SUNRISE REAL ESTATE GROUP INC [SRRE] Filings

10-Q 1 srre-20240630x10q.htm 10-Q

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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 June 30, 2024

☐ 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: + 86-21-6067-3830

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 ☐

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 ☐

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


Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: August 29, 2024–68,691,925 shares of Common Stock

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FORM 10-Q

For the Quarter Ended June 30, 2024

INDEX


		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30,2024 and December 31, 2023	3
	Condensed Consolidated Statements of Operations for The Six Months Ended June 30, 2024 and 2023	4
	Condensed Consolidated Statements of Stockholders’ Equity for The Six Months and Three Months Ended June 30, 2024 and 2023	5
	Condensed Consolidated Statements of Stockholders’ Equity for The Six Months and Three Months Ended June 30, 2024 and 2023	6
	Condensed Consolidated Statements of Cash Flows for The Six Months Ended June 30, 2024 and 2023	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28

SIGNATURES		29

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Expressed in U.S. Dollars)


	June 30,		December 31,
	2024		2023
ASSETS

Current assets
Cash and cash equivalents	$	25,501,806	$	20,453,464
Restricted cash (Note 3)		2,210,499		2,723,667
Transactional financial assets (Note 4)		17,416,588		26,505,532
Accounts receivable		191,080		552,964
Real estate property under development (Note 5)		83,502,785		88,742,269
Amount due from an unconsolidated affiliate		16,102,627		16,203,433
Other receivables and deposits, net (Note 6)		8,758,811		9,321,913
Total current assets		153,684,196		164,503,242

Property and equipment, net (Note 7)		629,044		728,094
Investment properties, net (Note 8)		27,842,067		28,910,575
Investment in an unconsolidated affiliate (Note 9)		13,010,327		13,091,335
Other investments (Note 10)		637,838		641,810
Total assets	$	195,803,472	$	207,875,056

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

Current liabilities
Promissory notes payable (Note 11)		1,403,154		1,411,891
Accounts payable (Note 14)		20,637,485		24,885,181
Amounts due to directors (Note 12)		462,093		472,104
Amount due to an affiliate (Note 15)		32,992,573		32,068,741
Customer deposits (Note 16)		25,101,324		23,318,011
Other payables and accrued expenses (Note 13)		7,592,373		7,352,352
Other taxes payable		225,347		247,516
Income taxes payable (Note 17)		1,075,063		1,926,888
Total current liabilities		89,489,412		91,682,684

Long-term income tax payable (Note 17)		—		—
Total liabilities		89,489,412		91,682,684

Commitments and contingencies (Note 18)

Shareholders’ equity
Common stock, par value $0.01 per share; 200,000,000 shares Authorized; 68,691,925 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively		686,919		686,919
Additional paid-in capital		8,110,008		8,110,008
Statutory reserve (Note 19)		3,986,618		3,986,618
Retained Earnings		91,562,848		99,169,737
Accumulated other comprehensive income		6,493,369		7,311,786
Total equity of Sunrise Real Estate Group, Inc.		110,839,762		119,265,068
Non-controlling interests		(4,525,702)		(3,072,696)
Total shareholders’ equity		106,314,060		116,192,372
Total liabilities and shareholders’ equity	$	195,803,472	$	207,875,056

See accompanying notes to consolidated financial statements.

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SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(Expressed in U.S. Dollars)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net revenues	$	4,448,410	$	7,042,904	$	6,348,124	$	12,776,666
Cost of revenues		(3,759,381)		(5,956,385)		(5,666,227)		(11,136,935)
Gross profit (loss)		689,029		1,086,519		681,897		1,639,731

Operating expenses		(353,624)		(490,120)		(671,479)		(940,599)
General and administrative expenses		(684,614)		(728,734)		(1,375,431)		(1,540,592)
Operating profit (loss)		(349,209)		(132,335)		(1,365,013)		(841,460)

Other income (expenses)
Interest income		67,201		248,416		121,898		495,420
Interest expense		(562,698)		(782,378)		(1,126,174)		(1,364,044)
Other income (loss), net		(3,271,230)		1,117,937		(6,545,190)		384,796
Total other Income (loss)		(3,766,727)		583,975		(7,549,466)		(483,828)

Income (loss) before income taxes		(4,115,936)		451,640		(8,914,479)		(1,325,288)
Income tax benefit (expense)		(169,070)		(250,864)		(169,216)		(361,315)
Net income (loss)		(4,285,006)		200,776		(9,083,695)		(1,686,603)
Less: Net (income) loss attributable to non-controlling interests		685,097		141,219		1,476,806		377,272
Net income (loss) attributable to shareholders of Sunrise Real Estate Group, Inc.	$	(3,599,909)	$	341,995	$	(7,606,889)	$	(1,309,331)
Net income (loss)		(4,285,006)		200,776		(9,083,695)		(1,686,603)
Other comprehensive income (loss) Foreign currency translation adjustment		(469,694)		(7,240,930)		(794,617)		(5,326,891)
Comprehensive income (loss)		(4,754,700)		(7,040,154)		(9,878,312)		(7,013,494)

Less: Comprehensive income (loss) attributable to non-controlling interests		666,200		782,428		1,453,006		841,187
Total comprehensive income (loss) attributable to shareholders		(4,088,500)		(6,257,726)		(8,425,306)		(6,172,307)
Earnings (loss) per share – basic and fully diluted	$	0.05	$	0.00	$	(0.11)	$	(0.02)

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.

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SUNRISE REAL ESTATE GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(Expressed in U.S. Dollars)


											Accumulated				Total
	Common Stock				Additional				Retained		Other				Stockholders’
	Number of				Paid-in		Statutory		Earnings		Comprehensive		Non-controlling		(Deficit)
	shares issued		Amount		Capital		Reserve		(Deficits)		Income		Interests		Equity
Balance, December 31, 2022		68,691,925	$	686,919	$	8,110,008	$	3,986,618	$	109,300,636	$	9,447,265	$	13,207,067	$	144,738,513
Profit (loss) for the year		—		—		—		—		(1,309,331)		—		(377,272)		(1,686,603)
Discontinuation of the equity method for an investment		—		—		—		—		—		—		—		—
Capital contribution from non-controlling interests of new consolidated subsidiaries		—		—		—		—		—		—		—		—
Dividend		—		—		—		—		—		—		—		—
Translation of foreign operations		—		—		—		—		—		(4,862,976)		(463,915)		(5,326,891)
Balance, June 30, 2023		68,691,925		686,919		8,110,008		3,986,618		107,991,305		4,584,289		12,365,880		137,725,019


											Accumulated				Total
	Common Stock				Additional				Retained		Other				Stockholders’
	Number of				Paid-in		Statutory		Earnings		Comprehensive		Non-controlling		(Deficit)
	shares issued		Amount		Capital		Reserve		(Deficits)		Income		Interests		Equity
Balance, March 31, 2023		68,691,925	$	686,919	$	8,110,008	$	3,986,618	$	107,649,310	$	11,184,010	$	13,148,308	$	144,765,173
Profit (loss) for the year		—		—		—		—		341,995		—		(141,219)		200,776
Translation of foreign operations		—		—		—		—		—		(6,599,721)		(641,209)		(7,240,930)
Discontinuation of the equity method for an investment		—		—		—		—		—		—		—		—
Dividend		—		—		—		—		—		—		—		—
Capital contribution to a new consolidated subsidiary		—		—		—		—		—		—		—		—
Balance, June 30, 2023		68,691,925		686,919		8,110,008		3,986,618		107,991,305		4,584,289		12,365,880		137,725,019

See accompanying notes to consolidated financial statements.

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SUNRISE REAL ESTATE GROUP, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(Expressed in U.S. Dollars)


										Accumulated				Total
	Common Stock			Additional				Retained		Other				Stockholders’
	Number of			Paid-in		Statutory		Earnings		Comprehensive		Non-controlling		(Deficit)
	shares issued	Amount		Capital		Reserve		(Deficits)		Income		Interests		Equity
Balance, December 31, 2023	68,691,925	$	686,919	$	8,110,008	$	3,986,618	$	99,169,737	$	7,311,786	$	(3,072,696)	$	116,192,372
Profit (loss) for the year	—		—		—		—		(7,606,889)		—		(1,476,806)		(9,083,695)
Discontinuation of the equity method for an investment	—		—		—		—		—		—		—		—
Capital contribution from non-controlling interests of new consolidated subsidiaries	—		—		—		—		—		—		—		—
Dividend	—		—		—		—		—		—		—		—
Translation of foreign operations	—		—		—		—		—		(818,417)		23,800		(794,617)
Balance, June 30, 2024	68,691,925		686,919		8,110,008		3,986,618		91,562,848		6,493,369		(4,525,702)		106,314,060


										Accumulated				Total
	Common Stock			Additional				Retained		Other				Stockholders’
	Number of			Paid-in		Statutory		Earnings		Comprehensive		Non-controlling		(Deficit)
	shares issued	Amount		Capital		Reserve		(Deficits)		Income		Interests		Equity
Balance, March 31, 2024	68,691,925	$	686,919	$	8,110,008	$	3,986,618	$	95,162,757	$	6,981,860	$	(3,859,502)	$	111,068,760
Profit (loss) for the year	—		—		—		—		(3,599,909)		—		(685,097)		(4,285,006)
Translation of foreign operations	—		—		—		—		—		(488,591)		18,897		(69,694)
Discontinuation of the equity method for an investment	—		—		—		—		—		—		—		—
Dividend	—		—		—		—		—		—		—		—
Capital contribution to a new consolidated subsidiary	—		—		—		—		—		—		—		—
Balance, June 30, 2024	68,691,925		686,919		8,110,008		3,986,618		91,562,848		6,493,369		(4,525,702)		106,314,060

See accompanying notes to consolidated financial statements.

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SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Expressed in U.S. Dollars)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities
Net income (loss)	$	(9,083,695)	$	(1,686,603)

Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation and amortization		1,004,617		1,179,643
Loss (Gain) on disposal of property, plant and equipment		—		32,902
Changes in assets and liabilities
Accounts receivable		359,628		18,513
Real estate property under development		4,705,607		(1,681,300)
Customer Deposits		1,933,871		(754,602)
Amount due from unconsolidated affiliates		1,126,462		1,751,782
Other receivables and deposits		507,062		(3,030,354)
Net cash from directors		(7,113)		43,182
Accounts payable		(4,107,021)		4,968,945
Dividends		—		(10,329,001)
Other payables and accrued expenses		286,445		(102,177)
Other taxes payable		(20,705)		(13,160)
Income taxes payable		(842,633)		(949,342)
Net cash provided by (used in) operating activities		(4,137,475)		(10,551,572)

Cash flows from investing activities
Purchases of property and equipment		(17,625)		(4,164)
Net Cash from Transactional financial assets		8,953,952		293,145
Net cash provided by (used in) investing activities		8,936,327		288,981

Cash flows from financing activities
Restricted cash		—		—
Net cash provided (used in) financing activities		—		—

Effect of exchange rate changes on cash and, cash equivalents and restricted cash		(263,678)		(2,659,654)

Net increase in cash, and cash equivalents and restricted cash		4,535,174		(12,922,245)
Cash, and cash equivalents and restricted cash at beginning of period		23,177,131		77,070,510
Cash, and cash equivalents and restricted cash at end of period	$	27,712,305	$	64,148,265

Supplemental disclosure of cash flow information
Income taxes paid	$	1,018,054	$	1,361,466
Interest paid		—		—

See accompanying notes to consolidated financial statements.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Sunrise Real Estate Group, Inc. “SRRE” was incorporated in Texas on October 10, 1996 under the name of Parallax Entertainment, Inc. SRRE together with its subsidiaries and equity investment described below is collectively referred to as “the Company”, “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 June 30, 2024, the Company has the following major subsidiaries and equity investment.


			% of Ownership	Relationship
	Date of	Place of	held by the	with the
Company Name	Incorporation	Incorporation	Company	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 Investment Management and 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
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
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
Shanghai Shangyang Tianxi (“SHTX”)	July 25, 2014	PRC	19.91%	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	78.46%⁴	Subsidiary	Investment holding
Shanghai Taobuting Media Co., Ltd. (“TBT”)	July 1, 2020	PRC	7.5%	Subsidiary	Streaming platform
Shangyang International PTE. LTD. (“SYIP”)	August 19,2022	SINGAPORE	100%	Subsidiary	Investment holding
Shanghai Da Er Wei Industry Co., Ltd.(“DEWSY”)	Oct. 20, 2020	PRC	19.58%	Subsidiary	Investment holding

1.	After an equity transaction in February 2015, the Company held equity in subsidiaries of SZSY as follows: SZXJY 49%, SHXJY 26% and Sunrise Real Estate Development Group, Inc. (CY-SRRE) 12.5%, totaling 75.25% equity interest in SZSY.

The Company and a shareholder of LYSY, who 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.

3.	On January 28, 2013, CY-SRRE, SZXJY and an unrelated party established a subsidiary in the PRC, SHXJYB, with CY-SRRE holding 15% equity interest and SZXJY holding 60% equity interest in SHXYJB.

4.	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%.

The accompanying condensed consolidated balance sheet as of December 31, 2023, 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.

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In the opinion of management, these condensed consolidated financial statements reflect all adjustments which are of a normal recurring nature and which are necessary to present fairly the financial position of Sunrise Real Estate as of June 30, 2024 and the results of operations for the six months ended June 30, 2024 and 2023, and the cash flows for the six months ended June 30, 2024 and 2023. 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, 2023. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results which may be expected for the entire fiscal year.

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

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

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

Foreign Currency Translation and Transactions

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

Foreign currency transactions during the period are translated into each company’s denominated currency at the exchange rates ruling at the transaction dates. 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 June 30, 2024 and December 31, 2023 are $1: RMB7.1268 and $1: RMB7.095, 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.

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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.

In October 2011, we established LYSY and own 34% 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. The LYSY project has divided into three phases. Phase 1 has completed construction of 121 units in May 2015 and sold 119 units out of all 121 units at the end of August 12, 2024. Phase 2 was divided into north and south area and completed construction of 84 units at the end of 2020. All units have been sold during phase 2 by the end of August 12, 2024. Phase 3 began construction in first quarter of 2021 and pre-sold 30 units out of 51 units at the end of August 12, 2024. In September 2020, the Company expanded the Linyi project by purchasing additional 54,312 square meters in the amount of 228 million RMB for future development.

In October 2018, HATX purchased the property in Huai’an, Qingjiang Pu district with an area of 78,030 square meters (“sqm”). In December 2018, we established HAZB with a 78.46% ownership for the purpose of real estate investment, and in March 2019, HAZB purchased 100% of HATX and its land usage rights to the Huai’an property. The Huai’an project, named Tianxi Times, started its first phase development in early 2019 with a gross floor area (“GFA”) of 82,218 sqm totaling 679 units, and started its second phase in 2020 with a GFA of 99,123 sqm totaling 873 units. As of August 12, 2024, the Company sold 664 units, respectively, out of 679 units of the first phase and sold 503 units out of 873 of the second phase.

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 did 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.

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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 January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, which requires disclosure of gross write-offs of finance receivables by year of origination. The adoption of this standard did not have a material impact on our disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which would require additional transparency for income tax disclosures, including the income tax rate reconciliation table and cash taxes paid both in the United States and foreign jurisdictions. This standard is effective for annual periods beginning after December 15, 2024. We are currently assessing the impact this standard will have on our disclosures.

New Accounting Pronouncements

Accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss new accounting pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

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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 June 30, 2024, and December 31, 2023, the Company held cash deposits of $2,210,499 and $2,723,667, respectively.

NOTE 4 – TRANSACTIONAL FINANCIAL ASSETS

As of June 30, 2024, we have $17,416,588 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 2.08% to 3.30% depending on the amount and time period invested.

NOTE 5 – REAL ESTATE PROPERTY UNDER DEVELOPMENT

Real estate property under development represents the Company’s real estate development project in Linyi, the PRC (“Linyi Project”), which is located 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 119 of 121 Phase 1 villas and sold all 84 units in Phase 2 as of August 12, 2024. As to Phase 3, we pre-sold 30 units out of 51 units as of August 12, 2024.

In October 2018, HATX purchased the property in Huai’an, Qingjiang Pu district with an area of 78,030 square meters. In December 2018 we established HAZB with a 78.46% ownership for the purpose of real estate investment and in March 2019, HAZB purchased 100% of HATX and tis land usage rights to the Huai’an property. The Huai’an project, named Tianxi Times, started its first phase development in early 2019 with a gross floor area (“GFA”)of 82,218 sqm totaling 679 units, and started its second phase in 2020 with a GFA of 99,123 sqm totaling 873 units. As of August 12, 2024, the Company sold 664 units, respectively, out of 679 units of the first phase and sold 503 out of 873 of the second phase.

As of June 30, 2024, land use rights included in real estate property under development totaled $83,502,785.

NOTE 6 – OTHER RECEIVABLES AND DEPOSITS, NET


	June 30,		December 31,
	2024		2023
Advances to staff	$	103,635		20,042
Rental deposits		709,619		719,354
Prepaid expense		49,143		48,462
Prepaid tax		5,699,792		6,242,218
Other receivables		2,196,622		2,283,757
	$	8,758,811	$	9,321,913

Other receivables and deposits as of June 30, 2024 and December 31, 2023 were stated net of allowance for doubtful accounts of $1,959,728 and $1,265,984, respectively.

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NOTE 7 – PROPERTY AND EQUIPMENT, NET