First, the balance includes a bank loan of $5,854,014. This bank loan is repayable before August 2, 2010 and bears interest at a rate of 8.217% per annum. This bank loan is secured by the properties as mentioned in Note 7 above. The repayment schedule of this bank loan is as follows:

February 1, 2010		$	1,466,641
August 2, 2010		$	4,387,373

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

Second, the remaining bank loan of $461,992 bears interest at 6.48% per annum, and is repayable before December 15, 2010 in monthly installments. The bank loan is secured by the properties as mentioned in Note 5 above.

NOTE 10 – PROMISSORY NOTES PAYABLE

There are four promissory notes, as listed below:

First, the balance includes a promissory note of $155,554 and accrued interest of $1,668 thereon. This promissory note of $155,554 bears interest at a rate of 5% per annum. The promissory note is unsecured and will be repayable before October 31, 2009.

Second, the balance includes a promissory note of $75,000 and accrued interest of $9,792 thereon. This promissory note of $75,000 bears interest at a rate of 5% per annum. This promissory note is unsecured and the term of repayment is not specifically defined.

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

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

NOTE 11 – AMOUNTS WITH RELATED PARTIES AND DIRECTORS

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

Amount due from related party

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

Amount due to director

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

Amount due to related party

The amount includes a rental deposit received from SZBFND. Rental income of $458,456 is generated from leasing the investment properties to SZBFND during the period. This amount is unsecured, interest free and repayable on demand.

NOTE 12 – OTHER PAYABLES AND ACCRUED EXPENSES

	September 30,		December 31,
	2008		2007

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

NOTE 13 – OTHER TAX PAYABLE

Other tax payable mainly represents PRC business tax which is charged at a rate of 5% on the revenue from services rendered. The amount of PRC business tax charged for the period ended September 30, 2008 was $369,901.

NOTE 14- COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

During the nine months ended September 30, 2008 and 2007, the Company incurred lease expenses amounting to $318,413 and $178,693, respectively. As of September 30, 2008, the Company had commitments under operating leases, requiring annual minimum rentals as follows:

	September 30,		December 31,
	2008		2007

Within one year	$	173,555	$	132,628
Two to five years		74,029		133,847
Operating lease commitments	$	247,584	$	266,475

During the year of 2005 and 2006, SZGFH entered into leasing agreements with certain buyers of the Sovereign Building underwriting project to lease the properties for them. These leasing agreements on these properties are for 62% of the floor space that was sold to third party buyers. In accordance with the leasing agreements, the owners of the properties can have an annual rental return of 8.5% and 8.8% per annum for a period of 5 years and 8 years, respectively. The leasing period started in the second quarter, 2006, and the Company has the right to sublease the leased properties to cover these lease commitments in the leasing period. As of September 30, 2008, 121 sub-leasing agreements have been signed, the area of these sub-leasing agreements represented 92% of total area with these lease commitments.

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

	September 30,		December 31,
	2008		2007

Within one year	$	3,264,552	$	3,047,216
Two to five years		6,755,192		8,412,157
Over five years		2,445,160		2,181,446
Operating lease commitments arising from the promotional package	$	12,464,904	$	13,640,819

An accrual for onerous contracts was recognised which is equal to the difference between the present value of the sublease income and the present value of the associated lease expense at appropriate discount rate. The accrual for onerous contacts was $535,811 as of December 31, 2007 and $487,380 as of September 30, 2008.

According to the leasing agreements, the Company has an option to terminate any agreement by paying a predetermined compensation. As of September 30, 2008, the compensation to terminate all leasing agreements is $3,018,375. According to the sub-leasing agreements that have been signed through September 30, 2008, the rental income from these sub-leasing agreements will be $2,250,166 within one year and $1,492,396 within two to five years. However, no assurance can be given that we can collect all of the rental income.

NOTE 15 –DEPOSITS RECEIVED FROM UNDERWRTING SALES

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

NOTE 16 – STATUTORY RESERVE

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

NOTE 17 – ACCUMULATED OTHER COMPREHENSIVE INCOME

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

NOTE 18 – CONCENTRATION OF CUSTOMERS

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

	Percentage of Net Sales Three Months Ended September 30,						Percentage of Net Sales Nine Months Ended September 30,						Percentage of Accounts Receivable as of September 30,
	2008			2007			2008			2007			2008			2007

Customer A		23	%		*			15	%		*			23	%		*
Customer B		*			*			10	%		*			*			*
Customer C		*			10	%		*			10	%		11	%		*
Customer D		*			13	%		*			*			*			*
Customer E		*			10	%		*			*			*			39	%

* less than 10%

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

CAUTIONARY STATEMENT

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand Sunrise Real Estate Group, Inc. (“SRRE”). The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and the accompanying notes. The information contained in this quarterly report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission, or SEC, including but not limited to our annual report on Form 10-KSB for the year ended December 31, 2007, which discusses our business in greater detail.

In this report we make, and from time to time we otherwise make, written and oral statements regarding our business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends, and other matters that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements containing the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimates,” “projects,” “seeks”, “believes,” “expects,” “anticipates,” “intends,” “target,” “goal,” “plans,” “objective,” “should” or similar expressions identify forward-looking statements, which may appear in documents, reports, filings with the Securities and Exchange Commission, news releases, written or oral presentations made by officers or other representatives made by us to analysts, stockholders, current or potential investors, news organizations and others, and discussions with management and other of our representatives, customer and suppliers. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties. No assurance can be given that the results reflected in any forward-looking statements will be achieved. Any forward-looking statement speaks only as of the date on which such statement is made. Our forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. Except as required by law, we do not undertake any obligation to update or keep current either (i) any forward-looking statement to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement.

In addition to other matters identified or described by us from time to time in filings with the SEC, there are several important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or results that are reflected from time to time in any forward-looking statement. Some of these important factors, but not necessarily all important factors, include those relating to our ability to raise money and grow our business, and potential difficulties in integrating new acquisitions with our current operations, especially as they pertain to foreign markets and market conditions. Please also refer to the section entitled “Risk Factors” in our Annual Report on Form 10-KSB for the year ended December 31, 2007.

OVERVIEW

In October 2004, the former shareholders of Sunrise Real Estate Development Group, Inc. (Cayman Islands) (“CY-SRRE”) and LIN RAY YANG Enterprise Ltd. (“LRY”) acquired a majority of our voting interests in a share exchange. Before the completion of the share exchange, SRRE had no continuing operations, and its historical results would not be meaningful if combined with the historical results of CY-SRRE, LRY and their subsidiaries.

As a result of the acquisition, the former owners of CY-SRRE and LRY hold a majority interest in the combined entity. Generally accepted accounting principles require in certain circumstances that a company whose shareholders retain the majority voting interest in the combined business be treated as the acquirer for financial reporting purposes. Accordingly, the acquisition has been accounted for as a “reverse acquisition” arrangement whereby CY-SRRE and LRY are deemed to have purchased SRRE. However, SRRE remains the legal entity and the Registrant for Securities and Exchange Commission reporting purposes. The historical financial statements prior to October 5, 2004 are those of CY-SRRE and LRY and their subsidiaries. All equity information and per share data prior to the acquisition have been restated to reflect the stock issuance as a recapitalization of CY-SRRE and LRY.

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

RECENT DEVELOPMENTS

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

During the year of 2005 and 2006, SZGFH entered into leasing agreements with certain buyers of the Sovereign Building underwriting project to lease the properties for them. These leasing agreements on these properties are for 62% of the floor space that was sold to third party buyers. In accordance with the leasing agreements, the owners of the properties can have an annual rental return of 8.5% and 8.8% per annum for a period of 5 years and 8 years, respectively. The leasing period started in the second quarter, 2006, and the Company has the right to sublease the leased properties to cover these lease commitments in the leasing period. As of November 10, 2008, 116 sub-leasing agreements have been signed, the area of these sub-leasing agreements represented 90% of total area with these lease commitments.

RECENTLY ISSUED ACCOUNTING STANDARDS

In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active.” This FSP clarifies the application of SFAS No. 157 in a market for that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. This FSP was effective for the Company upon issuance, including prior periods for which financial statements have not been issued; and, therefore was effective for the Company’s financial statements as of and for the three and nine month periods ended September 30, 2008. There was no impact of adoption of FAS 157 as the Company has no financial assets or liabilities which were not classified as level I.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (“GAAP”) for nongovernmental entities. SFAS No. 162 is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board Auditing amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. Management does not anticipate that the provisions of SFAS No. 162 will have an impact on the Company’s consolidated results of operations or consolidated financial position.

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

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

APPLICATION OF CRITICAL ACCOUNTING POLICIES

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

Revenue Recognition

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

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

All revenues represent gross revenues less sales and business tax.

Net Earnings per Common Share

Income Taxes

Segment Information

RESULTS OF OPERATIONS

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

Revenue

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

	Three Months Ended September 30,										Nine Months Ended September 30,
	2008		% to total		2007		% to total		% change		2008		% to total		2007		% to total		% change
Agency sales		1,561,122		63		1,432,271		79		9		4,069,064		63		3,432,808		77		19
Underwriting sales		-		-		-		-		-		-		-		216,085		5		(100	)
Property Management		914,799		37		385,319		21		137		2,368,083		37		823,899		18		187
Net revenue		2,475,921		100		1,817,590		100		36		6,437,147		100		4,472,792		100		44

The net revenue of the third quarter, 2008 was $2,475,921, which increased 36% from $1,817,590 of the third quarter, 2007. The total net revenue of the first three quarters of 2008 was $6,437,147, which increased 44% from $4,472,792 of the first three quarters of 2007. In the third quarter of 2008, agency sales represented 63% of the total net revenue and property management represented 37%. In the first three quarters of 2008, agency sales represented 63% of the total net revenue and property management represented 37%. The increase in net revenue in the third quarter and first three quarters, 2008 was primarily due to the increase in property management.

Agency sales

In the third quarter and first three quarters of 2008, 63% of our net revenue was due to agency sales. As compared with the same period in 2007, agency sales’ net revenue in the third quarter and first three quarters of 2008 increased 9% and 19% respectively. The primary reason for the increase in revenue was the two projects that contributed a net revenue of $1.56 million to our agency sales in the first three quarters of 2008, and there were no such projects in the same period in 2007.

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

Underwriting sales

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

Property Management

During the year of 2005 and 2006, SZGFH entered into leasing agreements with certain buyers of the Sovereign Building underwriting project to lease the properties for them. These leasing agreements on these properties are for 62% of the floor space that was sold to third party buyers. The leasing period started in the second quarter, 2006, and the Company has the right to sublease the leased properties to cover these lease commitments in the leasing period. As of September 30, 2008, 121 sub-leasing agreements have been signed, the area of these sub-leasing agreements represented 92% of total area with these lease commitments. We expect that the income from the sub-leasing business will be on a stable growth trend in 2008 and that it can cover the lease commitments in the leasing period as a whole. However there can be no assurance that we will achieve these objectives.

Cost of Revenue

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

	Three Months Ended September 30,										Nine Months Ended September 30,
	2008		% to total		2007		% to total		% change		2008		% to total		2007		% to total		% change
Agency sales		828,553		49		685,932		46		21		2,366,146		49		1,709,911		40		38
Underwriting sales		-		-		-		-		-		-		-		75,906		2		(100	)
Property Management		868,753		51		820,645		54		16		2,431,633		51		2,501,094		58		3
Cost of revenue		1,697,306		100		1,506,577		100		11		4,797,779		100		4,286,991		100		12

The cost of revenue of the third quarter of 2008 was $1,697,306, which increased 11% from $1,506,577 of the third quarter of 2007. The total cost of revenue of the first three quarters of 2008 was $4,797,779, which increased 12% from $4,286,991 of the first three quarters of 2007. In the third quarter of 2008, agency sales represented 49% of the total cost of revenue and property management represented 51%. In the first three quarters of 2008, agency sales represented 49% of the total cost of revenue and property management represented 51%. The increase in cost of revenue in the third quarter and first three quarters of 2008 was mainly due to the increase in agency sales.

Agency sales

As compared with same period in 2007, cost of revenue of agency sales in the third quarter and first three quarters of 2008 increased 21% and 38% respectively. The primary reason for the change was that as compared to the same period in 2007, the staff cost and designing fees increased $231,139 and $365,099 respectively in the first three quarters of 2008.

Underwriting sales

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

Property management

Operating Expenses

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

	Three Months Ended September 30,											Nine Months Ended September 30,
	2008		% to total		2007		% to total		% change			2008		% to total		2007		% to total		% change
Agency sales		183,318		51		228,787		73		(20	)		759,892		76		598,299		74		27
Underwriting sales		-		-		25,451		8		(100	)		-		-		80,208		10		(100	)
Property Management		178,146		49		57,718		19		209			240,687		24		128,370		16		87
Operating expenses		361,464		100		311,956		100		16			1,000,579		100		806,877		100		24

The operating expenses of the third quarter of 2008 were $361,464, which increased 16% from $311,956 of the third quarter of 2007. The total operating expenses of the first three quarters of 2008 were $1,000,579, which increased 24% from $806,877 of the first three quarters of 2007. In the third quarter of 2008, agency sales represented 51% of the total operating expenses and property management represented 49%. In the first three quarters of 2008, agency sales represented 76% of the total operating expenses and property management represented 24%. This increase was mainly due to the increase in property management.

Agency sales

When compared to 2007, the operating expenses for agency sales in the third quarter and first three quarters of 2008 decreased 20% and increased 27% respectively. The primary reason for the decrease in the third quarter of 2008 was that as compared to the same period in 2007, the staff cost, office expenses and transportation expenses decreased $21,208, $4,696 and $8,984 respectively in the third quarter of 2008. The primary reason for the increase in the first three quarters of 2008 was that as compared to the same period in 2007, the staff cost and business traveling expenses increased $83,698 and $33,169 respectively in the first three quarters of 2008.

Underwriting sales

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

Property management

When compared to 2007, the operating expenses for property management in the third quarter and first three quarters of 2008 increased 209% and 87% respectively. The main reason for the increase was the staff cost increased $84,652 in the first three quarters of 2008 with comparing to the same period in 2007.

General and Administrative Expenses

When compared to 2007, the general and administrative expenses in the third quarter and first three quarters of 2008 decreased 31% and 6% respectively. The primary reason for the change was

i)	The decrease in our legal fees. In the first three quarters of 2008, our legal fees decreased $68,715, compared to the same period in 2007. The legal fees are mainly for the maintenance of the Company’s listing status.

ii)	The decrease in our business traveling expenses. In the first three quarters of 2008, our business traveling expenses decreased $81,004, compared to the same period in 2007.

iii)	A US$349,195 allowance for other receivables was required in the third quarter of 2007, and there was no such expense in the first quarters of 2008.

Interest Expenses

When compared to 2007, the interest expenses in the third quarter and first three quarters of 2008 decreased 40% and 34% respectively. The interest expense relates to bank loans and promissory notes payable.

LIQUIDITY AND CAPITAL RESOURCES

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

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

We ended the period with a cash position of $841,236 (including cash and cash equivalents of $733,600 and restricted cash of $107,636). The Company’s operating activities used cash in the amount of $3,481,149 in the first three quarters of 2008, which was primarily attributable to the Company’s net loss and payment of promissory deposits.

The Company’s investing activities generated cash in the amount of $1,810,085 in the first three quarters of 2008, which was primarily attributable to the decreased in restricted cash balance.

The Company’s financing activities generated cash in the amount of $10,648 in the first three quarters of 2008, which was primarily attributable to the obtain of promissory notes.

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

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

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

OFF BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES

Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2008. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective at September 30, 2008, to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms. There were no changes in our internal controls over financial reporting during the quarter ended September 30, 2008, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit
Number	Description

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

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

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

SIGNATURES

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

SUNRISE REAL ESTATE GROUP, INC.


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

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