SUNRISE REAL ESTATE GROUP INC - Quarter Report: 2019 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 000-32585

SUNRISE REAL ESTATE GROUP, INC.

(Exact name of registrant as specified in its charter)

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

No. 18, Panlong Road,

Shanghai, PRC 201702

(Address of Principal Executive Offices) (Zip Code)

Issuer's telephone number: + 86-21-6139-8018

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

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

Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ¨ No x

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 x	Smaller reporting company x

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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: July 30, 2020–68,691,925 shares of Common Stock

FORM 10-Q

For the Quarter Ended September 30, 2019

INDEX

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	3
	Condensed Consolidated Statements of Operations for The Three Months and Nine Months Ended September 30, 2019 and 2018	4
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months and Nine Months Ended September 30, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows for The Nine Months Ended September 30, 2019 and 2018	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32

SIGNATURES		32

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Expressed in U.S. Dollars)

	September 30,		December 31,
	2019		2018
ASSETS

Current assets
Cash and cash equivalents	$	19,326,603	$	17,656,165
Restricted cash (Note 3)		4,967,262		1,550,988
Transactional financial assets (Note 4)		27,252,091		49,451,172
Accounts receivable		49,347		234,358
Promissory deposits (Note 5)		0		114,751
Real estate property under development (Note 6)		78,919,736		64,423,978
Amount due from an unconsolidated affiliate		326,316		5,818,440
Other receivables and deposits, net (Note 7)		6,566,381		8,775,153
Total current assets		137,407,736		148,025,005

Property and equipment, net (Note 8)		1,224,162		1,098,842
Investment properties, net (Note 9)		26,907,353		3,707,480
Deferred tax assets (Note 15)		63,086		-
Investment in an unconsolidated affiliate (Note 10)		12,527,540		30,857,551
Other investments		141,385		145,705
Total assets	$	178,271,262	$	183,834,583

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities
Promissory notes payable (Note 11)		1,413,847		1,457,046
Accounts payable (Note 14)		2,228,189		5,268,437
Amounts due to directors (Note 12)		822,331		1,767,609
Amount due to an affiliate (Note 15)		498,155		513,551
Customer deposits (Note 16)		15,687,782		40,698,987
Other payables and accrued expenses (Note 13)		14,250,217		929,941
Other taxes payable		114,870		214,502
Income taxes payable (Note 17)		950,950		730,051
Dividends payables		-		6,869,193
Total current liabilities		35,966,341		58,449,317

Long-term income tax payable (Note 17)		3,019,582		3,278,403
Deferred government subsidy (Note 18)		4,686,255		4,829,440
Total liabilities		43,672,178		66,557,160

Commitments and contingencies (Note 19)

Shareholders’ equity
Common stock, par value $0.01 per share; 200,000,000 shares Authorized; 68,691,925 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		686,919		686,919
Additional paid-in capital		7,570,008		7,570,008
Statutory reserve (Note 20)		3,194,604		3,194,604
Retained Earnings		106,213,811		106,727,898
Accumulated other comprehensive income		13,738,610		(2,790,200	)
Total deficit of Sunrise Real Estate Group, Inc.		131,403,952		115,389,229
Non-controlling interests		3,195,132		1,888,194
Total shareholders’ equity		134,599,084		117,277,423
Total liabilities and shareholders’ equity	$	178,271,262	$	183,834,583

See accompanying notes to consolidated financial statements.

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Expressed in U.S. Dollars)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018

Net revenues	$	724,827		$	1,664,317		$	32,424,073		$	5,162,387
Cost of revenues		(749,236	)		(999,707	)		(26,231,257	)		(3,087,307	)
Gross profit		(24,409)			664,610			6,192,816			2,075,080

Operating expenses		(548,691	)		(213,874	)		(1,372,674	)		(1,306,001	)
General and administrative expenses		(1,735,622	)		(779,372	)		(9,141,400	)		(1,897,276	)
Operating profit (loss)		(2,308,722	)		(328,636)			(4,321,258	)		(1,128,197)

Other income (expenses)
Interest income		48,925			33,981			88,179			64,375
Interest expense		-			56,026			-			(2,246,270	)
Equity in net gain of affiliate		-			33,343,384			-			64,679,542
Other income (loss), net		305,351			497,072			1,573,414			783,470
Total other Income		354,351			33,930,463			1,661,593			63,281,117

Income (loss) before income taxes		(1,954,371)			33,601,827			(2,659,665)			62,152,920

Income tax benefit (expense)		(362)			(980,563)			64,264			(961,626)

Net income		(1,954,733)			32,621,264			(2,595,401)			61,191,294
Less: Net (income) loss attributable to non-controlling interests		98,297			(236,314	)		2,657,997			(369,185	)
Net income attributable to shareholders of Sunrise Real Estate Group, Inc.	$	(1,856,436)		$	32,384,950		$	62,596		$	60,822,109
Net income (loss)		(1,954,733)			32,621,264			(2,595,401)			61,191,294
Other comprehensive income Foreign currency translation adjustment		(2,466,390	)		(5,319,554)			(222,297)			(7,429,136)
Discontinuation of the equity method for an investment		-			-			20,716,042			-
Comprehensive income		(4,421,123)			27,301,710			17,898,344			53,518,617
Less: Comprehensive income attributable to non-controlling interests		189,371			(134,582	)		(1,306,938	)		(233,541	)
Total comprehensive income attributable to shareholders		(4,231,752)			27,167,128			16,591,406			53,518,617
Earnings per share – basic and fully diluted	$	(0.03)		$	0.47		$	0.00		$	0.89

Weighted average common shares outstanding
Basic and fully diluted		68,691,925			68,691,925			68,691,925			68,691,925

See accompanying notes to unaudited condensed consolidated financial statements.

SUNRISE REAL ESTATE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(Expressed in U.S. Dollars)

	Common Stock
	Number of shares issued		Amount		Additional Paid-in Capital		Statutory Reserve		Retained Earnings (Deficits)		Accumulated Other Comprehensive Income		Non-controlling Interests		Total Stockholders’ (Deficit) Equity

Balance, December 31, 2018		68,691,925	$	686,919	$	7,570,008	$	3,194,604	$	106,727,898	$	(2,790,200)	$	1,888,194	$	117,277,423
Profit (loss) for the year										62,596				(2,657,997)		(2,595,401)
Discontinuation of the equity method for an investment		-		-		-		-		-		20,716,042		-		20,716,042
Gain (loss) contribution from newly consolidated subsidiaries		-		-		-		-		(576,683)		-		-		(576,683)
Translation of foreign operations		-		-		-		-		-		(4,187,232)		3,964,935		(222,297)
Balance, Sept. 30, 2019		68,691,925		686,919		7,570,008		3,194,604		106,213,811		13,738,610		3,195,132		134,599,084

	Common Stock
	Number of shares issued		Amount		Additional Paid-in Capital		Statutory Reserve		Retained Earnings (Deficits)		Accumulated Other Comprehensive Income		Non-controlling Interests		Total Stockholders’ (Deficit) Equity

Balance, June 30, 2019		68,691,925	$	686,919	$	7,570,008	$	3,194,604	$	108,580,558	$	16,707,852	$	3,384,503	$	140,124,444
Profit (loss) for the year										(1,856,436)				(98,297)		(1,947,985)
Discontinuation of the equity method for an investment		-		-		-		-		-		-		-		-
Gain (loss) contribution from newly consolidated subsidiaries		-		-		-		-		(510,311)		-		-		(510,311)
Translation of foreign operations		-		-		-		-		-		(2,969,242)		(91,074)		(3,060,316)
Balance, Sept. 30, 2019		68,691,925		686,919		7,570,008		3,194,604		106,213,811		13,738,610		3,195,132		134,599,084

See accompanying notes to consolidated financial statements.

SUNRISE REAL ESTATE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(Expressed in U.S. Dollars)

	Common Stock
	Number of shares issued		Amount		Additional Paid-in Capital		Statutory Reserve		Retained Earnings (Deficits)			Accumulated Other Comprehensive Income			Non- controlling Interests			Total Stockholders’ (Deficit) Equity
Balance, December 31, 2017		68,691,925	$	686,919	$	7,570,008	$	931,510	$	68,975,118		$	3,095,469		$	2,339,756		$	83,598,780
Profit (loss) for the year										60,822,109						369,185			61,191,294
Discontinuation of the equity method for an investment		-		-		-		-		-			-			-			-
Share issued								1,740,182		(1,740,182	)								-
Gain (loss) contribution from newly consolidated subsidiaries		-		-		-		-		-			-			-			-
Translation of foreign operations		-		-		-		-		-			(7,303,492	)		(135,644	)		(7,439,136	)
Balance, Sept. 30, 2018		68,691,925		686,919		7,570,008		2,671,691		128,057,045			(4,208,023	)		2,573,297			137,350,938

	Common Stock
	Number of shares issued		Amount		Additional Paid-in Capital		Statutory Reserve		Retained Earnings (Deficits)		Accumulated Other Comprehensive Income		Non- controlling Interests		Total Stockholders’ (Deficit) Equity

Balance, June 30, 2018		68,691,925	$	686,919	$	7,570,008	$	931,510	$	97,412,277	$	1,009,799	$	2,438,715	$	110,049,228
Profit (loss) for the year										32,384,950				236,314		32,621,264
Discontinuation of the equity method for an investment												-				-
Share issued								1,740,182		(1,740,182)
Gain (loss) contribution from newly consolidated subsidiaries										-						-
Translation of foreign operations		-		-		-		-		-		(5,217,822)		(101,732)		(5,319,554)
Balance, Sept. 30, 2018		68,691,925		686,919		7,570,008		2,671,691		128,057,045		(4,208,023)		2,573,297		137,350,938

See accompanying notes to consolidated financial statements.

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Expressed in U.S. Dollars)

	Nine Months Ended Sept. 30,
	2019			2018
Cash flows from operating activities
Net income (loss)	$	(2,595,401	)	$	61,191,294

Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization		1,294,402			363,713
Loss (Gain) on disposal of property, plant and equipment		15,841			4,174
Bad debts		2,481,884			-
Equity in net loss (income) of unconsolidated affiliates		-			(64,678,404	)
Changes in assets and liabilities
Accounts receivable		184,142			(36,332	)
Real estate property under development		(41,068,227	)		1,202,082
Customer Deposits		(24,617,243	)		(771,198	)
Amount due from unconsolidated affiliates		3,019,171			(8,260	)
Other receivables and deposits		2,015,129			(2,661,208	)
Deferred tax assets		(65,240	)		(83,670	)
Net cash from directors		(923,354	)		-
Accounts payable		(2,982,510	)		(1,634,516	)
Other payables and accrued expenses		13,803,548			96,324
Other taxes payable		(96,457	)		(31,807	)
Income taxes payable		(7,997	)		(946	)
Net cash provided by (used in) operating activities		(49,542,312	)		(7,048,754	)

Cash flows from investing activities
Purchases of property and equipment		(271,719	)		(3,665	)
Net Cash from Transactional financial assets		21,440,765			(86,947	)
Dividend distribution of affiliates		39,432,991			-
Net cash provided by (used in) investing activities		60,602,037			(90,612	)

Cash flows from financing activities
Restricted cash		(3,580,461	)		676,010
Repayments to directors		-			(3,870,889	)
Advances from directors		-			24,578
Advances from an affiliate		-			13,118,432
Repayments to an affiliate		-			(135,820	)
Dividends paid to noncontrolling interests		(6,869,193	)		-
Net cash provided by (used in) financing activities		(10,449,654	)		9,812,311

Effect of exchange rate changes on cash and cash equivalents		1,060,367			162,110

Net increase in cash and cash equivalents		1,670,438			2,835,055
Cash and cash equivalents at beginning of period		17,656,165			5,869,944
Cash and cash equivalents at end of period	$	19,326,603		$	8,704,999

Supplemental disclosure of cash flow information
Income taxes paid	$	-		$	1,094,024
Interest paid		-			139,237

See accompanying notes to consolidated financial statements.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Sunrise Real Estate Group, Inc. (“SRRE”) was incorporated in Texas on October 10, 1996 under the name of Parallax Entertainment, Inc. SRRE, together with its subsidiaries and equity investment described below, are collectively referred to as “the Company”, “we”, “our” or “us”. The Company is primarily engaged in the provision of property brokerage services, which include property marketing, leasing and management services, and real estate development in the People’s Republic of China (the “PRC”).

As of September 30, 2019, the Company has the following major subsidiaries and equity investment.

Company Name	Date of Incorporation	Place of Incorporation	% of Ownership held by the Company		Relationship with the Company	Principal Activity
Sunrise Real Estate Development Group, Inc. (CY-SRRE)	April 30, 2004	Cayman Islands		100%	Subsidiary	Investment holding
Lin Ray Yang Enterprise Limited (“LRY”)	November 13, 2003	British Virgin Islands		100%	Subsidiary	Investment holding
Shanghai Xin Ji Yang Real Estate Consultation Company Limited (“SHXJY”)	August 20, 2001	PRC		100%	Subsidiary	Property brokerage services
Shanghai Shang Yang Real Estate consultation Company Limited (“SHSY”)	February 5, 2004	PRC		100%	Subsidiary	Property brokerage services
Suzhou Shang Yang Real Estate Consultation Company Limited (“SZSY”)	November 24, 2006	PRC		75.25%¹	Subsidiary	Property brokerage and management services
Suzhou Xi Ji Yang Real Estate Consultation Company Limited (“SZXJY”)	June 25, 2004	PRC		75%	Subsidiary	Property brokerage services
Linyi Shangyang Real Estate Development Company Limited (“LYSY”)	October 13, 2011	PRC		34%²	Subsidiary	Real estate development
Shangqiu Shang Yang Real Estate Consultation Company Limited (“SQSY”)	October 20, 2010	PRC		100%	Subsidiary	Property brokerage services
Wuhan Gao Feng Hui Consultation Company Limited (“WHGFH”)	November 10, 2010	PRC		60%	Subsidiary	Property brokerage services
Sanya Shang Yang Real Estate Consultation Company Limited (“SYSY”)	September 18, 2008	PRC		100%	Subsidiary	Property brokerage services
Shanghai Rui Jian Design Company Limited (“SHRJ”)	August 15, 2011	PRC		100%	Subsidiary	Property brokerage services
Linyi Rui Lin Construction and Design Company Limited (“LYRL”)	March 6, 2012	PRC		100%	Subsidiary	Investment holding
Wuhan Yuan Yu Long Real Estate Development Company Limited (“WHYYL”)	December 28, 2009	PRC		49%	Equity investment	Real estate development
Shanghai Xin Xing Yang Real Estate Brokerage Company Limited (“SHXXY”)	September 28, 2011	PRC		20%	Equity investment	Property brokerage services
Xin Guang Investment Management and Consulting Company Limited (“XG”)	December 17, 2012	PRC		49%	Equity investment	Investment management and consulting
Shanghai Da Er Wei Trading Company Limited (“SHDEW”)	June 6, 2013	PRC		19.91%³	Equity investment	Import and export trading
Shanghai Hui Tian (“SHHT”)	July 25, 2014	PRC		100%	Subsidiary	Investment holding
Huaian Zhanbao Industrial Co., Ltd. (“HAZB”)	December 6, 2018	PRC		78.46%⁴	Subsidiary	Investment holding
Huaian Tianxi Real Estate Development Co., Ltd (“HATX”)	October, 2018	PRC		100%⁴	Subsidiary	Investment holding

The Company and a shareholder of SZSY, which holds 12.5% equity interest in SZSY, entered into a voting agreement under which the Company is entitled to exercise the voting rights in respect of the shareholder’s 12.5% equity interest in SZSY. The Company effectively holds 75.25% voting rights in SZSY and therefore considers SZSY as a subsidiary of the Company.

The Company and a shareholder of LYSY, which holds 46% equity interest in LYSY, entered into a voting agreement that the Company is entitled to exercise the voting rights in respect of her 46% equity interest in LYSY. The Company effectively holds 80% voting rights in LYSY and therefore considers LYSY as a subsidiary of the Company. On May 27, 2020, LYRL received 10% of the issued and outstanding shares of LYSY from Nanjing Longchang Real Estate Development Group. LYRL owned 34% of LYSY following the purchase.

In December 2019, SHDEW had an employee stock bonus where its employees received their issued shares. This resulted in the dilution of our ownership of SHDEW from 20.38% to 19.91%.

We established HATX for the purpose of for real estate development in Huai’an through HAZB of which we have 78.46% ownership.

The accompanying condensed consolidated balance sheet as of December 31, 2018, which has been derived from the audited consolidated financial statements and the accompanying unaudited condensed consolidated financial statements, has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations and the Company believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, these condensed consolidated financial statements reflect all adjustments which are of a normal recurring nature and which are necessary to present fairly the financial position of the Company as of September 30, 2019 and the results of operations for the nine months ended September 30, 2019 and 2018, and the cash flows for the nine months ended September 30, 2019 and 2018. These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2018. The results of operations for the nine months ended September 30, 2019 are not necessarily indicative of the results which may be expected for the entire fiscal year.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

The condensed consolidated financial statements include the financial statements of Sunrise Real Estate Group, Inc. and its subsidiaries. All significant inter-company accounts and transactions have been eliminated on consolidation.

Investments in business entities, in which the Company does not have control but has the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method.

We change our evaluation of SHDEW investment from the equity method to the measurement alternative method due to our ownership of SHDEW was decreased to 19.91% and the Company does not have significant control of SHDEW. This change in evaluation method will negatively affect our financial statement in items such as equity in net gain of an affiliate, net profit in our statement of operations and investment in unconsolidated affiliate in our balance sheet statement. Our equity in net gain of an affiliate decreased to $0 which lowered our net profit and thus lowering our earnings per share. A one-time effect in our financial line item is discontinuation of equity method for an investment as of three months and nine months ended September 30, 2019 was -$1,090,172 and $20,716,042 respectively, in our statement of operations.

Foreign Currency Translation and Transactions

The functional currency of SRRE, CY-SRRE and LRY is U.S. dollars (“$”) and their financial records and financial statements are maintained and prepared in U.S. dollars. The functional currency of the Company’s subsidiaries and affiliates in China is Renminbi (“RMB”) and their financial records and statements are maintained and prepared in RMB.

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

The financial statements of the Company’s operations based outside of the United States have been translated into U.S. dollars in accordance with ASC830. Management has determined that the functional currency for each of the Company’s foreign operations is its applicable local currency. When translating functional currency financial statements into U.S. dollars, period-end exchange rates are applied to the condensed consolidated balance sheets, while average exchange rates as to revenues and expenses are applied to consolidated statements of operations. The effect of foreign currency translation adjustments is included as a component of accumulated other comprehensive income in shareholders’ equity.

The exchange rates as of September 30, 2019 and December 31, 2018 are $1: RMB7.0729 and $1: RMB6.8632, respectively.

The RMB is not freely convertible into foreign currency and all foreign exchange transaction must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the rate used in translation.

Real Estate Property under Development

Real estate property under development, which consists of residential unit sites and commercial and residential unit sites under development, is stated at the lower of carrying amounts or fair value less selling costs.

Expenditures for land development, including cost of land use rights, deed tax, pre-development costs and engineering costs, are capitalized and allocated to development projects by the specific identification method. Costs are allocated to specific units within a project based on the ratio of the sales value of units to the estimated total sales value times the total project costs.

Costs of amenities transferred to buyers are allocated as common costs of the project that are allocated to specific units as a component of total construction costs. For amenities retained by the Company, costs in excess of the related fair value of the amenity are also treated as common costs. Results of operations of amenities retained by the Company are included in current operating results.

In accordance with ASC 360, “Property, Plant and Equipment” (“ASC 360”), real estate property under development is subject to valuation adjustments when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to be generated by the assets.

For the nine months ended September 30, 2019, the Company had recognized the net revenue and cost of revenue of ZJPF project based on the number of units sold.

In October 2018 we established HATX for the purpose of for real estate development in Huaian through HAZB of which we have 78.46% ownership. HAZB purchased the property in Jiangsu Pronvince, Huaian City Qingjiang Pu District, with an area of 78,030 square meters and the Company, through HATX, invested 78.46% shares in HAZB. The Huaian project, named Tianxi Times, started its 1^st phase development in early 2019 with a gross floor area (“GFA”) of 41,795 sqm totaling 347 units. As of April 30, 2020 the Company pre-sold 255 out of 347 units.

Long Term Investments

The Company accounts for long term investments in equities as follows:

Investment in Unconsolidated Affiliates

Affiliates are entities over which the Company has significant influence, but which it does not control. The Company generally considers an ownership interest of 20% or higher to represent significant influence. Investments in unconsolidated affiliates are accounted for by the equity method of accounting. Under this method, the Company’s share of the post-acquisition profits or losses of affiliates is recognized in the income statement and its shares of post-acquisition movements in other comprehensive income are recognized in other comprehensive income. Unrealized gains on transactions between the Company and its affiliates are eliminated to the extent of the Company’s interest in the affiliates; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

When the Company’s share of losses in an affiliate equals or exceeds its interest in the affiliate, the Company does not recognize further losses, unless the Company has incurred obligations or made payments on behalf of the affiliate.

The Company is required to perform an impairment assessment of its investments whenever events or changes in business circumstances indicate that the carrying value of the investment may not be fully recoverable. An impairment loss is recorded when there has been a loss in the value of the investment that is not temporary. The Company did not record any impairment losses in any of the periods reported.

Other Investments

Where the Company has no significant influence, the investment is classified as other assets in the balance sheet and is carried under the measurement alternative which is measured at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. Investment income is recognized by the Company when the investee declares a dividend and the Company believes it is collectible. The Company periodically evaluates the carrying value of its investment under the measurement alternative method in the case of the investment in SHDEW and any decline in value is included in impairment of cost of the investment.

Government Subsidies

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

In recognizing the benefit of government subsidies in accordance with U.S. GAAP, the Company considers intended use of and restrictions of the subsidy, the requirements for the receipt of funds, and whether or not the incentive is given for immediate financial support, or to encourage activities such as land development in specified area. Each grant is evaluated to determine the propriety of classification on the consolidated statements of operations and consolidated balance sheets. Those grants that are substantively reimbursements of specified costs are matched with those costs and recorded as a reduction in costs. Those benefits that are more general in nature or driven by business performance measures are classified as revenue.

Government subsidy was received in 2012 and the Company recorded it as deferred government subsidy in balance sheets. As of September 30, 2019, and December 31, 2018, the deferred government subsidy amounted to $4,686,255 and $4,829,440, respectively. The subsidy was used to reimburse the land acquisition costs and certain construction costs incurred for the Company’s property development project in Linyi, and are repayable if the Company fails to complete the subsidized property development project by the agreed date.

Revenue Recognition

Most of the Company’s revenue is derived from real estate sales in the PRC. The majority of the Company’s contracts contain a single performance obligation involving significant real estate development activities that are performed together to deliver a real estate property to customers. Revenues arising from real estate sales are recognized when or as the control of the asset is transferred to the customer. The control of the asset may transfer over time or at a point in time. For the sales of individual condominium units in a real estate development project, the Company has an enforceable right to payment for performance completed to date, revenue is recognized over time by measuring the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the asset.

All revenues represent gross revenues less sales and business tax.

ASC 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. ASC 606 also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, ASC 606 requires extensive disclosures.

The Company adopted ASC 606 on January 1, 2018 using the modified retrospective approach with no restatement of comparative periods and no cumulative-effect adjustment to retained earnings recognized as of the date of adoption. A significant portion of the Company’s revenue is derived from development and sales of condominium real estate property in the PRC, with revenue previously recognized using the percentage of completion method. Under the new standard, to recognize revenue over time similar to the percentage of completion method, contractual provisions need to provide the Company with an enforceable right to payment and the Company has no alternative use of the asset. Historically, all contracts executed contained an enforceable right to home purchase payments and the Company had no alternative use of assets, therefore, the adoption of ASC 606 did not have a material impact on the Company’s consolidated financial statements.

Net Earnings (Loss) per Common Share

The Company computes net earnings (loss) per share in accordance with ASC 260, “Earnings per Share” (“ASC 260”). Under the provisions of ASC 260, basic net earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net earnings (loss) per share recognizes common stock equivalents, however, potential common stock in the diluted EPS computation is excluded in net loss periods, as their effect is anti-dilutive.

Recently Adopted Accounting Standards

In August 2018, the SEC issued Release No. 33-10532 that amends and clarifies certain financial reporting requirements. The principal change to our financial reporting will be the inclusion of the annual disclosure requirement of changes in stockholders’ equity in Rule 3-04 of Regulation S-X to interim periods. We adopted this new rule on January 1, 2019. Upon adoption, the Company includes its Statements of Stockholders’ Deficit with each interim reporting.

In February 2016, the FASB issued ASU No. 2016-02, Leases. The standard requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The guidance in ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. The Company adopted this ASU on January 1, 2019 with no material impact on the Company’s financial statements.

In June 2018, the FASB issued Accounting Standards Update (“ASU”) ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The Company adopted this ASU on January 1, 2019 with no material impact on the Company’s financial statements.

New Accounting Pronouncements

There were no new accounting pronouncements related to the Company.

NOTE 3– RESTRICTED CASH

The Company is required to maintain certain deposits with the bank for those home buyers that has applied for a housing loan from their bank. This deposit is a percentage to each home buyer’s bank loan for the purpose of purchasing in our project. Once we complete the handover to the buyer, these deposits become unrestricted. As of September 30, 2019, and December 31, 2018, the Company held cash deposits of $4,967,262 and $1,550,988, respectively.

NOTE 4– TRANSACTIONAL FINANCIAL ASSETS

As of September 30, 2019, we have $27,252,091 invested in bank wealth management investment products. The investments are short termed with maturity periods and can be rolled into a maturity date of our choosing or automatically rolled into subsequent maturity period. The annualized rate of return may range from 3.15% to 4.4% depending on the amount and time period invested.

NOTE 5- PROMISSORY DEPOSITS

Promissory deposits are paid to property developers in respect of the real estate projects where the Company has been appointed as sales agent. The balances were unsecured, interest free and recoverable on completion of the respective projects.

NOTE 6 – REAL ESTATE PROPERTY UNDER DEVELOPMENT

Real estate property under development represents the Company’s real estate development project in Linyi, the PRC (“Linyi Project”), which is located on the junction of Xiamen Road and Hong Kong Road in Linyi City Economic Development Zone, Shandong Province, PRC. This project covers a site area of approximately 103,385 square meters for the development of villa-style residential housing buildings. The Company acquired the site and commenced construction of this project during the fiscal year of 2012. We sold 121 of 124 Phase 1 villas and sold 42 villas in Phase 2 North and also 42 villas in Phase 2 South as of April 30, 2020.

On March 13, 2014, the Company has signed a joint development agreement with Zhongji Pufa Real Estate Co. According to this agreement, the Company has obtained a right to develop the Guangxinglu (the “GXL”) project, which is located at 182 lane Guangxinglu, Putuo district, Shanghai, PRC. This project covers a site area of approximately 2,502 square meters for the development of one building of apartment. In 2016, the government issued a regulation prohibiting the by-unit sale of commercial-use buildings. The apartment unit sale for the GXL project was put on hold until the government reviewed our project’s status. During that time rented out any unsold apartment units while not recognizing the units previously sold before the regulation. In March 2018, we received government confirmation that our project cannot be sold on a unit-by-unit basis going forward. The Company decided to continue operating the project by renting out the units. These unsold units are recognized as investment in properties in Note 9. We also recognized all the units that were sold before the regulation in our 2019 Q3 financial.

For the period ended of September 30, 2019, the Company had recognized the net revenue and cost of revenue of the Linyi project and the GXL project based on the number of units sold. In the first quarter of 2019, we purchased the property of HATX with the land use rights. As of September 30, 2019, land use rights included in real estate property under development totaled $78,919,736.

In October 2018, we established HATX for the purpose of real estate development in Huai’an through HAZB of which we have 78.46% ownership. HAZB purchased the property in Huai’an, Qingjiang Pu district with an area of 78,030 square meters and the Company, through HATX, invested 78.46% shares in HAZB. The Huai’an project, named Tianxi Times, started its 1^st phase development in early 2019 with a GFA of 41,795 sqm totaling 347 units. As of April 30, 2020, the Company pre-sold 255 out of 347 units.

NOTE 7 - OTHER RECEIVABLES AND DEPOSITS, NET

	September 30,		December 31,
	2019		2018
Advances to staff	$	27,393		22,864
Rental deposits		40,021		39,085
Prepaid expense		29,549		12,033
Prepaid tax		1,814,969		4,620,338
Other receivables		4,654,449		4,080,833
	$	6,566,381	$	8,775,153

Other receivables and deposits as of September 30, 2019 and December 31, 2018 were stated net of allowance for doubtful accounts of $323,258 and $674,478, respectively.

NOTE 8 – PROPERTY AND EQUIPMENT, NET

	September 30,			December 31,
	2019			2018
Furniture and fixtures	$	213,983		$	161,949
Computer and office equipment		181,124			155,395
Motor vehicles		580,486			535,089
Properties		2,139,076			2,204,433
		3,116,116			3,056,867
Less: Accumulated depreciation		(1,891,954	)		(1,958,025	)
	$	1,224,162		$	1,098,842

Depreciation and amortization expense for property and equipment amounted to $1,294,402 and $249,487 for the nine months ended September 30, 2019 and 2018, respectively.

NOTE 9 – INVESTMENT PROPERTIES, NET

	September 30,			December 31,
	2019			2018

Investment properties	$	32,856,959		$	9,022,150
Less: Accumulated depreciation		(5,949,606	)		(5,314,670	)
	$	26,907,353		$	3,707,480

Depreciation and amortization expense for investment properties amounted to $1,164,561 and $924,757 for the nine months ended September 30, 2019 and 2018, respectively.

We recognized $19,364,708 of investment properties from the unsold apartment units in the GXL project.

NOTE 10 – INVESTMENT IN AND AMOUNT DUE FROM AN UNCONSOLIDATED AFFILIATE

The investments in unconsolidated affiliates primarily consist of WHYYL (49%) and SHDEW (19.91%). As of September 30, 2019, the investment amount in WHYYL and SHDEW were $0 and $12,527,540, respectively.

WHYYL is primarily developing a real estate project in Wuhan, the PRC on a parcel of land covering approximately 27,950 square meters with a 3-year planned construction period. SHDEW is a company engaged principally in the manufacture and sales of skincare and cosmetic products. The Company has accounted for these investments using the measurement alternative method for the periods presented in this report as the Company cannot exercise significant influence over their activities

In 2011, the Company invested $4,697,686 for acquiring a 49% equity interest in WHYYL to expand its operations to the real estate development business. As of September 30, 2019, the investment in WHYYL was $0.

SHDEW was established in June 2013 with its business as a skincare and cosmetic company. SHDEW’s online Wechat stores had a membership of over five million members as of June 30, 2020. SHDEW is developing its own skincare products as well as improving its online ecommerce platform. SHDEW sells products under its own brands as well as the products of third parties. The products include skincare, cosmetics, personal care products such as soaps, shampoos, skin care devices and children’s apparel. SHDEW is developing its own online shopping platform where consumers can purchase its cosmetics and skincare products as well as products imported into China. The online shopping platform has been in operation since 2017.

On December 2019, SHDEW had an employee stock bonus where many of its employees received their vested shares. This resulted in the dilution of our ownership of SHDEW from 20.38% to 19.91% thereby changing the accounting method for the SHDEW investment from the equity method to the measurement alternative method going forward.

NOTE 11– PROMISSORY NOTES PAYABLE

The promissory notes payable consists of the following unsecured notes to unrelated parties. Included in the balances are promissory notes with outstanding principal and unpaid interest of an aggregate of $1,413,847 and $1,457,046 as of September 30, 2019 and December 31, 2018, respectively.

The promissory note with a principal as of September 30, 2019 amounting to $706,924 bears interest at a rate of 0% per annum, is unsecured and has no fixed term of repayment. As of September 30, 2019, and December 31, 2018, the outstanding principal and unpaid interest related to this promissory note amounted to $706,924 and $728,523, respectively.

For the nine months ended September 30, 2019, the interest expense related to these promissory notes was $NIL.

NOTE 12– AMOUNTS DUE TO DIRECTORS

	September 30,			December 31,
	2019			2018
Lin Chi-Jung	$	841,272		$	1,769,484
Pan, Yu-Jen		(56,554	)		(58,282	)
Lin Hsin-Hung		37,613			56,407
	$	822,331		$	1,767,609

(a)

The balance due to Lin Chi-Jung consists of temporary advances.

The balances are unsecured, interest-free and have no fixed term of repayment.

(b)

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

(c)

The balances due from Pan Yu-jen are unsecured, interest-free and have no fixed term of repayment.

NOTE 13- OTHER PAYABLES AND ACCRUED EXPENSES

	September 30,		December 31,
	2019		2018
Accrued staff commission and bonus	$	218,643	$	285,506
Rental deposits received		52,890		46,331
Bid bond		299,736		203,986
Dividends payable to non-controlling interest		190,240		196,053
Other payables		13,488,708		198,065
	$	14,250,217	$	929,941

NOTE 14- ACCOUNT PAYABLE

Account payable was mostly derived from our property development of the Linyi project, the GXL project and the HATX project. As of September 30, 2019, and December 31, 2018, the Company’s account payable amounted to $2,228,189 and $5,268,437.

NOTE 15 – AMOUNT DUE TO AFFILIATES

The temporary borrowing, in the amount of $498,155 from JXSY is intercompany transfers for day to day operation.

NOTE 16 – CUSTOMER DEPOSITS

Customer deposits were mostly derived from our property development of the Linyi project and the GXL project, which was pre-sale collection from our customers. As of September 30, 2019, and December 31, 2018, the Company’s customer deposits amounted to $15,687,782 and $40,698,987.

NOTE 17 – INCOME TAX PAYABLE

The 2017 Tax Act was enacted on December 22, 2017. Due to the complexities involved in the accounting for the 2017 Tax Act, the SEC issued SAB 118, which provides guidance on the application of US GAAP for income taxes in the period of enactment. SAB 118 requires companies to include in their financial statements a reasonable estimate of the impact of the 2017 Tax Act, to the extent such an estimate has been determined. As a result, our financial results reflect the income tax effects of the 2017 Tax Act for which the accounting is complete, as well as provisional amounts for those impacts for which the accounting is incomplete but a reasonable estimate could be determined.

NOTE 18– DEFERRED GOVERNMENT SUBSIDY

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

Government subsidy was received in 2012, and as of September 30, 2019 and December 31, 2018, the Company’s deferred government subsidy amounted to $4,686,255 and $4,829,440, respectively. The subsidy is given to reimburse the land acquisition costs and certain construction costs incurred for the Company’s property development project, and are repayable if the Company fails to complete the subsidized property development project before the agreed date. The entire government subsidy is deferred and included as deferred government subsidy in consolidated balance sheets.

NOTE 19- COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

The Company leases certain of its office properties under non-cancellable operating lease arrangements. Payments under operating leases are expensed on a straight-line basis over the periods of their respective terms, and the terms of the leases do not contain rent escalation, or contingent rent, renewal, or purchase options. There are no restrictions placed upon the Company by entering into these leases. Rental expenses under operating leases for the nine months ended September 30, 2019 and 2018 were $247,709 and $33,780, respectively.

As of September 30, 2019, the Company had the following operating lease obligations.

	Amount
Within one year	$	43,960
Two to five years		-
	$	43,960

NOTE 20– STATUTORY RESERVE

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

According to the Law of the PRC on Enterprises with Wholly-Owned Foreign Investment, the Company PRC’s subsidiaries are required to make appropriations from after-tax profits as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) to non-distributable reserves. These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion reserve and (iii) a staff bonus and welfare fund. A wholly-owned PRC subsidiary is not required to make appropriations to the enterprise expansion reserve but annual appropriations to the general reserve are required to be made at 10% of the profit after tax as determined under PRC GAAP at each year-end, until such fund has reached 50% of its respective registered capital. The staff welfare and bonus reserve is determined by the board of directors. The general reserve is used to offset future losses. The subsidiary may, upon a resolution passed by the stockholders, convert the general reserve into capital. The staff welfare and bonus reserve are used for the collective welfare of the employees of the subsidiary. The enterprise expansion reserve is for the expansion of the subsidiary operations and can be converted to capital subject to approval by the relevant authorities. These reserves represent appropriations of the retained earnings determined in accordance with Chinese law.

In addition to the general reserve, the Company’s PRC subsidiaries are required to obtain approval from the local PRC government prior to distributing any registered share capital. Accordingly, both the appropriations to general reserve and the registered share capital of the Company’s PRC subsidiary are considered as restricted net assets and are not distributable as cash dividends. As of September 30, 2019, and December 31, 2018, the Company’s statutory reserve fund was $3,194,604 and $3,194,604, respectively.

NOTE 21 - SEGMENT INFORMATION

The Company's chief executive officer and chief operating officer have been identified as the chief operating decision makers. The Company's chief operating decision makers direct the allocation of resources to operating segments based on the profitability and cash flows of each respective segment.

The Company evaluates performance based on several factors, including net revenue, cost of revenue, operating expenses, and income from operations. The following tables show the operations of the Company's operating segments:

	Three Months Ended September 30, 2019
	Property
	Brokerage			Real Estate			Investment
	Services			Development			Transaction		Others			Total
Net revenues	$	537,403		$	247,242		$	-	$	-		$	784,645
Cost of revenues		(847,169	)		(294,587	)		-		-			(1,141,756	)
Gross profit		(309,766	)		(47,345	)		-		-			(357,111	)

Operating expenses		(616,556	)		(419,938	)		-		(67	)		(1,036,561	)
General and administrative expenses		(2,680,324	)		(279,395	)		-		(59,889	)		(3,019,608	)
Operating loss		(3,606,646	)		(746,678	)				(59,956	)		(4,413,280	)

Other income (expenses)
Interest income		47,045			27,392			-		2,644			77,081
Interest expense		-			-			-		-			-
Other income, Net		803,640,			(57,503	)		315,767		-			1,061,904
Equity in net income (loss) of unconsolidated affiliates		-			-			-		-			-
Total other (expenses) income		850,685			(30,111	)		315,767		2,644			1,138,985

Income (loss) before income taxes		(2,755,961	)		(776,789	)		315,767		(57,312	)		(3,274,295	)
Income tax		34,125			-			-		-			34,125
Net Income( loss)	$	(2,721,836	)	$	(776,789	)	$	315,767	$	(57,312	)	$	(3,240,170	)

	Nine Months Ended September 30, 2019
	Property
	Brokerage			Real Estate			Investment
	Services			Development			Transaction		Others			Total
Net revenues	$	588,059		$	31,836,014		$	-	$	-		$	32,424,073
Cost of revenues		(521,301	)		(25,709,956	)		-		-			(26,231,257	)
Gross profit		66,758			6,126,058			-		-			6,192,816

Operating expenses		(428,320	)		(944,101	)		-		(253	)		(1,372,674	)
General and administrative expenses		(3,376,886	)		(5,481,622	)		-		(282,892	)		(9,141,400	)
Operating loss		(3,738,448	)		(299,665	)				(283,145	)		(4,321,258	)

Other income (expenses)
Interest income		24,674			54,962			-		8,543			88,179
Interest expense		-			-					-
Other income, Net		35,512			(50,854	)		1,588,756					1,573,414
Equity in net income (loss) of unconsolidated affiliates		-			-					-			-
Total other (expenses) income		60,186			4,108			1,588,756		8,543			1,661,593

Income (loss) before income taxes		(3,678,262	)		(295,557	)		1,588,756		(274,602	)		(2,659,665	)
Income tax		64,264			-			-		-			64,264
Net Income( loss)	$	(3,613,998	)	$	(295,557	)	$	1,588,756	$	(274,602	)	$	(2,595,401	)

	Three Months Ended September 30, 2018
	Property
	Brokerage			Real Estate			Investment
	Services			Development			Transaction		Others			Total
Net revenues	$	257,284		$	1,407,033		$	-	$	-		$	1,664,317
Cost of revenues		(168,304	)		(831,402	)		-		-			(999,707	)
Gross profit		88,980			575,630			-		-			664,610

Operating expenses		(115,108	)		(98,674	)		-		(92	)		(213,874	)
General and administrative expenses		(502,436	)		(207,430	)		-		(69,506	)		(779,372	)
Operating loss		(528,564	)		269,526			-		(69,598	)		(328,636	)

Other income (expenses)
Interest income		30,222			3,261			-		498			33,981
Interest expense		-			3,473			52,553					56,026
Other income, Net		206,873			35,383			254,809		7			497,072
Equity in net income (loss) of unconsolidated affiliates		-			-			33,343,384		-			33,343,384
Total other (expenses) income		237,095			42,117			33,650,746		505			33,930,463

Income (loss) before income taxes		(291,469	)		311,643			33,650,746		(69,093	)		33,601,827
Income tax		(992,913	)		12,350			-		-			(980,563	)
Net Income (loss)	$	(1,284,382	)	$	323,993		$	33,650,746	$	(69,093	)	$	32,621,264

	Nine Months Ended September 30, 2018
	Property
	Brokerage			Real Estate			Investment
	Services			Development			Transaction			Others			Total
Net revenues	$	1,147,654		$	4,014,733		$	-		$	-			5,162,387
Cost of revenues		(659,007	)		(2,428,300	)		-			-			(3,087,307	)
Gross profit		488,647			1,586,433			-			-			2,075,080

Operating expenses		(805,529	)		(50,198	)		-			(274	)		(1,306,001	)
General and administrative expenses		(928,794	)		(586,819	)		-			(381,663	)		(1,897,276	)
Operating loss		(1,245,676	)		499,416			-			(381,937	)		(1,128,197	)

Other income (expenses)
Interest income		50,778			8,004			-			5,593			64,375
Interest expense		-			(139,237	)		(2,107,033	)		-			(2,246,270	)
Other income, Net		32,397			(109,589	)		860,918			(256	)		783,470
Equity in net income (loss) of unconsolidated affiliates		-			-			64,679,542			-			64,679,542
Total other (expenses) income		83,175			(240,822	)		63,433,427			5,337			63,281,117

Income (loss) before income taxes		(1,162,501	)		258,594			63,433,427			(376,60	)		62,152,920
Income tax		(1,045,296	)		83,670			-			-			(961,626	)
Net Income (loss)	$	(2,207,797	)	$	342,264		$	63,433,427		$	(376,600	)	$	61,191,294

	Property
	Brokerage		Real Estate		Investment
	Services		Development		Transaction		Others		Total
As of September 30, 2019
Real estate property under development	$	-	$	78,919,736	$	-	$	-	$	78,919,736
Total assets		9,846,321		60,031,914		39,921,016		68,472,011		178,271,262

As of September 30, 2018
Real estate property under development		-		63,422,830		-		-		63,422,830
Total assets	$	2,730,819	$	78,716,319	$	131,825,646	$	8,558,079	$	221,830,863

NOTE 22 – RELATED PARTY TRANSACTIONS

On January 18, 2019, SHDEW passed a shareholder resolution to issue a cash dividend to its shareholders. The Company, on March 13, 2019, through its subsidiaries SHSY and LYRL, received RMB 170,839,500 and RMB 98,858,500, respectively.

On January 28, 2019, Sunrise Real Estate Group, Inc. paid a cash dividend in the amount of $6,869,192 ($0.10 per share) to shareholders of record as of December 28, 2018. The ex-dividend date was December 26, 2018.

In January 2019, the Company rented a property unit from a related party for office use.

NOTE 23 – SUBSEQUENT EVENT

On December 2019, SHDEW had an employee stock bonus where many of its employees received their vested shares. This resulted in the dilution of our ownership of SHDEW from 20.38% to 19.91%. As the Company does not have significant influence in SHDEW and the change of ownership to 19.91%, we changed our accounting method for the SHDEW investment from the equity method to the alternative measurement going forward.

On May 27, 2020, LYRL received 10% of shares of LYSY from Nanjing Longchang Real Estate Development Group. LYRL now owns 34% of LYSY.

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

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

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

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

There are several risks and uncertainties, including those relating to our ability to raise money and grow our business and potential difficulties in integrating new acquisitions with our current operations, especially as they pertain to foreign markets and market conditions. These risks and uncertainties can materially affect the results predicted. The Company’s future operating results over both the short and long term will be subject to annual and quarterly fluctuations due to several factors, some of which are outside our control. These factors include but are not limited to fluctuating market demand for our services, and general economic conditions.

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

OVERVIEW

In October 2004, the former shareholders of Sunrise Real Estate Development Group, Inc. (Cayman Islands) (“CY-SRRE”) and LIN RAY YANG Enterprise Ltd. (“LRY”) acquired a majority of our voting interests in 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”), 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”), Wuhan Yuan Yu Long Real Estate Development Company, Ltd. (“WHYYL”), and Shanghai Da Er Wei Trading Company Limited (“SHDEW”) are sometimes hereinafter collectively referred to as “the Company”, “we”, “our”, or “us”.

The principal activities of the Company are real estate agency sales, real estate marketing services, real estate investments, property leasing services, property management services, and real estate development in the PRC.

RECENT DEVELOPMENTS

Our major business is agency sales, whereby our Chinese subsidiaries contracted with property developers to market and sell their newly developed property units. For these services, we earn a commission fee calculated as a percentage of the sales prices. We have focused our sales on the whole China market, especially in second-tier cities. To expand our agency business, we have established subsidiaries or branches in Shanghai, Suzhou, and Kunshan, and branches in Wuhan and Shangqiu.

In mid-2011, we established a project company in Wuhan in which we have a 49% ownership. We commenced the construction of Phase 1 of the project in the third quarter of 2012 and the pre-sale of Phase 1 in the first quarter of 2013. We have begun Phase 2 construction of the project in the second quarter of 2013 and the pre-sale of Phase 2 was started in mid-August. The Wuhan project is planned to include seven residential buildings with three buildings being part of Phase 1 and four buildings in Phase 2. We sold all of the residential units as of December 31, 2018.

In August 2017, the Wuhan project has reached a dispute settlement with the construction contractor, Hubei Fifth Constructions Co. (“HFCC”), which settled the expenses of construction and the project company could going through the handover progress. For the period ended of September 30, 2019, the company had recognized the net revenue and cost of revenue of the WHYYL project based on the number of units sold.

In October 2011, we established LYSY and own 24% of the company. During the first quarter of 2012, we acquired approximately 103,385 square meters for the purpose of developing villa-style residential housing. We began construction in mid-2012 and as of December 31, 2016 have constructed 121 units, which encompasses all units in phase 1. The phase 1 has completed construction in May 2015. The sales started in November 2013, we have made sales of 104 units at the end of December 2017. Proceeds from sales will be used to finance the constructions of the subsequent phases of the project. The phase 2 has begun construction of 17,000 sqm in October 2017. For the period ended of September 30, 2019, the company had recognized the net revenue and cost of revenue of the Linyi project based on the number of units sold.

On March 13, 2014, the Company has signed a joint development agreement with Zhongji Pufa Real Estate Co. According to this agreement, the Company has obtained a right to develop the Guangxinglu (“GXL”) project, which located on 182 lane Guangxinglu, Putuo district, Shanghai, PRC. This project covers a site area of approximately 2,502 square meters for the development of one building of apartment. In 2016, the government issued a regulation prohibiting the by-unit sale of commercial-use buildings. The apartment unit sale for the GXL project was put on hold until the government reviewed our project’s status. Since then, rented out the unsold apartment units while not recognizing the units previously sold before the regulation. In March 2019, we received government confirmation that our project cannot be sold on a unit-by-unit basis going forward. The Company decided to continue operating the project by renting out the units.

SHDEW was established in June 2013 with its business as a skincare and cosmetic company. SHDEW’s online Wechat stores had a membership of over five million members as of September 30, 2019. SHDEW develops its own skincare products as well as improving its online ecommerce platform. SHDEW sells products under its own brands as well as the products from third parties. The products include skincare, cosmetics, personal care products such as soaps, shampoos, skin care devices and children’s apparel. SHDEW has its own online shopping app, “庭秘密”, where consumers can purchase its cosmetics and skincare products as well as products imported into China. The online shopping platform is currently in operation.

In October 2018, we established HATX for the purpose of real estate development in Huai’an through HAZB of which we have 78.46% ownership. HAZB purchased the property in Huaian, Qingjiang Pu district with an area of 78,030 square meters and the Company, through HATX, invested 78.46% shares in HAZB. The Huai’an project, named Tianxi Times, started its 1^st phase development in early 2019 with a GFA of 41,795 sqm totaling 347 units. As of April 30, 2020, the Company pre-sold 255 out of 347 units.

In December 2019, SHDEW had an employee stock bonus where many of its employees received their vested shares. This resulted in the dilution of our ownership of SHDEW from 20.38% to 19.91%. The financial statements for 2018 will follow the equity method for the accounting treatment in regard to our investment in SHDEW and from the beginning of 2019 and going forward, we will be using the measurement alternative method instead. This change in accounting method may have an impact in our financial statements.

RECENTLY ADOPTED ACCOUNTING STANDARDS

In August 2018, the SEC issued Release No. 33-10532 that amends and clarifies certain financial reporting requirements. The principal change to our financial reporting will be the inclusion of the annual disclosure requirement of changes in stockholders’ equity in Rule 3-04 of Regulation S-X to interim periods. We adopted this new rule on January 1, 2019. Upon adoption, the Company include its Statements of Stockholders’ Deficit with each interim reporting.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

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

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

Revenue Recognition

All revenues represent gross revenues less sales and business tax.

The Company adopted ASC 606 on January 1, 2018 by using the modified retrospective approach with no restatement of comparative periods and no cumulative-effect adjustment to retained earnings recognized as of the date of adoption. A significant portion of the Company’s revenue is derived from development and sales of condominium real estate property in the PRC, with revenue previously recognized using the percentage of completion method. Under the new standard, to recognize revenue over time similar to the percentage of completion method, contractual provisions need to provide the Company with an enforceable right to payment and the Company has no alternative use of the asset. Historically, all contracts executed contained an enforceable right to home purchase payments and the Company had no alternative use of assets, therefore, the adoption of ASC 606 did not have a material impact on the Company’s consolidated financial statements.

Real Estate Property under Development

Government Subsidies

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

The government subsidy received by the Company is given to reimburse the land acquisition costs and certain construction costs incurred for its property development project in Linyi. The subsidy is repayable if the Company fails to complete the subsidized property development project by the agreed date. The Company recorded the subsidy received as a deferred government subsidy in consolidated balance sheets.

Income Taxes

The Company accounts for income taxes under ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Deferred tax assets or liabilities were off-set by a 100% valuation allowance; therefore there has been no recognized benefit as of December 31, 2019 and 2018.

RESULTS OF OPERATIONS

We provide the following discussion and analyses of our changes in financial condition and results of operations for the period ended September 30, 2019 with comparisons to the period ended September 30, 2018.

Revenue

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

	Three Months Ended September 30,										Nine Months Ended September 30,
	2019		% to total		2018		% to total		% change		2019		% to total		2018		% to total		% change
Agency sales		123,152		17		92,692		6		32		231,802		1		604,591		12		(62	)
Property management		199,432		28		164,593		10		21		390,113		1		543,064		11		(28)
House sales		402,243		55		1,407,032		84		(71)		31,802,159		98		4,014,733		77		692
Net revenues		724,827		100		1,664,317		100		(56)		32,424,074		100		5,162,387		100		528

The net revenue for the third quarter of 2019 was $724,827, which decreased 56% from $1,664,317 for the third quarter of 2018. The net revenue for the first three quarters of 2019 was $32,424,074, which represented an increase of 528% from $5,162,387 for the first third quarters of 2018. For the third quarter of 2019, agency sales, property management, and house sales represented 17%, 28%, and 55% of our net revenues, respectively. For the first third quarters of 2019, agency sales, property management, and house sales represented 1%, 1%, and 98% of our net revenues, respectively. The increase in net revenue for the first third quarter of 2019 was mainly due to the recognition of sales revenue of the GXL project.

Agency sales

For the third quarter and first three quarters of 2019, 17% and 1%, respectively, of our net revenues were attributable to agency sales. As compared with the same period in 2018, net revenue of agency sales decreased 28% and 62%, respectively, for the third quarter and the first three quarters of 2019.

Property Management

Property management represented 1% of our revenue for the first three quarter of 2019 and revenue from property management decreased by 28% compared with the same period in 2018.

House sales

For the first three quarters of 2019, the Company has recognized the house sales of the GXL project based on the number of units sold. House sales represented 98% of our revenue for the first three quarters of 2019.

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,
	2019		% to total		2018		% to total		% change			2019		% to total		2018		% to total		% change
Agency sales		107,118		14		60,423		6		77			185,502		1		302,129		10		(39	)
Property management		730,626		98		107,881		11		577			913,852		3		356,878		11		156
House sales		(88,508)		(12)		831,403		83		(111	)		25,131,903		96		2,428,300		79		934
Cost of revenues		749,236		100		999,707		100		(25	)		26,231,257		100		3,087,307		100		750

The cost of revenue for the third quarter of 2019 was $749,236, which decreased 25% from $999,707 during the third quarter of 2018. The cost of revenues for the first three quarters of 2019 was $26,231,257, which increased 750% from $3,087,307 during the first three quarters of 2018. For the third quarter of 2019, agency sales represented, property management, and house sales represented 14%, 98% and -12% of our cost of revenue, respectively. For the first three quarters of 2019, agency sales represented, property management, and house sales represented -39%, 156% and 934% of our cost of revenue, respectively. The decrease in the cost of revenue in the third quarter and increase in the first three quarters of 2019 was mainly due to the recognition of cost of sales revenue of the GXL project.

Agency sales

The cost of revenue for agency sales for the first three quarters of 2019 was $185,502, a decrease of 39% from $302,129 in the same period in 2018. This decrease was mainly due to the decrease in our commissions from the decrease in sales of agency sales for the first three quarters of 2019.

Property management

The cost of revenue for property management for the first three quarters of 2019 was $913,852, an increase of 156% from $356,878 in the same period in 2018. This was mainly due to more business for the property management as a whole.

House sales

For the first three quarters of 2019, the Company have recognized the cost of house sales of the GXL project based on the units sold. House sales represented 96% of our cost of revenue for the first three quarters of 2019.

Operating Expenses

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

	Three Months Ended September 30,											Nine Months Ended September 30,
	2019		% to total		2018		% to total		% change			2019		% to total		2018		% to total		% change
Agency sales		23,944		4		51,094		46		(53	)		85,450		6		212,024		16		(60	)
Property management		155,171		28		64,013		33		142			454,278		33		593,505		45		(23)
House sales		360,576		68		98,674		19		275			832,946		61		500,198		38		66
Service sales		-		0		92		0		(100	)		-		0		274		0		(100	)
Operating expenses		548,691		100		213,873		100		157			1,372,674		100		1,306,001		100		(5)

The operating expenses for the third quarter of 2019 were $548,691, which increased 157% from $213,873 for the same period in 2018. The total operating expenses for the first three quarters of 2019 were $1,372,674, which decreased 5% from $1,306,001 for the same period in 2018. For the third quarter of 2019, agency sales, property management, and house sales represented 4%, 28%, and 68% of the total operating expenses, respectively. For the first three quarters of 2019, agency sales, property management, and house sales represented 6%, 33%, and 61% of the total operating expense, respectively. The increase in the overall operating expense resulted from the increase in house sales and property management for the third quarter and the first three quarters of 2019.

Agency sales

The operating expenses for agency sales for the first three quarters of 2019 were $85,450, a decrease of 60% from $212,024 in the same period in 2018.

Property management

The operating expenses for property management for the first three quarters of 2019 were $454,278, a decrease of 23% from $593,505 in the same period in 2018. The increase is mainly due to the consulting expenses relating to the business.

House sales

The operating expenses for house sales for the first three quarters of 2019 were $832,946 which increased 66% from $500,198 in the same period in 2018. The increase is mainly due to the operating of HATX project.

General and Administrative Expenses

General and administrative expenses in the first three quarters of 2019 were $9,141,400, increased by 382% from $1,897,276, in same periods in 2018. This increase was mainly due to the write off the amount of $2,612,491 due from WHYYL and the expense of delayed house handover of the GXL project.

Equity in net gain (loss) of affiliates

Equity in net gain for the first three quarters of 2019 was $0. The equity in net gain of affiliates was mainly the investment value variety of WHYYL and SHDEW.

Other income, net

Other income for the first three quarters of 2019 was $1,573,414, an increase of 101% from gain of $783,470 for the same period in 2018. The income mainly due to the gain of transactional financial assets.

Major Related Party Transaction

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 September 30, 2019 was $822,331. The amounts due are as follows:

Amount due to Lin Chi-Jung

The balances due to Lin Chi-Jung consists of temporary advances at the amount of $841,272 and are unsecured, interest-free and have no fixed term of repayment.

Amount due to Lin Hsin Hung

The amount of $37,613 represents the salary payable to Lin Hsin Hung.

Amount due from Pan, Yu-Jen

The amount of $56,554 represents the temporary advance to Pan, Yu-Jen, for business expenses related to SZXJY and our project in Huai’an.

Amount due to affiliate

The amount due to JXSY, in the amount of $498,155 were intercompany transfers for day to day operation.

LIQUIDITY AND CAPITAL RESOURCES

For the first three quarters of 2019, our principal sources of cash were revenues from our house sales collection and property management business, as well as the dividend receipt from the affiliates. Most of our cash resources were used to fund our property development investment and revenue related expenses, such as salaries and commissions paid to the sales force, daily administrative expenses and the maintenance of regional offices.

We ended the period with a cash position of $19,326,603.

The Company’s operating activities used cash in the amount of $49,542,312, which was primarily attributable to the payment of real estate development and receipts in advance.

The Company’s investing activities provided cash resources of $60,602,037, which was primarily attributable to the dividend from affiliates and investment in transactional financial assets.

The Company’s financing activities used cash resources of $10,449,654, which was primarily attributable to dividend paid to noncontrolling interests.

The potential cash needs for 2019 are for investment in transactional financial assets, the rental guarantee payments and promissory deposits for various property projects, as well as our development projects in the Huai’an project (HATX) and the Linyi project.

Capital Resources

Considering our cash position, available credit facilities and cash generated from operating activities, we believe that we have sufficient funds to operate our existing business for the next twelve months. 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 or obtain funds 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

Material weaknesses

As discussed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2018, we identified one material weakness in the design and operation of our internal controls. The material weakness is related to the Company’s accounting department personnel having limited knowledge and experience in U.S. GAAP. In response to the above identified material weakness and to continue strengthening the Company’s internal control over financial reporting, we are going to undertake the following remediation initiatives:

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

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

Since the first quarter of 2015, additional qualified accounting personnel have been hired and put into place to assist preparation of financial information, as required for interim and annual reporting, in accordance with generally accepted accounting principles in the U.S. As the newly implemented remediation activities have not operated for a sufficient period of time to demonstrate operating effectiveness, we will continue to monitor and assess our remediation activities to ensure that the aforementioned material weakness is remediated.

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

Since the first quarter of 2015, we put into place additional qualified accounting personnel to address the aforementioned material weakness. This action strengthened our internal controls over financial reporting.

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

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material developments in any legal proceedings since the disclosures contained in the Registrant’s Form 10-K for the year ended December 31, 2018.

ITEM 1A. RISK FACTORS

Not applicable.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit
Number		Description

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

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

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

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

* Filed herewith

SIGNATURES

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

SUNRISE REAL ESTATE GROUP, INC.

	Date: July 30, 2020
	By: /s/ Zhang, Jian
	Zhang, Jian, Chief Executive Officer, Principal Executive Officer


	Date: July 30, 2020
	By: /s/ Mi, Yong Jun
	Mi, Yong Jun, Chief Financial Officer, Principal Financial Officer