SUNRISE REAL ESTATE GROUP INC - Quarter Report: 2012 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, 2012

[ ] 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)

No. 638, Hengfeng Road, 25^th Fl., Bldg. A.

Shanghai, PRC 200070

(Address of principal executive offices Zip Code)

Registrant’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 [X] No [ ]

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):

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 20, 2012 - 28,691,925 shares of Common Stock

FORM 10-Q

For the Quarter Ended September 30, 2012

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Sunrise Real Estate Group, Inc.

Unaudited Condensed Consolidated Balance Sheets

(Expressed in US Dollars)

See accompanying notes to consolidated financial statements.

Sunrise Real Estate Group, Inc.

Unaudited Condensed Consolidated Statements of Operations

(Expressed in US Dollars)

See accompanying notes to unaudited condensed consolidated financial statements.

Sunrise Real Estate Group, Inc.

Consolidated Statements of Cash Flows

Increase/(Decrease) in Cash and Cash Equivalents

(Expressed in US Dollars)

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 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. In January of 2012, SHXJY invested 24% and established a company in Linyi, named Linyi Shang Yang Real Estate Development Company Limited and acquired approximately 103,385 square meters for the purpose of developing into villa-style residential housings. In an agreement with Zhang Shu Qing, a majority shareholder of 51%, we have her 51% voting power and thus effectively have 75% of voting power.

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. In 2011 we established Wuhan Yuan Yu Long Real Estate Development Company Limited ("WHYYL") and have a 49% ownership, the purpose of this project company was for a residence development project in Wuhan.

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.

On January 21, 2011, we entered into a Share Purchase Agreement with Good Speed Services Limited (“Good Speed”) to issue 2.5 million shares for US $500,000. This agreement, subject to standard closing terms and conditions, was scheduled to close on or before March 20, 2011. On March 18^, an extension was signed between SRRE and Good Speed to extend the closing date to on or before July 5, 2011. On June 24, 2011, we issued 2.5 million shares of common stock to Good Speed and received US $500,000.

On January 22, 2011 we entered into a Share Purchase Agreement with Better Time International Limited (“Better Time”) to issue 2.5 million shares for US $500,000. This agreement, subject to standard closing terms and conditions, was scheduled to close on or before March 20, 2011. On March 16 an extension was signed between SRRE and Better Time to extend the closing date to on or before July 1, 2011. On July 1, 2011, Sunrise and Better Time extended the closing date to on or before September 30, 2011. On September 30, 2011, we issued 2.5 million shares of common stock to Better Time and received US $500,000.

Figure 1: Company Organization Chart

SRRE and its subsidiaries, namely, CY-SRRE, LRY, Shanghai Xin Ji Yang Real Estate Consultation Company Limited (“SHXJY”), Shanghai Shang Yang Real Estate Consultation Company, Ltd. (“SHSY”), Suzhou Gao Feng Hui Property Management Company, Ltd, (“SZGFH”), Suzhou Shang Yang Real Estate Consultation Company (“SZSY”), Suzhou Xin Ji Yang Real Estate Consultation Company, Ltd. (“SZXJY”), Linyi Shang Yang Real Estate Development Company Ltd (“LYSH”), Shangqiu Shang Yang Real Estate Consultation Company, Ltd., (“SQSY”), Wuhan Gao Feng Hui Consultation Company Ltd.(WHGFH), Sanya Shang Yang Real Estate Consultation Company, Ltd. (“SYSH”), Shanghai Rui Jian Design Company, Ltd., (“SHRJ”), and Wuhan Yuan Yu Long Real Estate Development Company, Ltd. (“WHYYL”) are sometimes here inafter collectively referred to as “the Company,” “our,” or “us”.

The principal activities of the Company are property development, 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 that include the financial statements of SRRE and its subsidiaries. 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 accumulated losses of $13,277,821 as of September 30, 2012. The Company’s net working capital deficiency and significant accumulated losses 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 property 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.

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect 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.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and all highly liquid investments with an original maturity of three months or less.

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 all the companies located in China is Renminbi (“RMB”) and the financial records and statements are maintained and prepared in RMB.

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

The financial statements of the Company’s operations based outside of the United States have been translated into US$ in accordance with ASC 830. 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 rates as of September 30, 2012 and December 31, 2011 are US$1: RMB6.3410 and US$1: RMB6.3009, 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:

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.

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” (SFAS 66). The commission revenue 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 income 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 ASC 260, “Earnings per Share.” Under the provisions of ASC 260, 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 ASC 740 “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 segments are generally determined based on the management of the businesses and on the basis of separate groups of operating activities, each with general operating autonomy over diversified products and services. 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.

Recent Accounting Pronouncements

In 2011, new guidance was introduced to eliminate the current option to report other comprehensive income and its components in the statement of stockholders’ equity, and require an entity to present items of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive, statements. This guidance would be effective in the first quarter of 2012, with early adoption permitted. This pronouncement only changes the way we present other comprehensive income and its components, and does not impact our results of operations, financial position or cash flows.

In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU clarifies the concepts related to highest and best use and valuation premise, blockage factors and other premiums and discounts, the fair value measurement of financial instruments held in a portfolio and of those instruments classified as a component of shareowners’ equity. The ASU includes enhanced disclosure requirements about recurring Level 3 fair value measurements, the use of nonfinancial assets, and the level in the fair value hierarchy of assets and liabilities not recorded at fair value. The provisions of this ASU are effective prospectively for interim and annual periods beginning on or after December 15, 2011. Early application is prohibited. This ASU is not expected to have an impact currently on our financial statements or disclosures as there are presently no recurring Level 3 fair value measurements.

On August 17, 2010, the FASB and IASB issued an ED on lease accounting. The ED, released by the FASB as a proposed ASU, creates a new accounting model for both lessees and lessors and eliminates the concept of operating leases. The proposed ASU, if finalized, would converge the FASB’s and IASB’s accounting for lease contracts in most significant areas.

The Company does not anticipate that the adoption of the above statements will have a material effect on the Company's financial condition and results of operations.

NOTE 3 – RESTRICTED CASH

This restricted cash is the covenant from the bank loan described in Note 10.

NOTE 4- PROMISSORY DEPOSITS

The amount of $1,029,806 represents the deposits placed with several property developers in respect of a number of real estate projects where the Company is appointed as sales agent.

NOTE 5 – INVENTORY

The amount of $12,544,116 belongs to Linyi Shang Yang Real Estate Development Company Limited.

NOTE 6 - OTHER RECEIVABLES AND DEPOSITS

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT – NET

All above properties as of September 30, 2012 and as of December 31, 2011 were pledged to secure a bank loan in note 10. The main increase in properties is due to the addition of our office space in Shanghai.

NOTE 8 – INVESTMENT PROPERTIES

The investment properties included one floor and four units of a commercial building in Suzhou, the PRC. The investment properties were acquired by the Company for long-term investment purposes.

All above properties as of September 30, 2012 and as of December 31, 2011 were pledged to secure a bank loan in note 10.

As of September 30, 2012, the four units of the investment properties were leased to a related party of the Company of 12% ownership, 88% of the total area of the one remaining floor was leased out.

NOTE: 9 – LONG-TERM INVESTMENT

In mid 2011, we invested in a project company in Wuhan where the initial investment amount is $4,151,375 for 49% equity stake, the purpose of this project company was for a residence development project in Wuhan. This investment is for our expansion to the real estate development business. We use equity method of accounting for this long-term investment. The land is approximately 27,950 square meters with an estimated development period of three years, and we began its initial construction in the first quarter of 2012 The project company total assets amount was $16,658,500, libility amount was $8,786,818 and has loss $309,134 from 2012, as the equity method accounting police we should decrease this investment by $621,728. The balance of this investment is $3,434,217 at September 30 2012.

We invested $60,000 for 40% equity stake to a new real estate agency company at February 2012. We use equity method of accounting for this long-term investment. The company did not commence its operations until the third quarter of 2012 and therefore there were no profit or loss recorded for the period ended September 30, 2012.

The remaining amount of $105,776 was invested in various real estate agency sales related projects. All of the equity stakes we have in these projects are less than 20%. We used the cost method for accounting purposes for these investments.

NOTE 10 – BANK LOANS

Bank loans included two bank loans and one long-term bank loan, as listed below:

The balance includes a bank loan of $8,673,710, which bears interest at 130% of three-year prime rate as announced by the People’s Bank of China (the rate for 2012 was 6.65%) and is secured by the properties as mentioned in Note 8 above. This loan is due on April 30, 2013 and can be extended automatically for another 3 years; however, the bank does an annual routine loan renewal request with the Company.

The remaining bank loan of $2,365,558, which bears interest at 130% of three-year prime rate as announced by the People’s Bank of China (the rate for 2012 was 6.65%) and is secured by the properties as mentioned in Note 7 above. This loan is due on April 30, 2013 and can be extended automatically for another 3 years; however, the bank does an annual routine loan renewal request with the Company.

The long-term bank loan consists of one loan of $6,434,316 which bears interest at 130% of three-year prime rate as announced by the People’s Bank of China (the rate for 2012 was 6.65%) and is secured by the properties as mentioned in Note 7 above. This loan is due on August, 2015.

NOTE 11 – PROMISSORY NOTES PAYABLE

The promissory notes payable consist of the following four unsecured notes to independent individual third parties.

The first note of $315,000 bears an interest at a rate of 15% per annum, consists of a principal of $300,000 and an interest of $15,000. This loan’s terms of repayment are not specifically defined.

The second note of $971,453 bears an interest rate of 15% per annum consists of a principal of $835,830 and an interest of $135,822. This loan’s terms of repayment are not specifically defined.

The third note of $877,028 bears an interest rate of 15% per annum consists of a principal of $788,519 and an interest of $88,708. This loan’s terms of repayment are not specifically defined.

The fourth note of $233,801 bears no interest and the terms of repayment are not specifically defined.

NOTE 12 – AMOUNTS WITH RELATED PARTIES AND DIRECTORS

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

Amount due to directors

The total amount due to directors for Sep 30, 2012 was $5,639,048. The amounts due are as follows:

Amount due to Lin Chi-Jung

As of Sep 30, 2012, the balance includes one amount to and six loans obtained from Lin Chin-Jung.

The amount of $63,344 represented the salary payable and rental reimbursement to Lin Chin-Jung outstanding as of Sep 30, 2012.

A loan includes a principal of $113,138 is unsecured, consists of a principal of $103,778 and an interest of $9,360. This loan’s the terms of repayment is not specifically defined.

A loan includes a principal of $275,589. This loan’s interest rate is 18%, per annum consists of a principal of $236,556 and an interest of $39,032. This loan’s terms of repayment are not specifically defined.

A loan includes a principal of $4,557,852 bears an interest rate of 15%, per annum consists of a principal of $4,094,370 and an interest of $463,481. This loan’s the terms of repayment are not specifically defined. This loan is for the investment of Wuhan development project stated in note 8 in addition to any expenses related to the investment.

An unsecured loan of $566,882 bears an interest rate of 18% per annum consists of a principal of $473,111 and an interest of $93,771. This loan’s terms of repayment are not specifically defined

An unsecured loan includes a principal of $47,311, which is without interest and the terms of repayment are not specifically defined.

Amount due to Lin Chao-Chin

A balance of $1,427 represented the salary payable and rental reimbursement to Lin Chao-Chin outstanding as of Sep 30, 2012.

Amount due to Lin Hsin Hung

The amount of $13,505 represents the salary payable to Lin Hsin Hung.

Amount due to related party

A balance of $86,737 is due to a related party of the Company of 19% ownership.

NOTE 13 - OTHER PAYABLES AND ACCRUED EXPENSES

NOTE 14– OTHER TAX PAYABLE

Other tax payable mainly represents the outstanding payables of business tax, urban real estate tax and land appreciation tax in the PRC.

NOTE 15 –DEPOSITS RECEIVED FROM UNDERWRTING SALES

The Company accounts for its underwriting sales revenue with underwriting rent guarantees in accordance with ASC 976-605 “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 revenues generated by sub-leasing properties exceed the guaranteed rental amount due to the purchasers.

NOTE 16- COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

During the years ended September 30, 2012 and 2011, the Company incurred lease expenses amounting to $23,320 and $233,050, respectively. As of September 30, 2012, the Company had commitments under operating leases, requiring annual minimum rentals as follows:

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 a rental return of 8.5% and 8.8% per annum for a period of 5 years and 8 years, respectively. In regards to 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%. As of September 30, 2012, 55% of the buyers agreed upon the lowered rate, 3% of the buyers did not agreed to a lowered rate and 42% of the buyers agreed to cancel the leasing agreements. 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, 2012, 82 sub-leasing agreements have been signed, the area of these sub-leasing agreements represented 88% of total area with these lease commitments.

As of September 30, 2012, the lease commitments are as follows:

An accrual for onerous contracts was recognized which is equal to the difference between the present value of the sublease income and the present value of the associated lease expense at the appropriate discount rate. The accrual for onerous contracts was $ 9,142 as of September 30, 2012 and $0 as of December 31, 2011.

According to the leasing agreements, the Company has an option to terminate any agreement by paying a predetermined compensation. As of September 30, 2012, the compensation to terminate all leasing agreements is $1,455,155. According to the sub-leasing agreements that have been signed through September 30, 2012, the rental income from these sub-leasing agreements will be 1,102,805 within one year and $352,350 within two to five years. However, no assurance can be given that we can collect all of the rental income.

NOTE 17 – 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 18 – ACCUMULATED OTHER COMPREHENSIVE INCOME

As of September 30, 2012 and 2011, the only component of accumulated other comprehensive income was translation reserve.

NOTE 19 – CONCENTRATION OF CUSTOMERS

During the years ended September 30, 2012 and 2011, the following customer accounted for more than 10% of total net revenue:

* less than 10%

NOTE 20 – SUBSEQUENT EVENT

None

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-K for the year ended December 31, 2011, 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-K for the year ended December 31, 2011.

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.

On January 21, 2011, and January 22, 2011, we entered into a Share Purchase Agreement with Good Speed Services Limited (“Good Speed”) and Better Time International Limited (“Better Time”) respectively, to issue 2.5 million shares to each company for US $500 thousand. On June 24, 2011, we issued 2.5 million shares of common stock to Good Speed and received $500,000. On July 1, 2011, Sunrise and Better Time extended the closing date to on or before September 30, 2011.

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, ChongQing and ShangQiu

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 a rental return of 8.5% and 8.8% per annum for a period of 5 years and 8 years, respectively. In regards to 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%. As of September 30, 2012, 55% of the buyers agreed upon the lowered rate, 3% of the buyers did not agreed to a lowered rate and 42% of the buyers agreed to cancel the leasing agreements. 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 September 30, 2012, 82 sub-leasing agreements have been signed, the area of which these sub-leasing agreements represented 88% of total area with these lease commitments.

In mid 2011, we invested in a project company in Wuhan where the initial investment amount is $4,151,375 for 49% equity stake, the purpose of this project company was for a residence development project in Wuhan. This investment is for our expansion to the real estate development business. The land is approximately 27,950 square meters with an estimated development period of three years, and we began its initial construction in the first quarter of 2012. The balance of this investment is $3,434,217 at September 30 2012.

We invested $60,000 for 40% equity stake to a new real estate agency company at February 2012. The company has not commence its operations and therefore there were no profit or loss recorded for the period ended September 30, 2012.

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

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

Revenue from marketing consultancy services is recognized when services are provided to clients, fees associated to services are fixed or determinable, and collection of the fees is assured.

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

The Company accounts for underwriting sales in accordance with the FASB guidance of ASC Topic 360, “Property, Plant and Equipment”. The commission revenue on underwriting sales is recognized when the criteria in ASC 360 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 income 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.

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.

RECENTLY ISSUED ACCOUNTING STANDARDS

In 2011, new guidance was introduced to eliminate the current option to report other comprehensive income and its components in the statement of stockholders’ equity, and require an entity to present items of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive, statements. This guidance would be effective in the first quarter of 2012, with early adoption permitted. This pronouncement only changes the way we present other comprehensive income and its components, and does not impact our results of operations, financial position or cash flows.

In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU clarifies the concepts related to highest and best use and valuation premise, blockage factors and other premiums and discounts, the fair value measurement of financial instruments held in a portfolio and of those instruments classified as a component of shareowners’ equity. The ASU includes enhanced disclosure requirements about recurring Level 3 fair value measurements, the use of nonfinancial assets, and the level in the fair value hierarchy of assets and liabilities not recorded at fair value. The provisions of this ASU are effective prospectively for interim and annual periods beginning on or after December 15, 2011. Early application is prohibited. This ASU is not expected to have an impact currently on our financial statements or disclosures as there are presently no recurring Level 3 fair value measurements.

On August 17, 2010, the FASB and IASB issued an ED on lease accounting. The ED, released by the FASB as a proposed ASU, creates a new accounting model for both lessees and lessors and eliminates the concept of operating leases. The proposed ASU, if finalized, would converge the FASB’s and IASB’s accounting for lease contracts in most significant areas.  

RESULTS OF OPERATIONS

We provide the discussion and analysis of our changes in financial condition and results of operations for the three and six months ended September30, 2012, with comparisons to the historical three and six months ended September 30, 2012.

Revenue

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

The net revenue in the third quarter of 2012 was $1,687,627, which decreased 8% from $1,830,438 in the third quarter of 2011. The total net revenue of the first three quarters of 2012 was $5,242,950, which decreased 20% from $6,555,787 of the first three quarters of 2011. In the third quarter of 2012, agency sales represented 57% of the total net revenue, underwriting sales represented 27% and property management represented 16%. In the first three quarters of 2012, agency sales represented 64% of the total net revenue, underwriting sales represented 13% and property management represented 23%. The decrease in net revenue in the third quarter was due to the decrease in our property management and the decrease in net revenue in the first three quarters of 2012 was due to the decrease in our agency sales and property management.

Agency sales

In the third quarter and first three quarters of 2012, 57% and 64%, respectively, of our net revenue was attributable to our agency sales. As compared with same period in 2011, net revenue of agency sales in the third quarter increased by 26% and decreased in the first three quarters of 2012 by 16%. The primary reason for the overall decrease was there were fewer projects that contributed to our agency sales revenue in the rest of 2012.

Because of our diverse market locations, the risk of market fluctuations has been minimized on our business operations in agency sales in 2012, and we are seeking stable growth in our agency sales business in 2012. However, there can be no assurance that we will be able to do so.

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 of $56.53 million. 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 are any unsold units on the expiration date of the agreement, then we may have to purchase the unsold property units from the developer at the underwriting price and hold them in our inventory or as investments.

We started selling units in the Sovereign Building in January, 2005. As of December 31, 2006, we have reached our sales target by selling 46,779 square meters with a total sales price of $70.45 million. However, there are still unsold properties with aggregate floor area of 314 square meters, which represents 1% of total floor area underwritten, as of December 31, 2006. As of the end of February, 2007, we had sold or acquired all of the units in the building, and we have achieved the sales target by selling 47,093 square meters with a total sales price of $75.96 million.

The Company accounts for underwriting sales in accordance with the FASB guidance of ASC Topic 360, “Property, Plant and Equipment”. The commission revenue on underwriting sales is recognized when the criteria in ASC 360 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 income deferred. In early 2009, the Company renegotiated the rental payments with buyers. Based on the renegotiated agreements, $349,398 of the deferred revenue on underwriting sales was recognized in the first three quarters of 2012.

Property Management

During 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. In regards to 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%. As of September 30, 2012, 55% of the buyers agreed upon the lowered rate, 3% of the buyers did not agreed to a lowered rate and 42% of the buyers agreed to cancel the leasing agreements. 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 September 30, 2012, 82 sub-leasing agreements have been signed, the area of these sub-leasing agreements represented 88% 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 the rest of 2012 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:

The cost of revenue of the third quarter of 2012 was $766,866, which decreased 48% from $1,481,513 during the third quarter of 2011. The total cost of revenue of the first three quarters of 2012 was $2,644,922, which decreased 45% from $4,766,336 during the first three quarters of 2011. In the third quarter of 2012, agency sales represented 49% of the total cost of revenue, underwriting sales represented 6%, and property management represented 46%. In the first three quarters of 2012, agency sales represented 54% of the total cost of revenue, underwriting sales represented 3%, and property management represented 43%. The decrease in cost of revenue in the third quarter and first three quarters of 2012 was mainly due to the decrease in the cost of revenue for our agency sales and property management.

Agency sales

As compared with the same period in 2011, cost of revenue in the third quarter and first three quarters decreased 43% and 38% respectively. This decrease was due to a decrease in our overall agency operation as well as marketing costs. Although agency revenue increased by 26% in the third quarter, these revenue were from past sales that are being recognized in the third quarter. In the first three quarters in 2012, cost of revenue decreased by 38%. The main reason in the cost decrease was mainly due to the decreased in our marketing costs in the first three quarters of 2012, compared to the same period in 2011, the cost of such expenses was $149,461, a decrease from 562,105.

Underwriting Sales

The cost of underwriting sales represents selling costs, such as staff costs and advertising expenses, associated with underwriting sales.

Property management

As compared with same period in 2011, property management’s cost of revenue in the third quarter and first three quarters of 2012 decreased 63% and 56% respectively. This decreased in cost was mainly due to the decreased in our overall property management business in 2012.

In connection with our leasing guarantees to third party buyers in the Sovereign Building, an accrual for onerous contracts was recognized equal to the difference between the present value of the sublease income and the present value of the associated lease expense at the appropriate discount rate. The accrual for onerous contracts was $186,193.35 as of September 30, 2012 and $30,712 as of December 31, 2010.

Operating Expenses

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

The operating expenses in the third quarter of 2012 was $468,213, which increased 62% from $288,388 of the third quarter of 2011. The total operating expenses of the first three quarters of 2012 were $1,078,922, which was an increase of 14% from $949,694 in the first three quarters of 2011. In the third quarter of 2012, agency sales represented 65% of the total operating expenses, property management represented 5% and development represented 30%. In the first three quarters of 2012, agency sales represented 79% of the total operating expenses, property management represented 7% and development represented 13%.

Agency sales

When compared to 2011, the operating expenses for agency sales in the third quarter of 2012 increased 18% and remained relatively unchanged for the first three quarters of 2012. The primary reason for the increase was that in the third quarter of 2012, our staff costs and transportation expense increased by $9,463 and $11,460 respectively compared to the same period in 2011.

Property management

When compared to 2011, the operating expenses for property management in the third quarter of 2012 decreased 21%. The reason for the change was that there was a general decrease in our property management business in the third quarter of 2012.

General and Administrative Expenses

General Administrative Expense increased for the third quarter and the first three quarters in 2012 as compared to the same periods in 2011 by 68% and 81% respectively. The main reason for the increase in the third quarter and the first three quarters in 2012 was the increase in salary expense, which increased $29,759 and $171,798 respectively and travel expense increased $53,166 and $127,901 respectively as compared to the same periods in 2011

Interest Expenses

When compared to 2011, the interest expenses in the third quarter decreased approximately 7% and in the first three quarters of 2012 interest expense increased 31%. The interest expenses relate to bank loans and promissory notes payable.

LIQUIDITY AND CAPITAL RESOURCES

In the third quarter of 2012, our principal sources of cash were revenues from our agency sales and property management business. 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 and the maintenance of regional offices, and the repayments of our bank loans and promissory notes.

As of September 30, 2012, we had a cash position of $1,223,853.

The Company's operating activities during the nine months ended September 30, 2012 used cash in the amount of $15,472,124, which was primarily attributable to our change in inventory.

The Company's investing activities during the nine months ended September 30, 2012 used cash in the amount of $3,480,251, which was primarily attributable to the acquisition of property, plant and equipment.

The Company's financing activities during the nine months ended September 30, 2012 provided cash in the amount of $18,930,332, which was primarily attributable to proceeds from funds received from capital increase.

The potential cash needs for the rest of 2012 are expected to be for the repayments of our bank loans and promissory notes, the rental guarantee payments and promissory deposits for various property projects.

We have accumulated losses of $13,277,821 as of September 30, 2012. Our net working capital deficiency and significant accumulated losses raise substantial doubt about our ability to continue as a going concern. However, management believes that we are able to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain successful operations in respect of the agency sales and property management operations.

If our business otherwise grows more rapidly than we currently 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. There can be no guarantee that we will be able to obtain such funds through the issuance of debt or equity that are with terms satisfactory to management and our board of directors.

OFF BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2012. 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, 2012, 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 ending September 30, 2012, 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 1A.  RISK FACTORS

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

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (REMOVED AND RESERVED)

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

XBRL Exhibit

101.INS† XBRL Instance Document.

101.SCH† XBRL Taxonomy Extension Schema Document.

101.CAL† XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF† XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB† XBRL Taxonomy Extension Label Linkbase Document.

101.PRE† XBRL Taxonomy Extension Presentation Linkbase Document.

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.